Enel Chile S.A. — FY 2019 Form 20-F Summary
Business context and reporting period
Annual report for the fiscal year ended December 31, 2019; it is not a quarterly filing. Enel Chile is a Chilean electricity utility with generation and distribution operations. It reported under IFRS as issued by the IASB, in Chilean pesos (Ch$). Enel S.p.A. owned 61.9% of Enel Chile at year-end.
Key financial and operating metrics
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue and other operating income | Ch$2,770.8bn | Ch$2,457.2bn |
| Operating income | Ch$526.1bn | Ch$670.6bn |
| Operating margin | 19.0% | 27.3% |
| Net income | Ch$316.1bn | Ch$412.8bn |
| Net income attributable to Enel Chile shareholders | Ch$296.2bn | Ch$361.7bn |
| Operating cash flow | Ch$743.7bn | Ch$735.5bn |
| Cash and cash equivalents, year-end | Ch$235.7bn | Ch$245.2bn |
| Capital expenditures | Ch$321.1bn | Ch$300.5bn |
| Consolidated interest-bearing debt, year-end | Ch$2,661bn | Not stated on the same basis in the supplied text |
| Total assets / total equity, year-end | Ch$7,858.0bn / Ch$3,747.3bn | Ch$7,488.0bn / Ch$3,674.2bn |
Cash flow from investing activities was an outflow of Ch$311.5bn, compared with Ch$1,881.6bn in 2018, when the corporate reorganization drove substantial investment outflows. Financing activities used Ch$440.4bn in 2019, versus Ch$966.6bn provided in 2018. The company reported Ch$150bn of committed undrawn revolving facilities and approximately Ch$53bn of uncommitted bank credit lines; it said it expected available operating cash flow, cash balances, borrowing capacity and capital-market access to meet foreseeable needs.
At year-end, current assets were Ch$1,018.2bn and current liabilities Ch$1,041.3bn. Debt maturities were reported as Ch$164bn in 2020, Ch$506bn in 2021–2022, Ch$490bn in 2023–2024 and Ch$1,501bn after 2024. The company had a US$1bn 4.875% bond due in 2028. Debt included Ch$782bn owed to related company Enel Finance International, according to the filing’s debt-risk discussion.
Material changes versus prior period
- Revenue increased 12.8%; generation revenue rose 9.2% and distribution revenue 11.8%. The filing attributes much of the increase to higher average Chilean-peso prices associated with the weaker peso, alongside changes in sales volumes, customer mix and non-recurring items.
- Operating income fell 21.6%, and net income fell 23.4%. The operating decline reflected Ch$280.0bn of impairment losses, chiefly Ch$197.2bn for Tarapacá and Ch$82.8bn for Bocamina I, associated with planned coal-plant closures. The year also included Ch$121.1bn of non-recurring income from early termination of three Anglo American Sur supply contracts.
- 2019 was unusually dry: hydroelectric generation decreased to 10,578 GWh from 11,395 GWh, while thermal generation rose to 7,233 GWh from 6,268 GWh. Total generation increased to 21,041 GWh, but electricity sales declined to 23,513 GWh from 24,369 GWh.
- Cash from operations was broadly stable. Cash declined by Ch$9.5bn during 2019, while financing outflows included loan and bond repayments, dividends and interest.
- Net income attributable to non-controlling interests fell to Ch$19.9bn from Ch$51.1bn, partly reflecting Enel Chile’s increased ownership in Enel Generación after the 2018 reorganization.
Outlook, commentary, risks and unusual items
- Management projected Ch$1,585bn of capital expenditures for 2020–2022, including network and plant maintenance, projects under execution and studies for potential projects. It described investment plans as flexible and dependent on market conditions and project economics.
- The company expected COVID-19 effects on 2020 results to be adverse, particularly in distribution, but said the impact could not yet be quantified. It cited possible lower demand, collection difficulties and reduced liquidity. These statements were made in the 2020 context and are not quantified earnings guidance.
- Chile’s October 2019 social unrest disrupted commerce and demand; Enel Chile’s Santiago headquarters suffered a severe arson attack. The company also highlighted political and regulatory uncertainty, including a proposed constitutional process and possible changes affecting resource, water and property rights.
- Law 21,185 stabilized regulated electricity prices, deferring generation-company revenue recovery. The mechanism set a US$1.35bn cap on receivables and provides for recovery by December 31, 2027; the company said financing the deferral would impose a financial cost. The filing recognized Ch$182.1bn of related non-current receivables and Ch$53.9bn of related supplier payables at year-end.
- Law 21,194 reduced the distribution tariff return framework to a CNE-set after-tax range of 6%–8%, with company returns constrained around the CNE rate. Further distribution-tariff reform was under discussion.
- Tarapacá’s coal unit closed in December 2019. Bocamina I was scheduled for closure by December 2023 and Bocamina II by December 2040, with management indicating an aim to close Bocamina II earlier.
- Key operating risks include drought and hydrology, fuel and commodity prices, Chilean peso volatility, changing regulation, environmental obligations, litigation, construction execution and cybersecurity. The filing reported Ch$13.5bn of provisions for legal and tax proceedings; it also disclosed pending claims, regulatory proceedings and fines, with further detail in the financial-statement notes.
- The board approved a final 2019 dividend payout of 60% of annual consolidated net income, plus an additional Ch$1.660963 per share from prior retained earnings. The filing described a proposed 60% payout policy for 2020, subject to profits and board discretion.
Important facts for investors to verify
- Review the audited notes for the assumptions and sensitivity behind the Ch$280.0bn coal-plant impairment, including recoverable values and closure timing.
- Verify the accounting, collection schedule, financing cost and regulatory treatment of the tariff-stabilization receivables and related supplier balances.
- Reconcile reported debt totals, related-party borrowings, currency and interest-rate exposures, maturity profile, and the availability of committed facilities.
- Assess the effect of the distribution-return law, tariff-setting process, customer migration and any further reforms on segment profitability.
- Track hydrology, thermal dispatch, fuel costs, generation contracts and the pace and economics of renewable projects and planned coal closures.
- Check the status and potential exposure of material litigation, regulatory fines, environmental proceedings and the Cerro Pabellón matters in the referenced notes.
- Distinguish the 2019 reported results from subsequent 2020 developments, including COVID-19, currency movements, related-party loans and the proposed dividend distributions.
The 2019 financial statements received an unqualified audit opinion, and the auditor reported effective internal control over financial reporting. The company disclosed that shareholders approved KPMG as auditor for fiscal 2020, replacing EY.