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Empresa Nacional De Electricidad S.A. (NYSE: EOC ) Q2 2015 Earnings Conference Call July 28, 2015 05:00 PM ET Executives Ramiro Alfonsin – Deputy CEO and CFO Analysts Zakill Fernandez – Scotia Bank Nicholas Schild – Santander Bank Rodrigo Mora – Moneda Asset Management Operator Good morning, ladies and gentlemen. Welcome to the First Half 2015 Endesa Chile Earnings Conference Call. My name is Carmen and I will be your operator for today. During this conference call we may make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements could include statements regarding the intent, belief or current expectations of Endesa Chile and its management with respect to, amongst other things, Endesa Chile’s business plans, Endesa Chile’s cost reduction plans, trends affecting Endesa Chile’s 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 Endesa Chile or its affiliates. Such forward-looking statements reflect only our current expectations, are not guarantees of future performances or 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 or interest in the United States or elsewhere, adverse decisions by government regulators in Chile or elsewhere and other factors described in Endesa Chile’s 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 that date. Endesa Chile undertakes no obligation to update these forward-looking statements or to disclose any development as a result of which these forward-looking statements become inaccurate. I would now like to turn the presentation over to Mr. Ramiro Alfonsin, Deputy CEO and CFO of the company. Please proceed. Ramiro Alfonsin Thank you, Carmen. Good afternoon everyone and welcome to Endesa Chile’s conference call to review the first half 2015 result. My name is Ramiro Alfonsin. I’m Deputy CEO and CFO of the company and joining me today is Mrs. Susana Rey, Endesa Chile’s Head of the Investor Relations Director and our Investor Relations team. As always we will be available to assist you and answer any questions you may have after this call. First of all I would like to highlight the most important events during this first half in slide two. Generation rose by 8%, mainly explained by higher combined cycle generation in Argentina and higher hydro generation in Colombia and Peru. We continue to face higher energy demand in Chile and Colombia of over 3% growth from 2013 and 5% growth in Peru and Argentina also compared to 2014. Our consolidated EBITDA increased 9%, reaching $744 million, as a result of a significant improvement in Chile as a consequence of higher energy sales, average energy sale price and the consolidation of GasAtacama since January 2015. In Chile on July 1 Bocamina started operations for economic dispatch by the CDECSIC operation center. In Colombia, El Quimbo, that we have being constructing for the past three years started to fill its reservoir reaching 95% completion. We expect to start operations during this fourth quarter 2015 of this 400 megawatt plant. Regarding our future investments the Board of directors Of Endesa Chile have been reviewing and decided to endorse a portfolio of projects presented by the management, amounting to 6,300 megawatts. For this total amount 3,001 megawatts are to be developed in the next five years. Now, let’s focus on slide three. When compared first half 2014 with the first half 2015 the most important consolidated changes are as follows. Revenue grew 14% mainly due to higher energy sales in Chile and in Argentina. Our physical sales increased by 11% mainly explained by higher sales to regulated customers and to the spot market in Chile and higher sales to spot market in Argentina. Costs increased by 16%, primarily due to higher fuel consumption. Thus consolidated EBITDA increased by 9% reaching $744 million. Our financial results reached an expense of $134 million, an increase of 3% mainly due to negative change rates differences in Chile and higher financial expenses in Argentina. Income from a related companies decreased by 18% mainly explained by the lower result in Enel Brasil and the full consolidation of GasAtacama since May 2014. Taxes increased 26% mainly due to higher taxable base and the tax rate in Chile that increased from 20% in 2014 to 22.5% in 2015. Net income attributable to Endesa’s shareholders decreased by 2% amounting to $146 million. On slide four you can see each of the countries contribution to our EBITDA. From a total amount of $744 million, 44% comes from Colombia, 31% comes from Chile, 20% from Peru and 5% from Argentina. Our operations in Brazil are accounted under the equity metrics and contributed a total of $38 million reflected in our related company result. In slide five, regarding our physical sales we experienced an increase of an 11% during this first half mainly due to 70% higher sales in Chile, mainly to distribution companies. We increased 750 gigawatt hours due to higher volumes from the energy biddings that we won in 2013 and also to unregulated customers. 80% sales in Argentina to the spot markets due to increased availability of our Costanera’s combined cycle. Let me remind you that the spot sales in Argentina corresponds to the sales to CAMMESA. 8% higher energy sales in Colombia to distribution companies, in particular sales that have been contracted at better prices and also sales to the spot as a consequence of higher hydro dispatch in Guavio. Partially this was offset by a 6% lower sales in Peru to distribution companies. In slide six let’s take a look at our financial position. Consolidated debt has decreased $850 million since June 2014 reaching $3.5 billion primary due to the exchange rate effect and the bond payment made by Endesa for $543 million. Lower debt also in Costanera $403 [ph] million as a consequence of a renegotiation with Mitsubishi and also lower debt in Edegel [ph] of $47 million as a consequence of a bank loan repayment. Of the total debt of $3.5 billion only 26% matures in the next two years and 91% corresponds to Chile and Columbia. Our consolidated debt has an average life of seven years with an average cost of 7% unadjusted for maturity and duration. In slide seven most of our funds from operations were used in CapEx, including Quimbo, Los Cóndores and the optimization of Bocamina II and Tarapacá and with the remaining cash of 2014 we paid $514 million in dividend. Now I would like to give you a brief summary of our operating performance on a country by country basis starting with slide eight. Regarding the Argentinean energy sector energy demand in the system increased 5% reaching 66 terawatt hours. Total available energy in reservoirs as of June 2015 increased to 65%, an improvement of 160 gigawatt hours compared to the same period last year. Reservoirs relevant to Endesa increased to 66%, an improvement of 51 gigawatt hour. Prices in Argentina as you are aware have been frozen in 120 Argentinian pesos per megawatt hour since 2002. EBITDA from our Argentinean operations were similar than the first half of 2014 amounting to $41 million, primarily influenced by higher fixed cost associated with inflation during 2014 and 2015 and salary readjustment during this period. These were partially offset by higher revenues as a consequence of more availability in Costanera. In Chile in slide nine, the energy sector demand in the SIC increased 3.5% totaling 33 terawatt hours. The total available energy in reservoirs as of June 2015 improved significantly compared to the same period last year, 348 gigawatt hour higher. Regarding the reservoirs relevant to Endesa Chile we improved 290 gigawatt hour, and particularly Laja and in Ralco. Through June 2015 the average material cost in the SIC declined from $175 to $149 per megawatt hour, 50% lower than in the same period last year. EBITDA from our operations in Chile doubled when compared to the first half of 2014 amounting to $230 million mainly due to higher physical sales, higher average energy price of $3 and the full consolidation and better results of GasAtacama. Regarding our plant of Bocamina let me tell you that on July 1, 2015 the Bocamina II power plant became available for economic dispatch, after obtaining the required authorizations and completing the operational testing period that began in June. Bocamina I is currently under the testing period and is expected to become available for economic dispatch during the next month. As of June 2015 Bocamina I and Bocamina II generation amounted to over 200 gigawatt hour. In slide 10 regarding the Colombian energy sector, during the first half the electricity demand in the system amounted to 32 terawatt hour, representing a 3% increase compared to the same period last year. The total energy stored in reservoirs as of June 2015 decreased by 213 gigawatt hours compared to the same period last year. Regarding reservoirs relevant to Endesa it decreased 145 gigawatt hours. Average marginal cost decreased from $137 to $78 per megawatt, 43% lower than in the same period last year as a consequence of the interest of – and the linear expectations in 2014. I would like to remind you that last year was exceptional for us in Colombia benefitting from good hydrology, particularly where we are present. Colombian EBITDA decreased by 14% to $329 million mostly explained by the devaluation of the Colombian pesos and $14 million wealth tax payment related to the tax reform of last year, that we mentioned in our first quarter presentation. This was partially offset by 9% higher hydro generation through El Vario [ph]. In Peru in slide 11 the electricity demand reached 19 terawatt hours, 5% higher than last year, the highest growth rate in the region. The total energy stored in reservoirs as of June 2015 were in the same level compared to last year. Regarding reservoir relevant to Endesa, it increased 40 gigawatt-hour. Let me remind you that at this period of time reservoirs are in the lower volumes of water in Peru. Marginal prices in the Peruvian spot market averaged $26 per megawatt hour decreasing by 32% with respect to the first-half of 2014, partly reflecting the new capacity added to the system, particularly by — combined cycle and other higher availability of existing power plants. Thus Peruvian EBITDA increased 4% reaching $145 million due to 6% higher revenue as a result of higher toll revenues and the conversion effect resulting from the exchange rate of the Peruvian Sol. This was offset by lower sales prices due to lower demand. Finally in slide 12, regarding the Brazilian energy sector the first half electricity demand in the system reached 268 terawatt hour, 2% lower than the same period last year. The total energy stored in reservoirs as of June 2015 decreased compared to the same period last year. Enel Brazil EBITDA decreased by 16% to $319 million, explained by 62% lower EBITDA in Ampla due to higher energy purchases in the spot market and to 33% lower EBITDA in Cachoeira Dourada our hydro plant as a consequence of the drought. This was partially offset by higher EBITDA in Coelce due to higher demand and Fortaleza, our combined cycle in the Northeast of Brazil. We remind you that Enel Brasil is accounted for under the equity method and our 37% ownership amounted to $38 million of net attributable income for the first half 2015. Now let me focus on our investments under construction. In slide 13, as of June 2015 let me highlight that we started the filling of El Quimbo reservoir. The project has reached 95% completion and we expect to start operations of this 400 megawatt plant during the fourth quarter of 2015. In regards to Los Cóndores run of river hydro plant located in Chile, upon its completion will add approximately 150 megawatt of installed capacity to the state. As of June 2015 the level of completion has reached 15%. We are currently developing important social work in the region in order to develop different projects with the local community. Regarding our future investments the Board of Director has been reviewing and decided to endorse a portfolio of projects presented by the management. The key criteria when selecting the projects to be developed was profitability, execution time and social and environmental feasibility. Each new project will be addressed under the methodology called a strategic plan of sustainable redevelopment. That includes the early involvement with the community. Establishing a continued relationship and implementing share value mechanism is in a territory where we plan to be present. The portfolio for Chile, Peru, Colombia and Brazil amounts to 6,300 megawatts of which 3,100 megawatts will be developed in the next five years. In the case of Chile the portfolio can see these projects for a total of up to 3000 megawatts, which represent more 50% of the current installed capacity of Endesa Chile. From this total amount 2200 megawatts will be developed in the next five years. The projects are in different stages of development and their focus is on providing growth opportunities for Endesa Chile. In terms of technologies this would be concentrated on hydro electric and natural gas plants, thus contributing to cleaner generation metrics and lower emissions of CO2 and other greenhouse gases. In this sense the management presented 23 projects in Chile of which 54% are hydro and 36% are gas and in Peru and Brazil and Colombia 13 projects of a total 3300 megawatts of which 40% are hydro and 55% are gas. Before ending this conference call on slide 14, let me brief you an update regarding the reorganization process. Following the presentation presented on May 18th, the SVS have answered clarify certain legal aspects and corporate government suggestions related to their reorganization plan. In particular the SVS has resolved that. the reorganization as this has been structured cannot be considered as a related party transaction. The reorganization should be considered as a single transaction as much as possible. And that the only the merger triggers the use of the withdrawal right for the dissident or not present shareholders. On the other hand the SBS reminded the Board of Director its duty to preserve the interest of all shareholders and to act in line with the corporate interest. On July 27, Endesa Chile filed into the SVS a significant event informing the market that the Board of Directors resolved that if approved the transaction should be executed in a following way. Each of the companies of the current companies known as Endesa Chile would carry out its spin off separating Chilean activities from those in other Latin American countries. Once the spinoffs are materialized, the subsequent international companies, Chelicera America, and Endesa Americas would merge into Enuresis Americas. The resulting companies would be based in Chile and listed in the same stock exchanges as before the spin offs. It is the intention of Endesa Chile to continue with the development of this transaction in strict compliance with the resolution number 15452 of the SVS. In addition, the Board of Directors of Endesa Chile resolved that the independent directors committee should grant an opinion on the transaction. On slide 15 we are presenting an indicative transaction timeline. The Board of Directors is currently evaluating the transaction. Expected timeframe to have an opinion is October 2015. If the board of director resolves to proceed with the transaction it would then called for an extraordinary shareholders meeting for December to vote on the spin-off. Once they spin offs have materialized and both vehicles are listed the second extraordinary shareholders meeting will be called to vote the merger. Finally on slide 16, I would like to highlight the most important issues here in this period. Prior consolidated energy sales due to increase in electricity demand. As I mentioned physical sales increased 11%, in particular increasing in Chile and Columbia the demand has increased 3% and Peru and Argentina demand has increased 5%. Consolidated EBITDA increased by 9% reaching $744 million mainly explained by a significant improvement in Chile. The company continues to show a solid financial position and a suitable debt maturity pattern. Consolidated debt has decreased by $850 million and average life is of seven years. On July 1, 2015 the Bocamina Power Plant become available for upcoming dispatch, adding to our portfolio of 350 megawatt of coal power plant. Bocamina has produced as of June 30 over 200 gigawatt hour. Access to liquefied natural gas and these regasification facilities allow us to continue to provide secured energy for Chile through a safe reliable efficient and sustainable operation. As of June 2015, we started filling the reservoir of El Quimbo. That has now reached a 95% completion and is expected to start operations during the fourth quarter of 2015. The corporate reorganization process is expected to conclude by the third quarter of 2015. If the Board of Directors decides to move forward on the transactions calling the extraordinary shareholder meeting for December. Regarding our future investments, the Board of Directors endorsed the portfolio of projects presented by the management amounting to 600. 300 megawatt from this total amount 3000, over 3000 megawatt are to be developed within the next five years. This concludes our review of Endesa Chile financial results for the first half of 2015. Now I will be glad to answer any quarters you might have. Carmen? Question-and-Answer Session Operator Thank you. [Operator Instructions] And our first question is from the line of Zakill Fernandez from Scotia Bank. Your line is now open. Zakill Fernandez Hi, good afternoon. Thank you for taking my question. The first thing I would like to ask is related to the CapEx in the Chile unit. If you could tell us how much is related to Bocamina II work, I don’t know if that’s possible? The second question is related to the Argentina operations, the revenue per megawatt and only you have seen energy revenues improved markedly quarter-over-quarter to $15 per megawatt hour. On the EBITDA level it was off by higher G&A but if you could provide a bit of color on the revenue per megawatt increase that would be appreciated? And the third question is related to the higher contracted level in Colombia if it’s related to any new contracts that pertain to El Quimbo, if we should expect this contracted level to remain high and if you still think that with [indiscernible] Endesa or Empresa should be able to fill the reservoir before December 2015 and get El Quimbo started? Thank you. Ramiro Alfonsin Yes, we can disclose the CapEx for Bocamina. I think we have disclosed in the past it’s roughly $180 million. This will be expanded during the next two years. So this will include 2015 and 2016. We expect to finalize all the environmental modifications we are doing into the plant. Regarding the revenues of Argentina we have basically the same revenues per megawatt hour that we had the previous year. Now in July there was been a new reform that the government has applied and it will be applied with effect from February 2015, and in this reform our revenues will be increased and will be corrected by inflation at least the large part of our income will be corrected by inflation. Regarding the new contract in Colombia we are not currently contracting El Quimbo and we will do so once we have certainty that the operations of this plant comes into place and the reservoir as you say is expected to be filled before the end of this year, probably in the coming two months but then we have to start the operations and the testing of this new plant, we expect this — this is why we’re speaking about the last quarter. But we do expect the reservoir to be filled much before than the end of this year. Thank you Zakill for your questions. Zakill Fernandez Oh, that was very clear, thank you. Operator And our next question is from Nicholas Schild from Santander. Nicholas Schild Hi, and thank you for taking my question. I have two questions if we can go one by one. First of all if you look at GasAtacama generation in June we have seen an increase in diesel generation. Does this respond to higher sales to spot market or are you selling somehow energy to using the interline to Argentina, and if it’s possible or are you doing something concrete to put more gas in the facility doing swaps with Argentina or having anything with the gas regasification port of source? Ramiro Alfonsin So going by one by one Nicholas thank you for your questions. The current generation in GasAtacama is being put into the spot market. We’re not currently exporting to Argentina. This is currently under evaluation. The Argentina authorities granted this authorization in the past month and this is something that we’re going to consider. Regarding installing the spot [ph] and we are doing this, sending one of our gas ships that we were supposed to receive in Quintero, we send it to [indiscernible] and we are regasifying the gas there. Nicholas Schild Okay, thank you. And the second question, the last contract you signed for renewal energy with Enel was at around $105 per megawatt hour. However your previous contracts seeing that year and the previous year were below $90 per megawatt hour. And why is the increase in price? And do you think if — or can you me what is the economical rationality of having direct contract with Enel Green Power and not trying to search for other renewal players to get the contract. Ramiro Alfonsin Yes, we are permanently reviewing and seeing what is available in the market and we’re not disclosing the prices of these contracts, although they might be close to what you’re mentioning. The energy we purchased from Enel Green Power on this last contract is based, a large part of it is based on geothermal. And this is a more predictable and stable energy that once, if we can purchase with other renewable sources. And we believe that there are very few suppliers in Chile currently that can provide this amount of energy. And as you know in the last two bids that we were granted we won 4.2 terawatt hours of contracts at roughly $126 per megawatt hour. So we do believe these contracts to be profitable and this is why we closed them. Nicholas Schild And do you have any direct contract with other renewal companies upside of Enel Green Power? Ramiro Alfonsin We are constantly reviewing those and if we have a suitable offer we will close them yes. Nicholas Schild Okay, thank you for the questions Ramiro. Ramiro Alfonsin No problem, Nicolas. Operator And our next question is from Rodrigo Mora from Moneda Asset Management. Your line is now open. Rodrigo Mora Hi, Ramiro. I have a question related to Bocamina I and Bocamina II. I would like to know if the energy generated by both plants were recognized by Endesa Chile’s second quarter results. Ramiro Alfonsin Yes, Rodrigo thank you for the question. Maybe we haven’t been clear. As of June 30th we have generated over 200 gigawatt hours. To be precisely it’s roughly 220 gigawatt hour with these two plants. And since there were not dispatched or recognized by CDEC at this point, this energy was sold to the spot market and this is in our figures yes, on the balance sheet and on the results that we presented. Rodrigo Mora Okay, thank you. Now and another question is related to the lack of water in San Isidro Complex especially for the next summer. Are there any actions that Endesa Chile is doing at this complex to solve the problem of water supply? Ramiro Alfonsin Yes, we’re carrying out a lot of evaluations to close and there are many alternative technical alternatives [ph] that require maybe long time. What we’re doing in the short term is that we’re bringing trucks with water. Currently we have been doing that for the past couple of months. And we have allow that one full combined cycle is working fully as a combined cycle and that the other one is performing as a combined cycle doing 12 hours daily more or less. So while we have high prices we’re able to produce with a combined cycle. This is the short term alternative that we have devised. And we’re currently under environmental authorization to take these fluids that have resulted from the power plant out to a mining company. We have an agreement signed with them but we need the environmental permit to do that and this is what we’re currently doing. If we manage to get this permit in this short term we will be able to produce with the two full cycles during the summer. Rodrigo Mora Okay, thank you, Ramiro. Ramiro Alfonsin I really appreciate your question. Operator And we have a follow up question from the line of Zakill Fernandez from Scotia Bank. Zakill Fernandez Hey, hi guys sorry for interrupting. Just very two quick ones. I wanted to know about the contracted level in Peru. It seems to be down versus at the last year, is this sort of a new level or will you try to contract more? And the second question is you talked a little bit about the new project in Chile, a new portfolio of project that include hydro and gas. I want to know if the figures that you gave for these projects include the strips of land that Endesa bought from BNS National [ph], I think last year. Thank you. Ramiro Alfonsin Regarding the reduction in contracted levels we have a particular reduction in Peru regarding our liberalized customers and we have some mining customers that have reduce their new demand considerably and although we are looking at alternatives to contract, prices are quite low currently in Peru. So it would be difficult to find out — to find other contracts at these prices during this year. We are looking into that Zakill. Regarding Chile we’re not providing — we’re not disclosing which are the projects. What we’re trying to face now is a different approach to this project, trying to work with the communities to establish relationships and to be involved in the very early stages of the designing of the projects with the communities. So it wouldn’t be serious and we’re not disclosing the names of where these projects are targeted. I’m sorry I cannot answer regarding whether these are in these territories or in other regions of Chile. Zakill Fernandez Got it, that’s probably smart. So thanks again. Ramiro Alfonsin Okay. Operator And we do have a follow up from the line of Rodrigo Mora from Moneda Asset Management. Rodrigo Mora Yes, Ramiro, I have another question related to the contract of Endesa in Chile. At the end of this year the company end important contract with a steel and iron mining company. What alternatives is the company analyzing to sell this energy available? Ramiro Alfonsin Currently if you look at our numbers Rodrigo, we have been during this first semester purchasing energy. So we are not in the short term looking at contracting or increasing our contracts. Having high marginal prices our purchases cost us roughly a $130 per megawatt hour. So the reduction on the contracted volume for us during this first semester and I would say during the next 12 months is actually better than increasing our portfolio. What we are considering to participate on the next bid in 2015 and there to propose potential projects to these new bid. Rodrigo Mora Okay. Are you thinking that the company will have available Bocamina II and I and more LNG and more hydro conditions, so to finish this contract could be not good. Ramiro Alfonsin I don’t know. I see your problem, but our purchases, I imagine we are purchasing roughly 2 terawatt-hour in this first semester or 1.5 terawatt hour in this first semester at $130. So even if Bocamina come in we are not looking — we do not feel the pressure or we not feel it convenient to go out and continue to increase our contracted volume. Rodrigo Mora Okay. So if the company is not analyzing or participating in other auctions for example if a customer call El Medro [ph]? Ramiro Alfonsin No, let me be clear on that. We are first possibly seeing the market and talking to liberalized customers and we have some part of energy that we can commit at suitable prices. But we’ll not look in — or we’re not very — we don’t feel pushed since our portfolio now with more on the buying side and on the tenant side. We still have to see how the hydrology performed this year. It’s still very early to know. Rodrigo Mora Okay. Ramiro, could you give us more details of how the project the investment plan in Chile, what kind of projects that you mentioned on the presentation? Ramiro Alfonsin Yeah, we are basically…. Rodrigo Mora I mean 23 projects in hydro, 64% in hydro and 36% in gas. Ramiro Alfonsin Yes, for the time being Rodrigo as I mentioned our approach is to work with the communities and we feel that we have to address them first to work with local authorities to try decide with them the project that is suitable, has very little environmental and social impact and this is how we want to address the project and to see whether socially, environmentally and community wise these projects are feasible before delivering more details on how the project or what’s the content of this project. Rodrigo Mora I understood, the new way to do the things. Ramiro Alfonsin Yeah, what we have we hope — we are convinced it’s going to work better and it is sustainable approach that we have to handle as a utility. Rodrigo Mora Okay, thank you, Ramiro. Ramiro Alfonsin Thank you. Appreciate it. Operator And our next question is from Rodrigo Garcilaso from JBM [ph]. Unidentified Analyst Hi, thanks for the call. I got one simple question is that considering the recently announced project portfolio especially in Chile is there a certain leverage ratio that you don’t want to surpass in order to develop all this announced projects there certain net debt to EBITDA ratio that you want to surpass to develop this? Thank you. Ramiro Alfonsin Thank you Rodrigo for the question. We certainly want to keep our investment grade and therefore having this the ratios cap which would be better than three times EBITDA, debt to EBITDA certainly parameter that we will keep on looking. Our financial depth is very solid. We have very little debt we feel we can face this investment project with confidence but we certainly are going to target the investment grade and we’re not to waste asset. Unidentified Analyst Have you already approached to the rating agencies to start discussing this possible project or is this three times net debt to EBITDA level to maintain the rating or you are reproaching the…? Ramiro Alfonsin Very early, since we have just being approved by the Board which are the projects we can tackle and how we must address them and this new policy of addressing the projects the time frame to develop one of these projects. The hydro project is quite long in permitting wise and investment wise. So it’s still very early in our analysis to do so. Our rating has been stable in the past year so we feel confident we will not have a problem with that. Unidentified Analyst Okay very clear, thank you. Operator Okay we do have a follow up from Nicholas Schild from Santander. Nicholas Schild Hi Ramiro again. One simple question if we do a simple exercise and take out the 2000 there, what’s expected for the next five years in Chile, we take out the Enel two metro of 490 megawatt. The rest divided by the number of project give you that the average size of the project should be 90-100 megawatt which is in line with what Mr. Thorat [ph] has said of doing smaller project, easier to get approval. But do you have any perception on what should be the return on investment capital of those projects or how much are you requiring for those investment? Ramiro Alfonsin Well the – EBIT number what we are doing to address is each of the projects once we see that socially environmentally the recent visibility we are going to review it with the market we certainly are going to address for a spread compared to our whack but there is not a specific number that I can say this is the approach we have. Nicholas Schild Okay and you are saying that you are going to try to socialize the project on to share is this sharing the revenues with the communities or can you elaborate if you have any specific mechanism sold that you could in order to get the trust on community and try to get approval from that? Ramiro Alfonsin No we are basically looking at value sharing and mechanism and basically it’s working in the very early stages with the community because we have learned that if you work together with them there are ways to mitigate the impact environmentally and socially and this is one we want to address. Nicholas Schild By value sharing investment like you’ve been giving them a certain percentage of the net income generated by the facility or something like that? Ramiro Alfonsin This is not defined we still have to see how they lay out different works that the ministries are carrying out. In Defense the tariff equivalency that the energy ministry is putting forward. So for the time been what we’re seen is that we need to work with them we need to define value share mechanisms that bind the projects or otherwise. But we need discuss it on a page-by-page issue. Nicholas Schild Sure thank you. Ramiro. Ramiro Alfonsin No problem. Operator And next question from Rodrigo Mora from Moneda Asset Management. Rodrigo Mora I have a last question is relating to the agreement with ASKNL to operate the [indiscernible] facility. Will this agreement extend to the end of this year? Ramiro Alfonsin That’s an excellent question. That has been a very profitable agreement for us in the first semester. And it depends very much on the hydrology but this is something that we’re going to have to analyze in this first — in the second semester. Rodrigo Mora So there is no decision today. Ramiro Alfonsin Today there is no agreement with Enel yet, no. Rodrigo Mora Okay, thank you. Ramiro Alfonsin Okay. Operator And I’m not showing any other questions in the queue. I would like to turn the call back to Mr. Alfonsin for any final remarks. Ramiro Alfonsin Thanking you everyone for your interest in the company. I would like to remind you that we are available throughout our Investor Relations team and would be glad to help you and assist you on any further questions you may have. Thank you. Have a good afternoon. Operator Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program and you may all disconnect. Have a wonderful day everyone. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) 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