Edited Transcript of ENERSIS-CH.SN earnings conference call or presentation 28-Feb-20 2:00pm GMT

The Tarapacá plant had installed capacity of 158 megawatts, equivalent to 25% of the total capacity of Enel coal-powered plants in Chile.

On the same page, as already announced, we have begun the construction of the largest solar power plant in Chile, Campos del Sol, a 382-megawatt solar power plant; and the expansion for our geothermal plant, Cerro Pabellón. In total, this year, we have approximately 600 megawatts in construction. During 2020, we will give you more information on the construction status.

We continue to consolidate our leadership position in electrification. And at Chile subsidiary, Enel X, we developed the first electro-route including 1,200 charging points and covering 5,000 kilometers from Arica to Punta Arenas in the next 5 years.

On quality of our operation, we are continuing to focus our investment to increase our efficiency and client satisfaction. Despite adverse hydro condition in the last quarter, full year EBITDA increased by $231 million or plus 18% versus the last year results, boosted by better performance in both generation and distribution business and the PPA onetime effect in Enel Generación.

In this context, the Board of Directors proposed a dividend payout of 60% in — for 2019 based on earnings, adjusted by the impairment associated to the onetime effect related to the decarbonization agreement. Last, but not least, ESG is fully embedded in our strategy and operations, which continue to be — to contribute in an important way to reach this target.

On Slide 2, let me reaffirm our full commitment with the decarbonization process in Chile. As you may recall, on June 4, we signed an agreement with the Ministry of Energy, which defined the procedures to carry out the progressive closure of our coal-fired power plants, Tarapacá, Bocamina 1 and Bocamina 2. After our request to the authorities to anticipate the closure of Tarapacá on December 31, 2019, we successfully disconnected and terminated the operation of this plant, following our commitments toward ESG and the fair transition. For instance, we have worked closely with our employees in order to identify other opportunities within our group, providing them all the necessary training to be reallocated in other activities.

Within this context, it’s worth to highlight that we are continuously evaluating the market conditions for potential closure of our 2 remaining coal power plants.

Now moving to decarbonization on Slide 3. At country level, Chile is one of the front runners in LatAm in terms of decarbonization strategy. Up to now, 1.4 gigawatts of Chilean coal capacity will be closed by 2024. In order to guarantee national energy system availability and stability, we strongly believe that certain regulatory guidelines are important to foster the country ambition goals.

Under this point, the new renewables capacity at a national level should be supported by transmission lines improvements to avoid cost payments. We expect as well an appropriate capacity payment mechanism to support the transition towards more sustainable generation metrics and the right technology to sustain the flexibility in the system.

Today, decarbonization is a reality and the formal requirement of our clients that are demanding clean energy. Under this context, during 2019, we signed 3 agreements with mining companies to supply up to 7 terawatt hour per year of renewable energy starting from 2020 and 2021 winter period, in addition to more than 83 smaller contracts awarded with green certificates.

Now on Slide 4. The role of customers is set to change, opening up new business opportunities that will be captured by Enel X. Enel X is our home to foster the electrification, coping with energy transition in the country and capturing new good business opportunity in this context. Recently, as a part of our plan to promote the development of electric mobility, we have signed an agreement to install 1,200 charges point from Arica to Punta Arenas, covering 5,000 kilometers, a strong support to reduce city’s high pollution.

Moving to distribution KPIs on Slide 5. Our customer base increased by 47,000 clients during this period, reaching 1.97 million of clients with a total energy distributed of 17.1 terawatt hour. On the resilience of the grid, we have been focusing in the critical areas for SAIDI and SAIFI, replacing approximately 100 kilometers of cables in our low-tension grids and executing more than 32 kilometers of grid extension and reinforcement.

Our interruption index, SAIDI, in 2019, showed a decrease of 6% with respect to last year’s adjusted figure. Aiming to improve our quality of services, we are focused in the installation of telecontrol equipment, reaching 2,184 units installed and the implementation of different technologies for monitoring our grids. Our goal is to install up to additional 940 units within the next 3 years.

On efficiency and agility of our operation, we are implementing a real expansion, and focusing on timing reduction, detecting more precisely and normalizing higher density urban zones.

Our 2019 energy losses decreased from 5.02% to 5.99%. The continuous improvement of the energy losses is related to the development of a predictive analytics model that indicates potential losses in a specific zone or supply interruption. Thanks to this model, we have reduced our losses and maximized our field efficiency, avoiding in productive works and displacements.

Slide #6. Let me give a highlight on our progress towards the SDG. Sustainability is a key driver for creating long-term value for our shareholders and stakeholders. Our strategy integrates our commitments to UN sustainable development goals, recognizing the synergies between social progress and corporate success. Aware of our role in the growth and progress of areas, where the company operates, we carry out more than 230 projects focused on engaging the plus-300 local communities and making them a part of the energy transition.

Since 2015, when we first committed to the SDGs, we brought more than 650,000 people under the perspective of the sustainable progress. Our business strategy contributes directly to achieve the SDGs number 9 and number 11 related to build sustainable and resilient industries, infrastructure in cities through digitalization of our grid and installing charging points to enable the growth of electric mobility.

Enel Chile decarbonization strategy, a strong investment in the renewables, drive our commitment to climate action and the journey towards a zero-emission company. In 2019, 66% of total energy in Enel Generacion was emission-free.

Slide #7. Continuing on our ESG progress, let me summarize our 2019 main achievements. The inclusion of the company in 3 categories of the Dow Jones Sustainability Index for the second consecutive years, and in the RobecoSAM Yearbook for the first time, receiving Bronze Class distinction, reflects our strong commitment towards a sustainable business model.

On MSCI, we have improved our evaluation, receiving A rate. Additionally, we continue to be part of the Emerging Market Index from FTSE4Good and FTSE4Good Emerging Latin America Index. All of this demonstrates our ability to create value for the shareholders towards developing and maintaining a fully sustainable business model, leading the energy transition and promoting responsible business practices.

The regulatory and macro framework play an important role in the sustainability of our business. So let me drive you through this on Slide #9. Country demand in 2019 had a slight increase when compared to 2018 figures, reflecting Chilean GDP evolution for 2019. Therefore, the National Energy Commission recently reduced its demand projection to consider an average evolution in the demand increase for the 2019-2029 period of 2.18%, the other increase in the free market, considering last year migration.

In 2019, we have seen a lower migration trend to the free market when compared to 2017 and 2018 figures. According to our estimate, we captured the last stake — the largest stake of the migrated clients. We estimate that it still remains 1.4 terawatt hour approx that could be great to the free market. Let me remind you that the government has also decided to postpone the regulated energy auction to November 18, 2020, maintaining the COD for January 1, 2026 and the volume of 5.6 terawatt hour.

In 2019, the country had a challenging year regarding hydrology. Globally, Chile faced an important hydro decrease of 3.2 terawatt hour, of which 0.8 terawatt hour in Enel Chile, when compared to 2018 figures, mainly as a result of a poor hydro condition in the fourth quarter ’19.

It’s worth mention that Enel Chile hydropower generation was slightly affected when compared to country’s figure, since our hydro facility are located in different basins with some of them with the reservoir.

Now let’s move to regulatory updates, Chart #10. Different measures have been announced and some already introduced as a mean to meet social demand that saw a spike last October. Regarding distribution business, end of last year, the government approved the so-called Ley Corta, where some new concepts were introduced. First of all, the discount rate for the tariff definition will be calculated every 4 years by the regulator. A 6% floor and 8% cap will apply, both cap and floor values are after tax.

The second element refers to the process to define the new distribution tariff. The so-called VAD, Valor Agregado, the distribution. The new process established that only the authority will develop the tariff assessment with the possibility for companies to challenge the result appealing to the panel of experts. The locals introduced some new elements so that the reference company that is used to define tariff will better reflect each distributor reality.

Last but not least, the law indicated that by January 2021, distribution companies should only perform distributed-related activities. We expect the regulator to provide practical implementation rules in the coming weeks.

Moving on what’s known as Ley Larga, the minister publicly committed to dispatch a draft of the law within the next weeks to the Congress. The discussion process will probably last several months and the new distribution framework is expected to be defined by the next year.

There are 3 potential topics under discussion. The rural traders, it is expected that the new law will create a new entity that shall be authorized by the government to operate. We are in favor of the creation of this new entity in the market, but [such wording] those new entities should have the financial balance sheet to operate without — not create uncertainties in the market.

The introduction of some new elements to better align the so-called reference company based on which the regulator will set tariff, with the real term — real company’s situation in order to better reflect real needs and the new role of the distribution company in the energy transition and electrification scheme and the market further liberalization.

Continuing distribution, let’s go to Slide #11. Based on the elements we have just commented, which were introduced by the so-called Ley Corta, the regulator is now in the process to define next regulatory cycle of tariffs, which will be applied between November 2020 and November 2024. The consultation document with the trial methodology to be used to define the new tariff for the next cycle has been published by the authority. And the VAD value has been calculated at 5.15%. Therefore, the floor of this real post-tax will apply. The process will follow different stages as identified in the slide. And once the final version of this document is concluded, the authority will select an adviser based on public and competitive process that will lever the assessment to define the new VAD within 5 months. Based on these events, we believe that the final decree will most probably be published by the second half of 2021 with the retroactive effect at November 2020.

On generation, let me give you an update on the energy stabilization mechanism on Slide 12. The energy price stabilization mechanism was approved at the beginning of November, and intends to defer the increases of the — in the regulated customer tariffs. The regulator has recently published a second version of the resolution, confirming that once the cap of USD 1,350 million is reached, finance tariffs will be revised so that companies will not accumulate any new credits. Also, based on the resolution published, all accounts receivable shall be recovered between January 2025 and December 2027. And in Chile, 2019 accounts receivable related to the energy stabilization mechanism will total USD 133 million approx.

Let’s now give a deep view on the company’s financials, Slide 14, starting with our CapEx. Our total CapEx amounted to USD 451 million, in line with the previous year. Customer CapEx totaled USD 55 million, 15% higher than December 2018 with remaining investments allocated to build connection to the new customers. Asset management CapEx reached $140 million, with a $9 million increase, mainly due to activities in our network associated to [laws] improvement and to the operation of 4 new substations required in order to compare with the region load expansion, offset by the onetime effect regarding the nonscheduled maintenance of Tarapacá power plant in 2018.

On growth, our development CapEx reached USD 286 million, mainly allocated to renewables, which recorded $235 million. During 2019, almost 90% of our investment was allocated to contribute to achieve the SDG targets that Enel Chile has committed.

Let’s go to Slide 15. In 2019, 65% of our capacity is based on renewable sources. The net production increased by 5% amounting to 21 terawatt hour, driven by 1 terawatt hour of hydrothermal production due to the higher dispatch of our coal-fired plants in the fourth quarter of 2019 and the dispatch of our CCGT plants, mainly San Isidro, due to a higher availability of gas from Argentina.

The 0.8 terawatt hour of higher renewal production, mainly coming from EGP, was offset by the lower hydro dispatch of our brands. Our physical energy sales decreased by 0.9 terawatt hour compared to 2018, by the following effects: minus 2.9 terawatt hour of lower consumption of distribution companies, mainly associated to the migration of customers to the free market, and reentering of new PPAs from the December 2014 auction to serve the regulated market, partially offset by 2 terawatt hour of higher free market sales as part of our strategy to capture new clients and the ones that recently immigrated to the free market. All in all, our energy balance showed a better risk profile in the sold side considering that we have reduced our exposure on the purchases.

I will now hand over to Giuseppe, who will go through the details of our financial summary for the period.

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Giuseppe Turchiarelli, Enel Chile S.A. – Chief Financial, Administration & Control Officer [4]

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Thanks, Paolo. Good morning, everyone. Let me present you the financial highlights for the full year 2019, summed up on Slide 16. Revenue increased 13% or $446 million, primarily due to the extraordinary income on early termination of Anglo American PPA, higher energy distributed in our network business and additional deposits delivered to the public transportation system through Enel X.

Our EBITDA was up by $231 million or 18% versus last year’s results, boosted by better performance in our business, and the previously mentioned PPA effect. Therefore, our EBITDA margin grew by around 200 basis points.

Group net income is 18% lower than 2018 figures, mainly due to the nonrecurring effects related to the decarbonization agreement signed in June 2019. Without this effect, net income will be higher by 35%. Our net debt in the period decreased $60 million, and I will go through it later. Finally, our net debt-to-EBITDA ratio reduced from 2.4x to 2.2x. I will give you more detail in the following slides.

Now on Slide 17, let me show you the drivers behind our EBITDA growth. As anticipated in our Investor Day held on December, our last quarter results EBITDA would have been impacted by the hydrologic and energy demand performance. As you can see in this slide, this scenario was confirmed. Let me now give you more detail on that.

In 2018, we booked a one-off positive impact from an insurance reimbursement related to Tarapacá power plant. This year, we registered lower hydrology that has been covered by higher thermal dispatch and spot energy prices covered part of it; lower energy demand affecting our generation business, particularly in the regulated market; regulatory impact related to the efficiencies, captured by the current distribution model and a minor impact on EBITDA by the adoption of the stabilization mechanism; and the recognition of Enel X e-buses business in the 4Q of 2018, which was anticipated in the third quarter of 2019.

Now on Slide 18, let me show you the drivers behind our full year EBITDA. Our 2019 full year EBITDA increased by 18% or $231 million as a result of the agreement of the early termination of Anglo American PPAs, partially offset by the Tarapacá insurance reimbursement booked in 2018; lower hydrology, mainly as a consequence of the last quarter results, and consequently higher thermal dispatch, resulting in a negative impact of $58 million; lower sales in generation business of $43 million, particularly in the regulated market, more than offset by PPA indexation of $82 million; higher EBITDA due to our decarbonization strategy resulting in better mix, thanks to the incorporation of Enel Green Power assets and lower variable generation cost; positive contribution from Enel X business boosted by e-public transportation. Finally, the EBITDA in distribution was near flat, that I will give details later on.

In Slide 19, we have a family of the performance of our generation business, including Enel Generación and Enel Green Power. The main drivers that explain the generation EBITDA are mainly associated with the performance of the demand in hydrology as I was just mentioning. And the positive effect from our decarbonization strategy and PPA indexation. As a result of this element, our generation EBITDA margin reached 47% in 2019, representing an increase of 2 point percentage when comparing to 2018 figures, showing the resilience of our margin.

Please let’s move to Slide 20 to explain the most relevant operating results of our network in Enel X business. As of December 2019, the EBITDA of Enel Distribución and Enel X grew by 3% or $9 million, mainly due to e-City positive results due to the addition of 183 new electrical buses to the public transportation system, associated to the infrastructure and the new public lighting contract that contribute with additional of $9 million. Our network business recognized an improvement of the so-called normal technical remuneration associated with higher investment in network, higher volume and lower losses. These results were offset by higher network maintenance cost in 2019 and the nonrecurring events of the period.

Now on Slide 21, let’s go through the main driver of our net — ordinary net income. Depreciation and amortization reached $337 million, an increase of $31 million, mainly related to the incorporation of Enel Green Power assets. The impairment increased $406 million, mainly due to the onetime effect of Tarapacá and Bocamina 1 power plant related to the decarbonization agreement signed in June 2019.

Financial results and other amounted — and others amounted to an expense of $250 million, an increase of $57 million, mainly due to higher financial expense related to the Elqui projects in Enel Chile. The effect of the stabilization maintenance in Enel Generación is around 50 million — $15 million in the incorporation of Enel Green Power Chile debt.

Income tax decreased by $131 million, mainly as a result of the lower tax expenses related to the coal-powered plant impairment booked in the second quarter, and a positive impact of the simplification of Enel Generación corporate structure, partially offset by higher taxes because of the PPA termination booked in 2019.

Minorities net income decreased by 61%, mainly as a consequence of the higher stake of Enel Chile and Enel Generación Chile since April 2018. As a consequence of all the above, the ordinary 2019 cumulative net income reached $421 million. It was to underline that the additional — the adjusted group net income grew by 35%.

Let me now go through our debt on Slide 22. Our gross debt decreased by $99 million versus January 1, 2018, amounting to $3.59 billion in December 2019, primarily due to Enel Chile and Enel Generación amortization. As of December 2019, our net debt-to-EBITDA ratio reached 2.2x, showing an improvement versus 2018 figures. The average cost of our debt is almost in line with 2018, reaching 5.2 percentage in 2019. The average term is less than 7 years. Our net debt as of December 2019 compared to 1 January 2018, adjusted by IFRS 16 closing, decreased $60 million mainly due to the positive performance of our free cash flow.

Finally, on our debt amortization, we have — on Slide 24, we have an annual average of around $230 million maturity in the next 4 years. Also, I would like to highlight the upgrade we have recently received from Fitch at Enel Chile national level to AA+ with stable outlooks.

Now I will hand over to Paolo for closing remarks.

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Paolo Pallotti, Enel Chile S.A. – CEO [5]

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Before starting the Q&A session, I would like to mention some relevant takeaways. Enel Chile continues to size new opportunities and new businesses in the Chilean market and to cope with recent changes in the regulatory framework. There are important elements to be addressed during 2020, to pursue a better regulatory environment and the right finance to guarantee system long-term sustainability. Our growth strategy is driven by long-term partnership with clients, a sustainable and well-diversified portfolio mix and investment in the digitalization and in the resilience of our grid. All this leads to an improvement in the efficiency of our operations and to better the services to our clients.

Our strategy on decarbonization allows us to minimize commodities and hydrological risks and to achieve a more predictable long-term cash flow. All in all, I would like to reinforce that we will continue to work along the path of sustainability and [fiscal] economy. And the closure of Tarapacá is a clear example of this approach, delivering stable cash flow, sustainable margins and value to our shareholders.

Thank you for your attention. And now let’s open the Q&A section. I will hand over to Isabela.

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Isabela Klemes, Enel Chile S.A. – Head of IR [6]

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Thank you for your attention. I will now pass the call to the operator for the Q&A section. Operator, please proceed.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from Javier Suarez from Mediobanca.

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Javier Suarez Hernandez, Mediobanca – Banca di credito finanziario S.p.A., Research Division – Research Analyst [2]

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I have three. The first one is on the numbers that the company has delivered versus the guidance that it was giving in the business plan presentation by early December. So the EBITDA, EUR 1.5 billion is lower than the guidance that was at EUR 1.66 billion. And also, the adjusted net income, it was $0.8 billion but now it’s below USD 0.7 billion. You can help us to understand the reasons for these numbers below guidance in December. One effect could be ForEx, but apart from ForEx, is there any other factor that has been affecting that — the numbers that you have been providing with — for 2019?

Also, a related question is on the CapEx. The CapEx has amounted to below $500 million. And I think that in the business plan, you were talking about a number north of USD 600 million here of CapEx. You can help us understand if there has been or not a delay on CapEx versus what you guide for in December. That’s the first question.

The second question is on the net working capital effect during 2019. So in the number — in the Slide #22, we see the debt evolution and the thing that I wanted a clarification on is on that FFO number that you have, that you are showing, you can help us understand what is embedded in terms of working capital impact in the net debt evolution of the company?

And then the third and final question is on the — in the new stability mechanisms for generation. So basically, the thing that I was — I would like to have a clarification is, what is the net working capital negative effect that you are expecting for the years 2020, ’21, ’22 as a consequence of this new mechanism?

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Paolo Pallotti, Enel Chile S.A. – CEO [3]

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Okay. Thank you for your question. I give you answer regarding CapEx and then leave the remaining question to Giuseppe. Regarding CapEx, as we also explained in our business plan presentation, we are committed to develop — to invest USD 2.5 billion and with a strong percentage on the renewables. We have several projects already ongoing. What we are doing is to improve the investment for this year to go north of USD 1 billion in order to have the main important plants under construction during this period to be finalized. First is the Campos del Sol and Cerro Pabellón that are on track, and we expect to finalize by the end of this year. We have a quite important project ongoing, so we will keep you update on the evolution during the next conference call.

Regarding the numbers, Giuseppe?

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Giuseppe Turchiarelli, Enel Chile S.A. – Chief Financial, Administration & Control Officer [4]

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Okay. For what concerns the guidance, the most important variances comparing the results with the data that have been provided in the Capital Markets Day in December, out of the effects, we have the impact of the crisis in terms of demand, energy demand and the impact of hydro lower volume. As we anticipated at the end of last year, we supposed to have these effects, and as a matter of fact, we will (inaudible), we think. So let me say that it’s around $100 million more or less still 50-50 hydro effect and crisis.

For what concern the net working capital, we have 3 main effects of the worsening of the net working capital when compared to 2018. The first one is the price — mechanism of price stabilization, and that was around $140 million in our net working capital. We have also roughly $80 million regarding the fact that during 2019, because of a very cheap Argentinian gas availability, we decided to stop using our long-term contract for what concern the gas. And since this contract is a take or pay, and we basically paid this amount that can be used in the future. So in other words, we anticipated the payment, and that will be used in the following year.

And finally, we had the big payment of the buses that we bought in 2018 and we paid in 2019. These are the 3 main important balances that we had in 2019 net working capital.

And I agree that for what concern the price mechanism, I’ve already answered. So it was more or less $144 million.

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Operator [5]

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Your next question comes from Enrico Bartoli from MainFirst.

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Enrico Bartoli, MainFirst Bank AG, Research Division – MD [6]

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The first one is regarding the guidance for this year. In the business plan you presented in November, you have a target of $1.8 billion. If we adjust 2018 for the impact of the termination of the PPA, we are starting from $1.3 billion. So there are — there is $0.5 billion increase implied in the guidance. First of all, I was wondering if you the guidance include any possible positive one-offs? And secondly, if you can elaborate on what you expect the drivers to be for these kind of increases? And if the target is still achievable, also considering the recent evolution of the ForEx?

The other questions are related — first of all, for 2020, if you can elaborate on the outlook that you expect for the power generation margins. You highlighted the low hydro production in the fourth quarter. So if you expect this to continue also this year? And if you can also elaborate on the impact that you expect on the distribution business from the revision of the return, the allowed return? And maybe it’s a bit early to say, but the possible impact on, let’s say, the study setting the VAD for your distribution business?

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Paolo Pallotti, Enel Chile S.A. – CEO [7]

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Okay. Thank you for your question. And let me give you the answer regarding the distribution and the add-on, then I’ll leave the comments on the detail of guidance to Giuseppe.

Going on, regarding the driver for the 2020, we have embedded in our numbers a projection for the [hydroelectricity] that is in line with the average over the last 10 years. The market practice and the — from a technical point of view, the number that should be taken into account — the number of years that should be taken into account should be larger.

On the matter of (inaudible), we have taken only 10 years, and this is one of the main drivers that should go to sustain our results. It’s clear that we are going through, let’s say, a very big monitoring of the evolution. First, during the first month, we get the production that is more or less in line with our expectations, sometimes gigawatt power of minor production. But you know that these as — is let’s say, technology that are the [PPA e-City] and so they move the important contribution really came in the second half of the year. But this is something that we’re continuing to monitor also using our, let’s say, best technical elements for the forecast and we will take into account any kind of evolution.

Regarding distribution, the — if I understood well the question, the — let’s say the new frame — the impact is — of the new framework is already embedded in our numbers. So even if — as it has been already stated, the work for the definition of the tariff for the new regulatory framework is set at 6. This will — according to our analysis, our numbers, our plan can sustain this approach. So we don’t see any impact on the numbers of distribution for this — about this definition.

And yes — no, this is regarding the — is related to definition of the VAD. So we do not expect any surprise in our number according to the evolution of the framework, regulatory framework on distribution.

Giuseppe, regarding guidelines, if you may add something…

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Giuseppe Turchiarelli, Enel Chile S.A. – Chief Financial, Administration & Control Officer [8]

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Well, I mean of course we confirm the guidance. And the only point is that 2019-2020 guidance, as Paolo already mentioned, foreseen in hydrology that is the average of the last 10 years. And of course, it means that we have cheaper sources of energy.

On the other hand, we assume to have an exchange rate where we return to a level around below the CLP 700 per dollar. So we have also a small effect regarding from the FX.

And I confirm that we don’t have any one-off effect or one-off possible upside right now.

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Operator [9]

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(Operator Instructions) Your next question comes from Rodrigo Mora from Moneda.

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Rodrigo Mora;Moneda;Analyst, [10]

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I have a question related to the fourth quarter results. I would like to understand how the energy purchase at the Generación level was almost the double than the third quarter 2019. And when we take an average energy price, we can see that this average price almost was the double than the third quarter results. And I don’t understand how was it possible when the spot price — at the Chilean electricity system, the spot price during the fourth quarter was lower than the third quarter of 2019. The spot price was USD 36 per megawatt hour compared with $48 per megawatt hour during 3 quarter 2019. I think, one, this point was how to resolve a very huge cost and the impact in the EBITDA of Generación business.

I have — another question is related to the low performance of the geothermal unit, Cerro Pabellón. When the project was announced, the company expected that this project generate approximately 330 gigawatt hours. And during 2019, we saw that the project had generated only — almost 200 gigawatt hour. I don’t know if the company are going to take actions to improve the performance of the project considering the huge amount and the higher CapEx that the company spent in this project. That’s all.

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Paolo Pallotti, Enel Chile S.A. – CEO [11]

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Thank you, Rodrigo, for your question. Regarding the first on volume and price in the first quarter, the fact that there was a large amount of volumes different from the other — the previous period or the last year period was due to the fact that this period, as I mentioned before, is impacted by hydro generation. And when there is low dispatching of and low volumes of hydro generation, the opportunity for the company is to generate with its own assets. And this year, we’ve had availability of Argentinian gas and buy in the spot market. For this reason, due to the fact that the — let’s say, the reduction in hydro generation was so huge that it, let’s say, give the — let’s say, the numbers, the volumes for other technologies, especially thermal gas and thermal coal, we saw a large amount. Especially, if you look at the evolution of the hydro generation around the year, the first 9 months was not so different from the previous one. The large — the very large impact came from the last quarter that was approx 1 tera. And 1 tera of hydro production in one single quarter in both — some other — let’s say, different kind of generation mix. This is the reason regarding volumes.

Regarding prices, you have also to take into account that our reference price is not the spot, so it is a bundle of different costs that we have. And there are some special, let’s say, amount of money that has been managed to — for the regulatory revalidation of the — of our position. This has an impact — if you look at the average price considered for the generation.

Regarding geothermal, we are, let’s say, fixing, let’s say, the technical aspects of the plant. And we expect to have the first and second unit fully — at full performance by the — within this year. And so going through the construction of the third unit and the improvement of the first 2 one, we think — we expect to have, by year-end, the 3 units fully loaded and fully operative at full performance.

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Operator [12]

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Your next question comes from Enrico Bartoli from MainFirst.

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Enrico Bartoli, MainFirst Bank AG, Research Division – MD [13]

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Sorry, I take the chance for a quick follow-up. We discussed about the impact on the regulatory changes in the distribution business. I was wondering what is your view on the possible impact from the Ley Larga, which I understand has not been proposed yet. But what do you think would be the impact on your integrated margins from the unbundling of the commercial activities from the distribution?

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Paolo Pallotti, Enel Chile S.A. – CEO [14]

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I think that it is — there is a matter in the organization of the business, I think, that could be also an opportunity because the Ley Larga should fix, let’s say, in a clear way, from one side, the way in which the tariff will be fixed, so to have a reference model company that should be closer to the real one. Then with the role of the new potential players like the trader, we do not expect any — let’s say, any impact on our business, but we expect to have, let’s say, player that has financial stability in the system, because we have experienced in other markets, in other countries, where at the opening of the market, with the introduction of the new figures, there is a huge amount of new players that create instability because of the lack of financial strength of the players. So good players with the right financial stability are welcome, and we are aiming that we’ll have a role in the sector. So we don’t see this kind of problem. And then there is also the element of the faster opening on the market. This is something that’s still in the discussion. I think that the gradual opening of the market is to be expected with a clear rule in order to have clear, open and transparent competitivity in these markets.

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Operator [15]

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(Operator Instructions) You have a follow-up question from Rodrigo Mora from Moneda.

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Rodrigo Mora;Moneda;Analyst, [16]

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Sorry, I forgot a question related to the project, Los Condores. When do you expect that the project will start to cover (inaudible)?

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Paolo Pallotti, Enel Chile S.A. – CEO [17]

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The project is going on regarding the, let’s say — the project has complete structure of vertical and horizontal development. We are going on in order to finalize the connection to the Laguna basin and we are under review of the, let’s say, vertical peak that is driving water into the — let’s say, in the generation machine. What we are — we have already — let’s say, in 2019, we have invested $130 million, and we are going to do the same this year.

In the end, we are looking for the best solution for the managing on the vertical peak. At the moment, we don’t have any new forecast. Regarding the deadline, we will keep you updated during this year.

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Rodrigo Mora;Moneda;Analyst, [18]

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During this year?

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Paolo Pallotti, Enel Chile S.A. – CEO [19]

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No. I will keep you updated regarding the evolution of the project during this year. At the moment, we do not have any review regarding the COD date. That at the moment is expected in 2021, but is affected by these analysis that we are doing in the vertical peak.

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Operator [20]

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(Operator Instructions) Your next question comes from Javier Suarez from Mediobanca.

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Javier Suarez Hernandez, Mediobanca – Banca di credito finanziario S.p.A., Research Division – Research Analyst [21]

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Two additional ones. In Slide #17, there is a column called Others that is impacting negatively the EBITDA during the fourth quarter by minus $16 million. You can help us to understand what is behind this number?

And then if you can remind us when you build up your numbers and your business plan guidance for 2019, which is the exchange ratio that you utilized in the numbers, the exchange rate is CLP 702 per U.S. dollar. What was the number that you used when you built up the business plan that you presented on the 2nd of December?

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Giuseppe Turchiarelli, Enel Chile S.A. – Chief Financial, Administration & Control Officer [22]

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Okay. For what concern, Slide #17, Others, basically, the amount is related to the financial raising of our debt. The impact is an accounting impact and not the cash flow impact. And for what concern the exchange rate that has been used for our guidance, it was CLP 652 per dollar in December versus in actual an average of CLP 700.

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Operator [23]

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I’m showing there are no further questions at this time. I would like to now turn the conference back to Mrs. Isabela Klemes.

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Isabela Klemes, Enel Chile S.A. – Head of IR [24]

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Okay. Well, as we do not have any more questions, I conclude the results conference call. Let me remind you that the Investor Relations team will be available for any doubts that you may have. Many thanks for your attention.

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Operator [25]

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Ladies and gentlemen, this does conclude today’s conference call. Thank you for your participation, and have a wonderful day. You may all disconnect.