Good afternoon, ladies and gentlemen, and welcome to Colbún Third Quarter 2022 earnings call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Mr. Sebastián Moraga, CFO of Colbún. Sebastián, over to you.
Hello to everyone, and welcome to Colbún's third quarter 2022 earnings review call. My name is Sebastián Moraga. I am the company's CFO, and joining me today is Miguel Alarcón, the company's Deputy CFO, and Benjamín Sperry, our financial analyst. I hope that you have received our earnings report and an earnings review presentation that we have prepared to complement the analysis of our figures. Otherwise, you can download them at the investor section of our website. Agenda for today on slide 3 is as follows. We will begin talking about the highlights of this quarter, to then analyze in detail this quarter's results, and after that, we will provide an update on our growth opportunities. Following the presentation, there will be time to participate in a Q&A session. Now, please go to slide number 4 to review the highlights of this quarter.
On August 11, Colbún entered the environmental impact study of Celda Solar PV and storage project. This PV project would be located in the Region of Arica and Parinacota with a maximum installed capacity of 420 MW approximately, along with 240 MW battery system for 5 hours, making it one of the largest storage projects in the country. On September 21, the company announced its intention to desist from the execution of the San Pedro hydro project, thus withdrawing it from the environmental impact study to focus on its portfolio of solar, wind, and storage projects. Additionally, as a subsequent highlight, on October 5, the company signed a green term loan with the Sumitomo Mitsui Banking Corporation for a total of $160 million, maturing on October 2029.
The proceeds from this facility will be used mainly for the financing of renewable energy generation projects. Now, please go to slide number 5 to review the main consolidated figures of the company. Consolidated EBITDA in the third quarter reached $205 million, increasing 186% compared to $72 million in the third quarter of last year. This increase is mainly explained by the higher income from ordinary activities, higher hydro and solar generation due to better hydro conditions and the entry into operation of the Diego de Almagro PV plant at the beginning of this year, and lower cost of gas consumption due to a lower generation with this fuel as a result of maintenance works at our Nehuenco One and Nehuenco Two power plants.
This effect was partially offset by an increase in the cost of raw materials and consumable use, mainly as a result of a higher average purchase price of coal and oil. The company recorded a profit of CLP 81 million, compared to the profit of CLP 601 million in the same quarter of last year, mainly due to the sale of the subsidiary Colbún Transmisión, recognized in the quarter of 2021. As of September 30, the company holds close to CLP 1,150 million of cash, and our net debt to EBITDA ratio is at approximately 1.4 times. Now, I will turn to Benjamin, who will speak about the main drivers of this quarter results.
Thank you, Sebastian, and hello to everyone. Now, please continue to slide 7 for physical sales and generation balance analysis in Chile. Total generation of the period increased 14% compared to the third quarter 2021, mainly explained by a higher hydroelectric generation and higher solar generation since Diego de Almagro project started fully injecting to the system. These effects were partially offset by a lower gas generation, mainly associated with the maintenance of the Nehuenco One and Nehuenco Two plants. Physical sales during the quarter reached 3.2 TWh, 17% higher than the third quarter of last year, mainly explained by a higher physical sales to free customers due to the start of the contract with BHP in January 2022. These effects were partially offset by the expiration of a contract with CGE on December 2021.
Spot market balance during the third quarter recorded net sales of 236 GWh, while in the third quarter of last year, net sales were for 254 GWh. The variation is mainly explained by a compensation between higher consumption and higher generation during the period. Now, please continue to slide eight to analyze the EBITDA from the generation business in Chile for the quarter. EBITDA in Chile reached CLP 180 million in the third quarter, increasing 460% compared to the third quarter of last year. This variation is mainly explained by the higher operating income recurring during the period and a higher hydropower and fossil type generation to the detriment of geothermal generation. These effects were partially offset by higher cost of coal and diesel consumption due to higher average purchase price of these fuels.
Please continue to slide nine for a physicals of sales and generation balance analysis in Peru. Total generation of the period decreased 3% compared to the same quarter of last year, reaching 1,176 GWh, mainly due to a lower availability of the plant due to maintenance. Physical sales during this quarter reached 1,150 GWh, increasing 3% compared to the same quarter of last year, mainly explained by a lower energy sales to the spot market as a result of a lower generation due to the lower availability mentioned above. Spot market balance during this quarter recorded net sales of 533 GWh, compared to the net sales of 677 GWh during the same quarter of the previous year, due to a lower generation recorded during this quarter.
Now please continue to slide 10 to analyze the EBITDA in Peru for third quarter. EBITDA in Peru reached $25 million in this quarter, 25% higher than the EBITDA of $20 million recorded in the same quarter of last year, mainly due to higher sales to regulated clients and higher sales price across all customer segments due to positive variation of indexes included in energy contracts and higher marginal costs. Those effects were partially offset by a lower sales to the spot market, mainly driven by a lower generation due to lower plant availability. Now please continue to slide 11 for the consolidated non-operating income and net income analysis. Non-operating income in third quarter recorded losses of $34 million, decreasing with respect to the gain registered in the third quarter of last year, mainly due to the sale of the subsidiary, Colbún Transmisión, recognized in that quarter.
The company recorded a profit of CLP 81 million, compared to a profit of CLP 601 million in the same quarter of last year, explained by the same reason mentioned above. Now, continuing with the conference call, please go to slide number 13, where Sebastián will give you an update on the status of our growth opportunities.
Thank you, Benjamín. Regarding our growth opportunities in Chile, the relevant update for this quarter is as follows: Horizonte, in the third quarter, there was 28% progress of the project, in line with what was planned. The construction of the camp was completed. The construction of platforms and foundations of the wind turbines by STRABAG is still in progress, with 20 of 140 completed foundations and 8 in the process of being assembled. 73 anchoring systems for the tower arrived at the site, which will be installed in the foundations of the wind turbines. Regarding Los Junquillos, during the month of August, the project submitted its Environmental Impact Study to the Environmental Impact Assessment System. However, during the month of September, Colbún decided to withdraw it to incorporate additional information into the Environmental Impact Study.
The project is expected to reenter the system during the last quarter of this year. Regarding Celda Solar, the Environmental Impact Study for a 420-megawatt PV project and 240-megawatt of batteries was processed on August 11, and is currently in the issuance stage of ex ante and citizen participation. For more information regarding our pipeline of projects, please review our earnings report. This concludes Colbún third quarter 2022 results review. Thanks for listening, and now we are open to your questions.
Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold while we poll for questions. Thank you. Your first question is coming from Ezequiel Fernández of Balanz Capital. Ezequiel, your line is live.
Hi. Good morning, everybody. Thank you very much for the materials. Very complete, as always, and congratulations on these strong results. I have one question, and it's related to maybe what is a hot topic right now, which is gas provisioning. First, if you could tell me how much Argentine gas would you expect to receive during the fourth quarter and first quarter of 2023. It should be a little bit more than last year, same amount?
Ezequiel, hi. Miguel here. Thank you for your question. First, I would say that we already have a secured gas with Argentine producers going from October of this year, so the months that just passed, up until April of next year, and that's for a total volume of 3 million cubic of gas per day. As you know, that's good for up to 2 combined cycles on an annual basis. On a daily basis, sorry. I think that's the base case. We can then complement that with the long-term LNG supply contract we already have in place.
Okay.
Yeah.
Okay. I guess that maybe you could try to get some additional gas.
Ezequiel, I'm not hearing you very well, really. The connection's a bit. It's not that good.
Can you hear me a little bit better now?
That's better.
Thank you. Sorry about that. I was wondering if Colbún could get a little bit more Argentine gas on a spot basis?
We might. We've been doing that throughout this year. We started with the expectation of having gas only up until April, just for the same way that I explained for next year. We actually got
Mostly throughout the whole year. As an example, this quarter, we generated about 70% of total gas from Argentinian producers.
Okay. That's great. My second question related to gas is a little bit trickier. I don't know what's your take on the possibility of seeing some of the LNG vessels bound for Chile being actually redirected to Europe, because of someone paying a penalty and redirecting the ship. If that is something that could happen, what could be Colbún's strategy? Because I imagine that you wouldn't be able to get the volumes from Enap.
Yeah. I think, E zequiel, that we believe that we have a really strong contract, and in that sense, the suppliers have been delivered the gas as expected, based on the contract. Because of that, I don't foresee anything like that happening in the future, at least.
Okay. Thank you very much. That was very clear.
More than welcome. Take care.
Thank you. Your next question is coming from Martín Arancet from Balanz Capital. Martín, please ask your question.
Yes. Hi. Well, first of all, thank you for the materials too, and congratulations on the results. I have two questions. I would like to know them one by one, if that's okay. My first question is that Colbún closed the quarter with almost CLP 1.2 billion in cash. And you don't have material amortizations in the next year, and it seems that free cash flow for the year should be more than enough for your ongoing projects. Maybe if you could break down for us the cash uses in terms of CapEx and dividends that you have in mind for the remainder of 2022 and 2023.
Sure, Martín. Thank you for your question. First of all, yes, we did finish the quarter with close to CLP 1.2 billion. You have to recall that we already have committed about CLP 850 million for the deployment of the CapEx linked to the Horizonte wind farm project. That CapEx intensifies, to put it in that way, next year with about half of the amount being spent. I think that will be a strong use of proceeds. On top of that, we have the maintenance CapEx, which is close to CLP 70 million per year. On top of that, you have debt service, which is close to CLP 90 million.
Dividends, hard to say at this point because we still need to finish the full year results, but as you may know, our dividend policy is 50% of net income. The net income as of September of this year is close to $160 million. That would take about $80 million of dividends with current figures.
Okay, great. Very helpful. My last question then is about Peru, if you have any updates on possible new investments in solar and wind?
Nothing new or nothing concrete to comment other than say that as you may know, we built a team there, and we've started to explore new possibilities, aiming to expand our major generation and incorporate renewables. We're trying to look at potential opportunities available either at brownfield or greenfield, but nothing new apart from the strategy to comment on.
Okay, thank you very much.
You're welcome.
Thank you. Your next question is coming from Andrew McCarthy of Credicorp Capital. Andrew, your line is live.
Good afternoon, everyone. Many thanks, Sebastián, Miguel Alarcón, and thanks for the conference call and the presentation. I wanted to ask about the material fact you've just published on the negotiation of the PPA with Codelco. I understand that this is basically replacing the 30-year PPA you had linked to the Santa Maria coal-fired plant with the renewable PPA. It seems at first glance that the quantity of energy that you've got signed under this new contract is lower. So maybe if you could confirm that. The term is also unchanged, so running to 2044.
The other thing I was just trying to understand is in terms of thinking about the, you know, what do we expect on the margin that you're getting, you're currently getting from this contract with the new one that will come into force from 2026 onwards? If you could comment on maybe on a, you know, on an EBITDA for the megawatt-hour basis, what you're seeing there. The final aspect on that, if you could comment on what you're considering to do with the, you know, with the Santa Maria plant post 2025, what the plans are there for that plant. That to start off with, please.
Andrew, hi. Thank you for your question. Yes, as you correctly point out, we just issued a material fact regarding a modification on the contract between Codelco and ourselves. First of all, just to confirm some facts you just asked. First is that, yes, the tenure will remain the same up until 2044. In second place, there will be a transition period up until the thirty-first of December of 2025, in which we will maintain the volume of 2.5 terawatt-hour. After January 1, 2026, that volume will be adjusted to 1 terawatt-hour per year. That is correct.
Finally, of course, I cannot comment regarding pricing or EBITDA linked to this contract, but I can say, as I think we've said before, that the intention from Colbún behind this agreement was to substantially maintain the value from the original contract.
That's very clear. Thanks, Miguel. Just on, in terms of the what you do with the Santa Maria plant after 2025-
Ah.
I don't know if you can provide any color.
Yes. Sorry, I forgot to mention that. That was the last part of your question. As I think we've said in the past, Andrew, we still believe that coal plays an important role in the matrix in a broader sense. Being Santa Maria one of the newest and most efficient plants in the system, we believe that plant will also play a key role, at least in the coming years. There's no decision about Santa Maria in the long run, but I would say, of course, that we adhere to the decarbonization plans that was reached in an agreement among the generation companies and the government. I think up to this point, we cannot make any further comments regarding that.
That's very clear. Thanks very much, Miguel.
Sure. No problem.
Thank you. Ladies and gentlemen, if you do have any remaining questions, please press star one on your phone at this time. Okay, it appears we have no further questions in the queue. I will now hand back over to Miguel for any closing comments.
Okay. Thank you to everyone for attending to this conference call, and have a great weekend, and we'll see you again for the next quarter results. Bye-bye.
Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.