Interconexión Eléctrica S.A. E.S.P. (ISA) Earnings Call Transcript & Summary

Tatiana Uribe, Head of Corporate Capital Markets for Ecopetrol. We welcome all participants to Ecopetrol's conference call in which we will discuss matters related to the process that led to the signing of the SPA with the Ministry of Finance to acquire its controlling stake in ISA. Before we begin, it is important to mention that this call or presentation might include projections of the company's future performance. These projections do not constitute any commitment as to future results, nor do they take into account risks or uncertainties that could materialize. As a result, Ecopetrol assumes no responsibility in the event that future results are different from the projections shared on this conference call. The call will be led by Mr. Felipe Bayon, CEO of Ecopetrol. Other participants include Juan Manuel Rojas, VP of Strategy and Business Development; Jaime Caballero, Chief Financial Officer; and Nicolás Azcuénaga, Head of Mergers and Acquisitions. We will wrap it up with a round of questions and answers. [Operator Instructions] I will now hand over the presentation to Ecopetrol's Chief Executive Officer, Mr. Felipe Bayon. Mr. Bayon, you may begin.

Welcome, everyone, to this conference call following the signature of the agreement to acquire 51.4% of ISA that was announced yesterday evening to the market. If we can go to the next slide, please, to the first slide. I just want to go back and provide some context in terms of why this is transformational for Ecopetrol, for ISA, and we believe overall for our shareholders and for Colombians as well. And we have a unique opportunity to become a leader in terms of energy transition in the Americas. On the right, you have a map of the areas where, following the acquisition that was announced yesterday, we would have presence and operations, which is quite relevant in terms of becoming a leader through the Hemisphere. In terms of energy transition, and we've talked about this before since we presented a nonbinding offer back in January, and that was a little bit over 6 months ago. The first thing is that ISA is a leading network infrastructure player in LatAm. The second thing, transmission of electricity and the use of networks will play undoubtedly, without any doubt, a key role in the future as we think of energy transition. And we've seen some of the circumstances that have happened throughout the last or the last few months in terms of the need to have reliable and efficient and well located, well-placed electricity transmission infrastructure. There is a commitment to sustainability that is shared by both companies. And that's fundamental in terms, for example, as we look at our businesses and as we look at our footprint, if you think about CO2. And through this transaction, we're doing something that compares very favorably and it is much, much more accretive in terms of value than doing things, for example, locally if we looked at the renewable portfolio. I want to stress that we continue as Ecopetrol committed to our own auto or self-power generating capacity in terms of renewable energy. And we've already mentioned or signaled to the market that we want to be at 400 megawatts of installed capacity by year 2023. The second lens is growth. And there's a very successful track record and a very good outlook, very attractive outlook as we look at the plans that the company, ISA, has and we've had the opportunity, and Juan Manuel will take us through the process of doing a very detailed due diligence, analysis and assessment that has confirmed our views in terms of the growth opportunity. In terms of scale, ISA, it represents around 25% of both companies. If you look at the combination of Ecopetrol and ISA, using the first quarter 2021 results, ISA has not yet posted results. So that should be updated. But it provides a growth opportunity in terms of EBITDA, for example, if you look at that, or even if you look at the growth in terms of EBITDA that ISA has had, 18% over the last 5 years. So it's a very, very attractive business proposition that hopefully will take to a good port when we do the closing of the deal. And we are -- we firmly believe that the transaction in terms of earnings per share is accretive from year 1. In terms of our risk profile and pandemic and the crisis last year showed us that we depend, although we are an integrated company, and we have a lot of possibility to better withstand the changes and volatility in prices, we depend on the prices of commodities. And from that point of view, the acquisition will provide us what we believe are stable and, as important, predictable cash flow generation due to this business being regulated and being long term in terms of the concessions and the duration of those businesses. We will have increased and improved resilience to oil price volatility. We will have a diversified platform in the region, as I was describing in the map, in terms of the asset classes and the geographies. And this is good because we are having -- or we would have a lower concentration of risk. Very important, very important as we see some of the things happening in the hemisphere. And in terms of the last point on the improved risk profile, it will -- or it enhances some of the characteristics that we already have to our midstream transportation systems as we think about energy transition in terms of how do we actually align these linear transportation systems, both in Ecopetrol and ISA. Let's go to the next slide, please. Transmission plays a key role and will continue to play a very important role. Two things, I think, have been accelerated through the crisis. The first one is decarbonization and the need of the world, and if you look, for example, at the IPCC report that came out a couple of days ago, decarbonization is fundamental in terms of the megatrend and electrification is the other trend that we need to address. And we need to be not only cognizant, but we need to act upon. And the role that the companies that do transmission and the role that they play in energy transition, we can look at it through some different lenses. The first one, it's the integration between where the energy is produced, this renewable energy, and you know that Colombia has done some very or has taken some very important steps to become or to basically grow, at exponential rates, its capacity from renewables. How do we actually connect? How do we actually connect those sites where power is generated to where power needs to be consumed? And there's additional regional integration plans, not too long ago. The plans between Colombia and Panama were announced in terms of how that continues to progress. The second lens in terms of electrification. We do believe that the economy will continue to be electrified and will bring this is -- will bring additional opportunities in terms of the need to support with reliable infrastructure that expansion. The systems may be decentralized, and that's something that we will need to look into. And due to the aging of some infrastructure, higher investments will be required, not only in maintenance but also in upgrading some of the systems. Climate risks, weather events have significantly affected hydroelectric power plants, for example, and how do we actually ensure that we provide reliable and systems that have not only good reliability but are dependable. In terms of the global investment outlook and this is some numbers that we've taken from McKinsey, there is, at least in their view, a factor of 2x when you think about the investment that will be done in energy transmission around the world and energy transmission investments that will be backbone of energy transition that will require more investments. As I said, how do you replace infrastructure that's aging? How do you increase the levels of performance back to the point of reliability? We take for granted that we turn off the switch, and there will be light as soon as we do that. And there's opportunity as we digitize and we automize or make automatization, sorry, with some of these investments and some of the grids going forward. Next one, please. In terms of the process, I will just say that it's been a very, very rigorous process for more than 2 years, and I'll ask Juan Manuel to share some of the context around that. Juan Manuel?

Thank you, Felipe. In the past, we have mentioned that Ecopetrol has intended to show the markets how disciplined we are in our approach to our investments in the oil and gas arena. That approach, we also apply it to acquisitions in other areas. And we have always said that we are prepared to move wisely rather than quickly in order to respond to the challenges posed by the marketplace. Having said that, that is why we believe that the 2 years that we have spent evaluating this transaction have presented meaningful. Specifically, we began this process 2 years ago when we started studying the trends of the energy transition. And once we began that process, we identified that transmission and other infrastructure alternatives could be one of the paths that Ecopetrol could undertake in the process of energy transition. It then implied comparing this alternative with other diversification options, and I want to be very -- I want to double-click on this aspect. Specifically, we evaluated how the purchase of a transmission company like ISA would allow Ecopetrol to take a unique step that not -- no other oil company has taken previously, mainly because it allows Ecopetrol to position itself as a leader in an activity of the electricity business in just one single step. And that was, in that process, resulted to be very meaningful. Acquiring a leadership position in the transmission business, we thought of it as more valuable than becoming a subscale operator in other businesses in the electricity value chain. Just to mention some of -- as an example, that we evaluated in Latin America, if you take the enterprise value of ISA and compare with the size -- in size to the combined enterprise value of the 5 major renewable energy generation companies in Latin America, you will find out that ISA's is greater. Having said that, ISA's acquisition strategy, followed by Ecopetrol, we believe, had an advantage over taking an incremental trajectory mainly because when you take incremental paths, you have more uncertainty, and it will require undertaking significant execution risk and the risk of developing complex capabilities. The difference in this case when we thought of ISA as an opportunity was that from day 1, we would have the capabilities at home and with diminishing great execution risk. The process took 2 years. And we then, having evaluated this strategic fit of the transmission business and of ISA, we value and we carried out the due diligence process with public information and presented a nonbinding offer in the month of January. After that, the due diligence process entailed a facilitation of information from the seller, and we were able to sharpen our pencils, bring down the value and the numbers and conclude with a binding offer that was presented on the 30th of July, and that was accepted yesterday, as you know. If we move to the next slide. The next question will be specifically why ISA and not other energy companies or transmission companies? And as Felipe mentioned, with -- from day 1, we initially thought that ISA could provide original energy infrastructure platform without precedence in the whole Western hemisphere, not only in South America, but also Central and North America. And when you take a look to ISA's statistics numbers and operational capabilities, you find out that the company is in the best position to materialize growth in the transmission networks of LATAM. It's the market leader in Colombia and Peru, concentrating more than 70% of market share. It's the second player in Brazil with approximately 20% of market share. It's the third operator in Chile and is the company with the greatest capacities and the best track record in transmission development in the continent. How do we measure that? Well, we see that ISA is first position in tenders, one in Colombia and in Peru; second position in tenders, one in Brazil; and is third in Chile. If we move to the right-hand side of the slide, I would like to highlight the financial advantages of ISA, including the stability of the earnings and strong returns on capital employed. Jaime will go into the detail in some slides ahead. But the company has consistently delivered above 60% EBITDA margins in the past years. This stability is a feature of the electricity transmission segment that we highly appreciate, specifically when we are in an oil and gas business upstream business in a very volatile market. And ISA has also delivered a return on capital employed in the range of 15% and over in the past 5 years. The first quarter of this year, it was 17% and the stability and absolute levels of these returns are highly attractive from a financial viewpoint. If we go to the next one. And as we have mentioned throughout the presentation, well, this acquisition provides an unprecedented platform to convert the Ecopetrol and ISA in a one-of-a-kind infrastructure energy player in the continent. We widen our strategic canvas, having both companies working together, widening both prospects. For ISA, for example, we do believe that Ecopetrol can facilitate its penetration to the North American business segment. While we do believe that we can leverage ISA's capacities in Brazil, for example. So we do see that in terms of growth prospects, it provides a great possibility. It provides a resilient operational model. We will end up with an integrated energy company with a strong midstream segment, great diversification and stability of earnings and cash flows that we have mentioned previously. And we do believe that the strong balance sheet of the group as a whole, which will provide lower cost of capital, supported by stable and predictable long-term cash flows. We see that we can share best practices, particularly in the midstream segment with those of ISA and share knowledge. ISA, we do believe, has advanced in substantially evaluating different lines of business in energy transition like batteries and energy gathering aspects. And as Felipe mentioned previously, the [ astounding ] competitiveness of this platform is unique in the Eastern Hemisphere. I will hand now the microphone to Jaime Caballero.

Thank you, Juan Manuel. So acquiring ISA really goes beyond these strategic merits. And the numbers that you're going to see in this slide and in the next slide actually go serve as proof points of that strategic rationale that Juan Manuel just described. The bottom line is that the primary conclusion of our review is that this makes strong financial sense as it provides scale, it provides profitable growth and clearly improves the risk profile of the Ecopetrol Group in a world where TESG is increasingly a priority. So I'm going to cover 4 of 5 key points around the data that you see in this slide. If you look at the top left corner, what you can see there clearly is that with ISA, an important part of the group's income will now come from non-hydrocarbon sources, within actually a broader energy chain. You can see that clearly in the contribution to revenues, and you can see it clearly in the contribution to EBITDA. And this, of course, will vary over time as you see the different kind of price cycles of the hydrocarbon business, but we believe that the sort of percentages and numbers that you're seeing here, which are reflective over the last 12 months are actually -- provide a good illustration of what you can expect from ISA in the context of the broader Ecopetrol Group. The second, I think, key data point to look at here is when you look at that piece of competitive profitability. The contribution from ISA is of a high quality. If you look at the margins and returns that ISA has been delivering over the last 4, 5 years, they're actually, in fact, superior to the margins and returns that you actually see in oil and gas, right? And that's -- I think that's an important point to make as perhaps in the past, and if you look at the broader diversification agenda in the industry, it has been viewed that diversification into power is at the expense of margins and at the expense of returns. In the case of ISA, that's not the case. We're actually looking at incremental margins to what we have nowadays. The third point that I think is a highlight of this slide is if you look at the top right-hand corner of it, which gives you a view of the contribution of each line of business of Ecopetrol and ISA. And what you can see from this is that with ISA, the Ecopetrol Group will now have a stable backdrop of earnings. If you look at the pie chart on the right, essentially, what you'll see is that between 50% and 60% of our future EBITDA is actually going to come from regulated predictable businesses. And actually not only regulated predictable but actually high-margin businesses because those are -- that's the nature of both the ISA transmission business and the midstream business that we currently own. On the other hand, we are obtaining this without sacrificing the exposure that we have to Brent and to the price upside that we expect Brent to provide at least over the next decade. So here's the balance between that predictability of the regulated business and the price upside that we're going to get from the brand. Importantly, this material growth comes with a marginal carbon footprint, and it's what you're seeing there at the bottom. The bulk of ISA's business is carbon neutral, and we can go into this in more detail later on. But fundamentally, the total footprint associated to Ecopetrol Group's earnings will now be substantially lower. We think this is fully consistent with a group's TESG agenda and its net zero ambition. And importantly, we think that this will actually have a benefit with regards to access to financing over the coming years and actually a lower cost of capital for the group in the bottom line. If we move on to the next slide, please. I want to speak a little bit more about how we see this transaction being value accretive to all our shareholders. As you know, we have agreed on a price of COP 25,000 per share, which ultimately, we believe, fairly captures the proven business performance of ISA as well as its growth prospects. This valuation is supported by 3 independent exercises commissioned by Ecopetrol separately from the seller. These valuations were all anchored on DCF methodology with a view to best reflect the longer-term value proposition of the business. Contract methodologies, such as multiples and precedent transactions were also considered. And we believe that the EBITDA multiple of about 8x enterprise value to EBITDA is competitive with transactions in the sector. If you look to the right where we speak about the solid investment case, the forward value creation is clearly solid, and we believe it's accretive to shareholders. In line with Ecopetrol's capital discipline strategy, we have taken a prudent and risk view of ISA's growth prospects and believe that historical margins can be sustained over time and the double-digit returns on allocated capital can be expected. As a result, EPS accretion to existing shareholders can be expected in all scenarios. As we have previously announced, Ecopetrol intends to fund 100% of the acquisition cost via debt. To this effect, we have secured terms and conditions for a syndicate bank loan which will be repaid within the next 2 years. Through a combination of available options, including, firstly, a longer-term bond placement; alternatively or in a complementary fashion, an equity offering under the program set forth by Law 1118 of 2006; and thirdly, through excess cash from our organic activities. It is important to highlight that in all scenarios that I've mentioned, including those where we retain 100% of the debt, projected leverage ratios remain well within the 2.5x debt-to-EBITDA ratio establishing our group's business plan. With that, I hand over to Felipe for his comments on the next steps.

Thanks, Jaime. We go to the last slide before we open up for Q&A. A few things that I want to share with everybody in the call in terms of how will these continue to go forward. So as we've mentioned, there's a plan to secure that -- the value proposition that's already in motion is secured. We've negotiated and executed the Contrato Interadministrativo or the Inter-administrative Contract, which is the SPA. The signature was done yesterday evening. Now we will continue, as Jaime was explaining, and we can go into more detail in terms of the loan agreement that will be signed. And we have a time frame to do the closing before December 6. Having said that, we're targeting in the order of 3 to 4 weeks to do the closing and will continue to work in that sense. And in terms of transition because I know that's one of the points that many of you have in mind and want to ask us about. We will assume having this controlling equity or controlling percentage. And we will exercise what's granted by the acquisition of the 51.4%. And I want to say that the first thing, and I've mentioned this before in some of the news conferences, ISA will continue to be ISA. That's very important. It doesn't mean that we will be a passive investment. We will have, as we've mentioned, we do believe this is a transformational transaction. And in line with that, we will do everything that we can do, as I was saying, with the faculties that are granted to us by gaining this controlling equity or percentage. Both companies have very, very strong corporate governance, and we will continue to build on that. And in that sense, I think there's opportunity for both organizations to continue to learn from each other. We've been working with ISA on this front of corporate governance for many, many years. And now we obviously will continue to do so. And I just want to highlight that in Ecopetrol, having different companies throughout the group, we have what we believe is a very robust and very flexible corporate governance framework that will allow us to move into this integration. Ecopetrol will be the controlling entity to ISA. We will need to consolidate all the financial statements. And obviously, when we do that will depend on the closing, and I've provided some views on the potential time frame for that. We're very excited, very, very excited with this transaction. We still have some yards to get to the finish line. We need to do the closing, as I've said, hopefully, within the time frame, not take all the time until December 6, but in 3 to 4 weeks. But we're very excited. We're very thrilled with the opportunities that this present not only for Ecopetrol but for its shareholders or ISA's shareholders and for Colombians as well. So with that, I'll open up for Q&A. Thank you.

Thank you, Felipe. I will now read the questions that analysts and other interest parties have provided via the link that we sent out with the press release. The first question is with regards to the capital structure. When do you expect to make the decision on the equity issue and [ its sets ]? And what is the rationale considering ISA acquisition should likely be financed via banks?

So let's start and I was going to do something here. I was going to do question #2 as well as it is related. And it says, is Ecopetrol funding the acquisition through debt? If yes, how much in the local or international market? What yield are you expecting for the debt to be issued soon? So I'll provide some opening comments and I'll ask Jaime to go much deeper into some of the details. So the first thing that we've announced to the market is that we have a very, very robust financial situation in the company. That was shared with most of you in the call at last week's results conference call. And we do believe that going through the mechanism of debt and using debt, short-term debt, to close this acquisition provides us a lot of flexibility and a lot of speed, which is something that's important. I just want to remind everybody that the consideration in terms of the price is very important. And both Jaime and Juan Manuel explained what was done to get there. And I think the timing of the process is very important. It's not only the amount but also when we are able to close the deal. And that's a very important fact. And in terms of the equity issue, that continues to be worked by the teams, and we'll eventually use that in the future should the windows in the market and the conditions in the market are such that an equity issue makes sense. Jaime, please go ahead and provide a bit more detail.

Thank you, Felipe. Perhaps the additional color that I could provide, Felipe had been very clear. There's a short-term conversation and then there's a structural financing conversation, right? The short-term conversation is about this bank loan, which, as Felipe has said, it's expedient, it's pragmatic and it's something that it's well within our reach. But the color that I could provide on that, I'd say, revolves around 3 things. The first one is we have decided that we want to tap the international market for that because it's more competitive compared to the local market. And by means of competition, I mean the access to the amounts that we need for this transaction and the cost associated. To give you an idea, the other thing that we've seen is that the terms of these loan are very competitive at this stage. We are at a good time in terms of markets for this. And as an indication, you saw that last week or a couple of weeks ago, we announced the terms of our committed line facility, and we are expecting this loan to deliver an improvement on those conditions. We recognize that these are different loans and they have different sizes and the like. But directionally, we are actually expecting better conditions than the ones that we have received for the committed line. And that's actually a lot to say because that committed line is probably our historical best. So we're very confident that these short-term financing kind of makes sense. The second component then is the longer-term financing, which is how do we go about repaying that loan. And as you heard in my remarks before in the presentation, we expect to do that over the next couple of years. That's the horizon that we are anticipating, a 2-year horizon. We believe that 2 years is a good frame because it provides a sufficiently a long window to accommodate to different market circumstances, whilst at the same time, keeping it to a manageable and predictable planning horizon. In that light, you also heard me say that we have 3 options, and they all remain on the table at this stage. One option and I mean options to translate that short-term financing into some form of longer-term repayment. The first option is bonds. At this time, markets are very favorable for that. The appetite for Ecopetrol's bonds remains very robust. We've seen that and I know that you guys are conscious of that. The second alternative is around the equity offering. The equity offering, and I know there's a lot of curiosity and interest in terms of the sizing and the timing and the conditions. You've heard Felipe speak about that. We cannot disclose much around that. The general box that I'd say where we're operating in is the box that's set by 1118, by the law. And basically, that gives us a ceiling. And that ceiling is that the Ministry of Finance cannot go below 80% of property in Ecopetrol. That's the ceiling. Anything below that is open for discussion and will be dictated by market circumstances and the terms and conditions that we believe we can obtain for our shareholders in that equity offering. And the third component is cash. Because in you -- we were speaking last week with many of you around the results. And as you've seen, we are delivering unprecedented results. That's giving us a solid cash position. And depending on how things evolve, we may have some flexibility to use cash for some of this. That's how we're thinking about this. Thank you.

Thank you, Jaime and Felipe. The next question is with regards the business model that Ecopetrol was to have after it gains control of ISA. Basically, the question suggests that management of Ecopetrol has previously mentioned that we would not change the current business management of ISA. Is this still the plan? Can we view this more of a path as a passive investment for Ecopetrol? And what are your plans for the new acquired business?

Thank you for the question. And I'll just step back for a second. So the first thing is that we still need to get through the finish line. We still need to ensure that we get to the closing. And as I've said, we have some time to do that. I've said, and I'll repeat it today, ISA will remain as ISA. That's very important. It's a very successful business that has a very robust strategy that has delivered consistently over the years, and that has a world-class team that operates in their businesses. So that's very, very important. That's very important. Having said that, and I was referring or alluding to this in my prior answer, we will not be a passive investment. We will not be a passive investor or this will not be a passive investment. That means that we will certainly, should we get to the closing, exercise our rights that are provided to us by acquiring the controlling interest or controlling equity, which will include things like being very active at the Board of Directors. And we will be doing some things in that space. But I think we need to be very conscious that there's things that we need to go through. There's milestones that need to be achieved before we moved into that space. So we like the strategy. We like the business plan. And I'll just link it to something that Jaime was mentioning earlier, both Jaime and Juan Manuel. In terms of the valuation and the offer that we made and that was accepted, that value or that price per share includes not only the value of the business today but a very detailed understanding and assessment of the growth opportunities that we see going forward. So again, we're very enthused. We're very, very happy with this. We need to get across the finish line. And certainly, believe you me, we will not be a passive investor in terms of ISA. Again, I've mentioned this before, we will need to do a consolidation of all the financial statements. And there will need to be a participation from our side very actively in terms of how capital is allocated. And that's, I think, also very important for shareholders. Thanks for the question.

Thank you, Felipe. The next question discusses topic with regards to dividends. How much in dividends is Ecopetrol expecting to receive from ISA? Would this start to be this year or the next? What should be an optimal dividend payout level after ISA is consolidated?

Thanks, Tatiana. I'll take this one. Within our models, we have assumed that during the next 5 years, ISA will keep its policy in terms of dividend distribution. And therefore, we have assumed between 40% and 50% dividend distribution in the next 5 years. That's how we have taken it.

Thank you. The next question is the following. What regulatory approvals are necessary for the closing? Does Ecopetrol need to seek bondholders or other creditors' approval to conclude the transaction?

Tatiana, there are no -- we do not need to seek bond holders' or the creditors' approval to complete the transaction, and all the other regulatory approvals that we needed within Colombia have been achieved so.

Thank you. Next question, how Ecopetrol could add value to ISA? And if there are any synergies that could enhance the potential returns to the Ecopetrol shareholders, what synergies do you identify today and in the future by acquiring ISA?

Thanks, Tatiana. I think there's -- and Juan Manuel was alluding to this earlier. In terms of the different geographies, we can leverage on each other, for example, in the U.S., Ecopetrol has already a very good presence both in the Gulf of Mexico and in the Permian Basin in Texas. So we can build on from that. And even though we have, as Ecopetrol, a good presence in Brazil, that's growing presence in Brazil, ISA has a lot to offer in that space. So I think the first lens would be that of the markets, of the geographies, how do we actually learn from each other? We've talked about, for example, potential financing that is sustainable, about refinancing or those type of things where ISA has done some very interesting things, not only in Colombia, in Peru and in other geographies as well. We can build on each other's, for example, network of relationships, supply chain. We can build in terms of -- one thing that has us very excited is the research and innovation and development of technology or application of technology and use of technology. And I think that's an area where we can do a lot of things. And Juan Manuel, I think, was mentioning energy storage and some other things. For example, Ecopetrol is a leader in hydrogen right now in production of hydrogen. So it's gray hydrogen. We're looking at blue hydrogen and green hydrogen. And I think in terms of research and technology and the application of innovation, there's quite a few things that we can do. So it's around markets, it's around relationships, it's around supply chains, things like the digital world as well, we've both done a very detailed digital transformation. I'll share something with you. I had the opportunity to visit ISA more than 3 years ago. And I was introduced to their security operations center in cybersecurity. And that experience from ISA is something that we brought back into Ecopetrol. And since then, we've built on that. And I think we now have a very robust cybersecurity program and capability inside of Ecopetrol. So some things that have already happened in terms of corporate governance and we've learned from each other and some things going forward. I don't know, Juan Manuel, if there's anything else that you want to add?

I think you've mentioned those. That's everything.

Thank you, Felipe and Juan Manuel. The next question is with regards to XM. Does the acquisition of ISA include XM?

Thanks for the question. And I want to be very clear, the acquisition of ISA does include XM. XM is included in the acquisition. And as part of the negotiation that we did with the Ministry of Finance and the Ministry of Energy that has responsibility for XM, Ecopetrol has signaled a very strong commitment to continue to enhance the corporate governance at XM. And some of the issues, historical issues that had to be resolved, are being resolved through the transaction. So should we get to closure, and there's some language that we included in the contract, that's a public document, around XM. And I think that's very clear. And it also encompasses some of the recommendations from the latest group of experts or wise men, for a lack of a better word in English, that came and provided some recommendations to the government. So there is a very, very strong commitment from Ecopetrol to ensure that XM maintains its independence and its corporate governance is enhanced through this acquisition. Thanks for the question.

Thank you, Felipe. The next question is with regards to the use of proceeds of the potential equity issuance. Does this include inorganic growth or only organic CapEx?

I'll take that one, Tatiana. The way that we're thinking about the equity issuance is that it's in service of Ecopetrol's energy transition strategy. That's the umbrella. And when you look at the energy transition strategy of Ecopetrol, there are 3 key elements around it. There is an element of organic growth, which is adjusting and adapting our existing business to the needs and opportunities of the energy transition. There is an element of inorganic growth, such as the transaction that we're talking today, which is all about the energy transition. And there is a third element, which is about strengthening the balance sheet, which includes managing debt, right, and keeping debt to levels that we feel are best for our shareholders. So those are the 3 axis by which we're thinking about the equity issuance. So in that context, the use of proceeds of equity issuance can fit into any of these 3 categories. If we did an equity issuance in the short term, in the foreseeable future, I'd say that a priority would clearly be about reducing the leverage associated to this particular transaction. Thank you.

Thank you, Jaime. The next question touches upon the strategy for ISA and it is the following: what will be the new strategy for ISA, continuity, diversification, consolidation? And specifically with regards to Brazil, any changes to the strategy there?

Tatiana, I will take that one. The company has been very vocal and policized this strategy towards 2030. And it has been very consistent achieving the goals set out in that strategy. As Felipe mentioned, we will respect that and that strategy involves the different aspects: consolidation, diversification, and continuity in those markets where it's currently -- where it currently is. So we believe it's consistent and so.