Q3 2021 Enel Americas SA Earnings Call
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Good day, ladies and gentlemen, and welcome to Enel Americas third quarter 2021 results Conference call. My name is Jesse and I'll be your operator for today. Please note that all lines will be open in listen only mode until the question and answer session to ask a question over the phone by that.
You May press the pound key followed by the number one from your telephone keypads.
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.
These statements could include statements regarding the intent belief or current expectations of Enel Americas and its management with respect to among other things Enel Americas business plans.
And they'll Americas cost reduction plans trends affecting enel Americas financial condition or results of operations, including market trends in the electricity sector in Chile or elsewhere.
Supervision and regulation of the electricity sector in Chile, or elsewhere, and the future effect of any changes in the laws and regulations applicable to enel Americas or its affiliates.
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 include a decline in the equity capital markets of the United States, or Chile, and increase in the market rates of interest in the United States or elsewhere.
Adverse decisions by government regulators in Chile, or elsewhere and other factors described in Enel Americas annual report on form 20-F, including under risk factors.
You may access our 20-F on the SEC's website at Www Dot S E C Dot Gov.
Readers are cautioned not to place undue reliance on those forward looking statements, which speak only as of their dates Enel Americas undertakes no obligations to update these forward looking statements or disclose any development as a result of which these forward looking statements become inaccurate I.
I'll now turn the presentation over to Mr. Rafael de La Rosa Enel Americas head of Investor Relations. Sir you May now proceed.
Thank you Shane and good afternoon.
Ladies and gentlemen, and welcome to our third quarter 2021 results presentation.
And lastly on July eight of Investor Relations.
The company opened in Americas, and in the coming of lights, our CFO Aurelio <unk> CEO will be presenting the main figures of this period.
Let me remind you that this presentation will follow the slides that have been already uploaded into the company's website.
Following the presentation, we will have the usual Q&A session.
Ladies and remember that glass deals can be made only through the telephone line now.
Now, let me hand over the call to Dahlia, who would have thought of by aligning the main highlights for the period in slide number two.
Aurelio.
Thank you <unk>.
Good afternoon everybody.
In this third quarter would have seen an important recovery in terms of demand in all countries.
Last year. He also concluded the installation of 100000 smart meters in Sao Paulo, which are part of a project that aims to install 300000 smart meters in the in some volatile.
In terms of tariff adjustments last weekend.
That if it was adjusted in 16, 5%.
The increase in demand and the consolidation of Egypt, the Americas at the mill.
Reasons that explain the important improvement in our results EBITDA increased by 47% during the third quarter and net income for the first nine months of the year grew by 58% regarding ESG, we were scored 53.
By Moody's incredible transition assessment at the same time, we reached the highest level of compliance and best branches of government by Pwc and we leveraged that Delos Santos. These recognitions reflect the relevance of ESG and our strategy.
Finally, we are glad to announce the start of operations of more than 400 megawatts of new nonconventional renewable energy capacity.
After the merger we have Americas, we have added three six gigawatts of solar and wind capacity.
Same time, we continually working on another two seven gigawatts under construction.
Move to the following slide to see the evolution of currencies demand and collection.
As shown as shown on the left chart Brazilian Reais.
It's the only currency that appreciated against the U S. Dollar during this third quarter, while all the various has suffered depreciations regarding electricity distributed we are glad to see the recovery.
In the last quarter that is the big corporates.
Escondida duty dispute demand compared to last year is significantly higher and even if we look the breath on that Nik viewed in 2019 before before the coffee we are in a better position now and recovering the levels breath on that.
In terms of collection, we have an important recovered in the region, especially in Peru, which increase at eight three.
<unk> percentage points compared to last year.
For Ken Bruce.
We are now around 100% slightly better than <unk> levels.
On the other hand regarding bad debt, we can see a deterioration or an increase in the bad debt.
The 38, 5%, reaching 248 million U S. Dollars. This is mainly explained by an increase in real.
And to a lesser extent in Enel Sao Paulo, and then they'll go yes, we expect for the coming months to reduce this level of net debt.
Sorry.
Improving our operations in the industry in the short term, especially in the Asia.
Distributions. After we are showing increasing these in these secret Invisalign now, let's have a look at our investments for the period.
During the third quarter of this year, our capex increased by 114% compared to the same period of led Sierra reaching 850 million U S. Dollars. This is mainly explained by the consolidation of Egypt, the Americas, which contributed with a capex of $316 million.
Which represents 39% of total capex of the period without considering these capex would have increased by 31% mainly explained by higher investment in distribution business in Brazil.
In cumulative terms, our investments increased by 84%, reaching one 8 billion U S dollars without the contribution of <unk> Americas Capex would have increased by 32% with incorporation of <unk> Americas, we see that Brazil has become the most.
Important country in terms of investments with 655% of the tool.
Now analyzed our operation operating highlights in the following in July.
Generation business, our installed capacity increased by 39% due to the incorporation of the GP Americas, reaching 15, six gigawatt from which 68% is really local.
Net production in the third quarter reached 13, eight stat of our towers.
An increase of 35% compared to the same period of last year explained by each of the Americas and higher production in Peru.
In <unk> terms.
Production increased by 21%.
And Theyre, just sales increased by 56% and 281% during the third quarter and nine months period, reaching $19 four terawatts hour and.
$52 seven Terawatt hours, respectively, mainly explained by the consolidation of <unk> and a demand recovery in the region.
Rising networks business in the next slide.
Electricity distributed reached 32 terawatt hours in the third quarter and 89 five terawatt hours.
Accumulated nine months period, which represents increases of 4% and 5% respectively.
This is explained by an important recover in demand in the four countries, where we operate.
Regarding number of customers, we had an increase of around 450000 in the last 12.
Months suppressing the level of $3 6 million clients among all distribution companies.
In terms of quality indicators.
E D and E C.
Move it in the full penetration during the period, while energy losses.
Basically remain flat with the exception of.
The rule, which has had an important reduction.
On the following slide we will see Enel X and with Vale businesses.
And Alex business.
We had a solid growth in charging stations political diabetics public lighting.
Car business would basically in line with the.
While the micro insurance decreased by 29% due to restrictions over the pandemic period regarding retail business the number of delivery points increased by 32%, reaching $4 30.
166 and <unk>.
In terms of delivery points in vantage, it's sold amounted to 15.1 Terawatt hours in the first nine months of the year, which means that 35% increase.
For the energy sold.
<unk> business, let's now analyze the look.
Let's now have a look at our ESG highlights in the next slide.
The merger of Egypt be Americas puts the.
In the Americas.
The company in an excellent excellent position to lead the energy transition and reduce our exposure to cogeneration and our C. O two emissions, even more which is a focus of our our strategy.
The integration was well received by the credit agency, which is reflected in the carbon transition assessment or Cta carried by modes for the company. The company will be paying at a score of or a free being one of the best score and then.
And then for this for this these rate set for the company strategy strong regarding the energy transition. Finally, we are glad to announce that the company obtained in the first place in a study made by price Waterhouse and University that they lose around this that Matt.
Or is the level of compliance regarding best practice in corporate governance in Chile. This reflects our boost corporate governance system and transparency in our reporting system that is align it with the best practice at the international level now.
Now I will comment about the financial results for the period into coming to life.
In the third quarter.
Which.
One 1060 $6 million, 47% to 1% higher than the same period of last year. This is mainly explained by the consolidation of the Americas and the demand recovery in distribution business. If we exclude the impact of Egypt get married and the negative impact of 39.
Millions of dollars coming from currency devaluation, we get to an EBITDA of $961 million, which is 32, 6% higher than last year.
Cumulative terms.
That increase it by 25, 6% in nominal terms and 19, 4%.
Losing AGP Americas, and the negative impacts of $126 million from effects.
Despite the inflation increase that we have seen during disputed we haven't been able to control the increase of Opex, which increased 13, 6% during the quarter and five 3% on a cumulative basis group.
Group net income in the third quarter increased by 39, 2%, while on a cumulative basis.
The increase it increased by 27, 8% in both cases, there is explained by the contribution of the Americas that Oh within EBITDA level and better net financial results.
Funds from operation in the period reached $682 million a decrease of 20.
Plus the year why on that that's increased by 31.
Reaching $5 $8 billion, we will analyze it.
The tail in terms of cash flow and net net that's in the in the presentation on the coming slide let's take a look in the EBITDA evolution and its breakdown Scott.
Starting from $735 million of EBITDAR of third quarter of 2020, we see that our business had a positive results except for analytics.
When you see thermal generation improved by $41 million why renewable increase it by $203 million from reach 134 are coming from Egypt the Americas.
Network.
<unk> distribution grew by $117 million and with the increased by $37 million.
Currency devaluation had a negative impact of $29 million considered this plus either.
Black box, we get to a final EBITDA of 1060 $6 million.
47% higher.
And the same period of 'twenty 'twenty 'twenty on a country basis, we see that the main contributed for the consolidation EBITDA was Brazil with 42%, while Colombia represented 36% to 14% Central America, 5% in Argentina, 4%.
Have a focus on.
On generation and networks business in the coming slides.
In generation business increased by 68% mainly explained by the contribution of generics, but that'll take effect EBITDA would have increased by 28% and this is mainly explained by better results in Brazil, and Colombia, mainly explained by higher sale price sales sale price and higher energy sales in cases.
Oh for the thermal plant of Fortaleza currency devaluate, the devaluation had a negative impact of $20 million on that.
Cumulative basis EBITDA for the first nine months of the year, Richard 1400, $12 million in Colombia, and Brazil. The main contributors. This represented an increase of 42% compared to the same beautiful.
Renewable diesel from Egypt, and Americas in the coming quarters.
He stopped capacity in operation during the disputed, reaching four four gigawatts from which to G go what's our wins one six gigawatts.
Many hydro this capacity inclusive 0.4, gigawatts of new capacity added during the third quarter of this year coming from six new projects in Brazil and Panama.
We currently have two seven gigawatts of capacity capacity under construction from which one eight gigawatts are weak projects and <unk> nine gigawatts of solar most.
Most of them coming from Brazil, and Colombia.
From these two seven Gigawatts 0.3, Gigawatts will begin operations next year or easier.
Until the end of this year six zero point you see the six she go watch next year and one seven gigawatts.
In 2022.
Did that during the third quarter was 134 million 40, Japan Americas.
And from which 54% came from Brazil, 40% from Central America, 6% from Peru in cumulative terms EBITDA reached $261 million since the first of April when we started to consolidate the AGP in mix.
Regarding Capex, we took the lives of $260 million and disquieting, mainly due to projects in Brazil, and Colombia Capex for the first nine months reached $509 million.
Now, let's see networks business in the next slide.
If you think networks business increased by Duane, it's 39% compared to the third quarter of 2000.
We.
We have the better results.
In all countries.
But the main growth come from the better result in Brazil.
You bet. Thank prove it by 39% mainly due to an increasing two 3% in energy demand along with the higher tariffs due to the benefit of just in an interview and et cetera, and then at some point.
Important to highlight that the energy demand increases in four countries, reflecting a solid recovery after the difficult times, we faced last year due to dip on deck.
Cumulative terms it'd be dining distribution business, which 1430 $3 million. During these nine months after you've been Brazil, and Colombia. The main contributors. This represents an increase of 12% compared to the same period of last year.
Summarizing, let's analyze our cash flow in the company's life.
Funds from operations amounted to 1170 $2 million on the period, starting from an EBITDA of 2750 $9 million. These results includes a negative net working capital in the period for an amount of $840 million, mainly due to higher.
Cva's in Brazil that should be recovery.
Thanks fades duty dispute it amounted to $600 million, while net financial expenses.
Or by statements financial payments.
Amounted to 102 last 147 million, 15% lower than last year after investments of $1 8 billion, including $360 million come from Egypt, The Americas, we get to a free cash flow of <unk>.
Minus $636 million.
Let me now analyze the debt for a company in the coming slides.
Gross debt amounted to almost $7 billion, an increase of 23% compared to December 2020.
This amount includes $1 $1 billion coming from Egypt, the Americas.
It is offset with the cash inject those injection made by analysts be before the merger and that is currently at the EM Americas holding level.
The increase in the gross debt is explained by increases in our distribution subsidiaries in Brazil and.
In Colombia, partially offset by a reduction in Enel Americas holding.
Looking at our net debt starting from starting we had a $4 4 billion of last year we.
We had a we had a minus 633 million of free cash flow that we've seen in the previous slides.
Net gifted in spades.
The two $767 million and financial receives that we see.
<unk> minus $14 million each.
B Americas contributed 688 coming from the equity injection.
Before mentioned.
Again, the cash for this project is that they never made it because the level.
With this plus.
The effects are less the effects of about $90 million. The total net debt reached five 8 billion U S dollars.
In terms of currency and country, we see that Brazil remains the lives contributor why that that's holding level.
This level represents only 10% of the total.
Finally regarding the cost of debt, we can see an increase for the spirit to go from four 9% to five.
Trends in the index indexes associated with variable rates of that's in Brazil. This is partially offset by a better rate conditions in refinancing debt in Colombia, and Peru, and liability management at Enel Americas with Apple.
Let me conclude this presentation with some closing remarks.
During the quarter.
We saw a solid operational recovery across the region.
This is.
The situation allow us allowed us to have an important improving EBITDA level boosted by the consolidation of renewable assets.
We continue with our ESG focus and we are.
<unk> our company is one of the best ESG players in Latin America finally.
We are strongly delivering and executing the new capacity coming from nonconventional renewable sources in line with our strategy.
Awesome.
Thank you Danielle and thank you for that.
Okay.
Well.
I now pass the call to the operator for the Q&A.
Operator please.
Yeah.
Thank you speakers participants we will now begin the question and answer session. As a reminder to ask a question over the phone you May press. The star key followed by the number one to withdraw your request you May press the pound key.
Again, Thats star one to ask a question.
The pound key to withdraw your request.
Speakers. Our first question is from the line of Enrico Bartoli of Stifel. Your line is now open.
Hi, good afternoon. Thanks for taking my question I have three.
The first one is on Brazil.
Do you feel this a very strong increase in our EBITDA from the distribution business.
You can provide us.
Some of these days in addition to the comments you already made on the drivers seem particularly on a recovery of an interest in demand from with sector, you're seeing that AR and the tariff adjustment that you received in the period and if you can also give us a.
Outlook for the fourth quarter in the next quarters. Both in terms of Additionally call very possibly all of demand and if you expect any more tariff adjustments are in the New York companies over the next quarters.
Second question is related to the renewable business you showed this two seven gigawatts of capacity and execution. If you can give us some hint on the pipeline that you have on top of this and the level of visibility and which country U S back to there.
And most of the development of renewable capacity over the next year and the last one if you can remind us your guidance for EBITDA for the full year I think it's around $4 billion about if you can confirm that or elaborate on this thank you.
Yes.
Hi, Hi, Andrea Thank you for your questions.
Well the increasing distributions.
Mainly explained by two factors right.
First one.
That is the readjustments for the period right.
We have that if you like.
And that's in all distribution business thing.
Brazil.
Yes.
Being in in it has already done it is in October is there nothing in these results, but we had.
For the first the first nine months seen in Rio and Sao Paulo all of them.
Well Leo and sat at around 6%.
It's about a nine.
5%.
So.
This is one of the reasons.
Secondly.
Drop in demand that we are a 5% better than the last few years duty the beta I need not only Brazil, but you know.
All regions.
And better than 2% of Duane D. Like deep disappeared. So this is this just shows shows.
In this in this line.
If you're asking me.
If this will maintain for the fourth quarter.
I think.
The only the only think the only thing.
The two things that will balance this situation first of all the recall verde in the country.
The quantities that are more let's say a recovery.
Cooperating the economy from one site.
But there is also temperature issues that can can affect and and we cannot.
<unk> it.
Estimate how is how will be the temperature.
I mean I.
It's sustainable recovery not it will not jump.
But we.
We are not seeing a reduction of the demand level in terms of for the for the last quarter.
And one important thing is that we got to the benefits that you had just made thing going out so.
The club magazine.
The 16% of tariff adjustment that it is not in the first months that will support the two let's say to maintain this recovery in terms of our offer.
<unk> results.
In terms of.
Capacity, Florida for the distribution.
And sorry for the renewable business.
We are constantly improving the pipeline of the of this business.
Because it is key to deploy renewables.
And take advantage to improve vantage transition during this period.
So we are constantly improving we are now 50 55 six.
6% of pipeline.
Of which 36.
Sorry, 55, six gigawatts of which 30 678.
Easing anything Brazil.
And of which I mean, if 15 15.
15, gigawatts, adding mature stage I mean, 55 gigawatts of pipeline to any three mature stage of this 280 315 Gigawatts hour.
In a in a in Brazil.
And of course, the difference in early stage.
Barton I mean, when you see these figures.
Of course, it doesn't mean that in the in the following day, we'll end with <unk>.
Gigawatts, but two to really deploy projects, we need to develop ment of coastal development constantly improving.
The pipeline and.
Improving the best breakfast to develop this pipeline in order to be to have better pricing approach it that way.
<unk> one demonstration of this is that the.
Exactly yesterday, we were awarded with the with the.
The auction in Colombia, with 100, Gigawatts, what sorry 100 megawatts.
With the of the option promoted by the Colombian government.
And if you start in operation into any sort of thing I mean.
This is the evolution in the way we do this in a very.
Proactive and industrial way to produce that the projects and to install the if you take advantage of momentum when pricing is not that you'll have an integrated portfolio to serve our clients with the best solution.
That week and the last but not least.
We are we have seen due to the.
Actually doing the effects.
Effect that we're seeing right now our our estimation.
$3 $9 billion for the EBITDA for this year.
Hum.
Yes, it depends on the on the on the.
The performance say I mean.
Regarding the operational issues, we are very.
Very well positioned.
But the main issue here is related to effects, let's see how it how it moves forward to to confirm this number but tomorrow March at $3 9 billion U S. Dollar so for the year.
For closing remarks, very very clear.
Youre welcome.
Next question.
<unk> is from the line of Enrique Peretti of JP Morgan. Your line is now open.
Thank you opened more than you know what Andrew I have two questions. The first one is about to have thought about your guidance.
Having better rainfall in October. So the question is do you think that's in fact, what's taken him for November December the next round and it's de risked compression declining first of all from tranche or if it's too early to tell and the second question would be we were reading in the local press about new sector.
For distribution companies ethical to range between 10, and 15 feet in Reais. So the question would be how much wood and metal withdraw from Congress.
On the farms and when we should have it done.
Sure.
Okay.
Thank you.
Very good political points very good questions.
Yes, we have seen improvement.
Yes.
That's obviously an important date there was if I in Brazil are improving but.
<unk> requires some some some attention.
I mean.
Even with the flags and Salon that is maintained at the distribution company.
They have been affected by this.
This is.
These working capital issues, because as you know part of the of this.
These higher cost generation is paid by distribution and with the flex.
Is paid by the the demand no AR, but again, we are a SKU.
Having these effect mark related not economically but financially in the distribution business.
So in terms of let's.
Let's say financial.
That's why we are discussing with the regulation not only annual but all the distribution companies the regulator.
Not only antibody distribution companies in order to rebalance the situation in terms of financing right.
We expect the amount if you see it.
Much senior letterman it is a coincidence, but.
It's similar to contact coffee, if you see that the amount that we had there last year right but.
Of course the dynamics.
Completely different because it's a it tomorrow.
Well it depends on that.
Yeah.
Over contracting or not.
Yes, so over contracted and as you know right now is it's more related to Armada.
The duration of these amounts over the let's say the dispatch and that caused us problems.
From a distribution company.
We are estimating.
Something around 400 million U S dollars.
Or let's say.
100, <unk>, it's more or less $3 billion led to $2 8 billion U S.
Delivery is.
For our distribution companies, but I mean, it's it's.
Rough estimation, because as you know the difference from the other calculation here.
He's too is to divide the quarters from.
Corpus quotes the parts of the generation the big Hydro generation distributed throughout distribution company and.
And this amount.
For this company, but this is more or less the amount that we expect and you can see the data planned for operation. This is very close to us.
We have a negative effect.
Because you see a very good let's say economic situation, but not so good.
Financial situations, that's why we.
We are discussing with the regulator in Brazil, and it's moving.
In my opinion in a good base.
It should have decent process concluded until the end of this year.
But we are confident that we are.
Reaching a.
A very good position I don't know if I answered all the questions, but if not.
Please in Haiti.
Remind me.
Yes, it's just one follow up regarding the hybrid cars.
So on the outside it will remain in place until April.
We have a better rainy season are you seeing the golf course, and go back to red level, one or two before acres are kind of three D.
Final consumers or the expectation is no matter what happens if hydrology there.
It's going to remain in place until April.
To help recover tourism and also the cash or a distribution company that had been after April and Thats. We think is gonna be a more normalized hopefully and then if we can go back to the lighter flag.
I request that depends on their own.
Especially on the <unk>.
All of the situation in the during the summer.
Especially in the it will start to raining.
We expect that by the month of November and December but yes.
Yes.
This is of course a protection.
And in my opinion, the government will be very.
Yeah.
Let's say conservative at that sense and.
Will.
My first impression that they will maintain.
Unless they see a very good improvement in terms of hydrology.
Well.
We see.
We see that.
Also the population the consumers they are reaction reacting.
Positively with this demand, let's say demand response compensation, which means this combination of a good hydro logical and then I good.
Ed.
Demand response, so the behavior I mean from the consumer consumption.
They could reduce the level of Paris.
I don't know exactly what the government of course, what the government will do but I mean, the approach that I see is that they will be the gap and that will be very conservative on the sand on this situation and.
And improvements in these both five fits but probably made the hydrology situation.
They can they can.
Alleviate a little bit to the flag the issue let's see.
Thank you Audrey.
Youre welcome.
Next question is from the line of Flavio <unk> of Goldman Sachs. Your line is now open.
Thank you good morning, Hi, Hi, Alright. Thank you for the call My call. My question is regarding the development of renewable capacity in the pipeline. We have seen several headlines regarding supply chain concerns increasing capex cost I'd say specific.
In Brazil, we have been hearing a lot about it.
Wanted to two here a little bit from you if you're seeing something.
Along those lines as well if you could give us some sort of a.
Haynesville.
Around what Youre seeing in terms of cost of development here and also if you could give us some some detail or some.
Information regarding the negotiation of contracts for this capacity.
The first thing you have a good movement a lot of interest from from the market companies in.
In the free market or.
What are you what are you thinking in terms of contract for this fall.
This pipeline.
Not only in Brazil, but in the whole region. Thank you.
Thank you thank you Flavio.
It's.
An important question because it is exactly the.
Let's say the big transformation on a region is this movement from a regulator to free market right.
Note that that not only the market is asking for these were much cheaper more reliable more green energy, but also the regulation is moving to these to this.
New let's say newest scenario liberalisation.
Brazil.
And this is also in Colombia, because Colombia is deployed deploying the smart meters.
These incentives they devised the Bismarck meeting its magnificent and with this.
With this as smart meters deployment, the profitability for the clients to choose their own supply in terms of energy. So.
The difference that Colombia, we have a revenue gap.
An hour or.
Model in terms of remuneration.
In Brazil as you know.
The escalation of these limits.
The way they're doing it.
Slightly different but this movement that I think gets us.
It's a challenge, but it's a big opportunity so.
From our from our perspective.
Too faced into meat.
Business in a sustainable way is key to have let's say.
The upstream the greening upstream of energy and to be no other value chain position. So that's why we were positioned in renewables in this in this in this chain, but most important most important to be with the customer. This is a very odd pills, so what I'm, saying, but that too.
<unk>.
The connection and to have a very solid and very proactive.
The sales force and integrate the sales force to discuss them or basis is key.
The notes that we have 26 million clients in the region. The main the main distribution companies in and delinquent it <unk> quite clear.
In Brazil so.
We are very well positioned for this.
And what is key here is to be with the customer selling.
The platform.
Sorry, the portfolio of energy mixing.
We'd solar.
Hydro and complementing with that thermo plants against them with the plants in order to provide what the custom what this customer that wants to be free and that once more cheaper energy more flexibility more green energy.
Reliable energy.
<unk>, what they want and for the use that they want and embed that with this all the services related to the users of the energy like that and then with the center the.
Uh huh.
Latam mobility entered the smart lighting and there's a demand response anthos a distributed energy so.
I mean for us.
Key here.
What you like what Youre asking is key because to take advantage of what is its more of an opportunity.
Note that this.
This market is very it's not consolidated and lots of commercialization if youll see Brazil with this evening in countries like Colombia.
But more in Brazil.
But this big movement of chunk of energy that's moving from.
From a regulated to free market of course the margins.
We will reduce in terms of commodities, but it increased a lot.
The value that will add to their clients and we can charge them.
For these related to it's an important issue that you mentioned also the cost the cost of developing and of course, we had also seen that the increase in terms of <unk>.
Especially due to the increasing the production in China.
All these effects in terms of.
We have seen there in the in the cost deflation in cost of materials and so on.
We'll increase the cost for Florida.
Funny everybody right.
I mean, there are some studies for example.
From.
That I can tell you that say that the cost will with increased 20% in January are right for the wind to empty.
In terms of weeks wind project in Atlanta and solar.
Another 10 to 15, but again.
This is funny everybody.
<unk>.
We are very well positioned in terms of procurement and in terms of development of this project because they take advantage of it.
The capacity.
The agreement capacity of Av.
Uh huh.
The final, which is our controlling shareholders.
And for US with this we can minimize that.
Let's say the impact to be using disparate acute event capacity it should not be impacted fully impacted by the.
<unk> deployment, which I need it will be.
Be more expensive, but for us we expect less from.
Comparing to other to other competitors.
In terms of pricing.
It's public information, but yesterday in Colombia.
A good demonstration of these in Colombia was.
Columbia promoted that.
And auction of renewable and renewable energy yesterday.
It was at 800 megawatts solar and wind.
We were awarded with 100 megawatts.
The average price of visits this project this auction was 155.
Colombian pesos per megawatt per.
Megawatt hour, which is.
In our opinion, it's a very very good price.
And in our in our projects of course, it's it's it's not booming.
But we got a better price than this one which means that.
More and more you should be at shot show have agility to capture price and.
At the better price in the in the best.
Our situation and that's why we probably the price that we got yesterday was higher or the highest price that they bought.
And even in Colombia for the previous year, which means that we capture the opportunity to not only sell energy, but also purchase energy because sometimes the energy in some situations you see for example to think Colombia with Italy to angle expectations, sometimes that the short term you will see some.
The price to go down go up.
Do you think that influences a lot. So you need to take to capture these opportunities and if not only sales, but also purchased when do you see cheaper energy like we did it but it is even with the pandemic.
We purchased some my energy to protect the company in the short term so that's where we are.
In the short term in Brazil.
A very proactive way in terms of.
Pricing and capture the best opportunities and last but not least.
So the hydrology situation for example, the pricing in Brazil, we see.
Prices in the in the same level of this.
This Colombian prices right and especially in the free market.
Showing that.
The best our best retina.
We are producing in pushing for the region is to deploy green and renewable energy.
And to push the cheapest and the cleaner energy and of course taken advantage to providing.
The better and the fastest fast that energy to the clients. Please note that this auction that we had yesterday in Colombia.
CMV is this is we need to enter inauguration in January of 2023 I mean.
It's a very fast if you compare to develop another project in for example, where with gas off the hydro and so on so that's our I mean, our contribution in terms of environment.
But also in terms of profitability and sustainability and economic economic situation to their clients into the system.
That's great. Thank you.
Youre welcome.
Next question is from the line of Javier Suarez of Mediobanca. Your line is now open.
Hi, many thanks to all of their for their presentation and good morning.
Three questions on excuse me, if I'm repeating some of the questions because I looked at the clinical in France. During the Q&A, maybe I have missed some of the questions on Michael rapidly and so on so I apologize.
And apologies in advance so the first one is on the on the on the working capital.
Looking at my notes I think that during the previous quarterly call.
<unk> mentioned that the negative net working capital impacts was not in my life.
Next year.
That's the expectation of the company or how do you see not worth anything on the working capital of the company during the third quarter of the year, So a clarity on that.
You Gotta expecting when are you expecting definitely say, it's all happening.
There is a suntan specialty.
People were keeping during the second quarter.
During the second quarter call.
I think the first question.
My question is on the on the NTT law says.
The company that remains.
Hi, particularly in Brazil, and so I was wondering what the managerial action that the company can take to reduce these energy losses that the steel remains a stable despite the.
Thank you Lisa.
So gave us the amount of heat albertsons to reduce any losses would be helpful as well.
The third one is on the on the growth that you have.
Also in Florida.
I have seen that the projects in Mexico, so instead of focusing in Brazil, and Colombia. So you can see that a fair statement to say that Enel Americas. When it comes to developing pretty authentically is likely to have a highly concentrated is that you'll have to really concentrate will start to see that focus.
On Brazil, and Colombia, and all the rest is that going to be.
Many thanks.
Yeah.
Thank you. Thank you so much.
No problem.
Look.
The working capital.
So we said in the second quarter that we expected that.
Balancing would be over the time with the recovery.
With.
Demand and so on but the hydraulic horsepower situation deteriorates.
The negative impact, but on the other hand on the other hand.
We are moving in a very good and positive way with this rebalancing from the regulator for the financial situation I mean.
If you see we have deteriorated in terms of working capital right.
But the regulator, we expect that the regulator will compensate this effect, we expect until the end of this year right. This is a new information I mean, two new wafer onshore new information.
Hydrology deteriorated in second.
The regulator.
East.
It's got to anything with all distribution companies there the rebalancing of our financial position and.
Our rough estimation that was entered into before is around $500 million.
U S dollars.
For this period.
The total amount for the Brazilian distribution companies and it is expected to total 15 billion Reais I mean, this number move from 10 to 15 billion.
It's around it's around <unk>. So these are the new new.
The new issue in terms of losses, Yes, you are right, we are still high, especially in Argentina, and Brazil right.
In Brazil.
The main.
Affirm that noise is real right.
Our focus.
In losses of course, this depends a lot in terms of discipline off market. So.
Since we've recovered the capacity to operate and to maintain the discipline of the market we will.
Recovery. This this this lawsuit level, but then we always do is just too high you are talking about any 1%.
Philosophy.
In real which is.
For our regulator.
So I mean.
This is a very important issue of course, we balance these with the cash flow investing and what we losing margin we've asked it but anyway there is a.
Since we are recovering the capacity to operate we are confident that we will recoup.
<unk> recovered the losses and again.
Improving the digital utilization.
And especially to remote.
Operator.
The delinquency I only in terms of not only if there was a philosophy, but also in terms of collection.
We will record will recall for Laurie we ought to focus to recover but I mean, there is a regulation discussion here regulatory discussion on the other hand.
That we are also addressing but.
Is that an.
Nishu.
More related to two real.
And Gwen in Argentina, and it should also.
Kinder is more related to the pandemic restrictions to doom.
To maintain the discipline.
So in Argentina, I think gene, 18% the losses.
So we expect that seats will be covered the capacity to operate and maintain the discipline.
Will will.
We will recover this.
These levels and.
Yeah.
I forgot.
The less than or.
I think I for one point to that you mentioned.
Yeah, I was mentioning on the I was asking on the on the growth of slightly of the company I have seen that most of the capacity in <unk>.
In Brazil and Colombia.
Yes.
Good morning.
Correct statement to say that Brazil is going through their first priority the Columbia on all the rest is going to be.
It's a very good point.
Yes, it's a very good point.
You'll see that our our hour.
Our capacity strategy.
And Sir should the demand request right.
We are seeing demand request.
I mean, there are more.
<unk>.
Possibilities and there are more let's say mature situation in Brazil, and in Colombia, right and this.
Despite lines they are answering two piece.
But yes, what you mentioned this is something that we are analyzing.
We are analyzing also because if youll see our hour.
It's a very good point, because these climate issues, especially hydrologists. So one it's more frequently.
See more frequent and when needed. The listing thing is that what happens in terms of hydrology in Peru and Colombia.
That is exactly the opposite.
Part of the time, we're seeing that.
Deepened from Brazil, and also Chile, right, so Pedro in Colombia, and that complement complement that with that with that with Brazil.
Our operating income so that.
We have a very this is a very good point to balance the situation in terms of generation and and.
Especially in the Hydraulics you know.
Because we are very well balance it. So it means that your question is why are you investing more in or how do you analyze the situation. Yes. We are analyzing and we are also seeing the positive that's why you increase at our hour.
It is just too high because the demand in Brazil requires more more capacity right.
But we are analyzing also the possibility of course to work.
As a portfolio, but to working in a possibility to compensate this.
It's a balance.
Closure, if I may say no.
Again, we have a very good well positioned in terms because we are we have compliment Terry.
Hydrology.
Systems, if I may say in terms of El Nino and learning yet in.
In Brazil, and compare it to Columbia.
And Peru. So we are analyzing the parcel that's why they are increasing and take advantage of this.
Marty, let's say improving conditions in terms of regulation in terms of demand kicks off push of the Colombian government to increase in Colombia, but it's still.
It is the morning, Brazil, because Brazil is more mature in this <unk>.
Technologist. Please note that the metrics of the generational matrix in Brazil.
In renewable energy and solar and wind at higher much higher than that.
In Colombia, I know youre talking about 13%.
And then just so.
That's why.
A question. It's a very good point, we are analyzing also of course, we analyze it we see the Busch of their demand, but we also see the risk analysis in order to be position.
<unk> way in terms of hydrology.
I repeat.
No it's more frequent that this kind of climate.
Situation, what's happened in the past seen.
It seems that not will not happen in the same way in the future so more and more of these issues very very very important.
Okay.
Very helpful. Many thanks.
Youre welcome.
Thank you.
Again participants its star one to ask a question over the phone.
Or the pound key to withdraw your request.
Next question is from the line of Nicholas slang loose of Kuprin. Your line is now open.
Hi.
Many things part of the conference call.
Just some questions.
Well first of all the first one I will let us understand.
Mobile data, increasing the average cost of debt of six gateway six points and year to date.
Chris.
And how much is explaining maybe from variable rate debt or debt or negotiations you might have done.
On the corporation or the EPA that the one the $1 billion.
But is that with your holding company.
It's understanding the financial cost of this last one.
I couldn't see in the third quarter earnings report.
The financial cost of this.
But in the second quarter one.
I saw that it was $29 million.
For a $1 billion debt so just on those tons.
How how are the coupons or.
Interim signals of the split.
On the Sunday, Guatemala right.
That's helpful.
We are thinking about.
<unk> really management.
So we'll take advantage of the low rates we have seen.
It is claimed rating.
Spectrum.
My second question is.
I would like to come back a bit on their working capital investment at all.
Okay.
Four.
400 or anything on those here today.
He brings more pumps and more.
80% of them with the duration in the period.
Oh, that's nice.
How do you think Obama could compensate for the company.
Because the.
An important portion of this investment is because the company.
Can't increase final customer starts as much us.
Surface rights in terms of the company.
So how do you see that make any sense to me.
Do you recover.
Working capital.
And how do you see that.
Continuing question, sorry, <unk> double digits.
Next couple of years.
And my third question is.
So first of all with the execution of the hotel volume pressure on liability management.
What is the current in bonds on a on a balance basis.
Many thanks.
Good afternoon.
Thank you for your question.
Well financial financial situations right.
Well the interest rates.
Inquiries, and especially Brazil right.
So it moved from four point.
Four point.
I mean, not the average cost.
Duane.
It's moved from four 9% to five 6% right. So.
But if you see the cash flow of the company.
Less.
Financial costs right.
From one hand.
The ink the.
The increase of interest rates of course, we paid more.
Around especially in Brazil.
Pay less cost right you can see the cash flow at 22 million U S dollars right compared to the previous period.
But this is.
If you can see that there is an increase in the in the financial cost of 60 million U S dollars right.
But we cannot but.
<unk> magazine, the cost, but remember that we will increase it did begin to enel Americas and maintain the payout for in America.
We.
The balance or reduce the.
Exchange effects variation in Enel, Americas, and reduce the financial cost and NOI America. So this.
This will reduce $9 million right. So keeping this calculation.
$60 million.
In Brazil.
Worse than we brew vanilla, mainly because we have $90 million than we do for the liability management, especially in Colombia.
$8 million capturing opportunities of.
In the right moment, reducing the cost and also in Peru, So I mean $8 million in Florida in Peru, and then we have.
$60 million positive.
Facts are.
Market to market, especially taking advantage of two things first of all this situation.
Of course, we have that's why we maintain our debts more corn.
Acted with the revenues so with the devaluation, we got an improvement.
In this way.
And also taking advantage of liability management and refinancing.
Our that's our expensive debt, especially by the end of last year and when you see opportunities.
To reduce the spread what's happening right now is that different from last year Nikolas.
The spread.
That we are seeing.
It is reducing so.
The key here is to refinance and get lower and lower spreads.
Compared to last year so.
I mean, despite the increase of the day.
Interest rates are.
Of course, we weren't.
Weren't impacted because we ought to expose it to see the IPO for example, not so liquid CD is very much growth.
In Brazil and.
But we take advantage of reducing the U S dollar exposure.
Refinancing, reducing the spread and if you've seen that in the nine months in the cash flow the company paid less and less.
Less financial costs Financial Services, Inc.
Interest costs, sorry, better better better speaking embarrassing.
In terms of working capital.
It is important to consider two things in July last year remember that we received in Brazil, the contact with the $500 million U S dollars right. So.
You see the comparison of.
Networking capital we ship.
Negative impact because last year injected the contact COVID-19 injected $500 million.
In the company second the effect this year.
The daily rate that the situations remember that I explained the situation.
Let's say hydrology, and especially in Brazil, right, because the distribution, but it's even different from Colombia.
Which recognizes the negative effects two months after in Brazil, you need to expect to wait one year to recover the bad hydrology, let's say.
Or the thermal dispatch and.
Imports from Argentina, and so on you need to expect for the next year. So.
<unk> had a huge impact.
Biodiesel.
Effects in terms of hydrology.
We expect that around $400 million debt.
That we are that we are discussing with the regulator to be compensated we expect by the end of this year right. So.
With this.
The main reason for the deterioration of our of our debt is two factor for it because we can't do we do with that extra ordinary cash, let's say for last year for the contact of each which is.
Our situation related to the reduction of demand.
And this year, we didn't have.
We have a worst situation in terms of <unk>.
Networking capital purchased energy.
We anticipate being cash for these centers, which will be recovered in the next period.
The regulator will compensated before by the end of this year or we expect that we are discussing with them and move in a very good way to be compensated by this effect similar effects that we have in the contract COVID-19, but with other neither on the let's say.
The reason our origin okay.
Regarding M&A, we're getting power we've got it there won't be the cash that came from any of the public discussion.
Enel Americas level right.
That is still missing Bruce.
Projects by the end of this year, but mainly in the next year that we of course as.
As we agreed in that as we discussed it in the previous quarter. The cash is that the enel Americas level to also support the reduction of Enel Americas.
Costs right. So with this we are not using credit lines, we can reduce our <unk> costs.
And inject money with capital increase and use this as long as the projects required we expect by the end of this year and next year.
If everything comes well, we expect so with the development of the of the projects in Colombia, and Brazil to inject. This this money.
There is still 600 million U S dollars to date to be injected in the in the project for this 1 billion that you said pretty much well that came with that with the merger.
You inject into countries.
Important thing is that we protected the sketch.
In the U S dollar so I mean it is.
It's protected in order not to devaluate to suffering backed off effect evaluation, which means this is a very good strategy also to better manage the.
The financial costs consolidated costs and this has helped us helping us also would be.
With this reduction of cost I mean.
Not only our liability management, but also.
Dosing the exposure Juliet and.
And I mean linking that that's.
With the currency.
Other countries.
I do remember the last question based on funds.
I don't know if its the latter.
Yeah.
Yeah, sorry, sorry go ahead.
Scott.
I think the DPA.
And then SBA.
Talking about.
What are you planning to do with it I don't know what's the.
Financing costs.
No.
The financing cost.
Yeah.
What do you mean.
No.
Uh huh.
Sure.
Okay.
Of course, we.
There is a clear.
Clear situational environments lamps here right.
We are looking for better conditions in terms of finance in terms of our findings. If you have a better condition for the financial arm of annual SBA why not okay, but it should be competitive as we always do and very transparent to our hour.
Our financial issues, an arm's length total arm's length Theres no.
There is no absolutely no more <unk> to be out of market any cost of these we are pursuing reduction of cost of financial cost constantly constantly okay.
Barry.
What's the rate.
All right.
This index.
<unk> will be also in local currency right always in local currency.
In the same currency of the revenues right.
It'll be in Reais of course, we are looking for financial instruments in IPA, which is that.
<unk>, which is the local inflation or CDI, okay and.
The spread of these of these costs.
Our April equalized with our with our financial strength to work with the spreads with 100 to one other than 50 basis points over the over this especially over the city.
But I mean, the current debt.
What's the current rate.
Suddenly just dollar rate.
Yeah, no it's not that it's not U S dollars in Brazil. For example, we have financing with the with the active for distribution companies right.
Uh huh.
<unk>.
Would you be able to.
Great.
Yeah.
<unk>.
It's pretty much the same I mean defined financing is not long term financing with analysts.
We are constantly working on reduction of this.
The spreads of these.
Of these I mean this tax right so.
I can tell you that it is.
Clearly.
Have I don't know if you have here the goal no it's not.
But I can tell you right now.
Six.
Nicolas.
Do you see this is.
The cost of debt of.
Can you open the financial.
Sure.
Yeah.
And just one second here because it's important to.
For sure.
This cost right now.
[laughter].
Just one second.
Yeah.
Look.
Four four.
Yeah.
For the then asset financing Youre talking about.
One three.
Total cost okay.
One 3% total costs I mean.
This is the.
The total debt that we have.
With that at 1.3, especially with.
With what we consolidate that enel Americas level level with comes with AGP level, if you see isolated Egypt b level.
Sure.
Four.
The projects that we have nowadays we are talking about.
<unk>.
Oh, I don't know why shouldn't be no middleman.
We are talking about.
Three nine.
Percent three 9% right total total cost I mean.
Spread plus the interest cost.
Right.
We are projecting.
Yes.
We are projecting that.
Again neutralized there's no mystery here, we are always looking better alternatives than us in R&D in order to reduce these are these.
These costs.
You can see for example of <unk>.
If the longer.
The project.
That's the higher will be the cost but.
Again.
It doesn't matter if we'll do this with their fee or with the with the <unk>.
Infrastructure bond debentures in Brazil.
We'll look for the bed are subsidizing financing with for example, with Banco do not actually in Brazil are either are being that we would look for a better situation and there's no. There's no difference here.
Yes.
So that's been great.
Big Picture question just now.
This pension fund is one point.
Three one point.
With one 3 billion in the U S U S dollars.
Or.
Well dependent on there we have thought about the west coast that we have today, it's 1 billion because it simply Hasnt nominated Nebraska 1 billion $1 1 billion Reais.
What do we need to remember that we promote the migration from.
Defined contribution.
Sorry defined benefit to defined contribution we got the migration for 21% so.
In terms of mining of amount of money.
We announced that that will.
Let's say remove the sponsorship for this plan.
Giving a period of course to the.
The managers of the fund to let's.
Let's say to prepare the.
Let's say the pension the pension fund and other pension safety another two in more.
One year or until the end of 'twenty two.
Starting from 283 to remove this this sponsorship which means that.
By the beginning of 2023, we expect it to transform this.
Because it is it is.
Liability right.
Nowadays it needed.
Some liability and we will transform this into a financial debt.
I mean.
With them with a more visible more profitability in terms of cost in terms of Av Av.
I mean.
Mortality table in terms of discount rate so in some markets.
Profitability is important because it is not our business. So by the beginning of 'twenty. Three we expect that this 1 billion auto let's say the amount that will be.
Will transform it into the fix it.
And with this we have.
Lower risk with the risk with this situation.
Thank you very much already it looks pretty good.
Thank you equalize.
Again participants its star one to ask a question over the phone or the pound key to withdraw your request.
Yeah.
No further questions at this time speakers.
Well.
There are no more questions cycled through their survey result conference call. Let me remind you as usual that English pollution team is available for any doubts that you may have from this results. Thank you very much for cancellation.
Thank you speakers and that concludes today's conference call. Thank.
Thank you all for joining you may now disconnect.
Okay.
Okay.
Yes.
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Yes.
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