Enel Chile(ENIC) - 2024 Q4 - Annual Report

Executive Summary Overall Performance For the first quarter of 2025, Enel Chile reported a net income of US$175 million, an 11.4% increase year-over-year, primarily driven by reduced operating costs in the Generation segment. EBITDA saw a significant rise of 24.6% to US$365 million, despite a marginal 0.8% decline in operating revenues. The company also commenced commercial operations at the Los Cóndores hydroelectric power plant Q1 2025 Key Financial Metrics (vs. Q1 2024) | Metric | Q1 2025 (US$ million) | Q1 2024 (US$ million) | Change (%) | | :--- | :--- | :--- | :--- | | Net Income (attributable) | 175 | 157 | +11.4% | | Operating Revenues | 1,102 | 1,111 | -0.8% | | Procurement and Services Costs | 651 | 732 | -11.1% | | EBITDA | 365 | 293 | +24.6% | - A key operational milestone was the start of commercial operations at the Los Cóndores run-of-river hydroelectric power plant, adding 153 MW of capacity[8] - The financial result shifted from a US$3 million profit in Q1 2024 to a US$26 million expense in Q1 2025, mainly due to lower financial income and reduced gains from exchange rate differences[8] Business Segment Summary The Generation segment's EBITDA grew 9.2% to US$316 million, benefiting from a 16.2% decrease in costs despite lower energy sales. The Distribution & Networks segment saw a substantial EBITDA increase to US$50 million, driven by a 0.5% rise in physical sales and a 1.4% growth in the customer base Generation Segment Physical Data (Q1 2025 vs. Q1 2024) | Physical Data | Mar-25 | Mar-24 | % Change | | :--- | :--- | :--- | :--- | | Total Sales (GWh) | 8,049 | 8,906 | (9.6%) | | Total Generation (GWh) | 5,581 | 6,051 | (7.8%) | - The Generation segment's performance was boosted by lower energy purchase and fuel consumption costs, leading to a 9.2% EBITDA growth despite a 9.6% drop in physical sales due to contract expirations[8][12] Distribution & Networks Segment Physical Data (Q1 2025 vs. Q1 2024) | Physical Data | Mar-25 | Mar-24 | % Change | | :--- | :--- | :--- | :--- | | Total Sales (GWh) | 3,660 | 3,643 | 0.5% | | Number of Customers | 2,169,976 | 2,140,260 | 1.4% | - The Distribution and Networks segment's EBITDA more than doubled to US$50 million, compared to US$21 million in Q1 2024, due to higher average prices and customer growth[13] Financial Summary and Key Developments Financial Summary As of March 2025, Enel Chile's gross financial debt stood at US$3,993 million, a slight increase from December 2024. The company maintains strong liquidity with US$416 million in cash and US$640 million in undrawn credit lines. It actively manages financial risks through hedging instruments like currency swaps and forwards - Gross financial debt increased by US$63 million from December 2024, primarily due to a US$50 million credit line disbursement and a US$13 million increase in leasing liabilities[14][18] Liquidity Position as of March 2025 | Component | Amount (US$ million) | | :--- | :--- | | Cash and cash equivalents | 416 | | Undisbursed committed credit lines | 640 | | Total Available Liquidity | 1,056 | - The company employs a hedging policy to mitigate exchange rate and interest rate risks, utilizing cross currency swaps (US$211M), forwards (US$578M), and interest rate swaps (US$286M)[15][16][17] Information Relevant to the Analysis Key developments impacting the financial statements include ongoing regulatory changes related to tariff stabilization laws, which aim to manage electricity prices for regulated customers and ensure generators recover accumulated debt. A significant accounting change occurred on January 1, 2025, when Enel Chile and its generation subsidiary changed their functional and reporting currency from Chilean pesos to U.S. dollars, reflecting the growing influence of the dollar on their business environment - Several laws (21,185, 21,472, 21,667) have been enacted to stabilize electricity tariffs for regulated customers, creating mechanisms for generation companies to recover billing differences over time. The US$1.8 billion fund from Law 21,472 was reached in February 2024[19][20][23][26] - Effective January 1, 2025, Enel Chile and its subsidiary Enel Generación Chile changed their functional currency from Chilean pesos to U.S. dollars. This was driven by the fact that free customer contracts, denominated in USD, became the main source of income[25][27] - Due to the currency change, accounting hedges were discontinued, resulting in the recognition of a Ch$620,164 million (~US$657 million) pre-tax amount as lower revenues at the end of fiscal year 2024[29][30] Market Operations Generation Segment The Generation segment operates a total net installed capacity of 8,889 MW, with a strong focus on renewable energy, which constitutes 78% of the total. In Q1 2025, the company's energy sales in the Sistema Eléctrico Nacional (SEN) were 8,049 GWh, representing a market share of 40.3%, down from 43.8% in the previous year - Total net installed capacity is 8,889 MW, with renewable sources (hydro, solar, wind, geothermal) and BESS accounting for 78% of this capacity[32] Generation Market Share in SEN (Q1 2025 vs. Q1 2024) | Market | Energy Sales (GWh) Mar-25 | Energy Sales (GWh) Mar-24 | Market Share (%) Mar-25 | Market Share (%) Mar-24 | | :--- | :--- | :--- | :--- | :--- | | Sistema Eléctrico Nacional (SEN) | 8,049 | 8,906 | 40.3% | 43.8% | Distribution & Networks Segment The Distribution and Networks segment, operated by Enel Distribución Chile, is one of the country's largest, serving 33 counties in the Metropolitan Region. In Q1 2025, energy sales grew by 0.5% to 3,660 GWh, and the customer base increased by 1.4% to nearly 2.17 million. Energy losses slightly increased from 5.4% to 5.8% - Enel Distribución Chile operates in a 2,105 square kilometer concession area in the Metropolitan Region[34] Distribution Physical Data (Q1 2025 vs. Q1 2024) | Physical Information | Mar-25 | Mar-24 | % Change | | :--- | :--- | :--- | :--- | | Energy Sales (GWh) | 3,660 | 3,643 | 0.5% | | Number of Customers | 2,169,976 | 2,140,260 | 1.4% | | Energy Losses (%) | 5.8% | 5.4% | +0.4 p.p. | Energy Sales Revenue Breakdown Total energy sales revenue for Q1 2025 was US$998 million, a 3.7% decrease from Q1 2024. The Generation segment's revenue fell to US$595 million, mainly due to lower sales to regulated customers. Conversely, the Distribution & Networks segment's revenue increased to US$403 million, driven by higher sales to residential customers Energy Sales Revenue by Segment (US$ Million, Q1 2025 vs. Q1 2024) | Segment/Customer | Mar-25 | Mar-24 | | :--- | :--- | :--- | | Generation (Total) | 595 | 655 | | - Regulated customers | 152 | 265 | | - Non regulated customers | 401 | 367 | | Distribution & Networks (Total) | 403 | 381 | | - Residential | 212 | 193 | | - Commercial | 121 | 118 | | Total Energy Sales | 998 | 1,036 | Consolidated Financial Statement Analysis Income Statement Analysis Net income attributable to shareholders for Q1 2025 increased by 11.4% to US$175 million, driven by a 24.6% rise in EBITDA to US$365 million. This was achieved through an 11.1% reduction in procurement and service costs, which more than offset a slight 0.8% dip in revenues. However, the financial result turned negative, and income tax expenses increased Consolidated Income Statement Summary (US$ Million) | Item | Mar-25 | Mar-24 | % Change | | :--- | :--- | :--- | :--- | | REVENUES | 1,102 | 1,111 | (0.8%) | | PROCUREMENT AND SERVICES | (651) | (732) | (11.1%) | | GROSS OPERATING INCOME (EBITDA) | 365 | 293 | 24.6% | | OPERATING INCOME (EBIT) | 272 | 214 | 26.8% | | FINANCIAL RESULT | (26) | 3 | (886.5%) | | NET INCOME BEFORE TAXES | 249 | 218 | 14.3% | | NET INCOME (Shareholders) | 175 | 157 | 11.4% | EBITDA Analysis by Business Segment Consolidated EBITDA grew 24.6% to US$365 million. The Generation segment's EBITDA increased 9.2% to US$316 million, primarily due to a 16.2% reduction in operating costs from lower energy purchases and fuel. The Distribution & Networks segment's EBITDA surged 144.9% to US$50 million, driven by higher revenue from increased average sales prices EBITDA by Business Segment (US$ Million) | Business Segment | Mar-25 | Mar-24 | % Change | | :--- | :--- | :--- | :--- | | Generation business EBITDA | 316 | 289 | 9.2% | | Distribution & Networks business EBITDA | 50 | 21 | 144.9% | | TOTAL ENEL CHILE CONSOLIDATED EBITDA | 365 | 293 | 24.6% | - Generation segment costs fell by US$79 million (16.2%), mainly from lower energy purchases (US$48M), reduced transportation expenses (US$17M), and lower fuel consumption costs (US$9M)[40][41] - Distribution & Networks segment revenues increased by US$36 million (9.2%), primarily due to higher average sales prices, which boosted energy sales revenue by US$22 million[43] Depreciation, Amortization and Impairment Depreciation, amortization, and impairment expenses for Q1 2025 totaled US$93 million, an increase of US$14 million from the previous year. The rise is attributed to higher depreciation from new renewable energy plants coming online and increased impairment losses on accounts receivable in the Distribution segment - Total depreciation, amortization, and impairment increased by US$14 million year-over-year[44] - The increase was driven by US$8 million in higher depreciation from new renewable plants and US$5 million in higher impairment losses on receivables from residential customers[46] Non-Operating Income The consolidated financial result swung to a loss of US$26 million in Q1 2025 from a US$3 million profit in Q1 2024. This US$29 million negative variation was caused by a US$20 million drop in financial income and an US$11 million decrease in gains from exchange rate differences, partially offset by US$12 million in lower financial expenses - Financial income decreased by US$20 million, mainly due to lower interest earned on accounts receivable from electricity distribution companies[47] - Financial expenses decreased by US$12 million, helped by lower average financial debt and optimized payment schedules with suppliers[48] - Net income from exchange rate differences fell by US$11 million, and income from indexation dropped by US$9 million, both largely due to the change in functional currency[49][50] Corporate Income Taxes Corporate income tax expense for Q1 2025 was US$63 million, a US$15 million increase compared to the same period in 2024. This rise is primarily due to higher pre-tax profits and the tax impact of changing the accounting currency to U.S. dollars - The tax expense increased by US$15 million, with US$12 million attributed to higher company profits and US$3 million due to the elimination of price-level restatement following the change in functional currency[51] Performance of Main Financial Ratios As of March 31, 2025, the company's liquidity and leverage ratios improved compared to year-end 2024. The current ratio increased to 1.14, and the leverage ratio (Total Liabilities / Total Equity) decreased to 1.31. Profitability, measured by operating income to revenue, improved to 24.6%. However, ROE and ROA declined, significantly impacted by the one-off accounting charge from discontinuing currency hedges at the end of 2024 Key Financial Ratios | Ratio | Unit | Mar-25 | Dec-24 | Mar-24 | | :--- | :--- | :--- | :--- | :--- | | Liquidity (Current Ratio) | Times | 1.14 | 1.00 | - | | Leverage (Liabilities/Equity) | Times | 1.31 | 1.39 | - | | Financial expenses coverage | Times | 9.04 | - | 9.24 | | Op. income / Op. Revenues | % | 24.6% | - | 19.3% | | ROE | % | 3.5% | - | 11.2% | | ROA | % | 1.7% | - | 4.5% | - Liquidity improved, with the current ratio rising to 1.14 from 1.00 at year-end 2024, mainly due to a decrease in trade accounts payable[54] - Return on Equity (ROE) fell to 3.5% from 11.2%. Excluding the extraordinary loss of US$657 million from discontinuing hedges in 2024, the ROE would have increased to 12.9%[56] Balance Sheet Analysis As of March 31, 2025, total assets increased slightly to US$12,851 million. The key change was a US$118 million rise in current assets, driven by higher trade receivables and cash. Total liabilities decreased by US$144 million, primarily from a significant reduction in current trade payables. Consequently, total equity grew by US$229 million, bolstered by the period's net income Balance Sheet Summary (US$ Million) | Item | Mar-25 | Dec-24 | Change | | :--- | :--- | :--- | :--- | | Total Assets | 12,851 | 12,765 | 86 | | Total Liabilities | 7,276 | 7,419 | (143) | | Total Equity | 5,575 | 5,345 | 230 | Assets Total assets grew by US$86 million to US$12,851 million. Current assets increased by US$118 million, mainly due to a US$79 million rise in trade receivables (related to tariff stabilization laws) and a US$30 million increase in cash. Non-current assets saw a minor decrease of US$32 million, as additions to Property, Plant, and Equipment were offset by transfers of long-term receivables to current assets - Current Assets increased by US$118 million, driven by higher trade receivables (+US$79M) and cash (+US$30M)[58][59] - Non-Current Assets decreased by US$32 million. A US$42 million increase in Property, Plant and Equipment was more than offset by a US$91 million decrease in non-current trade receivables, which were reclassified to current[60] Liabilities and Equity Total liabilities decreased by US$144 million. Current liabilities fell by US$180 million, primarily due to a US$233 million reduction in trade and other payables. Non-current liabilities increased by US$36 million, mainly from a new US$50 million bank loan. Total equity rose by US$229 million to US$5,575 million, reflecting the US$175 million net income for the period and positive translation reserve adjustments - Current Liabilities decreased by US$180 million, largely due to a US$233 million drop in trade and other current accounts payable[62][63] - Non-Current Liabilities increased by US$36 million, mainly due to a new US$50 million loan from Corporación Andina de Fomento (CAF)[63][64] - Total Equity increased by US$229 million, explained by US$175 million in retained earnings from the period's profit and a US$42 million positive variation in other reserves[64] Main Cash Flows For Q1 2025, the Group generated a net positive cash flow of US$1 million, a significant improvement from the US$142 million outflow in Q1 2024. Cash from operating activities was US$152 million. Investing activities resulted in a US$113 million outflow, significantly less than the prior year due to lower capital expenditures. Financing activities had a net outflow of US$38 million, reflecting dividend payments partially offset by a new loan Net Cash Flow Summary (US$ Million) | Cash Flow Activity | Mar-25 | Mar-24 | Change | | :--- | :--- | :--- | :--- | | From Operating Activities | 152 | 180 | (28) | | From Investing Activities | (113) | (242) | 129 | | From Financing Activities | (38) | (81) | 42 | | Total Net Cash Flow | 1 | (142) | 143 | - Cash flow from investing activities saw a US$129 million improvement (less outflow) compared to Q1 2024, mainly due to a US$154 million reduction in disbursements for property, plant, and equipment[68] - Cash flow from financing activities improved by US$42 million, driven by a new US$50 million loan, which helped offset US$70 million in dividend payments[69][70] Risk Analysis Main Risks Associated with the Activity The Group's primary risks stem from its operating environment. These include potential adverse effects from changes in government regulations and environmental laws, which could increase expenses or delay projects. As a hydroelectric generator, its operations are dependent on hydrological conditions, with droughts posing a significant risk. The company also faces financial risks from unmanaged exposure to interest rates, commodity prices, and foreign exchange rates - The business is subject to extensive government and environmental regulations; changes could adversely affect operations and financial results[73][74] - Hydroelectric generation depends on hydrological conditions, and droughts could negatively impact results. The company mitigates this by not contractually committing 100% of its generation capacity[75] - Financial performance can be negatively affected if exposure to fluctuations in interest rates, commodity prices, and foreign exchange rates is not managed effectively[76] Risk Management Policy Enel Chile follows a comprehensive risk management policy aligned with its parent company, Enel S.p.A. The policy employs a three-lines-of-defense model and covers financial, strategic, operational, and compliance risks. The company actively manages financial risks: interest rate risk is mitigated by maintaining a high proportion of fixed-rate debt (88%); foreign exchange risk is managed through hedging and aligning debt currency with cash flows, aided by the recent change to USD as the functional currency; commodity risk is handled via hedging instruments for fuel; and liquidity risk is managed by maintaining sufficient cash and committed credit lines General Policy and Structure The company adheres to the Internal Risk Management Control System (SCIGR) of its parent, Enel S.p.A., which is approved by the Board. It uses a three-lines-of-defense model (Business/Internal Controls, Risk Control, Internal Audit) and a risk taxonomy covering 6 macro-categories. Risk management is decentralized, with process managers responsible for risk treatment - The risk management framework follows guidelines from the parent company, Enel S.p.A., and is approved annually by Enel Chile's Board of Directors[78][79] - A three-lines-of-defense model is employed: 1) Business and Internal Controls, 2) Risk Control, and 3) Internal Audit[81] Financial Risks (Interest Rate, Foreign Exchange, Commodity, Liquidity, Credit) The company manages interest rate risk by keeping 88% of its debt at a fixed rate. Foreign exchange risk is minimized by balancing asset and liability currencies with cash flows, a process simplified by the 2025 shift to the USD as the functional currency. Commodity price risk for fuels like gas and coal is mitigated through hedging contracts. Liquidity risk is addressed by maintaining US$415 million in cash and US$640 million in committed credit lines. Credit risk from commercial receivables is considered low due to short collection terms and active monitoring - Interest Rate Risk: 88% of total gross debt is at a fixed interest rate as of March 2025 to reduce volatility[83][86] - Foreign Exchange Risk: Minimized by balancing flows in non-functional currencies. The change of functional currency to USD on Jan 1, 2025, was a key strategic move in this regard[88][89] - Commodity Risk: The company uses active hedges for Brent, Henry Hub gas, and coal to mitigate price volatility on its generation costs and revenues[90][93] - Liquidity Risk: As of March 31, 2025, the Group's liquidity consists of US$415 million in cash and US$640 million in long-term committed credit lines[96] Risk Measurement The company quantifies its financial risks. The estimated impact of exchange rate fluctuations for the next quarter is projected at US$42 million, considering the new USD functional currency. For interest rate risk, a 25 basis point change in the SOFR rate would impact the monthly financial expense by approximately US$42,000 - The estimated potential impact of exchange rate fluctuations on the income statement for the next quarter is US$42 million[101] - A 25 basis point (0.25%) change in the SOFR interest rate would alter the monthly financial expense by approximately US$42,000[103][107] Other Risks (Cross-Default Provisions) A portion of the company's financial debt is subject to cross-default provisions. Non-payment of any debt exceeding US$150 million could trigger an acceleration of other liabilities, including its Yankee Bonds (if demanded by 25% of holders). However, there are no clauses that would trigger debt prepayment based on changes in credit ratings - Certain credit facilities and Yankee Bonds contain cross-default provisions. A default on any debt exceeding US$150 million could lead to the acceleration of other debts[104][105][110] - There are no credit-agreement clauses that would trigger debt prepayment due to a downgrade in the company's credit rating[111] Asset Valuation Book Value and Economic Value of Assets The company's asset values are determined according to International Financial Reporting Standards (IFRS). Property, plant, and equipment are valued at acquisition cost less accumulated depreciation and impairment. Goodwill is not amortized but is tested for impairment annually. The company regularly evaluates all assets for impairment to ensure their recorded value does not exceed their recoverable value - Property, plant, and equipment are valued at cost, net of accumulated depreciation and impairment losses, with their useful life reviewed periodically[113] - Goodwill is not amortized but is tested for impairment at the end of each accounting period to ensure its recoverable value is not below its recorded cost[114] - The company performs regular impairment tests on assets if there is any indication of a loss, estimating the recoverable value of the asset or its cash-generating unit[115]