Aguas Andinas S.A. (AGUASA) Earnings Call Transcript & Summary

Good morning. Welcome to all. I'm Alexander Varschavsky, Co-Head of Research and Utilities Analyst. And on behalf of LarrainVial, I would like to thank you for your participation on this Aguas Andinas Earnings Call. We will have Didac Borras, CFO of the company; and Antonela Laino, Finance and Investor Relationship Manager; Rachel Bernardin, Resource and Production Manager; and Iván Yarur, Transformation Director. We will have 3 sections. First, there will be the financial performance presentation, then a section on the strategy of the company in the face of climate change and the transformation plan that Aguas Andinas is involved in. After the presentations, we will have a Q&A session. You can send your questions using the Q&A button at the bottom of your screens. We have simultaneous interpretation to English enabled and you can use the global function and you can select the English language at the bottom. Didac the floor is yours.

Good morning to everyone. It's a pleasure to be with you here on our Aguas Andinas Earnings Call. Today, as Alex has said, we have prepared a presentation in 3 sections. But before we move into the presentation, I would like to give you a brief overview of the quarter and the first 9 months of the year. It's a year that has been marked by 2 factors: inflation, high inflation levels in Chile. From January to September has reached almost 11%. And this obviously has had a great impact on the performance of the company, both on the income side because of the [ poor economic ] changes this year and also on cost pressures that we have linked to inflation. Therefore, we have realized these cost pressures, and this has been compounded by the macroeconomic context. We have energy, chemical input impact. We also have an important impact from the monetary correction in U.S., which means that there's also an important impact. And also on the tax side, we have an impact on the earnings side, which somehow offset -- somewhat offset the monetary correction on the financial results. We also are facing climate change impact. Despite this year, in terms of rainfall, we've had a better performance. We've had snow on the mountain range, but we cannot say that climate change has disappeared or has even lessened. We continue fighting against it, and we have several impacts, obviously, in terms of consumption. We think that the campaign conducted early in the year and towards the late 2021 has had an important impact on consumption. We've had less consumption than last year. We have maintained a conservative policy in the management of our stocks of water. And additionally, our CapEx plan, we continue -- we maintain that plan intact. And this year, we've had the reservoirs in Lo Mena, which gives us great margins. Another important factor in the first month has been the way we have accelerated our transformation project that looks to ensure the company's sustainability both in economic and operational terms. Additionally, we also look to mitigate risks, and Iván will give us a detailed presentation on that. This transformation project is already capturing efficiencies that are -- have been important to the month of September and will continue to be. So I would also like to close with the good news of the company that was the risk rating that we obtained in September, which grants us an I minus, which is the corporate in Chile with the best rating for quasi sovereigns. And without further ado, Antonela Laino will speak in greater detail of financial performance in these 9 months.

Thank you very much, Didac, and good morning to everyone. Welcome once again to our earnings call for the first 9 months of 2022. Let's go directly to the next slide and look at the main milestones in the third quarter for Aguas Andinas. It's important to say that thanks to the capacity of the company of having the automatic indexation, as you know, through the polynomial base if the variation is equal or above 3% and also the possibility of tarrifying investment projects. We have a continued positive impact on revenues with 12.4% growth. Looking at the first 9 months of the year, this translates then we'll look into a greater impact into cost. But when we look at our EBITDA, this has been translated on the positive path of 8.7% at the close of September. As we will mention further, this has given us a greater cash flow at the company level, which has also allowed us to mitigate a number of impacts on our net financial debt, and we will also look into that in greater detail and also everything in terms of the negative impact on our revenues because of the reduction in consumption, which has had an impact, but it has been less because of indexation of tariffs. Also aside from what -- or in the context of what Didac has mentioned, inflation continues pushing upwards. We are at 10.8% for the first 9 months. In variation, Aguas Andinas, it has an important impact on costs. Just to give you some context. As a company, we have 70% of our costs are indexed to U.S. 12% to foreign currency, mostly dollars. And about the impact of inflation. As you would know, the key impacts that we have on the cost line that have led to 16% hikes related to work, labor, chemical input, transport, which in the context of the pandemic and post-pandemic, we've suffered high hikes in real terms and everything related to payments for water transfers, all of this, obviously, we have been able to maintain a stable stock in the El Yeso reservoir. As I said, all of this has had an impact on costs, but these have been mitigated because of the efficiencies. As you can see on the last point on this slide, which have led to CLP 2.9 billion, which -- well, these are the summary of these efficiencies on these costs and operational side. Regarding the management of climate change, our commitment and persistence commitment is that we will continue with our investment plan to reinforce everything that has to do with the security of supply and preempt any potential events that could impede us from providing continuous service. We have invested in different projects. We have different agreements in place. One of the key aspects is the agreement with those who manage canals Río Maipo, which means that we have had -- Maipo River from El Yeso at a healthy level. And obviously, we will be able to see further ahead in the detailed results that we have had this -- the stocks of water at healthy levels. In the context of a drought and climate change that has been compounded over the past 3 years. Going to the next slide, and we zoom into the impact on revenues, as I mentioned before. The key impact comes from the possibility of carrying out automatic tariff indexations every time we are equal or over 3%. So we have had CLP 48 billion last indexation was up 3.9% in September this year. We have had 4 indexations this year in terms of investment projects. We haven't had any impact on tariffs this year. But yes, in the year, everything that is related to treatment of nitrogen in the Trebal factory and mitigating these positive impact, we have had the offsetting impact of lower consumption. As you have seen, we have our campaign [ cada gota cuenta ] Every Drop Counts. The main objective of which is to generate greater awareness in the population. And we, as workers in Aguas Andinas are the main ambassadors of being more efficient in our water use and obviously, owing also to climate change, lower temperatures when we've seen -- we've had lots of fluctuations, cold days, which also leads to lower consumption. All of this has meant that we've had lower consumption of around CLP 7 billion, which means a drop of 2.3%. Here, it's important to zoom in the previous quarters, that residential consumption continues to fall. It's 4.4% down, but we have a nonresidential sector that has a lower weight but we do have this segment that does mitigate this negative effect and till September has had a 1.7% increase [ till ] September. Having said this, we have additional impacts or higher revenues, as you can see in point 3, that referred to CLP 4.4 billion, explained from the nonregulated segment or the non-sanitation sector, EcoRiles, Anam companies as those. In addition and also not a small impact and given the impact of inflation accumulated to that. We have had a 16% increase in costs. When we look at this in cumulative terms, we have had a variation of CLP 28 billion, which has been lower to the positive impact on impact and has meant that our EBITDA has grown above 8%. And if we look at the one-off of the higher revenues of CLP 5.6 billion that we had in 2021. These revenues are higher and have translated into growth of 12.4%. This is a reflection of our commercial performance. We've also emphasized about this in previous calls is our financial performance. What has happened in terms of financial performance of higher inflation, we have had an impact on the revaluation of the financial debt in U.S. It has meant a cumulative impact of almost CLP 93 billion and a negative variation in that because of this revaluation of CLP 63 billion, but it's important that this impact, which is a noncash is mitigated by the management that we are conducting as a company on the financial revenue side, we should not forget that at the close of September that we have a stock of cash of CLP 163 billion. It's a political management policy, but it's active in the products that we invest in. It has generated revenues of CLP 12 billion, a variation of CLP 10 billion that helped to mitigate year-on-year. The increase in financial costs that we've had of CLP 4.5 billion net-net, we have had [ higher ] revenues by CLP 10 billion lower, higher financial costs by CLP 4.4 billion that are offset by the CLP 10 billion in revenues and a noncash inflationary impact on the debt of CLP 63 billion. Having said this, another important impact of inflation on our line is as you can see on our tax line, you're going to see a positive number, and this refers basically to higher deferred expenses so all of this has allowed us to end September 2022 with CLP 54.4 billion in earnings with a quarterly performance of CLP 10.3 billion. If we go to the next slide, we can see the impact on operating cash flow based on our revenues and cost performance. When we compare period to period, we are mostly flat, with operating cash flow at CLP 193.11 billion. When we see free cash flow considering all the impacts, we've dropped almost 1% and CLP 51.38 billion. But if we extract the one-off of the tax rebate that we received in 2021 or CLP 17 billion. The increase in free cash flow would have been more than 7%. Having said this, and looking at the right of the slide, we can see what's happened with net financial debt in cash flow to the close of 2021 and 9 months of 2022, we are almost flat. And in terms of net financial debt were increased 8.6%, mostly explained by the impact that I mentioned before, which is a noncash of the revaluation of our debt in U.S., which means -- well, which has been mitigated by the positive cash flow. If we look at our stock of debt by currency, most of our currency is denominated in U.S. 79%. The rest in Chilean Pesos, mostly because our main financing instruments are bonds, which are expressed in US. These are issued in the local market and the notes which are also in U.S. Having said that, we have 21% or 20% in bank loans. These have been negotiated with local banks and mostly are at fixed rates, although some may be at a variable rate. And as you can see, this translates into 11.5% of our debt in variable rates. Another very important topic in the next slide. We're looking at investment levels. As you can see to the 9 months of 2022, we are at CLP 86.95 billion. As we mentioned at the beginning, the company continues working on its projects to mitigate of mega drought and everything that relates to water resources. Today, we're looking at 22% of our investments but the aim is that we reached 25% of our CapEx in that sense by the end of the year. And one of the key milestones that we have already met is, as you've seen in the price is the implementation of the Cerro Negro, Lo Mena water bodies and these water bodies are going to allow us to improve supply to the south of Santiago, equivalent to more than 480,000 people aimed precisely to mitigate the impact from climate change and the drought. In addition, everything related to supply security, it's around 21% of CapEx. And also the renewal of networks of sewage networks and potable water, that's around 40%. All of these impacts translate into our financial ratios. As you have seen, we continue to have solid readings enterprise value to EBITDA of 8x, slightly above what we have had previous on ROCE of 11.1%. Earnings per share at CLP 12.31. Also a slight improvement related to expectations in the market and a very important indebtedness. As you can see in terms of leverage, 1.71x and in net debt-to-EBITDA 3.86, without prejudice that the company wants to return to more healthy levels of indebtedness, also liquidity growing and improving currently at 1.17x. One last thing is we have completed our international rating with Standard & Poor's. We obtained and publicized our international rated of A-, and we have ratified our local ratings by ISR (sic) ICR and Fitch, which have a AA+. Thank you very much for your attention. And now we will move on to Rachel Bernardin, who will talk of our climate change challenges.

Good morning, everyone. On my part -- well, the technical challenge that we have as Didac and Antonela have mentioned, is adapting to the climate change. And in particular, the extreme drought that we are living through in the metropolitan region. This chart that we present in each session, it's important to show that we have 13 years of drought but, in particular, 4 consecutive dry years as seen on the right-hand side, and we are on a 5th year that is following the same trend. You can see that in the flows of the Maipo River with those that are down 56% on a normal year, we saw that in 2022 has been critical in the first part of the year. Although we have had a better rainfall than last year. So so far in 2022 has been quite complicated because we had very low flows in the rivers as seen on the graph, especially during the winter months. The same in Maipo River, where we are down 68% relative to a normal year if we look at the average to October. So it's again a critical situation, but we have seen already in November that there is a slight improvement. So if we look at November and November of around 63 cubic meters per a second, and we're not where we should be at a normal year. But we are increasing in cubic meters per second. And in Maipo to 2.8 cubic meters per second, which is also below the average of normal years. So we're still in an extreme drought situation. If we look at rainfall [ Antonela, also ] Didac mentioned, but we should emphasize in terms of rainfall since April 2022, we're talking hydrological years. We are [ 237 millimeters ] levels above if we compare to last year because we were at [ 255 millimeters ] for the whole of 2021, but it's down on what we saw in 2020. We have become used to such critical years that we see a year as 2022 as an improvement. But if we look at the average since 1962, where we're looking at around 500 millimeters, we are at 48% down on a normal year. So we're still in a critical situation. Let's move to the next slide. We have the management of the El Yeso reservoir. Today, we are 150 hectometers -- cubic hectometers and in El Yeso reservoir, you could say why we were worst this year than last year, if you're saying that we have a relative improvement. We have to think that if we hadn't entered into the agreement, this agreement gives us a certain degree of a peace of mind regarding water transfers. And -- but if we look at 2022, the transfers from the [ voluntary ] transfers, plus those that were agreed from the other users of the reservoir, those represent 200 cubic hectometers. We would have emptied the reservoir if we hadn't had those agreement. So despite the very difficult year because of very low rainfall in the last winter, we have managed to maintain a same level in the reservoir to date, and that's important that you understand that point. Next slide. This always also gives us a bit of optimism. If we look at where we stood last year where we stand this year, we can see that in terms of snow coverage, we've had more snow than last year. And I'd say that it has been a better snowfall. What do I mean? When we have a year like last year, when you look at the graph at the bottom, where we have precipitation of around August, September. This snow is not useful for the reservoir. When we have the melting for the summer. But this year, instead, we have had earlier snowfall, and it's been very cold, which has allowed to stabilize snow cover and we have seen that this is melting at a very interesting pace for us because we don't want a sudden and sharp melting. We lost a lot of snow last year because of -- but it's true that we are better prepared for this year, and we are starting to see in recent weeks that flows have increased. We have a very good reading in Maipo and in Maipo as well, we've gone above 3 per second, 3 meters per second, which we haven't done for a while. If we look at the actions that we have taken in the face of climate change, we have a number of actions in place, looking to increase our water capacity and be able to face future challenges. We have Lo Mena, [ Los Trapenses ], Lo Mena. These represent 2.3 cubic meters per second since they began maximum capacity of [ 1.5 cubic meters ] depending on the demand. Obviously, we began functioning in winter when the demand is low, and that's going to increase, but this only accounts this year for 18 billion cubic meters of contribution, and that allows us to reduce our dependence on the river Maipo. Also, something that we've always asked about management of Los Trapenses. We've been capable of recovering the performance of these wells around 20 liters per second. That means 13 million liters in terms of efficiency. We have been implementing pioneer technology, looking for filtrations and leakage in the network. It's a new technology in Chile using gas. We -- it's in a testing and we have implemented and we have recovered 5,200 kilometers of the network, and we have been able to repair around 9,500 leakages. So we have gone from repairing -- recovering 200 liters per second to more than 500 liters per second, and that also represents more than 18 million cubic meters recovered this year. If we look -- also what I mentioned with cooperation with users of Maipo River, which allows us to manage voluntary transfers we're working jointly with that management. So we are not the only ones now concerned with climate change, and we are involved in a collaborative effort because people have understood that if we don't all work together, we're going to have a terrible time. So just to give you an idea, the voluntary transfers those that users have said, I have enough water and if you as a sanitation company and I can transfer that is 60 million cubic meters this year. This is an important volume and this will allow reducing our dependence on the River Maipo. If we zoom in into 2022, at the level of the volume that we need in terms of production of potable water, we have increased our production of groundwater to 24%. We have increased our voluntary transfers that today account for 10% of the water that we need. And therefore, the transfers agreed with other users today represent 21% of the water that we need. And with that, we are working on another project that I will present now where we are also collaborating in the first section of the Maipo River in reducing treated water. There's been a lot of coverage in the media of this. There was a committee that went to Spain last month, so different users and different stakeholders. Both in terms of the users of the first section and members of the press went to Spain to get to know these realities and understand that this is feasible. What do we want to do then is that in terms of total volume that we need as a company, 65% depending on the month comes from River Maipo, 60% to 65%. And that's distributed to the entire city from the city it goes to the treatment center. And from there, it goes to the La Farfana-Trebapl Biofactory and all the treated water goes back to the Maipo River. So what we want to do is close the circle in a certain way. We want to rebalance the -- well, return to the water balance returning part of the treated water from the biofactory to the first section of Rio Maipo so at the same time, the users of these canals who need this water of high-quality -- our biofactory delivers really high-quality water to be used for irrigation. They would then do a transfer of a maximum of 3 cubic meters per second for the production of potable water. So we are taking this water from Maipo River for our potabilization and the canalysts will recover water from the biofactory to use in their canals. That's the first for the water and canals. This is the first project of this nature in Chile. We're looking at 34 kilometers because we're looking at 200 meters difference in altitude from the biofactory to the first section of the Maipo River. And this would allow us to deliver an important volume of water depending on the months where we will manage around 60 million to 80 million cubic meters per year, and this would also give us some peace of mind. Is this solution enough? Probably not. We are working with other series of problems, the leakage in the aquifers looking at possibilities of desalination. Of course, we also have to look at the use of other wells in the aquifers in the metropolitan region. We have a spectrum of projects, some more advanced canalysts because we are aware that rivers are going to -- those flows are going to continue to come down. And therefore, we need a broad spectrum of solutions. Where do we stand with these studies? Well, we've done pre-feasibility studies, first engineering work, a more detailed engineering and the environmental impact study to look into in the coming years to take this to the citizens and the environmental impact agencies. That's what I wanted to comment with you today. And now I would like to hand over to Iván, who will speak on transformation.

Good morning. Last week, during our Investor Day, I presented our transformation project, the Avanza project. On that occasion, as Didac mentioned at the beginning, I commented that we are seeking to reach 3 key goals. First of all, mitigate the risks for the companies, the risks of critical infrastructure and water supply, looking for economic sustainability. The plan also looks to increase cash flow and also the cultural transformation within the company to make this permanent and that we change a certain way in which we work and in which we lead in the company. On that occasion, I mentioned that the project consists of 200 initiatives of which we have implemented almost half or more than half to date. And we have 8 different working fronts. Today, I want to present to you of all these initiatives, 4 initiatives of one of the fronts, which is the asset management front, which combine 3 things. First of all, improvements in the service will reduce risks. And this has an economic impact of -- economic benefit, and these are also leveraged on the introduction of innovation and technology. So these 4 initiatives are the joint work of our operations, territorial management and transformation, management, IT and innovation. If we look at the next slide. The first of these initiatives is the diagnosis, the dirt diagnosis in collectors using acoustic technology. So what is the problem here? We clean on average more than 600 kilometers last year, and we want to double that to 1,200 kilometers. Our cleaned networks and to be able to clean these we use small basins. So you clean the networks of these small basins. And some of these networks were already clean. So perhaps this could be more efficient because it's hard to know the state until you go in. So we're looking to close to 40% of the network where we have been cleaning. They were already clean. So we looked to see if there was technology that could help us make this process more efficient and adapt it to our reality. So we found this acoustic technology whereby we install -- in 2 chambers, we install devices that through acoustic waves can determine if those networks are clean or not and what is the degree of cleanliness. So with the same resources, we can practically clean twice as much of the network and reduce in around CLP 2 billion, the expenditure in these types of work. A second initiative is the rod rotator technology for those networks that have such that they are obstructed. It's a solid obstruction that prevents water flow. So how could we approach that in a more efficient way? When we have these blockages, we have to open up the road, and that has a high cost breaking through the pavement repairs and replacing. In fact, repairing those and replenishing all that infrastructure is the most expensive. So instead of having a person with the [ road ], what we have is a new machinery that introduces a new rod rotator that cleans these chambers. We have been able to increase efficiency in deblocking and we have been able to prevent breaking into the roads and having to replace the road and the network when you can't really dissolve the blockages. So to date, this has allowed us to save around CLP 5 billion. A third challenge that we have and that has given birth to this new initiative is the inspection of our aqueducts, those that go through the area in the mountain base. The problem is that these can't be easily inspected. So despite the existence of technology for inspection, it's very expensive. It costs $95 per meter approximately. So what did we? Here, the technology exists. It's not a question of having a team recording under water, the problem is the speed there. It's 4 cubic meters per second, which can easily drag the team or the equipment or destabilize it. So we've looked for technology through a partnership with a local technology company to develop what we have called our underwater robot. We've already tested this in our network, and we're already using to determine if we have any breakage or any problems with the infrastructure. The advantage has been to develop this with a local company. We have royalties involved in this innovation. And we have been able to reduce these $95 per meter to a cost of around $4 to $5 per meter. So it's a substantial reduction in costs. Lastly, the final initiative that I wanted to mention was the introduction of our software and a methodology to increase productivity when we assign works in the field. So how do we assign the roles that have to be conducted throughout the network? We carry out more than 160,000 works through the network per year. It's a huge amount of interventions. We have 64 proprietary teams plus contractors. So how do we assign these tasks in the best way possible? So through this click software, we can allocate the resources efficiently. And second, we can know where these teams are working. It also provides us indicators, and it also allows clients to see in which point of the network, there will be a unit intervening. This has a functionality, which is in a pilot phase that will also allow clients to be better informed of the status of work being conducted. This is integrated with all our IT systems, SAP, our geographic system, our technical systems. So this is carried out as efficient as possible. This has allowed to increasing [ 27% ], the efficiency of the teams that are out there working on the network. These are 4 examples that I wanted to share in how we are working on these fronts, and I hope to be able to show you more initiatives such as these in the future. We'll go back to Alex.

Thank you, Iván, and all the team, very interesting in all your presentations. We will now move on to the Q&A session. We're also going to have Camilo Larraín, who is the Legal Counsel for Aguas Andinas. He has a Masters in Corporate Law and he participated in several professional associations, including the Maipo canalysts. First question from the audience. Do you have any news on the legal case with [indiscernible] about the acquisition of [ ESSAL ]?

Yes, good morning to everyone. The case, which is currently before the judge, [ Alberto Line ] appointed by the Chamber of Commerce of Santiago. These cases have a discussion phase. It's in the normal process, proof and a final ruling or resolution. We are in the discussion phase in which the company submitted the claim against us and Aguas Andinas responded to that in October. So now we have the regular procedures. There will be observations from the claimant to our response and the deadline for that is the 29th of November. And after that, Aguas Andinas can make comments on the reply from the claimant and the deadline for that is end of December. That would be the end of the discussion phase of this arbitration process. And after that, we have a formal stage of potential reconciliation convened by the judge. And then we have the phase of evidence of proof. We should be with a final decision before the end of next year. During -- we have replied to the suit brought against us on the 24th of October and we were very satisfied with the way we did that. We ratified what we have been saying in previous occasions in the sense that we think that this is a case that has no foundations. It's exaggerated claim. The fundamentals of these claims seem unsustainable. We analyzed the entire selling process, which was totally serious. We had Banco Santander as our adviser. We provided all the background information. The buyer is utilities company. It's a company that knows exactly what they were buying and they also took part in extensive due diligence process. So we could say that on every front, we have covered everything. They are obviously suing us for a much higher amount than what we sold for. It's 58% over. There's no reason to believe that there could be any ruling above cap and we think any result will be significantly below that. They are also proposing compensation for expectations of a potential damage in the future. So we are in peace with what's going on with the process. We believe that the ruling will be that this is quite an inflated case with -- and we believe that it's not a responsible suit approach by this company.

We have another question about the works in Lo Mena, Cerro Negro. They're asking if these have been applied into the tariffs and since when and what would be the percentage increase of the average tariff. Didac, please.

Yes. As I said, the wells of Lo Mena have been operational that can give a capacity of up to 1,500 liters per second. And we hope that in recent weeks, we will be able to increase the tariffs that would be of around 0.6%.

I have a question about Alto Maipo. The Alto Maipo project already began operating, which uses water rights from Aguas Andinas and the features of this project have changed a lot with the climate change and also with energy prices. Maybe if you can give us an update on what you expect to receive from this project for the payment for the use of these water rights and ask from when could these revenues be expected? Rachel?

Well, as you know, Alto Maipo was always looking at preserving the priority of resources for human consumption and Aguas Andinas could use the resources for that. Now when can we see results from this agreement, we are in negotiations with Alto Maipo to determine the amount. But as of 2022 by the end of the year, we should see an impact on the income statement that would be a positive impact.

But do you have any estimates on what has happened so far this year?

I prefer not to give you any approximate figures right now, but we hope to provide that by the end of December.

Another question about personnel expenditure, spending on staff. Part of that is U.S., but we're also seeing that the headcount has grown around 15%. Can you tell us what's behind that growth? It's an important increase.

Yes. We would like to remind that as of end of March, we brought back into the operation of the biofactories of La Farfana-Trebal. This meant that we had around 300 incoming staff for that. Aside from the U.S. variations and wage revaluations, we have these 300 people coming in. Well, it's mostly because of the implementation of the contracts of the biofactories.

Another question from the audience. How much do you estimate for CapEx for 2022? And what about CapEx for 2023?

As we said, CapEx will be more or less in line with what we had in 2021, around CLP 150 billion and we're estimating similar amounts for 2023. As we said, our CapEx plan is a medium- to long-term plan. So we have to face and respond to climate change and therefore, the CapEx plan and our infrastructure plan is strategic to respond to climate change. So we expect for 2023, similar to 2022 and 2021 levels.

We have another question from the audience. Regarding your ESG rating by MSCI, there was a downgrade because of leakage of 30% for us. So the average 25%. They're asking if this is non-billed water?

As many of you know, we have been publishing this consistently through integrated reporting and public information. Non-billed water is an important topic in which we have focused on working on this. There is committed CapEx for this year and the next, where one of the key project is the change of meters. We have an issue with the older meters that tend to sub account for water. And here, I want to highlight that billed or not -- unbilled water is not only related to deterioration of the network and leakage, there are other factors that lead to these unbilled water levels. This is a cycle that comes from the production plant where we have normal loss or leakage to the actual pipes where we could have leakage, public use, for example, from fire departments and so on, where that water is not remunerated. Also, the self-contagion of our production. So in relation to that, we're working. We have a target. There is a long-term target, which has been included in the integrated report. So today, yes, MSCI are reviewing the sanitation sector very closely. And our commitment not only in ESG, but also in terms of water efficiency is something that we take very seriously. And very soon, we will go into a new tariff cycle, and this will be covered with the regulator as well.

Thank you, [ Denisse ]. I have another question about sales volumes. There have been several variables affecting volumes, the pandemic, scarcity, and we still look at -- see volumes dropping. What's your view on the volumes that we could see next year? Will we continue to look at this downward trend or stabilization of volumes.

Thanks, Alex. At the close of September, the drop in volumes in September is 2.3%. We've seen that there are several variables that affect on this time of change temperature. We also have to consider that there has been a change in behavior from the Santiago population, several variables that are changing. Nobody knows how they're going to evolve correctly. For climate, we can predict or try to predict something, but we do not know exactly what's going to happen for the rest of the year and 2023. But we have seen that as of the end of September, we have seen a certain easing of that downward trend and the loss of volume has been easing. And I think that this improving trend should continue in 2023, unless there are drastic changes in the climate, but we don't expect much change related to 2022, but obviously, this depends on climate change, which we cannot predict.

We have another question from the audience. They asked if the dividends agreement of CLP 35 billion is based on the performance of the first 9 months of 2022? Or if you're looking at a dividend payout close to 80% as last year? Or could we be looking at a drop in the payment of dividends?

As I mentioned in previous earnings calls, the decision on dividend distribution is a decision of the shareholders' meeting, which will happen in early next year. That is when the dividend payout will be decided. What we have announced is the provisional dividend based on estimate of the full 2022 year. And from there, we need to assess what is the definitive situation at the time of the distribution, what's going to happen with the global situation, the drought situation and the shareholders meeting will decide, we'll make the final decision.

Perhaps related to this, we see the cash flow levels are almost twice as much as pre-pandemic levels. Do you feel comfortable with these cash levels? Or would you think that you would go back down to lower cash levels like historically?

Yes, we've had 3 years of -- well, where we've had the pandemic, we've had a very difficult global environment. And all of this has given us the reason to be very conservative in terms of treasury management. If we see a more positive trend in these aspects, then we will look into it again to see if we return to other reasonable or historical levels of cash. But as I said before, our activity is focused on operational continuity and development continuity. And this level of cash stock ensures that regardless of whatever happens in the financial markets, capital markets, the global situation, we will be able to conduct our business normally and an investment plan normally. So we will continue to track this month after month, year after year, and we will reach and see the optimum level. We -- obviously, if there is a change in the macroeconomic conditions and in the capital market, we would need to see what is the optimum cash flow level for the company.

Well, this -- our time is up. I would like to thank everyone who connected and everyone from Aguas Andinas. Thank you very much, and I look forward to seeing you soon in the next call. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]