Enel Chile Stock

Enel Chile S.A. (Enel Chile), through its subsidiaries, engages in the generation and distribution of electricity of electricity in Chile. The company is a subsidiary of Enel S.p.A. (Enel).

As of December 31, 2022, the company had 8,408 MW of net installed capacity and approximately 2.1 million distribution customers. Of the company's total net installed capacity, 76% corresponds to renewable energies, including 3,509 MW of hydroelectric power plants, 725 MW of wind farms, 2,042 MW of solar plants, and 83 MW of geothermal capacity. All the company's net thermoelectric installed capacity corresponds to gas/diesel power plants (2,049 MW).

The company conducts its generation business through Enel Generation, EGP Chile, and their subsidiaries, which together own 61 generation power plants, all located in Chile, of which 18 are hydroelectric (3,508 MW of net installed capacity), 7 are thermal (2,050 MW of net installed capacity), 25 are solar (2,042 MW of net installed capacity), and 10 are wind-powered (725 MW of net installed capacity), and one is geothermal (83 MW of net installed capacity). The company conducts its distribution business through Enel Distribución Chile S.A. (Enel Distribution) and its subsidiary Enel Colina S.A.

Segments

The company operates through Electricity Generation Business, and Electricity Distribution and Networks Business segments.

Electricity Generation Business segment

In 2022, the company's consolidated electricity sales were 32,120 gigawatt-hours (GWh), and its electricity production was 22,215 GWh. The company's total net installed capacity in 2022 was 8,408 megawatts (MW).

The company sells electricity to regulated customers, through distribution companies, and to unregulated customers through generation companies. The sales to distribution companies to supply their regulated customers, that is, residential, commercial, or others, are classified as regulated sales and subject to government-regulated electricity tariffs. Generation companies' sales to unregulated customers are governed by contracts at freely negotiated prices and terms. The company sells directly to large commercial and industrial customers and other generators. The sales to generators are classified as unregulated sales and generally governed by contracts with freely negotiated prices and terms. Finally, pool market sales occur either when SEN dispatches generation companies in excess of their contractual obligations and therefore must sell their surplus electricity in the pool market or when the generators' electricity dispatched is less than their contractual commitments with customers.

In 2022, distribution company contracts awarded in the August 2016 auction came into effect. Therefore, the tariffs of the company's regulated contracts decreased by 6% due to the lower prices offered by Non-Conventional Renewable Energy (NCRE) providers in the energy auction for distribution companies. In 2024, contracts awarded in the November 2017 auction will come into effect. The company routinely participates in energy bids and has been awarded long-term electricity sale contracts that incorporate the expected variable costs considering changes to the most relevant variables. These contracts secure the sale of the company's current and expected new capacity and allow it to stabilize its income.

In November 2017, the outcome of a bidding process was announced. This process tendered 2,200 GWh per year to be delivered between 2024 and 2043. The company, through Enel Generation, were awarded 54% of the tender, corresponding to 1.2 TWh with a mix of wind, solar, and geothermal generation. In September 2021, 2,310 GWh per year were tendered to supply electricity to regulated customers for 15 years starting in 2026. In July 2022, 777 GWh per year of energy were awarded in a tender process to supply electricity for 15 years starting in 2027.

The company's thermal generation increases during relatively low rainfall periods, typically resulting in higher fuel costs. Under dry conditions, the electricity it has contractually agreed to provide may exceed the electricity it generates, requiring it to purchase electricity in the pool market at spot prices to satisfy its contractual obligations.

Seasonality

The generation business is affected by seasonal changes throughout the year. During average hydrological years, snowmelts typically occur during the warmer months of October through March. These snowmelts increase the level of water in the company's reservoirs. The company's reservoirs' increased level allows it to generate more electricity with hydroelectric power plants during months when marginal electricity costs are lower.

In general, hydrological conditions, such as droughts and insufficient rainfall adversely affect its generation capacity. For example, severe prolonged drought conditions or reduced rainfall levels in Chile caused by the La Niña weather phenomenon reduce water accumulated in reservoirs, thereby curtailing the company's hydroelectric generation capacity.

Operations

The company participates in electricity generation through its subsidiaries, Enel Generación Chile S.A. (Enel Generation), Enel Green Power Chile S.A. (EGP Chile), and Empresa Electrica Pehuenche S.A. (Pehuenche). As of December 31, 2022, the company had 61 generation power plants in Chile with a total net installed capacity of 8,408 MW, representing 27% of the National Electricity System's ('SEN' in its Spanish acronym) installed capacity in 2022.

Enel Generation owns 13 hydroelectric, 7 thermal, and 2 wind generation power plants, with a total net installed capacity of 4,851 MW. EGP Chile owns 2 hydroelectric power plants, 8 wind farms, 25 solar parks, and 1 geothermal power plant, with a total net installed capacity of approximately 2,861 MW. Pehuenche owns 3 hydroelectric power plants, with a net installed capacity of 697 MW.

During 2022, the electricity demand throughout the SEN increased by 2.6%. The total electricity demand was 77,044 GWh in 2022. The company's total generation amounted to 22,215 GWh in 2022, which represents 28.8% of the total demand.

The company's total hydroelectric generation (including mini-hydro) accounted for 44.0% of its total generation in 2022, reaching 9,768 GWh, while the company's thermal generation accounted for 37.0% of its total generation in 2022, reaching 8,211 GWh.

Water Resource Use Agreements

The company has three agreements signed with the Chilean Hydraulic Works Directorate (DOH). The agreements are related to water consumption from Maule Lagoon and Laja Lake, both located in southcentral Chile in areas where irrigation is more demanding, generally from September to April. Enel Generation signed the agreements regarding the use of water from Maule Lagoon and Laja Lake on September 9, 1947, and October 24, 1958, respectively. On November 16, 2017, Enel Generation signed an agreement to operate and recover water resources from Laja Lake, complementing the 1958 agreement with DOH.

In October 2020 and August 2021, the company's subsidiary Pehuenche, Colbún S.A., and the Maule Lagoon Vigilance Board-First Section, signed an agreement to optimize the use of water during drought periods. The agreement, which expires on August 31, 2025, and includes an automatic renewal clause for 58 months, facilitates water accumulation in the Colbún Reservoir in the spring for use in the summer, the peak irrigation period, of 2021/2022 and 2022/2023 irrigation season.

In October 2022, Enel Generation signed an agreement with the Biobío River Basin Vigilance Board to limit the use of the Ralco reservoir during the 2022/2023 irrigation season, along with making more flexible the generation of the Pangue power plant and its reservoir.

Thermal Generation

The company's thermal electricity generation facilities use mostly LNG and, to a lesser extent, diesel. To satisfy its natural gas requirements, the company signed a long-term LNG supply contract that establishes maximum quantities and prices. It also has long-term gas transportation agreements with pipeline companies. The company's gas-fired efficient power plants can operate using either natural gas or diesel. In particular, San Isidro and Quintero power plants operate using LNG from the Quintero LNG Terminal.

The LNG supply is based on long-term agreements with Quintero liquified natural gas (LNG0 Terminal for regasification services and Shell for supply. The company's LNG sale and purchase agreement with Shell is in force through 2030 and is indexed to the Henry Hub/Brent commodity prices. Electrogas S.A. is the company's gas transportation provider.

In 2022, Enel Generation used 453 million cubic meters of LNG for its generation and commercialization requirements.

In 2022, Enel Generation imported 1,085 million cubic meters of natural gas under supply agreements with YPF, Total Austral, and Pan American Energy, among other producers. Concerning the commercialization of LNG by truck, 112 million cubic meters were delivered in 2022.

In December 2022, the company reached an agreement with Shell Global LNG Limited, through which the parties agreed to a series of modifications to the long-term supply contract, corresponding, among others, to a reduction of LNG volumes, which are projected to be surplus to meet its future needs.

Generation from NCRE Sources

The company's Canela wind farms and Ojos de Agua mini-hydroelectric plant, and most of EGP Chile's power plants (except the Pullinque and Pilamiquen power plants), qualify as NCRE facilities.

Electricity Sales and Generation

The company's electricity sales reached 32,120 GWh in 2022, which represented a 41.7% market share. Energy purchases increased by 7.9% in 2022 mainly to comply with the company's contractual obligations with third parties.

The company supplies electricity to the major regulated electricity distribution companies, large unregulated industrial firms (primarily in the mining, pulp, and steel sectors), and the pool market. Contracts usually govern commercial relationships with the company's customers. Supply contracts with distribution companies must be auctioned and are generally standardized with an average term of ten years.

Supply contracts with unregulated customers (large industrial customers) are specific to the needs of each customer, and the conditions are agreed upon by both parties, reflecting competitive market conditions.

In 2022, the company had 993 customers. In 2022, the company's customers included 21 regulated customers and 972 unregulated customers.

For the year ended December 31, 2022, the company's principal distribution customers were Empresa Electrica de Puente Alto, Enel Distribution, Grupo CGE, Grupo Chilquinta, and Grupo SAESA.

The company's generation contracts with unregulated customers are generally on a long-term basis and typically range from five to fifteen years. These agreements are usually automatically extended at the end of the applicable term unless terminated by either party upon prior notice. Contracts with unregulated customers may also include specifications regarding power sources and equipment, which may be provided at special rates and provisions for technical assistance to the customer.

The company's principal unregulated customers were Anglo American Sur, BHP Billiton, Compañia Minera Doña Ines de Collahuasi SCM, Minera Valle Central, and SCM Minera Lumina Copper Chile.

The company has lower marginal production costs than companies whose installed capacity is primarily thermal because 44.0% of its installed capacity connected to SEN is hydroelectric. The company's installed thermal capacity benefits from access to gas from the Quintero LNG Terminal. However, during periods of extended droughts, the company may be forced to buy more expensive electricity from thermal generators at spot prices to comply with its contractual obligations.

Electricity Distribution and Networks Business segment

The company's distribution and network operations are conducted through Enel Distribution, in which it has a 99.09% economic interest.

The company distributes electricity in a concession area of 2,105 square kilometers, under an indefinite concession granted by the Chilean government. The company distributes electricity in 33 municipalities in the Santiago metropolitan region. As of December 31, 2022, the company distributed electricity to more than 2 million residential, commercial, industrial, and other customers, who are primarily municipalities, represented 36.0%, 11.3%, 0.8%, and 51.9%, respectively, of its total electricity sales of 17,534 GWh.

For the supply to regulated distribution customers, Enel Distribution has entered into contracts with the following generation companies: Acciona Energía Chile Holdings S.A., AES Andes S.A., Colbún S.A., Enel Generation, Engie Energía Chile S.A., and other companies.

Generation Business Projects

Projects Completed in 2022

EGP Chile

Cerro Pabellón Geothermal Extension Project

The Cerro Pabellón extension project is a geothermal energy plant with a net installed capacity of 32 MW and is in the Antofagasta Region in northern Chile. It has synergies with the company's Cerro Pabellón geothermal project and uses existing infrastructure, such as a substation and a transmission line. Construction began in August 2019, and the project was completed in June 2022, reaching commercial operation in December 2022.

Finis Terrae Solar Extension Project

The Finis Terrae extension project is a PV solar power plant in María Elena in the Antofagasta Region in northern Chile and has a net installed capacity of 126 MW.

The project has strong operational synergies with EGP Chile's existing Finis Terrae power plant and uses the same transmission infrastructure. A new bay unit and new power transformer was installed in the substation for interconnection purposes. Construction began in May 2020, and the project was completed in 2022. The company expects the project to reach commercial operation in 2023.

Finis Terrae 3 Solar Project

The Finis Terrae 3 solar project is in the Antofagasta Region of Chile. It has a net installed capacity of 18 MW and is an extension of the Finis Terrae Solar Extension project. Construction began in August 2021, and the project was completed in 2022. The company expects the project to reach commercial operation in 2023.

Guanchoi Solar Project

The Guanchoi solar project is in Copiapó in the Atacama Region and has a net installed capacity of 398 MW. Guanchoi is a PV solar power plant consisting of 893,508 crystalline bifacial PV modules with a solar tracking system. The project site occupies approximately 1,000 hectares.

The project connects to the Bella Mónica step-up substation, located between Campos del Sol I and Guanchoi. Bella Mónica is located 8 km from the Illapa substation, owned by Celeo Redes Chile Ltda., and is connected through a 220 kilovolts (kV) transmission line. Construction began in July 2021, and the project was completed in 2022. The company expects the project to reach commercial operation in 2023.

Pilot Green Hydrogen Project

The Pilot Green Hydrogen Project is in the Magallanes Region in southern Chile. The region has one of the best wind conditions due to its proximity to Antarctica. The project expects to produce 20.5 kg of hydrogen per hour through a wind farm, with 3.4 MW of net installed capacity and an electrolyzer with a net installed capacity of 1.2 MW. Construction began in August 2021, and the project was completed in 2022, reaching commercial operation in 2022.

PMGD I Solar Project (Caracoles, La Colonia, Piduco, and Rinconada)

Caracoles, La Colonia, Piduco, and Rinconada are part of the PMGD I Solar Project, which consists of a portfolio of eight solar PV plants to develop 54 MW of net installed capacity in the Metropolitan, O'Higgins, and Maule Regions of Chile. The four plants (Carcoles, La Colonia, Piduco, and Rinconada) total 27 MW of net installed capacity, and each plant is connected to distribution lines. Construction began in August 2021, and the four solar plants were completed in 2022. The company expects the project to reach commercial operation in 2023.

PMGD II Solar Project

Coinco, Don Rodrigo, and El Sharon are part of the PMGD II Solar Project, which consists of a portfolio of three solar PV plants in the Maule Region of Chile to develop 11 MW of net installed capacity. The three plants (Coinco 3 MW, Don Rodrigo - 5 MW, and El Sharon - 3 MW) are connected to distribution lines. Construction began in July 2021, and the project was completed in 2022. The company expects the project to reach commercial operation in 2023.

Valle del Sol Solar Project

The Valle del Sol PV solar project is in the Atacama Desert, approximately 100 km west of Calama in the Antofagasta Region in northern Chile.

It is a greenfield solar project with a net installed capacity of 163 MW that consists of 406,980 monocrystalline bifacial PV modules with a solar tracking system. The project site occupies 320 hectares. Valle del Sol will connect to the Miraje substation through a new 220 kV bay. The connection solution includes a step-up substation, one main transformer of 130/160 megavolt amperes (MVA0 (33/220 kV), and an interconnection 10 km, 220 kV transmission line. Construction began in 2021, and the project was completed in 2022. The company expects the project to reach commercial operation in 2023.

Enel Generation

San Isidro Power Plant Upgrade

The San Isidro power plant is a combined cycle plant in the Valparaiso Region in central Chile. The power plant has two combined-cycle units (Unit 1 and Unit 2), limited by environmental authorizations to 740 MW of net installed capacity. The project consists of upgrading the existing gas turbine to improve the efficiency of both units and recover 15 MW for each unit, within the approved environmental permit.

The project began in September 2022 and was completed in November 2022. The company expects Unit 2 and Unit 1 to reach commercial operation in 2023 and 2024, respectively.

Projects under Construction in 2022

EGP Chile

El Manzano Solar Project

El Manzano solar project is located 30 km north of Santiago in the Metropolitan Region. It is a greenfield solar project with a net installed capacity of 99 MW that consists of 162,000 monocrystalline bifacial PV modules, as well as a solar tracking system. The power plant will be able to incorporate a BESS in the future. The project site occupies 185 hectares. El Manzano will connect to the El Manzano substation, owned by Enel Distribution, through a 6.3 km medium-voltage transmission line. The company expects the project to be completed in 2023-2024.

La Cabaña Wind Farm and BESS

The La Cabaña wind farm is in the Araucanía Region in southern Chile and has a net installed capacity of 106 MW and includes a battery energy storage systems (BESS) with a storage capacity of 34 MW. The project will connect to the national system through the Renaico wind farm substation. Construction began in 2022, and the company expects the project to be completed in 2023.

PMGD I Solar Project (Cabimas and Pataguas)

Cabimas and Pataguas are part of the PMGD I Solar Project, which consists of a portfolio of eight solar PV plants to develop 54 MW of net installed capacity in the Metropolitan, O'Higgins, and Maule Regions of Chile. Each project is or will be connected to distribution lines.

Four projects (Caracoles, La Colonia, Piduco, and Rinconada) were completed in 2022, and two additional projects (Cabimas and Pataguas) are under construction, with a total of 21 MW of net installed capacity. Construction began in August 2021, and the company expects the projects to be completed in 2023.

PMGD III Solar Project

The PMGD III Solar Project consists of a portfolio of three solar PV plants (Bandurrias, Graneros, and Maitencillo), in central Chile. Each project has a net installed capacity of 3 MW, for a total of 9 MW of net installed capacity. Each plant will be connected to distribution lines. The company expects construction to begin in 2023 and the projects to be completed in 2024.

PMGD IV Solar Project

The PMGD IV Solar Project consists of a portfolio of three solar PV plants (Doña Rubena, Hijuelas IV, and Mora) to develop 9 MW of net installed capacity in the Metropolitan and Maule Regions of Chile. Each project will be connected to distribution lines. The land has been secured and environmental approval has been obtained. The company expects construction to begin in 2023 and the projects to be completed in 2024.

Renaico II Wind Project

The Renaico II wind project is in the Araucanía Region in southern Chile. It consists of a 144 MW power plant with two wind farms: the Las Viñas project, including a 58.5 MW wind power plant built by EGP Chile; and the Puelche project, which consists of an 85.5 MW wind power plant developed independently by Pacific Energy. The Puelche project was acquired in its entirety by EGP Chile.

The project consists of 32 wind turbine generators and will be interconnected to SEN through the existing Renaico I 220 kV substation. A new bay will be installed in the substation with a main transformer of 165 MVA. The Renaico II wind project has potential synergies with EGP Chile's operational Renaico I wind project and will use existing infrastructure, such as a substation and a transmission line. The land has been secured, and the environmental approvals were obtained. Construction began in April 2020. As of December 2022, 72 MW of net installed capacity had been connected. The company expects the remainder of the project to be completed in 2023.

Sierra Gorda Solar Project

The Sierra Gorda PV solar project is in Sierra Gorda, near Calama, in the Antofagasta Region in northern Chile. The PV solar power plant has a net installed capacity of 205 MW, which was reduced from 357 MW in February 2023. The site occupies 850 hectares, with a perimeter of approximately 28 km.

It is a greenfield project inside the existing Sierra Gorda wind farm owned by EGP Chile. The project has five main areas for PV modules inside the wind farm and an independent space for the medium voltage/high voltage substation. It consists of 830,000 monocrystalline bifacial PV modules with a solar tracking system. The project will connect to the Centinela substation located 19 km from the solar plant, in the Centinela substation owned by Red Electrica Chile. Construction began in July 2021, and the company expects the project to be completed in 2023.

Enel Generation

Los Cóndores Hydroelectric Project

The Los Cóndores project is in the Maule Region, in the San Clemente area in central Chile. It consists of a 150 MW run-of-the-river hydroelectric power plant, with two Pelton vertical water turbine units that will use water from the Maule Lagoon reservoir through a pressure tunnel. The power plant will be connected to SEN at the Ancoa substation (220 kV) through an 87 km transmission line. Construction began in April 2014, and the company expects the project to be completed in 2024.

Rapel Hydroelectric Repowering Project

The Rapel Hydroelectric Repowering project is being carried out within the company's existing 375 MW Rapel power plant in the O'Higgins Region in central Chile. Rapel is a reservoir hydroelectric power plant with five Francis vertical units that use water from the Rapel River.

The project involves replacing two turbines (Unit 3 and Unit 4) installed in 1968 with an efficiency rate of less than 85%. The turbines will have a new hydraulic design, offering improved efficiency and a more extensive operation range. The company expects to increase its net installed capacity by 2 MW (1 MW for each unit) and produce 67 GWh/year of new energy. The contract was awarded in September 2020, and the contractor's basic design activities began immediately.

The engineering design has been completed while model tests and the principal manufacturing activities have been executed. Supply for Unit 3 arrived at the project site in August 2022, and transport of Unit 4 supply began in December 2022. Site activities for both units were postponed until 2023 due to a lack of technical capability of a subcontractor. The project's principal contractor is in the process of selecting a new subcontractor. The company expects both units to be installed and the project to be completed in 2023.

Projects under Development in 2022

The company is evaluating the development of the following projects, which it classifies as 'under development'. The company will decide whether to proceed or not with each project depending on the commercial and other opportunities foreseen in upcoming years, as well as future tender prices for supplying the energy requirements of the regulated market and negotiations with existing or new unregulated customers.

EGP Chile

Andino Las Pataguas Solar Project

The Andinos Las Pataguas Solar project is in San Pedro in the Metropolitan Region. The project has a net installed capacity of 100 MW and includes a BESS with a storage capacity of 60 MW. The plant will be built on approximately 270 hectares and connected to the Las Arañas substation at 110 kV. The land has been secured, and environmental approval is in progress. The company expects construction to start in 2024 and the project to be completed in 2025.

Don Humberto Solar Project and BESS

Don Humberto is a solar project located in the Metropolitan Region. The project has a net installed capacity of 79 MW and includes a BESS with a storage capacity of 67 MW. The land has been secured, and environmental approval has been obtained. The company expects construction to begin in 2023 and the project to be completed in 2024.

Ovejera Sur Wind Project

The Ovejera Sur Wind project is in La Unión in Los Ríos Region. The project has a net installed capacity of 170 MW and includes a BESS with a storage capacity of 100 MW. The project consists of 38 wind turbines with a net installed capacity of approximately 4.5 MW each. The project will be built on approximately 5,500 hectares and will connect to the grid through the new Pichirropulli substation (220 kV). The land has been secured, and environmental approval is in process. The company expects construction to begin in 2024 and the project to be completed in 2025.

Rihue Wind Farm and BESS

The Rihue wind farm is in the Bio-Bio Region in southern Chile and has a net installed capacity of 120 MW and includes a BESS with a storage capacity of 34 MW. The project will connect to the national system through the Renaico Wind Farm substation. The company expects the project to be completed in 2024.

History

The company was incorporated in 2016 under the laws of the Republic of Chile. The company was formerly known as Enersis Chile S.A. and changed its name to Enel Chile S.A. in 2016.