Enel Chile S.A. (ENIC) Q1 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call reveals a stable financial performance with steady energy sales and purchases. However, concerns arise from increased energy purchase costs, deteriorating energy losses, and unclear management responses regarding BESS projects. The positive impact of the Shell agreement and strategic focus on renewables is tempered by postponed regulatory settlements and increased distribution capital. The market cap suggests moderate sensitivity, resulting in a neutral stock price prediction as benefits and concerns balance out.

Key Financial Performance

EBITDA $423 million, a 16% increase compared to the same period last year. The improvement was mainly driven by a better integrated margin performance.

Net Income $162 million, a 7% decrease compared to the first quarter of 2025. This was mainly due to higher depreciation following the commissioning of new renewable plants and lower capitalization of interest.

FFO (Funds From Operations) $122 million, a 12% increase compared to the same period last year. The improvement was due to a combination of factors including the EBITDA increase and lower CapEx payment related to new development capacity.

First Quarter Investment $111 million, allocated to the development of BESS projects, thermal power projects, and the reinforcement of the distribution network. Investments were distributed as follows: 41% ($46 million) in renewable and storage, 31% ($34 million) in thermal power projects, and 20% ($31 million) in grids investments.

Gross Debt $3.9 billion as of March 2026, remaining broadly flat compared to December 2025. The average term of debt maturity was 5.4 years, with 85% of the debt at a fixed rate. The average cost of debt was 4.9%.

Hydro Generation Remained broadly in line with last year's levels. Forecasted at 10.7 terawatt hours for 2026, supported by a well-diversified hydro portfolio and operational optimization.

Physical Energy Sales 7.5 terawatt hours, fully in line with the level recorded in the first quarter of last year, reflecting the stability of the commercial positioning and diversified sourcing mix.

Energy Purchases 1.3 terawatt hours of net spot market purchases and 0.8 terawatt hours sourced from third parties, maintaining a similar purchasing mix compared to last year.

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Operating Highlights

Battery Energy Storage Projects: Construction of 3 battery energy storage projects in northern Chile, adding around 0.5 gigawatts of capacity to enhance portfolio flexibility and support commercial strategy.

LNG Supply Agreement: Signed a new LNG supply agreement with Shell to optimize LNG and Argentine gas supply for generation business, aligning with long-term business vision.

Electrification Demand Growth: Electrification is driving demand growth in Chile, supported by developments in mining, industry, transport, and electromobility.

Hydrological Conditions: Favorable hydrological conditions reduced portfolio risk and supported stable operating performance.

Gas Sourcing Optimization: Secured longer-term contracts with Argentine gas suppliers at competitive prices, ensuring stable supply until April 2027.

Distribution Network Reinforcement: Investments in digitalization and remote control solutions to improve service quality and network resilience.

Renewable Energy and BESS Focus: 78% of the generation portfolio is from renewable energy sources and battery energy storage systems, enhancing flexibility and resilience.

Capital Increase: Extraordinary general meeting approved a capital increase of CLP 360 billion to reinforce financial flexibility.

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Risk or Challenges

Regulatory Delays: Tariff resettlements for the VAD 2020-2024 process have been postponed until July 2026, creating uncertainty in revenue realization. Additionally, the final tariff determination for the VAD 2024-2028 process is still pending, which could impact financial planning and operations.

Hydrological Risks: Although hydrological conditions were favorable in the first quarter, the increased probability of an El Nino event later in the year could negatively impact hydro generation, potentially affecting energy production and financial performance.

Gas Supply and Pricing: High gas prices and reliance on long-term contracts for Argentine gas and LNG could pose risks if market conditions change or if there are disruptions in supply, impacting operational costs and energy production.

Debt and Financial Costs: Gross debt remains high at $3.9 billion, with financial expenses increasing due to lower interest capitalization. This could strain financial flexibility and increase vulnerability to interest rate changes.

Operational Costs: Higher O&M expenses, particularly due to the anticipation of winter plant activities, could pressure margins and reduce profitability.

Energy Market Volatility: Dependence on spot market purchases and fluctuating energy prices could lead to cost unpredictability, impacting profitability and operational stability.

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Guidance & Outlook

Hydro Generation Forecast: For 2026, hydro generation is forecasted at 10.7 terawatt hours, based on a conservative view on hydrology and consistent with the average evolution observed over the last 13 years. Potential impacts from an El Nino event are expected mainly in the second half of the year.

Battery Energy Storage Systems (BESS) Development: Approximately 450 megawatts of new battery capacity are under development and will gradually start operations from December 2027 onwards, in line with the planned investment schedule.

Gas Supply Contracts: Contracts with Argentine gas suppliers secure firm volumes at more competitive prices, providing stable supply until April 2027. Additionally, a long-term LNG agreement has been optimized to align with the gradual ramp-up of battery storage in the coming years.

Distribution Tariff Review: The 2024-2028 distribution tariff review process is progressing, with a final tariff determination expected in the second half of 2026.

VAD 2020-2024 Tariff Resettlements: Settlement of outstanding debt with distribution companies has been postponed to July 2026. Enel Distribucion is expected to receive approximately USD 65 million.

Electrification Trends: Electrification is emerging as a key driver of demand growth in Chile, supported by developments in mining, industry, transport, and electromobility.

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Shareholder Return Plan

Final Dividend Approval: The annual general meeting approved the final dividend, fully in line with our commitment to shareholder returns and value creation.

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Key Q&A

Q:Apart from the gas valorization agreement, which is a positive one-off in your results, could you please indicate which other one-off negatives you have incurred in your first quarter 2026 figures?

A:The quarter had several non-recurrent effects: a positive impact from the agreement with Shell, offset by transmission line issues affecting efficiency (~$50 million impact), and a $60 million adjustment from the previous year, including a $30 million impact from ancillary services adjustments. Normalized results for the quarter are around $360-$370 million.

Q:Can you update on the key factors on the ongoing negotiations with the regulator of the distribution regulatory framework? Why was the settlement of VAD 2020-2024 postponed to July 2026?

A:The VAD 2024-2028 process is ongoing, with a methodology based on a reference model company and a regulated real post-tax WACC of 6%. The final technical report is expected by June 2026, and the tariff decree in early 2027. The VAD 2020-2024 settlement, with an estimated impact of $765 million, was postponed by 3 months to July 2026. The Ministry of Energy is evaluating alternative mechanisms, including debt factoring.

Q:Can you give more details on the profitability of the BESS project in Chile in terms of IRR?

A:The BESS project is designed to balance the portfolio and improve energy shift. As a stand-alone project, it is launched only if the return is at least 300 basis points above WACC. Stress tests are conducted to ensure resilience under critical scenarios.

Q:Why did energy purchase costs in the generation segment increase so much if volumes were similar to last year and spot prices were significantly below the first quarter 2025 levels?

A:The increase in energy purchase costs was due to negative adjustments from the past, which entered as sourcing costs.

Q:Energy losses in the distribution segment continued to deteriorate during the first quarter 2026. What is driving this, how do you expect it to evolve, and what can be done to reverse the trend?

A:Energy losses increased due to tariff adjustments and changes in customer behavior, leading to non-technical losses. Losses were also impacted by lower demand and a competitive market. A loss reduction strategy includes improved inspection targeting, expanded metering, increased field actions, and enhanced coordination with authorities. Losses are expected to decline to around 5.7% by 2028.

Q:Will the capital increase in distribution be subscribed by Enel fully using cash? How does the company plan to finance it, and how long will it take to recover the money?

A:The capital increase will be supported by controlling shareholders and financed through group-level financial resources for efficiency and flexibility. It is a long-term investment aimed at improving financial structure, lowering costs, and supporting the investment plan under the regulatory framework.

Q:Does the gas optimization contract with Shell imply lower contracted volumes or changing pricing terms? What is the expected timeline for the 3 BESS projects to reach COD and enter EGP capacity?

A:The Shell agreement optimizes the gas portfolio by rebalancing GNL contracts to align with needs, with a positive impact on 2026 results. For the 3 BESS projects, construction starts in 2026, with COD expected in Q3 and Q4 of 2027. Additional BESS investments are planned for 2027 and 2028.

Q:Where do you see Enel Chile's next avenues for growth, given lower demand from unregulated customers and the termination of regulated PPAs? Can the company maintain current earnings levels for growth?

A:Enel Chile will focus on a mix of short-term opportunities and long-term contracts, including regulated auctions and contracts with large customers. The company aims to maintain average portfolio pricing over the next three years, despite market price declines.

Q:What is the minimal cash position Enel Chile is operationally comfortable with? Will the company use credit lines this year or refinance short-term debt?

A:Enel Chile uses an internal model to define a minimal cash position to cover working capital needs. The company plans to refinance short-term debt with long-term financing, which is currently under negotiation.

Q:Review of Unclear Management Responses

A:Management appeared to avoid directly answering the question regarding the expected timeline for the 3 BESS projects to reach COD and enter EGP capacity. The response was fragmented and lacked clarity, with interruptions and incomplete details provided.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

ENIC Transcript

Enel Chile S.A. (ENIC) Q1 2026 Earnings Call Transcript

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Enel Chile S.A. (ENIC) Q4 2025 Earnings Call Transcript

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The earnings call summary and Q&A reveal strong financial performance, strategic planning, and potential growth opportunities. The company maintains its hydrology guidance despite challenges, plans significant CapEx in renewable energy, and anticipates regulatory updates. The Q&A highlights cost reductions in BESS projects, a consistent dividend policy, and strategic PPA management. While concerns about geopolitical impacts on PPA prices were noted, overall sentiment is positive due to robust investment plans and strategic positioning. Considering the market cap, a positive stock price movement of 2% to 8% is expected over the next two weeks.

Enel Chile S.A. (ENIC) Q3 2025 Earnings Call Transcript

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The earnings call reveals several negative factors: a decline in net production and energy sales, increased energy losses, and substantial financial obligations. Although FFO improved, the overall financial performance is weakened by debt and miscalculation costs. The Q&A highlights management's lack of clarity on future strategies and potential risks. Despite confirming guidance, the absence of new partnership announcements or strong positive catalysts suggests a negative sentiment. Given the market cap, the stock is likely to react with a negative movement in the range of -2% to -8%.

Enel Chile S.A. (ENIC) Q4 2024 Earnings Call Transcript

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The earnings call presented strong financial metrics with increased EBITDA and net income, alongside reduced debt and CapEx. The Q&A confirmed conservative guidance and strategic plans. Despite minor concerns about potential fines and regulatory impacts, the overall sentiment is positive with strong financial performance and future guidance. The market cap suggests a moderate reaction, likely resulting in a positive stock price movement of 2% to 8%.

ENIC Report

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