Enel Américas S.A.
Q4 2019 Earnings Call Transcript

Published: 29 Feb 2020

[Operator:]

Good day, ladies and gentlemen, and welcome to the Enel Américas Full Year 2019 Results Conference Call. My name is Josh, and I'll be your operator for today. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]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. These statements could include statements regarding the intent, belief or current expectations of Enel Américas and its management with respect to, among other things, Enel Américas' business plans, Enel Américas' cost reduction plans, trends affecting Enel Américas' 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 Américas 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 those forward-looking statements as a result of various factors. These factors include a decline in 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 government regulators in Chile or elsewhere, and other factors described in Enel Américas' 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 these forward-looking statements, which speak only as of their dates. Enel Américas 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, Enel America's Head of Investor Relations. Please proceed.

[Rafael de la Haza:]

Good afternoon, ladies and gentlemen. [Foreign Language]. And welcome to our full year 2019 results presentation. I'm Rafael de la Haza, Head of Investor Relations. And here with me are Maurizio Bezzeccheri, our CEO; and Aurelio Bustilho, 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 Maurizio, who will start by outlining the main highlights of the period in Slide number 2.

[Maurizio Bezzeccheri:]

Thank you, Rafael. Good afternoon, everybody. Enel Americas EBITDA for this period reached $3,994 million, an increase of 19% compared to last year, despite the currency devaluation in the 4 countries where we operate, especially in Argentina, Colombia and Brazil. Without a negative FX impact, EBITDA would have increased by 35%. During this period, we were able to reduce our OpEx by $119 million. This reduction is mainly explained by efficiencies in Brazil and Argentina. Group net income increased by 34%, reaching $1,614 million, this is explained by better operational results and a one-off impact coming from a tax benefit in Enel São Paulo, and past liability resolution in Edesur.Regarding our ESG focus on December, we received the award as the best company in Chile by ALAS20, being recognized as the number 1 company in terms of governance and sustainability in Chile. In addition, some weeks ago, we were included again in the sustainability yearbook of RobecoSAM and obtain Bronze category.2019 was a very intense year for Enel Americas, and we got several important achievements. On the following slide, we will see the main milestones over the period. On February last year, we announced our intention to make a capital increase for $3.5 billion. As you know, after many meetings with most of our shareholders and having held the market opinion, we decided to reduce the amount to $3 billion. On April, this operation was approved on an extraordinary shareholder meeting. And on September, we concluded with a remarkable 19.5% level of subscription.During the year, we received several recognitions and awards. We were included in the MSCI Emerging Market Social Responsibility Investment Index for the first time. And once again, we're included in FTSE4Good and Dow Jones Sustainability Indexes, and also in the best emerging market performer ranking of Vigeo Eiris. We also were recognized by [indiscernible] Chile as the company we advanced the most in the Reporta ranking. And finally, in December, we were awarded as the best company in Chile in terms of ESG by ALAS20. Along with these recognitions, we received the upgrades of our rating and the outlook by Fitch and Moody's, respectively.Now, on the new slide, let's see the main operating highlights of the period. On generation business, our installed capacity remains basically the same as last year, reaching 11,267 megawatts, from which 55% are hydro. Net production reached 41.8 terawatt hour, an increase of 5% compared to last year. From the total generation, 61% to response to hydro generation which increased by 1 terawatt hour, mainly due to higher generation in Brazil and Colombia. Our energy sales increased by 11%, reaching 72.6 terawatt hour. This is explained by the above-mentioned increase in energy production, but also by energy purchase contracts in Brazil that allowed to improve our margins.Let's analyze distribution business in the coming slide distributed energy increased by 19%, reaching 120 terawatt hours, from which 43 terawatt hours are explained by Enel São Paulo. [Indiscernible], our energy sales remain substantially flat compared to last year. Regarding number of customers, we had an increase of about 150,000 despite the client reclassification process that we have been doing in Brazil and Argentina. Quality indicators improved in all our subsidiaries, except for Enel Ceara where we suffered a severe rainy season during August, and an increase in the level of social violence at the beginning of the year. Enel Rio also had a small increase in the number of service interruptions. Quality improvement is the main focus of our investments and this number confirm it.I would like to mention that on 2019, we had the tariff revision processes of Enel Ceara and Enel Sao Paulo. Regarding the new tariff scheme in Colombia. We recently filed an appeal due to different interpretation in the values recognized for the initial asset base, costs and quality incentives. After that, we do not have any ordinary tariff revision process until 2022.On the following slide, we will see Enel X and retail businesses. In Enel X business, you can see that regarding e-City, public lighting points slightly increased, reaching 417,000. We had a growth of 50% in photovoltaic business industry. Regarding e-Home, we had a significant increase in the transactions of third-party billing and collection services, while the level of contract of micro insurance was slightly lower.Finally, in e-Mobility, the number of charging station increased from 43 to 448, mainly in Colombia and Argentina. Regarding retail business, the number of delivery points increased by 17%, reaching 2,731. And the energy sold amounted to 17.7 terawatt hour, 6% higher than last year.Let's move to the financial summary for the period on Slide 8. EBITDA in the period reached $3,994 million, a 19% increase compared to last year. If we exclude the extraordinary effect of the positive impact for resolution of pending regulatory issues in Argentina, EBITDA would have increased by 13% to $3,791 million.Group net income came in at $1,614 million, 34% higher versus last year. Explained by better EBITDA and by an extraordinary effect related to a tax benefit in connection with the merger between Enel São Paulo and Enel Sudeste. This was partially offset by a negative one-off impact in Enel Goiás due to the recognition of accounts stable to the state of Goiás, which we will explain in more detail later on. If we isolate extraordinary effect from both 2019 and 2018, group net income would have increased by 21%.Funds from operation, FFO, stood at $2,147 million, 16% higher versus last year. This result includes a negative net working capital in the period for an amount of $790 million, mainly due to the payment of activities implemented at the end of 2018 in Brazil and Colombia and to a noncash impact due to regulatory asset resolution in Argentina. Group net debt reached $4.3 billion, 37% lower versus the end of 2018, mainly explained by the payment of the debt in Enel Brazil in connection with the purchase of Enel Sao Paulo.Let's take a look at our EBITDA evolution and break down by country on the coming slide. As you can see on the chart, distribution business is the main contributor to our consolidated EBITDA increases, with $751 million in operational terms. While generation business increased by $314 million, of which $128 million is from hydro generation. Retail increased by $113 million, while Enel X grew $3 million. Currency devaluation in the 4 countries where we operate has a negative impact of $544 million. On a country basis, Brazil and Colombia are the most important countries in terms of EBITDA, with 41% and 31%, respectively. Followed by Argentina and Peru, both reached 14%. It is important to highlight that 88% of our EBITDA is generated by 0 direct emission activities.Let's analyze CapEx on the following slides. Total gross CapEx for the period amounted to $1,647 million, a decrease of 4.8% compared last year. We are considering FX effect, our investment increased by 5%. CapEx is well balanced between asset management, asset development and customers with 38%, 35% and 26%, respectively. Distribution captures most of our CapEx with a 79% share. Within distribution business, we have to mention the effect of the consolidation of Enel São Paulo in Brazil, which represents 16% of our total distribution CapEx. The investments in generation business represents 16% of the total, while Enel X and retail, 3% each. From a geographical point of view, 50% of the investments are devoted to our subsidiaries in Brazil.Now on the following slide, let's analyze our results on a country-by-country basis, beginning with Argentina. EBITDA in Argentina increased by 39% or $156 million, reaching $552 million. In operational terms, EBITDA increased by $410 million, partially offset by a negative FX impact of $254 million. This important increase in EBITDA is mainly explained by the positive effect coming from the agreement reached with the government in connection with the past liabilities, which entail a positive impact of $203 million at EBITDA level.In generation business, EBITDA increased by 12%, reaching $245 million, without considering FX effect, EBITDA would have increased by $141 million or 66%. This is mainly explained by higher margins as payments are dollarized and due to a net efficient fuel cost management. This was partially offset by lower physical sales due to lower demand. In distribution business, EBITDA increased by 71% or $128 million, mainly explained by the already-mentioned one-off effect. Demand in our concession area was 4.3% lower compared to last year, while the number of clients slightly decreased due to a reclassification process of our customers.The CapEx in generation business decreased compared to last year, mainly explained by lower investments in Dock Sud. In distribution business, CapEx increased by 23% due to the investments made to improve quality in Edesur.Let's continue with Brazil on the following slide. In Brazil, overall EBITDA in the period increased by 37% or $444 million, including $133 million negative impact coming from FX. EBITDA in generation business increased by 32% or $77 million, which is explained by better results in Fortaleza as a consequence of higher generation and higher energy sales. Our EBITDA and distribution business increased by 37% or $376 million, mainly explained by the full consolidation of Enel Sao Paulo. We also had better results in Enel Rio and Enel Ceara, partially offset by a decrease in Enel Goais.CapEx in Brazil decreased by 5% compared to last year, reaching $828 million, mainly explained by FX impact. In operational terms. CapEx remained substantially flat.Let's move to Colombia on the following slide. EBITDA in Colombia increased by $37 million or 3% compared to last year. Despite the negative impact of $141 million due to currency devaluation. Without FX impact, EBITDA would have increased by 15%.In the generation business, EBITDA remained flat, but without considering FX impact, we had an increase of 12%, mainly due to higher revenues as a consequence of higher prices. This was offset by a negative FX impact of $79 million.In distribution business, EBITDA increased by 6% or $34 million, mainly explained by a higher demand and a higher tariff. This was partially offset by FX impact of $62 million.CapEx in Colombia decreased by 3% due to negative FX impact. In local currency, CapEx increased 8% compared to last year, mainly focused on quality improvement project in Codensa.Now let's analyze Peru on Slide number 14. EBITDA in Peru remains flat, reaching $561 million, explained by better results in distribution business, but a lower result in generation. In generation business, EBITDA decreased by 4% or $17 million. The decrease is mainly due to the positive one-off effect that we reduced last year in connection with the insurance compensation due to a El Nino Costero flood. This was partially offset by higher energy sales and higher average sales price.In distribution business, EBITDA reached $257 million, $25 million or 11% higher than last year. Sales increased by 2.1% compared to last year, and average sales price was also higher. The number of clients increased by 11,000. Total CapEx decreased by 11% compared to last year, mainly explained by the completion of restorage work in Callahuanca power plant and technology improvement projects in Enel distribution at Peru.Let me now analyze our efficiencies in the following slide. Starting from $1,641 million of OpEx reported last year, we have to add the OpEx of the first 5 months of 2018 of Enel Sao Paulo in order to properly see the efficiencies gained in the period. In this way, we get to a pro forma OpEx of $1,925 million for 2018. From this amount, we obtained efficiencies for $119 million, mainly due to lower OpEx in Enel São Paulo and lower personnel expenses in Argentina. In addition to this, we see a reduction of $54 million explained by FX, reaching a final OpEx of $1,762 million, which represents a reduction of 9%. With this, we have reached 42% of the efficiency announced in our previous strategic plan 2019, 2021.On the following slide, we will make a focus on sustainability. Sustainability is a key driver for creating long-term value among our shareholders and all our stakeholders. In this way, our strategy integrates our communities and our commitments on United Nation's Sustainable Development Goals, recognizing the synergies between social progress and corporate success.Aware of our role in the growth and progress of areas where the company operates, we carry out in 2019 more than 300 projects, focused on engaging the local communities and making them a part of the energy transition. In line with our SDG commitments, the focus has been on promoting access to education, ensuring access to safe and quality energy services and fostering economic development through entrepreneurship.We have brought more than 4.9 million people under the perspective of sustainable progress since 2015, what we first committed to the SDGs. Enel Americas has also contributed to SDG 9 and 11, related to build a sustainable industry infrastructure and cities. In this way, Enel America relies on its low-carbon value-added products and services where the smart meter and Enel X business are relevant to the development of the urban areas. In addition, in order to prevent cyber security incidents, we cover all of our web application exposed to Internet with advanced cybersecurity solutions. Enel Americas has contributed to fight against climate change by generating 56% of its energy with hydroelectric assets during this period. As mentioned before, Enel America was awarded as the best Chilean company in terms of ESG by ALAS20, and was included in the Sustainability Yearbook of RobecoSAM and obtain Bronze category. These recognitions confirm the good work that we are doing and the relevance that has sustainability on our strategy.Now, let me hand over to Aurelio, who will present our financial performance in the coming slides.

[Aurelio Bustilho:]

Thank you, Mauricio. Starting from 2009, $194 million, EBITDA of 2019, the company registered depreciation and amortization of an amount of $1,225 million, 33% higher than the last year, mainly as a result of the consolidation of Enel Sao Paulo, reaching an EBIT of $2,769 million.Net financial results amounted to minus $378 million, which represents a high cost of $45 million. This is mainly due to higher financial expenses in Enel Brazil related to financial expenses coming from the purchase of Enel Sao Paulo.Income tax registered in the period was $236 million, which is 46% lower than last year. This is explained by the one-off effect already mentioned, related to the merger between Enel São Paulo and Enel Sudeste. Total net income amounted to $2,170 million, while attributable net income reached $1,614 million, a 34% increase compared to the previous year results.With all these elements, let's analyze the cash flow in the next slide.FFO amounted to $2,147 million, starting from an EBITDA of $3,994 million. These results includes a negative net working capital in the period for an amount of $790 million due to rebound of net working capital actions taken in 2018, and not compensated by the end of 2019 with new actions, mainly in Colombia and Brazil. In addition, we have a noncash impact due to the regulatory asset resolution in Argentina.Taxes paid during the period amounted to $592 million, while net financial expenses amounted to $465 million, mainly related to our activities in Brazil and Colombia. Net cash flow amounted to minus $224 million during the period after investing $1,647 million in maintenance and growth CapEx, as indicated in the previous slides. Dividends paid by the company amounted to $724 million during the period. Extraordinary operations amounted to $2,935 million, mainly as a consequence of the capital increase concluded in August 2018. With all these effects, total net debt decreased to $2,362 million compared with December 2018.Let me now analyze the debt of our company in the following slides.Gross debt amounted to $6.2 billion, a decrease of 28% versus December 2018. This reduction is mainly explained by the payment of the debt of Enel Brazil, in connection with the purchase of Enel Sao Paulo. This debt, which amounted more or less $2.5 billion was paid in August 2, with part of the proceeds of the capital increase. This paid amount was lower than the original $2.65 billion announced, thanks to the currency devaluation in Brazil. And as a consequence of this, we have a higher amount available to derisk the pension fund. Thus, the remaining 500 use of proceeds, as I said, are still in the balance of the company, ready to be used for the pension fund derisking waiting for the per VIC approval expected for the coming months.In terms of currency, despite the reduction in 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. Finally, regarding cost of debt, we can see a reduction for this period from 7.3% in 2018 to 7.1% in 2019.Now let's see how we have added value to our shareholders in the coming slides. Dividends accrued during the period reached a maximum historical amounts of $807 million, this represents an increase of 34% compared to 2018 and implies a dividend per share of $0.53, slightly higher than last year, due to the fact that after the capital increase concluded in August, the number of shares of the company increased. The dividend has still to be approved by the general shareholders meeting that will take place in April this year. In terms of share performance, you can see that Enel Américas' share has improved by 16.6% since the beginning of 2019, over performance in a significant way in the Chilean main index. As a consequence of this good performance, market cap basically reached a maximum amount for this company and currently is at $13.7 billion, being the biggest company in the Chilean market in terms of market cap.Let me now continue with a focus in our last 2 acquisitions in Brazil distribution business. Starting with Enel São Paulo, we are very satisfied with the reforms of the company. EBITDA reached $638 million at Enel Americas level. And if we compare the number in the reais in Brazilian debt, we see that EBITDA increased by 115%, mainly due to OpEx reduction and also higher tariffs due to the tariff reset process concluded on July 2019, which resulted in a higher RAB for the coming periods. At net income level, we have a positive result of BRL 737 million, while last year, the company reported a loss of BRL 315 million in Brazil in debt. This improvement is explained by a better operational results and a better financial results.Gross CapEx reached $221 million, and it was mainly allocated to digitalize and modernize the network -- the distribution network. OpEx decreased by 23% as a reduction as a result of the integration optimization process of Enel São Paulo in Enel Américas group, and has allowed us to reduce the operating costs. Debt profile has improved compared to the previous year, thanks to good liability management by the company.Regarding the operational performance, distributed energy slightly eased with respect of last year. And energy loss were in line with last year. We can see that quality indicators, SAIDI and SAIFI, have improved in -- on a significant matter, reducing by 10% and 16%, respectively, as a result of the investments in the company's distribution network. In fact, the company has been recognized as a distribution company with a better improvement in 2019, according to the consumer perception survey elaborated every year by ANEEL, the regulated -- Brazilian regulator. We are very confident -- we are very confident that we'll continue adding value in line to what we announced on our strategic plan.Now on the next slide, let me highlight the performance of Enel Goias during the period. Regarding quality indicators, we see a solid performance of SAIDI and SAIFI, which is explained by our strong CapEx plan focused in infrastructure networks. Both indicators were improved by 13% and 25%, respectively. It is important to mention that Enel Goias accomplished all the agreements defined in the investment plan settled with the government and current quality indicators are the best that the company has ever had, much better than the regulatory levels defined in the construction agreement. In August this year, the company signed a voluntary agreement with the government of Goias to improve some cluster areas to accelerate the investments and quality targets agreed in the original concession agreement. Despite the financial and operational efforts that the company is doing, we had a decrease in EBITDA of 5.5% in Brazilian reais, mainly explained by a higher office, which is mainly explained by an improvement -- the works to improve quality in the company.Net income registered a negative amount of BRL 100 million, explained by a negative extraordinary effect of BRL 437 million as a consequence of a reversal on the accounts receivable from the state of Goiás. This reversal refers to the judicial disputes on the right of reimbursement regarding legal and limitative accounting contingencies, originated priced by the company's acquisition of Enel Americas, which should be then reimbursed by the state of Goias through [indiscernible] mechanism. Such rights, although established by the purchase agreement, is currently being questioned by local law changes and is under legal dispute. As a result, the accounts receivable regarding contingency from December 2012 to April 2015 have been reverted. With this impact, net income would have -- without this impact, the net income would have been plus a positive of BRL 188 million.In terms of debt, we have been able to reduce the cost of debt by 1.1%. The company added more than 87,000 clients during the last 12 months, and its energy distributed increased by 3.7%. Energy loss slightly increased compared to last year, reaching 12.3%.Now, on the following slides, Mauricio will conclude this presentation with some closing remarks.

[Maurizio Bezzeccheri:]

Thank you, Aurelio. We were able to have a very positive result in the second -- in this period, thanks to our operational performance, driven by the distribution business. Our storytelling is really consistent with our strategy, allowing the company to reach targets despite the significant currency devaluation and other negative macroeconomic conditions that we have seen in the region in the last months. We concluded our tariff review processes in Ceará and São Paulo, and thanks to our CapEx acceleration plan, we have been able to significantly improve quality indicators in Enel Goais.Thanks to our good performance, we are going to distribute the highest dividend in the history of the company, and we became the largest company in the S&P IPSA Index by market cap. The capital increase was successfully completed, with 99.5% of our subscription and slightly more than $3 billion collected. Now we are in a very solid position to continue with our growth path in the region.As we have mentioned before, we have substantially, in the heart of our sustainability -- in the heart of our strategy, and we are glad to be recognized as an ESG-focused company. In 2019, we received several recognitions on ESG matters and were awarded as the best company in Chile by ALAS20.

[Rafael de la Haza:]

Well, thank you for your attention, and I'll now pass the call to the operator for the Q&A session. Operator, please proceed. Operator?

[Operator:]

[Operator Instructions] Our first question comes from Enrico Bartoli with MainFirst.

[Enrico Bartoli:]

I have 3. The first one is regarding the $4.7 billion target for EBITDA that you have for 2020. If we strip out the one-offs in '19, it would imply around $1 billion of increase compared to last year. If you can guide us on the drivers of this $1 billion increase? And if you can remind us what the assumptions are in the guidance in terms of ForEx?Second question is regarding Argentina. If you can give us an update on, let's say, the approach of the new administration towards the electricity sector. If you see any kind of risk of rediscussion of the regulatory framework, particularly in Edesur had been implemented in the past 2 years? And the last one is on the CapEx for 2020, if you can give us a guidance and possibly, a breakdown on the areas where you expect to implement the investments.

[Maurizio Bezzeccheri:]

I will start to reply -- rotate, then I will leave the floor to Aurelio. Regarding EBITDA, the increase is mainly due to the fact that you will get the benefit of the full year of revision of the tariff in Eletropaulo. Remember, we got the tariff review starting from July, so we will get the first 7 months full recognition of the tariffs. And in Brazil as well, you have deep actualization of the tariffs with inflation. So mainly, it's due to the increase in remuneration of distribution company. [indiscernible] on this one, you.

[Aurelio Bustilho:]

Just to add that, yes, the growth is a distribution. You asked about the ForEx considered. We considered 3.7. But actualizing this figure, we should have an adjust of $300 million, right, if we consider the current consensus. As you know, the real is being devaluated. So this is the effect. On the other hand, we are projecting some upside of these of efficiencies in order to try to compensate this figure. But mainly, it's the due to distribution.

[Maurizio Bezzeccheri:]

Regarding Argentina, just to recall, we have in our budget 2020. In our budget, 2020, as we said during the presentation of our business plan, we put a 6-month tariff frozen. And exactly is what is going on regarding -- as you can recall, the declaration of the government to the monetary fund and to the market that they will not go over the 6 months of tariff block. Regarding, of course, the announcement of the new tariff revision, that really was an announcement, we don't know exactly if and what will be the content of this revision. As you can imagine, that what we are doing, we are analyzing several aspects, for example, related to the Acuerdo Marco and to the other items that can compensate some differentiation by our hypothesis. So on the distribution side, we don't expect a big change compared to what we have assumed in our business plan.Regarding Generation, there was as well an announcement regarding the fact that they want to eliminate the dollarization of the tariffs and going to pesos, and some change regarding capacity payment. The discussion is also getting a higher price in terms of energy and with a sort of actualization of the tariffs with a proximal inflation. And based on our calculation, we don't see as well any major change in remuneration of the -- of generation as well. There are -- for example, there was the possibility last year for the generation to buy their own gas, and now, this is resorted to CAMMESA. And this is the major change that right now is producing in Argentina. So in the overall, we don't see, for the time being, major change in the hypothesis of our budget. Nevertheless, we are as well starting some other adjustments, we are under negotiation, of course, with the government. Just to recall, we'll now be responsible of the concession of Edesur if the government of the city of Buenos Aires and the president of the province of Buenos Aires, even though the regulatory body will remain ENRE. So we don't see any major change. And we are, of course, as usual, starting a plan B effect. Regarding CapEx...

[Aurelio Bustilho:]

You asked about the CapEx. The CapEx is 62% allocated in Brazil, right? The other 38% is located in Colombia, 60%, then Argentina and Peru. But the major part is Brazil. And in terms of business, 82% is infrastructure and actually distribution companies, of course. The total is $1.7 billion for this year. And as we -- Mauricio was explaining, this is focused in quality improvement, efficiency, and of course, to reinforce the RAB of the company to the next tariff we see.

[Operator:]

Our next question comes from Elchin Mammadov with Bloomberg Intelligence.

[Elchin Mammadov:]

I have 3 questions, please. The first 2 on guidance. So your -- can you confirm your 2020, 2022 earnings guidance that you published last December? Obviously, the consensus is way off, so I just wanted to see if you're still comfortable with your latest guidance. And the second question was -- again, on that, your 2019 figures came just below your target. Shall we expect any midsized acquisitions for you to bridge the gap between your guidance and this foreign exchange headwinds that we're seeing holding you back? And the last question is on minority buyouts. I mean, shall we expect more of them to come? Or you've done everything you could and you've reached the target? Obviously, you have some headroom following the capital increase, hence, why I'm asking.

[Maurizio Bezzeccheri:]

You are recognized. I will reply directly to the third question, and then I will leave the other two to Aurelio. Yes, the minority buyout processes is -- will continue along with the 2019, in line with our statement during the capital increase. I just recalled that the capital increase with the total equity payment, that means the focus is mainly on repaying the bridge loan for the Sao Paulo acquisition and the remaining adjusted derisking the pension fund in São Paulo. And we are doing -- we are going ahead very positive. Of course, with the capital increase, we have a net debt-to-EBITDA ratio that will allow us just to get more -- to increase our debt, and mainly this is the focus depending on by date of minority. This is true. Regarding guidance.

[Aurelio Bustilho:]

Regarding the guidance, you asked regarding our FX, ForEx projections. Let me tell you that basically, [indiscernible] is the main difference if you compare. Of course, you can calculate because we published our assumptions. Brazil is the main one that we see that are -- the effects has a difference with the last consensus. We considered 3.7 and 4 -- and now, with 4.1. Let's see the next one. But as I explained in the previous question, we expect the effect for this year of this balance or this difference, mainly, Brazil, would represent $250 million to $300 million this year, right? Of course, we have some -- we are accelerating some activities in order to compensate, not with new acquisition, but with efficiencies, okay? That's our focus. What happened in 2019. Yes, we suffered this -- mainly, this effect in the business of Brazil, also a small part in Colombia, but basically in Colombia, with an effect of $370 million of reduction by these effects variation.As you know, our local revenues in other countries are in local currency. So we have this translation effect that we cannot control. But on the same way, we have all our debt in local currency. So it's a balanced situation in the low deep curve. But let me remind you that in 2019, we announced $1.3 billion of net income, and we are delivering $1.6 billion of net income. And we'll pay this 50% of this amount in next May, 50% of the margin, which is around $800 million, of which we already paid in January, $100 million. So we -- of course, we are exposed, but we are improving our efficiency, and we'll report every quarter, the performance and the FX effects related to consensus from the following quarters, especially because we are suffering this, let's say, this scenario or volatile scenario in the [indiscernible] international financial market.

[Operator:]

Your next question comes from Charles Fishman with Morningstar.

[Charles Fishman:]

My question is concerning Slide 21. So based on that slide, your recommendation at the shareholders' meeting, dividend recommendation, is $0.53 per ADR. I just wanted to confirm that, number one. And then number two is when -- at one of the bullet point or the subtitle at the top, higher dividends versus guidance, the $0.53 is actually a couple cents less than the guidance in December. So I'm assuming when you say higher dividends versus guidance, that's the $807 million that you're referring to is higher than your guidance in December? If you could just clarify that, I'd appreciate it.

[Maurizio Bezzeccheri:]

Charles. Yes. Well, the net income of the company is $1.6 billion, right? We'll pay 50% of this amount this year, okay? The number, of course, if you calculate by shares, we will beat the capital increase. We issued new shares. So the amount by share is lower. But in any case, the amount that we'll pay is higher due to its higher results, especially for São Paulo, the acquisition of São Paulo is very important to beat because it was only possible because, one, why? The tariff we set that we did in São Paulo. And this is also possible to register this positive effect, tax effect in our balance sheet of 2019. So that's why we were very successful with the São Paulo transaction. And then we'll remunerate the shareholders in 2020. I don't know if I answered all your points.

[Charles Fishman:]

No, that was -- and then as a follow-up question, your target payout will be -- is still 50%, correct?

[Maurizio Bezzeccheri:]

Yes, yes, we'll maintain 50%.

[Operator:]

Our next question comes from Murilo Riccini with Banco Santander, Chile.

[Murilo Riccini:]

I have 2 questions. The first one is regarding the Slide 24 and the comment about future M&A. Is the statement provided in the capital market event about the intention to consolidate the latest acquisition before new purchase is maintained? Or should we see the statement of this page as a change in -- due to any new opportunities? And the second question is, what are the next targets to continue improving in the ESG rankings?

[Maurizio Bezzeccheri:]

Okay. Regarding -- just to recall, for the consistency of our storytelling, we're recalling who we were selling capital during the capital increase. We said, okay, with the capital increase, we saw the -- we will allow more money coming from Brazil to Enel America. And exactly, we are fulfilling this commitment, and we will open up possibility for new debt, doing 2 things, we said at that time, buyback of minority. And I already reply to the question, yes, this is -- we'll continue along the 2020. And regarding acquisition, as you know, the acquisition, it depends by the availability of targets to be acquired and the interest and the financial discipline of which we apply to our acquisition. And as you know, we continue to monitoring all opportunity in the region, and we will continue to do it. And we will see exactly what will come out in the next month in country like Brazil, for example.Regarding ESG, as you know, when you've got the clarification from 1 of the agents that I mentioned during the presentation, we come out with some recommendation. We see and we analyze why. And usually, we do a check list of improvement in terms of Board composition, in terms of activity to be -- that needs to be done. So usually, we recently received our classification as well in RobecoSAM, as I said, we are analyzing, let's say, the recourse that will be officially issued. And then we will work in improving. Our target is go up in the ranking of these indexes.And what is our driver? The driver is the analysis of the recommendation that comes from the analysis of the checklist analysis. So we will continue. Of course, as we said during the presentation of the business plan, we will work on the SDGs 7, 9, 11 and 13. We -- finally, we -- the 13, we will work for the reduction of CO2. We will continue to work in the improvement of infrastructure and cities. In the reality, Sao Paulo will continue in this respect to represent our focus just to go into the direction of smart city. As you know, we have already done the work in Olympia. we will continue demonstrating the concept related to smart city, digitalization, et cetera. And as -- of course, as I said in the closing -- in closing remarks, we have grew more than 4.9 million people under the perspective of sustainable progress since 2015, when we first committed to SDG. We will continue in this direction with the rules or the guidelines that comes from the analysis of the indexes with the intention to go up. And we will continue on these SDGs that are, let's say, according with our investment product plan, and we will continue to push into the direction, as I told you, the SDG 7, 9, 11 and 13.

[Operator:]

Our next question comes from Marcelo Britto with Citi.

[Marcelo Britto:]

The question is about Eletropaulo's deferred tax assets. We certainly know that in Brazil, there has been a lot of administrative and legal disputes, concerning the ability of a company to realize the deferred tax assets stemming from goodwill amortization. So the question is, how confident is the company about its ability to fully realize its deferred tax assets and reduce its tax burden? Do you have any sort of a legal opinion clearly stating that the company can actually fully amortize that deferred tax asset?

[Maurizio Bezzeccheri:]

The deferred -- yes, of course. Thank you, Marcelo Yes, we have the opinion that the balance sheet is audited by an independent auditors, divided by tax specialists and companies and so on. How -- it was -- your question is very important. How can we assure that we can compensate? After the tariff reset, you see that we doubled the EBITDA of the company. We doubled the results, we reduced OpEx and we increased the [indiscernible] remuneration. If you project our regulatory or our EBITDA, you will see that we'll more than compensate this amount in the following years. So of course, if you look at the previous Electropaulo, it would be possible. But after the tariff reset, after the voluntary initial plan, after the efficiencies in the company, the procurement efficiency, they invest the shift between OpEx, reducing OpEx and increase CapEx, you can see that you project this, and we are more than comfortable that we will be able to compensate. It's not -- it wouldn't be possible to register the effects in our balance.

[Aurelio Bustilho:]

So in that, resuming from this point of view, the strong results that we have demonstrated in -- with numbers, the improvement in the performance as well of the quality indicators of Sao Paulo, in the reality, this strong results will allow us and allows [indiscernible] as well the auditors just to confirm the sustainability of the recovery. And of course, if you recall, when we did the capital increase, we said that this capital increase, as we focused on some specific guidance, we said that at the end of the story, with the investment and the possibility to have a sort of tax shield will be expected a substantial recovery of $420 million of taxes in the next 3 or 5 years. And this is exactly what we -- if you recall, we announced during the capital increase, and we are exactly pushing.

[Operator:]

[Operator Instructions] Our next question comes from Sara Piccinini with Mediobanca.

[Sara Piccinini:]

I have 2 questions. The first one is on the EBITDA growth. If you can please guide us to the growth in EBITDA, excluding the one-off in Argentina and also excluding the difference in the perimeter for 2019, that will be helpful. And the second question is on the net working capital. If I'm not wrong, it was about 1 billion at 9 months and still appear about 800 million. So do you expect this working capital to recover during 2020?

[Maurizio Bezzeccheri:]

Well, regarding the, let's say, putting the same -- in the same comparison, the EBITDA from 2020. To -- sorry, your question for 2018 to 2019, right?

[Sara Piccinini:]

Yes, exactly.

[Aurelio Bustilho:]

Actually, without FX, the increase, it would be -- it would increase by 35%, okay, mainly driven by São Paulo. But if we adjust -- if I remove the FX effect, it would increase 35%. But we need to adjust also the one -- the EBITDA from São Paulo, not, let's say, annualize it, So this EBITDA would raise, would increase for 12.9%, okay? So the EBITDA growth was 19%. Without FX, it would grow 30%, 35%. But aligned with one-off and the [indiscernible] in São Paulo, it would increase 12.9% 13%. Is it clear?

[Maurizio Bezzeccheri:]

This is the first question.

[Sara Piccinini:]

Yes. Very clear.

[Maurizio Bezzeccheri:]

And the second one is networking capital.

[Aurelio Bustilho:]

The net working capital. Of course, net working capital here, we have 2 main effects here. First one is the CBA, which is the purchase of energy in distribution companies in Brazil, okay, to the company's [indiscernible] they have a tariff in their -- let's say, a spot price in their sales. So they-- if the price, the real price is higher, the company anticipates cash, okay, and then the following year, recover cash. In Brazil, we have a delay of 1 year. So this effect was not totally recovered, okay? It was not totally compensated. And the other effect is that since we have a tariff reset in '20 -- in '19, especially from São Paulo and from Ceara, we needed to, of course, to increase the RAB. We needed to anticipate or increase our payments, our CapEx payments, in order to accelerate the process and translate this into RAB. So both these effects, of course, puts pressure in our working capital, but it will be recovered because the CBA is --FX, too, will recover in 2020. And if there is a disbalance in 2020, improve in 2021. And the CapEx, of course, the higher CapEx will be a better remuneration. So it will be -- and our margin will recover these, let's say, this working capital.

[Operator:]

And I am not showing any further questions at this time. I would now like to turn the call back over to Rafael de la Haza for any further remarks.

[Rafael de la Haza:]

Well, there are no more questions. I conclude the results conference call. Let me remind you that the Investor Relations team is available for any doubt that you may have. Thanks for your attention, and good evening.

[Operator:]

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