Promigas S.A. E.S.P. (PROMIGAS.CL) Earnings Call Transcript & Summary

Good morning to each and every one of you. Welcome to the quarterly results report of the third quarter 2025. My name is Juliana Vergara. Through the platform, we have the Q&A icon and they will be answered at the end of the presentation. Please take into account that this presentation is being recorded. We have Juan Manuel Rojas, CEO of Promigas; and Aquiles Mercado, CFO of Promigas; and also the Group of Directors of Promigas. I would like to give the floor to Manuel, who will be starting the presentation.

Thank you, Juliana. Good morning to each and every one of you. As always, it is a pleasure to greet you and know that you are here with us in our traditional quarterly report call. As we're doing every quarter, we are bringing good news to share with you. And I would like to start with this graph that is well known for all of you, and we have included some changes on this slide, which summarizes our 2040 strategy. So we are speaking not of energy transition, but energy aggregation. We think it is important to make this difference because of what we are experiencing globally because it is an electric generation or energy generation element. What we are doing is adding new sources and new energy supplies in order to meet the planet demands and of the economies. We are also including in the enablers, these elements. We have a periodic follow-up. Now we are giving visibility to this and everything is part of the supply chain, and it helps us meet our projects in the agreed upon time. So when we speak about our Vision 2040, we'll see that now they are included here. Having said this, I want to move on to the relevant figures regarding the results of last quarter, and I want to highlight 4 things. The first one, even though revenues regarding gas transportation and LN and services to the hydrocarbon industry account for 30% and distribution 70%. We can see that the EBITDA and net profit are distributed among transportation, LNG, gas distribution, electric power. So EBITDA and profit are 58%, and this talks about the good balance that we have in our consolidated portfolio. Having said this, the second thing that I would like to say is the growth of 4% that we had in revenues compared to the same period last year and strict cost control that we're working on cost and expenses that regarding the budget, right now, we are in 93% with respect to what we had budgeted. This shows the discipline that we follow in the organization. And as to profit, I would like to highlight that we are complying with what we have set for the year and that it's 5% above of what we had anticipated. And regarding what we had in 2024 and 12% regarding what we had in the budget, so good results consolidated and at the individual level, we see the same situation, but I'm not going to dwell on it. It's just showing the positive results we've had during this last quarter. Now let's take a look at the figures from another angle. And here, I would like to show how the EBITDA is obtained, showing that 79% of the EBITDA comes from core business of Promigas, COP 1.4 billion that is represented by core business, while 21% is low emission businesses. For us, this is very important. The second element that I would like to highlight on the core business is the participation of 15% regarding the regasification. So it's of COP 272 million. Another element I want to highlight is how the contribution of the natural gas distribution and transportation EBITDA are equivalent, they contribute with 31%, 32%, respectively. So this is a very diversified and balanced portfolio. The fourth element I would like to highlight, if we take a look at the natural gas distribution business, we see that between Colombia and Peru, that EBITDA is quite balanced, 16% in Colombia and 16% in Peru. So this shows that we have a diversified and balanced portfolio. And the fifth element in low emission business is the participation acquired by the mobility business, 5% of EBITDA, and it's significantly growing, and it's equivalent to the Brilla business, 1 point below, but it is very similar indeed. And the mobility business is increasingly relevant and good results. And in EBITDA, it shows that we have a balanced and diversified portfolio in the different business lines between core business and low emission business, gas transportation, regasification gas and in the different geographies in which we operate. If you take a look at that from the perspective of the individual EBITDA by participation method and specifically Promigas, we see 34% corresponds to transportation Promigas and 66 percentage to the participation method. If we double-click here, we see that 68% comes from the natural gas distribution business and 17% of that participation or equity method is the LNG. To the right-hand side, we can see how a geographic level, 18% of our EBITDA is produced in Peru, while 82% is produced in Colombia. So these are 2 different ways of looking and analyzing our portfolio, but I want to stress this. We continue with a balanced and diversified portfolio by business area, by geography and by type of product and also product and services. Well, the relevant facts of the last period. Here, I would like to mention that, as you know, in April 2023, we commission by directionality with 50 billion cubic feet per day, the connection of the Promigas system on the Caribbean coast, and it's connected with the inland system. We connected them and there was a bidirectionality of 50 million, then 66 million cubic feet per day, which is the one working now. And in December, it's going to be above 100 million cubic feet per day and 100% of that by the directionality capacity has been contracted for 2026. This is not a minor data because it is contributing with additional resources for Promigas, and it is something we want to highlight of our management. The idea is to take it to 170 million cubic feet per day by 2027, but we are overcompliant with the goal, and this is representing higher revenues. And I would like to thank the work of the operation team, which have stand out in their work in order to increase that by directionality capacity and the transportation and commercial team that have been able to contract that by directionality. The second element I would like to highlight, which is good news for the countries that we have been able to comply with increasing regasification capacity as of September 1 of this year. Colombia has an import -- a gas import capacity that went from 450 million to 475 million cubic feet per day, 47% of the daily gas consumption of the country through SPEC and through the regasification at SPEC. So that's good news. We promised that to the country, and we've met our promise having those additional 25 million cubic feet of gas. By April -- well, in April 2024, we had 400 million cubic feet per day. And in April, we went from 400 million to 450 million cubic feet per day. That was in 2024, and now we've taken it to 475 million cubic feet per day, which was announced to the country previously. The idea, as you know, is to take this to 537 million cubic feet per day in 2027, and we're working on it in order to do this before August 2027. We're getting our licenses. The third element of the last quarter that I would like to highlight is that our safety continues aligned with the vision of 0 accidents presenting a reduction of 13% regarding accident rate compared to 2024. That is something that -- something we work hard on. And our operations have a mandate of doing this with the highest standards to the extent that we protect the lives of our personnel and our customers. So we work with those standards that enable these reductions between 2022 and today, we have reduced in over 70% this accident rate. And that's an important attainment regarding the type of operations we carry out. The fourth element that I would like to highlight has to do with the fact that the third ongoing year, Promigas is among the top 30 innovative companies of Colombia this year. We have the 12th position at national level. And this is a very important acknowledgment to all the teams of the organization. And we were ranked second as the most innovative utility companies in the country. We feel very proud of this. And it's not only an honor, but it's just also a pleasure to convey this message to our clients and users. And Promigas won the gold at the 2025 Effie Awards Colombia because of the campaign for Vos sos del Combo. It's in the marketing -- performance marketing category, recognizing the effectiveness and impact of Brilla's digital strategy and data-driven approach. So with this that we have been putting in place for over a year, we have a better focus on the way in which we place Brilla products among our customers, controlling the risk level of the Brilla portfolio and increasing the placements. So this is a very important recognition to the work being done at Brilla. Now moving on to businesses. And in this first part, I would like to focus on transportation, regasification and value-added services where we have Promisol as a company. And in transportation, we have Promigas, Transmetano, Transoccidente, Promioriente and SPEC. Having said this, the results show that when it comes to transportation of natural gas during the third quarter, we are accounting for 53% of the natural gas transported in the third quarter in 2025. This gives us a very important position in the transportation of natural gas. And we do this in pipelines of 3,299 kilometers. And we have contracted 903 million cubic feet per day in that capacity that we have available, we are above the budget, which was 895 million cubic feet per day. So we are in 903 million cubic feet per day. That's a very good result. And I would like to highlight that our -- we have a continuity of operations of 99.97%, which means the safety is a priority to us, and we keep on providing our services in a safe and reliable manner. And something that you always ask for in terms of the average length of contracts, it is 6 years. And if we double-click -- on this figure, we're going to see that those contracts are well distributed in time mainly until 2031, we see that some will be completed in 2031, mainly with SPEC with the transportation of gas through our pipeline. And we also have an important industry participation and the average with the industry is of 8.5 years with the thermal sectors, 7 years. And and we also have with distributors. So here, you can take a look at the profile of the length of the contracts with different types of customers. And we believe that, that average of 6 years is very important to us because these are guaranteed revenues for a very important period of time. Now liquefied natural gas. And here, I would like to highlight the strategic asset for Colombia, which is LNG, and natural gas imported through different agents that we regasify supplies 60% of the gas-fire thermal needs of Colombia. In the third quarter 2025, regasify LNG in SPEC accounted for 19% of natural gas consumption. Ecopetrol Hocol, which belong to the same business group contribute with 63% of gas in Colombia and SPEC will account for the second source of gas supply in the country. Remember that we do not import natural gas, we regasify, but the gas regasified at SPEC is the second gas -- natural gas supply in the country. So that's a very important position. At September 30, we have received 32 loads. So it's like every [ 8 and 4 ] days, we are receiving a vessel in the country. So we hope to end the year above 45 loads received. So this shows the strategic profile acquired for the natural gas supply at SPEC. September 27 and before the maintenance, we were regasifying every single day, the 365 days. Well, that was -- well, obviously, until September. So the only days where it didn't regasify it's when we had the scheduled maintenance. And at last, to announce once again that we have anticipated to broaden or enlarge the capacity adding 58 million cubic feet. So it's going to come up to 533 million cubic feet per day. So this asset is relevant not only for the country, but also representative for our EBITDA, 15% of EBITDA. Now I'll move on to natural gas distribution assets and what we call downstream. Here, I would like to highlight something that is very important to us, and that's the connections we do every day in Colombia and in Peru. This year, at the third quarter, we had connected 214,000 new households. That's between Colombia and Peru. The households have 3 to 4 people, we are speaking of an important number of people benefiting from this natural gas in these geographies. I mean -- so in an accrued figure, we have almost 7 million customers connected to natural gas. This doesn't include electric power, just natural gas. So it is 6.93 million households connected to natural gas, an increase of 5% versus the third quarter 2024. 38% of the Colombian market, 2.51 million customers in Colombia, and we have them in different distribution companies of the group and 96% of the Peruvian market, Calida, -- so that is for 2.42 million users in Peru. So these are very relevant data because they indicate our participation there. If we move on to electric power distribution this year, we connected 8,389 households. And as of September 30, we have 470,700 households connected in Cauca. That's an increase of 4% versus the third quarter 2024. We have benefited 1.5 million people in the Department of Cauca. We have installed smart meters in the Department of Cauca, 35,000. So this represents 1/4 of the smart meters that we have in the company not only as to electric power, but as to gas, so 35,000 new smart meters and the accrued figure is of 124,600. As to mobility, I would like to highlight when we take a look at the low emissions business EBITDA, the role of the mobility sector with an EBITDA of COP 87.3 billion. That's very important because 434 vehicles started or started using LNG that is as if we had connected 113,000 households. This is no minor data, and I would like to congratulate the mobility, commercial transportation sector and that is in both markets in Colombia and in Peru. And we can see this by vehicles in Colombia. You can take a look -- well, the light ones, 63,000 in Colombia and 330,000 in Peru and the heavy ones, 1,771 in Colombia, 9,200 in Peru. So we are very pleased with this. As to the low emissions business, we have Energy Solutions business with very good results. We have a growth of 11% with respect to the third quarter 2024. We have accrued 145.2 megawatts, 80% in Colombia and 20% of these in Peru. Of those 145 megawatts, we have 106 megawatts that are solar plus 39.2 megawatts gas self- co-generation. We have 54 megawatts that are operating in the solar. And in co-generation, we have some that are under construction in Peru, and that's very relevant. I also would like to highlight as an interesting point that the distribution of these projects in the Colombian geography takes place throughout the region with more important participation on the Caribbean region, but not less in Valle del Cauca and in the interior central part of the country. So here, you have the different participations. And we have also the Peruvian market, 20%. I also would like to say that we have projects under evaluation. It's a very big pipeline. This pipeline is increasing. So we have a commercial team that is devoted not only to solar and auto generation 1, 166 megawatts, but storage in batteries, 122 megawatts per hour and also bioenergy with something very attractive, mainly now that there's scarcity in gas supply. So we can produce biomethane and this becomes very interesting, more than 5 million cubic feet per day. And also the progress that we have attained regarding conservation and carbon projects. We have the Corozo project, 21,683 hectares involved. That's very important. And this program will prevent emissions of 3.5 million tons of CO2. Brilla, our non-bank financing model shows very attractive results. I would like to highlight the net consolidated profit during the first quarter of the year. So that's an execution of 125% of the budget. So that means that we have been actively growing. And a second element that in the third quarter, Brilla insurance business has been growing in a significant manner. It has 1.8 million beneficiaries, 552,000 policies. And a third element, the growth of 14% in loan disbursements. Well, Brilla figures during the first 3 months of the 3 quarters of the year, 282,768 families benefited. Here, you see also the number of loans disbursed. That's more than 385,000. These are income brackets 1, 2 and 3. And by the third quarter 2025, we have 2.5 million. And so I think that we are going to meet the goal, and it's very active. And as you know, this is a very attractive business to us in terms of profitability. Two topics to highlight before giving the floor to Aquiles, our CFO. On one hand, the CapEx execution to show how have we been improving our CapEx performance during recent years up to the third quarter. This year, we have an execution of 85% of the CapEx -- so that's COP 648 billion, and let's see how have we invested this. 75% is for core business. That's COP 492 billion. That's 89%. One part goes to gas transportation, another one for gas distribution. Here, you see -- and you see what goes into gas transportation and gas distribution and 24% is for energy aggregation business, COP 155.7 billion. And so these are very good results in this front, and it shows the execution capacity of the group. And at last, for giving the floor to Aquiles to highlight innovation. You know that innovation is part of our DNA. That's why we are positioned 12 in the ANDI National Ranking. And we have been working on innovation in every single front, distribution with important progress in AI, virtual reality for training of operators as to Brilla in digitized solutions and also advanced analytics as to transportation in different ways. For example, the Caracole advanced analytics in risk mitigation land slides that has been recognized internationally because of the mechanisms that we have for early detection of land slides that could affect infrastructure. We have also autonomous robots to inspect our stations. And that's something that we want to copy in different facilities. And as to Energy Solutions, we are starting the biomethane business, also businesses in renewable heat, digital solutions with AI -- IAM, sorry. Sorry, IAE and also batteries with new technologies and also hydrogen market. So innovation continues being very active. And I want to congratulate the team because we have been acknowledged in Colombia and internationally. So now I would like to give the floor to Aquiles, so we can start with the financial results.

Thank you, Manuel. Good morning to each and every one of you. In general terms, financial results are agree with our budget according to the forecast. We were waiting for a different quarter regarding the transported volume. We are executing this in 98% cost and expenses, a very strict discipline. It's 93% of the budget. EBITDA, it's given revenues 98% and net profit 112% of our budget. As to revenues at the budgetary level, there's an execution of 98% because of lower transportation revenues explained by reduced from the volumes transported following the recovery of hydro reservoir levels after the heavy rainfall recorded in late 2024 and early 2025. With respect to 2024, higher revenues were primarily driven by stronger results in natural gas distribution and the firm contracting of incremental capacity from SPEC, even though transportation has not given us the expected results, the distribution business on one side, SPEC and bidirectionality, as mentioned by Juan Manuel, that really have offset the revenues that we didn't have in transportation. As to cost and expenses in SPEC, we had some savings accrued mainly in operation and maintenance -- and in Surtigas, we also had efficiencies because we had savings in personnel, and we deferred some activities and also reduction in fiscal obligations with respect to what was budgeted. In Peru, we have some activities that are being postponed, but this doesn't affect the service. So that is an important premise. So the EBITDA is COP 1.9 billion, 18% of the budget. Well, that's because of a lower transportation revenues with respect to last year. And also the part on cost and expenses that were offset with the best results in gas distribution business, the contracting of the expansion of Phase 1 of SPEC and the contracting -- and the contracting firm contracting of the bidirectionality capacity in an anticipated manner. As to net profit, an over execution of 12% according to the budget. And this gathers the change in cost and expenses and the better results of affiliated companies with respect to the same period 2024 and we are asked a question regarding financial expenses because of lower rate in the third quarter of 2024. As to individual financial results, they show the same behavior than the consolidated. So it's not worth dwelling on it. So here, we see the impact of transportation revenues, but we have explained it is arriving 112% regarding the budget. As to the general balance, current asset, an increase because of what is presented by the affiliates and also the involved companies -- so we have -- here, we see the strength of our portfolio and the financial asset that has to do with the economic variables and other decreases because of the dividends reported in March. As to current liabilities, we have an increase decree by Promigas, and they will be paid throughout the year, mainly towards the end of the year in order to optimize the financial expense, long-term liabilities, an increase because of social bonds, the first one done in the country in different groups. One part is refinancing and the other one is placement of the Brilla loans, and it's very good the backup that we have received from that important entity. And as to the debt, here, we have the debt by product. We can say that it's like in equal parts, 55% bonds, 45% banks, the debt by Money Colombian pesos, dollars and the Peruvian debt, which is used as a hedging tool, given what we -- that -- what we have in that country, but mainly dollars. The consolidated debt has slightly increased from $9.36 trillion to $9.49 trillion. And the average cost, as we mentioned, went from 9.42% to 8.85%. With this, we conclude the financial part. And now we would like to start the Q&A session.

We have 3 questions regarding the reduction of the expectations because of Moody's.

Actually, the concentration of Moody's rating were in 2 fronts. What we had in 2025, 2026 which saw an expiration peak. And the second one was the noncontracting firm credits. How have we solved this? In October, we started working on that with our CEO and the Board of Directors. It was COP 1.9 billion. But up to now, we have refinanced more than 3 years, 80%, and it's ready just for the approval of banks committees. So by December, we will have refinanced 92% of these expirations. We have talked to Moody's about it. We have told them what we are doing. If we could show a graph, we will show that 2025, 2026, it's clearly the expiration of the banks. We only have the bonds expiration, so we will need to pay them when due. And the second comment with respect to committed credits this month, we are putting in place a strategy that we're presenting to the Board. And for the first time, we are going to propose the contracting of a credit of $150 million to pay commitment fees and to have it available for contingencies. Right now, we have that funded with the Bancolombia Group, the CapEx program mentioned by Juan Manuel. So we are complying with 2 of the most important comments made by Moody, and we hope to go to our stable condition in 2026.

Gabriel from Credicorp is asking about the project of bidirectionality, how is it going?

Thank you, Gabriel. Gabriel Perez, [indiscernible]. We are doing very well with the light direction project. We started with 50 million cubic feet per day and it increased to 66 million cubic feet per day. And now in December, we are commissioning 100 million cubic feet per day, and we are considering other options to see if we can increase it above 100 million cubic feet per day most likely. In December, we're going to have available to the market 100 million cubic feet per day, and that's very important because we are complying with our schedule around the execution of all the works in order to have available for the country 100 million cubic feet per day. Hopefully, we can give you good news for the first quarter of 2026. With an additional increase of that capacity, another relevant aspect that I mentioned during the presentation that 100% of that capacity is contracted. So that's very important given that it represents additional revenues to Promigas.