Enel Chile S.A.

Good day, ladies and gentlemen, and welcome to Enel Chile Q4 and Full Year 2021 Results Conference Call. My name is Gigi, and I will be your operator for today. At this time, all participants are in a 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 zero. During this conference call, we may make statements that constitute forward-looking statements within the meeting 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 Q4 and full year 2021 results. The presentation accompanying this conference call and Enel Chile's annual report on Form 20F including under risk factors. You may access our Q4 and full year 2021 results press release and presentation on our website www.nl.cl, and our 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 date, and El 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 Mrs. Isabella Clem, Head of Investor Relations of Enel Chile. Please proceed.

Buenas tardes, good afternoon, and welcome to Enel Chile's fourth quarter and full year 2021 results presentation. Thank you all for joining us today. I am Isabella Clem, the Head of Investor Relations. Let me remind you that our presentation and related financial information are available on our website, www.nl.cl, in the investor section, and in our app, Investor. In the final of the presentation, there will be an opportunity to ask questions via phone or webcast chat through the link, Ask a Question. Joining me this morning, this afternoon, our CEO, Paolo Palotti, and our CFO, Giuseppe Cuccarelli. In the following slides, Paolo will open the presentation with the main highlights of our company performance and strategic updates. Then Giuseppe will walk us through our financial results. A replay of the call will be available, and as always, our IR team will continue to be available to provide you with financial information you may need concerning the figures that are in this presentation. Let me remind you that media participants are connected only in this mode. Thank you all for your attention, and now let me hand over to Paolo.

Thank you, Isabella. Good morning, and I would say good afternoon at this stage, and thank you for joining us. As we have already commented during our previous calls, the Chilean electricity system has been affected by several incontemporary phenomena that put under pressure its dynamics and stability. In terms of ideology, the country is facing one of the driest periods of its history. The overall inflow levels of 2021 have been the lower of all hydrological conditions, while the level of basins continues to be poorer, with important consequences on correlated sectors like the electric and agricultural ones, among others. Furthermore, an higher demand for commodities as a consequence of larger support for thermal generation came in a year of increased pressure at global level and lack of availability of Argentinian natural gas during almost the first nine months of 2021. The combination of all these effects, in addition to structural delay of renewable project at country level, constrain our 2021 margins and our cashflow generation capability. The latter one also affected by such laws as basic service law and the price stabilization mechanism. We already mentioned the several actions we put in place since the first month of 2021 to improve gas availability, buying additional energy cargos to supply our plants at first, and then to sell gas in the system, being the last important energy gas in the country for the year. In this challenging scenario, with tough conditions imposed by the duration of the pandemic, we have been able to advance with our renewable project, increasing of 900 megawatts. This took capacity over the period. Additional projects are ongoing. I will recall you later. We have also started to link the issue of new credit lines to sustainability targets. Today, 21% stake of the total debt Is SDG linked? As we mentioned in our last strategic plan presentation, we target to achieve a 52% stake of this kind of financing by 2034. Regarding the SDG award, we are pleased to announce that we have been included in the Bloomberg Gender Equality Index for the first time. Also, we apply for the first time to the CDP climate change, obtaining a B score. This confirms that we are taking coordinated and consistent actions on climate change. Now, let's move to slide four to give you an update about the market situation. In 2021, the system has less water availability than in 2020, with poor hydrology only slightly better than the driest year recorded. That was in 1998 and 1999. The effects of melting season have been very poor and very limited because of the level of the snow accumulated in the winter period. In the second half of the year, some limited positive effect on the use of water resources derived from the issuing of the preventive rationing decree and the agreement that we reached with some communities. With the lack of Argentinian export of natural gas for the period of fall 2020, early 2021, some players are being forced to buy in the spot market to support their generation positions. facing a significant overall increase in commodity price as a consequence of the international market situation. Gas prices more than tripled from the fourth quarter 2020 to the second half of 2021. In addition, the delay of expected CODs or renewable projects at country level due also to some restrictions had a monthly effect on the system that can be considered equal to the lack of production of two CCGPs of 350 megawatts. All the above-mentioned factors led to a strong pressure to the system with an important rise in margin costs, particularly during the third quarter of 2021 and the issuing of the preventive rationing decree. the situation has improved during the fourth quarter of last year, thanks in particular to the availability return of Argentinian gas in the Chilean market that has been supplied on a stable manner until the end of the year. In the chart, in the graph in the center, the green areas illustrate the usage of natural gas coming from Argentina versus the usage of LNG, blue areas. As a result, The fourth price recovered in the fourth quarter, even if the good performance has been affected by contemporary technical outages of several thermal plants in the system. Also, important to notice that the 2021 elected demand has risen 5% over 2020. We expect that this growth will continue in 2022. Let's now and a review on the regulatory framework of the energy sector. Let's go to slide five. On transmission business, the expert panel published a discrepancy report regarding the regulatory period of 2020, 2023. Now the process is almost at the end, only pending the publication of the decree by the authorities. Considering the available information, we do not expect negative effects on the estimated tariff level already predicted. The process of distribution tariffs review is still in progress. No material advances have been made during the last month. And the final distribution tariff decree is expected to be released by the end of 2022 or early 2023. A significant review of the basic service law has been approved by the Congress and recently published, addressing the treatment of the debt incurred by the residential clients and small companies between March 2020 and December 2021. The electricity consumption threshold of 250 kilowatt-hours per month has been established to define the customers that will be subject to the effect of the loan. Customers with consumption up to 250 kWh per month will schedule the payment of their debts in 48 installments, with a limit of 15% of the average bill in 2021. The government will subsidize such quotas. If an outstanding balance will be in place at the end of the 48 installments, This will be addressed in agreement between distribution companies and governments. On the other hand, customers with over 250 kWh monthly consumption are subject to the standard rules already in place before the pandemic, with the possibility of being cut off from the service in case of not repayment of either the existing debt or the current bill. On December 31st, 2021, our total outstanding debt reached $210 million, of which $140 million can be referred to residential, being $32 million below the threshold of $250 million. Concerning the energy stabilization mechanism, according to the CNE estimate, the fund will reach its legal top of 1,350 million U.S. dollars by June 2022. As of December 21, NHL's net accounts reached 283 million U.S. dollars. Now, let's make an overview on our decarbonization process on page number six. In 2021, we successfully connected 900 megawatts of renewable projects, of which more than 90% are solar. With this milestone, we have achieved a total amount of 8 gigawatts of stored capacity, of which 70% are renewable. Such capacity, already connected to the network, will reach default production within the next month once all the tests are concluded. Let's go on slide seven. In addition to the recently connected project mentioned before, we are advancing with more than 1.4 gigawatts of additional projects. Those megawatts includes projects under construction since the last year, and the new ones already announced, like La Cabana in Rio, with facility whose construction will start in the following months, and Campo del Sol II and Sierra Gorda Solar, solar plants already under construction. Regarding our GED on green hydrogen with EMI and other partners, the wind turbine designed for high-speed wind recently arrived to Chile from Shanghai. We expect to start operation during this year, and it will be an important milestone in the development of the green hydrogen in Chile. Now let's review our network KPIs on slide number eight. We continue to deploy the digitalization of our commercial channels. In 2021, 90% of our clients' interactions were executed through digital channels. Nonetheless, the complexity introduced by the pandemic situation we have been able to enhance the quality of customer care, also thanks to the introduction of our APB app and WhatsApp interface. On the network side, our quality indicators continue to improve, supported by the increase of automation at any level of our grids. The visualization of the low voltage networks where the smart meters will have an important role in driving to lower CID figures and continue improving our overall point of service. Losses levels are plain stable, and we might see some reductions through 2022. To conclude, energy distribution improvement in 2021 reflects the easing of the sanitary restrictions and the overall economic recovery. showing a 5% increase compared to 2020 and reaching pre-pandemic levels. Now let's move to the stabilization focus on the final clients. Let's go to page number nine. Analyzing Chile is pushing on electrification of the final use of the energy. promoting the integration and development of new sustainable technologies. In January, we launched the first electrostation service in Latin America as a milestone for the growth and expansion of electromobility in Chile. This charging station, located in the strategic industrial sector of Santiago, has a total of 23 charging points to use through the Jewish Pass app. This initiative will support the reduction of 240 tons of CO2 per year. In collaboration with government authorities, last December, Analix presented the first smart square in Chile on services related to smart cities. The park has an analytic video camera, security totem, environmental sensors, and charging points, Thanks to this collaborative project with the Sub-Central Area of Telecommunications, WARP, and the Municipality of La Florida, inclusive technology is closer to everyone. Thank you, and now I will hand over to Giuseppe.

Thanks, Paolo. Let me start with a quick summary of our financial highlights on slide 11. The QEAR 2021 adjusted EBITDA reached $0.8 billion, 37% lower than last year, and the Q4 adjusted EBITDA reached $253 billion. The figure is aligned with our 2021 guidance previously reported.

Pardon me, speaker, we cannot hear you. Please check your mute button. Excuse me, this is the operator. I apologize that there will be a slight delay in today's conference. Please hold and the conference will resume momentarily. Thank you for your patience. Please remain on the line. Your conference will resume shortly. Please remain on the line. Your conference will resume shortly.

Pardon me, Isabella has rejoined us.

You may resume with your conference. Hello? Yes, we can hear you, Isabella. You may continue with your conference.

Okay, thank you very much, Giuseppe. Sorry, we have a problem. Connection to Giuseppe, please. Okay.

So let's start with a quick summary of our main financial highlights on slide 11. For the year 2021, adjusted EBITDA reached $0.8 billion. That's 37% lower than last year. And the Q4 adjusted EBITDA reached $263 million. The figure is aligned with our 2021 guidance previously proposed. In terms of adjusted net income, our $0.2 billion per year results are in line with our guidance for the year. In the last quarter, figures reached $96 million. CapEx stood at $1.1 billion, 12% higher than 2020, mostly in line with our guidance. FSO achieved $441 million, presenting a 49% reduction year-on-year. In the following slide, we will deep dive into the main financial figures. Now, let's begin with the capex on slide 12. 2021 accumulated capex reached $1.1 billion, out of which 96% allocated to achieve the SDG goals particularly devoted to the construction of our new renewable plants. Customer capex totaled $80 million, mainly allocated to build new connections and to implement our new distribution commercial system. Asset management capex reached $141 million, 17% higher than full-year 2020. mainly due to expansion of the new high-voltage projects awarded in 2021, activities to improve the quality of our services, and other digitalization projects. Development CapEx reached $960 million, mostly driven by our renewable expansion program and development of our distribution business to continue the digitalization of our network. the development of the renewable CapEx was concentrated in the solar expansion, considering the several solar projects under construction and recently connected to the grid. Regarding the network business, 2021 CapEx reached $200 million, mainly for the new customer connection and improvement of the quality of the grid, both in our distribution and transmission business. In the following slide, I will show you more detail about the mean generation in the period. In slide 13, generation of the was affected by poor hydrology in the county, which reduced our hydro generation by one terawatt-hour and increased our thermal dispatch by 0.9 terawatt-hour, mainly through our CCGT facilities. Therefore, our Q4 2021 production reached 5.2 TWh, decreasing 1% versus Q4 2020. For the year 2021, our production reached 19 TWh, slightly lower than 2020, ending with 2 TWh lower hydro production because of poor hydrology in the year. Our energy sales increased 26%, as of December 2021, primarily explained by new contracts with three customers, including Anglo-America and BHP, and retail clients transferred from energy distribution theaters as part of the unbounding regulation requirements. For what concerns our sourcing, on top of the already mentioned production variances, During 2021, we accounted a total increase of 6 TWh of purchases, which includes 3.7 on the spot market and plus 2.3 TWh from other generators, related to the unregulated customer portfolio of contracts coming from the distribution business. Let's now start with the Q4 adjusted EBITDA breakdown on slide 14. that accounted $253 million, 32% lower versus 2020 figures. Let me describe the main variances. Our generation portfolio mix resulted in a positive variation of $83 million, mainly related to higher PPA sales in Q4 2021, primarily explained by the new agreement started in 2021, with the marine company, as Anglo-American and BHP, readjustment due to indexation, and the new contracts coming from energy distribution pre-customer portfolios at the beginning of the year. Partially offset by $56 million related to higher thermal generation costs and higher export purchases. These positive results of our portfolio mix were offset by worst hydrology condition impacting in $88 million and $99 million related to higher commodity prices that impacted both the stock prices and our United States generation cost. Network remuneration demand accounting for a positive impact of $7 million related to recovery of the Q4 2021 demand in the distribution business, mainly associated with the release of the lockdown measures, and positive indexation in the tariff. Other effects accounted for $27 million mainly related to negative impacts associated to the financial age, energy stabilization mechanism impact on a disaster, and lower capitalization as generation business due to the end of construction of several projects. Let's move to slide 15 where we have the summary of fully adjusted EBITDA breakdown accounting for $724 million, still 7% lower versus 2020 figures. As you can see, the main effects are the same that we presented for the two cores. Our generation portfolio mix resulted in a positive variation of $35 million, mainly related to $171 million higher PBA sales in 2021, primarily explained by the new agreement started in 2021 re-adjustment due to indexation and a new contract coming from Edo Distribution pre-customer portfolio at the beginning of the year. Partially offset by $136 million related to the higher termination costs and higher spot purchases. These positive results of our portfolio meet were offset by what higher condition of around 2 terawatt hours impacting for $199 million, and $255 million related to the higher commodity price that impacts both the stock prices and our unitary generation costs. Network remuneration and demand accounting for a negative impact of $90 million, related to lower network remuneration, related to to the expected lower distribution and transmission tariffs, partially offset by higher volume. Other assets accounted for $90 million, mainly related to lower capitalization and generation business due to the end of construction of several projects, insurance reimbursement booked in 2020, and new contract agreement booked in Q1 2021 with heaven distribution unions. Now, on slide 16, let's go through the main drivers of our group meeting. DNA impairment from BASF reached $388 million, $15 million lower than last year, mainly related to lower DNA inhalation due to the Bocamina 2 impairment made in 2020, and lower DNA inhalation and a green power asset due to an appreciation of the Chilean emperors in the period. Next financial charges totaled an expense of $189 million, an increase of $58 million, mainly due to higher costs as a result of the factoring executed in generation business on accounting receivables that arise from the tax stabilization law, partially offset by a higher financial expense capitalized during 2021. Income tax disparities reflect the impact related to lower returns in this period, partially offset by positive effects in 2020 because of corporate reorganization in generation business and monetary tax adjustment in 2021 due to CPI in numbers. As a result of the jump to year 2021, NIST income reached $198 million. Moving now to cash flow on slide 17. 2021 SSL reached $441 million, 49% lower than previous year, mainly resulting from lower EBITDA as already explained, Higher income tax during 2021, mainly related to COVID-19 measures during 2020 that postpone part of the corporate tax payment to 2021, in addition to lower tax reimbursement in China versus 2020. And higher financial expense, mainly explained by the cost of factoring of accounts receivables that arise from the tax stabilization law in the course of factory and distribution business. These effects were partially offset by a positive impact relative to the net worth in capital versus 2021-2020, mainly claimed by factories in both generation and distribution business accounted for almost $228 million, Transmission line sales in 2020 and 2021, corresponding to any acceleraciones through the sales of Interosan with transmission line and the sales of states in Transmissora, Elevepeca, Iota and DBA. This is a total positive cash impact of $40 million in 2021. partially offset by lower collection in 2021 and the face of EBITDA in 2020. Let me now go through our debt evolution on slide 18. Our gross debt increased by $1 billion, amounting to $5 billion as of December 2021. due to the intercompany loan provided by Ellen Finance International to Ellen Schiele for $840 million, the bank loan for around $100 million, mainly to fund CapEx needs, and also $114 million increase in leasing agreements in EGP due to the renewable development. These transactions were partially offset by 43 million dollars of debits of earnest energy in a local bond. Therefore, currently 21% of our total gross debt is SDG-linked. Our plan is to continue to put this kind of debt in line with our sustainable business strategy. In terms of debt amortization, our schedule remains sustainable with an average of 6 years and with the cost of such substantially aligned with the last year figures. In terms of liquidity, we continue to have a comfortable position. We are entering some available committed lines considering the possible between-debt markets coming from the international conflict in Eastern Europe. For this year, we have around $400 million of debt at the MNCA level with AAC. It matures in December. We have already started to look at it and evaluate several opportunities in the local international market. And now I will leave the floor to Paolo for the closing remarks.

Thank you, Giuseppe. The construction of our renewable project is advancing. improving the competitiveness and resilience of our generation portfolio and supporting our long-term ambition regarding decarbonization. We will continue to support the electrification of the energy use of our clients to accelerate the reach of our net zero ambition. The implementation of our strategy continues to reflect the highest ESG standards. For example, we have been scored by the CDP climate change with a B that confirms that we are taking coordinated actions on climate change. For another year, we were included in the standards of Global Yearbook 2022 as a silver class company. This reflects our solid performance regarding the sustainability of our operations. We are advancing in the deployment of a proper asset rotation to support the implementation of our commercial strategy, strengthening a sound leverage structure. As you may be aware, today we have announced my departure from Enel Chile to assume another position within Enel Group. I would like to take this opportunity to thank all the colleagues and El Chile, the management team, that work together with me for all the support during these intense years where all of us have been called for a very strong effort to manage the business in a turbulent environment. Also, I would like to thank you for all the interesting interaction during our calls and our meetings. I hope things can come soon to normality in order to deal with regular businesses and not with the tremendous situation that we are hearing is going on in Ukraine. But tomorrow, Fabrizio Barberi is going to step in as the new CEO of Enel Chile. I wish Fabrizio all the success for the years to come. Now, let's open the Q&A section.

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

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Enrico Vartoli from Stifel. Your line is now open.

Hi, good evening, and thanks for taking my questions. I have three, actually. The first one is regarding slide 23 of the presentation, where you highlight the evolution of EBDA in the network business from distribution and transmission. So if you can guide us a bit in the relative movements of the two components, transmission and distribution, with distribution going down in 2021 but recovery in Q4, and the transmission contribution instead going down in the full quarter. And if you can guide us on how you expect these two components to move along to 2022. Second question is related to an update on the outlook, what you expect in terms of hydrology, considering the first two months of the year for 2022, and if you can update us on the guidance for EBDA for the whole year. And the third one is regarding the mention of on-asset rotation in slide 19. if you can give some flavor on what kind of asset you will be considering to be transferred in asset rotation transactions. Thank you very much.

Thank you, Enrico, for your questions. Let me take the last two questions and then I leave the first one to Giuseppe. Regarding technology, I would like to share a larger view on this. Just to consider which is the evolution of the sector in terms of resources. Because if we look at just the contribution of water resources, clearly the situation is not increasing so much. The effect of the melting season was true because of the low levels more accumulated during wintertime. And the positive effect of this is that during the last quarter of 2021, we, the sector, also we benefit from gas coming from Argentina. And so this allows to have, let's say, a management of the resources that allow to, let's say, limit the use of water resources into the basins. If we look at how we close the years and how we are opening in terms of availability of resources in the basin, we are in line with the expectation. And just to consider this is totally different from what happened end of 2020, beginning of 2021. the total lack of Argentinian gas required the coordinator of the grid of the networks to call for additional use of water. And so we reached the end of 2021, early 2021, with a low level of Beijing, but also without gas. because of lack of Argentinian gas. So from this point of view, the situation is, let's say, only more can be considered better, even if we focus on hydrology, nothing has changed, really. The other important point is that in the first four months of 2022, there continues to be availability of Argentinian gas. And so this allows, first, to manage properly the resources, and second also to optimize also the use of LNG that we have been planning since the end of last year to deliver within 2022. So just to make the long story short, water availability is still to be very low. additional resources are improving a little bit, the overall situation, even if we look at just the spot price market, the level is still under pressure, continues to be a little bit high because of some outages that we see in the sector between the end of 2021 and this early stage in 2022. Regarding asset allocation, let me make a general statement here. We add some optimization perimeter, as Giuseppe mentioned, in order to sell some non-core assets. And we are working also to address a larger part of the asset protection that at this stage is still continuing to be confidential. So I cannot highlight and describe the contents of the action that we are improving, we are performing, but let me say that we are advancing to our target. And Giuseppe, for the first question.

Yeah. So, talking about the EBITDA, let's move to slide 16 just for the guys. In terms of generation, as we said, we have an important impact for what concerns the sales of EPA. As I said before, we have a new agreement in place in 2021 that accounts for around $110 million. The remaining path to compliance, the $151 million, are related to the readjustments due to the indexation. So, basically, this is the breakdown of $151 million. And for what concerns the $136 million that we see there in terms of variable costs, I can tell you that it's almost 50-50. I mean, we have... around $70 million that is coming from the higher thermal generation costs and the remaining part because of higher spot purchases. This is for what concerns the portfolio needs. The hydrology, as I said, has an impact that is around $200 million. In this case, you know, this impact, you can see in two parts. One is the rate of the pure volume. The other one is the impact of lower hydrology on the spot price. So let me say that this $200 million includes all. And for what concerns the $255 million... Also, in this case, we have a speed that is around $100 million for the spot price and around $100 million less in the remaining part for the variable cost. Networks. Networks, as I said, we have $19 million lower than last year. Basically, because of the remuneration that changed at the end of 2020, as you remember, the new studies, at least the provision of the new studies, we started in November 2020, so we have around 19 million dollars coming from distribution and less than $10 million from the tax that has been offset by the higher volume because last year, because of the start of COVID, the volume was pretty lower than 2021. So these are the main effects for what concerns the business. And the other effect already discussed, coming from lower capitalization and insurance reimbursement that has been booked in 2020, and new contract agreement in distribution in 2021. Thank you very much.

Very clear. Just a follow-up regarding the hydrology. That means that since the hydrovolumes are in line, expecting in line with your forecast, also the guidance that you provided for the full year in terms of BDA is confirmed, is in line with how things are going on.

Regarding the volumes that are within our forecast, let me say, just to have a look at January, that the means the level of the measurement of the capability of production of our plants is, let's say, very high. So it's not going to increase. But let me say that there is a quite smart use of the basin that can support our evolution. So I cannot say that if the first month can be aligned with our expectation, if we look at just one month for a cap, there is a difference of approximately 100 gigawatts. May that begin with the fact that part of this discrepancy is derived by the use, the way in which the plant has been dispatched by the coordinator eléctrico-nacional. And so this gap is very limited and is based also on the way in which the plant has been dispatched.

Thank you very much. Very, very helpful.

Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Our next question comes from the line of Sarah Piccinini from Mediobanca. Your line is now open.

Hi. Thanks for taking my questions and congratulations for your opportunity. I have a first question on renewables. If you can please clarify how much is the level of capacity that you have secured for the coming years and how much is the level of capacity that you have contracted. So if you see an increase of this capacity related to higher commodity prices or inflation or you feel comfortable with that. The second question is on the level of working capital if you can please explain again the level of factoring that you include in this working capital and how the stabilization mechanism works so how much is the level of working capital that we can expect for 2022 and also if you see an improvement in the collection activities Then, just two clarifications. Regarding the PPA, it seems that the highest contribution from the PPA is in these fourth quarter, correct? So why is there an increase in the PTA? Maybe because the indexation has been particularly favorable in the fourth quarter. And finally, regarding the studies for the distribution and transmission business, so can we say that the regulatory review for the transmission business is set, so we expect a that the outcome is likely to be confirmed while in the distribution business the discussion is still ongoing and when we will have a disability on the process to be almost completed. Thank you very much.

Thank you, Sara. There are a lot of questions now that I catch all of them. Maybe that you can highlight something. Let's start from the end, so let me give you an highlight on the regulatory framework and then I leave to go through the numbers. There are plus and minus in the recent developments. The plus, in terms of timing at least, is that the new transmission tariff scheme, let's should be at the very final stage. The panel of experts already defined the position in all the increments that are submitted to them. Now we are waiting for the issuing of the tariff decrease. I ask you all to consider that we are in a quite peculiar situation, considering that by the 11th of March, the new government will enter, will take place. So maybe that this discontinuity may add some delay in important decisions in several sectors, including energy. So the process is ongoing. There are no... big debate on this, so on transmission, let's say, I would not see major problem. The guiding distribution is a different story because we are the third or the fourth issuing of technical report by the advice, by the consultants of the regulator. And here, the point here, the point here is pending. We submit our our, let's say, comments on the report, but we are not advanced. So maybe this is another item that is a real item that can go under the scrutiny of the new government. Let's say that, let me call it positive. Advance is only a basic service law. Because after, let's say, many months of discussions, a law has been approved by the Congress and signed and published that is trying to fix certain elements and also to allow the company to come back to the normality in the sense that from one side there is a clear and simple definition of clients that need the support and the support in this case is coming from the states So clients with a consumption below 250 kilowatt hour per month and has a debt created during the pandemic period can pay their debt in 48 installments with a capital. And such installments are going to pay by the state. The important point here is that the clients are in charge to pay their current bills. If they stop paying also the current bills, they will go under the cut-off scheme. That is the one that we are going to apply directly to the clients with the consumption above 250. Then can be cut-off. if they not repay the existing debts arising during the pandemic period or they are not paying their current bills. So it is a step higher than trying to reach the regularity. Even in 2022, we consider a year of recovery. So we are going to recover First of all, for the payment of the substance coming from the state, but also we are starting during these weeks, during these days, to put in place a cut-off scheme for the bad payers that are not in line and are not going to put on a normal situation their position. So this is, let's say, Regarding other pending elements, I would mention also something that we just mentioned. So there is no real or formal action ongoing regarding the stabilization type mechanism. Because all the players in the sector are expecting that The funds will be covered by June, next June. And so everybody is, let's say, thinking, talking about what next. I think that this is something that needs to be addressed by the new government, the new ministry, when it will be in place. because clearly it's something that has an impact on the generation sector and at the same time also on the tariff to the final clients. And Giuseppe, leave for the explanation now, so if you catch all the questions. Yeah, leave.

So for what concerns the networking capital, let me say that 2021 was an important year in terms of factoring for both generation and distribution. specifically for what concerns the receivable time from the certification price mechanism, where we made more than $200 million in terms of factoring, in terms of cashing. And all in all, factoring, including generation and distribution, we reached around $300 million in 2021. So something like $230 million higher than last year. Of course, how much the receivable coming from this law is going to be during 2022, it depends on the exchange rate. So we don't know right now. I mean, it's difficult to have a projection, but in any case... As of today, there is a law where once the receivable reaches the top, there should be an adjustment in the price, the tariff, in order to recover the additional receivable. For what concerns the level of collection, yes, we wish to improve a little bit in comparison to 2020. Of course, 2020 was the first year the first year of the so-called lay of services Basico. So clearly we had an impact now in 2021 through normal measure. We've reached to improve the percentage in terms of collation, but of course the impact in the networking capital was significant, more than $100 million. I believe that the last question was about the level of capacity. I didn't catch very well this.

Yeah, I can repeat if you want.

Yeah. Yeah, thank you.

Thank you. Yeah, it's about the capacity additions that you have for renewables in the coming years and if you have already contracted the CapEx for this new capacity or you expect some higher CapEx due to the commodity prices. Thank you.

Okay, yes, in general, of course, some projects are more than others, depending on the stage of the construction. Let me say this. In average, I would say more than 50%. I can find it out maybe in Isabella one by one if you are interested in some details in terms of contracting. But in general, yes, we are pretty advanced in the contractualization of the capital.

Many thanks. Thank you. Our next question comes from the line of Andrew McCarthy from Credit Corp Capital. Your line is now open.

Good afternoon. Many thanks, Paolo, Giuseppe, Isabella, for the presentation. My first question was a follow-up on the PEC tariff stabilization mechanism. Apologies if you may have already answered it. The line is not the best today, but just trying to understand what the alternatives are for going past June when we reach the limit of the $1.35 billion, what your conversations have been so far with authorities and what you're seeing as likely outcome there. That's the first question. Then the second question, just a question on the retirement of Boccamino 2. You know, there's been some press reports about that maybe being delayed. Just wanted to understand your take on that, your thoughts on that, whether that is now likely. And if so, until when and what your contingency plans are for making coal purchases would be. That's the second question. And then the third question is, and again, apologies if you may have already answered it, but just trying to understand how you're at it today, you know, three months after the strategic plan presentation, how you're feeling about the 2022 EBITDA target that you published at the very end of November and start of December. Just trying to get a handle on whether that now – you feel that that should maybe be adjusted already. Those are my three questions. Many thanks.

OK. Thank you, Andrew. Let me take the first two and leave. OK. Regarding the stabilization mechanism, honestly, What are the alternatives? We can be creative here. Honestly, there are some solutions that can be implemented. Honestly, I cannot be in the shoes of who will take this decision. What I can say is that according to the evolution of the price of the moon, the reference price of the energy, What we have seen at the end of 2022 is the effect of increase of the number published by the authority are the very, very small increase in terms of price and price of the energy. what are the expectations for April is that that increase, if reflected to the final tariff for the client, should be very useful. So the fund will be a caller, and then any gap should be managed in a different way. And I think that... I don't know if there is the possibility to implement additional very different solutions. I think that we have to work on what we have to improve a little bit because we, let's say, had a lot of effort to manage this situation from the generation point of view. let's say, an answer for this question. I think that this is something that should be managed starting from, let's say, next month in order to reach the landing point before the period of June when the fund will be covered. And the consequence could be something that cannot be affordable in the sense that the increase of the cost of the energy to the front line. I'm sorry to be not so comprehensive in the answer, but I don't have a precise question on this. Regarding our coal plant, Boccavina II, it was in the press since a few weeks. We always express our position. We have announced the requirements the closing of the plant by May 2022. It has been approved. And we have a plan, we are implementing a plan to close the facility. Means to manage properly the coal, the commodity, to manage properly also with big attention our people. the contracted companies that are working there, and also Russian with the communities. Any decision that may be taken by the authorities that are in charge to make this possibility, should be done in a very short way. This is what we have all said because everything has an effect on the way in which we are managing this process and if the decision of postponing the closing of the plant will be taken, we have to sit down and to define well the condition for this postponement. But for the time being, the authority that is in charge to take this decision has not yet taken a position. But time is running. This is the important point. The time is running and we cannot react properly at the very last moment.

Yes.

Well, what concerns the 2022, we confirmed the guidance that we presented in the last capital market day, so we're going to have in Ibiza between 1 and 1.1 billion dollars. Of course, I mean, as of today, the projection that we see is, you know, is expected. Clearly, any event can be, any disruptive event could affect, but as of today, we continue to keep this kind of, we don't see any issue.

Great. Thank you very much for all the additional comments.

Thank you. At this time, I'm showing no further questions over the phone line. I would like to turn the call back over to Isabella Clem.

Hi, thank you, Gigi. Actually, we have two questions from the chat. So the first one is from Fernando Salles from BTG. And the question is, if the hydrology is again poor this year, full and spot prices remain high, could the second house and new executor cover the plan fully? Where do you see the leverage by the end of the year? Thank you for your question, Fernando.

Let's start with Fernan. Fernan. Fernan, okay, so first in the list. Okay, this we are defining another, let's say, perfect storm. The fact that there is a possibility that the energy is poor again. Yes, there is. Yes, there is. There is no, let's say, possibility to predict precisely what can happen. Clearly, the 2021 was exceptional compared to all the previous years, but so we have to cope with this situation. The difference for this year, for 2022, is that there is a larger availability of Argentinian gas. that is supporting the position where LNG gas has been already called. So there is more flexibility optimization from the gas point of view. There is also the extension of the decreto that should let's say, fix certain rules in managing properly the infrastructure and the use of water. So, let's say that the current view cannot be, let's say, so optimistic because we cannot see that there will be more rain. Clearly, we are also still in some outside here, so it's difficult to say to see the effect of the hydrology here that is starting in April. So the real situation may involve starting from April and see if there will be rain or not. In this framework, clearly we see that the situation can be more under control. We have already had to the system 900 megawatts of renewable capacity. That is a sort of decoupling from the effect of lack of water and the effect of swing in commodities. Other megawatts are to come. Other players are developing their projects. So the perfect storm that There are conditions that may change from the perfect storm that we have in 2021. And then from our perspective, having a look at the leverage, we are also working to, let's say, to strengthen our financial position with extraordinary measures. So we think that all in all, even if... this pressure is not so easy, we have put in place an action plan that allows us to have more leverages to manage the difficulties.

Okay, thank you, Paolo. And then we have a second question from Romain Picard, and he is asking, asking about, please provide explanation on how the situation in Russia would affect the Chinese cost.

My first reaction here is to start monitoring what we are doing, the evolution of the commodities and how the situation in Russia can affect our current position. The first review is It's a very first feeling because you know that the situation is ongoing. Russia, the first element that can be affected are commodities, particularly gas and coal. From the perspective of our contract, we have not any direct or indirect link with European gas. So the source is more on Atlantic and the other basins. So we don't see a direct impact in terms of volumes. Really, we are in a very short, very early stage of the situation. But in terms of effect, in terms of price, the construct, the indexes in our constructs but is limited enough in terms of even if we're considering the swing, larger swing of the brands, for instance. So for the time being, we see very limited impact on our gas situation. In terms of coal, really, we are going to shut down our coal facility by May. If something may change, it may be that we have to face additional, let's say, effort to find coal on a spot market in a quite complex situation. This is something that should be addressed properly within the framework of the extension mechanism for the plant.

Okay, thank you, Paolo. And as there is no more questions, I now conclude our results conference call. Let me remind you that the investor relations team is available for any doubt you may have. Many thanks for your attention.

Thank you. Bye-bye.

Bye-bye.

Bye.

this concludes today's conference call thank you for participating you may now disconnect