Grupo Energía Bogotá S.A. E.S.P. (GEB) Earnings Call Transcript & Summary

Good morning, everyone. My name is Manuela Ramirez, Financing and IRO in Grupo Energia Bogota. Welcome to our fourth quarter results call. This conference is being recorded. The presentation we will see today was sent yesterday and is uploaded in our Investors section in our webpage. In the right corner of your screen, you can ask questions at any time in the Q&A section or raise your hand to do them live. Please state your full name and the company that you represent so we can easily identify you. Now let me introduce you to Jorge Tabares, our CFO, who will lead the call today. Thank you very much. Jorge, good morning.

Good morning, everyone. Can you hear me okay? Okay. So here's the agenda that we plan to cover today, and the most important part, I think, is going to questions, so feel free to ask whatever comes to your mind that could be relevant for the other investors also. Can we go to the next one, please? So the snapshot of the company in the quarter, fourth quarter 2022, figures in Colombian billion peso. So it's million of million of pesos, not the 1,000 million as in the U.S. Our EBITDA was COP 871 billion, normalized growth of 43%. And that normalization incorporates mainly 2 items. One is an advanced dividend that we received from REP and CTM. This is Footnote #3. And also dividend -- the final dividend distribution from Enel from the accumulation of the last 5 years at the time in which we did the agreement with them to distribute that accumulated dividend. Solid growth across businesses. I'll highlight the Transmission business growing 60%, which incorporates the execution of the strategy in Elecnorte, which was a company we acquired back in June of 2022 that delivered full results during the quarter as an ongoing business since the acquisition. In Gas Transportation, we also saw an increase, a significant and -- but this one has one item that is of about COP 60 billion in these same units, so I'm not going to repeat the unit except when it's different. The 151 includes about 62 of a TGI repurchase of bonds that, in fact, in TGI was incorporated below the EBITDA line. In terms of geography for the quarter, unlike the international piece, 36% of the EBITDA came from the international operations, and that grows 21%. And that is a solid result, incorporates positive results in Calidda in Guatemala and in Brazil, and to some extent, also in Argo in Brazil. Dividend yield. This is the previous dividend yield. I'm going to talk about the next one in a minute. Our net debt-to-EBITDA increases from the previous figure we had in the last quarter, and that's due to the new debt to pay for the acquisition in Brazil that we closed at the end of November, early December. And I'm going to talk about it soon also. And both ROE and ROA, although they are -- they show healthy levels, they are lower than the previous quarter in 2021. For a number of reasons that increased the equity: the merger with the Enel companies and the accounting of the new Enel Colombia entity in our consolidated results generates 1,800 of new equity, and also the international investments, the assets. We have international. Because of the depreciation of the currency, when we incorporate that, increases the denominator of that division return on equity and return on assets. Going to the bottom, the quarter results. In terms of revenues, 24% growth. Again, healthy and across business lines. Basically, as pointed in the headline, the diversification and the international diversification is delivering positive results for the quarter for the shareholders. In terms of operating income, we maintained margins, 17.7% growth with 2.1% EBITDA for the quarter, growing at 20%, reaching COP 4,569 million. And the controlled net income, which is the figure we used to pay dividends is COP 2.8 billion, growing 13%, which is positive. A significant number in the CapEx column, and that's because we incorporate here the acquisition of the Quantum assets in Brazil. But if we look at the organic CapEx deployment in our infrastructure, that figure is showing a positive growth of 24.4%. That's, I think, one of the key messages, is we continue investing and we will see that investment level maintained over 2023 and then goes slowly down while we find additional investment opportunities. In terms of the key drivers, I think the PPI in Colombia at the year-end of 19%, that's a really high number and is the second consecutive year. The previous year was 18%. And in fact, it's one of the main reasons why -- not the only one, but one of the main reasons why in Colombia the electricity tariffs and the gas tariffs have gone up significantly, contributing to the overall inflation in the country and driving a regulatory agenda that I will talk in a minute. In terms of the annual results, which is the second line on top of the quarter, I'll just focus on the EBITDA -- or I said it wrongly. The previous one was the annual, and now I'm going to go to the quarterly one. That shows much higher EBITDA growth of 43%, and that is, as mentioned, normalized by the dividends and the CapEx. The quarter in U.S. dollars in terms of CapEx and acquisition shows the acquisition of the Brazilian assets that I will talk in a minute. We'll expand on these figures in a minute. Next. I think a headline of our results is that the strategy is -- the execution of the strategy is progressing well and that the footprint and the businesses in which we have positions are delivering basically across the board. We do have some one-offs that I'm going to have -- that I'm going to explain as we go through that. In terms of sustainable generation, the participation of the Enel generation was 18% during the year in Colombia, generating 8,000 gigawatt hour during the year. And the main one-off we have here is the write-off of the Cartagena thermal power plant done by Enel Colombia, and this is in line with the strategy of decarbonization and electrification. The company is evaluating options. But at this point, the accounting figures we're showing you just write off completely that asset in Enel Colombia books, and consequently, in our books. In terms of gas for the future, which is one of the key strategic elements at Grupo Energia Bogota, Calidda reached 1.5 million connections during the year, an amazing pace of connecting basically homes in the Lima metropolitan area. During last year, we connected an equivalent to one home every 2 minutes. So 260,000 connections during the year. And in TGI, a hydrogen road map was put in place. And I think it's particularly positive because it's a near -- almost short and near-term plan that focuses on particular opportunities and not in this 10-year time frame of things that probably are not known at this point in terms of technology developments. So it's a very concrete and relatively short-term hydrogen road map that should put TGI in a competitive position to take advantage of new business opportunities across the hydrogen realm. In the smart cities, Agata which is the company we formed with other listed entities in Bogota. This is about the strategic plan. And more than this figure that we see here of revenues in 2022 of COP 7.5 billion, the important thing is the impact on our own operations and the possibilities that it creates not just for us, but also for the city. Enel managed to put in place a new lighting scheme for the city and is changing the light, modernizing them, which is going to contribute both to the better quality of the service, but also contributes from the electrification or the decarbonization. And a new very significant bus recharging station was put into operation in Usme in Bogota by Enel X. And that puts Bogota as the second city outside of China with a bigger electric buses fleet, which is quite remarkable. And the biggest activity has occurred in the Transmission business. 2,700 new kilometers of transmission lines were added to the portfolio. Now we have 18,000 across the portfolio. We created Enlaza to manage and measure separately the Transmission business in Colombia. That typically was a business unit within the GEB. And finally, the 2 acquisitions. So very, very active on the Transmission business. That supports actually a lot of potential business opportunities that we have identified in that business. Next. We have announced this at the time we published the shareholder assembly invite. I'll just focus -- the ordinary dividend is going to be proposed to the owners of the company. It's going to be COP 179 per share. That is a 12.9% dividend yield just using the dividend of the year end. If we were to measure by today's dividend, that's about 15%, which, although it's high, it compares to the high interest rates that we are seeing in Colombia. And we will be paying that dividend in 2 payments in July and December of COP 109 per share each. And the other key message here is the continuity of the 70% dividend payout. We do see, as I've mentioned, a lot of business opportunities across the region, and we think that maintaining part of the net income to be distributed is a positive development for the company. Next. It's taking a little bit for me to see it here, so I apologize. What we have announced is a summary of events here during the quarter. We finally closed the acquisition of the Brookfield assets in Brazil. And for that, we disbursed $509 million syndicated loan agreement mainly supported by Scotiabank and SMBC and then with participation from Sabadell, the Bank of China and Citibank. Moody's incorporating that acquisition and the leverage that will mean, reaffirmed our rating with a stable outlook, and that's at the level of the sovereign. And we were included in the S&P Sustainability Yearbook, being one of the top 10 in the gas and utilities benchmark that they put in place. I mentioned the creation of Enlaza. I think one aspect that is not as noticed is that we put into operation some of the projects of the Transmission business. So the Tesalia-Alferez, which is a remarkable engineering achievement, 201 kilometers that passes the west mountain range in Colombia, very, very complicated and very pristine area. We did a very thorough job there. And with the effort of many, many people, we were able to put in place this line. And is now connecting, if you will, the center of the country with the west, with the Cali area, Valle del Cauca. A private project of 11 kilometers, that, although it's not too big, it's just a positive demonstration of the opportunity that we are finding there and also the takeover of the San Juan 220 kilowatts line. In Conecta, basically, I will say derisking of the project. We continue progressing 91% of completion. And more importantly, we unlock some revenue from 56% to 66%, getting closer -- or closing the gap between the construction progress and the recognized revenue. That's important. It's not too material for the group, but at least demonstrates our willingness to complete that line and reach 100% of the total revenue that we expected there. In TGI, we continue a very active engagement with the regulator in terms of Resolution 99, which is the one that talks about the remuneration of the assets. As the company will be -- is our base case converted to peso revenue, Colombian peso revenue. We're preparing to manage that new exchange rate risk that will arise. And the CREG has issued a new resolution recently that is being discussed with them with the industry -- or by the industry, the 702 Resolution, that corrects some of the elements of Resolution 175. In our view, stating a more balanced regulatory framework for the TGI and in general for the Gas business in Colombia, which is very positive for the long term. And we extended our intercompany loan to the end of this year. To say also that, that loan is not further subordinated. The obligation for the subordination ended last year. Calidda, I mentioned, the significant growth in users and also a strong delivery on EBITDA. Next. I think a lot of activity on the regulatory front. Just to say 3 things, because it's probably not worth speculating on what could happen here. But from our perspective, there was an issue with the tariffs. The tariffs were increasing too high. And furthermore, in the north of the country -- and I'm talking electricity -- mostly in the north of the country, Afinia and Air-e, the 2 companies that were used to be Electricaribe, they have a different regulatory framework and the rates there increase much more, like more than 40% in some cases. So a temporary solution that was found in the #3 on the tariff pact by the majority of the industry on a voluntary basis, I think that's a very strong signal, and one in which I personally will put more weight than some of the recent announcements and decrees and the high court provisions. I think the industry and the government are sitting down, are trying to find ways to mitigate the impact on the users, on the citizens. And over the next months, perhaps a solution is going to be found, I think, most likely on the Bolsa de Energia on the spot price. And even the association of generators have proposed a solution to the government that is being very seriously considered. So the responsibilities of the different entities and the checks and balances and incorporation of the input from the industry is something that is happening, a very active dialogue. And again, they are addressing what we consider is a problem. They were just too high. And when you add that to the increase of prices of food, of transportation, of education, there is a lot of pressure on citizens. And finding a technical solution is one target that we are working very, very hard to achieve. Next. In terms of the quarter performance, as mentioned earlier, with a little bit of confusion by me, but the increase on the operating income was 18%, reaching COP 579 billion. And basically, we were able to protect the margins with the 16% -- 16.4% increase in revenues on the top left. And that increase reflects the diversification, the geographical footprint, but also it captures both the strategy and the strong economic positive environment in which we have we operated last year. It does have an FX impact of COP 329 billion, which is significant. Again, it's just simply the combination of the international diversification plus the dollar component of the local operations, both in Transmission business and TGI. And we have here a full quarter contribution of Elecnorte of COP 21 billion, which is going to be stable here as we look forward. The operating costs increasing. Again, this reflects to a great extent, the inflationary environment, mainly in Colombia, up 13.9% lower than the growth of the revenues. And here, we do have also the counter effect of the FX with COP 220 billion that compensates or negates a bit that a little bit of the effect of the COP 329 billion that we saw on the left side. And then on administrative expenses, we do have a couple of one-offs there. We do have the expenses in Brazil of the transaction. The fees we paid to the investment banks that help us deliver the transaction. Then we have -- also, we lost a long-dated dispute with a client in Peru, a final ruling by a dispute resolution court was against the company. And that because of that, we are incorporating here $12.5 million of -- a negative impact of $12.5 million that at the end is reflected in the operating income. I guess at this level, those are the main elements of the one-offs. I'm going to point in a minute the impact of the Enel decommissioning of the Thermal Cartagena. Next. In terms of EBITDA, the quarterly number showing a 43% increase, COP 261 billion, increase all businesses contribute. In this quarter, as we did not receive dividends for the noncontrolled entities. All of this is operational. So that's -- this is not a consolidated EBITDA, all of it is part of our operation. We are maintaining cost and that helps protecting the margins. If we see by company, in the consolidated view we have a 52% increase in TGI. And again, this -- when you look at the TGI reported numbers, we gave a different treatment of the positive effect of the -- about $10 million of the bond acquisition of the repurchasing of the bonds, which was part of the FX strategy. In our case, in the consolidated, we did include it as part of the EBITDA. So we just want to disclose it very clearly. So you can incorporate in whatever way you think is better or is more proper, if you will. The growth in the transmission business in Colombia, a very positive growth. That's organic, and that's due to those new lines coming into operation and the acquisition. And then the international transportation, gas electricity transmission companies, we see the impact of the acquisitions in Brazil that is captured both in Argos and Gebbras. You see in the EBITDA by business line that all of the businesses are growing in a very healthy way. Next. In terms of net income, I'll say also solid growth of 16.5%. And this is where we have incorporated the nonrecurring income of the acquisition of the bond. So TGI acquired bonds at about 92% price and the 8% is captured here in this COP 168 billion, and that's why this figure is a real positive benefit, although it's a nonrecurring one for sure. The out-- we acquired COP 156 million. So at the end of the quarter, the outstanding number was lower than COP 600 million, not the COP 750 million that we used to be for a long time. The exchange rate not only has a positive effect, as I mentioned before, has a counter effect -- a negative effect in terms of additional financial expenses. Because we have, as you know, a lot of that in U.S. dollars and despite being hedged from the net income perspective, when do actually we pay the either interest or part of the capital, the principle, the exchange rate has an impact on that accounting on that cash flow. In terms of the equity method, COP 468 billion, I'm going to start there. I'm going to go to the lower equity method graph. And this is where we see the very significant impact from Enel. So Enel had a write-off of COP 286 billion due to the plan to discontinue the operation of this plant in the near future. And this is the base case, significant impact. And despite that and the relevance of Enel in the overall portfolio, we did manage to reduce that equity method only by 4.2%. And that's because of the Argo, which is shown here in Argo. And in others, the contribution from the assets acquired in Brazil is capturing those 2. And then also both REP and CTM in Peru from ISA delivering very positive results for us. Next. 3 messages from our debt level. So it raises to 4.2 billion as we funded the acquisition. We have no pressure for the 2023 maturities. We managed to handle those in advance, but we are focusing very actively in managing the maturities of 2024. So we have there the syndicated loan and of GEB and syndicated lot of Contugas, 319 and 355. So we are aiming to find a definitive solution for those maturities in the next quarter or even earlier, at least stepping the conditions, agreeing the conditions to continue the regulatory approvals in Colombia that we have no control exactly how long could it take. And the second element at the top left is that 62% of our portfolio is fixed. The figure went down from 72 before because of the syndicated loan is indexed to software. But it still is something that has protected us significantly from the high interest rate environment. We now have 12% of our portfolio in SOFR, and we are working hard to convert that 15% portion of loans that are still in Libor to modify it to SOFR. The good news there is that the industry now has come up with a standard and the approvals are flowing slightly faster as basically the industry overall went to the learning curve. And finally, on the top right, net debt to EBITDA at 3.9x. We do consider that about 4x is the healthy level that we may use over the long run. So we're getting close to that. And a very solid cash position of more than $300 million at the end of the year. Next. So in 2024, on the organic level, we delivered more, so the first bar was our budget for 2022, and we did deliver, especially in Calidda, a much faster deployment of connections and deployment of network or distribution network to enable those connections. So quite a strong performance on the field and the same in Conecta in which we were able to deploy $32 million in terms of the $27 million that we had on the original plans. And when we add the $565 million acquisition, we reached the almost $1 billion investment. The $1.2 billion of CapEx projections are all organic based and identified projects that we have. So many opportunities on the portfolio and the main portion of that is the transmission business. I think the colors are -- the colors of the text on the right, do not correspond to the graph. So but the colors below the graph are the right ones. So transmission business being the main one, and we have 3 years of still very high investments. Calidda, is in the last couple of years of investments. And notably, I think Conecta is basically in the final year. So we have $44 million this year, $11 million next year. And in TGI, we have kind of marginal investments continuing. And some of those are related to improve the operational conditions of the network -- and they include also some of the projects that are linked to the new technologies and enabling possibilities on hydrogen and biogas and other opportunities that the company has found. Next. So for the first time, we are providing a guidance. Some of the companies used to provide it, but this is the general one. So this captures our budgets and the combined budgets of the company, on the EBITDA at the group level, I think we could come up on the at the right of that range. We do use -- the macroeconomic conditions are a key element of our both budget and guidance. And for that, we typically use consistently the service published by the central banks. We do not try to guess what -- or to fine-tune what the growth of inflation or growth of exchange rate, which are 2 of the key elements that have an impact. We do put a little bit more of science, if you will, in terms of the consumption of natural gas or the consumption of electricity. And this is what reflects the combined set of assumptions that we have. Next. I think with that, this emphasizing, we believe, solid operating results, not just because of inflation, either consumer inflation or producer price inflation or exchange rate, but also quantities, remarkable delivery of expansion of the business in Calidda, good progress in Conecta and the inorganic strategy starting to deliver and set up to deliver significant impact during 2025. In terms going back to repeat on the regulatory framework and activity and challenges, if you will. Our sense is that a technical solution that addresses key issues that our pain points are being addressed on a technical manner on working group tables, talking to people and something that I think is very positive. If you hear other industries like health care industry that they complained that they are not being leasing, that's not the case on the energy industry and the conversations are going. It took me a little bit longer. Sorry, Manuela, go ahead.

Okay. Thank you, Jorge. [Operator Instructions] So we now have 2 hands raised. I'm going to start with Rahul Bhat. Welcome, Carol, and thank you for your questions.

This is Rahul from Ninety One. I hope you can hear me?

We can.

Okay. Perfect. I just wanted to say thank you for hosting the call in English. It's very helpful, better than listening to the parallel translation. And so on the questions, I had a few questions. And you can tell me when you had enough and I can come back later or put it in the chat. But Jorge, on Brazil on the acquisitions. So we've started to see some of it come through to the equity line. But when does -- when will it properly start coming through the numbers and like dividends and cash flows start coming into the company? Is that -- and is there any CapEx associated with that? Is there going to be like cash infusion needed for that company? Or now that the initial acquisition loan is done, that's done?

You want to continue and I can answer all them.

And then on leverage, you said like 4x is now perfect. So then is it right to think that now there's not going to be any more like big M&A? How the Brazil transaction was there? And I guess this is also consistent with how the rating agencies are looking at you. So the 4x is like good to remain at your current IG rating. These are the 2 I had on GEB overall. And then on TGI, specifically on the debt tender that happened now, is the current debt level now comfortable after the tender? Or is the plan to like reduce debt more? Or is the plan to like change the debt mix and have more pesos versus dollars? And then how would you think about that? And then if you could also update on the new -- the recent Jan regulation and like how the hedging is going to happen in the -- how much percent hedging pass-through is going to be there? Those are the main ones.

So in terms of Brazil, the -- you're right to point. So we captured that in the net income, but in terms of cash flow and dividend, we'll only start receiving in 2025. So this and next year, the company -- it is because of how the projects are financed in Brazil and the participation of BNDES. We are receiving money, for example, from Gebbras in terms of paying us on debt, but actual dividend that goes to the EBITDA only will be received starting in '25, but it will come strong at that point. No more CapEx is needed. We acquired the recent acquisitions are ongoing assets. So assets that are fully operational, even a small acquisition of about $120 million that they did locally last year was the previous year but that closed in the first quarter also needs very little CapEx. We are -- so our numbers do not show any cash need or any cash infusion from here to our Brazilian entities. We will be working on the Argo level on the leilao, on the auction, from the government that is going to be at the end of the year. That will not require significant CapEx this year. And if we end up being successful, it's a multiyear CapEx program that the company could deliver at that point. That's on the CapEx and Brazil. From the Gebbras, no need to invest there. The 4x long-term net debt to EBITDA, we have spoken extensively with the rating agencies. It actually was here present a couple of weeks ago. They do ask questions about that number. And I'm going to pick on you saying it's probably not perfect, but it's a balanced number in terms of leverage as we think about it. We -- even in the current environment, we see debt at good levels and investment opportunities that add value for the group. So that's perhaps the 3.3x that we have a quarter ago was suboptimal for us. So it is incorporating the ratings. The TGI situation is -- so the tender was not so much lowering leverage activity, the current net debt-to-EBITDA TGI I think is like 3.1%. So it's very manageable. The reason was because if the company is converted to pesos, the decision that the Board of TGI made was to hedge that position being a public company. It's very difficult for us to take exchange rate risk on that amount. So unfortunately, the conditions were relatively abrupt and because it's a bond, not banking debt, there is very little to be done. So we acquired those or the company acquired those with cash that they had at hand. And if and when the regulation that converts the revenue to pesos comes into effect, which we expect is going to be soon, then the mandate that we have is to hedge the full position that the company has. The full position, at least with external lenders, the intercompany at the group level could come as a wash, whatever impact on the TGI side is going to have the negative impact the opposite sign at the GEB level. So that's what we plan to do there. But all new lending will have to be in COP or synthetic COP, because if the company is going to have revenue in pesos, that's what risk management decision was made. The exchange risk management position. Manuela?

Now we have Andres Duarte from CorFi Colombiana raising his hand.

Three short questions. Two are related to Brazil. And actually, the first one is pretty similar to Rahul's. So excuse me for that. Please tell us what's your -- I mean the expected dividends for Argo and Gebbras and the expected dividend growth for those companies whenever those dividends begin? And the second question is, if you have noticed any changes in the Brazilian market after Eletrobras' privatization. And the third one is, please, an update on the hydrogen projects that you have.

Sure, Andres. So basically, during -- in 2024, we will be receiving a very tiny amount of dividends. I'm thinking Argo now. I don't know, Juan Carlos -- Manuela. It's like COP 300 million, COP 300,000 million at the peso. So 300 in the units that we were using, COP 300 billion is the level of dividends that we will be receiving from Argo starting in 2025. And then it goes from at a healthy level. It doesn't -- it escalates like COP 350 billion next year, the following 26. That's the key. We do have with Gebbras, we do have an intercompany loan that is still about $30 million that we will be receiving cash from them. As I mentioned, it's not dividend, but it's cash flow from those investments that we will be receiving here that will help us manage our debt level at the GEB level. Hydrogen, everything is done at TGI. And basically, I'm happy to open up conversion with you with the technical team at TGI. But it's some our niche applications that are not technology with suppliers and with partners with -- in technology, it's called technology readiness level TRL. With TRL levels more than 7. So this means we're not in science projects. We're in actual industrial application at smaller scale with either industry players or other participants that will have pay out on a financial contribution within 6 months. So we're not doing pilot projects at big scale. We're just doing niche applications and have found all suppliers and clients and have worked in joint agreements with them to pursue those.

And the question related to Eletrobras?

Yes, sorry. I guess that was the answer, right? No, we have not heard anything that has changed that market. That market needs very significant investments. The leilaos that Enel is structuring are very significant, a lot of possibilities to invest. We have -- we see some in our operating areas, and we have set up technical teams to identify what could be done. And actually are working with the construction companies to see how we can work on a more kind of partner based as opposed to just being clients and they're constructing for us.

We have a question from Roberto. He's asking in the chat. Please explain your 2023 strategy to improve your ROAE? And any plan to have a stock buyback? Do you want me to ask them all Jorge or one by one?

Go ahead. I can take notes here. Yes.

The pipeline of colectora project and the fourth one is your opinion about government's intention to create a mega utilities holdings.

Okay. Only that. So in terms of ROE, so we are focusing on 3 fronts. One is growing income, so growing the revenue plan to do 200,000 connections in Calidda, that should help and the plans to continue progressing the transportation businesses, the transportation projects -- I'm sorry, the transmission projects in Colombia that should also help. We currently are -- the plan is to increase like from 91.2% to 93.5%, the progress of the Guatemala project. But the revenue increase associated, as I mentioned, we are at 65%. We think we can increase that, and that should help disproportionately versus the progress on the project development side. So that's on the revenue side, the key actions. And TGI is pursuing both they announced yesterday a new business with -- in which we will be operating some assets for an oil and gas player and that creates an additional source of revenue. And also more active on the commercial side, identifying kind of almost straight place a few months of revenue associated with client-specific needs. So doing a much more thorough work on the commercial side of the TGI. All of those efforts are to increase our top line. And to protect margins is austerity and controlling costs. We're very, very conscious on not just at the holding level, but in operating companies to manage companies with a low OpEx profile and be very, very conscious about costs. As with those 2, the ROE -- the outcome is going to be a better ROE. In terms of stock buybacks, in fact, a shareholder formally requested us to analyze that, we analyzed that and we went to -- we had our Board of Directors meeting last week to disclose the issue. The conclusion was that at this point, we're not going to pursue the buyback. And basically, it's -- I think there are 2 elements to analyze buybacks benefits. One is the theoretical and kind of empirical demonstration. And yes, it is a vote of confidence by the company that the share perhaps is cheap and that they have confidence in the strategy and the possibilities that, that will deliver. That's on the -- again, on the theoretical side. I think for us, our particular situation made us conclude that is not the best option for us, 3 elements. One is we do see a significant gap in what we will consider the fundamental value versus the stock price value. And some of it may be related to lack of liquidity an important element that I will address. And some of it may be related to overall uncertainty and all the announcements by the regulators or the government associated with our industry or even more macro global aspects to it. But the 3 key elements that led us to the conclusion one was one we think that our float is not very big. And if we buy back shares, we act negatively against that float, which is one of the problems of our kind of ownership structure, if you will. So that's -- we think it's against that. And without talking as a speculator and trying to do a trade with the shares, we do have a lot of investment opportunities that we think could deliver returns for the shareholders in the long term. Of course, we are adjusting upwards our expected returns of investments that we do currently as the capital markets prices have gone up overall, so not just interest rates, but also perhaps the appetite for risk. So even incorporating additional returns expected from new investments, we do see that this industry has opportunity. So when we combine those 2, I think it makes sense for us to continue deploying the corporate strategy as opposed to announce or execute a buyback program. And not trying to debate on the theoretical level, but just applying our reality, which is particular and every company has its own reality. In terms of the Colectora project, we were very close to finalize -- go ahead.

Now we have [ Juan Haco ] here. If you want, he can answer that question.

Fine, fine.

Manuela, would you like to help me in translation?

I'll translate. Don't worry.

Thank you so much. [Foreign Language]

[Interpreted] For Colectora, we are going to do it in 2 stages. One of them is La Loma Cuestecitas. 250 kilometers that we will start building in May this year. And we hope to be operational in the third quarter of 2024. This will allow a 1,000 kilowatts from wind -- to enter the system in Colombia. The second stage, that is from Cuestecitas to Colectora, we are hoping to file the environmental license in December this year. And then start building on the third quarter 2024 to finalize construction in September 2026.

Thank you so much Manuela.

Thank you, [ Juan Haco ]. Perfect. We have...

Just to add one thing, that in the Cuestecitas Colectora in which we have, overall, we have like 223 communities with which we have to agree. We were very, very close to finalize those called consultas previas, like previous consultations. We have -- we were less than 10 out of 223 to be finalized and the dynamic was positive. Unfortunately, we received a request to incorporate, I think it was 11 new communities after many years working with those communities and will state at least. So a change of the rules that will require an additional effort, and it was somehow unexpected as we had that 223 list for a long time, have been working on it. So that could have an impact of delaying the initial stages of putting in place the studio impact on the environmental study that we'll have to present in order to get the license from the government to start building the lanes on the ground.

Okay. Jorge, we are running a little bit short on time. So we're going to have Felipe now the question, and we're going to do short answers.

Yes or no more than that?

This is Felipe Fuentes with SMBC. So 2 things. If you could please expand on the company's strategy in Brazil. I mean we're all aware that Brazil is massive. So I want to hear what your level of ambition is over there. And if you can please elaborate on the persistent high power prices and potential regulation. And you mentioned voluntary action under the proposal has been discussed at the generation companies level. I'm just curious on what course of action could that take?

Thank you, Felipe. Good question. So sure, in Brazil, we see many investment opportunities across the board. And as our footprint expanded, we see more opportunities close to that. We are going to pursue in both sides, acquiring companies on greenfield, if we managed to gain some auctions with the level of return that we expect. The positive thing there is that as now we are the fifth biggest private player in the transmission business. We are not limited by the GEB financial framework and leverage that I mentioned before because we could have access to the capital markets locally, currently perhaps not in the best shape. But if we do something, it will be at least 6 months from now because we don't have anything now on the plate. We are in the process of integration of the newly acquired assets and kind of digesting that acquisition, if you will, before we actually deploy. But we don't have a target of being #1, #2, but we see we will pursue additional opportunities. And the fact that we are with Redeia 50-50 also puts less pressure and less constraints on the financial framework as we could get money from -- we both put money into that. In terms of the high prices in Colombia, apparently, where things are heading is to the spot price, which is being dislocated and for the right reasons. There are some early signs of potential El Nino situation at the end of the year. At this stage, those forecasts are not very precise. The uncertainty range is big, but some signals are out there. And because of that, some companies are reserving the water, and that's why the spot prices are high. But again, the signals were here, the signals we're hearing are positive in terms of a solution that focuses on that. The rest of the energy is sold in long term -- in medium-term contracts that is difficult to modify. And for us, the impact is very low because basically, the spot price is modified. Our impact is just the Enel, the non -- Enel 15% of the energy that Enel produces is perhaps exposed to spot market. And then we have 42.5% of Enel. So and Enel contributes to some 30% of our EBITDA. So when you compound all of that at risk is about 8%, and that 8% is not going to be zero. So it's just -- it's going to have some pressure on that 8%. So 2% perhaps exposed, if you will, if spot prices are intervened by the government.

Thank you. So Rahul has a follow-up question, I think we answered the first one, correct? Rahul?

And I would say just -- sorry, we do have some 10 minutes. We could stay longer, but conscious of that we had planned for 9:00 a.m. finalization. So whoever needs to leave, we'll be happy to be answering questions here until 9:15.

Yes, sorry. So just on the CREG, you answered most of it. But I just -- so the -- currently, what is under discussion is only to change the spot price? And so therefore, it will impact only the generation companies, but nothing on the transmission of the distribution side. Is that correct?

The transmission, it's in the regular agenda by the regulatory commission. I think last time that the transmission, its scheme -- regulatory scheme was updated was 2011. Supposedly, that's done every 5 years. So that's under a normal cycle, and we have seen even in the past, I'm talking a few years back, some ideas put by the regulatory commission in front of the industry. So that is in the CREG regular agenda, not in the, let me call it, extraordinary agenda set up by the president or by the superintendent of utilities. So that at some point this year could come into play. The positive thing there is that only 27% of our business is exposed to that regulatory framework. Because the rest of it is our newly granted concessions that are a fixed payment from the government. So on those cases, we do not have exposure to whatever changes in the regulatory commission. So in transmission, there will be a change. The change, we don't know exactly what is going to land, what's going to be the outcome. That's something that will happen throughout the year. We don't see that this is happening very quickly. And on the last review of tariffs was in 2016. So it's about to be ready, and it's a matter of capacity at the commission. But in 2016, significant changes were put into place. I think the other point in the regulatory intervention, I think it's not all companies on the distribution side are healthy today in Colombia. The ones in the North Coast have openly said that they have not financial difficulties, but they need some relief. In fact, for example, EPM granted a loan to their own company, Afinia, which is a strong signal. I think that the company needs money and the market is not willing to lend the money. So the overall decisions have to be -- have to take into consideration that the industry overall on the distribution side is not very healthy. So they are not very deep pockets, if you will, for the regulators to go after.

Understood. And just to clarify, the 27% of the business is 27% of your transmission assets, not the group?

Correct. Within our -- Enlaza business, if you will. In our Enlaza business, which is about 7% of our EBITDA, 27% of those of that 7 is exposed to the regulatory framework. The rest of it is long-term fixed payment.

And then the second question was just on your debt strategy. So like with TGI, you just increased the intercompany loan as you just rolled it over by 1 year. Is there a plan to like address it permanently this year, like either go into a long-term loan? Or refinance TGI, refinances that locally? How are you thinking about that? And then what you mentioned also of the syndicated loan for GEB in 2024 and Contugas. What are the markets you're looking at to refinance that? Is it more the bank market? Or do you plan to come back to the dollar bond market for example?

I'll answer the first part and let Manuela answer the second one. So on TGI, overall our framework aims to reduce as much as possible the intercompany loans, kind of having every company with their own debt and not having centralized debt in order to fund companies. That is the general policy we want to implement. We need to keep in mind that we are 100% owner. So we need to optimize the solution in any case. But that's where we're heading kind of towards TGI securing their own money. In terms of the 24 maturity, Manuela?

Sure. Thank you. We are working on having flexibility, Rahul with the shaky markets we want to have different options. We do not have plans right now to go to the bond market, but we do not have plans to not go. So we did ask for the general assembly to grant permission to the Board. So they can approve an eventual bond issues if necessary, if that is the road that we see most likely. We maintain an investment-grade rating, and that gives us alternatives between the bank debt and multilateral debt and the bond market. And we think this year, flexibility is key. So we live both like the 3 options open, and we invite everyone with ideas to bring it to us as well because you never know. So with that we conclude the call. I know I rushed a little bit the questions and answers. But if you have any question, feel free to send us an e-mail to [email protected]. We try to be available for a call to all of our investors. And we appreciate your attention today. Jorge, you want to say a few closing words?

We remain committed to execute the strategy. A lot of opportunities and the results are coming in makes us happy, and reinforcement of the message about transparency. And there is a dislocation between the share price and the fundamentals. And we will be working very hard to explain our business to explain our results, our strategy, expand the investor base is something we want. And in that sense, if you think we can be useful to your clients, to your audiences, more than happy to engage.

Thank you.

Have a good day. Bye-bye. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]