Enel Américas S.A.
Q3 2019 Earnings Call Transcript

Published: 28 Oct 2019

[Operator:]

Good day, ladies and gentlemen, and welcome to Enel Americas Nine Months 2019 Results Conference Call. My name is Judy, and I will be your operator for today. After the speakers' presentation, there will be a question-and-answer session.During this conference call, we will make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements could include statements regarding the intent, belief or current expectations of statements Enel Americas and its management with respect to, among other things, Enel Americas' business plans; Enel Americas' cost reduction plans; trends affecting Enel Americas' financial condition; or results of operations, including market trends in the electricity sector in Chile or elsewhere; supervision and regulation of the electricity sector in Chile or elsewhere; and the future effect of any changes in the laws and regulations applicable to Enel Americas or its affiliates.Such forward-looking statements reflect only our current expectations and 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 include a decline in the equity capital markets of the United States or Chile, an increase in the market rates of interest in the United States or elsewhere, adverse decisions by the government, regulators in Chile or elsewhere, and other factors described in Enel Americas' annual report on Form 20-F, including under risk factors.You may access our 20-F on the SEC's website, www.sec.gov. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of their dates. Enel America 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.I would now like to turn the presentation over to Mr. Rafael de la Haza with Enel Americas' Head of Investor Relations. Please proceed.

[Rafael de la Haza:]

Thank you very much. Good afternoon, ladies and gentlemen, and welcome to our nine months 2019 results presentation. I am Rafael de la Haza, head of Investor Relations. And here with me is our CFO of the Company.Let me remind you that this presentation will follow the slides that have been already uploaded into the Company's website. Following the presentation, we will have the usual Q&A session.Now let me hand over the call to Aurelio, who will start by outlining the main highlights of the period in Slide number 2.

[Aurelio Bustilho:]

Thank you, Rafael. Good afternoon everybody. Let me begin this presentation by highlighting the successful capital increase that our company concluded on late-August. This was the largest capital increase in cash in the history of the Chilean market and thanks to our shareholders we were able to have 99.5% of subscription, reaching more than $3 billion that will allow us to continue with our growth strategy and adding value to our shareholders. I would like to thank you, our shareholders for this strong confidence on our strategy.Let's now focus now on our results for the first nine months of 2019. In our Americas EBITDA for this period reached $2,972 million, an increase of 25% compared to the same period of 2018 despite the Company devaluation in four countries where we operate specially in Argentina and Brazil. Without the negative effects impact, EBITDA would have increases by 41%. During this period, we were able to reduce our OpEx by $35 million and this reduction is mainly explained it by efficiencies in Brazil and Argentina.Total net income increased by 42%, while group net income increased by 60% reaching $822 million. This is explained it by better operational results partially offset by higher financial expenses in connection with a purchase of Enel Sao Paulo. We continue our focus on sustainability reflected in the fact that we are the only South American utility group included in three different categories of Dow Jones Sustainability Index.Let's now take a look on our CapEx for the period in the next slide. Total gross CapEx for the period amounted to $1,078 million, an increase of 0.8% compared to the same period of last year. Without considering FX effects, our investments increased by 16% to its operated effect. CapEx is well balanced between asset management, asset development and customers with 38%, 31%, 30 respectively.Distribution and low carbon services capture most of our CapEx with 89% share in line with our growth strategy. Distribution business, we have to mention that effect of consolidation of Enel Sao Paulo Brazil, which represents 70% of our total distribution CapEx. From a geographical point of view 51% of investments are devoted to our subsidiaries in Brazil.Now, let's analyze the main operating indicator by business line on the following slide. On generation business, our net production reached 31.4 terawatt hours, an increase of 2% compared to the same period in 2018. From the total generations, 61% corresponds to hydro generation, which increased by 1 terawatt hours mainly due to higher generation in Cachoeira Dourada, Volta Grande and our hydro plants in Colombia.Our energy sales increased by 12%, reaching 54.4 terawatt hours, this is explained by the above mentioned increasing energy production but also the energy production construct in Brazil that allow us to improve our margins. That's aligned distribution business in the next slide.Distribution energy increased by 26% reaching of almost 90 terawatt hours, which 32 terawatt hours are explained by Enel Sao Paulo. In homogenous terms, our energy sales remained substantially flat compared to last year. Regarding number of end users, we have an increase of about 86,000 despite the client reclassification process that we were doing in Brazil and Argentina.I would like to mention that, at the beginning of July, we concluded the tariff reset processing Enel Sao Paulo and we expect to have the new tariff scheme in Columbia in place during the next coming months. Other than, we do not have any tariff which set process on Q2 other than two.On the following slide, we will see the performance of Enel X and retail business. Enel X business, you can see that regarding e-City, public lighting points remained at almost flat, reaching 401,000 points of utilizing. We had an important growth of 146% in photovoltaic and storage in the industry.Regarding e-Home, we had a significant increase in the transaction of third-party billing and collection services, while the level of contracts of micro-insurance was slightly lower. Finally, in e-Mobility, the number of charging stations increased from 10 to 185, especially in Argentina and Colombia.Regarding energy free markets business, the number of delivery points increased by 16%, reaching 2,730 delivery points and energy sold amounted to 12.3 terawatt hours, 6% lower than last year.Looking at our gas free market business, the number of delivery points increased by 10% and the gas sold increased by 49%, reaching an amount of 0.8 terawatt hours. The competitive advantage of Enel Americas due to its presence in the major urban areas of the different countries in which the Company operates will offer us the possibility to rapidly expand these businesses.Let's have a focus now on our efficiency of the period in next. Starting from $1,128 million of OpEx reported on September last year, we have to add the OpEx of the first five months of 2018 of Enel Sao Paulo in order to properly see the differences in efficiencies gained in the period. This way we get to a pro forma OpEx of $1,253 million for nine months in 2018.And from this amount, we obtained efficiencies for $35 million mainly due to lower OpEx in Enel Sao Paulo and lower personnel expenses in Argentina. In addition to this, we see a reduction of $10 million explained by FX, reaching a final OpEx of $1,307 million, which represents a reduction of 8%.On the following slide, we will make a focus on sustainability. Sustainability is key driver for creating long-term value among our shareholders and all our stake holders. In this way, our strategy integrates our commitment to United Nations of sustainable development goals, recognizing the synergies between social progress and corporate services.Enel group promotes economic development in the communities where we operate, taking actions to promote share value creation with all these communities with that we operate. Along these lines, the number of number of beneficiaries increased since 2015, totalizing 4.5 million of beneficiaries on SDGs 4, 7 and 8; on SDG 7 important to mention the increase to acquisition of Enel Sao Paulo.Enel Americas has also contributed to SDGs 9 and 11 relate to build a sustainable industry infrastructure and fees. In this way, Enel Americas relies on its low carbon value-added products and services, where the smart meters and Enel X business are relevant to the development of urban areas. In addition in order to prevent cyber security incidents, we cover all our web application exposed to internet with advanced cyber security solutions.Enel Americas has contributed to fight against climate change by generating a 56% of its energy with hydro assets during this period. Our inclusion in three categories of Dow Jones Sustainability Index for the second consecutive year is recognition of our commitment towards developing a sustainable business model, leading the energy transition and promoting responsible business practices.Let's move to financial summary for the period on next Slide. EBITDA for the period reached $2.97 billion, a 25% increase compared to the same period last year. Once, we exclude extraordinary effects of positive impact effects for the resolution in the regulatory in Argentina, EBITDA increased by 16% to $2.75 billion.Group net income came in at $822 million 60% higher versus last year explained by better EBITDA, partially offset by increase in financial expenses mainly in Enel Sao Paulo. FFO stood at $861 million to 81% lower versus last year starting from an increase in EBITDA and this lower result is offset by a negative impact in net working capital explained by two main sources.The rebound of net working CapEx was taken in 2018 mainly Brazil. This effect will be almost compensated by the end of 2019 with the new actions. And the non-cash impact of regulatory actions, regulatory assets, resolution Argentina, group net debt reached $4.5 billion 32% lower versus the end of 2018 mainly explained by the payment of debt in Enel Brazil in connection with the purchase of Eletropaulo, which was paid with the proceeds coming from the capital increase recently conclude.Let's take a look at the main group of business line drivers for EBITDA on Slide 10. On this slide, you can see performance summary of our businesses. It is worth highlighting that hydro and network accounted for 79% of available EBITDA after the consolidation of Enel Sao Paulo, confirmed the well balanced risk return profile of our business model.It is also worth to mention the great performance in our retail business, reached an EBITDA increase of 107% versus the same period of 2018. Therefore, the low-carbon EBITDA reached to 87%. EBITDA is confirmed by renew of this generation distribution retail and Enel X, and not included a thermal generation and tradel; finally, our thermal generation business increased by 29% mainly due to better results in Costanero and Fortaleza.Going in the sale on second different countries, let's improved to Argentina -- let's move to Argentina on Slide 11, EBITDA in Argentina increased by 83% or $195 million, reaching $431 million. In operational terms EBITDA increased by $341 million partially offset by a negative effect impact of $146 million. This important increase in EBITDA is mainly explained by the positive effect coming from the agreement reached with government in connection with the past liabilities which entailed the positive impact of $213 million at EBITDA level.In generation business, EBITDA increased by 44% reaching $161 million. Without considering FX effect, EBITDA would have increased by $96 million or 86%. This is mainly explained by the higher managing payments generation are dollarized partially offset by the lower physical sales due to lower demand. In distribution business, EBITDA increased by 118% or $147 million mainly explained for the already mentioned one-off effect -- regulatory effect.Demand in our concession area was 6% lower compared to last year, while the number of clients slight decreased by regulatory certification progress on our customer base. It is important to mention, that some weeks ago the government announced that the tariff increase that we were supposed to have announced this year was postponed to January 2020, where we are going to see an increase of 19% in tariff.Additionally, the amounts that we are not collecting during this month due to the mentioned delay will be recorded in seven installments starting on January next year. CapEx increased by 62% compared to last year on the other hand mainly as a consequence of investments made in the distribution business due to quality plan in Edesur and to improve the reliability of the grids in our concession area.Let's continue with Brazil in the following Slide. In Brazil, overall EBITDA is in the period increased by 48% of $385 million including $96 million negative impact coming from FX. EBITDA in generation business increased by 35% or $64 million which is explained by better results in Fortaleza as a result of Federal tax adjustment covering from 2013 and 2018.Our EBITDA in distribution business increased by 49% or $323 million mainly explained by the consolidation of Enel Sao Paulo, we also have better results in Enel Rio and Enel Goias partially offset by a decrease in Enel Sera. I would like to highlight that after the tariffs review that we have seen Enel Sao Paulo in July, we do not have any new tariff revision process on our distribution companies in Brazil until 2023.This means that a new walk -- the walk there is under discussion these days by Enel will not apply to our distribution companies and will remain with a 12.3% we will protect what until the tariff review periods. CapEx in Brazil decreased by 7% compared to last year reaching $549 million mainly explained by reduction in Enel Sera and Enel Rio due to higher investments last year related to tariff review process concluded for period in 2018 and to 2019 partially offset by an increase in Enel Sao Paulo.Let's move to Colombia on the following page -- the following slide. EBITDA in Colombia increased by $18 million or 1% compared to last year despite the negative impact of $117 million due to currency devaluation. Without effects in fact EBITDA would have increased by 13%. In generation businesses EBITDA decreased by $7 million or minus 1%, but in recent terms, we had an increase of 11% mainly due to higher sales revenue as a concept of higher prices due to higher production generation production. This was offset by negative FX effect impact of $68 million.In distribution business, EBITDA increased by 4% or $15 million mainly explained by higher demand and higher tariffs. This was partially offset by FX impact of minus $47 million. It's important to highlight the distribution business results also includes a contribution of analytics which in Colombia showed an important increase in public life insurance services and electric infrastructure project to big clients. CapEx in Colombia decreased by 2% due to negative FX impact, in local currency CapEx increased in 80% compared to last year.Now let's analyze Peru on the slide number 14. EBITDA in Peru increases by 2% or $12 million which is $411 million in this period. Generation business EBITDA decreased by 6% or $17 million from which $4 million were expanded by a negative FX impact. The decrease is mainly due to the positive one-off effects that we've resisted last year in connection with insurance compensation due to El Nino Costero flood. This is partially offset by higher energy sale and higher average sale price.In distribution business, EBITDA reached $196 million, 31 million or 18 million or 18% higher than last year. Sales increased by 2.8% compared to last year and average sale price was also higher, the number of clients increased by 14,000. Total CapEx decreased by 7% compared to 2018.Lets me now comment our financial performance on the following slide, starting from $2,972 million EBITDA, the Company registered depreciation and amortization for an amount of $811 million, 22% higher than the last year, mainly as a result of the consolidation of Enel Sao Paulo reaching EBITDA of $2,160.Net financial results amounted to minus $327 million, which represents a higher cost of $27 million. This is mainly due to higher financial expenses in Enel Brazil related to the financial expenses coming from the purchase of Enel Sao Paulo.Income tax registered in the period was $613 million, $48 million higher than last year. Effective tax rate during the period decreased from 39% to 33%, mainly due to the reduction in income corporate tax rate in Colombia. Total net income amounted to $1,221 million while attributable net income reached $832 million, a 60.3% increase, compared to the previous year results.With all these elements, let's analyze the cash flow in Slide number 16. FFO, funds from operations amounted to $861 million, starting from EBITDA of $2,972 million. This result includes a negative net working capital in the period for an amount of $1,168 million, due to rebound of net working capital actions taken in 2018, mainly in Brazil and in Colombia and this effect be almost totally compensated by the end of 2018 with new actions.In addition, we have a non cash impact due to regulatory asset resolution in Argentina. Taxes paid during the period amounted to $496 million without any relevant deviation the higher earnings before tax. Net financial expenses amounted to $447 million, higher than previous year, and 63.1% mainly due to the debt of the new perimeter of Enel Sao Paulo and debts related to the acquisition of Eletropaulo now and Enel Sao Paulo.Net cash flow amounted to minus $861 million during the period after investing $1,078 million in maintenance and growth CapEx, as indicated in the previous slides. Dividends paid by the Company amounted to $644 million to the period, now the dividends paid. Extraordinary operations amounted to $3,041 mainly as a consequence of the capital increase concluded in August. Without this effect, total net debt decreased to $2.15 billion, compared with December 2018.Let me now analyze the debt of our company in the following slides. Gross debt amounted to $6.28 billion, a decrease of $2,435 million versus December 2018. The reduction is mainly explained by the payments of debt of Enel Brazil in connection with the purchase of Enel Sao Paulo. This debt which amounted to $2.5 billion was paid in August 2nd with the proceeds of the capital increase.From the operational perspective, it is important to mention a decrease in the debts [indiscernible] offset by an increase in Enel Goais, Enel Sao Paulo, Enel Rio and Codensa. In terms of currency despite the reduction of Enel Brazil's debts, half of our debt is still in Brazilian real and also half of it is located in Brazil as you can see in the right side chart. The cost of debt remained flat versus December 2018.Let me now continue with the focus in our last two acquisitions in Brazil distribution business as we're doing every quarter. Starting with Enel São Paulo we are very satisfied with the performance of the Company. EBITDA reached at $438 million at the Enel Americas. If we compare the number with real in Brazil in debt, we see that EBITDA increased by 78% mainly due to OpEx reduction and also higher tariff due to the tariff revision process concluded on July of this year.At net income levels we have a positive result of BRL546 million while last year this company reported a loss of BRL158 million in Brazilian GAAP, this improvement is explained by a better operational result and a better financial result do with liability management. Gross CapEx reached $650 million and it was mainly allocated to digitalize and modernize distribution network.OpEx decreased by 14.4% as a result of the deepening of the integration and optimization process of Enel São Paulo in Enal Americas group which started on July last year and has allowed us to reduce the operational cost. Debt profile has improved compared to the previous year thanks to good liability management paid by the Company.Regarding the operational performance, distributed energies life increased with respect to last year and Enel's losses decreased from 9.57% to 9.56%, and we can see the quality indicators SAIDI and SAIFI, their duration of the frequency have improved on a significant matter reducing by 6% and 11% respectively as a result of investment in the Company distribution network.We're very confident that we will continue adding value in line to what we announce on our strategic plan. Another interesting news I want to tell about the launch of Eurobond Sustainability Project in [indiscernible] in São Paulo, a successful project that consist in innovative laboratory that research and implement smart meters in smart REITs contributed to a sustainable infrastructure through digitalization, reduction of CO2 emissions between other initiatives to develop of series.Now on the next slide let me highlight the performance of Enel Goiás during this period. Enel Goiás improved its EBITDA by 4.3% compared to the same period of last year despite a negative FX impact of minus $15 million. Without this negative effect EBITDA would have increased by 17%.Net income decreased by 8.5% explained by higher taxes paid, as last year we have the tax benefit due to the previous year losses. Cost of that was reduced by 0.9 percentage points, thanks to a good liability management. The Company added more than 86,000 clients during the last 12 months and its energy distributed was higher than first half of last year, increasing by 3.3% in and energy losses were flat compared to the remaining 12.1%.Regarding quality indicators, we see a solid decrease in SAIDI and SAIFI which is explained by our strong CapEx plan focusing infrastructure and networks. Both indicators were reduced by 28% and 29% respectively. Finally, let me comment that recently we signed an agreement with State of Goias, Enel and other institutions, in which we agreed among other things to increase 26% of energy availability in 2020 to build 17 new substations until 2022 and to accelerate our CapEx plan to improve even more the reliability and our quality indicators.Now on the following slide, I would like to present a summary of the capital increase. On August 29, we concluded our capital increase that was announced on February 27. After six months of hard work, we met more than 300 shareholders and made several presentations to explain the purpose of this operation. And we are very satisfied to see that at the end we had 99.5% of subscription level and basically all our shareholders joined us on this growth path.After this operation, our share price has significantly increased reflecting the value-added to the Company. And we became the largest selling company in terms of market cap in today's date. Now we expect to continue adding value to our shareholders improve our gross strategy in a sustainable way.Let me conclude this presentation with some closing remarks in the following slides. Despite the significant currency devaluation, we have seen in the region we were able to have a very positive results in this period, thanks to a better operational performance, the contribution from Sao Paulo and impact of past liability resolution in Argentina. All tariff reset processes were concluded except for Codensa which should be completed in the coming months. We do not have any tariff reset process until 2022.The capital increase was successfully completed with 99.5% subscription and slightly more than $3 billion collected. This shows the confidence that our shareholders have on our company and pays the way for continue with our growth strategy. Finally, our company was confirmed in three categories of Dow Jones Sustainability Index being the only South America Utility Group that has this important recognition in three segments in two categories of Dow Jones Sustainability Index.Let me hand over to Rafael.

[Rafael de la Haza:]

Thank you, Aurelio. Thank you very much for your attention. And I will pass the call to the operator for the Q&A session. Operator, please proceed.

[Operator:]

[Operator Instructions] And our first question is from Javier Suarez from Mediobanca. Your line is now open.

[Javier Suarez:]

The first one is on the networking capital on the slide number 16 decent negative networking capital of €1.1 billion, if you can help us to understand why that negative impact should be reabsorbed by the year-end. If I understood properly, the explanation the thing that you are expecting is that that number should be close to zero by the year-end. Is that correct and if you can explain us the dynamics explaining that the reduction about networking capital negative effects to zero by the year end? That would be the first question.The second question is on the EBITDA growth in the slide number 9. The Company has indicated that stripping out the one-off coming from Argentina the adjusted EBITDA growth could be plus 16%. If you can help us to understand the adjusted EBITDA growth stripping out the changes in the perimeter and referring mainly to Eletropaulo if you are able to help us to understand the underlying EBITDA growth excluding not only one-off but also perimeter effect.And then the final question, I know that it's maybe early, it's still early days. But if you have any comment on the possible impact that the new administration in Argentina may have on the Company? Many thanks.

[Aurelio Bustilho:]

Thank you, Javier. Well, for the first question regarding the networking capital. There is an important effect in the nine months that we have in this period which is in first of all in Brazil, right. Regarding the CVA effects, we accumulated a strong impact in the, let's say CVA we called it, regulatory assets in Brazil for distribution company in order to the distribution companies to purchase energy with expensive at a higher price than the Company has in its tariff.So, we accumulated a higher networking capital and we expect this especially in Sao Paulo from the tariff reset in Sao Paulo that we are started in July. We are recovering this effect during until, not only the next season until December, but until June of next year. So, this is one important effect that we are moving let's say in a good way in order, we are now recovering more on working capital than we are paying.The other effect is related to some payments that we will, we focus in the tariff was set up the Company. So refocusing in order to improve the rise of the assets especially in Brazil, we have most of payment of the assets we paid in the beginning of next year. So, since we do not have these effects for the next year, we don't have neither tariff resets for next year, we will not have the same impact.And third, the impacts we are renegotiating and doing a better let's say accounts payable payment statement terms to our suppliers in order to compensate. So, these three effects together can compensate the effects, right.The second question, the second question is related to the EBITDA without let's say without the one-off effects of the regulatory assets in Argentina which was $200 million more or less and without Enel Sao Paulo, if I let's say do a normal validation, let's say in Enel Sao Paulo. So, they said, the EBITDA would be $2.3 billion, okay, compared to $2.2 billion. So, in fact, without all of these are north of 3% more or less, okay.And the third question, well, its too early to understand what will happen of course we are confident that Argentina will despite the political, let's say, changes in budget will follow in our opinion in a good way. We still expect our returns in Argentina, of course its, let's say, its too early to answer. It's a wait-and-see situation and I think in the following months we will have more information to give you more information about what will be the plan and what will be the strategy.But again, as we also said Argentina for us is a neutral cash flow. Argentina we don't have debt in Argentina. So, we will maintain this policy to neutral cash flow impact for the country.

[Operator:]

Thank you. Our next question is from Ezequiel Fernandez from Credit Corp. Your line is now open.

[Ezequiel Fernandez:]

Hi. Thank you for the questions and the Q&A and the materials. I have three questions. I would like to go one-by-one, if you don't mind. The first one is related to Enel Sao Paulo. EBITDA is up quite significantly to BRL1.6 billion during the first nine months of this year versus the 900 million last year. There seems to be very good progress on [Persela] the manageable OpEx so congratulations on that one, but also the Enel Sao Paulo you mentioned on BRL630 million of lower OpEx due to lower hydro risk. If you could comment a little bit on that what it is? And also, I understand that [Parsela] issue should not structurally affect EBITDA. So, maybe would be helpful to know what do you expect for 2020 EBITDA in Enel Sao Paulo?

[Aurelio Bustilho:]

Well, Ezequiel, thank you for questions. Well, Eletropaulo as you mentioned, the new tariff reset, very important we got higher rent. This is very important. We have BRL80.5 billion. The plan we consider 80.1 so this is very, very good for our economic results. We reduced the OpEx. We are advancing this niche brand with the Company changing putting more innovation model let's say with more operations and with the volume of let's say human of people managing degree, but putting more innovation, so this one is very important factor.The last one that you mentioned what you call the CVA the asset, the regulatory asset it is exactly what I was explaining regarding the hydro risk, so what Eletropaulo anticipated the cash flow to recover in the next tariff reset. Why we have this difference in the value? You are right. The regulatory asset is suppose to not effect EBITDA but in the case of São Paulo you have to consider that São Paulo did not sign the agreement with Enel.So, São Paulo still has the demand in fact in some financial items with CVA. It’s a very technical issue but if you see the details of the tariff reset you see that the amount cumulated that we anticipated and also reflect in EBITDA was higher, more cost than it should be at the end of the day. So we will have a big impact in the cash flow because CVA and some positive effect with this adjustment of the CVA regarding the tariff reset.

[Ezequiel Fernandez:]

Okay, great. I think I understand what you say about the technical agreement, we don't know, but I will follow up with Rafael afterwards to make sure. My second question is related to Colombia, you mentioned you expect deficient in the upcoming months. I want to know if you have any regulatory asset base expectation, the value of it and if you can give us idea of what is the issue now that is preventing the [Craig] from making a final ruling on this, if there is any point of contention that is particularly hard to resolve?

[Aurelio Bustilho:]

Okay, well in our view Ezequiel is more procedural or operating issue with the regulator. In our opinion they are doing a very good work in considering the asset, as you know Colombia is moving to a revenue cap, so they are analyzing the real investment of the Company. So it’s a very important work to be done. They have some information regarding this. We already send this information to them. The asset has some information. Regarding this, we already send this information to them. It’s a matter of time.And you can see the law or the normative, said that the debt reset would be retroactive to April. So it’s a matter of in our opinion of month and I think to the end of the year we will have it. There is no big discussion regarding this. In terms of RAB, it's not property because you don’t have a number yet permission but we're maintaining the amount that we consider in our strategic plan. There is no big changes, we are maintaining which is the RAB is the amount, suited to various strategic plan of the Company.

[Ezequiel Fernandez:]

Okay, thank you very much, and my last question is related to Peru. If you could give us any update on how the regulatory discussions regarding the declaration of GAAP prices or this much is going?

[Aurelio Bustilho:]

Well for us, in terms of generation, we don't see relevant impact on this. We are in our estimation, dispatch considering, what we consider a lower price. And we are -- in our plan, we are very conservative. For us, we don't see major impact in this new regulation for Peru.

[Operator:]

Thank you. [Operator Instructions] And our next question is from Charles Fishman from Morningstar Research. Your line is now open.

[Charles Fishman:]

Thank you. On Slide 30, the energy losses are certainly high at on your distribution companies in Brazil and Argentina. And I know you're aware of that, I know you're working on it. But if you -- you focused on that, if you improve that because your tariff reviews are out several years. Any improvement in those efficiencies you retain, don't you? You don't have -- there is no ability for the regulator to come back and ask for those before the 2023 tariff reviews. Is that correct?

[Aurelio Bustilho:]

Yes. You're right. The issue here is to focus in the improvement of the losses, in the recovery of the losses. You're right, that in Colombia -- sorry, in Argentina and in Brazil. Especially, Brazil we are talking about Rio. Rio and Rio and Edesur, this was the main impacting office. The losses increased. Our focus is to -- we are reshaping our investment plan in order to recover these losses, but until the next tariff reset especially in both countries because in Argentina tariff reset until 2022, right. So, until 2022, there is no let's say, regulatory actions regarding the losses. So, our plan is to reshape to do a shift in our CapEx plan in order to reduce losses in the areas that we operate in.

[Charles Fishman:]

Okay. And similar question on Slide 11, you're seeing customer losses in Argentina it was 2% for the first nine months. I'm assuming that is a -- it's a similar parameter, in other words that is a like for like comparison. And the issue there is the macroeconomic situation on Argentina.

[Aurelio Bustilho:]

Yes, yes. This is related to the macroeconomic situation. Of course, there is an -- let's say an increase in areas with low income areas. But we are reshaping, as I told you the way we measure the grid in these areas in order to recover these reduction. As you can see the demands also reduces in Argentina. So the effect, both effects related to the economic situation. Well some of part of it also with the climate, but let's say the major part is related to the economic situation.

[Charles Fishman:]

And then my last is really a comment. Just your last point on slide two about being named to the three categories of the Dow Jones Sustainability Index, congratulations on that. There's something I know you're must be very proud of. That's it.

[Aurelio Bustilho:]

Just to make sure, I am quite -- because we didn't answer the RAB off of Enel in Codensa, in Argentina its $2.7 billion okay, and we expect to remain in this amount, okay. Sorry to interrupt you.

[Operator:]

Thank you. Our next questioner is from Ezequiel Fernandez from Credit Corp. Your line is open.

[Unidentified Analyst:]

I just had a final question related to the pension planning at Eletropaulo, if you have any updates on that if you're still thinking about doing something about it?

[Aurelio Bustilho:]

This is another part of the capital raise the use of proceeds to the pension fund. We already submitted to the regulator authorities in of pension funds in Brazil, which is per week in 26th of August we presented the request. As I don't know if you remember, we got an approval from the unions, the trade unions and approval from the retirees association and also with the foundation. Then we, we send it to the regulator all the process the migration plan and they are analyzing. We don't have information of this process we expect for five to six months for them to approve it.In parallel, we are building a stronger communication plan. We cannot start this right now because we cannot communicate as a negotiation is one-to-one is a 17,000 people, but we are preparing a stronger communication and negotiation plan. We expect after this process of the approval, we don't see any major issues, we started this process. In our estimation, we expect in next year to close next year with this, with the major part of the pension fund sold it, which you know the plan is to de-risk the plan.

[Operator:]

Thank you. At this time, I am showing no further questions. I would like to turn the call back over to Aurelio Bustilho for closing remarks.

[Aurelio Bustilho:]

Well, as there are no more questions, I conclude the results conference call. And let me remind you that the Investor Relation team is available for any doubts that you want to explore or that you may have and we are very happy to answer you and with our Investor Relations team.Thank you for all for your attention.

[Rafael de la Haza:]

Thank you.

[Operator:]

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