Good afternoon everyone, and welcome to Engie Energia Chile's second quarter 2025 results conference call. If you need a copy of the press release issued on July 30, it is available on our company's website at www.engie.cl. Before we begin, I would like to remind you that this call is being recorded and that information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed note in the company's press release regarding forward looking statements or contact Investor Relations Officer Marcela Muñoz. We would like to advise that participation of this call is dedicated to investors and market analysts, not for the press. We ask all journalists to contact Engie Energia Chile PR Department for details. I will now turn the call over to Mr. Vincent Sorel.
Please go ahead, sir.
Hello. Good afternoon everybody. Vincent Sorel speaking, the CFO of Engie Energia Chile. Today I'm here with Juan Villavicencio, our Chief Executive Officer, Alison Saffery, Head of our Corporate Finance and Investor Relations, Marcela Muñoz, Investor Relations Officer, and Bernardita Infante, our Financial Advisor. We are very pleased to present today Engie Energia Chile's first half results for 2025. Without any further transition, I will give the floor to Juan, who will describe our operational performance for the six first months.
Good afternoon, everyone. As described on page 2, we have organized this presentation into two sections. In the first part, we will briefly go through the first half's 2025 performance. Then, in part 2, we will provide an updated vision of our financial results and medium terms of looking forward to Engie Energia Chile. We can start directly on page 3, where we share the main highlights for the first half of 2025. First, the company continues the trend of strong results in the first half of the year, even in the challenging environment our sector has been facing. Second, we continue to increase our renewable generation capacity. Three projects reached COD during the first half, adding 468 megawatts of renewable capacity to our portfolio.
Third, the high availability of our thermal plants during this period allowed us to secure high generation in the challenging environment we are facing, reducing our exposure to the spot market. Fourth, we are continuing in our path toward the energy transition by converting our coal assets, developing our renewable portfolio, and investing in transmission. On page 4, we show the main highlights of our financial performance, which Vincent will discuss later in more detail. We had an EBITDA generation of $362 million. Our CapEx reached $302 million during the first half, while our net debt to 12 months EBITDA ratio continued the strong ground trend, reaching 3.3 x. Our net Income reached $186 million. We also share our upgraded guidance for the year.
We've raised our EBITDA guidance from a range of $525- $575 million to $650- $700 million, mainly reflecting the recognition of the arbitration award for the breach of contract of our main LNG supplier during 2023 and 2024, as well as a good performance during the first half of the year. On our CapEx guidance, we've increased from $850 to $900 million range to $900 to $975 million range by the end of 2025. This is mainly due to the addition of a new BESS project, as well as good implementation of our investment portfolio. As a result, our expected Net Debt to EBITDA ratio should continue at the level of 3.3 times by December of 2025. On page 5, we can see the current progress on the execution plan for renewables.
As of today, we have already implemented 1.4 gigawatts, including the addition of Wincalpa, BESS Tamaya, and BESS Capricornio, which together added 468 MW of capacity to our portfolio. All of these projects were developed on time and on budget. With this, during the first half of the year, we generated a total of 1,094 GW hours with all renewable assets. Now, please let's continue on page 6, where we show how we are giving new life to our coal-based assets with the installation of a synchronous condenser in our former unit 15, which was closed in 2022. At the same time, we improved, extended the life, and increased the capacity by 25 MW of our gas-fired combined cycle plant unit 16 to ensure flexibility in our regeneration and energy supply.
We are also working on the conversion of our EAM coal plant to general gas, by which we will stop cooperation with coal in December 2025 and finish its conversion to initial cooperation with natural gas by the second half of 2026. Our thermal assets have shown high availability and operational excellence during the first half, providing the generation required to secure the 24/7 supply for our PPA contract and reducing our exposure to the spot market. This was especially relevant during the high-priced environment in the first half of the year, especially during non-solar hours. The situation of our different coal plants is also explained on page 7, showing that, as well as the conversion mentioned in the previous slide, four of our remaining coal plants will be decommissioned by December 2025 in the case of CTM1 and CTM2, while CTA/CTH will be closed in May 2026.
These four plants will be kept in movable maintenance while the company decides if and how these assets could be used in the future. On page 8, we describe how the company has embarked on a complete generation portfolio transformation. Like you know, in 2019, coal generation represented 60% of our generation capacity, while renewable represented only 3%. Total generation capacity at the end of 2019 reached 2.2 GW. During 2025, Engie Energia Chile shows a generation capacity of 3.1 GW, of which coal represents 34%, natural gas 22%, and renewable plus batteries represent 44%. A notable increase during this period.
On expectation for 2027, considering the renewable and BESS projects currently under construction, as well as the conversion of EAM and retirement of the other coal plants, that we should reach a total installed capacity of approximately 3.7 GW, of which 29% will be natural gas and the remaining 71% will be renewable and batteries. Next, on slide nine, we show the eight renewable and battery projects we have currently under construction, which are deployed over five different regions of Chile, including, in the bottom left corner of the slide, the recently added BESS Capricornio, a 57 MW battery project being built, co-located within the Wincalpa site, which reached COD during the first half of this year. CapEx on BESS Capricornio is $69 million, and it's expected to reach COD in the second half of 2026.
If we move directly to page 10, we are presenting an updated development plan of renewable and BESS projects to be executed between 2025 and 2027. These are the projects shown on slide nine that are currently under construction. These projects should reach COD at different stages between the first half of 2026 and the first half of 2027. This new project will add around 1.2 GW of additional renewable and BESS capacity to the portfolio and will allow Engie Energia Chile to be fully balanced from both business and risk perspective to the end of 2027. The construction and implementation of this project will require approximately $1.4 billion US dollars between 2025 and 2027. On the graph on page 11, we can see how the construction of the previously described projects will have a positive impact in balancing our portfolio.
We present here the yearly average position of the portfolio. This way, by 2027, we should reach a full balance considering the new investments and planned conversion on the generation side, as well as the backup PPAs and the end of the regulated PPA in the north on the demand side. At the same time, we are already resuming the commercial effort to recontract our portfolio as from 2027 and forward, and accompanying the new demand with new generation and/or backup PPA to maintain the balance of our portfolio. I will now leave with Vincent, who will present the detailed evolution of Engie Energia Chile's financial and capital structure, as well as the detail of the guidance.
Thank you, Juan. On page 12, we will start with the second part of this presentation to demonstrate the successful execution of our strategy and our ability to capture value. Moving to page 13, this page summarizes our financial performance during this first half of the year. We see EBITDA that reached $362 million, a $67 million increase compared to the first half of 2024. The main reasons behind this EBITDA increase include the electricity margin that is improved and the generation margin of our assets. The award of the arbitration procedure related to the breach of one of our energy supply contracts that Juan mentioned in the beginning of the presentation was also recognized as of June 2025. Net result reached $186 million in the first half, $36 million higher than last year.
The positive trend in our Net Debt to EBITDA ratio was also confirmed with a 3.3 times ratio as of June 2025. I will now comment the chart on slide 14. As mentioned, the increase of $67 million for the EBITDA can be analyzed as follows. One of the reasons for this EBITDA improvement was the increase in the electricity margin, which rose by $13 million US dollars. The main positive effect driving this increase was, first, a $37 million positive effect of an increase in our own generation, roughly half of it from the three projects that reached COD this year: Wincalpa, BESS Tamaya, and BESS Capricornio. Also, our thermal assets were readily available and were dispatched. This allowed us to reduce energy purchases from the spot market. Second, we benefited from higher PPA revenue for $25 million US dollars.
This is mainly thanks to an increase in physical sales to distribution companies. As a result, notably, of an increase in our pro-rata share of regulated supply, as other generating companies' contracts were suspended or early terminated due to execution problems. This offset the 9% drop in physical sales to 3 grand, explained by maintenance work at some mining and industrial operations. Those two positive effects allowed us to cope with the significant increase in energy purchase prices driven by lower availability of other thermal plants, lower availability of Argentine gas, and lower hydrogeneration in the system. This increase represents a $50 million negative effect that we were able to offset. In short, our efforts to reduce our exposure to the spot market, especially during non-solar hours, proved very successful in the first half of 2025.
Outside of the electricity margin, we can also observe a $13 million increase in revenue from gas sales to third parties, in part due to the major maintenance and upgrades in our U16 combined CCGT in the first quarter. Our EBITDA also benefits year on year of $61 million from one-off. These were largely attributed to the recognition in 2025 of approximately $100 million US dollars related to the outcome of the arbitration with our main LNG supplier for the unfulfillment of one of our LNG supply contracts in 2023 and 2024. This was partially offset by positive impacts reported last year, notably a $17 million insurance compensation from a past loss at the CTA plant. Finally, we see a negative impact of $19 million coming mainly from increased operation and maintenance expenses and higher transmission tolls, leading to an EBITDA of $362 million.
All the above explain the 23% increase in EBITDA, as well as our upgraded EBITDA guidance for 2025. Moving forward to slide 15, this one illustrates in detail the evolution of our energy margin. This chart shows the available energy for the first half of 2025, which reached 6.5 TW-hours, and how this energy was supplied. Notably, the spot purchases during this period were lower in a higher spot price environment, as we discussed, mainly due to the high performance of our generation assets, as well as from the addition of the new renewable and batteries project previously mentioned. Slide 16 shows how this increase in EBITDA, held by foreign exchange gain, offset the increase in net financial costs, driving to a $36 million increase in net income, which climbed to $186 million in the first half of the year.
The increase that you see in net financial costs was mainly explained by the recognition last year of a one-off on tech-related accounts receivable as interest income in the first half of 2024 for $50 million US dollars. Important to note that the recurrence of one-off items above and below EBITDA, that differ in nature but are roughly similar in total value, contributes to a stable year-on-year variance. In slide 17, we see that our net debt decreased by $41 million to $1.9 billion. On the one hand, we reported strong cash generation, as well as $112 million proceeds from the last year's last sale of PAC 3 documented this year. This allowed us to finance a capital expenditure of $287 million, plus a $54 million dividend payment, the first one since late 2021, as well as interest and so on.
Important to see here is for this first half, our source and use of funds were balanced. Also, our cash flow from operating activities after interest and tax amounted to $382 million, significantly higher than last year for the same period that amounted to $71 million. Let's move to slide 18. As a reminder, our rating is BBB stable outlook confirmed by Fitch and S&P's. Net financial debt reached $1.9 billion at the end of June, with net debt to last 12-month EBITDA down to 3.3 times. We continue to improve our debt profile. We reduced our net debt to EBITDA, notably thanks to EBITDA recovery. The maturity profile of our debt is also strong, with a reduced refinancing risk, and it leaves headroom for future financing.
On the bottom part of the slide, you can see a 5.4% average coupon on our debt and the average remaining life of our debt of 4.9 years. Note that we repaid $136 million of the U.S. bond that was maturing in January, and we made other principal debt repayments for $78 million. That explains the reduction of the high level of cash that we were holding end of 2024. Slide 19 shows the evolution of our investment plan from 2029 to the estimated CapEx amount for 2025. Our investment should accelerate during the second half of the year compared to the first semester. During the last five years, it has been increasingly concentrated in renewables as well as BESS in the last three years. Between 2025 and 2027, we will invest $1.4 billion in renewables and BESS projects that are currently under construction.
These projects are expected to reduce our exposure to the spot market and, thanks to the batteries, reduce as well the risk associated to renewables. We are also investing in conversion projects on our coal-fired plants, as well as transmission projects needed for our portfolio. Please, let's continue on slide 20. As a result of the investment plan we just explained, our EBITDA is increasing, notably positively impacted by a reduction of our average supply cost. Leverage remains under control during this intensive CapEx phase. This is why the net debt to EBITDA ratio has been showing a downward trend, reaching a level of 3.3 times at the end of the first half of the year, and it's expected to stay at this level by the end of the year.
Moving to slide 21, as you can see, we have upgraded our guidance both for EBITDA and CapEx for the end of 2025. On the EBITDA front, we have increased the guidance from the previous $525-$575 million range to $650 to $700 million EBITDA range. The main reason for the increase is the recognition of the arbitration award related to the breach of contract with our main LNG supplier. On the CapEx side, we have upgraded the guidance to $900 to $975 million range. This upgradfe is related to the addition of a new battery project that started construction during the second quarter and good execution of the construction of the project in the portfolio. The resulting net debt to EBITDA ratio should reach then 3.3 times by the end of 2025.
As usual, this guidance is considering the driver and assumption presented in the left side of the slide that can affect our business. I now hand over to Juan for the conclusion.
Thank you. Thank you Vincent. Finally, on slide 22, we summarize how we continue on track by working on rebalancing our portfolio by adding new renewable generation and storage, expanding the life and increasing capacity of our LNG generation assets, and adding backup PPAs. We continue moving forward with our intensive CapEx program in renewable, transmission, and conversion of coal power plants for the energy transition during the period of 2025 to 2027, and we leverage our assets by reaching high availability of coal plants and excellence in their operations. All of the above maintain a strong result and balanced sheet. Thank you for your attention, and we are now open to any questions you may have.
Thank you. The floor is now open for questions. If you have a question, please click on the Raise Hand button, and if your question has already been answered, you can lower your hand by clicking on Put Your Hand Down. To ask written questions, please use the Q&A button. Questions will be taken in the order they are received. Please hold while we pull for questions. Our first question comes from Isabella Pacheco from Bank of America, and it's a written question. Can you give more color on how your energy transition is going to impact EBITDA and net leverage metrics in 2027? Thank you.
Thank you, Isabella. Indeed, we have a significant energy transition plan. This, as we've shown, is expected to happen in a context where we keep our balance sheet metrics under control. Notably, I would refer to the S&P notes that disclose it in a bit more detail. In a nutshell, I would say we target, at this stage, without giving any precise figures for 2027, because you know we don't give guidance on that horizon, I would target something around 4.5 times EBITDA or below.
Just as a reminder, if you wish to ask a question, please use the Raise Hand button or tap it down on the Q&A field. Wait while we pull for questions. Our next question comes from Florencia Mayorga. Can you provide thoughts on a recent headline about the intention to renegotiate regulated contracts? Thank you.
Thank you very much for your question. From Engie Energia Chile's perspective, we are in a clear position to dissent or contact, obviously, and we have been very clear in our communication with the regulators and the different Senate to secure that the contract will be respected. We are seeing this like a red flag for us. We are seeing in the last days that the progress in the Congress has been in terms of the concept that has been discussed and how it's evolving, the proposal of the government to the Congress is improving a lot in the way to respect our contract. Obviously, we are monitoring this very closely until the end of the discussion in the Congress to understand how this will be addressed at the end of the process.
From our side, obviously, our vision is we need to continue pushing and communicating the defense of our right in the contract, like we have done in all the period of this discussion in the Congress.
Just as a reminder, if you wish to ask a question, please use the Raise Hand button or type it down on the Q&A field. Wait while we pull for questions. Our next question comes from Felipe Flores. Is increasing CapEx mostly related to the new BESS Capricornio project? Any guidance on 2026 CapEx? Thank you.
Thanks Juan. The increasing guidance on CapEx reflects, first of all, I would say, a very good execution of our projects that are on track, on time, on budget, and we are, I would say, progressing very quickly because the key for us is to execute according to this plan. This partially explains the increase, and on the other side, we also have indeed the BESS Capricornio that is adding a bit less than $100 million of CapEx to this year. For 2026, we are currently, I mean, we will be able to reestimate our entire CapEx schedule, but at this stage, I would prefer not to give a precise figure for 2026.
However, you know that we have presented in this presentation $1.4 billion of CapEx between 2025 and 2027 for the renewable investment that will be spread out over this year based on the balance, will be spread out between 2026 and 2027, according to the new execution schedules.
Our next question comes from Fernan Gonzalez from BTG Pactual. I would like to understand the role of coal going forward. In your view, is there a chance that the CNE will request CTM, CTH, and CTA to remain operational for longer, and if so, for how long? Are we going to see more coal inventories revisions in the coming quarters? Thank you.
Thank you very much for your question. We are following the rules of the regulation to request the coal exit of our asset. This means that we need to request with two years of anticipation, and we did in the proper moment to say that CTM1 and CTM2 will exit at the end of this year and CTA/CTH in May of 2026. The authority has the right to extend the coal exit of each asset for one year more, depending on the systemic risk that they are evaluating. We are continuously discussing and very closely reviewing what is the plan of the coordinator with the most anticipation that we can to manage properly the storage of the coal in our asset. Obviously, it depends on how the market is going and how the risk of the coordinator is requesting the dispatch of the coal asset.
Concretely, about the storage of coal, we are seeing that we will have to maintain some level because, like you can see, the asset has been dispatched and probably will continue being dispatched in the next month. However, about your question, yes, the authority can extend by one year. This is the limit. This means that CTA/CTH could continue until May of 2027, the continuity of the operation.
Our next question comes also from Fernan Gonzalez from BTG. Also, could you please update us on what your exposure to the spot market is today, both in terms of geography and time of day? Thank you.
About the exposure, today, you know that we have finalized the first package of projects, including the batteries that are supporting our portfolio during the night, plus the relevant dispatch of gas and coal in the first semester, and that is continuing today. This means that our exposure during the night has been properly controlled, especially in the north of the country. The main relevance is that we have some exposure during the solar hours, that is the good exposure for the P&L, that we are continuing on that.
Our next question, also from Fernan Gonzalez. Finally, about the BESS Calpa, in the CEN's Connection Authorization Report, it says the planned capacity is 160 MW and not 57 MW. Is there a plan to expand it at a larger later stage? Thank you.
We have a development next development phase, but it's not confirmed yet to concrete the final capacity of our next step of this asset. Today, the confirmed capacity that we have is 57 MW. That is related to the business plan to secure the management of the containment in the node where the asset is connected.
Our next question comes from Cristóbal Mary from BTG Pactual. You mentioned that since 2027, you will need to start sending more PPAs. What kind of client is your focus? Distribution companies, free market clients? Could you give him some color on that? Thank you.
Like you know, historically, Engie Energia Chile has been the main provider for the mines clients in the north of the country, with the origin of our business more than 100 years ago. Obviously, considering our strong position in the north of the country, our intention is to continue with a relevant commercial action there. About the disco tenders or the distribution companies, we are in the process of evaluating. It depends on what is happening with the market. It's something that is part of the evaluation that we are having, like other players in the market today.
Our next question comes from Maria Paz Valenzuela from BCI. Hi. Could you give us more details on how you're planning to fund CapEx for the second half of the year? Thank you.
Thank you. Indeed, there will be a strong pickup in the investment activity over the next month. This will likely entail, considering that we want to keep a certain minimum cash level on our balance sheet to secure our financing needs, that we will be required to issue a senior debt over the next month. That being said, we intend to obviously recycle the CFFO, the cash flow from operation, into our investment, as we did over this semester.
Just as a reminder, if you wish to ask a question, please use the Raise Hand button or type it down in the Q&A field. Wait while we pull for questions.
This is more a legal question, indeed. For sure, we can send you a more formal vision about if this can happen. It's something that, in terms of the energy regulation, is not clear, but always could be a mechanism we can answer after the meeting is finished.
Our next question comes from Tomas Peruchin from Balanz Capital. Please, Mr. Tomas, your microphone is open.
Hi. Good morning. If I'm not mistaken, there was an increase in OpEx, excluding fuels and energy purchases in the second quarter. Could you give us some color on the drivers for this high expenditure? Thank you very much.
Yes. Basically, the way the EBITDA bridge is built is we separate the electricity margin from the rest, right? As we said, we have new assets that are coming online. Part of this $19 million is due to the new OpEx and O&M cost of these assets. Also, we have had some maintenance activities this semester that also explain an increase in the OpEx. This increase has happened as expected. It was not a surprise for us, and it was included in our forecast, obviously. Last but not least, there is always a bit of inflation that plays a role into it. Okay. Thank you.
Our next question comes from Martin Arancet from Balanz Capital. Please, Mr. Martin, your microphone is open. Mr. Martin, you can activate your microphone and ask your question.
Hi. Thank you for the presentation. Probably it's too soon, but I was wondering if you could share with us the options that you are considering for the coal units that you are thinking about closing at the end of the year or next year, and also the drivers for a possible transformation. If you decide not to transform those assets, if you could share with us what you think the decommission cost could be.
What are the options? There is more than one. One of them is to replicate what we are doing with EAM, like a gas conversion. The second one is ancillary services, like we are doing with unit 16 in Tokopedia, convert the asset for some synchronous condenser if there are some tenders. Obviously, about the future of the asset, we are in the process of evaluating the total cost.
We can answer after the meeting with more details about the quantification we are evaluating for this, in the case that we don't convert. Obviously, the conversion depends on market drivers and technological consistency. It's something that takes time to evaluate. Okay. Thank you.
Our next question comes from Felipe Flores from Manchile. How much money should come from interest regarding the arbitration with TotalEnergies? Is this completely resolved considering it was included in the quarterly results? Thank you.
We have booked in the half-year financial result the interest that we are entitled to from the arbitration decision, but keep in mind that there were legal costs associated to that. As such, I would say the approximately $100 million figures can be seen as including both interest and legal costs. Besides, on your question, whether the situation is completely solved, the big advantage of an arbitration is that it is final and enforceable, and we are moving forward in the execution of it. However, the supplier can still challenge the award before the Paris Court of Appeal, but based on very limited means. The remedies available and the legal grounds that can be invoked to challenge the award are also very limited. That's why we booked the damages in our P&L end of June 2025.
Just as a reminder, if you wish to ask a question, please use the Raise Hand button or type it down on the Q&A field. This does conclude the Q&A section. At this time, I would like to turn the floor back to Engie Energia Chile's team for any closing remarks. Please go ahead.
Thanks a lot for everybody who has attended this call. Thanks a lot to the team who have produced this excellent set of results because, again, I think we should keep in mind that it's thanks to strong operating results that we are posting this net result increase. I would say it was our first presentation for Juan and I, and we were delighted and very pleased to present this set of operational and financial results to you and look forward to exchanging with you in the next future. Thanks a lot and have a good day.
Thank you. This does conclude today's presentation. You may disconnect your line at this time and have a wonderful day.