Earnings Call Transcript - ENIC Q4 2020

Operator, Operator

Good day, ladies and gentlemen, and welcome to Enel Chile Fiscal Year 2020 Results Conference Call. My name is Carmen and I will be your operator for today. After the speakers’ presentation there will be a question and answer session. Please be advised that today's conference is being recorded. 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 press release reporting its fiscal year 2020 results, the presentation accompanying this conference call, and Enel Chile's annual report on Form 20-F, including under Risk Factors. You may access our fiscal year 2020 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 date. Enel Chile undertakes no obligation to update these forward-looking statements or to disclose any development, as a result of which forward-looking statements become inaccurate, except as required by law. I would now like to turn the presentation over to Mrs. Isabela Klemes, Head of Investor Relations of Enel Chile. Please proceed.

Isabela Klemes, Head of Investor Relations

Good morning, ladies and gentlemen, and welcome to Enel Chile's full-year 2020 results presentation. Thank you all for joining us today. I hope this finds you and your families doing well and staying healthy. Our presentation and related financial information are available on our website www.enel.cl in the Investors Relations section. A replay of the call will also be available. There will be an opportunity to ask questions after the presentation via phone or via chat through the link Ask A Question. Joining me today are CEO Paolo Pallotti and our CFO Giuseppe Turchiarelli. In the following slides, Paolo will open the presentation with the main highlights on business and targets, then Giuseppe will walk you through our financial results and operational performance. Let me remind you that media participants are connected only in listen-only mode. As 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. Thank you all for your patience, and now let me hand over the call to Paolo.

Paolo Pallotti, CEO

Thank you, Isabela. Good morning and thanks for joining us. Let me start with the main highlights of the period on Slide number 2. Last year was a challenging one at the global level as a consequence of the COVID outbreak. With reference to Chile, according to the last estimate, Chilean GDP decreased by 6% during 2020. Demand at the country level was almost flat and is being reported by certain sectors like the mining industry-wise in certain areas of the country, while in some sectors the decrease was double-digits. Despite this unprecedented scenario, our operations have shown a larger and continued support to our clients. We have decided to review our guidance for 2020, adjusting it to the new market conditions, commodities volatility, implementation of lockdown measures, and several other regulatory adjustments that were surprising to our estimates. With a consistent effort from all our teams, we have achieved our target on adjusted EBITDA and net income, reaching amounts of over US$1.2 billion and US$0.6 billion respectively. We continue to advance in decarbonization, accelerating our core facility while onboarding new capacity additions. Today, we have more than 1.3 GW in generation projects under construction. We continue to focus our actions to fight climate change. We have already announced one of our ambitious targets to reach a 64% reduction in our direct CO2 emissions by 2023 compared to our electricity generation business in 2017, meaning that Enel Chile is committed to making 90% of its electricity generation carbon-free. Our effort is reflected in our ranking in several ESG indexes; we have been recognized as one of the best-performing ESG companies in Latin America. Finally, regarding our dividend policy, our Board of Directors will propose at the Annual Shareholder Meeting an eventual dividend of approximately $3.9 per thousand shares to comply with our strategy and to avoid best accounting effects of the decarbonization process that will affect our shareholder remuneration. Let’s now have a look at our main 2020 results. I already mentioned our adjusted EBITDA and net income were in line with our 2020 revised guidance. On capital deployment, despite the effects of the lockdown that affected several areas where our projects are located and the delays due to the processes for ecological permits, we have been able to advance in the construction works, doubling our CapEx of 2020 versus 2019, while guaranteeing the safety of our employees and contractors in the field. Finally, on decarbonization, we successfully disconnected the first unit of Bocamina, contributing to the 1.5 cent increase scenario targets and making Enel Chile the most advanced company in the decarbonization process of the country. Let’s now move to some data that shows the consistency of our strategy. Sustainability is the backbone of our strategy aimed at decarbonization and electrification of final consumption. Our plan is accelerating energy transmission, showing our commitment to our stakeholders while maintaining and delivering sustainable value for all. During 2020, our company improved its core in all the main ESG ratings, maintaining a positive trend from the previous year. As you can see, this approach has been reflected in most of the main sustainability indexes, being distinguished as prime by the IFS ESG and receiving a Silver Class rating in the Sustainability Yearbook from Standard & Poor’s Global, meaning that our company is within 1% and 5% of the industry's most sustainable companies worldwide. Enel Chile is the only Latin American utility in that position. Let’s now have some more details on our decarbonization strategy on Page 6. During 2021, we will consolidate our position in the Chilean market, reaching 72% renewable capacity within our portfolio generation assets. Our team is focused not only on project execution but also on sizable opportunities targeting the best features, developing new projects, and seeking higher sustainable results. As a reference, today we have more than 14 GW in our pipeline in different stages of development, which gives us ample flexibility to continue our decarbonization goal and release our generation portfolio from commodity and hydrology risks. An example of that is our recent confirmation that we were awarded over 2,500 hectares after a competitive bidding process organized by the Ministry of National Assets to use in the development of new solar plants and storage systems, expected to contribute with more than 1,700 MW of clean energy to the country. During the year, we continued to find new opportunities in the market to cope with our target to reach net emissions by 2050. On Page 7, you can see more details on the status of each project under construction. Today, we have more than 1.3 GW in renewable capacity under construction. On average, the overall process of the project helped us reach more than 50%. A significant portion of our projects already has equipment on-site, allowing us to expedite material supply. I would like to provide more details on the first hydrogen project in Chile, a 61 MW solar project located at the same site as the wind farm at Valle de los Vientos. We have finalized the connection of five projects in our funnels during December. The construction works and balance of plants are expected to continue during the third quarter of this year. The project exemplifies hydrogen initiatives in which we are increasing the efficiency of our land usage, thereby bringing more competitiveness to our platform. The solar projects Sol de Lila, Domeyko, and Campos del Sol are expected to be operational during the first quarter of this year. I will keep you updated on the construction status of our projects during the next call. Still on generation, let me go through our main fourth-quarter industrial KPIs on Page 8. The total net production for the fourth quarter increased by 4%, amounting to 5.3 terawatt hours, primarily due to higher hydropower generation, reflecting the melting season of the last quarter of 2020. In terms of energy balance, as a result of lower spot prices, we remained the net spot buyers in the market with a purchase of plus 0.2 terawatt hours higher than the fourth quarter of 2019. On physical energy sales, we increased by 8% or 0.5 terawatt hours, primarily driven by 0.7 terawatt hours of higher free market sales, including spot sales, as part of our strategy to capture new clients, which were partially offset by a decrease of 0.3 terawatt hours due to lower demand from production companies, primarily related to the termination of the regulated PPAs with Endesa and Enel from the 2006 auction and the lower energy demand related to the lockdown measures established in different cities in the country. Now, the full-year figures on Slide 9. Net production for the full year 2020 decreased by 8%, amounting to 19.3 terawatt hours. The variance between 2020 and 2019 came mainly from a decrease of 0.9 terawatt hours in our hydro power plants, reflecting the very dry first half of 2020, and a drop of 0.8 terawatt hours in thermal production due to the closure of the Tarapaca power plant on December 31, 2019, alongside the impact of lower system marginal costs. In the year, we remained a net spot buyer in the market with a total purchase of 3.6 terawatt hours during 2020, which is equivalent to an increase of 1.2 terawatt hours over 2019, mainly due to low hydrology and lower marginal costs. On the other hand, our physical sales decreased by 2% or 0.6 terawatt hours, primarily explained by a decrease of 1.9 terawatt hours from lower demand from distribution companies, mainly tied to the termination of regulatory PPAs with Endesa and Enel, and lower national energy demand associated with lockdowns and economic restrictions. Now, on hydrology, Slide 10. We referenced our hydro power generation business and are presenting the cumulative rainfall for our most significant river basins: Maule, Bio-Bio, Laja, and Rapel. In the chart, you can find the new metrics, the green line highlighting the average cumulative rainfall over the last ten years. This year, we observed a recovery in rainfall in June and July, although hydrology was relatively poor during 2020, making it feasible in the fourth quarter of 2020, which was slightly better than the same quarter of 2019, explaining better performance in those periods. Therefore, our hydro generation was 5% higher in the fourth quarter of 2020, which led us to reach 6 terawatt hours of hydro generation during the second half of 2020, meeting the expectations we had set during the nine months of 2020 results conference call. For 2021, based on the information available today, modest rainfalls are expected, continuing the current conditions according to the La Nina phenomena that will remain until the second quarter. However, Pacific temperatures should move to natural conditions during the southern winds, which should imply an improvement in rainfall for the second half of 2021. During the last few weeks, a review of the regulation on infrastructure in the NSG in the country is under discussion. In our view, considering the volatility of the hydrology data experienced in recent years and the stability of the Argentina gaps has been a terrible source, it's important to avoid frequent disruptions in the current availability of gas. This may create a situation where the overall cost of generation will increase, relying on less efficient and more polluting plants, contradicting the country’s goals on decarbonization. Now, to our network business line on Slide 11. Energy distributed in the period reflects the lockdown measures in our concession area, slightly offset by an increase in household consumption. Our customer base continues to expand. During 2020, we had an increase of around 36,000 new clients: 33,300 residential, 2,000 commercial, exceeding two million clients by year-end. The quality of our services will continue to improve; our SAIDI and SAIFI indexes’ performance is associated with investments made in our concession area, despite the logistical restrictions we faced, and with the digitalization of our networks. The effect of the social unrest at the end of 2019 and the concerns explained a 200 basis points increase in total losses. We continue to work on recovering these KPIs to pre-pandemic levels. We continue to enhance the digitalization of our services to provide more efficiency and agility, nearing our customer app that supported the rise of digital interaction from 60% in 2019 to 62% in 2020. As of December, Enel Distribución App reached approximately 450,000 downloads, 72% higher than in December 2019 cumulative figures. We are still using digital channels as the main way to communicate with our clients. In 2020, we forecast growth in digital payments as we show in Slide 12. The increase in the digital channel and the new payment agreements executed during 2020 supported collection levels maintained at 97%, versus a historical level of over 100%. By December 2020, we executed almost 83,000 agreements with clients, which helped reduce bad debt, as Giuseppe will show later. On average, we executed more than 1 million contacts with our clients during the last quarter through direct calls, SMS, and other communication channels. Moving to Enel X and Electrification on Slide 13. Despite the COVID-19 pandemic outbreaks in the country, we continued to consolidate our leadership in electro-mobility and electrification. In 2020, we secured new contracts on public lighting, upgrading the lighting infrastructure to bring more efficiencies in favor of local municipalities. In terms of mobility, in 2020, Enel X signed a partnership with McDonald's, Enex, and Shell, among others, to continue developing the ElectroRuta Project. Today, more than 22 partners have joined us in this initiative. Additionally, at Enel X, we are developing the first project with the retail sector to standardize logistics, boosting e-trucks in Chile and reaffirming our commitment to the energy transition towards the use of clean energy in transportation. In 2020, we also secured new contracts with large real estate groups to provide energy efficiency solutions based on the industrial services and new challenging infrastructure for their projects. This year, we are promoting several projects with mining, such as the use of electric buses combined with solar energy and storage. The first project in the mining sector developed with Anglo-American will begin operations in the next few days. Finally, thanks to the agreement with public and private partners, forty companies have participated with Enel. We continue our efforts to promote efficient substitutes for the energy usage, restoring 8,000 devices since 2017, with an estimated reduction of 27,000 tons of CO2 emissions per year. Now to conclude this part of the presentation, a quick view on the main regulatory discussions ongoing on Slide 15. Starting with distribution, on COVID contingency products in January 2021, basic services have been expanded from its original timeline to support the most vulnerable clients for a more extended period. Enel intends to support clients that had the option to postpone the payment of their bills in up to 36 installments without interest. This loan valid until May 5th includes benefits for vulnerable clients, which our company already voluntarily offered before they were mandated. Nevertheless, they will keep this offered to capture more companies, institutions, and households. As of today, we have almost 21,900 agreements under the basic study deal and an additional 20,900 under our voluntary programs. On network tariff, the government will present its final letter during the second quarter of 2021, followed by a final regulatory report on the values, which can be challenged in the expert panel expense. Consequently, we expect the release of the final distribution tariffs drafted in November 20, to be released in early 2022. On transmission, according to the transmission tariff cycle 2020-2023, by the second quarter we are expecting the regulators to report, which can also be challenged in the expert panel with us. Transmission tariff decreases are expected to be published by the fourth quarter of 2021. Moving to Slide 16 on our recent updates, on the tariff stabilization mechanism during December 2020, the report published by the Chilean Energy Commission showed that the total balance accrued under the stabilization mechanism totaled $856 million for the entire Chilean market as of September 2020. By the end of December 2020, the Chilean balance totaled around $360 million. Earlier this year, the sales of the current receivable generated by this mechanism were secured with government-structured liabilities totaling around $290 million. The first tranche of around $90 million was realized during February this year. A new law on energy efficiency has been recently published, defining the regulatory framework for the rational and efficient use of energy. This year, the government established certain rules on energy efficiency, including the implementation of management energy systems and requirements to reach target levels of energy consumption, which we have already been developing. In our view, this important initiative in Chile is aimed at supporting the energy transition, and at Enel, we are committed to supporting our clients in complying with these new rules. We are now in an open public hearing phase for this process, and we expect that the regulation related to implementing this law will be passed during this year. Now, I will turn over to Giuseppe.

Giuseppe Turchiarelli, CFO

Okay. Thanks, Paolo. Let me start with a summary of our financial highlights, which we'll go through in detail in the following slides. First, let me explain the adjustment we made in our figures for both 2019 and 2020. As Paolo mentioned before, we accomplished the goal of EBITDA and net income committed in our last strategic event. For 2019, we adjusted EBITDA and income, excluding the PPA early termination effect and the net impact of impairments of Bocamina 1 and Tarapaca power plants. For 2020, we adjusted EBITDA and income considering the effects rising from the impairment of the Bocamina 2 power plant asset and the costs associated with both units of Bocamina, along with the organization of current costs. All the details are described at the bottom of the slide. In the following slide, I will address in more detail each of these figures. Let me start by giving you some detail about EBITDA and bottom-line net of COVID impact for 2019. Net of the COVID-19 impact, our adjusted EBITDA would have been around $100 million higher than the 2020 adjusted figures, reaching a total of $1,182 million. Factors behind this are as follows: $89 million related to the reduction of demand impacting our sales in both the distribution and transmission businesses, net of energy passes in the period; and $12 million mainly related to higher energy losses, extraordinary custom and care costs, and other operating expenses needed to face the contingency, coupled with lower EBIT from Enel X. Moving down the profit and loss statement, we recorded a negative impact related to the bad debt provision of $9 million, mainly driven by a temporary expansion of the historical collection period. Therefore, net of COVID-19, our 2020 adjusted net income would have reached $640 million. Now let's go to our CapEx on Slide 20. In the 4Q 2020, our CapEx reached almost $380 million, mainly due to development CapEx, which totaled around $300 million during the period. Consequently, our total CapEx for 2020 amounted to $921 million, allocated as follows: customer CapEx for a total of $61 million, a 24% increase with significant investments allocated to build connections for new customers associated with the increase in our client base, as well as an improvement of our commercial system to ensure better interface with our clients and efficiency in our internal commercial processes. Asset management CapEx reached $111 million, 10% lower than 2019 due to lower maintenance activities in coal-fired units of Bocamina and Tarapaca, and lower purchases of spare parts for maintenance in San Isidro in 2020, with rescheduled activities in our distribution business. As of December 2020, development CapEx reached almost $800 million, $544 million higher than 2019, largely driven by renewable expansion and development of our distribution business, which is continuing the digitalization of our network. Let's start with the Q4 adjusted EBITDA breakdown on Slide 21. Adjusted Q4 2021 EBITDA is 17% better than last year's figures, mainly due to improvement in hydrological conditions that contributed to better maintained season, which increased our hydro generation by 0.1 terawatt hours, amounting to a positive impact of $1 million. The PPA margin effect equaled $24 million, including the impact of commodity CPI and FX on the PPA recognition costs that lowered our cost price, along with higher revenue from ancillary services amounting to $10 million for system quality and safety. Other positive effects of $16 million were mainly explained by $6 million lower OpEx in our transmission business, $3 million resulting from higher depreciation of local currency versus US dollar related to the translation of the US dollar-denominated loan - our functional currency. Settlement on spot and transmission accounts of the previous year were booked in the quarter, partially offset by higher losses in our distribution business. Let's now move to accommodated figures on Page 22. Our EBITDA adjusted with this table only compares 2019, including the preliminary FX impact. The PPA margin encompasses positive effects of $125 million considering the impact of commodities, CPI, and FX on EBITDA, transmission cost, and lower spot prices. We recorded higher ancillary services raising $10 million, which reflected the monetization of $26 million. All these effects were offset by the lockdown measures that affected energy demand, net of positive results in both generation and distribution businesses by $53 million, primarily related to COVID-19 pandemic effects; lower hydro generation impacting our adjusted EBITDA by $42 million; sale of six LNG cargos during the first half of 2019 that wasn’t executed this year due to lower commodity prices on the international market with a $26 million impact; lower EBITDA of $10 million in Enel X due to electric bathrooms incorporated into the public system during 2018; higher depreciation on local currency versus US dollar of $34 million related to the translation of U.S. dollar-denominated loans in our books; and lower $70 million, mainly due to higher energy losses in the distribution business and transmissions under the new distribution tariffs. On Slide 23, I will show a summary of the performance of our generation businesses, including Enel Chile and Enel Green Power Chile. The main variances between the periods have been detailed in previous slides. Let me remind you that 2020 adjusted EBITDA based on 2019 adjusted results, impacted by the PPA sale and termination, increased by 8%. Additionally, our generation adjusted EBITDA margin reached 65% in Q4 2020 and 52% in the full year, still higher than 2019 figures despite the early termination of PPAs. Now, on distribution network and Enel’s business on Page 24. Q4 2020 adjusted EBITDA reached $52 million, which is 29% lower compared to the same period in 2019, due to $5 million lower energy consumption in both regulated energy market clients as a result of lockdown measures applied by the government to contain the spread of COVID-19; $4 million increase in energy losses due to cutting logistics restrictions and COVID-19 effects on the economy; and higher OpEx to maintain safety measures in distribution activities, which amounted to $8 million in the quarter, alongside provisions on the effects of the new distribution tariffs in the third quarter. In the annualized figures, a higher activity offset these previous effects. On the accommodated figures, EBITDA was lowered by $64 million, mainly affecting Enel X, and encountering a negative impact of $8 million, primarily from services incorporated in the public association season. On network distribution, a reduction of $56 million resulted from lower demand, higher energy losses, and higher OpEx incurred to maintain effective management and provision at the sites of the new distribution tariffs. On Slide 25, let's go through the main drivers of our group's net income. D&A and bad debt reached $310 million, a variance of $2 million mainly reflecting lower D&A in Enel Generación due to Tarapaca and Bocamina plants trending in 2019 and 2020, partially offset by higher depreciation in EGP Chile due to the devaluation of the Chilean peso. We also had higher bad debt provisions due to the COVID outbreak, and higher depreciation in the distribution business due to increased investment. The impairment increased by $727 million, primarily related to Bocamina 2 in June 2020 tied to its closure scheduled for 2022. Financial results totaled an expense of $142 million, a decrease of $49 million due to lower average costs of our debt as a result of the renegotiation of EGP debt with EFI, Enel Finance International, and lower net financial expense arising from the accounting impact of the energy stabilization mentioned in duration profile and higher capitalized interest, largely related to the development of renewable energy projects, offset by depreciation on foreign exchange rates in 2020. Results from equity investments increased mainly due to a decrease in internal service suspension lines in December 2020. Income tax and minorities reflect impacts related to the Bocamina 2 impairment and the merger of Gas Atacama Chile into Enel Generación Chile in 2019. The adjusted 2020 net income reached $1,260 million, that's a 9% increase over the last year's adjusted net income. Moving to the cash flow on Slide 26. 2020 FFO reached $1.67 billion, higher than the previous year, mostly due to higher net working capital, primarily explained by cash management actions of around $150 million in the last quarter; EBITDA sales to AMP capital, totaling around $100 million; and other net working capital initiatives, which included higher LNG payments in 2019 versus 2020 of $59 million, partially offset by lower receivables due to COVID-19 amounting to around $100 million. Lower income tax during 2020 was explained by lower company results, owing to decarbonization expenses related to the Tarapaca Power Plant and delayed tax payments due to government COVID programs, along with lower financial expenses primarily due to reduced interest rates on inter-company loans between EGP and EFI, and lower company compensation initiatives. Let me now go through our debt on Slide 22. Our gross debt increased by approximately $400 million compared to 2019 due to the ongoing efforts with EFI to finance our decarbonization plan, partially offset by the amortization of Enel Finance and Chile and EGP’s debt. As a result, our net debt as of December 2020 increased by $254 million compared to 2019. The average cost of our debt was reduced from 5.2% in December 2019 to 4.6% in December 2020, demonstrating an important improvement in our financial condition and an effort to lower our financial expenses. We also achieved an average debt expenditure of $6 million. Finally, in terms of liquidity, we maintained a level of $1 billion, enabling us to finance our CapEx plan and maintain a comfortable position concerning the current economic scenario. Our debt amortization has been very minimal.

Paolo Pallotti, CEO

Thank you, Giuseppe. Let’s go to the closing remarks. Despite the challenges we faced, we achieved confirmed resilience and strength of our strategy, continuing to push for clarity and drive decarbonization, concentrating on leading positions in electrification and renewables in Chile, and contributing to the fight against climate change. Our clients will remain at the center of the strategy, and alongside this, we will continue to focus on client needs and support them in their path to aligning with our vision. Our business resilience and sustaining strategy is supported by our balance sheet strength and long-term vision promoting value creation. Thank you for your patience, and let’s now open the Q&A session. I will hand over to Isabela.

Isabela Klemes, Head of Investor Relations

Thank you, Paolo. Thank you all for your attention. As we have anticipated, we have received questions via phone and chat in the webcast on this occasion. The Q&A section is open. Operator, please start.

Operator, Operator

Our first question is from Javier Suarez with Mediobanca. Your question, please.

Javier Suarez, Analyst

Hi. Good morning, and thank you for the presentation. I have several questions. The first one is on the regulatory review and recent regulatory changes. So I am interested in the basic service law that is basically changing the capacity of the company to deal with the bills. So, the question here is, how do you see these new laws affecting your profitability in 2021 and 2022? How significant do you think that is going to be in terms of your cash flows, working capital, and the overall profitability of your business? Then, on the energy efficiency law that is trying to promote rational utilization of energy sources, I have seen in the presentation that hydrogen has been clearly approved, so the question for you is if you can update us on how you see hydrogen and the hydrogen opportunity affecting the Enel Chile’s business model in the coming years? Any updates on that would be appreciated. The third question is on the free market – the service to the free market. It seems part of your clearance letter on the free markets. So, how do you expect the free market to evolve in 2031? What should be the expectation on free market evolution in 2021 and its impact on your profitability? Finally, on working capital. There was a positive impact in the fourth quarter; please explain why this positive impact happened during that quarter. Many thanks.

Paolo Pallotti, CEO

Thank you, Javier, for your questions. Very interesting, let's address a lot here. Let me start with the regulatory aspects, and then I will hand over to Giuseppe for clarification on numbers. Regarding the basic service law, I would recommend this is more of a regulatory manager, more of a law that I would believe was enacted during the period of the economic crisis to support a category of clients that are remarkable for our company. We have been offering similar arrangements since the beginning of operations, allowing people to enter into agreements for payment term extensions. Essentially, this change involved an extension of the payment term from 12 to a maximum of 36 installments, which is reasonable given the current economic conditions. However, we strongly assert that we do not agree with the law, as it limits our capability to recover the overall domestic debtors, including larger consumers in the sector. This change clearly influences the clients' payment capability and remains a concern during this contingency period as to how payment will occur when the law expires on May 5th. That summarizes the impact and our position. Regarding energy efficiency law, we think this is an important step for Chile to offer clearer guidelines, and we expect real benefits within the next couple of years. Regarding hydrogen, as you know, we are part of the consortium in the first pilot project in the south of Chile for the production of green hydrogen using turbine generation. This opportunity is significant for us, and we are keenly monitoring its evolution as it may solidify our position in the green economy. We believe we can position ourselves advantageously for a stable supply of hydrogen through our generation fleets, supporting our wind energy pipeline. We planned to construct 2.4 GW by 2023, partnering with key players to enhance our capabilities. Regarding free market evolution, we recognize the portability law is under discussion at the Senate. There’s an ongoing hearing about it, as conditions for market opening are being debated. We are seeing clients migrating from regulated to free markets, which is positive as we are signing contracts based on green energy. Overall, the movement toward green energy among clients is generating solid leads for us.

Giuseppe Turchiarelli, CFO

In terms of net working capital, the actions we implemented in the last quarter are detailed in Slide 26, amounting to around $100 million. We initiated factoring to bolster our working capital, and importantly, the demand for our services remained solid, contributing positively to cash flow. As for what we foresee for this year, we must monitor the evolution of the pandemic and its influence on payment behavior among our clients.

Javier Suarez, Analyst

Interesting, many thanks.

Operator, Operator

Thank you. Our next question comes from Enrico Bartoli with Stifel. Your question, please.

Enrico Bartoli, Analyst

Hi, good afternoon, and thanks for taking my questions. I have several as well. The first is on the outlook for 2021. We've observed a recovery of electricity production in the power generation business, and demand in the distribution business is increasing. You are indicating expectations for improved hydrology. Can you elaborate more on the scenario you foresee for this year? If possible, can you provide indications on the level of EBITDA that you expect for 2021? Additionally, you anticipate 1.3 GW of added renewable capacity; can you give us an indication of the EBITDA you expect from a full-year contribution from that capacity? As to the regulatory environment, you likely have deadlines for presenting the new regulatory frameworks for distribution and transmission; please update us on the expected impacts from these two new models on your distribution business. Lastly, regarding the PPA, might you expect an impact from taxes, exchange rates, and commodity prices? How does this mechanism work, and can you share details on the positive effects we saw in 2020?

Paolo Pallotti, CEO

Thank you, Enrico, for your questions. The gap in the outlook for 2021 confirms what we discussed during our people's plan and offers more detail on key issues. The key indicators here include how the country evolves from 2020 in terms of wealth management and how limited lockdowns affect the movement and purchasing ability of clients. We are also working closely with clients to support them through agreements to help them navigate the situation. Advanced clients have exhibited resilience, and we don't foresee negative impacts from them. Regarding hydrology, we confirm our expectations based on the number of units sold and the expected evolution. We can provide more specific updates during our next calls as we observe how the weather conditions change. Concerning projects, we maintained balance during the lockdown conditions, ensuring continuity in projects while managing positive outcomes with limited people impacts. We expect no delays in close times for construction due to how we managed project timelines. We have many projects within view, and we are progressing on-site within expectations. As for distribution regulatory impacts, we anticipate some initial delays related to legal final target definitions, but we do not foresee significant deviations from our business plan projections.

Giuseppe Turchiarelli, CFO

Regarding PPAs, these are indeed sensitive to shifts in commodity prices and foreign exchange rates, which affect both our PPA revenues and expenses. The mechanisms we've built consider these variances, and the resulting impacts will vary depending on market conditions. We will provide context for this when we present the figures.

Enrico Bartoli, Analyst

Okay, thank you very much.

Operator, Operator

Thank you. Our next question comes from Murilo Riccini with Santander. Your question, please.

Murilo Riccini, Analyst

Hi, good morning. Hi, Paolo, Giuseppe, and Isabela. This is Murilo Riccini from Santander. Thanks for the call. Could you provide us more details on the gas supply situation in Chile? Specifically, the dynamics for Enel Chile: we know that you are primarily negotiating gas supply during the pandemic and now you are benefiting from that. How long can we expect gas availability for Enel Chile? What are your expectations for winter regarding gas availability and spot prices? Regarding CapEx, we'd like to understand how you’ll manage CapEx to avoid renewable energy oversupply in the system. Could that strategy lean more towards storage solutions rather than just renewable capacity? Finally, could you share your expectations about collection and provisions? Should we expect provisions to increase during the first half of 2021?

Paolo Pallotti, CEO

Hi, Murilo. Thank you for your questions. Let's start with the gas supply issue; it's a very pertinent point. First, gas supply in Chile is complex at times because of the reliance on LNG facilities, predominantly in central and northern regions, alongside interconnection with Argentina. This dual-sourcing presents unique management challenges, particularly regarding seasonality, where gas from Argentina is often more accessible during certain times of year. Our planning approach accounts for this; we typically rely on Argentine gas in late spring and summer but opt for LNG imports during winter due to availability and reliability. Currently, we do not see any issues with gas availability, as we have planned for both from Argentina and LNG imports. Our long-term LNG contract secures our needs efficiently. It is crucial to manage both supply methods concurrently since shortages can occur in Argentina during peak demand periods. We also evaluate our requirements, so we do not foresee any challenges in supplying our facilities during this winter. As for CapEx management to prevent renewable energy oversupply, we are in discussion with the regulators and technology stakeholders to align with the best strategies toward capitalizing on renewables while integrating effective storage solutions.

Giuseppe Turchiarelli, CFO

Regarding collection and provisioning, we believe that the second half of 2020 will be better than the previous year due to forecasting improvements in Chile, alongside government plans targeting specific companies to incentivize sales, while excluding high-consumption clients from the closures. Therefore, this should yield better performance heading into 2021. We'll closely monitor early-year trends for how these adjustments touch our collection rates.

Operator, Operator

Thank you. I will now turn the call back to Isabela Klemes for the webcast questions.

Isabela Klemes, Head of Investor Relations

Okay. Thank you. We have some questions on our chat here. The first is from Andrew. We have been seeing higher spot market prices in Chile in early 2020 and 2021. Should we expect that to translate into higher net purchase expenses for long-term business? The second question is, authorities in Chile appear to be reviewing how gas costs are declared by power generators. What is Enel’s opinion on this? What implications could this have for the company? I will hand over to Paolo.

Paolo Pallotti, CEO

Thank you, Andrew, for the questions. Regarding higher spot market prices in the early months of 2020 and 2021, we expect some of this to translate into increased net purchase expenses. The drivers here include an ongoing dialogue centering on gas supply chains. Notably, natural gas is fundamental for electricity production, predominantly through LNG imports—your first question about how higher prices could influence costs factors directly into this. Our strong mix of gas and renewables gives us competitive advantages in absorbing shocks from gas price fluctuations. Concerning the planned regulations on gas costs declaration, we believe focusing on economic efficiency is crucial, allowing systems to minimize costs and avoid reliance on the most polluting fuels. We commend regulatory advances towards optimizing gas imports and productions, enabling a more flexible approach. Overall, our position emphasizes leveraging cost-effective, cleaner fuel options aligning with our overarching energy transition goals.

Isabela Klemes, Head of Investor Relations

Thank you, Paolo. We have some questions also from Rodrigo Morales from Vanessa. The first question is, could you explain the factorization agreement with Goldman Sachs and IDB? How much do you expect to receive for this first tranche? Then the second question relates to our ability to leverage LNG to face seasonal drops in the country. The third one is about repowering projects that Enel Generación is managing, whether those projects were completed. The second is related to the Los Cóndores project. How much was spent as of the end of 2020, and how much does the company forecast to invest to conclude this project? Also, for Bocamina 2, considering current hydro conditions and lack of Argentinean gas, is there a possibility for the company to evaluate postponement of the closure of Bocamina 2 scheduled for May 2022? Finally, are there plans to postpone the TOD of Los Cóndores to 2023?

Paolo Pallotti, CEO

Yes. Let's start from Los Cóndores. The expenses allotted until 2020 were in the range of US$880 million. The amounts reported considering the announced total investment of $1,150 million have been necessitated by the additional requirements for deeper studies mandated recently due to pandemic impacts. Therefore, management remains mindful of the complexities but maintains a balance in executing our project work.

Isabela Klemes, Head of Investor Relations

And what about the repowering projects?

Paolo Pallotti, CEO

Regarding the status of the repowering project with Enel Generación, we are making progress on that front as timelines will align with project feasibility factors. For the LNG question related to our ability to manage seasonal drops, I’ve addressed that earlier, reiterating that starting from March, our LNG imports should secure us comfortably for winter needs.

Giuseppe Turchiarelli, CFO

Yes, regarding the factoring agreement, we have already executed the financing and, in fact, we have already cashed in $58 million, which you'll see reflected in the first quarter results when we present it. Everything is proceeding well; if the regulators issue the necessary decreases based on factorization, we expect to receive another $100 million throughout this year.

Isabela Klemes, Head of Investor Relations

Okay, thank you, Giuseppe. Now, we have the last question from Tomas Gonzalez with Scotiabank. He asks for more details on the leverage of the company in 2020, what we are expecting for leverage going forward, and if facing CapEx would be an alternate. The last part of the question refers to the Chilean services and the $10 million recognition this year, so he is seeking what we expect for 2021 from this perspective.

Giuseppe Turchiarelli, CFO

On net EBITDA, we are around 3.1 times at the end of the quarter. We will evaluate how the year shapes up, but we anticipate confirming these parameters during our Capital Markets Day. In regard to services, we do not foresee repeating the same volume recognition as we had in 2020. Expecting a gradual decrease this year, achieving similar levels by year-end.

Isabela Klemes, Head of Investor Relations

With that, thank you, Giuseppe. We do not have any other questions, so I would like to thank you all for joining us today. Our investor relations team will be available for any additional questions you may have. Thank you for your questions, and stay safe.

Giuseppe Turchiarelli, CFO

Thank you.

Paolo Pallotti, CEO

Thank you.

Operator, Operator

Thank you, ladies and gentlemen, for your participation in today’s program. You may now disconnect. Have a wonderful day.