Ladies and gentlemen, thank you for standing by, and I would like to welcome you to Colbún's Third Quarter 2026 Results Conference Call on October 30, 2026. 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 Soledad Errázuriz. Please go ahead.
Thank you for joining us once again in reviewing our quarterly results. My name is Soledad Errázuriz. I am Colbún's financial manager, and joining me today are Miguel Alarcón, the company's CFO, and Isidora Zaldivar from our investor relations team. I hope 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 from the investor sections on our website. On this occasion, we will review the highlights of the quarter, our liquidity and debt position, and to conclude, the company's consolidated results for the third quarter of 2026. Now, please go to slide number 4 to review the highlights of the year. First, regarding our commercial strategy. During this year, power purchase agreements have been signed in Chile with 108 clients for an annual volume of 1,591 GW hour per year.
In Peru, supply contracts have been awarded to 11 clients for a total contracted capacity of 17.9 MW. Second, regarding financing activities. On September 2, 2026, Colbún signed a 5-year club deal bullet loan at a rate of SOFR plus 135 basis points with the banks BBVA, Bank of America, JP Morgan, Itaú, and Santander for $400 million. These funds were used for the prepayment of the remaining balance of the 2027 bond for $233 million and for the refinancing of the bank loan with BBVA and Bank of America, originally maturing in 2029. Third, regarding our pipeline of projects. During this quarter, the company's main advances were, in BESS Celda Solar, this project reached 96% progress. The performance and regulatory tests of the park were completed. Regarding the BESS Diego de Almagro Sur, overall progress reached 79%, and the cold commissioning of the BESS began.
Regarding Don Eduardo substation, overall project progress reached 84% as of the date. 100% of the main supplies are on site, and construction of the foundations for the sectioning towers and the assembly of height structures continue to advance. Regarding Cuatro Vientos Wind Farm, the environmental impact study for this project was submitted for processing in the first quarter of 2024 and obtained its environmental qualification resolution in the third quarter this year. Now, please go to slide number 5 to review subsequent events of the quarter. First, regarding the National Reconstruction and Economic and Social Development Act. On October 17th of this year, Law Number 21,850 on National Reconstruction and Economic and Social Development was enacted. The law introduces amendments to the Chilean tax regime, including gradual changes for the First Category Income Tax rates.
The estimated effect of the reduction in the corporate First Category Income Tax rates is a net decrease in the consolidated deferred tax liabilities of approximately $140 million, resulting in the recognition of an income tax benefit of the same amount in profit or loss of the period in accordance with IAS 12 income taxes. Now, continuing with the conference call, please go to slide number seven to analyze the liquidity position and consolidated financial debt held by the company. Total financial debt on a consolidated basis this quarter reached $2.4 billion, with an average life of 5.6 years and an average interest rate of 4.2% in consolidated terms. The debt to EBITDA as of September 26th reached 2.4 times. Now, I will turn to Isidora, who will speak about the main drivers of the results for this quarter.
Thank you, Soledad, and hello to everyone. Before starting with our quarterly results review, I would like to highlight some relevant data about the system's operation on slide number nine. In Chile, the average marginal cost measured at Alto Jahuel decreased compared to the third quarter of 2025, averaging $49 per MW hour. Electricity demand grew by 1.1% during this quarter compared to the third quarter of 2025. Hydrological conditions have improved significantly compared to the drought experienced over the past decade, although most seminary basins remain below average year rainfall levels. Cumulative inflow energy stands at a 56% probability of exceedance. In Peru, Santa Rosa's average marginal cost increased compared to the third quarter of 2025, averaging $110 per MW hour this quarter.
This increase was mainly explained by the lower availability of hydro and wind resources, as well as the increase in the electricity demand that continued to expand, growing 7.3% compared to last year. Additionally, the hydrological year, which began in September, started with a probability of exceedance of 22% compared to the 5% in the same period of the previous year. Now, please go to slide number 10 to review this quarter's physical sales and operating income figures. In Chile, physical sales during this quarter reached 3.2 terawatt-hours, increasing 15% compared to the third quarter of 2025. This variation was mainly explained by higher spot market sales compared to a period with no spot market sales during the third quarter of 2025, mainly due to the higher generation during the quarter.
This effect was partially offset by a decrease in the sales to regulated clients, primarily associated with the expiration in December 2025 of a contract with Enel Distribución. In Peru, physical sales during the quarter reached 1.2 terawatt-hour, increasing 2% compared to the third quarter of 2025. This increase was mainly explained by higher sales to regulated clients associated with the entry into force of a contract with Pluz Energía and the increase in the contracted capacity with Electro Oriente. This effect was partially offset by lower energy sales in the spot market. For the third quarter of the year, consolidated operating revenue amounted to $468 million, increasing 21% compared to the operating revenue recorded in the third quarter of 2025. This variation was mainly explained by, one, higher revenues from unregulated clients in Chile due to a higher average sales price. Two, higher energy and capacity sales in Chile.
And three, higher revenues from regulated clients in Peru. These effects were partially offset by lower revenues from regulated clients in Chile. Now, please go to slide number 11 to review the generation and the raw materials and consumable used to figures. In Chile, total generation of the quarter reached 3.2 terawatt-hour, increasing 37% compared to the third quarter of last year. This variation was mainly explained by, one, higher hydroelectric generation due to the better hydrological conditions recorded during the quarter. Two, higher wind generation, mainly due to a greater contribution from Horizonte wind farms owing to lower curtailments. And three, higher coal-fired generation associated with the return to operation of the Santa María power plant, which was unavailable during last year. This effect was partially offset by lower gas-fired generation due to the lower economic dispatch.
In Peru, total generation reached 1.2 terawatt-hour during the quarter, increasing 2% compared to the third quarter of 2025. This increase was mainly explained by a higher economic dispatch during the period associated with lower hydrology and increased demand in the interconnected system. Consolidated raw material and consumable use cash in the third quarter of 2026 amounted to $229 million, increasing 4% year-on-year, mainly driven by higher diesel and coal consumption associated with the higher generation with those fuels. Now, please go to slide number 12 to review the main differences in the consolidated EBITDA for this quarter. Consolidated EBITDA reached $197 million during this quarter, increasing 55% compared to the third quarter of 2025. EBITDA in Chile amounted $168 million, increasing 64% compared to the third quarter of 2025.
This increase was mainly explained by a higher gross margin driven by higher unregulated spot market revenues together with lower energy purchases due to the increased generation. EBITDA in Peru reached $29 million in the third quarter of 2026, increasing 24% compared to the third quarter of 2025. This increase was mainly explained by higher gross margin, reflecting higher regulated and spot market revenues, partially offset by higher energy purchases, prices, and system charges. Now, please go to slide number 13 to review the consolidated net income of the quarter. Non-operating income for the third quarter of 2026 posted a loss of $30 million compared to a loss of $32 million in the third quarter of 2025.
This variation was mainly due to, one, lower financial expenses explained by a lower average financial debt, and two, higher profit or losses of companies and associates were using the equity method, particularly from Electrogas. These effects were partially offset by, one, higher losses recorded under the other losses, mainly explained by the recognition of extraordinary non-recurring effects recorded during the quarter. Among this, the most significant was the cost associated with the early termination of a coal supply contract signed on 2022, and two, lower foreign exchange gains recorded during the period. The company recorded a profit of $72 million during this quarter compared to a profit of $25 million recorded in the third quarter of 2025. This increase was mainly explained by the higher operating income recorded during the quarter, partially offset by the higher income tax expense.
Now, please go to slide number 14 to review the consolidated cash flow. The company began the period with a cash flow balance of $832 million, ended with $844 million. Regarding operating activities during the third quarter of 2026, the company generated a positive operating cash flow of $166 million, compared to the $93 million during last quarter. This reflects higher operating collections during the quarter, mainly associated with the higher sales recorded in the period. In terms of financing activities, they recorded a negative cash flow of $86 million during this quarter, compared to a positive cash flow of $163 million recorded during the third quarter of 2025. This variation was mainly explained by the signing of a new club deal loan for $400 million in September 2026.
These proceeds were used to prepay the remaining balance of the 2027 bond for $233 million and to refinance the bank loan with BBVA and BofA, originally maturing on 2029. Meanwhile, during the third quarter of 2025, the company issued a 2035 bond for $500 million and entered into a loan for Colbún Perú for $50 million. This issuance during the third quarter of 2025 was partially offset by the partial prepayment of the 2027 bond and the acquisition of the remaining 41% of Inversiones Las Canteras. Lastly, investment activities generated a negative cash flow of $66 million during the third quarter of 2026, decreasing 29% compared to the negative cash flow of $94 million recorded during last quarter.
This variation was mainly explained by lower disbursements associated with the company investment plan, considering the different progress of growth projects compared to the same period of the previous year. This concludes Colbún's third quarter of 2026 results review. Thank you for listening, and now we are open to answering your questions.
Thank you. We will now move to the question-and-answer session. If you'd like to ask a question, please press star two on your phone and wait to be prompted. If you are dialing via the web, you can type your question in the box provided or request to ask a voice question. Our first question comes from Tomás Francisco Peruchin from Balanz Capital. Your line is open. Please go ahead.
Hello, good morning. Well, thank you for the presentation and for taking my questions. I have two questions. First, regarding natural gas supply, could you provide an update on your gas procurement strategy, particularly from Argentina? What volumes do you currently have contracted? Are these contracts firm or interruptible, and when do they expire? Thanks.
Hello, Tomás. This is Isidora. Thank you for your question. For the strategy of the gas for next year, we consider to maintain the contracts with interruptible gas with Argentina, and also we will have some space for spot market gas in Chile. We are not going to have firm contract with Argentina, only interruptible.
Okay, thank you. My second question is regarding the Canutillar Hydropower Plant. Following the recent submission of the Lago Chapo remediation plan, could you provide an update on the legal proceedings? Have you been able to quantify the potential financial impact of the restriction on generation, as well as any additional CapEx required under the remediation plan? Thank you very much.
Hi, Tomás. Miguel speaking here. Thank you for your question. Regarding the Canutillar plant and the Lago Chapo, we recently submitted the remediation plan in October, actually a couple of weeks ago, and we are still awaiting the environmental court's response. Because of how these processes typically work, we do not expect a resolution in the upcoming weeks. Probably it will take longer. In the meantime, we are still currently conducting engineering studies in order to better assess the cost of that plan and expect to have more information during probably mid of next year. We do not expect material disbursements this year or next year while we come up with a different solution. And probably those expenditures will be spread out over the next three years.
It is important to note, though, that the court already accepted our request for greater operational flexibility regarding the minimum reservoir level that is linked to emergency temporary situations, after considering the potential technical and operational implications of maintaining the restriction under all circumstances as it was before this change.
Okay, thank you very much. Very clear.
Thank you very much. Our next question comes from Fernan Gonzalez from BTG Pactual. Your line is open. Please go ahead.
Hi, everyone. I have a question, basically on the future. Your CapEx planning is almost completed now. Is the next step a growing free cash flow and a fast deleveraging ahead over the next couple of years, or will there be a new investment plan released sometime over the next couple of months? I was wondering if you could walk us through on how to think about this.
Hi, sir. Hi, Fernan. Thank you for your question. This is Soledad here. Yes, actually, you are right. We are finalizing the construction of the two battery energy storage projects we have on the pipeline, and considering only to finalize those investments. With the maintenance CapEx, the total CapEx for next year, without any additional decision of investments for future projects, would be of around $140 million or so. With that, we won't need to resort to the capital markets for additional funding. However, we are analyzing a couple of new projects in Chile that are already environmentally approved and are only waiting for the investment decision. We are also looking at M&A opportunities, especially in Peru.
We also have a pipeline of projects there that we are seeking to develop, that we will continue to analyze our growth opportunities, and for the use of that cash at hand we already have.
Okay, thank you.
Thank you very much. Our next question comes from Martín Arancet from Balanz Capital. Your line is open. Please go ahead.
Hi. Thank you for the presentation. Only one quick question. I know that regulated sales in Chile is a small portion of your total sales, but I would appreciate your view. We have seen increasing fuel prices and depreciation of the peso. The last time that we saw that, we saw also the accumulation of receivables because it is hard to transfer those additional costs to regulated clients. Do you see that happening again this time?
This is Miguel Alarcón here. Thank you for your question. The regulated segment still represents an important percentage of our sales, although significantly lower than the industrial clients, as you correctly point out. Having said that, we have not seen actually a deterioration in the collection of those type of clients. Because of that, up to this point, we do not foresee actually a risk associated with the movement in the Chilean peso to US dollar exchange rate or the payment capacity of those clients so far. Again, we are still in a good position because of that, and we do not foresee, again, any risk up to this point.
Okay, thank you.
Thank you very much. Our next question is a written question from Steffanía Mosquera from Credicorp Capital. "Do you expect the USD 140 million movement related to the reconstruction law to translate into a higher dividend?
Hello, Steffanía. Thank you for your question. We expect that this effect is going to be recognized during the next quarter. Considering the current dividend payout ratio of 50%, this would represent $70 million of additional dividend. This would be confirmed in our annual shareholder meeting in April of next year.
Thank you very much. Our next written question comes from Ignacio Llanos from Empresas Penta. First question is, "How do you expect Colbún to be meaningfully different five years from now compared with today?
Thank you for the question. I would say that we expect the company to continue progressing in our percentage of renewable generation. We will probably have more projects to invest, as Soledad Errázuriz pointed out before, probably with more storage capacity as we are increasing our current capacity with the two projects that are on the execution pipeline. We are also aiming to hopefully incorporate different segments of business, as we have studied in the past. Potentially, for example, water treatment or water conduction, perhaps being able to serve data centers and study other adjacent technologies. The company will materially continue in the generation segment, but hopefully we will enter into different businesses and maybe into a third country of operations.
Thank you very much. Another question from Ignacio. What material changes should we expect to see in the business?
I think I tried to tackle most of the question in the previous answer, but basically, we see, or we've seen in the last years, increased competition, and that is why we believe that being able to differentiate ourselves by having a robust portfolio of assets in operation and viable projects is what we should expect to continue to develop in the future. Another probably key element of Colbún, its financing strategy and conservative financial policy in the sense of having a level of cash that should enable us to embark into new projects, potentially M&A opportunities, and also tackle potential risks linked to volatility in the industry.
Thank you. Another question from Ignacio. If you could change just one thing about Colbún's business today, what would it be?
Sorry, can you please repeat the question? I did not get it.
Of course. If you could change one thing about Colbún's business today, what would it be?
I think that what we're trying to pursue, and we've had these discussions in previous conference calls, is our ability to increase our installed capacity by adding, hopefully, a new market or another business as part of our diversification strategy. We've been trying to pursue those possibilities in the last few years, and hopefully that's something that we plan to change in the future by incorporating, again, more assets and potentially a third country.
Thank you. Another question from Ignacio. What do you think will be the single biggest source of value creation for Colbún over the next 5 to 10 years, and what could prevent you from capturing it?
I wouldn't refer to one source of value creation. I think that's something that has been remarkable about the company, its resiliency to navigate through different volatilities and risks in the industry of, for example, hydrology, wind, and solar resource, and disruptions in the commodity markets. I think that has been a key element because of our portfolio of assets, a diversified base of clients that has been unique to the company, and create enormous value for the company and its shareholders. Going forward, we expect that to continue while we increase the portfolio of assets by developing our projects and hopefully incorporating new assets through M&A processes. That growth path would be another relevant source of value creation.
Thank you. Last question from Ignacio. What metric would make you conclude that the strategy has been successful? EBITDA, growth, ROIC, free cash flow, market share, or something else?
Again, hard to point out just one, but I think metrics linked to profitability would be the ones that I would look for. But again, it is hard to just choose one.
Thank you very much. Our next question comes from Jay Samani from Scotiabank. Your line is open. Please go ahead.
Hi, thanks. Can you discuss a little bit on how the pricing economics of new contracts are compared to the existing portfolio, mainly in Chile, with the renewal of certain contracts in Chile? As well in Peru, how are you looking at the long-term pipeline of contracts there on the regulated and the unregulated side? Thank you.
Hi, Jay. Thank you for your question. First idea would be that, as we have said in the past, we cannot discuss specifics about pricing. But in general, as a trend, we still see a lot of competition on one side, more presence of renewables available that also puts some pressure around pricing, but at the same time, a lot of potential demand linked to new projects, especially in the industrial frame and linked to mining. All in all, we have not seen actually a material change regarding pricing, but a lot of competition with the new entrants coming into the industry and, of course, participating in the larger projects and larger processes. That is for Chile. For Peru, situation is a bit different because, as you may know, reserve margin is probably in the lowest part of the range that has been in the last five years.
Because of that, during especially the second part of 2026, marginal cost has gone up, and actually serving or signing new PPAs has been more challenging to customers because pricing now is going up. I do expect for the Peruvian market to have higher prices. Hard to say the level of those prices and the amount of increase, but again, because it is a tight balance between supply and demand, we do see a different trend and prices going up compared to Chile in that region.
Thank you. Thank you.
Thank you very much. Just a reminder, if you would like to ask a question, please press star two on your phone and wait to be prompted. Our next written question comes from Roberto Zegers from Empresas Penta. "What part of Colbún's business do you think investors misunderstood the most today?
Thank you, Roberto, for your question. I think that for investors, it is still maybe hard to capture the rationale, or more than rationale, actually, the potential value creation linked to the opportunities that might arise in different jurisdictions. We have, I think, stated the case successfully of the opportunities in Chile and Peru. We still need to work with investors in conveying the strategy around other countries in LATAM, for example.
Thank you very much. Just a final reminder, if you would like to ask a question, please press star two on your phone and wait to be prompted. If you are dialing in by the web, you can either type your question in the box provided or request to ask a voice question. We will just wait a moment or two for more questions to come in. Our next question comes from Fernan Gonzalez from BTG Pactual. Your line is open. Please go ahead.
Just to follow up on Peru, just because on how tight that reserve margin is and how long it takes to develop new capacity, is it likely that we will see higher than normal marginal costs in Peru in 2027 and potentially 2028? Is that a fair assessment, or is this really more of a short-term thing only? Is it more structural or not? That is the main question here.
Fernan, it will depend, right? Because as you know, the Peruvian system is, roughly speaking, 50% served from hydro production and 50% from thermal in the form of competitive natural gas. The natural gas is sourced locally, and because of that, tends to be really stable, as opposed to renewables, not only hydro, but an increased presence of solar and wind resource. That, to me, is key to actually forecast the trajectory of the marginal cost of energy. For example, this year, especially the second half of the year, has been really affected by the El Niño phenomenon, and that has meant a decrease in especially wind generation, and to a lesser extent, hydro production. That has impacted the marginal cost of production due to a lower reserve margin.
If you were to assume a similar situation to what has happened in 2026, yes, marginal cost is expected to go up in 2027, but again, that still heavily depends on the situation in hydrology and the rest of renewable output. We see that, as you mentioned, projects still take some time to develop in Peru. There is a pipeline that is expected to materialize and actually incorporate in the form of new capacity in 2027. It will depend on renewable resource to actually see the marginal cost of energy, because demand has been growing significantly. Just to give you a sense, year to date, 2026, I think demand has increased about 5%.
Okay, perfect. Thank you.
Thank you very much. I am not seeing any more questions, so perhaps I can hand it back to the Colbún team for the closing remarks.
Thank you to everyone for joining this conference call for the third quarter of 2026. Thank you for your participation, and hopefully we will see you again for year-end results around January of 2027. Thank you again, and have a great weekend. Bye-bye.
This concludes the call for today. We are now closing all the lines. Thank you, and have a nice day.