Enel Chile SA

NYSE:ENIC

Earnings Call Transcript 2020-Q4

[Operator]

Good day, ladies and gentlemen, and welcome to Enel Chile Fiscal Year 2020 Results Conference Call. My name is Carmen, and I'll be your operator for today. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

During this conference call, we may make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect only our current expectations, are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those anticipated in the forward-looking statements as a result of various factors.

These factors are described in Enel Chile's press release reporting its fiscal year 2020 results, the presentation accompanying this conference call and Enel Chile's annual report on Form 20-F, including under Risk Factors. You may access our fiscal year 2020 results press release and presentation on our website, www.enelcl (sic) [ www.enel.cl ]; and our 20-F on the SEC's website, www.sec.gov.

Readers are cautioned not to place undue reliance on those forward-looking statements which speak only as of their dates. Enel Chile undertakes no obligation to update these forward-looking statements or to disclose any development as a result of which these forward-looking statements become inaccurate, except as required by law.

I would now like to turn the presentation over to Ms. Isabela Klemes, Head of Investor Relations of Enel Chile. Please proceed.

[Isabela Klemes, executive]

Good morning, ladies and gentlemen, and welcome to Enel Chile's Full Year 2020 Results Presentation. Thanks to you all for joining us today. I hope this finds you and your families doing well and is staying healthy.

Our presentation and related financial information are available on our website, www.enel.cl, in the Investors Relations section. A replay of the call will be also available. There will be an opportunity to ask questions after the presentation via phone or the chat through the link, Ask a Question.

Joining me this morning are our CEO, Paolo Pallotti; and our CFO, Giuseppe Turchiarelli. In the following slides, Paolo will open the presentation with the main highlights on business and targets; then Giuseppe will walk you through our financial results and operational performance. Let me remind you that media participants are connected only in listening mode.

As always, our IR team will continue to be available to provide you with any detailed information you may need concerning the figures included in this presentation.

Thank you all for your attention. And now let me hand over to -- the call to Paolo.

[Paolo Pallotti, executive]

Thank you, Isabela. Good morning, and thanks for joining us. Let me start with the main highlights of the period on Slide #2. Last year was a challenging one at global level as a consequence of the COVID outbreak. With reference to Chile, according to the last estimate, Chilean GDP decreased by 6% during 2020. Electricity demand at country level was almost flat, having been supported by certain sectors like the mining industry, while in certain areas of the country, certain cities and some sectors, the decrease was double digit.

Despite this unprecedented extreme scenario, our operations have shown a large resilience and a continued support to our clients. Last July, we have decided to review our guidance for 2020, adjusting it to the new market conditions, commodities' volatility, implementation of lockdown measure and several other regulatory adjustments that weren't priced in our estimates.

With a consistent effort to all our -- of all our company, we have achieved our target on adjusted EBITDA and net income, reaching amounts of USD 1.2 billion and USD 600 million as expected. We continue to be frontrunners on the decarbonization, advancing in the discontinue to our core facility, accelerating at the same time, renewable capacity additions. Today, we have more than 1.3 gigawatts in generation projection -- projects under construction.

We continue to focus our action to fight climate change. We have already announced one of our ambition targets to reach a 64% reduction in our direct CO2 emissions by 2023 compared to our electricity generation business in 2017, meaning that Enel Chile is committed in having roughly 90% of its electricity generation carbon-free. Our effort is reflected in our ranking in several ESG indexes. We have been recognized as one of the best performers in ESG in Latin America.

Finally, regarding our dividend policy. Our Board of Directors reproposed at Annual Shareholder Meeting an eventual dividend of approximately $3.90 per 1,000 shares to comply with our strategic plan and to avoid the accounting effects on -- of the decarbonization process will affect our shareholder remuneration.

Let's now have a look at our main 2020 results. I already mentioned our adjusted EBITDA and net income were in line with our 2020 revised guidance. On CapEx deployment, despite the effects of the lockdown that have affected several areas where our projects are located and the delays produced by the processes for the ecological permits, we have been able to advance in the construction works in our working sites, doubling our CapEx of 2020 versus 2019, guaranteeing, at the same time, the safety of our people and construction on the field. Finally, on decarbonization, we successfully disconnected the first unit of Bocamina, contributing to a minus 1.5 Celsius -- degrees scenario target and making Enel Chile the most advanced company in decarbonization process of the country.

Let's now move to the sum data that shows the consistency of our strategy. Sustainability is the backbone of our strategy, aimed at decarbonization and electrification of the final consumption. Our plan is accelerating the energy transition, showing our compromise to our stakeholders and aiming at delivering sustainable value for all. During 2020, our company improved its core in all the main ESG ratings, maintaining the positive trend of the previous year.

As you can see, this approach has been reflected in most of the main sustainability indexes as well as Enel Chile has been distinguished as Prime by the ISS ESG and has received a Silver Class rating in The Sustainability Yearbook from Standard & Poor's Global, meaning that our company is within 1% and 5% of the industries' most sustainable companies worldwide. Enel Chile is the only Latin American electricity utilities located in that position.

Let's now have some more details on our decarbonization strategy on Page 6. During 2021, we will consolidate our position in the Chilean market, reaching 72% of renewable capacity within our portfolio generation asset. Our team is focused not only on the execution of this project but also on sizing new opportunities, targeting the best regions, developing new projects and seeking higher sustainable returns.

As I reference today, we have more than 14 gigawatts in our pipeline in different stage of development, which gives us enough flexibility to continue our decarbonization goal and de-risking our generation portfolio from commodities and hydrology. As an example of that, we have been recently confirmed that after a competitive bid process organized by the Ministry of National Assets, we were awarded over 2,500 hectares of -- for use in the development of new solar plants and storage systems, expected to contribute with more than 1,700 megawatts of clean energy to the country. As you will see during this year, we continue to strive new opportunities in the market, coupled with our target to reach net-zero emission by 2050.

On Page 7, you can see more details on the status of each project under construction. Today, we have more than 1.3 gigawatt in renewable capacity under construction. On average, the overall process of our project totals more than 50%. A large part of our projects already have the equipment on site, which reduces significantly the risks of material supply. I would like to give more details on the first hybrid project in Chile, Azabache, a 61-megawatt solar project located in the same side of the wind farm of Valle de los Vientos. We have finalized the connections of part of the solar panels during December.

The city works and balance of plants are expected to be contributing during the third quarter of this year. Azabache is an example of hybridization project in which we are increasing efficiency in our -- of our land usage, bringing more competitiveness to our portfolio.

The solar projects, Sol de Lila, Domeyko and Campos del Sol are expected to be into operation during the third quarter of this year. During the next calls, I will continue to keep you updated on the status of the construction of our projects.

Still on generation, let me go through our main fourth quarter industrial KPI on Page 8. The total net production for the fourth quarter increased 4%, amounting to 5.3 terawatt hour, mainly due to higher hydro generation, reflecting the positive melting season of the last quarter of 2020. In terms of energy balance, as a consequence of lower spot price, we remain the net spot buyers in the market with a purchase of plus 0.2 terawatt hour higher than fourth quarter 2019.

Our physical energy sales have increased 80% or 0.5 terawatt hour, mainly explained by 0.7 terawatt hour of higher free market sales, including spot sales as part of our strategy to capture new clients and the ones that recently migrated to the free market, partially offset by minus 0.3 terawatt hour or lower demand from distribution companies, primarily related to the termination of the regulated PPAs with SAIDI and Enel secured in 2006 auction, and the lower energy demand related to the lockdown measures established in different cities in the country.

Now the full year figures on Slide 9. Net production for the full year 2020 decreased 80%, amounting to 19.3 terawatt hour. The variance between year 2020 and 2019 came mainly from minus 0.9 terawatt hour of lower generation in our hydropower plants, reflecting the very drop in first half of 2020; minus 0.8 terawatt hour or lower thermal production, mainly in our coal fire plants due to the closure of Tarapacá power plant in December 31, 2019, and the impact of the lower system marginal costs.

In the year, we remained a net spot buyer in the market with a total purchase of 3.6 terawatt hour during 2020, equivalent to plus 1.2 terawatt hour higher than 2019, mainly due to low hydrology and lower marginal costs. On the other end, our physical sales decreased 2% or 0.6 terawatt hour, mainly explained by minus 1.9 terawatt hour of lower demand from distribution companies, primarily related to the termination of regulated PPAs with SAIDI and Enel and the lower national energy demand associated to lockdown and economic restrictions. This was partially offset by plus 1.3 terawatt hour or higher free market sales, including spot sales as part of our strategy in the free market.

Now on hydrology, Slide 10. With reference to our hydropower generation business, we are presenting the cumulative rainfall for our most significant river basins, Maule, Bío-Bío, Laja and Rapel. In the chart, you can find the new metrics. The green line that highlights the average cumulative rainfall over the last 10 years. Since now, we will include this new reference under our materials.

With regards to 2020 performance and we saw a record recovery in rainfall in June and July, hydrology was rather poor during 2020, making season during the fourth quarter 2020 was slightly above the same quarter of 2019, explaining better performance in the period. Therefore, our hydro generation was 5% higher in the fourth quarter 2020, which led us to reach 6 terawatt hour of hydro generation during the second half of 2020, meeting the expectation we have anticipated with the 9 months 2020 results conference call.

For 2021, based on information available today, modest rainfalls are expected considering the current conditions according to the La Niña phenomenon, that will remain until the second quarter. Nevertheless, Pacific temperature moved -- should move to a neutral condition during southern winter, which should imply an improvement in rainfall for the second semester 2021.

During the last weeks, a review of the regulation on the importation of the energy in the country is under discussions. In our view, considering the volatility of the hydrology that has been experienced during the recent years and the low predictability of the Argentina Gas as an interruptible source, it is important to avoid strict limitation in the current availability of gas. This may create situation where the overall cost of generation will increase with dispatching more less efficient and high contaminating plants. That is the opposite of the accounting goals on decarbonization.

Now Networks business line on Slide 11. Energy distributed in the period reflects the lockdown measures in our concession area, slightly offset by the increase in the household segment consumption. Our customer base continued to expand. During 2020, we had an increase around 36,000 new clients, 33,300 residential, 2,000 commercial, exceeding the 2 million clients by the year-end. On the quality of the -- both of our services, we continue to improve our SAIDI and SAIFI indexes. Performance is associated with investment made in our concession area, despite our logistics restriction that we have faced and with the digitalization of our networks.

The effect of the social unrest at the end of 2019 and the pandemia (sic) [ pandemic ] explained the 0.2 basis points increase in the total losses. We continue working to recover this KPI to historical level. We continue to improve the digitalization of our services. To provide more efficiency and agility, we have improved our customer hub, which supported the rise of digital interaction from 16% in 2019 to 52% in 2020. As of December, Enel Distribución reached approximately 450,000 downloads, 72% higher than in December 2019 cumulative figures, reaffirming that digital channels are the main way to communicate with our clients.

In 2020, we also saw stronger growth in digital payment, as we show in Slide 12. The increase of digital channel and the new payments agreement executing (sic) [ executed ] during 2020 supported the collection levels maintained at 97% versus historical level of higher than 100%. By December 2020, we have executed almost 83,000 agreements with clients, which has been supported with decrease in bad debt, as Giuseppe will show later. On average, we executed more than 1 million contacts with our clients during the last quarter through direct calls, SMS and other communication channels.

Moving to Enel X and electrification on Slide 13. Despite the COVID-19 pandemic outbreaks in the country, we continued to consolidate our leadership on electric mobility and electrification. In 2020, we secured new contracts on public lighting, upgrading the lighting infrastructure with LED, bringing more efficient system in favor of the local municipalities or e-mobility in 2020; Enel X signed partnership with McDonald's; with Enex, means with Shell; Saba; concessionaire in terminal ISA among others, to continue the development of the ElectroRuta Project. Today, more than 22 partners have joined us in this initiative.

Additionally, as Enel X, we are developing the first project with retail sector to attend the last-mile logistics, boosting e-trucks in Chile, reaffirming our commitment to the energy transition toward the use of clean energy in transportation.

In 2020, we also secured new contracts with large real estate groups to provide energy efficiency solution based on industrial hot water, industrial services and new charging infrastructure for their projects. During this year, we are promoting several projects with mining industry, which the use of -- such as the use of electric buses, combined with solar energy and solar charging systems.

The first project with -- in the mining sector developed with AngloAmerican will begin operation in the next few days. Finally, and thanks to the agreement with other public and private partners, 40 companies has participated with Enel. We continue our effort to promote efficiency to substitute the use of wood for electric heating and reduced particle emissions. 8,000 devices have been restored since February 2017, and we estimate that this is aborting 27,000 tons of CO2 equivalent per year.

Now to conclude this part of presentation, a quick view on the main regulatory discussion ongoing on Slide 15. Starting with distribution. On COVID contingency front, in January 2021, the basic service bill has been extended from its original time lines to support the most vulnerable clients for a more extended period. The law intends to support the vulnerable clients that have the option to postpone and request the payment of their bills with up to 36 installments without interest.

The law is valid until May 5, including benefits to vulnerable clients, which our company already voluntarily offered before the law approval. Moreover, the law keeps the suspension of services cut -- or service cutting to remote companies, other distribution and/or households. As of today, we have almost 21,900 agreements under the basic service law and an additional 20,900 under our voluntary programs.

On network tariff, on distribution, we have -- the government shall present its final report during second quarter '21, followed by the final regulatory report on the matter, which can be challenged in the expert panel instance. Consequently, we expect the release of the final distribution tariff retroactive to November '20 to be released in early 2022.

On transmission, according to the transmission tariff cycle, 2020, 2023, by the second quarter, we are expecting the regulator's report, which can also be challenged in the expert panel instance. Transmission tariff decrees are expected to be published by the fourth quarter in the year 2021.

Moving to Slide 16, our recent updates. On tariff stabilization mechanism, during December 2020, the report published by the Chilean Energy Commission showed that the total balance accrual under the stabilization mechanism totals $856 million for the entire Chilean market as of September 2020. By the end of December 2020, Enel Chile balance totaled around $360 million. Early this year, the effects of the accounts receivable generated by this mechanism were executed with Goldman Sachs and IDB, totaling around $290 million nominal value. The first tranche of around $90 million was already cashed-in during February of this year.

A new rule on energy efficiency has been recently published in which the government defined the regulatory framework for the rational and efficient use of the energy. In this new rule, the government established certain rules on energy efficiency, like the implementation of management energy system for large clients or requirements for all the new buildings to targeted levels of energy consumptions as we currently have in direct people treatment. In our view, this is an important initiative that Chile is giving towards the energy transition, and as Enel, we are prepared to support our clients and their needs to comply with this new rule. We are now in an open public hearing phase of the process, and the expectation is that the regulation related to the implementation of this law shall be published during this year.

Now I will hand over to Giuseppe.

[Operator]

[Operator Instructions]

[Giuseppe Turchiarelli, executive]

Okay. Thanks, Paolo. Let me start with a summary of our financial highlights, which we'll go through details in the following slides. But first, let me explain the adjustment we made in our figures for both 2019 and 2020 periods.

As Paolo mentioned before, we accomplished the goal of EBITDA and net income committed in our last strategic plan. For 2019, we have adjusted EBITDA and net income, excluding the PPA early termination effects and the net impact of the impairment of Bocamina 1 and Tarapacá power plants. For 2020, we have adjusted the EBITDA and net income considering the effect arising from the impairment of Bocamina 2 power plant asset and coal consumption associated to both the units of Bocamina and reorganizational and personnel costs. All the details are described in the bottom of the slide.

In the following slides, I will address in more detail each of these figures. But let me start giving you some detail about the EBITDA and bottom line net of COVID impact on Slide 19. Net of COVID-19 impact, our adjusted EBITDA would have been around $100 million higher than the 2020 adjusted figures, reaching a total of $1,282 million. Factors behind this are: $89 million related to the reduction of demand impacting our sales in both distribution and generation business, net of energy purchases in the period; $12 million mainly related to the higher energy losses, extraordinary customer care costs, other OpEx we needed to face the contingency and Enel X lower activities.

Moving down the profit and loss, we recorded a negative impact related to the bad debt provision of $9 million, mainly driven by temporary extension of historical collection period. Therefore, net of COVID-19, our 2020 adjusted net income would have reached $640 million.

Now let's go to our CapEx on Slide 20. In the 4Q '20, our CapEx reached almost $380 million, mainly due to development CapEx that's reached around $300 million in the period. Consequently, our total CapEx for 2020 amounted to $971 million, allocated as follows: customer CapEx for a total of $61 million, a 24% increase with significant investments allocated to build connections to new customers, associated to the increase in our client base and improvement of our commercial system to guarantee a better interface with our clients and efficiency in our internal commercial processes.

Asset management CapEx reached $111 million, 10% lower than 2019 due to lower maintenance activities in coal fire units of Bocamina and Tarapacá and lower purchases of spare parts for maintenance activity in San Isidro in 2020 and rescheduled activity in our distribution business. As of December 2020, development CapEx reached almost $800 million, $544 million higher than 2019, largely driven by renewable expansion and development of our distribution business to continue the digitalization of our network.

Let's start with the Q4 adjusted EBITDA breakdown on Slide 21. Adjusted Q4 '21 (sic) [ '20 ] EBITDA is 17% better than last year's figures, mainly due to improvement on hydrological conditions due to a better maintained season, which increased our hydro generation by 0.1 terawatt hour equivalent to a positive impact of $1 million; positive PPA margin effect of $24 million, this includes the impact of commodity, CPI and FX on the PPA, transmission cost and lower spot price; higher revenue from ancillary services for $10 million in order to provide system quality and safety.

Other positive effect of $16 million, mainly explained by $6 million on lower OpEx in our generation business, $3 million coming from higher depreciation of local currency versus U.S. dollar related to the translation of the U.S. dollar denominated loan as our functional currency is in pesos, settlement on spot and in transmission account of previous years booked in the quarter, partially offset by higher losses in our distribution business.

Let's now move to cumulative figures analysis on Page 22. Our EBITDA adjusted was stable when compared to 2019 and included the following main effect. PPA margin positive effect of $125 million includes the impact of commodities, CPI and FX on the PPA, transmission costs and lower spot prices; higher ancillary services revenue for $30 million; and tariff harmonization with a positive impact of $26 million.

All these effects were offset by the following items: lockdown measures that affect the energy demand in net of purchases of both generation and distribution business by $53 million, mainly related to the COVID-19 pandemic effect; lower hydro generation impacting our adjusted EBITDA of $42 million; sales of 6 LNG cargoes during first half 2019 that wasn't executed in this year due to the lower price of commodity in the international market with an impact of $23 million; lower EBITDA of $10 million in Enel X due to the eletric buses incorporated in the public system during 2019; higher depreciation of local currency versus U.S. dollar of $34 million related to the translation of U.S. dollar dominated loan in our books; and lower $17 million, mainly due to higher energy losses in distribution business and provision of effect of the new distribution tariffs.

In Slide 23, I will show a summary of the performance of our generation business, including Enel, Enel X in Chile and Enel Green Power of Chile. The main variances between the periods wherever is detailed in the previous slide. Let me remind you that 2020 adjusted EBITDA versus 2019 adjusted EBITDA by the PPA early termination increased by 8%. Moreover, I would like to highlight that our generation adjusted EBITDA margin reached 65% in 4Q 2020 and 52% in the full year, still higher than 2019 figures adjusted by the early termination of PPA.

Now on distribution network and Enel X business on Page 24. Q4 2020 adjusted EBITDA reached $52 million or 29% lower compared in the same period 2019 due to $5 million of lower energy consumption in both regulated and free market clients as a result of the lower -- of lockdown measures applied by the government to contain the spread of COVID-19; $4 million of higher energy losses as a result of cutting logistic restrictions and COVID-19 effect on economy; higher OpEx in order to maintain the safety measure in the distribution activity, which amounted to $8 million in the quarter; and provision of effect of the new resolution on the tariff quarter; and finally, our Enel X higher activity that offset the following -- the previous effect.

On the cumulative figures, EBITDA was low by $64 million, mainly due to Enel X; and negative impact of $8 million, mainly due to the recognition of 183 e-buses from Trans and Tele 2, which were incorporated in the public transportation system. On networks, a reduction of $56 million coming through lower demand, higher energy losses, higher OpEx in order to maintain the safety measures in the industry and provisional of the effect of the new distribution tariff.

Now on Slide 25, let's go through the main drivers of our group net income. D&A and bad debt reached $310 million, a balance of $2 million, mainly related to lower SG&A in Enel and Enel Generación, mainly due to Tarapacá and Bocamina power pending impairment in 2019 and in 2020 for books on impairment of Bocamina 2. Partially offset by higher depreciation in EGP Chile due to the devaluation of Chilean pesos; higher bad debt provision, mainly due to COVID outbreak; higher depreciation in the distribution business to -- due to the higher investment.

The impairment increased by $527 million, mainly due to Bocamina 2 booked in June 2020 related to the power plant early closure scheduled for May 2022. Financial results totaled an expense of $142 million, a decrease of $49 million, mainly due to lower average cost of our debt as a result of renegotiation of EGP debt with EFI or Enel Finance International, lower net debt -- net financial expense coming from the accounting impact of energy stabilization mechanism duration profile and higher capitalized interest primarily related to the development of renewable energy projects, offset by the exchange rate -- depreciation of foreign exchange rate in 2020.

Results from equity investments increased mainly due to the sale of Quintero service transmission line in December 2020. Income taxes and minorities reflect the impact related to the Bocamina 2 impairment and the merger of GasAtacama Chile into Enel Generación Chile in 2019. The adjusted year 2020 net income results reached $560 million, 9% higher than last year's adjusted net income.

Moving to cash flow on Slide 26. 2020 FFO reached $1.67 billion, higher than previous year. Mostly due to higher net working capital, mainly explained by cash management action of around $150 million in the last quarter, e-buses sale to AMP Capital which totaled around $100 million and other net working capital initiatives; higher LNG payments in 2019 versus 2020 of $69 million, partially offset by lower receivables due to COVID-19 of around $100 million.

Lower income tax during 2020, explained by the lower results of the company due to the decarbonization in terms of Tarapacá power plant and tax payment postponement as a consequence of government COVID program and lower financial expense, mainly explained by a reduction in the interest rates of -- in the company loan between EGP and EFI and lower debt compensation in EGP and in Enel Finance International.

Let me now go through our debt on Slide 22 (sic) [ 27 ]. Our gross debt increased approximately by $400 million versus 2019 due to the Enel Chile new funding with EFI to finance our decarbonization plan, partially offset by the amortization of Enel Finance in Chile and EGP debt. As a result, our net debt as of December 2020 compared to 2019 increased $254 million. The average cost of our debt was reduced from 5.2% in December 2019 to 4.6% as of December 2020, showing an important improvement in our financial condition as a result of our cost effort to optimize our financial expense. The average term of our debt is over $6 million -- 6 years, sorry.

Finally, on our debt amortization on Slide 28. In terms of liquidity, we maintained the level of $1 billion, enabling us to finance our CapEx plan and have a comfortable position to cope with the current economic scenario. Our debt amortization, as you can see in the slide, remains very smooth.

Now I will hand over to Paolo.

[Paolo Pallotti, executive]

Thank you, Giuseppe. Let's go to the closing remarks. Despite the challenging circumstances, Enel Chile confirmed its resilience and the strength of its strategy, continued to push for fleets' and clients' decarbonization, consolidating the leading position in electrification and renewables in Chile, contributing to the fight against the climate change. Our clients will remain the center of our strategy. And new business lines will continue to focus on client needs and support them in the path towards the energy transition.

Our business resilience and sustainable strategy is supported by our balance sheet strength and long-term vision, promoting value creation to all.

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

[Isabela Klemes, executive]

Thank you, Paolo. Thank you all for your attention. As we have anticipated, we received questions via phone and chat in the webcast on this occasion. The Q&A section is open. Operator, please, you may start.

[Operator]

[Operator Instructions] Our first question is from Javier Suarez with Mediobanca.

[Javier Suarez Hernandez, analyst]

I have several questions. The first one is on the regulatory review on recent regulatory changes. So I'm interested on the basic service law that is basically changing the capacity of the company to deal with unpaid bills. So the question here is how do you see this new law affecting your profitability in 2021 and '22? How significant do you think that, that is going to be in the management of your cash flows and working capital, and in general, the profitability of your business?

Then on the energy efficiency law that is trying to promote the rational utilization of energy sources, I have seen in the presentation that hydrogen has been declared as a fuel. So the question for you is that if you can update us on how do you see hydrogen -- the hydrogen opportunity affecting the Enel Chile's business model in the next year to come? So any update on that would be appreciated.

The third question is on the free market -- the service to the free market. So there is still some significant part of your clients that are on the free market. So how do you expect that free market evolving in 2021? How should be the expectation on free market evolution in 2021 and impact on your profitability?

And the fourth one and final question is on the working capital. So there has been a positive impact during the fourth quarter. If you can please explain us why this positive impact has happened during the fourth quarter of the year?

[Paolo Pallotti, executive]

Thank you, Javier, for your questions, let's say, very interesting and covering lots of things. Let me start on regulatory aspects, and then I will hand over to Giuseppe for clarification on numbers.

Regarding the basic service law, I would say that it is not, let's say, regulatory measure. It's more, let's say, a low debt has been issued during the merging superior, the economic crisis during the pandemia to support certain category of clients, the most vulnerable clients. This is something that we have, let's say, approached since the beginning as a company, with offering more or less the same approach of letting people ask for, let's say, the -- an agreement for the extension of the payment terms.

What is -- what means the last decision? This is -- was the decision taken early in January. But honestly, it was expected considering that the previous law issued in August was, let's say, designed to cover the energy incident that was expected to end by year-end. In this situation, clearly, the likely change that has been introduced is to a larger number of installments for the payment. Before the law, defined at 12, but now the client can choose up to 36. And this is clearly -- is quite reasonable because it's -- we've been talking about small and vulnerable clients having 1 year, approximately 1 year of debt -- the extension of the payment, we should have them to cover the direct exposure.

The element that we -- honestly, as we often say, we do not agree on this law is that the limit in our own exclusion, our capability to cut off all the, let's say, domestic bad payer, also the largest consumer in the sector. So this clearly has, let's say -- they may have an influence on the attitude of the client that may pay their bill because they have resources also during this, let's say, contingency period, not to pay the bill and waiting until the end of the law. The law will expire by the 5th of May. So the situation we have, let's say, publish and we push for having as much as agreement as possible in order, let's say, to have a direct contact with the client in order to start recovering our exposure when the law will expire. So we're in this situation. Giuseppe can give you later the, let's say, how it is reflected in our numbers.

Regarding the energy efficiency law, this is, let's say, I think -- we think that this is an important step in Chile country. Clearly, as sometimes to be, let's say, developed because it refers to a 5-year plans in order to present. And now we are in the renewing process. We expect that this, let's say, will be -- will have a real exploitment by doing that next couple of years.

Regarding hydrogen, you know that we are part of the consortium that -- in developing the first pilot project in the south of Chile regarding the production of green hydrogen using a [ returbine ] generation plant. And this is, let's say, is a part of our strategy in evaluating and monitoring the evolution of this opportunity. Clear for us, it is an opportunity because we are a renewable player. And it could be a very important upside in having a part of this green economy.

Clearly, we are focusing what are, let's say, the use of hydrogen in the industry sectors in the sense that we think that it may give a strong upside, changing the industrial process and adopting as much as possible the green hydrogen as a vector for the energy. And clearly, we can be available in, let's say, producing the green hydrogen through our generation fleet for this scope. We have a very large pipeline. We have 2.4 gigawatts that we plan to construct by 2023, but we have the large part. So we can add all the flexibility in order cope to a potential increase in demand in Chile for the green hydrogen.

Regarding the free market evolution, this is, let's say, a question that touch base, let's say, a process that is still in the middle because you know that the portability law has been presented to Commission of CNE. This is under discussion that is really ongoing. They are debating about this. And this law has certain condition for opening of the market.

For the time being, what we're seeing is that for one side, clients that have the possibility to be great from the regulated to the free market due to the conditions, being in a connection capacity between 500 gigawatt and 5 megawatt, are moving, and so clients that are moving from regulated to the free market. And the other trend is free clients that are switching into a full renewable subscription in the sense that they are requiring to be provided with green energy. And we see these 2 elements for the time being as a good upside for us because you know that we have signed recent contracts with very large clients based on green energy. Some clients request us to reach [ further into ] green energy. And we are, let's say, targeting the clients that are moving from regulated market to the free market in our concession area as well as outside our concession area.

I leave Giuseppe the answer regarding, let's say, details on the basic service law and on the working capital.

[Giuseppe Turchiarelli, executive]

Well, let me say that for the net working capital, the action that's in place in the last quarter was, as I said in Slide 26, around $100 million. And basically, we take some action in terms of factoring or reverse factoring, especially in the second one, taking into account the fact that we perform a very important amount of CapEx in the last quarter. So these are basically the issue for what concern the net working capital.

And for what concern the [Foreign Language] I would say that we believe that, considering the projection that we have in terms of recovery, we shouldn't have any additional impact in the following months. But of course, it's really early to say now. We're going to see in the following months how could be the impact of possible [Foreign Language]

[Paolo Pallotti, executive]

Yes. And also, [indiscernible] the impact in the evolution of pandemia here in Chile, the process for basing is going time still. So we hope that in the following months, there could be, let's say, a recovery from the Senator point of view.

[Operator]

Our next question comes from Enrico Bartoli with Stifel.

[Enrico Bartoli, analyst]

So I have also a few. First one is on the outlook for 2021. We saw a recovery of electricity production in the power generation business, of demand on the distribution business. You are indicating and expecting improvement of the hydrology. So can you elaborate a bit more in detail the scenario that you see for this year? And if possible, if you can give us some indication of the level of EBITDA that you expect for 2021?

And related to this, you're also expecting 1.3 gigawatts of additional renewable capacity. So if you can give us an indication of the EBITDA that you expect from a full year level from that capacity.

Then I have a question regarding the regulatory environment as well. You highlighted some deadlines for the presentation of the new regulatory framework for distribution and transmission. If you can update us on the impact that you expect from these 2 new models for your distribution business?

And the last one is related to the PPA. You highlighted the impact on -- from PPAs from the indexation to forex commodities, CPI. If you can remind us how this mechanism work? And if you can provide some details on this positive impact that you had in 2020?

[Paolo Pallotti, executive]

Okay. Thanks, Enrico, for your questions. Regarding the outlook of 2021, let's say, I may confirm what we have discussed during our, let's say, business plan, with some details regarding, let's say -- I would say that the key issue here is how the country is evolving from 2020. So the wealth measure and the possibility of having not strong retention in the lockdown in the movement of people is a very key indicator on how the country and, so as a consequence, the demand, the ability of -- for payments and to have new contracts can, let's say, support the recovery in the economy.

On our side, what we are doing is, first of all, supporting our clients in many case we can do. I mean I'm referring to the small/medium clients. We are targeting them with agreements in order to help them to come out from this situation. On the other side, the large client confirmed the resilience. So we don't see any negative impact on this.

Regarding the hydrology. We, let's say, confirm our, let's say, estimation based on, as usual, the number of years of average and analysis of the evolution. So we can be more specific during the next month, during the next calls in order to see effectively how the country either -- and the weather and the condition may change or can sustain the numbers.

Regarding projects. The [indiscernible] project, I would say that during 2020, that from the point of we are working on site, movement of people, the impact of pandemia was very tough. And we appreciate very much the work made by our teams to manage this very difficult situation. We advanced in all the projects that we have on site. We have opened new working sites, and we manage to have people working also during the lockdown that affected our areas of -- for the new projects, especially in the north of Chile.

So again, we have advanced, I think, in 2020, due to these conditions. But also the lengthy projects, the lengthy process that's arising from, let's say, the authority like the Consejo Nacional de Monumentos (sic) [ Consejo de Monumentos Nacionales ] where the timing for receiving any kind of approval were enlarged so much due the [ amount ] of people in the office remote working [indiscernible]

The situation we have today, as we mentioned, 1.3 gigawatts of projects under construction. We are advancing and we have managed this year, but also especially last year also, some, let's say, bit more outbreaks of COVID that arrived during the contractors, but we managed very well. And so today, we have a very, very, very little number of people affected in the company.

And what we expect is to advance, clearly, with all our effort in time with the construction of the plant. Also in this case, we will keep updated for any step ahead on our plans. There are clearly different stage of advancing, but we are, let's say, quite positive on the work that we are doing on site.

Regarding the impact of the distribution tariffs or regulatory. Yes, I see that. What I can say is that first, the process may have some months of delay in terms of release of the last -- of the very final tariff definition because of the work that is doing the regulator with its consultants.

We do not expect -- according to the information that we received until now, we do not expect a difference from the numbers that we have projected in our business plan. So we don't see neither in distribution as well as in transmission. So at this stage, it is a lengthy problem, but it is, let's say, is going on online with all the parameters and analyst data as been shared and defined in the beginning.

Regarding the exchange rate question, I leave Giuseppe to give you some more flavor of this.

[Giuseppe Turchiarelli, executive]

Yes. Well, the PPA are strictly linked to variable like U.S. CPI on the exchange rate, peso-dollar and other commodities. So depending on the evolution of the commodity, we have the change in our PPA. Of course, it's not also easy to explain the link between the trend of the commodity and the impact of the PPA because, for example, for some commodity, we have -- the reference for the indexation is coming to, for example, 6 months previous the trend of the commodity.

So we have different kind of indexation and period to -- reference period for each of the variable. But basically, these are the driver of our PPAs.

[Operator]

[Operator Instructions] Our next question is from Murilo Riccini with Santander.

[Murilo Riccini, analyst]

This is Murilo Riccini from Santander. Could you provide us more details on the gas supply situation in Chile and specifically the dynamic for Enel Chile? We know that you're -- you have been negotiating gas supply during the pandemic, and now you are benefiting from that. How long can we expect availability of gas for Enel Chile? And what are you expecting for the winter in terms of gas availability and spot prices? This is the first one.

My next one is regarding CapEx. And we would like to understand how could you handle CapEx in order to avoid renewable energy oversupply in the system? And could that be a strategy more focusing on storage systems than renewable capacity?

And finally, if you could you share to us more your expectations about collections and provisions. Should provisions increase during the first half of 2021 in your view? That's all from my side.

[Paolo Pallotti, executive]

Thank you for your question. So let's start from gas supply. It is a very interesting question, due time being. Let's say -- first of all, let's have a look on gas supply in Chile because you know that it is not very, let's say, a very easy country to supply with in the sense that the gas is coming from LNG facility, especially in the center, in the north. Then there are the interconnection with Argentina. And the manner of managing the 2, let's say, the 2 elements, 2 areas for providing of gas is quite different also in terms of seasonality because you know that Argentinian gas is interruptible in the sense that we can use that gas in certain period of the year but we are -- but can be interrupted by the seller, especially by a reduction managed by the government agency.

On the other hand, to manage the import and, let's say, dispatching of LNG is quite important exercise because require a quite clear planning in order to manage the boat that's coming to discharge the gas. The usual, the mechanism is that during the springtime until, let's say, January, February, the gas is coming from Argentina. There is a availability, and the system often use gas coming from Argentina.

During wintertime, it is very difficult to have gas from Argentina. And so there is -- we, especially, we have planning -- we are planning every year to receive gas from LNG. So in this scenario, we do not see, let's say, a problem for us in having availability of gas because we have -- we can plan the boat -- the required boat during -- for -- available for wintertime and at the same time, using gas coming from Argentina in spring and summer.

What can happen here, as we happen during, let's say, January and February were -- is that there is some lack of gas from the general, let's say, deriving from general condition of the country. I mean certain drop in the water availability and gas unavailability for other players. On our side, we also plan -- we always plan to have gas mix in the region from Argentina and LNG. So we don't see a problem -- especially we don't see a problem also this year starting from March because the plan of receiving energy is clear. During January and February, we have to manage a certain action in order to cover our needs, especially due to the lack of gas coming from Argentina that's been brought during the recent months.

In terms of our position, we don't see, let's say, a problem because our LNG contract is a long-term contract. And so we can cover our needs. We can plan to cover our needs in an easy way. And we have also several contracts signed and in place with Argentina's operators, and so we can also benefit for the availability from Argentina.

Regarding next question on CapEx. And especially regarding, you mentioned the oversupply in terms of, let's say, oversupply of renewables. We have some elements here to share. First, you know that we are, let's say, a quite first mover in the sector in the sense that we have a project ongoing that we have connected to the grid starting from this year.

The second element is that there is also decarbonization process ongoing that is limiting the availability of thermal company capacity. The said aspect is very important -- is also, let's say, the clients' demand in the sense that they are switching more and more in the requiring green energy. And at the same time, considering our portfolio of contracts, we have account -- clients located also in the north of Chile. So we may avoid also bottlenecks or the grade in order to provide them with our advantage because it's very important dynamic also, considering the impact on price.

The point of having renewable plants with storage is a very interesting element. We are developing our plan base also on this strategy. We are in discussion also with, let's say, with the regulator and with the authority in order to manage the best way to, let's say, to remunerate the investment in order to have a possibility to start planning the installation of batteries, especially together with our solar plants. But it is evident that we are, let's say, when we are working on it, we are, let's say, developing very closely.

Regarding the collection, I'll leave the, let's say, the answer to Giuseppe.

[Giuseppe Turchiarelli, executive]

Yes. As I said before, it's really difficult to understand how could be the impact. What -- I believe that it's going to be lower than what we had in 2020 for several reason, first of all, because I believe that the situation is going to be better than last year, also linked to the vaccine plan that the company is -- the government is doing in this space and also because the layoffs in [indiscernible] is excluding some clients with a high consumption where we can manage in order to get the payment.

So that will be better. But as of today, it's really difficult to understand how it could be.

[Operator]

And I will now turn the call back to Isabela Klemes for the webcast questions.

[Isabela Klemes, executive]

Okay. Thank you. So we have some questions on our chat here. So the first one is from Andrew McCarthy, CrediCorp. So his first question is, we have been seeing higher spot market prices in Chile in early 2021. Should we expect that to translate into higher energy purchase expenses for Enel Generación business?

And the second question is, authorities in Chile appear to be reviewing the way gas costs are declared by power generators. What is Enel's opinion on these? And what the implications could be for the company? So I hand over to Paolo.

[Paolo Pallotti, executive]

Thank you, Andrew, for the questions. And I -- in the answer to your question, I will reconnect to the previous one made by Murilo in the sense that -- the starting point is that here, the, let's say, the way in which the gas is imported in Chile. And clearly, one of the most important -- or I would say the most important channel for importing Chile -- importing gas in Chile is the LNG because, as I mentioned, the gas supply coming from Argentina is interruptible, and it is not a stable source for providing gas. And the LNG gas requires some planning because the chain is based on both coming from the same timing for discharging and occupation of the storage facility in the regasification.

In this situation, the discussion that is ongoing on -- with the regulator that is reviewing what is called normal technical LNG is regarding the flexibility of the system for providing gas in Chile. And our view, honestly, is that we have to define as -- the first focus is to have the economicity of the system in order to have the less costly system overall. And second, to avoid any kind of use of the most contaminating, the most polluting generation assets.

And if we go through some request or some discussion that we are having, where it impose some rigidity in the system also importing gas through LNG, the consequence of this is to have, let's say, a system that cannot have the flexibility in optimizing the availability of gas and to have the system where it is forced to burn and to produce with the most contaminating and the less economic, but the most expensive fuel.

And so coming back to the -- your third question on our position, we have a very large mix of technology and capacity. We can use hydro, renewables and gas and just for 1 year, coal in Bocamina. In this situation, we can be buyer on the spot if the, let's say, the cost of energy is below our cost of production or we are backstopped by our cost of production. And we are importing gas to our long-term contract LNG. So we are also [ the back of the cap on ] the [ availability of ] gas. So on our side, we have the backstop in any condition of higher spot price.

And regarding the Norma Técnica, we are pushing in adding the flexibility that allow to have availability of gas in the system because it is important for us but also for all other players that are managing gas facilities. That is okay, you do not have a long-term contract, but they are going to go spot on the LNG. And so to include some constraint or to base all the, let's say, planning of the system based on a yearly basis by the [ Coordinador de la Red ] this may have, let's say, an impact on the availability of gas in certain periods of the year. So we should avoid to have this situation, but to look at the economicity of the overall system.

[Isabela Klemes, executive]

So thank you, Paolo. So now we have some questions also from Rodrigo Mora from Moneda. So the first question is could you explain the factorization agreement with Goldman Sachs and IDB? How much do you expect to receive for the first tranche? Then the second question that I believe was already answered that is related to the ability that we have with LNG to face the drop season in the country.

The third one is related to repowering projects at Enel Generación. So he was asking if the projects was concluded. And the second one related is about Los Cóndores project. So Rodrigo was asking about how much it was expensed in the project at the end of 2020? And how much is the company forecasting to invest to conclude this project?

Then the other one is related to Bocamina 2. So Rodrigo is asking that considering the hydro conditions that we are facing now and the lack of Argentinian gas, there is a possibility of the company to evaluate the postponement of the closure of Bocamina 2 in May 2022.

And then the final question is need for details on the postponement of the COD of Los Cóndores project to 2023. So this is the questions that...

[Paolo Pallotti, executive]

Okay. So let's start...

[Isabela Klemes, executive]

Yes. Let's start...

[Paolo Pallotti, executive]

Please, Isabela, [indiscernible] let's start from the end.

[Isabela Klemes, executive]

Okay...

[Paolo Pallotti, executive]

No. Let's start from the end so we can cover the plans. So let's start from -- the first was what about Los Cóndores?

[Isabela Klemes, executive]

Yes.

[Paolo Pallotti, executive]

Okay. Los Cóndores, what the expenses made by -- cumulated until 2020 was in the range of USD 880 million. This is the total amount, considering that what has been announced during the [indiscernible] published at the end of July, we announced a range of $1,150 million as a total amount of CapEx. Where we stand today, the -- in a very difficult situation, let me say this, not because of the project, but because the management of the pandemia effect in any working areas, we have advanced in our analysis and in our works. And so we have, let's say, going ahead with, let's say, the element that has, let's say, create requirement for deeper studies during the recent time. So we have overcome these elements. And so we are advancing the construction, clearly managing also the -- all the elements of safety regarding the people that are working on site, but clearly on the safety works and safety on wealth regarding regard the pandemia.

There was another [indiscernible] regarding...

[Isabela Klemes, executive]

Requiring [indiscernible] project.

[Paolo Pallotti, executive]

Regarding Los Cóndores, there is no other...

[Isabela Klemes, executive]

The CapEx -- included in CapEx. Okay. So the other one is about the repowering projects that Enel Generación, if this is already concluded?

[Paolo Pallotti, executive]

Yes.

[Isabela Klemes, executive]

And then let's go to the LNG question then. So inquiry, our ability to face the drop season in the country, considering the LNG contract. I think you have already...

[Paolo Pallotti, executive]

Yes, I already mentioned. So you have to consider that starting from March, we are going through the, let's say, the receiving of the ship that will deliver the required gas for all the winter period. So we don't have any kind of dependency from Argentina for all the period around full spring and summertime. So we don't see a problem starting from today to have this kind of, let's say, lack of gas coming from Argentina.

[Isabela Klemes, executive]

Perfect. And then the last one, Giuseppe, is about the selling of the credits with Goldman Sachs and IDB.

[Giuseppe Turchiarelli, executive]

Yes. We have already performed the first tranche in February. And as a matter of fact, we have already cashed in $58 million, you're going to see reflecting the first quarter results where we're going to present it. And if everything is going well, meaning that if the regulator will issue the decrees that are the base for the factoring, we're going to expect to have another $100 million along the year.

[Isabela Klemes, executive]

Okay. Thank you, Giuseppe. So we have questions from [indiscernible] from [ CrediCorp. ] So the first one, if you -- we could share guidance for revenues, EBITDA and CapEx for 2021. And then the second question is are you planning to pay the intercompany loan that you have with [indiscernible] in the short term? Giuseppe?

[Giuseppe Turchiarelli, executive]

Yes. Well, for what concern the guidance, we're going to confirm what we have been presenting during our Capital Market Day. So just to recap, EBITDA is going to be in the range of $1.4 billion, $1.5 billion. And same for what concern the CapEx, so we're going to spend or we will expect to spend $1.2 billion. And for what concern the intercompany loan, we don't have any intercompany loan expiration by the end of this year. We have just a credit line that is going to be expired in June, and we are evaluating whether it makes sense to renew in total or just a part of it.

We have -- the only expiration that we have on top of the amortization of some loan is a loan versus a bank, an EGP loan that is going to expire in December. And so we're going to decide how to end it.

[Isabela Klemes, executive]

Okay. Thank you, Giuseppe. So we have the last question now from Tomas Gonzalez, Scotiabank. So Tomas is asking more details on the leverage of the company on 2020 and what we are expecting in order to deleverage it. And also if phasing CapEx would be an alternative, so if you can give more details on this.

And then the last question is Tomas is asking color on the ancillary services that we registered, the $10 million recognition this year. So he is asking what we are expecting for 2021 for our company. Okay so...

[Giuseppe Turchiarelli, executive]

Okay. Well, what concern the net debt-to-EBITDA, the full year net debt-to-EBITDA, we are around 3.1x. And of course, we're going to see how the year is going to be, but also in this case, we're going to confirm what we said and during our Capital Market Day.

For what concern the ancillary services, we -- I mean, the situation is going to be a little bit different because the rules changed a little bit. So we don't believe that we have exactly the same amount that we had in 2020. It's going to be a little bit lower. And as of today, we believe this is going to be $3 million.

[Isabela Klemes, executive]

Perfect. Thank you, Giuseppe. Now so we do not have any other questions. So I would like to thank you all for joining us today and also to mention that our team, the Investor Relations team, is going to be available for any other questions you may have, okay? Many thanks to you all for your attention. Stay safe you all.

[Paolo Pallotti, executive]

Thank you.

[Giuseppe Turchiarelli, executive]

Thank you.

[Operator]

And thank you, ladies and gentlemen, for your participation in today's program. You may now disconnect. Have a wonderful day.