Enel Americas SA
SGO:ENELAM
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Good day, ladies and gentlemen, and welcome to Enel Américas Fourth Quarter 2021 Results Conference Call. My name is Howard, and I will be your operator for today. [Operator Instructions] As a reminder, this conference call 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 Américas and its management with respect to, among other things, Enel Américas' business plans, Enel Américas' cost reduction plans, trends affecting Enel Américas' financial condition or results of operations, including market trends in the electricity sector in Chile or elsewhere, supervision and regulation of the electricity section in Chile or elsewhere and the future effect of any changes in the laws and regulations applicable to Enel Américas or its affiliates.
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 include a decline in the equity capital market of the United States or Chile, an increase in the market rates of interest in the United States or elsewhere, adverse decisions by government regulations in Chile or elsewhere and other factors described in Enel Américas' 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 dates. Enel Américas undertakes no obligation to update these forward-looking statements or to disclose any development as a result with these forward-looking statements become inaccurate.
I would now like to turn the presentation over to Mr. Rafael de la Haza, Enel Américas' Head of Investor Relations. Please proceed.
[Foreign Language] Good morning, ladies and gentlemen, and welcome to our full year 2021 results presentation. I'm Rafael de la Haza, Head of Investor Relations of Enel Américas. In the coming slides, our CEO, Maurizio Bezzeccheri; and our CFO, Aurelio Bustilho, will be presenting the main figures for this period.
Let me remind you that this presentation will follow with the slides that have been already uploaded into the company's website. Following the presentation, we will have the usual Q&A session. [Operator Instructions]
Now let me hand over the call to Maurizio, who will start by outlining the main highlights of the period in Slide #3.
Thank you, Rafael. Good morning, everybody. During 2021, we had an important recovery on the main operating indicators compared to last year, reaching pre-pandemic levels. The increase in demand and the consolidation of Enel Green Power Americas are the main reasons that explain the important improvement in our results.
EBITDA increased by 15% during the fourth quarter and 26% in the full year period. In addition to this, we had an accounting adjustment in Brazil that resulted in a positive impact at EBITDA level. We will see the details later on. Net income was affected by higher financial expenses and one-off effect that implied a negative impact. On the other hand, despite the significant increase in debt, our net debt-EBITDA ratio remained flat compared to last year.
Regarding ESG, we continue with our strong commitment to support the energy transition. As a consequence of this, we were scored with a B rating by the Carbon Disclosure Project. Finally, during the fourth quarter, we incorporated 0.3 gigawatts of new renewable capacity into our metrics, meaning that thanks to the merger with the EGP, we have added 4.7 gigawatt of new capacity. At the same time, we continue working on another 2.7 gigawatts under construction.
Let's move to the following slide to see our current scenario. As shown on the left side of the chart, during the quarter and the cumulative full year, all the currencies in the countries where we operate devaluated against U.S. dollar, except for Guatemala, which remained flat.
In terms of inflation, we can see that it increased in all the countries, except for Guatemala. This significant increase has an impact on our operating cost and on our CapEx level, which has been partially compensated by the currency devaluation in the countries we operate in.
Regarding electricity distributed, during the last quarter, we saw an important recovery in Argentina, while Colombia and Peru continue its growth trend. On the other end, Brazil slightly decreased due to lower economic activity, lower temperature and rationalization plans launched by the government in connection with the dry conditions we saw last year. Considering the full year, we see a recovery in the 4 countries, which has allowed to be in line with the pre-pandemic levels.
Finally, in terms of collection, we had an important recovery in the region, especially in Peru, which increased 5.2 percentage points compared to last year. In the 4 countries, we are now around 100% of collection, slightly better than pre-pandemic levels. However, in terms of bad debt, we had an increase of 42%, mainly due to the -- to bills not paid in more than 1 year by the client in Brazil due to the pandemic.
Now let's have a look at our investment for the period. During the fourth quarter of this year, our CapEx increased by 163% compared to the same period of last year, reaching USD 1,163 million. This is mainly explained by the consolidation of EGP which contributed with a CapEx of USD 524 million, which represents 45% of total CapEx of the period. Without considering this, CapEx would have increased by 44%, mainly explained by higher investment in distribution business in Brazil. In cumulative terms, our investment increased by 109%, reaching USD 2,971 million.
Without the contribution of EGP, CapEx would have increased by 36%. Asset development CapEx or growth CapEx grew in a significant manner during the period, mainly due to the development of renewable generation plants in line with our strategy and our commitment with the energy transition.
Let's now analyze our operating highlights on the following slide. In generation business, our installed capacity increased by 31% due to the incorporation of EGP, reaching 15.9 gigawatts from which 69% is renewable. Net production in the fourth quarter reached 12.1 terawatt hour, an increase of 18% compared to the same period of last year, explained by EGP and higher production in Peru. In cumulative terms, production increased by 20%. With this, we have increased our emission-free production to 72%, showing our commitment to the energy transition.
Energy sales increased by 18% and 20% during the fourth quarter and full year periods, reaching 18.5 terawatt hour and 71.3 terawatt hour respectively, mainly explained by the consolidation of EGP and a demand recovery in the region.
Let's analyze networks business in the coming slide. Electricity distributed reached 30.4 terawatt hour in the fourth quarter and 119.8 terawatt hour in the cumulated full year period, which represents increases of 0.4% and 4%, respectively. This is explained by an important recovery in demand in Argentina, Colombia and Peru, partially offset by a slight decrease in Brazil during the fourth quarter.
Regarding number of customers, we had an increase of around 540,000 in the last 12 months, reaching almost 26.2 million customers among all our distribution companies. In terms of quality indicators, SAIDI and SAIFI improved in the fourth country during the period. with a small results and deviation of SAIFI indicator in Argentina while energy losses decreased in the 4 countries. The steady improvement allows us to supply energy in a reliable and efficient way, showcasing our commitment towards our electrification goal.
On the following slide, we will see Enel X and retail business. In Enel X business, we had a very solid growth in charging station and maintenance and repair contracts, and photovoltaic plant with public lighting and credit card business also improved.
Regarding retail business, the number of delivery points increased by 32%, reaching 4,602, and the energy sold amounted to 20.3 terawatt hour in 2021, which means a 32% increase compared to 2020. Both businesses keep reinforcing our focus on customer and electrification, helping us on our strategic goals and toward a net zero target.
Let's now have a look at our ESG highlights in coming slides. As we have already mentioned on previous occasions, these recognitions reflect how we embedded sustainability in our operations with our ethical social responsibility, environmental and corporate governance behavior being part of our culture and the day-to-day action of our operation.
During 2021, our company improved in all the main ESG ratings, maintaining the positive trend of the previous year. As you can see, in MSCI, S&P Dow Jones, FTSE Russell, Moody's ESG and Refinitiv, we had significant improvements. We want to highlight that in 2021, we made the application for the CDP climate change 2021, and we received a B score, positioning the company in the management cluster. This means that we are taking coordinated action on climate issues.
We also received a B in the 2021 CDP Supplier Engagement Ratings report that evaluates organization and suppliers' engagement on climate change. We are also proud to be recognized again by the S&P Dow Jones Index on their Sustainability Yearbook 2021 with a Bronze class. Notwithstanding these excellent results, we are always looking in to improve our score in our reporting system.
I will now pass the call to Aurelio for the financial part. Aurelio, the floor is yours.
Thank you, Maurizio. Good morning to everybody. Let me begin this slide by mentioning that in this period, we have to make an adjustment in our Brazilian distribution subsidiaries due to an accounting rule IFRIC 12, which implied moving some financial revenues to operational revenues.
This represents a positive impact at EBITDA level of $247 million for full year 2021 and $82 million for the fourth quarter. In order to make it comparable, we adjust 2020, and the impact, in that case, is $99 million for the full year and $70 million for the fourth quarter. Having said that, EBITDA in the fourth quarter reached $1,179 million, 14.7% higher than the same period of last year. This is mainly explained by the consolidation of EGP Américas and by the better results in conventional generation, especially in Colombia and Peru.
If we include -- sorry, if you exclude the IFRIC 12 impact, the impact of EGP Américas and the negative impact of $59 million coming from the currency devaluation, we get to an EBITDA of $1,043 million, which is 9% higher than the adjusted EBITDA of the fourth quarter last year. In cumulative terms, EBITDA increased by 26.1% in nominal terms and 16.3%, excluding IFRIC 12 impact. EGP Américas had a negative impact of $185 million from the currency devaluation for the 2 years.
Group net income in the fourth quarter decreased by 65%, while on a cumulative basis, it decreased by 10%. We will have a focus on net income in the coming slides in order to better understand these numbers. Funds from operation in 2021 reached $2,374 million, a decrease of 2.2% compared to last year. while net debt increased by 32.6%, reaching $5.9 billion. We will analyze in detail cash flow and debt in the -- later in this presentation.
On the coming slide, we'll see EBITDA evolution and its breakdown. Starting from $1,027 million of EBITDA of fourth quarter 2020, we see that all our businesses had positive operational results during this period, except for networks. Thermal generation improved by $46 million while renewables increased by $141 million, from which $113 million are coming from EGP Américas. Networks decreased by $7 million, mainly due to lower demand in Brazil, while retail and Enel X grew by $24 million and $15 million, respectively.
Currency devaluations have a negative impact of $59 million. Considering these plus other impacts, we got to a financial EBITDA -- a final EBITDA of $1,179 million, 15% higher than the same period of last year. On a country basis, we have -- we see that the main contributors for consolidated EBITDA was Brazil with 51%, while Colombia represented 30%; Peru, 11%; Central America, 5%; and Argentina, 3%.
Let's see cumulative EBITDA in the coming slide. Here, we started from $3,259 million (sic) [ $3,253 million ] of EBITDA of 2020, and we can see that all our businesses have significant increases in operational results. Thermal generation improved by $186 million, while renewables increased by $476 million, from which $374 million came from EGP Américas. Networks increased by $294 million, including $148 million from the positive impact of IFRIC 12, while retail and Enel X grew by $68 million and $14 million respectively.
Currency devaluation had a negative impact of $185 million, reaching a final EBITDA of $4,102 million, 26% higher than the same period of last year. On a country basis, we see that the main contributor for our consolidated EBITDA was Brazil with 47%, while Colombia represented 33%; Peru, 13%; Central America, 4%; and Argentina, 4%.
Let's have a focus on generation and networks business in the coming slides. EBITDA in generation business increased by 42%, mainly explained by the contribution of EGP Américas. Without this effect, EBITDA would have increased by 13%. This is mainly explained by better results in Colombia, Peru and Fortaleza in Brazil due to higher sales prices and higher energy sales.
This is partially offset by currency devaluation, which had a negative impact of $31 million. On a cumulative basis, EBITDA in 2021 reached $1,965 million being Colombia and Brazil, the main contributors. This represents an increase of 42% compared to last year.
Let's analyze EGP Américas in the coming slide. Installed capacity in operation during this period reached 4.7 gigawatts, from which 2.3 gigawatts are wind, 1.6 gigawatts solar and 0.8 gigawatts in hydro. This capacity includes 300 megawatts of new capacity added during the fourth quarter in Brazil.
We currently have 2.7 gigawatts of capacity under construction, from which 1.7 gigawatts are wind projects and 1 gigawatt of solar, most of them coming from [indiscernible] in Colombia. From this 2.7 gigawatts, 600 megawatts will begin operation this year 2022, 1.9 gigawatts in 2023 and 200 megawatts in 2024. EBITDA during the fourth quarter was $113 million, from which 47% came from Central America, 45% from Brazil and 8% from Peru. In a cumulative basis, EBITDA reached $375 million in April 1.
Regarding CapEx, we totalized $0.6 billion in this quarter, mainly due to projects in Brazil and Colombia. CapEx for the 2 years reached $1.1 billion. Finally, our long-term pipeline currently reaches around 56 gigawatts, from which 31 gigawatts are in the early stage and 25 gigawatts in mature stage.
Let's analyze networks business in the next slide. EBITDA in networks business decreased by 3% compared to the fourth quarter last year, reaching $641 million. This amount include $82 million coming from the reclassification made due to IFRIC 12 already explained. Without this effect, EBITDA in distribution business would have [ decreased ] by 5% in the quarter, mainly explained by lower demand in Brazil and lower results in Argentina due to higher costs. This was partially offset by better results in Colombia and Peru.
On cumulative terms, EBITDA in distribution business reached $2,228 million, with Brazil and Colombia the main contributors. This represents an increase of 14% compared to last year. However, if we exclude the impact coming from IFRIC 12, EBITDA would have increased by 7%, mainly due to higher demand in the 4 countries and higher sale prices.
Let's analyze net income in the next slide. Starting from $1,181 million on last year net income, we have a negative impact coming from currency devaluation of $277 million. One-offs in 2021 amounted to plus $101 million while -- and mainly are connected with the new perimeter and other adjustments. EBITDA contributed to $709 million, which includes IFRIC 12 impact already explained.
Then we have negative variation in depreciation and amortization for $288 million, mainly due to higher asset base; net financial results for $234 million, explained by higher debt; and taxes paid by $57 million due to higher earnings before tax and higher tax rate in Argentina and Colombia. With this, we get to a net income of $1,135 million, which is 4% lower than 2020.
Let's analyze our cash flow in the next slide. Funds from operation amounts to $2,374 million in 2021. Starting from an EBITDA of $4.1 billion, these results includes negative net working capital in amount of $708 million, mainly due to CVA in Brazil that should be recovered in the coming tariff adjustments.
The working capital increase compared to 2020 is mainly explained by the positive impact of $614 million related to contract [indiscernible] in 2020. Taxes paid during this period amounted to $735 million, while net financial expenses amount to minus $284 million. After investments of $2,971 million, including $1,117 million coming from EGP Américas, we get to a free cash flow of minus $596 million.
Let me now analyze the debt of our company in the following slides. Gross debt amounted to $7.4 billion, an increase of 24% compared to December 2020. This amount includes $0.9 billion coming from EGP Américas, which is offset by cash injections made by Enel SpA before the merger and is currently Enel Américas' holding level. This increase in gross debt is also explained by increases in our distribution in subsidiaries, Brazil and Codensa, partially offset by a reduction in Enel Américas Holding.
Looking at our net debt, starting with $4.4 billion last year, we had minus $596 million of free cash flow, as mentioned in the previous slide. Net dividends paid amount to $972 million and financial receivables, minus $103 million. EGP Américas contributes with $675 million of cash coming from equity injection aforementioned, which aims to finance new projects -- new renewable projects.
With this plus the net debt coming from EGP Américas of $631 million and FX effect of minus $22 million, total net backs reached $5,870 million. In terms of currency and country, we see Brazil remains the largest contributor, while the debt at holding level represents less than 10% of the total.
Finally, regarding the cost of debt, we can see an increase for this period going from 4.9% to 6.1%, mainly explained by the growing trend in the industries associated with variable rates back in Brazil. This was partially offset by better rate conditions in the refinancing debt in Colombia and Peru.
Now on the following slide, we'll look at our liquidity and debt amortization. We finished the year with USD 3.1 billion in liquidity, split evenly among cash and committed credit lines. We also have a smooth debt maturity profile for the coming years with an average maturity of 3.6 years and enough liquidity to support the maturities over the time period.
Now on the following slide, Maurizio will finish the presentation with some closing remarks. Please, Maurizio.
During 2021, we saw a solid operational recovery across the region reaching pre-pandemic levels. This, along with a solid contribution of EGP Américas, allowed us to have an improvement [ into ] at EBITDA level, in line with the guidance announced on our strategic plan. We continue with our ESG focus, and we are positioning our company as one of the best ESG players in LatAm. Finally, we are strongly delivering and executing the new capacity coming from nonconventional renewable sources in line with our strategy. Rafa, off to you.
Thank you, Maurizio, Aurelio for the explanation. And thank you all for your attention. I now pass the call to the operator for the Q&A session. Operator, please proceed.
[Operator Instructions] Our first question or comment comes from the line of Enrico Bartoli from Stifel.
I have 3, actually. First of all, if you can update us on the outlook for 2022. If you can provide a few comments on the growth drivers that you expect for this year, in particularly the evolution of electricity demand and the tariff increases that you expect in the distribution business. So maybe some comments by country would be really very helpful.
Second question is related to this change in accounting in the Brazilian distribution business. If I understood well, some items have been moved from financial results into revenues. If you can provide some details of what kind of items we are talking about. And if this additional EBITDA, how much of that is actually is cash?
The last one is regarding the capacity, additional renewables, that you expected for 2022. If you can provide some details on that, possibly by country and also a guidance on the CapEx that you expect this year.
Thanks for the question. I will start to take the first question regarding demand. We expect, really -- we are observing in all countries where we are, as we said during the conference, that we are back to the pre-pandemic level. The decrease of the demand in Brazil is mostly due to the reduction of demand in Sao Paulo. While coming in distributed generation, there are some change in terms of customer base in the sense that commercial business suffered a lot on -- due to the pandemic.
And so we have seen the industry going back to the consumption pre-pandemic, and we observed an increase in demand by the domestic customers. So the major segment suffering in terms of demand is commercial segment. And then you have distributed generation, especially in Brazil. So in general, the demand will continue to grow in all countries of Enel Américas. Regard -- and the projection is different country by country. We can give some number -- Aurelio can give you some number in terms of expected growth in terms of demand for 2022.
Regarding the second, the second is I will let Aurelio reply. The variable that would be affected by IFRIC 12 is mostly the RAB, but I will have Aurelio just to reply on this. Please, Aurelio.
Thank you, Enrico, for your questions. For the coming years, we have 3.5 gigawatts of new capacity, right, in renewables. We have 17% of this quantity for 2022, right? Then we have -- 600 megawatts, I mean, for 2022. Then we have 27 -- 56% of this quantity from 2023 and then 27% for 2024.
I mean the main increase is for 2023 of this 3.5, which is 56%, a little bit more than the half, for 2020 -- 2023, okay? If you want to -- this quantity is related to -- yes?
Aurelio, Maurizio speaking. The other question is related to IFRIC 12. He wants just to understand exactly what kind of extraordinary revaluation we have done.
Okay. For IFRIC 12, we have a reclassification in IFRIC 12 regarding -- I mean, we consider -- before this period, we consider this effect as a financial results. I think the next [ classification ] regarding the -- related to inflation, okay, of the net RAB of distribution company. So before this period, it was classified as financial results.
Then after an assessment with our auditors, we reclassified this as operational results since it is related to the tariff adjustments. I mean, this is the basis -- the asset base that is a base due to -- for a partial bid of the tax. So it is better reclassified as operational results. So it was USD 247 million. In 2020, this amount was USD 99 million. I mean the full year, okay? I'm talking about full year.
Aurelio, sorry. Just to be clear, this additional revenues are cash or just an accounting change?
No, no. It is accounting, Enrico, because it is an actual -- you need to readjust the net RAB of the company each year, right, within each concession distribution due in Brazil each year. What we just reclassified -- what it was before classified as financial results then we classify this as EBITDA, I mean, operational results, okay? But just accounting.
Okay. Okay. And can you provide some details on the tariff increases that you expect for this year in the distribution business?
Yes. This year, just to say that if you remember, you recall the period of tariff adjustment is every 4 years, 5 years. So the major tariff redefinition is, for example, in Brazil in 2023. What we observed year-over-year is just an adjustment of the tariff due to inflation or due to devaluation depending if -- is the indexation is to the Eléctrico Mayorista or CPI.
So the increase or the adaptation of the tariff will be due to inflation adjustment mostly. But the change in tariff, the new tariffs will be defined in Brazil in 2023, in Argentina as well. In Colombia, recently, we had the adjustment of the tariff even though you have a mechanism of the adjustment totally different from the other countries. And Peru as well, we will expect 2023 for new tariff definition. But all the tariffs are adjusted with inflation. Most of it.
Okay. Sorry, the very, very last one. If you can spell the numbers on the guidance for EBITDA and CapEx for this year.
Aurelio, up to you.
Yes. The number of EBITDA, of course, we have rationalized the $4.1 billion this year. And we are estimating for the next year between $4.9 billion and $5.4 billion. I mean, this is related to currency, okay? That's the range that we are calculating. So for 2022, the amount is -- I mean, the lower, if we have the figures here -- we have $4.8 billion, between $4.8 billion and $5.2 billion.
I mean, we are considering more $4.8 billion considering the effect that we are seeing now. So we closed at $4.1 billion now, and we are estimating $4.8 billion in 2022, $4.8 billion in 2023, $4.9 billion in 2024. Net income, we closed it at $1 billion. We are estimating $1.5 billion in 2022, $1.4 billion in 2023 an $1.2 billion in 2024.
Our next question or comment comes from the line of Sara Piccinini from Mediobanca.
I also have 3. The first one is on working capital. Looking at the Slide 18, where you showed the bridge, it looks that the level of working capital still remains high, at a level of -- lower but still high versus what we have seen in the 9 months. So do you expect this level to be reabsorbed?
And on the other hand, we have seen the FFO to have substantially improved. And if I understood correctly, this is related to the Conta COVID cash that you received from the regulator. Is this figure included in -- so in this bridge, where can we see this positive effect from the Conta COVID that explains the better FFO? Sorry maybe for the long question, but just to understand how the bridge work in terms of working capital and FFO.
The second question is on the energy losses. So if we look at the Slide 7 where you indicate level of energy losses, it still looks quite high. Do you see an improvement over the year? Or are you doing other managerial actions to lower this level? This is the second question.
And the last question is on renewables. So you indicated the capacity you expect for 2022, '23. Is this capacity, the CapEx for this capacity, already contracted and so it doesn't suffer the effect of the higher commodity prices? Or you expect some increase in the level of CapEx per megawatt versus your expectations?
Okay. I will reply the second and the third, and will let Aurelio reply on working capital. Regarding losses, losses, as you know, they are recognized as well by regulatory and tariffs to some extent. If you go through, we can say that in many cases, we are in the losses that are supposed to be compensated by the tariffs.
But nevertheless, what we are doing, we are completely changed our relationship with our customer. Centricity of the customer is not just a formula, but something that we are transforming in our daily operation. So we have now a powerful system of platforms that are able just to know exactly what are the needs of our customer, explaining exactly how it works, the -- how it works our system.
And of course, we are, after 2 years of pandemic in which, in some cases, we were obliged not to cut in case the dam activity was suspended. Since the last 6 months, we have -- we started to work with the customer just explaining the relevance of a good relationship with the grid in the benefit of all person.
As you recall from the conversation we had, we still continue with an impact of bad debt of 42%, but this means that we are working as well in reestablishing the discipline of the market. So in many cases -- summarizing, in many cases, the losses, that looks like high but are in line with the performance in that the regulator recognized in the tariff due to the special situation, for example, in Rio or in Sao Paulo on [indiscernible], or in Argentina, of course.
Regarding the question of renewable energy, of course, in general, the majority of the items are already contracted, but due to the strong crisis of material equipment, of course, we are under this, let's say, negotiation with our suppliers. In general, we don't see a huge impact in our IRRs in the performance of our project. But of course, the situation of material of logistics is there.
And this, thanks to the relationship we were able to create with our supplier, we are solving the cases in which this is a problem as well for the supplier, and we are not observing a material impact on our IRR for each project.
Regarding working capital, I let Aurelio to reply. And of course, if you have some other questions, please. Aurelio?
Thank you, Maurizio. Well, if you see the -- in full year of 2020, we see a negative impact of $94 million in Slide 18, right? This was, I think, positively affected by the Conta COVID injection of $614 million, right? So this is a year we're very impacted by the Conta COVID, and the regulator, with all the distribution, established this financing way, not only for distribution, but the whole sector. That's why the amount is due to, let's say, it's smaller than we have today.
In 2021, we have another impact, which is the hydrology impact, right? So in Brazil, mainly in Brazil, we are -- we anticipate the amount of a higher price, the purchase from distribution company, and this affected negatively the working capital of the company with the hydrological effects, right? This amount of money, this lower impact, it was around $800 million to $900 million. I mean, a huge impact.
The distribution companies are now in discussions with the regulator in order to have a similar mechanism like Conta COVID, let's say, I mean, Conta hydrology, if I may say, in order to support all the sector in order to -- for the distribution company to balance their working cap. A better condition, an improvement in the [indiscernible] the hydrology situation of Brazil, this amount of money is being, of course, has been anticipated by the flag, the better flag that we have today in Brazil.
So we are still discussing what amount will come from these hydrology support from the regulator. I mean it's very difficult to compare 2020 with 2021. As you know, in 2020, a huge impact of the pandemic. In 2021, we still have this impact. This impact, Maurizio explained the losses issue that we are recovering, but it's still to come, still to improve and also collection.
So I mean -- this is -- we are progressively improving the discipline of the market since we can operate in the period. So difficult -- and of course, in 2021, this hydrological effect that we didn't have last year, and we are expecting this improvement. First one, the improvement of the situation of the reservoir. And number two, the support from the regulator in order to rebalance the working capital, okay?
And if I may -- sorry, on the question on guidance that Enrico -- yes. sorry. Yes, on the question on guidance...
[indiscernible] please?
Yes. Sorry, on the question on the guidance that Enrico made before, just a clarification. I was looking at your latest target that you provided in the business plan at the end of the year.
So are you expecting the EBITDA and net income to be in the lower end of the guidance? And is this related to the volatility of the currency? Basically did I understand correctly?
Yes. You understood correctly. We expect in the lower part of the guidance, okay? Sara, I think you asked regarding the CapEx. Just to give you more color about this, we said that we'll invest 3.5 -- sorry, we will add 3.5 gigawatts in the coming years.
This CapEx for us, we are estimating USD 3.4 billion, right? More or less $1 billion per gigawatt that we [indiscernible]. 2/3 of these investments will be in Brazil where we are [ estimating ] in Brazil, then Colombia, then Peru and Central America, right?
Our next question or comment comes from the line of Murilo Riccini from Santander.
I had some questions. Could you elaborate a little more, explain the contractions of volumes in the distribution business in Brazil, please? Maybe some details on the regional seasonality or something that give us more details on this?
The second one, if you can also provide us more details about this positive performance of the operations in the generation segment in Colombia and Peru.
The other one, if you could remember us or give us an update on the possibility to delist the company from Chile? Or any other kind of structural changes that you see as an opportunity for this year?
Okay. Regarding the demand, if you look at Brazil, the only distribution companies that is really reducing the energy demand is Sao Paulo. Because if you look at Goiás, Goiás is growing up 4%. Ceará is growing. The same, Rio de Janeiro is growing.
Regarding [indiscernible], of course, the -- as you said, the seasonality will have an impact. If you have some -- a little bit fresh weather, you have less consumption of air conditioning, and this can be an impact. But what we have observed in the case of Sao Paulo is some structuring transformation and demand both. You have the transition that I mentioned, you have more or less a reduction of 2%, something like that. And we are comparing as well with the demand of 2019, the pre-pandemic effect.
In Sao Paulo, you have a reduction, you are baked to the consumption in the other distribution company. So something structurally is changing in Sao Paulo. And if you observe, you have more domestic customer because you continue, as you -- if you can recall by the -- what we said during this call, we added something in all Latin America, something like 560,000 new customers because you have organization process ongoing, and Sao Paulo is one of the distribution company that gets an increase in terms of customers that goes to Sao Paulo. We are losing a big customer from the commercial side, for example, the big storage of -- in the food industry.
The other industrial segment is going back to the -- in Sao Paulo is going back to the consumption before pandemic. And this, if you look in overall, you have an increase of customer with a bigger margin that are the domestic customers. So -- and all -- the other aspect is related to the distributed energy demand.
So the -- if you look at the megawatt of distributed energy installed, Minas Gerais in Sao Paulo are on top of the state in Brazil in terms of megawatt installed of distributed energy. So this is another component of the reduction of the demand in Sao Paulo. But the other distribution company is growing in terms of demand.
Then the second question is the performance of Colombia and Peru. Let's say, in Colombia, we observed during 2021 higher price due to the PPI indexation. So the industrial production index is going up, and this have been transforming a higher price of energy. Then we sold some green certificate. And of course, we generate hydro with a higher price, and then this was the positive result of Colombia.
Of course, we spoke about tariff review. If you recall, I said that in Colombia is a sort of revenue cap regulation. And so we had more revenues, having put more RAB, more investment in distribution network. And so these have been recognized much later. It's a very small delay in recognition in the tariff. As well for the tariff of distribution, PPI indexation is an effect. And then you have major volume in terms of distributed energy.
In terms of Peru, of course, is an effect of a higher hydrology, a very good hydrology and of course, a different mix of our contract, both in the contract to cover our position, better price. So we got better results over there in terms of generation. And in terms of distribution in Peru is mostly due to a higher volume of distributed energy.
Regarding the last question, we always -- we have -- we told you that the process of -- are something that we study and we analyze over the time. But of course, there is no decision taken on this aspect regarding possible delisting. So we are starting always better organization in the interest of all shareholders.
So as you see, last year, we complete the integration with renewable energy. We made, let's say, some assumption. And today, we are showing through the results that we deliver exactly. We promised in December 2020, and then we completed in 2021. For the time being, we are always thinking better organization and no decisions have been taken in whatever decision is.
That was very helpful, Maurizio. And last one, if I may. There are currently many discussions about the conditions on the renewal of the distribution concession in Brazil. Could you provide your view on this as the Ministry of Energy will begin to take this matter more and more into account going forward? Do you have a view on this -- on renewals of the concessions? Could you comment a little bit?
I suppose that you are talking about hydro concession or you are talking of what kind of concession for renewable? Did you talk about -- distribution concession. In Brazil, distribution concession is already there. They have every 4 year or 5 years a revision based on the formula defined by the ministry.
And every year, every year, you have a rededication, for example, of the WACC and the application of the WACC. So this is a normal process like in all countries. You have a revision of the tariff remuneration every 4, 5 years. Nothing particularly different in Brazil from the other countries.
Okay. [indiscernible] Murilo, what Maurizio explained, you know that we have different dates for concession renewable. In Brazil. I mean, we have different situations, but let's talk about [indiscernible]. We have the first one in Rio in 2026, right? Then we have Ceará in 2028 and also in Sao Paulo, Eletropaulo in 2028 and Goiás will be 2045, right?
This, as Maurizio was explaining, the contract that we have, the concession contract established all these mechanisms, and you have the discussions regarding the renewables started, regarding the contract, 3 years before the renewal concession. We understand, and this -- for distribution is different from [indiscernible]. For distribution, it depends more on the situation and the -- first of all, it's the current concession operator who wants to renew. Of course, it depends on the KPIs that we are reaching for. I mean, a good operator, right?
And then it depends more on the operator than the regulator. I mean it's cheaper for the system. I mean, it is an analysis that we do if you read the country. It's cheaper for the consumer, the clients, that renewing the concessions is the best way to optimize the season. But again, it depends on the KPIs, the [ variation ] KPIs, as you know.
If we are meeting the -- reaching the KPI priority losses, I mean, times of -- satisfaction, I mean the quality, especially the quality of the services. So if you miss all these issues, it will be really renewals. And that is -- this is our intention in Brazil to maintain our, of course, maintain our operation there in order to renew the concessions, right?
Our next question comment comes from the line of Andrew McCarthy from CrediCorp Capital.
My first question, just wondering if you could provide any color on the likelihood of getting tariff adjustments in Argentina this year, how the conversations there are going with the authorities, what your expectations are?
Then my second question was just a follow-up on the working capital increase. Just trying to understand in terms of the timing of when you'll get maybe that agreement with the authorities on the Conta here, if you like. And then the timing on when we should see that those cash flow's coming through.
And then the final question was -- and apologies if you already said it, but I didn't quite hear it. I just wanted to check what the CapEx number was for 2022 that you're now seeing, just given that you obviously had a -- it seems like a bit of an acceleration in CapEx in the fourth quarter. So just trying to understand how we should think about that CapEx number for 2022. That's it from me.
Okay. I will try to supply to the first question regarding Argentina. In the reality, we are, already in these days, getting a definition of the first tariff adjustment of 20%. The 20% will go to the generation component and to the distribution component. We are observing that in both cases, they are insufficient just if you consider that 50% of inflation in 2021. And for this reason, I think that we need to go ahead in the middle of the year with another tariff adjustment.
So first tariff adjustment is there. But of course, it's insufficient to cover the needs for 2022. We just recall that the generation component of the tariff is a pass-through for distribution company. But of course, we'll improve the balance of the generation company, and we are as well as the generation company then we will have an improved on VAD -- on value added of distribution, and this will continue -- this component of the tariff, it's in charge for investment, for payroll, et cetera.
So due to the fact that we are getting a limited adjustment of the tariff this will put under -- we put suffering the distribution company situation. So for this reason, already first adjustment that we need to work on just to get some other adjustments along the years. Recall that the agreement with the ministry is just to have a transition tariff all over 2022, because in 2023, there would be the major revision of tariffs. The last one was in 2017. So 5 years later, we need to have another adjustment. So this is the situation in Argentina.
Working capital, will let Aurelio address to working capital and CapEx 2022. I will let Aurelio to reply.
Thank you, Maurizio. Thank you, Andrew, for your question. Regarding working capital, as I was explaining, we are moving to from the discussion with the regulator and in parallel, of course, the improving of the hydrological situation. This amount of money is being, let's say, entering or in our 2022 numbers.
In our estimation, by the end of first quarter of 2022, we'll probably see -- completed the solution. I mean what will enter via or by tariff flag and what will enter, what will cash in by regulator or Conta [indiscernible]. By the end of this quarter, we'll probably see the solution. And also because the hydrological [indiscernible] season, it ends, well, by the end of March and the beginning or first 2 weeks of April. It is our indication.
Regarding CapEx, you asked if it will accelerate CapEx? No, we'll maintain the CapEx that we provided. I mean we provided a USD 3.2 billion. If we adjust by FX, this probably could be a little bit lower. But I mean there is no intention to accelerate the CapEx. We also see the -- I mean we have tariff resets in the next year, important tariff resets in Brazil.
So -- but we want -- the plan that we presented already took into consideration this tariff effect and also the capacity, as I mentioned, the new capacity of renewables for the fall the coming year. So I mean we are in line with this estimation that we presented, $3.2 billion for 2022.
[Operator Instructions] Our next question or comment comes from the line of Sebastián Ramírez from Banchile.
Many thanks for the presentation. I got one quick question, and it's regarding with cash flows for 2022. Given what you already said that you're expecting on the low end of the guidance of $4.8 billion and around $3.3 billion on CapEx plus $1 billion or so in taxes and interest expenses, should we think that, overall, net debt should be growing next year? And therefore, where do you think that leverage should end next year?
I'll reply to, Aurelio.
Thank you, Maurizio. Sebastián, thank you for your question. I mean, we are in a very sound situation, solid situation in terms of net debt, right, despite the difficulties, despite the pandemic, hydrology. But even though if you see the leverage, we are at 1.4. If we also eliminate this IFRIC 12 adjustment, we'll be with 1.5. And considering the pension fund, we'll move into 1.7. I mean we are in a solid situation.
Even with these projections, I mean, that is realistic projections with $4.8 billion EBITDA, with $3.2 billion CapEx, we'll maintain our leverage in not -- let's say, not a dangerous situation, right? Remember that one important thing and seeing the behavior of hydrological, also we have a [indiscernible], I mean, lots of things that we are prepared -- will be boosted by our payout policy due to this, we'll be boosted from what we [indiscernible]. So we have to close the reduction from 50% to 30% in order to rebalance the cash flow.
We are maintaining -- again, our priority here, of course, is to maintain the sound situation in terms of finance and payment of net debt. We have a very good situation in terms of liquidity. If you see our rate in our credit lines and so on, $3 billion of liquidity. And again, we have important tariff reset in 2023. And we need to deploy and take advantage of liberalization of the market, improving our capacity of renewables.
So in order to put all these elements, external and internal and industrial, I mean, that's why we decided to propose a reduction in our dividend policy in order to pass through this situation that we are facing in a very sustainable way. The good thing -- good news here that we didn't -- it wasn't so sure when we analyzed the -- when we published the plan was the hydrology. We have a significant improvement in hydrology.
And different from Colombia, for example, in Brazil, you know that we anticipate the cash flow. And 1 year after, you see the recovery. So these elements could bring also very good compensation during this year. So with all these elements, we maintain our prudence in -- very prudential behavior in terms of cash flow.
And that's why we balance the distribution payout, the dividend payout in order to have this, the certainty -- a better risk position to meet all this important position that will happen only in 2022, 2023. I mean, as effect, I mean market liberalization, I mean, [indiscernible] generation. And we are confident that with these measures, we are -- we have a sound and solid financial position to face the future.
That's very clear. If I may add a follow-up. On regards of what you're seeing in an acceleration of CapEx for the renewal side, that has been something that you have been talking on socializing with the market.
Should we think that there's still some -- how big is the room to accelerate the increase in projects on Brazil specifically? Should we think that there is, I don't know, 500 to 1,000 megawatts that could be accelerated within the plan in order to see that happening between 2022, 2023?
Really, I will reply in this way. What we are going right now, we are going in a process, in the entire Group Enel, the definition of what is the integrated margin. That means what is our commercial strategy? For this reason, I told you that we are focusing on customers. We will start to elaborate a commercial strategy that we call for new generation in the sense that right now, we have a defined portfolio of projects under construction and in operation in Brazil, for example. And based on this, we elaborate our commercial strategy.
What we are doing right now, we are elaborating a new commercial strategy, and this new commercial strategy will call for eventually additional acceleration in renewable energy. So we are changing the focus. On one side before was the focus of having energy and then sell it. Now we won't. Still, having our commercial strategy and focusing on additional generation facilities.
So the acceleration or the possible additional acceleration in renewable generation is based on the plan, on commercialization plan, that we are going to elaborate -- we are elaborating right now. So already, you have an important number of gigawatt in construction and in operation in Brazil. We will be able to have a more ambitious commercial plan. Of course, this will recall for additional renewable energy.
Thank you. I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.
Well, thanks. If there are no more questions, we conclude the results conference call. Let me remind you that as usual, the Investor Relations team is available for any doubt that you may have. Thank you for your attention, and have a good evening.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.