Good afternoon, everyone, and welcome to Engie Energia Chile's third quarter 2025 results conference call. If you need a copy of the press release issued on October 29, it is available on the company's website at www.engie.cl. Before we begin, I would like to remind you that this call is being recorded, and the 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 this call is dedicated to investor and market analysts, not for the press. We ask all journalists to contact Engie Energia Chile's PR department for details. I will now turn the call over to Mr. Vincent Sorel. Please go ahead, sir.
Hi everybody, good afternoon. Today I'm here with Juan Villavicencio, our Chief Executive Officer, Alison Saffery, Head of Corporate Finance, Marcela Muñoz, Investor Relations Officer, and Bernardita Infante, Financial Advisor. We are pleased to present Engie Chile's third quarter result for 2025, and I will leave you with Juan, who will describe our performance during the ninth month of the year.
Thank you very much, Vincent. Good afternoon, everybody. On page two, we have organized this presentation into two sections. In the first part, I will briefly go through the third quarter 2025 performance. In part two, Vincent will provide an updated vision of our financial result and medium-term outlook for Engie Energia Chile. We can start directly on page three, where we share the main highlights for the first nine months of 2025. First, the company continues showing consistent, strong results as of the third quarter of 2025, despite the challenging conditions faced during this first nine months of the year. Secondly, due to the result we have obtained and given security of supply, we can highlight the high availability of our thermal plants during this period, which has allowed us to reduce our exposure to the spot market. Third, we continue to increase our renewable generation capacity.
Three projects reached COD during 2025, adding 468 MW of renewable capacity to our portfolio. Fourth, our first standalone battery project achieved 100% energization during the third quarter at Tocopilla site, quite before the planning. It is a 116 MW capacity project, and its COD is expected for the first half of 2026. On page four, as usual, we show the highlight of our financial performance, which Vincent will discuss later in more detail. We had an EBITDA generation of $521 million, while our capex reached $604 million during the first nine months of the year. Our net debt to 12-month EBITDA ratio remained relatively stable at 3.4 times as of September. Our net income reached $208 million. We are thus maintaining our guidance for the year with our EBITDA guidance at $650-$700 million and our capex guidance at the $900-$975 million range presented last August.
As a result, we are maintaining our expected net debt to EBITDA ratio at the level of 3.3 times for December of 2025. On page five, we can see the current progress on the execution plan for renewable. As of today, we have already implemented 1.4 GW, including the addition of Wind Calpa, Vesta Maya, and Ves Capricornio, which together added 468 MW of capacity to our portfolio. All these projects were developed on time and on budget. On such during the first nine months of the year, we generated a total of 1,721 GWh with our renewable asset.
During the third quarter, we also reached 100% of energization of our 116 MW battery project, Ves Topopilla, which, as we will see, is completing its construction in the same site where we used to operate Unit 12 and Unit 13, coal asset that were disconnected and then finally dismantled in 2023. Now, let's continue on page six, where we show the work we are doing, giving new life to our coal-based asset. Firstly, we convert our former Unit 15, which was closed in 2022, into a synchronous condenser that will provide ancillary services to the system. We also 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 generation and energy supply.
Finally, we are working on the conversion of our EAM coal-fired plant to natural gas, by which we will stop its operation with coal in December of 2025, and finish its conversion to initial operation with natural gas by the second half of 2026. Our thermal asset continues to show high availability and operational excellence, providing the generation to secure the 24/7 supply for our PPA's contract, and at the same time, reducing our exposure to the spot market. This has been especially relevant during the first nine months of the year, when we have faced more challenging than expected conditions with lower hydrology, restriction in transmission, and others.
The situation of our different coal plants is also explained on next page seven, showing that, as well as the conversion mentioned in the previous slide, two of our remaining coal assets, CTM1 and CTM2, will be disconnected by December of 2025, while CTA and CTH have an expected disconnection date for May 2026. These four plants will be kept under preservation maintenance while the company decides if and how this asset could be used in the future. It's important to mention that the authority has a right to require Engie to maintain this plant in operation for up to one year after the expected disconnection date, considering the need for security of supply for the system.
In page eight, we showed a graph of the complete generation portfolio transformation Engie has embarked on since 2019, when coal generation represented 60% of our generation capacity, while renewable represented only 3% of our total generation capacity, which reached 2.2 GW at the end of that year. As of September of 2025, Engie Energia Chile shows a generation capacity of 3.2 GW, of which coal represents 34%, natural gas 22%, and renewable plus batteries represent 44%, a significant increase during this period. Our expectation for 2027, considering the renewable and BESS project currently under construction, as well as the conversion of EAM and retirement of the other coal plants, is 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.
On page nine, we show a little more about the transition process undergoing by Tocopilla site, where the Ves Topopilla project is concluding its construction with 100% energization of the batteries during the last quarter, in the same site where Unit 12 and Unit 13 were dismantled. This shows the commitment of Engie to the region and the 24/7 supply of energy to serve our PPAs, including the transformation of a problem into a new opportunity for the portfolio of the company. Next, on slide 10, we show the eight renewable and battery projects we have currently under construction, which are deployed over five different regions of Chile, including the already mentioned Ves Topopilla, which is the first of these projects to reach 100% energization and is expected to reach COD by the first half of 2026.
During 2026, we expect to continue the energization of the other projects under construction, some of which should reach COD by the second half of 2026, and the wind projects by the first half of 2027. Notably, these projects include the first greenfield project in the Metropolitan Region, PP+VESS Libélula, as well as the first wind project built in the Ñuble Region in the south of Chile, Wind Tequenes. If we move directly to page 11, 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 10 that are currently under construction. As you can see, we have added 160 MW of Ves Topopilla in 2025.
Since the project is already 100% energized, in total, the new project will add around 1.2 GW of renewable and BESS capacity to the portfolio and will allow Engie Energia Chile to be virtually balanced from both business and risk perspective by the end of 2027. The construction and implementation of this project will require in total approximately $1.4 billion between 2025 and 2027. Now I will 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. Thank you, Juan. Good afternoon to everyone. On page 12, we start with the second part of this presentation and present the financial performance and updated guidance for 2025. In addition to the good numbers, it demonstrates our ability to deliver, our ability to capture value, and the progress in the execution of our strategy, as you can see. On the financial performance side, during the first nine months of the year, it is summarized on page 13, where we show EBITDA figures, which reach $521 million, a $97 million increase compared to the same period last year. The main reasons behind the EBITDA increase, I will come back to it, but include, sorry, the increase in the electricity margin and the generation margin of our asset.
As a reminder as well, the award from the arbitration procedure related to the breach of one of our LNG supply contracts from our main LNG supplier was recognized as of June 2025. Net result reached $209 million in the first nine months, a 4% increase compared to the same period of the previous year. Finally, our net debt to EBITDA ratio reached 3.4 times as of September 2025. On the next page, I will now comment on the chart on this page. In the first nine months of the year, EBITDA increased by $97 million and reached $521 million, as I said on the page before. One of the reasons for the EBITDA improvement was the increase in the electricity margin, which rose by $64 million.
The main positive effects on this electricity margin were, first, a $74 million positive effect from an increase in our own generation and the associated lower energy purchases. In gigawatt-hours, this increase in our generation can be explained by one-third from the three projects that reached COD in 2025: Wind Calpa, Ves Maya, and Ves Capricornio, while the other two-thirds came from the increased generation of our thermal assets, which were readily available and were dispatched. This allowed us to reduce energy purchase from the spot market from 3 TWh in the first nine months of 2024 to 1.5 TWh in the same period this year. Second, higher PPA revenue for $55 million.
This is mainly thanks to an increase in the physical sales to the distribution companies because of natural demand growth, but also an increase in our pro-rata share of the regulated supply, as other companies did suspend their contracts or terminated them early due to execution problems. This offset the 10% drop in physical sales to freight clients, explained by maintenance work at some mining and industrial operations. These two positive effects allowed us to cope with the significant increase in energy purchase price, driven by lower availability of other thermal plants in the system, lower availability of Argentine gas, and lower hydro generation in the system. This increase represented a $65 million negative effect that, as you can see, we were able to compensate.
In summary, our effort to reduce our exposure to the spot market, especially during non-solar hours, has proved successful in the first nine months of 2025. Now, outside of the electricity margin, we can observe a $10 million increase in revenue from gas sales to third parties, due notably to the major maintenance and upgrade of our U16 combined cycle plants in the first quarter. Our EBITDA growth benefits also from $28 million from one-off. These were largely attributed to the recognition in 2025 of approximately $100 million related to the outcome of the arbitration with our main LNG supplier. In 2023 and 2024, it did not fulfill its obligation. During this quarter, an agreement was reached with the LNG supplier for the payment of the above-mentioned arbitration amount and will be settled over 2025 and 2026.
Increase in some provision mid-2025 in the context of our transformation also offsets the one-off of this arbitration outcome. Finally, we see a negative impact of $6 million coming mainly from operation and maintenance expense, as well as higher transmission tolls, leading to our EBITDA at $521 million. All this explains our 23% increase in EBITDA. Moving forward, this slide explains in detail the evolution of Engie Energia Chile energy margin. It shows the available energy for the first nine months of 2025, which reached 9.7 terawatt-hours, and how this energy was supplied. Notably, the spot purchases during this period were lower in a higher spot price environment, mainly due to the high performance and dispatch of our generation asset, as well as the addition of new renewable and battery projects previously mentioned.
The energy margin was thus higher, going from $54 in the first nine months in 2024 to $60 in 2025. Slide 16 shows how the increase in EBITDA held by foreign exchange gain offsets the increase in net financial costs and deferred gaps, driving to the increase in net income, which climbed to $209 million in the first nine months of the year. Although we had a strong operating result, it was indeed offset by the effect of one-off below EBITDA, such as the recognition of $50 million interest income on PEC-related account receivable in 2024. However, excluding this, financial expenses are lower this year than last year, reflecting the decrease of the average coupon of our debt and an increase in capitalized interest.
Note that these figures exclude the impact of the subsequent event related to the preliminary technical tariff report issued mid-October by the National Energy Commission regarding note price applicable to our regulated PPA. Our financial statement and press release explain that the figure mentioned in this report will have a negative effect on interest income for about $26 million. On the tax expense, tax expense increased by $51 million versus last year. It's mainly related to deferred taxes, considering the tax losses of Engie Energia Chile. And it's explained by, one, the increase in profit before tax, and second, by $37 million coming from the impact of a merger between CTA and EECL. It's important to note that in total, when considering also this one-off below EBITDA, 2025 September net income is not materially impacted by one-off and is mainly driven by our operating result.
In fact, 2024 net income was much more favorably impacted by one-off than 2025, impacting the year-on-year variance. In slide 17, we see that our net debt decreased by 100, increased to $2.1 billion. We reported strong cash generation and $112 million in proceeds from the last sale of PEC 3 document. This allowed us to finance capital expenditure of $582 million, plus a $54 million dividend payment, the first one since 2021, as well as interest, taxes, and insurance premium. It's important to note that our cash flow from operating activities after interest and tax is significantly higher than the one generated in last year for about $200 million. Now, let's move to slide 18. Our BBB stable outlook rating has been confirmed by Fitch Ratings and Standard & Poor's.
Net financial debt reached $2.1 billion end of September, with a net debt to EBITDA for the last 12 months reaching 3.4 times. We continue to improve our debt profile. Our net debt to EBITDA ratio remains contained in the context of a significant CapEx program, notably thanks to strong EBITDA. In addition, the maturity profile of our debt is also strong, with a reduced refinancing risk and leaves headroom for future financing. We have secured two important new financing that have contributed to extend the average life of our debt and maintain the cost of our funding. Namely, the issuance of the equivalent of $122 million 20-year bullet green bond in the local market, as well as the recently announced closing of a $400 million green loan with CAF, seven-year amortizing facility, one-year disbursement period.
With these two financing, we expect to have raised most of the debt required to finance our current CapEx plan, described previously by Juan. On the bottom part of the slide, we can see the 5.4% average coupon rate of our debt, as well as the 5.5-year average remaining life of the debt. During this period, we repaid $136 million balance of the US bond maturing in January, and we made other principal debt payment for $93 million, reducing the high level of cash we were holding end of 2024. Slide 19 shows the evolution of our consolidated CapEx program from 2019 to the estimated CapEx amount for 2025. As you can see, our investment has been accelerating, notably during the second half of this year compared to the first semester. Capital expenditures have been increasingly concentrated in renewables as well as in BESS over the last three years.
Between 2025 and 2027, we will invest $1.4 billion in renewable and BESS projects 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 with renewables. We will also continue investing in conversion progress of our coal-fired plant, as well as transmission projects that are needed for our portfolio. Please, let's continue on page 20. As a result of the investment plan we just explained, our EBITDA is increasing, notably positively impacted by the reduction in our average supply cost. Leverage remains under control during this intensive CapEx phase. That's why the net debt to EBITDA ratio has been showing a downward trend, reaching a level of 3.4 times at the end of the first nine months of this year.
It's expected to stay around this level by the end of the year. Moving to slide 21, we confirm our guidance both for EBITDA and CapEx for 2025. We don't see ourselves exceeding this target or landing in the high end of the range, but these targets are confirmed. On the EBITDA, we should thus be within $650 million-$700 million range. As you may remember, we increased the guidance on our June result, mainly due to the recognition of the arbitration award related to the breach of the contract we've previously discussed, as well on the back of strong operating performance. I should note that during this third quarter, we reached an agreement regarding the award that will materialize the recovery of the amount in 2025 and 2026. On the CapEx, we are confirming the guidance between $900 million and $970 million.
The resulting net debt to EBITDA ratio should thus reach 3.3 times by the end of 2025. As usual, this guidance is considering the driver and assumption presented on the left side of the slide. Finally, we summarize; we continue to be on track by first working on the rebalancing of the portfolio, adding new renewable generation and storage, extending the life and increasing capacity of our gas asset, and adding backup EPA. Second, we continue moving forward with our intensive CapEx program in renewables, transmission, and conversion of plants for the energy transition during the 2025 to 2027 period. Third, we leverage our assets. We pay strong attention to maintain high availability of our plants and excellence in their operation. Last but not least, all this while maintaining strong results and strong balance sheets.
Thank you for your attention, and we are now open to any question you may have.
Thank you. The floor is now open for questions. To ask a question, please click on the Q&A button down on the menu bar and write your question. Please remember that your name and company should be visible for a question to be taken. Questions will be taken in the order they are received. Please hold while we poll for questions. Our first question comes from Andrew McCarthy with Lorraine Vail. Is Engie Energia Chile currently aiming to sign new PPAs in both the regulated and unregulated customer segments? What type of PPAs would it prefer to enter into and why? Can the company participate in auctions currently underway given its current short position in the spot market?
Thank you very much for the question. Of course, that's like a key provider for Chile.
We are always evaluating the PPAs and the opportunities in the market. We are evaluating the current process for sure. It is not decided if we will participate or not. The key element to share with you is any decision that we will take regarding the participation will be related to not exposing our business to participate in a serious manner, protecting our P&L and our position. About the preference, like always, we are key players in both markets. In the case of the regulated PPAs, something relevant to mention is Chile during the history has been serious in the contract respect. Our expectation is this will continue. If this happens, of course, that is something that we can evaluate.
Thank you. Please hold while we poll for questions. Once again, to ask a question, please click on the Q&A button down on the menu bar and write your question. Please remember that your company's name should be visible for your question to be taken. Our next question comes from Andrew McCarthy with Lorraine Vail. Excluding the impact of the one-time gain in 2025 from the arbitration outcome with your LNG supplier, what should be the remaining drivers for the evolution of the company's EBITDA into 2026?
Hello, thank you. At this stage, we do not provide guidance for 2026. However, what I explained was that 2025 was not materially impacted by one-off when we look at in all net. Besides, we continue to put new assets online, and we will have the ramp-up of the new asset generating. Also, the demand, I mean, is expected to remain strong. You can expect 2026 to remain quite strong compared to 2025.
Thank you. Next question from Ferdinand Gonzalez with BTG. Of the EBITDA growth over the past year or two, how much can be explained by the higher prorata and regulated volumes, and how much can be attributed to the incorporation of more renewables BESS capacity?
On that topic, I think the best is to stay close to this publication where we explain everything. I do not think it was explained that way in the previous years. However, you still have the graph in page, if I am not mistaken, page 15 that we were producing last year as well, and from which you could derive your own estimate.
You will understand that we do not disclose, I would say, a margin on specific PPAs as we have a portfolio approach, as well as upstream PPAs and spot market and spot purchase on the market that create, in fact, portfolio management, which is basically the circle of how we create value in this market.
Our next question comes from Martin Arenset with Balance Capital. What could we expect in terms of revenues and EBITDA from the synchronous condenser?
More than a particular amount, the key element to share with you is this investment is supported by a regulated contract that we awarded time ago from the regulator, providing ancillary services, and the revenues, the annual revenues are regulated and properly protected. This means that to maintain the business model that we approved for the investment decision depends on not having extra costs and delays during the project execution.
Now we are progressing in the order of the expectation with no big issues to report. This means that we'll be in the order of the normal requirement for investment decision in Engie Energia Chile.
Please hold while we poll for questions. Next question from Martin Arenset with Balance Capital regarding the methodological error made by the regulator when adjusting tariffs for inflation. What impact do you expect this remediation to have on your 2025-2026 results?
Thank you. On this, as you might have noted, we released quite an extensive note to the subsequent event in our financial report, giving some preliminary figures that are being confirmed and fine-tuned by the authorities. This error is related to the past, has been building up slowly in the account, I would say.
Of course, as soon as we have a final amount or an indication of the final amount, we will adjust the financial statement, and you can expect it to be adjusted in the last quarter of 2025. Regarding the return of the money, we will reimburse based on the applicable regulation mechanism in the timing that will be set by the decree that we are waiting to finalize this topic.
Please hold while we poll for questions. This also answers our question from Juan Felipe with Credit Corp Capital. Please hold while we poll for questions. Another question from Andrew McCarthy with Lorraine Vail. One of our key LNG supply agreements will expire in after 2026. What is the plan with respect to contracting LNG volumes after that date?
You know, the LNG market is quite liquid, and we have a strong position worldwide to be able to recontract if it's needed. Today, we are evaluating the best solution for the ECL P&L to protect the position of the company. This is ongoing today.
Please hold while we poll for questions. Once again, to ask a question, please click on the Q&A button down on the menu bar and write your question. Please remember that your company's name should be visible for your question to be taken. This concludes the question and answer section. At this time, I would like to turn the floor back to Mr. Vincent Sorel for any closing remarks.
Thank you. It has been a pleasure to present these results together with Juan. I think the key message here is that you show the delivery of our strategy.
You show the progress on how we are progressing on time, on budget, on the transformation of our portfolio. As always, transformation is in the context of a high CapEx phase, but while maintaining the strong balance sheet. I think all this is super positive together with the good numbers we just showed you. I hope we have answered all of your questions. Otherwise, do not hesitate to contact the team, and we will be happy to help you. Have a good day all, and looking forward to the presentation of the year-end financial result and the guidance for the future year.
Thank you. This does conclude today's presentation. You may disconnect your line at this time and have a nice day.