Enel Chile Financial Statements Analysis 9M 2021 – Q3 2021

ENEL CHILE

FINANCIAL STATEMENTS ANALYSIS

AS OF SEPTEMBER 30, 2021

ENEL CHILE

ANNOUNCES CONSOLIDATED RESULTS

FOR THE PERIOD ENDED SEPTEMBER 30, 2021

(Amounts expressed in millions of Chilean Pesos)

EXECUTIVE SUMMARY

• Net income of Enel Chile S.A. reached a Ch$ 48,403 million profit as of September 2021 compared to a Ch$ 226,054 million loss for the same period of 2020. This improvement is mainly explained by higher impairment losses booked in as of September 2020 amounting to Ch$ 688,331 million related to the disconnection of Bocamina II coal-fired power plant. Net income in Q3 2021 decreased Ch$ 116,924 million when compared to Q3 2020 reaching a Ch$ 15,037 million loss mainly due to the significant increase in the operating costs of the electricity generation business.
• When excluding the extraordinary effects related to Bocamina II and the Ch$ 17,603 million in expenses booked in 2021 related to the Group's 2021- 2024 digitalization strategy, the Company's net income declined 70.4% to Ch$ 77,053 million as of September 2021, compared to Ch$ 260,167 million adjusted net income as of September 2020. When applying the same adjustments to quarterly figures, net income for Q3 2021 decreased Ch$ 113,672 million compared to Q3 2020 reaching a Ch$ 9,290 million loss for Q3 2021, mainly due to the greater operating costs of the generation business during the last quarter of 2021.
• Operating revenues as of September 2021 increased 5.8% to Ch$ 2,060,379 million, when compared to September 2020, due to higher energy sales and greater gas sales particularly during Q3. These factors explain most of the 17.8% increase in operating revenues for Q3 2021 that reached Ch$ 777,465 million.
• Procurement and services costs amounted to Ch$ 1,464,245 million as of September 30, 2021, representing a 34.2% increase when compared to September 2020, due to higher energy purchase costs and fuel consumption in the generation business. This led to a significant 89.2% increase in Q3 2021 operating costs reaching Ch$ 641,862 million as a consequence of the higher amount and average price of energy purchases in addition to greater fuel consumption and other variable procurement and services costs in the generation business segment.
• As a result of the factors previously mentioned, the Company's EBITDA reached Ch$ 354,414 million as of September 2021, representing a 43.9% reduction when compared to September 2020. When excluding the extraordinary effects mentioned previously, Enel Chile's EBITDA decreased
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ENEL CHILE

FINANCIAL STATEMENTS ANALYSIS

AS OF SEPTEMBER 30, 2021

38.9% to Ch$ 395,698 million. During Q3 2021, EBITDA declined 74.1% to Ch$ 60,574 million. When excluding extraordinary effects, EBITDA decreased 71.0% to Ch$ 68,989 million.

• Financial results went from a Ch$ 89,039 million expense as of September 2020 to a Ch$ 121,981 million expense as of September 2021, mainly explained by greater financial expenses and lower financial income. During Q3 2021, financial results amounted to a Ch$ 29,183 million expense representing a 1.6% increase when compared to the same quarter of 2020 mostly due to lower financial income.
• In early September 2021, the pilot of the first industrial scale green hydrogen power plant began construction in Chile, specifically in Cabo Negro, located North of Punta Arenas. AME and Enel Green Power Chile, subsidiary of Enel Chile, are partners in this project co-developing renewable energy generation (wind) and green hydrogen production using electrolysis.
• Enel Chile was awarded first place in the 6th Informe Reporta Chile ranking, which measures how consistently and coherently companies provide information and includes the Company's narrative on how sustainability is integrated into their mission, vision, and purpose. The Company also received first place in complying with CMF's NCG 385, the general rule regarding compliance with a list of Board of Directors' best practices.

BUSINESS SEGMENT SUMMARY

Generation

• Net electricity generation reached 13,802 GWh as of September 30, 2021, 1.6% less (-222 GWh) than the same period of 2020. During Q3 2021, net electricity generation reached 4,624 GWh, which is 7.6% (-383 GWh) less than the amount for Q3 2020. This was primarily due to lower hydroelectric generation during the last quarter due to the drought that has affected the country.
• Physical energy sales amounted to 20,765 GWh as of September 30, 2021, 22.3% (+3,792 GWh) more than the same period of 2020, explained by higher energy sales to unregulated customers, mainly related to new contracts, including those transferred from Enel Distribución Chile related to the enaction of legislation allowing distribution companies to only distribute electricity to customers subject to regulated electricity prices ("Ley de Giro Exclusivo"). During Q3 2021, physical electricity sales reached 7,601 GWh, which is 31.4% more (+1,817 GWh) than Q3 2020, due to higher sales to unregulated customers.
• Operating revenues followed the same path, reaching Ch$ 1,415,175 million as of September 30, 2021, representing a 19.4% increase when compared to September 2020, mainly explained by higher physical energy sales and greater gas sales
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ENEL CHILE

FINANCIAL STATEMENTS ANALYSIS

AS OF SEPTEMBER 30, 2021

particularly during Q3 2021, which explains the 40.2% increase in operating revenues during Q3 2021 amounting to Ch$ 548,391 million.

• Procurement and services costs reached Ch$ 989,329 million, which represents a 92.7% increase, due to higher energy purchase costs, greater fuel consumption and higher other procurement and services costs. This increase was primarily due to the significant 261.0% increase in this year's Q3 operating costs that reached Ch$ 478,280 million mainly due to the higher average price and amount of electricity purchases in addition to greater fuel consumption as a consequence of the less efficient generation mix resulting from the lower level of hydrology, and also due to the higher cost of gas sales.
• Personnel expenses increased 15.0% to Ch$ 47,178 million as of September 30,
  2021, primarily due to greater expenses during Q2 2021 related to the Group's digitalization strategy. Personnel expenses for Q3 2021 decreased 12.1% to Ch$ 13,993 million when compared to Q3 2020.
• As a result of the abovementioned, EBITDA of the generation business reached Ch$ 295,079 million, 45.8% less than the period ended September 30, 2020. During Q3 2021, EBITDA decreased 86.0% when compared to Q3 2020 to Ch$ 28,924 million, mainly due to greater operating costs during the third quarter of the year.

		Cumulative
Physical Data	Sep-21	Sep-20	% Change
Total Sales (GWh)	20,765	16,973	22.3%
Total Generation (GWh)	13,802	14,025	(1.6%)

Quarterly

Q3 2021	Q3 2020	% Change
7,601	5,784	31.4%
4,624	5,007	-7.6%

Distribution and Transmission

• Physical sales reached 12,452 GWh as of September 2021, representing a 0.8% increase (+95 GWh) when compared to the same period of 2020, mainly explained by greater tolls and sales to other customers, which offset the lower sales in the industrial and commercial customer segments primarily related to the sale of unregulated customer contracts to Enel Generación Chile due to the enaction of legislation allowing distribution companies to only distribute electricity to customers subject to regulated electricity prices ("Ley de Giro Exclusivo"). This effect was mostly relevant during Q3 2021, as physical sales increased 5.5% (+227 GWh) to 4,381 GWh.
• The total number of customers grew 1.9% to 2,034,323, mainly residential and commercial customers. Annual energy losses went from 5.21% as of September 30, 2020, to 5.25% as of September 30, 2021.
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ENEL CHILE

FINANCIAL STATEMENTS ANALYSIS

AS OF SEPTEMBER 30, 2021

• Operating revenues reached Ch$ 866,988 million as of September 2021, 17.6% lower than the figure for the same period of 2020, mainly due to a lower average sales price when expressed in Chilean pesos, the tariff review process in the distribution business, and the transfer of unregulated customer contracts. Similarly, during Q3 2021, operating revenues decreased 16.0% when compared to Q3 2020 to Ch$ 309,697 million.
• Procurement and services costs declined 18.4% to Ch$ 697,148 million primarily due to lower energy purchase costs as a consequence of the lower average purchase price when expressed in Chilean pesos and also lower transportation expenses. During Q3 2021, procurement and services costs decreased 19.5% to Ch$ 244,681 million mostly due to lower energy purchase costs, lower other variable procurement and services costs and lower transportation expenses.
• Personnel expenses increased 47.5% to Ch$ 29,442 million when compared to September 30, 2020, mainly due to the higher expenses incurred in Q2 2021 related to the Group's digitalization strategy. In Q3 2021, personnel expenses decreased 25.9% to Ch$ 5,259 million when compared to Q3 2020.
• Consequently, EBITDA of the Distribution and Transmission business amounted to Ch$ 82,950 million, which represents a 29.7% reduction when compared to September 2020, although during Q3 2021, EBITDA increased 10.1% to Ch$ 39,757 million.

		Cumulative
Physical Data	Sep-21	Sep-20	% Change
Total Sales (GWh)	12,452	12,358	0.8%
Number of Customers	2,034,323	1,996,446	1.9%

Quarterly

Q3 2021	Q3 2020	% Change
4,381	4,154	5.5%
2,034,323	1,996,446	1.9%

FINANCIAL SUMMARY- ENEL CHILE

Gross financial debt of the Company increased US$ 562 million to US$ 4,717 million when compared to the balance as of September 2020. This variation is mainly explained by intercompany loans provided by Enel Finance International (EFI) to Enel Chile for US$ 640 million (US$ 400 million in Q2 2021 and US$ 240 million in Q3 2021) and a bank loan for US$ 50 million granted in July 2021. All these new loans are SDG- Linked debt, aligned with our sustainability strategy and focused on moving towards a low carbon economy. Leasing liabilities (IFRS 16) also increased by US$ 63 million. These transactions were offset by the repayment of an EGP Chile bank loan for US$ 150 million in December 2020, and a US$ 41 million amortization of Enel Generación Chile's local H and M bonds.

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ENEL CHILE

FINANCIAL STATEMENTS ANALYSIS

AS OF SEPTEMBER 30, 2021

Liquidity available to Enel Chile is composed of the following:

∙ Cash and cash equivalents

: US$ 379 million.

• Undisbursed committed credit lines (*) : US$ 342 million.
• 1. Includes a committed credit line with related parties for US$ 200 million granted by EFI to Enel Chile, which is completely undisbursed.

The average cost of Enel Chile's debt fell from 4.6% as of September 2020 to 4.5% as of September 2021.

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$ 359 million and US$ 270 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$ 600 million.

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 account receivable in favor of generation companies, limited to a maximum US$ 1,350 million. The balance of these account receivables must be recovered by December 31, 2027.
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