Q3 2025 Enel Americas SA Earnings Call
Speaker #1: Good day , ladies and gentlemen . And welcome to NL , America's third quarter and nine months , 2025 results conference call . My name is Carmen and I will be your operator for today .
Speaker #1: At this time , all participants are in a listen only mode . After the speakers presentation , there will be a question and answer session .
Speaker #1: And to participate, you will need to press *11 on your telephone. You will then hear a message advising that your hand is raised and to withdraw your question.
Speaker #1: Simply press star, one, one again. Please note that this conference is being recorded. This presentation contains statements that could constitute forward-looking statements.
Speaker #1: These statements appear in a number of places in this presentation and include statements regarding the intent, belief, or current expectations of Enel Americas S.A. and its management with respect to, among other things, Enel Americas S.A. business plan and cost reduction plans.
Speaker #1: Trends affecting an 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 SA or its subsidiaries , such forward looking statements reflect our current expectations and not guarantees of future performance , and involve risks and uncertainties .
Speaker #1: Actual results may differ materially from those in the forward-looking statements as a result of various factors. These factors include a decline in the equity capital markets and an increase in the market rates of interest in the United States or elsewhere.
Speaker #1: Adverse decisions by government regulators in Chile or elsewhere , and other factors described in the Nail Americas Integrated Annual Report . Readers are cautioned not to place undue reliance on these forward looking statements , which state only as of their date and America's undertakes no obligation to release publicly the result of any revisions to these forward looking statements , except as required by law .
Speaker #1: I will now turn the presentation over to Mr. Jorge Veliz, Americas Head of Investor Relations. Please proceed.
Speaker #2: Thank you . Carmen . Good afternoon , ladies and gentlemen , and welcome to our third quarter 2025 results presentation . I'm George Veliz , head of Investor Relations of Enel Americas SA .
Speaker #2: In the coming slides , our CEO , Giuseppe Chiarelli , and our CFO , Rafael de Aza will be presenting the main figures for this period .
Speaker #2: Let me remind you that this presentation will follow the slides that have already been uploaded on the company's website. Following the presentation.
Speaker #2: We will have the Q&A session. If you want to make a question, please send it through the webcast or write to us at our corporate email at Enel Americas S.A.
Speaker #2: Now let me hand over the call to Youssef, who will start by outlining the main highlights of the period in slide number three.
Speaker #2: Thank you, Parker. First of all, I would.
Speaker #3: I'd like to highlight that our share buyback program, announced a couple of months ago, successfully concluded on September 26th. In the coming slides, we will review the main details of this operation.
Speaker #3: Moving to the results of this quarter, we had an important increase in investment in Greece of 29%. When we exclude the effect of the currency devaluation.
Speaker #3: These investments are mainly focused on the digitalization of our grid and improving network resilience in generation. We are glad to report the completion of the electrical construction phase of three solar power plants in Colombia.
Speaker #3: The technical stage required for energy production. This 167 megawatt facility will deliver clean energy to more than 800 customers. It is expected to be operational in the first quarter of 2026.
Speaker #3: Reported earnings in this quarter reached $1.03 billion, which is 10% higher than the same period of last year, with limited impact from currency devaluation.
Speaker #3: This is mainly explained by better results in generation in Colombia , as well as in Greece . In Brazil and Colombia . Before going into the detail of operations and financial performance of the period , I would like to present a brief summary of our share buyback program in slide four .
Speaker #3: On August 28th, in an extraordinary shareholder meeting, our shareholders approved the share buyback program for up to 4% of the total shares of the company.
Speaker #3: With a purchase price of $105.20 per share, implying a 15% premium over the last 20 days, the average share price before its announcement.
Speaker #3: The purposes of this operation were to increase shareholder remuneration while optimizing our capital structure. The subscription period concluded on September 26th with an oversubscription of almost 2.8 times.
Speaker #3: This implied a pro-rata of 35.8% and a total disbursement of $0.47 billion. We are glad that this operation was very successful and well perceived by our shareholders, as it was a good opportunity for shareholders who wanted to sell and represents an important value creation for those who decided to stay in the company.
Speaker #3: Now, in the coming flight, this is a main regulatory news from the field regarding the concession renewal process in Brazil for São Paulo.
Speaker #3: The process is currently suspended due to a ruling by the São Paulo Federal Civil Court, which mandated the suspension of the renewal process until an audit of a climate event that occurred in 2023.
Speaker #3: In 2024, it is concluded that we are going to appeal against this decision, considering that the regulator has already said that the company is in compliance with all technical requirements specified in the concession contract.
Speaker #3: On the other hand . A real and Terra are moving ahead in the process . In the case of anal Rio , we have a positive recommendation from an L and we are waiting for the final decision of the Minister of Mines and Energy .
Speaker #3: And in the case of Sara, after the approval of the results plan presented to the Minister, we are waiting for an L recommendation.
Speaker #3: Also in Brazil, the Supreme Federal Court ruled that the compensation to customers related to the overcharged Fisk and Coffin taxes due to the inclusion of ICMS in the calculation was limited to ten years, meaning that all compensation claims over ten years have prescribed.
Speaker #3: We are waiting for the final written ruling, which is expected by the end of 2025. According to our preliminary internal estimation, the impact on our books should be around $110 million.
Speaker #3: The level is around $180 million at the net income level. Finally, let me highlight two relevant reforms in the Brazilian energy sector.
Speaker #3: First , the approved MP 1300 . That includes expanded tariff benefit for low income families . Second MP 1304 , which was approved today in the mixed Commission and moved to the Chamber of Deputies .
Speaker #3: It includes multiple topics in the recently published draft, such as market liberalization curtailments, battery capacity, and auctions, among others. These measures are expected to be voted on by November 7th.
Speaker #3: Moving to Argentina, the auction for Alcorcón and other concessions was postponed to November 7th, and we are currently analyzing the conditions of the auction.
Speaker #3: Eventual offer. All Argentina, a text on response was recently approved in the form of Resolution 400, which aims to normalize the electricity sector and redefine the role of Canada.
Speaker #3: Eventually , this could lead to the possibility of entering into bilateral energy contracts between generators and regulated and non-regulated customers . Finally , in Colombia , it was recently approved a reform that limits the spot sales of Hydrogenator to maximum 5% , which has a limited impact on our operation .
Speaker #3: Given the fact that we already have a high percentage of our energy contracted regarding the tariff review process after publishing the main guidance of the process in July, no relevant news has been received.
Speaker #3: Now let's analyze our investment for the periodic and implied. During the third quarter of this year, our CapEx increased by 20% compared to the same period of last year, reaching $542 million.
Speaker #3: This is mainly explained by higher CapEx in Greece . Businesses in Brazil , 62% of the total investment were devoted to Brazil and 29 to Colombia , while Argentina represents 8% of the total .
Speaker #3: In terms of business line, 81% of the total CapEx was allocated to Greece, and 18% for generation regarding grid CapEx. This quarter grew by 23%, and investment dedicated to network upgrades increased by 66%.
Speaker #3: Compared to the same period of last year, in cumulative terms, as of September 2025, we have invested $1.5 billion, with 76% devoted to the grid.
Speaker #3: Let's now analyze grid operation highlights in slide seven . Electricity distributed reached 26.4 . Terabytes tower in the third quarter , in line with the same period of last year .
Speaker #3: This is explained by higher sales in Colombia and Argentina, offset by lower sales in Brazil. Regarding the number of customers, we had an increase of 392,000 in the last 12 months, reaching 22.9 million customers.
Speaker #3: Magnetars increased by 60% , reaching almost 2 million in this period due to our deployment plan in Sao Paulo . Net and net Rabat customers increased 11 and 9% , respectively , isolating the impact of currency devaluation .
Speaker #3: This reflects the significant investment that we are making in our networks in terms of quality indicators. We can see that CD improved in all subsidiaries except for São Paulo, mainly due to severe climate events during the last quarter.
Speaker #3: Safety improved in Colombia and Rio, while the tour and São Paulo and Sara increased due to climate events in transmission line failure.
Speaker #3: In the case of Sara, finally, regarding energy losses, we are improving in São Paulo and remaining flat in Colombia, while in Rio.
Speaker #3: And as is to increase. Let's continue with the generation operational highlights in slide eight. Capacity remained at 12.9 GWh per year, of which 98% is renewable.
Speaker #3: We are currently working on additional 0.5 GW capacity on two solar power plants located in Colombia, Apoe3 and Atlantico, as already mentioned.
Speaker #3: We recently began the testing phase to successfully inject the first kilowatt hour into the system. We expect to begin operation during the first quarter of 2020.
Speaker #3: Regarding energy balance , we can see that in this quarter , we decreased our sales by 7% , reaching 16.6 . From these , 69% came from our own production and 31 came from purchases to third parties .
Speaker #3: The sales decrease is explained by Brazil and Argentina. Now, Rafael will comment on the financial results of the period in the coming slides.
Speaker #4: Thank you . Giuseppe . Buenas tardes . A todos . Reported a quarter reached 1,029 million USD , an increase of 10% compared to the third quarter of 2020 .
Speaker #4: Excluding the positive limited effect from the currency variation this quarter, adjusted EBITDA increased by 9%. This result is mainly explained by better performance in generation in Colombia due to weather conditions.
Speaker #4: When compared to the previous year . Of course , and higher tariffs increase in Brazil and Colombia . Adjusted net income reached 220 million USD in this quarter , which is 24% lower than the first quarter .
Speaker #4: In the third quarter of last year, results were impacted mainly due to higher depreciation and financial expenses, as well as lower results in Argentina related to hyperinflation. Funds from operations reached $771 million, an improvement of 3% compared to the same period of 2020.
Speaker #4: Four . And this is mainly explained by higher EBITDA in Brazil and Colombia . We are confident that with these results we are well positioned to reach the guidance for this year in terms of EBITDA and in terms of net income presented in our 2025 2027 strategic plan , mainly due to the operational results expected for the fourth quarter and the end of this year .
Speaker #4: And the recognition of Cofins' impact in Brazil that should be registered in the next coming months. The guidance should be reached if we take into consideration the effects and assumptions of our 2025-2027 plan.
Speaker #4: So we confirm the guidance in both. I'll repeat EBITDA and group net income for 2025 on slide 11. We will see this quarter's evolution and breakdown starting from $939 million of EBITDA in the third quarter of 2024.
Speaker #4: We see that generation had an increase of 64 million USD , mainly explained by Colombia due to conditions . As already mentioned , grids improvement by $18 million , mainly due to better results in Brazil and Colombia due to the tariff indexation and also customers and business and others slightly improved .
Speaker #4: With this, we get to an EBITDA of $1,024 million for the third quarter of 2025, which is 9% higher than the same period of 2020.
Speaker #4: For . FX had a positive impact of 5 million , resulting in a EBITDA for this quarter of 1029 million from our reported EBITDA , 53% came from Brazil , 42% from Colombia and 5% from Central America .
Speaker #4: In terms of business line grids, it represents 56% of the total generation, 42%, and customers contribute 2%. Let's analyze the cumulative EBITDA breakdown in slide number 12 for the first nine months of the year.
Speaker #4: We see that in generation and grids, we have significant increases. Generation increased by 147 million, mainly due to better conditions in Colombia.
Speaker #4: While grids grew by 163 million, including 99 million from debt regularization with Camisa in Argentina, customer business decreased mainly due to lower results.
Speaker #4: In Colombia , while in others we are considering operations from Peru , which amounted to 10 million . With this , we get to an EBITDA of 3329 million , which is 11% higher than the same period of 2020 .
Speaker #4: For FX had a negative impact of 223 million resulted in resulting in a reported EBITDA for the first nine months of the year of 3,106 million USD , an increase of 3% compared to the same period of the previous year .
Speaker #4: From our reported EBITDA , 50% came from Brazil , 40% from Colombia , five from Argentina and five from Central America . When we move to the business line , the contribution of every business line grids represents 59% of the total generation , 39% , and customers contribute with 2% .
Speaker #4: Now we will focus on the cash flow of our company . Slide number 13 . Starting from an EBITDA of 3106 million . We see that net working capital amounted to 603 million , higher than the same period of last year .
Speaker #4: And this is mainly explained by our deterioration in Sebuah in Brazil related to higher energy prices. As we mentioned earlier, this is a pass-through of energy costs and will be recovered in the next adjustment.
Speaker #4: Taxes paid during the period amounted amounted to 308 million , a lower amount when compared to the previous year due to lower taxes paid in Colombia , mainly explained by lower taxable results in 2024 , compared to 2023 .
Speaker #4: Net financial expenses also decreased , reaching 363 million , and this is mainly mainly explained by lower average debt during the first nine months of this year , compared to the same period of 2024 .
Speaker #4: With this , funds from operations amounted to 1833 million . After investments for 1467 million . We get to a free cash flow of 346 million USD , significantly higher when compared to the same period of last year .
Speaker #4: Let's now analyze the debt of our company in the following slide . Slide number . Slide number 1112 . Sorry . Gross debt amounted to 6.2 billion USD , an increase of 17% compared to December 2024 , mainly explained by FX impact and higher debt in Brazil , net debt reached 4.3 billion , an increase of 103% compared to the end of 2024 .
Speaker #4: This includes positive free cash flow for $0.3 billion net dividends, paid for $0.9 billion extraordinary operations for $1 billion USD, mainly related to the tax payment in Peru.
Speaker #4: In Peru , due to the capital gain connected to the sales of our assets in 2020 for and the payment of the second installment of the pension fund in Sao Paulo for around 270 million USD , FX had a negative impact of 0.7 billion USD in terms of currency and country .
Speaker #4: We see that Brazil remains as the largest contributor , while the debt at holding level represents 10% of the total . Finally , regarding regarding the cost of of the debt , we can see an increase for this period going from 10.3% to 11.3% , explained by higher interest rates , substantially explained by higher interest rates in Brazil .
Speaker #4: On the next slide, you will conclude this presentation with some closing remarks.
Speaker #3: Thank you, Rafael. We successfully concluded our share buyback program for 4% of the total shares of the company, which implies the deployment of $470 million.
Speaker #3: We continue focusing our investment in Greece, aiming to improve service quality for our customers. EBITDA improved mainly due to better results in Generation Colombia and Greece.
Speaker #3: In Brazil and Colombia , and we continue improving our efforts , mainly due to higher and lower financial expenses and tax . A .
Speaker #3: Finally, we would like to announce that our Investor Day will be held in the first quarter of 2020.
Speaker #2: Thank you . Giuseppe . Thank you Rafa . Thank you everybody for your attention . Now we will begin the Q&A session . And the first question , first question comes from Andrew McCarthy .
Speaker #2: Three questions. First, can you provide more color or detail about the current status of the concession renewal process for each of the three subsidiaries in Brazil?
Speaker #2: Can you give an update on how authorities and the industry are trying to tackle the containment problem in generation in Brazil? And the third one following the congressional election result in Argentina?
Speaker #2: How are you thinking about your capital allocation plans for distribution and generation in that country? Okay.
Speaker #3: So let's start with São Paulo, and São Paulo is said during the presentation. The process is temporarily suspended because of the ruling of the São Paulo Federal Civil Court.
Speaker #3: Until when? Until the OVP over the climate events that occur in 2023 and 2024 is concluded. At Enel, we are currently defining our legal strategy regarding the recent ruling that suspended the renewal process.
Speaker #3: We reaffirm our full compliance with all legal and regulatory requirements for concession renewal and maintain that the minimum quality standards were met during the Q3 2024 event.
Speaker #3: As a matter of fact, the extra annual report already confirmed that we respect all the requirements of the regulation, so we will continue to follow the necessary procedures while waiting for the next step in the process.
Speaker #3: But again , we reiterate our commitment to keeping the market informed at any material developing . Regarding the extension of the concession for what concerns a real that is the most advanced process .
Speaker #3: As I said before, we have already received a positive recommendation from Anil. So basically, we are just waiting for feedback from the Minister of Mines and Energy.
Speaker #3: Talking about Enel, Sara. Let me recap a little bit. The status is in March 2025, and Sara filed a formal request with Anil for the renewal of its concession.
Speaker #3: Due to a non-compliance with the quality criterion in the same month, the company filed a restart plan with the Ministry of Economy in compliance with the decree, and in October, we received formal approval of this plan.
Speaker #3: So basically right now , the process is currently underway at Nel , waiting for the recommendation . For what concern the curtailment ? I mentioned during my my presentation that in the .
Speaker #3: 1304 that has been right now . I mean a couple of hours ago approved by the mixed in the Parliament in Brazil . One of the items that has been approved is related to the curtailment .
Speaker #3: Now , curtailment that , of course , requires several adjustments . The the media advisory includes a compensation from from the the past until the moment in which the measure is going to be approved .
Speaker #3: And of course, it requires an additional regulation for the future. Clearly, we are at the first step of the approval.
Speaker #3: So we we need to see how the media will be approved in the second part of the approval . So after the approval of the Chamber of Deputies and the Senate , for what concerns the election in Argentina , we are .
Speaker #3: We are pretty fine with the results of the election because it means that the older form and the political measure is going to have a certain level of stability and improving the country.
Speaker #3: Of course, we are looking at the country as a potential increase, and let's see how the tender for addressing power plants is going to be.
Speaker #2: Thank you, Giuseppe. We have one more question about the company guidance. Is the company confirming the guidance given at our latest Investor Day?
Speaker #4: This question comes from Javier Suarez , Mediobanca . Right , correct . Hi , Javier . Good afternoon for you . Yes , we are confirming our guidance for 2025 .
Speaker #4: As we mentioned before , in in the during the presentation , along the presentation , as expected , we continue to see some effects volatility for sure across our markets .
Speaker #4: But we have not identified at this stage any particular events that will lead us to review the targets previously communicated for this year in both in terms of Evitar and in terms of group income and our performance year to date remains aligned to our expectations and we are confident in our ability , ability to deliver on the guidance .
Speaker #4: For sure. We are closely monitoring macro and regulatory developments, but I repeat that at this stage, there is no indication that it will lead us to justify a change in our outlook for 2025.
Speaker #4: For sure . As I mentioned before , we are expecting to register the potential positive impact of peace and cofins by the end of of the year and this would this would have an impact impact of around .
Speaker #4: According to our internal estimates, we are projecting around $115 million in terms of EBITDA and approximately $180 million in terms of net income.
Speaker #2: Thank you . Rafa . It seems we don't have any more questions . So we conclude the results conference call and and let me remind you that .
Speaker #2: Sorry . One one more question is , is entering from Fernando Gonzalez from BTG . What are your thoughts ? Thoughts about the spot sales cap in Colombia ?
Speaker #2: Is this already a reality? The impact on a dry year can be significant. Are there any measures that you could adopt to mitigate the risk under such a scenario?
Speaker #4: Okay .
Speaker #3: Let me say that . This measure , as I said , that under during the presentation there is new regulation . The hydroelectric power must sell at least the generation firm energy obligation to the firm contract .
Speaker #3: So through the year, only 5% can be sold to the spot market. Now as for what concerns our company, it is not a big deal because, for example, this year we have contracted around 95% of the total energy.
Speaker #3: So in we have a similar profile in the following year . So for what concerns ourself , you shouldn't be an issue . This this low .
Speaker #3: Now clearly it's the end of it's going to be a dry season with season . But it's difficult to understand right now how much would be the situation , how to mitigate .
Speaker #3: Well for . What concerns about sales of course we have several other planes that can be covered . The commitment with the PPA for what concerns the solar power plants .
Speaker #3: And as I said before, one of these new plans is going to be in operation starting from the first few. So this is the situation, at least for ourselves.
Speaker #2: Thank you . Josep . Well , as there are no more questions , we conclude the results conference call . Let me remind you that Investor Relations team is available for any doubt that you may have .
Speaker #2: Thanks for your attention .
Speaker #4: Thank you .