Enel Americas SA
SGO:ENELAM
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Good day, ladies and gentlemen, and welcome to the Enel Americas Second Quarter 2022 Results Conference Call. My name is Shannon, and I will be your operator for today. [Operator Instructions] Please be advised that today's conference is being recorded.
During this conference call, we may make statements that constitute forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995. These statements could include statements regarding the intent, belief or current expectations of Enel Americas and its management with respect to, among other things, Enel Americas business plans, Enel Americas cost reduction plans, trends affecting Enel Americas, financial condition or results of operations, including market trends in the electricity sector in Chile or elsewhere, supervision and regulation of the electricity sector in Chile or elsewhere, and the future effect of any changes in the laws and regulations applicable to Enel Americas or its affiliates.
Such forward-looking statements reflect only our current expectations are not guarantees of future performance and involve risk and uncertainties. Actual results may differ materially from those anticipated in the forward-looking statements as a result of various factors. These factors include a decline in the equity capital markets of the United States or Chile, an increase in the market rates of interest in the United States or elsewhere, adverse decisions by government regulators in Chile or elsewhere and other factors described in Enel Americas annual report on Form 20-F, including under Risk Factors. You may access 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 Americas 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.
I would now like to turn the presentation over to Mr. Rafael de la Haza, Enel Americas Head of Investor Relations. Please proceed.
Thank you, Shannon. Good afternoon, [Foreign Language], ladies and gentlemen, and welcome to our second quarter 2022 results presentation. I'm Rafael de la Haza, Head of Investor Relations of Enel Americas. In the coming slides, our CEO, Maurizio Bezzeccheri; and our CFO, Aurelio Bustilho, will be presenting the main figures of this period.
Let me remind you that this presentation will follow the slides that have been already uploaded into the company's website. Following the presentation, we will have the usual Q&A session. Please remember that questions can be only made through the telephone line.
Now let me hand over the call to Maurizio who will start by outlining the main highlights of this period in Slide #3.
Thank you, Rafael. Good morning, everybody. During the second quarter of this year, we had a solid result in all our businesses. In Generation business, we had an important growth in production in Brazil and Colombia. In Network business, we saw a solid performance boosted by tariff adjustments in Brazil, in line with our expectation, while in Enel X, we saw a solid increase in all our indicators. With the improved operational performance, our EBITDA increased by 20% during the period, while net income grew also by 20% despite higher financial expenses and a negative impact coming from the sale of Central Fortaleza that we will analyze later.
Fund from operations improved due to better net working capital and EBITDA and our net-debt-to-EBITDA ratio remained below 2x. During this period, we added 264 megawatts of new renewable capacity, and we continue working on another 2.4 gigawatts of capacity under construction. We also have a long-term pipeline of 64 gigawatts that supports our growth and decarbonization strategy. Finally, let me highlight our asset rotation and corporate simplification policies, where we have 2 important milestones in this period, the sale of Central Fortaleza and delisting of our shares from New York Stock Exchange. We will analyze the details of this operation later on.
Let's move to the following slide to see the main macro indicators. As shown on the left side of the table, during this quarter, currencies in Argentina, Colombia and Costa Rica devaluated against U.S. dollar. In Peru and Guatemala, we had a slightly positive variation, while Brazilian real had a significant appreciation. In terms of inflation, we can see that during this year, inflation rate increased in all the countries in a significant level in line with the situation that we are seeing across the world during these days.
Regarding electricity distributed, during the last quarter, we saw an increase in the 4 countries, especially in Colombia and Argentina. Finally, in terms of collection, we can see that we are in a better position in Peru and Argentina, flat in the case of Colombia and slightly lower in Brazil. In terms of bad debt, we had an increase of 70%, mainly due to the bills not paid in more than 1 year by the clients in Brazil and Colombia due to the pandemic.
Now let's have a look at our investment for the period. During the second quarter of this year, our CapEx increased by 11% compared to the same period of last year, reaching USD 772 million. This is mainly explained by higher investments in Generation business in Colombia and Peru due to the development of renewable projects and a higher investment in Distribution business in Argentina, Colombia, Peru. From the total amount, 62% were invested in Brazil, while in terms of business, 59% was devoted to network and 34% to renewable generation. Looking at our growth CapEx, we see that it grew by 3% compared with the second quarter of last year.
Let's now analyze our operating highlights on Slide #7. In Generation business, during the second quarter, we added 264 megawatts of new renewable capacity through Lagoa dos Ventos, a wind farm in Brazil. With this, our total installed capacity reached 16.2 gigawatts, from which 69% is renewable. Net production in the second quarter reached 12.5 terawatt hour, a decrease of 5% compared to the same period of last year explained by lower generation in Argentina and Central America. From our total production, 75% is emission free, an important improvement compared to the 69% over the same period of last year. Energy sales increased by 15% during this period, reaching to 22.5 terawatt hours due to higher sales in Brazil, mainly on higher trading activity in Colombia.
In Slide 7, we will have a focus on EGP Americas. With the 0.3 gigawatts of new renewable capacity happen during the second quarter, we reached 5 gigawatt of capacity coming from EGP Americas, from which 78% are in Brazil. In terms of technology, 2.6 gigawatts are wind capacity, 1.6 gigawatt, solar and 0.8 gigawatts hydro. We have 2.4 gigawatts of capacity under construction, mainly located in Brazil and Colombia, 1.4 gigawatts are wind project and 1 gigawatt of solar project. During the rest of 2022, around 0.3 gigawatts will begin operation, while 1.9 gigawatts will enter in 2023 and 0.2 gigawatt in 2024. CapEx in EGP Americas during this quarter was USD 0.3 billion, mainly located in Brazil.
Regarding our pipeline, we are considering 64 gigawatts from which 37 gigawatts are in an early stage and 26 gigawatts are in mature stage. In addition to this, we have around 1 gigawatt of battery energy storage system, and we are also considering the 2.4 gigawatt of project under construction already mentioned.
And continue with the network operational highlights on Slide #8. Electricity distributed reached 29.8 terawatt hour in the second quarter, which represents an increase of 2% compared to the same period last year, explained by higher sales in the 4 countries, especially in Colombia and Argentina. Regarding number of customers, we had an increase of around 560,000 in the last 12 months, reaching almost 26.5 million customers among all our distribution companies. In terms of quality indicators, SAIFI, meaning the frequency of shutdown of the grid, improved in Brazil, Colombia and Peru and remain flat in Argentina, while SAIFI measure the frequency of shutdown of the [ green ] improved in Brazil, Colombia and Peru and remain slightly in Argentina. While SAIDI measured the duration improved in Brazil and Colombia and slightly improved in Peru and Argentina. In terms of energy losses, it improved in Argentina and Colombia and slightly increased in Brazil and Peru.
On Slide 9, we will see Enel X and the retail businesses. In Enel X business, we had a very solid growth in all our businesses, especially in charging stations, photovoltaic partners and maintenance and repair contracts. This allowed to increase our EBITDA in almost 2x compared to second quarter 2021, reflecting the growth potential that we see in this business line.
Regarding the retail business, the number of delivery points increased by 19%, reaching almost 5,000 points and the energy sold amounted to 11.8 terawatt hours in the first half of 2022, which means a 19% increase compared to the same period of 2021.
Let's now have a focus on the sale of Central Fortaleza. On June end, we announced the sales of Central Fortaleza, a combined cycle plant of 319 megawatts of installed capacity located in Ceara, Brazil. The main reason of this sale was the fact that we are committed with our decarbonization strategy, and we have announced that we intend to be a net-zero emission company by 2040. Our growth is focused on developing renewable plants, and we are working on replacing thermal capacity with the renewable capacity.
In addition to this, we think this was the best moment to sell this asset considering that 2023 was the termination date for 2 important contracts of Fortaleza. The energy sales contract with the Enel Distribution Ceara, which considers all the generation capacity of the plant and also the gas supply contract that we have with Petrobras. Thermal capacity currently represents 6.1 of our energy metrics in Brazil, but after this operation, Brazil will be 100% renewable.
Let's now have a focus on our NYSE delisting operation. On May 31, we announced our intention to delist our share from New York Stock Exchange and deregister our company from the SEC. This decision is mainly based in the following reason: the condition under the other program was done 30 years ago no longer exist, as the Chilean market has become much more liquid and open to foreign investors with Chile being a benchmark for governance in LATAM until now. Our stake on our ownership structure has been significantly reduced during the last year. At the moment of the announcement, it's worth below 2%. Being listed on NYSE and registered in the SEC is very demanding in terms of management time.
Our shares were delisted on June 21 and started trading on the OTC market, and last week on July 21 was the new data to convert ADS into local shares. A significant percentage of the total ADS were converted, and now we are in the process of selling the remaining 0.38% ADS, paid the corresponding cash to ADR [indiscernible] and finally close the ADR program, which should occur on the last week of July. At the same time, we are working on the deregistration of our company from the SEC. In that sense, we already filed the Form 15F, and now we have to comply with at least 1 of these 2 situations, less than 5% -- first, less than 5% of the traded volume is in the U.S. market for the last 12 months. This test could last until July 2023; less than 300 shareholders have residency in U.S. We will start the testing process in August, and it should last 4 to 5 weeks. After the program closes, we will have more visibility on the timing of this process.
Now Aurelio will comment about the financial results for the period in the coming slides.
Thank you, Maurizio. EBITDA in the second quarter reached $1,199 million, 20.5% higher than the same period of last year. This is explained by better results in Networks and Generation businesses, mainly in Brazil due to higher tariffs in networks business and higher EBITDA and Generation business in Colombia. OpEx increased by 14.6% due to higher inflation in the region. However, if we isolate FX impact and inflation, OpEx decreased by USD 80 million as we see ahead on the presentation.
Group net income in the second quarter increased by 20.4%, explained by better operational results partially offset by higher financial expenses and the negative impact of $78 million registered in this period coming from the sale of Fortaleza. Funds from operation in this period reached $1,276 million, while our net debt increased by 20%, reaching USD 6.6 billion. We will analyze in detail cash flow and that's later on in this presentation.
On the next slide, we'll see EBITDA evolution and its breakdown. Starting from $995 million of EBITDA of second quarter of 2021, we see that all our businesses have positive operational results during this period, except for thermal generation, which slightly decreased by $4 million. Renewables grew by $56 million, mainly explained by Colombia and Brazil. Networks grew by $65 million, also explained mainly by Brazil and Colombia, while retail and Enel X grew by $57 million and $22 million, respectively. Currency devaluation plus other impacts had a negative impact of $8 million, reaching a final EBITDA of $1,199 million, 20% higher than the same period of last year.
On a country basis, we see that the main contributor for consolidated EBITDA was Brazil with 48%; while Colombia represented 34%; Peru, 14%; Central America at 3%; and Argentina, 1%. In terms of business line, Networks represent 43% of our EBITDA and Renewable Generation, 35%. Thermal Generation, Retail and Enel X contributes with 10%, 9% and 3%, respectively.
Let's see the EBITDA breakdown on a cumulative basis on Slide 15. Started from $1,784 million of EBITDA on first half of 2021, we see that all of our businesses have positive operational results during this period. Thermal Generation increased by $15 million; Renewable grew by $244 million, mainly explained by Colombia and Brazil; Networks grew by $294 million, also explained mainly by Brazil and Colombia; while Retail and Enel X grew by $98 million and $33 million, respectively.
Currency devaluation plus other impacts had a negative impact of $15 million, reaching a final EBITDA of $2,365 million in the first half of 2022, 33% higher than the same period of last year. On a country basis, we see that the main contributor for consolidated EBITDA was Brazil with 48%; while Colombia represented 34%; Peru, 14%; Central America 3%; and Argentina, 1%. In terms of business lines, Networks represent 45% of our EBITDA and Renewable Generation, 34%; Thermal Generation, Retail and Enel X with 9%, 9% and 3%, respectively.
Let's see now Networks (sic) [ Generation ] business on Slide 16. EBITDA in Generation business increased by 9%, reaching $569 million in this quarter. This positive result is mainly explained by better results in Brazil due to higher physical sales and lower expenses. Colombia and Peru also showed an increase in EBITDA, mainly due to higher energy sales plus price. This was partially offset by a lower result in Argentina due to lower production and lower sales. On the right side of the chart, you can see that Colombia was the main contributor to total EBITDA with 37%, followed by Brazil and Peru with 33% and 18%, respectively. Argentina and Central America reached 6%.
Let's see Networks business in the next slide. EBITDA in Network business increased by 28% compared to second quarter of last year, reaching $643 million. In Brazil, we had an increase of 34% at the EBITDA level, mainly explained by higher tariffs and by a positive accounting impact of plus $44 million coming from IFRIC 12. Colombia also showed a solid growth of 38% due to higher tariffs and higher demand, while Peru grew by 24%, also explained by higher tariffs and higher demand. This was partially offset by Argentina, which had a negative impact -- negative EBITDA due to the fact that the tariffs in Argentina are frozen. Brazil represents 63% of our network's EBITDA, followed by Colombia and Peru with 27% and 10%, respectively.
In Slide 18, we will have a focus on the OpEx efficiency gain during this period. As seen before, OpEx increased by 11% moving from $0.82 billion for the first half of 2021 and $0.91 billion in this period. However, we can see that the increase is fully explained by FX and inflation effects, which represents higher OpEx of $150 million, and the perimeter difference due to the consolidation of EGP Americas 6 months this year versus 3 months last year, which implied higher OpEx of $20 million. Leaving this effect aside, we are able to gain operational efficiencies of $8 million in the period. The efficiencies gained are mainly related to network digitalization platformization. With this, we are on track to meet our 2022-2024 target announced on our strategic plan, which is $0.2 billion of cumulative efficiency in the period.
Let's analyze our cash flow in Slide 19. Starting from an EBITDA of $2,365 million, we see that net working capital amounted by minus $248 million, a significant improvement compared to last year and into the first quarter 2022, mainly explained by improvements in CVAs in Brazil due to better hydrology. Taxes paid during this period amounted to $405 million, while net financial expenses amount to minus $276 million, an increase of more than 2x compared to last year, mainly due to the consolidation of EGP Americas and higher interest rates. With this, transform operations amount to $1,435 million in the first half of 2022. After investment of $1,334 million, including $539 million of growth CapEx, we get to free cash flow positive in $101 million.
Let me now analyze the debt of our company in the coming slide. Gross debt amounted to $8.2 billion, an increase of 19% compared to December 2021. This increase is mainly explained by an increase in Enel Americas Holding, Enel Brazil, Enel Sao Paulo and Enel Ceara. Net debt reached $6.6 billion, which considers free cash flow of $101 million, net dividends paid for $377 million, financial receivables for $203 million and extraordinary operation for $34 million, and also the FX impact of $261 million.
In terms of currency and country, we see that Brazil remains as the largest contributor, while the debt at holding level represents 13% of the total. Finally, regarding the cost of debt, we can see an increase for this period going from 6.1% to 9.1%, mainly explained by higher interest rates in Brazil and in Colombia, partially offset by a lower cost of debt in Enel Americas Holding.
In Slide 21, we'll see our financial position. Our liquidity amounts to $3 billion, from which 72% corresponds to cash and cash equivalents and 28% committed credit lines. The average maturity for -- of our debt is 2.4 years. For 2022, we have maturities of USD 1.7 billion and most our debt matures after 2024. This solid position allows us to support our growth structure.
On Slide 22, Maurizio will conclude this presentation with some closing remarks. Please, Maurizio.
Thanks, Aurelio. Summarizing. During the second quarter of 2022, we saw solid operational results across all our businesses despite a challenging macroeconomic context. This, along with the solid contribution of EGP Americas, allowed us to have an important improvement at EBITDA, net income and FFO level while we maintain a solid financial position that supports our growth strategy. We are strongly delivering and executing the new capacity coming from the renewable sources in line with our strategy. And finally, in line with our decarbonization and asset rotation policies, we executed the disposal of the thermal plant Fortaleza, which will allow us to be 100% renewable in Brazil.
Well, thank you, Maurizio, Aurelio. A very clear explanation of our results for the second quarter and first half of 2022. I now pass the call to the operator for the Q&A session. So operator, please proceed.
[Operator Instructions] Our first question comes from Henrique Peretti with JPMorgan.
I have 2 questions. The first one is about the asset rotation, which is reportedly for sale or -- I'd like to have some update on the sale of this asset? And the second question, along in this one would be what is going to be the use of proceeds? I understand the focus of the company right now is to keep developing the projects in execution of the pipeline. So could you please give us an update on the returns that you're seeing, the Capex per megawatts for the new projects? Or if the company is considering slowing down CapEx in renewables and what we could expect for the update of the business plans?
Yes, very, very [indiscernible]. The operation of asset rotation like Goias is not -- is still ongoing. We will see what will be the final result. The rationale of this operation was based on the fact that, of course, we want to be concentrated in operation or distribution company, in -- especially in Sao Paulo, Rio de Janeiro, Ceara. Use of proceeds are make even more sustainable our growth in Brazil. In the reality, Brazil, we are in strong effort in terms of improving our quality indicators -- in a strong effort in terms of improving of quality indicators like SAIDI and SAIFI, in line with our strategy to make a robust resilient distribution system an enabler of our transition strategy.
And on the other hand, just to continue to grow in renewable business. Our philosophy, as you know, is mostly concentrated in a free cash flow positive, in our growth chart to maintain the sustainability from an economic and financial point of view. So we will continue just to look the operation of -- the sale of Goias. And of course, the intention is to use the proceeds to make a more sustainable growth in Distribution and Generation.
Yes. Henrique, thank you for your question. I understood that your question was related to recurrent, right? Or cost of capital I'm sorry, if you can repeat the final one.
Of course. A view is that at the moment because CapEx for Goias [indiscernible] going up, the returns for new projects, not the ones that are already approved and already under construction, but upcoming ones could be challenged by these new conditions. So I wanted to hear if the company will adapt base strategy or the amount of projects to be built in the coming years given the new conditions.
Yes. Yes. We are -- of course, we had a very good pipeline, a huge pipeline with different characteristics, different returns. We are, of course -- during these times, we are more selective with the CapEx. And we are very disciplined in this CapEx, right? Our -- basically -- and we maintain our hurdle rate, I mean, the requirements of return of 150 basis points higher than our capital than our watch, okay? I can tell you that it is around 11% our cost of capital. But again, it depends on the technology. It depends on the country. It depends on the project. The key issue here is that we have a very good pipeline, and we can be very selective in choosing to choose the best alternatives as Maurizio was explaining to reinvest this capital and rotate the asset getting better returns.
[Operator Instructions] Our next question comes from Andrew McCarthy with CrediCorp Capital.
I have a couple of questions. The first one was on the evolution of the bad debts. Obviously, they've risen quite significantly lately. I just wonder if you could provide some more color on what you're seeing there going forward? And whether -- and what key drivers are there? I imagine obviously, the inflation environment and the rise in tariffs is not been particularly helpful. So just to understand what you see there and how that could evolve going into the next few periods?
And then the second question, just to get a bit more color, Aurelio, you mentioned there on the free cash flow evolution. The net working capital seems to have gotten a lot better versus prior periods. Just wanted to understand a little bit more color to what's been driving that? So those are 2 questions from my side.
Yes. Let's say, regarding the first question, the business environment, the increase in inflation is not just an experience of Latin America, but it's a general experience worldwide. Nevertheless, the impact of inflation got 2 aspects in our business. First aspect, of course, an increase of OpEx. And we -- as we show, we are getting more efficiency just to compensate the inflation effect on OpEx increase.
And the second aspect is a positive aspect regarding the tariff of distribution company, but in this case, we get a higher tariff that is actualized with the inflation. So in synthesis, our strategy is on 1 side, of course, take the advantages of actualization, the positive impact on tariff and, as a consequence, an increase in revenue and EBITDA. On the other hand, our maximum focus is to get efficiency in OpEx to compensate the increase in OpEx due to inflation. So we maintain this strategy very well coordinated between the different business line and controlled systematically in our business review. So this is more or less the strategy beyond. I don't know the second, Aurelio?
Yes. Regarding -- thank you, Andrew, for the question. The issue regarding the funds from operation or the free cash flow. Well, one important element -- well, first of all, we are getting better readjustments, right, in the company, in the distribution companies. Second thing, important thing, remember that this year, we have a very good hydrology, especially for Brazil. And we are recovering all the impacts, especially compared to last year because we have a bad hydrology in the distribution business. So of course, my working capital -- our working capital improved a lot during this, let's say, good -- what's the opposite dry, humid, dry season. Wet, exactly dry season. So we are recovering the -- our working capital.
So with this, we are in a very good situation compared to last year. And of course, we are also implementing especially some actions related to improve our average time to recover our revenues. And of course, in our payments in order to put in a more, let's say, optimized way, right? And this is something very important because as you know, it captures -- there's a lot of value locked on this, and we showed during this quarter that implementing all these activities and also take advantage of the hydrological situation, we are in a very better -- much better situation compared to our working capital in the first quarter.
We have another question from Murilo Riccini in relation to the situation of the Sao Paulo Pension Fund.
And the question is the following: when can we expect the Sao Paulo Pension Fund to be recorded on the Enel Americas balance sheet?
Of course, the process of -- as you know, the process of closing the pension fund that was based on defined benefit and not the defined contribution is ongoing. It's ongoing following exactly the time line, the time schedule that we have defined. So we are right now in the phase of approval of [indiscernible], and this will take another 6 months just to continue and finalize the operations. So It's perfectly in line, and we expect to close at the end of this year, beginning of next year, and just finalize the operations and moving, of course, the pension fund as a financial debt and we will see an increase of financial debt because the pension fund will imply this type of condition. So in line with time schedule, expected at beginning of the next year, exactly in line with the time schedule ordered by the look.
If I can add you, Maurizio. Thank you, Murilo. It's important to mention that the rating agencies, they already consider the pension fund as debt, right? So -- and the debt, of course, is -- I mean, the pension fund and is booked in our financial statements. So it's something that we are moving to have a more predictable liability, right, as a debt.
Perfect. Thank you, Murilo. And then we have a final and additional and final question from Scotiabank, Tomas Gonzalez, and the question is the following.
Today, renewables development is already more expensive given the current global scenario and logistic issues. Do you see any impact in returns for renewable project that suppress contract prices? And on the other front, because they are more expensive, do you expect to see delays in the renewable expansion?
Let's say, the present situation in terms of increase in terms of raw material and in terms of logistics, of course, will impact renewable energy, but even more thermal generation. So we have no doubt that we need to move into the direction of decarbonizing the energy method. So no doubt regarding what's the direction we need to follow.
Regarding the dynamic that we are observing right now, we are observing an increase in price because due to the fact that you have this type of situation, that means increase in terms of raw material price and in terms of logistics, this kind of risk is factored in the price and the future price that you will observe in the market. I think it's very attractive remaining in Latin America on serving the last low in Brazil or the last tender in Chile that was finalized on 22nd of July, and you observe that you are getting less availability of offers and a higher price.
It is the consequence of the impact on small medium developer. So we see that the market will readjust the price to maintain the reliability, otherwise, the market will collapse and you will not get much offer in the market just to comply with the increasing demand of energy that we are observing in all countries of Latin America. Of course, we need to maintain the proper discipline in our growth strategy, and this is the reason why we are compliant with the exercise of integrated margin. That means we work just to generate a positive free cash flow in our group. And this will be the revision of the strategy we are fulfilling right now inside in general in Enel group and in particular, Enel Americas.
So in synthesis, we will see due to the increase of strong problems or bottleneck in logistics and increase in price, we will see an adjustment in our view, an adjustment in terms of price because many of the projects are not getting on time and on budget. So we will see our growth. We will continue based on the financial sustainability of the same growth.
Thank you, Maurizio, and thank you, Tomas. We have received at this moment a final question, [ Mario Australia ], Itau. Mario, please go ahead.
My question is about the CapEx. I mean generally speaking in the industry, we have seen a more expensive construction costs and more labor cost mainly labor cost. So I was wondering how much of that -- and a consequence of that, it is very possible that we see high prices in energy, right? So I was wondering how much of that could be passed through the prices to customers? And the real question is how much of that could be translated into better margins or just a pass through to labor -- I mean pass through to prices. I don't know if I'm clear. So could the company benefit from indexation or even better margins, more profitability or?
In general, I will let Aurelio just reply. But in general, of course, we are pursuing best profitability due to the fact that we are moving into the direction, just not to say commodity but sell our service to our customers. So we are adding value to our offers to end customer because we try just to solve the issues or the energy problem that has our customer. We have not to forget exactly the work that we are doing through Enel X as well. So we have a sales of commodity and beyond commodity in this respect, and this is the reason why we highlighted the improving of the key performance indicator of Enel X.
So we are maintaining and growing the, let's say, the value -- the economic value of our offer. So in general, as a strategy, we are -- not only we maintain, we will increase the profit of our offer. Of course, it's a question of competitive environment. We are observing due to the critical situation that not all competitors were able just to recover from pandemic and this international crisis to a group like Enel much more robust, much more digitalized, much more international with a proper procurement platform is more resilient and able just to growth that is profitable.
And on the other side, as I mentioned you, the exercise that we are doing and, as I already said, focusing on the better opportunity for growth, maintaining the sustainability of free cash flow -- a positive free cash flow, make often -- make sure that we will continue a growth as well in terms of profitability. I don't know...
Yes. Look, it's exactly this. And if you see my -- we are in a very good position because we deal with the market as Maurizio was explaining in an integrated division, right? We are not dealing project by project talking about receivables or technology by technology. We build us a portfolio of assets and a portfolio of projects then we can -- the market push the capacity, right? Of course, the situation of logistics inflation is affecting, as Maurizio explained everybody. But in our view, we are in a much better position to face this challenge, this environment because we have a big procurement capacity on the other side -- on 1 side. We have a best-in-class know-how to develop and implement projects and having good returns. And last but not least, market as an integrated digital.
So we are the biggest renewable and generation capacity on the other hand, and we have the biggest customer capacity base on the other hand. So treating this as an integrated margin and having this portfolio of investment, of course, gives us an enormous competitive advantage in this market. It's not that we prefer the inflation. Inflation is not good for anybody. But considering our position, we are in a very well position in the industry. And last but not least, financially, we are in a very good position if you see our leverage in terms of debt. So -- and maintaining the discipline, I mean we are in a -- it's a very good and sound financial position to face this challenging -- this environment that we are facing, all the world is facing right now.
And I'm currently showing no further questions at this time. I'd like to turn the call back over to Rafael de la Haza for closing remarks.
Thank you, Maurizio, Aurelio. And as there are no more questions, we conclude the results conference call. And let me remind you before finalizing that the Investor Relations team as usual is available for any doubt that you may have in the next coming days. So thank you for your attention, [Foreign Language], and good evening.
This concludes today's conference call. Thank you for participating. You may now disconnect.