Ladies and gentlemen, thank you for standing by. I would like to welcome you to Colbún's Q1 2024 Results Conference Call on 3 May, 2024. At this time, all participant lines are in listen-only mode. The format of the call will be a presentation by the management team, followed by a question and answer session. Without further ado, I would now like to pass the line to Mr. José Ignacio Escobar, the CEO of Colbún.
Thank you everyone for joining us in reviewing our quarterly results. My name is José Ignacio Escobar. I'm Colbún's CEO, and joining me today is Miguel Alarcón, the company's CFO, and our investor relations team. I hope you have received our earnings report and our earnings review presentation that we have prepared to complement the analysis of our figures. Otherwise, you can download them from the investor section on our website. On this occasion, we will review the highlights of the quarter, the company's consolidated results, our liquidity and debt position, and finish with an update on the development of our pipeline of projects. Now, please go to slide number four to review the highlights of this year. First, regarding the operation of our power plants. On 11 January , 2024, Central Santa María completed its major maintenance, which lasted for 75 days.
Among the main activities carried out in this major maintenance are: improvement to the steam turbine control system, change of the low pressure turbine rotor, change of the valve's design that controlled the entry of high pressure steam, predictive boiler inspection, among others. On 20 January 2024, Unit 1 of the Nehuenco Complex restarted operations after the unit's fire on 4 August 2023, while it was undergoing major maintenance. During the Q1, Fenix Power carried out its annual maintenance, which caused the plant to be out of service for the last 16 days of February. Second, with respect to our commercial strategy, this quarter, we signed power purchase agreements with 22 clients for up to 2,070 GWh per year. Among the main contracts signed are: first, Antofagasta Minerals' 100% renewable energy supply contract for the project, Nueva Centinela.
This contract has a term of 15 years and is for a total up to 912 GWh, starting from 2025 onwards. Second, Codelco, a 100% renewable energy supply contract, which will enter into force in January 2026 for 15 years, providing up to 1.1 TWh per year. Third, regarding our growth opportunities in Chile, the relevant updates for this quarter are as follows. On 26 January 2026, the company began the environmental impact assessment of the Cuatro Vientos Wind Farm in Llanquihue. This project will consist of 48 wind turbines with an installed capacity of up to 360 MW. Environmental evaluation services indicated that the storage projects linked to the Diego Almagro Solar Power Plant, Inti Pacha and Jardín Solar Power Plants, don't have to submit a new environmental impact assessment.
During the Q1 of 2024, 80% progress was reached of the Horizonte Wind Project. As of today, $668 million have been disbursed, of a total of approximately $900 million. Additionally, on March 28, the company entered a modification project into the Environmental Impact Assessment System, which will increase the total capacity by 20%. This expansion will add up to one hundred and eighty MW of additional capacity, through the installation of 24 new wind turbines. Regarding growth opportunities in Peru, relevant updates for this quarter are as follows: On January 25, Fenix Power began the operation of its first green hydrogen plant. This project will allow to replace 100% of the gray hydrogen consumed by the plant, reducing its carbon footprint by around 70 tons of CO2 equivalent per year.
On March 14th, Fenix Power entered the Bayóvar project into environmental impact approval studies in Peru. The project has a maximum installed capacity of 660 MW to be built in two phases. This wind farm is located in the department of Piura, in the north of Peru. For more information regarding our pipeline of projects, please review our earnings report. Finally, subsequent highlights. On April 25th, the ordinary shareholders meeting was held and agreed to distribute a final dividend of $25 million, which added up to the $169 million paid in December 2023, reached a total of $175 million, which represents 50% of the distributable net income for the 2023 year, according to the dividend distribution policy agreed on 2023 annual shareholders meeting.
Now, I will turn to Miguel, who will speak about the main drivers of the results for this quarter. Miguel?
Thank you, José Ignacio, and hello to everyone. Before starting with our quarterly results review, I would like to highlight some relevant data about the system's operation. In Chile, average marginal cost measured at Alto Jahuel decreased 60% compared to the Q1 of last year, averaging $47 per MWh in the Q1 of 2024. Electricity demand grew at a rate of 3.8% compared to the Q1 of 2023. On the other hand, hydrological year, which is measured from April 2023 to March 2024, ended with a probability of exceedance of 57%, compared to 89% recorded in 2023. In Peru, Santa Rosa's average marginal cost during the Q1 2024 reached $32 per MWh. Electricity demand grew at a rate of 3.6% compared to the Q1 of 2023.
In turn, the related year ended with a probability of exceedance of 10% compared to the 78% recorded last year. Please go to slide number 10 to review our physical sales in each country and our consolidated operating income figures. In Chile, physical sales during the quarter reached 3.1 TWh, decreasing by 7% compared to the same quarter of last year, mainly due to, first, lower sales to regulated clients, driven by the expiration of contracts in this segment in December 2023. And second, lower physical sales to unregulated clients, explained by a lower consumption recorded this quarter by the mining industry. In Peru, physical sales during this quarter reached 817 GWh, decreasing by 14% compared to the Q1 of 2023.
Primarily due to, first, lower sales to regulated clients due to an option execution that extended the contract's maturity at the expense of lowering the annual contracted capacity. And second, lower sales to unregulated clients, given the expiration of contracts in this segment in December of last year. The Q1 of the year, consolidated operating income amounted to $382 million, decreasing by 31% compared to revenues recorded in the Q1 of last year. In Chile, operating income for the Q1 of 2024 amounted to $332 million, decreasing by 33% compared to the $495 million recorded in the Q1 of 2023.
Mainly due to, number one, lower sales to unregulated clients associated to the lower average sales price, giving the decrease in the value of these contracts indexators, accompanied by lower physical sales in this segment. Number two, lower sales to regulated clients, mainly associated with contracts expirations in this segment. And finally, lower sales in the spot market, primarily explained by a lower average, average sale price. In Peru, operating income amounted to $51 million, decreasing by 15% compared to the income of $60 million recorded in the Q1 of 2023. Mainly explained by lower sales to regulated clients, due to a lower contracted annual capacity associated with the contract's expiration in this segment. Now, please go to slide number 11 to review our total generation for each country and the consolidated raw materials and consumables used cost figures.
In Chile, total generation for the quarter reached 3.2 TWh, decreasing 6% compared to the same quarter of last year. This was mainly due to a lower gas generation, explained by a lower economic dispatch and the availability of Unit One of the Nehuenco Complex until January 20, due to a fire instance in the Q3 of 2023. These effects were partially offset by higher hydrological generation, giving the better hydro conditions since June of last year. In Peru, total generation reached 771 GWh, a 20% decrease compared to the Q1 of 2023, mainly due to the maintenance carried out, which cost the power plants be out of service for the last 16 days of February.
Raw materials, consumables, used costs in the Q1 of this year amounted to $196 million, decreasing by 39% compared to the same quarter of last year. In Chile, the 43% lower figure is mainly explained by, number one, lower gas consumption costs associated with the lower generation with this fuel. Number two, lower energy and capacity purchases, mainly due to the previously mentioned contract expiration. And number three, lower coal consumption costs, explained by the lower average price of this fuel compared to the Q1 of 2023. The figure in Peru also shows a decrease compared to the Q1 of last year, mainly explained by the lower gas consumption costs associated with the reduced generation with this fuel, due to the power plant unavailability, resulting from its maintenance carried out at the end of February.
Now, please go to slide 12 to review the main differences in the consolidated EBITDA for this quarter. Consolidated EBITDA reached $148 million during this quarter, decreasing 23% compared to $192 million EBITDA in the Q1 of 2023. The main factors which explain the decrease are: in Chile, lower sales to unregulated and regulated customers and to a spot market, partially offset by lower gas consumption, lower energy and capacity purchases, and finally, lower coal consumption. While in Peru, it was lower sales to regulated customers, partially offset by higher energy and capacity sales and lower gas consumption. To conclude with the financial figures review, please go to slide 13, to review this quarter's consolidated profit.
The company recorded a profit of $59 million in the Q1 of 2024, compared to $92 million profit obtained in the same period of last year, primarily due to the lower EBITDA previously mentioned. This impact was partially offset by, first, lower tax expense in the period, and second, a lower non-operating loss recorded during the period. Now, please go to slide number 15 to analyze the consolidated cash flow of the quarter. The company recorded a negative net cash flow of $20 million, which compares to a negative net cash flow of $91 million in the Q1 of 2023.
In terms of operating activities during the Q1 of this year, a positive net cash flow of $75 million was generated, compared to a positive net cash flow of $78 million in the Q1 of last year, mainly explained by the lower operational income recorded during the period. In terms of financing activities, they generated a negative net cash flow of $48 million during the Q1 of this year, in line with the negative net cash flow of $47 million in the same quarter of last year. Finally, in terms of investment activities, they generated a negative net cash flow of $47 million during the Q1 of 2024, compared to a negative net cash flow of $122 million in the Q1 of 2023.
Mainly explained by lower CapEx disbursements associated with the Horizonte wind farm, compared with disparate disbursements during the Q1 of 2023. Now, please go to slide number 16 to analyze consolidated financial debt held by the company. Gross financial debt this quarter reached $2,102 million, with an average life of 5.7 years and an average interest rate of 3.8%. Net debt to EBITDA ratio for this quarter reached 1.7 times. During this quarter, $17 million were designated to debt service, of which $5 million corresponds to interest and $12 million to capital amortization payments. With this, we conclude Colbún's Q1 of 2024 results review. Thank you for listening, and now we're open to answer your questions.
Thank you very much. We will now move to the question and answer section. If you would like to ask a question, please press star two on your phone and wait to be prompted. If you're dialed in by web, you can type your question in the box, or request to ask a voice question. We'll now wait a moment or two for the questions to come in. Our first question comes from Fernán González from BTG. Your line is open, please go ahead.
Hi, guys, good morning. Could you explain a bit further the lower regulated volumes in Peru? I mean, this option to extend the contract maturity at the expense of lowering the annual contracted capacity. If you could provide more details on that, please. And my second question is that in the operating income in Chile, there was a $38 million gain in the quarter, which is normally a lot lower than that. If you could explain also what's behind that number?
Hi, Fernand, this is Miguel. Thank you for your question. Related to the Peru question operation, this is something that we've done in previous quarters, and basically it's a reflection of the situation that's happening in the market, in which most of the distribution companies are over-contracted in terms of capacity. And we, on the other side, are willing, of course, to extend the maturity of those contracts, trying to displace contracted capacity from current period to long-term contracts and in future in time. That's why there's a mechanism that's in some way consolidated in the system, in which you can agree with them a modification the PPA contracts, in the sense of reducing the amount of contracted capacity, and move it forward further on in the contract to make it longer.
And this, of course, helps in turn, the discourse to reduce the overcapacity situation. There's a payment linked to that, that we register in the financial statements, and it basically tries to be close to NPV zero exercise. That's basically the first question. And the second one, if you can repeat it, please?
In Chile, in the operating income, you had a $38.5 million gain, which is relatively large when you look at it historically. So I wanted to know if there was something, a one-off, something special that is explaining that number.
Give me a minute, please. I don't see the gain, Fernand, the operational gain. Basically, on the non-operating side, we don't have anything particular. It's a combination. We see... I actually see a loss, a $16.6 million loss.
In Chile.
Sorry, in Chile, operating income.
Yeah, I was looking at it at the press release.
Give me, please, a minute. I'll take another question and get back to you with the answer later on this call.
Okay, perfect. And just my final question would be the Bayóvar project in Peru. If you could share the rationale behind the decision of selecting that particular project, which is in northern Peru. So, if you could share why you decided to go for that one. Is it the location? Are there big PPAs in the area that you could compete for? The solar resource is better? I don't know, if you could share your thoughts on this.
Yeah, thank you. I will answer on that. Yeah, you're referring to Bayóvar project in the north, the wind farm. So yes, we, we are permanently scanning the country for, for finding, you know, projects that are in line with our, with our growth strategy, both in solar and in wind. And yes, the wind in the north of Peru we find very good resource. There's also more capacity available in the transmission systems in the north than what we see in the mid-long term in the south of Peru, where it's a bit more tight in terms of potential curtailment, because there are much more... It's, there's more development.
Also, in the particular site of Bayóvar, one of the, probably one of the most important highlights of that project is, it is a private land. It's owned by a mining company and in Peru, the land control, especially if it's public land, it's a one of the critical activities, and it's a big risk in Peru. So, finding big private land with good resources, it's not an easy task to do. And finally, also we are talking with several customers within the, you know, the area of Bayóvar for potential PPA offtake. So, good site, good resource, good land, and also potential offtakers.
Perfect. Thank you.
Thank you. So our next question comes from Martín Arancet from Balanz Capital. Your line is open. Please go ahead.
Hi, thank you, as always, for the materials and for taking my questions. Just two questions. First, regarding the Nehuenco Complex, if you already have an estimate on the additional cost and the non-perceived revenues due to the failure, and how much of that you could get back from the insurance company? And then regarding your construction status in Chile, if you could share with us your long-term strategy, if you are aiming to be fully contracted or if you feel comfortable with some positive exposure to the spot market. Thanks.
Hi, Miguel, Miguel here. So, basically, regarding your question about the Nehuenco Complex, you have to remember that. I assume you refer to the fire insurance that occurred in the Q3 of last year. Basically, that did not have a significant effect on our loss of the EBITDA or operational income, since it occurred at the same time in which we had ample access to hydro generation. Basically, the only cost in some way is linked to the retirement, in terms of physical terms, of the fixed assets that were damaged on the fire. This is a non-material amount, and because of that, it doesn't have a relevant impact on our results, while at the same time, we expect a material recovery from the insurance companies.
Yes, regarding the second question on the commercial balance, we have been very successful this quarter on signing, you know, 22 new PPAs, in particular, the two big ones I already mentioned. Those PPAs are going to fulfill with our current portfolio. Of course, for every PPA we submit offers, we evaluate the current portfolio, we evaluate hydrology, we evaluate the production of our renewable assets. And depending where is a contract that requires 100% renewable certificates or not, it's how we allocate that, our current mix with the compromises for that contract. For sure, we cannot—our commercial policy is not to take annual spot exposure.
But for sure, in an hourly basis, depending on the profile of the consumption of that contract and the profile of our generation mix, there are some hours which we are exposed to spot. And it's part of the evaluation we do for every contract. So no, we don't foresee taking more exposure to spot market. We try to deliver the products that we can produce with our own portfolio. So that's why we are very careful deciding each opportunity with a very tight balance between our generation capacity and the demand of that particular contract. So that same strategy will be applied during the - was applied during this quarter, and for sure it's going to be applied for the rest of the year.
Thank you very much. Very clear.
Okay, thank you. Just a reminder, if you have a question, please press star two on your phone and wait to be prompted. You can also request to ask a text question. The next question we have is a text question from Martín Zegers at Fundamental Capital. He asks: When should we expect the Horizonte Wind Farm to start generating? How should we expect the average price of contracts, regulated, unregulated, to behave for the rest of the year and in 2025?
Okay, thank you. This is José Ignacio again. Regarding Horizonte, we are very thrilled that the connecting substation to the grid substation in Parinas has been energized last week. So we are in the process of working with the grid operator, in order to start receiving the connection of our first 70 wind turbines. In this particular case, because of the size of the project, the grid operator has accepted basically to have a first COD of the first 70 turbines, and then by the end of the year, a second COD of the other 70 turbines. So at this moment, we are working on the process of connecting the first 70 wind turbines, that are all fully erected, of course.
So those turbines are going to start injecting electrons probably by mid-May, and have a full COD of those wind turbines, probably by end of May. And the balance, the other 70 wind turbines, those are expected to be received throughout the Q4 of this year. So the project should be fully operational by the end of 2024. Regarding the second question, well, as you probably know, we've just received the results of the tender, our regulated tender process, that was done last month, and the offers were opened yesterday. So we are seeing a trend that is reflecting basically the risks of the technologies and the market and, in particular, the regulated contracts. So it's an upward trend.
We didn't submit an offer in that trend, because of the previous questions. We don't feel comfortable of submitting offers of energy, basically, we cannot cover with our own assets. So in this case, we didn't submit an offer. But anyway, we think that that trend is, I would say, properly reflecting the current risks of the regulated situation.
In the particular case of the private contracts, again, I think, what we have seen in the last tenders, particularly the ones that we participated and were awarded, again, I would say they're reflecting the current situation of the market in terms of the system costs, the bilateral payments, and of course, the increase in the cost of the technologies, for example, like wind, that has an increase in CapEx of almost 40% in the last year. All that in place, what we have seen in this, probably the last six months, it's an upward trend of prices that is reflecting risk, and is reflecting the current CapEx.
Okay, thank you very much. Just a final reminder, if you have a question, please press star two. We'll just give it a few more moments for any remaining questions. So we have one more text question from Pedro Letelier at LarrainVial. He asks: Are you going to have gas from Argentina during fall and winter season?
Well, that's a good question. I think, yes. We've had, of course, as Miguel explained before, a Q1 with a lot of hydropower. The melting, the ice melting was much lower than expected, so that's why our coal and gas units, apart from the maintenance that we explained before, were used much less than the hydro, which was still very high until almost end of March, which was pretty incredible. For the rest of the year, of course, we see some commitment from both GNL and also from the Argentinian gas, particularly from April onwards.
The volumes are still being, you know, negotiated, but we are talking about having a more or less an average of a bit more of 1 million cubic meters of gas between May and September, and something similar for spring and summer. Of course, it will depend a bit on the hydrology, but that are the clear commitments that we are looking for at this moment. But yes, the expectation is that, yes, we will have, as has been in the past 5 years, some gas from Argentina being imported.
Okay, thank you. I'm not seeing any more questions, so perhaps I could hand back to you, José Ignacio, for closing remarks.
Yeah. Yes, for sure. Well, we are very happy to have this chat with you. Our Q1 has been a very interesting year, very different, with a lot of water during the summer, with a lot of flexibility requirements, you know, for all of our units. So again, I think we're in a very good position and, in terms of, you know, being an active participant of the transition that Chile is living. I would say that the most clear example of that is that the biggest mining companies in Chile are, you know, backing us up with very good long-term contracts. We have a lot of commercial activity during this quarter, and we expect that activity to move forward during the rest of the year.
We are preparing a pretty robust pipeline of new projects coming online, and we expect to have news throughout this year on battery storage systems and new generation capacity, to again sort of give an answer to our customers that are willing to again have a long-term partnership with companies like Colbún. So very thrilled for what's coming up next for the year. Very thrilled to be moving forward with our pipeline of projects, both in Chile and Peru. Also, exploring new technologies like green hydrogen, what we hope will be just opening in Peru. We are also building the same, a very similar project here in Chile, of green hydrogen to supply to our gas refrigerator systems.
So again, very thrilled of what's coming up for the year. Thank you very much for your time, and of course, open to have any inquiries or questions during the next weeks. And Miguel, if you wanna have some closing remarks.
No, thank you to everyone, and thank you for listening again, and hopefully you'll join us in the next quarter results. Have a great weekend, and bye-bye.
That concludes the call for today. Thank you, and have a nice day.