Good morning, ladies and gentlemen, and welcome to Enel Chile First Half and Second Quarter 2023 Results Conference Call. My name is Gigi, and I'll be your operator for today. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] 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 reporting its first half and second quarter 2023 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 first half and second quarter 2023 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 these 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 Mrs. Isabela Klemes, Head of Investor Relations of Enel Chile. Please proceed.

Buenos dias. Good morning, and welcome to Enel Chile's second half 2023 and first half results presentation. Thanks to all for joining us today. Joining me this morning is our CEO, Fabrizio Barderi; and our CFO, Giuseppe Turchiarelli. Our presentation and related financial information are available on our website, www.enel.cl in the Investors section and 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 or webcast chat through the link Ask a Question. Media participants are connected only in listening mode. In the following slides, Fabrizio will open the presentation with our key highlights of the period, our portfolio management actions and regulatory and market [management] (ph) update. Later, Giuseppe will give us a view of the business economic and financial performance. Thank you for your attention. And let me now hand over the call to Fabrizio. Fabrizio?

Thank you, Isabela. Good morning, and thanks for joining us. Let's start our presentation with our main highlights on Slide 2. The first topic I would like to highlight and will give you more context is the status of our several portfolio management actions. Together, these actions target the optimization and flexibility of our portfolio in the energy transition scenario. Having followed this path during the first semester, we received the commercial operational authorizations for more than 1 gigawatt of our renewable projects. All the growth projects added 0.8 terawatt hour of additional production to our portfolio. Another important topic was all the management and timely effective measures carried out by our team to continue the operation of our plants and safeguarding the neighboring communities after the heavy rains during June. These heavy rains contributed to accumulating almost 1 terawatt hour of water in our reservoir for the following period, which will be very positive also in terms of reducing spot market prices for the second semester of this year. In terms of market context, the most expected positive news has arrived. The PEC 2 factoring process is very close to being initiated. On the regulatory side, we have some updates on the government's efforts to continue pursuing the faster decarbonization path for Chile. On the performance of our business, the second quarter presented a temporary mild performance, taking into account the complex pricing environment, as expected. But looking at the first half results overall, we continue to see a significant improvement in terms of EBITDA, increasing by 50%, mainly due to all the gas optimization efforts we have been performing. Net debt has temporarily increased mainly due to the delay in the PEC 2 factoring execution. That, once executed, could add $300 million to our cash flow. Higher contribution…

Many thanks, Fabrizio. Good morning to all connected. I will start the financial analysis on Slide 8, introducing a summary of our main results for the period. In order to better evaluate the earning performance of our company, the 2022 figures are shown as the pro forma where we are including two main adjustments. In the first half and the second quarter of 2022, EBITDA was adjusted by the impairment made to the coal stock of the period, which amounted to $63 million and $42 million, respectively. These adjustments had an effect on the bottom-line of $43 million in the first half and $29 million in the second quarter of 2022. The second adjustment and the most relevant one is to exclude from 2022 figures, the contribution of Enel Transmision considering the sales this company executed in December 2022. We excluded from our analysis the EBITDA of Enel Transmision for the first half and the second quarter of 2022, which amounted to $54 million and $22 million, respectively. Enel Transmision Chile had an effect on the bottom-line of $30 million and $10 million in the first half and in the second quarter of 2022. In terms of FFO, we are also excluding from 2022 figures, the contribution of Enel Transmision in terms of cash $2 million in the first half of 2022 and minus $19 million in the second quarter 2022. And in 2023, we are excluding the payment of taxes related to the capital gain of this transaction of $310 million. So, taking into the mind, let's see how the earnings indicator and FFO performed in the period. In the first half, EBITDA and net income showed improvement versus last year indicators, mainly as a result of the trading activity, improvement in hydrology and renewable contribution. The quarter earnings…

Many thanks, Giuseppe. Now on Page 15, as part of our goal to continue optimizing our portfolio, reinforcing the value of our assets and, as a consequence, strengthening the sustainability of our balance sheet, I would like to speak on the recent announcement of the sale of our subsidiary, Arcadia. On July 12, Enel Chile signed an agreement with Sonnedix to sell its entire state in Arcadia Generacion Solar. Arcadia operates and owns portfolio of 460 megawatt of generation assets that includes four solar power plants named Diego de Almagro, Carrera Pinto, Pampa Solar Norte, and Domeyko. The agreement provides that Sonnedix will pay an equity value of $550 million for the entire stake held by Enel Chile, and share secured back-to-back PPA to Enel with different tenures of around 80% of the production of the power plants defined in the contract. The capital gain embedded in this transaction will generate an estimated impact on our net income of $110 million in 2023 and the cash impact of around $500 million, net of taxes of about $50 million. The purchase and sale transaction is subject to certain condition precedents that are customary for these kinds of transactions, like the approval from the Chilean antitrust authority Fiscalia Nacional Economica. The closing of the transaction is expected by the end of this year. Finally, this transaction is part of our asset rotation initiatives and unlocking value growth, targeting the optimization and diversification of our portfolio. The funds generated with the sale will create further space for our company to execute our CapEx deployment plan, while at the same time strengthening our financial position in a virtual cycle. With the execution of the Enel Transmision sale and the Shell agreement both executed last year, and the closing of this transaction, we have Enel…

Thank you, Fabrizio. Thank you all for your attention. Now, let's begin the Q&A section. We will receive questions via phone and the chat in the webcast [indiscernible]. The Q&A session is now open. Gigi, please, you may start.

Thank you. [Operator Instructions] Our first question comes from the line of Beatrice Gianola from Mediobanca.

Yes. Good morning, everybody, and thanks for taking my questions. I have three. My first question regards to Slide 14. I can see there has been some cash flow absorption related to the stabilization mechanism. Can you provide more color on how do you expect this amount to evolve by year-end? And related to this, how do you see debt evolving during the year? The second one in studies on hydro, we see that the generation has been positively impacted by good hydro output. How do you see this evolving in '23? And how do you see this in the years to come? And a very last one. You confirmed your earnings guidance for '23. What about the one for EBITDA? Is that still confirmed? Can you please provide more color on this? Many thanks.

Well, I think that I can answer the second question about hydro generation, and then let Giuseppe answer to the first and the third question. As I mentioned during my presentation, basically, we already have 1 terawatt hour more than expected in our reservoirs. So that it's quite easy to predict that at least 1 terawatt hour -- we will exceed at least 1 terawatt hour our expectation of hydro generation for this year. As for the following years, probably a good level of hydro inflows during 2023 could, in some way, also benefit the beginning of 2024. But for sure, this is, of course, a temporary effect. Let me say that structurally, it's something difficult to comment that we could be more optimistic on the following year. For sure, we are quite optimistic for this year, and probably also some potential positive effect on 2024.

Okay. For what concern the PEC 2, as I said, in the first half, we accounted $189 million and we believe that we are going to accrue at the end of the year, something like more than $700 million. All in all, not coming from the 2023. I'm talking about the full amount of tax receivable. Clearly, in August, we expect to perform the first part of factoring that is going to be around $300 million, and another $100 million, a little bit more factoring of PEC by the end of the year. So let me say full year, it should be around $400 million factoring. For what concern the guidance, basically, we are confirming the upper side of our target in terms of EBITDA. Because on one side, the remaining margin coming from the trading activity is going to be already -- is already closed. So, we are going to perform the margin in the last quarter. But in the same time, the positive effect of the hydrology is going to guarantee a certain level of confidence in reaching the EBITDA. This is basically the situation. We have to remember that more hydrology doesn't mean only energy available during the night, but also a reduction in the spot price. So basically, we are benefiting from both sides. For this reason because we believe the target that we had begun is reachable.

Thank you, Giuseppe and Fabrizio. Gigi, do we have more questions on the line?

Thank you. Yes. One moment for our next question. Our next question comes from the line of Florencia Mayorga from MetLife.

Hey, everyone. Thanks for taking my question. I have two questions. One is regarding your expectation on prices for the generation business, the spot one regulating and for free clients. And the other one is more regarding your expectation on leverage by year-end considering both the asset sales recently announced. Thank you.

Okay. Let me address the first question and then I'll hand over to Giuseppe for the second one. Well, in terms of spot prices, as I said, given the reduction of international commodity prices, which would be reflected in lower costs in the system, and also thanks to the good hydrological conditions, the second part of the year, we would expect a significant lower prices in the spot market. That is good news for us. As for the free clients, I think I guess you are referring to long-term contract prices for free clients. In that respect, we are seeing some positive trends in the market in the sense that due to the financial problems experienced from some renewable players in the last month, we are seeing a context that in the medium long-term seems to be a little bit more tighter, reflecting better prices in the free market. Some way it was already factored in the last regulated auction last year. But I think this trend has been reinforcing in the last month or so. We are enjoying more comfortable prices selling our energy to free customers.

Okay. For what concern the leverage that we're going to have at the end of this year, according to our projections, we are going to be below the 3 times net debt-to-EBITDA, thanks to confirming the EBITDA of our guidance and supporting our leverage with the cash-in of the sales of that. This is going to be around $550 million.

All right. Thank you so much.

You're welcome.

Thank you. Gigi, do you have more questions on the line?

Thank you. At this time, I'm showing no further questions. I would like to turn the conference back over to Isabela Klemes.

Perfect. So, we have some questions here coming from the chat. The first one is coming from [Andrew McCarthy] (ph). Andrew McCarthy is asking, did I understood correctly that you expect 1 up to 2 terawatt hours more of hydro generation in 2023 versus the strategy plan forecast of 9.3? How much additional EBITDA should that your $1 billion to $1.2 billion EBITDA target for 2023? Fabrizio, Giuseppe?

Yes, I can address. We have just mentioned from a physical point of view that it's true. So confirming that we are expecting from one 1 to 2 terawatt hour more of hydro generation in 2023 compared to our forecast of 9.3. So it was correct what Andrew was referring to. It is quite easy to say that, as I mentioned, we have already 1 terawatt hour more in our reservoir. This is quite easy to be in the first part of the range. But I'm quite optimistic in seeing also some short-term forecast that we could also have something more of that. And in terms of EBITDA, let me say that approximately each terawatt hour could add like $50 million more in our EBITDA, and that was the reason why I also was quite comfortable in mentioning that we are in the upper range of our guidance.

Okay. Thank you, Fabrizio. We have another question coming from Rodrigo Mora from Moneda. Rodrigo is asking more details about [indiscernible] transaction. He is asking if we could give more details about the PPA security of this operation in terms of the duration of this PPA?

Okay. Let me say that these PPAs is absolutely like a mirror PPA of what originally these plants have in different times of the recent years when they were built. So each PPA started in a different year and so as a consequence, also have a different expiry in the future. So we are saying that these PPAs start declining in 2029 and the last one that refers to the recent -- the more recent plant, that is Domeyko, it's going to end completely in 2041. As I said, there are contracts that are absolutely in a mirror condition of the original PPAs that each of these plants signed at the moment of their construction, and of course, we have mirror sales in our portfolio that would be, of course, addressed also from the 80% of our energy sourcing that we continue to have, thanks to this mirroring PPA.

Okay, Fabrizio. Many thanks. So, we are all for the questions. So I would like to thank you all for your attendance today. And any other information you may need, the Investor Relations team will be available. Okay, thank you. Have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect.