Colbun SA

SGO:COLBUN

Earnings Call Transcript 2023-Q1

[Operator]

Good afternoon, and welcome to Colbun's First Quarter 2023 Results Conference Call.

I will now hand over to Miguel Alarcón to begin the presentation.

[Miguel Alarcón, executive]

Hello, everyone, and welcome to Colbun's First Quarter 2023 Earnings Review Call. My name is Miguel Alarcón, I am the company's CFO. And joining me today are Isidora Zaldívar and Macarena Güell From the Investor Relations team. I hope that you have received our earnings report and an earnings review presentation that we have prepared to complement the analysis of our figures. Otherwise, you can then load them at the Investors section of our website.

Agenda for today on Slide 3 is as follows: we will begin talking about the highlights of this quarter to then analyze in detail this quarter's results. And after that, we will provide an update on our growth opportunities. Following the presentation, there will be time to participate in a Q&A session.

Now please go to Slide #4 to review the highlights of this quarter. One, on March 31, the company reached 47% completion of Horizonte wind project. Specifically, during the first quarter of 2023, the assembly of the turbines began reaching mechanical completion of the first 2 wind turbines.

In addition, the construction of internal roads, platforms and foundations of the wind turbines is still in progress with an advance of 63% as well as the substations, transmission lines and medium voltage networks with an advance of 52%. In total, 156 main components have been unloaded to date at the wind turbine site, including grades, towers, hatchs and generators.

Two, during the quarter, the company requested to the national electric coordinator to perform the real-time signal tests of Diego de Almagro batteries for their certification. During this first quarter, the batteries are in the final phase of their commissioning and will have a capacity of 8 megawatts for 4 hours.

Three, on March 28, the Board of Directors agreed to propose to the ordinary shareholders meeting to distribute a total definitive dividend of $148 million, consisting of definitive dividend of $64 million and a provisional dividend of $84 million paid in December of 2022, which represents 50% of the total distributable net income for last year. And finally, an additional dividend of another $75 million.

In terms of subsequent highlights, 2 things to comment. First, on April 24, the company received $116.4 million from Alfa Desarrollo SpA corresponding to the final price adjustment associated with the Colbun transmission S.A. shares sale. As agreed by the parties with the purchase and sale agreement dated March 30, 2021, whose closing and payment was reported on August 10, 2021. Leading on that occasion of final adjustment price customary in this type of transactions.

By arbitration decision dated April 13, a claim of Puerto Coronel S.A. against Colbun S.A was rejected, which sought to readjust the Santa Maria thermal power plant coal and loading tariff based on their income tax rate increase. On the other hand, by arbitration sentence dated April 18 of this year, Colbun S.A lawsuit against Puerto Coronel S.A. was rejected, which had the purpose of demanding constituting compliance and operating company, contractor obligation that manages the coal assets and coal transportation to Santa Maria thermal power plants.

Now please go to Slide #5 to review the main consolidated figures of the company. Consolidated EBITDA in the first quarter of this year reached $192 million, increasing 32% compared to the $146 million EBITDA of the same quarter last year.

This increase is mainly explained by the higher income, mainly explained by: first, higher revenues from sales to unregulated clients in both countries, Chile and Peru; second, higher revenues from the sale of energy and capacity in the spot market in Chile; and third, higher revenues from sales to regulated clients in both countries, Chile and Peru. This effect was partially offset by an increase in the cost of raw materials and consumables used.

The company recorded a profit of $92 million compared to a $56 million profit recorded last year, mainly due to the higher EBITDA recorded in the period and the lower nonoperating loss, mainly associated with higher financial income, driven by the higher cash surpluses investment rates. As of March 31, the company holds $1,062 million of cash and cash available and net debt-to-EBITDA ratio is at 1.3x.

Now I will turn to Macarena, who will speak about the main drivers of this quarter results.

[Macarena Güell, executive]

Thank you, Miguel, and hello to everyone. Now please continue to Slide 7 for physical sales and generation balance analysis in Chile . Total generation of the period increased 6% compared to the first quarter of 2022, mainly explained by, first, a greater hydroelectric generation over 161 gigawatt hour due to the greater [indiscernible] compared to the first quarter 2022, driven by a better hydroelectrical commissions during the year.

And second, where gas generation of over 114 gigawatt hour, affiliating with a greater availability of Argentina gas, coupled with a higher availability of our gas fired power plants. These effects were partially overset by lower energy purchase from third party.

Physical sales during the quarter reached 3,344 kilowatt hour, 5% higher than the first quarter 2022, mainly due to: first, higher sales to the spot market, explained by the higher generation recorded in the quarter; and second, higher sales to regular clients mainly to the exploration of [ science ] contracts with at the same time to rate a higher load factor for those contracts of our sealine ports.

Spot market balance during the first quarter of 2023 recorded net sales of 320 gigawatts hour, while the first quarter of 2022 net sales of 240 gigawatts hour were recorded. This variation is mainly explained by the higher generation during the quarter.

Now please consider to Slide 8 to analyze the EBITDA for the regulational business in Chile for this quarter. EBITDA in Chile reached $167 million in the first quarter of 2023, increasing 39% compared to the EBITDA of $121 million in the first quarter in 2022. Mainly due to higher operating income, partially offset by higher raw materials and consumable used cost.

Now please continue to Slide 9 for physical sales and generation balance analysis in Peru. Total generation of the period increased 6% compared to the first quarter of 2022, reaching 969 gigawatt hour, mainly explained due to the lower availability of the plant driven by the scheduled maintenance performance during this quarter.

Physical sales during this quarter reached 950 gigawatts hour, decreasing 5% compared to the first quarter of 2022. Mainly explains the lower energy sales to the spot market, explained by the lower generation. This effect was partially posted by higher sales to unregulated clients, explained by the entry into force of a new area client contract for 105 megawatts.

The spot market balance during the first quarter of '23, recorded net sales of 77 gigawatt hours compared to the net sales 385 gigawatt hours during the same quarter of the previous year. Due to the large generation recording periods mainly explained by: first, the lower Fenix CT generation mentioned before; and second, a higher client's consumption.

Now please continue to Slide 10 to analyze the EBITDA in Peru for the first quarter of 2022. EBITDA in Peru reached $25 million in the first quarter of 2023, in line with the EBITDA reported $25 million registered in first quarter of 2022. This result is mainly explained by increasing operating income and partially offset by an increased raw material and consumable used costs.

Now please continue to Slide 11 for consolidated nonoperating income and net income files. Nonoperating income in the first quarter of 2023 recorded losses of $19 million compared to $31 million loss recorded in the first quarter 2022 mainly opposite to higher financial income due to the higher cash surplus investment risk.

The company recorded a profit of $92 million compared to the profit of $56 million in the first quarter of 2022, mainly to: first, the higher EBITDA recorded in the period; and secondly, lower non-operational loss previously mentioned.

Now continuing with this conference. Please go to Slide #13, where Miguel will give you an update on the status of our growth opportunity.

[Miguel Alarcón, executive]

Thank you, Macarena. Regarding our growth opportunities in Chile, relevant updates for this quarter are as follows: Horizonte, as of the first quarter of 2023, 47% of the project was completed. Turbine assembly began reaching mechanical completion of the first 2 wind turbines in March.

In addition, the construction of internal roads, platforms and foundations for the wind turbines is still in progress with 63% progress as well as the substations, transformation lines and main voltage network with 52% progress. In total, 156 main components have been unloaded to date at the wind turbine site, including blades, towers, hubs and generators.

Los Junquillos. During this quarter, the public participation process was initiated the environmental approval process. Diego de Almagro BESS. As of the first quarter, it's in the final phase of commissioning. For more information regarding our pipeline of projects, please review our earnings report.

This concludes Colbun's First Quarter 2023 Results Review. Thank you for listening, and now we are open to answer your questions.

[Operator]

[Operator Instructions] So I'm not seeing any questions. So perhaps I can hand over to Miguel for closing remarks. Thank you.

[Miguel Alarcón, executive]

Yes. So since there are no questions, thank you for interest in the company, for joining this conference call, and we'll meet again for second quarter results review. Hope you all have a great weekend and bye-bye.

[Operator]

That concludes the call for today. Thank you, and have a nice day.