CELSIA S.A. E.S.P. (CELSIA) Earnings Call Transcript & Summary

Good morning. We would like to welcome you all to our quarterly meeting for the Second Quarter of 2023. Today, we joined by Ricardo Sierra, Chairman of the company. [Operator Instructions] This meeting has a simultaneous interpretation for all those connected. We assume you can select the option by clicking on the bottom tool bar of the same window. You could do both so either in your laptops or in your mobile phones. Today, we were also through X platform, formerly known as Twitter for all the audience who is joining us via that channel. We'd also like to welcome. So, 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 our [ $198 million ], and we will be receiving USD 194 in cash, which represents 30% of capitalization of the market of the company at the 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's talk about renewable nonconventional energy projects. We still are focusing on 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 2 partner companies that are Solla and Alianza 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 it will become more, this makes a more efficient system. It used to be very expensive. It used to be more cost efficient, but in technology prices have dropped down, I think that most although farms that we will have in Colombia, we'll have that trackers technology. During its construction, we generated 200 employees, most of them local in this farm that will assume that saw an investment of COP 55 billion. We have 7 site projects that add up to 89.3 megawatts, and we already reached 166.5 megawatts of solar capacity throughout 14 farms. Most of our clients are directly using energy from the farms and the rest of the energy, it's delivered to the national integrated 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 from more resistant, modern safety ones. We have installed [indiscernible] new post, there was important work there. We change wood post for concrete post. And 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 will -- and the clients will also be ready to receive other services and benefits that come with the energetic transition. Now I would like to talk to make a switch, and we will be talking about 2 [ entrepreneur ]. One of them, it's the Internet business 3 years ago, almost 4 years ago. Right before the pandemic, we started with an experiment through our electric grid systems. We decided to start to serve clients from low-income segments that had a connection problems issues. And after this experience for 3 months, we decided to transform it into one of the businesses of the company. It's a business line that we haven't really discussed too much in these meetings, but it's been very good, and it's been very successful. So we would like to give you some headlines and little by we just start to formalize that business line with you. We have more than 62,000 clients in Valle and Tolima. We've built over 3,000 kilometers of optic fiber. This is Internet, home Internet businesses of the highest quality. We've had an availability of the service of 99.99%. And here's something that is really fantastic, which is the experience index of our client is 86.4%, which means that it's almost 4x or 5x what the normal Internet industry has, on average, of the world. This is because our highest specification friendly, flexible and a very good price for our clients. Additionally, we've already had content alliance. We've generated our partnership with DIRECTV with our clients. It's been very well received, and we're doing something that is really interesting. We're helping to bridge the digital gap. And what we're 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. So there are 218 small schools, public schools, from municipalities in Valle and Tolima that are having -- receiving a benefit and it's 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're doing to face El Nino phenomenon. You know that, that's happening. We know that it's happening, and we know that we need to be really well prepared. So all of our efforts have been at making sure that our generation facilities are ready. And it's important to indicate that the temperatures of the ocean are indicating that we are reaching El Nino. We're just waiting for it to match the atmosphere, but we're really well prepared because we come from a 2-year period of La Nina, where we've had really good rainfall on good water availability and all of the water reservoir are above 80%. So this is really important. This means that the hydric reservoirs are there, and we can comply with all of the contracts of the energy contracts that we have and all the commitments that we have with the system. For all of this, we've done preventive maintenance, equipment machinery and all of the centrals, all the facilities are ready and the working conditions are optimum. We did anticipate maintenance of our thermal plants even when we don't -- we were ahead of time. We had no delays, and we will be seeing this scarcity period by the end of this year and the beginning of the next one. So we are 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 Merilectrica 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 the next 12 months. The experience that we've had in the previous El Nino phenomenon has allowed us to learn to be better prepared. We were a little bit [ disconcerned ] from last phenomena, and we devised the plan for this next El Nino. So what we've done, we've had the necessary stock, the critical stock. All of our plants have stock ready. Our strategic partner, vendor partners have assured us that they've had enough stock to provide supply for key elements really fast. And additionally, now jumping from plants to our clients, 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. And as a matter of fact, we have a philosophy of purchasing 2 or 3 years ahead of time. So we have prices that are good, that are competitive outside of the stack mechanism, which tell us that 94% of the energy that we will deliver to our clients is already purchased. So we shouldn't see any variations with the -- and we will see -- 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 is dry spells and hard summers come together with wildfires, which is why we've already -- 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. So yes, 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 portfolio, 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 -- with around 200 megawatts, which means we can turn the facility, the 20 megawatts at a time and that way, we can guarantee the input to the system. We also have a direct gas pipe with our partner in this company, and this gives us flexibility. And 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 are 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 haven'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 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 that we -- with which we closed this half year. The EBITDA was around COP 995 billion, which is a 9% increase compared to the previous year. And the net consolidated earnings was COP 200 billion. Asset and platform management. We had new assets in operation, boosted the EBITDA that includes the platforms to [ COP 1.17 trillion ]. This means that when you include EBITDA around COP 995 billion, we are practically in this first semester, incorporating a figure that is around COP 122 billion to the EBITDA. This is an increase of 17% compared to the previous year. Our transmission platform, which is Caoba has managed to energize 16 projects throughout the year. Its income has grown 32% and EBITDA 30%. Solar business, which is C2 Energia had earnings of COP 46 billion EBITDA is COP 39 billion. And jumping to the thermal plant, Tesorito, we have an accumulated generation of 297 gigawatts hour and has generated an EBITDA of COP 58 billion during this first semester. So the platforms that we've developed for growth are having an EBITDA that is significant, almost 15% of the EBITDA -- of the consolidated EBITDA of the company through in this semester. So Esteban, we can now jump into the financial results.

Hello, Ricardo, 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 on 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 were -- have 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 [ IBR and IPC ] also to the new assets in commercial operation and to the WACC adjustment. Additionally, the income for other operational service reached COP 233.7 billion because during the trimester, we saw a significant block of assets to go. And it's important to mention, I think that we did it so last meeting is that when we conduct this sales between ourselves and the platforms because we still have an interest in the platforms. We recognize in the -- 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 generation. In Panama, we're seeing a dry spell that has meant a higher operation of the Cativa 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 income of the B2B income are not being transferred in the assets sales active because it's mainly the farm -- the solar farms that we've been developing in the region. Throughout the year, the income have reached COP 3.09 trillion, with an increase of 22.8%. Now jumping to the sales cost during the quarter, this 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've seen that during the quarter, the other costs reduced --throughout the year, the sales cost reached COP 2.1 trillion and they grew 11.9%. The administrative costs reached COP 95.3 billion. This is an increase of 10%, due mainly to 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've 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%. And 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're the commercial representatives and the responsible for the operation, we -- for instance, for Tesorito, we gathered the call of the collection. But in our cost, we have a [ whole of the transfers ] that we do for that partnership, keeping only the income in the commercial representation. And now in the asset sales, what we're seeing, which are the accounting effects as the descending operation. The accumulated EBITDA margin for the year, closing the second quarter is 32%. If we eliminate the effect of Thermal Tesorito and the effects of the sales of assets to Caoba, the EBITDA margin for this period would be 43%, which is well in line with our operations with our historic operations. So you can see that and Ricardo is mentioning, the platforms are so relevant that in this particular case, they generate in the results report that would generate an effect of 300 points in margin. The EBITDA has growth 9%, and it's 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 [ RBI ]. Also, we have paid commission to IFC for restructuring, 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's important to mention the cost is -- there's a difference of [ $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's an income that is contract by the effects of the indexing of the cost of the debt that reached COP 93.9 billion. It's the net effect of the indicators throughout the semester was practically 0. This is -- I heard something that Ricardo said, it's inflation linked. We are an industry that it's typically normally linked to inflation. And here, what we're seeing is that the balance is kept everything that's we adjust with income, financial cost, you have the year reached COP 65.4 billion with an increase of 16.5%. Throughout the year, taxes and fiscal cost reached 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 costs. Throughout the year, the net consolidated earnings adds to COP 200.8 billion with a decrease of 36.9% and net earnings that are part of the controlling at [ COP 222 billion ]. Now the company closed the quarter with a consolidated debt of COP 5.65 trillion, an indicator of leverage of 2.87x 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 [ disinvested ] 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 investment would be COP 4.86 trillion, and the leverage indicator would be 2.75x. Ricardo, with that, I conclude the financial figures.

Thank you, Esteban. Thank you very much. So 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 Nino phenomenon that's closed. Now -- regarding works for taxes, 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 ways. With this works for taxes, we're having an impact in the communities with which have a bond relationship. So the impact is almost 10x that of what we do in terms of social impact. So this is very significant. We will continue proposing projects for this mechanism so that we're always working there, and we're always filling the quota there. When we do the consolidate of works for taxes, this company is right below Ecopetrol as the company that has used this mechanism the most. We have, let's say, 28 initiatives, projects that we have conducted through this methodology, and we've invested more than [ COP 30 billion ] in more than 5 departments, and we then provided benefits to more than 280,000 people. This means that we're going around that fiscal toll booth, and we're directly having a positive impact in the society. And we've been able to execute all those projects taking time. And with that, we finished our quarter. So Gonzalo, we can open the Q&A section or portion of the meeting.

[Operator Instructions] We have our first question from [indiscernible]. There are 4 questions from [indiscernible]. What's the percentage of compliance budget with income and cost? What is the amount of dividends, the project for the exit out of 2023. When are we going to see Internet and energy services from servicing Barranquilla and Antioquia? And what's the percentage of compliance with the buyback plan? Those are the questions.

Well, Juan, good morning. We've never really discussed about the budget. We're [ not going ] to talk about that, but incomes are well above expectations for the year. It's really tied to [ house ] that the geothermal plants have been more active to really meet the needs of the system as we prepare and get ready for El Nino. Now when it comes to costs that obviously has an impact in the variable cost because we have a higher consumption of gas for operations. So the variable cost, we have exactly the same effect. The fixed cost, as we were mentioning in the previous meeting, we are seeing -- or there's 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. And I can tell you that as the figures we're pointing out in cost, we are increasing, but under inflation and that base 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've 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 4 installments as usual, we already paid 2 out of the 4 installments, the one corresponding to April and June, and now for October, we'll 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's next. Now regarding Internet and services. I would like Ricardo to answer that.

Yes, Esteban. Look, we're in Barranquilla and in Antioquia. We are running operations there actively with our -- with services from our energetic portfolio. But here, I would like to have a short break and talk about an initiative. We cannot -- we are not the upper network operators, great operators there because in Barranquilla side. In Antioquia, we all know that it's EPM. But like 18 months ago, we have a digital commercialization. It's a culture, the name of the company [indiscernible]. It's a company that's 100% [indiscernible]. It's access start-up, just to do our comparation to run a symbol so that you can understand that everyone can understand, we're talking about like [indiscernible]. That's our digital commercialization. And we have reached [Technical Difficulty] Cartagena, [ Cali ] Bogota, Pereira, Barranquilla. And here, we have more than of [ 82 to 100 ] clients. We have a saturation index that are really high with the service and that's provided here. And just to paint a picture, it's a company that's completely revolutionary. For instance, the field installation times, we develop hardware together with some start-ups 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 the 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, and they will be doing -- we'll be doing it in a very fast and easy manner. Thank you for the question because this gap makes way to introduce an experiment that's gaining traction and that we're seeing a lot of potential there. And finally, with the buyback, we want to tell you that we are 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 award to have everything ready to continue with the process.

Well, Ricardo stay on the next question, is from Ezequiel Fernandez from Balanz.

Well, thank you for the presentation, for organizing the meeting. Those are wonderful results. I have 4 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 in the spot market. I would like to know if you had any update on that decree or what's going on there? And 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 spot -- the offers for the spot market. I would like to know if we were within this normative and what's the impact there?

Yes, Ezequiel. So I have right next to me Carlos Solano. She is the regulatory leader. She is in the day-to-day discussion with the government, with the sector, with the gilts 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 in terms of things that are coming from regulation.

First, the decree that you're mentioning from April, that was a draft. Now in June, the definite decree, which is 2029 from the presidency of the Republic basically what it did is set guidelines and policies to promote efficiency and competitiveness in the energetic sector, in the electric sector. So it provided guidelines to the CREG, which is the Regulation Commission for Energies, now regarding tariffs and other things. So CREG has been providing some drafter solutions so that the market can do comments, can make the remark and enhance these guidelines. And that's the stage that we're at. So the CREG is generating resolutions on 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 allies that were highly questions that had transgressions that transgress the extents of the capacities of the ministry. And so the effects are going to depend on the measures that the CREG takes. And now that's been sent to the market so that the market can generate comments on [ REMAX ], so that they can be defined. Now on the recent resolution from the CREG to control spot market, what it says is that XM should take every day the offered 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're not -- we don't have the size enough to be pivotal. And now what happens if we end up being pivotal for those agents, which are like, for instance, the largest generating companies like Enel and EPM. So well, we have to do -- 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 percent total variation with -- regarding variation cost. If that criteria is not met or it's -- then those companies should automatically do must report that to the superintendents of the utilities, but they don't -- you don't receive a sanction and penalty, but it's just having a lot, better control on the offer of the energy. So I hope I can answer that -- those questions.

And yes, 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 [indiscernible], if there is any -- what are the updates there with that project? And also, we would like to know what the strategy for the commitment of energy and capacity that these 2 wind farms have that should be starting next year. That should be up and running this year.

Okay. Ezequiel, 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 are 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 time lines -- we had that situation. So from that perspective, we're very cool, very calm with that, where it is within. Now by December 2023, we should have the lines all set up, and that is jumping to portfolio. And the other thing that I want to tell you is that we are conducting the -- 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. So we are still finishing all the licensing stage of the project, and we're having -- we're being very, very careful on the ideal moment what's the ideal situation so that we can proceed with the construction, but that's something that will be happening midway through next year when we have absolute certainty on the matter. But for now, we're looking to different options for the equipment 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. So we're advancing with that.

I would like to close with a final question. Now the cash flow that you will be receiving from the asset sale in Central America. I think that, that will be part of the financial plan for next year. And I would like to know if you have any preliminary comments regarding this, if -- you're going to use it more for buyback if you will be using those resources to accelerate investments? Or what are your [ plus ]?

That's a really good question, Ezequiel. So the Board of Directors today has everything on the portfolio, as a whole of the portfolio on the table of the [ 2 ] things that you mentioned are being considered. We still don't have full clarity because all of the investments are really well, we'll fund it. So we have the possibility of using it for additional growth for dividends, buybacks. I don't know Esteban, if you have any additional comment.

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.

We will continue now with Katherine Ortiz.

I have -- 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's the extent of the reach of the government by that, I mean, the decree 2029 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 conversations that you've had with the government, it would seen that there's a fixation on generation segment more than on distribution or transmission. I would like to know if you see any additional risks there. And if you consider that at this moment, the people are at risk -- that cannot be so independent. What are the impacts on Celsia from the regulations and the CREG. And 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's next is a change in the bill of public services. And the second matter that I would like to ask is regarding El Nino phenomenon. If you can tell us -- do you have any additional information regarding the intensity. We've seen -- we've heard from many different agencies that currently, we're going through El Nino, 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? And 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.

These are very good questions, Katherine. And here with Carlos and with Esteban, we will try to answer them as best as we can. So I'll start with the question about El Nino, and then Carlos will talk about regulation and Esteban can talk about the other one. So let's start with El Nino. Look, this El Nino phenomenon, we're really well prepared because we've come from 2 years where there's been a high rainfall. So the reservoir levels are really high, are excellent. So we're above 82% in the natural aggregated level, and we're practically at the same level. So that's really good. What have we done? And we conducted a description to 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 realize that this Nino is going to be very similar to that of [ 97 ]. We conducted several modeling and looking to the worst case scenario -- and under that scenario, we're really comfortable with what's going to happen. So we are not really seeing any issues. We have everything in place that everything will be working under the worst-case scenario, but in these scenarios that we've modeled that are extremely harsh and that might -- 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. So those are really good news because this team being led by Celsia today, it's were really traumatized by what happened in 2015, and we didn't want to relieve that. So from the reconfiguration for the sale of Zona Franca, the insurance that we have for these new options for other -- for purchasing from other plants. We see -- we've had a lot of alternatives and complementary actions to address those situations. And with that, we can start talking about the regulatory.

So 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 2029 decree. So as I was telling you, this decree provided general guidelines to the CREG in which the risk -- so 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 in -- on how to pay back the generators. It also gives some guides on regulating energy purchases and trying to promote quality between nonintegrated and integrated agents. So as integrated agents, we would see an impact that we might be seeing by that. Now impact development, as I recently explained, and also a revision of the guarantee scheme that we have set, those are the things that we're most concerned. But 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 measures -- for the specific measures from the CREG to reach that definition. So you were asking also about if we were concerned or worried about what's being said from the government in generation because there is lack of awareness, and also a lot of question marks on how the energy stock market works. First, are trying to explain the functioning and regarding specific functioning, especially with the situation that we're facing with El Nino, we try to be proactive to -- so that we can establish some temporal norms, temporary norms that can mitigate the conjuncture without altering the functioning of the market. So basically, we're wanting to explain and to propose we're waiting to -- for the reaction of the government.

Carlos, if you allow me. That animosity regarding asset -- generation assets. Look, throughout La Nina, this 2-year period, he was the [ CEO, pesos for generics ]. Everything that was being generated on the stock market was 20% and COP 15 of income, COP 15 per kilowatt. The average price, it's [ 219, and COP 15 ], 35%, so picture that. We're looking into time lines that are completely read for those reactions because stock 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 is we're not seeing that picture. We're not really seeing it. So when we do a comprehensive assessment, we reach different conclusions and different solutions to from. So hopefully, all of these arguments are considered, right Carlos?

Yes, that's right, Ricardo. 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 these harsh times. Now I would like to talk about the commission, the CREG. We really worried the fact that 6 out of 6 experts that are part of that commission plus the members from the national government. There are other 3 members from the government, which are the Ministry of Mines, Treasury, the Ministry of Treasury and these 6 commission experts, there's only one that's really been named. There's one MTC. What's -- 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 big spirit, they will have the autonomy to take decisions, and that might lead us so that the President takes the 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 4 officials, they all are part of the Ministry of Energy, and they answered to the Ministry of Energy, so they do not 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 3 turns -- for 3 months and that can happen [ 2 times ]. We're under that condition. They just finished the first 3 months. But at the end of those -- the second term, the government can have new officers and they can start again. So there's really not something that limits specifically the use of that figure of appointment. We understand that, that figure is so that very -- you have temporary seats having long-term decisions, but that's not the way that the government's management. And as I'm telling you from the sector, from the [indiscernible], we're trying to provide all the arguments to the government so that they can [ appoint that on the full tranche ]. Now Katherine, now we'll talk about the public services reform. So the government has decided that they will take the [ 132, 134 ] bills that have the guiding principles of the public services and the average electric services. We've seen some drafts, but these are nonofficial documents regarding the -- the reform that wants to be done. The superintending of public service has taken the voice regarding or in front of the companies to explain what is it that the government do? What he's recently said is that they want to do -- reach consensus. They want to hear the opinions of the sector before presenting the official build 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 to 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 still are still very valid. It has allowed for in the last [ 30 ] years to provide really good results in terms of coverage, quality insurance, reliability so that what happened 30 years ago doesn't happen again. And yes, we are aware that the rules norms can improve, and we hope that that's the case with the national government.

So I don't know, Carlos and Esteban, if you 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 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. And today, it was defined that it will -- the bid will close in 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 manifest formally 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 for -- at that time, we were seeing El Nino with a high intensity, we might have energy deficit to meet the demand. And that's why this bit is so important, and it's important to have run its course in a successful manner. And also 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 been has the characteristic that the projects must have approved connection, which might reduce the offer in previous years compared to previous years, but there's a portfolio of different technologies that can meet those requirements. And we hope that we'll be successful, but that will really depend on the decisions that the government will take in the coming months.

So I think that we covered everything there, right?

Yes. It was a very good explanation.

Okay, Katherine. Now we would like to give the floor to Ricardo Sandoval from Bancolombia.

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, mainly the explanation was a little quick and more than the sales cost that was increased -- that increases year after year. I would like to know what part of that percentage come from higher purchase of gas and other things. And what's the exact percentage of the effect of the platforms on Celsia's result? And also, if you could repeat or extend, expand and clarify the information on the platform on the EBITDA margin.

I would like to say that -- if you want to see more in detail, we have the financial reports available if there is any specific inquiry regarding that, we can answer 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, EBITDA of [ 495. Out of those COP 3.9 trillion, COP 298 billion really correspond, trillion ] correspond to the income from Thermal Tesorito. This doesn't leave a big EBITDA margin, 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 cover. It's an operation from around [ COP 200 billion that was in Caoba ] and have a utility of around before taxes of around COP 80 billion. In the financial statements out of the descendant operation becomes an income line of [ 182, and an EBITDA of 438 ]. If we subtract that to really understand the electric business present that we have not the commercial representation of Tesorito or the [ Gavita ] active sales, asset sales -- we're seeing that when closing at the close of the second quarter, it would be COP 2.9 trillion. And the EBITDA would be -- yes. And when you're seeing those 2 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 2 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 leads our EBITDA margin, which is a commercial representation and then the other one is the EBITDA margin that I was mentioning. That's basically what happens with the EBITDA margin. We would like to ask big favor. We were having an issue. So please when you -- we had a problem with the platform. So please rename yourself because we're seeing everyone with the same name. So if you can change your name, you can remain in soon, so that we can really know who you are and we give that customer service, customer-made -- tailor-made service. And now we're going to jump to the Q&A section. Another person is asking why are the financial cost? Why did we see an increase in financial costs? What's the -- and also what's the -- can you give us an update on the buyback? So I think Esteban can talk about.

So financial costs, as we were mentioning at the beginning, almost [ COP 94 billion ] from variation that we're seeing in financial costs correspond to the effects of the index. When the index start to reduce, we're starting to see in these last few months and during this quarter. And we hope that we see -- we're going to see that, that effect is going to be reversed. It's 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. Well, the other thing is that we have a variation of [ COP 134 billion ] that corresponds to a higher stock. If you look into the graph and the information that we have in the investment kit, we have the evolution of the indebting stock. And in the last year, we acquired that gradually. But right now, we haven't seen any variation in that. So we're seeing the effect of understanding that delta that we took in the first quarter of 2022 and then comparatively speaking, we haven't replicated. When we reached the third quarter this year, given that we don't have substantial variation in the stock, where we're going to start to see fundamentally is the variation linked to index. We're even going to see a reduction as soon as we execute the [ de-imbursement ] of Central America that as we were seeing during the meeting, reduces almost COP 1 trillion of stock link. That's basically of the explanation for the cost. And what we'll 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.

We will continue with the question from [indiscernible]. What's the percentage of income from generation that correspond to spot and which one to sales per contract. Do you have any estimates on how the profile of the debt will finish once the asset sale in Central America has concluded. And if you could go deeper into the fiscal impact and what's going on there? In the generation business, you've 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 consolidating. 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. So on -- that's more or less the average. Thermal Tesorito is a different story, because Tesorito has income from reliability and all of the generation is sold on spot because of the nature of the operation. The other question that you were asking was on tax and fiscal impact. And yes, it corresponds to the tax reform. And also remember that we have a lot of fiscal beneficiary -- benefits. And we hope that this year, we will be taking a very important stance regarding those benefits that have been generated. But yes, we -- as any other company, we're seeing an impact on -- due to the tax reform. We will continue with the questions that we have here in the Q&A. [ Alejandro Lopez ]. So, according to the... what's the real value of the stock that the stock you have? I think that -- you have to look into what the analysts are saying or we saying that the models from the analyst is putting the price to 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 to have conducted. Ana Guasca from Davivienda Corredores. Well, it looks like Ana is not right now available, and we will continue with the Q&A. Now considering the price of the U.S. dollar is stabilizing? Are you going to pick investment in new technologies for energy?

Yes. One of the things that has had the biggest appetite of investment of the company or the exchange rates. When you look into all the investments that we do in this sector, they are related -- 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 and renewable energies and energy generation, a lot of the transformer, and a lot of the generators and even structures are important -- all the equipment. And yes, the exchange rates were just taking out us of -- were 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 difference. We're seeing a different dynamic. We're starting to have conversations again with the clients and that matters because we have some projects in the standby and now especially what you were talking about, which is a smart measure, smart meters. We have a lot of strength there. We have already almost 200,000 smart meters installed, and we'd obviously had to stop the deployment of this equipment. But right now, we're looking -- 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 [ Enel, beat ] 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 yes, as you mentioned, the price of the dollar is linked to the investment.

And also, I would like to mention that the space that we have available in Twitter, we have some questions from [indiscernible] Twitter. The development of that project that you mentioned when -- so what are the end customers from Enerbit, are those corporate clients?

90% of the Enerbit clients are residential. We're very focused into serving them and to small, medium businesses to SMBs. But the type of services that we provide can be for any customer. And I would like to hear, make an advertisement. This is a team that has almost 70 people, a high percentage of them are exclusively developing technology, software development. It's a company that it really that really has the support from Celsia from different fronts. But they're creating their own path in a very interesting way. This is a business [ when I was conceived by Andrew Stino ]. We have a very high level in the team. We have people that have had a lot of experience in the field. We've also managed to bring people from other companies that have had high-level positions in companies such as EPM or [indiscernible]. And additionally, we have a technology team, a multidisciplinary team that's nothing but spectacular and that they are part of this new company Enerbit. So we really see -- we see a lot of potential. There -- it's a company that it's an experimentation phase and seeing how is it that we can scale that technology.

So I'll go back to the questions from [indiscernible]. Can you tell us a little bit more about the generation from hydropower plants. Second, in the past -- or the -- yes, the tax reform, so an increase of 3 points for electric generation. How is this having an impact in Celsia? Well, I'll answer in broad strokes. Since we've been managing our own reservoirs and like foreseeing what we have in terms of the commitments that we have, we've tried to raise those levels as much as possible. And that's the management exercise that we've had. There's not a lot to be said. Each company manages their own strategy. We have the big advantage of having a couple of years we had a lot of water and we can reach this phase now. And additionally second quarter 2023, the stock price was really low considering the water situation in the country. So 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 situation between or the current situation with Ukraine and Russia had an impact on the prices, that explains more or less the reason of the prices that we're seeing. We're almost finished. We have Roberto Paniagua from Casa de Bolsa. And the first question is, how do you expect to stabilize the EBITDA margin? And second, what's -- how much of the debt is indexed to CPI, how much to the [ RBI ] and that 94% of energy [ purchase ] how much to the trend? And that 94% of purchase energy is on what term?

Yes, I'll try to answer in very general, and then I'll leave Esteban to it. That... It's -- the EBITDA margin is not a problem for us. We're generating a lot more EBITDA, which is welcome. We won't try to stabilize it. What is 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. So 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 2 parts. First, the [ trader as a fair is hired ]. We have a contract there. But what Roberto 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 to 3 years, which is the normal term of those contracts. But it's gradually reducing. So this year, it's 3, next year is going to be 2, and then it's going to be decreasing. And the ones that are really long comes from renewable energy bids, remember that those are 10-year contracts. So we've been able to be around 10% of the target and more or less 10% of the energy is found in the contract of renewable sources. Some of them are having certain [ initiative ] continuing the market. And we're always trying to have a stable -- or a really high number contract. In generation is the same -- is very similar. It's 90% what's contracted a little over 90%, and then it will gradually decrease with the contracts that are -- we continue [ that on average 3 ] years. How is the debt separating to CPI and [ RBI ]. And I think it's more or less 20% of the debt is fixed, 20%, 25%, and the other 75% is distributed following, 20% in RBI, depending on the app and the debt that we have. And it's going to be deconsolidated. But almost all the debt is indexed to something. And the other 55% is more or less on the CPI, but let's say that the specific figures you can -- it can be found in the investment kit, so that you can see how they are dividing.

Okay. And we will have one final question in Zoom. So the person who is raising their hand, you can ask your question. Also apparently, the person is not available right now. So there are no more questions. And I don't know, Ricardo, if you want to close the meeting.

Yes. Well, first of all, thank you for everyone for your attention, for your interest, for your questions for joining us in this meeting. We hopefully, we will be providing news on the evolution of the different projects of the company and the strategy or the buyback that you've asked. And yes, kind regards to all of you, to [ Ricardo ], to Natalia, everyone. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]