Enel Chile SA

NYSE:ENIC

Earnings Call Transcript 2021-Q4

[Operator]

Good day, ladies and gentlemen, and welcome to Enel Chile Q4 and Full Year 2021 Results Conference Call. My name is Gigi, and I will 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 Q4 and full year 2021 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 Q4 and full year 2021 results press release and presentation on our website, 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 date. 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 Mrs. Isabela Klemes, Head of Investor Relations of Enel Chile. Please proceed.

[Isabela Klemes, executive]

[Foreign Language] Good afternoon, and welcome to Enel Chile's Fourth Quarter and Full Year 2021 Results Presentation. Thank you all for joining us today. My name is Isabela Klemes, the Head of Investor Relations.

Let me remind you that our presentation and related financial information are available on our website, www.enel.cl in the Investors section and in our investors. In the time of the presentation, there will be an opportunity to ask questions via phone or webcast through the link Ask a Question.

Joining me this morning -- this afternoon, our CEO, Paolo Pallotti; our CFO, Giuseppe Turchiarelli. In the following slide, Paolo will open the presentation with the main highlights of our company performance and strategic update, then Giuseppe will walk us through our financial results. A replay of the call will be available, and as always, our IR team will continue to be available to provide you with information you may need concerning the figures detailed on this presentation. Let me remind you that media participants are connected only in listen-only mode. Thank you all for your attention, and now let me hand over to Paolo.

[Paolo Pallotti, executive]

Thank you, Isabela. Good morning, and I would say, good afternoon at this stage, and thank you for joining us. As we have already commented during our previous calls, the Chile Enel electricity system has been affected by several and contemporary phenomenon that put under pressure its dynamics and stability. In terms of ideology, the country is facing one of the driest periods of its history. The overall inflow levels of 2021 have been the lower of all hydrological conditions, while the level of building continues to be poor, with important consequences correlated on correct sectors like the electric and agriculture one among others. Furthermore, an higher demand for commodities are a consequence of largest coal and thermal generation came in a year of increased pressure at global level and lack liability of Argentina and natural gas during almost the first 9 months of 2021. The combination of all these effects in addition to structural delay of renewable projects at country level constrained our 2021 margins and our cash flow generation capability. The latter one also affected by such laws as basic [indiscernible] is low and the price stabilization mechanism. We already mentioned the several actions we took in place since the first month of 2021 to improve gas availability by additional LNG cargoes to supply our plants first and then to sell gas in the system, being the large importer LNG gas in the country for the year. In this challenging scenario with tough conditions posed by the duration of pandemic, we have been able to advance with our renewable project, increasing of 900 megawatts digital capacity over the period. Additional projects are ongoing. I will recall you later.

We have also started to link the issuing of new credit lines to sustainability targets. Today, 21% stake of the total debt is EGP linked. As we mentioned in our last strategic plan presentation, we target to achieve a 52% stake of this kind of financing by 2024. Regarding the [indiscernible], we are pleased to announce that we have been included in the Bloomberg Gender Quality Index for the first time. Also, we apply for the first time to the CDP Climate Change, obtaining a big score. This confirms that we are taking coordinated and consistent actions on climate change.

Now let's move to Slide 4 to give you an update about the market [indiscernible]. In 2021, the system are less water availability than 2020 with poor hydrology, only slightly better than the driest year recorded that was 1998 and 1999. The effects of main season have been very poor and very limited because of the level of the low [indiscernible] in the winter period. In the second half of the year, some limited positive effect on the use of water resource is derived from the issue of the preventive direction in Greek and the agreement that we reached with some communities.

With the lack of Argentinian export of natural gas for the period of full 2020, early '21, some players are being forced to buy in the spot market to support their generation position, facing a significant overall increase in commodity price as a consequence of the international market situation. Gas prices more than triple of the fourth quarter 2020 to the second half of 2021. In addition, the delay of expected CODs or renewable project at country level due also to some trade restrictions. The monthly effect on the system that can be considered equal to the lack of production of 2 CCGTs of $350 million. All the above-mentioned factors led to a strong pressure to the system with an important rise in margin costs, particularly during the third quarter of 2021, and the issuing of the preventive rationing decree. The situation have improved during the fourth quarter of last year, thanks, in particular, to the availability return of Argentinian gas in the Chilean market. That has been supplied on a stable manner until the end of the year. The chart in the graph in the center, the green area illustrates the usage of natural gas coming from Argentina versus the usage of LNG, blue areas. As a result, the spot price recovered in the fourth quarter, even if the group performance has been affected by contemporary technical outages of several thermal plants in the system. Also important to notice that the 2021 electric demand has rise at 5% over 2020. We expect that this growth will continue towards 2022.

Let's now have a view on the regulatory framework of the LNG sector. Let's go to Slide 5. On transmission business, the expert panel published a discrepancy report regarding the regulatory period of 2020, 2023. Now the process is almost at the end or depending the publication of the 3 by the authorities. Considering the available information, we do not expect negative effects on the estimated tariff level already predicted. The process of distribution tariff review is still in progress. No material advances has been made during the last month. And the final distribution tariff is expected to be released by the end of 2022 or early 2023. Significant review of the basic service law has been approved by the Congress and recently published, addressing the treatment of the debt incurred by the residential clients and small companies between March 2020, December 2021. The electricity consumption threshold of 250 kilowatt hour per month have been established to define the customers that will be subject to the effect of the law. Customers with consumption up to 250 kilowatt hour per month rescheduled the payment of their debt in 48 installments with 50% -- 15% of the average bill in 2021. The government will subsidize such quarters. Even an outstanding balance will be in place by the end out the 48 installments, [indiscernible] will be addressed in an agreement between distribution companies and governments. On the other hand, customers with over 250 kilowatt hour month -- monthly consumption are subject to the standard rules already in place before the pandemia with the possibility of being cut off from the service in case of not repayment of either the existing debt or the current bill.

On December 31, 2021, our total outstanding debt reached $210 million, of which USD 140 million can refer to residential, being $32 million below the threshold of $250 million. Concerning the energy stabilization mechanism, according to the CME estimates, the farm will reach its legal top of USD 1,350 million by June 2022. As of December 21, Enel Chile's net accounts reached USD 283 million.

Now let's make a review on our debt carbonization process on Page #6. In 2021, we successfully connected 900 megawatt of renewable project, of which more than 90% are solar. With this milestone, we have achieved a total amount of 8 gigawatt of store capacity, of which 70% renewable. Such capacity already connected to the network will reach the full production within the next month once all the tests are concluded.

Let's go on Slide 7. In addition to the recently connected projects mentioned before, we are advancing with more than 1.4 gigawatt of additional projects. Those megawatts includes projects under construction since the last year, and the new ones already announced, like [indiscernible] construction will start in the following months, and Campos del Sol 2 and Sierra Gorda solar, solar plants already under structure. Regarding our JV on green hydrogen [indiscernible] and other partners, the wind turbine design for high speed wind recently arrived to Chile from Shanghai. We expect to start operation during this year and will be an important milestone in development on the green hydrogen in Chile.

Now let's review our net gross KPIs on Slide #8. We continue to deploy the digitalization of our commercial channels. In 2021, 90% of our clients' interactions were executed through digital channels. Nonetheless, the complexity introduced by the pandemic situation, we have been able to announce the quality of customer care, also thanks to the introduction of our ADP act on -- and or after interface. On the network side, our quality indicators continue to improve, supported by the increase of automation at any level of our grids. The digitalization of the low voltage networks where all the more -- the smart meters will have an important role in driving to lower salary figures and continue improving our overall quality of service. Losses levels are playing stable, and we might see some reductions through 2022. To conclude, energy distribution improvement in 2021 reflects the easing of the sanitary restriction and the overall economic recovery, showing a 5% increase compared to 2020 and reaching pre-pandemic levels.

Now let's move to the digitalization focus on the final clients. Let's go on Page #9. Enel Chile is pushing on electrification of the final use of the average, promoting the integration and development of new sustainable technologies. In January, we launched the first electric station service in Latin America as a milestone for the growth and expansion of electric mobility in Chile. These charging stations located in the strategic industrial sector of Santiago as a total of 23 charging points to use through the [indiscernible]. This initiative will support the reduction of 240 tonnes of CO2 per year. In collaboration with government authorities, last December Enel presented the first smart square in Chile. On services related to smart cities. The park has analytic digital camera, security total environmental sensors and charging points. Thanks to this collaborative project with the success of telecommunication world and the municipality of La Florida, including technology is closer to everyone.

Thank you. And now I will hand over to Giuseppe.

[Giuseppe Turchiarelli, executive]

Thanks, Paolo. Let me start with a quick summary of our financial highlights on Slide 11. Full year adjusted EBITDA reached $0.8 billion, 37% lower than last year, and the Q4 adjusted EBITDA reached EUR 253 million. The figure is in line with our 2021 guidance previously reported. In terms of...

[Operator]

Pardon me, speaker. We cannot hear you. Please, check your mute button. Excuse me, this is the operator. I apologize that there will be a slight delay in today's conference. Please hold and the conference will resume momentarily.

[Technical Difficulties]

[Paolo Pallotti, executive]

Pardon me. Isabela Klemes has rejoined us. You may resume with your conference.

[Isabela Klemes, executive]

Hello?

[Operator]

Yes, we can hear you Isabela. You may continue with your conference.

[Isabela Klemes, executive]

Okay. Thank you very much. Giuseppe, sorry for it. We have a problem connection. Giuseppe, please.

[Giuseppe Turchiarelli, executive]

Okay. So let's start with a quick summary of our main financial highlights on Slide 11. Full year 2021 adjusted EBITDA reached $0.8 billion, 37% lower than last year, and the Q4 adjusted EBITDA reached $253 million. This figure is in line with our 2021 guidance previously reported. In terms of adjusted net income, our $0.2 billion full year results are in line with our guidance for the year. In the last quarter, it reached $96 million. CapEx stood at $1.1 billion, 12% higher than 2020, mostly in line with our guidance. FFO achieved $441 million, presenting a 49% reduction year-on-year.

In the following slide, we will deep dive into the main financial figures. Now let's begin with the CapEx on Slide 12. 2021 cumulated CapEx reached $1.1 billion, out of which 36% allocated to achieve the SDG goals particularly devoted to the construction of our new renewable bank. Customer CapEx totaled $80 million, mainly allocated to build new connections and to implement our new distribution commercial systems. Asset management CapEx reached $141 million, 17% higher than full year 2020, mainly due to expansion of the new high-voltage projects awarded in 2021, activities to improve the quality of our services and other digitalization projects.

Development CapEx reached $960 million, mostly driven by our renewable expansion program and development of our distribution business to continue the digitalization of our network. The development of the renewable CapEx was concentrated in the solar expansion, considering the several solar projects under construction and recently connected to the grid. Regarding the network business, 2021 CapEx reached $200 million, mainly for the new customer connection and improvement of the quality of the green, both in our distribution of our [indiscernible].

In the following slide, I will show you more detail about the main generation keeps happening in the period on Slide 13. Generation of the fourth quarter was affected by a full hydrology in the country, which reduced our hydro generation by 1 terawatt hour and increased our signal dispatch by 0.9 terawatt hour, mainly through our CCGT facility. Therefore, our Q4 2021 production reached 5.2 terawatt hour, decreasing 1% versus Q4 2020. For the year 2021, our production reached 19 terawatt hour, slightly lower than 2020, ending with 2 terawatt hour lower hydro production because of poor hydrology in the year.

Our energy sales increased 26% as of December 2021, primarily explained by new contracts with the customers, including AngloAmerican and BHP and retail client transfer from Enel Distribución Chile as part of them [indiscernible] regulation requirements. For what concern our sourcing on top of the already mentioned production variances, during 2021, we have counted a total increase of 6 terawatt hour of purchases, which includes 6.7 on the spot market and plus 2.3 terawatt hour from other generators related to the unregulated customer portfolio of contracts tagging from the distribution business.

Let's now start with the Q4 adjusted EBITDA breakdown on Slide 14 that accounted $253 million, 33% lower versus 2020 figures. Let me start the main balances. Our generation portfolio mix resulted in a positive variation of $83 million, mainly related to higher PPA sales in Q4 2021, primarily explained by the new agreement started in 2021 in the company as AngloAmerican and BHP, where adjustment due to indexation and the new contracts coming from Enel Distribución customer portfolio at the beginning of the year, partially offset by $56 million related to higher fermentation cost scenarios of purchase. This positive results of our portfolio mix were offset by worse hydrology conditions impacting $88 million and $99 million related to higher commodity prices that impacted both the spot prices and our united generation costs. Network remuneration demand accounting for a positive impact of $7 million related to the recovery of the Q4 2021 demand in distribution business, mainly associated to the release of the lockdown measures and positive indexation in the tariff. Other effects accounted for $27 million, mainly related to negative impact associated to financial [indiscernible] impact on EBITDA and lower capitalization generation due to the construction of several projects.

Let's move to Slide 15, where we have the summary of full year adjusted EBITDA breakdown accounting for $774 million, 37% lower versus 2020. As you can see, the main assets are the same that we presented in Q4. Our generation portfolio mix resulted in a positive variation of $35 million, mainly relative to $171 million higher PPA sales in 2021, primarily explained by the new agreement started in 2021. The adjustment due to indexation and the new contracts coming from energy distribution pre-customer portfolio at the beginning of the year, partially offset by $56 million related to the higher fermentation cost and higher [indiscernible]. These positive results of our portfolio mix were offset by -- was higher condition of around 2 terawatt hour, impacting for $199 million and $255 million related to higher commodity price that impact both the spot prices and our [indiscernible] generation costs. Network remuneration in the number accounting for a negative impact of $90 million related to lower network remuneration related to the expected lower distribution and transmission tariffs, partially offset by higher volume. Other assets accounted for $90 million, mainly related to lower capitalization and generation business due to the end of construction of several project. Insurance reimbursement booked in 2020, a new contract agreement booked in Q1 2021 with Enel Distribución.

Now on Slide 16, let's go through the main driver of our group income. Very impairment and the debt reached $388 million, $15 million lower than last year, mainly related to lower G&A in [indiscernible] due to the Bocamina 2 impairment made in 2020 and lower G&A in our assets due to an appreciation of the Chilean pesos in the period. Net financial charges total net expense of $189 million, an increase of $58 million, mainly due to higher cost as a result of the factoring executed in generation business on accounting receivable that derived from the tariff obligation law, partially offset by a higher financial expense capitalized during 2021. Income taxes variances reflect the impact related to lower results in the period, partially offset by positive effect in 2020 because of [indiscernible] generation business and monetary tax adjustment 2021 due to CPI [indiscernible]. As a result of the adjusted full year 2021 net income reached $190 million.

Moving now to cash flow on Slide 17. 2021 FFO reached $141 million, 49% lower than previous year, mainly resulting lower EBITDA, as I already explained. Higher income tax during 2021, mainly related to COVID-19 measures during 2020 that postponed part of the cost of the tax payment in 2021 in addition to lower tax reimbursement in Chile versus 2020. In other financial expenses, mainly explained by the cost of factoring of accounts receivables that arises on the price stabilization law in the cost of factor in the solution business. These effects were partially offset by a positive impact related to the net working capital versus 2021, mainly explained by factoring in both generation and distribution business accounted for almost $228 million. Transmission line sales in 2020 and 2021 corresponding to [indiscernible] Chile sales of [indiscernible] transmission line and the sales of stake in [indiscernible] with a total positive cash impact of $40 million in 2021, partially offset by lower collection in [indiscernible] in 2020.

Let me now go through our debt evolution on Slide 18. Our gross debt increased by $1 billion, amounting to $5 billion as of December 2021 due to the company loan provided by Enel Finance International to Enel Chile for $840 million. The base loan for around $100 million, mainly to aim CapEx needs and also $114 million increase in leasing agreements in Egypt due to the renewable development. This transaction were partially offset by $43 million [indiscernible] Chile local bonds. Therefore, currently, 21% of our total gross debt [indiscernible]. Our plan is to continue to improve this kind of debt in line with our sustainable business [indiscernible]. In terms of debt amortization, our schedule remains sustainable with an average of 6 year and the cost of such substantially aligned with the last year period. In terms of liquidity, we continue to have a comfortable position. We are embedding some available committed lines, considering the possible headwinds in the market. Coming from the international income fleet in Eastern Europe. For this year, we have around $100 million of debt at [indiscernible] with maturity in December. We have already started maturities and evaluate several opportunities in the local and international market.

And now I will leave the floor to Paolo for the closing remarks.

[Paolo Pallotti, executive]

Thank you, Giuseppe. The construction of our renewable project is advancing, improving the competitiveness and resilience of our generation portfolio and supporting our long-term ambition regarding [indiscernible]. We continue to support the electrification of the energy use our clients to accelerate the reach of Net Zero ambition. The implementation of our strategy continues to reflect the highest ESG standards. For example, we have been scored by the CDP Climate Change with B, that confirms that we are taking coordinated actions on climate change. For another year, we were included in the Standard & Poor's global year 2022 as a silver class company. This reflects our solid performance regarding the sustainability of our operations. We are advancing in the development -- in deployment of a proper asset operation to support the implementation of our commercial strategy, strengthening some leverage structure.

As you may be aware today, we announced my departure from Enel Chile to assume another position within [indiscernible]. I would like to take this opportunity to thank all the colleagues in Enel Chile, the management team that work together with me, for all the support during these intense years, where all of us have been called for a very strong effort to manage the business in a turbulent environment. Also, I would like to thank you for all the interesting interaction during our calls and our meetings. I hope things can come soon to normality in order to deal with regular businesses and not with the tremendous situation that we are hearing is going on in Ukraine. By tomorrow, [indiscernible] is going to step in as the new CEO of Enel Chile. I wish to [indiscernible] all the success for the years to come.

Now let's open the Q&A section.

[Isabela Klemes, executive]

Many thanks, Paolo, for your words. Thank you for all your attention. As anticipated, we will receive questions via phone and shared in the webcast in this occasion. [indiscernible] operator, please, you may start.

[Operator]

[Operator Instructions]

Our first question comes from the line of Enrico Bartoli with Stifel.

[Enrico Bartoli, analyst]

I have three actually. The first one is regarding Slide 23 of the presentation where you highlight the evolution of EBITDA in the network business from distribution and transmission. So if you can guide us a bit in the relative movements of the 2 components, transmission and distribution, with distribution going down in '21, but recovery in Q4, and the transmission contribution instead going down in the fourth quarter. And if you can guide us on how we expect these 2 components to move along to 2022? Second question is related to the -- an update on the outlook. What you expect in terms of hydrology considering the first 2 months of the year for 2022? And if you can update us on the guidance for EBITDA for the whole year? And the third one is regarding your -- the mention on asset rotation in Slide 19, if you can give some flavor on what kind of assets you will be considering to be transferred in asset rotation transactions?

[Paolo Pallotti, executive]

Thank you, Enrico, for your questions. Let me take the last 2 questions, and then I'll leave the first one to Giuseppe. Regarding [indiscernible], I would like to share, let's say, a larger view on this. Just to consider which is the evolution of the sector in terms of resources because if we look at just the contribution of water resources [indiscernible] is not increasing so much. The effect of demand in the season was true because of the low levels more accumulated during winter time and the positive effect of this is that during the last quarter of 2021, we -- the sector also we benefit from gas coming from Argentina, and so this allowed to have, let's say, a management of the resources. That allow to, let's say, limit the use of water resources into the basin. If we look at how we close the year and how we are opening in terms of availability of resources in the basin, we are in line with the expectation. And just to consider, this is totally different from what's happening end of 2020, beginning of 2021, when the total lack of Argentinian gas required, let's say, [indiscernible] the grid of the networks to call for additional use of water. And so we reached the end of 2021, early 2021, with a low level of [indiscernible], but also without gas because of lack of Argentinian gas.

So this -- from this point of view, the situation is, let's say, all in all, can be assumed better. Even if we focus on hydrology, nothing has changed really. The other important point is that in the first 4 months of 2022 is, there continue to be availability of Argentinian gas. And so this allows first to, let's say, to manage property resources; and second, also to optimize also the use of LNG that has been planned since the end of last year to deliver within 2022. So just to make the long story short, water availability is still to be very low. Additional resources are improving [indiscernible] situation even if we look at just the spot price market, the level is still under pressure, continue to be a little bit high because of some outages that we [indiscernible] sector between the end of 2021 and this early stage in 2022. Regarding [indiscernible], let me make a general statement here. We had some optimization for it, as you said mentioned in order to sell some noncore assets, and we are working also to address a larger part of the [indiscernible] that at this stage is to still continue to be confidential. So I cannot highlight or describe the contents or the action that we are improving, we are performing but let me say that we are advancing to our target.

And Giuseppe, for the first question.

[Giuseppe Turchiarelli, executive]

Yes. So talking about the EBITDA, let's move on to Slide 16, just for -- in terms of generation, as we said, we have an important impact for what concern the sales. I said before, we have a new agreement in place in 2021 that accounts for around $110 million. The remaining path to compliance, the $151 million are related to the readjustment due to the indexation. So basically, this is the breakdown of $151 million. And for what concern the $136 million that you see there in terms of variable costs. I mean tell you that it's almost 50-50. I mean we have around $70 million that is coming from the higher [indiscernible] costs and the remaining part because of higher [indiscernible] for what concern the portfolio.

The hydrology, as I said, have an impact that is around $200 million. In this case, this impact, you can fit in to part one is related the pure volume there on is the impact of lower hydrology on the stock price. So let me say that this $200 million improved, Paolo. And for what concerned, $255 million, also in this case, we have [indiscernible] is around $100 million from the spot price and around $100 million [indiscernible] less and remaining part for the available cost.

Network. Network, as I said, we have a $19 million lower than last year. Basically, because of the remuneration that changed at the end of 2020. As you remember, the new side, at least the provision of the tariff we started in November 2020. So we have around $90 million coming from distribution and less than $10 million from the tariff that has been offset by the higher volume because last year, because of the start of COVID [indiscernible] was pretty lower than 2021. So these are the main effect for what we're going to show in the business, and the other effect already discussed coming from lower capitalization and insurance reimbursement that has been booked in 2020 and new contract agreements in distribution in 2021 [indiscernible].

[Enrico Bartoli, analyst]

Very, very clear. Just a follow-up on -- regarding the hydrology. That means that since the hydro volumes are in line -- expecting in line with your forecast, also the guidance that you provided for the full year in terms of EBITDA is confirmed is in line with how things are going on.

[Giuseppe Turchiarelli, executive]

Regarding the volumes that we are -- within our forecast, let me say, just to have a look at January that the [indiscernible] means the level of the measurement of the capability of production, our plant is, let's say, very high. So there is not going to increase, but let me say that there is a quite smart use of the basin that can support our evolution. So I cannot, let's say, say that the -- if the first month can be in line with our expectation, if we look at just one month forecast, there is a difference of approximately 100 gigawatt. May but -- in fact that part of this discrepancy is arrived by the use -- the way in which the plant has been dispatched by the continental electric national. And so there is this gap is very limited and is based also on the way we see the plant has been dispatched.

[Operator]

[Operator Instructions]

Our next question comes from the line of Sara Piccinini from Mediobanca.

[Sara Piccinini, analyst]

I have a first question on renewables. If you can just clarify how much is the level of capacity that you have secured for the coming years? And how much is the level of CapEx that you have contracted? So if you see an increase of this CapEx related to higher commodity prices or inflation or you feel comfortable with that? The second question is on the level of working capital. If you can please explain again the level of factoring that you include in this working capital and how the stabilization mechanism work? So how much is the level of working capital that we can expect for 2022? And also, if you see an improvement in the collection activity, then just 2 clarifications. Regarding the PPA, it seems that the highest contribution from the PPA [indiscernible] fourth quarter, correct? So how -- why there is this increase in the PPA? Maybe because the indexation has been particularly favorable in the fourth quarter. And finally, regarding the tariff for the distribution and transmission business. So can we say that the regulatory review for the transmission business [indiscernible] we expect the outcome is likely to be confirmed, while in the distribution business, the discussion is still ongoing? And when we will have visibility on the process to be or not considered.

[Paolo Pallotti, executive]

Thank you, Sara. There are a lot of questions. I hope that I have catch all of them, maybe that you can [indiscernible] if we miss something. Let's start from the end. So let me give you a highlight on the regulatory [indiscernible]. Then I leave Giuseppe to -- let's say, to go through the numbers. There are plus and minus in the recent developments. The plus in terms of timing. Timing at least is that new transmission tariff scheme, let's say, should be at a very final stage. The panel of experts already defined position in all the equipment that are submitted to them. Now we are waiting for the issue of the tariff decrease. So we should, let's -- even if I ask you all to consider that we are in a quite peculiar situation, considering that by the 11th of March, the new government will enter, which will take place. So maybe that this discontinuity may add some delay in important decision in [indiscernible], including energy. So the process is ongoing. There are no big debate on this. So on transition, let's say, I would not see a major problem.

Regarding distribution, it's a different story because we are the first or the fourth issuing of technical report by the advice -- by the consultant of the regulator and still the point here, the points we are spending. We submit our, let's say, comments on the report, but we have not advanced. So this is another item that is a real item that can go under the scrutiny of the new government. Let's say, let me call it positive. Advance is on the [indiscernible] low because after, let's say, many months of cash [indiscernible] has been approved by the Congress and signed and published that we're trying to fix certain elements and also to allow the company to come back to the normal in the sense that from one side, we were in simple definition on clients that need the support, and support in this case is coming from states. So clients with a consumption below 250 gigawatt hour per month and has a debt created during the pandemic period, can pay their debt in for installments with the capital and such installments are going to pay by the state. The important point here is that the clients are in charge to pay the current bill. If they stop paying also the current deals, they will go under the cut-off scheme. That is the one that we are going to apply directly to the clients with a consumption above 250, then can be cut off, if they not repay the existing debt in during the familiar period or they are not paying their current debt. So it is a step higher in the trying to reach the regularity even if there is 2022 even we consider a year of recovery. So we are going to recover first of all for the payment of the [indiscernible] coming from the state, but also, we are starting during these weeks, through these days to put in place a cutoff team for the best players that are not in line, and are not going to putting on a normal situation in their position. So this is, let's say, moved.

Regarding other pending elements, I would mention also something that we just mentioned. So there is no real or formal action ongoing regarding the [indiscernible] because all the players in the sector are expecting that the fund will be called by June -- next June. And so everybody is, let's say, thinking, talking about what next. I think that this is something that we need to be addressed by the new governor, a new ministry going when it will be in place because clearly something that has an impact on the generation sector and at the same time also on the tariff to the final clients.

And Giuseppe Turchiarelli for the explanation number. I do know if you catch all the questions.

[Giuseppe Turchiarelli, executive]

So for what [indiscernible] net working capital, let me say that 2021 was an important year in terms of factoring for both generation and distribution, specifically for what concerned, the receivable coming from the stabilization price mechanic where we made more than [ $200 million ]in terms of factoring in terms of pacing. And all in all factor, including the refund distribution, we reached around $300 million in 2021. So something like [ $230 million ] higher than last year. And of course, how much the receivables coming from this [indiscernible] is going to be during 2022 is depend on the exchange rate. So we don't know right now. I mean it's going to have projection, but in any case, as of today, there is a low -- once the receivable is set up, it should be an adjustment in the tariffs in order to recover the additional [indiscernible]. For what concerned the level of collection, yes, we wish to improve a little bit in comparison to 2020. Of course, 2020 was the first year of the so-called [indiscernible]. So clearly, we had an impact now in 2021 through normal [indiscernible] we wish to improve the percentage in terms of collection, but of course, the impact in the net working capital was significant, more than $100 million. I believe that the last question was about the level of capacity. I didn't catch very well these...

[Sara Piccinini, analyst]

Yes, I can repeat if you want.

[Giuseppe Turchiarelli, executive]

Yes. Yes. Thank you.

[Sara Piccinini, analyst]

Yes. It's about the capacity additions that you have for renewables in the coming years. And if you have already contracted the CapEx for this new capacity? Or do you expect some higher CapEx due to the commodity prices.

[Giuseppe Turchiarelli, executive]

Okay. Yes, in general, of course, some projects more than others, depending on the stage of the construction business. Let me say that, In average, I would say, more than 50%. I can find it out maybe, Isabela, one by one, if you are interested in some detail in terms of contracting. But in general, yes, we are pretty advanced in the contextualization of the CapEx.

[Operator]

Our next question comes from the line of Andrew McCarthy from CrediCorp Capital.

[Andrew McCarthy, analyst]

My first question is a follow-up on the tariff stabilization -- tariff stabilization mechanism. Apologies if you may have already answered. The line is not the best today, but just trying to understand what the alternative for going past June when we reach the limit of the $1.35 billion. What your conversations have been so far with authorities and what you're seeing likely outcome there? That's the first question. And the second question, just a question on the retirement of Bocamina 2. There's been some press reports about that maybe being delayed. Just wanted to understand your take on that? Your thoughts on that, whether that is now likely? And if so, until when and what your contingency plans are for making coal purchases would be? That's; the second question. And then the third question is -- and again, apologies if you may have already answered it, but just trying to understand how your -- as of today, with 3 months after the strategic plan presentation, how you're feeling about the 2022 EBITDA target that you published at the very end of November to start in December? Just trying to get a handle on whether that now you feel that, that should maybe be adjusted already, but those are my 3 questions then.

[Paolo Pallotti, executive]

Okay. Thank you, Andrew. Let me take the first 2 and [indiscernible]. Okay. Regarding the impact from the [indiscernible] mechanism. Honestly, [indiscernible] what are the alternatives. It's -- we can be creative this year. Honestly, there are some solution that can be implemented. Honestly, I cannot be in the shoes of who will take this decision. What I can say is that according to the evolution of the [indiscernible], means the reference price of the energy, what we have seen at the end of 2022 is the effect of increase of the land published by the authority are the very, very small increase in terms of price of the energy. But what is -- what are the expectations for April is that, that increase is reflected to the final tariff for the clients should be very huge. So the fund will be covered and then any gap should be managed in a different way. And I think that the team is there. I don't know if there is a possibility to implement additional -- very different solution. I think that we have worked on what we are clearly to improve a little bit because we, let's say, had a lot of efforts to manage the situation from the generation point of view.

So I can anticipate because I don't have, let's say, an answer for this question. I think that is something that should be managed starting from, let's say, next month in order to reach lending points before the period of June the fund will be covered. And the consequence could be something that cannot be affordable in the sense that the increase of the cost of the energy to the final client. So I'm sorry, not so comprehensive in the answer, but I don't have a precise question on this. Regarding our coal plant, Bocamina 2, it wasn't the price since a few weeks. We always express our position. We have announced -- required the closing of the plants by May 2022. That has been approved. And we have a plan -- we are implementing a plan to close the facility, means to manage properly the coal, the commodity, to manage properly also with big attention our people, the contracting company that are working -- the other companies that are working there and the operations with the communities. Any decision that may be taken by the authority that are in charge to make this tent possibility should be done in ever. This is what we have always said because everything has an effect on the way which we are managing this process. And if the decision of postponing -- the closing of the plant will be taken, we have to sit down and to define well the condition for this postpone. But for the time being, the authority that is in charge to take this decision have not yet taken a position, so -- but time is running. This is the important point. The time is running, and we cannot react probably at the very last moment.

[Giuseppe Turchiarelli, executive]

What concerns to be -- we confirm the guidance that we presented in the last [indiscernible] in EBITDA between $1 billion and $1.1 billion. Of course, I mean as of today, the projection that we see is -- we expected, clearly anything can be -- any [indiscernible] event could affect. But as of today, we will continue to keep this guidance. We don't see any issue.

[Operator]

At this time, I'm showing no further questions over the phone line. I would like to turn the call back over to Isabela Klemes.

[Isabela Klemes, executive]

Thank you, Gigi. Actually, we have two questions from the chat. So the first one is from Fernando Gonzalez from BTG, and the question is, if [indiscernible] this year, and spot prices remain high for the second half, a new executor CapEx plan fully, where do you see the leverage by the end of the year. Thank you for your question, Fernando.

[Paolo Pallotti, executive]

Let's start with [indiscernible]. Okay. This, we are defining another, let's say, perfect store. We sense that there is a possibility that [indiscernible] is poor again. Yes, there is -- yes, there is -- no, let's say, possibility to predict precisely what can happen. Clearly, the 2021 was the exceptional compared to all the previous year, but we have to cope with this situation. The difference of -- for the year for 2022 is that there is a larger availability of Argentinian gas that is supporting a position where LNG gas has been already called. So there is more flexibility optimization from the gas point of view. There is also the extension of the [indiscernible] that should, let's say, fixed [indiscernible] managing properly the infrastructure and the use of water. So let's say that the current view cannot be, let's say, optimistic because we cannot see that there will be more rain. Clearly, we are also in [indiscernible], and it's difficult to, let's say, to see the effect of the hydro Chile that is starting in April. So the real situation may evolve starting from April and see if there will be rain or not.

In this framework, clearly, we see that the situation can be more under control. We have also to consider that we have already added to the system 900 megawatts of renewable capacity. The business sort of the coupling from the effect of electro water and the effect of [indiscernible] in commodity. Our megawatt are to come. Other players are developing their projects. So the perfect storm that -- there are conditions that may change from the perfect storm that we cope with in 2021. And then from our perspective, look at the leverage, we are also working to, let's say, to strength our financial position with, as Paolo mentioned. So we think that, all in all, even if this pressure is not so easy, we have put in place an action plan that allow us to give more leverages to manage the difficulties.

[Isabela Klemes, executive]

Okay. Thank you, Paolo. And then we have a second question from [indiscernible], and he is asking about please provide explanation on how the situation in Russia would affect on Chile's costs?

[Paolo Pallotti, executive]

I -- my first traction here is to start monitoring what we are doing, the evolution of the commodities and how this resolution can affect our current position. The first review give us, it's a very prestigious because you know that [indiscernible] is growing. And the [indiscernible] of Russia, the first element that can affect the commodities [indiscernible] gas and coal. From the perspective of our contract, we have not any direct or indirect link with European gas. So the source is more on Atlantic and the other basins. So we don't see a direct impact in terms of volumes. Really, we are very [indiscernible] of the situation, but in terms of effect, in terms of price, the indexes in our contract, but is limited enough in terms of even if considering the wind -- larger wind of the brands, for instance. So for the time being, we see very limited impact on gas -- in our gas situation. In terms of coal, really, we are going to shut down our core facility by May. If something may change maybe that we have to face additional, let's say, effort to find coal on a spot market in a quite complex situation. And this is something that should be addressed virtually this properly within the framework of the extension mechanism for the client.

[Isabela Klemes, executive]

Okay. Thank you, Paolo. And as there is no more questions, I now conclude our results conference call. Let me remind you that the Investor Relations team is available for any doubt you may have. Many thanks for your attention.

[Paolo Pallotti, executive]

Thank you. Bye-bye.

[Isabela Klemes, executive]

Bye-bye.

[Giuseppe Turchiarelli, executive]

Bye.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.