Good day, ladies and gentlemen, and welcome to Enel Chile Third Quarter and 9 Months 2021 Results Conference Call. My name is Victor, 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 risks and uncertainties. Actual results may differ materially from those anticipated in the forward-looking statements as a result of various factors.

These factors are described in Enel Chile's press release reporting its third quarter and 9 months 2021 results. The presentation accompanying this conference call and Enel Chile's annual report on Form 20-F include under risk factors.

You may access our third quarter and 9 months 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 to disclose any development as a result of which these forward-looking statements become inaccurate, except as required by law. I will now turn the presentation over to Ms. Isabela Klemes, Head of Investor Relations of Enel Chile. Please proceed..

Thank you, Victor. Good morning, and welcome to Enel Chile's Third Quarter 2020 Results Presentation. Thanks to 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 Investor section and in our investors.

[Operator Instructions]. Joining me this morning, our CEO, Paolo Pallotti; and our CFO, Giuseppe Turchiarelli. In the following slides, Paolo, we will open the presentation with the main highlights of our strategy and operational performance of the quarter. Then Giuseppe will go through our financial results.

A replay of this call will also be available. And as always, our IR team will be continue available to provide you with any other disclaimer that you need. [Operator Instructions] Thank you all for patience. And let me hand over to Paolo.

Paolo?.

Thank you, Isabela. Good morning, and thanks for joining us. Let me start with the main highlights of the period on Slide number 3. First, let me comment about the new usual situation of the Geneva market. In terms of hydrology, the country is facing the driest calendar year of its history.

And as a consequence, the system is required and is still requiring an important support from thermal generation. At the same time, by the end of 2020 in the first month of 2020, Chile suffered a shortfall of Argentinian natural gas, followed by the rise of the LNG spot price.

Considering this lack of resources in the system since the first month of 2021, we put in place some actions to improve gas availability, buying additional LNG and the current cost to supply our plants first and then to sell gas to the system. During the first period of 2021, we have been the largest importer of LNG gas in the country.

At the same time, we launched a force to improve the performance of our power hydro plants to operate also with minimal conditions. Despite all the actions we put in place during 2021 the external scenario are worsened with escalation of commodity prices and very bad hydrology.

Especially in July and the first half of August, leaving the authority to put in place a preventive rationing decree within today's March 2022. Consequently, our margin remained affected.

Within this challenging scenario, investing in renewables to diversify our matrix, to reduce our exposure to the hydrology commodity has been confirmed to be a priority. With reference to our 1.3 gigawatt of new projects under construction, where key constructions are advancing.

And during the last quarter, we also celebrated the start of the construction of the first green hydrogen pilot project in Chile and in Latin America, located in Magallanes. Electric mobility, last week, Enel X signed an agreement to bring to Chile the first mining electric truck.

Additionally, today, we have more than 10,000 wood heating system replaced with safer, efficient and cleaner technology as part of our effort to support the contamination of the cities. We continue to develop our actions based on ESG standard, allowing us for instance, to leverage our expansion through SDG-linked financial instruments.

Now moving on Page 4, our capacity in construction. We continue to develop our strategy towards a cleaner generation markets. Renewable energy is the catalyzer for the energy transition and an essential pillar for our positioning in the market.

During the last 18 months, we went through some headwinds associated with the COVID-19 pandemic as the constraints in worker displacement and closing of the border. And they brought us into the [indiscernible] for instance.

Nevertheless, without including Los Cóndores today, we have 1.3 gigawatts of projects under construction, of which around 0.6 gigawatts have been already connected to the system by the end of September.

By the end of this year, we are maximizing our effort to advancing the construction of the remaining project, expecting to reach at least 900 megawatts to be connected into the grid.

Additional 250 megawatts will be connected to the grid by first quarter 2022, and their part to full production will be finalized by first half 2022 for most of the projects. The construction of wind farm Renaico II will be finalized during 2022, considering the effort to move components of the wind facilities from the port to the site location.

With reference to our JV on green hydrogen with AME and other partners, we have recently started the construction of this first pilot project in Chile. And we expect to be operational by second quarter 2022.

We are fully convinced that along the renewable energy, green hydrogen will be essential ally in the energy transition and faster decarbonization process into the hard-to-abate industries. Now let's move to decarbonization of the final consumption, Page 5.

Enel X is expanding its effort to displace polluting energy sources and promote the intensive use of electricity in the public and private sectors, accelerating an agenda that allows the electrification of industrial processes, fleet and public transport as well as the implementation of energy efficiency measures in private and public buildings.

Along with this plan, a great complement is the action in public transport. Chilean government committed to reaching 100% electrical public transport by 2040, launched a tender to replace 1,640 buses in early 2021.

Under Enel X, we are participating in this process and have been awarded, together with our partner, with 991 electric buses, reinforcing our leadership position in public mobility in Chile with a market share of 81%.

In the field of private sector fleet, together with the mining company, SQM, we have presented the first 30 tons electric mining truck, with incorporation of 6 electric buses for transportation of the employees. Enel X is also implementing the necessary charging infrastructure for the operations.

This is an important step for the mining industry in Chile, where complete process is being made in mitigating the emissions at the core of the mining operations. Regarding the recognization of homes and final consumer, we have achieved the milestone of replacing 10,000 wood stoves with an efficient electrical conditioning equipment in Chile.

This initiative reduced CO2 emissions and improved the well-being of our cities and communities, benefiting more than 40,000 people.

Finally, in the face of efficient lighting in our cities, Enel X expand and consolidate its presence in regions with the award of the maintenance service of the public lighting system in municipalities of Temuco with more than 32,000 public lighting that allow us to reach 340,000 points of light, of which, 50% corresponds to projects carried out outside Santiago, lighting our city efficiently and increasing the safety of the citizens.

Now let's go to networks, Page 6. Energy Distribution improvement reflects the recent using of the sanitary conditions, showing a partial recovery when comparing to the previous year. Our efforts and investments have allowed to increase the quality of our service, resulting in lowering SAIDI by 16%.

Our investment in digitalization continues to improve the contact channels with our clients. In this period, almost 90% of our contracts with our clients has been executed through these channels. Let's now move to the basic service law.

With this expansion -- with its extension until 31st December 2021, the application of such a law is still affecting the level of overdue debt. As of September, the overdue debt reached $180 million. In order to minimize this impact, we continue to promote payment agreements with the aim at reducing the overdue accounts by September 2021.

In more than 1 year, we have reached more than 58,000 payment overdues with our clients, of which 53% corresponds to the basic service law. Moving to collection.

The ongoing process for the update to stop fees or lower billing fees was an important lead in the digital transformation process of our company as temporarily working our KPI versus previous quarters. We expect a normalization of the collection rate during the next quarter. A quick update on regulation.

On distribution, we expect that the consultant report on the reference model will be released during November. This -- if this date is confirmed, the regulator's final report could be issued early next year. Considering the challenge of potential [indiscernible], the final distribution tariff decrease is expected to be released during mid-2022.

On transmission, we have entered into expert final phase. All the discrepancies referring to the final regulatory effort on the transmission system for the period 2020-2023 were already presented. As a result, we expect that the new VAT charge shall be published early in 2022. Thank you. And now I will hand over to Giuseppe..

Thanks, Paolo. Let me start with the summary of our financial highlights on Slide 8. Before starting, let me explain the extraordinary effect of the period. 2021 adjusted EBITDA and net income considered the effect arising from the coal stock impairment associated to Bocamina 2 and the voluntary retirement program announced last quarter.

The coal stock impairment and the voluntary retirement program had an aggregated effect of $56 million and $39 million, respectively, in EBITDA and at the bottom line in cumulative figures. In the third quarter of 2021, the coal stock impairment amounted to $11 million in EBITDA and $8 million in the group net income.

For cumulative figures in 2020, the adjustment coming from the coal stock impairment is $22 million in EBITDA. And the net effect of the impairment of Bocamina 2 is $659 million at the bottom line. All the things are described in the bottom of this slide. Now on CapEx deployment on Slide 9.

2021 accumulated CapEx reached $735 million, largely devoted to the construction of our new renewable capacity. Customer CapEx totaled $49 million, mainly allocated to build new commission into implementing the new commercial system.

Asset management CapEx reached $86 million, 21% higher than 9 months 2020, mainly due to the maintenance of the new high voltage project awarded in 2021 and other digitalization project.

Development CapEx reached $600 million, largely driven by our renewable expansion program and development of our distribution business to contain the digitalization of our network.

Let's now start with the third Q adjusted EBITDA breakdown on Slide 10 that accounted $93 million, 71% lower versus 2020 figures, mainly due to higher PPA sales in the third Q 2021, primarily explained by the new agreement started in 2021 with mining companies, AngloAmerican and BHP.

The adjustment due to the indexation and the new contract coming from Enel Distribution create customer portfolio at the beginning of the year. Hydrology, lack of Argentinian gas and higher LNG international prices explain the main variances of this quarter that demanded us to increase the volume of purchases at a higher prices versus last year.

Let me explain each element that are included in the slide. Spot purchases volume represented a variation of almost $120 million, mainly explained by the lower hydro generation. Spot purchases cost represented an increase of around $90 million.

Variable production costs, partially offset by the aging contracted for the year, represented a variance of around $100 million. Gas margin represented a positive variance of $6 million in our EBITDA as an increase of our natural gas trading activity in the market.

Following the chart, we have also indicated variances coming from a recovery of the third Q 2021 demand in distribution business, mainly in the regulated customer due to the release of the lockdown measures in the step-by-step government planner.

Network remuneration, mainly related to the provision on lower remuneration on distribution tariff, which should be retroactive to November 2020 and in the lower remuneration of transmission tariff as a result of the indexation of the tariff.

Other aspects accounted for $18 million, mainly related to higher Enel X EBITDA in the quarter, mainly due to the public lighting business. Lower penalty and compensation costs in distribution business due to a better quality indicators and the temporary effect during the third Q '20 on raising services costs due to the logistic restriction.

Let's move now to Slide 11, where we have the summary of 9 month adjusted EBITDA breakdown accounting for $536 million, 39% lower versus 2020 figures. As you can see, the main effects are the same that you presented in the third Q. Higher PPA sales in the 9 months 2021 due to the new agreement already mentioned, which started in 2021.

Higher spot purchases volume during the 9 months with an effect of $160 million. The increase in the spot price due to the doubt and for the commodity availability in other higher commodity prices in the international market represented an impact of $151 million.

The variable generation cost, mainly impacted by the third quarter results, offset by the commodity coverage of around $8, million total $45 million in the period. The already mentioned gas wholesales factor with a positive impact in EBITDA was $17 million.

The distribution business has had a recovery of the demand due to the flexibility of the lockdown with an effect of $5 million EBITDA and negative $33 million on network remuneration related to the expected lower distribution and tariffs, lower distribution and transmission tariff and other accounted for $7 million mainly due to the new contract agreement booked in the first Q 2021 with Enel distribution unions.

Now on Slide 12, let's go through the main drivers of our group net income. D&A and bad debt reached $223 million, a variance of $42 million, mainly related to lower D&A in Enel Generación due to the impairment made in Bocamina 2 in 2020 and lower D&A in EGP assets due to depreciation of Chilean pesos in the period.

Net financial results totaled an expense of $165 million an increase of $47 million, mainly due to higher costs, mainly related to the factoring executing generation business on stabilization mechanism account, higher client agreement mainly due to the basic sales flow and higher financial expense capitalized during 2021.

Income tax reflects the impact related to the lower EBITDA. Higher financial expense and higher tax credit in the quarter due to the higher monetary correction in the period. As a result, the adjustment 9 months 2021 net income reached $104 million.

The adjusted third Q 2021, registered a losses of $13 million, mainly explained by the lower EBITDA result in the quarter for the reasons mentioned in the previous slide, partially offset by the lower income tax, mainly due to the earnings before tax settles out and the monetary correction due to the higher inflation in the country versus last period.

Moving to the cash flow on Slide 13.

9 months 2021 FFO reached $309 million, 45% lower than previous year figures, mostly due to lower EBITDA, due to the already mentioned hydrology and spot price effect, higher income tax during 9 months 2021, mainly related to COVID-19 mentioned during 2020 that postponed part of the corporate tax payment to 2021; lower fiscal tax payment paid during 2020 and Chilean peso sharp depreciation in the end of 2020 that generated gains resulting in higher tax payment during this year.

And higher financial expense, mainly explained by the cost of the factoring of the stabilization mechanism account. Higher -- all this effects were offset actually by the higher networking capital versus 2020, mainly explained by the factoring in both generation and distribution business accounted for almost $300 million.

A transmission line sales in 2020 with a cash impact of $28 million in 2021, lower impact of stabilization price mechanism in 2021 versus 2020 due to depreciation of Chilean pesos, partially offset by sales of e-buses during 9 months in 2020; a temporary effect in collection in 2021, mainly due to the implementation of new commercial systems.

Let me now go our debt on Slide 14. Our gross debt increased by around basis $700 million versus December 2020, amounting to $4.7 billion as a result of new issuance in the period with Enel Finance International and third parties.

The new insurance all SDG Linked, which considered as KPI, the CO2 emission of our generation fleet by 2023 are mainly related to the CapEx plan execution. Therefore, we now have 14% of our total gross debt SDG linked. Our plan is to continue to pursue this kind of debt line that is awarding our movement toward a cleaner metrics.

In terms of debt amortization, our schedule remains sustainable with an average of 6 years and with the cost substantially aligned with the last year figures. Finally, in terms of liquidity, our figures give us flexibility to face potential headwinds in the market. And now on Page 15.

Since the first quarter of this year, we have been anticipated our internal view of the hydrology for Chile. As we show in this slide, the idle performance in very much correlated to the driest period we have faced for Chile. And there's no perspective as far from the last year's figures.

Tied to this scenario, which demanded a much higher national thermal generation level, the lack of Argentina natural gas coped with the sharp increase of LNG and raising prices expose ourselves to a noncompetitive mix of generation and the higher spot prices.

Therefore, we have revised our number to express this update around several scenarios to reflect the evolution of some variables. This study drove us to predict 2021 adjusted EBITDA figures between $0.8 million and $0.9 million, implying an evaluation of around $300 million versus our guidance reported in the last quarter.

We don't see essential deviation of CapEx as the more significant part of our development CapEx is being deployed in the following months. In our view, the 2021 scenario adjustment is not a structural one.

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

Thank you, Giuseppe. Executing our investment plan will remain our priority and create -- to bring additional flexibility and resilience to our current portfolio. Last month, the regulator presented the proposal to define a new framework for storage remuneration in electrical system.

Companies and associations submitted their feedbacks on the proposal, and we are waiting for the final version of this regulation, expected to be published in the next month. This is an important step ahead for the improvement of the use of effective technology, having resilience and flexibility into the system.

We will continue to support our clients and communities to accelerate the electrification of the energy use in order to reach the net zero ambition. Our strategy will continue to be deployed under the highest ESG standards.

For example, we have been awarded in a former report of 2021 as the best company in terms of reporting and purpose, and recognition in a PwC study as one of the companies with the best practice in corporate governance in Chile. Thank you for your attention. Now let's move into the Q&A session..

[Operator Instructions]. Our question will come from the line of Javier Suarez from Mediobanca..

I have 3 questions. The first one is on the -- obviously, on the margin for the generation activity this quarter that has been affected by hydro. And I guess that, that -- on that, the company is taking care, and also by the lack of Argentinian gas and a very high international gas prices.

So I was wondering if you can give us an update on your gas supply -- natural gas supply strategy and outlook for the next couple of quarters because, obviously, that is going to be very relevant for your profitability in case of hydro conditions continues to be difficult.

So any guidance on managerial action to improve natural gas supply for the next quarter and maybe mitigate that negative impact, could be helpful. Then second question is on the KPIs during the third quarter. There has been some deterioration on the collection. I think you mentioned that during the presentation.

So you can kindly elaborate on the reason for the deterioration of the collection. And the third question is on Slide number 13 -- 12 and 13 on the -- on your factoring strategy or your factoring for the stabilization mechanism, if you can help us to understand how this is working and how that is accounted..

Okay. Thank you, Javier, for your questions. I will take the first 2 and the second one, we manage together, Giuseppe Turchiarelli -- and Giuseppe. Regarding the gas strategy, just to give you an update on the situation, starting from end of September, I would say, very early October, the gas -- Argentina gas has been available for the Chilean market.

So we started to import to pipes Argentina gas, that is continuing until now. And just as an analysis, clearly, we don't have let's say, certainty 100%. But I can mention that today, the flow at beginning of October started with an amount of 2.5 million cubic meter per day. And then now it is increasing a little bit.

We have -- and together with other player in the sector in the Chilean market, we have a firm contract with Argentinian counterparts. And considering the current situation and considering that during the recent times, the pressure on energy demand in Brazil is a little bit lower, demand from upside, so we're importing from Argentina to Brazil.

We see some more stability for availability of the Argentina gas. It's hard to mention how it will end, but it is, let's say, a relief within this situation.

And for additional elements during this period, we are analyzing our negotiation for -- with our counterpart in the LNG gas contract in order to define the availability of delivery for the vessels for the next years starting from early 2022.

This is important because we are working to cover whole the period for 2022, including the, let's say, the early months where maybe the impact of growth is higher. And usually, if you look at the standard year, we used to, let's say burn only Argentina gas. Now we are doing, let's say, a more calibrated approach on this availability.

Maybe we are looking also other elements in terms of gas availability. The other element that I would like to mention is that the issuing of the rationing decree by the Minister.

And let's say, some agreement that we have signed with the local community in the water -- in our water basins allow us also to keep the level of basin with a higher level, consider also the availability of Argentinian gas, as I mentioned.

So the outlook in the next month, even if the contribution of melting of the snow and the rain is very, very limited, give us let's say, some, let's say -- I would say, not a negative view for the next month. Clearly, everything is based on the next month's evolution.

Considering also that the commodity price still to be -- remain high, looking at forward curve for the -- let's say end of the year, early 2022. Regarding collection, as we mentioned, Giuseppe and myself, we are in the process of upgrading our systems. So it is requiring the adequate time to migrate 2 million clients from one system to another.

And put everything in line and keep working properly. Clearly, at the regime, we will gain a lot in terms of speed and, let's say, precision and so on. And so we can have, let's say, the capability of elaborating, issuing the bills in a quickest, more precise, more adequate way.

For the time being, we are working for finalizing for finalizing this transition. We elaborate and issued the bid for the month of September. We are finalized in the month of October. So we will still having some weeks of delay that we are covering during November and December. Regarding factoring, I would leave the answer to Giuseppe..

Yes. Well, let me say, first of all, that up to now, we sold $226 million of receivables coming from the price stabilization mechanism. And we have an agreement to sell up to around $350 million. So we have still a part of the equity that is going to be sold in the future.

According to the release of the decree because as I -- we discussed it several times, we can sell the receivable only once the regulator will issue the decree in stating exactly how much credit each bank has in the portfolio.

Having said that, the impact that we have in the profit and loss is pretty high because the discount of the receivable are made assuming a cash in of the receivable the last moment of 2027. So it means that the timing of the money from 2017 till this year is pretty important.

And is the reason because we have a such high level of interest expense in this year that we made $226 million of factoring. This is the reason. We have an agreement based on which if the average of those will be paid in advance, so we have certain profit sharing.

But in general, this is the reason because we have such an important amount in the interest expense..

[Operator Instructions]. Our next question will come from the line of Murilo Riccini from Santander..

I have some questions, and sorry if I repeat any -- that has already been answered.

Could you comment on the production of your solar facilities? Are they producing accordingly to your estimate? And are you seeing some seasonal deviation in this regard? The second one is, are you having any deviation from CapEx versus the expected guidance? And could we see a lower-than-expected CapEx execution since most of it was left by the end of this year? And the last one, just to confirm the previous question about natural gas, you were not able to get more gas PPAs during the past year.

Is that right or I misunderstood something here? That's it from my side..

Murilo, thank you for your questions.

Regarding the production of solar facility, let me comment that if we look -- if we see the expected generation curve that we projected at the beginning of this year, the beginning of 2021, I believe there is [ remodulation ], in relation due to the execution of the project that has been affected, especially in 2021 from events derived from the pandemic.

So in some cases, we had to wait until the opening of the border to have people onboard and working on the sites. And we managed -- this year, we managed it very well, all the problem regarding the delay in the terms from the hydrology. Now we are, let's say, almost at regime, even if clearly, each site has its peculiarity.

So what we are projecting is to have at least 900 megawatts already connected by the end of this year. The remaining, considering 1.3 gigawatts, the remaining 250 megawatts connected in the early months of 2022. And the remaining plant, the [indiscernible] one, the south, is still requiring some more time because of transferring of the grid.

So what I would say is that the work on site is advancing. We started to operate some megawatts that are already connected to the grid, clearly, with limited amount of the generation. The, let's say, full ramp-up will take place in the first part of 2022.

We think as well to, let's say, reach approximately the expected level of CapEx that we have, let's say, forecast for this year. And we are also working for opening additional working areas for new projects. So the activity, the cities are advancing. We are very focused on this development.

And we don't expect to have -- to lower the CapEx for this year, and we are preparing the new CapEx plan for the next -- for the following years.

Regarding gas, if we look backward, what happened this year, clearly, you have also to consider that the plan for dispatching our gas contract is discussed and agreed with the counterpart, let's say, in September. So it was -- at that time, it was not possible to anticipate, let's say, the shortage of Argentinian gas.

So what happened to every player in the gas market, and keeping the energy market in Chile, is that was a lack of resources in the early 2021. So we managed, in fact, getting -- to anticipate to deliver one of the ship. We managed to buy on the spot the required amount.

And there was -- the lack of gas still remains because not all the players have been able to cover the gas. Clearly, starting from end of March, April, the delivery of shale gas was at regime.

But considering the month of July and August, especially the first 15 days of August where the draft was very, very low -- very, very big, so the heat to the system very much additional ship, additional bets have been bought and to be delivered early September. So this is, let's say, the situation backward.

Looking forward, clearly, we are managing to have more equilibrated delivery of gas around 2022. This is a negotiation essentially with the counterpart and you have also to take into consideration what the pressure on this sector at global level.

So it is an hard task that we are trying to cover because clearly, our scope is to cover all the needs that we have in 2022..

[Operator Instructions] And I'm not showing any further questions in the queue. I'd like to turn the call back over to Isabela for any closing remarks..

Thank you all for your attention to be here with us today. As I anticipated, we received questions -- sorry. So thank you for your questions that we have already received. But if you have any other questions or any other comments, please let us know. Just send us a message for the IR team. Many thanks for your patience, and stay safe. Bye-bye..

Thank you. Bye-bye..

Thank you. Bye-bye..

And this concludes our conference call for today. Thank you for your participation. You may now disconnect. Have a great day..