Earnings Call Transcript - ENIC Q3 2025

Operator, Operator

Good morning, ladies and gentlemen, and welcome to Enel Chile Third Quarter and 9 Months 2025 Results Conference Call. My name is Carmen, and I will be your operator for 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 anticipated in the forward-looking statements as a result of various factors. These factors are described in Enel Chile's press release reporting its third quarter and 9 months 2025 results. The presentation accompanying this conference call and Enel Chile's annual report on Form 20-F, included under risk factors. You may access our third quarter and 9 months 2025 results press release and presentation on our website at www.enel.cl, and our 20-F on the SEC's website at 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 to 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

Good morning, and welcome to Enel Chile's 2025 Third Quarter and 9 Months Results Presentation. We greatly appreciate you taking the time to join us today. My name is Isabela Klemes, and I'm the Head of Investor Relations. Joining me this morning is our CFO, Simone Conticelli. Our presentation and financial related information are available on our website, www.enel.cl in the Investors section as well as through our app investors. In addition, a replay of the call will be soon available. At the end of this presentation, there will be an opportunity to ask questions via webcast chat through the link Ask a Question. Simone will kick off the presentation by covering key highlights of the period, our portfolio management actions, providing us updates on the regulatory context and an overview of our business economic and financial performance for the period. Thank you all for your attention. And now let me hand over the call to Simone. Simone?

Simone Conticelli, CFO

Thank you, Isabela. Good morning, and thank you for your participation. Let's start the presentation with our main highlights of the period. Let's begin with portfolio management. We observed a high-level performance of our thermal generation fleet, which helped offset lower hydrological conditions during the quarter. This outcome reflects our ability to adapt to evolving market dynamics and maintain operational stability. In addition, our gas optimization activities continued to support our margin, reinforcing their strategic role in balancing our portfolio and mitigating exposure to spot market volatility. On the distribution side, we achieved successful implementation of the comprehensive winter plan aimed at strengthening grid's resilience and improving service continuity under challenging climate conditions. Indeed, our performance in the period was one of the best in Chile. The winter plan included the deployment of emergency crews strategically positioned in high-risk areas, extensive vegetation management action, and the installation of new telecontrol units to reduce restoration time. Additionally, targeted measures were implemented to support vulnerable customers, ensuring continuity of supply during adverse weather events. Now let's move on the Chilean regulatory context. With reference to the VAD 2024-2028, a key milestone was the publication in the last weeks of the consultant report followed by the preliminary regulatory technical report. I will give you more details about it. Furthermore, in October, was also released the preliminary regulated energy tariff report for the first half 2026. Now the generation association, of which Enel is a part of, is working with authorities regarding the outcomes of the report. Looking ahead, 2 regulated energy auctions are scheduled for the fourth quarter 2025. Let's now turn to business profitability. We closed the first 9 months of 2025 with a stable EBITDA compared to the previous year despite the difficult context and significantly lower hydrology, demonstrating the resilience of our operations. Our FFO remained positive, driven by the recovery of $261 million of receivables generated by the PEC mechanism. This inflow significantly strengthened our cash position for the year. As a result, we maintained a strong liquidity position, enabling us to support our development plan and to mitigate operational headwinds associated with the market and climate uncertainties. In the next slide, we will take a closer look at these topics to provide further insight, but let me anticipate that these achievements demonstrate our focus on operational excellence and sustainable growth. We remain committed to delivering long-term value to our shareholders while advancing in the energy transition and strengthening the resilience of our business. And now let's move to Slide 4 to talk about the energy market situation, especially regarding hydrology and gas opportunities. On the left side of the slide, you can see our hydro production over the last 10 years. For 2025, we set our target at 10.7 terawatt hour based on the last 10-year average. Although 2025 has been a particularly dry year, our hydro production has remained in line with our strategic plan. This was possible, thanks to the flexibility of our hydro plants with access to hydrological basins. For this reason, we are keeping our hydrology guidance unchanged. To manage this dry scenario, we relied also on the flexible and competitive thermal fleet, supported by a strong and diversified LNG and Argentine gas supply. This helped us respond quickly to market needs and reduce exposure to hydro volatility. As a result, we increased thermal production, used competitive gas and seized favorable trading opportunities, adding $74 million in margin during the first 9 months of 2025. Regarding gas business, in October, we completed a gas sale to Europe with margins similar to those recorded in the second quarter 2025. Looking ahead to 2026, we are evaluating options to secure competitive gas from Argentina through firm contracts in line with the past year strategy. And now moving on to Slide 5, let's review our generation portfolio and energy balance. During the first nine months of 2025, net production fell by 9% compared to the same period in 2024. This drop was mainly due to lower hydro dispatch, a decrease in renewable energy output because of maintenance on two solar plants, and increased curtailment from transmission line issues. These challenges were somewhat balanced by greater contributions from the efficient combined cycle gas turbine. The same factors influenced third-quarter generation, which totaled 5.4 terawatt hours, down 1.1 terawatt hours from the same period in 2024. Energy sales reached 22.7 terawatt hours, primarily due to reduced sales to regulated customers after the expiration of regulated contracts. This decline in regulated contract volume also led to a drop in third-quarter sales from 8.4 to 7.6 terawatt hours. I would now like to highlight an important milestone in our distribution business's resilience program. We successfully executed a comprehensive winter plan designed to enhance the stability of our grids and ensure service continuity during the most challenging months, especially for our most vulnerable customers. We deployed 376 emergency crews throughout our service area to address outages and restore power. One significant initiative was the execution of over 115,000 tree trimming actions, which notably reduced feeder failures in weather-vulnerable areas. We also modernized the grids by installing new telecontrol units, allowing us to identify faults more effectively and minimize service interruption times. Alongside this, we implemented various infrastructure upgrades to boost network reliability and service quality for more than 193,000 customers. Supporting vulnerable customers remains a top priority for Enel, and we assisted over 3,000 electro-dependents to ensure continuous supply through targeted interventions. More than 2,000 received digital meters, while almost 2,900 were provided with backup power solutions like generators or battery systems. Lastly, we reinforced collaboration with municipalities to better coordinate during extreme weather events, which has enhanced our emergency response capabilities. All these actions have led to clear improvements in the performance of our distribution network, showcasing the effectiveness of our winter plan. Now, let's take a look at key updates on the energy regulatory landscape. In 2025, we experienced significant changes in the regulatory framework, with the distribution cycle for 2024 to 2028 currently being developed. The final consultant report was published in September, followed by the release of the preliminary technical report by the CNE in October, outlining changes to maintenance and technical standards. Companies must submit their comments by November 10th, with the final report anticipated in 2026. Additionally, we are awaiting the settlement of outstanding debt related to the PAD decree for 2020 to 2024, published in April 2025, which is also expected to be settled in 2026. Regarding our generation business, on October 14th, the CNE published the preliminary technical report for the first half of 2026, which includes a correction regarding inflection effects that we are currently reviewing while awaiting the final report. The stabilization mechanism indicates that as of September 2025, we have a $149 million PEC 1 receivable to be fully recovered by the end of 2027. In other updates, a resolution on battery energy storage system remuneration took effect in August, allowing BESS to provide ancillary services. Recently, there have been amendments to the 2025 regulated auctions, increasing the volume for the 2027-2030 auction from 1.7 to 3.4 terawatt hours per year. The offer deadline is now November 14th, with a short-term auction for 2026 of 1.5 terawatt hours per year set for December 2nd. Lastly, the third electricity subsidy round ran from June 3rd to July 15th, covering the period from July to December 2025, helping around 341,000 annual distribution customers. A proposed expansion of the subsidy is still pending in Congress. And now I will start reviewing the highlights of our financial performance over the period. Before we review the results, a quick reminder. As of January 1, 2025, Enel Chile changed its functional currency from Chilean pesos to U.S. dollars. For comparison, 9 months and third quarter 2024 figures are shown using the average exchange rate of these periods. I will enter into details of our financial and economic performance in the next slide. So let's move to the next slide to look at the progress made on CapEx. Our total CapEx reached $245 million during the first 9 months of the year, maintaining a focus on grids and power plant fleet performance. Let's review the allocation in more detail. 41% or $101 million was directed towards grids investments. 31% or $76 million supported thermal power projects. 27% or $67 million was invested in renewable and storage. Regarding grids, the focus remains on the resilience program to strengthen the grids and ensure service continuity under adverse weather conditions. In the thermal segment, the priority is the maintenance and performance enhancement of the power plant fleet. In the renewable segment, we have centered our efforts on finalizing the PMGD program, enhancing hydro facility performance, and maintaining fleet reliability. Now let's move on to the breakdown by nature. Asset management CapEx totaled $139 million, accounting for 57% of total CapEx, mostly used for the maintenance of Atacama Quintero and San Isidro CCGT, the improvement of renewable fleet availability, and corrective maintenance and digitalization of grids. Development CapEx was $60 million, mainly driven by investment for grid reliability enhancement, digital methods programs, telecontrol deployment, and for the completion of 2024 investment program for PMGDs. The 2025 development CapEx for battery-related projects will be recorded starting from the next quarter. Finally, customer CapEx totaled $46 million, mainly invested in low and medium voltage connection projects and initiatives to support load increase. Let's now turn to the next slide, which provides a closer look at our EBITDA performance. During the last quarter, our EBITDA totaled $345 million, representing a decrease of $63 million compared to the same period of 2024, mainly explained by several factors. Starting with the generation business, we recorded a decrease of $89 million in PPA sales, mostly due to the termination of some high-price regulated contracts that impacted volumes and average price of the regulated portfolio, partially offset by the negative impact of exchange rate hedges recorded in 2024. Regarding sourcing, its contribution remained in line with the same period in 2024. This result was mainly achieved thanks to our optimized sourcing strategy and the issuance provision, mainly coming from GasAtacama, which effectively offset higher costs in the energy spot market due to the higher purchase volume. Gas trading contributed positively with a $5 million margin increase, mainly fueled by expanded trading activity in the third quarter of 2025. Turning to grids, we recorded a positive impact of $17 million, mainly driven by regulatory provision reflecting the settlement adjustment for the previous year and higher OpEx recorded in the third quarter of 2024 due to the extreme weather events that occurred in May and August. These effects were partially offset by the increase of OEM expenses, mainly associated with the implementation of the comprehensive winter plan. And now let's move on to the next slide to review the main impacts on EBITDA during the 9 months period. Our EBITDA reached $1,004 million, remaining flat compared to the same period of 2024. Starting with the generation business, we recorded a decrease of $244 million in PPA sales, mainly due to the termination of high-price regulated contracts, partially offset by the negative impact of exchange rate hedges recorded in 2024, and the positive price effect due to the indexation of the free market contracts. Regarding sourcing, we recorded a positive effect of $192 million despite the $34 million negative impact related to the transmission line restrictions following the February blackout and the additional second quarter issues. The result was obtained thanks to lower spot and third parties energy purchases costs, energy settlements from previous periods, already anticipated insurance provision, and finally, lower transmission costs. In the first 9 months of 2025, gas margin contributed $27 million, also thanks to the increase in gas trading activity compared to the same period in 2024. Passing to grids, we recorded a positive impact, primarily driven by the provision reflecting the higher tariff expected for the 2024-2028 regulatory period and tariff indexation, some settlement adjustment from the previous year, and higher OpEx recorded in the period 2024, mainly due to the extreme weather events, partially offset by the increase of OEM expenses, mainly associated with the implementation of the comprehensive winter plan. We also recorded an increase of generation costs due to the new developed capacity and maintenance activities. Finally, in 2025, specifically in the second quarter, we recorded the personnel cost one-off effect, mainly for the incentivized early retirement plan to support the company organization aimed at improving internal skills and performance. And so now let's move on to the next slide, where we will review the net income evolution. Our 9-month 2025 net income reached $352 million, a 21% decrease compared to the last year's figure, mainly explained by higher depreciation, amortization, impairment and bad debt expenses of $84 million, mainly due to the commissioning of new renewable capacity amounting to $32 million, the impairment related to our decision not to proceed with the new PMGD solar project initially planned for development in this area. And finally, the $12 million increase of grid's bad debt provision, mainly due to the higher billing resulting from tariff increase and long overdue customer debt. Regarding financial results, we recorded a negative variation of $38 million, mostly explained by the lower capitalized expenses on renewable projects by $61 million, partially offset by lower financial expenses for $29 million resulting from lower average outstanding debt and lower average interest rates. The latter was partially offset by a $20 million reduction in corporate income tax expense, mostly explained by lower results. Focusing on the quarter, net income decreased by $74 million, mainly due to a $63 million decrease in EBITDA, a $29 million increase in depreciation, amortization and bad debt, primarily due to the operation of new renewable capacity and an $11 million increase in financial results, mainly due to the lower capitalized expenses on renewable projects. The latter was partially offset by a $23 million reduction in corporate income tax expenses mostly explained by lower results of the period. And now let's move on to the FFO analysis on the next slide. Let's analyze the FFO composition for the first 9 months of 2025 and the main effect compared to the same period in 2024. Our FFO reached $615 million, representing an improvement of $248 million compared to the previous year. This is due to the following factors. First, EBITDA totaled $1 billion, remaining flat compared to the same period last year, as previously explained. Second, the recovery of PEC receivables in 2025 contributed $285 million, mainly thanks to factoring executed in April 2025 related to PEC 2, 3 and recovery to the tariff of $31 million of PEC 1 receivable. It is worth mentioning that we offset a positive FFO variation of $248 million versus the 9 months 2024, thanks to the end of accumulation of PEC receivables started in October 2024. Third, the increase of net working capital impacted for $329 million, mainly due to the 2024 development CapEx payment, lower collection in our distribution business, and other seasonality effects. The increase was higher by $255 million versus the previous year, mainly due to the negative effect of energy payment scheduling and the voluntary compensation paid in 2025 regarding the extreme climate event from May and August 2024. These effects were partially offset by lower CapEx payments related to renewable capacity. Fourth, the income taxes impacted on FFO amounted to $231 million, mainly due to the tax payment in the generation business. Income taxes paid in the 9-month 2025 were higher by $63 million compared to the 9 months 2024. This difference is mainly due to the increased tax payment in the generation business, driven by both higher results and higher monthly payment tax rates. Finally, financial expenses were $130 million, mostly due to the debt-related costs. This represents a reduction of $52 million compared to the 9 months 2024, mainly driven by a lower average debt this year. And now let's take a look at our liquidity and leverage position. Our gross debt is $3.9 billion at the end of September 2025, in line with the gross debt as of December 2024. The average terms of our debt maturities decreased from 6.2 years as of December 2024 to 5.5 years as of September 2025, and the portion at the fixed rate is 87% of total debt. The average cost of our debt reached 4.8% as of September 2025, decreasing from 5.0% in December 2024, in line with our efforts to optimize the financial costs. Regarding liquidity, we are in a comfortable position to support our capital needs for the upcoming months and cope with the next year maturities. As of September 2025, we have available committed credit lines for $640 million and cash equivalent for $373 million. And now I would like to share the following closing remarks. In the coming months, significant regulatory updates are expected that will clarify tariffs and market mechanisms. These represent an essential step to refine our long-term strategy and to assure that our investment decisions remain aligned with regulatory developments. We are implementing proactive initiatives to address portfolio dynamics and climate challenges. This includes action to strengthen our generation and distribution businesses, improve risk management, and enhance our ability to respond to extreme weather events. The measures are designed to safeguard service continuity and maintain system stability. Our solid financial position and flexible business model allow us to follow through with our business plan, even through market uncertainties, while continuing to invest in strategic renewable and BESS projects and deliver sustainable returns for our shareholders. Finally, we are preparing for our 2026 Investor Day scheduled for the first quarter 2026, where we will share a comprehensive view of our strategy and the actions that will drive long-term value creation. And now let me hand it over to Isabela for the Q&A session.

Isabela Klemes, Head of Investor Relations

Thank you, Simone. Now let's move on to the Q&A session. We will be taking questions via chat through the webcast. The Q&A session is now open. Okay. So, Simone, the first question is coming from Rodrigo Mora from Moneda. Rodrigo has 4 questions, so I will be talking one by one, okay? So the first one is, what is the amount that Enel Chile must return to customers due to the miscalculation of the CNE included in the first half 2026 PNP report?

Simone Conticelli, CFO

Thank you, Rodrigo. To provide some context, in early October, the CNE announced that they have revised the formula for calculating the PNP, which will have an impact. We estimate this impact on Enel to be between $40 million and $45 million, leading to a negative provision chiefly related to financial costs. The effects will mainly be reflected in the financial items. While you mentioned customers, it's worth noting that they were only slightly impacted; just 2% of the total changes was passed on to customers in the tariff. This amount will be accounted for by Enel in 2025 and then reimbursed. The process is still being clarified, but we anticipate this will be done in the first half of 2026. However, this amount will not significantly affect the overall value for the customers.

Isabela Klemes, Head of Investor Relations

Okay. Thank you, Simone. So the second question now is on Enel distribution. So what is the amount owed to Enel's distribution Chile in connection to the VAD 2000, 2025, please?

Simone Conticelli, CFO

So talking about the remuneration period of 2020, 2024, we are really finalizing the last steps of the process. So the amount was ready to be defined. And what we are waiting is that the sector will say when we have to receive back the missing part. And the amount, in this case, is around $50 million to $55 million. There are 2 possibilities. If you want to be prudent, you can imagine that this cashback can start middle of 2026, even if I remember an interview of the new Minister of Energy that said the process can also be faster and start earlier.

Isabela Klemes, Head of Investor Relations

Okay. Thank you, Simone. So now let me check here. We have the third question. So the third question of Rodrigo now is on the generation side on the LNG strategy. So could you please explain your strategy regarding LNG and Argentina gas firm or interruptible? For the year 2026, how many ships do you plan to buy?

Simone Conticelli, CFO

So as you know, for us, the gas business is a very important business because we need gas for our thermal power plant, but also because we find during the year some creative opportunities to make margin on our gas contract. We have basically a long-term gas contract for LNG, and more or less, the volume for this contract is more than 32 terabtu per year. And so in 2026, we'll keep on using this contract. In these very days, we are negotiating with Argentinian suppliers for the new contract for Argentinian gas. And so at this moment, I cannot talk about this negotiation. The negotiation is ongoing and has not been finalized.

Isabela Klemes, Head of Investor Relations

Okay. Thank you, Simone. Now the last question of Rodrigo is regarding CapEx also on the generation business. Regarding CapEx for generation, could you please give us an update for 2025? And actually, we also received the same question from Balances as well.

Simone Conticelli, CFO

Talking about this year's capital expenditures, we have generally followed our plan with one exception related to the development of the new system. We experienced a slight delay in this project due to strategic reasons, particularly concerning new regulations for battery energy storage systems participation in the ancillary service market. Consequently, we started the project a bit late. In the first three quarters, our capital expenditures for this project were lower than expected, but the projects have commenced and are currently ongoing. For the last quarter, we are looking at total investments in aggregate generation and projects ranging from USD 150 million to USD 160 million, with at least $50 million allocated to battery energy storage systems. Additionally, we are continuing to increase our investments in the thermal fleet, highlighting its strategic importance. In situations of low water availability, our efficient combined cycle gas turbine plants will be utilized for production. Therefore, we must maintain these plans with the utmost efficiency and performance.

Isabela Klemes, Head of Investor Relations

Okay. Thank you. And we have a final one. Sorry, Rodrigo. We have 5 questions from Rodrigo Mora. So the last one is on the distribution side, okay? On distribution, could you outline the measures being taken to address the increasing energy losses?

Simone Conticelli, CFO

Okay. Talking about losses in energy, we have discussed the losses getting higher in the last 2 years, starting from 2023. And so at this moment, the percentage of losses is a bit higher than 6%, which is due to many reasons, but the most important reason is the increase in the target. So the final customer. And so a little bit a change in EBIT related also to this increase in tariff. What we are doing? On one side, we are increasing the activity to recover these losses, and so we have recovered more than expected in the initial planning related to losses. And on the other side, we are taking other actions, for example, launching flexible payment plans for the customers who want to pay the new bill. We have a new smarter special tool. We work on formulas to localize where the losses originate so we can intervene. And finally, we are working with the regulator to try to find changes in the regulation that can help to contain this phenomenon.

Isabela Klemes, Head of Investor Relations

Okay. Thank you, Simone. Now move on. We have questions from Javier Suarez from Mediobanca. Thanks for the question. So the question is, does the company Enel Chile confirm its latest guidance?

Simone Conticelli, CFO

The answer is yes, but I want to provide some context. This year has been challenging due to the hydrological situation, leading to a drier season than anticipated. Nevertheless, we demonstrated our flexibility as a company by utilizing our highly profitable gas contract and our efficient CCGT. As a result, we maintained high production levels. Additionally, our hydropower plants were able to utilize reservoirs, which helped minimize the decrease in production for Enel. Thanks to all our actions and the flexibility we've built over the past year, we are able to respond to these adverse climate conditions and confirm our results for the year.

Isabela Klemes, Head of Investor Relations

Okay. Thank you, Simone. So move on. The next one is also from Javier Suarez, Mediobanca. It's about the FFO. So could you explain the dynamics of FFO during the 9 months of this year? And your expectation by the year-end?

Simone Conticelli, CFO

Okay. Talking about the FFO, in our business, the FFO usually is concentrated in the second half of the year, and particularly in the last quarter. The main reason is that EBITDA is higher in this period. And so on. This year, in the first 9 months, we had a very high level of FFO. This was thanks to the not ordinary cash-in from the regulatory process. So we cash in around USD 300 million recovering cash credit from the past. Looking ahead, the cash flow from ordinary business will be higher compared to the first months in the last period. And also, we will manage net working capital more efficiently, because in the last part of the year, the CapEx focused on the last part of the year. So also, the net working capital can be managed in a more efficient way. And so we expect to improve the performance of FFO in this last quarter, which is more or less the dynamic.

Isabela Klemes, Head of Investor Relations

Okay. Perfect. So now the next question is coming from Fernan Gonzalez from BTG Pactual. So Fernan is talking about the BESS, not the storage that we are implementing. So I will read here. I saw that BESS Las Salinas, 200 megawatts and BESS Acebache, 58 megawatts were declared under construction at the CNE. So these projects involve additional solar capacity or just energy storage. There are still an additional 200 megawatts of BESS capacity to meet your announcement plan. Will this be added to existing solar PV in the North?

Simone Conticelli, CFO

Yes. So talking about the strategy on BESS, we have launched 3 projects this year in line with what was expected in the plan. These projects are hybrid projects. So we are going to implement BESS systems in solar power plants in the North. And while we do this, in general, the BESS can be profitable also as a standalone device. But the profitability is higher if you use the BESS system to improve our power plants. Why? Because the project is faster. You need fewer environmental documents to be produced, considering that you are building the BESS in your plant, and also we have some savings in terms of cost and electrical infrastructure. And so I think that I have answered the question. At this moment, we are not increasing the solar capacity; we are just equalizing solar projects.

Isabela Klemes, Head of Investor Relations

Okay. So let me check here. So we have another one from Thomas Peruchi, Balanced Capital. Part of the question was already answered. So I'll just keep the one that wasn't here. So thank you for the presentation. And he has one question. If I'm not mistaken, you had a target for 2025 of $500 million for expansion projects, mainly relating to batteries to storage. How has that changed by now, given that you are expecting a resolution on ancillary services before moving forward? And was the resolution in line with your expectations? Do you think it will be enough to unlock high investment in storage?

Simone Conticelli, CFO

Okay. So in our current power plant, we put more or less 600 megawatts of new capacity. And you are right, $450 million is average in BESS projects. This project should have been launched at the beginning of the year and was launched during the second launch. And so you can expect a movement of the COD. The recent COD was in 2026 in the second half, and then the new COD will be in 2027, and this will have an impact. But in any case, we start from a fleet of around 9 gigawatts of production, and so this change is not huge. Talking about regulation. So on August 4th, there was a largely new regulation that states that BESS can participate in the Chile service market. This means that this is very good news for the country, because the BESS is a very important element that can stabilize the system at a very low cost. And so, usually, as for the system, it is also reducing the cost for the participants. In terms of revenues, it's not a huge increase, but it's in line with what we expected. Talking about the current BESS that we have, the BESS already installed will mean around $5 million to $7 million per year. However, it's an important step because it permits to meet the BESS project is a little bit more profitable than considered in the beginning. And it means that they are profitable, also imagining a higher penetration of BESS projects.

Isabela Klemes, Head of Investor Relations

Okay. Perfect. So we have the last question that is from Edward Palma from Itaú Asset. So the question is, do you have any news for unregulated PPA contracts?

Simone Conticelli, CFO

At this moment, no, we don't have any news related to this stock.

Isabela Klemes, Head of Investor Relations

Okay. Perfect. Let me just check if we have no more questions. Okay. As there are no further questions, we formally conclude our conference call. The Investor Relations team is at our disposal for any further inquiries. Many thanks for joining us and have a great rest of the week. Thank you.

Operator, Operator

And ladies and gentlemen, this concludes our conference. Thank you for participating. You may now disconnect.