Good day, ladies and gentlemen, and welcome to Enel Américas second quarter 2023 results conference call. My name is Carmen, and I will be your operator for today. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, please press star one one again. 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, first, Enel Américas's business plans, second, Enel Américas's cost reduction plans, third, trends affecting Enel Américas's financial condition or results of operations, including market trends in the electricity sector in Chile or elsewhere, fourth, supervision and regulation of the electricity sector in Chile or elsewhere, and fifth, the future effects 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 risk 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 state only as of their dates. Enel Américas undertakes no obligation to release publicly the result of any revisions to these forward-looking statements except as required by law. I would now like to turn the presentation over to Mr. Rafael de la Haza, Enel Américas Head of Investor Relations. Please proceed.
Thank you, Carmen. Buenas tardes. Good afternoon, ladies and gentlemen, and welcome to our second quarter 2023 results presentation. I'm Rafael de la Haza, Investor Relations of Enel Américas. Before we begin our presentation, let me remind you that at the end of June, Maurizio Bezzeccheri left the company, and as of July 1, Aurelio Bustilho took the position of CEO of Enel Américas. We would like to deeply thank Maurizio for this time leading our company in the best possible way. We wish him the best of luck for his future. In the coming slides, Aurelio will be presenting the main figures of this period. Let me remind you that this presentation will follow the slides that have been already uploaded into the company's website. Following the presentation, we will have the usual Q&A session.
Please remember that questions can be made only through the telephone line and that media is listening to both the presentation and the Q&A session. Now, let me hand over the call to Aurelio, our CEO, who will start by outlining the main highlights of the period in slide number three. Aurelio, the floor is yours.
Thank you, Rafael. During the last few months, we have continued with our thermal capacity disposals and along with Costanera and Dock Sud in Argentina, we have recently announced the sale of Cartagena Power Plant in Colombia, which will be executed in December this year. With this, close to 90% of our capacity is renewable. Adjusted EBITDA in this quarter increased by 13% compared to second quarter of last year. This considers homogeneous perimeters. This means that we are including results from Peru in both periods and excluding from 2022 results Fortaleza, Goiás, CIEN, Costanera, and Dock Sud, as we do not consolidate those companies anymore. We are also excluding FX effect, which had a negative impact of -$76 million this period. This improvement is mainly explained by better results in Enel São Paulo, Enel Rio, and renewable business in Brazil.
Regarding net debt, as of June, we reached $5.5 billion, which is 20% lower than year-end 2022. This is mainly explained by better cash position and lower debt consolidation related to asset disposals. Let's now analyze our operational highlights on slide four. In generation business, during this year, we have added more than 540 MW of new renewable capacity. After the sale of Costanera and Dock Sud, we reached 13.6 GW of installed capacity, and considering the recently announced thermal Cartagena sale, our installed capacity is close to 90% renewable. Net production in the second quarter reached 12.2 TWh, a decrease of 2% compared to same period of last year, explained by the deconsolidation of Costanera and Dock Sud.
Isolating this effect, production would have increased by 18%, explained by higher generation in Brazil, Colombia, and Peru. From our total production, 88% is emission-free, a significant growth compared to the 75% of same period last year. Energy sales decreased by 15% during this quarter, reaching 18.4 TWh, mainly due to the change in the perimeter. Isolating these effects, sales would have decreased by 2%, mainly explained by lower trading activity in Enel Brasil, explained by higher energy availability in the country due to better hydrology. On slide five, we will focus on our development of renewable capacity. As mentioned before, we have added more than 540 MW during 2023. 340 MW are wind farms located in Brazil, and 205 megawatts are solar plant located in Colombia, Peru, and Central America.
We have invested $0.6 billion in renewable energies during the first half of the year, mainly located in Brazil and Colombia. We are currently working on additional 1.9 GW of capacity under construction, also located mainly in Brazil and Colombia. 0.6 GW are wind projects, and 1.3 GW are solar projects. During 2023, around 0.9 GW will begin operations, while 1 GW will enter in operations in 2024. Regarding our pipeline, we are considering 54 GW of potential new capacity. From this amount, 26 GW are in early stage and 26 GW are in mature stage. In addition to this, we have around 1 GW of battery energy storage system, and we are also considering the 1.9 GW of projects under construction already mentioned. Let's continue with grids operational highlights on next slides.
Electricity distributed reached 26.6 TWh in the second quarter, which represents an increase of 1% compared to the same period last year in homogeneous perimeter, explained by higher sales in our distribution companies except Enel Rio. Regarding number of customers, without considering the customers of Enel Goiás last year, we had an increase of around 390,000 in the last twelve months, reaching 23.5 million customers. Smart meters increased around 2.5 x, reaching 459,000 in this period, mainly due to the deployment in Enel São Paulo. Our net RAB has increased by 19% in the last twelve months, reflecting the significant investments that we have done in our grids and that have been captured in our tariff review revision process.
The ratio net RAB per customer also reflects an important growth of 17%. In terms of quality indicators, both SAIDI and SAIFI improved as an average, explained by better performance in Colombia and Brazil. In Argentina, we saw a deterioration of our quality indicators due to extreme temperatures during the summer, while in Peru, we saw an increase of SAIDI explained by a change in the calculation criteria compared to last year. Finally, in terms of energy losses, it improved in Argentina, Brazil, and Peru, and slightly increased in Colombia. Let's analyze our investments of the period in the coming slide. During the second quarter of this year, our CapEx increased by 4% compared to the same period of last year, reaching $804 million.
Despite that, we do not have Enel Fortaleza, Enel Goiás, CIEN, Costanera, and Dock Sud in our perimeter. If we exclude these companies from the numbers of last year, CapEx would have increased by 19%. This is mainly explained by higher investments in Enel Colombia and renewables in Brazil. We would also like to highlight that nearly 80% of our CapEx is allocated to our core countries and businesses. From the total amount, 64% were invested in Brazil, while in terms of business, 52% were devoted to renewables and 42% to grids. Growth CapEx reached $466 million, while was mainly devoted to renewable with 84%.
In the following slide, we will discuss our ongoing corporate simplification process. During the first months of the year, we concluded the sale process of our thermal generation assets in Argentina, named Costanera and Central Dock Sud. At the same time, during March, we completed the concession transfer of the transmission line called CIEN. In addition to this, we recently announced the sale of Cartagena Thermal Plant in Colombia, which should be completed by December this year. Finally, regarding the sale of distribution assets in Peru, already announced, the final approval of Indecopi and Chinese economic authority is still pending. Regarding the remaining disposals announced on our strategic plan last year, we are working on them as planned, but we are not in a rush to sell and will sell only at the right price.
Now I will comment on the financial results of the period in the coming slides. EBITDA in the second quarter reached $955 million, 7.4% lower than the same period of last year. However, this reduction is fully explained by the fact that we do not consolidate Enel Fortaleza, Enel Goiás, CIEN, Costanera, and Dock Sud in this period. If we exclude this effect, and also include the results in Peru and isolate effects, we get to an adjusted EBITDA of $1.2 Billion, an increase of 13.2% compared to the same period of last year, mainly explained by better results in distribution and renewables in Brazil. Net financial results improved by 51.6%, mainly due to a positive impact coming from Brazil, Brazilian reais appreciation.
Group net income in the second quarter reached $169 million, reduction of 20% compared to second quarter of 2022, reflecting the negative impact coming from the sale of Dock Sud and the change in the perimeter. Finally, in terms of debt, we see an important reduction of 20.5% that we'll analyze in detail on our debts later on. On slide 11, we'll see the EBITDA evolution and breakdown. Starting from $1.03 billion of EBITDA of second quarter of 2022, we have to exclude $129 million coming from Enel Fortaleza, Enel Goiás, CIEN, Costanera, and Dock Sud in order to make it comparable with second quarter of 2023.
We see that we have positive operational results in renewable and grids, while retail, Enel X, and thermal generation decreased in the quarter. With this, we get to an EBITDA of $1.041 billion for second quarter of 2023, which is 16% higher than last year. FX had a negative impact of $86 million, resulting in a reported EBITDA for this quarter of $955 million, 7% lower than reported EBITDA of the same period of 2022. As already mentioned, Peruvian assets are considered discontinued operations, meaning that its result is considered below EBITDA level. If we consider EBITDA coming from Peru, we get to an EBITDA of $1.13 billion .
From our reported EBITDA, 59% came from Brazil, 40% from Colombia, and 1% from Central America. In terms of business lines, grids represents 51% of our EBITDA and renewable 40%. Retail and Enel X contribute with 8% and 1% respectively. Let's see EBITDA breakdown on a cumulative basis in the coming slide. Starting from $2.036 billion of EBITDA of the first half of 2022, we have to exclude $236 million coming from asset disposals. We see that we have positive operational results in thermal generation, renewable, and grids businesses, while retail, Enel X decreases. With this, we get to an EBITDA of $2.079 billion for the first half of 2022, which is 15% higher than last year.
FX had a negative impact of $180 million, resulting in a reported EBITDA for this half of $1.899 billion , 7% lower than reported EBITDA of the same period of 2022. EBITDA from Peruvian operations was $367 million, reaching with this an EBITDA of $2.265 billion . From our reported EBITDA, 61% came from Brazil, 36% from Colombia, and 3% from Central America. In terms of business lines, grids represent 53% of our EBITDA. Renewables, 39%. Retail and Enel X contribute with 8% and 1% respectively.
On next slides, we'll focus on cash flow of the company. Starting from an EBITDA of $1.899 billion , we see that net working capital amounted to $571 million, mainly explained by PIS/COFINS credit use in connection with reimbursement to final customers, CVA impact and provisions from pension funds and bad debts. Tax paid during the period amounted to $342 million, while net financial expenses amounted to $225 million. With this, funds from operations amount to $761 million, a decrease of $340 million compared to the same period of last year.
After investments of $1.334 billion , which includes $715 million of growth CapEx aimed at a future growth for the company, we get a free cash flow of minus $573 million. Let me now analyze the debts of our company in the coming slides. Gross debts amounted to $7.6 billion, a decrease of 5% as compared to December 2022, mainly explained by the deconsolidation of assets available for sale of 2023. Isolating this effect, gross debt would have increased 6%. Net debt reached $5.5 billion, a reduction of 20% compared to the end of 2022.
This includes a free cash flow of -$573 million, net dividends paid for -$49 million, extraordinary operation for $1.467 billion related to the sale of Enel Goiás, Costanera and Dock Sud. Net debt, this consolidation for $907 million, and effects for -$348 million. In terms of currency and country, we see that Brazil remains as the largest contributor, while the debt at holding level represents 9% of the total. Finally, regarding the cost of debt, we can see an increase for this period going from 9.8% and 12.7%, mainly explained by higher interest rates in Brazil and especially in Colombia.
We can see that we are in a very solid position, solid financial position, which is recognized by our rating agencies. In the last few weeks, both Fitch Ratings and Feller Rate have confirmed our rating and outlook. On the next slide, I will conclude this presentation with some closing remarks. During second quarter of 2023, we saw solid operational results across all our businesses with a relevant increase in energy demand. We maintain a solid financial position, which allows us to execute our CapEx plan. We are strongly delivering and executing the new capacity coming from renewable sources in line with our strategy. Finally, we continually working on our corporate simplification, concluding sales processes of non-strategic assets and moving ahead on coming disposals.
Well, thank you very much, Aurelio, and thank you all for the attention. Let's now move to the Q&A session. Carmen, please proceed.
Thank you. At this time, we will open the line for your question. As a reminder to ask the question, press star one one to get in the queue and wait for your name to be announced. To withdraw the question, simply press the star one one again. Please stand by while we compile the Q&A roster. One moment for our first question, and it comes from the line of Alessandro Di Vito of Mediobanca. Please proceed.
Hi all. Thanks for the presentation. I have a couple of questions. The first one is related to the asset rotation program. You previously said that you're not in a rush to close the remaining operations that you have in your pipeline and that you are looking to achieve good multiples. I wanted to know if you could provide more color on the different multiples that you're looking to achieve for different businesses. The second question is related to hydro conditions. We saw a partial recovery during this year. I was wondering if you could provide more color on your expectation for the remaining half of 2023. Many thanks.
Hi, Alessandro. Thank you for your question. Well, related to multiples in this discussion, there is not a standard that you can, each asset has its, I mean, its main characteristic, its main situation, Alessandro. Of course, if we analyze, for example, the operation that we did in Peru, for example, it's a clear demonstration that we follow the best, I mean, the best price that we got for this asset.
It doesn't mean that this multiple should apply to other assets, you know, if I go to Argentina or to Brazil. I mean, this is a special case. There's not a standard or a formula to reach this. Of course, we have the projections of growth in our case. Everybody has the projections of growth, the projection of synergies. We make it very clear that our plan is aiming to achieve the best price, the best condition for each asset. If not, no problem, we do not sell.
I mean, the key issue here is that we demonstrate in our management that we follow the best conditions for the company. We provided this in the past when we bought, for example, São Paulo, no? We showed São Paulo right now when we bought the company. We proved that we paid a fair price. Now in the selling, I mean, not the selling side, but the selling process that we are moving forward, consider what we did in Peru, that we are achieving and aiming to the best conditions. If not, no problem. In terms of El Niño, your question about prices, no? Well, exactly.
We see a very, let's say the reservoir in Brazil, they are full, no? It's we see a different situation, for example, in Colombia, no? In Brazil, the effect is that we have a good hydrology, lower price. Well, good, it depend on what you analyze. Lower, I mean, lower price. It's the market works like this. Of course, the Southeast, we see that the reservoir in the Southeast, they are more important because they are close to the consumer areas. In the Northeast it's the opposite with more support from solar plants.
At the end of the day, with this, we are seeing lower prices, at least in the next year or in 2023, 2024, because of this hydrology. What we do, our strategy is being very proactive at this time that we see lower prices. We got opportunity purchasing energy and do trading, more trading business in to get margins. Of course, being very proactive, since the situation gets a higher price, we are signing PPAs in order to follow our strategy, our integrated strategy in terms of margin and in terms of position in terms of margin.
It's very interesting because today we see lower prices in Brazil and higher prices in Colombia, and we are in both markets, no? This is a unique condition for a company like Enel Américas to be positioning in this complementarity of both markets. When we see this phenomenon of El Niño or La Niña, we see a complementarity between those markets. In Colombia, we are very well contracted, I mean, in energy with higher price. In Brazil, we are contracted but with some more difficult to get higher prices in the coming years. This is a conjuncture process, and it changes.
We passed through this in the past, and it shows that we know exactly how to deal under this condition, since we have on one side the capacity, the renewable capacity, and one side, one hand, a very good trading activity to having a very good customer base that we can achieve, not only in our concession areas, but all around Brazil.
Very clear. Many thanks.
You're welcome.
Thank you. One moment for our next question, please. All right, it comes from the line of Ezequiel Fernández with Balanz. Please proceed.
Good morning, everybody. Thank you for taking my call and very complete material as always. I have three questions, one in Colombia, one in Peru, and one regarding batteries, possible investment in batteries and storage. I would like to go one by one, if you do not mind. My first question is related to Colombia and has to do with the upcoming Cargo por Confiabilidad auction, planned for the end of the year. I was wondering if you can comment if you're planning to participate, and if so, with what technologies.
Okay. Ezequiel, do you want to ask all the questions or just to. I'm sorry, I thought you would have.
No. I see that again. It's better if you let me say read the three questions all together and then we are going to organize it.
Okay. No problem.
First question one in Colombia. Second question on battery storage interest, if I'm correct. The third one?
Let me elaborate on the three. Colombia upcoming Cargo por Confiabilidad auction, if you're planning to participate and with what technologies. Regarding batteries, we're seeing a lot of action in Chile regarding batteries as complement to renewables and also transmission solutions. But we're not seeing, or maybe we're mistaken, we're not seeing a lot in other countries. If you are aware of any or participating in any initiatives on that side in perhaps Brazil, in Colombia, et cetera. The third question is related to Peru. If for the power generation arm, are you already in the process of evaluating bids?
What milestones perhaps are pending, perhaps related to the merger of Enel Generación Piura and Enel Generación Perú, and when do you expect to close or at least announce the same?
Okay. You know, we are focusing our strategies mainly in the free market, Ezequiel. Of course, if we are not participating just for the auction or just for the Cargo por Confiabilidad. It's a very good complement of the revenues. Of course, the main one is related to PPAs. We of course see that the market has different conditions in Colombia.
We are fully contracted in Colombia, but we certainly will in the coming months present our strategy in terms of integrated margin that we can provide you more details on this. In terms of batteries, we of course in our plan consider it especially in the demand response, right, business. We are considering a small margin, not too big. We are tripling the demand response that we have today. But in terms of remuneration, it is still not relevant.
We see that especially in Brazil and in Colombia, there is different from Chile, the cost is still high in terms of, I mean, especially to use in the wind plants, for example, to reduce the effects and to solar plants, to reduce the reflex effects during the night. We are still developing the technology, but not as slower than what Enel is doing in Chile, just to give you a comparison. In terms of in Peru, we are, of course, focusing selling the assets in Peru. No, we are not increasing our capacity.
Of course, we are, we put in function some renewable plants. This is all part of the package that we are in, that we commented with this corporate simplification and especially the generation assets. It's not for us, it's not an objective to increase our capacity in Peru. It is the opposite.
Okay. That was very clear. That's all from my side. Thank you very much.
You're welcome.
Thank you Ezequiel.
Thank you. I'm not showing any further on the queue. I will turn the call back to Rafael de la Haza for closing remarks.
Carmen, we have received some other questions in our email.
Okay, go ahead.
Let me read the first question from Andrew McCarthy, Credicorp Capital. Aurelio, the question is the following from Andrew. Can you comment on your latest thoughts on what risks are you seeing with the process for the renewal of distribution concessions in Brazil?
Thank you, Andrew, for your question. I think that's interesting because Brazil opened. There's lots of discussion, space for discussion and space for anyone could contribute in the process. You know that there is a process of public hearing that the contribution period finished last Monday, and now the government is analyzing the contributions, lots of discussion, lots of space and according to the timeline, it is estimated in October to be the final proposal. Regarding the proposal, of course it's a huge negotiation. At the end of the day, what I see is that the technical aspect will prevail.
I mean, it should be balanced and the distribution companies should have an equilibrium in terms of returns in order to keep on providing an important service in Brazil. You know that in Brazil we have a lack of infrastructure. We need investment. It's not like put some regulation and distribution invest for free. It will not work. In my view, it will be a balanced possibility or situation or proposal, especially to maintain the health of and sustainability for the operators, for the distribution. It's clear that it's cheaper for the whole system to maintain the current distribution. Not to maintain, but not to re-auction, you know, the system.
Having said that, the conditions in my view will be more to incentivize the investment and to improve the infrastructure in Brazil in a more balanced way, not damaging the whole system. Because if you damage the distribution, we are damaging the whole society. I mean, the quality of the service of Brazil will not move forward. I think at the end, this common sense and this discussion will be more to adjust remuneration to a fair remuneration and a balanced position in order to the distribution to operate and to get their remuneration to this and also provide a good quality, a quality according to the tariff that the customer pays.
The system and the customers will be benefiting in the end. I do not see many. Of course, if the proposal pass like it is today, like in a certain way, not respecting, for example, fiscal benefits that was assured for the company to invest in this, in the Northeast, for example, or a calculation that is not correct. I mean, proposing investment in social issues, not remunerating, but without providing any minimum benefit for the distribution. It will not work. I mean, at the end of the day, if you see the contributions, there are very good contributions.
I'm sure that the government will analyze it and reach a good formula in the system to provide the infrastructure that Brazil needs to be a competitive country and to grow in the future in a competitive way. That's it.
Okay. I don't have any other questions over here on this side.
Yes. Let's continue with the last ones. We have received some three questions, three final questions from Banco Santander. The first one is the same that, Moneda sent by email to Enel, to Enel Américas team, and is regarding the divestment plan that the company is carrying out and the progress of the remaining assets, in particular with a focus in Coelce and the concession in Argentina, El Chocón. The second question is regarding the management changes that have been observed in the company and on Enel S.p.A. in the last months. Do you expect, the question is the following one. Do you expect this to change the strategy of Enel Américas going forward, or are you keeping with the current strategy? The final question is regarding the Colombian assets and the current situation in that country.
The question is the following: Do you see the possibility that this asset could also be included in the divestment process? Do you see the assets in Colombia as a strategic one?
For El Chocón, I think it's public in all the news that the concession was postponed. At the end of the concession was postponed by 60 days and will have with the possibility for more 60 days, which means that maybe, if the first 60 days, the concession ends in October with a new renewal in December. I mean, this is not, I mean, the government is focusing on trying to assure that the concession, they will do an auction, but it seems that the concession to give a safe view of the concession, a safe operation and transition for the concession.
Probably Argentina will have elections. The new government will probably decide or to push for this process of the new auction of El Chocón. It means we are following the plan to finish this concession, to sell the asset, no? Like we as we announced it, like leaving the country. In terms of Coelce, we are in the middle of the process. Coelce is a very good company, very good asset. As I told you, of course, we are discussing this concession renewal process. In my view, there's no big issue considering the asset.
We are not in a rush. I mean, if we don't see a good proposal, there's absolutely no rush and even no need to rush to sell it. I repeat that the company is a good company. I mean, we expect a very good multiple for this company. Anyway, we're not in a rush, as you see in our financial statements, our financial position, our financial situation. In terms of Colombia, yes, we see that the asset Colombia is very important for us. It is part. Colombia is still important part of our strategy.
Colombia is a strategic country for us, and then there is no plan to leave Colombia. The strategy here is to maintain our portfolio, Colombia. I don't know if you are referring about Windpeshi and this solar issue. It's an isolated issue. I think it's specific for this project. That's why we announced to leave this project. It has nothing to do with our strategy in the country. I repeat, we are satisfied with our assets, with the cash flow generation, with the increase. We see demonstrations that the institutionality of Colombia prevails, despite some issues, regulatory issue.
At the end of the day, the regulation is very good. There is safety in terms of legal aspect, institutionality, and so on. Okay. In terms of strategy, we do not see changes. We saw that the first, I mean, the first indications for the new management is aligned with this focus of simplification, with this focus to invest in the countries that make sense to be, not spread lots of countries and so on. I think, I mean, it's totally. The strategy is totally aligned. Of course, we can see some adjustment, but it's normal. It's common.
In a vibrant world, we have this also to analyze and to be very proactive in our movement in terms of tactics and so on. The strategy, the general strategy, didn't change, and we're not seeing any big changes on this.
Thank you, Aurelio. Very clear. The last question,[ I promise], from Kallpa Securities, and it's regarding the sale of Enel Distribución Perú. The question is the following: Many Peruvian media and politicians are strongly opposed to the sale of the company to China Southern, arguing antitrust reasons, let me say. Could you share your thoughts on this matter, on this matter? Do you think the Peruvian antitrust regulator could approve the deal without any observation anyway? In how much time do you expect to deal or to close the deal?
Yeah, we do not see any indications. It's normal, moving, normal. Peruvian institutions are very independent. They do their work very well, very profound, very deep, and we do not expect any different outcome from this process. It takes time, and the government should work very well on this. If I were them, I would do this exactly the same. We are confident that this institutionality, I mean, this. The way that Indecopi works will be as expected. The timeline for this process probably considering other experiences in the past that we see, probably in the first quarter of 2024.
I mean, there's no fixed timeline, but I'm giving you some experience that we had, that we saw in the past, probably in the first quarter of 2024. They are doing their work. They are working, showing that they are working in a fair and very deep way. We are waiting for their position.
Well, thank you again, Aurelio. As there are no more questions here in this conference call, we conclude the results conference call for the first half, second quarter. Let me remind you that as usual, investor relations team is available for any further doubt that you may have in the next coming days. Thank you for your attention, and have a good evening.
All right. Thank you, everyone. This concludes the conference, and you may now disconnect.