On Wednesday, Enel Chile (NYSE:ENIC) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Enel Chile reported a 16% increase in EBITDA for Q1 2026, totaling $423 million, despite a 7% decrease in net income due to higher depreciation and financial expenses.
The company initiated construction on three battery energy storage projects to enhance portfolio flexibility, with projects expected to be operational by late 2027.
Hydrological conditions were favorable during the quarter, aiding stable operational performance and a forecasted hydro generation of 10.7 TWh for 2026.
Strategic agreements, such as the LNG supply deal with Shell, aim to optimize gas supply and align with Enel Chile's long-term vision.
The regulatory environment is challenging, with tariff resettlements postponed, affecting expected cash flows; however, the company remains engaged with regulators for future tariff reviews.
Management highlighted the importance of electrification in Chile as a growth driver and emphasized a focus on investment in renewables and battery storage.
The company's financial position remains robust, with $454 million in cash and available credit lines totaling $640 million to support ongoing operations and investments.
Full Transcript
OPERATOR
Good morning ladies and gentlemen and welcome to Enel Chile first quarter 2026 results conference call. My name is Carmen and I'll be your operator for today. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to chat through the webcast. 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. Such statements may include Enel Chile's Current Expectations, Intentions, Plans, Beliefs and Projections. Forward looking statements are based on management's current assumptions and expectations, do 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 the Enel Chile's press release on its first quarter 2026 results. In the presentation accompanying this conference call, NEnel Chiles annual report on Form 20F on the risk factors. You may access our first quarter 2026 results press release and presentation on our website www.nl.cl and our 20F on the SEC'. Readers are cautioned not to place undue reliance on these forward looking statements which speak only as of their dates and 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. I would now like to turn the presentation over to Ms. Isabella Clemis, head of Investor Relations of ENEL Chile. Please proceed.
Isabella Clemis
Buenos Dias. Good morning and welcome to Enel Chile's 2026 first quarter results presentation. We greatly appreciate you taking the time to join us today. My name is Isabella Clemis. I'm the Head of Investor Relations. Joining me this morning are our CEO Gianluca Palongo and our CFO Simone Conticelli. Our presentation and related financial information are available on our website www.enel.cl in the investors section as well as through our Investors app. In addition, a replay of the call will soon be available. At the end of the presentation there will be an opportunity to ask questions questions via webcast chat through the Ask a Question link. Participants are connected in listening mode. Gianluca will kick off the presentation by covering key highlights of the period, our portfolio management actions and providing updates on the regulatory contest. Following that, Simone will offer an overview of our business, economic and financial performance. Thank you all for your attention and now let me hand over the call to Gianluca.
Gianluca Palongo (Chief Executive Officer)
Thank you Isabella, Good morning and thank you for your participation. Let's start the presentation with our main highlights of the period. Let's begin with portfolio management. During the quarter, hydrological conditions were favorable which helped us reduce portfolio risk and supported a stable operating performance across the business. We will come back to this point in more detail later on. At the same time, through EGP Chile, we started the construction of three battery energy storage projects in the northern part of the country. These base projects will add around 0.5 gigawatts of additional capacity and will play a key role in strengthening the flexibility of our portfolio while supporting our commercial strategy. In addition, Enel Generacion Chile signed a new LNG supply agreement with Shell. This agreement allows us to better valorize surplus gas volumes already available and to optimize LNG and Argentine gas supply for our generation business. Importantly, this initiative is fully aligned with our long term business vision for Chile. This is particularly relevant in the context of the growing deployment of battery energy storage systems which are essential to ensure a more flexible and efficient portfolio. Let's now move to the country and regulatory context. Starting with the VAD 2020-2024 process, tariff resettlements have been postponed until July 2026. At this stage, the regulator is working on alternative solutions to fund this payment with the objective of avoiding any impact on regulated customers tariffs. Turning to the VAD 20242028 process during the quarter, the regulator published the Preliminary Technical Report Volume 2 in January 2026. Over the next few months, we are awaiting the publication of the final report. Let's now turn to business profitability. The first quarter of 2026 delivered consistent financial results. EBITDA showed a solid improvement compared to previous years plus 16% during the period. The extraordinary General Meeting approved a capital increase of CLP 360 billion at Enel Distribution Chile, reinforcing the company's balance sheet and overall financial flexibility. In addition, the annual General Meeting approved the final dividend, fully in line with our commitment to shareholder returns and value creation. In the next slides, we will go deeper into each of these areas and provide further details on the key drivers behind these results. Let's move to slide 4 to talk about hydrology and the progress of our battery energy storage project. Let me begin with our hydro generation. Hydro generation during the quarter remained broadly in line with last year's level. As shown on the left hand side of the slide for 2026, we are forecasting hydro generation at 10.7 TWh. This assumption is based on a conservative view on hydrology. Fully consistent with the average evolution observed over the last 13 years. That allows us to confirm our 2026 guidance. This is the case even though the probability of an El Nino event has increased in recent weeks, with potential impacts mainly expected in the second half of the year. This level of performance is supported by our well diversified hydro portfolio together with continuous operational optimization. Moving now to gas activities on gas sourcing, we have signed contracts with Argentine gas suppliers with a longer tenor compared to previous years. These contracts secure firm volumes at more competitive prices, providing stable supply until April 2027. In parallel, in the context of high gas prices and the more flexible demand outlook for our thermal fleets, we concluded a negotiation related to our long term LNG agreement. This approach is well aligned with our view of a gradual ramp up of battery storage in the coming years, supported by a solid and reliable gas supply from Argentina. Finally, let me focus on battery storage. We continue to strengthen our generation portfolio through the development of battery energy storage systems. These investments will increase the flexibility of our portfolio and support the long term resilience of our generation mix. In addition, they will continue to optimize our sourcing strategy. In this context, approximately 450 megawatts of new battery capacity are currently under development and will gradually start operations from 1227 ahead in line with our planned investment schedule. And now let's move to slide 5 where we will review our generation portfolio and the energy balance. Let me start with our generation portfolio. We entered 2026 with a solid and well diversified portfolio. In fact, our total net installed capacity stands at 8.9 gigawatts, of which 78% comes from renewable energy sources. Therefore, this structure enhances flexibility and supports a balanced and resilient energy mix. Moving now to our energy balance during the first quarter of 2026, net production remains stable compared to the same period last year. This performance reflects the flexibility of our generation portfolio. Higher contributions from wind, solar and efficient natural gas combined cycles more than compensated for the slightly lower hydro generation. Physical energy sales amounted to 7.5 TWh, fully in line with the level recorded in the first quarter of last year. This confirms the stability of our commercial positioning supported by our diversified sourcing mix. On energy purchases during the quarter, we maintained a similar purchasing mix compared to last year. This included 1.3 TWh of net spot market purchases and 0.8 TWh sourced from third parties. And now I would like to take a moment to share with you some key topics related to the distribution business which we will cover on the next slide. Let me start with the tariff review shown on the left hand side of the slide. We are in the 2024-2028 Distribution Tariff Review process. In January of this year, the regulator released the second version of the technical report. The remaining technical steps are expected to lead the final tariff determination in the second half of 2026. Overall, the review is progressing in line with the regulatory timetable. Turning now to the VAD 2020 24, the settlement of the outstanding debt with distribution companies which was originally scheduled to begin earlier, has been postponed to July 2026. For annual distribution, the amount to be received is around USD 65 million, while at the distribution sector level the total amount involved is approximately US$900 million. We remain confident that the process will progress toward the prompt resolution considering its relevance for the sector and the need for orderly completion. Turning to distribution reform, we continue to see constructive and positive engagement from stakeholders, together with a growing and broad consensus on the need to further evolve and modernize the distribution framework in Chile. This is particularly important in the context of electrification and considering the long term nature of distribution investments. Finally, a few words on grids and execution we continue to reinforce specific parts of the network while at the same time expanding digitalization and remote control solutions across the network. These actions allow us to restore service faster, improving customer experience and strengthen the flexibility and resilience of our networks. Overall, execution in distribution remains solid with a clear and continued focus on service quality and with that I will now hand over the presentation to Simone.
Simone Conticelli
Many thanks Gianluca and good morning everyone. I will begin my presentation with an overview of our key results for the period as shown on the slide. During the first quarter of 2026, EBITDA reached $423 million with a 16% increase compared to the same period of last year. The improvement was mainly driven by a better integrated margin performance. First quarter net income amounted to $162 million, representing a 7% decrease compared to the result of Q1 2025, mainly due to higher depreciation following the commission of the new renewable plans and lower capitalization of interest. Finally, first quarter FFO reached $122 million, representing a 12% increase compared to the same period last year. The improvement is due to a combination of several factors which will be commented on the following slides. And now let's move to the next slide to talk about the investment made during the quarter. First quarter investments amounting to $111 million were mainly allocated to the development of battery energy storage system project, increasing the value of our power plant fleet and reinforcement of our distribution network. Lets review the allocation in more detail. 41% or $46 million were invested in renewable and storage 31% or $34 million supported thermal power projects. 28% or $31 million was directed toward grid's investments in the renewables segment. We have focused our effort on the development of battery energy storage system project as announced in our strategic plan, on the announcement of hydro facility performance and on the improvement of fleet availability in the thermal segment. The priority has been the maintenance and performance enhancement of the power plant fleet. And finally, regarding grids, the focus remains on the resilience program to strengthen the distribution network and ensure service continuity under adverse weather conditions. Passing to the Nature of Investment First Asset Management CAPEX totaled $58 million accounting for 52% of the total CAPEX. The main activities have been the maintenance of Atacama Quintero as San Isidro ccgt, the maintenance of renewable fleet aimed at ensuring plant availability and some activities for decorative maintenance and digitalization of grids. Second development CAPEX amounted to $40 million mainly invested in batteries development which represented 75% of total and digital meters, English remote control equipment. Finally, Customer CAPEX totaled $30 million mainly invested in low and medium voltage connection project and initiative to support load. Let's now go on to the next slide which provides a closer look at the EBITDA performance. In the first quarter of 2026 EBITDA reached $423 million. The increase of $58 million compared to the same period of 2025 is mainly explained by the following Starting with the integrated business, we recorded an increase of $67 million mainly due to first, lower natural gas costs that reduce the viable production cost of our thermal power plants and the spot energy purchase costs and second, the positive impact of the optimization of gas sourcing which allowed us to improve LNG and Argentine gas supply for our thermal fleet extracting value from our gas contracts portfolio. As previously commented by gianluca, these positive impacts were partially offset by determination of certain high price regulated contracts and higher provisions related to energy and transmission charges adjustments booked in 2025 going to grids, we recorded a decrease of 18% mainly due to the positive impact of issuance provision on 2025 and the impact of the higher OEM expenses associated with the anticipation of the 2026 winter plant activities, partially offset by a higher contribution from complementary distribution activities mainly related to the new customer connections. And now let's move to the next slide to review the net income evolution. Net income amounted to $162 million in the first quarter of 2026. The difference compared to the first quarter 2025 is mainly due the $58 million improvement in EBITDA thanks to more efficient sourcing, partially offset by higher depreciation and amortization, mainly related to the commissioning of new renewable capacity in the generation business and higher financial expenses partially due to lower interest capitalization in the generation business and now passing to the next slide, let's analyze the FFO composition for the first three months of 2026. In the first quarter 2026 FFO reached $122 million as a result of the following First, EBITDA totaled $423 million as previously explained. Second, the increase of net working capital amounted to $161 million mainly due to seasonality of energy payments and gas optimization agreement for which the payment was registered. In April 3, financial expenses amounted to $93 million, also including the settlement of hedging derivatives. Finally, income tax expense payments amounted to $48 million mainly related to generation business. Passing to the comparison with the Results of the first quarter of 2025, the 2026 FFO was $30 million higher, mainly thanks the EBITDA increase for $58 million, the lower increase of net working capital for $27 million mostly due to lower CAPEX payment related to a new development capacity, a positive effect of energy payment scheduling partially offset by the increase of account receivable following the LNG agreement settled in April, the higher financial expenses for $62 million and the higher income taxes for $9 million, reflecting higher monthly payment tax and now let's take a look at our liquidity and leverage position. Gross Debt amounted to $3.9 billion as of March 2026, remaining broadly flat compared to December 2025. The slight increase reflect the seasonal cash and working capital requirements which were temporarily funded through a $50 million drawdown on the CAF credit line, partially offset by a $9 million reduction in if erasxin lease liability. The average term of our Debt maturity reached 5.4 years by March 2026 versus the 5.8 years seen in December 2025, and the portion at the fixed rate was 85% of the total debt. The average cost of our debt reached 4.9% as of March 2026, in line with December 2025 figures. Regarding liquidity, we are in a comfortable position to support our capital needs for the upcoming months and cope with next year maturities. As of March 2026, we have available committed credit lines for $640 million and cash equivalent for $454 million. So thank you all for your attention. And now I will pass the floor to Gianluca for the closing remarks.
Gianluca Palongo (Chief Executive Officer)
To conclude, our resilient and diversified business model supported solid and stable results in the first quarter of 2026. Even in a volatile operating environment, a well balanced portfolio combined with disciplined execution continues to provide resilience, allowing us to navigate changes in market and climate conditions with confidence. Second, electrification is clearly emerging as a key driver of demand growth in Chile. This trend is supported by structural developments across mining industry, transport and electromobility. In this context, we remain closely engaged and well positioned to support the country's electrification process, leveraging our integrated offering of clean energy infrastructure and services. At the same time, we continue to closely monitor regulatory developments and their potential impacts. Finally, our solid financial position and flexible business model continue to support the execution of our investment plan and our ability to meet financial commitments. This financial strength allows us to continue investing in renewables and battery storage while maintaining financial discipline and delivering sustainable returns to our shareholders. Now let me hand it over to Isabella for the Q and A session.
Isabella Clemis
Thank you very much Simone and Gianluca. We now start the Q and A. As a reminder, we are receiving questions from our chat on the application. So I will start now Gianluca and Simone with the first question. We actually received this question from several analysts including Angela McCartney from La Rencial. So I will do the questions. Okay, so the first one is congrats on the results. Apart from the gas valorization agreement which is a positive one off in your results, could you please indicate which other one off negatives you have incurred in your first quarter 2026 figures? Basically, I'm interested in knowing the recurring EBITDA booked in the first quarter 2026. Actually on the same we also received question regarding what we have mentioned in the EBITDA regarding the provisions recording the first quarter 2026 related to energy and transmission charts.
Simone Conticelli
Simone, so thank you for the question. And so you are right in this course that we have more than one non recurrent effect. The first one is the impact of the agreement with Shell. That is a positive impact but then was partially offset by some problem with the transmission line that impacted in our efficiency. And on the other side this impact can be around $50 million and then around USD 60 million of adjustment coming from the previous year. The main part from 2023 it was related to an adjustment of the ancillary services book in this year. After quite a long discussion with the system, we finally take the Final decision. And this has an impact of -2, USD 30 million. So to make a synthesis, if you normalize all these non recurrent effect, our Results is around 360, $370 million for the quarter.
Isabella Clemis
Okay, thank you, Simone. So we are receiving several questions. Let me go to the second one. So the second one is coming from Javier Suarez from mediabanka. So Javier has several questions. I will split here. So the first one is, can you update on the key factors on the ongoing negotiations with regulator of the distribution regulatory framework? And also on the same page on distribution, he also is asking why? In other words, what is the reasons for the postponement of the settlement to July 20226 relating to VAD 2020 2024? So Gianluca, is this yours?
Gianluca Palongo (Chief Executive Officer)
Yes. Okay, so let me start for the first part on the distribution regulatory framework. The VAD 2024-2028 process is still ongoing. So the methodology remains based on the reference model company with a regulated real post tax work as you know of 6%. We believe that there is still room for improvement in the CNA proposal. And we are actively participating with the distribution association in the observation and the discrepancy process. The final Techno report is expected by June 2026 and the tariff decree in early 2027. So regarding the postponement of the VAD 2020-2024 settlement, the estimate impact is around USD 65 million. The recovery mechanism was defined by the SEC in February 2026, but collection was postponed by three months. So in this moment, our current planning assumption is collection from July 2026, while the ministry of Energy is also evaluating alternative mechanism, including potential debt factoring.
Isabella Clemis
Okay, thank you, Gianluca. Now another question from Javier. The other question from Javier. Simone, this is for you. Can you give more details on the profitability of the BEST project in Chile in terms of irr?
Simone Conticelli
Yes, thanks for the question. First of all, let me make initial comment saying that Enel is developing new battery energy storage system following the strategical goal to balance our portfolio. So, first of all, we see this battery energy storage system project like an improvement of our portfolio and a way to have some energy shift that can result in a better match between the demand and the production card. But looking at the battery energy storage system project as a standalone project, what we can say is that we launch this kind of project only if the return is at least 300 basis points above our work. And also that we make also some stress tests trying to change the market condition to see the resilience of this kind of project, also to some more stress and Critical scenarios.
Isabella Clemis
Okay, thank you, Simone. So move one. The other question is coming from Fernando Gonzalez. This is also for you Simone, from BTG Pactual. So the question is why did energy purchase cost in the generation segment increase so much if volumes were similar versus last year and spot prices were significantly below the first quarter 2025 levels even in the non solar hours? Simone.
Simone Conticelli
Okay, so in such a way as we answer at the beginning indirectly to this question, cause this negative impact from adjustments from the past entered as sourcing cost. And so you are looking also at the impact of this negative adjustment.
Isabella Clemis
Okay, thank you, Simone. So moving on, we're receiving a lot of questions. So the next one is coming from Andrew McCartney. Another question from Andrew from La Renvial. Good morning. Energy losses in the distribution segment continue to deteriorate during the first quarter 2026. Can you comment on what is driving that, how you expect to evolve and what can be done to reverse the trend? Gianluca?
Gianluca Palongo (Chief Executive Officer)
Okay, thank you for a question. So energy losses increased mainly due to tariff adjustments, some change in customer behavior, which have led to a rise in non technical losses such as the debt. So in the fourth quarter losses were also impacted by lower than expected demand and a more competitive market environment. That said, our loss levels remain below regional averages and we have a clear plan to reverse the trend. So we are strengthening our loss reduction strategy through this plan. So first of all, improved inspection targeting using better analytics. Second, expansion of micro and macro metering. So this is an action to help the balance, micro balance, increased field action and controls, considering the better analysis that we will do. And finally, enhanced coordination with authorities to address illegal connection. That is one of the problem that we have. So looking forward, we expect losses to gradually decline, targeting around 5.7% by 2028, supported by these operational and technological improvements. That is very important for us.
Isabella Clemis
Okay, thank you Gianluca for the question. I'm checking here other questions. Okay, so the other question is coming from Felipe Flores from Banchile City. The question is, my question is related to the capital increasing distribution. Will this be subscribed by a now fully used cash? How does the company plan to finance it? Or it's a red coin, how much would it take to recover the money? So Gianluca, if you can give some color on the capital increase.
Gianluca Palongo (Chief Executive Officer)
Yes, of course. Okay. The capital increase is intended to strengthen Enel Distribution financial position and it's expected to be supported by controlling shareholders in line with its long term commitment to the business. So from a financial, from a financial perspective, it will be covered through group level financial resources, ensuring absolute efficiency and flexibility. So in terms of returns, this is not a short term recovery investment. It supports the long term sustainability of the business through improved financial structure, lower financial costs and maybe it's very clear the ability to execute the investment plan under regulator framework. This is the last question that I can add in this case.
Isabella Clemis
Okay, thank you Gianluca. So I'm checking here, we are receiving another question. Some of them, some of them we have already talked about that is related the capital increase and also on the postponement on the divide. So I'm continue checking here. So another one was a question related also Gianluca regarding the. Regarding the VAR 20202024 that potentially is going to be a new pack. But Gianluca has already answered this. That is one of the proposals that could be done in order to have the payment on the vad. So let me just. Okay, so we have other questions. That is coming from Juan Felique Becerra that is relating. He asked Simone if you can give more details on the gas optimization contract on Shell. We have already included. But if I can check also now. So he has another question. Does this optimization imply lower contracted volumes or changing pricing terms with Shell? And regarding the three best projects highlighted in the presentation, can you provide more details on the expected timeline for each project to reach COD and enter in EGP capacity?
Simone Conticelli
Simone, so let's start talking about the Shell agreement. This is an agreement that has the goal to optimize our performance. As you know, you have a very valuable portfolio of gas contracts. Part of the contract is for LNG. Part of this contract is for gas from Argentina. What I want to stress is that the total amount of volume of gas that we can manage is higher of our needs. Even stressing the needs of our power plant during a dry year. So what we have done in this agreement is try to rebalance the amount of the general contract to make coherent our portfolio. And we did it in a very right moment in such ways. So we have also positive impact on 2026 results. On the other side, talking about the best.
Isabella Clemis
Yeah, this is. Go to Gianluca.
Gianluca Palongo (Chief Executive Officer)
Okay, so regarding the three best, to complement the answer regarding the three best projects highlighted in the presentation, that we could you provide more detail on expected timeline. So in this case. Okay, so in this case,
Isabella Clemis
yes. So the question Gianluca was regarding the best. So what we're expecting the COD on the best side. So what Angeluca was saying that we expect. Expecting it's included in our business plan that we have recently presented. And look, if you want now your mic is going back again.
Gianluca Palongo (Chief Executive Officer)
Okay. So during the 2025, we focused on engineering, permitting and project preparation. And with the regulatory framework now in place, we are starting construction in 2026 and expecting the COD during the third and fourth quarter of 2027. So our strategy also included additional best investment like we presented in the last capital market day in 2027 and 2028, reinforcing storage as a core pillar of our portfolio. So we will continue to closely monitor market conditions, maintain flexible approach, focus on profitability and value creation. This is our pillar in our optimization of our portfolio.
Isabella Clemis
Thank you, Gianluca. Another question is coming from Jay Samani from Scotiabank. This is for you, Simone. So where do you see NL Chile next avenues for growth giving that lower demand from unregulated customers? He's mentioned about the determination of the regulated PPAs. How is Nel Chile position itself for long term? And can we expect the company to maintain the current earnings level for growth? He's asking about our business plan.
Simone Conticelli
So can you repeat me the first part of the question please? Yes. Jay is asking you where do you see that NL Chile is going? So what are the strengths of our plan? He's also mentioned that we have seen the results, not the reduction of the regulated PPA. So he's asking what we are seeing the long term. So we are seeing more regulatory unregulated customers coming on new options and how we are positioning ourselves in the long term. Okay. ENEL will confirm its strategy in this moment. Clear. We see a reduction in the volumes of regulated contract, but this is related in how the auction will arise in the market. What we have to stress is that we won the full last auction also at competitive price on the market. So we have a very good portfolio in terms of price in the short term. Also we can stress the fact that the price of our portfolio, the average price in the next three years, we will maintain the same value even if the price on the market is going down. And for the following following year, we will keep on looking to a good mix among short term opportunity and also long term contract. That can be new regulated auction, but also long term contract with the big customers.
Isabella Clemis
Okay, thank you, Simone. We have a last question that is coming from Isabella from Bank of America. So she's asking what is the minimum cash position you are operationally comfortable with? You currently have a cash position of around $454 million. Do you plan on using your credit line this year or will you refinance your short term debt.
Simone Conticelli
So thanks for the question. You know that our business has a strong seasonality with some needs in terms of financing in the first and the second quarter and then and higher cash production in the second half. So we have an internal model to define the comfortable minimal cash position to cover the networking capital needs. And then for for the future financial needs, we plan to refinance using
Isabella Clemez (Head of Investor Relations)
long term financing that is under negotiation. Thank you, Simone. We do not have any more questions coming here from the chat. So any other doubts that you may have, the investor relations team will be fully available to execute other calls and to go into more details. Thank you very much for connecting today. Have a nice holiday. Thank you.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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