Enel Chile - Earnings Call - Q4 2024

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to Enel Chile Full Year and Q4 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 *11 on your telephone. You will then hear a

message advising your hand is raised. To withdraw your question, simply press *11 again. Please be advised that today's conference is being recorded. During this conference call, we may make statements that constitute forward-looking statements within the 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 and reporting its full year and Q4 2024 results. The presentation accompanying this conference call and Enel Chile's annual report on Form 20-F included under risk factors. You may access our full year and Q4 2024 results press release and presentation on our website at 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)

Good morning and welcome to Enel Chile 2024 Q4 and Full Year Results Presentation. Thanks to you all for joining us today. My name is Isabela Klemes. I am the Head of Investor Relations Team. Joining me today are CEO Giuseppe Turchiarelli and our CFO Simone Conticelli. Our presentation and related financial information are available on our website www.enel.cl in the Investors section and on

our app, Investors. In addition, a replay of the call will be soon available. At the end of this presentation, there will be an opportunity to ask questions via phone or web press chat through the link Ask a Question. Media participants are connected only in listening mode. Giuseppe will start the presentation

by covering key highlights of the period. He will then discuss our portfolio management actions, provide updates on regulatory contests, and share our guidance achievements. Following that, Simone will offer an overview of our business economics and financial performance. Thank you for your attention. Giuseppe will now take over the call.

Giuseppe Turchiarelli (CEO)

Thank you, Isabela. Good morning and thanks for joining us. Let's start the presentation with our main highlights of the period on slide two. Our hydro portfolio performed exceptionally well, with hydro generation increasing by 12% compared to last year. This performance was a result of a higher reservoir level at the beginning of the year, influenced by El Niño phenomenon observed in 2023 and a solid rainy

season during 2024. Also, on hydro, we are pleased to announce that the Los Condores Hydro Power Project has finally been connected to the system. The plant is already in full capacity mode generation. All the tests were concluded, and we are now expecting to receive the COD in the next weeks. As we reviewed last quarter, the fourth major climatic event on August severely impacted our distribution concession area.

In this presentation, I would like to provide you with some updates on the additional measures we have been taking to prepare for the future climate events while we do not see changes in distribution regulations. Regarding the August event, I would like to emphasize that Enel Distribution was the first distribution company to request and agree on a voluntary compensation plan for its clients impacted by

the fourth major events in August. Also, I will give you more color on how we are in terms of VAD 2024-2028 process and the PEC situation, considering the publication of PNP regulated consumer tariff during January this year. Regarding the business profitability, I'd like to remind you that we changed the company functional currency during the Q4. This led to a no cash impact of $657 million at the EBITDA level.

As we have emphasized before, this will not affect the dividend distribution for our shareholders. Throughout the presentation, we will discuss adjusted EBITDA and net income excluding this impact. Taking the adjustment, I am pleased to announce that our adjusted EBITDA and net income result were fully in line with the 2024 guidance, reaffirming the confidence in our strategic plan. In terms of FFO, we

see an important improvement versus last year, coming mainly from our EBITDA and the PEC factoring executed in the Q4. I will provide more detail on this later. Let's review some updates regarding our generation sourcing, beginning with the hydro and natural gas situation as outlined on

slide three. The positive hydrological conditions during 2023, which led to a greater water availability from the beginning of 2024, coupled with higher than expected rainfall records in 2024, allowed us to increase our hydro production.

This resulted in a 12% increase compared to the 2023 period, equivalent to 1.5 terawatt-hours of additional hydro generation. The hydrological situation in our reservoir continued to be comfortable year-to-date compared to the last year figures, despite experiencing La Niña phenomenon. However, for the year, we have chosen to adopt a conservative strategy and set our hydro condition target for our

hydro fleet close to the average of the last 10 years, equivalent to 10.7 terawatt-hours. To strengthen and diversify our portfolio, we have strategically secured contracts with a variety of Argentine natural gas providers for 2025. Unlike previous years, this agreement covers the entire year, not just the winter and summer periods. This approach enhances our visibility of both prices and quantities, providing us with a more stable and predictable supply for the year.

Furthermore, while Argentine gas remains highly competitive, our strategy continues to be anchored to our long-term and firm LNG contract with Shell. This dual sourcing strategy ensures the security of our required volumes and offers the flexibility to explore trading opportunities in both internal and external markets. This proactive measure positions us strongly to navigate market and climate fluctuations and

capitalize on opportunities. Let's continue discussing our generation sourcing with a focus on the development of our portfolio on generation assets now on slide five. I would like to start emphasizing that in 2024, we successfully completed the expansion of our renewable portfolio across the country, increasing our exposure to battery energy storage. This milestone represents a crucial step in our strategy to diversify and make our portfolio more flexible. Our ongoing efforts to advance battery regulation for ancillary services are vital for boosting market competitiveness and reducing system costs.

In 2024, we received authorization from the National Electric Coordinator to begin commercial operation of a total of 693 megawatts. These include 385 megawatts of solar, 202 megawatts of battery storage, and 106 megawatts of wind capacity. Additionally, we successfully connected 404 megawatts of renewable capacity in 2024, bringing our total capacity to 8.9 gigawatts. Today, almost 80% of our

total capacity is renewable and BESS. As anticipated in the Q4, we connected Los Condores Hydro Power Plant into the grid. The plant is already operating in testing mode until we receive approval for the combination to commence commercial operation. The good news is that we are generating at high levels. To date, we have received approval for the 11 testing procedures requested by the system coordinator and have sent a letter formally requesting approval for commercial operation last week.

Therefore, it is reasonable to anticipate authorization by March this year. Now, on the next slide, we will review the performance of our generation KPI. Net electricity generation totaled 24.6 terawatt-hours as of December 2024, exceeding by 2% the production during 2023, mainly due to higher hydro and renewable generation resulting from the improved hydrology this year and the operation of new

projects. During the Q4 of 2024, net generation decreased 8% to 6.1 terawatt-hours, mainly due to lower thermal dispatch during the Q4 of 2024, lower other renewable production, and slightly better hydrology recorded during 2023. Our energy sales totaled 33.4 terawatt-hours during 2024, 8% higher than the level recorded in the previous year, resulting from higher sales to both regulated customers and free clients.

Our commitments with our clients were fulfilled with a higher portion of our renewable generation, coupled with an efficient portfolio of purchases for third parties. Regarding the latter, in terms of our balance during 2024, we increased our purchases from third parties by 2.3 terawatt-hours as part of our continued efforts to diversify and optimize our energy sourcing. During the Q4 of 2024,

physical energy sales grew by 6% to 8.1 terawatt-hours, mainly due to higher sales to regulated customers. Now, I would like to take a few minutes to talk about the extraordinary weather events of last August. I would like to provide updates on the extreme weather events that impacted our concession area in August 2024 and discuss our preparation for future events.

Just to recall, on August 1st and 2nd, an extraordinary and unpredictable storm with winds of up to 124 kilometers per hour impacted the metropolitan region, causing extensive damages. This storm severely affected our electricity distribution network, resulting in widespread power outages and making system restoration extremely challenging. We requested the local regulator to declare the August 2024 storm as

the fourth major event, but it was rejected. In response, we filed a reclamation remedy with the Santiago Court of Appeal to overturn the Superintendencia de Electricidad y Combustibles decision (SEC). On September 30, 2024, the Santiago Court of Appeal accepted our reclamation remedy, requiring the SEC to provide substantial information about our claim. As anticipated, on November 2024, the SEC report recommended rejecting our claim. We are now awaiting the court-filed resolution, which remains pending, and we stand confident in our position.

Still related to the event in August, last January, the SEC imposed a $20 million fine on Enel Distribución. This fine is the largest ever imposed on electricity providers in Chile for service disruption, among others issued identified by the SEC. Enel Distribución booked 100% in December 2024 of the fine, but filed an administrative remedy, reiterating that the August climate event was an unforeseen and irresistible force

majeure under Chile's current legal and regulatory framework. We are awaiting the SEC's formal response to our appeal. On February 4th, 2025, Enel Distribución, as part of a voluntary collective procedure, became the first distribution company in Chile to reach a voluntary agreement with the

National Consumer Services (SERNAC) to establish an extraordinary compensation mechanism for residential customers affected by the prolonged power outages in the country. The agreement includes a total voluntary compensation of approximately $80 million, benefiting around 800,000 customers.

This amount is divided into first compensation of interruption, second compensation for claims, and third compensation for the loss of food, medicine, and similar items. This agreement is separated from the legal compensations that are pending the resolution of the force majeure and aggravated abnormal state of reclamation remedies. The impact of this voluntary agreement program was also recorded in

our 2024 financial results, as Simone will show you later. Despite several regulatory and legal discussions surrounding the August event, we have introduced many initiatives to improve the response of our parties involved in the future climate events. We believe that climate changes will make such events always more frequent. Therefore, it is essential for all parties to act promptly and effectively to ensure the proper functioning of the networks. Let me provide you with some examples.

We agreed on operational emergency guidelines with the municipality to better coordinate with our operational teams during climate events. We signed a collaboration agreement with the electro-dependent group to ensure backup for medical devices and to provide training on the correct use of the equipment. We accelerated the rollout of the smart metering program for electro-dependent clients,

and we conducted preventive aerial inspections of the grid in preparation for the upcoming winter, particularly to identify any potential additional damage from the August events and to address any further needs for preventive trimming. Part of these actions were already included and presented as part of Enel Distribución 2025 Autumn-Winter Season Plan, which was submitted to the SEC on February 19, 2025. In the distribution sector, we remain committed to promoting reform and modernizing the regulatory framework to enhance asset resilience.

This effort will enable us to optimize the value of our distribution network, fully meet our clients' needs, and ensure long-term sustainability. Talking about regulation, let's take a look at the main update on the next slide. A supportive regulatory framework is crucial for attracting investments necessary for the energy transition and providing resilience against increasingly extreme and frequent events due to

climate change. Therefore, we continue to advocate for a new model based on real assets that addresses factors such as proper remuneration rates and incentive mechanisms for resilience, quality, and performance improvement. We appreciate the consensus among academia, the electrical industry, and the Congress on the urgency of the distribution reform and hope it will soon be part of the legislative agenda once the legislative members return in March.

The process for the 2024-2028 VAD has started using the same methodology applied for the 2020-2024 cycles by the reference model company. The delivery and official publication of the consultant final report are expected by the end of March, and we estimate that by the Q2 of 2025, the regulator will publish the preliminary technical report on this new cycle. We expect an improvement in

remuneration for this new process, considering the newly approved Valor Nuevo de Reemplazo (VNR) and all the economic and technical assumptions of the December 2022 included in the report. We believe that this factor will be confirmed in the various stages of this process. Regarding the FEC, since October of the last year, we have not accumulated additional receivables as the client's tariff now reflects the real contract price.

In December 2024, the decree for the first half of 2025 PMP was published, and the regulated tariff was updated. In this process, the average residential consumer in the metropolitan region of Santiago experienced an average increase of around 12%, mainly due to the integration of the client protection

mechanism (MPC) into their tariff. This mechanism allows for the gradual repayment of accumulated debt to the generator and establishes a transitional subsidy for the most vulnerable clients. On the other hand, clients with consumption higher than 350 kilowatt-hours per month that have been paying for this mechanism since last year saw a decrease of approximately 3% compared to their tariff from last year.

Related to the FEC accrual, as of December 2024, we had an account receivable related to the FEC already net of factoring and including readjustment and interest of around $500 million, showing a reduction of around 40% versus 2023. This reduction is mainly due to the factoring executed last October 2024. We expect to execute a new factoring during the Q2 of 2025 of around $250

million. Let's move to the right side of the slide, where we will review the key points of the government-proposed law to expand subsidies, which currently benefit around 1.8 million families. The new proposal aims to extend coverage to approximately 4.7 million families, targeting the 40% most vulnerable households in Chile. In January 2025, the Chamber of Deputies approved the government-proposed text with some changes.

The proposal, which will now move to the Senate for its second legislative stage, includes various instruments to fund the subsidies. The key instruments to fund the subsidy are as follows: allocating the additional VAT revenue that the Treasury is collecting due to the increase in the tariff; implementing a temporary surcharge on the green tax emissions, increasing it from the current $5 per ton of CO2

emitted. Also, in this project, the Chamber of Deputies has approved the following: increasing the amount of compensation that the distribution company must pay to clients in case of distribution power outages; and for what concerns the small and medium companies, replacing the price of electricity currently provided through the regulated contract with a price that includes a reduction coming from the electricity prices of PMGD, in order to offer a tariff discount to these clients, limited to 500 kilowatt-hours per year.

As Enel, we support the government's effort to assist the most vulnerable families amid potential economic challenges. While this solution aims to provide necessary support, it is important to ensure that they do not disrupt the market, as occurred since 2019. For a sustainable approach, it is essential to consider measures that preserve long-term investment, competitiveness, and the energy sector. We

believe that allocating additional VAT revenue could be a viable and sustainable option among the proposed measures. I will now conclude with our commitment on deliverable on slide 9. Let me point out that we have reached our main financial targets for the year 2024. Our results, adjusted for the no-cash effect of the change in functional currency, show an EBITDA of $1.4 billion and a net income of $0.6 billion.

These achievements reflect our ability to generate value in a resilient and flexible manner, even in a challenging environment. A more efficient portfolio mix, driven by improved hydrological conditions, allowed us to meet our EBITDA and net income commitments of our guidance announced during 2024 Investor Day. Simone will provide details on our performance on EBITDA and net income in the following slides. The actions taken during 2024 have ensured the fulfillment of our leverage and net debt to

EBITDA commitments, allowing us to recommend maintaining the committed payout in our guidance. This recommendation was also endorsed by the company Board of Directors and will be submitted for approval at the 2025 annual shareholder meeting. Now, I will hand over to our CFO, Simone Conticelli. Simone, the floor is yours.

Simone Conticelli (CFO)

Many thanks, Giuseppe, and good morning, everyone. I will start my presentation with a summary of our main results for the period. First, to better evaluate our company's earning performance, we present the 2023 and 2024 figures adjusted by the following one-time effects. For 2024, full year and Q4 EBITDA and net income have been adjusted by the non-cash effect of the change in the functional

currency, respectively amounting to $657 million and $468 million. For 2023, the full year and Q4 net income excludes the capital gains obtained from the sale of Arcadia executed last year and amounting to $163 million, and the full year FFO excludes the taxes paid on capital gains obtained from the sale of Enel Transmission, amounting to $310 million. Considering this adjustment, let's pass to the analysis of economic and financial performance, starting with a quick overview of the key figures, which I will detail in the following slides.

Adjusted full year 2024 EBITDA and net income recorded significant improvements when compared to the previous year indicators, despite the negative impact of the force majeure event of August 2024. This is mainly explained by a more efficient sourcing mix boosted by a better hydrological situation and an increase in our energy sales and better pricing. These results demonstrate the resilience of our

business and the solidity of our strategy. Furthermore, the full year 2024 figures show an important FFO increase versus previous year, mainly due to a better EBITDA and the FEC's factoring operation, with a significant impact on the Q4. Now, on the next slide, let's review the progress on CAPEX. Our total CAPEX reached $583 million during 2024, 90% lower than the previous year, considering the conclusion of several renewables and storage projects over the 2023-2024 period.

61% of the total CAPEX, amounting to $355 million, was mainly related to renewable and storage deployment CAPEX, and 22%, equivalent to $130 million, was related to grids. Asset management CAPEX reached $203 million, which represents 35% of our total CAPEX. It increased around 77% compared to 2023 figures, mostly due to the following facts in both businesses. In the generation

business, an increase of $58 million was mostly related to maintenance activity in the Atacama CCGT power plant and also in the solar and wind assets. In the distribution business, an increase of $30 million due to climate event emergency and maintenance activities related to the line failures. Finally, the development CAPEX reached $318 million, a decrease of 40% compared to 2023 figures, mainly due to the conclusion of renewable and battery projects.

Let's move to the next slide, where we have a summary of the Q4 EBITDA breakdown. During the Q4 2024, our adjusted EBITDA reached $424 million, excluding, as anticipated, the one-time and non-cash effects of the change of functional currency. The $5 million increase compared to the same period of 2023 is primarily due to the following effect. In the generation business, we recorded a

$71 million increase due to a significant contribution from PPA sales. This growth is mainly related to pricing effects, primarily due to contract indexation in the free market, and higher volumes, especially in the regulated market. Additionally, we recorded an increase of $33 million due to positive performance in our generation. This is mainly explained by lower production costs resulting from reduced thermal generation dispatch, partially offset by higher commercial costs.

The positive performance of generation business was reduced by $68 million, mainly due to the reduction of gas trading margin given the 2023 outstanding results. Regarding grids, we recorded a $9 million positive impact, mainly due to an increase in remuneration associated with the rise in the valor nuevo de reemplazo, the VNR. However, this margin was more than offset by the impact of last year's

extreme weather events, including the force majeure event in August. The impact amounted to $41 million, including fines and clients' voluntary compensation program. Let's move to the next slide to review the full year EBITDA breakdown. In the full year 2024, our adjusted EBITDA reached $1,421 million, not considering the impact of functional currency change.

The increase versus 2023 amounts to $320 million, primarily due to a significant contribution of $321 million from PPA sales in the generation segment, mainly explained by higher volume, especially in the regulated market, and pricing effect related to the contract indexation in the free market. The positive impact of $2.027 billion from the generation sourcing activity, mostly due to lower variable production

costs resulting from lower thermal generation, thanks to the remarkable hydrology during the year, and lower price in spot market purchases, partially offset by higher purchases from third parties. The reduction of gas trading margin compared to 2023 outstanding performance amounting approximately to $200 million.

Finally, regarding grids, we recorded a $31 million positive effect for the full year, primarily due to the increase in the remuneration linked to the publication of VAD 2024 regulatory report, the increase in the valor nuevo de reemplazo, and the tariff indexation, partially offset by higher technical losses and the negative impact of inflation on our costs. Grids results were more than offset by the impact of extreme

weather events that amounted to $62 million for the full year, including fines and clients' voluntary compensation program. Now, let's move to the next slide, where we will review the net income evolution. Our full year 2024 net income amounted to $622 million, 22% higher than last year's figure, mainly explained by the already commented EBITDA improvement. Now, let's comment on the additional effects for this year.

Referring to depreciation, amortization, impairment, and bad debt, we recorded higher costs of $81 million, mainly resulting from higher depreciation in Enel grids and Enel wind power due to new added renewable capacity and Chilean peso devaluation in the period. An impairment made in December 2024 related to Las Salinas extension projects, higher bad debt accrual in grids due to a worsening in clients' payment behavior, and higher tariffs. Regarding financial results and equity investment, we recorded a $75 million negative variation ve

rsus last year, mainly explained by positive exchange rate differences in 2023 and higher financial expenses, mainly due to FX variation and higher amount of PEC receivable also in 2023. Finally, on income taxes, we recorded a $39 million increase, mainly due to bad results in the period. Focusing on the quarter, our adjusted net income decreased by $37 million.

This is mainly explained by, first, the difference of impairment accounted in the period for $29 million. Second, the higher financial expenses for $10 million, mainly due to lower interest recognition related to PEC II in the Q4 2024, partially offset by positive exchange rate differences in 2023. These effects were partially offset by lower tax expenses of $2 million, mainly due to lower EBITDA in the Q4 2024. Now, let's

move to the FFO analysis on the next slide. Let's analyze the FFO composition for the 2024 period and the main effects when compared to 2023. It is worth mentioning that the 2023 FFO figures have been adjusted by $310 million related to taxes paid on capital gains from the sale of Enel Transmission, Chile, in December 2022. 2024 FFO reached $1,209 million.

It means an improvement of $332 million versus 2023 as a result of the following factors. First, the adjusted EBITDA amounted to $1.4 billion, with the already explained positive variation of $320 million versus 2023 result. Second, the cumulative negative impact of the stabilization mechanism amounted to $310 million, which was more than offset by the execution of the IDB factoring related to PEC II and PEC

III, amounting to $697 million. If we compare the 2024 total effects of the PEC net of factoring versus 2023, we see an increase of $393 million. Third, the increase of net working capital equal to $153 million, mostly due to CAPEX payment related to renewable development in the second half of 2023.

Compared to last year's figures, the impact of working capital on FFO was negative for $233 million, mainly due to CAPEX payment related to 2023 renewables, collection impact from distribution business, and cash in from the sale of Santa Rosa building receipt in 2023. Fourth, the income taxes that negatively impacted our FFO by $205 million, primarily due to tax payments related to generation

business and to the sales of Arcadia asset. Comparing income taxes paid in 2024 versus paid in 2023, we see a negative effect of $174 million. The difference is mainly due to the tax payment of Arcadia transaction in 2024, higher tax payment in the generation business, and lower recovery from previous periods. Finally, the financial expenses amounting to $241 million, mainly due to the debt-related expenses. Compared to last year, our financial expenses decreased by $25 million in 2024.

This decrease was mainly due to the financial expenses related to PEC I in 2023. Now, let's take a look at our liquidity and leverage position. Our gross debt decreased by 11% to $3.9 billion as of December 2024, compared to December 2023. This decrease was mainly due to the optimization on the use of

cash from the PEC III factory, which took place in October 2024, and the operational cash generation during the year. The average term of our debt maturities slightly increased to 6.2 years as of December 2024 versus 6.1 years in December 2023, and the portion of gross debt at fixed rate was 89% of the total debt in December 2024.

The average cost of our debt reached 5.0% as of December 2024, slightly above the 4.9% recorded in December 2023, primarily due to the Enel generation Yankee bond maturity in April 2024 for $400 million at 4.25%. Finally, regarding liquidity, we are in the comfortable position to support our capital needs for the upcoming months and cope with 2025 maturities. As of December 2024, we had available

committed credit lines for $690 million and cash and cash equivalents for $385 million. With the financial debt analysis, we close our comment on the company figures. Thanks, everybody, for the attention. Now, I will leave the floor to Giuseppe for the final remarks.

Giuseppe Turchiarelli (CEO)

Thank you, Simone. To conclude my presentation, I would like to give you the following closing remarks. Despite the very challenging context related to the clients' events registered in August, Enel Chile's resilient business model allowed us to obtain robust results for the year, enabling us to fulfill our commitment to all our shareholders. This year, we have delivered a robust economic and financial

performance aligned with the target and strategic pillar presented on our last investor day. This gives us confidence that Enel Chile is more than prepared to operate in a volatile environment and to take advantage of new opportunities. For 2025, we will continue to advocate for utilities reform and the modernization of the regulatory framework to enhance asset resilience. This will help us optimize the value of our assets across both businesses and ensure long-term sustainability.

Finally, to conclude on April 28, we will hold our annual shareholder meeting, during which the final and extraordinary dividend to be paid in May 2025 will be proposed, including the interim and eventual dividend. The total amount will be $4.24 trillion pesos per share. Now, let me hand over to Isabella for the Q&A session.

Isabela Klemes (Head of Investor Relations)

Thank you, Giuseppe. Thank you all for your attention here. We will now begin with our Q&A session. We 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. As a reminder to our tele-audience, just press star 11 to get in the queue and wait for your name to be announced. To remove yourself, press star 11 again. Thank you. One moment for our first question. It's from Alessandro Di Vito with Mediobanca. Please proceed.

Alessandro Di Vito (Senior Equity Analyst)

Hi, hi all, and thanks for taking my question. I have three or four. The first one is we saw a couple of days ago that you had a big blackout in Chile, and it looked like it was a systemic event. I wanted to understand whether distribution companies like yourselves would be liable for potential penalties, or it was more like a systemic event, so no fault on networks. This was the first question. Second question, I

was looking at the hydro output, your assumption for 2025 of 10.7. I understand that the estimate is based on our 10-year average, but we come from two exceptionally wet years. Would you argue that this estimate could be conservative? Maybe it would be interesting to understand if you had moved maybe a portion of the extra 2024 hydro resources for production in '25.

The third question is more related to batteries because we saw that you started operation of 200 megawatts of batteries. I wanted to understand whether these were standalone batteries or they were part of a hybridized renewable plant. If they are standalone batteries, I wanted to understand which IRR do you see on battery projects in the country, and in general, how do you see the ramp-up in standalone battery capacity in the country for the coming years? The last question is if you confirm 25 guidance that was included in the latest BP. Thank you.

Isabela Klemes (Head of Investor Relations)

Thank you, Alessandro, for your question. I will pass to Giuseppe.

Giuseppe Turchiarelli (CEO)

Okay. Let's start from the blackout. For what concerns this massive interruption of the electricity supply that has been caused by the transmission system and disconnection, which unfortunately affected also our distribution company, we are not liable for any penalty because we are not responsible as distribution company for this interruption. Of course, there will be several analyses that have to be made

by the coordinator and the SEC. We're going to see which will be the results. But as of today, our information is that everything is coming from an interruption in the transmission line. We don't foresee right now any kind of penalty for our distribution company. For what concerns the hydro output for 2025, as you see in the presentation, we made maybe a conservative assumption using the 10-year average historical data. This is our current approach since several years because we believe that the hydro is pretty volatile.

We prefer to take this kind of conservative approach. It's too early to understand whether there will be an extraordinary rainy season or weather condition. We're going to see in the following months as soon as the winter season will start, basically in May. We are confident to match this hydro production, and

we're going to see or we're going to give you more information in the following months, not before May or June. Talking about the battery, the battery that we have already in operation and the battery that has been presented in the last Capital Market Day are hybrid. Basically, we are going to build up together with solar or wind projects. For what concerns the IRR, I mean, it's double-digit.

Of course, the IRR depends on each project and the characteristics that the project has and the location that the project has in the system. Finally, the guidance, yes, we confirmed the 2025 guidance that we presented in the last Capital Market Day.

Isabela Klemes (Head of Investor Relations)

Thank you, Giuseppe.

Giuseppe Turchiarelli (CEO)

Thank you.

Isabela Klemes (Head of Investor Relations)

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

Operator (participant)

Yes. Let me bring the next one to our stage. It's from Martin Arancet with Balanz Capital. Please proceed.

Martín Arancet (Equity & Credit Research)

Hi. Thank you for the presentation. I'll answer my questions. I have three questions. First, regarding the distribution business, you mentioned a fine of almost $20 million and the voluntary compensation program. If I'm not mistaken, the government was also assessing the possibility of revoking the concession. I'm wondering if that's off the table or if the government is still working on assessing that possibility.

My second question, well, regarding CAPEX, if you can share with us possibly the CAPEX plan for this year. My third question, probably a follow-up for a recent question, I was wondering where is your strategy, your commercial strategy with batteries? If it's just to take advantage of arbitrage opportunities due to low marginal cost during solar hours, or if you think that you could add the cost of batteries to new PPA prices to give a 24/7 solution.

Isabela Klemes (Head of Investor Relations)

Thank you. Martin, I will pass over to Giuseppe and then to Simone.

Giuseppe Turchiarelli (CEO)

Okay. Talking about the concession, first of all, let me remind that the revoking of the process for the concession has not yet started. What happened is that the Ministry of Energy tasked the SEC, the superintendencia, with preparing a technical report on Enel Distribution concession.

According to the authority, this study could take between 6 and 18 months. As of today, I would like to point out that we have not received any notification or communication in this regard. No administrative process is pending for the forfeiture of Enel Distribution electricity concession. Under the local laws, the president of the republic must declare the forfeiture of the electricity distribution concession through an

administrative act. The SEC, the Superintendencia de Electricidad, is mandated by law to carry out all necessary steps regarding the expiry of the operational concession. It's really important to underline that the law excludes the forfeiture of the electricity distribution concession in case of force majeure, duly verified by the superintendency. As of today, we don't have, as I said, any further update on that.

Talking about CAPEX and the BESS, the business model, I mean, the BESS we used to have in terms of business model, let me remind you the business model. First of all, as of today, we have two revenue streams in our business model for the BESS. The first one is the energy shifting. So basically, we charge the BESS during the solar hour, and we discharge during the night. So we take advantage of the spread

that we have in terms of prices. You probably know that in Chile, there are in general, in all the counties, but specifically in the north, there is a very important imbalance between solar and solar hour. The second revenue stream for the BESS is the capacity payment. Capacity payment foreseen by the regulation that guarantees a certain percentage of the revenue for the BESS.

Let me say, in general, I would say that it is around 30% capacity payment, 70% energy shifting. Important point for what concerns the BESS is that this year is supposed to be issued a change in the regulation. We hope it's going to be issued by the end of this year, probably in the middle, we hope,

based on which there will be a new regulatory stream for the BESS because they are going to be entitled to receive ancillary services remuneration. So I believe that the BESS business model is very good as of today in Chile. By the way, the system requires this kind of technology. So everything is going well.

Isabela Klemes (Head of Investor Relations)

Okay. Thank you, Giuseppe. Now, Simone on the—sorry, Martin, yes, yes, go ahead.

Martín Arancet (Equity & Credit Research)

Yeah, just a small follow-up on that. While you share that arbitrage is currently the most important revenue stream, I was wondering if you have, I don't know, an estimate on how that could change with this ancillary service charge, if that will be relevant close to arbitrage revenues, or what's your expectation there?

Giuseppe Turchiarelli (CEO)

The ancillary services remuneration is a very good complement to the remuneration of the battery because, of course, there will be a moment during the year or in the following year in which the arbitrage is less confident than what we see right now. Having the ancillary services is a very good complement in order to guarantee the remuneration of the battery. Clearly, it's not going to be a third. It's going to be a third remuneration, but not in the same moment.

Martín Arancet (Equity & Credit Research)

Okay. Thank you.

Isabela Klemes (Head of Investor Relations)

Thank you. Now, from the CAPEX, over to Simone.

Simone Conticelli (CFO)

Hi, Martin. Thanks for the question. Talking about 2025 CAPEX, as we commented during the presentation of the plan, we are focused on obtaining the best mix in terms of generation just to reduce the cost of generation. So we expect a very intense year in terms of CAPEX. In general, we are going to invest something less than $800 million, and more or less $500 million are related to development

CAPEX in new power plants. We are going to focus on new BESS projects, three BESS projects with a total of more or less 450 megawatts, this kind of BESS that Giuseppe described, hybrid projects. The investments are more or less all in this year, in 2025, but the BESS will arrive at the beginning of next year. So improving our mix of production starting from 2026.

Isabela Klemes (Head of Investor Relations)

Thank you. Simone, operator, do you have more questions on the line? Thank you, Martin.

Operator (participant)

Yes, we do. But as a reminder to get in the queue, simply press star 11. One moment for our next question. All right. It's from Emanuele Oggioni with Kepler. Please proceed.

Emanuele Oggioni (Senior Financial Analyst)

Good morning, everybody. Thank you for the presentation and taking my question. I have two left. One is on the regulatory framework. You mentioned in a very detailed slide the next steps expected. My question is related to your target of roughly $150 million of EBITDA along the plan, basically yearly in '26,

'27, if the current expectation based on the regulatory framework, the evolution of the regulatory framework, could confirm or not, or improve or not the current targets included in the business plan. This is my first question. The second one is on the renewable side and the additional capacity. If you remind us of the expected additional capacity in '25, if there is some delay or something to flag. Thank you.

Isabela Klemes (Head of Investor Relations)

Thank you very much, Giuseppe.

Giuseppe Turchiarelli (CEO)

Okay. Well, the Enel Distribution industrial plan 2025-2027 has been made according to the view that we had at the end of last year that is supposed to be confirmed in this preliminary report that is going to be issued at the end of November by the consultant. So everything is in line. There could be some smaller improvement that we are going to see in the next month, but I mean, it's really to see whether we are

going to have any upside. But the amount that we put in terms of RAB for distribution companies is in line with the most conservative expectation that we have about the new regulatory cycle. For what concerns the renewable capacity, all the CAPEX, I will give you the floor to Simone, but all the CAPEX are devoted to capacity that is going to be in operation next year. But Simone, please.

Simone Conticelli (CFO)

Talking about the CAPEX and complementing about the CAPEX, the new project will involve the company basically for the larger part in the second half of 2025. The plants are expected to reach their COD just in the first half of 2026. As of today, we don't see any specific reason for a delay. In any case, the impact of these plants I want to highlight that are not for this year. It will improve the EBITDA for 2026.

Emanuele Oggioni (Senior Financial Analyst)

Thank you.

Isabela Klemes (Head of Investor Relations)

Thank you. Thank you, Emanuele. Thank you, Simone, operator. If you don't have more questions from the line, I go to the chat questions that we received. We received several questions. A lot of the questions coming from the outages from Chile, from last February 25th. We received questions related to it from Francisco Paz, Santander, Andrew McCarthy, LarrainVial, Fernán González, BTG. The

questions are more or less all the same. I will read one of these. Regarding the massive power outages in Chile, the Ministry of Energy puts Enel Chile as one of the companies pointing out in the problem. In this case, for the delay in connecting some power plants in the system in order to reestablish the electricity

service in the country, particularly the hydropower plant Rapel. Do you think you can see fines for the delay in connecting your plants? How long did it take to activate the plants versus what was requested from the authorities? We also received questions about potential impacts on the distribution business related to the blackouts. So if you see any impact on the distribution as well. Giuseppe?

Giuseppe Turchiarelli (CEO)

In response to the failure of the national electric system, Enel Generación and Enel Green Power immediately mobilized all its teams, procedures, and protocols to control and restore the operation of generators across the country. Specifically, for what concerns one of our plants, Rapel hydropower plant, which had several attempts to connect to the national electric system, we emphasized that there

was no technical unavailability of the plant. External factors or conditions that prevented regular startup are being analyzed. Additionally, Enel team immediately mobilized all teams, procedures, and protocols to control and restore the operation for all the countries. In particular, our generation control room center was operational for corresponding communication with the national electric coordinator.

Talking about, I saw other questions, but I mean, talking about the possible fines, as I said before, it's too soon to foresee any impact related to it. The incident is under investigation by the system operator, and there are a lot of issues regarding the system operation that must be clarified before assigning any accountability to any company.

Isabela Klemes (Head of Investor Relations)

On distribution, you have heard?

Giuseppe Turchiarelli (CEO)

As I said before, distribution is not involved in terms of responsibility. Actually, we made a lot of effort in order to restore the electricity to the final customer, but not having any kind of responsibility, we don't believe there will be any kind of liability for the company.

Isabela Klemes (Head of Investor Relations)

Okay. Thank you, Giuseppe. Now, changing the subject, we received some questions on the extraordinary effect, not the one-off effect on the functional currency. Questions coming also from Francisco Paz, Santander, Edward Rutsham from HSBC. Regarding the change of currency in the reporting of results going forward, will we see any additional adjustment to the one observed in Enel Generación in the next period? Also, please, could you give further details on the effect of changing the functional currency to USD? What are the mechanisms behind this move? Simone? Okay.

Simone Conticelli (CFO)

Thanks for the question. I will give some detail about this change of currency. First of all, highlighting that given the international financial reporting standards, the change of currency is not a choice of the management. It's something that we have to do. I mean, what I have to say is that the currency should reflect relevant transaction events and conditions of the company. What happened between 2024 and 2025 to the three companies that changed their currency?

It's important starting from Enel Generación because the impact on Chile is related to the change in Enel Generación Chile. Enel Generación Chile has two main forms of revenues and flows. One are the regulated contracts, and the other one is the contract on the free market. The first, the regulated contracts are exposed to the exchange rate between the US dollar and the CLP. On the other side, the

free contracts are strictly linked to US dollar. So which was the trigger for the change? On one side, the regulated contract volume decreased at the end of 2024 because some old bid from the past expired. On the other side, linked to our policy to keep on selling on the free market, we increased the volume in the free market contracts.

As a result, the volume for 2025 is now higher looking at the free market contract. This is the reason why we had to change the currency. Talking briefly about Pehuenche, it's similar. Pehuenche had in the past until 2024 a contract that was a big contract with the same condition as the regulated contracts.

Now changed a little bit of strategy because it's going to sell energy to spot price. This kind of contract is basically strictly linked to US dollar. Talking about Enel Chile, Enel Chile received the dividends from its affiliate company. The change in Enel Generación Chile changed the flow. We had to change also in Enel Chile. This is the story. Now, the impact. Until 2024, we had to make some reserves related to exchange rate risks.

Of course, to hedge this exchange rate, we eliminated some liability in dollars. Following the IFRS principle, we had to create this reserve that was a negative reserve given the trend of the exchange rate. At the moment in which in the last quarter of 2024, we decided to change the currency. At this very moment, we had to discontinue this kind of activity. So we took this reserve and brought it to the P&L. This is the impact that you see in the P&L at the level of EBITDA, at the level of net income. Finally, to answer the question, all the changes were recorded in 2024, so we will not have any other impact starting from 2025.

Isabela Klemes (Head of Investor Relations)

Thank you, Simone. Moving on to the questions. Now we have questions in terms of the gas trading. The following question is coming from Andrew McCartney, Lauren Bial, and also Andres Navarrete from BTG. The question is, where and when do you see the most likely gas commercialization opportunities this year? And could you give us some color regarding the gas contracts from Argentina, size, price range, take-or-pay agreements? And also, why will there be an extraordinary shareholder meeting on April and end of April for Enel Chile?

Giuseppe Turchiarelli (CEO)

During February, we have already traded a surplus volume for 2025, around 6 TBtu, taking advantage of the current market condition. And we are always looking for new opportunities to improve our financial results. This trading opportunity was already included in our guidance figures. However, at the moment, we cannot share more detailed information due to the confidential, commercial, and strategical nature of this operation.

About Argentinian gas, we have contracted about 30 TWh distributed in the year 2025 with a competitive price lower than LNG prices. Due to competitiveness, what I can say is that it's lower than 2024 prices of $8 per million BTU. An extraordinary shareholder meeting will be held to amend the bylaws in order to reflect the new functional currency, changing the capital currently expressed in pesos to move to dollars. To implement the functional currency changes from a statutory perspective, it is necessary to amend the company's bylaws to redenominate the share capital from Chilean pesos to US dollars.

Isabela Klemes (Head of Investor Relations)

Thank you, Giuseppe. Moving on to the questions, we have questions coming from Fernán González from BTG, and also Felipe Torres from AFP Capital. The first one is about the fine. If the $20 million fines were already booked in 2024 numbers, then Fernán has some questions regarding distribution. What makes you think that the debate around the distribution reform can begin in March? The minister has

said that some of your—this has already been said. Then he's asking about if our plans in terms of a strategic plan, the guidance in CAPEX and also EBITDA would be changed considering the last updates in terms of the distribution segment. Also, if we'll keep our plan to invest the free cash flow in the distribution segment in this period, or if we're seeing any change due to regulatory restrictions.

Giuseppe Turchiarelli (CEO)

First of all, as I said in the presentation, all the fines, all the other extraordinary items like the compensation to the client are already booked in the closing 2024. As I said in the past, the distribution business is very important for our strategy. We believe that there is a lot of value in the company. We confirm our CAPEX and our strategy in this segment. There is no reason as of today to change our strategic plan for what concerns the distribution company. We are focused to spend most part of our cash flow in order to improve our grids in terms of resilience and quality.

Isabela Klemes (Head of Investor Relations)

Thank you, Giuseppe. Simone, just another question regarding the CAPEX and EBITDA for Enel Distribution. We haven't said, but just to complement according to the guidance that we gave to the market.

Simone Conticelli (CFO)

We can confirm the guidance given to the market. You have seen that we expect an increase in terms of EBITDA in 2025 compared to 2024. The reason of this delta is mainly related to the very negative impact of the climate event on 2024 that amounted to more than $60 million impact. On the other side, as you know, the evolution of the regulation is giving us a little bit more space. These are the two reasons. This plan, in our opinion, as of today, is quite solid, and so can be confirmed.

Isabela Klemes (Head of Investor Relations)

Okay. Thank you, Simone. Thank you, Giuseppe. Just checking if there is any more question. As we do not have any more questions, I conclude the results conference call. Let me remind you that the investor relations team is available for any doubts that you may have. Many thanks for your attention, and see you soon. Bye-bye.

Thank you all for participating, and you may now disconnect.