Earnings Call: Q3 2019

Nov 4, 2019

Good day, ladies and gentlemen, and welcome to the Culbourn Third Quarter 2019 Earnings Call. All lines have been placed on a listen only mode and the floor will be open for questions and comments following the presentation. At this time, it is my pleasure to turn the floor over to your host, CFO, Sebastien Morzabi. Sir, the floor is yours. Hello, everyone, and welcome to Golboon's Q3 2019 earnings review call. My name is Sebastian Moraga. I am the CFO of the company. And joining me today are Miguel Alcon, our Deputy CFO and Soledad Vasiles from the Investor Relations team. 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 Investors section of our website. Agenda for today on Slide 3 is as follows. We will begin talking about the highlights of the quarter to then analyze in detail this quarter 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 and A session. Now please go to Slide number 4 to review the highlights of this quarter. 1st, regarding the commercial strategy. In October 2019, Corvino was informed of the award of our renewable energy supply contract for 3,000 gigawatt hour year with BHP for Escondilla and Spen minesides. The contract starts in January 2022 for a 10 year period. The agreement will allow the development of our portfolio of renewable projects, especially of the Horizonte wind farm of approximately 600 megawatts of installed capacity. Considering this agreement during 2019, the company has contracted approximately 3,000 500 gigawatt hour year of its generation with new and regulated customers. 2nd, regarding the expansion strategy, Colvin continues looking for renewable projects throughout the country with the target of consolidating a robust and diversified project portfolio, in line with the goal of doubling our current installed capacity, incorporating renewable generation equivalent to a total of 4,000 megawatts. In this line and related to the Horizonte project, progress is being made in the feasibility stage and the wind turbines option concluded. For its part, the Diego del Magro Sur solar project received environmental approval during the Q3 of this year. 3rd, regarding the fixed cost efficiency plan implemented during 2018, it can be highlighted that Colbun has continued its execution. This is reflected on the consolidated financial statements fixed cost figures. 4th, during this quarter, Corun was selected to list for the 4th consecutive year at the Dow Jones Sustainability Index Chile and for the 3rd year at the Dow Jones Sustainability Index Pacific Alliance. In addition, the company led the ranking of Informa Raporta standing out as the company that best reports information to the market. And the Machicura Vacation Center was awarded as the best sustainable practice in the good practices for a more sustainable electric future contest. 5th, the Santa Maria power plant is declared and available since July 28. Due to the major maintenance scheduled for 2019 and the finding of a failure in the steel turbine. With the available information on estimated preparation terms and considering the average marginal cost during the unavailable period, the impact of the failure on the company's financial results is not material in the context of Colvun. Colvul estimates that the plant will restart its operation in the 1st days of November. Now please go to Slide number 5 to review the main consolidated figures of the company. Consolidated EBITDA for the Q3 of this year reached $179,000,000 increasing 14% compared to the $156,000,000 EBITDA for the Q3 of 2018, mainly due to lower costs explained by lower gas consumption expenses, mainly driven by a lower price in Chile and second, to lower coal consumption due to a lower generation with that fuel. Those effects were partially offset by an increase on energy purchases in the spot market in Chile during this quarter. Consolidated profits reached $55,000,000 2% higher than the $54,000,000 in profit in the Q3 of 2018, mainly explained by the higher EBITDA recorded in the quarter. Financial investments totalized $780,000,000 and net debt to last 12 months EBITDA ratio is set at 1.3 times. The average long term financial debt interest rate is 4.5% in U. S. Dollars. Colbun has a total installed capacity of 3,895 Megawatts comprised of 2,252 Megawatts in Thermal Units, 1634 in Hydro and the rest arising from our PV power plant, Orocheryl. In terms of transmission asset, it owns 941,000,000 of transmission lines and 28 substations. Now I will turn to Soledad, who will speak about the main drivers of last quarter results. Thank you, Christian, and hello to everyone. Now please continue to Slide 7 for our fiscal sales and generation balance analysis in Chile. Total generation of the period decreased 14% compared to the Q3 of the previous year, reaching 2.6 6 terawatt hour, mainly due to a lower coal, hydro and diesel generation, partially offset by a higher wind and gas generation. Physical sales during the Q3 of this year reached 2.9 terawatt hour, 5% lower than the same quarter of the previous year, mainly explained by lower sales to regulated clients and to spot market, partially offset by higher sales to unrouted clients. Stock market balance during the quarter recorded net purchases of 3.15 gigawatt hour compared with the net sales for 49 gigawatt hours in the Q3 of 2018 as a result of the lower generation. Now please continue to Slide 8 to analyze the EBITDA from the generation business in Chile for the Q1 of this year. EBITDA of the generation business in Chile reached BRL 145 1,000,000 in the Q1 of this year, increasing 10% compared to the same quarter of the previous year. The higher EBITDA of the quarter is mainly explained by lower raw materials and consumables use, mostly driven by, 1st, a lower coal generation and second, a lower gas consumption cost due to a decrease in the purchase price of the RPO. These effects were partially offset by an increase in spot market purchases. Now please continue to slide 9 to analyze the EBITDA from the transmission business for the 3rd quarter of this year. EBITDA in the transmission business reached BRL 17,000,000 this quarter, increasing 4% compared to the Q3 of 2018, mainly explained by an increase in revenues from solar transmission assets due to the release of the 60% decrease in October 2018, which modified the pricing of those assets. Now please continue to Slide 10 for our physical sales and generation balance analysis in Peru. Total generation of the period increased 6% compared to the Q3 of 2018, reaching 1.2 terawatt hours, mainly explained by the higher availability of the plant due to a program maintenance carried out during the Q3 of 2018. Physical sales during the Q3 of this year reached 1.2 terawatt hour, increasing 6% compared to the same quarter of the previous year. The increase is explained by higher sales to the spot market and to customers under contract. Spot market balance during this quarter recorded net sales for 4.30 gigawatt hours, increasing 6% to 16% compared to the 3rd quarter of the previous year. Now please continue to Slide 11 to analyze the EBITDA in Peru for this quarter. EBITDA in Peru reached BRL 16,000,000 in the Q3 of this year, 117% higher than the EBITDA of BRL7 1,000,000 recorded in the Q3 of the previous year, mainly due to, 1st, the higher generation of the quarter and second, the recognition of the gas distribution contract with CALIA as a financial lease from January 2019 onwards. Now please continue to Slide 12 for the consolidated non operating income and net income analysis. Non operating income in the Q3 of this year presented losses of €34,000,000 66% higher than the losses of €20,000,000 in the Q3 of the previous year. The higher losses are mainly explained by first, a negative effect of the variation of the Chilean peso to dollar exchange rate on temporary balance sheet items in local currency during the quarter and second, higher sales and development expenses recorded in the line other profit loss and third, higher financial expenses due to the recognition of the gas distribution contract with CALIA as a financial leader. The company reported in the Q3 of this year profits of BRL 55,000,000, 2% higher than the BRL 54,000,000 profit in the same quarter of the previous year. The higher profit is mainly explained by the higher EBITDA recorded in the quarter previously explained. Now continuing with this conference call, please go to Slide number 14, where Sebastian will give you an update on the status of our growth opportunities. Thank you, Soledad. Regarding our growth opportunities in Chile, we have focused our growth in renewables based on 3 pillars. 1st, developing a pipeline of projects. Regarding incorporation of renewable energy from variable sources, up to this date, Colzum has been able to complete a portfolio of locations for wind and solar projects, which are in different stages of studies and development. Horizonte, a wind farm of 600 megas approximate of capacity located in Atacama Rinto. Diego del Magro Sur 1 and 2, 2 PV projects of an overall capacity of 200 megas located in the Atacama region Intipacha, a PV project of 430 Megawatts located in the Autorogaster region. Jarvin Sonar, another PV project of 4 50 Megas located in the Tarabacay region. Machikura, a PV project of 10 megawatts located in the Malo region. Additionally, at the end of Q3 of this year, Cobun holds a portfolio of locations for other wind and solar projects, which are in early stages of development. For more details on this slide, you can refer to the latest earnings report available at our website. 2nd, the company does not rule out the purchase of renewable assets in operation. And finally, the 3rd pillar of our growth in renewables is acquiring energy from third parties. Regarding the transmission business, Colby has several projects for the expansion and enhancement of the company's current transmission assets with a total investment value of approximately $50,000,000 In terms of our international expansion strategy, as we have mentioned before, we continue searching for growth opportunities in selected countries of the region in order to maintain a leading position in the power generation business and to diversify our sources of income. With this, we are concluding Colbun's Q3 year's results review. Thanks for listening. And now we are open to answer your questions. Thank you. The floor is now open for questions. At this time, I'd like to turn the call back to management. Okay. Since there are no questions, with this, we conclude convuls third quarter results review. Thanks for listening and hope you all have a great week. Bye bye. Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time and have a wonderful day.