Good morning, welcome to Grupo Energía Bogotá second quarter 2025 financial and operating results conference call. The results reports were published yesterday and are available on GEB's website for your reference. The conference will start with an overview of the quarter's results, the main events in the economic and industry environment of the four countries where GEB operates, followed by the group's financial milestones. At the end of the presentation, a question-and-answer session will follow. On the bottom right of your screens, you'll find a question and answer section for you to write your questions at any time. Or you can raise your hand if you'd like to ask your question live. Our conference speakers will be the Chief Executive Officer, Juan Ricardo Ortega, and the Chief Financial Officer, Jorge Tabares. Juan Ricardo, the floor is yours.
Good morning, everyone. Thank you for join us for our second quarter earnings call. Between April and June, we continued to post positive results supported by the group's solid operational performance. We generated revenues of COP 2 trillion and an adjusted EBITDA of COP 1.1 trillion. After a dividend approved by Argo of BRL 205 million, approximately COP 153 million, net income of COP 0.6 trillion, affected by two non-operational or extraordinary events, which we will detail later on. Adjusted EBITDA for the first half of the year reflects a year-over-year growth of 13% with broad-based performance across operating segments, except for gas transportations, whose results reflect the lower gas dispatch to thermal power plants and reduced variability contracting compared to 2024. Remember that that year was one of the driest in the country's recent history. The thermals operated at full capacity for a couple of months.
Additionally, we continue to await CREG's decision on the tariff framework and implementation of the new rates, which we expect to get in the next couple of months. On July 24th, we made a dividend payment of COP 1.1 trillion to our more than 18,000 shareholders, in accordance with the approval granted at the general shareholder meeting in March. On another note, on July 1st, following Moody's rating downgrade and outlook revision for our majority shareholder, the District of Bogota long-term credit rating was defined at Baa3. That's the new rating for GEB, with an outlook adjustment from negative to stable. The agency highlighted the group's successful track record on investment and growth, supported both by strong cash flow generation from subsidiaries and by dividend distribution from non-controlled companies.
On the sustainability front, I like to highlight our social and environmental investments, which total COP 16 billion in social investment and COP 12 billion in environmental during the April and June period. 95% of second quarter social investment came from Enel, as primarily directed at the ongoing projects, particularly Colectora and La Guajira. Much of this investment is focused on the productive initiatives for the communities, the community's infrastructure, and access to water, which is one of the key aspects for the communities in La Guajira. Meanwhile, on the environmental investment, it's related mostly to the compliance of the environmental obligations for the current projects in execution. Turning to the next slide. Here are the quarter's key operational milestones. In Colombia, regarding our transmission project, two major developments occurred in May. The Membrillal private project was declared commercially operational before Ecopetrol and XM.
This project connects the Cartagena refinery to the national transmission system on an 80-km lines. The environmental authority, ANLA, issued a Resolution 937, thereby formalizing the environmental license for Section 2 of the UPME Southwestern Reinforcement 500 kV project. We're going to begin building that section of the line pretty soon. On another front, Enel Colombia delivered solid results in the second quarter of the year, reporting an EBITDA of COP 1.8 trillion. This performance was mainly driven by the recovery in the hydropower generation segment, supported by high reservoirs levels within the National Interconnected System, which allowed for a reduction in thermal generation across the country and in energy purchases that had been necessary in 2024 to fulfill contracts when water was extremely low, particularly in the months of August and April.
Another significant event for Enel was its award of 2,949 GWh in firm energy in the reconfiguration auction convened by the Comisión de Regulación de Energía y Gas, CREG, for the 2025-2028 period. The auction aimed to balance demands with previously allocated firm energy. Enel award represents 38% of the total auction, helping ensure the country's energy demand is met over the coming years. Those were mostly the solar plants that Enel had been developing during the last years. Additionally, the Special Administrative Unit of Public Services of the District of Bogota, UAESP And Enel made progress towards reaching an agreement to resolve an outstanding payment related to the Agreement 766 of 1997, which relates to the public lighting services.
The agreement, validated by the Tribunal Administrativo de Cundinamarca, established that Enel Colombia will provision COP 244 billion with an initial payment of COP 91 billion that has been already made. The remaining balance would be paid between 2027-2028, and we're expecting to get a final ruling sometime before that we are clear, which is the real final number of these legal disputes. Another noteworthy development this quarter is related to IDES receivables provisioning, which totaled COP 95 billion as of June 2025. The group has been actively participating in the creditors' committee and has reached consensus on a first initial payment agreement between the parties involved. In the natural gas transportation segment, unlike last year, when extreme dry weather led to higher thermal generation, the increase in rainfall and higher reservoir levels have favored hydropower generation, as I already mentioned in Enel's case.
As a result, gas transportation volumes have now returned to the normalized levels. In Peru, there is a good news. President Dina Boluarte announced the imminent launch of an energy project aimed at bringing residential natural gas services to communities in the southern and highland regions of the country. This is a long-standing debt with those communities from which the Camisea gas is extracted. This will require investment exceeding $500 million. As part of this initiative, Cálidda concession for the city of Lima will be extended to cover these Andean regions, and that will extend the concession by 10 years until 2043. Finally, in Guatemala, GEB and Trecsa submitted their rejoinder to the International Centre for Settlement of Investment Disputes, ICSID, part of the World Bank, and here we're addressing objections related to the tribunal's jurisdiction and/or the admissibility of our claims.
The arbitration process remains ongoing in accordance with the procedural schedule. We expect results sometime next year. Jorge, please go ahead with the financial results. Thank you everyone for attending to this call.
Thank you, Juan Ricardo. Good morning, everyone. I am pleased to share with you the group's results for the second quarter. Starting with operating revenues, the increase of COP 123 billion or 6% year-on-year growth is the result of the positive performance observed across most business segments. In an environment with the Colombian peso depreciated by 7% against the U.S. dollar year-on-year, with a conversion effect of 82. In natural gas distribution, revenues grew 8% year-on-year, driven by an increase in the average distribution tariff, higher bill volumes, and better performance in the non-banking financing business. In electricity distribution, 25% growth was led by the higher volume of energy sales to regulated customers, 7,565 MWh. In electricity transmission, revenues reflected a positive variation of 8%, mainly in Colombia, following the indexation effect of the exchange rate TRM due to quarterly appreciation of income from assets remunerated in U.S. dollars.
In natural gas transportation, a 3% decrease was observed primarily due to lower capacity contracting and a reduction in the variable component during the quarter with no thermal demand. Operational costs, 7% year-on-year increase is explained by gas distribution segment due to higher distribution services costs related to relocations, disconnections, and reconnections, given the larger customer base. Gas transportation at 13% increase is explained by maintenance cost, higher replacement cost, gas consumption, and energy maintenance events. In transmission, the cost grew mainly in Colombia due to increased depreciation from the capitalization of projects that have been commissioned, such as Southwestern Reinforcement. Moving to administrative and operating expenses, the 38% year-on-year increase is primarily due to an extraordinary event related to the provisioning of IDES receivables amounting to COP 68, covering account receivables from February to June 2025, thus completing 100% of the provision of the outstanding balance.
Without this provision, the total increase in administrative expenses would have been 13% year-on-year. Let me explain the detailed performance of the main segments. In gas distribution, primarily Cálidda, higher costs were recorded for billing collections and network maintenance due to the explained increase in the customer base, which surpassed two million in the second quarter of 2025. In gas transportation, on the other hand, there was a 20% decrease year-on-year, driven by lower compensation costs, salaries, and bonuses, as well as a reduction in depreciation expenses for property buildings and transportation equipment. Regarding quarterly operating margins by segment, calculated as revenue minus cost and expenses, the impact of the provision of IDES receivables in the transmission segment is reflected with a 29% decrease. Next, please. The operating profit for the quarter decreased by 11% compared to the second quarter of 2024.
The main variations are as follows: in financial revenue, which decreased by 24%, primarily due to lower interest income from the establishments of term deposits. The exchange rate expense decreased, reflecting the reduction in GEB's foreign currency debt, that 2.9% quarterly appreciation of the Colombian peso against the dollar. The equity method was pressured by Enel Colombia S.A. ESP due to the provision as a result of the progress in the agreement with UIS. Excluding this extraordinary event, the equity method profit will have been COP 577 billion. Income tax decreased by 44% year-on-year, mainly due to positive effect of deferred taxes for GEB, resulting from the appreciation mentioned before. The controlled net profit for the quarter amounted to COP 561 billion. Next, please. The equity method amounted to COP 509 billion, decreasing 6% year-on-year.
This variation is mainly attributed to Enel Colombia S.A. ESP following the impact of the provision of the agreement with UIS, which represented COP 68 billion in GEB. This was partially offset by the increase in operating revenues and the recovery of maintenance provisions in ISA Perú. Vanti also showed improved results and growth in operational profits by June. Total executed CapEx by June reached an equivalent to $230 million. Transmission business accounted for 62% of the total, increasing 23% compared to 2024, and this is mainly to Colectora, Sogamoso-Chivor II Norte, and Southwestern Reinforcement projects. This was followed by a 20% share from Cálidda in natural gas distribution segment. The updated five-year CapEx projections is $1.5 billion, led by investments in energy transmission. In Colombia, the funds will be allocated to projects such as Colectora North, Sogamoso-Chivor II Norte, and Southwestern Reinforcement.
With investments starting in 2027 aimed at ensuing UPME auction processes. Regarding natural gas transportation segment, TGI incorporated the initiation of its major maintenance plans for 2025-2028 period. Go to next, please. The adjusted EBITDA for the quarter was COP 1.1 trillion, growing 27% compared to the same quarter of 2024, driven by dividends declared in Argo Energia, which amounted to BRL 153 million. The contribution from controlled companies was COP 917 billion, accounting for 86% of the total. In the chart on the left, segment contribution is shown led by energy transmission, which includes Argo Energia, followed by gas distribution and electricity distribution. In the chart on the right, the controlled EBITDA for the quarter is shown with 85% coming from three companies: TGI 43%, Cálidda 26%, and the transmission business in Colombia with 16%.
In the adjusted EBITDA by segment, notable positive variations are observed in energy transmission, mainly due to Argo Energia with 94%, and electricity distribution with an 80% increase driven by higher revenues in Dunas Group. Move to the debt section, please. At the end of the second quarter, the consolidated debt amounted to $4.8 billion, with a balanced distribution between GEB and its subsidiaries. 34% of the consolidated debt is structured at fixed rate, while the remaining 66% is linked to reference indices like SOFR, IBR, and Colombian CPI. In terms of currency, 65% of the debt is denominated in U.S. dollars and 31% in Colombian pesos. The group's leverage indicators remain stable with the net debt EBITDA at 3.3x and EBITDA to financial expenses at 4.8x .
In line with the strategy to optimize the debt profile and reduce financial costs, I highlight the following: GEB successfully reduced the interest rate margin by 143 basis points in a local banking agreement. TGI, in June, thanks to the solid cash position, made a voluntary prepayment of COP 50 to the club deal, leaving the balance at COP 821. Cálidda de Corporación Andina de Fomento board approved an A/B loan of up to $500 million to refinance debt maturing next year. Finally, in line with Trecsa maturity optimization strategy on July 25th, after the quarter close, we finally obtained the Ministry of Finance approval to refinance outstanding obligations through a private placement of $110 million. Regarding management of sustainability matters within GEB and its subsidiaries, highlight on the environmental front, the completion of the design for 100% of TGI infrastructure adaptation plans.
These include the integration of measures within the gas infrastructure to address impacts of climate change. This progress not only strengthens resilience of our operations, but also supports the sector long-term sustainability together with the energy transition. On the social side, Enlaza, in collaboration with the National Land Agency, facilitated the viability of 240 properties to initiate land formalization for rural families in Colombia. This initiative not only contributes to the legal security of the beneficiaries, but also fosters their long-term stability and prosperity, creating a direct impact on the improvement of their living conditions. Finally, I'd like to summarize four key highlights. Good operational results, although impacted by Air-e provision and the Enel litigation. Net income reached COP 609, reflecting a 4% year-over-year decrease.
However, a 27% year-on-year growth in adjusted EBITDA for Q2, which demonstrates the effectiveness of our operational strategy, with progress in the gas distribution, transmission, and energy distribution segments, or a strategic diversification which drives value creation amid regulatory, geopolitical, and economic challenges. The group is currently exploring growth opportunities via acquisitions in Brazil and Peru, which will help further strengthen the presence in these regions. We have proactively managed the debt maturities and have broad access to new financing sources, which should enable the execution of the regional growth opportunities. Perhaps most importantly, the potential extension of the Cálidda concession, which not only foster the economic development of these regions, but also enhance the quality of life for thousands of families, ensuring sustainable and equitable access to energy resources for future generations, and enabling an extension of the concession for 10 years.
Thank you again for your interest, I will now move to the question-and-answer session.
Thank you very much. We'll now move to the question-and-answer part of this call. If you'd like to ask a question, please press star two on your phone. That is star two on your phone. If you're dialed in by the web, you can type your question in the box provided or request to ask a voice question. We'll wait a few moments for the questions to come in. Once again, it's star two on your phone if you have any questions. If you're dialed in by the web, you can request to ask a voice question or send a text question. Our first question is from Juan José Muñoz from BTG Pactual. Your line is now open. Please go ahead.
Hi, team, thank you for the presentation. You can hear me?
Yes, we can hear you.
Okay, perfect. Just could you provide more color on the Enel Colombia litigation with UAESP? That's the main question that I have, then I can ask another one. Thank you.
Sure, Juan José. Jorge Tabares here. This is an issue that was raised or arose between UAESP and Enel more than 20 years ago. They had reached an agreement, and then a judge decided not to let the agreement progress. Since then, basically, in addition to the original claim amount, the time has passed, and interest have accumulated. A very final stages of negotiation between the two parties that should lead to a final resolution soon.
Given the status of the negotiation, Enel made at the Enel pre-tax level, EUR 51 million provision, from which about 1/3 is cash that was already paid to UAESP. A long-term issue that finally is going to be resolved. Resolution of long disputes is always positive, but clearly, as we have mentioned, has a financial impact bigger on the P&L side than on the cash flow side. As Juan Ricardo mentioned, the rest of the cash payments are due i f the current negotiation stands between 2027 and 2028. Next question, please.
Thank you. Our next question is from Andrés Duarte, from Corficolombiana.
Hello. Please explain the difference in net foreign exchange from the first quarter to the second quarter. Thank you.
I don't know if Julio is in the call. The difference is because of the FX depreciation. Julio, could you please repeat the exchange rate? In March, COP 4,162 and COP 4,069. It's due to the exchange rate.
Thank you. The second question that I see on the chat is: What explains the increasing costs from energy transmission, 21.6% year-over-year, 21.2% quarter-over-quarter?
This is the IDE provision, mainly. As mentioned, we have all the account receivables from IDE have been provisioned, and this shows as a higher cost. Also, three projects have been put into operation. Bonda, La Loma, and Dumont. When you start operations, the costs increase a little bit also. Those are the two main explanations.
Thank you very much. Our next question is from Steffania Mosquera from Credicorp Capital.
Thanks for the call. Is there any remaining debt from IDE after the right? I think you mentioned a payment plan. Can you provide more detail?
Sure. At the end of the quarter, we have provisioned all outstanding amounts, with IDE. Since then, we received a payment equivalent to about 12% of the amounts owed for 2025, which is not a very significant number, but is a positive signal of the intent of the government trying to pay down the debt. Having said that, we're not aware of the Fondo Empresarial, which is the vehicle by which the government needs to fund the intervene company's operations. We're not aware that that fund has been replenished with all the money required to operate IDE and to pay all the debt.
Thank you very much. Just a reminder.
If I can put the numbers. The payment recently was 7,000 million COP, and the total accumulated debt, pre and post-intervention from the government, is 125,000 million COP.
Thank you. Just a reminder, if you'd like to ask a question, it's star two on your phone. If you'd like to ask a question from the web, you can send a text question or request to ask a voice question. We'll give it a few more moments. Looks like we have no further questions. We would like to thank you all for your presence. Okay, actually, it looks like Steffania has a follow-up. Steffania, your line is now open. Please go ahead.
Thank you very much. Just to get the figures right, the payment of IDE was COP 7 billion, and the total amount due is COP 125 billion. This is from before 2025, I assume. This includes that from 2024 also.
That's correct, Steffania. 2024 and 2025 up to June. The figures you mentioned are correct.
Okay, great. Thank you very much. The COP 68 billion is only from February to June?
Right.
Okay, great. Thank you very much.
I don't know if Juan José mentioned that that was the first question, that he may have another one. I don't know if you want to answer to us now.
Okay. Juan, your line is now open. Please go ahead.
Thank you. Jorge, how you're seeing the M&A landscape in Brazil for you in the second part of the year? How competitive it is, and do you think that you could close something or you are close to meet a target there in terms of M&A? Thank you.
Sure, Juan José. It is public information, Brookfield is selling a key asset, which is called Mantiqueira. We are pursuing that possibility and investing time and effort trying to analyze and put a good valuation on it. The process is currently in Stage 2. After the non-binding offers, now they open it for the binding offer round. If we are successful, the transaction could be closed this year, but the actual payment is probably going to be in the first quarter of next year. Rough numbers, we could say it's about $500 million transaction. That's the more active transaction that we are pursuing in Brazil at this point.
Perfect. Thanks.
Thank you very much. We'll give a few more moments for any further questions to come in. Okay, now looks like we have no further questions. We would like to thank you all for the presence today. As a reminder, the investor relations team at GEB is available at any time to resolve your questions. We hope you all have a nice day. We'll now be closing all the lines. Thank you.
Thank you very much. Bye-bye