Enel Chile - Q2 2024

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to Enel Chile's first half and second quarter 2024 results conference call. My name is Carmen, and I'll be your operator for today. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star one one again. Please be advised that today's conference is being recorded. During this conference call, we may make statements that constitute forward-looking statements within the meaning of the 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 Enel Chile's press release, reporting its first half and second quarter 2024 results, the presentation accompanying this conference call, and Enel Chile's annual report on Form 20-F, included on the risk factors. You may access our first half and second quarter 2024 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 would now like to turn the presentation over to Ms.

Isabela Klemes, Head of Investor Relations of Enel Chile. Please proceed.

Isabela Klemes (Head of Investor Relations)

Buenos días. Good morning, and welcome to Enel Chile 2024 second quarter and first half results presentation. Thank you for all joining us today. My name is Isabela Klemes, and I'm the Head of Investor Relations. Joining me this morning is our CEO, Giuseppe Turchiarelli. Our presentation and related financial information are available on our website, www.enel.cl, in the Investors section, and also in our app, Investors. In addition, a replay of the call will be soon available. At the end of this presentation, there will be an opportunity to ask questions via phone, webcast, chat, through the link, Ask a Question. Media participants are connected only in listen-in mode. In the following slide, Giuseppe will open the presentation with our key highlights of the period, then go through our portfolio and regulatory context update.

And finally, will give us a view of our business, economic, and financial performance. Thank you all for your attention, and let me now hand over to Giuseppe.

Giuseppe Turchiarelli (CEO)

Thank you, Isabela. Good morning, and thanks for joining us. Let's start our presentation with our main highlights of the period on slide 2. During the second quarter, our hydro portfolio performed outstandingly, repeating the good performance of the first quarter. This resulted from higher reservoir level at the beginning of the year, due to El Niño phenomenon last year, coupled with strong weather events during this quarter. This gave us a robust and efficient generation portfolio mix for the semester. We added approximately 250 megawatts of new renewable energy capacity and BESS projects. All this addition will support our long-term ambition of decarbonization and the ongoing optimization of our portfolio. Furthermore, I would like to mention that we have received the commercial operation date from the system operator for around 410 megawatts this year, totaling 0.6 gigawatts since January 2023.

Moreover, during this period, Enel Generación, a subsidiary of Enel Chile, secured a 20-year term regulated PPA, representing a sales of around 3.6 TWh in the regulated auction, starting to deliver around 1.5 TWh since 2027, and the remaining part to reach 3.6 TWh in 2028. This continued Enel Generación goal to diversify its sales and include more long-term PPA in its portfolio. On the regulatory side, we have some important news to share. First, as you may know, the Chilean Congress approved the law related to the stabilization mechanism, type three. In July, the decree with the updated regulatory tariff was published. Now, we are awaiting the sovereign guarantee decree during the third quarter to enable to start the factoring process.

Second, the distribution tariff for 2020-2024 came into effect in June of this year. The review process for the distribution tariff for 2024-2028 has already begun and is progressing as expected. I will give you more color on this topic later on. Regarding profitability, I'm pleased to announce that the first half showed solid EBITDA and net income results. This reflects our confidence in our guidance for this year. We achieved a positive FFO, despite the tax receivable. As you know, we expect to recover a portion of it during the second half of this year. The positive effect of FFO reflects our solid operation performance during this semester. And finally, we have a solid level of liquidity to be used for future cash CapEx deployment. I will provide more details on this later.

Now, let's look at some updates on the hydrological situation on slide three. Positive hydrological condition during 2023 allowed us to have a greater water availability during the first quarter of this year. In addition, higher than expected rainfall during the second quarter of 2024 allowed us to increase our hydro production, exceeding by 72% the level recorded in the second quarter of 2023. Therefore, during the first half of 2024, we have accumulated 2.1 TWh of hydro generation compared to the last year. The hydrological situation in our reservoir is also very positive year to date, once compared to the last year figures, especially in the south.

In fact, with the water accumulated in our reservoir to date, we have sufficient availability to supply our energy demand until the end of this year, even with the possibility of a weak La Niña phenomenon in August and September. Based on these results, we have updated our hydro generation estimate to approximately 12 TWh for 2024. We expect to complement this information once we know the results of the Ruta de la Nieve studies, which will be carried out in the coming months, so that we can better estimate the snow melt forecast for the fourth quarter. Now, let's move to the next slide to review how we continue improving our portfolio of generation assets.

We continue developing our strategy toward a more efficient generation matrix, increasing our renewable capacity across different areas of the country, focusing on solar, close to the center of consumption, and incorporating more battery in our portfolio projects. During this first half, we reached a total net installed capacity of 8.7 GW. We connect almost 250 MW of additional net capacity related to our solar plant with batteries, Don Humberto, located in the Metropolitan Region, and two more projects with battery. These are El Manzano BESS, which is also in the Metropolitan Region, and La Cabaña BESS, too, in the south part of the country. During this half, we received authorization from the National Electricity Coordinator to begin commercial operation for 410 MW related to the two solar plants.

Las Salinas, in the north zone, a hybrid project that is located in the same field as Sierra Gorda Este, a 112 MW wind farm, and El Manzano, a solar plant located in the metropolitan region of Santiago, very close to the consumption center. And finally, our wind farm, La Cabaña, located in the south of Chile. In addition, let me inform you that we are concluding the Los Cóndores hydropower plant. In September, we will have the important milestone. We will start filling the tunnel with water to execute what we call the wet test. Following it, coordinated with the system operator, we will start the testing process of Los Cóndores. Our goal is to have the connection and testing concluding during 2024. The deployment of our renewable plants aim to increase the flexibility of our portfolio, which is today 77% renewable base.

It should be noted that with everything mentioned above, we have completed the first wave of growth projects that were part of our plan. Now, on slide-- on the next slide, we will review the performance of our generation KPIs. Net electricity generation totaled 12.1 TWh as of June 2024, exceeding by 15% the production during the first half of 2023, mainly due to higher hydro and renewable generation, resulting from the improved hydrology and the operation of the new project, respectively. During the second quarter of 2024, net generation grew by 11% to 6.1 TWh, mainly due to higher hydro and wind generation. Our energy sales totaled 17 TWh in June 2024, 10% higher than the level recorded in the first semester last year, resulting from higher sales to both regulated customer and free clients....

It's worth mentioning that our commitment with our clients were fulfilled with a higher portion of our renewable generation, which also led us to lower energy purchases in the spot market, mainly in our solar hour. During the second quarter of 2024, physical energy sales grew by 11% to 8.5 TWh, mainly due to higher sales to regulated customers. In terms of our balance, during the first semester, we increased our purchases from third parties by 1.5 TWh, as part of our continued effort to diversify our sourcing. Now, on the next slide, we will review the performance of our main KPI. In the generation business, during this semester, we have seen relevant improvement in our KPI. In terms of renewable and BESS increased capacity, reaching 6.8 GW of net capacity, representing a 77% stake in our generation portfolio.

This enable us to reach 74% CO2 free production, which is 13 basis points higher than in the first half of 2023. Additionally, the energy sold in the generation segment reached 17 TWh, representing an improvement of 10% compared to the last year. I would like to highlight now the great contribution that Enel X is making in terms of our that allow us to continue driving the electrification process. We improved our figures in this semester compared to the last year period. We have increased the number of public and private charging points for electric vehicles by 25%, reaching almost 3,000 charging points. Regarding e-Home services and electrification indicator, we also improved our number by 40% and 60% respectively, compared to the last year.

Regarding the public lighting, we reached 372,000 lighting points, 1% higher than last year, mainly due to the maintenance contract with La Florida, Castro, and Huechuraba Municipality. Regarding the distribution segment, the number of clients and distributed energy in our concession area continue to grow by 2% and 3% respectively, compared to last year. It is relevant to mention that this quarter, we had some critical weather events, with heavy rains and snow, that affected the stability of the electricity supply, impacting our quality indicators, such as SAIDI, SAIFI, and losses. Regarding SAIDI and SAIFI, as a matter of comparison, the numbers presented on this slide do not include the impact of the maintenance event. Now, on the next slide, let's look at some updates related to the regulatory content.

As you may recall, last call, we indicated that in January, this year, the Ministry of Energy presented a bill related to the Stabilization Energy Mechanism, with the purpose of continuing the PEC mechanism and mitigating the projected tariff increase to final customers. At the same time, they also aim to improve the client protection mechanism, known as MPC mechanism, to allow gradual repayment of accumulated debt with the generator, and establish a transitory subsidy for the most vulnerable clients. This new law was discussed and approved by the Chilean Congress in April, published and came into force last Tuesday, April third. In June, the PNP decree was published, and with this publication, the tariff of the regulated clients started to be updated, depending on their location and monthly consumption.

Clients with consumption below 350 kWh had their generation component of the tariff updated by inflation, and clients with consumption above 350 kWh, 12% and a higher amount increase of around 35%, related to the starting to pay the real price of electricity, plus a new charge, named MPC. We are now waiting for the issuance and publication of the Sovereign Guarantee Decree, as well as the complementary set of rules and regulations to the new law, needed to start the factoring process. This guarantee will be presented to investors as a part of the issuance coordinated by the IDB, expected in the next few months. As of June 2024, we had an account receivable related to the PEC, already net of factoring, of $904 million.

Considering the readjustment and the interest of around $115 million, we reached an accrual of $1 billion, approximately. With the issuance and publication of the pending regulation, we expect to execute the factoring of the current accounts receivable during the second half of this year, ranging from $550 million-$650 million. We expect that by the end of 2024, the accounts receivable net of factoring should range between $350 million-$450 million. Now, all the discussion are centered on the subsidy in place, which could increase the number of families that will receive subsidies and avoid further tariff increase.

According to the law approved today, $100 million are coming from subsidies paid by the consumer, particularly the free customer, and $20 million are coming from the Treasury of Chile. This $120 million would support around 1.2 million families. The family that will be benefited shall be known during September, and the distribution company shall apply retroactively since July, this benefit during October this year. Now, Congress is discussing with the executive authorities a potential increase of this benefit, to increase the number of families supported by this subsidy to around 4.7 million families, increasing the total annual subsidy to around $300 million per year, versus the current $120 million in place. The potential changes to increase the subsidy are still under discussion by the government and the Congress.

We expect the final proposal to be submitted by the middle of August. On the distribution tariff review, the regulatory final decree for 2020-2024 cycle was published in early June, and therefore, the new distribution tariff will represent an increase in the tariff for the final customer in our concession area of around 5%. Regarding the 2024-2028 cycle, in July, the consultant technical report was received, and is currently being reviewed by a committee. The final report is foreseen to be published early in Q4 2024. We expect that by the end of this year, the regulator shall publish the preliminary technical report on this new cycle. We are more confident regarding this process, considering that the consultant who is working is the same one who worked in the previous cycle period.

Therefore, we understand that some topics already discussed before the previous cycle shall be automatically applied to this process. Now, let's review on the next slide our earnings indicator performance. Our economic and financial performance was very solid in the first half and second quarter of 2024. As you can see on the slide, in the first half and second quarter of 2024, we had an important improvement in EBITDA and net income versus last year's figures. This is mainly explained by the outstanding hydrological situation and a more efficient generation mix. In the first semester of 2024, the FFO also showed an improvement compared to last year, reaching $52 million. This is mainly explained by the improvement in the EBITDA, offset by a negative impact due to higher tax payments related to Arcadia operation and a more significant capex accumulation.

Regarding the second quarter, FFO improved by $27 million in 2024 versus 2023, due to the same impact already mentioned in the semester. We will review more detail on the following slide. Now, on the next slide, let's review the progress on CapEx. Our total CapEx reached $290 million this first half, 9% lower than last year, considering the conclusion of several renewable and storage projects since the second quarter of 2023. 66% of our total CapEx, equivalent to $190 million, was related to renewable and storage, and 22% equivalent to $63 million, was related to grid. Mainly, due to new customer connection associated with the growth of our customer base and corrective maintenance of the network. Asset management CapEx reached $87 million, which represents 30% of our total CapEx.

It decreased by around 22% compared to last year's figures, mainly explained by increased CapEx in the distribution business, mostly related to activities in the low and middle voltage, and maintenance activity in our generation fleet, particularly in our hydro and gas facilities. Finally, development CapEx reached $167 million, representing 58% of our total CapEx, a decrease of 21% compared to last year's figures, considering that we are finalizing our renewable and BESS portfolio under construction. Let's now move to the next slide, where we have a summary of the second quarter EBITDA breakdown. In the second quarter of 2024, our EBITDA reached $301 million, 6.4 times higher than the second quarter of 2023. Let me explain the main effects on this quarter. I will start with the positive effect.

First, I would like to highlight a relevant contribution from PPA sales equivalent to $150 million, primarily related to higher volume, mainly in regulated market, as we have viewed in the preliminary slide, and indexation in the free market. Another relevant effect this quarter is related to industrial sourcing for $70 million, mainly explained by lower variable costs coming from lower commodity prices and thermal generation, considering this quarter hydrological situation and more efficient generation mix. Third, there is a positive contribution of $60 million related to commercial sourcing, primarily due to lower purchasing in the spot market, mainly explained by lower prices as a result of more significant higher generation in the period.

In addition, we had a positive effect of $12 million related to the grid margin, mainly explained by the grid remuneration associated with the VAD 2020-2024 regulatory report publication. Finally, we had a positive effect of $13 million from OpEx and other. This is mainly explained by higher capacity payments coming from new projects, which more than offset higher OpEx relating to these new renewable projects. The above-mentioned effects were partially offset by a negative effect of $7 million related to the largest gas activity carried out during the second quarter of 2023. And finally, we had a negative effect of $10 million related to the Methanex PPA agreement, which was signed in 2023. Let's move on to the next slide to review the main impact on the EBITDA during the first half.

In the first half, our EBITDA was 74% higher than last year, reaching $597 million. Let's start by explaining the positive effect. First, we had a positive contribution from PPA sales equivalent to $168 million, mainly related to higher volume in the regulated market and indexation in the free market, in line with effects explained previously in the quarter. Second, there is a relevant effect of $160 million related to industrial sourcing, primarily explained by lower variable costs due to lower thermal generation, as a consequence of the remarkable hydrology of the period and a more efficient generation mix, and by a positive effect of the AG instrument versus 2023.

Third, there is a positive contribution of $108 million related to the commercial sourcing, primarily explained by lower prices and volume associated with the purchases in the spot market. This effect is partially offset by higher purchases from third parties. In addition, we had a positive effect of $16 million related to the grid margin, primarily explained, as in the quarter, by the recognition of the VAD 2020-2024 in the period. Now, on OpEx and other, we had a positive effect of $16 million from OpEx and other, which is mainly explained by the same effect as I already mentioned in the quarter, linked to the higher capacity payments coming from the new projects, which offset higher OpEx related to them, and higher costs for contingency plan after the climate events during the second quarter of 2024.

The above-mentioned effects were partially offset by, first, a negative effect of $124 million related to the remarkable gas trading activity carried out during the first half of 2023, for around 20, 20 TBtu. Finally, there was a negative effect of $35 million related to the Methanex PPA agreement signed in 2023. Let's move on to the next slide, where we will review the net income evolution, accounting for $267 million. Our net income increased by 2.2 times versus last year's figures, mainly explained by the EBITDA results. Let me drive you through the additional effects for the first half. Higher depreciation, amortization, and bad debt of $34 million, mainly resulting from higher depreciation in Enel Green Power due to the new renewable capacity coming into operation.

However, higher bad debt occurring in Greece due to higher credit losses expected associated with the residential customers. Regarding financial results and equity investment, we recorded a $6 million reduction versus last year, mainly explained by higher interest related to the PEC receivable, offset by higher financial expenses and lower financial income linked to the lower average interest rate. Income tax increased by $57 million, mainly due to better results in the period. This was partially offset by a lower cost related to the reclassification of assets held for sale in 2023, specifically, that related to Arcadia. Focusing on the quarter, our net income increased by $137 million.

This increase is mainly explained by the rise in EBITDA contribution, which was partially offset by an increase in D&A and bad debt of $21 million, primarily due to a $15 million linked to the operation of new renewable capacity, but that increased by $6 million, primarily due to higher credit losses among residential customers in the distribution business. This dynamic closely mirrors that observed in the first half. Higher financial expenses of, and lower financial income linked to the lower average interest rate. An increase in tax of $58 million in the period, mainly due to the earnings before tax losses recorded in the second quarter of 2023, and positive EBT in 2024. Moving to FFO analysis on the next slide.

Regarding FFO, the figures for 2023 have been adjusted by $310 million, paid in taxes on capital gains obtained from the sale of Enel Transmisión in 2022. The first half of 2024, our FFO reached $52 million, representing an improvement of $56 million compared to the same period in 2023. Let's see the comparison of our first half 2024 FFO and the balances versus 2023, starting with EBITDA. $597 million coming from EBITDA in 2024, and a variation of $254 million versus last year figures, primarily due to higher PPA sales and positive performance of the industrial and commercial sourcing, as already explained. $260 million negative impact coming from the cumulative stabilization mechanism effect in our receivable.

This negative effect is partially offset by the execution of IDB factoring related to the FEC, which amounted to $70 million this first half. Once compared with the last year figures, the net impact of the FEC, adjusted by factoring in the period, totalized $147 million, an amount of $13 million higher than last year figures. Working capital reached a negative balance of $142 million, mainly due to the payment from 2023. Once compared last year figures, the working capital was $19 million lower, mainly explained by the sales of our headquarters in Santa Rosa building in 2023, partially offset by higher accumulation of VAT tax credits and payments associated with the Santa Rosa E-buses lane.

Income tax also negatively impacted our FFO result by $137 million, mainly explained by higher tax payment in generation business in 2024, and taxes paid on the sales of Arcadia assets. Once comparing the income tax paid in the first half of 2024 versus first half 2023, we see a negative balance of $135 million. The main differences come from the tax payment of Arcadia operations, the recovery from previous periods obtained during 2023, and lower tax payment in generation business. To conclude, regarding financial expenses, this first half of $120 million has a negative effect, primarily explained by the payment of debt-related expenses.

Once we compare this first half financial expenses with the last year figures, we see a variance of $32 million, mainly explained by lower financial income linked to both reduced cash level and lower average interest rate. Now, let's take a look at our liquidity and leverage positions. Our gross debt increased by 8% to $4.8 billion by the end of June 2024, compared to December 2023. This higher debt was mainly due to higher working capital and CapEx needs for 2024. This increase in gross debt should reverse during the second half of 2024, considering the seasonality of our generation business and the upcoming factoring under the FEC stream mechanism, which we expect to be carried out soon.

The average term of our debt maturity is slightly decreased to 5.9 years by the end of the first half of 2024, versus the 6.1 years seen in December 2023, and the portion at the fixed rate was 76% of the total debt. The average cost of our debt reached 5% as of June 2024, slightly above the 4.9 recorded in December 2023, primarily due to the Enel Generación Yankee bond maturity in April 2024, for $400 million at 4.25%. Regarding liquidity, we are in a comfortable position to support our capital needs for the upcoming months and cope with the next year maturity.

As of June 2024, we have available committed credit line for $750 million, and a cash and cash equivalent for $305 million. Now, I will conclude this presentation with some closing remarks. The first half of this year was very important regarding updates in the regulatory framework. The VAD 2020, 2024 decree, and approval of the PEC 3, were followed by the publication of the PMP decree, which was a significant milestone for the generator, starting to execute factoring in the third quarter of 2024. Today, the regulatory agenda is centered on the potential increase of subsidies for vulnerable families. We understand the importance of this moment, and we are constantly monitoring the situation. We will provide any necessary feedback to the authority and association according to formal processes.

However, we hope that the state of Chile will make the best decision for all, maintaining the security of the regulatory and market environment. An important message that I would like to leave here concerns the increase of flexible technology in our generation markets. As you can see, all the committed megawatts of renewable generation and BESS were successfully delivered. As I mentioned before, we are also concluding the Los Cóndores hydropower plant by the end of this year. To conclude, in this quarter, you can also see that we have been able to deliver a more than solid operating and financial performance in the first semester. These are the results of our action to unlock value and give us enough support to be confident about our 2024 guidance. Let me now hand over to Isabela.

Isabela Klemes (Head of Investor Relations)

Thank you, Giuseppe. Let's now begin with the Q&A session. We will receive questions via phone and chat in the webcast. The Q&A session is open. Operator, please, you may start.

Operator (participant)

Thank you so much, and as a reminder to our teleaudience, press star one one to get in the queue and wait for your name to be announced. To withdraw your question, simply press star one one again. One moment for our first question, and it's from Alessandro De Vito with Mediobanca. Please proceed.

Alessandro Di Vito (Analyst)

Hi. Hi, thanks for taking my question. I have three. The first one is on the PEC mechanism. So, I wanted to understand, you said that you have more or less $1 billion to recover. I wanted to understand if this, if this amount can move, or is it still, because I saw that on your cash flow, you booked $200, additional $200 million in this first half. So I wanted to understand if you could either move upwards or downwards. And then you said that you expect that, you expect to recover, let's say, $600 million of receivables by the end of the year, but the whole amount is going to be fully recovered by 2035. So I wanted to understand the trajectory of the remaining $400 million. This was the first question.

The second question is on the update of distribution tariffs. I wanted to understand if the conclusion of the review for 2020-2024 tariffs had some impact on your numbers. And you also said that you expect a 5% increase in tariffs for the next update for 2024-2028. So I wanted to understand which impact that this may have on your numbers. And the last question is on guidance. You confirmed the guidance for 2024. If I remember correctly, the guidance was based on an assumption of a 10 TWh hydro output, but now we see that the projection are pointing more towards 12 TWh.

So, I wanted to understand whether this, this guidance, is conservative, because looking at the numbers, they're more or less, we're more or less halfway through the year, and they're half the number of the guidance. So I just wanted to square the circle on this matter. Thank you.

Giuseppe Turchiarelli (CEO)

Okay. Starting from the first one, as I said, we have, at the end of June, we have $1 billion. That includes also around $150 million in terms of interest. Now, the evolution of the PEC is based on the exchange rate US dollar pesos, because I remind you that we have the PPA in dollar, even if the payment of the price is in pesos. We have a certain trend at the end of the year, but again, this trend is strictly linked to the exchange rate effect. The recovery that we expect in 2024, of course, are strictly linked to this factoring process.

The remaining part is going to be recovered between 2025 and 2020. I would like to remind you that the effect one foreseen to have a mechanism of recovery that is going to finish in 2027. So approximately, we are... But again, this is just an estimation so far, we are going to recover another $200 million in 2025, and the remaining part between 2026 and 2027. These are basically the current estimation that we have today. For what concern the price update on 2020, 2024, as I said, we have an increase in our number of around $16 million in June versus last year.

You have to consider that this amount includes also around $7 million that are the part of recognition that is referring to the previous year. We have to consider that this tariff decree is basically adjusting a situation that was absolutely extraordinary, because we are at the end of the process, and only now we got the final tariff. So part of this increase is related to the adjustment from 2020 to 2023. And for what concerns the next regulatory cycle, the 2024-2028, let me say that the technical report that we have received so far is in line with our strategic plan.

So basically, we don't see any kind of situation that could so far affect the strategic plan. Clearly, we are going to give us our feedback, and we are going to try to understand which is the best type for covering the several aspects of the distribution company. But as of today, we don't have any kind of issue for the first technical report. In terms of guidance, well, what I can tell you is that, as of today, we confirm our guidance. Of course, what we declare in the last capital market day was a range, and as of today, I can confirm in that we are in a range, in this range.

Clearly, we are still trying to understand which is the result of the Ruta de Nieve, and that will give us further information to understand how the melting season will be in the following months. But as of today, I can tell you that we are in the range of the guide.

Isabela Klemes (Head of Investor Relations)

Okay. Thank you, Giuseppe. Operator, do we have more questions coming from the line?

Operator (participant)

Yes. Thank you. One moment for our next question. That is from Maria Florencia Mayorga Torres, with MetLife. Please proceed.

Maria Florencia Mayorga Torres (Analyst)

Hey, Giuseppe, Isabela, thanks for taking my question. Just a follow-up regarding the receivables. So for this year, how much are you expecting to be able to monetize?

Isabela Klemes (Head of Investor Relations)

Thank you, Florencia.

Giuseppe Turchiarelli (CEO)

Yeah. Well, for what concerns the receivable that is currently affecting our generation company, as I said, in June, in the June closing, we have approximately $1 billion. And, if everything is going as expected, in the second half, between, I would say, September and October, we're able to to proceed with the factoring process. So we should have around $550 million-$600 million of factoring. This is the-

Maria Florencia Mayorga Torres (Analyst)

Okay.

Giuseppe Turchiarelli (CEO)

Expected amount.

Maria Florencia Mayorga Torres (Analyst)

Okay, perfect. Thank you.

Isabela Klemes (Head of Investor Relations)

Thank you, Florencia. Operator, more questions coming from the line?

Operator (participant)

Yes, I have one more question from the line of Martín Arancet with Balanz. Please proceed.

Martín Arancet (Analyst)

Hi. Thank you, Giuseppe, for the presentation and for taking my questions. I have three questions. I would like to run them one by one, if that's okay. First, we learned that Superintendencia de Electricidad y Combustibles expressed a desire to see the Santiago electrical grid strengthened in order to address potential issues with quality of service. I was wondering if this could affect the Enel Distribución Chile OPEX and CapEx plan, and if so, by how much?

Isabela Klemes (Head of Investor Relations)

Thank you. Giuseppe?

Giuseppe Turchiarelli (CEO)

Yeah, I mean, really, you know, the extreme weather events that we had in May affected our supply of energy to our workers. It was very, very, very complicated because of rain and also temperature. We had some cost associated with approximately $3 million. Clearly, we are in discussion with tech to understand how to manage this situation. We don't have so far any other information about that.

Martín Arancet (Analyst)

Okay. Okay. Well, following up then on energy solution, and I'm sorry, because I think that you already mentioned this, so I may be asking you to repeat yourself, but I want to understand the situation around current household power bills. So if you could please tell us which hikes have already been implemented by July? I guess that the ones related to VAD are already implemented. I was wondering which hikes have been implemented in the energy component, and also specifically about the surcharge for large customers related to the SEC credits payment, if that has been already included in the power bills also?

Isabela Klemes (Head of Investor Relations)

Okay, thank you. Giuseppe?

Giuseppe Turchiarelli (CEO)

Well, for what concerns the tariff adjustment in the distribution segment, we have two kinds of adjustments depending on the cluster. So we have the clients that consume lower than 350 kWh, which the increase is gonna be around 16%. And this increase is basically the results of three components. The first one is the update of VAD 2024, that represent 5%. So basically, the increased tariff associated to the VAD 2024, for the distribution company is around 5%. The remaining part is split between an increase in the tariff coming from the update in transmission regulatory framework, that is around 4%. And finally, we have 8% that is associated to the generation segment.

This is for what concern the cluster of client lower than 350 kWh. For the other one, more than 350, the increase of tariff is higher, because we have an increase in distribution segment 5%, transmission 4%, and an increase in the segment for the generation company that is going to be around 33%. And this is because basically for this customer, we are going to apply basically the cost of PPA that the tenders in the past year has been resulting. For what concern the pack, the pack that we are going to factorize by the end of the year, includes also the interest.

Martín Arancet (Analyst)

There is a date for these increases? Sorry.

Isabela Klemes (Head of Investor Relations)

The, the-

Giuseppe Turchiarelli (CEO)

Yeah?

Isabela Klemes (Head of Investor Relations)

The date of this increases, it's.

Giuseppe Turchiarelli (CEO)

It's already, it was already in place.

Martín Arancet (Analyst)

Oh, okay. Thanks. Well, my last question then, regarding the standalone batteries, I think that they were connected, if I'm not mistaken, before their co-located generation plants start the operation. So I was wondering, what is the remuneration mix that you expect to receive from these for the moment, standalone batteries, if just spot trading or also capacity payments and perhaps some ancillary services as well? And also, who will be in charge of deciding the charging and discharging times of these batteries, if it's going to be Enel Chile or the CEN?

Giuseppe Turchiarelli (CEO)

Okay. Look, for what concern the, these two battery, basically the composition of the revenues are basically coming from the capacity payment and the, and the energy system. These are the, the main component of the remuneration of this battery. The ancillary services, we are waiting for an update of the regulation by the end of this year, and as soon as it's going to be in, in force, we are going to have also an additional effect coming from this stream of revenue. And, these two projects are projects that, retrofitting, so basically are jointly to another, another renewable project, in this case, the Humberto and Manzano. In this case, we are talking about solar power plants.

So basically, they are charging from the solar power plants, but the regulation allow us to charge the battery also by the grid. So depending on the situation, we are going to use one of the two.

Isabela Klemes (Head of Investor Relations)

Thank you, Giuseppe. Operator, do you have more questions coming from the line?

Operator (participant)

Yes, I do. One moment for a follow-up from Alessandro De Vito with Mediobanca. Please proceed.

Alessandro Di Vito (Analyst)

Hi. Hi. Hi again. Thanks for taking my questions. I have a follow-up, a couple of follow-ups, actually. Well, the first one is on PEC. You said that the general framework to recover the PEC 3 receivables goes up to 2035, but you want to recover all the, the whole $1 billion before 2027. Is this correct? You said that you have this $1 billion in 2024, of which $450 million is related to interest, and $850 million is related to tariff receivables. Is this correct? Because in this sense, the $850 million is still, and the $150 million related, let's say, related to interest, is the amount that is going to change... That may change in the coming months.

This is the first follow-up. The second follow-up is just a clarification on the update of tariffs. So you said that you expect a 5% tariff increase on the next regulatory period, so 2024, 2028, but the CLP 16 million that you, let's say, that you are counting in your numbers, it's related to the update, so the one that has been concluded, the 2020, 2024. I just wanted to have a confirmation on this. Thanks.

Isabela Klemes (Head of Investor Relations)

Thank you, Alessandro.

Giuseppe Turchiarelli (CEO)

Okay.

Isabela Klemes (Head of Investor Relations)

Giuseppe?

Giuseppe Turchiarelli (CEO)

Yeah, I mean, I will try to be more clear. So as I said, as of today, we have $1 billion. That includes $1 billion credits coming from the PAC three, that include $150 million in terms of interest. And by the end of the year, we are going to factorize around $550-$650. The remaining part is going to be recovered, not necessarily through the factoring, but according to the regular mechanism, by the end of 2027, okay? This for what concerns the outstanding credit that we have today.

Really, from now onwards, we are going to accumulate, depending on the market condition, we're going to accumulate another remaining part that is not going to be a huge part of our credit, but we are going to recover it in the next year. And

Isabela Klemes (Head of Investor Relations)

The second question was-

Giuseppe Turchiarelli (CEO)

For what concern the update, tariff in the distribution, as I said, the impact for the distribution, so the remuneration that is going to impact the distribution company, is only related to the 5% increase that the company is going to receive. Because, of course, the remaining company, transmission and generation, is going to, to, to be passed through to the, to the generation company and transmission company. So the, the amount that you see there, in terms of margin, of course, is linked exclusively to the 5%. And as I said, we are-

Alessandro Di Vito (Analyst)

Okay.

Giuseppe Turchiarelli (CEO)

Sorry?

Alessandro Di Vito (Analyst)

For the next regulatory period, 2024-2028, right?

Giuseppe Turchiarelli (CEO)

No, for the 2024, 2028, we are still understanding how it's gonna be the case.

Alessandro Di Vito (Analyst)

Oh, okay. Okay. I just wanted to understand-

Giuseppe Turchiarelli (CEO)

What I can say is, yeah-

Alessandro Di Vito (Analyst)

To what regulatory period was related that $16 million, which relates to the 5% increase, so it's 2020-

Giuseppe Turchiarelli (CEO)

The past one.

Alessandro Di Vito (Analyst)

The past one.

Giuseppe Turchiarelli (CEO)

The twenty-

Alessandro Di Vito (Analyst)

Okay. Okay, okay.

Giuseppe Turchiarelli (CEO)

No, as I said, this one, as of today, at least the information that we got it, are in line with our expectations, so we don't see... As of today, we don't see any kind of worries, but it's too early to understand how it's gonna be the tariff.

Alessandro Di Vito (Analyst)

Okay, thank you so much.

Operator (participant)

I'm not showing any further questions in the queue. I will pass it back to Isabela for any additional questions on your side.

Isabela Klemes (Head of Investor Relations)

Okay. Thank you.

Operator (participant)

... Isabela, your line is muted if you're reading the questions.

Isabela Klemes (Head of Investor Relations)

Thank you, operator. I was in mute, sorry. So the first question is coming from Felipe Torres, from AFP Habitat. So the question is: Could you explain the better results in the distribution segment? Is it related to the tariff decree of June?

Giuseppe Turchiarelli (CEO)

Yeah. As I said, basically, the tariff decree allows energy distribution to adjust the provision made in the past regarding the VAD 2024. So basically, up to June, we used to make an estimation, the provision point of view, estimation of the tariff. Right now, we have the final tariff, so we started applying the final tariff that we received, and we are recovering part of the adjustment that we made in the previous year. So this is basically the main reason of increase in the distribution company. Clearly, we have our own several other effects, you know, the demand, the inflation, but basically in terms of the decree, this amount is clearly significant for a company, because it's recovering the gap that we had in the last year.

Isabela Klemes (Head of Investor Relations)

Okay. Thank you, Giuseppe. Also now on distribution, we have received some also questions coming from our email, okay? So some retail investors are asking us, now, regarding the impact of the current tariff discussions on Enel Chile. The question is whether the published tariff decree explained the results of Enel Chile, as indicated by the press.

Giuseppe Turchiarelli (CEO)

Well, let me clarify a point. The, for what concern the generation company, the tariff decree doesn't have any kind of impact in terms of EBITDA, because since the first PEC law has been issued, we started to register, to make a provision according to the PPA in place. So basically, we don't have any kind of increase in terms of EBITDA because of this tariff decree. And this is the reason, because we have the PEC receivable. So we continue, since the beginning, to register the correct PPA price, but we receive, in terms of payment, only a part of this PPA price. This is the reason, because we have the PEC receivable.

For what concerns the tariff decree, the only impact that we can that is related to the increase of our performance is on the distribution company, so basically, what we have already said. Distribution is quite, you know, after three years and half, roughly, starting to accrue, accruing the current tariff, and this is explained, and this explain around $16 million, not more, not less, of which, half of it, approximately, is coming from the adjustment of the previous year. So basically, in a, in a very short way, I would say that the tariff decree decree impacted in our performance in a very, very low amount.

Isabela Klemes (Head of Investor Relations)

Okay. Thank you, Giuseppe. Let's go to another question, now coming from... The second question is coming from Fernán González from BTG Pactual. So Fernán is asking us: How and when do you expect to receiving the payments from the accumulated debts in the distribution segments from the delayed 2020, 2024 decree?

Giuseppe Turchiarelli (CEO)

Okay. Well, our estimation is that we are going to receive the accumulated debt at the beginning of next year, the first quarter of the next year. This is the estimation that we have as of today. I don't believe that we are going to get any kind of adjustment by the end of this year.

Isabela Klemes (Head of Investor Relations)

Okay. Thank you, Giuseppe. Now, I will join two questions here, one from Fernán González, still from BTG. How do you feel about your medium to longer term contracted portfolio? Are you still participating in the new unregulated option to try to win new PPAs, or do you believe you don't have much room left? Also there is a very similar question coming from Kene Dichia from Morgan Stanley. He's also asking us about, are you still on track to hit the 33 TWh sales by 2024, 2026? You have several regulated contracts ending, so how will you source additional contracts?

Giuseppe Turchiarelli (CEO)

Well, as of today, we don't see any. We don't have any kind of information about new regulatory terms as of today. In general, of course, as already explained several time, I mean, we don't have any kind of prejudice in our customer, so the best PPA we are going to choose. So, for what concerns the 33 TWh this year, we don't see any kind of issue. We basically all the contract has been already in place. For the next year, we are in negotiation with several customer in order to fulfill the amount of TWh that is going to expire according to the PPA in the regulated segment.

So as of today, we confirm our target in terms of sales, and we are confident to reach.

Isabela Klemes (Head of Investor Relations)

Okay, we have other questions in terms of the guidance that you have already answered. So the other question is coming from Ignacio Llanos, from Penta. He's asking: Can you give us some color on the cost for a new solar and wind project per megawatt? Related to that, what about the cost of battery?

Giuseppe Turchiarelli (CEO)

Yeah. I mean, in terms of wind, I would say it's around $1.6 million per megawatt, approximately. Of course, it, we all said several times, it's depending on the project, how, if it is an extension of an existing one, how close it is to the grid, but in general, 1.6 is a good proxy of the cost. For what concerns the solar, I would say that we are close between $0.7-$0.8 million per megawatt. Let me remind you that, in our plan, as of today, we are not expecting any other solar power plant. And for what concerns the BESS, we believe that, you know, something is improving the BESS cost, because we are...

We believe that we're able to reach $1 million per MW in the BESS power plants for 4 hour.

Isabela Klemes (Head of Investor Relations)

Perfect. Thank you, Giuseppe. We do not have any more questions, so we would like to thank you all for being connected today. And as always, if you have any other doubts, the Investor Relations team will be available. Have a great end of week. Bye-bye.

Operator (participant)

Thank you all for participating in today's program, and you may now disconnect.