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

Good morning. Thank you for joining us in this webcast of results of ISA and its companies for the second quarter of 2023. [Operator Instructions]. Matteo is the person that will be supporting us for this presentation. Matteo, let's move on to next slide, please. Today, we are with Juan Emilio Posada, our President; Daniel Isaza, VP of Corporate Finance, Patricia Castano, VP of Corporate Strategy; Gabriel Melguizo VP of Power Transmission; and Eduardo Larrabe, VP of Road Concessions. I'm Diana Cardona from the team of Investor Relations. So let's look at the next slide, please, to leave the floor to Juan Emilio, who will provide you the highlights of this quarter. The floor is yours.

Let me repeat. I had my mic off. Thank you, Diana. As always, what a pleasure to be with all of you, and thank you for joining us again. To begin, let's move on to the next slide, please, Matteo. I'd like to take several minutes to frame the achievements of this quarter within the dimensions, our 2030 ISA strategy, which is based on the generation of sustainable value. On the very first of the 3 dimensions, which is generating value for shareholders. We set out ambitious financial challenges by 2030 and in this sense, today, we still honor this commitment with upgrowing financial results even in a setting in which we have a deceleration of the scalers of our revenue and also with a sound financial structure, which allows us to keep growing and making good business opportunities, which, as we'll see, have reached $21 billion for the next 12 months. In this same dimension, we also highlight the 2 lots awarded to ISA CTEEP by the end of June. Projects which not only guarantee the continuity of our business, but also the profitability of shareholders, while we expect EBITDA margins above 90% and real returns for shareholders of double digits. Within the second dimension to create a positive social environmental impact, we highlight the commissioning of projects, [Foreign Language] and Smart Valves in Colombia as well as the project COYA in Peru. These projects not only generate additional revenue and growth, but also they enable and enhance the network to transport clean energies. In Brazil, our program Conexión Jaguar backed the first project of conservation that creates carbon credits in a zone, which is a natural heritage for humanity. Lastly, the dimension to ensure corporate effectiveness through 2 projects bid in energy transmission, 6 expansions and a private connection, we ensure the continuity of our business and contributed to energy transition. These milestones are framed by the internal control model, SOX. Or Sarbanes-Oxley Act, which was successfully implemented by ISA and its company this year. The adoption of SOX controls means more trust in the integrity of the information that we provide to different stakeholders, the proper monitoring and the timely response of the risks of the business. as well as the instruments of corporate governance and the practices of transparency. Matteo, let's move to the next slide, please, to look at these aspects closer. The core of our corporate strategy is sustainability. Our goal here is to create sustainable value and our objective is to create a positive social environmental impact where we operate. This is one of the 3 pillars that we have. Consequently, we'd like to remind you that since 2017, ISA has developed a program Conexión Jaguar in which it contributes to the conservation of biodiversity by implementing projects in priority areas to protect habitat, especially that of Jaguars and to develop communities nearby. The program supports several initiatives that add a potential reduction of more than 7 million tons of CO2, contributing to meet the goals of the agreement of Paris, the biological biodiversity comping and the sustainable development goals. So as I said before, in the second quarter of the year, Conexión Jaguar back the first project that generates credits of carbon in an area classified as a natural heritage area in Brazil. Also, more than 231 credits of carbon were certified with high international standards. And these will be traded in the international voluntary market with the potential of reducing about 430,000 tons of CO2 by 2030. This is the progress shown this quarter. This project reached the gold level, which is the highest category granted by [ Vera ], which is an organization that establishes global standards for climate action for contributing exceptional benefits to biodiversity, to climate and communities. Matteo, let's move on, please, to the next slide. Investments executed represent specific advances in all of our strategic dimensions. During the second quarter of the year, we executed investments for COP 1.1 billion. a figure that really represents a specific contribution of ISA to the energy transition since most of the projects that we include here enabled the entry of renewable energies, nonconventional to the interconnected systems and will contribute to enhance the grid, improving its reliability, its resilience and its capacity. Looking at this by countries, CapEx was distributed as follows: In Colombia 30% of that CapEx was concentrated, and we invested in building several projects, including connections of nonconventional renewable energy sources to the national grid, expansions and projects [indiscernible] earned in past bids, which were made, yes, in the past. Brazil also participated with 30% since ISA CTEEP kept working with its reinforcements and improvements and building 6 energy transmission projects. In Chile, we continue to executing projects in our 2 main businesses. In power transmission, we worked in 3 expansions of the ISA interchile network and the projects, Kimal Lagunas, which is 100% of ISA and the project, Kimal Lo-Aguirre, which is 33% of ISA. When it comes in terms of roads in Chile, we advanced in the construction of Rutas del Loa as well as the improvement in road safety works in Ruta de La Araucanía and Ruta de Los Rios. And these improvements and additional works will generate new revenue or term expansions of the concessions. In Peru, we advanced in 3 expansions and reinforcements to substations, one connection and the projects Yana and Chincha-Nazca. With regards to the Yana project, I have to point out that we have detected the geological risks at the [ Jaro ] substation and that these will impact the commissioning of this project. Consequently, we're really analyzing different alternatives for the mitigation and the cost related, which will be timely informed or reported to the market. So if we analyze these figures considering our effective share, in the energy transportation platforms in which we have other partners. The investment execution of these in the second quarter would rise to COP 830,000 million and would be mainly focused in Colombia, 40%, followed by Chile 33%; and Brazil, 17% and ending with Peru with 10%. These minor participations in Brazil and Peru, it's because we have major partners there, and that's why the figure -- the total figure there is not as large. We will continue working building 36 projects through ISA and the companies that we control. These projects will represent more than 3,400 kilometers of lines -- transmission lines and 136 kilometers of roads. Once in commission, these will generate new revenue of -- for ISA above COP 1 billion. In addition, Conexión, a company that said in Chile, which ISA shares 33% of its capital is advancing in its environmental licensing and engineering phases of the Kimal Lo-Aguirre project. This project is a first in Chile with the HVDC type of technology. It's called the High-Voltage Direct Current and its commissioning will enhance the decarbonization of the energy matrix in this country, transporting clean energy of nonconventional sources of renewable energy from the north of Chile. The referential CapEx of this project is $2 billion. And the annual revenue that we receive when it enters Commercially, in operation is $130 million of 2023, of which ISA will consolidate its 33% share through the equity method. Matteo, let's move on please to the next slide. During the second quarter, we ended the construction of projects that will enable a cleaner energy matrix in the region in Colombia. At the end of June, we had the commercial commissioning of the Sabanalarga-Boliver project, one of the bids of open in 2017, a project that provides a stronger power transmission system in the Caribbean region, decreasing the restrictions, improving the continuity and the demand of the service in the departments of Bolivar in Atlantico in Colombia. Also in Colombia, we began the commercial operation of the smart valve devices at the substation Santa Marta, which, as we've mentioned in other times, increased the capacity of the system, favoring its reliability and renewable energy connections to the system. Meanwhile, in Peru, a very important milestone took place. We began the experimental operation of Project COYA in June, which was previously required to authorize the commercial operation that was given last week. Let's remember that this project leads to connect clean energies from La Sierra to Lima, improving the capacity and reliability of the system in that country. Lastly, in Brazil, we have the commercial operation of 14 reinforcements and improvements of the ISA CTEEP network. All of the above, really, all these projects add up to 450 kilometers of circuits to the transmission network and generate annual revenue of over COP 130 billion. Next slide, please, Matteo. To develop our growth strategy, we ended the second quarter with big highlights. ISA CTEEP won or was awarded 2 lots in the first energy transmission public bid made this year by ANEEL in Brazil. With these new projects, ISA continuous consolidating its share in the electric market of Brazil, which is the biggest of Latin America created progress and development for the population of that country. These projects have an estimated investment by ANEEL of over 2,400 million reals, which is about COP 2.1 billion and an annual revenue of 226 million reals, which is about COP 200,000 million. Lot 7 is of great importance for energy transition since through its more than 1,000 kilometers of line, it will transport energy of solar generation sources over the metropolitan region of Rio Janeiro, relieving loads on the Governador Valadares substation. In addition, it's the entrance of ISA CTEEP to the Rio Janeiro where it wasn't present yet. Its maximum construction term defined by ANEEL is 66 months. And the second lot that we won, #9, includes the works in the substation Agua [indiscernible], which will enable the connection of new projects of portable tech generation in Northeast of Sao Paulo, and in the Mineiro triangle. It's construction term determined by ANEEL, is 36 months. Financing these projects will be made directly by ISA CTEEP with own resources and adapt to Brazil. EBITDA margins are expected above 90%, thanks to the use of synergies with our existing assets. Matteo, let's go on to the next slide, please. In addition to the lots of Brazil during the second quarter, ISA added to its portfolio, other projects that are not subject to bids that represent major steps in our strategy to create sustainable value. Firstly, two agreements were signed between the Ministry of Public Works of Chile and the concessions [indiscernible] with an estimated investment of 1.5 million foment units, which is about COP 285,000. These agreements include the construction of bridges and other improvements that will expand the term of the concessions for 8 months for Ruta de La Araucania and 9 months for Ruta del Lo Rios. And going back to the energy transmission business, ISA was awarded 6 expansions in Brazil and a private connection in Colombia, which in total, will add a CapEx of about COP 84,000 million. The materialization of these investment opportunities is something that we really feel proud about. And with this, our growth strategy, which is profitable and disciplined is nonstop. Next, we will give you an update of the portfolio of opportunities of investments in the region. Matteo, please let's move on to the next slide. In the following 12 months, organic investment opportunities in the region rise to $21 billion. 74% of this correspond to energy transmission and 26% to roads. Looking at this per countries. In Colombia, we expect bids by the UPMES, which exceed $2 billion and also bids for roads for $1.7 billion. In Brazil, there will be bids made by ANEEL amounting to $11 billion. And ISA, we will selectively analyze the opportunities we see in Brazil to determine the lots that are -- have more synergies with our portfolio, strategy and investment goals. In Chile, we identified opportunities in the energy business for $400 million in transmission line bids, substations and in a project of battery storage, which is large scale. Also in Chile for the road business, we expect to participate in bids of existing routes with an estimated CapEx of over $3 billion. In Peru, we've identified opportunities and bids in energy transmission for $1 billion. Lastly, in Panama, we have opportunities that exceed $1 billion in the business of energy transmission and roads. We highlight in these opportunities, the fourth line in the transmission business. And the Pan American East Road project or CPE. This road is part of the strategic plan of the government of Panama. The Pan American Road entirely, which includes the CPE and also the West CPW has more than 750 kilometers long between Costa Rica and Colombia. The first project that was bidded is the section East, which joins Panama City with the Darién province, which is close to Colombia. ISA [indiscernible] presented an offer for this project in July. And the opening of envelopes should take place in the third quarter of this year. If successful, this investment would positively contribute to the growth of the business into the goals of ISA's 2030 strategy. Now let's listen to Daniel Isaza, who will talk about the financial results of the quarter. Matteo, let's move to the next slide, please. So Daniel can provide his presentation.

Thank you, Juan Emilio, and good morning to all of you. It's a pleasure to be with our investors and with the market today to show you the financial results of the second quarter of 2023. Let's look at the next slide, please. On this slide, you can see the revenue on the very top part of the slide, you can see the performance of the second quarter of this year that we are reporting now compared with the second quarter of 2022. And at the bottom, you see the accumulated results the first 6 months of this year compared with the first 6 months of 2022. The first step we'd like to show you is that in the quarter, we have an increase of total revenue by 9% which surpassed COP 3.5 billion compared to the COP 3.2 billion displayed in the second quarter of 2022. So there is a growth in every business and energy, the business reached a 3% growth compared to the second semester of 2022. And this is due to several things. First, we have our value promise new revenue with the commissioning of projects in all the geographies. In addition, we have increases because of the contractual climbers, which have to do with the inflation changes of price levels, which in the second quarter of the year, grew at rates lower than those observed in past quarters, and it's because of the financial assets logic, which is how we see the accounting in Brazil. And the financial statements, when you compare them, it creates a lower revenue than what we saw in 2022, and that has an influence so that our transmission energy is lower. Also, we have the effect of the conversion. Remember in the income statement. The results in currencies that are not pesos are given in an average rate and in the semester, the quarter of '23 compared to those of '22, there's a devaluation. So the revenue in other currencies are higher than those in pesos. In Chile, we see growth rates that are high, 39% in the quarter, almost 60% for the semester, and this is related to what we've been reporting to the market since the third quarter of 2022 with the change of how we account the financial assets and also the road concessions also in Chile, which are accounted for as financial assets, and we turn them into UFs to better reflect the changes they are in the income statement, especially in the debt, which is in UFs and also hired in UFs, which have which are the format units in Chile. Lastly, with regards to the slide. Here, you can see the total revenue of the semester is COP 7.5 billion and the growth compared to the first half of last year is 24%. Next slide, please. On this slide, there are 2 interesting ways to think about ISA's revenue. Of course, those COP 7.5 billion (sic) [ trillion ] that we had in the first semester of the year. On the left-hand side, what you see is the composition of that revenue per currency. ISA is a company that's proudly Colombian, that began with the growth strategy and diversification in the region and that was present in several countries and in several businesses. So it's exposed to different currency. And it's interesting to see that more than the more -- let's say, 26% of ISA's revenue is in dollars. It is mainly from Chile, from the business of energy transmission, from Peru also from the energy transmission in Colombia with the [indiscernible] which also have revenue in dollars. And it also has an exposure to the Chilean peso almost 20% which has a good performance compared to stronger currencies and 17 -- no 37% to the Brazilian real. So you can see here that we consolidate this 100% despite our having a lower participation, the exposure to pesos is 17%. It's the lowest of the exposures that we have to the 4 currencies seen on this graph. On the right-hand side, you can also look at this revenue and the value promise, and it's the duration of the revenue because most of our revenue are long term, as typical, it is for infrastructure. Three, you could say that 75% of this company are for more than 10 years. And of that revenue, 25% is perpetual in some of our concessions, there are revenues and only 5% of our company's revenue consolidated have a duration of less than 5 years. So there's a good regional diversification. It's part of our promise value and long-term revenues that give us an outlook that's quite interesting for the company. Next slide, please. On this slide, we really focus more on the EBITDA and the net income. During the quarter, the EBITDA reached to almost COP 2.4 billion, up 7% compared to the same period in 2022. And the net income of the quarter has grown 23 -- almost 23% compared to the year before. We would explain these figures really because they're influenced because of the revenue and when it comes to the accumulated, we see higher rates, 22% of the EBITDA, and we end with an EBITDA of COP 5.1 billion, and the net EBITDA grew 22% and with closing with a net EBITDA of COP 1.5 billion. For context, the profit of the entire 2022 was COP 2.2 billion. On the bottom of the screen, you see the margins. Operating margin on the left, represented by the EBITDA margin. And here, you can see a reduction of 1 to 2 percentage points of the total margin of EBITDA. And this has to do with operating and construction revenue and those of the controlled companies, and also without construction, excluding construction, you see 1 percentage point. In the next slide, we'll look at this even closer. Although operationally, there is a reduction in our profit margins, net wise. If you look at the proportion between the net margin and revenue, you do see an increase. In the first 6 months of '22, we had 18% of a net margin. And this semester in '23, it's 20%. So what's happening here? This is mainly because of financial expenses. Those of ISA not only have the payment of interest, but also the adjustments for the conversion or difference of exchange. And as a proportion of the revenue, the financial expenses of the second -- no, the first semester of this year have dropped compared to the revenue in the first semester of '22, it was 22% of revenue and instead this year, it's 17%, 5 percentage points less, and that's why we have a recovery of the points lost in the EBITDA. And there's also a recovery with the financial expenses and the exchange difference that will also look at closure ahead and the effect this has. It's also very relevant to look at the slide on the bottom right because this has to do with the profit of the equity. It was 15%, and we're talking the ROAE, and you compare this with recent figures, it's the same figure that we reported in the first quarter of 2023. And it's above that of December 2022, which was 14% and the first semester of '22, which was 12%. So we keep our profitability in the first semester, and we're with levels above those of 2022. Next slide, please. On this slide, we really decided to discuss with you the variation seen with our EBITDA and I think it's identical to show you the elements that can vary on EBITDA. And we have to think about 3. One is that there are changes in the composition of our income statement. Remember, in ISA, we have 2 types of operating revenue. One is the operating revenue, which has to do with the capital and our concessions and the revenue from construction, which you can see in the platforms in which you account concessions as a financial asset, when the CapEx executed is also registered as an additional revenue. So we have those 2 types of revenue. The operating revenue is higher than that of construction because the operating revenue is not only -- it includes the capital invested, while those of construction have a lower margin because it's more theoretical, and it's assigned above the CapEx invested according to the IFRS standards. So while there are more revenue for operations, the EBITDA increase or if there is more for construction, the EBITDA drops. And the third is the ratio of both revenue and the variation in the profitability it has. So what we see here in the first semester of 2022 and 2023, there is a reduction in the operating margin from 70% to 75%, and this has an impact on the margin of 1.1%. The margin of the construction business increased and that improved the margin and 1.6%. And the mix of both revenue we have more construction this semester because we are developing more projects and infrastructure compared to the first half of last year, and this shows the variation. Now what I'd like to zoom in on this slide is that we are aware and we closely monitor our operating profit. And something happens there that is particular to the structure of our contracts that have indexes, that have a lag when it comes to the inflations that we have observed and the costs of these companies typically are indexed to the inflation seen the year before. So we see an increased revenue through the climbers, which is lower to the ones we see in costs, which are mostly indexed to the inflation of 2022, which in the entire region we're much higher than now. Next slide, please. Here now, we look at the balance. And this slide really zooms in on the debt. It's interesting to see what's happening here. The company has deleveraged significantly and this has -- can be seen with the indicator we see on the top right, which is gross debt over EBITDA, which had a level of 4.2x at the end of 2022. And today, it's at 3.5x. And there are 2 things happening here. First, I explained the increased EBITDA, not only because we provided the value promise but also because of the conversion effect because the average rates of this semester compared to those of last year, there was a devaluation of the peso. The average rate this year is higher than the other currencies. So the EBITDA is higher there. But when it comes to the debt, the rates that convert everything to peso turn into the exchange rates at the end of the period. And the peso at the end of the period had a relevant revaluation compared to the other currencies in which we have debt. So the EBITDA is higher because of the average exchange rate, and it's smaller because of the conversion rate. On the left, you can see how the total balance -- debt balance has changed. In December 2022, it was COP 34 billion. And now in June 2023, it's at COP 32.3 billion. So the bar on the left -- no, the left is the conversion effect. Here, you can see the debt that we had at when the peso was devaluated, there is a lower value of the debt turned into Colombian pesos. The variations of the debts in countries are significantly lower than this. But in the next, we have an increase of the debt balance in the countries, ranging between COP 700 billion and COP 800 billion from December 2022 and June 2023. Another data it has to do with this leverage, and it's important for you to understand our growth and to be comfortable in the investment degree, we see the net debt over EBITDA that in December 2022 was at 3.4%. And in June this year, it's at 2.9%. On the very bottom of the screen, you can look at the debt composition. These are also in our income statement. And on the left-hand side, you can see that ISA's debt is more long term, which is normal in a company that like we saw in the previous slides, and almost half of the debt is at fixed rate. So we're not suffering really with interest rates increases that we've seen recently. Those that are in variable rates have a natural coverage with the scales of our revenue. Most our rates that really depend on the inflation and the proxies of those inflations are indexed in our revenue. So we really have an expansion or increase of our net profitability because the rates -- the fixed rates do not change and are not affected. And those that are variable, we are protected because we have the index of the debt that are variable and the scalers of our revenue. Per type of instrument, 83% of ISA's debt is hired with capital markets, and that corresponds really to long-term profiles we have. And the debt that we have the capital market that you can see on the bottom right-hand side, 43% is with green bonds, which is very interesting with our promise for sustainability. Next slide, please, Matteo. On this slide, now to end the financial results as such. We zoomed in this quarter on investments. And here, although the bars have texts that are quite small, I'd like to explain to you what this graph -- top left-hand side graph is all about. We've been reporting to the market historically, the ISA's CapEx projection. And it's important to understand financially this business and the valuations and price estimates to take a look at ISA's value. Our current estimate at June 2023 of the CapEx that we will be investing by 2023 ascends to COP 25 trillion, and this is close to 12% more than we have reported in the first quarter. And it's got the variations because we have been awarded different projects. So this adds to the different revenues that we have and also because of variations of the CapEx figures because of the conversion markets and others. So within those COP 25 trillion, there are 2 types of investments. The first, and this -- are the first 4 bars that you can see is what we call the backlog. What does it mean? These are commitments acquired for investments, meaning these are the bids that we are awarded with new contracts of our concessions, complementary agreements that are already committed with -- to the state. There is no commercial risk. But of course, there is a risk for execution and time. So all these contracts that add up to COP 13.8 billion, have revenue related, once in operation after the construction phases, we will see revenue generated. So this is a driver of growth for ISA's promised value. The next 4 bars are investments that are committed in CTEEP in reinforcements and improvements to the existing basic grid in Brazil. And these investments also have revenue that is assured once they are in operation. The third graph under backlog have to do with equity contributions of Kimal Lo-Aguirre. Since we didn't consolidate this in the balance and these investment figures have to do with the IFRS consolidated standards. Here, we see the capital contributions that we have committed to make for the connection, which we have a 33% share, and this will be developed by this CapEx, which is about COP 2 billion and will be executed by all 3 partners. And with the project finance step that will be hired ahead to carry out this project. So these 3 bars are the backlog, which for ISA means COP 18.4 million (sic) [ trillion ]. Now when it comes to report to the market, the projection of other investments that we estimate for the period by 2030 without considering other bids that we have when it comes to the CTEEP and have -- in which we are trying to generate revenue. Here, you can see that these are part of the best projects that we have by the end of 2030 with reinforcements. And the next number is COP 1.3 trillion, and it has to do with our maintenance projects, especially in Colombia in which the regulation does not -- or does compensate the infrastructure as if it was new. So it's not that we have additional revenue, but total -- the total revenue do compensate these projects, a maintenance that we have to make of the networks. Then we had seen the COP 0.6 billion (sic) [ trillion ] in regulated XM projections. And here I'd like to stop for a minute because these are our projections that XM authorizes -- request an authorization from the CREG for the system. And only after the approval given by the CREG, we execute them. And so those investments are charged to the market. So that COP 0.6 trillion of investments, XM -- is invoiced by XM. So really, the cash here is 0. It doesn't affect this. It really is equivalent to the investment. And there are other related investments for the maintenance of our assets and IT. So these 2 groups of investments backlog, COP 18.4 trillion, other investments projections of COP 25.1 trillion leads us to believe that as of August 1 as of today until the 2030, the execution of this money will be made at the pace of what we see on the top right-hand side. The last comment about this slide, 88% of our investments projected by 2030 are for energy, 7% in roads and 5% in telecommunications. On the bottom right-hand side, the graph shows you composition by country. Here, you can see Brazil is 54%. It's got the CTEEP followed by Colombia, 23%. So with this, I give Juan Emilio, the floor, and thank you for your attention.

Daniel, thank you. I would like to close by giving you the following messages that summarize this talk. Firstly, the projects that we were awarded in the quarter -- in the first quarter show that we are still competitive maintaining the requirements for the profitability that we demand from our new businesses because we take very seriously our commitment to our shareholders to create sustainable value. Secondly, the projects that were commissioned and those that are still under construction, are specific steps towards an inclusive and sustainable energy transition, which in turn will help us tangibly advance towards our 3 strategic pillars for sustainable value. First, to generate a positive social environmental impact; second, to add value for the shareholder; and third, to maintain the corporate effectiveness of ISA and its companies. A third component of the summary is that we have ambitious growth outlooks, back to buy a portfolio of opportunities of $21 billion in the following 12 months and that we have the financial capability to continue expanding ISA's sprint in the region and provide our value proposition. Next slide, please, to begin the Q&A session. Diana thank you, and thank you all for joining us.

Okay. Thank you, Juan Emilio. Thank you, Daniel. Let's begin the Q&A session. So here, I have a couple of questions made by Florencia. She wants to know if we could give an update of the Kimal Lo-Aguirre project. And if we see a higher delay-- more delays in the approvals of several of the countries where we have projects underway.

Gabriel, please.

Thank you, Juan Emilio. Good morning to everyone. Everyone that is joining us in this meeting. When it comes to the Kimal Lo-Aguirre, it is advancing according to the timetable. Right now, we are building ties with the communities, detailed engineering, and we're looking at the environmental impact studies, which will be presented in next month. In addition, there is an advancement to finance the development of the first phases of the project. One, it's called the green label which is given to sustainable projects with high international standards. That's in terms of the Kimal Lo-Aguirre. When it comes to possible delays, due to approvals of projects in Latin America. Really, this is a content that we see in Latin America. The main cause of delays of projects globally really is the environmental license. And it happens that most projects delay -- are delayed because of this, but also the authorities recognize these delays as additional times given to execute the projects. As we have seen this, and we do hope that this will happen. Anyway, we will continue working to have less impacts when it comes to environmental licenses. This answers both questions.

Sure, Gabriel. Thank you. Diana next question, please.

Yes. It also comes from Florencia and she asks why there is an increase of the short-term debt? And how do we expect to refinance it?

Daniel, would you mind to answer this question, please?

Yes. Thank you for the question. Indeed, there is an increase in the short-term debt. And the total debt I showed you that there is a lower debt and an indicator of leverage that dropped from [indiscernible] in December '22 to a lower figure in June 2023. What happens with the composition of the debt is that especially in CTEEP in the first semester of 2024, which, as of now appear in the short-term debt. When it comes to these debts, mainly, we have debt ventures, which are bonds in Brazil for the development of infrastructure and financing those debts surely, again, will go through market -- capital markets on a long-term basis that meets the profile of the revenue that we have there.

Thank you, Daniel. Diana next question, please.

Okay. The next question is made by a lot of people is, if you could get -- if we can give them an update of the business of energy transmission.

Sure. Thank you for the question. Daniel -- No, Gabriel, could you please answer this?

Thank you Juan Emilio and all those that asked this question. When it comes to regulatory change, we have to clarify several things. First, the regulator has made 3 issues. One in 2016, establishes a change to use a reposition of depreciated cost and also to review different parameters, which are part of the methodology to determine the revenue. This was in the last project issued since 2016. In parallel, CREG has issued 2 resolutions, 1 and 73 in 2021 that establishes the methodology to estimate the cost for energy transmission. But this cost has not been determined yet. And we would have this value when we have the final remuneration of the energy, which we mentioned before. So what's next? According to discussions held with the regulator. We expect that in the second half of 2023, we will have the fourth resolution issued and the final methodology, the application about this can begin in 2025, depending on the times required to provide the information by companies and the regulations per se. That's it, Juan Emilio.

Thank you, Gabriel. Next question, please, Diana.

Okay. Here, we have 2 questions for the Roads business that I think we can answer them. One, Lucas is asking, did you make an agreement with Construction, El Condor to participate in the Road business, right? Why has nothing happened with this agreement? And second question also if the Pan-Americana road that we introduced is solely for maintenance? Or does it also include construction?

Thank you, Diana. Eduardo, could you please answer this question made by Lucas, both questions, please.

Okay. Yes. With regard to the first question with El Condor, this alliance was made several years ago to pace -- to carry out projects together in Colombia and Peru. We've studied 4 projects, and we've offered or bid for 2. Today, what we see is that after our attempts, we do not see in the immediate future a project in which we have an active alliance. So what we've decided mutually by both parties is to end our alliance. And now we are looking at the administrative parts, we can do this the best way possible. With regards to the second question, the project in Panama is 246 kilometers between Panama City and [ Yaviza ] in the extreme east of Panama. The investments that should be made are different types. There are sectors in which we have to make -- to rebuild and build infrastructure and revamping and others for the traditional maintenance. So in short, it has construction in different sectors, especially those close to Panama City. So it's a mix of both.

Eduardo, thank you. Diana, next question?

Yes, we have from Andrés Duarte Pérez from Corporacion Colombiana. Yes, with regards to these results of the quarter with regard -- and with the contractual scalers, what do you expect for the rest of the year?

Perfect. Thank you for the question. Daniel will provide the answer.

Yes. Thank you. Indeed, although we see a realization of these climbers in the first quarter of the year, we still displayed strong growth, which [ realized ] in the second quarter. And by the end of the year, what we see in our projections with 6 real months and the best estimate is for the end of the year, we will be within the range that we reported to the market and to the assembly, which is an increase of 10% to 15% compared to the profit of 2022, which was up COP 2.2 billion.

Thank you, Daniel. Diana, are there any more questions?

Yes, we have a last question from Steffania from Corficolombiana, is how do you expect to see a convergence between the IPP and the IPC and how long do you think that these 2 indexes will diverge.

Thank you, Steffania, for your question. Now Gabriel, please provide the answer.

Thank you, Juan Emilio, for the question Well, the truth -- this topic is being reviewed by the regulator with [indiscernible] Banco de la República to determine the best indicator possible for the rates. This is something that we do not control at all. We support this through the guilds, especially through Andesco but this is something that the crack is working directly with Dane and Banco de la República. So the -- we are just providing support to Andesco. That's my answer my Juan Emilio, thank you.

Thank you. Gabriel. Diana? No more questions then.

No, Juan Emilio, no more questions, we can end the event here.

Okay, to our analyst investors and those interested and you said its performance in future to all of you, thank you so much for your interest and for joining us today. And to all of our team of Investor Relations, Communications and Vice President, thank you for attending this. This is an internal note. This is the last time that Diana will be with us as a moderator of these webcast because she's moving to another area of ISA in the Vice President of Strategy, Diana, thank you so much for your support, your assistance. Thank you so much.

Juan Emilio, thank you for your kind words. Thank you to the market for listening to us for all of these quarters. Really, it's been great working with all of you, and I've learned a lot from all of you. As Juan Emilio said, fortunately, I'm staying in ISA, I'll be here for whatever you may need in the future. And I'll be here in [indiscernible]. Thank you all, and have a nice day.