Enel Chile S.A. (NYSE:ENIC) Q2 2022 Results Conference Call July 28, 2022 2:00 PM ET
Company Participants
Isabela Klemes – Head of IR
Fabrizio Barderi – CEO
Giuseppe Turchiarelli – CFO
Conference Call Participants
Murilo Riccini – Santander
Operator
Good afternoon, ladies and gentlemen, and welcome to Second Quarter and First Half 2022 Results Conference Call. My name is Victor, and I will be your operator for today. [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. Such forward-looking statements reflect only 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 Enel Chile’s press release reporting its second quarter and first half 2022 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 second quarter and first half 2022 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 those forward-looking statements, which speak only as of their date. Enel Chile undertakes no obligation to update these forward-looking statements or 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 Mrs. Isabela Klemes, Head of Investor Relations of Enel Chile. Please proceed.
Isabela Klemes
Good afternoon, and welcome to Enel Chile’s second quarter and first semester 2022 results presentation. Thank you all for joining us today.
Joining me this afternoon is our CEO, Fabrizio Barderi and our CFO, Giuseppe Turchiarelli. Let me remind you that our presentation and related financial information are available on our website, www.enel.cl in the Investor Relations section and in our ask investors. In addition, a replay of the call will be soon available. In the time of this presentation, there will be an opportunity to ask questions via phone or webcast chat through the link ask a question. [Operator Instructions]
In the following slides, Fabrizio will open the presentation regarding highlights and strategy updates. And then Giuseppe will walk us through our financial results and our recent material fact release. Thank you all for your attention, and let me now hand over to Fabrizio.
Fabrizio Barderi
Thank you, Isabela. Good afternoon, and thanks for joining us. Let me now start with the highlights of the period on Slide 3.
As you know, the market pressure remained over during the year to second quarter. Given these we have been taking several management actions to offset the pressure and take advantage of the [Indiscernible] of our assets, proving that our strategy is sustainable and resilient. I will give a detailed view of the actions contribution for this first up in the following slide.
We have several force during the first semester, bringing us the right ideological perspective for the second semester. Also, there have been some regulatory updates, like they approved the second energy subdivision manage the distribution [Indiscernible] and some recent update related to the 2022 to 2024 report.
Regarding our economic and financial performance, we have faced some temporary headwind over the margin related to the commodity pressure. But thanks to many actions we have put in place in the positive ideological perspective for the second half w are comfortable that we will execute our 2022 guidance, as we say in this presentation.
Finally, as we have just released the asset allocation process as part of our sustainable balance sheet requisition with ongoing and evolving as expected in terms of both timing and multiple supplies in different stations, confirming the quality of our assets and our proposals to unlocking value for our shareholders. They [Indiscernible] agreement with a company fully owned by investors for an equity value of $1,345 million for the [Indiscernible]. We hope everything with the growth by the year end [Indiscernible].
Now let’s move to slide five to briefly talk about the market situation. The national electrical system has been impacted by a set of factors correlated with the rush of income and the last year critical. Commodities continue the uptrend, particularly coal prices that are associated to a lower — resulted in the sharp increase of the spot price. This scenario has been due to the presence of Argentina natural gas up to April and several actions in terms of thermal optimization that were put in place.
Unfortunately, the coal prices in the [Indiscernible] were also negatively impacted by decreased energy force measures in the system. There must be maintenance and outages and some transmissions. Despite the strong adverse scenario, we have been able to put in place actions that contribute it for around $130 million in the period. Our solid LNG supply position, which includes our long term LNG contract that include supply, which was successfully delivered up later this year it will ask to increase the generation volume and optimize our operating natural gas contributed to the first half of the year with $27 million and without some natural gas drilling [Indiscernible] contributing more than $34 million in the third half.
In addition, our commodity hedging instruments contributed an additional $68 million in the first half. Complementing these short term actions and also having in mind the new configuration of the market we also decided to enter into long term PPAs with some fuel renewable development, and then anticipated move over renewal of our portfolio strategy to reduce our known hedge position. Renewable growth has been one of the main pillars in the energy transition. So let’s now look at how we are consolidating our renewable position on slide six.
The current context is unquestionably means an important challenge for the energy sector. And we’ve acted as necessary to adapt to this new environment. In that sense, we have been one of the principal driving forces in the energy system process in account. One group or the effort I mentioned with our strong position in the renewables market, where we have consolidated our leadership, connecting more than 1,000 megawatts of renewable capacity in 2020. During these years we have already connected 202 megawatts of solar capacity. Moreover, our efforts are committed to connect until year end and more significant parts of our projects in construction as exemplified in this slide.
We are strongly convinced about the potential of Chile as a renewable development board in the region. And we will continue contributing to consolidate this position aiming for a clean energy metric.
Now, on page seven, let’s take a look at an illogical condition and the outlook for the second half of the year. During June and July, there has been a significant increase in rainfall and [Indiscernible] especially in the south of the country. In fact, in the eight regions where the basis of [Indiscernible] are located, the rainfall recorded to-date is equivalent to one recorded in a year — something that we haven’t seen for a while in three years.
As you can see on the left side of this slide, no over in the mountains is clearly better than the last year figures and therefore [Indiscernible] highlights a very good situation, allowing us to perceive an optimistic ideal scenario for the rest of the especially for the fourth quarter.
On the other hand, we have also been carrying out various actions to maintain our portfolio resilience, mainly thanks to the higher availability of gas. During this year, we have been able to reroute our LNG capacity, increasing our trading activities and optimizing our thermal generation. This year, we have rescheduled part of our LNG deliveries from [Indiscernible].
For the second half of the year, the presence of Argentina gas which permit us to continue going forward with optimization. On Argentina gas during June and July, the government is organized the three auctions which several Argentinean gas suppliers have participated to deliver natural gas, two of these auctions were focused on the interests of the electrical system. In both bids, we traveled 4.7 million meters cubic feet of natural gas from October 2022 to April ‘23, competitive prices that will allow us to maintain a resilient portfolio. All in all, we are convinced that the time that the worst is leaving us behind, recovering our performance in seconds, and confirming our targets for the full year.
Regarding the new stabilization mechanism projects and other regulatory matters for the energy sector, let me highlight some topics on this on slide eight. On July 13, the second energy subsidization and emergency funds and those established a new mechanism for [Indiscernible] was approved. The approval of this low — positive for our company and also for the sector as a whole to bring back system rationality, since it means that the generators will not continue financing sectors.
Now with the new mechanism, we expect to reduce the impact on our cash flow, and the receivables shall be backed by the new energy subsidization making. Regarding the basic service law in early February 2022 a new law was approved to solve the problem of the debt accumulated between March ‘20 and December ‘21. And in the consumption limit of 250 kilowatt hour per month was established to define the customers that will be benefited, replacing the criteria of vulnerable profiles and other institutions.
The collection system of this law shall begin in our concessioner in August. In June, the consultant report was published on the distribution direct review. And we have already addressed more than 100 performances to the regulator who shall review. Any potential discrepancies between the companies and the regulator shall be reviewed by the expert partners in the next week. On permission the process is pretty completed the largest sectors company arguments were offended by the panel of experts and we expect a new [Indiscernible] to be published during the second half.
Now, let me recap our strategy based on its depreciation and decarburization. Despite all the temporary headwinds within our market, we continue foreseeing our long term goal. Now on slide nine. As you will know, our strategy best sustainability. That is why the quality and visualization of our network remain a key enabler for the decarburization and electrification of our final customers. As you can see in our main KPIs, we are improving in all quality, digitalization, decarburization and a replication indicator as demonstrated by our network and ex-businesses, all the strategy is backbone by solid ESG structure that is aligned with the UN and is well recognized confirming our leadership on the main energy indices ending transparency and reporting.
Let me now hand over the presentation to Giuseppe Turchiarelli our CFO.
Giuseppe Turchiarelli
Sorry for the problem. Many thanks, Fabrizio. Good evening to our investors connected. I will start my presentation on the slide 11 with a quick summary of the adjusted — apply in the period. In the first half in the second quarter of 2022 we applied an adjustment in the EBITDA due to the impairment made to the cost stock of the period, which amounted $62 million and $41 million, respectively. These adjustments had an effect of the bottom line of $42 million in the first half and $28 million in the second quarter.
To the same period of 2021 we applied an adjustment due to the coal stock and the voluntary retirement which amounted to $40 million in the first half and $27 million in the fourth. At the bottom line these effects amounted $28 million and $19 million in the first and the second quarter respectively. The second quarter of 2022 adjusted EBITDA has a decrease of 54% or $110 million, mainly due to the higher commodity prices, which increase the spot prices and had an increase in the variable costs of the deal. These affected has also impacted the first half 2022 adjusted EBITDA performance, which decrease of 21% or $82 million in terms of adjusted net income during the first half 2022.
This decrease by 3%, reflecting the lower EBITDA of the period, which was offset by the lower financial costs coming from the factory of the [Indiscernible] accounts made in the first half 2021 to improve the liquidity of the company. In the second quarter the net income decreased 65% due to the same reason mentioned before.
First half 2022 CapEx almost reached $500 million, 12% higher than the first half 2021, mainly due to the construction of the new renewable capacity. In the second quarter, our CapEx reached $336 million at 63% higher than the same period of the previous year. FFO reached minus $290 million, representing a significant reduction in the first half 2022 mainly coming from the subsidization mechanism effect in the second to 2022.
Now, let’s review more about our CapEx on slide 12. In a consistent trend throughout the last year, our primary effects efforts have been mainly focused on boosting the country’s energy transition. As a result, during the 2022 first half accumulated CapEx reached $499 million of which 95 was mainly related — customer CapEx totaled $35 million and was mainly allocated to enhancing our networks, building new connections and improving the experience for our customer.
Asset management CapEx reached $68 million mainly related to maintenance activity in order to increase the resilience of our thermal capacity, the reducing unavailability rate, development CapEx reached $397 million, representing an increase of 10%, mostly due to the activity of our projects under construction is a clear signal that our renewable expansion plan is still on track.
Let’s move now to slide 13, where we have the summary of the second quarter adjusted EBITDA breakdown, accounting for $92 million. This variation was mainly related to an increase in our CPA sales of $100 million primarily explained by the higher valuation of the Chilean pesos against dollar. New renewable capacity, which was connected in December 2021 and during 2022, adding $12 million in EBITDA.
GAAP trading activities that generated $21 million on margin, mainly due to the sales of gas is a consequence of Argentina natural gas availability and selling during the second quarter of 2022. All these effects that I’ve just mentioned in slide were offset by $11 million due to the lower hydrology and negative effects on variable costs mainly due to the higher termination costs driven by higher commodity price. This was partially offset by a more efficient thermal generation in the field and by the aging commodity coverage increment in the higher spot price in the system in the 2Q 2021, mainly due to the higher commodity price, and several system facilities that were into outages during the period.
Following on this slide, let me talk about the other elements that explain our EBITDA. Network remuneration and demand accounting for a positive impact of $60 million relative to [Indiscernible] business. The recovery of the regulated demand in the period which increased 9% in the Q2 2022 compared to the last year period, reaching pre-pandemic level. Other effects accounting for $6 million, mainly related to the aging associated with a bond.
Let’s move now to slide 14, where we have the summary of the first half EBITDA breakdown accounting for $330 million 21% lower versus 2021 figures. These valuations was mainly related to $190 million higher PPA sales in the first of 2022, primarily explained by the higher foreign exchange of the Chilean Pesos against dollar. New renewable capacity, which was connecting December 2021 and during 2022 first half added $20 million in EBITDA of the period, GAAP trading activity that generated $24 million margin mainly due to the sales of gas as a consequence of Argentina natural gas availability and LNG largely during the second quarter, 2022.
All these effects that I’ve just mentioned in generation side were offset by lower — with an impact of $27 million and negative impact of $100 million on variable costs mainly related to higher generation costs due to the commodity prices and higher re-gasification costs in the field due to the higher volume partially offset by more efficient thermal generation and by the aging commodity coverage instrument in the field. And negative $234 million due to the higher stock price in the first half.
The remaining variation of our EBITDA comes from $35 million, due to the network remuneration and demand explained by $14 million mainly due to the release of the final transmission ties taken into a report issued by the regulators in the first quarter of 2022. This final cut allowed us to reduce the provision we have been made since the beginning of the new regulatory cycle that started in January 2022 and $16 million of ties indexation in both network business in the recovery of the demand in the period, which increased 7% in the first half 2022 to compare to the first 2021 reaching a pandemic level.
Other effects accounted for $9 million, mainly related to the aging instrument explained before partially compensated by lower OPEX in network business due to the union agreement signed in the first quarter 2021.
Let’s now give you more detail on generation KPI on page 15. Net electricity generation grew by 11% to 10.2 [Indiscernible] during the first half of 2022 mainly as a result of higher dispatch of our combined cycle power plants in the division capacity coming from our new solar unit in the period. During the second quarter, 2022 net generation increased 8% to 5.1 hours also due to the higher payment dispatch coupled with higher solar, mainly due to the new project in wind generation. Even though our first semester generation was affected by full hydrology, during the second quarter, there was an improvement in rainfall that enabled a recovery in our reservoir level. And there’s no COVID in the mountain that brings a new a better perspective for the second half of the year.
Nevertheless since there is a variance in electricity rationing decree enforcement September 30, 2022, 0.4 of our solar — water reserve for the oil nation electricity system, out of which 0.2 are in our reservoir. The impacts of these water reserve is basically natural since the community’s water belongs to the system into the generated return — in proportion to the sales. Our energy sales increase 18% during the first half of 2022. Mostly related to the higher sales, primarily due to the new contract coupled with an improvement in sales to regulated customer, during second quarter, 2022 physical sales increased 10% as a result of the higher sales to both three regulated cluster.
Let’s quickly see the [Indiscernible] performance on the business by business line on page 16. As it was mentioned previously, our first half 2022 EBITDA decreased by 21% mainly due to the performance of our generation business, which was affected by the increase in commodity prices worldwide and has affected the country and the consequence that these effects have add into the production costs and into the spot market.
On the network business side, these add an increase of $41 million mainly due to the reduction of the provision as a consequence of the technical status report published in the first quarter 2022 in the recovery of the demand during the 2022. Besides this affected, the one off effects of the Union agreement made in the first quarter 2021 had a positive effect in the OpEx this year. Others reflect mainly the holding OpEx of the period and the effects of [Indiscernible].
Now, on slide 17, let me show you how our ‘22 EBITDA guidance will be accomplished. During this presentation, Fabrizio indicated our portfolio center elements and strengths that make us reasonable confident that the current headwinds shall not jeopardize either our guidance or our long term goals for our assets in Chile. Let me give you a few words on our adjusted EBITDA guidance for the year end.
As you know our generation business is quite seasonal. That is mainly related to the fact that from June to August period in Chile associated with the starting of snowing at the beginning of our spring, during October, we start to have hydro generation in the country associated with the melting sea. All these October, we start to have a higher hydro generation in the country associated with the melting sea. All these effects associated with the return on Argentina natural gas result in the reduction on the spot prices and higher generation of our [Indiscernible] generating the higher EBITDA in the second semester of the year versus the first one.
Decent seasonality that have just introduced associated with the several active portfolio management in place, and a better than expected hydro season here support our view that we will be able to tackle this year guidance. Next quarter, I should give you more detail on the evolution of our EBITDA performance and our action.
Now, on slide 18, let’s go through the main drivers of our group net income. Our first half adjusted net income amounted to $102 million, representing a slight variation versus the last year, remaining balances are coming from lower adjusted EBITDA, which decreased $82 million or 21% mainly explained by the effects of higher commodity prices and its consequences in the spot market and variable costs and generation business. Higher DNA impairment in bad debt by $28 million versus last year, periods mainly related to higher depreciation and amortization in energy power assets, primarily explained by the exchange rate affecting the period in the initial commissioning of a new solar power plants. In the higher depreciation in the distribution, the financial segment related to the new project and higher amortization of intangible assets related to the new commercial system recently updated up.
Also we had the higher provision of bad debts in the distribution business mainly due to the increase in overview depth in the retail clients. Financial results in investments recorded a $53 million declining by $59 million in the first half of 2022 mainly due to a lower expenses related to the factoring executing the first half 2021 in generation business on the accounts receivable that arose from the tariffs subsidization low.
Income tax decrease by $49 million, mainly related to a higher tax credit due to the higher monetary correction in the period among the lower results of the company embedded with accounting the first half 2021. The adjusted net income on the second quarter 2022 reached $50 million, which represents a reduction of $28 million in the quarter mainly explained by the same aspect of the [Indiscernible].
Moving to the first half of 2022 on slide 19. The first half of 2021 amounted a negative $219 million in the period. Mainly explained by the correlated mechanism accounted in the first half of 2022 for $211 million as the reduce the cash conversion of the deal during the second quarter this effect has a significant impact in our accounting $144 million out of 2011.
The working capital in the period accounts for a negative impact of $187 million, mainly due to $57 million related to the debt payables in June 2022 mainly coming from the CapEx execution. $43 million related to the lower collection in energy distribution mainly associated to the system update. Most of these impacts should be recovered within this year. And other effects in the period mainly related to $62 million referring to the cost of payment not including the EBITDA adjusted.
So as mentioned, provision in bad debt. Let me just underline that regarding the working capital in 2021 it included the factoring instrument — executing totaling $189 million income taxes with $25 million with regard to the variation versus last year period. I would like to recall the last year number was impacted by FX losses resulting in a lower payment of tax. And finally, the financial expenses amounting to $100 million related to the debt costs payment in the period. But what concern the last few years, which include the expense related to the fact factoring that I just mentioned.
Moving to our debt on page 20. Our gross debt increased by $665 million, amounting to $5.7 billion as of June 2022. Due to intercompany loans provided by NL financing termination on [Indiscernible] $400 million and third parties for $300 million in the Q2, 2022 offset by the amortization of [Indiscernible] and amortization, leasing contracts. As of June 2022 18% of our debt is linked to our [Indiscernible] production for 2023 and 2024.
In terms of debt amortization, our scale will remain comfortable with an average of five year. For the current year we have around $400 million debt that has a maturity in December, and we aim to renegotiate looking at the opportunities in both local and international markets. Regarding the debt in 2023 we will use the proceeds from the sale of transmission to repay this maturity.
In terms of liquidity, we continue to have a comfortable position, we are reserving some available committed lines considering the possible headwinds in debt market coming from the international conflict in Eastern Europe. Despite the increase in our debt, its average costs in June 2022 decreased to 3.9% versus 4.4% as of December 2021, as a result of our financial management carry out during the last month.
As a part of our goal to strengthen the sustainability of our balance sheet, we have put in place an asset rotation strategy focusing on optimizing our ineptness, increase in value for all the shareholders. Let me spend few words on the recent material facts regarding the sales on slide 21.
As we have just informed the market energy lead assigned today with [Indiscernible] a company 100% controlled by Enel Chile a group of — agreements to sell its entire state equal to 99.09% of the share capital. In Santiago metropolitan area operate 683 kilometers of transmission lines, managing 60 substations.
Capacity in sales, transition will be carried out through a public tender offer by [Indiscernible] subject to certain conditions precedent customer for this kind of transition. Like the approval from the financial and the trust authority fiscally a national economy, the agreement provides a group will pay an equity value of $1.345 million for the entire state equal to $1526 million of enterprise value. The capital gain embedded in this transaction shall generate an estimated impact in our net income of 2022 of $783 million.
The pricing is subject to a price adjustment mechanism based on the interest rate from January 1, 2022 until the launch date of the public tender offer as mentioned. The closing of the transaction is expected by the end of this year. This transaction is part of our assets of rotation initiatives, focusing on the capital recycling of our company and contributing to optimize our leverage. The timing and the pricing, we have reached on this negotiation clearly express the quality of our portfolio and our continuous path to unlock the value of Enel Chile. We are going to give you further update about the process in the next quarter call. But what I can dissipate is that the sources we obtain in this operation shall be used as an input of a liability management we are focusing for an Enel Chile.
And now I will hand over to Fabrizio.
Fabrizio Barderi
Many thanks Giuseppe. Just to point out some closing remarks. During our presentation, we have behaved the several actions we have taken to face a series of [Indiscernible] starting from the impact of an international conflict in the commodities market. All of these scenario led to main messages for us. First, we are on the right path to continue conducting the energy transition to the decarburization of our magic in the electrification of the consumption.
Second, continue to reshape our actions to bring value to our stakeholders. [Indiscernible] and our action plan gives us confidence that we will reach our 2022 guidance. Let me be clear that there are no low hanging fruits on this path. But we know that we are trading the right world and we continue to unlock the value of our quality and resilient portfolio.
Let me now hand it over to Isabela.
Isabela Klemes
Thank you Fabrizio and let us open now the Q&A section as anticipated. We will receive questions via phone or chat in the webcast during today. Operator please, you can start the Q&A section.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from the line of Murilo Riccini from Santander. Your line is open.
Murilo Riccini
Many thanks for the call and information provided here today. So considering the level of water and use no start so far, and the reservoir in the mountains, can it be possible to generate approximately 10 terawatt hour of hybrid generation this year. This is my first question.
And the second one is, could you provide us your view on the availability and prices of fuel during the second half of this year, after this lower shipments that we are currently seeing to Europe? Do you believe or do you see the possibility that your guests provider cancel any guests ships during the winter in Europe, even if they need to pay a fine, for example? And the third question is, do you have any other assets rotation in process or under analysis? Thank you.
Fabrizio Barderi
Let me go with the first two questions. And let Giuseppe answer the third one. Well, yes, we are quite optimistic on the second semester, and we think that we could reach all of hydro production this year. This is our estimation today. Of course, as known season is not yet finished. It depends also on how it goes on in the next week. But as of today, this is our best estimation to be close to the 10 terawatt that we mentioned. Second question, no, we don’t foresee any problems in our gas supply. Our contract is very tight with many professing clauses in our favor in this case. So no, we are not worried about any potential consideration.
Giuseppe Turchiarelli
Possible other assets rotation, Murilo I mean we are always looking, whatever opportunity could come up from the market. We don’t have so far anything on the table, but it’s something we will consider, for sure we’re going to share this information with everybody but again, is there a regular process to look to our assets in order to find a way to unlock the value for the company.
Operator
Our next question is from the line of [Indiscernible] your line is open.
Unidentified Analyst
Hi, good afternoon, everybody. Thank you very much. The materials very complete as always. I have four questions. And I would like to go one by one if you do not mind. The first one is pretty much an accounting thing. We saw an unusual jump in the other operational expenses, P&L line not related to fuel, which affected EBITDA. Could you please tell us a little bit what was behind this?
Fabrizio Barderi
May you explain a second which line you’re referring to because?
Unidentified Analyst
Yes. Before getting to EBITDA, you have four different operational expenses lines. And in the second quarter, the last one that says other operational expenses, that’s the one that jumped quarter-over-quarter significantly.
My second question is related to the [Indiscernible] team shut down. And what’s the latest on the timing?
Fabrizio Barderi
To fulfill the schedule that was defined with the minister of energy of course, as you well know, it was expected May then [Indiscernible] to perform at the end of September. And to be honest, we don’t see and we don’t need to get deeper ideological conditions that we committed back to the availability of Lanka, as the system is not expected to be on [Indiscernible] anymore. And for the rest going forward that we have also the ones they can integration of the renewal workflow. So we don’t see any reason why we should postpone again.
Unidentified Analyst
My third question or actually topic has to do with the sale of the transmission lines. I wanted to get a sense of how much tax you expect to pay in the gain of that sale and when Enel Chile actually pay for?
Giuseppe Turchiarelli
From what concern is going to be paid next year. The amount of the stock if you look at this the capital gain impact we are talking about around $350 million. But we have to consider that we have some losses that we can use in order to offset such amount. We are estimating around $100 million – $110 million. In the short we are talking about $240 million – $250 million next year.
Unidentified Analyst
And we’ll also just have — mentioned that proceeds from the sale to pay down $1 billion debt amortization due 2023 and I wanted to know how much of that are intercompany loans?
Fabrizio Barderi
Well, let me say that all the loan, all the fund with they’re going to dedicate it to the repayment of the loan, the criteria they don’t wish we are going to select the loan zone to be repeat that are basically, the expiration date and the cost associated to the to the rebate like breakage fee or other kinds of costs. I will say that a good portion of this amount is going to be used in order to repay the revolving credit facility that we got busier during this year and they are going to expire next year. We are talking about most of them are in the company credit.
Unidentified Analyst
My final question is also well, after selling the lines collecting the cash paying down the debt, I think you might still be a little bit above your comfort level regarding leverage. Is the Enel group thinking about an eventual equity injection of capital rates?
Giuseppe Turchiarelli
Well, of course, I mean, the answer is going to have to be done by — what I know is of today’s isn’t, there is no plan now of capital injection on the table.
Operator
Thank you. We will move on to our next question. Our next question comes from the line of from [Indiscernible] JPMorgan. Your line is open.
Unidentified Analyst
Thank you. Good afternoon, Giuseppe and Fabrizio. Thanks for the question. I have a couple of ones. The first one would be, so this tax payment is about $250 million. And the equity value is over 1.3 billion. So the cash inflow was about $1.1 billion. Is that correct?
I’m sorry, I was using the headphones. I’m going to try again. So, the question was, if the equity value is $1.3 billion and tax payment is about 250 million, so can we expect the cash inflows of about $1.1 billion if the asset sale?
Giuseppe Turchiarelli
Yes, yes, you have to consider that of course as a loan, an intercompany loan owned by Chile, basically also designed is going to be paid about out of tax, we are talking about 1.1 roughly. Again the correct amount for giving the correct amount we need to wait the end of public tender offer because there is a price adjustment mechanism that will change a little bit the amount of the equity event. So roughly, the calculation that you made is correct.
Unidentified Analyst
Thank you. The second question will be if the annual EBITDA of the traditional business is still about $70 million and the third question would be you mentioned the company could consider other opportunities in the market if they arose. My question would be what type of assets with Enel Chile selling or a large stake in case other asset rotation measures would have to be taken?
Fabrizio Barderi
Well, again we used to evaluate all kinds of assets really Enel — was out of our strategy that we are focused basically on the renewable and generation side and distribution side because of the guidance together with the new services of Enel. And having said that it is clear that renewable projects are easy to split in the model distribution and it’s all together so we are analyzing everything. Their view of the potential opportunity but it’s something we come up, we’re going to do.
Unidentified Analyst
And just to confirm the EBITDA. Thank you so much.
Giuseppe Turchiarelli
It is around $70 million if I am not wrong.
Operator
All right. I’m not showing any further questions in the queue. I’ll turn the call over to Isabela Klemes for any webcast chat or questions.
Isabela Klemes
Victor, thank you all for your questions. Now I go through the chats that we received several questions from different analysts and investor connected. One of the questions here just to say again, like the numbers of these transaction to — some analysis are requesting more details about the amount that we are expecting that is going to be the cashing of this operation and how much would be an estimate of the reduction of the net debt of the company considering this cashing.
Giuseppe Turchiarelli
As I said, we’re going to the projection that we have, is to get after the payment of the tax were around $1.1 billion. $1.1 billion that is going to be dedicated to the payment of the debt and to the distribution of the dividend related to the 30% dividend policy. So we’re talking about around $200 million dividend and around $190 million of debt, because again on top of the amount that we receive, they will be debated will be going to be paid also for the loan that we estimate at the end of the year around $170 million. So basically, we’re going to reduce significantly our debt.
Isabela Klemes
And on the term, we are still missing questions regarding dividend. So the company is expecting to increase dividends related to the sale of these assets.
Giuseppe Turchiarelli
Well, we’re not going off, let me say we are going to increase the value of the dividends because we’re going to have this capital gain, we are not going to increase the dividend payout, but it will remain 30%. So since the 30% is mandatory okay, so the company has positive results. We are going to distribute the dividends associated to the capital gain after tax. We’re talking about roughly $200 million.
Isabela Klemes
Then the other question that was made by [Indiscernible] he’s requesting more details about — asking that the system is still very fresher to the hydrology and commodities. And if you are indeed, thinking close these facilities are now in September or if we’re expecting to let these units in the strategic reserve energy mechanism?
Fabrizio Barderi
Yes, as I already mentioned, we don’t see the system to be any more like under stress. And this was also consistent with the great [Indiscernible] there’s no reason to postpone again, the closure for AMEA and we were pretty clear since the beginning that we are not going to use the strategic reserve mechanism, so it’s simply shut down the plant and finding an estimate to use the site.
Isabela Klemes
Perfect, thank you, Fabrizio. We have more questions here also from several analysts and investors regarding the LNG. So what we are, first of all, what we’re expecting regarding sales of potential trading sales of natural gas in the second half of this year, and if we can deliver detail on how much was sold to or Enel has sold during this first half of this year. So also the other questions yes, this is all the questions in terms of LNG and commodities. So, Fabrizio?
Fabrizio Barderi
Yes, well basically in the first part what was approximately 15 [Indiscernible] out of which 10 was about [Indiscernible] last year that was done last year in order to manage an effective — to have during the first half of the year. The numbers they were meant to during the presentation while the other states were more short term or continuous, what I mentioned as an action to cope with the challenges scenario and pulling.
And about the second, we expected to have as I mentioned the significant surplus during the combination of Argentinean gas availability and our long term LNG contract with Shell and so we expect another at least 10 data to be available to sell in the second half and good piece of news about that is that I think that we are trying to optimize better opportunity and to leverage on the very good market output about gas.
Isabela Klemes
Thank you Fabrizio. We have another question also regarding the CapEx. What we are seeing regarding CapEx for Chile this year if we are estimating any kind of a reduction in the CapEx or postponing to the next year?
Fabrizio Barderi
Well, the CapEx as you probably know most of our project our project already under construction actually all the projects are already under construction and committed. So, we are confirming the CapEx at the end of the year for because of course, we need the energy that this project is going to produce in order to improve our margins. So, as of today, we confirm that the CapEx is going to be in line with our capital market projection.
Isabela Klemes
Perfect. Thank you and the final question here that we have regarding the rating agencies. So have you had recently discussions with other rating agencies and what they are anticipating regarding the moment of the company?
Giuseppe Turchiarelli
Yes, well, we always are in touch with the rating agency. We discuss and we pass all the message that we believe needed for them. We discussed about the progression of the business and the design also about the evolution of the debt. I believe that we are in line with their expectation in terms of managerial action that are needed in order to deliver the company. So we don’t really believe that rating agencies is going to give a negative feedback about the situation that we have today. So we are fine with them.
A – Isabela Klemes
Okay, thank you very much Giuseppe and also Fabrizio and thank you all for being connected today. In case you may have any other doubts or any other consultations please let us know. And as always our Investor Relations team is going to be available for any other information you may need. Thank you very much and have a nice day.
Operator
This concludes today’s conference. Thank you for participating. You may now disconnect. Everyone have a good day.
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