Enel Chile (ENIC) Q3 2026 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Thursday, Oct. 29, 2026

CALL PARTICIPANTS

• Head of Investor Relations - Isabela Klemes
• Chief Executive Officer - Gianluca Palumbo
• Chief Financial Officer - Simone Conticelli

TAKEAWAYS

• 9-Month EBITDA -- $1.021 billion, representing 2% growth driven by gas optimization initiatives that contributed more than $90 million and lower thermal production costs.
• 9-Month Net Income -- $390 million, an 11% increase supported by improved operating performance and a $40 million decrease in depreciation, amortization, and impairment expenses.
• 9-Month Funds From Operations (FFO) -- $770 million, rising 25% due to EBITDA resilience and a $381 million improvement in net working capital.
• Q3 Hydro Generation -- 3.9 terawatt-hours, increasing 88% compared to the second quarter following a significant improvement in rainfall and snow accumulation.
• Total Capital Expenditures -- $492 million for the first nine months, doubling the amount from the previous year with 63% allocated to renewable generation.
• BESS Project Pipeline -- 0.6 gigawatts under construction across four projects, including the 206-megawatt Las Salinas facility and the 100-megawatt Finisterre project.
• 9-Month Hydro Production -- 8.2 terawatt-hours, representing 3% growth and offsetting dry conditions experienced earlier in the fiscal year.
• Energy Distribution Margin -- $127 million for the nine-month period, remaining stable as higher margins from distribution services were offset by one-off settlements from the prior year.
• Distribution Operational Metrics -- 11.1 terawatt-hours of energy distributed, a 2% increase while energy losses remained stable at 6.4%.
• Gross Debt -- $3.8 billion as of Sept. 30, 2026, a 1% decrease from the end of 2025 following $150 million in debt amortizations.
• Cost of Debt -- 4.9%, remaining consistent with December 2025 levels with 84% of total debt at fixed interest rates.
• Full-Year Hydro Generation Guidance -- 11 terawatt-hours to 12 terawatt-hours, based on current reservoir levels and a 43% probability of exceedance for the snowmelt season.
• Q3 FFO -- $271 million, representing 28% growth compared to the prior year period.
• Liquidity Position -- $1.021 billion in total liquidity, consisting of $650 million in committed credit lines and $371 million in cash equivalents.
• Grid Digitalization -- 4,300 remote control units, a 22% increase to enhance network resilience and operational response.
• Spot Energy Purchases -- Decreased by 1.3 terawatt-hours during the first nine months, reflecting reduced market reliance due to improved hydrology.
• 9-Month Physical Sales -- 22.3 terawatt-hours, remaining broadly stable despite lower demand from mining customers in the free market.
• Average Debt Maturity -- 5.1 years, compared to 5.8 years at the end of December 2025.
• Sourcing Impact -- Negative $60 million in the third quarter, primarily due to energy assessments from previous bills and higher spot purchase costs in July.
• Asset Management CapEx -- $146 million, representing 31% of total spending focused on maintenance for thermal and renewable fleets.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Palumbo stated, "thermal units can be dispatched to provide inertia and support system security but without any specific economic recognition for that service," indicating a lack of formal compensation for essential stability services.
• Palumbo warned that increased hydro generation does not translate directly into higher EBITDA because much of the output offsets earlier drought impacts and current spot prices are historically low.
• Conticelli noted that while the company is evaluating liability management for its Yankee bonds, current market interest rates for a 10-year bond are approximately 6.2%, which is higher than the current 4.9% cost of the bond.

SUMMARY

Enel Chile S.A. (NYSE:ENIC) reported resilient financial performance for the first nine months of 2026, supported by a significant recovery in hydrological conditions and growth in its renewable energy portfolio. Management confirmed that the company is on track to meet its full-year EBITDA and net income guidance, citing the benefits of its integrated business model and gas optimization initiatives. Strategic capital allocation remains focused on expanding battery storage capacity and modernizing the distribution grid to support Chile's energy transition. The company is actively participating in regulatory discussions regarding distribution tariff reforms and the formal recognition of system stability services.

• The company is prioritizing grid-forming technology in its storage projects, with CEO Palumbo stating, "Las Salinas will be the first grid forming BESS in the country, a milestone for Chile's energy transition."
• Management expects the Chilean government to submit a comprehensive electricity grid reform bill to congress in March 2027 to address long-term distribution modernization needs.
• The 100-megawatt Finisterre project represents the fourth grid-forming battery project in the portfolio, with commercial operations expected to begin in 2028.
• Operating capacity at the Ralco and Pangue hydroelectric plants reached 100% in the Bío Bío region following heavy rainfall in August and September.
• CFO Conticelli reported that a recently approved corporate tax reduction will result in a one-off deferred tax revaluation benefit of approximately $11 million in the fourth quarter.
• The company is utilizing artificial intelligence and specialized sensors to improve visibility on snow accumulation levels and water availability in key basins.

INDUSTRY GLOSSARY

• BESS: Battery Energy Storage System, used to store electricity and provide flexibility to the power grid.
• VAD: Value Added of Distribution, a regulatory component of electricity tariffs that covers the costs and returns of distribution companies.
• Grid-forming: Advanced inverter technology that allows a battery or generator to independently establish grid frequency and voltage, enhancing stability.
• FFO: Funds From Operations, a measure of the cash generated by a company's core business activities.
• Terawatt-hour (TWh): A unit of energy equal to 1 billion kilowatt-hours, typically used to measure large-scale electricity production.
• PEC: Price Stabilization Fund, a Chilean mechanism designed to manage electricity price volatility for regulated customers.

Full Conference Call Transcript

Operator: Good morning, ladies and gentlemen, and welcome to Enel Chile's Third Quarter and 9 Months 26 Results Conference Call. My name is Victor, and I will be your operator for today.

Isabela Klemes: During this conference call, we may make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 2 thousand. Such statements may include Enel Chile's current expectations, intentions, plans, beliefs, or projections. Forward looking statements are based on management's current assumptions and expectations. Not guarantee future performance, and involve risks and uncertainties. Actual results may differ materially from those anticipated in the forward looking statements as a result of various factors, These factors are described in Enel Chile's press release on its third quarter and 9-month 2026 results, In the presentation accompanying this conference call, and in the agenda's annual report on form 20 f under risk factors.

You may access our third quarter and 9 months 26 results press release, and presentation on our website, www.enel.cl, and our 20-F on the SEC's website, www.ssec.gov. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of their date. Enel Chile undertakes no obligation to update these forward looking statements or to disclose any development as a result of which these forward-looking statements become inaccurate, except as required by law.

Operator: I will now turn the presentation over to Ms. Isabela Klemes, Head of Investor Relations of Enel Chile. Please proceed.

Isabela Klemes: Good morning, and welcome to our third quarter and 9-month 2026 results presentation. Thank you for taking the time to join us today. My name is Isabela Klemes, and I am the head of investor relations Joining me today are our CEO, Gianluca Palumbo, and our CFO, Simone Conticelli. Our presentation and related financial information are available on our website, in the investor section as well through our investor app. In addition, a replay of the call will soon be available. At the end, there will be an opportunity to ask questions through the webcast chat using the ask a question link.

Gianluca will begin by covering the key highlights of the period our portfolio management actions, and recent regulatory developments. Simone will then provide an overview of our business economic and financial performance. Thank you for your attention, and I will now hand the call over to Gianluca.

Gianluca Palumbo: Thank you, Isabela. Good morning, everyone. Thank you for your joining us today. Let me start with the main highlights of the period. First, let me turn to portfolio management. During the third quarter, ideological conditions improved significantly especially in August and September, following exceptionally dry hydrological conditions through July. Strong rainfall supported hydro production, while nonconventional renewable generation also increased compared to last year. Turning to our medium term strategy, our battery energy storage projects remain on track. With approximately 0.6 gigawatts under construction. In August, we started construction of the 100 megawatt Finisterre batteries project the fourth grid forming best of our portfolio. Additionally, last week, we performed the first synchronization of the Las Salinas BESS.

Let's now move to country and regulatory context. The National Reconstruction Law was enacted supporting national investment conditions through tax incentives and economic reactivation. In addition, the electricity grid reform is under discussion. With working groups ongoing between the authority and the industry. The government is expected to submit a bill to congress in March 2027. We see these as an opportunity for a structural reform of a distribution framework that, once defined, could address the need arising from electrification, digitalization, and grid resilience, and especially enabled new long term investments. Finally, let me turn to business performance. Our 9 month results remain resilient with EBITDA and net income above the prior year.

Our FFO increased by 25% compared to the same period last year. We also maintained a sound liquidity position which allow us to execute our CapEx plan while maintain financial flexibility. In the next slide, we will go deeper into each of these areas and the key drivers behind these results. Let's now move to slide 4 for a closer look at our ideological conditions and hydro generation. As shown on this slide, hydrological conditions improve significantly in August and September after a prolonged period of severe dryness through July supporting a positive start to the 2 thousand 22 thousand 27 ideological year. After tracking close, to historically dry conditions, through July, hydrology improved markedly from August onward.

Cumulative rainfall in Maule and Bío basins is now above historical average. And well above the dry historical scenario. Mainly due to a strong El Nino event. In fact, regarding our reservoir levers, proactive reservoir management allowed us to manage stronger inflows responsibly, avoid extreme weather discharge, and protect downstream communities. This is an important example of how operational discipline and responsible weather management work together. As a result of this strong rainfall improvement, hydro generation increased 88% from 2.1 terawatt-hours in the second quarter to 3.9 terawatt-hours in the third quarter. 9 month hydro production reached 8.2 terawatt-hours 3% above last year, offsetting the weaker hydrology early in the year.

At this point, it is worth noting that reservoir levers recovered significantly during the third quarter of this year. In fact, our Ralco and Pangue power plants are currently operating at 100% capacity in the Bío region. Finally, regarding the upcoming melting season, in May, of the Maule and Laja Basins show an important recovery in snow accumulation during the third quarter. According to the latest forecast from the national electricity coordinator, the outlook represents a 43% probability of exceedance scenario for the 2026-2027 snow melt season which is broadly consistent with average ideological conditions. Currently, we are also complementing conventional monitoring with sensors and artificial intelligence to improve visibility on snow levels and water availability.

And now let's move to slide 5 where we will review the progress of our strategic projects in the generation business. Our best projects demonstrate how we are enhancing the value of our renewable portfolio. Through disciplined investments in advanced storage solutions and grid support technologies. I will explain now how. We currently have 4 BESS projects under construction. Representing approximately 0.6 gigawatts of store. Storage capacity. Las Salinas a 206-megawatt BESS project integrated with a hybrid wind and solar facility, recently achieved its first synchronization to the national grid. Valle del Sol, which we led 153 megawatts of storage capacity to its existing solar plant. Azabache, will incorporate a 94-megawatt BESS project into its hybrid wind and solar platform.

And finally, Finisterre, our most recently launched project, which will add 100 megawatts of storage capacity to its existing solar facility. This project go beyond adding storage capacity. By incorporating grid forming technology, they bring capabilities that will play an increasingly important role in enabling a more flexible, resilient, and reliable over Chilean power system. Notably, Las Salinas will be the first grid forming BESS in the country, a milestone for Chile's energy transition. Importantly, these projects were designed with reforming capabilities ahead of the new requirements introduced this year. In simple terms, reforming technology allows a battery system not only to follow the grid, but also to actively support it and keep it stable.

BILP maintain voltage and frequency it can provide the same kind of stability traditionally provided by conventional power plants. This brings greater flexibility enabling the integration of a more renewable energy, and greater resilience helping the system better manage disturbances and recover more quickly. As the chiller continue to increase, it is a share of renewable generation. Technology such as grid forming will play an increasingly important role in ensuring a secure and reliable power system. Las Salinas, Valle del Sol and Azabache are expecting to begin commercial operation during 2027, while Finisterre is expected to enter operation in 2028. So these investments increase portfolio flexibility reinforce security of supply, and support our long term value creation objectives.

Now let us move to slide 6 to review our generation mix and energy balance. Let me now turn to our generation mix. As shown in the charts on the left, our net electricity production increased during the first 9 months of 2026. Driven by improved hydrological conditions and a stronger renewable generation mix, which contributed to a stronger energy balance. Pedro generation reached 3.9 terawatt-hours in the quarter, increasingly by 1.3 terawatt-hours compared with the same period in 2025. Offsetting the way hydrological conditions experienced through midyear. The change in thermal output reflects the flexibility of our integrated portfolio. Enabling us to optimize our generation mix while supporting CICE stability requirements and efficiently adapting to changing market conditions.

In this context, we would like to highlight the inertia provided by thermal plants which is essential for system stability and has proven to be very necessary for the system this year. However, this service is currently provided without economic recognition. We expect authorities to promptly recognize this new operating reality and establish price signals through services aimed at enhancing system reliability and flexibility. Moving now to our energy balance. Physical sales remain broadly stable totaling 22.3 terawatt-hours during the first 9 months of 2026, in line with the 22.7 terawatt-hours recorded in the same period last year.

Our diversified sourcing portfolio enabled us to fully capture the benefit of improved hydrology while maintaining a solid commercial position across both regulated and free market customers. This difference compared to the previous year was driven by a decrease in free market sales. Partially reflecting lower demand mainly from mining customers among others. On our portfolio mix, portfolio flexibility continues to be 1 of our key competitive advantage. During the first 9 months of the year, production increased slightly to 17.0 terawatt-hours primarily driven by strong hydro generation which more than compensated for lower output from our thermal fleet. As a result, our generation mix remain highly competitive and increasingly supported by renewable and emission free resources.

Regarding sports performance, improved hydrology and high internal generation significantly reduced our reliance on market purchases. Net spot purchases, the declined by 1.6 terawatt-hours in the third quarter and 1.3 terawatt-hours over the first 9 months. Mainly during solar hours. This was partially offset by moderate increase in purchasing from third parties. And now let me move to slide 7 and provide an update on our distribution business. Quarter was marked by progress across key regulatory initiatives. While continued investment in grid modernization and resilient supported operational performance. Let me start with the regulatory milestones on the left hand side of the slide. Regarding the VAD 2 thousand 24 process in September, the second issued the type normalization report.

Determining the month pending recovery for distribution companies. This is an important step in resolving past tariff differences and provides greater visibility on the recovery process. Turning to the VAD 2 thousand 22 thousand 30, tariff review, the process remains ongoing. Following the regulators technical report issued in January, Enel Distribución submitted its comments. The next relevant milestone is the regulator's financial report expected in fourth quarter of 2 thousand 26 followed by the expert panel and the final report in 2027. In parallel, 2 key regulatory initiatives continue to advance. The first is defining the technical details of the investment framework under the electricity tariff protection bill. Particularly for investments in service quality and network resilience.

The second is the electricity grid reform. Focused on the broader modernization needs of the distribution system. These initiatives are complementary. The first addresses more immediate investment requirements. While the proposed reform could provide a longer term framework for grid modernization. Turning now to right hand side. Our indicator show continued execution. Energy distributed increased by 2%, reaching 11.1 terawatt-hours. While energy losses remain stable at 6.4%. Remote control equipment increased by 22%, reaching 4.3 thousand units, for further strengthening the digital capabilities of the network.

At the same time, CapEx reached $122 million, increasing by 21% compared with the same period last year, mainly reflecting the early execution of investment aimed at improving service quality and supporting grid digitalization and resilience. This progress was reflected in network's solid performance, during the last winter season and the severe weather condition in Santiago in recent weeks. Supporting service continuity and faster operational response. Overall, while regulatory discussions continue to evolve, we remain focused on modernizing and strengthening the network through concrete actions. With this, I will now hand over the presentation to Simone who will review our economic and financial performance.

Simone Conticelli: Many thanks, Gianluca, and good morning, everyone. Let me start with our key financial highlights of the period. In September 2026, year to date EBITDA reached $1 billion, an increase of 2% year-on-year, reflecting the resilience of our integrated business, and the stable performance of our grids operation. While third quarter EBITDA reached $336 million, remaining broadly stable compared to the last year. In the first 9 months of 2026, net income totaled $390 million, increasing 11% year-on-year supported by improved operating performance, and positive DNA effects. While third quarter net income reached $118 million, confirming the growth trend.

FFO also delivered a strong performance in the first 9 months of 2026. totaling $770 million, an increase of 25% compared to the same period of 2025. Thanks to EBITDA resilience and net working capital improvement. Third quarter FFO increased 28% to $271 million further confirming a positive cash generation performance for the year. We will go into more detail later in the presentation So let's move to the next slide to talk about the investment made during the quarter. During the first 9 months of 2026, we invested $492 million, doubling CapEx compared to the same period last year.

Our capital allocation remained focused on our strategic priorities. with 63% of investments directed to renewable generation. and 25% to strengthen and modernizing the distribution network. The remaining investments were mainly aimed at ensuring the reliability and availability of our thermal free. Let me provide some additional details on our investment allocation. In the renewable segment, our investment were focused on the development of our grid forming best projects in line with the objectives set out in the strategic plan the optimization of hydro facility performance, and the fleet maintenance In the thermal segment, the priority continues to be the maintenance and performance enhancement of the power plant fleet.

Regarding Greece, we continued advancing our network modern modernization and resilient plan, supporting service quality improvement and strengthening distribution network. Looking at CapEx breakdown by nature, development investment equal to $295 million, represented 60% of total spending and were mainly allocated to BASE, which accounted for 79% of the spending,, networks representing 14%, mainly driven by development reliability and quality of service investment, and digitalization. In hydro power plants with 6%, driven by performance enhancement projects.

Asset management CapEx totaled $146 million, accounting for 31% of total CapEx mainly allocated to the maintenance of Atacama Quintero and San Isidro CCGT the maintenance of renewable fleet aimed at ensuring plant's availability and some activity for the corrective maintenance and digitalization of grids. And finally, customer CapEx totaled $52 million, mainly invested in low and medium voltage connection project and initiatives to support load increase. And now let me walk you through the key drivers behind the EBITDA performance during the third quarter of 26. REBITDA reached $336 million in the third quarter 26. Remaining broadly stable year on year. The $9 million decrease compared to the third quarter 25 is mainly explained by the following factors.

Starting with PPI sales, the results were essentially flat compared to the prior year with no material impact during the period. Moving to sourcing, we recorded a negative impact of $60 million, mostly due to energy assessments from previous bills, higher spot energy purchase costs, mainly during July, and lower insurance recovery provisions compared to 2025. These effects were partially offset by lower natural gas production cost reflecting lower thermal generation volumes Regarding gas margin, we recorded a decrease of $10 million, reflecting the contribution from gas or concession activity recognized in the third quarter of 2025, while in 2020, these activities were largely concentrated in the first quarter.

On the other hand, Greece and others remain increased by $70 million, mainly due to first, higher grids margin contribution driven by new connection activity and other distribution related services. Partially offset by previous year 1 off settlement adjustment recorded in the third quarter 25. Second, the optimization of the processes of our renewable facility. And now let's move on to the next slide to review. The EBIT evolution during the first 9 months of this year. In the first 9 months of 2026, our EBITDA increased from $1.004 billion to $1.021 billion reflecting resilient business performance despite the challenging scenario of the first half of the year.

Starting with the integrated business, we recorded an increase of $50 million, mainly due to gas optimization initiatives that increased for more than $90 million in EBITDA and contributed to optimize the portfolio and lower thermal production cost due to the lower production volumes and lower natural gas costs. These positive impacts were partially offset by lower capacity payments reflecting structural energy dynamics, including the incorporation of new renewable capacity into the Higher spot energy purchase cost mainly due to the higher spot price and the net impact of energy and transmission cost settlements. Moving to grids.

EBITDA remained broadly stable totaling $127 million, mainly due to the higher margin from distribution related services and the positive impact of exchange rate partially offset by the 1 off positive settlements recorded in 2025. And now let's move on to the next slide to review the net income evolution. In the first 9 months of 2026, our net income amounted to $390 million, $38 million higher than the same period last year. Mostly explained by first, the already mentioned EBITDA improvement of $17 million.

Second, the decrease in depreciation amortization, impairment and bad debt expenses of $40 million, mainly due to positive effects from impairment charges recorded in September 2025, along with the recovery of value of certain thermal generation asset previously impaired. Partially offset by higher depreciation and a amortization for the new renewable asset. Third, the negative variation of ($70) million in financial results mainly explained by lower capitalization on generation projects, negative foreign exchange differences, and recognition of financial interest in 2025 related to PEC balances. And finally, the increase of income taxes of $4 million, due to improved results.

Focusing on the quarter, net income improved by $12 million, mainly resulting from positive change of $17 million in financial results mainly due to positive foreign exchange rate effects lower depreciation, amortization and impairment expenses of $1 million, mainly due to the last year in related effects on generation asset, partially offset by a $9 million reduction in EBITDA as previously explained. And now passing to the next slide, let's analyze the FFO composition. In the first 9 months of 2026, FFO amounted to $770 million as a result of the following factors. First, EBITDA totaled $1.021 billion, as previously discussed. Second, we recovered $42 million of back receivable during the period.

Third, net working capital decreased by $52 million, mainly due to positive effects of payment optimization of development CapEx, seasonality of energy payments, partially offset by the increase in annual distribution receivable. 4, financial expenses amounted to $172 million, including financial costs related to foreign exchange instruments. Finally, income tax payments amounted to $172 million, mainly related to the generation business. Starting to the year on year comparison, FFO increased by $156 million compared to the first 9 months of 2025. Mainly supported by higher EBITDA, which increased by $17 million, the decrease in the collection of pack receivables by $243 million, mainly due to the PEC 3 factor in transaction executed in April 2025.

The positive net working capital variation of $381 million, mostly due to higher commercial debt related to the newly developed capacity, the positive effects of energy payment optimization, and the voluntary compensation paid in 2025 regarding the extreme climate events from May and August 2024. The higher financial expenses of $58 million and the lower income tax payments of $60 million, net of the negative impact from higher monthly payment tax rates in the generation business. And now let's take a look at our liquidity and leverage position. Our gross debt reached $3.8 billion at the end of September 26. Decreasing by 1% compared to the gross debt as of December 2025.

In term of that movements, we amortized $150 million of debt over the period. Partially offset by a $40 million drawdown under revolving credit facility to support working capital needs. In addition, we recognized $28 million of new lease liabilities under IFRS 16. The average majority of our debt decreased to 5.1 years at the end of September 26. Compared with 5.8 years in December 2025. Fixed rate debt represents 84% of total debt. Compared with 87% in December 2025. The average cost of our debt reached 4.9% as of September 2026. In line with December 2025. Regarding liquidity, we remain in a comfortable position to support our capital needs and meet upcoming maturities.

As of September 2026, we had available committed credit lines of $650 million And cash equivalents of $371 million. So thank you all for your attention. And now I will pass the floor to Gianluca for the closing remarks.

Gianluca Palumbo: Thank you, Simone. Now I would like closing remarks. First, our results were resilient and demonstrated the value of our diversified generation. And distribution platform After weaker hydrological condition through July, hydrology improved significantly in August and September, supporting hydro generation and a stronger energy balance. Thermal generation has been an important contribution during all year for the stability and security of the system proving initial, especially in the North. Together with higher renewable generation, and our gas optimization initiatives, we delivered resilient earnings and remain on track to achieve our 2026 EBITDA and net income guidance. The expiration of a certain regulated contract and a lower gas margin weighed on the third quarter.

Nevertheless, the underlying execution of our integrated business remain solid, supporting our confidence in achieving our full year targets. Second, regulatory discussions continue to evolve alongside our grid and integrated margin investments plan. On grids, the electricity tariff protection law and the proposed electricity grid reform address different but complementary aspects of the distribution business. Continue to see opportunities to strengthen the distribution framework while advancing service quality, resilience, and the network modernization. We will continue to engage constructively with the regulator and the industry as these discussions progress.

On the integrated margin side, our decision to invest in grid forming technology reflects our commission that system reliability will become increasingly important as Chile advances toward a more renewable generation mix. As Chile moves toward a generation matrix with a higher share of renewable energy, the market framework will also need to evolve to recognize the broader set of the services required to maintain system stability and security. We support an open and constructive discussion on these topics as we believe well designed reliability framework is essential to enable further renewable integration, why, preserving a secure and resilient power system. Third, our portfolio flexibility, solid liquidity, and this capital allocation continue to support future growth.

Our CapEx remains focused on executing of our best portfolio with around 0.6 gigawatts under construction and clear visibility of future growth opportunities. We do this from a solid financial position. 84% of our gross debt is at a fixed rate. The average maturity is 5.1 years, and our liquidity covers upcoming maturities. Looking ahead, we remain focused on execution, financial discipline, and long term value creation, supported by a flexible portfolio and a solid financial position. Thank you for your attention. I will now hand the call back to Isabela for the Q&A session.

Isabela Klemes: Thank you all. Thank you, Juan Luc. Now let's move on the Q&A session. We will be taking questions via chat through the webcast. The Q&A session is open. As we have received some questions that are related to the same topic, I will try to join altogether. Okay? So we have received questions from Alessandro Di Vito, Mediobanca, Juan Felipe Bezera, from Credicorp, Andrew McCarthy, LarrainVial, Thomas Peruchi from Balanz, So I will start with the first 1 that several analysis is asking about the hydrology. So, Gianluca, I put this for you. So we have basically 2 questions here.

1 is what is the hydrology outlook Rainfall, El Nino, reservoirs levels, snow melt, and how will it affect hydro generation, spot prices, EBITDA? And also on the same line, also the analysts are asking about guidance for 2020 that we have already presented. But, if we have any preliminary estimates for 2027.

Gianluca Palumbo: Okay. Thank you for your question. As I mentioned, after a very challenging first half, we have seen a significant improvement in hydrological condition since August. First of all, rainfall has no accumulation record materially. Second, precipitation continued through October which further strengthened our hydro availability going forward. With the year now well advanced, we have much greater visibility, and so we expect full year hydro generation to be between, 11 and 12 terawatt hour. That said, and this is an important point higher hydro generation should not be translated 1 to 1 into higher EBITDA. I mean, a large part of the additional generation is simply offsetting the impact of the drought that we experienced in the first half.

And as you mentioned, spot prices are currently very low. So the economic value of this additional water is also lower than it has been historically. Overall, the stronger hydrology clearly supports our operational position and reinforces our confidence in the full year outlook. So to conclude regarding the 2026, as we said during the presentation, we remain on track to deliver our 2026 EBITDA. And net income guidance. And regarding the 2027 so it is too early to define the guidance on the hydrology of the end of the year Okay.

Isabela Klemes: Thank you, Gianluca. Then we have received some questions about the gas. No? Argentina gas and LNG. So I am reading 1 that is looking into 2026-27, your firm Argentina gas contract runs through April. How comfortable are you with your gas supply position beyond that date, and do you see any potential supply risk for the year, I mean, the 2027?

Gianluca Palumbo: Okay. As I mentioned during the presentation, our current firm Argentina gas agreement give us contracted volumes through April 2027. Beyond that, I think it is it is still too early to draw conclusion on gas supply conditions for the rest of the year. So for commercial reasons, we expect to give you more color with our first quarter 2 thousand 27 results. What I can add that there are several variables that we need to consider ideological conditions, the evolution of Argentina gas production and exports. And overall market conditions But importantly, our strategy does not rely on a single source of gas.

As you know, we manage our needs through a diversified approach that combines Argentina gas, LNG, and active portfolio management. So concluding, basing all the information available today we do not see evidence of a material supply risk for 2027. And we will continue to actively manage our position as market condition evolve.

Isabela Klemes: Perfect. Thank you, Gianluca. Now I move to use Simone. So we have a question actually, 2 questions. 1 is regarding the, potential 1 off accounting effects related to the tax regime change. So could you explain the impact of the recently approved corporate tax reduction on Enel Chile? And how much of the benefit will be recognized in the fourth quarter of 2026 relates to the 1-off accounting effect?

Simone Conticelli: Okay. Thanks for the question. And of course, the impact will be positive starting, and will be recorded in the October closing. There are 2 kinds of effects. 1 is a 1-off effect. And this is related to the deferred tax. With the change of tax rate, we had to reevaluate the deferred tax And so we will have an impact of around $11 million. And then there will be another effect in the next year, so a recurring effect. And during, from the decrease in the tax rate. In this case, the effect will be an increase in terms of net income. but also a reduction in cash out. This effect will increase until 2029 and then will end.

Thank you, Simone.

Isabela Klemes: Now I am going to another 1 about inertia. And now I will read for you. So, Gianluca, this is for you. So the framework for inertia is still not very clear. How do you expect inertia services to be remunerated going forward? And what role could grid-forming BESS play in supporting system stability? Actually, just to add on the same topic, can you provide any guidance on expected remuneration for the grid-forming attributes of your BEST? This is the 2 questions, Gianluca.

Gianluca Palumbo: Okay. Thank you. Let me start by saying that this is a very relevant topic, especially in the northern part of the system. Due to renewable penetration keeps increasing, As we mentioned in the presentation today, thermal units can be dispatched to provide inertia and support system security but without any specific economic recognition for that service. So in our view, to ensure reliability and, at the same time, send the right price signal, inertia should be formally recognized and properly compensated as a system service. And this is exactly where grid-forming batteries can play an important role.

Our BESS projects currently under construction were designed from the start with grid-forming capabilities Even before the new technical requirements were published during this year. So these capabilities allow batteries to contribute to frequency regulation, fault response, and, in general, overall system stability. So concluding, we see the regulatory direction on grid-forming as positive. At the same time, it is important to move forward with a proper framework that recognizes and pays for the system services needed to ensure security and reliability. Regarding the second 1, Yes. Exactly. Okay. Okay. At this stage, we are not providing specific guidance on remuneration for grid-forming attributes.

And what I can say on this topic is that as the Chilean power market and regulatory framework evolve, storage may capture additional value from capacity remuneration and system support services. However, the contribution of these value streams will depend on market conditions, regulation, project location, and technical characteristics. So we continue to assess this based on its overall contribution to our integrated portfolio rather than on any single revenue stream. Perfect. Thank you, Gianluca.

Isabela Klemes: Now, Simone, turning to you. So we have, received also a question from Alfredo from BTG. why did your company purchase energy at high spot prices while the hydropower its generator was sold at lower spot prices. Basically, it is asking about the difference on spot price purchase and sale.

Simone Conticelli: Okay. Thank you, Alfredo. I think that you are referring to the last quarter. That is, it was like a roller-coaster quarter. So at the very beginning, I mean, until the 10th or 11th of July, there was little water to produce for our hydropower plant. In this moment, we are in a buyer's position. And, you know that the price went up. Why? Because it was the last part of a very tight season, around the start of the end of 2025. And so, no more water to support the system. Going ahead, starting from July 10, the quarter was much better with a lot of water. But in this moment, the prices went down.

And so the selling price of our hydro production was at, lower price I would say something between $20 and $30 for megawatt hour. Okay. Thank you, Simone.

Isabela Klemes: We have another question now, Gianluca, from Andrew McCarthy. he is asking about when do you expect the definition of the technical detail for the investment framework for the distribution company under the electricity tariff protection law to be ready.

Gianluca Palumbo: We expect the authorities to release a detailed proposal for public consultation in the coming weeks. Okay.

Isabela Klemes: Perfect. So we have another 1 coming We have also from Jay Samani from Scotiabank. And also other analysts that are asking, which I will summarize here. As some of legacy regulated contracts roll off, how are you thinking about recontracting the portfolio? And do regulated options represent an attractive opportunity for Enel Chile?

Gianluca Palumbo: We continue to see commercial opportunities across different market segments, both regulated and free. Our approach is to actively manage the portfolio and place our energy on attractive terms, always keeping the right balance between returns and risk. On the regulated side, the upcoming auction is certainly 1 of the opportunities that we are evaluating. We see some of the improvements in the preliminary framework as positive. For example, the greater contractual flexibility and the mechanism to manage the supply obligations. As always, any decision to participate will depend on the final conditions expected returns, and consistency with our overall portfolio strategy. At the same time, we will keep looking at opportunities in the free market.

So for us, it is not about prioritizing 1 channel over the other. So it is about finding the right commercial opportunities. And creating value through active portfolio management. Perfect. Thank you, Gianluca.

Isabela Klemes: Now, we received 1 from. Related to Bess. Gianluca. So the question is, can you provide an update on the BESS projects currently under construction? Should we expect additional battery investment beyond this project or does this complete your current BESS development program?

Operator: Thank you for your question.

Gianluca Palumbo: As I mentioned, during the presentation, our BESS projects under construction continue to progress according to plan. And our focus today is on executing them successfully. Battery storage remains an important part of our strategy because it gives our portfolio greater flexibility, support renewable integration, and helps reduce the curtailment. Looking beyond the projects already announced, the I do not want to get ahead of our next strategic plan. As we are still evaluating different opportunities. But what I can say is that we will remain very selective and disciplined in our investment decision. Any new investment needs to meet our return requirements and create value for our shareholders.

And we will maintain flexibility in how we pursue opportunities considering both organic and inorganic alternatives like PPA buyouts when they make sense. So concluding, we continue to see opportunities in battery storage. But always under the same principle. Disciplined capital allocation and value creation. Okay. Thank you, Gianluca.

Isabela Klemes: Now, Simone, this is for you. About the Yankee bonds. Any update on how and when you plan to finance the Yankee bond?

Simone Conticelli: Okay. Thank you for the question. I think that it is a little bit premature to talk about specific refinancing measure. What you know that we are, clearly continuously evaluating the possibility of this liability management. This possibility goes through, I do not know, issuing a new bond, or some long-term financing, or also using or partially using liquidity to, pay part of this bond. The fact is there is something like a trade-off in refinancing early versus waiting a little bit. Why?

Because, the current bond has a cost of around 4.9% or something less, And in this moment, if we look at the market, for example, 10 years bond in US dollar, the interest rate should be around 6.2%. But in any case, for a company that has our credit profile, the remain. The market remain quite liquid and accessible to issue a bond. So in this moment, we are still working on it but are not worried. Okay.

Isabela Klemes: Thank you, Gianluca. Now, this is the final question. That, we have received about distribution. As the regulatory discussion progress, what specific change would be most meaningful for the Enel distribution in terms of tariff recognition, investment incentives, and returns on incremental grid CapEx.

Gianluca Palumbo: Okay. Regarding the short terms, we expect the implementation of a new quality and resilience investments under the law approved in August. In the middle terms, as we have noted previously, we view distribution reform as a key priority for the energy sector. The continued electrification of end use consumption, particularly through the growing adoption of electric mobility will require significant investment in distribution network. To enhance grid resilience, increase flexibility, and improve service quality for our customers. In this regard, we believe the Ministry of Energy proposal is broadly moving in the right direction. As it transition toward a regulatory framework that better reflects actual asset investments and incorporates performance based incentives. Okay.

Isabela Klemes: Thank you, Gianluca. Thank you, Simone. So as there are no further questions, I would like to conclude this results conference call. Let me remind you that the Investor Relations team remains available to address any questions you may have. Thank you for your attention, and we look forward to seeing you soon again.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.