Good afternoon, everyone. Good afternoon, everyone, and welcome to ENGIE Energía Chile's second quarter 2026 results conference call. If you need a copy of the press release issued on July 28th, 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 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 all participants that this call is dedicated to investors and market analysts, not for the press. We ask all journalists to contact ENGIE Energía Chile's PR department for details. I will now turn the call over to Mr. Vincent Sorrel.
Please go ahead, sir.
Hello, everyone. Today I am here with Juan Villavicencio, Chief Executive Officer, Alison Saffery, Head of Corporate Finance, and Marcela Muñoz, Investor Relations Officer. We are very pleased to present ENGIE Chile 2026 first half results. I leave you with Juan Villavicencio, who will describe our performance during the first half of 2026.
Good afternoon, everybody. On page two, we have organized this presentation into two sections. In the first part, I will briefly go through our first half 2026 performance, and then in the second part, Vincent will provide an updated vision of our financial results and guidance. We can start on page three, where we share the main highlight for the first half of 2026. First, I want to highlight that we continued to show strong results during the first half of the year. We had a very strong cash generation, which helped support our investments as well as our dividend payments. Some of the drivers of this excellent result were, on the one hand, the high regulated demand we supplied, leveraging on the high availability of our thermal fleet, which together with the addition of new BESS capacity, helped give stability to our generation portfolio, especially in non-solar hours.
This continued to reduce our exposure to the spot market. Notably, all our renewable projects under construction are currently injecting energy to the system. Most of them 100% energized, while the wind farm have been progressively adding energy. This strong operating performance allow us to confirm our guidelines for 2026. On page four, we give you a summary of all the projects and activities we continue to develop related to our thermal asset in Tocopilla and Mejillones. In Tocopilla, we continue working on our coal-based former Unit 15, which was closed in 2022 and is being converted into a synchronous condenser, which will provide ancillary services to the system. We have also improved, extended the life, and increased the capacity of our gas fire combined cycle plant, Unit 16, thus becoming the most efficient in the north and ensuring the flexibility of our generation portfolio.
In Mejillones, the conversion of our IEM coal-fired plant to natural gas has advanced as planned and is currently in its final stage to reach COD during the second half of 2026. Also, as we've already mentioned during the pure calls, our coal plants, CTM1 and CTM2, were decommissioned on December 21, 2025, while CTA and CTH have continued operating as required by the authorities until May 2027 in order to secure supply and services to the system until such date. CTM1 and 2 will be kept under preservation maintenance while the company decides if and how this asset could be used in the future, and the same will occur in CTA/CTH once disconnected in 2027.
Our thermal asset in operation continue to show high availability and operational excellence, providing the generation to secure the 24/7 supply for our PPA contract and at the same time reducing our exposure to the spot market. This continued to be true during the first half of 2026, despite our IEM plant being closed during its conversion. On page five, we show in some depth the importance of the conversion of IEM to natural gas. It is a key milestone in ENGIE Chile's decarbonization roadmap. The project enhanced operational resilience, support renewable energy integration, and strengthen system reliability through dispatchable backup generation. At the same time, it reduced emission and improves ESG performance. The plant is now equipped with 20 dual fuel burners and new gas infrastructure, enabling more efficient and sustainable operation while creating long-term value.
This project demonstrates how ENGIE Chile continues advancing the energy transition while maintaining reliability and operational excellence. If we go to page six, we show a graph of the complete generation portfolio transformation ENGIE has embarked on since 2019, when coal generation represented 61% of our generation capacity, while renewable represent only 3% of our total generation capacity of 2.2 GW. In December 2027, we showed that our generation capacity had reached 2.9 GW, of which coal represented only 25% after disconnection of CTM1 and CTM2. Natural gas represented another 25%, and renewable plus batteries represented 50%, a significant increase during this period. Today, as of June 2026, our generation capacity increased to 3 GW, which now includes the 0.1 GW extra capacity of BESS Tocopilla and BESS Arica.
Our expectation for 2027, considering the renewable and BESS project currently under construction, as well as the conversion of IEM and retirement of the remaining coal plant, is to reach a total installed capacity of approximately 3.6 GW, of which 71% will be renewable and batteries, and the remaining 29% will be natural gas. On page seven, we can see that we continue to show additional progress in the execution plan for our renewable capacity under construction. As of today, we already have 1.6 GW of renewable installed capacity, including the recent additional of BESS Tocopilla, our first standalone battery site, built in the same site where coal units 12 and 13 used to operate and which added 119 MW of capacity to our portfolio in February of 2026. Additionally, in June of 2026, BESS Arica reached COD. All these projects continue to be developed on time and on budget.
As such, during the first half of 2026, we generated 1,071 GWh through our renewable asset. Next, on slide eight, we show the six renewable and batteries project still under construction, which are developed over five different regions of Chile, including BESS Los Loros, which is in the process of obtaining its COD. BESS Libélula, the battery project in our Libélula PV plus BESS site, is also in the process of obtaining COD. The PV is 100% energized, as well as the Lile and Kallpa battery project. These three projects should reach COD during the second half of 2026. Our two wind project, on the other hand, have advanced on a schedule and are expected to reach COD in the first half of 2027. We expect this project to continue adding megawatt hour of generation as they progress with their energization.
On slide nine, we provide an overview of our transmission project. The strength and reliability of our transmission asset are enablers for the accelerated growth of our renewable generation portfolio. As shown, we have project in different region of the country. Currently, we have six expansion works in the north and south of Chile and another six new project in different state, mostly in the center south. On May of 28, our Totihue substation reached COD, showing our project execution capacity and our ability to provide integrated energy services to our customers. And now I will leave you with Vincent, who will present the detailed evolution of ENGIE Chile's financial for the first half, as well as the guidance for 2026.
Thank you, Juan. Hello, everyone. I am now pleased to present the financial performance for the first half of 2026. On slide 11, we present our key financial highlights for the first half of 2026. EBITDA reached $400 million, up 11% year-on-year, reflecting strong operating performance, higher electricity margin explained by a more efficient generation mix, and higher physical sales to regulated client. Despite lower thermal generation, we were able to reduce our purchase from the spot market. Net income amounted to $205 million, representing a 10% increase versus the same period last year. This improvement was mainly supported by a stronger operational result. Finally, net financial debt stood at $2.3 billion, while the net debt to 12-month EBITDA ratio improved to 3.3x as of June 2026. This reflects both our strong EBITDA generation and disciplined financial management, even as we continue executing our investment plan.
On slide 12, let me provide more detail on the driver behind our EBITDA performance in the first half of the year. Our EBITDA increased by $38 million, from $362 million in the first half of 2025 to $400 million in the first half of 2026. The main driver was a $67 million increase in electricity margins, supported by a more balanced generation position that reduced energy purchase volume in the spot market. Higher sales to regulated clients and lower spot purchase explain most of this improvement. In addition, EBITDA benefited from positive contribution from transmission, as well as higher savings reflected in the performance break, which also contributed $8 million to this EBITDA year-on-year increase. These gains were partially offset by a negative effect of one-off, considering that last year we had reflected the result of the arbitration with our main natural gas supplier.
Overall, this chart shows us that a stronger and a more balanced operating profile was the key factor behind our EBITDA growth in the first half of 2026, confirming the benefits of our portfolio transformation and reduced exposure to spot market volatility. On slide 13, you can see how this improvement in operating performance translated into growth in final result. Net income increased by $20 million, from $185 million in the first half of 2025 to $205 million in the same period this year. The main positive driver was the strong increase in EBITDA, partially offset by higher depreciation and higher income tax, as well as a negative foreign exchange effect. At the same time, a decrease in net interest expense contributed to a positive net income during the first half as compared to the same period last year.
The decrease in net financial expense is mainly explained by a $16 million increase in capitalized interest, but also by lower interest rate. Notably, our net income this first half of the year is the highest since 2016. On slide 14, we show our investment program continue to be funded through internal cash generation, which allowed us not only to fund our CapEx, but also our dividend payment. Despite a high level of capital expenditure during this first half, net debt decreased by $57 million. This reflects strong cash from operation, which more than covered all of the CapEx deployed during the first half. In addition, the company received $17.5 million in dividends from TEN S.A. during the first quarter and paid $66 million in dividend to its investor. Slide 15 highlights the strength of our financial structure.
ENGIE Chile continues to maintain investment-grade rating at both the international and local scale, reflecting a solid credit profile and disciplined financial management. Notably, confirming this solid credit and risk profile, Fitch Ratings upgraded ENGIE rating in national scale from AA- to AA stable during the second quarter. As of June 2026, net debt stood at approximately $2.3 billion, while the net debt to 12-month EBITDA ratio improved to 3.3, excluding IFRS 16 lease. At the same time, the company increased its cash position and continued reducing its average interest paid, which stood at 5% coupon. The debt maturity schedule also remained well spread over time, with no material short-term refinancing pressure, and overall, this slide confirms that ENGIE Chile is preserving a strong and flexible balance sheet while continuing to execute its growth plan. In June 2026, we issued a new bond in the local market.
It was a 3 million UF bond equivalent to $136 million with a seven-year bullet structure. We used the fund from this bond, plus cash, to prepay a loan with Banco Santander. Finally, on slide 16, we confirm our 2026 guidance. After a strong first half, the company remains on track to deliver an EBITDA in the range of $690 million to $760 million, while CapEx, as mentioned, is expected to range between $640 million and $710 million. At the same time, we expect net debt to EBITDA to remain below 3.5x , excluding IFRS 16 lease. The first half result, EBITDA of $400 million, net income of $205 million, CapEx of $384 million, and a debt to EBITDA ratio of 3.3, support our confidence in meeting this target.
While capital expenditure will remain high, this represents a decrease compared to the record investment level of 2025 and will reduce our financing needs. Overall, this reflects a strong first half of the year and reinforce our confidence in the outlook for the full year 2026.
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. If you have a question, please write it first on the Q&A section. Later, your microphone will be open so your question can be answered on the call. Questions will be taken in order they are received. Please hold while we poll for questions. Our first question comes from Fernan González from BTG Pactual.
How do you perceive the current operation of BESS in terms of charging and discharging profiles, spot price formation, and asset remuneration? Are you willing to renegotiate regulated PPA with the CNE, or do you rule out that option? Have you signed a new LNG contract to replace the one expiring this year? Are there market conditions for such contracts these days?
Okay. Thank you very much for the good questions. Regarding the batteries charging and discharging profile, spot price formation, and asset remuneration, what can we say? In Chile, this is a new technology, more than two years in industrial scale. The authorities and the different players, we are learning in the process to maximize the value of the asset. We are not seeing a big disruption in the way of operating this. I think that there are a fluent communication to take care about the short-term value for the system, for the companies, and to take care in the long term, the operation to secure that we will not damage them in the long-term expectation of production. In terms of the remuneration, what can we say?
That today there are a business case leveraged by the capacity payment, and when the batteries are requested to supply ancillary services, there are a transitory regulation. Obviously it's in the center of attention of all the players. What will be the formal stable regulation that will start in one and a half years more, is something that we need to secure that will make sense to protect the value of the asset and the kind of services that we supply to the system. Okay? Regarding the second question, about the renegotiation of the regulated PPAs, what can we say today, is that it's not clear yet what will be the mechanism to understand if makes sense or not to participate in some manner.
Obviously, we agree in the voluntary concept that was introduced and the two principles that are directly mentioned related to the economical efficiency and the respect of the contract that is the base of our same principles that we are following. But we can't say yet if we will participate or not, because it's not clear the rules. Okay? About the LNG, what can we say is today we are focusing close positions for the next year to secure on the confrontation of the winter. This is what we are doing, not thinking in more than this. The focus and the center of attention is to protect the risk of position during the winter. Okay.
Our next question comes from Andrew McCarthy from LarrainVial.
Good afternoon.
Yes.
Can you hear me?
Yes, we can.
Okay, great. Thanks very much. Yeah, just a couple of questions from my side. First one, the better hydrological scenario that we've been seeing in Chile since mid-July. I was just wondering if you could comment on how that impacts your confidence, with respect to the 2026 EBITDA guidance. My second question is, can you comment on potential impacts to earnings or the balance sheet from the reconstruction law, especially the tax reform within that law, with respect to impacts that you will see on deferred taxes. Just try to understand if adjustments to deferred taxes might impact your earnings this year or next year, and any impacts that could have on the balance sheet. That's it from my side. Thanks.
Thank you, Andrew, and always a pleasure. For the first question on hydrology, good hydrology is better for result indeed. That being said, I think we are closing the short position. As you know, we are less exposed than in the past to volatility of spot prices. Also, I would say the level of reservoir today, in July, is not higher than last year at the same date. So the probability of the El Niño is increasing above 50%. But all in all, I would say we remain balanced, and I don't see a significant upside to date of El Niño condition on our result. Regarding the deferred tax, we are analyzing and we are, I would say, observing all the tax progress through the various legislative steps.
Indeed, will impact the balance sheet and the P&L in the same period, and it will also depend on the instruction that CMF will likely issue like they did when the rate was increased to 27%.
Our next question comes from Mr. Juan Felipe Becerra from Credicorp Capital, please. You may now proceed.
Hello, and thank you very much for taking my question. I have two by my side. The first one related to backup PPAs, and if we could expect the company to maintain its backup PPAs contracted status to remain around 4 TWh per year. And given the significant amount of BESS capacity that it's been expected to come online in Chile over the next few years, do you expect the renewal of these backup PPAs to remain relatively straightforward, or how do you expect the market for these PPAs to evolve? My second question is regarding, maybe emphasizing some of the previous questions regarding standalone BESS projects, battery projects. How do you see the arbitrage opportunities evolving over the medium term as the additional capacity of BESS enters the system? That will be it from my side. Thank you very much.
Thank you, Juan Felipe. In general, to clarify what is our expectation about backup PPAs and the evolution of this in our portfolio. The backbone of our strategy is our own capacity, and because of this, we are creating a strong pipeline to secure that the growth will be responsible to protect the position. Obviously, the backup PPA is a complement to hedge positions, but it is not the base of the strategy. This is what I can mention in general. Okay? Regarding the scenario of the standalone BESS project, of course, the arbitrage spread is reducing because of the high penetration. From our side, the key topic, and this is happening now, it is not a topic of the future. We are seeing a reduction when you are reviewing the average spread, and the focus is to be contracted.
At the end of the day, if you are contracted and you have a proper hedge, it is not so relevant. The impact is more a protection for the portfolio. The role of the BESS is to give in flexibility to the energy management from our side. We are not seeing a big or any strong threat from our side. Probably for players that are deciding investment for merchant, it is a real complication. It is not our case.
Our next question comes from Mr. Jay Samani from Scotiabank Chile. Mr. Jay, you may now proceed.
Following up on the BESS penetration. Is increasing BESS penetration beginning to reduce evening peak prices, or are you seeing that it is creating more competition among storage operators? Secondly, on your guidance, you had a very strong first half. Almost over 50% of the annual guidance has been met. So what do you think are the main variables that could prevent ENGIE from outperforming in the second half? Thanks.
Thank you, Jay. Regarding the first question, I think that I answered in the previous one, mainly conceptually speaking. The BESS penetration so fast in big portion of the year, with the exception probably in the drop years, May, June, July could be different, but in the rest, the peak in price is being lower in general. And obviously, there are more competition. This will affect the capture price and the spread. The key topic here is the hedging that you are having with the PPAs. It's the only way. Today it's the vision that we have to invest in future asset, with the exception of managing curtailment that could leverage some ideas of investment. In general, you must go through contracted strategy. Okay? In the second question, I will leave Vincent to answer you better. Okay?
Thank you, [Juan]. The operating performance that we deliver over the first half is in line, I would say, with our expectation. It's important to note as well that the guidance is the highest EBITDA ever posted by the company, that the low end of the guidance is higher than the EBITDA of last year. And we still have many risk ahead of us. That being said, we are super confident to achieve the guidance. And indeed, a combination of positive factors like, I would say, good hydrology, a very strong regulated demand and that sort of thing, combined in addition to capturing market opportunities on gas sales, for instance, and it's too early to say, could indeed lead us to outperform the current range. But at this stage, we maintain the range published in February and while we express again the confidence to achieve this target.
Our next question comes from Ms. Isabel Luna from Farellones Capital . Ms. Isabel, you may now proceed.
Hi, you hear me?
Yes, we can hear you.
Okay. Could you give us an idea of the CapEx levels we should expect from 2029 onward? Could you expect lower levels now that the mix, the matrix has been rebuilt around non-conventional renewable energy and gas? Thank you.
Thank you, Isabel. What we can say is that we have the ambition to add 2 GW between end of 2027 and end of 2030. This is backed by a strong pipeline that we presented in the strategy update earlier this year. All this was presented under, sorry, the condition of profitable megawatt. In other words, the technologies that will form this 2 GW are, of course, backed by a pipeline, any other project acquisition that we could do. With that regard, as the technology mix is not definitive yet, it's very difficult to give an indication of the CapEx range, especially spread between 2029 and 2030, because this will be dependent of the life of the project development.
I guess that starting from the 2 gigs, you can probably use that as a model and multiple to model the CapEx intensity that we could have, even if it is not committed in 2029 and 2030.
This concludes the question and answer section. At this time, I would like to turn the floor back to ENGIE Energía Chile for any closing remarks.
Thanks a lot. Thanks a lot for attending this call. Thanks a lot for the question. I hope we answer to the extent of what was possible, and we met your expectation. As always, anytime you can contact our IR people here to further discuss the result. Considering the forecast, I would say next timeline for us is the September result. We will have more information and we will update. We are looking forward updating you in October with our press release and in November with this call for the reforecast of the performance of this year. Thanks a lot.
Thank you. This does conclude today's presentation. You may disconnect your line at this time and have a nice day.