Earnings Call: Q2 2023

Aug 10, 2023

Morning. We would like to welcome you all to our quarterly meeting for the second quarter of 2023. Today, we are joined by Ricardo Sierra, Chairman of the company. At this moment, all of the participants are in listening mode. As usual, we have had a Q&A at the end of the meeting, and they will be available for those of all who have joined via Zoom. This meeting has a simultaneous interpretation. For all those connected via Zoom, you can select the option by clicking on the bottom toolbar of the Zoom window. You can do so either in your laptops or in your mobile phones. Today, we are also through X platform, formerly known as Twitter, for all the audience who is joining us via that channel, we would also like to welcome. Ricardo, take it away. Good morning, Gonzalo. Good morning, everyone. In the last meeting that we had, we talked about certain asset sales in Central America. We are finishing those processes, and we have to remember that with this transaction, we will be reducing the debt of the company in around $198 million, and we will be receiving $194 US in cash, which represent 30% of capitalization of the market of the company at its current trust. This strengthening for our financial structure and liquidity will allow us to continue growing with the company and execute different buybacks. Now let us talk about renewable non-conventional energy projects. We still are focusing very specific segments and working in B2B segment. During the first quarter, we inaugurated a new solar farm in Buga of 9.9 megawatts that will provide clean energy to two partner companies that are Soya and LS Team. The project also has a tracker system, which is a technology that allows for the panels to keep track of the sun throughout the day, and this makes a more efficient system. It used to be very expensive. It used to be more cost efficient, but since technology prices have dropped down, I think that most of the farms that we will have in Colombia will have that tracker technology. During its construction, we generated 200 employees, most of them local, in this farm that saw an investment of COP 55 billion. We have seven site projects that add up to 89.3 megawatts, and we already reached 166.5 megawatts of solar capacity through our 14 farms. Most of our clients are directly using energy from the farms, and the rest of the energy, it is delivered to the National Interconnected System. On the other hand, we keep our commitment to improve our service in a continuous manner. This year, we have invested COP 57 billion in maintenance and remodeling of the network, which need to be updated, and we must change the equipment for more resistant, modern, safe ones. We have installed in Tolima a new post. There was important work there. We changed wood posts for concrete posts. We also did updating that allows us to reduce electrical failures. We also have installed smart meters that will allow us to keep track in real-time of consumption, and the clients will also be ready to receive other services and benefits that come with the energetic transition. Now, I would like to make a switch, and we will be talking about two entrepreneurment. One of them, it is the internet business. Three years ago, almost four years ago, right before the pandemic, we started with an experiment through our electric grid systems. We decided to start serve clients from low-income segments that had connection problems, issues. After these experiments for 3 months, we decided to transform it into one of the businesses of the company. It is a business line that we have not really discussed too much in these meetings, but it has been very good and it has been very successful, so we would like to give you some headlines and little by little, just start to formalize that business line with you. We have more than 62,000 clients in Valle and Tolima. We have built over 3,000 kilometers of optic fiber. This is home internet business. It is of the highest quality. We have had an availability of the service over 99.99%. Here is something that it is really fantastic, which is the experience index of our clients is 86.4, which means that it is almost 4 or 5 times what the normal internet industry has on average on the world. This is because our highest specification, friendly, flexible, and a very good price for our clients. Additionally, we have already had a content alliance. We have generated a partnership with DirecTV, with our clients. It has been very well received, and we are doing something that is really interesting. We are helping to bridge the digital gap. What we are most excited about is that we took the decision that all public schools that are on the way of our grid, we will connect them free of charge. There are 218 small public schools from municipalities in Valle and Tolima that are receiving a benefit, and it is more than 116,000 students that can now navigate through internet with the best connection. Additionally, I would like to also mention some of the other preparation things that we are doing to face El Niño phenomena. You know that that is happening. We know that it is happening, and we know that we need to be really well prepared. All of our efforts have been at making sure that our generation facilities are ready. It is important to indicate that the temperatures of the ocean are indicating that we are reaching El Niño. We are just waiting for it to match the atmosphere, but we are really well prepared, because we come from a 2-year period of La Niña where we have had really good rainfall, good water availability, and all of the water reservoirs are above 80%. This is really important. This means that the hydraulic reservoirs are there, and we can comply with all of the energy contracts that we have and all the commitments that we have with the system. For all of this, we have done preventive maintenance, the equipment, machinery in all of the centrals, all the facilities are ready, and the working conditions are optimum. We did anticipated maintenance of our thermal plants, even when we were ahead of time. We had no delays. We will be seeing this scarcity period by the end of this year and the beginning of the next one. We're hoping, or we know that the facilities, the plants that we have are ready to face these, let's say, trying times. Our thermal plants, Tesorito and Marieléctrica, had gas purchase contracts. We haven't identified any risks in supply, and additionally, we've been in permanent communication with the vendors to be ready for these next 12 months. The experience that we've had in the previous El Niño phenomenon has allowed us to learn to be better prepared. We were a little bit disconcerted from last phenomena, and we devised a plan for this next El Niño. What we've done, we've had the necessary stock, the critical stock. All of our plants have stock ready. Our strategic vendor partners have assured us that they've had enough stock to provide supply for key elements really fast. Additionally, now jumping from plants to our clients, our more than 1 million clients, we have very important news, which is that we have anticipated the purchase of most of the energy that we will be providing in these coming months. As a matter of fact, we have a philosophy of purchasing 2 or 3 years ahead of time. We have prices that are good, that are competitive, outside of the stock mechanism, which tell us that 94% of the energy that we will deliver to our clients is already purchased. We shouldn't see any variations, and we won't see any issues there. This is very important in the energy billing, which represents 35% of the invoice. As you've seen, the world, these dry spells and hard summers come together with wildfires, which is why we also have a protocol that's really well organized with the different risk management units in the municipalities and departments where we operate, so that we can have a fast action whenever this type of situation arises. Yeah, unfortunately, when it happens, it also has an impact on the electrical grid. Additionally, we would like to tell you that from the perspective of production, we balance the generation portfolio. Remember that we have the Zona Franca in Barranquilla, the free zone in Barranquilla. It's a very big area with very little flexibility in its equipment. We decided to sell it, and we decided to incorporate Tesorito, which is extremely efficient because it has 19 engines with around 200 megawatts, which means we can turn the facility 20 megawatts at a time, and that way we can guarantee the input to the system. We also have a direct gas pipe with a partner in this company, and this gives us flexibility. Today, I would say that it's one of the most important facilities in the system, not just because of its point, but also because of its configuration. Additionally, we're seeing the effects of high temperatures, especially in the increase of the demand. In the second quarter, between May and June, we saw a jump in the energy demand that we hadn't seen for a while. In the mid-income sector, we saw an increase of 9%. This is very unusual, very atypical, and it just shows how consumption just skyrockets due to the high temperatures. We need to continue with the campaigns and raising awareness on the importance of savings and good energy usage. Now, let's go to the positive results with which we close this half year. The EBITDA was around COP 995 billion, which is 9% increase compared to the previous year, and the net consolidated earning was COP 200 billion. Asset and platform management. We had new assets in operation, boosted the EBITDA. That include the platforms to COP 1.17 trillion. This means that when you include EBITDA of around COP 995 billion, we are practically, in this first semester, incorporating a figure that's around COP 122 billion to the EBITDA. This is an increase of 17% compared to the previous year. Our transmission platform, which is CAWA, has managed to energize 16 projects throughout the year. Its income has grown 32% and EBITDA 30%. Solar business, which is C2 Energía, had earnings of COP 46 billion. EBITDA is COP 39 billion. Jumping to the thermal plant, Tesorito, we have an accumulated generation of 297 gigawatts power and has generated an EBITDA of COP 58 billion during this first semester. The platforms that we've developed for growth are having an EBITDA that is significant, almost 15% of the consolidated EBITDA of the company in this semester. Esteban, we can now jump into the financial reserve. Hello, Ricardo, and once again, thank you to everyone who's joining us in this meeting. As you know, the detailed analysis of the state of results and the rest of the financial information, you can read it in all of the reports that have been published in the website. In the second trimester, the consolidated income added up to COP 1.58 trillion, with a growth of 31% compared to the same period last year. The operations in Colombia represent 89.8% of its income, and Central America provided 10%. In Colombia, the results had grown mainly because of the increase in income of generation of around 35% due to the sales in spot explained behind or backed by the increase of thermal generation. We have the facilities up and running because of the dry spell. We also saw an increase in IPP and IPC. That also to the new assets in commercial operation and to the WACC adjustment. Additionally, the incomes for other operational service reached COP 233.7 billion because, during the trimester, we saw a significant block of assets to CAWA. It's important to mention, I think that we did it so last meeting, is that when we conduct these sales between ourselves and the platforms, because we still have an interest in the platforms, we recognize only the utility in the proportion that was done, which generates a distortion in the figures and the results due to the fact that everything lies within the financial report. At the same time, everything that I mentioned come from the commercial representation of Tesorito, but that are translated to that platform. In Central America, the income in dollars increased 7% compared to the same quarter of previous year, and they increased mainly because of an increase in energy generations. In Panama, we are seeing a dry spell that has meant a higher operation of the Cativá thermal plant. The B2B business in this region provided COP 4.5 billion, with a growth of 69.4% compared to the same period last year. Most of the B2B income are now being transferred in the assets sales active because it is mainly the solar farms that we have been developing in the region. Throughout the year, the income have reached COP 3.09 trillion, with an increase of 22.8%. Sales costs during the quarter reached COP 1.1 trillion, registering an increase of 44% due to the highest gas purchase for energy generation, as well as for the increase of CERE, due to the CPI adjustment throughout this year. We have seen that during the quarter, the other costs reduced. Throughout the year, the sales cost reached COP 2.1 trillion, and they grew at 11.9%. The administrative cost reached COP 95.3 billion. This is an increase of 10%, due mainly to the register some costs that are not recurrent due to the asset sales. When normalizing this cost, the increase would be 3.2% increase, well below inflation. So far throughout the year, we have seen a sum of COP 178 billion and a growth of 10.9%. The EBITDA for the quarter reached COP 480 billion, and it registered a growth of 5%. The EBITDA margin of the quarter was 30.3%. Here I would like to do a parenthesis and connect with what Ricardo was talking about, which is what is the impact of the commercial representation of the platforms and the asset sales, because we are the commercial representatives and the responsibles for the operation. For instance, for Tesorito, we gather the whole of the collection, but in our cost, we have a whole of the transference that we do for that partnership, keeping only the income in the commercial representation. Now in the asset sales, what we are seeing, which are the accounting effects as the descendant operation. The accumulated EBITDA margin for the year, closing the second quarter, is 32%. If we eliminate the effects of Termo Tesorito and the effects of the sales of assets to Caoba, the EBITDA margin for this period would be 43%, which well in line with our historic operations. You can see that, and Ricardo just mentioned, the platforms are so relevant that in this particular case, they generate in the result a report that would generate an effect of 300 points in margin. The EBITDA has growth 9%, and it is around COP 995 billion. The financial cost reached COP 223 billion with an increase of 94%, mainly due to the increase of the indexes of the CPI and IBR. Also, we have paid commission to IFC for structuring, for availability of revolving credit index to the compliance of the social environmental indicators, and the commissions for guarantees for the electric market with the National Bank. It is important to mention the cost is. There is a difference of COP 19.6 billion, which is out of the cash available for equipment purchase and also for risk management. On financial cost and its impact on the first semester of the year, I would like to mention that the income coming from generation and distribution that are linked to CPI added COP 94.2 billion. This means that the effect of indexing this income, it is an income that is counteracted by the effects of the indexing of the cost of the debt that reached COP 93.9 billion. The net effect of the indicators throughout the semester was practically zero. I heard something that Ricardo said, it is inflation-linked. We are industry that it is typically, normally linked to inflation. Here, what we are seeing is that that balance is kept. Everything that is readjusted with income is working well. Financial cost of the year reached COP 65.4 billion with an increase of 16.5%. Throughout the year, taxes and fiscal cost reaches COP 129.6 billion with a reduction of 24.7% compared to the previous year. The net earnings of the second trimester was COP 78.6 billion, with a decrease of 48%, mainly due to the financial cost. Throughout the year, the net consolidated earning adds to COP 200.8 billion, with a decrease of 36.9%, a net earning that are part of the controlling at COP 222 billion. The company closed the quarter with a consolidated debt of COP 5.65 trillion, an indicator of leverage of 2.87 times that of the EBITDA. The quarter was closed with a cash of COP 304.2 billion. Now, I will be talking about the results of the quarter without considering the assets to be divested in Central America. So the income would have been COP 2.95 trillion, 27% increase. EBITDA would have been COP 923 billion, 12.6% positive, and financial cost of COP 415 billion, and total endowment would be COP 4.86 trillion, and the leverage indicator would be 2.75 times. Ricardo, with that, I conclude the financial figures. Thank you, Esteban. Thank you very much. As you can see, the operational results are positive. It gives us a lot of energy and motivation to continue working our strategy, focusing clean energy, energetic efficiency, and it also provides a good base to face the El Niño phenomenon that is close. Regarding Obras por Impuestos, we are executing COP 54 billion. We are providing supplies to schools, not just furniture, but also technological equipment like computers. So in 437 schools, we are providing equipment and computers. We will be providing supply and training 287 teachers in IT skills, and we will be building 4.17 kilometers of waste. With these Obras por Impuestos, we are having an impact in the communities with which we have a bond, a relationship. So the impact is almost 10 times that of what we do in terms of social impact. This is very significant. We will continue proposing projects for this mechanism so that we are always working there, and we are always filling the quota there. When we do the consolidate of Obras por Impuestos, this company is right below Ecopetrol as the company that has used this mechanism the most. We have, let us say, 28 initiatives, projects that we have conducted through this methodology, and we have invested more than COP 330 billion in more than five departments, and we have provided benefits to more than 280,000 people. This means that we are going around that fiscal toll booth, and we are directly having a positive impact in the society. We have been able to execute all those projects sticking to time. With that, we finish our quarter. Gonzalo, we can open the Q&A section or portion of the meeting. Thank you, Esteban. Thank you, Gonzalo. Right now, if you want to ask a question, you can either raise your hand in Zoom, or you can use the Q&A section also in the bottom toolbar. It is also very important that you write your name when asking the question, that we will work on. We have a first question from Juan Pulgarín. There are four questions from Juan Pulgarín, which are as follow: What is the percentage of compliance of budget with income and cost? What is the amount of dividends the project for the exercise of 2023? When are we going to see internet and energy services from CELSIA in Barranquilla, Antioquia? What is the percentage of compliance with the buyback plan? Those are the questions. Well, Juan, good morning. We have never really discussed about the budget. We are not ones to talk about that. But incomes are well above expectation for the year. It is really tied to how is that the thermal plants have been more active to really meet the needs of the systems as we prepare and get ready for El Niño. Now, when it comes to cost, that obviously has an impact in the variable cost because we have a higher consumption of gas for operation. So the variable cost, we have exactly the same effect. The fixed cost, as we were mentioning in the previous meeting, there is a big effort from the whole of the company or the whole of the organization to keep those costs under control, to be really efficient. I can tell you that as the figures we are pointing out, in cost, we are increasing, but under inflation. That obeys or that is due to all the efforts and all the whole of the creativity within the organization to be sure, just to make sure that we are delivering everything that we have committed to, and that we can provide the best quality and the best service to our client, obviously keeping costs under control. The amount that we have for distribution in 2023, that was approved in the investors' meeting, we will be distributing in the four installments as usual. We already paid 2 out of the 4 installments, the one corresponding to April and June, and now for October we will have one, and the last one would be January next year. Obviously, the distribution in next year, we will have to wait to close the year, and then we will need for the assembly to meet and then determine what is next. Regarding internet and services, I would like Ricardo to answer that. Yes, Esteban, thank you. Look, we are in Barranquilla and in Antioquia. We are running operations there actively with services from our energetic portfolio. Here I would like to have a short break and talk about an initiative. We are not the network operators, grid operators there, because in Barranquilla is Air-e. In Antioquia, we all know that it is EPM. But 18 months ago, we have a digital commercial, let us say, is the culture, the name of the company is enerBit. It is a company that is 100% owned by CELSIA. It acts as a startup. Just to do a comparison, to run a similar, so that everyone can understand, we are talking about like the Nequi for that. That is our digital commerce, I would say. We have reached 7 Cartagena, Cali, Medellín, Bogotá, Pereira, Barranquilla. And here we have more than 5,200 clients. We have a saturation index that are really high with the service, and that's provided here. Just to paint a picture, it's a company that's completely revolutionary. For instance, the field installation times, we develop a hardware together with some startups from Cali, and it's a combination of hardware and software, and we've reduced 80% installation times in the field of the services. Additionally, we've been able to provide really important information because it's almost real time. The clients can have information about their use. There is an interaction between this operator and its motto is that they're going to revolutionize the way in which clients interact with energy. They will be doing it in a very fast and easy manner. Thank you for the question because this makes way to introduce an experiment that's gaining traction and that we're seeing a lot of potential there. Finally, with the buyback, we want to tell you that we're continuing in the regulatory process. We're finishing the Panama operation so that we can have the resources, without restriction, and we're waiting for the next meeting of the board to have everything ready to continue with the process. Thank you, Juan, for your questions. Well, Ricardo, Esteban, the next question is from Ezequiel Fernández from Balanz. So Ezequiel, we give you the floor so that you can open your mic and ask the question. Good morning, everyone. Can you hear me well? Yeah, we can hear you. Well, thank you for the presentation, for organizing the meeting. Those are wonderful results. I have four questions, but I will try to just do them as quickly as I can. I would like to go one by one, if it's okay. The first one has to do with the regulatory environment of the market. In April, we had the Petro's decree that was aimed at the spot market. I would like to know if you had any update on that decree, what's going on there. A question derived from that is, a few weeks we saw a resolution where XM and CREG can do a check of market concentration to validate the offers for the spot market. I would like to know if we're within this normative and what's the impact there. Yes, Ezequiel, and thank you for the question. So I have right next to me, Carlos Solano. He's the regulatory leader. He's in the day-to-day discussion with the government, with the sector, with the guilds, on all of the evolution of all this regulation. So, Carlos, if you can help us with this question to provide clarity on the implications for CELSIA from the things that are coming from regulation. Thank you, Ezequiel. Thank you for your questions. First, that decree that you're mentioning from April, that was a draft. Now, in June, the definite decree, which is 0929 from the Presidency of the Republic. Basically, what it did is set guidelines and policies to promote efficiency and competitiveness in the electric sector. So it provided guidelines to the CREG, which is the Regulation Commission for Energies, regarding tariffs and other things. So CREG has been providing some draft resolutions so that the market can do comments, can make their remark, and enhance these guidelines. That's the stage that we're at. The CREG is generating resolutions and remarks, but it's important to say that the definitive decree was way less invasive compared to the draft, to the original decree, because it had very specific guidelines that were highly questioned, that transgressed the extents of the capacities of the Ministry. The effects are going to depend on the measures that the CREG takes. Now that's being sent to the market so that the market can generate comments and remarks so that they can be defined. On the recent resolution from the CREG to control the spot market, what it says is that XM should take, every day, the offer from each of the agents and do a pivoting test each hour. This means that they would take out the offer of that agent and see if they can meet the offer of the whole of the market. If that condition is the case, then that agent is not pivotal, and they don't run to all those measures. If it's pivotal, then it does. In CELSIA's case, most of the times, we don't have the size enough to be pivotal. What happens if we end up being pivotal for those agents, which are, for instance, the largest generating companies like Enel and EPM. What they have to do is that if they don't meet with the variation of the price offer regarding the hydraulic, for instance, the average of the previous week, in case of thermal, it's a percentile variation regarding variation cost. If that criteria is not met, then those companies should automatically must report that to the Superintendent of Public Service, but you don't receive a sanction or penalty, but it's just having a better control on the offer of the energy. I hope I can answer those questions. Thank you very much. That's really good, what you're mentioning. It's very clear. Now I would like to talk about the wind projects in La Guajira. We're seeing that there's a delay because of the supply line and more specifically in Cuestecillas. What are the updates there with that project? Also, we would like to know what's the strategy for the commitment of energy and capacity that these two wind farms have that should be up and running next year. Okay. I'll tell you about these projects. First is that from the energy perspective, our energetic commitments that we acquired due to those contracts of the bidding, where we had the wind projects, we're already meeting them with the current CELSIA portfolio. These were financial commitments that could be addressed from our portfolio, and in the design and the timelines, we had that situation. From that perspective, we're very calm with that, where it is with it. By December 2023, we should have the lines all set up, and that is jumping to portfolio. The other thing that I want to tell you is that we're following and monitoring all the situation that some of our colleagues have seen, especially what has happened to Enel and EPM with the construction and the development of the projects. We are still finishing all the licensing stage of the project, and we are being very careful on the ideal moment, what is the ideal situation, so that we can proceed with the construction. That is something that will be happening midway through next year, when we have absolute certainty on the matter. For now, we are looking to different options for the equipments that we have assured for that project to see where we can locate it, what other types of projects we can develop in the region or the country. We are advancing with that. I would like to close with a final question. The cash flow that you will be receiving from the asset sale in Central America, I think that will be part of the financial plan for next year. I would like to know if you have any preliminary comments regarding this, if you are going to use it more for buyback, if you will be using those resources to accelerate investments or what are your plans? That is a really good question, Ezequiel. The board of directors today has the whole of the portfolio on the table. The three things that you mentioned are being considered. We still do not have full clarity because all of the investments are really well-funded. We have the possibility of using it for additional growth, for dividends, buybacks. Esteban, if you have any additional comments. No. As we were mentioning in the last meeting, part of the resources are going to be allocated for the buyback that was already approved by the assembly, which are the COP 300 billion that were approved for action for the buyback. Thank you. Thank you very much. Yeah. There is a lot of clarity there. Thank you. Thank you, Ezequiel, for your questions. We will continue now with Katerine Ortiz. Katerine, you can open your mic, so you can ask the question. Good morning. Can you hear me? Yes, we can hear you, Katerine. Good morning, Ricardo, Esteban, everyone. I would like to ask about regulation, and regarding the answer that you provided for the previous question, I would like to know the resolution that CREG is publishing and if you did a balance of what is the extent of the reach of the government, by that I mean the decree 0929, of intervention and modifications that might have a financial performance of the company. The other thing that I would like to know is if in the conversation that you have had with the government, it would seem that there is a fixation on generation segment, more than on distribution or transmission. I would like to know if you see any additional risks there. If you consider that at this moment, the people that are at risk, that cannot be so independent, what are the impacts on CELSIA from the regulations and the CREG? Also, if you can tell us if you had had any discussions with the government regarding the reform for public services or the utilities, because during this weekend, he mentioned that what is next is a change in the bill of public services. The second matter that I would like to ask is regarding El Niño phenomenon. If you can tell us if you have any additional information regarding the intensity. We've heard from many different agencies that currently we're going through El Niño, but what we're seeing is that the level of the water reservoirs is still really high. I don't know if you have any studies, or you can tell us what are the projections, what's the intensity, what's the projection there. Finally, if you know if the government is going to run a new tender to supply the future demand or if definitely that's just on hold. Those are very good questions, Katerine. Here with Carlos and with Esteban, we'll try to answer them as best as we can. I'll start with the question about El Niño, then Carlos will talk about regulation, and then Esteban can talk about the other one. Let's start with El Niño. Look, this El Niño phenomenon, we're really well-prepared because we've come from 2 years where there's been high rainfall. The reservoir levels are really high, are excellent. We're above 82% in the national aggregated level, and we're practically at the same level. That's really good. What have we done? We conducted a description during the presentation of all the measurements that we've taken from the operational perspective, but from financial modeling, our equipment, our team, our climate and weather experts with energetic model planning, we run a lot of simulations, and we realized that this Niño is going to be very similar to that of 1997. We conducted several modeling and looking to the worst-case scenario. Under that scenario, we're really comfortable with what's going to happen. We're not really seeing any issues. We have everything in place so that everything will be working under the worst-case scenario. In the scenarios that we've modeled that are extremely harsh and that looks like it's not going to be the case, the financial result is not going to see a negative impact in what we have projected. Those are really good news because this team being led by CELSIA today, we're really traumatized by what happened in 2015, and we didn't want to relive that. From the reconfiguration, from the soul of Zona Franca, the insurance that we have for this Niño, options for purchasing from other plants. We've had a lot of alternatives and complementary actions to address those situations. With that, we can start talking about the regulatory matter. Katerine, good morning. I'll try to answer the best of my ability regarding the regulatory. If I'm forgetting something, just let me know. I will start with the decree 0929. As I was telling you, this decree provided general guidelines to the CREG, in which the risk. What are we worried there? With the stock market price, with the market prices, because we not really know what's going to be the impact on how to pay back the generators. It also gives some guides on regulating energy purchases and trying to promote equality between non-integrated and integrated agents. As integrated agents, we might be seeing impact there. Now, impact development, as I recently explained, and also a revision of the guarantee schema that we have set, those are the things that we're most concerned. With the level of ambiguity that the decree has, it's impossible to determine what's the financial impact or in the financial statement. We have to wait for the specific measures from the CREG to reach that definition. You were asking also about if we were concerned or worried about what's being said from the government in generation because there's lack of awareness and also a lot of question marks on how the energy spot market works. First, trying to explain the functioning and regarding specific functioning, especially with the situation that we're facing with El Niño, we try to be proactive so that we can establish some temporary norms that can mitigate the conjuncture without altering the functioning of the market. Basically, we're wanting to explain and to propose. We're waiting for the reaction of the government. Carlos, if you allow me. That animosity regarding generation assets. Look, throughout La Niña, this 2-year period, it was COP 0 for generators. Everything that was being generated on the spot market was 0%, 20%, and COP 15 of income, COP 15 per kilowatt. The average price, it's COP 290. And in COP 15, 35%. Picture that. We're looking into timelines that are completely rigged for those reactions because the spot market price is today at COP 600. But when you look at the importance of the stock as a mechanism to guarantee the reliability of the systems, we're not seeing that picture. We're not really seeing it. When we do a comprehensive assessment, we reach different conclusions and different solutions to the problem. Hopefully, all of these arguments are considered, right, Carlos? Yes, that's right. As you explained, this mechanism has allowed to see low costs during, let's say, times with a lot of resources, so that we can regulate the reservoirs, save water, and to be ready for those harsh times. Now, I would like to talk about the commission, the CREG. We're really worried the fact that six out of six experts that are part of that commission, plus the members from the national government, there are other three members from the government, which are the Minister of Mines, the Minister of Treasury, and these six commission experts, there's only one that's really been named. There's one empty seat. What is it that we're concerned with this? First, that the CREG is designed so that these seats are for terms of 4 years, and since they have a fixed period, they will have the autonomy to take decisions, and that might lead us so that the president takes these short-term decisions. But when they're appointed, they can do if they take a decision that is not in line with the philosophy of the government, they can just exit the commission. To that condition, those four officials, they all are part of the Ministry of Energy, and they answer to the Minister of Energy, so they don't really have autonomy to make the decision. The companies, the members of the sector have mentioned this, and we've requested that they appoint the people to have more autonomy. We'll keep pushing on that, but it's something that really worries us. What I understand is that those seats are for three terms, for three months, and that can happen two times. We're under that condition. They just finished the first three months, but at the end of that second term, the government can have new officers, and they can start again. There's really not something that limits specifically the use of that figure of appointment. We understand that that figure is so that you have temporary seats having long-term decisions. That's not the way that the government's management, and as I'm telling you from the sector, from the guild, we're trying to provide all the arguments to the government so that they can appoint that on their full terms. Now, Katerine, now let's talk about the public services reform. The government has decided that they will take the 13,234 bills that have the guiding principles of the public services and the electric services. We've seen some drafts, but these are non-official documents regarding the reform that wants to be done. The Superintendent of Public Service has taken the voice regarding or in front of the companies to explain what is it that the government wants to do. What he's recently said is that they want to reach a consensus. They want to hear the opinions of the sector before presenting the official bill project. They don't want to have a reform that entirely changes everything, but to set the criteria so that the service will be more universal, that the demand needs are met. We're monitoring that really closely. We're having a close eye into that, and we are waiting to see a more definitive text document to have more clarity on this reform. We consider that the current regulation are still very valid. It has allowed for, in the last 30 years, to provide really good results in terms of coverage, quality assurance, reliability, so that what happened 30 years ago doesn't happen again. Yes, we are aware that the rules and norms can improve, and we hope that that's the case with the national government. I don't know, Carlos and Esteban, if we can do a comment on the bid and the tender that will happen in November, and also connected with this Reform climate that we're seeing. Yes, Ricardo, the resolution was initially for a bidding that was going to be closed in August, but then, out of the request of different agents that mentioned that it was a very short time. Today, it was defined that the bid will close on November 14. That bid is ongoing, and in August, we have the declaration of interest, where all the companies that want to participate in the bid, we have to formally manifest our interest of doing so. We believe that that bid should be conducted, and the energy balance that CREG does show that by 2026, 2027, we might start seeing a deficit, which means that if at that time we're seeing El Niño with a high intensity, we might have an energy deficit to meet the demand. That's why this bid is so important, and it's important to have it run its course in a successful manner. Ricardo was mentioning the stability signs are very important to generate trust and confidence from the government, because this will define which companies will present to the bid and the offer that they can do. This year's bid has the characteristic that the projects must have approved connection, which might reduce the offer compared to previous years, but there's a portfolio of different technologies that can meet those requirements, and we hope that that will be successful. That will really depend on the decisions that the government will take in the coming months. Thank you, Katerine. I think that we covered everything there, right? Yes. Thank you very much. It was a very good explanation. Okay, Katerine. Now we would like to give the floor to Ricardo Sandoval from Bancolombia. Ricardo, you can open your mic so that you can ask your question. Good morning, everyone. Thank you for the presentation and for that very thorough explanation on the regulatory matters. I would just like to ask, after that, on the EBITDA margin reduction. Maybe the explanation was a little quick, and more than the sales cost that increases year after year, I would like to know what part of that percentage comes from higher purchase of gas and other things, and what's the exact percentage of the effect of the platforms on CELSIA's result. Also, if you could repeat or expand and clarify the information on the platform on the EBITDA margin. Once again, thank you for the opportunity. Yeah. Thank you, Ricardo. I would like to say that if you want to see it more in detail, we have the financial reports available. If there's any specific inquiry regarding that, we can answer it, no problem. Now, regarding the specific impact of the platform, I would like to share the following. The figures from the consolidated financial statements for June had an EBITDA of COP 495 billion. Out of those COP 3.9 trillion, COP 298 billion correspond to the income from Termo Tesorito. This doesn't leave a big EBITDA margin, and it's consolidated. We're seeing small income from commercial representation, so we're talking really about that those income have to be analyzed to understand the margin of the operation. The other operation that we were mentioning is the active sales to CAOA. It's an operation from around COP 200 billion that was invoiced to CAOA, and have a utility before taxes, of around COP 80 billion. In the financial statements, out of the descendant operation, becomes an income line of COP 182 billion and an EBITDA of COP 438 billion. If we subtract that to really understand the electric business per se, that we have not the commercial representation of Tesorito or the CAOVITA asset sales, we're seeing that at the close of the second quarter, it will be COP 2.9 trillion, and the EBITDA would be. When you're seeing those two values, it's a 35% EBITDA margin. So what we're trying to explain is that when we analyze just the business, the EBITDA margin is very in line with the historic. When we add two very relevant items, we're saying that it's more than 10% of the income of the exercise, is where we see the effects on the EBITDA margin, because it leaves zero EBITDA margin, which is a commercial representation. The other one has the EBITDA margin that I was mentioning. That is basically what happens with the EBITDA margin. Thank you very much. No problem. We would like to ask a big favor. We were having an issue, so please, when you We had a problem with the platform, so please rename yourself, because we are seeing everyone with the same name. If you can change your name, you can rename in Zoom, so that we can really know who you are, and we give that customer service, tailor-made service. Now we are going to jump to the Q&A section. Another person is asking, why did we see an increase in financial cost? Also, can you give us an update on the buyback? I think Esteban can talk about it. Financial costs, as we were mentioning at the beginning, almost COP 94 billion from variation that we are seeing in financial costs correspond to the effects of the index. When the index start to reduce, we are starting to see in these last few months and during this quarter, and we hope that we are going to see that effect is going to be reversed. It is not going to go back to the levels of 2020 when we had a CPI of 2% and the IBR was around 3% or 2%, but we will see a reduction in that volume. The other thing is that we have a variation of COP 134 billion that corresponds to a higher stock. If you look into the graphs and the information that we have in the investment kit, we had the evolution of the in-depth stock, and last year we acquired that gradually, but right now we have not seen any variation in data. We are seeing the effect of understanding that delta that we took in the first quarter of 2022, and then comparatively speaking, it has not replicated. When we reach the third quarter this year, given that we do not have substantial variation in the stock, what we are going to start to see fundamentally is the variation linked to index. We are even going to see a reduction as soon as we execute the divestment of Central America, that, as we were seeing during the meeting, reduces almost COP 1 trillion of stock link. That is basically the explanation for the cost. What we will be seeing next is a reduction of the stock out of Central America and a normalization of the indexes as we start seeing a reduction. Thank you very much, Esteban. We will continue with the questions from Simón Díaz from Protección. What is the percentage of income from generation that correspond to spot and which one to sales per country? Do you have any estimates on how the profile of the debt will finish once the asset sale in Central America is concluded? If you could go deeper into the fiscal impact and what is going on there. Simón, in the generation business, you got to remember that more than half of the income of the company come from that. But if we try to isolate generation business, and once again, I need to clarify, without considering Tesorito, but just the assets that are property of CELSIA in the consolidated. Today, we see that 90% of the income from generation come from contracts with other agents and with traders, and 10% of those income come from spot. That's more or less the average. Termo Tesorito is a different story because Tesorito has income from reliability, and all of the generation is sold on the spot because of the nature of the operation. The other question that you were asking was on tax and fiscal impact. And yeah, it corresponds to the tax reform. Also remember that we have a lot of the fiscal benefits. And we hope that this year we will be taking a very important stance regarding those benefits that have been generated. But yes, as any other company, we're seeing an impact due to the tax reform. Well, thank you very much. We will continue with the questions that we have here in the Q&A. Alejandro Ledesma. So according to the, what's the real value of the stock that the stock should have? I think that you have to look into what the analysts are saying. We're seeing that the models from the analyst is putting the price of the stock at around COP 4,500 and COP 5,000. So as a company, we're not providing information on that, and I would like to look into the different exercises that the independent evaluators have conducted. Ana Guasca from Davivienda Corredores. Well, looks like Ana is not available right now, and we will continue with the Q&A. Now considering the price of the US dollar is stabilizing, are you going to pick investment in new technologies for energy? Yeah. One of the things that has had the biggest appetite of investment of the company were the exchange rates. When you look into all the investments that we do in this sector, they're entirely related to the price of the dollar. All of the acquisition of equipment is done outside of the country. So basically, the acquiring of equipment and technology in renewable energies, in energy generation, a lot of the transformers, a lot of the generators, and even structures are imported. All the equipment. And, yeah, the exchange rates were just taking us out of the range of investment so that we could sell it at a certain price. Now that it's at almost COP 4,000, now we're seeing a different dynamic. We're starting to have conversations again with the clients on that matters because we had some projects on standby. And now, especially what you were talking about, which is smart meters. We have a lot of strength there. We have already almost 200,000 smart meters installed, and we obviously had to stop the deployment of this equipment. But right now, we're analyzing the situation if we can continue progress with that. But also if we can see other technologies, other different alternatives, and we're working with enerBit, with our own planning and distribution equipment, and with the startups trying to design new measuring mechanisms that allow to reduce the costs and reach more clients and provide better service, metric service, so that they can have a better energy management and usage. And yeah, as you mentioned, the price of the dollar is linked to the investment. Thank you, Ricardo. I would like to mention that the space that we have available in X, we have some questions from Glory. The development of that project that you mentioned. What are the end customers from enerBit? Are those corporate clients? Glory, 90% of the enerBit clients are residential. We are very focused into serving them and to small-medium businesses, to SMBs. The type of services that we provide can be for any customer and I would like to here make an advertisement. This is a team that has almost 70 people. A high percentage of them are exclusively developing technology, software development. It is a company that really has the support from CELSIA, from different fronts. They are creating their own path in a very interesting way. This is a business that was conceived by Andres Caino. We have a very high level in the team. We have people that have had a lot of experience in the field. We have also managed to bring people from other companies that have had high-level positions in companies such as EPM or Air-e. Additionally, we have a technology team, a multidisciplinary team that is nothing but spectacular, and that they are part of this new company, enerBit. We are really thrilled, and we see a lot of potential there. It is a company that is at its experimentation phase and seeing how is it that we can scale that technology. Thank you, Ricardo. I will go back to the questions from Zoom. Can you tell us a little bit more about the generation from hydropower plants? Second, the tax reform saw an increase of 3 points for electric generation. How is this having an impact in CELSIA? I will answer in broad strokes. Since we have been managing our own reservoirs and forcing what we have in terms of the commitments that we have, we have tried to raise those levels as much as possible. That is the management exercise that we have had. There is not a lot to be said. Each company manages their own strategy. We have the big advantage of having a couple of years where we had a lot of water, and we can reach this phase now. Additionally, in the second quarter of 2023, the stock price was really low considering the water situation in the country. Since we started to see a decrease in the levels of water and the signal of thermal plants to start operations, and because of the current situation with Ukraine and Russia, it had an impact on the prices. That explains more or less the reasoning of the prices that we are seeing. We are almost finished. We have Roberto Paniagua from Casa de Bolsa, and the first question is, how do you expect to stabilize the EBITDA margin? Second, how much of the debt is indexed to CPI? How much to the IBR? That 94% of energy purchase equivalence, how much to the term? That 95% of the purchase energies are what term? Thank you, Roberto, for the question. Yes, I will try to answer very general, and then I will leave Esteban to answer. The EBITDA margin is not a problem for us. We are generating a lot more EBITDA, which is welcome. We will not try to stabilize it. What it's important to do, and for you, for the analysts and the shareholders, it's important that you understand the volatility is because we're generating more, not because we're having an issue that the margin is dropping. In those terms, we want to highlight the importance of that fact. Now, Esteban, if you want to give us some details on what we're being asked. There's something really important, which is that we have two parts. First, the trader, as a trader, is hired. We have a contract there. What Roberto Paniagua is talking about, I think, is they're very similar. The 94% that the trader has acquired has the normal terms of the market. It means it has a certain variation, but we have that contract for the next 2 or 3 years, which is the normal term of those contracts. But it's gradually reducing. This year it's 3, and next year it's going to be 2, and then it's going to be decreasing. The ones that are really long comes from renewable energy bids. Remember that those are 10-year contracts. We've been able to be around 10% of the target. More or less 10% of the energy is found in the contract of renewable sources. Some of them are having certain issues in continuing the market. We're always trying to have a stable or a really high number of contracts. In generation, it's very similar. It's 90% what's contracted, a little over 90, and then it will gradually decrease with contracts that are on average, 3 years. How is the debt separating to CPI and IBR? I think it's more or less 20% of the debt is fixed, 2025, and the other 75% is distributed as following: 20% in IBR, depending on the app and the debt that we have. It's going to be deconsolidated. But almost all the debt is indexed to something. The other 55% is more or less on the CPI, but let's say that the specific figures can be found in the investment kit so that you can see how they are divided. Okay. We will have one final question in Zoom. The person who's raising their hand, you can ask your question. Apparently, the person is not available right now, so there are no more questions. I don't know, Ricardo Sierra, if you want to close the meeting. Yeah. Well, first of all, thank you, everyone, for your attention, for your interest, for your questions, for joining us in this meeting. Hopefully, we'll be providing news on the evolution of the different projects of the company and the strategy of the buyback that you've asked. Yeah. Kind regards to all of you, to Ricardo Sierra, to Natalia, everyone. Thank you very much.