Enel Chile S.A.

Good afternoon, ladies and gentlemen, and welcome to Inoculate first quarter 2022 results conference call. My name is Olivia and I will be your operator for today. At this time, all participants 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 the star and the one key on your touchtone telephone. 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 NLTLIFT Press release reporting is first quarter 2022 results. The presentation accompanying this conference call and Enel Chile's annual report on Form 20F included under risk factors. You may access our first quarter 2022 results press release and presentation on our website, www.enel.cl, and our 20F on the SEC's website, www.sec.gov. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. NLT will undertake 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 Clemens, Head of Investor Relations of Enel Chile. Please proceed.

Buenas tardes, good afternoon, and welcome to Enel Chile's first quarter 2022 results presentation. Thanks to all for joining us today. Joining me this afternoon are CFO Giuseppe Turchiarelli, Let me remind you that our presentation and related financial information are available on our website, www.nl.cl, in the Investors Relations section, and in our app, Investors. In addition, a replay of the call will be soon available. In the final of this presentation, there will be an opportunity to ask questions via phone or webcast chat. Through the link, ask a question. On this occasion, media participants are connected only in Eastern mode. In the following slides, Giuseppe will open the presentation with our main highlights and strategy updates. Then we will go through our main financial results. Thank you all for your attention, and now let's hand over to Giuseppe. Giuseppe, please.

Thank you, Isabella. Good afternoon, and thanks for joining us. Let me start with the highlights of the period on slide three. We continue to enforce our leadership in renewable markets, growing with renewable capacity. We connected around 0.2 gigawatts of renewables to the grid during the first quarter of this year, and we still have over 1 gigawatt of projects under construction that will be added during the 2022-2024 period. Argentina's natural gas availability was a positive highlight of the year. During this quarter, the natural gas supply from Argentina was burned, which supported our natural gas loss strategy, as I will show you later on. In addition, for this year, we have contracted with Shell for around 12 LNG cargoes to fulfill our operation in Chile, a strategy that gives us more flexibility. The annual general meeting held on April 27th approved the new dividend policy of 30% payout ratio for 2021 and 2022. This reflects the final dividend approved of 0.26 trillion pesos with payment date of May 27th, totaling a distribution for the 2021 fiscal year of 0.37 trillion pesos. That's it. And lastly, the extraordinary general meeting held right after the AGM approved the e-mobility business Carbound, which considers selling the 51% stake of Enel X-Way Chile to Enel SBA, representing a cash-in of 12.75 million euros in Enel Chile during the Q2 2022. Now, Let's move to slide four to briefly talk about the market situation. During 2021, we saw a combination of factors that led to a very particular and stressed situation for the Chilean electricity system. Unfortunately, some of these factors continue to impact the energy market, such as a poor hydrology, a delay in the commissioning of some renewable projects at the country level, and the important overall increase of commodity price worsened by Russia-Ukraine conflict. In addition, there have been several failures in maintenance of thermal power plants that have put even more pressure on the system. All these factors have led to an increase in margin and cost during the first quarter 2022. We were able to cope with this situation thanks to our solid LNG supply position, which includes our long-term LNG contract with Shell and the Argentinian gas supply, which was successfully delivered during the first quarter this year. In this regard, it is worth noting that we have 12 LNG shipments already committed for the year 2022, ensuring our supply for the entire period. out of which we have already received three cargoes. On Argentinian gas, between January and April 2022, we have imported an amount of gas equivalent to five LNG cargoes approximately. Our renewable expansion will be called to bring additional flexibility, so let's now take a look. on our generation portfolio on slide five. We are convinced that renewable expansion is a key factor to cope with the energy transition, and it will give us a better position in the current challenging context. Therefore, during the first quarter, we connected 178 megawatts of solar capacity to prove our consolidated position in renewable development in China. In line with our decarbonization plan and asset optimization, we completed the sale of Diego del Magro thermal power plant, 24 megawatts, during the first quarter. Chile is now at the forefront of the jet energy transition, and we will continue contributing to consolidating the country position and reaching the environmental targets set out in the Paris Agreement. Now, let's see our evolution in terms of network main API that support the diversification movement from slide six. We continue to deploy the digitalization of our commercial channels. In the first quarter of 2022, 86% of our client interaction was executed through digital channels. Despite the complexity introduced by the pandemic situation, we have been able to enhance the quality of our customer care thanks to the introduction of our app and WhatsApp interfaces to improve the communication with our customers. On the network side, our quality indicator continues to improve, supported by an increase of automation at any level of our bridge. As a result, our SAID indicator decreased by 15%. To conclude, energy distribution increased 5% in Q1 2022 compared to Q1 2021, reflecting the easing of the sanitary restrictions and overall economic recovery and reaching pre-pandemic levels. Now, let's see the main KPIs and highlights of power beyond commodity strategy that is supporting the electrification and decarbonization of the panel consumption on slide 7. Electrification has turned into one of the main pillars of the decarbonization process and one of the core elements of our strategy. In that sense, we continue to develop different and innovative initiatives. promoting new uses of energy and bringing real change towards a sustainable future. E-mobility is one of the channels towards electrification, and on this line we are working on stewardship structures to foster the growth. One example is the creation of NLX Way Chile, which will be focused on e-mobility facilities. During the external nature of the meeting held on April 27th, 80% of our shareholders approved the sale of 51% of this unit to an SBA. That, by an international arm on e-mobility, has a commitment to accelerate electricity mobility in the country in line with the global trend, benefiting from a scale economy. In our view, the growth of this unit shall bring additional opportunity to our generation and distribution business. During the first quarter, we have incorporated 107 new electric buses into the public transportation system associated with Transantiago 5. This incorporation is also part of our Circular Cities project. It brings the development of the infrastructure and the energy sales, improving the quality of services and bringing technology closer to the people. E-industries and E-cities are important parts of electrification. In line with that, we have developed, with the Mandarin Oriental Hotel, the first rooftop in Chile that incorporates photovoltaic panels and biodiversities. which deliver unique and differentiated experiences with a dark, positive impact on environment. On the city, we continue to tackle the opportunity to build circular cities now outside the Santiago region. Now, in slide 09 and 09, on a summary of our main financial highlights of the quarter, Let me start with a quick summary of the adjustments applied and a summary of our main financial highlights. In the first quarter of 2022, we applied an adjustment of $21 million in EBITDA due to the impairment made on the cold stock of the period. This has an effect at the bottom line of $14 million. To the same period of 2021, the adjustment applied due to the cold stock was $13 million, with an effect at the bottom line of $9 million. The 2021 adjusted EBITDA had an increase of 15% or $29 million, mainly due to positive provisions of transmission business as a result of the conclusion of the regulatory status review process and indexation at a higher volume on generation and distribution differences. In terms of adjusted net income, this increase by 41% reflects the higher EBITDA and the lower financial costs in the period coming from the structuring of the pension accounts made in Q1 2021. to improve the liquidity of the compact. CAPEX reached $167 million, 31% lower than Q2021, mainly due to the connection of the new renewable capacity, which has ended in December 2021. $151 million, presenting a significant reduction quarter-on-quarter, mainly due to the factoring of the PEC accounts made in June 2021 and the sales of Interos and NIST services online. Now, let's begin with the capex on slide 10. 2022 first quarter accumulated capex reached $167 million. out of which 93% are located to achieve the SDG goals, particularly devoted to the construction of our new renewable capacity. Customer capex total $15 million, mainly located to build new connections and to implement our new distribution commercial system. Asset management capex, which is $29 million, 35% higher than 1st June 2021, mainly due to the maintenance in our CCGP unit. Development capex reached $123 million, a decrease of 41%, mostly driven by our renewable extension program, which added nearly of 0.9 gigawatts of installed capacity in December 2021, and the recently connected by solar power plant. Regarding the network business, we executed the lower traffic due to the quality and digitalization project made into one 2021. Let's move now to slide 11. where we had the summary of the first quarter adjusted EBITDA breakdown accounting for $26 million, 15% higher versus 2021 figures. Our generation portfolio mix resulted in a positive variation of $14 million, mainly related to $82 million higher GPA sales in 2020, 2021-2022, primarily explained by the higher foreign exchange of the Chinese pesos against dollars, the new PPA agreement started in 2021, and the higher regulated demand. New renewable capacity, which was connected in December 2021, added $8 million in the bid-out decision. A positive effect on variable costs and purchases, mainly due to a more efficient thermal injection in the period, boosted by an aging commodity coverage instrument negotiated for the period. All these elements were partially offset by a higher thermal generation cost due to the commodity prices. On the effect that I have just mentioned, were partially offset by higher stock price in the system in the Q1 2021, mainly due to the higher commodity prices at the World War XI, hydrology, and several system facilities that were into outgift during the period. And following on the slide, let me talk about the other elements that explain our data. Hydrology continued to have a negative trend. The 0.2 terawatt-hour LED hydrogeneration impacted our EBITDA in around $16 million. Network remuneration and demand accounting for a positive impact of $20 million related to a positive impact of the release of the final transmission type technical report issued by the regulator in the first quarter 2022. This final tariff allows us to reduce the provision we have been made since the beginning of the new regulatory cycle that started in January 2020, and the tariff indexation in both business, network business, and the recovery of the demand in the period, which increased 5% in the Q1 2022, compared with the Q1 2021, reaching a semi-minimum level other aspects accounted for $10 million, mainly related to lower OPEX in network business due to the regional agreement signed in 2021, and higher capitalization of generation business due to the construction of the project. Let me now give you more detail on generation on page 12. Next, electricity generation reduced by 15% to 5.2 terawatt-hours, mainly as a result of a higher dispatch of our combined type of power plant, and higher solar generation in the field, partially affected by lower hydro generation related to reduced water availability. Our energy sales increased 27% during the first quarter of 2022, essentially explained by the higher sales to pre-customers primarily related to the new contract, coupled with an improvement in sales to regulated customers. Adjusted EBITDA grew 4% to $180 million, reflecting the portfolio effect that had previously been mentioned. Regarding our sourcing on the stock of the ready-making production variances, we have counted a total increase of 1.1 terawatt-hours or purchases primarily on the stock market to meet the higher energy demands of the quarter. Let me now give you more detail on networks on page 15. In Feb-June 2022, our network business reached 50 million dollars, an increase of 71% compared to 2021, due to the above-mentioned effects. One of the positive effects on transmission business, as explained in that slide, the start of taxation in both network business and recovery of demand in the field, which increased 5% in Q1 2021 compared to Q1 2021, reaching the same level. Lower OPEX due to the union agreement signed in Q1 2021. The performance of the network business in this quarter improved regarding Q1 2021. the demand reached pre-pandemic increasing 5% and the sales decreased in 10 minutes in this quarter. In regulatory terms, we expect that the tariffs decreased from traditional business will be published during the first half of this year. Now, on slide 14, let's go to the main driver of our group meeting. Adopted EBITDA increased 15% to reach a total of $26 million, mostly owing to the better results in distribution and distribution business. DNA impairment and backbite reached $77 million, $9 million higher than the first quarter of 2021, mainly related to the higher depreciation and amortization in energy and power assets, primarily explained by exchange rate effects and the initial commissioning of new solar power plants. Also, there was a higher depreciation in the distribution and transmission segment related to the transfer of new investments into operation and the higher amortization of intangible assets related to the new commercial system, frequently upgraded at NL Financial results recorded at $36 million, declining by $11 million, meaning to a lower expense relative to the factoring executed in Q1 2021 in generation business on account receivable that arose from the tariff stabilization laws. Increasing income tax was basically related to the improvement in results during the Q1 2022, partially compensated by higher tax credits due to higher monetary collection. Therefore, the adjusted Q1 2022 net income reached $89 million, representing a 41% growth when compared to the first quarter of last year. moving to the SSO on this quarter 2022 on July 15th. Q1 2022 SSO reached a negative $151 billion, 151% lower than previous year figures, mainly resulting from negative one-off effects related to the factory made in Q1 2021 of the spec account which had a commodity during the period in order to manage the cash needs from the business operation. And higher commodity accounts of the stabilization mechanism 2.1.2.2 versus 2.1.2.1, which has reduced the cash conversion in $44 million. Negative effects related to the net working capital versus 2.1.2.1, mainly explained by Kintero-San Luis transmission line sales corresponding to MSNS in Chile with a total positive cash of $29 million in Q1 2021. A lower collection of corporate clients in Q1 2022 and a lower factoring of distribution receivable accounts in the period compared to Q1 2021 also affected the cash conversion. FIRE cost of payment in the period and not catch a debt. Entire financial expense mainly explained by the new debt time. These effects were offset by higher debt that is already explained and lower income tax during Q1 2022, mainly related to the lower PPM rate in the period in generation and distribution period. Let me now go to our debt evolution on slide 16. Our gross debt increased by $0.3 billion, amounting to $5.3 billion as of March 2022. Due to an intercompany loan granted by Enel Finance International for $300 million, mainly to fund capex and networking capital needs, In terms of debt amortization, our schedule remains sustainable with an average maturity of 5.5 years. For the current year, we had around $400 million debt at NHK level with AFI that has the maturity in design. We have already started to evaluate several opportunities in the local and international markets in order to face the most efficient options. The average cost of the debt in March 2022 decreased to 3.9% from 4.4% as of December 2021 as a result of the financial management error carried out during the last month. On the other hand, 20% of our total gross debt is currently SDG. Our plan is to continue to pursue this kind of debt in line with our sustainable business strategy. In terms of liquidity, we continue to have a comfortable position. We are returning some available committed lines considering the possible testing in the debt market coming from the international complex in Eastern Europe. Now, I would like to point out some closing remarks. We are always looking for new alternatives to strengthen our generation portfolio, making it cleaner, efficient, and resilient to external shocks, such as the commodity volatility that the world is facing. We will continue to pursue the electrification of the country to open the access for more uses of electricity for our clients and communities. We are pleased to announce that we published our first integrated annual report. This report includes the financial and non-financial information for the 2021 period. And we also published the 2021 sustainable report. Both reports are aligned with CCFD and GRI and SAP standards. And they are available in our website in the investor section. The record reflects how sustainability is fully integrated into our business model and a risk management and validation data. It also demonstrates the company effort to face the energy transition, mainly in the countries of decarbonization and electrification, and comply with our mid-zero commitment and the group commitment to the Paris Agreement. We are scaring and active portfolio management plans and other case initiatives to support the implementation of our commercial strategy, strengthening a sound leverage structure. Let me now hand over to Isabel.