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Enel Americas SA (NYSE:ENIA)
Q1 2020 Earnings Call
May 4, 2020, 11:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2020 Enel Americas Results Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Rafael de la Haza, Head of Investor Relations. Thank you. Please go ahead, sir.

Rafael de la Haza -- Head of Investor Relations

Thank you, Gigi [Phonetic]. Good morning, ladies and gentlemen. [Foreign Speech] and welcome to our first quarter 2020 results presentation. I am Rafael de la Haza, Head of Investor Relations. Here with me is Aurelio Bustilho, CFO of the company.

First of all, we hope you all and your families are safe and well during this time. 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 that in this opportunity, the questions will be only received through the chat of the webcast.

Now, let me hand over the call to Aurelio, our CFO, who will start by outlining the main highlights of the period in Slide number 2. Please, Aurelio.

Aurelio Bustilho -- Chief Financial Officer

Thank you, Rafael. Hello everybody. [Foreign Speech] As you all know, the world is going through difficult times at this moment due to the COVID-19 virus. Our company is completely focused on developing the best possible measures to face the situation, and we are rapidly reacted in order to protect our people and help our community. In the coming slides, we'll see more detail about this topic.

Going to our operational highlights, Enel Americas EBITDA for this period reached $848 million, a decrease of 7% compared to the same period of last year. This is mainly explained by a negative currency devaluation impact, which reduced our results by $147 million. Without this negative effect, EBITDA would have increased by 9%. Group net income increased by 2%, reached $208 million. This is explained by lower financial expenses due to the payment of Enel Brazil's debt on August last year that we were able to do with the proceeds of the capital increase.

Regarding the potential impact coming from COVID-19 situation, our company is well prepared to face any working capital needs that we may have during this period. We have more than $2.5 billion of available liquidity and our net debt to EBITDA ratio is below one time at this moment and rating agencies has confirmed our ratings. Finally, in terms of ESG, we were recognized with Bronze Class for being part of the ranking of top performing companies of SAM's annual Corporate Sustainability Assessment that was published in the beginning of 2020. On the following slides, we will see a summary of how we are facing COVID-19 situation.

We have taken timely preventive measures to make sure our employees are safe during the COVID-19 emergency. Around 50% of the total workforce are working remotely, and all personnel that can work remotely is currently doing so. We have also taken steps to ensure the safety of our employees on the field, providing them with protective equipment during work hours. As well, everyone in Enel Americas is covered by the insurance policy which was entered by Enel SBA and was implemented worldwide, the first ever of its kind.

In relation to our clients, we have put our focus on increasing digitalization efforts. We have redesigned the websites of our subsidiaries to ease the clients' experience and focus on communication and payment channels such as emails, task manager, text messages and payments apps. On the coming slide, we'll see the engagements with our operations and stakeholders.

Regarding operations, our infrastructure is fully operational and reinforcing critical infrastructure is a key concern on these difficult times, and safety and security protocols have been reinforced. Some of our companies in Brazil have notified their counterparts for force majeure clause, which has begun as a preventive measure to negotiate with suppliers looking to mitigate the impact of the current conditions. We have also committed efforts on all big countries we operate in doing donations to help institutions purchase of medical materials and preventive measures in communities.

Now let's see the main government measures in the countries where we have operations. On the topic of regulation, government and local regulators have taken a variety of measures looking to curb the impact of the virus on population and the economy. Argentina, Colombia and Peru are in mandatory quarantine till May and cities in Brazil like Sao Paulo are doing the same. All four countries have implemented some form of waiver on payments to low-income clients as well as closing commercial offices, which has a negative effect on collection.

We want to highlight measures like the Medida Provisoria 950 in Brazil, which are aimed to bring liquidity relief on distribution companies that are the most affected by the current situation with the decrease on collection. On the similar vein, liquidity lines for company were implemented in Colombia with the same objective.

Let's analyze capex on the following slides. Total capex for the period amounted to $301 million, a decrease of 6.6% compared to the same period of last year. This reduction, however, is mainly explained by the devaluation of local currency. Without this, our capex would have increased by 11%. Our investments were mainly devoted to maintenance capex and focusing distribution business like we announced. From a geographical point of view, 60% of our investments were made on our strategic review with a significant increase in Enel Goias, Enel Ceara and Enel Rio.

Now, on the following slide, let's see our main ESG indicators. As we have said in the past, ESG is part -- important part of our strategy. In that sense, we continue with our focus on contributing with United Nations' sustainability development goals. We have been supporting our community through goals four, seven and eight, where almost 5.5 million people have been benefited with our actions.

We also have contributed to SDGs 9 and 11 related to build a sustainable industry, infrastructure and cities. In this way, Enel Americas relies on its low-carbon value-added products and services where the smart meters and Enel X business are relevant to the development of urban areas and improved quality of life in these areas. In addition, in order to prevent cybersecurity incidents, we cover all of our web application exposure to Internet with advanced cybersecurity solutions. Enel Americas has contributed to fight against climate change by generating 58% of its energy with hydroelectric assets during this period. As mentioned before, Enel Americas was included in the Sustainability Yearbook of RobecoSAM and obtained bronze category. These recognitions confirm the good work that we are doing and the relevance that sustainability has on our strategy.

Now, let's analyze our financial performance in the coming slide. As mentioned before, reported EBITDA reached $848 million, a 6.7% decrease compared to the same period of last year. However, we -- if we exclude the FX variation, which amounted $147 million negative effect, the EBITDA would have increased by 9%. Group net income increased by 1.6%, reaching $208 million. This is mainly explained by lower financial expenses due to the debt payment in Enel Brasil made with the proceeds coming from last year's capital increase. FFO reached $127 million, an increase of 87% compared to last year, while net debt decreased by 11%, reached $3.8 billion. We will analyze in detail cash flow and debt ahead on the presentation.

On the coming slide, we'll see EBITDA evolution and its breakdown, starting from $909 million of EBITDA from first quarter of last year. We can see that distribution in large hydro businesses contributed with an important increase, while Enel X also showed an improvement. On the other hand, thermal generation had an important decrease in EBITDA, mainly explained by Fortaleza one-off adjustment made in last year EBITDA of this company. Retail business has also showed a small reduction. And the currency devaluation in four countries where the operator had a negative impact of $138 million, which mostly explains the 7% reduction of consolidated EBITDA. In terms of business lines, distribution represents 49% of our EBITDA, while generation contributes with 43%, from which 33% is large hydro; retail and Enel X represent 6% and 1% respectively. It is important to highlight that 89% of our EBITDA is generated by zero direct emissions activity.

Let's now analyze our operating highlights in the following slide. On generation business, our installed capacity remained basically the same as last year, reaching 11.3 gigawatts, from which 55% are hydro. Net production reached 10.6 terawatt hours, an increase of 3% compared to last year. From the total generation, 58% corresponds to hydro generation, which increased by 200 megawatt hours. Our energy sales decreased by 9%, reaching 16.6 terawatt hours. This is explained by a reduction in trading activity in Brazil.

Let's analyze distribution business in the coming slide. Distributed energy remained substantially flat compared to last year, reaching 30.2 terawatt hours, mainly driven by a lower demand in Enel Sao Paulo due to a weather condition in the city, in the State of Sao Paulo and in Peru due to decrease in economic activity as a consequence of COVID-19 situation. This is partially offset by small increase in Codensa, Edesur and Enel Ceara.

Regarding number of customers, we have an increase of around 157,000, mainly explained by increases in Enel Sao Paulo, Codensa and Goias. Quality indicators improved in all subsidiaries except for Enel Ceara, where we suffered a severe rainy season and also suffering damage on our networks caused by increase in the level of social violence and complexity during the second half of last year.

On the following slide, we will see Enel X and retail business. Enel X business, you can see that, trends in e-City, public lighting points slightly decreased, reached 390,000. Photovoltaic panels installed also decreased from 0.4 megawatts to 0.2 megawatts. Regarding financial services, we had a significant increase in credit card business, which reached 882,000 active credit cards, while in e-Home, the level of contracts of microinsurances was in line with the last year. Finally, in e-Mobility, the number of charging stations increased from 100 to 589, mainly explained by Colombia and Argentina. Regarding retail business, the number of delivery points increased by 10%, reaching 3,069, and the energy sold amounted to 4 terawatt hours in line with 2019.

Let's move to country-by-country analysis on the coming slides, beginning with Argentina. EBITDA in Argentina decreased by 11% or $8 [Phonetic] million, reaching is $63 million. In operational terms, EBITDA increased by $32 million, but this result was offset by a negative FX impact of $39 million. In the generation business, we suffered the pesification of tariff during February and EBITDA decreased by 10%, reaching $56 million. If we don't consider the FX effects, EBITDA would have increased by $34 million or 36%. This is mainly explained by a higher capacity payment in nominal terms and by higher sales partially offset by a lower full margin and higher costs.

In the distribution business, EBITDA decreased by $2 million, mainly due to FX effects. In operational terms, EBITDA increased by $9 million, mainly due to higher tariffs due to the inflation tariff adjustment of March last year and higher social tariffs. Demand in our concession area was 1.7% higher compared to the same period last year.

This is important to mention that we are going to -- we are doing big efforts to sustain the operation in a very adverse scenario. The sharp drop in our revenues was a result of the country's financial and economic situation and frozen tariff for more than 12 months have caused significant losses in the company, as you can see. Despite these losses, our commitment is to guarantee quality services, continuing quality service especially during the COVID-19 provisions. Capex in Argentina decreased by $19 million compared to last year. Most of this decrease was due to FX effect. In operational terms, capex decreased by only $3 million.

Let's continue with Brazil in the following slide. In Brazil, overall EBITDA in the period decreased by 13% or $53 million, including $64 million of negative impact coming from the FX effect. Without these negative effects, EBITDA would have increased by 3%. EBITDA in the generation business decreased by 37% or $45 million, which is explained by worse result in Fortaleza as a consequence of a lower energy sales and higher cost of gas. I explained at the beginning, it was an one-off positive adjustment or result in 2019.

EBITDA in the distribution business decreased by 5% or $16 million. If we don't consider the FX effect, EBITDA increased by $34 million, mainly due to the Sao Paulo tariff resets and higher loss recognition, partially offset by lower energy sales. Capex in Brazil increased by 5% compared to last year, reaching $182 million. If we don't consider the FX effects, capex increased by $42 million.

Let's move to Colombia on the following slide. EBITDA in Colombia increased by $12 million or 4% compared to the same period last year. This result was obtained despite a negative impact of $41 million due to the currency devaluation. If we don't consider the FX effect, EBITDA would have increased by 17%. In the generation business, EBITDA increased by 4% or $8 million. If we don't consider the FX effect, we have an increase of 18% or $32 million. This was mainly due to higher spot price, higher price in the contracts and an increase in energy sales.

In the distribution business, EBITDA increased by 3% or $4 million. In operational terms, EBITDA increased by $21 million, mainly explained by higher tariffs, higher energy sales, lower losses and a better quality of services. Capex in Colombia decreased by 18%, explained in equal parts by the FX effect and lower investments in distribution business.

Now, let's analyze Peru on the Slide 18. EBITDA in Peru reached $132 million, which means a decrease of 80% [Phonetic] or $11 million compared to the same period of last year. In the generation business, EBITDA increased by 7% or $5 million. This was mainly due to lower energy purchase costs and lower fuel costs, partially offset by lower revenues due to lower energy sales. In distribution business EBITDA decreased by 21% or $15 million. This was mainly due to lower distributed energy and to higher energy purchase costs. Sales decreased by 5% compared to last year, mainly due to the COVID-19 effect. Total capex increased by 4% compared to last year.

Let me now analyze our P&L main indicators in the coming slide, starting from $848 million EBITDA of the first quarter of 2020. The company registered depreciation and amortization for an amount of $303 million, 5.8% higher than the same period last year as a result of a larger asset base in Argentina and Colombia, reaching an EBIT of $545 million. Net financial result amounted to minus $114 million, which represents a lower cost of $36 million compared to the same period last year. This is mainly due to lower financial costs -- financial expenses in Enen Brasil due to the payment of the debt in connection with the purchase of Enel Sao Paulo. Income tax registered in the period was $122 million, which is 21.6% lower than the last year, mainly as a consequence of lower earnings. Total net income amounted to $310 million, while attributable net income reached $208 million, a 1.6% increase compared to the previous year results.

With all these elements, let's analyze the cash flow in the next slide. Slide 21. Funds from operations amounted to $127 million, starting from an EBITDA of $848 million. This result includes a negative net working capital in the period for an amount of $498 million, mainly in Brazil. Tax paid during the period amounted to $122 million, while our net financial expenses amounted to $101 million. Net cash flow amounted to minus $219 million during the period after investing $183 million in maintenance and growth capex, as indicated in the previous slides. Dividends paid by the company amounted to $162 million, as you can see. Extraordinary operations amounted to $15 million due to a leasing in Colombia and with the operation in e-Mobility. Without this effect, total net debt increased by $490 million compared with last year.

Let me give you a quick update on the use of proceeds of the last capital increase in the next slide. As you know, February of this year, we announced our intention to make a capital -- sorry. February of last year of 2019, we announced our intention to make a capital increase of $3.5 billion. After many meetings with most of our shareholders and having heard the market opinion, we decided to reduce the amount to $3 billion. We announced that use of proceeds would be dedicated to the payment of debt in connection with Eletropaulo or Enel Sao Paulo acquisition and to start the restructuring process to the pension funds in Enel Sao Paulo.

April last year, this operation, as you know, was approved with an extraordinary shareholders' meeting. In August, after the first pre-emptive rights period, Enel Americas paid the acquisition debt of Enel Sao Paulo for an amount of $2.5 billion. In September, we successfully concluded the capital increase with a remarkable 99.5% level of subscription. Finally, in March of this year, the Brazilian pension fund regulators approved the annual distribution Sao Paulo pension funds project, which includes the remaining of $504 million in order to implement the contribution benefit migration plan.

Let me now analyze the debt of our company in the following slide. Gross debt amounted to $5.47 billion, a decrease of 13% versus December 2019. The FX effect accounts for a debt reduction of more than $1 billion. This is mainly explained by the fact that most of our debt is in local currency, and by the fact that these currencies suffered an important devaluation during the period, especially in Brazil. In terms of currency, almost half of our debt is located in Brazil and in local currency, as you can see on the charts.

Finally, regarding the cost of debt, we can see a reduction for this period going from 7.1% in 2019 to 5.9% for first quarter of 2020. This is mainly explained by a decrease in the weight of the debt coming from acquisition of Eletropaulo, a lower variable interest rate in Brazil, better conditions to refinance debt in Brazil and Colombia and historical reduction of Brazilian inflation rate.

Now, let me show you how our company is well-prepared to any potential liquidity needs, thanks to our solid financial situation and position. Our liquidity and balance sheet remained strong. We had around $2.6 billion of availability, liquidity as of March 31. Cash and cash equivalents accounted for 64% of the total, while committed credit lines account for the remaining 36%.

In the context of global pressure on metrics, as the consequence of the coronavirus pandemic and despite the slowdown in the economic activity and the lower electricity demand in the region, Moody's and Standard and Poor's recently confirmed Enel Americas as an investment-grade company. Our strong liquidity and credit profile gives us confidence to support our financial strategy during this difficult period.

Let's move to Slide 25. As you can see here, for this year, we have maturities for around $1.15 billion along with the liquidity position showed on the previous slide. We have also important leverage capacity to face these maturities. Our net debt to EBITDA ratio is slightly below one time, which gives us the possibility to issue new debt for up to $6 billion without putting in risk our investment grade.

Let me conclude this presentation with some closing remarks. Enel Americas is well prepared to face the economic consequences of the pandemic, and we will continue to strengthen our attention to all our stakeholders during the COVID-19 emergency. Once we exclude the currency devaluation effects, our business showed a solid performance during the first quarter with strong results compared to the same period last year.

Despite the crisis situation, the company significantly increased its capex in local currency, especially in the distribution business and in Brazil. Our solid financial structure endorsed by the ratings guidance allows the company to confirm the emergency situation is moved away and to obtain the financial and operational needs in the short-term without major issues. Enel Americas is actively supporting initiatives to mitigate the impact of the pandemic in the communities where we operate. Let me just tell you that we feel that this is the first time that we do it this way, this presentation. Hope the next time, we'll be in a better condition and hope you are safe and well.

Let me hand to Rafael to complete the Q&A session.

Questions and Answers:

Rafael de la Haza -- Head of Investor Relations

Well, thank you very much, Aurelio. Very clear. We will now begin our Q&A session. And I would like to remind you that the questions will come from the chat of the company. We have some questions. The first question received in the chat comes from balance, Ezequiel Fernandez. And the first question is a following one. What protective measures has each county implemented regarding the quarantine period, non-payment, payment in installments, provision for service cut-off, etc? And the second question from balance is the pressure on working capital collection is at 100% by distribution companies. Can you explain that to the rest of the chain, generation and transmission in an official manner via regulation or in an informal manner, unilateral extension of the term of monetary transfer of the energy transmission and companies?

Aurelio Bustilho -- Chief Financial Officer

Okay. Thank you, Rafael. Gracias, Ezequiel. Thank you for your questions. Well, in Argentina, we have mandatory quarantine extended into May the 10, that's the latest information that we have. We closed all the commercial offices. And only personnel needed to continue services in the network can be mobilized. Yes, we are in the streets with this priority to keep the lights on. Of course, with safety and very -- lots of attention in the safety condition of our people. And also in Argentina, we have limited to disconnect or to suspension basic services for six months for users with social tariffs or subsidies.

In Brazil, quarantine is not mandatory at a country level. Sao Paulo is the region that we have the biggest effect of the crisis. The crisis in Brazil is the state of the highest level. Sao Paulo has declared a mandatory quarantine until May the 10. Normatori -- the resolution 838 of this year prohibited the suspension of supply for 90 days during these periods for let's say, non-payments during these 90 days, right? Previous delinquency, yes, we cannot disconnect. But for this period, no. We measure to preserve the provision, of course, of the public electric distribution services, which is maintained.

Well, the Medida Provisoria 950 of this year increased to 100%, the discount to consumers benefited by social rate, let's say a construction up to 280 kilowatt hour -- sorry kilowatt month. Well, there's also allocating CDE, the account for the subsidy, obviously the services resources to cover these measures. So the distribution company will pay less CDE. Of course, we are refining this number to see the impact in our company.

In Colombia, there is a mandatory quarantine extended till May 11. Liquidity line for the company, voluntary contribution and transfer of non-reconciled values of subsidy by the Minister of Energy. Transitional measures for payments of energy bill. Well, there is a definition of payments period of 36 months for social structure one and two, 24 months for social structure three and four; and for other regulated uses as agreed between the price. Of course, the regulator will act as a -- let's say as a mediator.

In Peru, mandatory quarantine extended till May the 10 as well. Well, there is a state of emergency, restricting mobility of all cities, except for those working on essential services. And of course, our field activity is considered as essential services certainly. Postponement of payments of contribution to Osinergmin, which is a regulator, up to the last day of April 2020. Well, that's more or less -- these of course we've sent -- we showed a slide represent the measures, so you can see. If you have more doubts, we have a pleasure to complete the answer.

The other question was regarding net working capital and collection. Well, lower collection is associated with two concepts; the closure, of course the closure of our collection channels. Having in mind that before the crisis, we have the major part of our collection due that's been done in the physical agencies. And now with the digitization processes, now our platformization improving the digital channels, we reduced this -- let's say this dependency. We used to have 60% and now it's 40% in the region, which is a very good advantage. But of course, this is something that we are more exposed because people cannot go to the physical places in some areas. And of course the benefit for low income customers. As I explained before, had let's say, delay in these payments, allowed by regulatory measures.

Well, as I as I told you, the first one, we are in fighting this with digitalization. And the second one, regulatory issues. Of course, there is lots of discussions advancing and I'm confident that we'll have a solution in the coming weeks to cover the financial and economic exposure, especially in Brazil. Well, at a certain point we declared and we informed our energy provider that we may be force majeure in terms of cash collection. Of course, we are confident that we'll have a regulatory solution for this in order to, let's say, to have all the value chains of electric center in very well balances. Rafael?

Rafael de la Haza -- Head of Investor Relations

Okay. Well, thank you, Aurelio. Thank you once again for the questions. And now, let's move to Banco Santander [Technical Issue]

Aurelio Bustilho -- Chief Financial Officer

Rafael?

Operator

Pardon me, Rafael. Please check and see if your line is on mute? Pardon me, Rafael. Are you there?

Aurelio Bustilho -- Chief Financial Officer

Hi. This is Aurelio. Can you hear me?

Operator

Yes. We can hear you, Aurelio.

Rafael de la Haza -- Head of Investor Relations

Yes. Rafael here. Okay. The first question, Aurelio is from Banco Santander. What do you see effects -- have you seen effects on demand and delinquency so far in your distribution companies? Which countries have been the most affected? This is the first question from Banco Santander. The second question, have you received any contract renegotiation requests for generation business? Which countries have received the most? Third question from Banco Santander. In relation to Argentina, how have the payments been to commission? Was there any agreement between the generators and commission? And the last one is, is Enel Americas is going to change, is going to modify the strategy for 2020 taking into consideration the current scenario? Thank you.

Aurelio Bustilho -- Chief Financial Officer

Rafael, just to clarify, who sent this question. I'm sorry I didn't get you because it's...

Rafael de la Haza -- Head of Investor Relations

Murilo Santos [Phonetic] from Banco Santander.

Aurelio Bustilho -- Chief Financial Officer

Okay, OK. Thank you, Murilo for your questions. Well, demand and delinquency for distribution companies. Of course, there is -- we are following daily this issues. After safety, after of course maintaining the milestone of our clients, this is the priority of the financial society. We are following and managing them daily on a daily basis. What we are seeing is that we are -- the most affected countries are Peru and Brazil, right? Of course, it's a day to day learning process because this is started in our region in March 15. And of course, we have seen some improvements during this process. So it's -- right now it's very difficult to predict how it will move until the coming months, but what we have seen that Peru and Brazil is a major effect.

In Brazil, well, we see that in the beginning we have a delinquency in the beginning of 25%, but now we are around in accumulated basis of 5%. If you see during the last days, we are around 50% and improving. Why is that because in the beginning it was difficult to -- we are in a learning process how to also to communicate to the customers and so on. But taking advantage of our platform and our digital channels, we've been improving during these periods.

In terms of generation, renegotiation. Yes, let me tell you that we are more -- let's say, we have seen a better picture in terms of the generation and commercialization business in terms of negotiation compared to the regulatory market. Why is that, because we are taking advantage of our approach in terms of trading and commercialization activities. We also been -- have this approach of not selling commodities, but selling services, selling -- and solving problems of generation and of consumption of our clients. So this helps us to be very proactive from our side and also for the client side understanding and being flexible and having a flexible negotiation process in order to accommodate to their production capacity.

Let me tell you that if it's more than 5%, then I see problems. It could be huge comparing to the scenario that in the current scenario. So we are -- the major part of our selling, of our sales it's been well aggressive with our clients. Of course, there will be some situations that cannot be solved and so on, but it's minimum, I cannot serve them and I can tell you that's a minimum part of our sales, it's not relevant right now. And again, this is basis to a very good strategy initiated two years ago in our trading commercialization activities to be part of their solution, not only selling commodities, but selling with these approaches of services, OK?

Well in relation to Argentina, yes, we are the delaying the payment of CAMMESA, nothing new in this field. Of course, in Argentina we have this strategy if we have delays in the adjustments, delays in the collection generated by the regulatory measures and the government measure then we compensate our cash flow with CAMMESA. It's not something that we can say that's new. We've been busy in the past, and of course, we are doing it now.

In terms of agreement between generators and CAMMESA, of course we are having a very good space to discuss the issues, to discuss with government, with CAMMESA. Until now we don't have a formal agreement with the regulator and generation companies, I think it's a process. But anyway, we always consider Argentina in the sense of neutral cash flow, we'll not increase debt in Argentina. If we don't -- if we have delays, we have some issues with the collection and the readjustment, of course we'll compensate with our investment and costs in the country. So that's in general what -- nothing new that's what we will be doing and we are doing in Argentina right now. Thank you.

Rafael de la Haza -- Head of Investor Relations

Thank you, Aurelio. We have a question from MainFirst, Enrico Bartoli. Good evening, Enrico, and thank you very much for your questions. The first one is our outlook for working capital evolution, [Technical Issue] with the regulator for possible recovery of unpaid bills. And the last one expected impact on EBITDA from Argentina for the year 2020 due to the tariff and distribution and specification of generation business?

Aurelio Bustilho -- Chief Financial Officer

Okay. Thank you, Enrico for your questions and participation. Well, as I was telling you, it's difficult to predict right now the impact in terms of net working capital, especially in terms of collection, which is the first line of our cash flow. Why is that? Let me tell you that in the beginning, we firstly saw a very negative prediction. Well, especially in Brazil it was announced that it would be around 30% of delinquency and so on of reduction in cash in of distribution companies and so on. We are not seeing these figures right now. We're seeing -- in terms of demand reduction around 12.9%, but right now not in the first quarter -- in the country, the government shows reduction in Brazil of 0.2% of demand versus March of last year.

So of course we are seeing a reduction, but not accordingly with this news that was in the beginning of the pandemic crisis. We are, as I was explaining, we are improving our collection. We are giving alternatives to our clients. It was very important to our financial businesses, especially in Colombia, which helps us to have better channels for collection. So right now we don't have this figure yet, it's a day to day learning process and it's very important that also the government, especially in Brazil which is a major part, is considering measures to compensate the debt and the distribution.

So my answer is that we don't have this figure right now, we will have probably after all these implementations of the measures from the governments. And we will properly allow to and tell you what would be exactly the impact. What can I say, what I can tell you is that, with the improvement during the last month and we expect it to keep on maintaining our cash in during the coming weeks.

In terms of FX, yes, there is -- I will not deny that it's a huge impact in terms of FX, it's a simple calculation. If you see the FX especially in Brazil, in Colombia, we see a huge variation. It's a simple calculation and you can calculate by the best consensus that you want to use and to see the FX for the coming -- for the year end.

In terms of Argentina, well, the specification effects -- well, we saw it in the beginning of March. It is around $10 million to $15 million estimated by this year. But again, we need to see a complete situation without the measures that we are implementing for the next quarter. Rafael, I don't know if I answer all the questions for Enrico?

Rafael de la Haza -- Head of Investor Relations

Yes, I think so. Thank you, Enrico. Thank you, Aurelio. Now let's move to Bloomberg Intelligence, Elchin Mammadov, and he's asking for the following question. Can you please clarify if you are still comfortable with your EBITDA and net income guidance 2020 given the decline in power demand and devaluation of currencies in LATAM?

Aurelio Bustilho -- Chief Financial Officer

Well, this is Elchin, right? Thank you very much for your question. Well, the major impact is the FX. Of course, the effects, I don't have the figure, there's a lot of variation in the consensus, but the FX will impact the EBITDA and net income of the company, especially the EBITDA. If you do a rough calculation with our consensus and our assumption and the situation that we have right now in terms of the reals devaluation and in terms of Colombia and especially Colombian pesos, you will see that we'll have a huge impact, and this is a major impact. We still don't have the impact, the calculated -- the total impact of COVID-19. But I can tell you in advance that the major impact, I mean, 80% or 90% of the impact will be and it's been due to the FX impact.

For example, the reals is in the -- it was 5.7, 5.3 right now, so you see a huge devaluation in that sense, because the reals generated in -- the EBITDA and the net income generated in Brazil are in reals, local currency so translated into U.S. dollars, you will get the current effects of currency BRL to U.S. dollar, you see a huge variation. It's not difficult to calculate. We're talking about more or less $600 million to $800 million of FX impact in terms of EBITDA. So in terms of demand, it's something that we're still waiting to see more development.

One important thing is that if you see all the regulators, especially the planner for the countries, the official planner, they are planning more or less recover in the countries in the second half. Nobody can assure this not us and not even -- but working with this assumption of the government this recovery maybe the impact will be lower or -- so it's very recent to see the impacts. And again, take in mind that especially in Brazil, which is a major impact, we have the compensation been worked by the regulators and all the distribution companies in Brazil in order to compensate this negative impact of demand.

And let me remind you that in Colombia, we have a revenue cap methodology, which provides or which make at least economic impact in distribution companies recover. So more or less, just as a summary, FX will be the major impact not difficult to calculate and demand as you see especially the recovery of economic activities in our countries. As I said, the planner or the governments in each country, more or less, they are estimating the recovery starting to improve in July, August, OK?

Rafael de la Haza -- Head of Investor Relations

Okay. Thank you, Elchin. Thank you, Aurelio. The following question comes from Mediobanca, Sara Piccinini. [Foreign Speech] We have four questions from Mediobanca. The first question is a following one. Could you please provide more details on the $498 million working capital impact and if this will be reabsorbed through the year? Second question is a following one. How much is the financial support that the company is receiving from the countries in which it operates and could this mitigate impact on working capital? The third question, would you consider M&A given your fire power? And the final one from Mediobanca is, how much would be the impact of COVID-19 in terms of EBITDA net of FX that you estimate in your numbers in 2020?

Aurelio Bustilho -- Chief Financial Officer

Thank you, Mediobanca. Well, let me tell you that we have, let's say, a space or liquidity. We have very well -- a very good position in terms of credit line to support this period. We have a liquidity of $2.6 billion in terms of cash and cash equivalents and credit lines. So we are prepared. Of course, what we are facing is something that we never predicted. Of course, we didn't do the capital raise for this purpose, but it helped in terms of balance sheet to pass through this situation. Of course, we will not and we are not considering. We do not want to use our fire power to this crisis, but it's better to have to face this situation with balance sheet position.

In terms of M&A, yes, we still maintain our strategy to keep on growing in the region. Although, right now it's not our priority. Of course, it's not our focus. We are focusing in maintaining our operations and so on. But have a special team working and scouting opportunities and developing new possibilities and so on. But in general terms, it's not our priority. Our priority right now is to maintain operation, maintain our cash flow, maintain our financial stability and taking advantage of this financial position to maintain the lights on, which is the main position and the safety of our people.

Rafael, can you help me with another -- with other points? I'm sorry. I didn't get...

Rafael de la Haza -- Head of Investor Relations

Yes, Aurelio. There is a question about our M&A fire power taking into consideration our net debt ratio in the company. And the last one is the impact...

Aurelio Bustilho -- Chief Financial Officer

No, no, just to follow. We can do it this way. Fire power is if you consider the limit that we have 2.5 times net debt to EBITDA established by our credit agencies, we're talking about more or less $4.5 billion. One thing is very important, the pension plan. We got the approval to use the procedures to start the reach of the pension fund. It's something very important that we are working very hard and very assertively during this year in order to close the year with major part of this debt, the pension fund debt at Sao Paulo in the major part of the risk. So Rafael, please, sorry.

Rafael de la Haza -- Head of Investor Relations

Yes. And the last question is, how much will be the impact of COVID-19 in terms of EBITDA net of FX for 2020? That has been partially answered before, no?

Aurelio Bustilho -- Chief Financial Officer

Yes. We do not have it calculated yet. We have lots of situations, but we prefer not to calculate, because it's important to see the development of the behavior of our consumption and clients in our geography. But let me tell you that in the scenario that we analyze it, the major part of FX -- of impacts of the COVID is related to the FX. I mean, 80% would be FX and it's not difficult to make calculations in scenarios considering that we publish our macro assumptions.

Rafael de la Haza -- Head of Investor Relations

Okay. Perfect, Aurelio. [Foreign Speech] Now let's move to [Indecipherable] two questions, Credicorp. First question is the following one. Energy losses have increased during first quarter 2020. Is there a common explanation for that? Could you share more details on what are you respecting regarding them for the year? And the second question is the following one. Related to your generation projects, any of them would be delayed because of COVID-19? Thank you.

Aurelio Bustilho -- Chief Financial Officer

Okay. In terms of delays in generation -- thank you very much for your question. In terms of delays in generation, while we do not have any generation projects in Enel Americas, there's only the current maintenance and major maintenance going on. We have some issues in some plants that we have one case of infection in terms of COVID-19, but it's already solved. So it's not relevant. So we are -- we maintain our major projects just repeating. It's related to maintenance, not to growth because we do not have any growth activities or projects in Enel Americas parents. The second question, Rafael?

Rafael de la Haza -- Head of Investor Relations

The second question is about energy losses. There is an increase during the first quarter 2020...

Aurelio Bustilho -- Chief Financial Officer

I'm sorry. I'm sorry for missing that. In terms of energy losses, well, the major impact was observed in Ceara. Why is that? Well, we have in some parts in Rio, we have a deterioration in some areas related to more, let's say, aggressive of the market and complexity of the market, social complexity. And also in Peru, in Peru in some areas in our distribution companies we have an increase not relevant increase, but something that we are focused on to reduce with more complexity in this market or low income populated areas to combat or to fight these commercial losses. So we are implementing the measures to realign the measures in order to keep on these ratios controlled.

And also in Argentina, the dealers in Argentina we had some deterioration in some part of the dealers. Also due to the COVID-19, we had some restriction to not to enter, but to reconnect these issues. The issue that we are solving and recovering and we are confident that we'll compensate during the following months. In terms of working capital, why is the difference between the -- or what they explained the $498 million impact, negative impact. Let me tell you that this will be compensated during the year. In order to, as I told you, to improve the capex, improve the automatization and digitalization in the region, we've been increasing, and thank God, we've been increasing these activities in the end of 2019. So what we are seeing right now is a part of payments of this capex to be compensated.

The other part is related to effects in our spot payments in Brazil, especially in Brazil that will be compensated by the regulatory assets that we are having -- we'll have from this year onwards. We've got the tariff readjustment in Rio and in Ceara. And right now in the tariff, we are recovering these effects. So this is measure related the to capex efforts in the end of 2019, and part of it -- and part of the effects of higher payments, let's say, not in the spot market, but the spot prices to dispatch thermal plants and it will be compensated during this year and finalized in the first half of next year. Why is that? Because we have tariff readjustments in March of Rio, in April in Ceara and in Sao Paulo it will be in July and in Goias it will be in October. So the tariff year is not the same year of the 2020. So it will move some part to 2021. Thank you.

Rafael de la Haza -- Head of Investor Relations

Thank you, Aurelio. The following question comes from Scotiabank [Indecipherable]. And the question is the following. Can you please give the rate of collections in each of your countries in April and how that compares to the previous months?

Aurelio Bustilho -- Chief Financial Officer

Okay. Just one moment please. Let me get the material right now. But let me tell you that -- I can tell you that we have, let's say, until January, we are recovering more than what we invoiced. I could tell you, till January we are recovering if we invoiced 100%, we are recovering 101% more or less. We started to feel the level of reduction by March, which is around more or less, I can tell you the figure -- exactly the figure, but it will be a little bit lower of 100%. I mean 98% more or less.

Rafael de la Haza -- Head of Investor Relations

Thank you, Aurelio. The last question comes from Charles Fishman from Morningstar. And the question is the following. Has COVID-19 impacted on your 2022 capital spending of $5.3 billion especially with the majority planned for Brazil networks? Thank you, Charles.

Aurelio Bustilho -- Chief Financial Officer

Thank you, Charles for your question. Well, we're not changing this plan. Why, because it's very important to, first of all, to keep on improving the quality in our region, in our assets, the quality of supply of our clients. Let me remind you that 80% of this is related to the distribution assets. So its very important to keep on maintaining the capex and to keep on investing in order to improve the quality and losses in our region.

So we're maintaining the plan. Of course given now this is referenced, $5.3 billion is in U.S. considering the capex and the scenario or the assumption that we used to do the capex. But having said that, we are not considering reduction. But it's important to mention that we develop a very good capacity to be flexible in terms of capex. In the last five years, we did all the tests with sets and doing it very well and a very good recognition by regulator of our capex, which means that we've been very effective and we learned in our very good learning process and improved our flexibility in terms of capex, which means that this gives us lots of confidence that in the short term, if we need to place some capex investments, for example, related to demand increase or to new clients increase or decrease or demand decrease, we can adapt our capex in order to pass through this crisis period. So the most important message here is that we can be very flexible in terms of capex to adapt the pace, to adapt the timing. But in general terms, we are not reducing our targets in the region and maintaining our interest in South America and in Brazil. Thank you.

Rafael de la Haza -- Head of Investor Relations

Thank you, Aurelio. Well, as there are no more questions, I conclude the results conference call. Let me remind you that as usual the Investor Relations team is available for any doubt that you may have. Stay safe. Thank you for your attention.

Operator

[Operator Closing Remarks]

Duration: 74 minutes

Call participants:

Rafael de la Haza -- Head of Investor Relations

Aurelio Bustilho -- Chief Financial Officer

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