Enel Chile S.A. (ENIC) Q1 2022 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to Enel Chile First Quarter 2022 Results Conference Call. My name is Lydia, and I will be your operator for today. [Operator Instructions] 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 those anticipated in the forward-looking statements as a result of various factors. These factors are described in Enel Chile’s press release reporting its first quarter 2022 results. The presentation accompanying this conference call and Enel Chile’s Annual Report on Form 20-F, including under Risk Factors. You may access our first quarter 2022 results press release and presentation on our website, www.enel.cl, and our 20-F on the SEC’s website, www.sec.gov. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of their date. 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 Mrs. Isabela Klemes, Head of Investor Relations of Enel Chile. Please proceed.

[Foreign Language] Good afternoon, and welcome to Enel Chile’s first quarter 2022 results presentation. Thank you all for joining us today. Joining me this afternoon, our CFO, Giuseppe Turchiarelli. Let me remind you that our presentation and related financial information are available on our website, www.enel.cl in the Investor Relations section and in our ask investors. In addition, a replay of the call will be soon available. In the time of this presentation, there will be an opportunity to ask questions via phone or webcast chat through the link ask a question. [Operator Instructions] In the following slides, Giuseppe will open the presentation regarding highlights and strategy updates. Then we walk us through our main financial results. Thank you all for your attention, and let me now hand over to Giuseppe. Giuseppe, please?

Thank you, Isabela. Good afternoon, and thanks for joining us. Let me start with the highlights of the period on Slide 3. We continue to reinforce our leadership in renewable market, growing with renewable capacity. We connected around 0.2 gigawatts of renewables to the grid during the first quarter of this year, and we still have over 1 gigawatt of projects under construction that will be added during the 2022-2024 period. Argentina natural gas availability was the positive highlight of the year. During this quarter, the natural gas supply from Argentina was firmed, which supported our natural gas traffic, and I will show you later on. In addition, for this year, we have contracted with Shell for around 12 LNG cargoes to fulfill our operation in Chile, a strategy that gives us more flexibility. The Annual General Meeting held on April 27 approved the new dividend policy of 30% payout ratio for 2021 and 2022. This reflects the final dividend approved of CLP 0.26 with payments made of May 27, totaling a distribution for the 2021 fiscal year of CLP 0.37. And lastly, the Extraordinary General Meeting held right after the AGM approved the E-Mobility business carve-out, which considers selling the 51% stake of [indiscernible] representing a cash-in of €12.75 million in Enel Chile during the Q2 ‘23. Now let’s move to Slide 4 to briefly talk about the market situation. During 2021, we saw a combination of factors that led to a very particular and stressed situation of the Chilean electricity system. And some of these factors continue to impact the energy market, such as a pure hydrology, a delay in the commissioning of some renewable projects at the country level and the important overall increase of commodity price worsened by Russia, Ukraine conflict. In addition, there have been several failure and maintenance of thermal power plants that have put even more pressure on the system. All these factors have led to an increase in marginal costs during the first quarter 2022. However, we were able to cope with this situation thanks to our solid LNG supply position, which includes our long-term LNG contract with Shell and the Argentinean gas supply, which was successfully delivered during the first quarter this year. In this regard, it is worth noting that we have 12 LNG shipments already committed for year 2022, ensuring our supply for the entire period, out of which we have already received 3 cargoes. On Argentinean gas, we see in January and April 2022, we have imported an amount of gas equivalent to 5 LNG cargoes approx [indiscernible]. Our renewable expansion will be core to bring additional flexibility. So let’s now take a look on our generation portfolio on Slide 5. We are convinced that renewable expansion is a key factor to cope with the energy transition, and it will give us a better position in the current challenging context. Therefore, during the first quarter, we connected 178 megawatts of solar capacity to prove our consolidated position in renewable development in Chile. In line with our digitization plan and asset optimization, we completed the sale of Diego de Almagro thermal power plant 24 megawatts during the first quarter. Chile is now at the forefront of the just energy transition, and we will continue contributing to consolidating accounting position and reaching the environmental targets set out in the tariff agreement. Now let’s see our evolution in terms of network main KPIs that support the digitization movement on Slide 6. We continue to deploy the digitization of our commercial channel. In the first quarter of 2022, 86% of our client interaction was executed through digital channels. Despite the complexity introduced by the pandemic situation, we have been able to enhance the quality of customer care thanks to the introduction of our app and WhatsApp interfaces to improve the communication with our customers. On the network side, our quality indicators continue to improve, supported by an increase of automatic digitization at any level of our group. As a result, our sales indicator decreased by 15%. To conclude, energy distribution increased 5% in Q1 2022 compared to Q1 2021, reflecting the easing of the sanitary restriction and the overall economic recovery and reaching presenting to level. Now let’s see the main KPIs and highlights of our beyond commodity strategy that is supporting the digitization and decarbonization on the current consumption on Slide 7. Electrification has turned into one of the main pillar of the decarbonization process and one of the core elements of our strategy. In that sense, we continue to develop different and innovative initiatives, promoting new uses of energy and bringing real chains towards a sustainable future. E-Mobility is one of the challenge towards electrification. And on this line, we are working on [indiscernible] structure to faster the growth. One example is the creation of Enel X main Chile, which will be focused on E-Mobility services. During the extraordinary shareholder meeting held on April 27, 80% of our shareholders approved the sales of 51% of this unit to Enel [indiscernible] that by an international arm on E-Mobility and a commitment to accelerate electricity mobility in the country, in line with the formal trends, benefiting from scale economy. In our view, the growth of these units shall bring additional unit to our generation and resolution businesses. During the first quarter, we have incorporated the 107 new electric buses into the public transportation system associated with [indiscernible]. This incorporation is also part of our circular cities project. It brings the development of the infrastructure and the energy sales, improving the quality of services and bringing technology closer to the people. Each industries and each cities are important for electrification. In line with that, we have developed with the Mandarin Hotel, Oriental Hotel, the first rooftop in Chile that incorporates photovoltaic panels and biodiversity, which deliver unique and differentiated experiences with a dark positive impact on environment. On this city, we continue to tackle new opportunity to build circular cities now outside the Santiago region. Now in Slide 9 on a summary of our main financial highlights of the quarter. Let me start with a quick summary of the adjusted applied and a summary of our main financial highlights. In the first quarter 2022, we applied an adjustment of $21 million in EBITDA due to the impairment made on the coal stock of the period, being as an asset at the bottom line of $14 million. For the same period of 2021, the adjustment applied due to the coal stock was $15 million with FX at the bottom line of $9 million. The Q1 2021 adjusted EBITDA had an increase of 15% or $29 million, mainly due to a positive provision of transmission business as a result of the conclusion of the regulatory status review process and indexation and a higher volume on elevation and distribution businesses. In terms of adjusted net income, this increased by 41%, reflect the higher EBITDA and the lower financial cost in the period coming from the factoring of FX accounts maybe in Q1 2021 to improve the liquidity of the company. CapEx reached $167 million, 31% lower than first Q 2021, mainly due to the connection of the new renewable capacity, which has ended in December 2021. FFO reached minus $151 million, presenting a significant reduction quarter-on-quarter, mainly due to the factoring of the bank accounts made in Q1 2021 and the sales of Intero submission line. Now let’s begin with the CapEx on Slide 10. 2022 first quarter accumulated CapEx reached $167 million, out of which 93% allocated to achieve the SDG goals, particularly devoted to the construction of our new renewable capacity. Customer CapEx totaled $15 million mainly allocated to the new connection and implemented our new distribution commercial system. Asset management CapEx reached $29 million, 35% higher than first Q 2021, mainly due to the maintenance in our CCGT unit. Development CapEx reached $123 million, a decrease of 41%, mostly driven by our renewable expansion program, which added nearly of 0.9 gigawatts of installed capacity in December 2021 and the recently connected Biodel solar power plant. Regarding the network business, we executed a lower CapEx due to the quality and the digitalization projects made in Q1 2021. Let’s move now to Slide 11, where we have the summary of the first quarter adjusted EBITDA breakdown accounting for $26 million, 15% higher versus higher versus 2021. Our origination portfolio mix resulted in a positive variation of $14 million, mainly related to $82 million higher PPA sales in Q1 2022, primarily explained by the highest foreign exchange of the Chilean pesos against dollar. The new PPA agreement started in 2021 and a higher regulative demand. New renewable capacity, which was connected in December 2021, $18 million in the EBITDA over the period. A positive effect on variable costs and purchases, mainly due to a more efficient thermal injection in the period, boosted by an aging commodity coverage instrument and negotiated for the period. All these elements were partially offset by a higher thermal generation costs due to the commodity prices. On the effect that I’ve just mentioned were partially offset by higher spot price in the system in the Q1 2021, mainly due to the higher commodity prices at the 11 level, hydrology and several system facilities that were out set during the period. And then following on the slide, let me talk about the other elements that explain our EBITDA. Hydrology continues to have a negative timing. With 0.2 power less hydro generation impacted our EBITDA in around $60 million. Network remuneration and demand accounting for a positive impact of $20 million related to a positive impact of the release of the final transmission tag technical report issued by the regulator in the first quarter 2022. This final tariff allowed us to reduce the provision we have named since the beginning of the new regulatory cycle that started in January 2020 and result indexation in both business network business and the recovery of the demand in the period, which increased 5% in the Q1 2022 compared with the Q1 2021, reaching [indiscernible] level. Other effects accounted for $10 million, mainly related to lower OpEx in network business due to the [indiscernible] agreement signed in 2021 and higher capitalization and generation business due to the construction of the sales. Let me now give you more detail on generation on Page 12. Net electricity generation grew by 15% to 5.2 terawatt hours, mainly as a result of a higher dispatch of our company [indiscernible] power plants and higher solar generation in the period, partially offset by lower hydro generation related to the reduced water availability. Our energy sales increased 27% during the first quarter 2022, essentially explained by the higher sales to 3 customers, primarily related to the new contracts, coupled with an improvement in sales to regulatory capital. Adjusted EBITDA grew 4% to $180 million, reflecting the portfolio effect that had previously maintenance. Regarding our sourcing on the top of the already mentioned production balances, we accounted a total increase of 1.1 terawatt hour [indiscernible] primarily on the spot market to meet the higher energy demand of the quarter. Let me now give you more detail on network on Page 15. In first Q 2022, our network business reached $50 million, an increase of 71% compared to Q1 2021 due to the above making effect, one-off positive effects on transmission business, as explained the dark line, the start indexation in both network business and recovery of demand in the period, which increased 5% in Q1 2020 compared to Q1 2021, where it changed by funding lower OpEx due to the UNO agreement in Q1 2021. The performance of the network business in this quarter improved regarding the next Q1 2021. The demand reached [indiscernible] increasing price expense and the phase decreased in increasing units in this quarter. In regulatory terms, we expect that the tariff decreased from traditional business will be published during the first half of this year. Now on Slide 14, let’s go through the main driver of our group EBITDA. Adjusted EBITDA increased 15% to reach a total of $26 million, mostly owing the better result in distribution and transmission business. D&A impairment and bad debt reached $77 million, $9 million higher than the first quarter of 2021, mainly related to the higher depreciation and amortization in energy and power assets, primarily explained by exchange rate effects and the initial commissioning of new solar power plant. Also, there was a higher depreciation in the solution and transmission segment related to the transfer of new investments in operations and higher amortization of intangible assets related to the new commercial system recently upgraded at Enel distribution. Financial results recorded a $36 million, declining by $11 million mainly to a lower expense related to the factoring executed in Q1 2021 in generation business on account receivable that arose from the tariff stabilization loan, increase in income tax were basically related to the improvement in results during the Q1 2016, partially compensated by higher tax credits due to higher monetary collection. Therefore, the adjusted Q1 2022 net income reached $89 million, representing a 41% growth when compared to the first quarter of last year. Moving to data clock on this quarter 2022 on Slide 15. Q1 2022 FSL reached a negative $151 million, 151% lower than previous year figures, mainly resulting from negative one-off effects related to the factoring made in Q1 2021 of the spec account, which has accommodated during the period in order to manage the cash needs from the business operation and higher completed account of the stabilization making in Q1 to improve versus Q1 2021, which has reduced the cash conversion in $44 million. Negative effects related to the net working capital versus 2021, mainly explained by interrecovery transmission line sales corresponding [indiscernible] in Chile with a total positive cash $29 million in Q1 2021, a lower collection of corporate clients in Q1 2022 and a lower factoring on distribution receivable accounts in the period compared to Q1 2021, also affects the cash conversion. Higher cost of payments in this period and no cash EBITDA and higher financial spend mainly explained by the new best time. These effects were offset by higher EBITDA that as already explained and lower income tax during Q1 2022, mainly related to the lower PCM rate in the period in generation and resolution. Let me now go to our best evolution on Slide 16. Our gross tax increased by $0.3 billion, amounting to $5.3 billion as of March 2022. Due to the company loan granted by Enel Finance International of Chile for $300 million, mainly to fund CapEx and networking capital lease. In terms of debt amortization, our scale remains low with an average maturity of 5.5 million. For the current year, we had around $400 million debt at level that has massive [indiscernible]. We have already started to evaluate several postings in the local international market in order to take the most efficient option. The average cost of the debt in March 2022 decreased to 3.9% from 4.4% as of December 2021 as a result of the financial management we carry out during the last month. On the other hand, 20% of our total prospect is currently SBTU. Our plan to continue to proceed this kind of best in line with our sustainable business strategy. In terms of utility, we continue to have a comfortable position. We are repairing some available committed line, considering the possible asset team in the best market coming from the international contract in Eastern Europe. Now, I would like to point out some closing remarks. We are always looking new benefits to strength our generation portfolio, making each cleaner, efficient and resilient to extend our shops, such as the commodity volatility that the world is facing. We will continue to put the rectification of the country to open the assets for more uses of electricity for our clients and communities. We are pleased to announce that we published our first integrated annual report. This report includes the financial and non-financial information for the 2021 period and we also published the 2021 sustainable report. Both reports are aligned with CPSG and GRI and TCFD standard, and they are available in our website in the investors section. The record reflects house sustainability’s fully integrated into our business model and risk management and value creation business rather. It also demonstrates the company’s efforts increase the energy transition, mainly in the counter recognition and electrification and comply with our lead deal commitment and the group’s commitment to the size agreement. We are scaling an active portfolio management plan and other case initiatives to support the implementation of our commercial strategy, strengthening a sound leverage strategy. Let me now hand over to Isabela.

Thank you, Giuseppe. And before we start our Q&A section, just we call you if you have any questions, please just put a question on the chat or just raise your hands into the call. Okay. But before going, let me just as we, to all the investors and connectors that highlighting that we have now published already our integrated report that is our first integrated report and also our sustainability report. So as Giuseppe mentioned, all the reports are aligned with the different kinds of taxonomies in terms of climate change and others. So we would really like your feedback and also any other information that – any comments that you have in this report, okay? So thank you very much, and now I will open the Q&A. Lydia, please?

Thank you. [Operator Instructions] Our first question coming from the line of Murilo Riccini with Santander. Your line is open.

Hello. Hi, Giuseppe and Isabela. Thanks for the call. My first question comes from the generation side. What are your expectations for generation among your several sources? Maybe you could comment a little bit about how these 12 cargoes of LNG compares to last year cargoes that you used – and what should we expect from hydro dispatches in the – as Chilean coordinator has about strategy to save water for now to face a potential complex situation during the second or in maybe third quarter of this year. So a little bit of your feeling about this generation situation for the coming quarters? And my second question, if you could give us a little more details on this additional $199 million related to working capital that affected your FFO during this first quarter, please? Thank you.

Okay. Murilo, thank you for your question. We have now have Giuseppe, please.

Yes. Hi, Murilo. Look, for what concern the faltering the shipment, as I said, we have already committed all the cargo for this year and already exceed three cargoes. Consider that this year, the situation is definitely better than last year because of the availability of Gas Argentina that, of course, it will cover till April and we’re supposed to receive in the summer period. And so we believe that the situation that we have this year with the seller viability and the Gas Argentina is going to allow us to feel comfortable for what concerted sourcing in this time. And for what concern the FFO, let me say that this year, we – if you compare this year with last year, as I said, we have a negative effect because last year, we made the factoring of PEC. It was an important amount around $130 million related to the tax accumulated in the moment. And the amount is definitely lower. But on top of that, we have also the impact of the commission of the tax receivable because of the situation that we have, especially because of the situation that we have in the exchange rate, U.S. dollar paid loss. And another impact that we have to take into the consideration is related to the amount of CapEx that are – that the concentrate in the last quarter last year in order to ensure the connection to degree of our renewal plan. So all the situation give us results that you can see in the slide.

Okay. Thank you, Murilo. Operator, Olivia, do you have more questions?

Yes, our next question coming from the line of Javier Suarez with Mediobanca. Your line is open.

Hi, Giuseppe and Isabella, thank you for the presentation and for taking my question. I have three. The first one is a follow-up on the negative working capital during the first quarter. The question is do you expect EBITDA that number that working capital absorption by the year-end? And the second question that is related is, can you help us to understand what do you see the net debt-to-EBITDA ratio by the year-end, which is the assumption on CapEx that, that forecast due to – and the third question is, if you can update us in the process for the tariff review, we going to review in your network business, many thanks.

Thank you, Javier. May you Giuseppe?

Yes. Well, for what concern the FFO and the negative result that we had this year, of course, as I said, are strictly committed under one-off expect that we had last year and also the per fee of CapEx that we had. We are expecting to recover the situation by the end of the year, considering the evolution of our business and also considering the fund that. Of course, we’re going to continue the CapEx of the project. And let me confirm taking the second question related to the CapEx. Let me say that we are confirming the amount that we have already presented in our Capital Markets Day for the full year that was around €1 billion more or less. So all the CapEx are confirmed, and the time is going well. For what concern the net debt to EBITDA, of course, the revolution at the rear end is going to be in – is going to have a better result in comparison to 2021. As you know, we are looking at expanding operation in terms of asset rotation in order to improve this target. But let me say that without this asset rotation measure, we’re going to be around 5x EBITDA, a little bit more than 5x without the asset rotation. And the last question, maybe I didn’t get correctly. Can you repeat it?

Okay, if you can repeat the – your last question, please?

So the question is if you can update us on the process for the tariff, the ongoing tariff review for your distribution business? Any update on that?

Well, actually, the good question that we don’t have a lot of information, unfortunately, as a matter of [indiscernible] that you know that the process breaks in delay. We do believe that we’re going to have some additional news in the second half of the year. So as of today, we’re going to have in front of us an expectation or in the news at least before June. I mean that something is coming up in the second half of this year.

And as a follow-up, you mentioned that your estimate on net debt to EBITDA was before asset rotations. So the follow-up question would be, what is the level of net debt-to-EBITDA that the company managed considered to be sustainable for Enel Chile?

Well, let me say that we are putting increase several actions to improve our net ratio. And clearly, one of the most significant asset rotation measure and of course, as soon as we can have some additional information about the process we are going to communicate to the market. But we believe that this improving – the improvement of the net debt to EBITDA is something needed for in Chile considering the ambition that Enel Chile has in is on plan to increase and to develop our decarbonization strategy. So, we are monitoring clearly the situation, and we are going ahead with this action to improve. Of course, this kind of situation is a temporary situation, because you know that as soon as all the projects, all renewable projects going to be put in operation, the situation is going to change as a matter of the zero rating situation in development – in comparing with the last year.

And our next question is coming from the line of Isaque Fernandez with Valence [ph]. Your line is open.

Hi. Good afternoon everybody and thank you for the materials. I have a question on the pack limit, the receivables for the stabilization fund. We know that the government and the power generators are in talks, but I was wondering if you could share perhaps some details on whether a new agreement might imply a higher limit for the fund or maybe a lower price for higher duration agreement on the BPA side or something else?

Well, let me say that, first of all, it’s a very good thing that the government is trying to take this decision. You probably know that in June 1, it’s going to be used totally. So, basically, in traffic from July, we need to find the solution. We don’t have a lot of detailed information about this new proposal that has to be discussed in the parliament. But what I can tell you is that, of course, we as a company, but also association, we are always in touch with the government. We believe that this new – at least for what we understood, we believe that this proposal is definitely better than the previous one because it is going to link the perimeter of the client that is going to be managed with the system. And what we understood also is that this proposal would be a temporary proposal in order to find a better solution in any situation for the future. We are going to have better information. But sure we will discuss on together. But as of today, we are really at beginning stage of the situation. So, we don’t have enough of the information.

Okay. Great. And if I may ask a second question. Well, we saw through the last year, many renewable projects winning bids in the distribution auctions for $20, $25 per megawatt hour solar and wind projects, right? So, with this new scenario for spot prices, that should be materially higher than what we thought before for at least 3 years or 4 years. Do you think any of these projects are – which are scheduled to start in 2023, ‘24, ‘25, if any of these projects are at risk of not being commissioned?

Well, clearly, the trend of price is one – is pretty different than last year. And if I have to talk about energy, of course, every time that we decided to take the decision to do nothing in project, we do have in mind that our portfolio in terms of sales. So, basically, all of our projects or the projection of the energy that we have in our project on the consumption are in some record by this stage and the question is more general. So, if you look at what is going or what could happen in the season, clearly, there could be some players that they are going to be affected by this trend. Now, again, here we need to decide whether a moment to the family to see the short, medium, long-term, right. Because, of course, in the short-term and maybe medium-term, the trends are towards a price that are higher than what we saw last year in the long-term, clearly the situation is going to return to the previous estimation. We don’t have any worry about anything. You are right, it could be this trend situation could trigger some difficulties to the specialty small player.

[Operator Instructions] Our next question is coming from the line of Andrew McCarthy with CrediCorp Capital. Your line is open.

Good afternoon Giuseppe and Isabela. Thanks very much for the call and taking my questions. First one is with respect to the transmission business. Could you give us an update…?

Sorry, if you could just – hi, hello, this is Isabela here. We are not able to hear you just like can be close to mic, please.

Yes. Certainly, sorry.

Thank you. Thank you very much.

Certainly, I will try to speak louder. So, my first question was on the transmission business. There, I am just trying to gauge where you are in that process with respect to the formal potential sale of that asset. And also, just trying to understand from the presentation, you showed a sort of a transmission EBITDA and then a tariff adjustment. Should we be thinking there, therefore, that the sort of the annualized transmission EBITDA going forward is in the order of $75 million to $80 million. That’s the first question. And then the second question was with respect to the fuel costs in the quarter. If we take a look at the – particularly the cost of coal, we take out the provision that you recorded, it appears that your unitary cost was very, very low. I am just trying to understand if I am reading that right and what might be behind that? That’s it to begin with. Thanks very much.

Well, first of all, let me explain a little bit the point with the tariff adjustment, the transition new tariff cycle had to start in January 2020. Since then, we started making a provision of what we estimated the time would be there when we try. Now according to the last technical record that has been issued by the regulator, we understood that the provision that we made since January 2020 was lower than what basically the report is saying. So, in other words, we had an one-off effect because we had to register the positive impact relative to the period of 2020 and 2021. So, this is the reason because we have such a positive impact in the present days. Of course, as I said, is a one-off because we are recovering what we begin to look in 2020, in 2021 because we assume that the target would be lower than what the regulator is seeing right now. For what concern the sales of our transmission, we are in the process, we are again the process. And so as soon as we are going to have more information and something that we can disclose, we are going to communicate to the market. If I understood well the question about the coal, you were in doubt about the fact that the cost of coal in Q1 2022 does include the impairment of coal, this was the question, but I am not sure that I understood very well. Can you confirm it?

Andrew?

Sorry, once I take away – can you hear me?

Yes. If you could, again, just speak closer to the mic because I think that’s lag here, but we can – we are not able to listen you very well.

Understood. I will try and speak up. So, with respect to the coal – unitary coal costs in the first quarter 2022, once you take to sort of adjusted the impairment, it seems to be a very low unitary cost. I just wanted to understand if I am reading that right. And if so, why is it so low?

Look for what concern the cost of coal without into account, of course, the impairment, so the extraordinary effect because of coal that we have is between $150 to $200 per ton.

Great. Thanks very much.

Best of luck.

Thank you. Operator, do we have more questions?

I am showing no further questions on the phone line.

Okay. Then thanks. So, let’s go here. So, we have some questions here from the chat of our call. So, let’s start with a question from Rodrigo Mora from Moneda. Rodrigo has some questions that so we are going to just leave the questions and then we go one by one, okay? So, the first question of Rodrigo also came from the same topic on the coal. So, Rodrigo is asking us to give more details about why the company continues to make the coal impairment, okay, in 2022. And this decision might or not might be impacted or by the coal crisis to-date. The second – one by one?

One by one. Well, for what concern this point – the impairment of the coal is straightly related to the fund that our facility is pursuant to be closed according to the plan. So basically, in other words, the fact that we have explained that should be closed soon. And according to the declaration that we made and especially according to the fund that is not, let’s say, fundamental for our sourcing. This allows us to consider it as an impairment. Now, you know very well that there are some informal requests for the extension of the life of the plant. As of today, we didn’t receive any clear reflect or at least any reason for more tests or any in the line. So, as soon as we are in this situation, we continue with the same criterion that we have so far.

Okay. Thank you, Giuseppe. The second question from Rodrigo, we have already addressed it, but just to give more the numbers. So, Rodrigo is asking about, if we can get more details on the LNG contract for 2022? And how many LNG cargoes, the company has already been led consumer in the first quarter?

Yes. The cargo, as I said, there are 12 LNG cargo for this year, and we have already used three cargo in the first quarter 2022.

Okay. Thank you, Giuseppe. And then we have other questions on the price stabilization mechanism that you have addressed it. So, let me go now to another question that came from Mario Titella from Itau. Mario is asking us how are you planning to mitigate the effect of the end of the Argentinean gas supply and the problems with Bocamina 2 considering the weak hydro expected for this year? Giuseppe, please?

Yes. So, as we have said, we have a long-term contract with Shell. So, we have a supply of LNG cargo already committed for this year. And you have to consider also that in our plan in our margin in our first year of plan, we did have considered we have into the account that our net Argentina gas was available. So, basically, if you compare with our target for this year, we are in a better position because of the Argentinean gas availability. In terms of hydrology, we have the same projection that we declared in the capital market. The situation in the first quarter was a little bit lower than expected. But of course, the hydrologic year is starting in April. So, fortunately, the situation seems positive, at least for what we see to be this month.

Okay. Then, thank you very much. I think that we don’t have any more questions from here from the chat. So, I would like to thank you all your attention to joining us today. And I conclude then our conference call. Let me remind you that the Investor Relations team will be available for any doubt, any feedback that you may have. Just contact us by our website, email or telephone, okay. Thank you very much for your attention, and have a good day. Bye-bye.

Thank you. Bye-bye.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.