Good morning, ladies and gentlemen, and welcome to the Colbún second quarter 2022 earnings review 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. Sebastián, over to you.
Hello to everyone, and welcome to Colbún's second quarter 2022 earnings review call. My name is Sebastián Moraga. I am the company's CFO, and joining me today is Miguel Alarcón, company's Deputy CFO, and Isidora Zaldívar, Head of Investor Relations. I hope that you have received our earnings report and 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 results. 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 the slide number four to review the highlights of this year.
On May 10, 2022, Colbún paid a dividend of CLP 73 million. This payment is comprised of a definite dividend of CLP 23 million and an additional dividend charged to the profits of the previous fiscal year of CLP 50 million. Based on the foregoing and considering the CLP 250 million and CLP 750 million paid in October 2021, associated to the extraordinary income from Colbún's transmission sale as interim dividends and eventual dividends, respectively, the total distribution of dividends amounted to CLP 1,073 million. As it was reported to the CMF through an essential fact on May 16, 2022, Mr. José Ignacio Escobar was appointed as CEO of Colbún, replacing Mr. Thomas Keller. During board session on June 28, 2022, Mr. Andrés Leguina resigned from the position of director, which became effective as of the same day.
In the same session, the board of directors agreed to appoint Mr. Jaime Maluk as director. Now, please go to slide five to review the main consolidated figures of the company. Consolidated EBITDA in second quarter reached CLP 153 million, increasing 4% compared to the CLP 148 million EBITDA in the second quarter of last year. The increase is mainly explained by the higher operating income driven by higher sales to the unregulated clients in Chile, higher energy and power sales in the spot market associated with a higher average sales price, despite the lower physical sales in this segment, and the income associated with the creation of the water reserve.
These effects was partially offset by lower operating sales from regulated clients and higher cost of raw materials and consumable use, driven by the cost of gas consumption as generation with this fuel was higher this quarter. The company recorded a profit of CLP 38 million, compared to the profit of CLP 33 million in the second quarter of last year, mainly due to the lower tax expenses explained by the appreciation of the Peruvian sol during the second quarter of 2022 and its impact on the deferred taxes. Given that Fenix tax accounting is in Peruvian soles according to the tax legislation in Peru. As of June 30, the company holds CLP 990 million in cash and a net debt EBITDA ratio of 2.2x . Now, I will turn to Isidora, who will speak about the main drivers of this quarter's.
Thank you, Sebastian, and hello to everyone. Now, please continue to slide seven for physical sales and generation balance analysis in Chile. Total generation of the period increased 13% compared to the second quarter of last year, mainly explained by, one, higher generation based on gas and diesel as a result of a higher economic dispatch and decoupling in the interconnected system. Two, higher solar generation since Diego de Almagro project has started fully injecting energy to the system. These effects were partially offset by lower hydroelectric generation, mainly associated with the water reserve. Physical sales during the quarter reached 3.5 terawatt-hours, 15% higher than the last quarter of last year, mainly explained by higher physical sales to unregulated clients driven by the entry into force of BHP contract in January 2022. This effect was partially offset by the expiration of CGE contract in December 2021.
The merchant balance during this quarter recorded net sales of 537 GWh, while in the second quarter of 2021, net sales reached 622 GWh. The variation is mainly explained by higher commitments during the period. Now, please continue to slide eight to analyze the EBITDA from the generation business in Chile for this quarter. EBITDA in Chile reached $131 million this quarter, increasing 14% compared to last year. This variation is mainly explained by the higher operating income recorded during the period. This effect was partially offset by higher raw materials and consumable use, mainly due to the higher generation with gas and diesel during the quarter.
Now, please continue to slide nine for a physical sales and generation balance analysis in Peru. Total generation of the period increased 19% compared to the second quarter of last year, reaching 929 GWh, mainly due to a greater economic dispatch of the plant associated with a greater demand of the system. Physical sales during this quarter reached 952 GWh, increasing 8% compared to the last quarter of last year, mainly explained by higher sales to regulated customers associated with a higher demand for such contracts. Spot market balance during the second quarter of 2022 recorded net sales of 318 GWh, compared to the net sales of 254 GWh during the same quarter of the previous year, due to the highest generation recorded during the quarter.
Now, please continue to slide 10 to analyze the EBITDA in Peru for this quarter. EBITDA in Peru reached $22 million during the second quarter of 2022, 15% higher than the EBITDA of $15 million recorded during the second quarter of 2021, mainly due to higher sales to regulated clients and two, higher sales to the spot market, mainly driven by higher marginal cost after the change in the gas price regulation in July 2021. Those effects were partially offset by lower sales to unregulated clients, given the expiration of a PPA contract in December 2021. Now, please continue to slide 11 for the consolidated non-operating income and net income analysis. Non-operating income in this quarter recorded losses of $41 million, in line with the losses of $40 million in the second quarter of 2021.
The company recorded a profit of $38 million, compared to the profit of $33 million the second quarter of 2021, mainly explained by the lower tax expenses previously mentioned and the higher operational results. Now, continuing with this conference call, please go to slide number 13, where Sebastián will give you an update on the status of our growth opportunities.
Thank you, Isidora. Regarding our growth opportunities in Chile, the relevant update for this quarter is as follows: Horizonte. In the second quarter, an 18% progress was achieved in line with budget. The delivery of the first stage of the camp was completed, the mobilization to the site of the main contractors was concluded, and the construction of platforms and foundations of the wind turbines began. 36 anchoring systems for the towers arrived at the site, which will be installed in the foundations of the wind turbines from the third quarter of 2022. Los Junquillos. During the second quarter of the year, progress continued on the environmental impact study. It is expected to enter the processing of the environmental impact study in the coming months. Celda Solar.
During the second quarter, advancement was achieved on the review of the final version of the environmental impact study prior to its entry for processing. Meetings were also held to socialize the project with the relevant authorities, residents, and communities of the zone. The preparation of the AER was concluded for a 420 MW project and a 240 MW battery of five hours duration, which expected to be processed in the coming months. For more information regarding our pipeline of projects, please review our earnings report. This concludes Colbún's second quarter of 2022 results review. Thanks for listening, and now we are open to answer your questions.
Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments via the phone lines, 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 speaker phone to provide optimum sound quality. If you would like to ask a question via the webcast, please click on the Ask Question box on the left side of your screen, type in your question, and hit Submit. Please wait while we poll for questions. Thank you. Your first question is coming from Martín Arancet of Balanz Capital. Martín, please ask your question.
Hi, this is Martín Arancet from Balanz Capital. Well, first of all, congratulations on the results, and thank you for the materials, as always. I have four questions. Sorry for extension. I would like to go one by one, if that's okay. Well, my first question regarding Horizonte, just to check, is the budget formally closed and fixed with the EPCs, or do you have some open budget items? And also, if you could give us an expecting COD in 2024.
Martín, hi, Miguel here. Thank you for your question. I would say that yes, Horizonte has its main contracts duly signed, and because of that, we expect to be in line with the announced CapEx, total CapEx. That CapEx was updated because of the increase in the installed capacity of the power plant, and it is about CLP 898 billion, sorry, for 812 MW of installed capacity. The expected commissioning date remains the same. That would be starting in November of 2023 to finalize full commission COD in November 2024.
Okay, perfect. My second one is regarding Santa Maria. When do you expect to see marginal cost for dispatch closer to international coal prices?
Sorry, can you please repeat the question, Martín?
Yes. Regarding Santa Maria, when do you expect to see marginal cost for dispatch closer to international coal prices?
I cannot give you a specific date. What I would say.
Yeah.
is that we tend to have purchase programs for coal, and we do that regularly, let's say twice a year. Because of that, yes, there is some catch up to make in terms of the variable cost of the power plant and the actual cost of fossil fuel, of coal in this case. Because of that, we still have some coal stored that goes beyond the actual total cost. What I would say that is you need to remember that because of a particular PPA that we have with this power plant, there is a complete pass-through of the variable cost of this unit.
Because of that, we are in some way protected in terms of the expected margin of this plant going forward, and we should be not materially affected by changes in the coal, in the price of coal going forward.
Okay. Perfect. Well, regarding gas in Chile, could you show us the mix of gas supply for this quarter? How much from your local contract, how much for Argentina, and confirm that you did not buy any spot volumes on the LNG market.
Yes, of course. For this quarter, we have Argentinian gas for 436 GWh, and for the ENAP contract, we have 1,128 GWh. That's for this quarter. In terms of the semester, Argentinian gas reached 1,400 GWh, and the ENAP contract, 1,700 GWh.
Well, my last question then, going to Peru, Fenix has shown solid cash flow generation. What cash uses do you see as more likely moving forward there? Do you see opportunities for expanding with your renewables footprint there? Or perhaps via an auction with distributors or maybe industrial PPAs? Also, if there is the alternative of maybe dividends into Colbún Chile.
I didn't get the last part, Martín. Let me try to answer your question. First of all, the Peruvian business has been improving significantly over the last 12 months after the change in the gas generation price that took place in July of last year. Because of that, we are having a cash surplus, as you correctly point out. The main uses for this cash in the second semester would be to service debt in September and to pay the scheduled maintenance. Apart from that, and talking more about Colbún's point of view, I would say that we maintain our intention to expand the platform in Peru by growing that generation unit, hopefully trying to make it more diversified and hopefully incorporating different types of technology, mainly renewables.
That's still the intention that we maintain for a few years now.
Okay. Thanks. Thank you very much.
Thank you. Your next question is coming from Alejandra Andrade of JP Morgan. Alejandra, please ask your question.
Hi. Thank you so much for taking my question. I had a couple of questions. First, I don't know if you can comment a little bit on hydrology going forward and how you're seeing that develop in Chile. Secondly, if you could just comment on your gas contracts with ENAP, how is pricing done for those? Is it just LNG? Is it more Henry Hub? Or what's the reference for those ones? Thanks.
Hello, Alejandra. This is Isidora. In terms of hydrology, we have experienced greater rainfalls in most of the basins in Chile, and also most impacted in the basin that we have the most installed capacity. It's very good news for the company. If we compare rainfalls of the hydrological year compared to the last one, we have, for example, Maule region, 3% higher than the last year, 5% in Laja, and 9% in Biobío. Also if we compare that figure with an average year, we maintain higher rainfalls for 2% in El Maule, 9% in El Laja, and 11% in Biobío. We expect to have greater hydroelectric generation in the coming quarters. Yes?
Sorry, just to complement Alejandra's previous question, we're still waiting for the first melting forecast. That melting forecast should be available by the beginning of September. With that, we should have more visibility on accumulated rainfall and what to expect in the final pool of this year regarding hydro outputs. Regarding your second question about LNG and the ENAP contract, that contract has a reference that in some way replicates the main supply contract that ENAP has with its own suppliers, and the reference to that is linked to Brent prices. There is a Brent indexation that is adjusted in the pricing supply.
I do have to say that in Colbún, we have a hedging program, and with that we try to cover our exposure to Brent prices, and we do that using especially call options. That's it.
Great. Thank you so much.
Thank you. Your next question is coming from Andrew McCarthy of Credicorp Capital. Andrew, please ask your question.
Good afternoon, everyone. Many thanks, Sebastián, Miguel, Isidora for the presentation and the call and opportunity to ask questions. I had a couple of questions. First one is just in terms of the greenfield projects in Chile, especially the ones that already have their environmental approval, i.e., Inti Pacha and Jardín Solar. I'm just wondering if you have any further color there on expected timing of when those could maybe get green-lit. Just connected to that, you know, how you're thinking about that sort of from a management perspective that sort of capital allocation decision, you know, maybe accelerating the CapEx versus payment of dividends to shareholder. How you...
That sort of dilemma as it were, are you thinking about that at the moment? Then my second question is just on the regulated segment public power auction we had last week. We got obviously the results of all the bids there. A big upward shift in, you know, where people or where companies were making their offers. A heavy, you know, a preponderance of offers around sort of $45-$50 per MWh range versus, you know, $30, I think, more or less kind of the average where people were offering last year. It's a big upward shift.
Just interested to hear what your take is on that and also with respect to where Colbún was bidding in that auction. You know, the sort of rationale there that you were seeing. Be very interested to hear your thoughts on that. Many thanks.
Hi, Andrew. This is Sebastián. Thanks for your question. Regarding the first one in greenfield projects, I would say we keep on following the strategy we have been explaining probably the last seven years. Which is basically, we seek the opportunities to secure the location. That location must have good characteristics such as, in the case of the solar projects, a good radiation, location to the consumption centers, distance from the transmission lines and having obviously the social and environmental, I would say, issue well covered. Having said that, yes, today, as you mentioned, we have a couple of projects awaiting there.
What are those projects awaiting? There is basically our philosophy of having projects and assets and a portfolio of assets tied to PPAs. It is very unlikely we would move forward those projects without having a PPA going into that equation. It would be unlikely for us to develop that project going into, say, the spot market. We are looking very closely at all the transmission issues that are happening in the system. That, I would say, is a new ingredient into the equation. In simple, Andrew, those projects would be most likely triggered if we would be successful in, say, a relevant PPA, such as what happened with BHP and Horizonte 3 years ago.
I would add to that equation today is how we are seeing that the transmission congestion, especially in the north, would be solved in the couple months coming through. On that note, to your question to the regulated auction, yes, I share your view that there was a shift in prices. And that and I would say that's from us, that's natural, basically, because today we are seeing an increase in the CapEx. Today, well, if you go to public information sites, you see that the costs both of solar and wind capacity have spiked for different reasons, basically raw materials, disruption in supply chains, et cetera. You need to add a new ingredient, which is the financing costs. Financing costs have been coming up.
I would also add to the last piece of the equation is also again transmission issues. These regulated auctions imply that you typically need to inject or you need to serve customers in a wide range of locations. That obviously has some basis risk in terms of pricing. I would say those, for me, would be the three elements that could explain that the prices in this auction showed a different level from the ones that we have been probably seeing the last five years.
Very helpful. Many thanks, Sebastián.
Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad or type your question in the webcast chat box. Okay. There are no more questions in the queue or the phone lines. Isidora, do you have any questions on the webcast?
Okay, if there are no more questions, we would like to thank all the investors that tuned in to this second quarter results presentation and hope to see you soon in the next quarter. We wish you all a very good weekend. 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.