Enel Americas SA
SGO:ENELAM
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Good day, ladies and gentlemen, and welcome to Enel Americas Third Quarter 2020 Results Conference Call. My name is Victor, 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 Private 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 include 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 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. We are cautioned not to place undue reliance on those forward-looking statements, which speak only as of their dates. 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, Americas Head of Investor Relations. Please proceed.
Thank you, Victor Borstar. Good afternoon, ladies and gentlemen, and welcome to our third quarter 2022 results presentation. I'm Rafael De La Haza, Head of Investor Relations of Enel Americas. In the coming slides, 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 made only through a telephone line. Now let me hand over the call to Aurelio, who will start by outlining the highlights of the period in Slide #3.
Thank you, Rafael. Good morning, everybody. During the third quarter of this year, our production and energy sales in generation had a solid growth of 8% and 12%, respectively, mainly due to better performance in Brazil and Colombia, thanks to the renewable capacity we have added during this year. In Networks, our sales remained flat, while the tariff adjustment in Sao Paulo and the new tariffs in Peru were in line with our expectations. Regarding NLX and retail businesses, we saw a solid increase in all our indicators. EBITDA for the first 9 months increased 17%, with positive performance across all our businesses. This impact and networking capital produced increase in 59% of our FFO, funds from operations. On a quarterly basis, the third quarter EBITDA was 7% lower compared to the same period of last year. This is explained by lower results in networks in Brazil, Argentina due to lower adjustments in the value of distribution concessions in Brazil due to the inflation and the delay in tariff adjustments in Argentina.
Regarding net income, it was affected by the extraordinary negative impact of $0.9 billion due to the impairments in connection with the sale of Enel Goiás and Enel Fortaleza. In terms net debt-to-EBITDA ratio remains stable while we continue to execute our significant CapEx plan, especially the gross cash CapEx plan. During this period, we added close to 100 megawatts of new renewable capacity, and we continue to work on 2.9 gigawatts of capacity under construction. Our renewable capacity now represents 71% of our total capacity and 73% of our production, reflecting our commitment to 0 emissions. Finally, we concluded the sale of Fortaleza Thermal plant, and we are well on track on the sale process of Enel Goiás, where we just received the approval by the Antitrust Authority to go ahead with the operation. We're also working on the merger process in Enel Generación Peru, and Enel Green Power Peru. And finally, we are moving ahead with the deregistration of our company of the SEC and as we announced a few months ago. Let's move to the following slide to see the main macro indicators.
As shown on the left table, during this quarter, currencies in Argentina, Colombia, and Costa Rica devaluated against the U.S. dollar. In Peru and Guatemala, we had no operation, while Brazilian reals have a 4% appreciation. In terms of inflation, we can see that during this year, inflation rate increased in most of the countries, we're, in a significant level, in line with the situation that we are seeing across the world during these days.
However, in Brazil and Panama, we saw a slowdown compared to last year. We are working on delivering on our efficiency targets to compensate for the effect of inflation and currency volatility on our results, as we will see later on this presentation. Regarding electricity distributed, during this quarter, we saw growth in Argentina, Colombia, Peru, while Brazil decreased due to lower temperatures and stronger rainfall. In terms of collection, we can see that Argentina, Peru, and Peru improved in a significant way. Colombia remained stable and while Brazil slightly decreased, reaching almost 98% of collection. Finally, regarding bad debt, it remained basically in line compared to last year. Now let's have a look at our investments for the period.
During the third quarter of this year, our CapEx increased by 2% compared to the same period of last year, reaching $883 million. This is mainly explained by higher investment in generation business in Peru due to development of renewal projects YRI and solar cleanse and higher investments in distribution business in Brazil, Colombia, and Argentina. From the total amount, 60% were invested in Brazil, while in terms of business, 57 were devoted to networks and 37% to renewable generation. Gross CapEx reached $396 million and was mainly devoted to renewable business with 72%. Let's now analyze our operating highlights on Slide 6. In Generation business, during this quarter, we added close to 100 megawatts of new relocate capacity, reaching 16 gigawatts of installed capacity from which 71% is renewable. Net production in the third quarter reached 14.9 terawatt hours, an increase of 8% compared to the same period of last year, mainly explained by higher generation in Brazil and Colombia.
From our total production, 74% is emission-free, an important improvement compared to the 68% of the same period of last year. Energy sales increased by 12% during this period, reaching 24.1 terawatt hours due to higher sales in Brazil, Colombia, and Peru. In Slide 7, we will have a focus on EGP Americas. We're close to 100 megawatts of new renewable capacity added during this third quarter, we reached 5 gigawatts of capacity coming from EGP Americas, from which 79% are in Brazil. And in terms of technology, 2.6 gigawatts are wins and 1.6 gigawatts solar, another 0.8 gigawatts hydro.
During this quarter, we began the construction of Arinos solar plant in Brazil, reaching 2.9 gigawatts of capacity under construction, mainly located in Brazil and in Colombia. 1.4 gigawatts are wind projects, and 1.6 gigawatts of solar projects. During what's left off 2022, around 0.2 gigawatts will begin operation while 1.9 gigawatts will enter in 2023 and 0.8 gigawatts in 2024. CapEx in EGP Americas during this quarter was USD 0.3 billion, mainly located in Brazil. Regarding our pipeline, we are considering 69 gigawatts, 13 gigawatts more than what we had on December last year. From this amount, 37 gigawatts are in early stage, and 31 gigawatts are in the mature stage.
In addition to this, we have around 1 gigawatt of battery energy storage systems, and we are also considering the 2.7 gigawatts of projects under construction already mentioned. Let me highlight that we just announced the beginning of the construction of LeGoadosVentos 5 in POE Brazil. This new expansion of Lagos Ventos, the big wind farm in South America will have 3399 megawatts of capacity and will be operative by the end of 2023 and beginning of 2024. When the complex is fully finished, it will have 1.5 gigawatts of wind capacity, enough to supply the cities of Rio de Janeiro and Sao Paulo combined. Let's continue with great operational highlights on Slide 7. Electricity distributed reached 30.2 terawatt hours in the third quarter, flat compared to the same period last year, explained by higher sales in Argentina, Colombia, and Peru compensated by lower sales in Brazil.
Regarding the number of customers, we had an increase of around 540,000 in the last 12 months, reaching 26.6 million customers among all our distribution companies. In terms of quality indicators, SD improved in Brazil and Colombia, whereas Argentina and Peru slightly increased due to the higher temporary tools at the start of the year and scheduled outage due to environmental regulations, respectively. Regarding SAIFI or the frequency, we performed better than in all countries except for Argentina. Finally, in terms of energy losses, it improved in Argentina and Colombia and slightly increase in Brazil, explained by higher non-technical losses in Peru, mainly due to regulatory changes, which we expect should -- that should be normalized by the year-end.
On Slide 9, we'll see NLX and retail businesses. In the analyte business, we had a very solid growth in our businesses, especially in charging stations, photovoltaic panels, and maintenance and repair contracts. Regarding retail business, the number of delivery points increased by 14%, reaching almost 5,000 points, and the energy sold amounted to 18.1 terawatt hours in the first 9 months of 2022, which means a 20% increase compared to the same period of 2021. The solid growth of both businesses shows the importance of our commitment towards electrification as core pillars of our strategy.
On the following slide, we will discuss our ongoing asset rotation and corporate simplification processes. The sale of Fortaleza thermal plants was fully completed in August. Now our generation metrics in Brazil is 100% renewable. Regarding Enel Goias, the sale process announced on September 23 is well on track. We have the under-track regulation. Kate recently approved the operation, and we are waiting for the final approval of Enel. We expect to have this process concluded by December of this year. Regarding corporate simplification, we recently announced the merger between Enel Generation, Peru and Green Power Peru.
The independent Board members committee will soon announce the external valuator who will handle this operation. Finally, in connection to our -- with our listing in New York Securities Exchange, we are working on our defenestration of SEC. And as soon as we present the documentation needed, we will continue our efforts on simplifying and streamlining our operations in line with our asset rotation and corporate simplification strategy. Now let me comment on financial results for the period on the coming slides.
EBITDA in the third quarter reached USD 1 billion, minus 7.1% lower than the same period of last year, considering in last year's results, the adjustment related to I-12 that was recognized in the fourth quarter of 2021. This lower result is mainly explained by distribution business in Brazil and Argentina. In the case of Brazil, we had a reduction of EBITDA level mainly due to lower adjustments in the value of distribution concessions IFRIC 12 and higher transportation costs, and in the case of Argentina, due to the delay in tariff adjustments. EBITDA of the first months reached USD 3.4 billion, growing 17.1%, with positive results in all our businesses, except for thermal generation.
Currency exchange had a negative impact of minus USD 64 million in this quarter. If we isolate this effect, EBITDA would have decreased by minus 1.5%. OpEx increased by 6.7% due to higher inflation in the region, partially compensated by our efficiency or efforts. Net financial results improved by 5%, mainly due to hyperinflation inflect in Argentina, partially offset by higher financial expenses. Group net income in the third quarter, considering the extraordinary effects of the sales of Portales and Gas, reached $680 million. And if we exclude these effects, the net income would have decreased by 4.2%, reaching $253 million. FFO, in this period, funds from operations reached $699 million, while net debt increased by 13%, reaching $6.6 billion. Let me highlight that we have a very positive funds from operation variation in this period. which increased almost 60% for the 9 months of 2022. Well, we will analyze the detailed cash flow and debt later in this presentation. On next slide, we'll see EBITDA evolution and breakdown.
Starting from $1.1 billion of EBITDA in the third quarter of 2021, we see that thermal generation networks businesses had a negative variation, mainly driven by lower trading activity and lower adjustments of distribution assets, respectively. Excluding these effects on revenues for adjustments of distribution assets, networks grew by $61 million. On the other hand, renewables business grew by $38 million, mainly explained by Colombia and Brazil, while retail and analytics grew by $11 million and $7 million, respectively. Current devaluation plus other impacts had a negative effect of $31 million, reached a final EBITDA of $1 billion, 7% lower than the same period of last year. On a country basis, we see that the main contributor for consolidated EBITDA was Brazil with 46%, while Colombia represented 33 through 16, Central America 4%, and Argentina 1%. In terms of business lines, networks represent 44% of our EBITDA and renewable generation, 41%. Thermogeneration, Retail and NLX contributed with 6%, 7% and 2%, respectively. Let's see the EBITDA breakdown on a cumulative basis on Slide 13.
Starting from $2.9 billion of EBITDA for the first month of 2020, we see that all our businesses had a positive operational results during this period. Thermal generation increased by $4 million, while renewables grew by $281 million, mainly explained by Colombia and Brazil. Networks grew by $194 million, also explained mainly by Brazil and Colombia, which was partially offset by lower revenues for adjustment of distribution assets of $48 million. Retail and Alex grew by $109 million and $40 million, respectively. Currency devaluation plus other impacts had a negative effect of $46 million, reaching a final EBITDA of USD 3.4 billion, 17% higher than the same period of last year.
On a country basis, we see that the main contributor for consolidated EBITDA was Brazil with 49%, while Colombia represented 32%; Peru, 14%; Central America, 3%; and Argentina 1%. In terms of business lines, networks 45% of our EBITDA and renewable 36%. Thermal generation, retail, and LLX contributed 8% and 3%, respectively. Let's see our generation business on Slide 14. EBITDA in the Generation business remained flat compared to the third quarter of 2021, reaching $557 million. This result is mainly explained by a lower result in Brazil and in Colombia, mainly due to lower trading activity, and Argentina due to lower energy sales, offset by higher EBITDA in Peru due to higher sales prices.
On the right side chart, you can see that Colombia was the main contributor of our total EBITDA with 37%, followed by Brazil in Peru with 32% and 18%. Central America and Argentina reached 7% and 6%, respectively. Let's see the Networks business in the next slide. EBITDA in the Networks business decreased by 12% compared to the third quarter of last year, reaching $537 million. This lower result is mainly explained by lower EBITDA in Brazil and Argentina. In the case of Brazil, we have, as explained, this impact with the actualization of distributed concessions, IFRIC 12, due to lower inflation in this period.
In the case of Argentina, tariffs are not covering the increasing inflation in the country. This was partially offset by better results in Colombia and Peru due to higher energy sales and higher prices. Excluding the effects of revenues related to the actualization of distribution concessions, Network's EBITDA grew 9%, with Brazil growing 16% due to tariff indexation. In a cumulative 9 months period, we reached $1.8 billion of EBITDA, an increase of 16% compared to the same period of last year. Brazil represents 63% of this amount, followed by Colombia and Peru with 27% and 10%, respectively.
On Slide 16, we'll have a focus on OpEx efficiency game during this period. As seen before, OpEx increased by 9%, moving from $1.2 billion in the first 9 months of 2021 to USD 1.36 billion in this period. However, we can see that the increase is fully explained by FX and inflation effects, which represented a higher OpEx of $170 million, and the perimeter difference due to the consolidation of EGP Americas during the first quarter of this year, which represented a higher CapEx of $20 million. Leading these effects aside, we were able to gain operational efficiency for $80 million. The efficiency gains are mainly related to network digitization and platformization. With this, we are on track to meet our 2022-2024 target announced on our strategic plan, which is $200 billion on a cumulative efficiencies for this 3 years period. Let's analyze our cash flow on Slide 17.
Starting from an EBITDA of $3.4 billion, we see that net working capital amounted to minus $381 million, a significant improvement compared to last year, mainly explained by improvement in CVAs in Brazil due to better hydrology. Taxes paid during the period amounted to $495 million, while net financial expenses amounted to $415 million, an increase of more than 2x compared to last year, mainly due to consolidation of any repower and higher interest rates. With this, France firm operates about $2.1 million in the first 9 months of 2022, 59% higher than the same period of last year. After investments 0f $2.1 billion, including EUR 900 million, which includes $935 million of growth CapEx we get to a free cash flow of minus $34 million, a significant improvement compared to last year. Let me now analyze the depth of our company in the coming slides.
Gross debt amounted to $8.2 billion, an increase of 11% compared to December 2021. This increase is mainly explained by the increase in Enel Americas Holding [indiscernible] and Enel Generation Peru, and Enel Colombia. Net debt reached $6.6 billion, which considers free cash flow as we saw of minus $34 million. Net dividends paid for minus $547 million; financial receivables from minus $154 million and extraordination operation and effects for a net impact of minus $30 million. In terms of currency in countries, 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 9.4%, 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 19, we'll see our financial position. Our liquidity amounts to $2.5 billion, from which 64% corresponds to cash and cash equivalents and 36% are committed credit lines. The average maturity of our debt is 3.5 years. For 2022, we have matured $4.9 billion, and most of our debt matures after 2024. This solid liquidity position allows us to support our growth strategy. On the next slide, I will conclude this presentation with some closing remarks. During the third quarter of 2022, we saw solid operation results across all our businesses despite a challenging macroeconomic context. We had a solid FFO generation for this period. And despite we are executing a significant amount of CapEx -- of growth CapEx, our net debt remained stable. We are strongly delivering and executing the new capacity comes from renewable sources in line with our strategy. Finally, in line with our decarbonization and asset rotations policies, we concluded the sale of the thermal plant of Fortaleza and so we'll conclude the sale of NWOs. Please, Rafael.
Thank you for the remarks, Aurelio. Really very clear, complete presentation, and explanation. And we now move to the Q&A session. Operator, please proceed.
[Operator Instructions] Our first question will come from the line of Javier Suarez from Mediobanca.
I have 2 questions. The first one is on the capital structure of the company. So we have seen quite a significant increase in the cost of financing for the company that is mainly related to higher financial costs in Brazil and Colombia. And at the same time, the company has a very intense CapEx lag for the year to come. So the question for you is in order to maintain financial stability, do you see the necessity to modulate this CapEx in light of the cost of financing that is significantly higher maybe than it was forecasted by the company in this latest business plan or what other managerial options the company may take to ensure that CapEx continues while financial stability is insured. That would be the first question. And then the second question is on the working capital absorption. I think that the recent slide is #17, in which net working capital absorption has improved materially this year versus the previous year. So can you help us to understand the dynamics behind?
Thank you, Javier. Capital structure, yes, it's a very, very good, important question. We see different, let's say, talking about regarding the monetary policy of the policymakers and countries. We saw different movements. For example, Brazil, we increased more the interest rates. And I can tell you that Peru will lower. But anyway, we are proactively structuring the debt speaking in an operational way, in order to capture the momentum and very proactively to capture the momentum in terms of effects on one hand and in terms of interest rates in other hands.
Let me -- I'm telling this because we decide, for example, to increase less our debt in Brazil since we observed higher interest rates in the beginning of this year or in the last 12 months and increased a little bit more in Enel Americas level. I mean, you can say that. But in Enel Americas, we increased in U.S. dollars, but in Brazil, we [indiscernible]. Yes, we analyzed this, and we saw that the all-in costs compensated this strategy to have more debt during this period in Enel Americas and reduce our debt in Brazil. On the other hand, we increased a little bit more our consolidated debt in a smaller scale, of course, in Peru, which we saw a lower interest rate in Peru, more favorable. And we did not -- for the capital needs in Peru, we did not increase our debt in LN.
So we balance our debt in a very proactive way in order to meet this investment, especially these investments that we are doing and the needs in terms of cash during -- among our countries and companies, okay? That's from one side. You are right that the capital cost increase that is general, it's increased for FI. Of course, for the projects, we are much more, I mean, selective in terms of investments, pacing the level, and the -- I mean, the velocity of investments. But in any case, we are very well positioned in terms of leverage, 1.4x. Of course, we are not considering this 1.4x the pension fund. But again, with the pension fund, it will be 1.7x.
I mean, it's a very comfortable position in order to support the growth, even in this scenario with higher capital costs during this period. For the coming plan, we are analyzing our alternatives in order to support our growth in terms of open to partnership and so on, but it's still under analysis in order to grow without any -- without causing any risk in terms of leverage of the company. This is a mantra for us. So that's why we preserve this capital structure. I mean, proactively distributing the debt among the countries analyzing these effects and interest rate difference. And on the other hand, selective in the CapEx and, on the other hand, providing different and innovative models in order to reduce our debt level in the consolidated balance sheet. In terms of net working capital, we had a significant improvement as we saw this year of 59% of network -- of FFO, driven by net working capital.
Two factors, mainly 2 factors here. We are very well positioned in terms of the regulatory assets of hydrology in Brazil, right? We have positive hydrology in Brazil, but also we booked all the negative effects last year. So we are collecting this effect in the CVA of this year. The second point, we are improving our collection during the countries. Of course, not -- we expect by the end of this year, to improve much more at this level. But we are seeing some improvement in the -- at least in the last 3 months. So with all these effects combined, our net working capital was very positive during this period. This effect, of course, the hydrology is something that we cannot control. But again, since we are developing a very good strategy in terms of contracts and demand contracts. We are confident that this -- we will maintain this -- I mean, this networking capital controlled for the next year. I think that's it. Thank you, Javier.
Our next question will come from the line of Francisco Paz from Santander.
My question is the following. What is the company's strategy regarding the funds we received from the sales of Enel Goiás and Fortaleza Suvari? Could you tell us about what are the plans for this month, for the moment for part of the company?
Thank you, Francisco. Yes, in line also with the question -- the previous question made by Javier, we complement our financial position with the sales. And our -- we want -- first one, we wanted to rebalance our generation of EBITDA cash flow more in generation business and reduce the -- a little bit [Audio Gap] exposure in distribution CapEx. company. We're in renewables. And we want to increase our support financially our increase in renewables in the region, of course, observing returns, of course, observing the financial discipline. But these funds, we will use, of course, being selective and observing returns in the renewables projects and growing more our participation, let's say, in our EBITDA in terms of generation business. That's basically this, Francisco.
And I'm not showing any further questions in the queue at this moment. I'd like to turn the call over to Rafael de la Haza for any closing remarks.
Well, thank you, Victor. Thank you, Aurelio. As there are no more questions, we conclude the results conference call. Before finalizing, let me remind you that the Investor Relations team is [indiscernible]. Have a good evening.
This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.