Enel Americas SA

SGO:ENELAM

Q3-2025 Earnings Call

[Operator]

Good day, ladies and gentlemen, and welcome to Enel Americas Third Quarter and 9 Months 2025 Results Conference Call. My name is Carmen, and I will be your operator for today. [Operator Instructions] Please note that this conference is being recorded.

This presentation contains statements that could constitute forward-looking statements. These statements appear in a number of places in this presentation and include statements regarding the intent, belief, or current expectations of Enel Americas and its management with respect to, among other things, Enel Americas business plan, Enel 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 subsidiaries. Such forward-looking statements reflect only our current expectations and not guarantees of future performance and involve risks and uncertainties. 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 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 integrated annual report. Readers are cautioned not to place undue reliance on those forward-looking statements, which state only as of their dates. Enel Americas undertakes no obligation to release publicly the result of any revisions to these forward-looking statements, except as required by law.

I will now turn the presentation over to Mr. Jorge Vellis, Enel Americas' Head of Investor Relations. Please proceed.

[Jorge Velis Espinosa, executive]

Thank you, Carmen. Good afternoon, ladies and gentlemen, and welcome to our third quarter 2025 results presentation. I'm Jorge Vellis, Head of Investor Relations of Enel Americas.

In the coming slides, our CEO, Giuseppe Turchiarelli; and our CFO, Rafael de la Haza will be presenting the main figures for this period. Let me remind you that this presentation will follow the slides that have already been uploaded on the company's website. Following the presentation, we will have the Q&A session. If you want to make a question, please send it through the webcast, or write us to our corporate email, [email protected].

Now let me hand over the call to Giuseppe, who will start by outlining the main highlights of the period in Slide #3.

[Giuseppe Turchiarelli, executive]

Thank you, Jorge. First of all, I would like to highlight that our share buyback program announced a couple of months ago, successfully concluded on September 20. In the coming slides, we will review the main details of this operation.

Moving to the results of this quarter. We had an important increase in investment increase of 29% when we exclude the effect of the currency devaluation. These investments are mainly focused on digitalization of our grid and improving network [ rebidding ]. In generation, we are [indiscernible] to report the completion of the [ Letica ] construction phase of Guayepo III power plants in Colombia, the technical stage required for energy production. This [ 467 ] megawatts facility will deliver clean energy to more than [indiscernible] is expected to be in the first quarter of 2026.

Reported EBITDA in this quarter reached $1.03 billion, which is 10% higher than the same period of last year, with a limited impact from currency devaluation. This is mainly explained by better results in [indiscernible] in Colombia as well as [indiscernible] in Brazil and Colombia. Before going into the details, of operation and financial performance of the period, I would like to present a brief summary of our share buyback program in Slide 4.

On August 28, in an extraordinary shareholder meeting, our shareholders approved the share buyback program for up to 4% of the total share of the company. With a purchase price of [ 105.2 per share ], implying a 15% premium over the last 20-day average share price before this announcement. The purposes of this operation was to increase shareholder remuneration while optimizing our capital structure. The subscription period concluded on September 26th, with an oversubscription of almost 2.8x. This implies 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. If it was a good opportunity for those shareholders who wanted to sell and represent an important value creation for us for [indiscernible].

Now in the coming slides, let [indiscernible] Regarding the concession renewal process in Brazil, [indiscernible] the process is currently sustained due to the ruling of [indiscernible] scores that mandated to suspend the renewal profit until an audit of a climate event occurred in [indiscernible] quarries, concluding. 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. On the other end, [indiscernible] are moving in [indiscernible].

In the case of Enel [indiscernible] we have a positive recommendation from Enel, and we are waiting for the final edition of the Minister of Mines and [indiscernible]. And in the case of [indiscernible], after the approval of the results plan presented to [indiscernible], we are waiting for Enel recommendation. Also in Brazil, the Supreme Federal court ruled that the compensation to customers related to the overcharged is [indiscernible] due to the inclusion of ICMS in the calculation was limited to the same year. Meaning that oil compensation above 10 years have [indiscernible]. We are waiting for the final recent ruling, which is expecting by the end of 2025.

According to our preliminary internal estimation, the impact on our books will be around $110 million EBITDA level and around $180 million at the net income level. Finally, let me highlight two relevant [indiscernible].

First, the approved [ MP1,300 ] that includes expanded sale benefit for low-income [indiscernible] Second, [ MP 1204 ], which was approved today in the [ MIC ] commission and move to the chamber of [indiscernible]. This includes multiple topics in the recently published [indiscernible] such as the market late liberalization, curtailment, battery capacity auction among others. This [indiscernible] is expected to be voted by November 7th.

Moving to Argentina. The option for [indiscernible] and other [indiscernible] was postponed to November 7, and we are currently analyzing the condition of auction event of [indiscernible] Argentina, a sector reform was recently approved in the form of Resolution 400, which aims to normalize the electricity sector and redefine the role of [indiscernible], this could lead to the possibility of entering into [indiscernible] any contract between generator and regulated -- and regulated customers. Finally, in Colombia, it was recently approved reform that limits the spot phase of [indiscernible] to maximum pipeline. Which has a limited impact on our operations given the fact that we have already a high percentage of our energy contracted. Regarding tariff review process, after publishing the main guidance of the process in July, no relevant news has been received.

Now let's analyze our investment for the [indiscernible] the coming slides. During the third quarter of this year, our CapEx increased by 20% compared to the same period of last year, reaching $542 million. This is mainly explained by higher CapEx increase business invested. 52% of the total investment were devoted to Brazil and [indiscernible]. In terms of [indiscernible] line, 81% of the total CapEx was [indiscernible] [ 18 ] to generation.

Regarding [indiscernible] this quarter grew by 23% and investment dedicated to network increased by 66% compared to the same period of last year. In cumulative terms, as of September 2025, we have invested $1.5 billion with 76% [indiscernible] Let's now analyze brief operational highlights in Slide 7.

Electricity distributed reach [ 26.4 terawatt ] in the third quarter, in line with the same period of last year. This is explained by higher sales in Colombia and Argentina, offset by lower [indiscernible] in Brazil. Regarding number of customers, we had an increase of 392,000 in the last 12 months, reaching 22.9 million customers. [indiscernible] meters increased by 50% reaching almost 2 million in this period due to our deployment plan in [indiscernible].

[indiscernible] increased 11% and 9%, respectively, isolating the impact of currency devaluation. This reflects the significant investment that we are making our network. In terms of quality indicators, we can see that [indiscernible] improvement in our subsidiaries set for Sao Paulo, mainly due to severe climate events during the last quarter [indiscernible] improve in [indiscernible] Rio, while [indiscernible] increased due to [indiscernible] and transmission line failure in the [indiscernible]. Finally, regarding energy losses, improving [indiscernible] Sao Paulo and remains flat in Colonia, while in Rio and a [indiscernible] increase.

Let's continue with generation operational highlights in Slide 8. Installed capacity remains at 12.9 gigawatts of which 98% is renewable. We are currently working on additional 0.5 gigawatt capacity on 2 solar power plants located in Colombia, Guayepo III and Atlantico. In the Guayepo III, as already mentioned, we recently began the testing phase, and we successfully injected the first [indiscernible] We expect to begin operation during the first quarter of [indiscernible].

Regarding energy balance, we can see that in this quarter, we decreased our sales by 7%, reaching [indiscernible] from these 69% came from our own production and 31% came from [indiscernible] third parties. The sales decrease is explained by [indiscernible].

Now Rafael will comment on the financial results of the period in the coming slides.

[Rafael de la Haza Casarrubio, executive]

Thank you, Giuseppe, [indiscernible] Reported EBITDA this quarter reached USD 129 million, an increase of 10% compared to the third quarter of 2024. Excluding the positive limited effect from the currency variation this quarter, adjusted EBITDA increased by 9%. These results is mainly explained by better results in generation in Colombia due to the [indiscernible] when compared to the previous year, of course, and higher tariff increase in Brazil and Colombia.

Adjusted net income reached USD 220 million in this quarter, which is 24% lower than the third quarter of last year, mainly due to higher depreciation on financial expenses and lower results in Argentina related to hyperinflation. Funds and operations reached $771 million, an improvement of 3% compared to the same period of 2024, 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 of this year and the recognition of [indiscernible] impact in Brazil that should be registered in the next coming months. The guidance should be reached if we take into consideration the FX assumptions of our 2025, 2027 plan. So we confirm the guidance in both, I repeat, EBITDA and group net income for 2025.

On Slide 11, we will see this quarter's EBITDA evolution and breakdown. Starting from $939 million of EBITDA in the third quarter of 2024, we see that generation has an increase of USD 64 million, mainly explained by Colombia due to better conditions, as already mentioned, rich improvement by USD 18 million, mainly due to better results in Brazil and Colombia due to the tariff indexation, and also customers and business and others have slightly improved. With this, we get to an EBITDA of $124 million for the third quarter of 2025, which is 9% higher than the same period of 2024. FX had a positive impact of $5 million, resulting in a reported EBITDA for this quarter of $1,029 million. From our reported EBITDA, 53% came from Brazil, 42% from Colombia and 5% from Central America. In terms of business line, Grids represents 56% of the total generation, and 42% [indiscernible] customers contribute with 2%.

Let's analyze cumulative EBITDA breakdown in Slide #12. For the first 9 months of the year, we see that the generation and grids, we have significant increases. Generation increased by $147 million, mainly due to better [indiscernible] in Colombia. [indiscernible] grew by $163 million, including $99 million from debt regularization with CAMMESA in Argentina. Customers business decreased mainly due to lower results in Colombia while [indiscernible], we are considering operations from Peru, which amounted to $10 million. With this, we get to an EBITDA of $3,329 million, which is 11% higher than the same period of 2024. FX had a negative impact of $223 million, resulted in -- resulting in our reported EBITDA for the first 9 months of the year of USD 3,106 million, an increase of 3% compared to the same period of the previous year. From our reported EBITDA, 50% came from Brazil, 40% from Colombia, 5% from Argentina and 5% from [indiscernible]. When we move to the business line, the contribution of every business line, Grid represents 59% of the total generation of 39% and customers contribute [indiscernible]

Now we will focus on the cash flow of our company on Slide #13. Starting from an EBITDA of $3,106 million, we see that net working capital amounted to $603 million. Higher than the same period of last year, and this is mainly explained by a deterioration in [indiscernible] 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 tariff adjustment.

Taxes paid during the period 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. Net financial expenses also decreased, reaching $363 million, and this is mainly -- mainly explained by lower average during the first 9 months of this year, compared to the same period of 2024. With this, [indiscernible] operations amounted to [indiscernible] million after investments for [indiscernible] million, we get to a free cash flow of USD $346 million significantly higher when compared to the same period of last year.

Let's now analyze the debt of our company in the following slides. Slide #11. Sorry. [indiscernible] debt amounted to USD 6.2 billion, 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. This includes positive free cash flow of $0.3 billion, net dividends paid for $0.9 billion, extraordinary operation for USD 1 billion, mainly related to a tax payment in Peru due to the capital gain connected to the sales of our assets in 2024, and the payment of the secure installment of the pension fund in Sao Paulo for around USD 270 million. FX had a negative impact of USD 0.7 billion.

In terms of currency and countries, we see that Brazil remains the largest contributor, while the debt at the holding level represents 10% of the total. Finally, regarding the cost of the debt we can see an increase of this period going from 10.3% to 11.3%, explained by higher interest rates substantially explained by higher interest rates in Brazil.

On the next slide, Giuseppe will conclude this presentation with some closing remarks.

[Giuseppe Turchiarelli, executive]

Thank you Rafael. We successfully concluded our share buyback program of 4% of the total share of the company, which implied the deployment of $470 million. We continue focusing our investment in Greece, aiming to improve service quality for our customers. EBITDA improved mainly due to better results in generation in Colombia, and Greece in Brazil and Colombia, and we continue improving our FFO mainly due to higher EBITDA and lower financial expense in [indiscernible]. Finally, we would like to announce that our Investor Day will be held for the first quarter of 2026.

[Jorge Velis Espinosa, executive]

Thank you, Giuseppe. Thank you, Rafael. Thank you, everybody, for your attention. Now we will begin the Q&A session. And the first question comes from Andrew McCarthy. Three questions.

First, can you provide more color or detail about the current status of the concession renewal process for each of 3 subsidiaries in Brazil? Can you give an update on how the authorities and the industry are trying to tackle the curtailment problem in generation in Brazil? And the third one, following the congressional election result in Argentina, how are you thinking about your capital allocation plans for distribution and generation in that country?

[Giuseppe Turchiarelli, executive]

Okay. So let's start with Sao Paulo and then [indiscernible] As said during the presentation, the process is temporary suspended because of the ruling of Sao Paulo Federal [indiscernible] Until the audit over the climate events that occur in 2023, 2024 is concluded. At Enel, we are currently defining our legal strategy regarding the [indiscernible] the suspended the renewal process, we reaffirm our full compliance with all legal and regulatory requirements for concession renewal and maintain the minimum quality standards [indiscernible] during the '23, 2024 [indiscernible].

As a matter of fact [indiscernible] already confirmed that we expect all the [ CPI ] required by the regulation. So we will continue to follow the necessary procedure while waiting for the next [indiscernible]. But again, we reiterate our commitment to keeping the market informed at any material development regarding [indiscernible].

For what concerns [indiscernible] that is the most advanced process. As I said before, we have already received a positive recommendation from [ NL ]. So basically, we are just waiting for feedback from the [indiscernible] of mines and energy.

Talking about [indiscernible]. Let me recap a little bit. The status in March 2025, [indiscernible] filed a formal request with Enel for the early renewal of [indiscernible] Due to a no compliance with the quality retail, in the same month, the company filed [indiscernible] with the [indiscernible] of economy in compliance with the decree. And in October, we received a formal approval of this plan. So basically, right now, the process is currently underway at P&L waiting for the recommendation.

For what concern the core payment, I mentioned during my presentation that in the [indiscernible] that has been right now, I mean, a couple of hours ago approved by the mix commission in the [indiscernible] Brazil, one of the items that has been approved is related to the core payment. Now [indiscernible] that, of course, require several adjustments, the [indiscernible] includes a compensation from the past until the moment in which the measure is going to be approved. And of course, it requires an additional regulation for the future.

Clearly, we are the first step of the approval. So we need to see how the [indiscernible] will be approved in the second part of the approval. So after the approval of the chamber of the [indiscernible] For what concerned the election in Argentina, we are we are pretty fine with the results of the election because it means [indiscernible] form and the political measures going to have a certain level of stability and improving in the country. Of course, we are looking at the country as potential increase and let's see how the standard of [indiscernible] power plant is going to be.

[Jorge Velis Espinosa, executive]

Thank you, Giuseppe. We have one more question about the company guidance. Is the company confirming the guidance given in our latest Investor Day?

[Rafael de la Haza Casarrubio, executive]

This question [indiscernible] Yes, [ Javier ], we are confirming our guidance for 2025, as we mentioned before in the -- during the presentation and on the presentation. As a second, we continue to see some FX volatility for sure across our markets. But we have not identified at this stage any particular events that will lead us to review the targets we will be communicated for this year, in both in terms of EBITDA and in terms of [indiscernible]

Our performance year-to-date remains aligned to our expectations, and we are confident in our ability to deliver on the guidance. For sure, we are closely monitoring macro regulatory developments. But I repeat at this stage, there is no indication that it will -- it does to justify a change in our outlook for 2025. For sure, as I mentioned before, we are expecting to register the potential positive impact of [indiscernible] by the end of the year. This would have an impact of around -- according to our estimates, internal estimates, of around USD 115 million in terms of EBITDA and around USD 180 million in terms of net income.

[Jorge Velis Espinosa, executive]

Thank you, Rafael. It seems we don't have any more questions. So we conclude the results conference call. And let me remind you that -- sorry, one more question is entering from Fernando [indiscernible] from [indiscernible].

What are your thoughts about the spot sales gap in Colombia? 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?

[Giuseppe Turchiarelli, executive]

Okay. Let me say that this measure, as I said, under -- during the presentation under the new regulation, the [indiscernible] power must sell, at least the generation firm energy obligations through the [indiscernible] the PPA. And only 5% can be sold to the spot market.

Now for what concern our company is not a big deal because, for example, this year, we have around 95% of the total energy contracted. So -- and we have a similar profile in the following year. So for what concern ourself it shouldn't be an issue -- this [indiscernible].

Now it really is the [indiscernible] of it's going to be a dry season with season that it's difficult to understand right now how much would be the situation. How to mitigate? Well, for what [indiscernible], we have several other plans that can be covered the commitment with the PPA, or a consent the South Power plant. And as I said before, one of this new plan is going to be in operation starting from the [indiscernible]. So this is the equation at least for our side.

[Jorge Velis Espinosa, executive]

Thank you, Giuseppe. Well, as there are no more questions, we conclude the results conference call. Let me remind you that the Investor Relations team is available for any doubt that you may have. Thanks for your attention.

[Rafael de la Haza Casarrubio, executive]

Thank you.

[Operator]

And this concludes our conference. Thank you for participating. You may now disconnect.