Enel Chile S.A. American Depositary Shares (Each representing 50 shares of Common Stock)

Good morning, ladies and gentlemen, and welcome to NL Chile first half and second quarter 2023 results conference call. My name is Gigi, and I'll 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. 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 Chiles' press release reporting its first half and second quarter 2023 results. The presentation accompanying this conference call and Enel Chiles' annual report on Form 20F included under risk factors. You may access our first half and second quarter 2023 results, press release, and presentation on our website at www.nl.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. NL Chile undertakes no obligation to update these forward-looking statements or to disclose any development as a result of which these forward-looking statements become inaccurate, except as required by law. I would now like to turn the presentation over to Mrs. Isabella Clemes, Head of Investor Relations of Enel Chile. Please proceed.

Buenos dias, good morning, and welcome to Enel Chile second half 2023 and first half results presentation. Thanks to all for joining us today. Joining me this morning is our CEO, Fabrizio Barderi, and our CFO, Giuseppe Turchiarelli. Our presentation and related financial information are available on our website, www.enel.cl, in the Investor section, and in our app, Investors. In addition, a replay of the call will be soon available. At the end of this presentation, there will be an opportunity to ask questions via phone or webcast chat through the link Ask a Question. Media participants are connected only in listening mode. In the following slides, Fabrício will open the presentation with our key highlights of the period, our portfolio management actions, and regulatory and market main updates. Later, Giuseppe will give us a view of the business economic and financial performance. Thank you for your attention and let me now hand over the call to Fabricio. Fabricio?

Thank you, Isabella. Good morning and thanks for joining us. Let's start our presentation with our main highlights on slide two. The first topic I would like to highlight and will give you more context is the status of our several portfolio management actions. Together, these actions target the optimization and flexibility of our portfolio in the energy transition scenario. Having followed this path during the first semester, we received the commercial operation authorizations for more than one gigawatt of our renewable project. All the growth projects added 0.8 TWh of additional production to our portfolio. Another important topic was all the management and timely effective measures carried out by our team to continue the operation of our plants and safeguard the neighboring communities after the heavy rains during June. These heavy rains contributed to accumulating almost 1 TWh of water in our reservoirs for the following period. which will be very positive also in terms of reducing spot mark prices for the second semester of this year. In terms of market context, the most expected positive news has arrived. The PEC 2 factoring process is very close to being initiated. On the regulatory side, we have some updates on the government's efforts to continue pursuing the faster decarbonization path for Chile. On the performance of our business, the second quarter presented a temporary mild performance, taking into account the complex pricing environment, as expected. But looking at the first half results overall, we continue to see a significant improvement in terms of EBITDA, increasing by 50%, mainly due to all the gas optimization efforts we have been performing. Net debt has temporarily increased mainly due to the delay in the Pact 2 factoring execution. Debt, once executed, could add $300 million to our cash flow. Higher contribution of our generation business in the second half of this year due to the seasonality embedded in the business and the closing of an asset rotation transaction named Arcadia are going to allow us to reach sounder level of net depth by the end of the year. Finally, let me then talk about Arcadia. As we announced two weeks ago, we signed an agreement to sell four non-strategic solar power plants in the north of the country. We expect this to be concluded at the end of 2023. I will give you more details on this later. We continue to develop our strategy toward a cleaner and more efficient generation matrix. During this first semester, we connected 98 megawatts of additional net capacity related to the final phase of our wind farm, Renico DOS, and the first phase of our solar plant, Sierra Gorda. New renewable projects added around 1.4 terawatt hour of additional generation. During this year, we have also received the commercial operation approvals from the system operator for around 1.1 gigawatts related to Campos del Sol, Valle del Sol, Finisterre Extension and Finisterre Tres. And one choice, the latter being the largest solar power plant in Chile with a capacity of 398 megawatts. All these projects together prevent the emission of around 2.5 million tons of CO2 into the atmosphere. We are maximizing all efforts to advance in the construction of diversified projects in different zones of the country, fully aligned with our strategy to increase exposure to wind, storage and solar close to the center of consumption. In the following days, we are also going to receive the authorization for Renaioco DOS, our 144 megawatt wind project located in the south. Today, we have around 0.7 gigawatts of projects in construction, which is performing as expected. The deployment of our renewables plants aims to improve our generation mix and increase the flexibility of our portfolio, which today is 76% renewable based. Now, on page 4, let's take a look at the hydrological condition and the outlook for the second half of the year. By the end of June, there was a significant increase in rainfall, especially in the south of the country. In fact, in the seventh and eighth regions where the basins of Maule and Biobio are located, the rainfall almost reached the level of hydrology for a normal year. Fortunately, we had no damage to the infrastructure of our hydropower plants. We also managed our reservoirs in a timely manner, regulating the flows permanently, enabling us to avoid impact on the neighboring communities. In addition, as you can see on the right side of this slide, snow cover in the mountains has been improving in Maule and Laha, particularly during July. So far, we cannot predict the volume of snow. We expect to have more details in August once the system coordinator performs a new inspection. The situation allows us to foresee an optimistic hydro scenario for the second half of this year. Based on this, we can fairly estimate at least one up to two terawatt hour of additional hydro generation for the full year 2023 when compared to our last strategic plan. Regarding our gas trading activities, let me highlight some topics on slide five. During the last semester, we have continued having plentiful gas availability thanks to the long-term LNG agreement with Shell and the contracts signed with Argentinian gas suppliers. Given the availability of Argentinian gas in the central zone, it has been possible to carry out LNG swaps in the northern zone, where natural gas is not unavailable enough. Multiple gas shipments have been sent from Quintero to Mecillones during the first half of 2023, totaling around 12 terabitu, and we expect to continue sending gas to the north during the rest of the year. As you may recall, during the first quarter of this year, we executed some opportunistic sales and negotiated during the year end 2022, taking advantage of attractive prices of natural gas in the international market. These transactions contributed around $150 million in the period. In addition, we have continued to perform trading activities with local industrial and mining customers that continue to bring additional margins for our business. In the second semester, we have already granted some additional sales for the end of the year, expecting an additional $50 million to come from this trading activity. To conclude, let me say that we are also anticipating additional volumes of gas from Argentina for the October-April 24th period. On page 6, let's review our performance and new initiatives in distribution and analytics with focus on electrification and decarbonization. Our main pillars include boosting electrification and decarbonization in the public and private sectors to face climate change properly. As a result, we have taken an active role and expanded our efforts to speed up these main goals. Let me highlight some indicators and projects executed during the last half, starting with the distribution business. In our concession area, the number of customers and distributed energy continue to grow. Therefore, New opportunities and challenges will arise. The important message is that looking at the last 12 months, we see a sound improvement in the CIDI index of around 4 million. In distribution, we continue to review our processes and intelligence on energy losses to better respond to the current environment and the current sound indicators level are a result of it. Finally, regarding digital payments, we have continued promoting payments through digital channels. Regarding NLX, some important milestones focused on electrification and decarbonization of our clients' energy consumption have occurred. Let me go through some examples from this period. Regarding the decarbonization of households, this semester we have replaced 104 households 1,420 hood stoves with efficient air conditioners, contributing to a reduction of around 2,600 tons of CO2 per year. Most of these replacements are due to contracts signed with companies that seek to offset their CO2 emissions. In the field of efficient lighting in our cities, NLX has replaced the National Stadium's lighting system for the 2023 Pan American Games. bringing efficiency and quality to this important event. Third, as leaders in electric public transport, we continue participating in new projects. We have signed an integrated offer with a bus operator called VOI. This offer includes 212 e-buses, two terminals, and a PPA for 10 years. To conclude, we continue working to increase the number of public and private charging points for electric vehicles and to be awarded more lighting projects throughout the country. All these efforts are noticeable once we look at the electrification indicator that is showing a significant improvement in the period. Now, regarding market context, let me comment on major updates on slide 7. Chile is a reference in the region for its commitment towards the net zero emissions and decarbonization of the matrix. Faster renewable growth and increase in electrification require the country's prompt response. Regulations should continuously adapt to continue giving the right signs for the further and faster achievement of the country's goals. In that sense, we received positive news on the changes in the main characteristics of the 2023 regulated auction, which introduced the concept of segmentation. Now the generators can choose the zonal areas they would like to beat in the auction and clear benefits for hybrid projects. In other words, renewable energy plus storage system of four hours. Also, the government has just submitted a draft bill related to energy transition. The government is proposing the realization of a storage auction in 2024 in the north and the definition of a national energy plan to better anticipate and efficiently plan the new transmission infrastructure required for the country. This process is still in the beginning phase, so throughout the year we might have further details to share with you and how this draft bill fits with our strategy. Now let's share some more good news. The factoring process of PEC2, also known as the Consumer Protection Mechanism, is very close to being concluded. At the end of this quarter, we accumulated around $633 million relating to this instrument. The important and most expected news arrived, allowing Gencos to start recovering the credits through a factoring mechanism guaranteed by the Chilean Treasury. Around half of the accounts receivable accumulated since the second half of 2022 will be paid through an additional fee levied on the final tariff, requiring the publication of decrees for recovery. A second decree is expected to be issued in the following months related to the second half 2022 period in order to reduce the gap between the tariff and the contract price, normalizing the process. Regarding the distribution tariff review, we expect the regulator to publish the final report in the following weeks. As for the process, we still see several lines for improvement, but we managed to achieve some positive outcomes, as the panel recognized some of our claims. Now, I will hand it over to Giuseppe.

Many thanks, Fabrizio. Good morning to all connected. I will start the financial analysis on slide eight, introducing a summary of our main results for the period. In order to better evaluate the earning performance of our company, the 2022 figures are shown as a pro forma, where we are including two main adjustments. In the first half and the second quarter of 2022, the EBITDA was adjusted by the impairment made to the cold stock of the period, which amounted to 63 and 42 million dollars respectively. This adjustment had an effect on the bottom line of 43 million dollars in the first half and 29 million dollars in the second quarter of 2022. The second adjustment and the most relevant one is to exclude from 2022 figures the contribution of Enel Transmision, considering the sales this company executed in December 2022. We excluded from our analysis the EBITDA of Enel Transmision for the first half and the second quarter of 2022, which amounted to 54 and 22 million dollars respectively. NL Transmission Chile had an effect on the bottom line of $30 and $10 million in the first half and in the second quarter 2022. In terms of FFO, we are also excluding from 2022 figures the contribution of NL Transmission in terms of cash $2 million in the first half of 2022 and minus 19 million dollars in the second quarter 2022 and in 2023 we are excluding the payment of taxes related to the capital gain of this transaction of 310 million dollars so taking into the mind let's see how the earnings indicator and ffo perform in the period In the first half, EBITDA and net income showed improvement versus last year indicator, mainly as a result of the trading activity, improvement in hydrology and new renewable contribution. The quarter earnings performance on the other end was more challenging, particularly due to the temporary effect of higher spot purchases and terminal costs, and I will give you more detail in the next slide. In terms of FFO in the first half, figures continue to be impacted by the accumulation of the PEC accounts that reached $189 million during 2023. The FFO in the quarter also demonstrates the same impact, but I will give you more details later. Let's review our CAPEX on slide 9. Our first half 2023 total CAPEX reached 372 million dollars. 74% of our total CAPEX deployment was related to the renewables and 91% of the total CAPEX was linked to the SDG goals. Customer CAPEX total 41 million dollars. 14% higher than the previous year, mainly associated to the new customer connection in the period. Other investment reached $83 million, mainly as a consequence of the several maintenance and repair activities to guarantee the continuity and resilience of our operation in our power plants. Development CAPEX reached 24 million dollars representing a decrease of 39% versus last year figures in line with the remaining portfolio under construction. The 2023 CAPE shall be committed to confirming our strategy of growing in the center part of the country and in the south with wind projects. Let's move now to slide 10 where we have The summary of the second quarter EBITDA breakdown accounting for $55 million. Let me remind again the change in the company consolidation perimeter, mainly as a consequence of the sales of Enel Transmissions Chile in December last year. We have included the performance of our EBITDA for Q2 2022 for comparison purposes. Second quarter 2023 EBITDA is $18 million lower than 2022 pro forma, mainly explained by the following. $55 million increase in thermal generation costs, mainly related to lower thermal generation and lower positive effects of aging instruments in 2023 versus 2022, partially offset by lower commodity costs versus 2022. And a $36 million higher spot price in the period as a consequence of the higher dispatch costs of the Chilean thermal fleet, particularly coal units, during the 2023. Also as a consequence of the unavailability of different power plants in the system, increasing the spot prices. and a lower effect of gas optimization activities, which decreased $7 million mainly related to lower gas trading sales of around 3.6 terabitu in the period versus last year figures. The above-mentioned effects were partially offset by $34 million from higher PPA sales in the second Q2023 primarily due to higher average PPA prices, mainly related to the contract indexation, higher ancillary system services and capacity payment revenues, where the last one is mainly due to two factors, delay in the code of some market renewable projects that increase the payment for all the other projects in operation, and the new power plant connected and commissioning units the second half of 2022 and 2023. Improved hydrology contributed $19 million to our margin, $24 million contribution from renewable volume mainly related to the new capacity added. The remaining variation of our EBITDA comes from $6 million due to the grid remuneration related to indexation lower fines and compensation and higher demand higher opex and other costs mainly in the generation business by 2 million dollar associated to the new renewable capacity in operation and inflation and now let's move to slide 11 where we have the summary of the first half amid a breakdown accounting for 400 million dollars As we did in the second quarter, we are excluding the 2022 EBITDA of Enel Transmissions for competition purposes and for a better understanding of the 2023 results. Enel Chile EBITDA increased 50% or $133 million, mainly explained by $124 million from higher PPA sales in the first half of 2023 primarily due to $83 million of higher average PBA price, mainly related to indexation, $42 million mainly due to higher ancillary services system incapacity payment revenues, where the last one is mainly due to two factors. First, delay in the code of some market renewable projects that increased the payment for all other projects in operation and to the new power plant connected and commissioned during the second half 2022 and 2023. $110 million of gas optimization activities versus previous year, mainly due to higher volume and higher commercialization prices, improved hydrology volume contributing $33 million to our margin and $33 million contribution from renewable growth volume mainly related to the new capacity added. The above-mentioned effects were partially offset by a $152 million increase in variable costs mainly related to $129 million related to higher thermal generation costs due to commodity prices and lower thermal generation, 24 million dollars related to higher purchases in the period as a consequence of the higher commodity prices during 2023 and for the unavailability of different power plants in the system and partially compensated by an agreement with one of our PPA suppliers. The remaining variation of our EBITDA comes from $7 million due to great remuneration related to the indexation, lower fines and compensation, and higher demand. Higher OPEX mainly in generation business by $14 million associated to new renewable capacity and inflation across all the business. Let's move now to slide 12 to take a look at our generation KPI. Net electricity generation total 10.6 TWh as of June 2023, 3% higher than the level recorded in the first half of 2022. This was mostly due to the higher solar and hydro generation during the current year, reflecting the contribution of new projects and higher water availability, respectively. During the second quarter of 2023, net generation reached 5.5 TWh, increasing 8% when compared to the second quarter of 2022, mainly due to higher renewable generation. Our energy sales totaled 15.5 TWh during the first half of 2023, maintaining the level recorded as of June 2022. This was mainly explained by lower sales to free markets, offset by an improvement in the sales to regulated classes. During the last quarter, physical sales increased 3%, mainly due to the higher sales to free customers. As a result, in terms of energy balance, the amount of energy purchased in the spot market, both in solar and non-solar hour, was basically in line with the last year figures. Now, on slide 13, let's go through the main drivers of our group net income. Mid-income from the first half this year increased 90% to $141 million, mainly resulting from greater EBITDA of $133 million, as explained in the previous slides. Flat depreciation and amortization impact as higher depreciation related to the new renewable project in the operation are fully compensated by lower bad debt in essential and distribution. mainly related to the client's debt recovery as a result of the several commercial actions, including disconnection and commercial agreements. Flat financial results and equity investment, considering higher financial income in the period, mainly explained by greater returns on the short-term fixed income investment, related to the higher cash availability and interest rates, lower debt costs mainly to lower debt level and higher capitalization interest. Higher financial costs mainly due to the factoring of accounts receivable executed in 2022 versus the one executed in 2023. Lower financial revenue related to the commissioning of our former core fleet. partially offset by higher income tax that increased by $61 million, mostly due to the higher EBITDA results and higher monetary correction. The second quarter 2023 net income reached a negative $33 million, mainly related to lower EBITDA, as detailed in the previous slides, lower depreciation and amortization essentially due to the lower bed depth in in distribution mainly related to the client depth recovery as a result of several commercial action including disconnection and agreement partially affected by higher depreciation related to the new renewable project in operation Higher financial results and equity investment of $70 million, mainly related to lower financial revenue related to the decommissioning of our former coal fleet. Higher financial costs due to factoring of accounts receivables executed in 2022 versus the ones executed in 2023. Higher financial income in the period mainly explained by greater return on short-term fixed-income investments related to the higher cash availability interest rate, lower debt costs mainly due to lower debt level and higher capitalized interest. Higher income tax that increased by 14 million dollars mostly due to provision related to the classified NACADA as a help for sale higher monetary correction partially offset by lower EBT results. Moving to FFO analysis on slide 14. Let's now see in more detail the FFO for this video. The pro forma FFO in 2023 that excluded the $310 million payment on taxes from the capital gains generated with energy transition reached a negative $5 million, which reflects a $217 million improvement once comparing to last year's performer figures, resulting from $400 million coming from EBITDA driven by better hydrology, higher renewable contribution and gas trading activity in the period. $118 million negative impact from the cumulative stabilization mechanism effect in our receivables, reducing the cash conversion of the period. This situation has slightly improved since the Treasury Decree for July 2022 period was published enabling us to start the process of recovery of part of these receivables. According to the mechanism and the process approved, we expect to recover an important part of the balance accumulated during this year. So, in August, we expect around 300 million dollars from the factoring process with IDB. Working capital negative reached a negative balance of $111 million as a consequence of energy and capex rebound from 2022 last month, partially offset by cash management action and cash-in from the sales of Santa Rosa building. Working capital improvement once compared with the last figures here mainly comes from Santa Rosa. building another managerial section. Income tax reached $2 million, mainly related to better results in generation business in both 2022 and first half 2023, offset by tax recovery from previous periods for both generation and distribution business. Once compared the income tax paid in 2023 versus last year, the main difference comes from the tax recovery from previous period obtained now during this year. To conclude, now on financial expenses that reached $103 million mainly due to the debt interest paid during the year, higher factoring costs partially offset by higher cash interest Financial expense figures are in line with the last year. Now let's take a look at our liquidity and leverage position on page 15. Our gross debt increased around $0.4 billion to $5 billion as of June 2023, when compared to December 2022. This increase was mainly related to the delay of PEC2 payment and other network capital needs as the tax payment of the sales of Enel Transmissions executed last year. It should be noted that this debt increase is a temporary effect as we should receive part of the PEC2 funds, hopefully within August, and we will start to see higher income from our operating business coming from the better hydrology and later this year the sales of Arcadia assets. All in all, guaranteeing a net debt EBITDA lower than three times by the end of 2023. The average of our debt maturity reached 5.7 years at the end of the last semester, maintaining the largest portion of the fixed rate with 77% of the total debt. Regarding our maturity during 2023, in the slide we are seeing a 200 million dollar maturity for this year of 2023. This amount was already paid early July, using a bridge instrument that shall be paid once the packed two factory resources are cashed in. The average cost of our debt reached 4.7% at the end of last June, a little bit higher than December figures due to the new profile of our debt, prepayment of some bridge short time instruments and current market situation. I would like to reinforce the message that the current debt levels are temporary. considering all the sources generated by our asset during the second half of this year, as you may be aware that our generation business has an important seasonality during the raining season and by the sources coming from Arcade transactions. Fabrizio will give you more details. Many thanks. Now I will hand over to Fabrizio.

Many thanks, Giuseppe. Now, on page 16, as part of our goal to continue optimizing our portfolio, reinforcing the value of our assets and, as a consequence, strengthening the sustainability of our balance sheet, I would like to speak on the recent announcement of the sale of our subsidiary Arcadia. On July 12th, Enercile signed an agreement with Sonadix to sell its entire stake in Arcadia Generación Solar. operates and owns a portfolio of 460 MW of generation assets that includes four solar power plants named Diego del Magro, Carrera Pinto, Pampa Solar Norte and Domeico. The agreement provides that SONEDIX will pay an equity value of $550 million for the entire stake held by Enel Chile and share secure back-to-back PPAs to Enel with different tenures of around 80% of the production of the power plant defined in the contract. The capital gain embedded in this transaction will generate an estimated impact in our net income of $110 million in 2023 and the cash impact of around $500 million. net of taxes of about $50 million. The purchase and sale transaction is subject to certain condition precedents that are customary for these kinds of transactions, like the approval from the Chilean Antitrust Authority, the Fiscalía Nacional Económica. The closing of the transaction is expected by the end of this year. This transaction is part of our asset rotation initiatives and unlocking value goals, targeting the optimization and diversification of our portfolio. The funds generated with the sale will create further space for our company to execute our CapEx deployment plan, while at the same time strengthening our financial position in a virtuous cycle. With the execution of the Enel Transmission Sale and the Shell Agreement, both executed last year, and the closing of this transaction, we have Enel Chile in a much more comfortable position to continue targeting a creative and strategic market opportunity. Now I will point out some closing remarks on slide 17. The first semester showed a solid operating performance. The elements that we have now catalyzed by better than expected hydrology, full natural gas availability and the quality of our assets support our view for a solid 2023 result. Our business has progressed in line with our expectations and visibility for the rest of the year allows us to be fully confident in reaching the upper range of our targets provided back in November 2023. The repositioning of our generation portfolio, growth actions and diversification of our sources continues to evolve. The Arcadia transaction was an important and well-designed action that will support the execution of our committed plan. The growth of our renewable fleet is well on track and will continue to bring additional value to our portfolio, complementing and diversifying our matrix and sourcing needs. Thanks to the portfolio optimization actions that we have been constantly pursuing and the significant asset rotation initiative addressed, we continue to deliver a strong economic performance and build a solid financial balance sheet. This will allow us to leverage our strong positioning in the energy transition context and exploit the opportunities that will materialize. Let me now hand over to Isabella.

Thank you, Fabricio. Thank you all for your attention. Now let's begin the Q&A section. We will receive questions via phone and the chat in the webcast on this equation. The Q&A session is now open. Gigi, please, you may start.

Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Beatriz Giannola from Mediobanca.

Yes, good morning, everybody, and thanks for taking my questions. I have three. My first question regards slide 14. I can see there's been some cash flow absorption related to the stabilization mechanism. Can you provide more color on how do you expect this amount to evolve by year-end? And related to this, how do you see debt evolving during the year? The second one in studies on hydro. We see that the generation has been positively impacted by good hydro output. How do you see this evolving in 2023, and how do you see this in the years to come? And a very last one. You confirmed your earnings guidance for 2023. What about the one for EBDA? Is that still confirmed? Can you please provide more color on this? Many thanks.

Well, I think that I can answer the second question about hydro generation, then let Giuseppe answer to the first and the third question. As I mentioned during my presentation, basically, we already have one Tarawa Tower more than expected in our reservoir. uh so that it's quite easy to predict that at least one terawatt hour we will exceed at least one terawatt hour our expectation of uh either generation for this year as for the following years uh uh well probably a good level of uh hydro inflows during 2023 could in some way also benefit the beginning of 2024 but for sure this is of course a temporary effect let me say that structurally it's something that's difficult to comment that we could be more optimistic on the following years For sure, we are quite optimistic for this year and some probably also some potential positive effect on 2024. Okay.

For what concerns the PEC 2, as I said in the first alpha, we accounted $189 million and we believe We believe that we are going to accrue at the end of the year something like more than 700 million dollars. All in all, not coming from the 2023. I'm talking about the full amount of back receivables. Clearly, in August, we expect to Perform the first part of factoring that is going to be around 20 million dollar and another 100 a little bit more Factoring of back by the end of the year. So let me say Fully, it should be around 400 million dollar fact for what concern the guidance basically we are confirming the upper side of our target in terms of ABDA because on one side the remaining margin coming from the trading activity is already closed so we are going to perform the margin in the last quarter but in the same time the positive effect of hydrology is is going to guarantee a certain level of confidence in reaching the bida this is basically the situation we have to remember that more hydrology doesn't mean only energy available uh during the night so but also a reduction in the spot price so basically we are benefit benefiting from both sides so this is the reason because we believe the target that we had began is reachable

Thank you, Giuseppe and Fabrizio. Gigi, do we have more questions on the line?

Thank you. Yes. One moment for our next question. Our next question comes from the line of Florencia Mayorga from MetLife.

Hey, everyone. Thanks for getting my question. I have two questions. One is regarding your expectation on prices for the generation business, the spot one, regulating and for free clients, and the other one is more regarding your expectation on leverage by year end considering both the asset sales recently announced. Thank you.

Okay, let me address the first question and then I'll hand over to Giuseppe for the second one. Well, in terms of spot prices, as I said, given the reduction of international commodity prices, which would be reflected in lower costs in the system, and also thanks to the good hydrological conditions, the second part of the year, we would expect a significant lower prices in the spot market. That is good news for us. As for the free clients, I think, I guess you are referring to long term contrast prices for free clients. In that respect, we are seeing some positive trend in the market in the sense that Due to the financial Problems Experienced from some renewable player in the last month We are seeing a context that in the medium long term seems to be a little bit more tighter reflecting in a better prices for for in the in the in the free market it was some some way it was already factored in the the the last regulated auction last year but i think this trend has been reinforcing in the last in the last month so

we are enjoying more comfortable prices selling our energy to to free customers okay for what concern the leverage that we're gonna have at the end of this year according to our projection we are going to be below the three times net activity down thanks to the confirming the ABDA of our guidance and supporting our leverage with the cashing of the sales of the asset. This is going to be around $450 million.

Thank you so much.

Thank you. Gigi, do you have more questions on the line? Thank you. At this time, I'm showing no further questions. I would like to turn the conference back over to Isabella Clemens.

Perfect. So we have some questions here coming from the chat. The first one is coming from Andrew McCartney. Andrew McCartney is asking, did I understood correctly that you expect one up to two terawatt hours more of hydro generation in 2023 versus the strategy plan forecast of 9.3? How much additional EBITDA should that your $1.2 billion EBITDA target for 2023? Fabricio Giuseppe.

Yeah, I can address. We have just mentioned from a physical point of view that it's true. So confirming that we are expecting from one to two terawatt hour more of hydrogen generation in 2023 compared to our forecast of 9.3. So it was correct. what Andrew was referring to. It is quite easy to say that, as I mentioned, we have already one terawatt hour more in our reservoirs, so it's quite easy to be in the first part of the range, but I'm quite optimistic seeing also some short-term forecasts that we could also have something more of that. And in terms of EBITDA, let me say that approximately each terawatt hour could add like $50 million more in our EBITDA. And that was the reason why I also was quite comfortable in mentioning that we are in the upper range of our guidance.

Okay, thank you, Fabricio. We have another question coming from Rodrigo Mora from Moneda. Rodrigo is asking more details about the Arcadia transaction. He is asking if we could give more details about the PPA security, this operation, in terms of the duration of this PPA.

Okay, let me say that this PPA is absolutely like a mirror PPA of what originally these plants have in different times of the year. of recent years when they were built. So each PPA started in a different year and so as a consequence also have a different expiry in the future. So we are saying that these PPAs start declining in 2029 And the last one that refers to the more recent plan, that is Domeico, is going to end completely in 2041. As I said, there are contracts that are absolutely in a mirror condition of the original PPAs that each of these plants signed at the moment of their construction, and of course we have mirror sales in our portfolio that would be, of course, addressed also from the 80% of our energy sourcing that we continue to have thanks to this mirroring PPA.

Okay, Fabrizio, many thanks. So we are all for the questions. So I would like to thank you all. for your attendance today and any other information you may need, the investor relations team will be available. Okay, thank you. Have a good day.

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