Enel Spa Unsp/Adr

Good morning, ladies and gentlemen, and welcome to NL Chile third quarter and nine months 2025 results conference call. My name is Carmen, and I will be your operator for today. 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 risk 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 NL Chile's press release reporting its third quarter and nine months 2025 results. The presentation accompanying this conference call and NL Chile's annual report on Form 20F included on the risk factors. You may access our third quarter and nine months 2025 results press release and presentation on our website at www.nl.cl and our 20F on the SEC's website at www.sec.gov. Readers are cautioned not to place under reliance on those forward-looking statements which speak only as of their dates. NL Chile undertakes no obligation to update these forward-looking statements or to disclose any development as a result of which these forward-looking statements become inaccurate except as required by law. I would now like to turn the presentation over to Ms. Isabella Clemes, Head of Investor Relations of NL Chile. Please proceed.

Buenos dias, good morning and welcome to NL Chile's 2025 30 quarter and nine months results presentation. We greatly appreciate you taking the time to joining us today. My name is Isabella Clemes and I'm the head of investor relations. Joining me this morning is our CFO Simone Conticelli. Our presentation and financial Related information are available on our website, www.nl.cl, in the investor section, as well as through 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 webcast chat through the link, Ask a Question. Media participants are connected in listening mode. Simone will kick off the presentation by covering key highlights of the period, our portfolio management actions, providing us updates on the regulatory contest, and an overview of our business, economic, and financial performance for the period. Thank you all for your attention, and now let me hand over the call to Simone. Simone?

Thank you, Isabella. Good morning, and thank you for your participation. Let's start the presentation with our main highlights of the period. Let's begin with portfolio management. We observed a high-level performance of our thermal generation fleet, which helped us offset lower hydrological conditions during the course. This outcome reflects our ability to adapt to evolving market dynamics and maintain operational stability. In addition, our gas optimization activities continued to support our margin, reinforcing their strategic role in balancing our portfolio and mitigating exposure to spot market volatility. On the distribution side, we achieved successful implementation of the comprehensive winter plan aimed at strengthening grid resilience and improving service continuity under challenging climate conditions. Indeed, our performance in the period was one of the best in Chile. The winter plan included the deployment of emergency crews strategically positioned in high-risk areas, extensive vegetation management action, and the installation of new telecontrol units to reduce restoration time. Additionally, targeted measures were implemented to support vulnerable customers, ensuring continuity of supply during adverse weather events. Now let's move on the Chilean regulatory contest. With reference to the VAD 2024-2028, a key milestone was the publication in the last weeks of the consultant report, followed by the preliminary regulatory report technical report. I will give you more details about it. Furthermore, in October was also released the Preliminary Regulated Energy Tariff Report for the first half of 2026. Now, the Generation Association, of which Enel is a part of, is working with authorities regarding the outcomes of the report. Looking ahead, two regulated energy auctions are scheduled for the fourth quarter of 2025. Let's now turn to business profitability. We closed the first nine months of 2025 with a stable EBITDA compared to the previous year, despite the difficult contest and significantly lower hydrology, demonstrating the resilience of our operations. our sfo remained positive driven by the recovery of 261 million dollars of receivables generated by the peck mechanism this inflow significantly strengthened our cash position for the next for the year as a result we maintain a strong liquidity position enabling us to support our development plan and to mitigate potential headwind associated with the market and climate uncertainties. In the next slide, we will take a closer look at these topics to provide further insight, but let me anticipate that these achievements demonstrate our focus on operational excellence and sustainable growth. We remain committed to delivering long-term value to our shareholders while advancing in the energy transition and strengthening the resilience of our business. And now let's move to slide four to talk about the energy market situation, especially regarding hydrology and gas opportunities. On the left side of the slide, you can see our hydro production over the last 10 years. For 2025, we set our target at 10.7 terawatt hour based on the last 10 year average. Although 2025 has been a particularly dry year, our hydro production has remained in line with our strategic plan. This was possible thanks to the flexibility of our hydroplanes with access to hydrological basins. For this reason, we are keeping our hydrology guidance unchanged. To manage this dry scenario, we relied also on the flexible and competitive thermal fleet supported by a strong and diversified LNG and Argentine gas supply. This helped us respond quickly to market needs and reduce exposure to hydrovolatility. As a result, we increased thermal production, used competitive gas and seized favorable trading opportunities, adding $74 million in margin during the first nine months of 2025. Regarding gas business, in October we completed a gas sage to Europe with margins similar to those recorded in the second quarter of 2025. Looking ahead to 2026, we are evaluating options to secure competitive gas from Argentina through firm contracts in line with the past year's strategy. And now, moving on to slide 5, let's review our generation portfolio and energy balance. During the first nine months of 2025, net production decreased by 9% compared to the same period of 2024. This decline was driven by lower hydro dispatch during the first nine months of 2025, reduction in renewable energy production due to the maintenance of two solar plants, higher curtailment levels also caused by transmission line limitations, These efforts were partially offset by higher contributions from the efficient CCGT. The same factors impacted the third quarter generation that amounted to 5.4 TWh lower by 1.1 TWh versus the same period of 2024. Energy sales reached 22.7 TWh mainly due to the lower sales to regulated customers. following the expiration of regulated contracts. The regulated contract volume reduction is also the main cause for the decrease of the third quarter sale from 8.4 to 7.6 TWh. And now I would like to take a moment to review an important milestone in the resilient program of our distribution business. We are pleased to share that we successfully implemented a comprehensive winter plan aimed at strengthening the stability of our grids and guaranteeing service continuity during the most challenging months of the year, particularly for our most vulnerable customers. First of all, we deployed 376 emergency crews across our service territory. These teams were mobilized to respond to outages and restore power. One of the most impactful initiatives was the execution of more than 115,000 pre-trimming actions, which significantly reduced feeder failures in areas exposed to severe weather. We also modernized the grids, installing new tele-controlled units This helped us to isolate faults and reducing service interruption time. In parallel, we implemented several infrastructure upgrades that enhanced network reliability and quality of service for more than 193,000 customers. Supporting vulnerable customers remained a priority for us, so we assisted more than 3,000 electrodependents ensuring continuity of supply through targeted measures. Among them, more than 2,000 were equipped with digital meters, while almost 2,900 received backup power solutions such as generators or battery systems. Finally, we strengthened the collaboration with municipalities to improve coordination during extreme weather events. This joint approach has enhanced emergency response capabilities. All these efforts translated into tangible improvements in the performance of our distribution network with results that clearly demonstrate the effectiveness of the winter plan. And now let's take a look at slide seven where we highlight key updates on the energy regulatory contest. In 2025, we saw key changes in the regulatory framework. The distribution cycle for 2024-2028 is under development. In September, the consultant final report was published. Then, in October, the CNE released its preliminary technical report with changes in maintenance and technical standards. Company have until the 10th of November to submit comments. The final report is expected in 2026. In parallel, we are currently awaiting settlement of outstanding debt related to the VAD decree for 2020-2024, published in April 2025, that is expected to be settled in 2026. Passing to generation business on the 4th of October, on the 14th of October, the CNE published the preliminary technical report for the first half of 2026. It includes a correction related to the inflection aspects. We are reviewing the impact and waiting for the final report. Passing to the stabilization mechanism, as of September 2025, we have $149 million spec-1 receivable to be fully recovered by the end of 2027. Going to other relevant topics, in August came into effect a resolution on base remuneration that authorized the base to provide ancillary services. In the last week, changes have been introduced in 2025 regulated auctions, increasing the volume of the 2027-2030 auction from 1.7 to 3.4 TWh per year. The offer deadline is now the 14th of November, launching a 1.5 TWh per year short-term auction for 2026. The offer deadline is the 2nd of December. Finally, regarding subsidies, the third electricity subsidy round runs from the 3rd of June to the 15th of July, covering the period from July to December 2025. Around 341,000 annual distribution customers benefit of it. A bid to expand the subsidy is still pending in the Congress. And now I will start reviewing the highlights of our financial performance over the period. Before we review the results, a quick reminder. As of January the 1st, 2025, Enel Chile changed its functional currency from Chilean pesos to US dollars. For comparison, nine months and third quarter 2024 figures are shown using the average exchange rate of these periods. I will enter into details of our financial and economic performance in the next slide. So let's move to the next slide to look at the progress made on CAPEX. Our total CAPEX reached $245 million during the first nine months of the year, maintaining a focus on grids and power plant fleet performance. Let's review the allocation in more detail. 41% or $101 million was directed towards grid investments. 31% or $76 million supported thermal power projects. 27% or $67 million was invested in renewable and storage. Regarding grids, the focus remains on the resilience program to strengthen the grids and ensure service continuity under adverse weather conditions. In the thermal segment, the priority is the maintenance and performance enhancement of the power plant fleet. In the renewable segment, we have centered our efforts on finalizing the PMGD program, enhancing hydrofacility performance, and maintaining fleet availability. Now, let's move on to the breakdown by Nasher. Asset management capex totaled $139 million, accounting for 57% of total capex, mostly used for the maintenance of Atacama, Quintero, and San Isidro CCGT, the improvement of renewable street availability, and corrective maintenance and digitalization of grids. Development CAPEX was $60 million, mainly driven by investment for grid reliability enhancement, digital matters programs, and telecontrol deployment, and for the completion of 2024 investment program for PMGDs. The 2025 development CAPEX for battery-related project will be recorded starting from the next Finally, customer cap is totaled $46 million, mainly invested in low and medium voltage connection project and initiative to support load increase. Let's now turn to the next slide, which provides a closer look at our EBITDA performance. During the last quarter, I bid a total of $345 million, representing a decrease of $63 million compared to the same period of 2024, mainly explained by the following factors. Starting with the generation business, we recorded a decrease of $89 million in PPA sales, mostly due to determination of some high-price regulated contracts that impacted on volumes and average price of the regulated portfolio, partially offset by the negative impact of exchange rate hedges recorded in 2024. Regarding sourcing, its contribution remained in line with the same period in 2024, This result was mainly achieved thanks to our optimized sourcing strategy and the issuance provision, mainly coming from Gas Atacama, which effectively offset higher costs in the energy spot market, mainly due to the higher purchase volume. Gas trading contributed positively with a $5 million margin increase, mainly fueled by expanded trading activities in the third quarter of 2025. Turning to grids, we recorded a positive impact of $17 million, mainly driven by a regulatory provision reflecting the settlement adjustment for the previous year, and higher OPEX recorded in the third quarter of 2024 due to the extreme weather events that occurred in May and August. These effects were partially offset by the increase of OEM expenses, mainly associated with the implementation of the comprehensive winter plan. And now let's move on to the next slide to review the main impacts on EBITDA during the nine-month period. Our EBITDA reached $1,004 million, remaining flat compared to the same period of 2024. Starting with the generation business, we recorded a decrease of $244 million in PPA sales, mainly due to the termination of high-price regulated contracts. partially offset by the negative impact of exchange rate hedges recorded in 2024, and the positive price effect due to the indexation of the free market contracts. Regarding sourcing, we recorded a positive effect of $192 million, despite the $34 million negative impact related to the transmission line restriction. following the February blackout and the additional second quarter issues. The result was obtained thanks to lower spot and third parties energy purchases costs, energy settlements from previous periods, already anticipated insurance provision, and finally lower transmission costs. In the first nine months of 2025, gas margin contributed for $27 million also thanks to the increase of the gas trading activity versus the same period in 2024. Passing to Greece, we recorded a positive impact primarily driven by the provision reflecting the higher type expected for the 2024-2028 regulatory period and tariff indexation. some settlement adjustment from the previous year, higher OPEX recorded in the period 2024, mainly due to the extreme weather events, partial offset by the increase of OEM expenses, mainly associated with the implementation of the comprehensive winter plan. We also recorded an increase of generation costs due to the new developed capacity and the maintenance activities. Finally, in 2025, specifically in the second quarter, we recorded the personal cost one-off asset mainly for the incentivized early retirement plan to support the company organization aimed at improving internal skills and performance. And so now let's move on to the next slide where we will review the net income evolution. Our nine-month 2025 net income reached $352 million, a 21% decrease compared to the last year figure, mainly explained by higher depreciation, amortization, impairment, and bad debt expenses for $84 million, mainly due to the commissioning of new renewable capacity amounting to $32 million, The impairment related to our decision not to proceed with the new PMGD solar project initially planned for development in this area. And finally, the $12 million increase of grid bed debt provision, mainly due to the higher billing resulting from tariff increase and longer overdue customer debt. Regarding financial results, we recorded a negative variation of $38 million, mostly explained by the lower capitalized expenses on renewable projects by $61 million, partially offset by lower financial expenses for $29 million, resulting from lower average outstanding debt and lower average interest rate. The latter was partially offset by a $20 million reduction in corporate income tax expenses, mostly explained by lower results. Focusing on the quarter, net income decreased by $74 million, mainly due to a $63 million decrease in EBITDA, a $29 million increase in depreciation, amortization, and bad debt, primarily due to the operation of a new renewable capacity, and an $11 million increase in financial results mainly due to the lower capitalized expenses on renewable projects. The latter was partially offset by a $23 million reduction in corporate income tax expenses, mostly explained by lower results of the period. And now let's move on to the FFO analysis on the next slide. Let's analyze the FFO composition for the first nine months of 2025 and the main effect compared to the same period in 2024. Our FFO reached $615 million, representing an improvement of $248 million compared to the previous year. This is due to the following factors. First, EBITDA totaled $1 billion, remaining flat compared to the same period last year, as previously explained. Second, the recovery of PEC receivable in 2025 contributed for $285 million, mainly thanks to factoring executed in April 2025 related to PEC 2030. and recovery through the tariff of $31 million of PEC 1 receivables. It is worth mentioning that we have set a positive FFO variation of $248 billion versus the 9 months 2024 thanks to the end of accumulation of PEC receivables started in October 2024. Third, the increase of net working capital impacted for $329 million, mainly due to the 2024 development cap payment, lower collection in our distribution business, and other seasonality effects. The increase was higher by $255 million versus previous year, mainly due to The negative effect of energy payment scheduling and the voluntary compensation paid in 2025 regarding the extreme climate event from May and August 2024. These effects were partially offset by lower CAPES payments related to the new renewable capacity. Fourth, the income taxes impacted on FFAO amounted to $231 million, mainly due to the tax payment in the generation business. Income taxes paid in the nine-month 2025 were higher by $63 million compared to the nine-month 2024. This difference is mainly due to the increased tax payment in the generation business, driven by both higher results and higher monthly payment tax rate. Finally, financial expenses were $113 million, mostly due to the debt-related costs. This represents a reduction of $52 million compared to the nine months, 2024, mainly driven by a lower average debt this year. And now, let's take a look at our liquidity and leverage position. Our gross debt is $3.9 billion at the end of September 2025, in line with the gross debt as of December 2024. The average terms of our debt maturities decreased from 6.2 years as of December 2024 to 5.5 years as of September 2025, and the portion at the fixed rate is 87% of total debt. The average cost of our debt reached 4.8% as of September 2025, decreasing from 5.0% in December 2024, in line with our efforts to optimize the financial costs. Regarding liquidity, we are in a comfortable position to support our capital needs for the upcoming months and cope with the next year maturities. As of September 2025, we have available committed credit lines for $640 million and cash equivalent for $373 million. And now I would like to share the following closing remarks. In the coming months, significant regulatory updates are expected that will clarify tariffs and market mechanisms These represent an essential step to refine our long-term strategy and to ensure that our investment decisions remain aligned with regulatory developments. We are implementing proactive initiatives to address portfolio dynamics and climate challenges. These include action to strengthen our generation and distribution businesses, improve risk management, and enhance our ability to respond to extreme weather events. The measures are designed to safeguard service continuity and maintain system stability. Our solid financial position and flexible business model allow us to follow with our business plan even through market uncertainties, while continuing to invest in strategic, renewable and best projects and deliver sustainable returns for our shareholders. Finally, we are preparing for our 2026 Investor Day, scheduled for the first quarter of 2026, where we will share a comprehensive view of our strategy and the action that will drive long-term value creation. And now let me hand it over to Isabella for the Q&A session.

Thank you, Simone. Now let's move on to Q&A session.

We will be taking questions via chat through the webcast. The Q&A session is now open. Okay, so Simone, the first question is coming from Rodrigo Mora from Moneda Patria. Rodrigo has four questions, so I will be talking one by one, okay? So the first one is, what is the amount that TNL Chile must return to customers due to the miscalculation of the CNE included in the first half 2026 TNP report.

Okay. Thank you, Rodrigo. Just to read some context, so in the first half of October, the CNE explained that they have changed the formula for the calculation of the TNP. And so this change in the formula will have some impact. We have calculated the impact for Enel in an amount that is between $40 and $45 million. So we have to expect a negative provision in terms of mainly financial costs. So the impact will be mainly in the financial items. and but in your question you talk about customer but in any case just comment that the customers were impacted just for a small amount because just the two percent of the total amount of the changes was preferred customer in the target so this amount will be accrual by NL in 2025 and then we will pay back in this moment the process is not so clear but in any case we expect in the first half of 2026 but the amount will have not impacted directly for the total value the customer

Okay, thank you Simone. So, the second question now is on distribution. So, what is the amount on and to distribution in Chile in connection to the VAD 2000-2025 brief?

So, talking about the remuneration period 2020-2024, we are really not finalizing the last steps of the process. amount was already defined and what we are waiting is that the sector will say when we have to receive back the missing part and the amount in this case is around 50-55 million dollars there are two possibilities if you want to be prudent you can imagine that the that can start in the middle of 2026, even if remembering the view of the new Minister of Energy that said that the process can also be faster and start earlier.

Okay. Thank you, Simone. So now let me check here. We have the third question. The third question of Rodrigo now is on generation side on the LNG strategy. So could you please explain about your strategy regarding LNG and Argentinian gas for the year 2026? How many ships do you plan to buy?

So as you know, for us, the gas business is very important business because we need gas for our thermal power plant. But also because we find that during the year some creative opportunities to make margin to our gas cost. We have basically a long-term gas contract for LNG and more or less the volume of this contract for a year is something more than 32 terabit per year. in 2026 we will keep on using this contract. In these very days we are working, we are negotiating with an Argentinian supplier to add new contracts for Argentinian gas. And so in this moment I cannot talk about this negotiation because the negotiation is ongoing and has not been finalized.

okay thank you simone now the the last question of rodrigo is regarding capex also on generation business no uh regarding capex for generation could you please give us an update for 2025 and actually we also received the same question from balance as well okay so uh what it was and talking about this year capex as you know we we

all of the plan with one exception that was the capex for the development of the new base system because we recorded a little delay for this project and it was due to strategical reason i mean we wait where the new piece of regulation related to best i mean the regulation for the participation of PES in the ancillary service market, and then we keep on studying the evolution of the market and the penetration of the PES in the Chilean production system. So we started a little bit late in the project, and in the first report, the amount of CAPEX credit project was reduced compared to the expectation. But the projects have been already started, are ongoing, and so you will see in the last quarter, in total, talking about the AGP and generation, investment for more or less $100 to $160 million, and a part of this investment will be the best, at least $60 million, And then we keep on growing also investments on thermal fleet, and you know how strategic is the thermal fleet. And of course, in case of low water in the system, our efficient CCGT plants are called to produce. And so we have to keep on these plants at the highest level of efficiency and performance.

Okay, thank you. And we have a final one. Sorry, Rodrigo. We have five questions from Rodrigo Moura. So the last one is on distribution side. Okay. On distribution, could you outline the measures being taken to address the increasing energy losses?

Okay. Talking about losses in energy, we have discussed the losses getting higher in the last two years, starting from 2023. And so in this moment, the percentage of losses is a bit higher than 6%. Which is the reason, can be many reasons, but the most important reason is the increase in the time. So the bid to the final customer, and so a little bit a change in habit related also to this increase in time. What we are doing? From one side, we are increasing the activity to recover these losses, and so we have recovered more than expected in the initial planning related to losses. And on the other side, we are making other action. For example, launching flexible planning plans for the customers that want to pay the new bill, we have new smart inspection tool, we work on formulas to localize where the losses are originated, and then we can intervene. And finally, we are working with the regulator to try to find changes also in the regulation that can help to contain this phenomenon.

Okay, thank you Simone. Now move on. We have questions from Javier Suarez from Mediabank. Thanks for the question. So the question is, is the company in Chile confirmed its latest guidance?

So the answer is simply yes, but just some context. This was a very tough year in terms of hydrological situation, so finally the system was drier than expected. But in any case, we show our flexibility as a company. We leverage on our very profitable gas contract. We use the flexible and efficient CCGT, and so we So, we maintain high production. Also, our hydropower plants can use reset water. So, that production did not decrease so much. And given all this action and the flexibility the company built in the past year. we can react to these adverse climate conditions and achieve – well, achieve – we can confirm the results for the region.

Okay. Thank you, Simone. So, move on. The next one is also from Javier Suarez, Mediabanca. It's about the FFO. So could you explain the dynamics of FFO during the nine months of this year and your expectation by the year end?

Okay. Talking about the FFO, talking about our business, the FFO usually is concentrated in the second half of the year and particularly in the last quarter. And the main reason is that Nvidia is higher in this year and so on. This year, in the first nine months, we had a very high level of FFO, and this was thanks to the not ordinary cashing from PEC regulatory processes. So we cashed in around $300 million recovering cash from the past. Looking ahead, the cash flow from ordinary business will be higher compared to the first months in the last period and also we will have more efficient management of the networking capital because in the last part of the year the capex are focused in the last part of the year so also the networking capital can be managed in a more efficient way And so we expect to improve the performance of FFO in this last one, which is more or less the dynamic.

Okay, perfect. So now the next question is coming from Fernan Gonzalez from BTG Pactual. So Fernan is talking about the best, not the storage that we are implementing. I will read here. I saw that BES La Salina, 200 megawatts, and BES Azabache, 58 megawatts, were declared under construction at the C&E. Do these projects involve additional solar capacity or just the energy storage? There are still an additional 200 megawatts of BES capacity to meet your announcement plan. Will this be added to existing solar PV in the north? Simone?

Yes. So talking about the strategy of BESS, we have launched three projects this year in line with what was expected in the plan. And these projects are hybrid projects, so we are going to implement BESS system in our solar power plant in the north. And while we do this, in general, the best can be profitable also like a standalone device. But the profitability is higher if you use the best system to improve our power plant. And why? Because the project is faster. You need less environmental document to be produced, considering that you are building the best in your plant. And also, we have some savings in terms of cost and electrical infrastructure. And so, I think that they have answered the question. At this moment, we are not increasing the solar capacity. You are just hybridizing the solar project.

So let me check here. So we have another one from Thomas Peruchin, Balanced Capital. Well, part of the question was already answered, so I just skipped the one that wasn't here. So thank you for the presentation. And he has one question. If I'm not mistaken, you had a target of for 2025 of $500 million. for expansion projects mainly relating to batteries, to storage. How has that changed by now, given that you are expecting a resolution on auxiliary services before moving forward? And was the resolution in line with your expectations? Do you think will be enough to unlock higher investment in storage? Thank you.

okay so in our current power plant we put more or less 600 megawatts of new capacity and you are right 450 are related to the best project this best project should have been launched at the beginning of the year and were launched during the second month and so you can expect a movement of both of the cod the original cod was in 2026 in the second part then the new COD will be in 2027 and this will have an impact but in any case you know we start from a flip of around nine gigawatts of production and so this change is not a huge change. Talking about regulation so in august the fourth of august now was launched this new regulation that said best can participate in ancillary service mark it means that this is a very good news for the for the country because the best are very in important element that can stabilize the system at a very low cost and so reducing the cost for the system is also reducing the cost for the participant in terms of the revenues it's not a huge increase but this line was expected uh talking about the the current base that we have our base that we have already installed it means that it among five and seven million us dollars per year but in this it's an important step because for me to make the the best project a little bit more profitable than considered in the beginning and it means that they are profitable also imagining and higher penetration of cost projects

OK, perfect. So we have the last question that is from Edward Palma from . So the question is, do you have any news for unregulated PPA contracts?

In this moment, no. We don't have any news related to this topic.

OK, perfect. Let me just check if we have no more questions. OK. As there are no further questions, we formally conclude our conference call. The investor relations team is at our disposal for any further inquiries. Many thanks for joining us and have a great rest of the week. Thank you.

And ladies and gentlemen, this concludes our conference.

Thank you for participating.

You may now disconnect.