Enel Americas SA (XSGO:ENELAM) Q3 2024 Earnings Call Highlights: Strategic Debt Reduction and ...

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Tue, Oct 29, 2024, 3:01 AM 4 min read

EBITDA (Q3 2024): USD 0.94 billion, 6% lower than Q3 2023.
Gross Debt (as of September 2024): USD 5.7 billion, a 30% reduction compared to December 2023.
Net Income (First 9 Months 2024): USD 2.5 billion, including a USD 1.7 billion positive impact from the sale of Peruvian assets.
CapEx (Q3 2024): USD 450 million, a 37% decrease compared to Q3 2023.
Renewable Capacity Added (2024): 800 megawatts.
Electricity Distributed (Q3 2024): 26.4 terawatt hours, a 3% increase compared to Q3 2023.
Number of Customers: Increased by 424,000, reaching 22.5 million.
Free Cash Flow (First 9 Months 2024): USD 0.1 billion.
Cost of Debt: Decreased from 12.2% to 10.5%.

Warning! GuruFocus has detected 8 Warning Signs with XSGO:ENELAM.

Release Date: October 28, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Enel Americas SA (XSGO:ENELAM) increased investments in the Grids business by 30%, reaching USD 0.4 billion, aligning with their strategy to enhance network resilience and service quality.
The company added 800 megawatts of new renewable capacity in 2024, primarily in Brazil, demonstrating a commitment to expanding renewable energy sources.
Gross debt was reduced by 30% to USD 5.7 billion, largely due to proceeds from the sale of Peruvian assets, which also decreased financial expenses by 33%.
Despite challenges, Enel Americas SA (XSGO:ENELAM) maintained a solid financial position, allowing them to execute their CapEx plan effectively.
EBITDA for the first nine months of the year increased by 6% compared to the same period last year, driven by better results in the Grids business in Argentina and Colombia, and the Generation business in Brazil.

Negative Points

EBITDA in the third quarter decreased by 6% compared to the same period last year, primarily due to the depreciation of the Brazilian real and lower EBITDA in the Generation business in Colombia.
The hydrological situation in Colombia negatively impacted the Generation business, leading to increased energy purchase costs at higher spot prices.
Currency depreciation in Brazil had a negative impact of USD 91 million on the company's financial results.
The company faced severe weather events in Sao Paulo, which disrupted electricity supply to millions of customers and required significant operational responses.
CapEx decreased by 37% compared to the same period last year, mainly due to the completion of renewable projects and a slowdown in developing new projects.

Q & A Highlights

Q: Can you quantify the possible impact of the ongoing drought in Colombia on your latest guidance? Also, can you update us on the latest regulatory developments in Argentina? A: The hydrological situation in Colombia is expected to impact this year's results by approximately $150 million. We do not anticipate this affecting future periods, although weather conditions are unpredictable. In Argentina, we are pleased with the recognition of inflation in the value of distribution, but more details are forthcoming.

Q: Could you provide more color on the measures you are adopting in Colombia to face poor hydrological conditions if higher rainfall doesn't arrive soon? A: We are not increasing our PPAs or sales on big contracts and are optimizing our plants while monitoring spot markets. We are also in discussions with regulators to address the inability to generate with our reservoir to meet contracts due to regulatory measures.

Q: During the quarter, you paid $1.4 billion in debt. When do you expect to prepay the remaining $600 million debt? Also, what is the expected financial cost annually? A: We expect normalized financial costs to be below $500 million per year. We are analyzing options for the remaining $600 million, focusing on reducing debt in Brazil and addressing the Sao Paulo Pension Fund.

Q: On October 24, Enel Group CEO met with Colombia's President to discuss energy transition. Could you provide more details about the investment plans? A: Colombia is a key country for our investments, and we are aligning our plans with the energy transition strategy. More details will be provided in our upcoming strategic plan presentation.

Q: Are the tax effects in Peru over after the negative impact this quarter, or should we expect more in the next quarter? A: The capital gain has been registered, but the tax will be paid in 2025. This is a natural progression following the capital gain registration.

Q: Can you explain the reasons for the year-over-year improvement in net working capital and expectations for year-end? A: The improvement is mainly due to delays in CapEx and lower CapEx in the generation business. We expect positive free cash flow by year-end, similar to the current $100 million to $130 million.

Q: Is there any update on the development of renewable projects in Colombia's La Guajira region? A: We are still experiencing delays in permitting and transmission lines in La Guajira. We have shifted focus to other areas for development due to these challenges.

Q: Regarding the new concession contract, would you be willing to pay penalties to sign it? A: We are analyzing the details, but it's not a blanket requirement to give up all legal claims. We are reviewing the specifics to ensure sustainability and compliance with business operations.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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