Earnings Call Transcript
Enel Chile S.A. (ENIC)
Earnings Call Transcript - ENIC Q2 2021
Operator, Operator
Good day, ladies and gentlemen, and welcome to the Enel Chile Q2 and First Half 2021 Results Conference Call. My name is Felita, and I will be your conference operator today. During this conference call, we may make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 anticipated in the forward-looking statements as a result of various factors. These factors are described in Enel Chile's release reporting in Q2 and first half 2021 results, the presentation accompanying this conference call and Enel Chile annual report on Form 20-F including under Risk Factors. You may access our Q2 and first half 2021 results press release and presentation on our website, www.enel.cl, and our 20-F on the SEC's website, www.sec.gov. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of their dates. Enel Chile undertakes no obligation to update these forward-looking statements or disclose any development as a result of which these forward-looking statements become inaccurate, except as required by law. I would now like to turn the presentation over to Ms. Isabela Klemes, Head of Investor Relations of Enel Chile. Please proceed.
Isabela Klemes, Head of Investor Relations
Thank you, Felita. Good morning, and welcome to Enel Chile's Second Half 2021 Results Presentation. Thanks to you all for joining us today. I am Isabela Klemes, the Head of Investor Relations. Let me remind you that our presentation and related financial information are available on our website, www.enel.cl, in the Investors section and in our app Investors. After the presentation, there will be an opportunity to ask questions via phone or chat through the link Ask a Question. Joining me this morning are our CEO, Paolo Pallotti; and our CFO, Giuseppe Turchiarelli. In the following slides, Paolo will open the presentation with the main highlights on his strategy and operational performance, then Giuseppe will walk you through our financial results. A replay of the call will also be available. And always, our IR team will continue to be available to provide you with any detailed information you may need concerning the figures included in this presentation. Let me also remind you that media participants are connected only in listening mode. Thank you all for your attention. And now let me hand over to Paolo.
Paolo Pallotti, CEO
Thank you, Isabela. Good morning, and thanks for joining us. Enel Chile is consolidating its leading position in renewables and is driving the energy transition. We are conscious of the importance of those advances in the energy transition in a country like Chile, where resources and technology may support the implementation of a true path towards the fight against climate change and the expansion of the use of electricity in the industry, in the cities, at home, transforming the quality of life of citizens. This is an effort with multiple benefits that also requires a quick reaction by the several authorities involved to truly understand and support those changes. During this quarter, we are advancing the construction of more than 1.2 gigawatts of renewable capacity in 7 projects that are part of the 2.4 gigawatt additional renewables that we will add during the 2021-2023 period. As you will see in the results slides presented by Giuseppe, our 2021 half results have been impacted by non-structural elements like liquid gas availability and commodity price hikes. Looking at our sustainability commitment, recently, we have been included for the first time in the Standard and Poor's IPSA ESG Titled Index. Launched early this year by the Santiago Stock Exchange, Enel Chile is now one of the 27 companies added and the first with local operations on this index, with the rebalancing executed during July '21. Also, I would like to highlight the new FTSE Russell score for our company, recently announced. We have achieved 4.0 points out of a total of 5.0 versus 3.4 in the previous year. These recognitions reflect our sustainability strategy and our commitment to just energy transition. We are growing along with our strategy, together with our clients' energy requirements. In addition to supplying electricity via our retail operations, Enel has signed several agreements with the private sector, mainly in mining companies as a starting point and then service companies to promote electric mobility and energy efficiency solutions. Additionally, we continue to support the decontamination of the cities, participating in the implementation of several programs to promote the adoption of electric heating systems in exchange for more contaminating ones. Finally, consistent with our strategy, we have signed an agreement with Banco Santander for our first SDG-linked instrument. This law is linked directly to climate action SDG 13 and is related to the reduction of our direct CO2 emissions by 2023. Enel Chile is the first local utility in securing this kind of instrument linked to United Nations SDGs. Now on our capacity under construction, let me give you some updates on our projects under construction as an important pillar for our position in the market and for the implementation of the energy transition. As already commented with you, the last 12 to 15 months have been quite complex in managing the construction of new plants due to the pandemic causing lockdown restrictions and closure of the country's borders, jointly with additional delays on archaeological permits caused by bureaucracy and lack of personnel, which required, in some cases, the rescheduling of our project timeline. Notwithstanding the above, we have continued to advance in constructing our renewable portfolio. As you can see in the chart, considering the capacity under construction, by the end of this year, we will put into operation a significant percentage of that amount. Today's clients are requiring our support to be provided with an aggregate of services related to the use of green energy and to the contamination therapies. We have signed different partnerships and agreements to promote sustainable transportation and, more generally, innovative services in the use of energy. A recent example is the agreement with the Falabella Group, one of the largest retailers in Latin America. After a private tender, Enel has been awarded to sell energy to their operations and at the same time to incorporate more than 500 electric charging points throughout the country. With those agreements, we are providing a complete solution to our clients, helping them on the path to decarbonization. At the same time, we have increased Enel X's market share and enhanced its leadership in energy efficiency and electric mobility in the country. Finally, in line with contributing to the development of smart cities, with Enel X, we have developed security projects like monitoring and video surveillance. This kind of project includes security cameras, automatic reading counters of car license plates, and laying optical fiber; definitely a good fit. Today, we will have more than 1,200 security cameras installed in Chile, complementing the plans for citizen security and contributing to preventing crimes and road infractions. Customers are becoming more aware of sustainability and the efficient use of energy. Enel X is our clients' first choice and an agent of change. Now, on Page 6. With reference to our network during the second quarter, we have seen a partial recovery in energy demand compared to the previous period. As a result, the aggregated energy distribution reached 7.9 terawatt hours, increasing 2% compared to last year's period. We have increased the quality of our service and reduced our distribution loss rate from 5.21% to 5% despite all the challenges we are facing with reference to our actions towards the digitization of our processes. The Enel Distribución app reached more than 494,000 downloads, 30% higher than June 2020 cumulative figures. Our digital interactions have increased to 86% from 75% in the same period of last year. On the regulatory side, the final report on the distribution reference model shall be published in the coming weeks, and the following regulatory report is expected to be issued by November 1. As we have mentioned, any discrepancy between regulators' and companies' positions can be challenged in the expert panel instance. We expect that the regulator will release the final distribution tariff decree during 2022. Regarding the transmission tariff cycle 2020-2023, the regulators report fixing the new tariff cycle will be published during the next weeks. It could be challenged in the expert panel instance depending on the results of the various comments presented by different companies during the evaluation phase. We anticipate that the transmission tariff decree will be published at the end of this year or very early 2022. On Slide 7, the application of the basic service law is affecting the level of overdue debts. We are continuing to push in providing alternatives for payments to our clients and to promote the adoption of payment agreements. By June '21, we have finalized more than 62,000 payment agreements, of which 50% correspond to the basic service law and the other half corresponds to voluntary agreements promoted by Enel Chile. Due to our effort, our collection level remains stable with a slight improvement in the second quarter of '21. As of the end of June, the net overdue debt reached USD 186 million, representing more than 543,000 clients, a 20% increase compared to last year. On a monthly basis, we have factored around USD 32 million, supporting part of our liquidity in the period. In our view, as already commented with you, the level of overdue accounts is going to materially increase during the next months and will not be sustainable in the long term for the most vulnerable families once the conditions of payments return to normality. In that sense, a solution involving the state is crucial in this process. Now, I will hand over to Giuseppe. Giuseppe, your turn.
Giuseppe Turchiarelli, CFO
Thanks, Paolo. Let me start with the summary of our financial highlights on Slide 9, which we'll go through details in the following slide. But before starting with the presentation, let me explain the extraordinary effects of the period. For the first half of 2021, we have adjusted EBITDA and the net income considering the effects arising from the cost of impairment associated with Bocamina 2 and the voluntary retirement program that the company has offered to the employees, which were nearly at the retirement age. The coal stock impairment and the voluntary retirement program had an aggregate effect of $46 million on the first half 2021 EBITDA and $31 million at the bottom line. In the second quarter, these effects amounted to $31 million in EBITDA and $21 million in group net income. For the previous year, we have adjusted the figures by the coal stock impairment of $17 million in EBITDA and the net effect of the impairment of Bocamina 2 of $672 million at the bottom line. All the details are described at the bottom of the slide. Now let's start with our CapEx allocation, out of which 96% is linked to the SDG on Slide 10. First half 2021 CapEx reached $510 million, mainly devoted to the construction of new renewable capacity. Customer CapEx was mainly allocated to building new connections, reaching a total of $33 million, with an increase of 13% versus last year. Asset management CapEx reached $62 million, $45 million higher than first, mainly due to the higher maintenance activity in distribution, higher maintenance work in our non-coal thermal facility, and digitalization projects. Development CapEx reached almost $45 million, $123 million higher than the first half of 2020, largely driven by our renewable expansion and development of our distribution business to continue the digitalization of our network. Let's now start with the second quarter adjusted EBITDA breakdown on Slide 11, which accounted for $233 million, 22% lower than 2020 figures, mainly due to a seasonal recovery of hydrology in our basin that allowed us to increase our hydro generation of 0.3 terawatt hours or 23% versus the second quarter 2020 figures. The continuity of the lack of gas in the system and the increase in international market prices has maintained a very high spot price in comparison to the second quarter of 2020 and consequently increased the cost of energy purchase, particularly during the nonsolar time required to supply our PPA. The negative PPA margin effect is mainly associated with the depreciation of the Chilean peso in 2021 versus 2020, considering that our book currency is in Chilean pesos and our PPAs are U.S. denominated. This effect was offset by the new agreements started in 2021 as AngloAmerican and the new contracts coming from Enel Distribución pre-market portfolio at the beginning of the year and the PPA price update mainly by CPI indexation. The net commodity coverage resulted in a positive effect on the EBITDA due to the higher commodity price in the market in line with our hedging strategy. A negative effect of the tariff settlement due to a tariff harmonization in 2020 related to the recovery of supply costs in the regulated PPA and the settlement made in the distribution business second quarter 2021. The network business variance is coming from a recovery in the second quarter 2021 demand, mainly in regulated customers due to the flexibility on the lockdown measures in the step-by-step government plan, provisions on lower remuneration on the distribution tariff, which shall be retroactive to November 2020, and lower remuneration on the transmission tariff as a result of the devaluation of steel and iron versus the previous tariff cycle. Other effects account for $15 million, mainly related to our headquarter insurance recovery received during 2020, Transantiago 3 agreement executed also in 2020, public lighting contract celebrated during the second quarter of 2020, and additional insurance costs on renewables. Let's move on to Slide 12, where we have the summary of the first half adjusted EBITDA breakdown accounting for $454 million, 20% lower than 2020 figures. As you can see, the main effects are the same as those presented in the second quarter: $58 million related to commodity availability and higher commodity prices; negative PPA margin effect mainly associated with the negative variance coming from depreciation of the Chilean peso in the period versus the first half of 2020, considering again that our book currency is in Chilean pesos and our PPAs are U.S. denominated. This effect was offset by the new agreements started in the period as AngloAmerican's new contracts coming from Enel Distribución customer portfolio at the beginning of the year. A positive $56 million on the net commodities coverage; the already mentioned $26 million on tariff settlement in both generation and distribution; a negative $18 million on network remuneration related to the expected lower distribution tariff and transmission tariffs. Other accounted for $8 million, mainly due to our headquarter insurance recovery received last year and Transantiago 3 agreement executed also in 2020. Let me now give you more detail about the main generation KPI on Page 13. Even though our first semester generation has been affected by poor hydrology in the country during the second quarter, especially in June, there was a slight improvement in rainfall, which enabled an increase in our hydro generation as well as in our total production when compared to the same period of last year. Therefore, our second quarter production reached 4.7 terawatt hours, increasing 10% versus 2020. In the year, our production reached 9.2 terawatt hours, very similar to last year and also supported by thermal generation. Our energy sales increased 18% during the first half of 2021, primarily explained by new contracts with 3 customers, including AngloAmerican and retail clients transferred from Enel Distribución Chile as part of unbundling the regulation requirement. For what concerns our sourcing, on top of the already mentioned production balances during the first half of 2021, we accounted for a total increase of 1.8 terawatt hours of purchases, which includes 0.7 terawatt hours in the spot market and 1.1 terawatt hours from other generators relating to the unregulated customer portfolio contracts coming from Enel Distribución's business. On Slide 14, just a recap of the performance of our generation business, including Enel Generación Chile and Enel Green Power Chile, which is largely explained by unfavorable hydrology, higher commodity prices, and higher spot market prices compared to last year. EBITDA has been adjusted by excluding the extra effect on the coal consumption cost related to the decarbonization process and the voluntary retirement program. Finally, on Slide 15, I show a summary of the adjusted performance of our network business, including Enel Distribución Chile and Enel Transmisión Chile. The second quarter 2021 reached $35 million, decreasing 27% regarding the second quarter of 2020, mainly due to lower regulated remuneration in both the solution and transmission business, tariff settlement booked in the second quarter of 2021 related to the 2020 tariff period, free market clients who transferred to the generation business to accomplish the unbundling law, partially offset by higher volume. Accumulated adjusted EBITDA reached $71 million, or 34% compared with the first half of 2020's EBITDA, mainly due to lower demand in the regulated market and the provision of the new tariff in distribution and transmission, with free market clients transferred to the generation business to accomplish the unbundling law. And finally, a union agreement, a one-off impact booked in the first quarter of 2021. Now on Slide 16, please go through the main driver of our group net income. D&A and bad debt reached $151 million, a variance of $37 million, mainly related to lower D&A in Enel Generación due to the impairment made in Bocamina 2 in 2020 and lower D&A in EGP assets due to depreciation of the Chilean peso in the period. Net financial results totaled in excess of $129 million, an increase of $45 million, mainly due to higher costs due to the factoring executed in the generation business on the stabilization mechanism accounts, higher costs regarding the new debt issued during 2020, and higher exchange differences, mainly in account receivable of stabilization mechanisms in the generation business. This effect was partially offset by the higher financial expense capitalized in the first half of 2021. Income tax reflects the impact related to lower EBITDA and higher financial expenses due to the factoring costs of debt accounting. As a result, the adjusted first half '21 net income reached $119 million, 45% lower than last year's figures. The adjusted second quarter 2021 net income reached $48 million, 59% lower than the second quarter 2020 results. This was mainly explained by the lower EBITDA result in the quarter for the reasons mentioned on the previous slide, lower D&A mainly related to the lower D&A in Enel Generación due to the impairment made in Bocamina 2 in 2020, and an increase of $29 million in financial results, mainly explained by the factoring executed in the second quarter of the generation business. Lower income tax mainly due to lower adjusted EBITDA, the higher financial expense as a consequence of factoring costs of debt accounting in the quarter, and match effects of Green Power Group and lower taxes accounted in the previous year. Moving to cash flow on Slide 17, first half 2021 FFO reached $272 million, higher than previous year's figures, mostly due to higher net working capital versus 2020, mainly explained by factoring in both generation and distribution businesses accounted for almost $300 million, a transmission line sale in 2021, with a cash impact of $29 million, purchases of e-buses during the first quarter of last year, and lower impact of the stabilization price mechanism in 2021 versus 2020 due to the depreciation of the Chilean peso. These effects were offset by higher income tax during the first half of 2021 versus last year, mainly related to COVID-19 measures during 2020 that postponed part of the corporate tax payment to 2021 and a lower fiscal tax payment base during 2020, and higher financial expenses mainly explained by the cost of the factoring of the stabilization mechanism account. Let me now go through our debt on Slide 18. Our gross debt increased by $405 million versus December 2020, amounting to $4.4 billion as of June 2021. The variance is mainly associated with our CapEx plan execution. In the period, we have executed a $400 million funding with EFI, partially offset by the amortization of Enel Generación Chile. Therefore, our net debt in the period increased by $414 million. The average cost of our debt in the period remained stable at 4.6% as of June 2021. As Paolo highlighted, we are focusing now on sustainable SDG-linked instruments. We just issued our first SDG-linked third-party debt of $50 million with Banco Santander with a maturity of 3 years at a very competitive industry rate, demonstrating the recognition of our derisking strategy. The new SDG loan considered as KPI the CO2 emissions of our generation fleet by 2023. As of June, around $400 million of our debt are SDG-linked, which considered $400 million of intercompanies decreasing that issue as of June 2021. These figures do not consider the USD 50 million signed in July with Santander. In terms of debt amortization, our schedule remains very smooth with an average of 6 years and around $300 million annually maturing up to December '23. In terms of liquidity, we maintained the level of $0.8 billion, providing us the flexibility to face potential headwinds in the market. And now on Page 19, let me conclude this part of the presentation with a guidance update driven by the recent events already discussed. As usual, the numbers are coal stock and retirement plans. During our presentation, we have highlighted the main factors that stood out in the last month. We changed our scenario for this year, particularly the complex hydrological scenario, commodities availability, especially lack of Argentine natural gas, and rising commodity prices, which is clearly not a structural effect in our market that can be transferred to our investors. We have run several scenarios to reflect the evolution of some variables driving us to predict the second half adjusted EBITDA in a range between $0.6 million and $0.7 million. Consequently, our EBITDA should be in the range of $1.1 billion to $1.2 billion for 2021, a devaluation from $300 million to $400 million versus our guidance reported in November 2020. We are not yet anticipating our view on the net income result as we are running several actions to offset as much as possible the devaluation of our EBITDA. On CapEx, we don't see important deviations as the larger part of our development CapEx is expected to be deployed now in the second half of this year. Let me remind you again that this adjustment is not structural but a result of the negative headwinds that all utilities are facing this year. We strongly believe that our strategy of increasing renewable capacity will significantly reduce exposure to commodity prices and hydrological issues in the following year. Paolo, I will hand over to you for the closing remarks.
Paolo Pallotti, CEO
Thank you, Giuseppe. The implementation of our investment plan and execution of our renewable growth projects will continue to be one of our priorities, and it is necessary to support the country in the acceleration of the decarbonization. In this sense, some important discussions need to evolve with authorities regarding regulations for batteries, for instance. Our strategy will continue to be deployed under the high gas ESG standards towards decarbonization and energy transition for the full benefit of our clients and communities. Digital operations and customer care will be key to developing a long-term relationship with our clients. Our strategy is supported by our long-term vision and balance sheet strength, targeting new SDG-linked instruments. Thank you for your attention, and let's now open the Q&A session. I will hand over to Isabela.
Isabela Klemes, Head of Investor Relations
Thank you, Paolo. So operator, do we have questions?
Operator, Operator
Thank you for your attention, and let's now open the Q&A session. I will hand over to Isabela. Isabela Klemes, Head of Investor Relations, will now take over. Thank you, Paolo. So operator, do we have questions?
Isabela Klemes, Head of Investor Relations
Okay. Perfect. So I received here from the chat questions from Murilo Riccini from Santander. So the first question from Murilo, Paolo and Giuseppe, is how do you evaluate the expansion of the transmission system? Will this be enough for the relevant incorporation of renewable capacity from your point of view, or could we expect a higher level of losses due to congestion? How do you plan to handle this issue? So I think we could answer this and then go for the others, Paolo and Giuseppe.
Paolo Pallotti, CEO
Okay. Thank you for your question. Regarding the extension of the transmission system, the connection between the north and especially the center, which is the area of mine consumption, is always an interesting large debate among different players and actors in the sector. Now there is this project for improving the connection using high-voltage business connection. Clearly, it is a very impactful project in the sense that it will require time. There are 2 elements to take into consideration. The full commitment of all the authorities involved in speeding up this interconnection system is key for Chile, for sure. And second, I can mention also our reactions in the sense that we are defining our portfolio of plants and also of clients to avoid being affected by a certain bottleneck. In this sense, we have important contracts in the north and we are still developing our potential contracts in the same area. At the same time, we are also developing an interesting position in the center. So that is the way we can cope in the short and midterm, but I agree with you that it is key. Honestly, I think that being so essential in the evolution of the country, this kind of interconnection will evolve possibly. Don't ask me to bet about the right year to enter into operation because it could be hard to answer. But I am positive about the attention of the authorities on this. At the same time, as a company, we are trying to have countermeasures to avoid being affected by bottlenecks.
Isabela Klemes, Head of Investor Relations
Okay. Thank you, Paolo. The second question from Murilo is, how are you seeing the performance of the demand in the concession area of Enel Distribución in July? Any signs of recovery with the low restriction measures?
Paolo Pallotti, CEO
Okay. We are evaluating clearly a period of 6 months. If we focus on the very recent months, the negative effect of having the Santiago metropolitan region in lockdown, with so many of our clients, especially in commercial sites, being strongly affected. All in all, what we see is recovery in the last 1.5 months, even if it's early to provide you a figure. At the same time, we have a general evaluation in terms of consumption in the concession area in the first 6 months compared to the first 6 months of last year, a slight decrease, but you take into consideration also perimeter effect in the sense that there is a continued movement, even if not so big, of clients that are entitled to move from the regulatory system into the free market. This has an impact in the regulated segment. If you look at that specific area, there is, overall, a decrease between 2% and 3%, considering all the factors that I mentioned: the perimeter effect and the lockdown that affected Santiago during the central area of the period between March and mid-June.
Isabela Klemes, Head of Investor Relations
Perfect. Thank you, Paolo. And the last question from Murilo from Santander is, why is the number of overdue clients decreasing versus the first half of 2020? Could you provide more details on this and on the discussions being held with the Board, please?
Paolo Pallotti, CEO
Okay. It is a bit of an extensive discussion because, on one side, what we have measured—let's focus for a second on the domestic segment, which is the most affected by the recent regulations started in August of 2020. If we measure that segment, we have not seen a significant improvement in terms of the number of clients that are not paying. But let's say the mechanism that we have seen is that clients that during the regular period of the year used to enter into the overdue debt segment and then start to pay in a period of, let's say, aging between 40 and 60 days, because this is the zone where the cutoff will start to exert pressure from distribution. In this case, the amount of clients not paying remains in the overdue segment, but their hedging is increasing. This has happened unfortunately also for large domestic clients with consumptions higher than 1,000 kilowatt hours per month, which is roughly 4 times the average of Santiago, but also for clients between 500 and 700 kilowatt hours per month that are not paying. If we look at that number, for instance, the large client segment, the overdue debt of the large client segment more than doubled between March '20 and June '21. So there is an effect driven by the impossibility for the distributor to, let's say, cut off nonvulnerable clients because we are talking about nonvulnerable clients here. Clearly, all the attention, all the care for families that cannot afford to pay their debt is different from this discussion. Our focus and analysis are about that category of clients, the high consumption clients, who have the resources to pay but are not paying because nobody can cut them off. This is an important element and a discussion we are having with the authorities. On a general basis, there has been this announcement in early June, if I remember correctly, regarding the famous negotiation table between different parties involved—the government and the senate—to find a solution that should help vulnerable families, the vulnerable clients, to afford the period once the system returns to normality; that is the real issue. Because if we look at today, vulnerable clients, the average debt using a number that we have is in the range of CLP 100,000. If we add this on top of the regular fare they are paying on a monthly basis, it becomes very difficult to manage, even if we use the 48 quotas without interest. So this is where we must focus and leave the distributors to work with clients that can pay but do not.
Isabela Klemes, Head of Investor Relations
Perfect. Thank you, Paolo. I don't know, operator, if we have any more questions online. Otherwise, I have one from Rodrigo Mora from Moneda. Can we do it now?
Operator, Operator
There is a question on the phone line.
Isabela Klemes, Head of Investor Relations
Yes, can you open the line, please?
Operator, Operator
Okay. The question comes from the line of Rodrigo Mora from Modena.
Isabela Klemes, Head of Investor Relations
Okay. Sorry, Rodrigo has sent me the questions. He has a problem on the line. So the first question— Rodrigo's first question is that, given the drought situation in the country, is Enel evaluating postponing the closure of Bocamina 2 in order to preserve the electrical security of the system? This is the first question, Paolo and Giuseppe.
Paolo Pallotti, CEO
Yes. Clearly, as already Giuseppe highlighted in his analysis, we are not dealing with structural changes. So this—what happened this year is a coincidence of different elements that didn't occur in the past. We do not perceive any reason or the effect for changing our strategy and decision to phase out Bocamina, considering that by next year at least 1.3 or more megawatts will come online solely from our side. If we look at the general picture, the effect and evolution this year has been driven also by an important delay of many renewable projects that should cover the energy requirements of the system in the short to midterm. The important point here is to allow the system to work properly. For instance, together with other companies, we are focusing on the development of the regulation of storage that will be key for the proper functioning of the system. We hope this is something that will take place during the second half of this year to ensure all requirements of the system are met.
Isabela Klemes, Head of Investor Relations
Perfect, Paolo. Thank you. The second question from Rodrigo from Moneda is, what is the hydro generation that you are estimating for the second half of the year, considering the guidance update released by the company today?
Paolo Pallotti, CEO
Yes. On this, I will leave the answer to Giuseppe, who can provide more precise numbers. Conceptually, you know, Rodrigo, how difficult it is to make predictions on hydrology. It happened a couple of years ago that after the first 6 months of drought, we experienced very important storms that covered all requirements during the second half. So it's quite difficult to predict what can happen, especially in the second half of the year, where we could have potential snow—still potential snow, which has happened in the past—and then the melting of the snow. So yes, it is difficult to predict. I’ll hand it over to Giuseppe to give you some insights on numbers.
Giuseppe Turchiarelli, CFO
Yes. Well, basically, we are projecting to have around 6.6 terawatt hours, so in order to close the year around 10.4 terawatt hours. This is the projection that we have right now.
Isabela Klemes, Head of Investor Relations
Thank you, Giuseppe. Then the next question from Rodrigo is asking for more details about the extraordinary effects that we booked during this period. So he's asking for more details about the impact of $46 million. And if we can give a breakdown on the voluntary retirement program that we announced for the group, for group Enel Chile in this period.
Paolo Pallotti, CEO
I leave it to Giuseppe to answer that.
Giuseppe Turchiarelli, CFO
Yes. So the $46 million we can split into two parts. The first one, which is around $21 million, is related to the decarbonization effect. The remaining part, which is around $24 million, is related to the retirement plan. If you want to have an additional breakdown, this $24 million is 50% in Enel Distribución, $9 million for Enel Generación, and around $3 million for Enel Chile Holding. So this is basically the breakdown that we have.
Isabela Klemes, Head of Investor Relations
Okay. Thank you, Giuseppe. So operator, do you have any more questions?
Operator, Operator
No, ma'am.
Isabela Klemes, Head of Investor Relations
Okay, then. As we do not have any more questions, we would like to thank your presence in our call today and mention that our team from Investor Relations will be available for any other questions or doubts you may have during this period. Many thanks for your attention. Thanks, Paolo, and Giuseppe. Have a nice day. Bye-bye.
Paolo Pallotti, CEO
Thank you. Thank you.
Giuseppe Turchiarelli, CFO
Thank you very much. Bye.
Paolo Pallotti, CEO
Bye, bye.
Operator, Operator
This concludes today's conference call. You may now disconnect.