Good day, ladies and gentlemen, and welcome to the Enel Chile Q2 and First Half 2021 Results Conference Call. My name is Felita, and I will be your conference operator 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 risks and uncertainties. Actual results may differ materially from those anticipated in the forward-looking statements as a result of various factors.

These factors are described in Enel Chile's release reporting in Q2 and first half 2021 results, the presentation accompanying this conference call and Enel Chile annual report on Form 20-F including under Risk Factors.

You may access our Q2 and first half 2021 results press release and presentation on our website, www.enel.cl, and our 20-F on the SEC's website, www.sec.gov. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of their dates.

Enel Chile undertakes no obligation to update these forward-looking statements or 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. Isabela Klemes, Head of Investor Relations of Enel Chile. Please proceed..

Thank you, Felita. Good morning, and welcome to Enel Chile's Second Half 2021 Results Presentation. Thanks to you all for joining us today. I am Isabela Klemes, the Head of Investor Relations.

Let me remind you that our presentation and related financial information are available on our website, www.enel.cl, in the Investors section and in our app Investors. After the presentation, there will be an opportunity to ask questions via phone or chat through the link Ask a Question.

Joining me this morning are our CEO, Paolo Pallotti; and our CFO, Giuseppe Turchiarelli. In the following slides, Paolo will open the presentation with the main highlights on its strategy and operation performance, then Giuseppe will walk you through our financial results. A replay of the call will also be available.

And always, our IR team will continue to be available to provide you with any detailed information you may need concerning the figures included in this presentation. Let me also remind you that media participants are connected only in listening mode. Thank you all for your attention. And now let me hand over to Paolo.

Paolo?.

Thank you, Isabela. Good morning, and thanks for joining us. Enel Chile is consolidating its leading position in renewables and is driving the energy transition.

We are conscious about the importance of those advances in the energy transition in a country like Chile, where resources and technology may support the implementation of a true path towards the fight to climate change and the expansion of the use of electricity in the industry, in the cities, at home, transforming the client, the citizens' quality of life.

This is an effort with multiple benefits that also requires a quick reaction by the several authorities involved to truly understand and support those changes.

During this quarter, we are advancing the construction of more than 1.2 gigawatts of renewable capacity in 7 projects that are part of the 2.4 gigawatt additional renewables that we will add during the 2021-2023 period.

As you will see in the results slides presented by Giuseppe, our 2021 half results have been impacted by no structural elements like liquid gas availability and commodities' hiking prices. Looking at sustainability commitment. Recently, we have been included for the first time in the Standard and Poor's IPSA ESG Titled Index.

Launched early this year by Santiago Stock Exchange, the Standard & Poor's IPSA ESG Titled Index, Enel Chile is now one of the 27 companies added and the first with local operation on this index, with the rebalancing executed during July '21. Also, I would like to highlight the new FTSE Russel score for our company, recently announced.

We have been achieved 4.0 points of a total of 5.0 versus 3.4 in the previous year. These recognitions reflect our sustainability strategy and our commitment towards just energy transition. We are growing along our strategy, together with our clients' energy requirements.

In addition to supply electricity via our retail operations, Enel has signed several agreements with the private sector, mainly in mining companies as a starting point and then service companies to promote electric mobility and energy efficiency solutions.

Additionally, we continue to support the decontamination of the cities, participating in the implementation of several programs to push on the adoption of electric heating system in exchange of a more contaminating one. Finally, consistent with our strategy, we have signed an agreement with Banco Santander for our first SDG-linked instrument.

This law is linked directly to take on the climate action the SDG 13 and is related to the reduction of our direct CO2 emissions by 2023. Enel Chile is the first local utility in securing this kind of instrument linked to United Nations SDGs. Now on our capacity under construction, Page #4.

Let me give you some update on our projects under construction as important pillar for our position in the market and for the implementation of the energy transition. As already commented with you, the last 12 to 15 months have been quite complex in managing the construction of the new plants.

The effects of the pandemic causing lockdown restriction and closure of the country's borders, jointly with additional delays on archaeological permits caused by bureaucracy and lack of personnel, required, in some cases, reschedules of our project time line.

Notwithstanding the above, we have continued to advance on constructing our renewable portfolio. As you can see in the chart, considering the capacity under construction, by the end of this year, we will put in operation a significant percentage of that amount. Let's move to Slide 5.

Today, our clients are requiring our support to be provided with an aggregate of services related to the use of the green energy and to the contamination therapies. We have signed different partnership and agreements to promote sustainable transportation and more, in general, innovative services in the use of the energy.

A recent example is the agreement with Falabella Group, one of the largest retailers in Latin America. After a private tender, Enel has been awarded to sell energy to their operations and at the same time to incorporate more than 500 electric changing points through the country.

With those agreements, we are providing a complete solution to our clients, coping with the path to decarbonization. At the same time, we have increased Enel X market share and enhanced its leadership in the energy efficiency and electric mobility in the country.

Finally, in line of contributing to the development of smart cities, with Enel X, again, we have developed security projects like monitoring and video surveillance. This kind of project includes security cameras, automatic reading countries of car patent and laying of optical fiber definitely a good fit.

Today, we will have more than 1,200 security cameras installed in Chile, complementing the plans of citizen security and contribute to preventing crimes and road infraction. Customers are becoming more aware of the sustainability and the efficient use of the energy. Enel X is our clients' first choice and agent of change. Now on Page #6.

With reference to our network during the second quarter, we have seen a partial recovery in the energy demand compared to the previous period. As a result, the aggregated energy distribution reached 7.9 terawatt hour, increasing 2% versus last year's period.

We have increased the quality of our service and reduced our distribution loss rate from 5.21% to 5% despite all the challenges we are facing with reference to our actions towards the digitization of our processes, Enel Distribución app reached more than 494,000 downloads, 30% higher than June 2020 cumulative figures.

Our digital interaction have increased to 86% from 75% in the same period of the last year. On the regulatory side, the final report on the distribution reference model shall be published in the following weeks and the following regulatory report is expected to be issued by November 1.

As we have mentioned, any discrepancy between regulators and companies positions can be challenged in the expert panel instance. We expect that the regulator will release the final distribution tariff decree during 2022.

Regarding transmission tariff cycle 2020-2023, the regulators report fixing the new tariff cycle will be published during the next weeks. It could be challenged in the expert panel instance depending on the results of the several comments presented by different companies during the evaluation phase.

We are expecting that the transmission tariff decree to be published at the end of this year or very early 2022. On Slide 7, the application of the basic service law is affecting level of overdue debts. We are continuing to push in providing alternatives of payment to our clients and to promote the adoption to payment agreements.

By June '21, we have finalized more than 62,000 payment agreements, of which 50% correspond to basic service law and the other half corresponds to voluntary agreements promoted by Enel Chile. Due to our effort, our collection level remains stable with a slight improvement in second quarter '21.

As of the end of June, the net overdue debt reached USD 186 million, representing more than 543,000 clients, 20% increase versus last year. On a monthly basis, we have factorized around USD 32 million, supporting part of our liquidity in the period.

In our view, as already commented with you, the level of overdue accounts is going to materially increase during the next months and will not be sustainable in the long term for the most vulnerable families once the condition of payments will come to normality. In that sense, a solution involving the state is crucial in this process.

Now I will hand over to Giuseppe. Giuseppe, your turn..

$58 million related to commodity availability and higher commodity price; negative PPA margin effect mainly associated with the negative variance coming from depreciation of Chilean pesos in the period versus first half 2020, considering again that our book currency is in Chilean pesos and our PPA are U.S. denominated.

This effect was offset by the new agreement starting in the period as AngloAmerican new contracts coming from Enel Distribución customer portfolio at the beginning of the year.

A positive $56 million on the net commodities coverage; the already mentioned $26 million on tariff settlement in both generation and distribution; a negative $18 million on network remuneration related to the expected lower distribution tariff and transmission tariffs.

Other accounted for $8 million, mainly due to our headquarter insurance recovery received last year and Transantiago 3 agreement executed also in 2020. Let me now give you more detail about the main generation KPI on Page 13.

Even though our first semester generation has been affected by poor hydrology in the country during the second quarter, especially in June, there was a slight improvement in rainfall, which enabled an increase in our hydro generation as well as in our total production when compared to the same period of the last year.

Therefore, our second quarter production reached 4.7 terawatt hour, increasing 10% versus 2020. In the year, our production reached 9.2 terawatt hour, very similar versus last year and also supported by thermal generation.

Our energy sales increased 18% during the first half of 2021, primarily explained by new contract with 3 customers, including AngloAmerican and retail clients transfer from Enel Distribución Chile as part of unbundling the regulation requirement.

For what concern our sourcing, on top of the already mentioned production balances during the first half of 2021, we accounted a total increase of 1.8 terawatt hour of purchases, which includes 0.7 terawatt hour on the spot market and 1.1 terawatt hours from other generators relating to the unregulated customer portfolio contracts coming from Enel Distribución business.

On Slide 14, just a recap of the performance of our generation business, including Enel Generación Chile and Enel Green Power Chile, which is largely explained by unfavorable hydrology, higher commodity price and higher spot market price when compared to the last year.

EBITDA has been adjusted by excluding the extra effect on the coal consumption cost related to the decarbonization process and the voluntary retirement program. And finally, on Slide 15, I show a summary of the adjusted performance of our network business, including Enel Distribución Chile and Enel Transmisión Chile.

The second Q 2021 reached $35 million, decreasing 27% regarding the second Q 2020, mainly due to the lower regulated remuneration in both the solution and transmission business, tariff settlement booked in second Q 2021 related to 2020 tariff period, free market clients who transferred to the generation business to accomplish the unbundling law, partially offset by higher volume.

Accumulated adjusted EBITDA reached $71 million or 34% compared with the first half 2020 EBITDA, mainly due to the lower demand in the regulated market and the provision of the new tariff in distribution and transmission, free market clients transferred to generation business to accomplish the unbundling law.

And finally, union agreement, a one-off impact booked in the first quarter of 2021. Now on Slide 16, please go through the main driver of our group net income.

D&A and bad debt reached $151 million, a variance of $37 million, mainly related to the lower D&A in Enel Generación due to the impairment made in Bocamina 2 in 2020 and lower D&A in EGP asset due to depreciation of Chilean pesos in the period.

Net financial results totaled in excess of $129 million, an increase of $45 million, mainly due to higher cost due to the factoring executed in generation business on the stabilization mechanism accounts, higher costs regarding the new debt issued during 2020, higher exchange differences, mainly in account receivable of stabilization mechanism in generation business.

This effect was partially offset by the higher financial expense capitalized in first half 2021. Income tax reflects the impact related to the lower EBITDA and the higher financial expense due to the factoring costs of debt accounting. As a result, the adjusted first half '21 net income reached $119 million, 45% lower than last year figures.

The adjusted second quarter 2021 net income reached $48 million, a 59% lower than the second Q 2020 results.

This was mainly explained by the lower EBITDA result in the quarter for the reasons mentioned on the previous slide, lower D&A mainly related to the lower D&A in Enel Generación due to the impairment made in Bocamina 2 in 2020, increase of $29 million in financial results, mainly explained by the factoring executed in the second quarter of generation business.

Lower income tax mainly due to lower adjusted EBITDA, the higher financial expense as a consequence of factoring cost of debt accounting in the quarter, match effect of Green Power Group and lower taxes accounted in the previous year. Moving to the cash flow on Slide 17.

First half 2021 FFO reached $272 million, higher than previous year figures, mostly due to higher net working capital versus 2020, mainly explained by factoring in both generation and distribution business accounted for almost $300 million; a transmission line sale in 2021, with a cash impact of $29 million; purchases of e-buses during first quarter of last year; and lower impact of stabilization price mechanism in 2021 versus 2020 due to depreciation of Chilean pesos.

These effects were offset by higher income tax during first half 2021 versus last year, mainly related to COVID-19 measures during 2020 that postponed part of the corporate tax payment to 2021 and lower fiscal tax payment base during 2020, and higher financial expense mainly explained by the cost of the factoring of the stabilization mechanism account.

Let me now go through our debt on Slide 18. Our gross debt increased by $405 million versus December 2020, amounting to $4.4 billion as of June 2021. The variance is mainly associated with our CapEx plan execution. In the period, we have executed a $400 million funding with EFI, partially offset by the amortization of the Enel Generación Chile.

Therefore, our net debt in the period increased $414 million. The average cost of our debt in the period remained stable at 4.6% as of June 2021. As Paolo highlighted, we are focusing now on sustainable SDG-linked instruments.

We just issued our first SDG-linked third-party debt of $50 million with Banco Santander with a maturity of 3 years with a very competitive industry rate, demonstrating the recognition of our derisking strategy. The new SDG loan considered as KPI, the CO2 emission of our generation fleet by 2023.

As of June, around $400 million of our debt are SDG-linked, which considered $400 million of intercompanies decreasing that issue as of June 2021. These figures do not consider the USD 50 million signed in July with Santander.

In terms of debt amortization, our schedule remains very smooth with an average of 6 years and around $300 million annually maturity up to December '23. In terms of liquidity, we maintained the level of $0.8 billion, giving our flexibility to face potential headwinds in the market.

And now on Page 19, let me conclude this part of the presentation with a guidance update driven by the recent events already discussed. As usual, the numbers are coal stock and retirement plans. During our presentation, we have highlighted the main factor that stand up in the last month.

We changed our scenario for this year, particularly the complex hydrological scenario, commodities availability, especially lack of Argentina natural gas and hiking of commodity price, which is clearly not a structural effect in our market to be transferred with our investors and all the interest part, we have run several scenarios to reflect the evolution of some variables driving us to predict the second half adjusted EBITDA in a range between $0.6 million and $0.7 million.

Consequently, our EBITDA should be in the range of $1.1 billion to $1.2 billion for 2021, a devaluation from $300 million to $400 million versus our guidance reported in November 2020. We are not yet anticipating our view on the net income result as we are running several actions to offset at most the devaluation of our EBITDA.

On CapEx, we don't see important deviation as the larger part of our development CapEx is expected to be deployed now on the second half of this year. Let me remind again that this adjustment is not a structural one as a part of the negative headwinds that all the utilities are facing this year.

We strongly believe that our strategy of increasing renewable capacity will reduce significantly the exposure to commodity and hydro in the following year. Paolo, I will hand over to you for the closing remarks..

Thank you, Joseph. Implementation of our investment plan and execution of our renewable growth project will continue to be one of our priority and necessary to support the country on the acceleration of the decarbonization. In this sense, some important discussions need to evolve with authorities as a regulation for battery, for instance.

Our strategy will continue to be deployed under the high gas ESG standards towards the decarbonization and energy transition for the full benefit of our clients and communities. Digital operations and customer care will be key to develop a long-term relation with our clients.

Our strategy is supported by our long-term vision and balance sheet strength, targeting new SDG-linked instrument. Thank you for your attention, and let's now open the Q&A session. I will hand over to Isabela..

Thank you, Paolo.

So operator, do we have questions?.

[Operator Instructions]..

Okay. Perfect. So I received here from the chat questions from Murilo Riccini from Santander.

So the first question from Murilo, Paolo and Giuseppe, is how do you evaluate the expansion of the transmission system? Will this be enough for the relevant incorporation of renewable capacity in our point of view -- in your point of view? Or could we expect a higher level of losses due to conjunctions? How do you plan to handle this issue? So I think we could answer this and then go for the others, Paolo and Giuseppe..

Okay. Thank you for your question. Regarding the extension of transmission system, the connection between the north and especially the center that is the area of mine consumption, it is always interesting large debate between the different players, different actors in the sector.

Now there is this project for improving the connection using high-voltage business connection. Clearly, it is a very impacting project in the sense that it will require time. So there are 2 elements to take into consideration. The full commitment of all the authorities involved in speeding up this interconnection system that is key for Chile, for sure.

And second, I can mention also our reactions in the sense that we are, let's say, defining our portfolio of plants and also of clients in order to avoid to be, let's say, TackleBar this bottleneck in the sense that we have important contracts in the north. We are still developing our potential contract in the same area.

And at the same time, we are also developing interesting position in the center. So that's the way in which we can cope in the short and midterm, but I agree with you that it is key. Honestly, I think that being so essential in the evolution of the country, this kind of interconnection. It will evolve possibly.

Don't ask me to bet about the right year to enter into operation because it could be hard to answer. But I'm positive on the attention of the authority on this. At the same time, we, as a company, we are trying to have a countermeasure in order to avoid to beat it by a certain element of bottleneck..

Okay. Thank you, Paolo.

The second question from Murilo is, how are you seeing the performance of the demand in the concession area of Enel Distribución in July? Any signs of recovery with the low restriction measures?.

Okay. We are evaluating clearly a period of 6 months. If we focus on the very recent months, the effect -- the negative effect of having the Santiago metropolitan region in lockdown, and so many of the -- of our clients, I'm referring to the commercial sites through small [indiscernible] being strongly affected.

So all in all, what we see the recovery in the last 1.5 months, even if it's early to provide you a figure.

At the same time, we have a general evaluation in terms of consumptions in the concession area in the first 6 months compared to the first 6 months of last year, a slightly decrease, but you take into consideration also perimeter effect in the sense that continue to be a movement even if not so big that -- of clients that are entitled to move from regulatory system into free market that are, let's say, choosing to be free, to be out of the regulated system.

And this has an impact in the regulated segment. If you look at that specific area, there is, all in all, a decrease between 2% and 3%, all in all, considering the -- all the factors that I mentioned. So the perimeter effect and the lockdown that suffers Santiago in the -- let's say, in the central area of the period between March and mid of June..

Perfect. Thank you, Paolo.

And last question from Murilo from Santander is, why is the number of overdue clients decreasing versus first half 2020? Could you provide more details on this and on the discussions being held to the Board, please?.

Okay. It is a little bit large discussion because from one side, what we have measured considering -- let's focus for a second on the domestic segment that is the most affected by the recent regulations started in August of 2020. If we measure that segment, we have not seen a very improvement in terms of number of clients that are not paying.

But let's say, the mechanism that we have seen is that the clients that during the regular period of the year, used to, let's say, enter into the overdue debt segment and then start to pay in a period of, let's say, aging between 40 and 60 days because this is the area where the cut will enter into -- the cutoff will enter into pressure by the distribution.

In this case, that amount that the clients are not paying. So they remain in the segment of overdue, but their hedging are increasing. And this is happening also for unfortunately, and this is something that we have, let's say, announced in the press.

This is something also to a large domestic clients with the consumptions higher than 1,000 kilowatt hours per month. It means approx. 4x the average of Santiago, but also for clients between, let's say, 500, 700 kilowatt hour per month that -- they are not paying.

If we look at that number, for instance, the last -- the large client segment, the overdue debt or large client segment more than doubled between March '20 and June '21. So there is an effect that is driven by the impossibility for the distributor to, let's say, cut off the nonvulnerable clients because we are talking about nonvulnerable clients.

Clearly, all the attention, all the care for the family that cannot afford to pay their debt. But this is a different discussion. The focus and also our analysis is focused on that category of clients that are high consumption that have resources to pay, but are not paying because nobody can cut them off.

And this is an important element and discussion that we are having with authority.

On a general basis, there is -- there has been this announcement in early June, if I remember correctly, regarding the famous table -- negotiation table between different parties involved, the government, the senate where to find a solution that should help the vulnerable families, the vulnerable clients to afford the period once the system will come to normality, that's the real issue.

Because if we look at today vulnerable clients, the average debt just using a number that we have is in the range of CLP 100,000. If we add this on top of the regular fare that they are paying on a monthly basis, this is very difficult to be managed. Also if we use the 48 quotas without interest.

So this is where we have to focus and leave the distributors work with clients that can pay but they do not..

Perfect. Thank you, Paolo. So the -- I don't know, operator, if we have any questions online. Otherwise, I have one from Rodrigo Mora from Moneda.

Can we do it now?.

There is a question on the phone line..

Yes, can you open the line, please?.

Okay. The question comes from the line of Rodrigo Mora from Modena..

Okay. Sorry, sorry. Rodrigo has sent me the questions. He has a problem on the line. So the first question -- on Rodrigo, the first one is that, given the drought situation in the country, is Enel evaluating to postpone the closure of Bocamina 2 in order to preserve the electrical security of the system. This is the first question, Paolo and Giuseppe..

Yes. Clearly as already Giuseppe highlighted in his analysis, we are not dealing with structural changes. So this -- what happened this year is something that is a coincident of difference in elements that didn't happen in the past.

So we do not see, let's say, any reason or the effect for change our strategy and our decision to, let's say, come back on the phase out of Bocamina considering that by next year at least 1.3 plus more megawatts will come online only, only by our side.

If we look at general picture, the effect and the evolution of this year has been driven also by an important delay of many other projects, renewable projects, that should cover in the short, midterm the energy requirements of the system on the country. The important point here is to allow the system to work properly.

For instance, as together with other -- also other companies because this was -- we heard, we are focusing on the development of the regulation of the storage that will be key for proper functioning of the system. And this, we hope, is something that will take place by -- during the second half of this year in order to be properly in place.

I am referring to both the ancillary services package system and to a recognition of the capacity payment in order to allow to enter into the system with renewables plus storage and to fulfill all the requirements of the system..

Perfect, Paolo. Thank you.

So the second question of Rodrigo from Moneda is, what is the hydro generation that you are estimating for the second half of the year, considering the guidance update released by the company today?.

Yes. On this, I will -- the answer to Giuseppe that can be more precise in terms of numbers. In terms of concept, you know, Rodrigo, how difficult it is to make some, let's say, prediction in terms of what hydrology.

It happened in the couple of years ago that after first 6 months of drought period, we have very important storms that covered all the requirement from -- during the second half.

So it's quite difficult to predict what can happen especially in the second half where you should have, let's say, potential snow, still potential snow, has happened that time and then the melting of the snow and -- yes. So it's a difficult to predict. I leave it to Giuseppe to give you some feeling on numbers..

Yes. Well, basically, we are projecting to have around 6.6 terawatt hours, so in order to close the year around 10.4 terawatt hours. So this is the projection that we have right now..

Thank you, Giuseppe. Then the next question from Rodrigo. Rodrigo is asking more details about the extraordinary effects that we booked during this period. So he's asking more details about the impact of $46 million. And if we can give a breakdown on the voluntary retirement program that we announced for the group, for group Enel Chile in this period..

I leave to Giuseppe the answer. Yes..

Yes. So the $46 million we can split in two parts. The first one, that is around $21 million that is related to the decarbonization effect.

And the remaining part, which is around $24 million, is related to the retirement plan where -- if you want to have an additional breakdown, this $24 million is 50% in Enel Distribución, $9 million for Enel Generación and around $3 million for Enel Chile Holding. So this is basically the breakdown that we have..

Okay. Thank you, Giuseppe.

So operator, do you have any more questions?.

No, ma'am..

Okay, then. So as we do not have any more questions, we would like to thank then your presence in our call today, and I mentioned that our team from Investor Relations will be available for any other questions or doubts that you may have during this period. So many thanks for your attention. Thanks, Paolo, and Giuseppe. Have a nice day. Bye-bye..

Thank you. Thank you..

Thank you very much. Bye..

Bye, bye..

This concludes today's conference call. You may now disconnect..