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

Good morning. This is Karen Guzman, Grupo Energia Bogota, Investor Relations and Financing Officer. Welcome to Grupo Energia Bogota First Quarter 2024 Financial and Operating Results Conference Call. The results reports were published yesterday and are available on our website for your reference. Please note that this conference call is being recorded. As per the proposed format for our calls, we will start with an overview of the quarter's results and the main developments in the economic and industry environment of the countries where we operate, followed by the Group's financial and sustainability milestones. At the end of the presentation, a Q&A session will follow. We invite you to register with your name and the name of the company you represent so we can identify you during this session. In the top right-hand corner of your screens, you will find a question-and-answer section for you to write your questions at any time or you can raise your hand at the end of the session, if you would like to ask your question live. The management team that will join us today is composed of GEB's CEO, Juan Ricardo Ortega; our CFO, Jorge Tabares; and our Sustainability Director, Eduardo Uribe; and myself. Juan Ricardo, you may begin.

Good morning. It is a pleasure to have you here at the Grupo Energia Bogota first quarter 2024 remarks. Thank you, Karen, and everybody, you are most welcome back. Grupo Energia Bogota continues to have a significant robust results. We are extremely positive on what has been accomplished, and I want to briefly give you some facts on how the Group is performing so far. We generated COP 1.9 trillion in revenues, adjusted EBITDA of COP 2.1 trillion and a total net income of COP 788 billion. The General Shareholders Meeting held in March 26 had the representation of 96% of the company's shareholders, among other items, the assembly approved the distribution of COP 2.3 trillion in dividends corresponding to COP 251 per share. The adjusted EBITDA for the quarter showed a decrease of 17.6% versus the same period 2023. This is mostly explained by Enel's 25% decrease in EBITDA, and that is -- was presented last year and is mostly due to Windpeshi's impairment and the loss of a lawsuit in Costa Rica. So this has already been mentioned in previous presentations. In terms of the sustainability and corporate governance, there are some positive news. I would like to highlight the following points. The shareholders assembly approved the election of new members for the Board of Directors, ratifying three members and electing six new members. And these guarantees are continued in the strategic plan, and it shows the strength of the Group's corporate governance. As a new member, we have the new Secretary of Finance [indiscernible] is demonstrating his responsibility in the management of the company and its commitment to its corporate governance. We had a good news from the point of view of our social responsibility. We'll launch the Enel EnlazaNet pilot program. It is an initiative to bring fiber optic Internet through the indigenous use of the available infrastructure and that allows us to provide Internet approximately to 4,000 children, 60 teachers from 10 educational institutions in the area of Riohacha. This is going to be continued further and we just got the news yesterday that we're going to be using the government's program, pay taxes per project and continue the growth of EnlazaNet in La Guajira. We also obtained a score of 4 out of 4 that is outstanding maturity level achievement, the highest results in general consolidated sustainability levels according to the annual measurements made by Corficolombiana. And we also announced the inauguration of a new solar generation plant of our subsidiary in Electrodunas. This is going to be only part of Peru, it is small, just a capacity of 0.5 megawatt. It has already tracker systems that automatically redirects the 268 panels towards the sun and maximizing solar energy collection. The radiation has been higher than expected, which clearly shows the potential for the growth of solar generation in the South of Peru. The project represents also an approximately annual reduction of 214 tons of CO2 as part of our commitment in sustainability and is equivalent to planting almost 10,000 trees. On the next slide, we want to give some good news regarding El Nino. The issue has been finally normalized. The Ministry of Mines and Energy declared the phenomenon has been overcome, and the Institute for Hydrology, Methodology and Environmental Studies in Colombia has announced the gradual decrease in rainfall, which is expected during the months of May and June in the departments where the reservoirs of electricity had been significantly diminished. In Colombia, the situation of El Nino is reflected in the rebound in the demand of natural gas that is good news for our [indiscernible] with an increase of 31% year-over-year as well as an increase of around 85% in the energy spot prices when comparing with average prices in '24 versus '23. In this regard, I would like to point out that the Group's exposure through its non-controlled subsidiary Enel has broadly caused an impact on Enel's results due to the higher prices that they had to pay in the month of April and the lack of water for them to generate electricity in those months. Water reserves, fortunately, increasing significantly after expanding at 31.5% at the end of the quarter. They had already close to 36%, which clearly shows the El Nino is over, but we need those rains to continue in order to guarantee there is no other crisis in the future. There is expectation of El Nina, so that most likely is not going to be the case. In terms of regulation, we've been lacking a full operational [Technical Difficulty] and that has been one of the main concerns in the sector. There is a legal lawsuit that was forcing the government to appoint those members and also state of [Technical Difficulty] that lawsuit and the government has the mandate to appoint six members of the [Technical Difficulty] on a permanent basis. That is absolutely critical for the Group because there is a lot of regulation that will be a stock for the last year. Furthermore, in line with the suggestions and alerts from the [Technical Difficulty] center, the government implemented some temporary actions to [Technical Difficulty] El Nino. But as of today, some of those informations although maintained are not going to have any impact because of the [Technical Difficulty] in the rainfall pattern. However, we're still finding challenging the environment is affected with all the news about the risk of an intervention and with the limited functioning of the CREG and it's added to the critical delay in the energy infrastructure. And this is going to be more relevant in the coming future. On the average, only 6 megawatts out of 10 megawatts from previous auctions allocations came in line and less than 3 out of 10 came in-line in scheduled time. And the same is happening to the transmission projects that because of delays in the licensing and social opposition are not being concluded. The company's regulatory team in combination with [Technical Difficulty] is in constant active conversation with the government and included and other agents in the energy chain and we're mostly concerned about how to guarantee supply from 2026 in the area of Bogota, its North and Western parts of the city. Regarding the other countries, in Peru, there is some impact because of El Nino. There is a decrease in term of electric generation of around 140%, but this is in line with the behavior of El Nino. This is a phenomenon [indiscernible] by higher rainfall in the northern region, therefore, higher operation of the hydro electric plant. And in this sense, the average production of natural gas in the first quarter of 2024 decreased 7.1% compared to as recorded in 2023. The Peruvian Multisectoral Commission for the national study of El Nino are reported the beginning of April that the phenomenon has weakened, so its status has changed to not active. Neutral conditions are expected until May, followed by weak fall conditions between June and July. The [indiscernible] economic activity indicators in February grew 2.8%, little improvement over last year. However, the fishing sector, which is critical for Contugas contracted 31% given the slower progress of the second and show efficiencies. This is going to be obviously a concern for the revenue of Contugas that has seen an impact of 2.1% decrease on the quarter. In Brazil, the [ GEC ] is performing better, close to 2.09% as well. The National Consumer Price Index continues at a low level. This accumulated in April of 1.8% and a 3.69% annual. The Selic, which is the main instrument for the Central Bank has been left at 10.5%, but we expect some reductions that could bring some positive results if it reaches around 9% towards the end of the year. Likewise, in Brazil, the transmission sector continues to grow significantly, 15 lots were awarded in the year auction for BRL 18.1 trillion, and that is going to continue to be growing given the commitment of the overseeing to electrification of the country. Eletrobras continues leading with 4 awarded blocks. The next slide, we will talk about some operational milestones that will give you an idea of how our companies are performing. In transmission, the Colombian mining, energy and unit [indiscernible], the project for the construction, operation and maintenance of a new transformer that will improve the reliability of electric power service in the Department of [indiscernible]. If you remember, in the previous quarter, we won one in [indiscernible], we continue to perform quite well in the [indiscernible] indications. Additionally, our subsidiary Conecta in Guatemala was certified on the ISO 22301. But more importantly, our substation [indiscernible], going to be inaugurated in the 1st of June, and it's already been electrified improving the income base for Conecta to Guatemala. In terms of distribution, Electrodunas completed as well the construction of [indiscernible], so a station that it was implemented on a new nonbank financing business at [indiscernible], and we also implemented the new nonbank financing [indiscernible], which at the end of the quarter reported 228 new loans for a total amount of over [ 1 million ]. The new line of income for Dunas that we'll be expecting to grow significantly in the coming years. Additionally, there is an increase of 2.9% compared to the same period in the previous year. We recorded energy demand point in Colombia in an area of customer base. In generation, during the first quarter of the year, Enel Colombia inaugurated the largest solar farm of the country, La Loma, and this is close to 200 megawatts and started commercial operation of El Paso, which is a solar farm that is being installed for over a year and has the capacity of 86.2 megawatts, and it recorded 84% availability of its energy generation plans. In the operations, in the gas chain, although El Nino clearly improved the results for [indiscernible] and it increased 0.9% versus the first quarter in 2023. And it's because of the intensive use of the thermoelectric generation in the first quarter the biggest contrast is the decrease in the average volume. We've been losing participation, and it's mostly due because of the imports by [indiscernible], while investors in Promigas they expect -- is a subsidiary of [indiscernible] of Promigas and most of the generation by gas is in the northern part of Colombia, and most of it was done with imported gas. The gas deficit is going to be main concern in the coming years for Colombia. And in distribution, Contugas accelerated the pace of the residential connections. This is quite positive, and we've reached 5,358 as of March. And in Calidda, 50,206 new connections were made reaching [indiscernible] connections this year, almost 800,000 new users in the past 12 months. So here to have a brief presentation of the overall results of the Group and now let us hear Jorge Tabares on all the financial details regarding our performance this first quarter. Thank you, Jorge. The floor is yours.

Thank you, Juan Ricardo. In the first quarter of 2024 our operating income decreased by 10%. This compared to the same quarter in the previous year and mainly explained by lower revenues in the Natural Gas Distribution segment, which decreased 18% due to FX effect given the aforementioned revaluation of the Colombian peso that explained [ 195 ] of the variation. In the functional currencies, Calidda revenue decreased by 2.2% and Contugas increased by 36%. There was also lower revenues in the consolidated pesos statement in the Power Transmission segment decreasing 11% due to FX conversion and lower revenues in the Energy Distribution segment due to the FX conversion given the revaluation of the Colombian peso. In this case, because the Peruvian sol of approximately 16%. And this was partially offset by a 6.2% annual increase in revenues in the Natural Gas Transportation segment. Operating costs for the quarter decreased by 15% compared to the same period of the previous year mainly thanks to lower cost in the Natural Gas Distribution segment, decreasing by 21%, which were mainly explained by the appreciation of the currency impact, which accounts for 85% of the decrease and lower cost in the energy distribution decreasing by 18%, again as a result of the FX conversion effect accounting for 88% of the decrease. This was partially offset by a 6.4% annual increase in the natural gas transportation cost and a 6.2% increase in transmission costs. Regarding administrative and operating expenses, fees decreased by 7%, mainly due to the decrease in expenses in the Natural Gas Distribution segment given the appreciation of the peso and lower expenses recorded in the corporate center due to lower legal fees. Operating income for the quarter represented a 2.7% decrease compared to the first quarter of '23. Additionally, the quarter recorded higher financial expenses increasing 20% year-over-year, mainly explained by expenses associated with the issuance of the GEB sustainable bond in the 4Q of '23, bonds in local currency and the new debt subscribed by TGI in the fourth quarter of '23. Accordingly, controlled net income for the quarter decreased 11% compared to the same period. Next, please. The equity method -- for the quarter closed at COP 586 billion, growing 1.3%. This variation is mainly explained by higher contribution from Promigas with a 39% growth given higher income as a result of higher volume transport during the quarter and from [indiscernible] with a growth of 19% from higher income in the four joint venture concessions with [ Eletrobras ]. This growth managed to offset the negative variation of 1.5% in Enel, participation method, which is in line with the lower earnings recorded in the quarter and Argo decreasing by 15%, mainly explained by FX conversion effect due to the peso appreciation versus the Brazilian real and the annual variation of the inflation in Brazil IPCA. Additionally, the CapEx [ executed ] for the quarter amounts to COP 91 million equivalent or COP 50 million correspond to transmission in Colombia and COP 22 million in Calidda. In the Colombian transmission branch, the CapEx was mainly allocated to the Sogamoso, Colectora and Refuerzo Suroccidente projects. The updated 5-year CapEx projection stands at $1.4 billion, increasing by 8% compared to the previously shared figure, mainly explained by the additional projects in Guatemala associated with the extension of the construction contract that was signed in the last quarter of last year. The adjusted EBITDA for the quarter decreased by 18% compared to the 1Q in '23, mainly due to the decrease in the EBITDA of the associated companies will decrease 25% year-over-year. This is explained by the lower dividend declared by Enel Colombia. Those figures for '23 reflected the accounting impact of Windpeshi and the elimination of the Chucas receivable in Costa Rica. Additionally, the EBITDA of controlled companies, which for this quarter represents 43%, decreased by 6% compared to the previous quarter last year. This is mainly due to the adjustments, making EBITDA calculation, which now includes the operating taxes as we shared in the fourth quarter of '23 earnings call. There was also a decrease as a result of revaluation of the peso against all currencies of the Group portfolio of companies. The controlled EBITDA for the quarter is made up 86% by three companies: [ TTI ], Calidda, and our Transmission business in Colombia. Looking by segment, a decrease of 57% year-to-year in the Energy Generation segment, which represents 85% of the inauguration of this metric. And this is again due to lower dividends [indiscernible] by Enel Colombia, which is in line with the profit accounted in '23. And finally, it's worth highlighting that the adjusted EBITDA calculation for the last 12 months amounted to COP 4.7 trillion, approximately $1.2 billion. And now I give the floor to Karen Guzman who will talk about the portfolio of debt and the actions we're taking to secure new debt. Go ahead, Karen.

Thanks, Jorge. GEB's consolidated debt amounts to $4.8 billion with a similar distribution between GEB and [indiscernible]. It is highlighted that 37% of our debt, it has a fixed interest rate, while the remaining is indexed to [indiscernible], CPI and IBR. Regarding the distribution by currency of origin, 65% of the debt is denominated in U.S. dollars, followed by 33% in Colombian pesos, mainly explained by the TGI [ steel claw ] for COP 1.5 trillion and TGI cross-currency swap on its 2028 bonds as a result of the company's strategy to reduce its exposure to dollars. Regarding GEB's leverage rates, our objective is to maintain sustainable leverage in the medium term below 4x as part of our strategic commitment to maintain our investment grade. In this regard, for the first quarter of 2024, our net debt to EBITDA was 3.5x and 4.7x EBITDA on financial expenses. As we have previously reported, we continue to prioritize our refinancing of 2024 maturities specifically COP 320 million owed by Contugas with a corporate guarantee of GEB and TGI. Finally, we would like to highlight that during this first quarter, CGI, GEB and Contugas made partial capital payments on the following obligations: COP 370 billion for local bonds of GEB, COP 200 billion from TGI Club Deal and $25 million from the syndicated credit of Contugas. Let's now continuing with our Sustainability Director, Eduardo Uribe, who will chair the main advances in sustainability for the quarter.

Thank you, Karen. In relation to sustainability milestones for the first quarter of the year 2024, we highlight the inclusion of GEB and TGI in the Standard & Poor's Global Sustainability Yearbook. We received this recognition for the third consecutive year being positioned in the top 5 of the gas utilities industry for its high performance in environmental, social and governance issues. TGI ranked first in the oil and gas transportation and storage industry. Now in terms of social performance, GEB [indiscernible] launched their last call for the [indiscernible] program that will benefit more than 1,500 people with training in technology and digital sectors, soft skills and energy transition. TGI completed the delivery of 42 interactive solar classrooms in the departments of Antioquia, Bolivar, Cesar and Valle del Cauca. This will benefit more than 20,000 children and it was carried out under the Works-for-Taxes mechanism with an investment of nearly COP 17,000 million. And [indiscernible] agreed on more than 300 social investment initiatives with Energy Communities in the Colectora project in La Guajira, Colombia. This will benefit more than 23,000 people for 199 indigenous communities. And finally, the social investment of GEB and its subsidiaries amounted to nearly $1.6 million and benefited more than 29,000 people. The Group was able to leverage resources for social projects for about $300,000. In relation to environmental performance, we highlight the publication of the climate change management reported GEB and its controlled subsidiaries following the recommendation of the task force on climate-related Financial Disclosures Framework. The IDB financed Calidda for the development of a pilot project to explore the viability of biogas in the [indiscernible] area in Lima. And also, we highlight the investment of GEB and subsidiaries in environmental projects for nearly $1.27 million. Having said this, I give the floor back to my colleague, Mr. Jorge Tabares for the final remarks of this presentation.

Thanks, Eduardo. Before moving to Q&A, just want to summarize [Technical Difficulty] and our commitment to dividend. Important actions that demonstrate our leadership in sustainability and corporate governance, from which I highlight the election of the Board of Directors, which includes new members of top quality and that positive are going to help us move the strategy forward, and the launch of a very innovative EnlazaNet program, which will allow a transmission company to deliver Internet to communities in La Guajira. Our [indiscernible] to a challenging operating environment, not just the Nino phenomenon that is already gone, but also our regulatory environment in Colombia, which is posing significant challenges in which we are engaged with all the stakeholders, of course, including the government and the regulators to try to find ways to move forward the energy agenda of the country. And finally, our debt management and our actions on securing new indebtedness and maintaining the leverage level at healthy levels that we have had for the last few years. Pass it to Karen then for Q&A.

[Operator Instructions] We have a question from Andres Duarte.

And the best of luck for this year's results. So I have three questions. The first one is related to future gas imports from Venezuela, the second one with our distribution and the third one with the share of currencies in income and EBITDA. So the first one is, assuming a repaired Antonio [indiscernible] pipeline, what role, if any, would TGI have on the transportation of this gas? The second question is, please explain or repeat the explanation that Juan Ricardo on what explains the impressive increase in operating income coming from electricity or power distribution with respect to the previous Q. And the third question, the one related to the share of currencies in income and EBITDA is that after the next Q, TGI would have completed a whole year with operating income denominated in pesos. And this will imply a decrease in U.S. dollars denominated income from around 65% to 55% as far as I can tell. I wanted to know if this is accurate and in terms of EBITDA, what distribution are you expecting for the whole year?

Thanks, Andres. I think I can take the first one. In terms of potential imports from Venezuela, same position as we have maintained in the past, we're not dealing with Venezuela government. This is a government-to-government interaction. But if they manage to both negotiate commercial terms and resolve the technical issues on the [indiscernible] pipeline. The only way to get this gas to market in the center of the country of Colombia is the TGI system. So we see an upside from for TGI if gas is imported from Venezuela. Clear concerns about reliability, about cost. But in any case, if something comes to Colombia, it will have to use our system. I got a difficulty understanding the second point. I don't know if Karen has that? And the third question, either I couldn't get that very well.

The second one is that there is around 26% as far as I can remember, of an increase with respect to the previous quarter in operating income coming from power distribution. So I wanted to know what explains that increase, if possible. And the third one has to do with the share of income and EBITDA in terms of the different currencies, specifically U.S. dollars and pesos after a whole year is completed with TGI having the whole operating income in pesos.

Okay. The third one so TGI being in pesos since June of last year, as you point, is going to be a peso-dominated company throughout 2024. And when we account our total EBITDA of 48% we expect to be U.S. dollar based. This is coming down significantly from the more than 60% around 60% that we used to have. But we also adjusted our balance sheet and now have much less U.S. dollar exposure in our debt. So TGI when specified to minimize foreign exposure -- foreign exchange risk, they hedge the 2028 bond; what was left, about $500 million. And also the -- used to be an intercompany loan for U.S. dollar that was prepaid to GEB and pesos were secured in the local market from balance in order to have the balance sheet of the TGI not exposed to U.S. dollars. The 26% increase in the distribution business in revenue.

With respect to the previous quarter. That's okay. I'll ask by e-mail later whatever.

Yes, I'm just thinking here, and I don't -- I don't know if somebody in the team has a quick answer for that.

We'll come back to you from e-mail.

So there is an impact -- there is an impact of El Nino. So prices during the quarter were higher prices, especially because they account for prices of the peak of the El Nino back in November, December, January. So a significant portion of that is associated with higher spot prices that were translated into the cost to the customers and secured in revenue by the companies. But it's a onetime it's not sustainable and not at margin as that part of the cost is a pass-through. It is just has a delay in [indiscernible]. And the second portion of it is that Enel was able to recoup a part of that exposure. So let me explain in details in -- when the generation price goes up has happened during El Nino, there is a lag of about two months in between the moment that the distributor pace for either cost of generation and the moment in which it recoups the money from the clients. And at the end of last year, El Nino had an exposure that impacted our revenue negatively in the last quarter on the distribution business. And now during the first quarter, it was able to recoup that because this spot price were lower on what it had betted during the last quarter. So that also is recorded as additional revenue and explains part of the distribution business results.

I'm going to allow [indiscernible].

Thank you for the presentation. Just had a couple of questions here. The first one is related to Enel's dividends for the next year, considering the decline in the dividends [indiscernible] this year. How do you see or your expectations for the next year, considering the impacts of in El Nino on Enel Colombia's financials? That's the first one. The second question is related to the financial expenses that grew like 20% year-over-year. So you see those levels as the new normals or we shall see a decline in the following quarters. And the third one is if you could give us a quick update on the Colectora project? That are my questions.

So Enel dividends for '24 given -- and the new shareholder agreement, which is now two years old. We had a payout of 90%. So it's not an ongoing conversation with Enel Americas, but it's a given number because there is a table in our shareholder agreement that is the leverage of Enel Colombia is lower than 1.5x net-debt-to-EBITDA. The dividend payout is 90%. So that is what the company declare has announced, and we will receive that between July and December of this year. In terms of dividends for the next year, we do expect the 90% payout to remain in place. And just from the budget perspective, the company has projected a significant improvement over last year, given that the year '23 was impacted by the two nonrecurring items that we have described extensively. You have read in the media that Ecopetrol's President has -- the company said that Windpeshi negotiations are going very well that they are committed to close that transaction. So we expect that to happen and that should allow Ecopetrol to continue the Windpeshi project and finalize that. And with that, the budget and all the projections that the company has are most likely to be made. That's when Ricardo signaled April was challenging because of El Nino but El Nino is gone, and we go all now back to normal business as the spot price today is COP 188 per kilowatt hour. In terms of financial expenses, we do expect interest rates going down. The good news is that the banking system is acting faster than the Central Bank. And this is not by any means accretive to the Central Bank. I don't get involved into that into their dynamic. But clearly, the IBR in general, despite some volatility associated with the international rates, the IBR is going down, and we expect the financial expenses at the end of the year to adjust, as Karen mentioned, only about 32% of the fixed. So the rest of it is going to be adjusted during the year, especially the new loan at the TGI level that I mentioned, that's a significant portion, although we paid down [ COP 300 billion ], still COP 1.2 billion that is going to reprice every quarter here as we move along. And our debt also will be repricing and the CPI is also going down continuously now for 13 months. And that also when we repriced the inflation index debt will help us on the financial expenses. Colectora, so we are expecting the environmental license for Colectora in the next few days, if not weeks. We have submitted all the information required after the announced closing of the 235 previous consultations. And on the south part of the Colectora project, we're making progress very fast. I think it's more than 45% complete by now and going at full speed. So as soon as we get the license, we will start the construction of the north part of the project and move forward. So we will announce, of course, as soon as we get the environmental license in the next few days.

We have a question from [indiscernible]. You have some net-debt-to-EBITDA target branch. I think it was mentioned in the call already, but I missed it.

No. Yes, we value the investment grade, we're committed. And we think that given our shareholder base and the [ Citi ] being a minor owner of the company, maintaining investment grade is what gives us more flexibility and to secure debt and also to have it on an efficient cost. So we combine that conservative view with the rating agencies' views, and we think it's sustainable for us maintaining the ratings we -- the investment-grade rating if we have a net-debt-to-EBITDA below 4 or almost 4 on a sustained basis. So if we go up or down from that at least if you go up from that, we will adjust very quickly, which means that today at 3.5, we have about $600 million of acquiring of firepower to acquire companies and keep implementing our nonorganic strategy.

We have a couple of questions from [indiscernible]. First, can you elaborate on the expectations of dividends to be received by subsidiaries in 2024? How about the dividends expected to come from Brazil mentioned in the prior call. That's the first one, if you want to take that one?

The first one is dividends received from subsidiaries.

Yes, expected in 2024. And I can help you with the number. We're expecting COP 1.9 trillion, even though right now, there's only between COP 1.2 billion being declared by the subsidiaries. And regarding Brazil, dividends that haven't been already declared, but we're expecting some dividends from Argo as well next year.

The dividends from Brazil that has evolved recently. The company Argo has a good cash position. And given the CapEx profile and the CapEx needs that the company has which is a very low CapEx profile, we are expecting to have the Board of Directors of Argo, and we have already agreed with REDEIA, our partner to advance a dividend that we have been talking about for next year. So for GEB, I will expect around $50 million equivalent to be received from Argo during 2024, which was not in our original budget, and that's a positive development. And Karen mentioned the dividends we are planning to receive from subsidiary. The only one I think that is only one subsidiary left to approve internally the dividends. But in general, we're maximizing the dividend that we can receive based on the net profit of the companies and all of them are able to pay a significant portion of the net income. The only case in which we were conservative was at TGI. I think at the end, we distributed about less than 60% of the net income. And that's because some of the net income of TGI was associated with a noncash event, the nonrecurring noncash event but associated with exchange rate profits. And we conservatively did not distribute that as part of our cash dividend.

The second question from [indiscernible]. Can you provide an update on the company's appetite for M&A this year?

Sure. So we continue, as I mentioned, we think we have financial capabilities. And fortunately, in this business, we see a lot of potential opportunities. So currently, we are actually considering three potential acquisitions in the countries in which we operate, maintaining the same businesses in which we are. We cannot provide more details in order to make sure that we can execute smoothly the transactions. I don't think anything is going to be announced in the next couple of months given the maturity, the stage at which the acquisitions are. A couple of them are moderate in size. There may be one that be bigger in size, more relevant, more material for us. But nothing that we can say now that is 100% sure. We maintain discipline in the way we evaluate the potential targets. But just to confirm that yes, we are seeing some interesting opportunities that we're working on.

Okay. And the last question from [indiscernible]; what is the outlook for regulation in Colombia [Technical Difficulty] peak of El Nino? When can we expect final solutions for pending matters at TGI?

Thank you, [ Sebastian ]. That's very critical. So I think it cannot pass without being highlighted the strength of the power generation system in Colombia. El Nino was not a mild Nino, was a relatively strong Nino. And the system responded and energy was there and no blackouts or constraints were impacted significantly over all the market. So that's a very good outcome. Of course, every few years in a hydro-based energy metrics, you're going to see spot prices going up, that only impact about 20% of the final cost to customers, which is a moderate impact despite of how much publicity the spot price gets that does not have such a huge impact. So the energy matrix responded very, very positively to a demand of the energy system, which is not just associated with less rain, but as we have seen with a very important increase in demand when there is more when [indiscernible] is under higher temperatures and demand for electricity to make people more comfortable and to facilitate their lives gets higher. The regulatory agenda is the most challenging issue we're facing. And as you point, TGI is the more exposed. The fact, as Juan Ricardo mentioned, that the [ crack ] is not -- has not operated as institutionally defined is very critical for the industry because that's where the key technical decisions are made. And it is a very bad recipe to have an energy system operating based on political decisions and not technical decisions. We saw the [indiscernible] Council of State confirming decree by the Tribunal Administrative Cundinamarca, High Court -- State High Court that required the President to appoint the six Board members on a firm basis, not on a temporary basis. So that confirmation demonstrates the institution is working. Originally, the Tribunal Administrative are given 30 days for that decision for the President to act. And we're just waiting to see that line has and what the President reaction to forming the [ crack ] is going to be. So for us, it's sustaining because as we have repeatedly communicated to markets we do have the pending resolution of our TGI 175 resolution being fixed with draft resolutions out for comment, but the fact that the credit is not moving -- is not evolving the normal agenda in a technical way, makes life more difficult. And also the El Nino created some by now can call it, distractions and the [indiscernible], although quite late, got into the energy optimization and into how the energy matrix was managed during the big Nino season associated with trying to avoid a potential blackout that could have materialized if rainfall will have not appeared or if any plant would have come out of operation for unexpected reasons. So we hope that with the normalization of the Nino and with the decree by the [indiscernible], we can go back to normal operations of the [indiscernible] and resolve the issues that we have on a technical manner.

We have a last question from [indiscernible]. Congratulations on the result. My questions; you have a long-term target on the FX debt exposure ratio versus U.S. dollars for the Group overall. Can you elaborate on the policy in that regard? That's the first one, and we have another one that we can.

Sure, [ Diego ]. So I think it can be seen in two ways. We -- for the Colombian financial markets, we are too big. So there is no way we can secure $5 billion in the local market. In fact, about 19% of our current debt portfolio is funded locally. So we need international markets and the more efficient way of securing money in the international markets is U.S. dollar debt. So we will continue to secure U.S. dollar debt as we are doing currently in the Contugas rollover of the COP 320 million that Karen mentioned. Then the point is how to manage FX exposure. We do have a higher FX exposure because of the U.S. dollar debt associated with the specification of TGI. We do have a policy that -- or the way we manage that FX risk is with the international investments or with U.S. dollar investments in the portfolio. As TGI now, it's not U.S. dollar, it was a sizable part of that investment portfolio. We are exploring ways of managing that additional FX mix that we have, and that likely will have to be to just cross-currency swaps to hit part of the U.S. dollar debt. So we do not have a target on how much U.S. dollar debt we get. But if we get above our threshold that we think is -- or that we defined as our risk appetite, we will chase the rest of it, and there is a market out there for hedging. So that's not a problem. That's it. Second?

The second one is filing for new projects and investments can you give us some color on the prospects for new investments in Colombia or the region?

Investments in Colombia, given that we [indiscernible] is the one doing all the generation. So they are very active in pursuing more solar projects in different parts of the country, including on the Atlantico cluster has proven to be quite successful for them. They have the Guayepo 1, Guayepo 2 and Guayepo 3. There is a potential project for Atlantico, which account for more than 1,000 megawatts of new capacity. So Enel is pursuing a lot of projects. Enel secured about 25% of the reliability charge auction for '27, '28 that the government put out for auction a few months back. So that's another important portion of the generation portfolio that Enel is pursuing. And what is left then is for us transmission. So we're focusing on moving forward our transmission projects. We're in the next -- this and next year a big project in terms of our CapEx profile, really challenging in terms of securing all the environmental permits and all the clear enough, the ability for us to continue transmission lines that have been in construction for a long time or a long delay and are badly needed for the Bogota area. Bogota has an energy deficit in terms of the generation area. So we need to import electricity from the rest of the country, but we do not have enough transmission lines to bring all the electricity required by the region. And we're not able to -- we're not allowed to continue the projects as at a regular project pace due to some constraints, mostly from the environmental licensing perspective or approval perspective in general, not just environmental license, but other [ borders ]. Besides that, it's -- we participate and have participated in the [indiscernible] auctions. We secured a last one, which is a small project that will -- like $1.2 million in revenue when we completed a transformer at was auctioned and expansion of a substation basically. And we are interested and we'll continue to be interested if [indiscernible] put more auctions into play for us to participate. A few nonmaterial private projects that we are pursuing also. And that's our project portfolio in Colombia. The project pipeline is going down. If you look three years further out, our CapEx demand is more slower and that reinforces our strategy of acquiring companies to make sure that we continue growing in having cash flow to our portfolio.

Thank you, Jorge. We don't have any more questions, but I would like to answer [ Andres ] question regarding distribution of energy. Just to give you the data. There was an increase of 26% regarding the prior quarter and it's mostly because of higher volumes of electricity sales in Electrodunas, our company of the distribution -- power distribution in Peru. You're so welcome. So we don't have any more questions. We would like to thank you once again for your presence here today. And as a reminder, our IR team is always available to resolve any of your questions. We hope you have a nice day. Thank you very much.