Enel Chile S.A. Q2 FY2026 earnings call

Portfolio and Operational Performance

• First half 2026 results remained resilient despite weaker than expected hydrological conditions, with lower hydro generation partially offset by higher renewable output, increased thermal generation, secured Argentina gas supply, and active portfolio optimization.
• 0.5 GW of battery energy storage (BES) projects are currently under construction, with a total pipeline of over 4,050 MW of combined capacity across multiple projects to support system flexibility and renewable integration.
• A new 15-year long-term renewable power purchase agreement (PPA) was signed, adding up to 1 TWh of annual supply to diversify the sourcing portfolio, enhance flexibility, and support long-term customer demand, aligned with the firm's flexible make-or-buy growth strategy.
• Hydro generation for the full year 2026 is targeted at 10.7 TWh; recent improvements in rainfall and snow accumulation have increased management confidence that this target is achievable.
• Thermal generation increased 5% YoY to 3.6 TWh in H1 2026 to offset lower hydro output and support system reliability; additional short-term LNG volumes have been secured for the second half of 2026 to maintain fuel flexibility.

Regulatory Developments

• The Electricity Tariff Protection Bill received final congressional approval in July 2026, addressing longstanding pending regulatory matters for the distribution business.
• The bill establishes a securitization mechanism to recover outstanding regulatory receivables from the 2020-2024 tariff period; NL Chile expects an estimated $70 million cash inflow from this process, which is targeted for completion by end-2026 or early 2027.
• The current 2024-2028 tariff cycle is extended through 2030 to prevent future delays in tariff reviews, increasing long-term regulatory predictability for the distribution business.
• A new dedicated framework is created to support grid resilience investments to improve service quality and prepare for extreme weather events; management views this as a positive step, though key implementation details remain to be finalized.

Financial Position

• Cash generation remains strong, with H1 2026 FFO up 24% YoY, reflecting disciplined cash management and portfolio value optimization.
• Liquidity remains comfortable, with sufficient available resources to fund the current CapEx plan and cover upcoming debt maturities while preserving balance sheet strength.

For the first half of 2026: Consolidated EBITDA reached $685 million, up 4% year-over-year (YoY); net income hit $272 million, up 11% YoY; and funds from operations (FFO) grew 24% YoY to $499 million. For Q2 2026 alone: EBITDA was $262 million, down $32 million YoY, while net income grew 54% YoY driven by lower non-cash expenses. Total capital expenditure (CapEx) was $328 million, more than doubling YoY: ~67% of CapEx was allocated to renewable energy and battery energy storage (BES), 22% to distribution network modernization and resilience, and 11% to thermal fleet maintenance. By CapEx category: development CapEx was $196 million (60% of total, 80% of which went to BES), asset management CapEx was $102 million (31% of total, focused on thermal and renewable fleet maintenance), and customer connection CapEx was $30 million (9% of total). Net generation declined YoY due to lower hydro output, which fell 1.1 TWh to 10.7 TWh year-to-date; this was partially offset by a 0.3 TWh increase in renewable generation (to 3.0 TWh) and a 0.3 TWh increase in combined cycle thermal generation (to 3.2 TWh), leaving 67% of total production emission-free. Total physical energy sales were broadly stable at 14.8 TWh, just 2% lower than the 15.1 TWh recorded in H1 2025. As of end-June 2026, gross debt totaled $3.8 billion, down 1.4% from end-2025, with 85% of debt at fixed rates and an average cost of 4.9% (unchanged from end-2025). Available liquidity includes $640 million in committed credit lines and $276 million in cash equivalents.

• Management reconfirms its full year 2026 guidance, noting that first half results were in line or slightly better than expectations despite a challenging operating environment, with no material factors justifying a change to existing projections.
• The 2026 full year hydro generation target of 10.7 TWh is maintained, with recent rainfall and snow accumulation improvements increasing confidence in meeting the target; El Niño-related extra hydrological gains are not included in guidance, leaving potential for an upside surprise.
• No changes to the BES growth strategy are made; all BES projects remain on track as a core priority for the firm.

• Weaker than expected early-2026 hydrological conditions reduced hydro generation output and increased the need for more expensive spot market purchases, pressuring Q2 2026 EBITDA.
• Key implementation details for the newly approved Electricity Tariff Protection Bill remain undefined, creating uncertainty around the timing and final terms of regulatory receivable recovery, tariff setting, and grid resilience investment recognition.
• Volatile global commodity prices and geopolitical conditions impact BES unit capital costs, creating uncertainty around project investment costs.
• Power demand from mining customers has declined in the short term, leading to lower free market sales compared to the prior year period.

Q: Multiple analysts asked for an update on the implications of the newly approved Electricity Tariff Protection Bill for NL Chile's distribution business, including details on the 2020-2024 settlement, tariff cycle extension, and resilience investment framework. / A: Management confirms the bill is a positive, significant development for the Chilean distribution sector. The securitization process for 2020-2024 regulatory receivables will return an estimated $65-70 million to NL Chile, with completion expected by end-2026 or early 2027. Extending the current tariff cycle to 2030 is expected to increase regulatory predictability and avoid future settlement delays. The new grid resilience investment framework creates a path to recover costs for needed network upgrades, though implementation details are still pending and no specific projects are ready to announce yet.

Q: Analysts asked how NL Chile is adjusting its portfolio and sourcing strategy to manage market volatility, and what role battery storage, long-term contracts, and optimization play in supporting growth. / A: Management notes the strategy is focused on adding flexibility and resilience to navigate increasingly volatile power markets. Battery storage is a core portfolio pillar that enables better value capture from renewables, shifts energy to higher-priced peak hours, and improves system resilience. Long-term PPAs remain a key commercial pillar that provides customer price stability and mitigates spot market volatility. Combining flexible generation sources, storage, and active portfolio optimization allows the firm to manage price volatility, protect margins, and create additional value from portfolio flexibility.

Q: Asked to elaborate on the strategic rationale for the new long-term PPA, and whether it signals a change to the company's battery storage growth strategy. / A: Management confirms the new PPA is fully aligned with the existing long-term strategy and does not represent a change in direction. The agreement strengthens portfolio diversification, improves sourcing flexibility, and supports expected future customer demand, consistent with the firm's disciplined make-or-buy approach to growth. The company's battery storage project pipeline remains on schedule, and BES continues to be a core priority of the growth strategy to support renewable integration and portfolio resilience.

Q: Asked if the 2026 full year hydro generation guidance is at risk after weak early conditions, and whether the company has sufficient fuel secured for the remainder of 2026. / A: Management notes the 2026 budget already incorporated a conservative dry scenario for the first five months of the year, so weak early hydrology was not a surprise. Recent rainfall has put the full year target of 10.7 TWh back on track, and guidance is maintained. For fuel supply, the company has a diversified portfolio of firm contracts: a fixed volume Argentina gas supply agreement and firm fixed-price LNG contracts with Shell. An additional LNG cargo was recently secured for H2 2026, and management is fully confident it has sufficient fuel to meet all needs even in a stressed scenario.