Enel Chile S.A. — FY2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021; filed April 27, 2022. This is an annual report, not a standalone fourth-quarter results filing. Financial statements are consolidated and prepared under IFRS as issued by the IASB, in Chilean pesos (Ch$).
Business context
Enel Chile operates electricity generation, transmission and distribution businesses in Chile. At year-end it had 8,054 MW of installed generation capacity, 70% from renewable sources, and approximately 2.0 million distribution customers. Enel S.p.A. held 64.9% of the company. In January 2021, distribution and transmission were separated into distinct subsidiaries.
Key financial and operating metrics
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue and other operating income | Ch$2,855.2bn | Ch$2,585.4bn |
| Operating income (loss) | Ch$259.6bn | (Ch$34.3bn) |
| Operating margin | 9.1% | (1.3)% |
| Net income (loss) | Ch$100.7bn | (Ch$52.4bn) |
| Net income (loss) attributable to parent | Ch$85.2bn | (Ch$50.9bn) |
| Net financial results | (Ch$157.1bn) | (Ch$112.4bn) |
| Net cash from operating activities | Ch$412.9bn | Ch$755.9bn |
| Cash and cash equivalents at year-end | Ch$310.0bn | Ch$332.0bn |
| Total assets | Ch$9,500.3bn | Ch$7,904.5bn |
| Interest-bearing debt | Ch$4,214.1bn | Ch$2,856.1bn |
Capital expenditure was Ch$786.1bn in 2021. Management estimated Ch$2,196.2bn of capital expenditure for 2022–2024. Cash flow from investing activities was an outflow of Ch$736.6bn; financing activities provided Ch$293.2bn. Current assets were Ch$1,268.3bn against current liabilities of Ch$2,132.3bn. The filing also reports consolidated debt of approximately Ch$4.3tn, including related-party payables and financial liabilities.
Material changes versus prior year
- Revenue rose 10.4%; generation revenue increased 23.8%, while distribution and transmission revenue fell 13.0%, partly reflecting the transfer of unregulated customer contracts to Enel Generation.
- Operating results returned to profit, substantially reflecting the much smaller coal-plant impairment charge: Ch$28.8bn in 2021 versus Ch$697.9bn for Bocamina II in 2020. Parent-attributable net income improved by Ch$136.0bn.
- Raw materials and consumables increased 46.3% to Ch$2,011.3bn, driven by more and costlier electricity purchases, fuel costs, drought-related generation mix and higher commodity prices.
- Operating cash flow declined 45.4%, mainly due to higher supplier and tax payments. Generation and distribution energy purchases rose materially; consolidated electricity purchases increased from 3,629 GWh to 9,181 GWh.
- Installed capacity increased 11.9% to 8,054 MW, mainly as solar projects entered operation. Electricity sales rose 22.9% to 28,214 GWh, while generation fell 1.5% to 19,034 GWh; drought reduced hydroelectric output 20% and increased thermal generation 25%.
- Interest-bearing debt increased from Ch$2,856.1bn to Ch$4,214.1bn; 82% was fixed-rate at year-end, compared with 99% in 2020. A substantial portion of company funding is from related parties.
Outlook, risks and unusual items
- Management expected regulated-contract tariffs to decline as lower-priced auction contracts take effect in 2022 and 2024. A 2021 regulated-supply auction awarded no energy to Enel Chile; a further 2022 auction was scheduled to conclude in August 2022.
- The 2022–2024 investment plan includes network maintenance, generation projects and development studies. Los Cóndores hydroelectric project was 87% complete at year-end, with completion expected in 2023. Multiple solar, wind, geothermal and distributed-generation projects were expected to complete in 2022.
- Enel Chile maintained its expected Bocamina II closure date of May 2022 despite a system-operator proposal to postpone it. Coal phase-out, emissions rules and potential changes to water and property rights under Chile’s constitutional process may affect operations and investment.
- Prolonged drought and high 2021 spot prices increased reliance on thermal generation and market purchases, creating exposure to fuel and power prices and possible losses when purchase costs exceed contracted sales prices.
- The regulated-price stabilization mechanism defers generation-company collections. Receivables may reach a statutory cap of US$1.35bn; billing differences are not due to earn financial remuneration until December 31, 2025, and are expected to be recovered by December 31, 2027. The deferral creates financing costs.
- Basic-services measures restricted disconnections and allowed customer debt installment plans. A subsequent February 2022 law was expected to produce an additional 2022 receivables impairment of up to ThCh$980,000 (Ch$980m).
- Other risks include regulatory changes to distribution returns and tariffs, foreign-exchange volatility (the peso depreciated 15.8% against the U.S. dollar in 2021), political and economic uncertainty, commodity and supply-chain disruptions, cyber risk, and litigation. Russia–Ukraine conflict effects were described as uncertain.
- Unusual items included Ch$46.6bn of coal and diesel inventory impairments related to Bocamina II, and approximately Ch$17.5bn of expense associated with a voluntary retirement and digitization program. KPMG issued unqualified audit opinions on the financial statements and internal control; management reported that a 2020 IT-controls material weakness was remediated in 2021.
Important facts for investors to verify
- Cash conversion and liquidity: investigate the sharp decline in operating cash flow, negative working capital, near-term maturities and reliance on intercompany funding and refinancing.
- Receivables quality: review collection trends, impairment assumptions and exposure to tariff-stabilization balances and customer-payment relief measures.
- Generation economics: track hydrology, spot-market purchases, fuel and commodity costs, and the effect of new supply contracts on margins.
- Capital plan delivery: verify project schedules, remaining investment requirements and expected returns, particularly for Los Cóndores and renewable projects.
- Debt and related-party terms: check debt covenants, currency and interest-rate exposure, and the terms and availability of Enel Finance International funding.
- Contingencies and reporting estimates: review material litigation and sanctions, and the Ch$466.6bn estimated unbilled energy revenue identified by the auditor as a critical audit matter.