Enel Chile S A : – Financial Statements Analysis – H1-Q2 2022

ENEL CHILE

FINANCIAL STATEMENTS ANALYSIS

AS OF JUNE 30, 2022

ENEL CHILE

ANNOUNCES CONSOLIDATED RESULTS

FOR THE PERIOD ENDED JUNE 30, 2022

(Amounts expressed in millions of Chilean Pesos)

EXECUTIVE SUMMARY

• Net income of Enel Chile S.A. reached a Ch$ 49,197 million profit as of June 2022, 22.5% less than the first semester of 2021. This reduction is mainly explained by higher operating costs in the generation business as a consequence of a complex scenario in the electricity sector in Chile. Net income for Q2 2022 was a Ch$ 11,145 million loss, which represents a Ch$ 30,862 million reduction when compared to Q2 2021, explained by higher operating costs, primarily energy purchases.
• When excluding the extraordinary effect related to Bocamina II and the expenses booked in 2021 related to the Group's 2021-2024 digitalization strategy, the Company's net income declined 2.0% to Ch$ 84,071 million as of June 2022, compared to Ch$ 85,812 million adjusted net income as of June 2021. When applying the same adjustments to quarterly figures, net income for Q2 2022 declined Ch$ 22,490 million from Ch$ 34,648 million in Q2 2021 to Ch$ 12,158 million for Q2 2022, mainly due to the higher operating costs of the generation business.
• Operating revenues increased 49.3% to Ch$ 1,915,293 million as of June 2022, when compared to June 2021, mainly due to higher physical energy sales and a higher average sales price when expressed in Chilean pesos in both the generation and the distribution and transmission business segments, in addition to greater gas sales in the generation business. Similarly, operating revenues for Q2 2022 increased 49.3% to Ch$ 1,018,208 million.
• Procurement and services costs amounted to Ch$ 1,562,975 million as of June 2022, representing a 90.1% increase when compared to the first semester of 2021, due to higher electricity purchase costs due to both greater physical purchases and a higher average purchase price, and also greater fuel consumption costs and other variables procurement and services costs, all in the generation business. Procurement and services costs during the last quarter of this year followed a similar trend, increasing from Ch$ 445,717 million in Q2 2021 to Ch$ 899,475 million in Q2 2022.
• As a result of the factors previously mentioned, the Company's EBITDA reached Ch$ 207,710 million as of June 2022, a 29.3% reduction when compared to June 2021. When excluding the extraordinary effects above mentioned, Enel Chile's EBITDA decreased 20.8% to Ch$ 258,777 million.
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ENEL CHILE

FINANCIAL STATEMENTS ANALYSIS

AS OF JUNE 30, 2022

During Q2 2022, EBITDA declined 71.0% to Ch$ 42,198 million. When excluding extraordinary effects, EBITDA decreased 54.4% to Ch$ 76,323 million.

• Financial result improved by Ch$ 46,422 million as of June 2022 when compared to the June 2021 reaching a Ch$ 46,376 million expense, mainly explained by a lower net financial expense during the period. Similarly, during Q2 2022, financial result amounted to a Ch$ 16,919 million expense, a Ch$ 37,565 million lower expense than in Q2 2021, due to greater financial income and a lower net loss from exchange rate differences.

BUSINESS SEGMENT SUMMARY

Generation

• Net electricity generation reached 10,229 GWh during the first semester of 2022, which is 11.5% (+1,051 GWh) higher than the same period of last year, mainly explained by higher dispatch of the Company's combined cycle power plants and greater solar electricity generation. Net electricity generation during Q2 2022 amounted to 5,064 GWh, which is 8.1% (+378 GWh) higher than the figure for the Q2 2021, also due to greater thermal dispatch and higher solar and wind generation.
• Physical energy sales amounted to 15,865 GWh as of June 2022, 20.5% (+2,701 GWh) more than the first semester of 2021, explained by higher physical energy sales to unregulated customer, mainly related to new contracts, in addition to greater sales to regulated customers. During Q2 2022, physical electricity sales increased 13.1% (+889 GWh) to 7,654 GWh due to higher physical sales to regulated and unregulated customers.
• In line with the aforementioned, operating revenues amounted to Ch$ 1,449,568 million as of June 2022, representing a 67.2% increase when compared to June 2021, mainly explained by higher physical energy sales, a higher average sales price when expressed in Chilean pesos, and greater gas sales. Performance during Q2 followed the same trend. Operating revenues during Q2 2022 amounted to Ch$ 770,128 million, representing a 66.3% increase when compared to Q2 2021.
• Procurement and services costs reached Ch$ 1,226,009 million as of June 2022, which represents a 139.9% increase, mainly explained by higher electricity purchase costs due to greater physical purchases and higher average purchase price, higher fuel consumption costs related to higher thermal electricity dispatch and higher commodity prices, in addition to higher gas costs of sales. In Q2 2022, procurement and services costs totaled Ch$ 712,828 million, higher than the Ch$ 276,990 million recorded in 2Q 2021.
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ENEL CHILE

FINANCIAL STATEMENTS ANALYSIS

AS OF JUNE 30, 2022

• As a result of the abovementioned, EBITDA of the generation business reached Ch$ 141,146 million as of June 30, 2022, 47.0% less than figure for the same period of 2021. During Q2 2022, EBITDA decreased 90.7% when compared to Q2 2021 to Ch$ 12,785 million, mainly due to greater operating costs in 2022.

		Cumulative
Physical Data	Jun-22	Jun-21	% Change
Total Sales (GWh)	15,865	13,164	20.5%
Total Generation (GWh)	10,229	9,178	11.5%

Quarterly

Q2 2022	Q2 2021	% Change
7,654	6,765	13.1%
5,064	4,686	8.1%

Distribution and Transmission

• Physical sales increased 6.9% (+553 GWh) to 8,624 GWh as of June 2022, when compared to the same period of 2021, mainly explained by greater sales to residential customers and higher tolls revenue. Similarly, during Q2 2022, demand continued to recover and physical sales increased 9.1% (+371 GWh) to 4,432 GWh.
• The total number of customers grew 1.7% to 2,057,100 clients, mostly in the residential segment. Energy losses went from 5.0% as of June 2021 to 5.26% as of June 2022.
• Operating revenues reached Ch$ 658,143 million as of June 2022, 18.1% higher than the figure for the same period of 2021, mainly due to higher physical sales as explained previously and a higher average sales price when expressed in Chilean pesos due to a greater exchange rate effect. During Q2 2022, operating revenues followed a similar trend increasing 19.0% when compared to Q2 2021 to Ch$ 352,026 million.
• Procurement and services costs increased 15.3% to Ch$ 521,545 million, mainly due to higher energy purchase costs as a consequence of the higher average purchase price when expressed in Chilean pesos and also higher physical energy purchases to satisfy greater electricity demand. During Q2 2022, procurement and services costs increased 15.8% to Ch$ 285,252 million, primarily due to greater energy purchases to satisfy greater electricity demand.
• Consequently, EBITDA of the Distribution and Transmission business increased 107.3% to Ch$ 89,541 million when compared to June 2021. Similarly, EBITDA increased 145.9% from Ch$ 17,652 million during Q2 2021 to Ch$ 43,403 million during Q2 2022.

		Cumulative
Physical Data	Jun-22	Jun-21	% Change
Total Sales (GWh)	8,624	8,071	6.9%
Number of Customers	2,057,100	2,022,833	1.7%

Quarterly

Q2 2022	Q2 2021	% Change
4,432	4,061	9.1%
2,057,100	2,022,833	1.7%

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ENEL CHILE

FINANCIAL STATEMENTS ANALYSIS

AS OF JUNE 30, 2022

FINANCIAL SUMMARY- ENEL CHILE

Gross financial debt of the Company increased US$ 665 million to US$ 5,669 million as of June 2022, when compared to the balance as of December 2021. This variation is explained by the disbursement of 100% of the new US$ 300 million intercompany credit line obtained by Enel Chile from Enel Finance International (US$ 200 million disbursed in February 2022 and US$ 100 million in March 2022), and the disbursement of 100% of the new US$ 300 million credit line obtained by Enel Chile from Nova-Scotia and Mizuho (US$ 150 million disbursed in April 2022 and US$ 150 million disbursed in May 2022), and the partial disbursement of the intercompany credit line obtained by Enel Chile from Enel Finance International for US$ 100 million in June 2022. These transactions were offset by the US$ 21 million amortization of Enel Generación Chile's local H and M bonds and a US$ 14 million reduction in leasing liabilities (IFRS 16).

Liquidity available to Enel Chile is composed of the following:

∙	Cash and cash equivalents	: US$ 304 million.
∙	Undisbursed committed credit lines	: US$ 186 million.

The average cost of Enel Chile's debt declined from 4.4%, as of December 2021 to 3.9% as of June 2022.

Hedging and protection:

To mitigate the risks associated with exchange rate and interest rate variations, Enel Chile has established policies and procedures to protect its financial statements against the volatility of these variables.

Enel Chile's exchange rate hedging policy states that there should be a balance between the currencies of each company's operations and the currency of its debt. Therefore, we have cross currency swap and forward contracts that amount to US$ 316 million and US$ 287 million, respectively.

To reduce financial statement volatility caused by interest rate variations, the Enel Chile Group maintains an adequate debt structure balance. Therefore, the Company has interest rate swaps for US$ 450 million.

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ENEL CHILE

FINANCIAL STATEMENTS ANALYSIS

AS OF JUNE 30, 2022

INFORMATION RELEVANT TO THE ANALYSIS OF THESE FINANCIAL STATEMENTS

Regulatory Changes:

• As part of the Social Agenda announced by the government, the Ministry of Energy published Law 21,185 (hereafter the "Tariff Stabilization Law") in the Official
  Gazette on November 2, 2019. This Law creates a Temporary Regulated Customer Tariff Stabilization Mechanism that states that the price to charge regulated customers for electricity from July 1, 2019 through December 31, 2020 is to be equal to the prices in force during the first semester of 2019 (Decree 20T/2018). This stabilized price was named the "Stabilized Regulated Customer Price" PEC
  (in its Spanish acronym). From January 1, 2021, until the stabilization mechanism is suspended, the prices will be those defined in the tariff setting processes carried out every six months as established in Article 158 of the Electricity Law, but not to exceed the PEC adjusted by inflation according to the Consumer Price Index as of January 1, 2021, using the same date as base (adjusted PEC). The billing differences until 2023 are to be recorded as an accounts receivable in favor of generation companies, limited to a maximum US$ 1,350 million. This limit was reached in February 2022. These accounts receivables are to be recovered by December 31, 2027.
  On September 14, 2020, the National Energy Commission published Exempt Resolution 340 that modified the technical provisions regarding the implementation of the Tariff Stabilization Law. This Resolution clarified that the payment to each supplier "must be booked against the Balance in a chronological manner, beginning with the most dated to the most recent pending Balances", and not weighted based on the total Balance pending payment as it had been interpreted by the industry up to such date.
  Additionally, this Resolution established that the payment of Balances is to be performed using the Observed Exchange Rate on the sixth working day following the day the Balance Payment Chart is published by the System Coordinator, which replaces the average value of the dollar during the billing month that had been in force up to then.
• To comply with the latest amendments issued by the Ministry of Economy, Development and Reconstruction to Electricity Law 4/2016 establishing that distribution companies are only to distribute electricity as their sole purpose, on January 1, 2021, Enel Transmission Chile S.A. was created from the division of Enel Distribución Chile S.A. receiving all assets and liabilities of Enel Distribución
  Chile's electricity transmission business segment.
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