Enel Chile SA (ENIC) 2019 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Enel Chile 9M 2019 Results Conference Call. My name is Justin, and I'll be your operator for today.

During this conference call, we may make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect on our current expectations, are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those anticipated in the forward-looking statements as a result of various factors. These factors are described in the Enel Chile press release reported at 9M 2009 (sic) [2019] results. The presentation accompanying this conference call and Enel Chile's annual report on Form 20-F, including under Risk factors. You may access our 9M 2019 results press release and presentation on our website, www.enel.cl, and our 20-F on the SEC's website, www.sec.gov.

Readers are cautioned not to place undue reliance on these forward-looking statements, which may -- which speak only as of their dates. Enel Chile undertakes no obligation to update these forward-looking statements or to disclose any development as a result of which these forward-looking statements become inaccurate, except as required by law.

I would now like to turn the presentation over to your host, Ms. Isabela Klemes, Head of Investor Relations of Enel Chile. Please proceed.

Good morning, ladies and gentlemen, and welcome to Enel Chile 9 Months 2019 Results Presentation. I am Isabela Klemes, Head of Investor Relations. The presentation will be hosted by Paolo Pallotti Palace, our CEO; and Giuseppe Turchiarelli, CFO. Paolo will walk you through the main highlights and evolution of our strategy and our operational performance, and Giuseppe will detail our financial results.

After this call, a Q&A section that will be open to those connections, our IR team will continue to be available to provide you with any detailed information you may need with respect to the figures included in this presentation.

Thank you, Isabella. Good morning, ladies and gentlemen. Before starting, I would like to share a few words regarding last week's events. During the process, we succeeded in executing our contingency plan in order to continue delivering a secure and permanent electricity supply to our customers, keeping our plants up and running and maintaining the safety of all our workers, which is our first priority. I would like to highlight that our immigration to the cloud as part of our digital transformation plan in recent years also contributed to guarantee the variability and security of our operation.

Let's then start with the highlights of the period. Our decarbonization plan is on track. By the end of December 2019, the Tarapacá power plant will stop operating, and we will then start all the activities related to the decomissioning of this core facility. On the same page, we have begun the construction of the largest power plant in Chile, solar power plant in Chile, Campos del Sol, a 382-megawatt solar power plant; and the expansion of our geothermal plant, Cerro Pabellón.

On customer centricity, we continue targeting long-term partnership with our clients, seeking the stability of our cash flow. In this sense, let me highlight that in this quarter, we have been awarded with a 3-terawatt hour per contract with BHP Billiton for 15 years period starting in August 2021. The energy to be supplied should be 100% of renewable.

Renewable energy PPAs is a trend in our markets and we link from our clients. Recently, we have announced that we secured 2 100% renewable PPA with Anglo American and Collahuasi. The 2 summing up to 4-terawatt hour per year, starting in the period 2020, 2021 for 10 years each. We also continue to cope with the energy transition in Chile.

Last October, Enel Chile subsidiary Enel X together with Metbus and BYD inaugurated the first full-electric pass-through, a comprehensive sustainable transport season, that will feature 100% electric buses with a total of 285, 0-emission public transport units.

All in all, the EBITDA increased 43% during this 9-month period, with a margin improvement from 52% to 59%.

Our adjusted net income, excluding the mentioned onetime effect, grew by 50% at September 2019. On our SDG track record Enel Chile, together with Enel Americas, where the only Chilean utilities included in the 3 different categories of the Dow Jones Sustainability Index.

In addition, Enel Distribución in joining in Chile and Enel Generación is being awarded the ISO 37001. This is an important achievement as the IS0 37001 is an international standard that recognizes the existence of the effective anti-bribery management system.

Now moving to decarbonization on slide 2. As part of this process, with the closure of Tarapacá by year-end, on early 2020, we will start the activities required to proceed with the commissioning process of our core facility. The local community, our local employees and environmental agencies will be involved to guarantee the sustainability of this process.

Before moving on, I would like to recall that the impairment booked at last quarter on Enel Chile and its subsidiary, Enel Generación Chile, will not impact our annual dividend distribution. On our commercial strategy, after the 2 contracts recently signed with Collahuasi in Latin America, we have been awarded by BHP in a comprehensive process to supply energy for 2 of its mining facilities in Chile. In this process, we would supply 3-terawatt hour per year renewable energy for 15 years, starting from August 2021. These contracts increased our free-market sales by 7-terawatt hour per year in the 2020-2021 window period.

Now on Slide 3. In this quarter, we have consolidated our leadership on electric mobility by inaugurating the first electric route Latam, adding 183 new buses, electric buses; building 3 additional electric terminals; and developing 40 digital bus stop, offering a range of new services of led lighting, bicycle parking, information panels and USB charging points to improve the experience of the public transportation clients. In this period, as part of our plan to promote the development of electric infrastructure plan, we will install 1,200 charging points through the country's main highway interstates over the next 5 years.

Along this path, we are promoting the use of electric buses in the mining companies in accounts, not only as passenger transportation but also as the managing resources that will enable the mining site to displace these by green energy, using the available energy of the buses' batteries.

Additionally, and thanks to the collaboration with other public and private partners, we continued our effort to promote the use of efficient heating in order to replace the use of routes contributing the reduction of carbon emission in Chile. Almost 5,000 devices has been already sold since 2017, and we are estimated to avoid 15,000 of tons of CO2 equivalent yearly.

Now let's move on to Slide 4, which presents the breakdown of our CapEx allocation as of September 2019, reached $296 million. Customer CapEx of this period totaled $55 million, 27% higher than September 2018, with the main investments allocated in the construction of 5 new substations.

Asset management CapEx reached $83 million, with a $6 million increase mainly due to activities on our network associated to a lot improvement, investment, corrective maintenance and health and safety environment, offset by the onetime effect regarding the nonscheduled maintenance in Tarapacá power plant in 2018.

On growth, our development CapEx reached $178 million, mainly allocated to the new renewables, which recorded an amount of $156 million.

Let's move to Slide 5. The net production increased 11%, amounting to 16 terawatt hour, driven by 0.9 terawatt hour of higher renewable generation, mainly coming from EGP; 0.5 terawatt hour of higher thermal generation due to the higher variability of gas from Argentina, mainly in San Isidro power plant; and higher availability of Tarapacá, which resulted with a reduction of energy purchase, improving our margins.

Physical energy sales was in line with last year with the following effect, plus 2.5 terawatt hour of 5 years contracted sales with 3 customers, following the trend of client immigration to the free market and the beginning of new contracts with other market players. 0.3 terawatt hour of higher sales to the spot market, offset by minus 2.6 terawatt hour or lower consumption of distribution company, mainly associated with the immigration of customers to the free market.

All in all, the energy balance of Enel Chile was positive, bringing margin to our operation due to the lower generation cost, lower energy purchase costs as a consequence of our [plain] plan's higher availability and positive impact of the currency exchange and corporate indexation, once comparing to last year's figure.

Slide #6. Our customer base increased by 59,000 clients during this period, reaching 1.96 million of clients, with a total energy distributed of 12.9 terawatt hour. On the resilience of the grid, we have been focused in the critical areas for SAIDI and SAIFI, replacing approximately 41 kilotons of cables in our low-tension grids and executing more than 28 kilometers of grid extension and the reinforcements.

Despite the fact that no one of our 33 (inaudible) are above the regulatory limits for 2019, our interruption index, SAIDI, in the last 12 months shows an increase of 14% with respect to last year, mainly due to the change made by SEC, the supervisory entity in Chile, in the SAIDI force measure methodology and the climate events as we guessed during the end of May and June.

Aiming to improve the quality of service, we are focusing in the installation of telecontrol equipment, reaching 1,902 units installed and the implementation of different technologies for monitoring our grids. Our goal is to install up to 940 units within the next 3 years. As part of our effort to enhance efficiency, energy losses decreased from 5.1% to 4.9%. All in all, the performance of our network continues to be a benchmark for the South American area.

Let's go to the progress on SDGs on Chart #7. At Enel Chile, we have integrated the sustainable development costs in our business targets. As a result of this strategy, we are complying with SDG 9 and 11 to build a sustainable industry, infrastructure and cities by increasing the buses fleet and it's by installing 312 electric vehicle charges.

On February, it's worth mentioning that 100% of our web applications are covered in cybersecurity solution, guaranteeing data privacy and the reliance of highly digitized operations. We also have focused our activities with local communities in agreement with the sustainable development goals for 7 and 8, recognizing the synergies between social progress and corporate success.

Looking at the business strategy related with climate change, our generation metric is evolving to report our journey to 0-emission generation mix. This year, we have reached 61% of emission-free production.

Our inclusion in the 3 categories of the Dow Jones Sustainability Index for the second consecutive year is a recognition of our commitment towards developing a sustainable business model, leading their energy transition in promoting responsible business practices.

I will now hand over to Giuseppe, who will go through the details of our financial summary for the period. Giuseppe?

Thank you, Paolo. Good morning, everyone. Let me present you the financial highlights for the 9 months of 2019, summed up on Slide 9.

Revenue increased 18% or $466 million, primarily due to the higher energy sales, higher sales related to the gas commercialization and the extraordinary income to the early termination of Anglo American PPAs signed in 2016.

Our EBITDA was up by $356 million or 46 -- 43 percentage versus last year's results, boosted by the better performance in both generation and distribution businesses and the CPI onetime effective Enel Generación. Therefore, our EBITDA margin grew by 680 bps.

Group net income is in line with 9 months '18 figures. The onetime effect to relate it to the decarbonization agreement signed in June 2019 has been fully compensated by the positive operating performance in the first 9 months of the year, the outcome from the simplification of our corporate structure in Enel Generación and the early termination of Anglo American's PPA.

Finally, our net debt as of September 2019 compared to the January 1, 2019, increased $73 million. And I will give more detail in the following slide.

Now on Slide 10, let me show you the drivers behind our EBITDA growth. In the third quarter, our EBITDA increased by 18% or $61 million. As a result of, first, higher margin of our generation portfolio, mainly associated to lower fuel costs as a consequence of the agreement with Argentinian gas supplier, lower international coal price unless energy passes its cost; second, the recognition of the leasing agreement of Enel X associated to the 183 additional electric buses in operation, partially offset by higher holding costs mainly due to the collective employees' negotiation held this year.

In the next slide, I will give you more color on the EBITDA evolution for the 9 months 2018 -- '19 versus 9 months 2018 business line that explains the increase in our accumulated EBITDA of 43%.

In Slide 11, a big dive on the financial performance of our generation business. Our generation EBITDA margin, which includes the performance of Enel Generación and Energy Green Power, excluding the PPA yearly estimation improved from 40% to 46%. This operating improvement was a consequence of a more efficient generation mix, better availability of our power plants, together with an optimization of our thermal generation cost due to the agreement with the Argentinian gas supplier and lower international coal price.

On our efficient generation mix. Let me remind you that our net production grew by 11%, totaling 16 terawatt hours mainly due to the higher generation from renewable energies, especially wind and solar, along with the higher thermal dispatching related to a better availability of our plant, especially San Isidro in Tarapacá. Moreover, our hydro generation represented a slight improvement of 168 gigawatt hours, mainly related to higher dispatch of El Toro power plant. As a result, our EBITDA increased 52%, reaching $986 million in the 9 months 2019, and our EBITDA margin increased 680 basis points versus 2018.

Please, let's move on to Slide 12. To explain the most relevant operating fact of our distribution business. As of September 2019, the EBITDA of annual distribution, and Enel X grew by 10% or $20 million, mainly due to better performance on the distribution business as a reduction of energy losses. Higher energy distributed an additional of 183 new electrical buses to the public transportation system through Enel X, along with Metbus and BYD that contributed with additional $11 million.

Now on Slide 13, let's take a deeper look at the main driver of our net ordinary income. Depreciation and amortization, excluding the impairment effect to reach $262 million, an increase of $33 million, mainly related to the incorporation of EGP assets.

Financial results and other amounted to an expense of $157 million, an increase of $49 million mainly due to higher financial expenses related to Elqui projects in Enel Chile, Chilean pesos devaluation and incorporation of Enel Green Power Chile debt.

Here, I would like to recall that in June 2019, Enel Chile refinanced a loan of Enel Green Power with Enel Finance International, reducing the spread from LIBOR plus 4.94%, with a 6-month payment to a LIBOR -- to a spread of LIBOR plus 1.40%, with a yearly payment. This will enable to reduce Enel Chile financial expenses by $25 million per year.

Additionally, in September, we entered in a new amendment, fixing the interest rate in order to eliminate the risk of interest rate fluctuation and extending the duration of the intercompany loan.

Income tax decreased by $90 million mainly as a result of lower tax expenses relating to the coal power plant impairment booked in the second quarter. And positive impact on the merger of the Gasoducto Atacama Argentia with GasAtacama Chile, partially compensated by higher taxes due to PPA early termination booked in the first Q 2019.

Minority net income decreased by 66%, mainly as a consequence of a higher stake of Enel Chile in Enel Generación Chile since April 2018. As a consequence of all level ordinary 2019 accumulated net income is in line with the previous year.

Now moving to the cash flow on Slide 14. FFO in 2019 amounted to $559 million, which continues to be sufficient to fund 100% of our current CapEx thus resulting in a positive free cash flow. The net free cash flow result is still impacted by the seasonal effect related to the 2018 dividend payment. As we have anticipated in our call, previous call, which we were paid to our shareholders in January and May 2019, with a 60% payout.

Let me now go through our debt on Slide 15, our gross debt decreased by $120 million versus September 2018, amounting to $3.65 billion, primarily due to the amortization of the debt raised to finance Elqui project and Enel Generación Chile local bond amortization, partially offset by new intercompany debt to be dated, used to refinance Elqui debt, a new financial debt due to the application of IFRS 16, among others.

Of the total gross debt, 59% corresponds to bonds and 41% corresponds to loan. As of September 2019, our net debt-to-EBITDA ratio reached 2.1x versus 2.7x net debt-to-EBITDA ratio as of September 2018. The average cost of our debt reached 5.4% in September 2019 as a result of a long-term refinancing of Elqui remaining debt. The average term of our debt is 6.7 years.

Our net debt at the end of September 2019 compared to January 1, 2019, adjusted by IFRS 16 closing increased $73 million, mainly due to the seasonality effect that I have explained in my previous slide.

As I mentioned in Slide 13 of what concerns the $644 million Elqui loan, we signed an amendment changing the interest rate from variable to 2.82% fixed -- percent fixed. This modification eliminates the risk of volatility in financial expenses, associated with the potential increase of the interest rates in the future. Moreover, the payment schedule of this debt has been changed now starting in June 2024, which increased the average term of the debt from 4.4 to 6.1 years.

Finally, on our debt amortization, we have an annual average of $245 million maturating in the next 4 years.

Now I will hand over to Paolo for a brief overview of the energy tariff stabilization mechanism.

Thank you, Giuseppe. Let me give you some colors on the energy tariff stabilization mechanism. The Chilean government submitted a bill proposal to the Senate and Congress houses to approve a new law, known as the energy price stabilization mechanism, aiming to defer the increase in the tariff to the final regulated customers. This bill was signed by the Chilean President, Mr. Sebastián Piñera, and enter into force on Saturday, 2nd of November with the publication on the official gazette.

Under the approved law, regulated consumer tariffs will be frozen at first half levels, and will begin to be adjusted by inflation from January 1, 2021, onwards and the adjustment for regime in the PPA -- generation PPAs will create an account receivable in favor of the generation companies. Starting from 2021 onwards, the new regulated -- renewable PPAs will come into operation, therefore, operationally allowing a positive balance to settle the generator's accounts receivable as shown in the graphics. Total generation accounts receivable shall be published twice a year based on information that the National Energy Commission will provide.

Below also establishes that all the accounts receivable shall be recovered by generators by 31st December 2027 at the latest. Moreover, a total amount of USD 1,350 million has been fixed as a maximum exposure for the system between the publication of the law in July 2023.

Interest on receivables would be applied on any eventual standing balance as of the 2025 onwards. We are currently assessing different scenarios on commodity prices, inflation and foreign exchange ratio to evaluate all the alternatives to mitigate the cash impact of this law enforced.

Before starting in the Q&A, I would like to highlight some takeaways. First, on the sustainability of our growth. We continue to focus on improving our margins, taking advantage of our renewable portfolio and our investment in the series of our grid and the efficiency of our operations. With our strategy of adding renewable capacity, we are able to provide to our clients, 100% renewable PPAs, coping with the sustainability requirements, bringing us more predictability on our long-term cash flows.

All our SDG's commitments are on track. The first Latam electric route in transportation system of Santiago and the closure of our core plants are just 2 examples on how our strategy is aligned with SDG goals with the ISO 37001 certification. And our inclusion in the 3 categories of the Dow Jones Sustainability Index for the second consecutive year and also recognition of our commitment towards developing a sustainable business model, leading the energy transition and promoting sustainable business practices.

To conclude, I would like to reinforce that margin sustainable growth and cash flow stability will continue to be one of our priorities. And therefore, we keep working on all the activities to mitigate potential impact.

Thank you for your attention, and let's now open the Q&A session.

Thank you, Paolo. I now request the call operator for the call section. Operator, please proceed.

(Operator Instructions) And our first question is going to come from Enrico Bartoli from MainFirst.

First of all, I have a question regarding the stability tariff mechanism that you explained just now. I'm wondering if you're going to have an impact at the P&L level for that, or there will be only a cash impact?

In the case, if you can quantify the impact on EBITDA that you expect for '19, 2020 and the coming years? And if you have any discussions ongoing with the government related to any other possible measure for the mitigation of electricity tariffs.

The second question is related to the expansion of your renewable capacity. If you can update us on the amount of capacity that you expect to be installed by the end of the year and in 2020 and '21?

Then I have a question regarding Slide 5. You highlighted a different mix in your sales with more exposure to liberalized customers. If you can give us -- elaborate a bit on the impact that this has on your margin.

And finally, if you confirm the $1.7 billion EBITDA target that you have for the full year 2019?

Okay. Thank you, Enrico, for the question. Let's start with the first regard the stability system mechanism. What we can say that this mechanism should follow the account treatment of the current, let's say, a framework that is already in place. So for the time being, and you may imagine that we are still working on this aspect because the publication below is very recent. We do not expect any significant impact from the economical point of view.

And regarding the expansion on renewables, we have announced in our last plan, a growth between '19 and '21 of 1.1 gigawatts of renewables capacity. On these developments, we are developing -- we are building the largest solar plant that this campus has shown that is under construction, and we expect that we will come online in the second half 2020.

We are, let's say, working on the third unit of Cerro Pabellón. And the same -- we already started the works, and we expect that it will come online second half 2020.

At the same time, we are developing additional projects of solar plants that should come in -- the work should start early 2020 in order to have the facility online and in 2021. So this is the evolution to match the deadline that we have on our business plan.

As I mentioned, also, in another call, we have a very strong pipeline. So we are evaluating additional projects that may come online, and we will -- we can present these projects with the new plan that will cover the 2020-2022 period.

Regarding the question on margin, let me -- your point is regarding the evolution of our sales, if I understood correctly?

Yes. The sales mix.

The sales mix. Yes. You -- okay. The situation in the country is that -- there is a trend. At least, it is not so strong, but it's a trend ongoing of switching of potential free market from the regulated into the free one. So what -- with yesterday, consequence, so this is that you have larger amount of clients in the free market arena and a contraction of the consumption of the distribution.

Now on this situation, we are having a -- both approach of securing that -- the margin in the regulated business and gaining the largest market share on the free market. This is going through long-term contracts with larger clients like nice companies. That is going to secure our margin, free cash flow for long term and also targeting the medium and small clients where you can have shorter-term condition for the contract.

All in all, we see the evolution of our portfolio of our sales along the next 4 years, quite resilient. And we see, let's say, that the margin can be -- kept almost stable around the next, let's say, 3, 4 years.

The last one is regarding the EBITDA? We can confirm the target of $1.7 billion by year-end.

And our next question comes from Javier Suarez from the Mediobanca.

This is Javier Suarez at Mediobanca. 2 or 3 questions on my side as well. The first one is a follow-up on this new law with the tariff on the tariff stabilization. So the thing that you have mentioned is that you're not expecting any P&L impact, is that is correct? Can you give us an indication on the amount the accounting receivable that you are forecasting for the year 2020, '21, '22? In the next few years, you have to have a sense on how that may affect your, obviously, working capital? And that should be reflected on our growing accounting receivable.

And also at that aspect, are you assuming in your comment that the net present value of this new law on tariff stabilization is 0. And therefore, that -- all the cash flow collection that you have expected is going to be finally collected by the company without any damage related to the time value of the money. Because if not, there should be a negative effect for these legislations. If there is not a full compensation for the time value of the money, that negative effect should appear through your P&L, correct? So that is the first question.

Then the second question is on the margin for the generation business, there has been a sizable increase on the EBITDA margin. And you mentioned during your recent presentation that there is a significant savings in terms of coal price and natural prices -- natural gas prices. If you can elaborate on what are your expectations for the next few quarters? I'm particularly interested on your natural gas prices.

And then the final question is on the profitability on the EBITDA margin for the network business. There is a slight decrease on the EBITDA margin from 15% to 14%. If you can help us to understand the reason for that.

Okay. Thank you, Javier, for the question. Regarding let's start again with the tariff mechanism. Let me start from the first point. Indeed, it is the [truthful] neutrality regarding the NPV effect. Honestly, this is a question hard to answer because the evolution of the mechanism is also linked not only to the contents of the law but also due to the external effect, foreign exchange, the commodities, the IBC effect.

And so today, we can run a lot of scenarios where we can have a negative NPV because you have seen already that there is no, let's say, interest in the first period. But we can also run other scenarios where due to the exchange rate, it could be fully neutral. So to have a full evaluation of the impact there in terms of NPV. It depends on the scenario that you are running. So there is the real situation, the mechanisms -- in which the mechanisms work.

The other question regarding the tariff mechanism sorry is -- sorry, I missed the other...

Yes, the other question is if you can give us a quantification on the total amount of the receivable or regulatory receivable that you're expecting to have in 2020, 2021, 2022, in the next few years, the size of that receivable?

Yes. You see the regulator has ran his on simulation. And this simulation has been done considering flat currency exchange. So in this situation, EBITDA, it does assume that, all in all, impact in the system is in the range of $1.3 billion. That is the reason why in the law has been inserted as sort of long-term stop between states and amounts. So this is the reference that we have.

As I mentioned, this depends on the exchange rate. The number, it should be run with the current exchange rate. So I'm assuming that the analysis made by the regulator, it should be in the range of CLP 720, CLP 715 exchange rate between Chilean pesos and dollar.

And the linked to the exchange rate, this is the amount that all the system including -- this means that all the players that today has contract with the distribution. So the main 4 -- again, the main 4 largest generators, plants, all the other player, included in those will bear the cost of all the amount.

Coming back -- sorry, to the point of profitability on international business, the improvement of our profitability is based also regarding the thermal generation on the availability since December -- end of the year 2018 of the gas coming from Argentina. This is an interval-term contract but gives us a quite good spread considered to the regular gas coming from the G&L. And the spread should be in the range of 20%, arriving at the provinces of the plant. So this gives us a quite good margin also in thermal generation, and give us the possibility also to sell to the spot -- and to limit the amount of energy debt that we are buying to the market.

The last point of profitability is on -- and distributed business, profitability and distribution. Just to have a full comparison between first 9 months of 2018 -- first 9 month of 2018. The number that we had in 2018 was -- with inclusion of analytics that in 2018 -- as a contribution of $4 million.

Looking at the second evolution of the pure distribution business, we see an increase of total amount of approx. $5 million. That is driven by the volume effect, the normal technical and the improvement of losses, offset by, clearly, the, let's say, the reimbursement of the -- maybe smart meters and some additional costs related to the normal tech.

(Operator Instructions) Our next question comes from Ezequiel Fernández from CrediCorp.

I have 4 questions. I would like to go one by one, if you don't mind. My first one is related again to the stabilization fund. I think that it's already clear what you talked about, but I wanted to know if this affects your dividend payout of 70% expectation for 2020.

Okay. As I mentioned, we are running all the scenario considering also the potential evolution that we have seen. We see it in our forecast regarding the new plant. According to the analysis that we are doing -- we do not expect an impact from accounting and so from an economic point of view.

And regarding the impact of cash, we are evaluating which could be the evolution of the variables, that has an impact on the cash and which are the measures that we can put in place considering the traction, considering previously the law, considering that it is a mechanism where the regulator will publish every 6 months, the real amount related to each of the player involved in the system. And so we are evaluating, which are all the mitigation that outstand -- limit any cash or any impact on cash.

At this point, do the analysis -- do the factor analysis, it's already -- is still ongoing, I cannot -- I would like to avoid to comment regarding the potential future impact on our network.

Okay. Understood. Great. My question -- my second question is related to the BHP new contracts. I wanted to know if you could give us a sense of -- out of the 3-terawatt hour per year, how much you expect to service that with renewables, solar and wind. And how much with uncontracted hydro?

These are contracts where we are supplying with our renewable portfolio. So there is no direct affiliation or direct link between the plants or technology and supply of renewable energy. This is the way towards the standard way with this kind of contracts. So we are assuring that the energy that we've inserted in the grid will be the amount that BHP is going to consume. So there is no direct allocation between different technology. But there is a justification that all the energy that BHP and the other players are going to use are coming from renewable plants.

Yes. Great. I understand that there is no contractual commitment in terms of volumes coming from certain facilities or other ones. I just wanted to get a sense if you believe that you can fulfill the volumes of the BHP contracts, maybe 70%, 80% or 90% with solar and wind and the rest perhaps with hydro. But so I'm trying to get an idea of how much you think you can fill up that contract just with solar and wind?

The only way in which I can answer and comment to your question is that we are going to enter into the system by the end of 2021, at least 1 gigawatt, 1.1 gigawatt of renewables capacity or more considering also the pipeline that we are evaluating in this period. So the -- and the mix of the capacity that is going (inaudible) solar, as I mentioned, we have one plant in -- the structure on a project under evaluation and development. And the small amount in wind, we have a plant, and it is one of the 35-megawatt capacity that we plan for next year -- I mean by the end of 2021.

So this is the mix that we are providing with them, and so we expect that this will part of the production that we are going to use. We have that large amount of our volumes is coming from our hydro assets.

Okay, that's great. And finally, a final question, a housekeeping question that has 2 parts. The first one is related to the transmission cost, P&L line on the generation units, that was pretty low this quarter, $30 million. It's usually around $70 million or $80 million. If you could give us some color on why was it so low during this quarter. And then if you made use of the (inaudible) this quarter and, ideally, how much gigawatt-hour?

Sorry, I heard not very well. The second question is more (inaudible) and...

Yes, sorry. Yes if (inaudible) if you made use of that facility this quarter? And for how much gigawatt hours if you could tell us that. Do you need me to repeat the first question?

Yes, please.

Okay, great. The transmission cost or the toll cost, transport cost line at the generation unit was quite low during this third quarter, around $30 million, when it's usually around $70 million or $80 million, if you could tell us why if it's something very specific, maybe I can take it off the call with the Investor Relations team.

Okay. Regarding the answer on (inaudible). We are still going to use in the fourth quarter 2019. The total amount of gigawatt-hour that we are going to use and produce, depending also on how could be the evolution on the other technology, especially on hydro. Of course, you can see that Chile is going into a draft at the moment, the impact was mostly on the central area. And so the impact could be limited, and it could have some -- impact to be limited in the plans that we have in the south.

So for this reason, we are -- we have the availability of (inaudible), we can use also the cheaper gas and we'll see dependence on the evolution of the other sources, the other technology.

Little bit -- the factor of the -- sorry, that is a quick question -- a quick answer regarding the cost of transportation. The cost of transportation is higher also because we have included the cost for transportation of gas.

(Operator Instructions) I'm showing no further questions. I would now like to turn the call back over to Ms. Isabela Klemes, Head of Investor Relations of Enel Chile for closing remarks.

Thank you, operator. Well, there is no more questions, I will conclude the results conference call. Let me remind you that the Investor Relations team is available for any doubts that you may have. Many thanks for your attention.

Thank you. Ladies and gentlemen, today's conference -- ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.