Good day, ladies and gentlemen, and welcome to Enel Américas' Q1 2024 Results Conference Call. My name is Gigi, and I'll be your operator for today. To ask a question during the session, you will need to press Star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press Star 1 1 again. Please be advised that today's conference is being recorded. This presentation contains statements that could constitute forward-looking statements.
These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations of Enel Américas and its management with respect to, among other things: Enel Américas business plans, Enel Américas cost reduction plans, and trends affecting Enel Américas financial condition or results of operations, including market trends in the electricity sector in Chile or elsewhere, supervision and regulation of the electricity sector in Chile or elsewhere, and the future effect of any changes in the laws and regulations applicable to Enel Américas or its subsidiaries. Such forward-looking statements reflect only our current expectations, are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of various factors.
These factors include a decline in the equity capital markets, an increase in the market rates of interest in the United States or elsewhere, adverse decisions by government regulators in Chile or elsewhere, and other factors described in Enel Américas' integrated annual report. Readers are cautioned not to place undue reliance on those forward-looking statements, which stay only as of their dates. Enel Américas undertakes no obligation to release publicly the results of any revisions to these forward-looking statements, except as required by law. I would now like to turn the presentation over to Mr. Jorge Velis, Enel Américas' Head of Investor Relations. Please proceed.
Thank you, Gigi. Good evening, ladies and gentlemen, and welcome to our Q1 2024 results presentation. I'm Jorge Velis, the new Head of IR of Enel Américas, taking this position as our former head of IR, Rafael de la Haza, has taken the CFO role for Enel Américas as of April 1st . In the coming slides, our CEO, Aurelio Bustilho, and our CFO, Rafael de la Haza, will be presenting the main figures of this period. Let me remind you that this presentation will follow the slides that have already been uploaded in the company's website.
Following the presentation, we will have the Q&A session. If you want to ask a question, please send it through the webcast or write to us at our corporate email, ir.enelamericas@enel.com. Now, let me hand over the call to Aurelio, who will start by outlining the main highlights of the period.
Thank you, Jorge. Let me begin this presentation by highlighting our commitment with our operations in Brazil. As you know, in the last few months, we have suffered some extreme weather events and extraordinary situations out of our control that have affected our services. In the last days, we have announced a solid investment plan that aims to solve the situation. We will see more details of this in the next slide. Moving to this quarter results, EBITDA reached $1.1 billion in this quarter, which represents an increase of 14% compared to the Q1 of 2023. This improvement is mainly explained by Colombia and to a better result in Argentina, which moved from a negative EBITDA in 2023 to a positive one during this quarter.
We also had a positive FX effect in this quarter due to the appreciation of the Brazilian real and the Colombian peso. We were able to reduce our cost of debt in about 120 basis points, reaching an average cost of 11%. This is mainly explained by lower interest rates in Brazil and Colombia, and also by lower debt in Brazil as part of our liability management strategy. Finally, group net income reached $0.4 billion this Q1 , an increase of 17% compared to the same period last year, mainly explained by better EBITDA and an improvement in Peruvian operations, which, as you know, are considered below EBITDA. Regarding our Peruvian operations, let me highlight that all the figures in this presentation are excluding Peruvian assets unless we indicate the opposite.
Now in the coming slide, I will show the details of our investment plans in grids business in Brazil. Recently, we announced our investment plans for Enel São Paulo and Enel Ceará, which add up to a total of BRL 11 billion to be deployed in the 2024-2026 period. This implies investments of around BRL 2 billion and BRL 1.6 billion per year in São Paulo and in Ceará respectively, which represents an increase of over 40% compared to the average of previous years. We are increasing our base of internal employees by 1,200 and 1,750 in each company respectively. Aiming at improving and accelerate our response to any request of our customers.
The main initiatives of our plans includes, among other things, focus on preventive maintenance, increasing preventive planning, modernization of networks, expansion of communication channels and customer service. With these two announced plans, along with our CapEx commitment in our other operations, we total BRL 11 billion for 2024 and 2026 period, reinforcing our commitment with our operations in Brazil. Despite most of energy cuts that we have faced in the last few months were due to extreme weather events and extraordinary situations out of our control. We want to be part of the solution and are already putting our best effort in order to leave behind the service problems suffered by our customers. Let's analyze our investment during this period.
During the Q1 of this year, our CapEx decreased by 4%, reaching $556 million. As we announced in our strategic plan, we are looking to be more selective in our investments, especially renewable projects. 78% of total investments were allocated into Brazil, where, as mentioned, we are reinforcing our commitment with improving service quality and preventive maintenance. By business line, 55% was invested in grids and 43% in generation. Asset development CapEx matched $282 million, with 77% devoted to renewables. Let's now analyze our operating highlights on slide 6. In generation, our installed capacity reached 12.2 GW, and includes 200 MW during the Q1 of 2024. All in 98% of our capacity is renewable.
Net production in the Q1 reached 8.7 TWh, a decrease of 3%, mainly explained by a decrease in Colombia due to lower hydro resource and, to a lesser extent Brazil, due to lower wind speeds with availability. Not capacity, but availability, partially offset by higher hydro production in El Chocón and Panama. From our total production, 97% is emission-free, reflecting our commitment towards decarbonization in the countries we operate in. Energy sales increased by 26%, reaching 18.6 TWh, mainly due to higher sales in Brazil, especially in Enel Trading. Partially offset by lower sales in Colombia due to the unfavorable hydro conditions we have faced in the country. On slide 7, we'll focus on development of renewable capacity.
During the Q1 , we built 200 MW of new renewable capacity located in Brazil and Colombia, and our investments in new project amounted to $0.2 billion. We are currently building an additional 1.1 GW of capacity located in Brazil and Colombia. As you can see on the right side, we are working on two projects in Brazil, Arinos and Pedra Pintada, and two in Colombia, Guayepo II and Guayepo III . Pedra Pintada is a wind farm of 194 MW, and the other three are solar plants totalizing more than 900 MW. And most of this new capacity will be entering operations in 2024. Let's continue with grids operational highlights on slide 8.
Electricity distributed reached 27.3 TWh in the Q1 , which represents an increase of 4%, explained by higher sales in Brazil and Colombia. Regarding number of customers, we had an increase of around 420,000 in the last 12 months, reaching 22.3 million customers. Smart meters increased around 2.3 times, reaching 824,000 in this period, mainly due to the deployment in São Paulo. Our net RAB has increased by 15% in the last 12 months, reflecting the significant investment that we have done in our grids. The ratio net RAB per customer also reflects an important growth of 13%. In terms of quality indicators, we can see that in general terms we have struggled against difficult weather conditions that affected our metrics.
We are working hard in order to have a more resilient grid system, and as already mentioned in the last days, we have reinforced our investment commitments in Brazil and have defined a set of actions to improve quality. In addition to this, in Colombia, the regulator changed the criteria used to calculate the indicators, which implied an increase in both SAIDI and SAIFI. Now, Rafael will comment on the financial results in the coming slides. Please, Rafael.
Thank you, Jorge. Thank you, Aurelio. First of all, let me remind you that all the numbers that I'm going to mention here are in US dollars, are expressed in US dollars. EBITDA in the Q1 reached $1,077 million, an increase of 14%, mainly explained by better results in Argentina and Colombia in grids, both due to tariff adjustments and positive effects in Colombia and Brazil due to currency appreciation. If we exclude from 2023 results of sold assets, Costanera, Dock Sud and Cartagena, and also exclude FX impact in this period, we get to an adjusted EBITDA of $1,010 million, 11% higher than last year. Net financial result was a net expense of $181 million, which is slightly lower than last year.
This is mainly explained by higher impact of hyperinflation in Argentina, partial offset by lower financial income in Brazil due to lower cash position. Group net income in the Q1 reached $359 million, an increase of 16.8%. This is mainly explained by higher EBITDA and better results in our Peruvian assets, already considered as discontinued operations. In terms of net debt, we see an increase of 2.9% compared to December 2023. We will analyze in detail our debt later on.
Finally, let me highlight that our shareholders meeting held on Tuesday approved a final dividend payment of $142 million, which will be paid on May 30, 2024, and with the interim dividend of $170 million paid in January 2024, adds to a total dividend for 2023 of $259 million for this period. On slide 11, we will see EBITDA evolution and breakdown. Starting from $945 million of EBITDA in the Q1 of 2023, we have to exclude $35 million coming from sold assets, reaching $910 million in homogeneous perimeter. We see that generation decreased, mainly explained by Colombia, while grids had a significant improvement due to better results in Argentina and Colombia.
Customers improved mainly in Colombia, and others decreased mainly due to higher expenses in Argentina due to, as you probably know, inflation effect, the inflation effect that we saw in the previous months. With this, we get to an EBITDA of $1,010 million, which is 11% higher than last year considering the same perimeter. FX had a positive impact of $78 million, resulting in a reported EBITDA for this quarter of $1,077 million, as I mentioned at the beginning of the presentation. From our reported EBITDA, 59% came from Brazil, 36% from Colombia, and 5% from Central America. In terms of business line, grids represents 53% of our total EBITDA, generation 35%, and customers contribute with 11%.
On slide number 12, we will have a focus on the cash flow of our company. Starting from an EBITDA of $1,077 million, we see that net working capital amounted to $287 million, mainly explained by higher accounts payable related to energy purchases in Colombia and Central America, but substantially mainly in Colombia, along with capital recycling effect in Colombia, partially compensated by lower investment payments in generation in Brazil. Taxes paid during the period, you see the relevant difference compared with the same period of the previous year, amounted to $185 million. This is a significant increase compared to last year.
The explanation here is that in the previous year, we completed the merger between Enel Colombia and Enel Green Power, our renewables activities within Enel Green Power, so the taxable base is higher than the one that we saw in the previous year. With this, the taxes paid during this period amounts to $185 million. Net financial expenses amounted to $170 million, higher than Q1 2023, due to higher financial expenses in Colombia and at Enel Américas standalone, Enel Américas Holding, due to higher debt and lower financial income in Brazil related to lower cash position explained by the sale of Enel Goiás at the end of 2022 and FIEM in March 2023.
Just to be clear, we are not increasing the level of net financial expenses paid. This is a temporary effect due to the non-remunerated cash that we saw in the previous period in 2023 due to the sale of, as I mentioned it before, Enel Goiás and FIEM in March 2023. With this, funds from operations amounted to $441 million, a decrease of $111 million compared to the same period of last year. After investment for $556 million, including $282 million of growth CapEx, we get to a free cash flow of $116 million. Now let me analyze the debt of our company in the following slide.
Gross debt amounted to $8.4 billion, an increase of 3% compared to December 2023, mainly explained, as I anticipated before, by higher debt at Enel Américas standalone, Enel Américas Holding, related to dividend payments and a capital injection to Brazil, which allowed us to avoid new debt in that country that, as you know, is very expensive, still very expensive. Net debt reached $6.7 billion, an increase of 3% compared to the end of 2023. This includes Free Cash Flow of -$0.1 billion, net dividends paid of -$0.1 billion, and extraordinary operations also of -$0.1 billion, mainly related to the partial amortization of the Enel São Paulo's pension fund.
As you know, this is not a financial liability, it's an operational liability, but we concluded recently a partial amortization of this liability that is registered in our balance sheet. FX impact on our balance sheet of $0.1 billion, positive $0.1 billion, due to the revaluation of the local currencies in Colombia and Brazil. In terms of currency and country, we see that Brazil remains as the largest contributor, while the debt at holding level represents around 20% of the total. This is a temporary effect while we finalize the sale of our Peruvian assets, which will result in a relevant cash-in for the company of around $3.8 billion net of taxes.
Finally, regarding the cost of debt, we can see a decrease for this period going from 12.2% to 11%, mainly explained by lower debt in Brazil. The stock of the debt in Brazil is lower when compared to the same period of the previous year due to the liability management actions that we mentioned before, and lower interest rates in Brazil and Colombia. With this, I finalize the financial part of this presentation, and on the next slide, Aurelio will conclude this presentation with some closing remarks. Aurelio, please proceed.
By implementing-
Aurelio.
Yes? Can you hear me?
Yes.
Yeah.
Now we can hear you. Yeah.
Yeah. Thank you. We are reinforcing our commitment in Brazil by implementing a clear and strong investment plan in reach, aimed at improving our quality. This is our priority. We have a solid operational result in maintaining the sound financial position, which allows us to execute our CapEx plan. Regarding our corporate simplification process, we have the authorization of Peruvian authorities and are facing the final steps of selling process in interview. Finally, let me highlight that we had our shareholders meeting on Tuesday, and among other things, we have elected our new board of directors and approved a final dividend payments of $142 million to be paid on May 30, totalizing this, the payment, a total payment of $259 million for 2023 period. Please, Jorge.
Thank you, Aurelio. Thank you, Rafael. Now we will begin the Q&A session. The first question comes from Fernán González from BTG Pactual. Two questions regarding Brazil. First, local authorities in São Paulo have been advocating to terminate Enel São Paulo concession due to an alleged quality of service issue and insufficient investments. You have mentioned before that these were force majeure events due to weather, peak demand, and strong winds damaging infrastructure that led to the blackouts. What are the chances that politicians succeed in early termination of your concession? The second question regarding Brazil is the decree containing the terms of the renewal of the concessions in Brazil will soon be revealed according to the energy ministry. The minister has flagged that if he's considering excluding discos that have an ongoing concession revocation process from participating in the renewal.
He's even analyzing to prevent companies within the same economic group from seeking contract renewal if one of them is undergoing a revocation process. What are your thoughts on these measures potentially being included in the terms? Please, Aurelio.
Thank you. Thank you, Jorge. Thank you, Fernán . Let me tell you that this is a technical process. Technically, if you see the indicator, there's absolutely no risk. São Paulo is accomplishing all KPIs, all the quality KPIs, all indicators. It's not a discretionary process. This is a technical process. São Paulo is meeting all the requirements, all the indicators to renew. These allegations or this political interference or speech, it doesn't make sense. We are confident that the concession will be renewed.
We'll have, of course, as you all know, the decree with it. It's not issued or it's not public yet. We are confident that the technical aspect and the institutionality and that this process is embedded and it will be respected. This concession of São Paulo, we have no doubt that it will be renewed. We, as was declared, we still don't know the details of the conditions, but we are confident that it will be renewed.
Thank you, Aurelio Bustilho. Next question is about Argentina. What are your plans for Edesur? There's been some news suggesting that you are no longer planning to sell the asset. Is there any truth to this? What about El Chocón? Will you seek to renew the concession?
Well, for Argentina, we declare we started this process in the previous year. But we stopped the process since we are seeing and following improvement in terms of the expectations of the country. For now, we stopped this process and following the progresses, the political and economic progress that we are seeing in this country to reanalyze this process. I'm talking about, of course, the distribution, the Edesur asset. For now we are maintaining the distribution. Let's see the evolution of all this improvement in terms of economic and regulatory conditions.
Regarding El Chocón, which is a hydro plant, the concession finalized, you know, last year. We've been attending to a request from the current government to operate this asset until they prepare or define a new auction, let's say, to renew this concession to another operator. Of course, we are totally available to support the government in this process. We are operating this asset, this new renewables small period, you know, for the plant. It cannot be more than one year, which means that in August 2024 it should be redefined.
Our approach on this is to support the government, any needs they need in order to maintain the operation and to maintain the asset in a good quality, serving the Argentine population, the country, you know. Let's see, it's not defined. It depends on the government and since you have a new clear situation, we will analyze. For now, we are totally available and operating the asset in order for the government to prepare the next, let's say, the next phase of El Chocón, you know.
Thank you, Aurelio. Next question is for our CFO. Your leverage is low, CapEx mostly funded, and you are still distributing the legal minimum 30% in dividends. Could we expect an extraordinary dividend after you receive the cash from the sale of Peruvian assets? Or perhaps launch a share buyback?
Well, thank you, Jorge. As you probably know, yes, the situation in terms of net debt to EBITDA is close to 1.7x , without including the pension fund in São Paulo. We are comfortable with this situation. We have a very strict discipline in terms of financial terms, and we expect to continue in this path. The company is not contemplating an increase in terms of dividend payout, at least for 2024, and not a distribution of extraordinary dividend. Let me remind you that, when the distribution operations or the distribution processes and generation process in Peru will be concluded, this will entail a registration of a relevant capital gain in our balance sheet.
There will be an implicit, let me say, extraordinary dividend due to the base of the amount to be distributed in 2024. We are not considering an additional extraordinary dividend because already the group net income for this year will be relevant due to these capital gains to be registered in our balance sheet once the operations will be concluded. In relation to a potential share buyback, et cetera, this is something no decision has been taken. This is not the moment to speak about this potential operation because this is something that has not been considered.
The focus of the company at this moment is, as we mentioned before, to use the cash proceeds to be obtained from the sales of generation and distribution assets in Peru for Liability Management, substantially in Brazil. As you know, the cost of the debt in Brazil is really expensive for our company, and not only for our company, for all the companies operating there. The situation or the target, the strategy of the company of Enel Américas is to reduce the most expensive debt that we have in that country. To avoid new debt to finance the new CapEx. Because as you know, we continue with new projects there as Aurelio mentioned before.
Part of this amount coming from Peru will be devoted to this, no? To reduce the most expensive debt in that country, and also in Colombia, but substantially in Brazil, and to avoid the new debt to finance the new CapEx. That's it. If about the potential buyback is not the moment because no decision has been taken, I repeat. Regarding a potential extraordinary dividend, the answer is no. We are not considering an extraordinary dividend. We are not considering an increase in terms of dividend payout for this period. Thank you, Jorge.
Thank you, Rafael. Next two questions from Francisco Paz from Santander. The first one, the company's divestment process has made progress during 2023, 2024, and also undergone some changes in different contexts. For example, Enel Ceará and Argentina distribution assets are no longer being sold. As a result of which the plan is almost complete. Given this, what should be the next step in Enel Américas strategy? Aurelio, please.
Thank you, Jorge. Thank you, Francisco. Well, this is a very dynamic process, you know, in Ceará. We analyzed that it was not feasible to advancing this project having a renewal of concessions discussion in the middle. I mean, we are seeing some improvement, some better conditions. And the same for Argentina. Which makes sense to stop this project for us during this period. Priority in the short term, of course, we have a huge transaction that we are moving from this selling assets in Peru. We need to complete this process.
We are closing in a very short time frame. We need to finish, we need to conclude this. As Rafael was explaining to use these funds to reduce and to improve our financial condition with this, with our debts, and also with this movement, support our priority right now that is totally focused to improve quality of our distribution assets, mainly in Brazil. Yeah. Our focus, we need to improve. It's not only CapEx, you know, it is also OpEx. I mean, there are also activities that we were explaining to attend the customers in appropriate way, to improve our call centers. I mean, there are lots of operational activities, but it should be done and it costs.
Our focus right now is to support these operations and assure of course these conditions in the concession renewal. We want to renew our concession, we want to keep on operating and keep on improving the quality of attendance to our customers, having them in the center of our business. This is especially the priorities. Let's see what comes in the following years. We are seeing, if you see the generation business, we are seeing that the hydrological conditions can bring another possibility in terms of pricing.
We are seeing some possibilities of course to reduce the cost of capital so we can activate some projects in the future, renewable projects. Let's see, it's not in our plan, the main direction should move to this way. For now, as I repeat, the is to rebalance this financial position in order to support this priority which means that to improve the quality of our distribution distribution asset. Improving this situation, improving these elements, pricing, cost of capital, all the effort that we are doing, improving our financial position, we can see better and other alternatives for the coming years.
The main thing here is that, as Rafael was explaining, we are improving our financial position or we have a sound financial position, different to other competitors, I mean, especially in a period that we have higher interest rates and so on. We are entering in this phase in a very good shape in order to meet our and having our strategic options for the coming years.
Thank you, Aurelio. The second question from Francisco Paz , regarding Colombia. Given the water crisis that Colombia has experienced in recent months, which reached its peak in the first weeks of April, what should we expect to be the impact on the company's results in the Colombian operations in the next quarter?
I didn't understand the question. Referring to the spot prices or to the related to changes in regulatory changes.
It's regarding the situation of drought in Colombia.
Not yet.
The situation of drought in Colombia, a potential situation of drought in Colombia for the Q2 of this year. If we expect any potential impact in terms of results for our activities in the country, you know.
Okay.
But, uh-
Okay.
Yeah. That's the point. If you want, I can start, Aurelio, by underlining that, of course in Colombia-
Please.
Yeah. Thank you. The situation in Colombia has improved during the last two weeks. As you know, the level of the reservoirs in the country are around 33%, which is a little bit better than the situation that we saw one month or a couple of weeks ago. The situation was around with the reservoirs around 25-27%. The situation is a little bit better. We hope the situation in terms of rains improve in the Q2 , particularly in May. Let's see what happens. Of course, for us, the situation in terms of prices could impact in our activities, in our generation activities in Colombia because of the spot prices will increase, could increase in that case.
Of course, the reservoirs of our assets in Colombia, hydro assets in Colombia is still low. Let's see what happens. We hope the situation improves, particularly, I repeat, during this month. Of course, we think that the government and the authorities are analyzing very closely this situation. It seems that the situation improves as most of us are awaiting. We will not see rationing measures announced some weeks ago. We are very confident with a potential new situation, a better situation in terms of rains in the country, but we cannot anticipate any impact in terms of results in our activities there.
Thank you, Rafael.
Yeah. I agree with Rafael, if I may. Yeah, it's very important because this phenomenon El Niño, La Niña, there is. Of course, we see some improvements, but the situation of reservoir in Colombia is so bad. I mean, with the dry season, you know, that needs more to solve this situation, to increase the reservoir. So, we are prepared. But as Rafael said, it's too early to see that this beginning of April will change completely in this situation. I think it's too early to see. But commercially and especially the location that we have our plants, we are confident that we are well-prepared to any situation.
Thank you, Aurelio. Next question comes from Yordin Lozano from Kallpa in Peru, and it's regarding the sale of Enel Distribución Perú. Peruvian antitrust regulator already approved the deal. In this sense, in how much time do you expect the deal to be closed?
We expected the main issues, I mean, in the corporate authorization was, as you said, done. We are expecting especially the authorization from the Chinese antitrust regulator. We are on time in consideration of our schedule. We are expecting the first half, as we said, in the first half of this year, we will have this deal completed. I don't think we have any major issues to complete this operation, this deal. I mean, we expect to give you more information as soon as we have, during this process. Everything is under the timeline that we established in the beginning.
Thank you, Aurelio Bustilho. We have a final question coming from Sebastián Gallego. What is your plan for the remaining two wind projects in Colombia following the impairment of Windpeshi? Following El Niño in Colombia, should we expect the divestment of the remaining thermal plant in Colombia?
Thank you. Thank you for the question, Felipe. We maintain there's no new issues regarding our plan. We are trying to find another solution for this, especially for the wind project that we have in Colombia. As you know, I mean, it's not only for us, but in general in Colombia, the permitting process is delaying substantially in terms of timing. We expect the government to be more proactive on this to accelerate this process. Of course, altogether with communities and so on, but having the leadership of the government. We expect that improving this project, probably, who knows?
We have a very good pipeline of projects. We can reactivate more projects. Until now, there's no new plan, but we are waiting for acceleration in terms of permitting. It's affecting the new projects, I repeat, not only for us, but for all projects in Colombia. All this very good position and capability that Colombia has in terms of renewables, this is something that Colombia should take more advantage of this and also important for the country, important for the population, important for the community.
Again, we are not doing crazy things in terms of new projects or trying to invest in any additional projects when you see that the conditions of permitting are not reliable. Mainly reliable is not the word, but I mean some effective approvals to move forward with this project. In terms of thermal plants, we still follow this decarbonization process. This is a long-term view. This is a medium-term view. This is not something opportunistic. We still believe that renewable is the way, is the very best way that we can contribute for the climate change, for the electrification of countries in our region, not only in our region, but worldwide.
We follow the plan of decarbonization. There's no news regarding this. Of course, we are proactive and pragmatic in terms of this project and doing it in a proper way and in a fair way. We maintain our focus in decarbonization. We maintain our focus in renewables as we've been announcing it during these years. Thank you.
Thank you, Aurelio. Well, if there are no more questions, we conclude the results conference call. Let me remind you that the Investor Relations team is available for any doubt that you may have. Thanks for your attention.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.