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

Good morning. We would like to warmly welcome all of you to the quarterly results for Promigas. [Foreign Language] My name is Juliana Vergara, the Director of Investor Relations. Through this platform, we will enable a chat for any questions that may emerge, and these will be answered at the end of the presentation. Please keep in mind that this session is being recorded. We would like to use this opportunity to inform you that we are carrying out a data update process for our investors, [ mentioned by investors throughout ] the data on the [ actualization tab ] in the top part of [ there ]. We have Mr. Eric Flesch, President of Promigas; and Aquiles Mercado, Financial and Administrative VP; and other company directors. Now I would like to defer to Mr. Flesch, who is going to start the presentation of the quarterly results of this year.

Good morning, everyone. We thank you for joining this call to present the second quarterly results of 2021. On behalf of the director team, all the collaborators, we thank you, and we're going to begin with the second quarter report. Some relevant events for the second quarter of 2021. We can highlight that the results for the period show an EBITDA growth of 61%, amounting to COP 520.7 billion and also net profits for COP 326.6 billion in the second quarter, which represents a growth of 108% for the second quarter of [ 2021 ]. Also worth noting that Fitch Ratings rated us AAA for Surtigas in Colombia and F1+ also for Colombia. We are also pleased to tell you that Promigas has released [Foreign Language], the new Promigas Foundation. Promigas has many foundations for companies. And we have consolidated the foundation into a single one, and we decided to pool efforts and resources from all the foundations to be able to have a greater impact. We activated the early and chief operation of Gases del Norte in Peru in April as per our contract agreement to benefit the family and the businesses and the industries in the Piura market. Promigas is also among the top 25 companies with the best social impacts particularly, and Promigas is ranked 18th out of 140 companies in the general ranking. It gives us a company feel that social matters are in our DNA. It's very important. Also according to Merco Talento, we went up 31 positions. Promigas is in the 50th position, and we are among the top 5 companies in the sector. Promigas also released their new portal, which is www.promigas.com, an updated portal, where -- which you can browse to receive more updated information. So relevant events by [ GEN ]. In terms of natural gas transportation, we have covered 3,287 kilometers at transport capacity of 1,153 Mcfd, and we transported 431 Mcfd. As for liquefied natural gas, the capacity of our regasification had reached 400 Mcfd. We -- our volume was 799 Mcfd (sic) [ Mcf ], and we had 23 regasified days. We have a 47 megawatt generation capacity and a gas treatment capacity of 35 Mcfd. In the -- in distribution, in Colombia, we have 3.9 million users, we grew by 4%. In Peru by 1.3% (sic) [ 1.3 million users ], We grew by 20% for a total 5.2 million users. 884 of the populations are in Colombia, 49 (sic) [ 52 ] in Peru. We've made networks for 50,323 kilometers in Colombia, 16,280 kilometers in Peru. And gas sales totaled -- showed a growth of 9%, out of which [ 1.8 billion ] were in Colombia and 1.80 from [indiscernible]. In terms of nonfinancial funding, we have 3.9 million users. Our portfolio is COP 1.2 trillion (sic) [ 1.2 billion ] with a growth of -- a placement of [ COP 456,555 million ] in the second quarter. This represents a growth of 119%. As for electrical energy, we have 416,303 users connected. That's a 3% growth. And energy demand of 479 gigawatts per hour losses. They were very good, 12.4, that's under 16%, which is an average cap. We've laid 28,300 kilometers in pipelines with a growth of 4%. As for individual financial results, Promigas, without consolidating the second quarter, the income was COP 0.4 trillion (sic) [ COP 0.4 billion ], an execution of 113% of the budget and inflows compared to the second part of 2020 of 58%. The EBITDA was COP 0.4 trillion (sic) [ COP 0.4 billion ]. That's 120% execution and a growth of 79%. And net profit of COP 0.3 trillion (sic) [ COP 0.3 billion ]. That's an execution of 121% and a growth of 108%. In the participation method, we -- in the participation method, 63% is for transportation and 37% for distribution. We have the individual financial results accrued onto July, COP 0.8 trillion (sic) [ COP 0.8 billion ], 108% execution, 30% growth. EBITDA of COP 0.7 trillion (sic) [ COP 0.7 billion ]. That's 113% execution, growth of 39%. Net profit of COP 0.6 trillion (sic) [ COP 0.6 billion ], execution of 114%, growth of 41%. 60% is participation method and 40% is Promigas. As for consolidated results, we have revenue on the second quarter of COP 1.1 trillion (sic) [ COP 1.1 billion ] at 97% execution and growth of 13% compared to 2020. And EBITDA of COP 0.5 trillion (sic) [ COP 0.5 billion ] and execution of 109% and a growth of 61%. And net profits of COP 0.3 trillion (sic) [ COP 0.3 billion ] and execution of 122% and growth of 108%. We have the pie charts below showing transportation and distribution and what the ratio is. As for the pandemic, Promigas has had a response in the face of this global crisis that has been outstanding. And of course, [indiscernible] on the one hand to provide an excellent service as we always have to all of our customers, but we have also protected and prioritized the well-being of our collaborators and their families. And during this, we've had 100% of normal operations. Upon the close of the quarter, we have -- we've been working from home, 36% of our collaborators, which amount to 864 people. And we start to see some alternation as of the month of August. We are gradually returning to our offices, certain administrative departments and alternating hybrid as it is called elsewhere. This amounts to 26%. And there's field and office work of 38% [ anyhow. And we're ] already implementing gradual return to our offices with all the care possible, and we have adapted the offices with automatic doors, with window panes, giving priority to health and the care for all our collaborators. [ The prevention admin ] strategy is biosecurity protocols, COVID-19 test plans and safe facilities. We have an excellent financing strategy. We have resource for the CapEx base plan for 2021. We have provided full support to our clients through financing programs implemented during the health emergency, benefiting users in socioeconomic [ brackets 1, 2 and 3 ]. And of course, we have continued support to the community, which is special and important to us. As for transportation, we can say that in the second quarter, the income was COP 344 billion. This is an increase of 12% of income and overall a 2% increase. Our income is COP 677.2 billion compared to COP 660 billion in 2020. It is worth noting that transportation has operated at 100%. We haven't faltered at all. Even in 2020 when the pandemic started and all the way up to 2021, despite having restrictions and due to special care for our collaboration -- our collaborators, we have still managed to have a great transportation services. And this is very good for the service of our clients but also for the country to continue having normal operation. Some relevant aspects is we -- there's been a decrease in [ shipments to thermal clients ] due to the rainfall. This situation has led to a decrease in gas consumption in this sector. And the second part of 2021, there was maintenance in the national transmission lines. We had no significant impact on the dispatch for the period. The thermoelectric sector -- the nonthermoelectric sector had an 18% compared to the second quarter of 2020, especially in industrial consumption as a result of the economic [ recovery ]. To the right, we see a chart where we can see that the thermoelectric sector in this quarter had a drop in 24% in gas consumption or industrial, we have 24%. In distribution, [ negative 8% ]. And natural gas for vehicles, 73% positive for a total of negative 2%. We are still talking about natural gas transportation, and now I'll discuss Promioriente. Promioriente in the second quarter of 2021 has had an increase of transported gas at 33%, that 35 Mcfd compared to 2020 when it was only 27. There is a strong recovery in industrial demand regulated by economic recovery, and the Barrancabermeja refinery has high levels of consumption due to the increase in crude oil load. Transmetano also has an increase of 25%. We transport 50 Mcfd compared to 40 the previous quarter. There's a positive consumption perspective due to the economic recovery in the face of the pandemic. So we're still discussing the relevant aspects. Promisol, that's our energy solutions provider and also of natural gas infrastructure. Promisol continued with the execution of the 3 new services contracts for preventive and corrective maintenance for Promigas, exceeding the agreement. The operation has resulted in the Bonga and Mamey hydrocarbon plants, meeting Hocol expectations regarding operational availability. And there's also been positive progress in the construction of the Zona Bananera pipeline. We had a successful completion of pipeline changes in Riohacha-Guajira, and also the mechanical part was finished in July 2021. As far as SPEC, we mentioned this earlier, this year, SPEC has reduced its operations as a consequence of hydrology. The number of shipments in the second quarter of 2021 was 1 compared to 5 in 2020, [ 40,514 cubic meters ], a decrease of 80% compared to '20. 491 cubic feet compared to [ 2020 ]. And in 2020, we have regasified [ it in 2021, and within ] a decrease of 91%, 92%. And 92%, this is due to hydrology in the quarter. There's been a lot of rain in Colombia, and we expect rain at the end of the year. In the Atlantic, we're going to have the La Niña phenomenon, so we don't expect this to change. [Foreign Language] And more pipelines would have to be linked so we hope to be able to reach agreements where both the regulators and the transportation sector agree for the mutual benefits of everyone. And we can -- we hope to have the discussion. As for distribution, we also mentioned that in the second quarter, income [ 13% ] and COP 781 billion compared to COP 691 billion in 2020. And within the year, our income has grown by 6% and if we compare the numbers between the same quarter in this year and last year. For SBU distribution, this is [ during -- that ] despite our transportation in Colombia has been also impacted by civil unrest, and there was a loss [indiscernible] why we could not [indiscernible] 32 days because there was damage in the liquefaction -- LNG liquefaction plant in Peru. We could overcome this, but there was an impact from -- as a swap or [indiscernible] shows commercial losses of 12.4%, which is lower than the contractually required 17%. Quavii accumulates 140,108 users, 95% of the BOOT commitment. And this is the [indiscernible], and the allocation of FISE resources for our area of influence, allowing the continuation of the massification of natural gas benefits. Gasnorp is a new concession that we operate -- that we had in Piura. Progress of our pipeline is at 41% completion, 74 kilometers of steel and 70 polyethylene. And on June 9, Surtigas was rated AAA with a stable outlook from Fitch Ratings. This is the eighth consecutive year with the highest credit rating. As for distribution results, we've seen that the volume of natural gas has grown by 9%. We're at 5,739 million cubic meters. Our CapEx is COP 464.4 billion. The electrical energy demand is at 479 gigawatts per hour. The towns served add up to 936. In the last period, we added 71 populations with a growth of 5%. Total users are 5.6 million users, considering that we received new users. And the Brilla placement is COP 456.5 billion for the period with a variation of 119%. The gas distribution results have been very good. The EBITDA in the first quarter is at [indiscernible] compared to last year. And we have COP 5.7 billion compared to COP 10.8 billion for the entire 2020 year. As for technological transformation, this -- our strategy for the period was to become leaders in innovation and sustainability in our areas of influence. And we've gone into more transformation for the benefit of all our customers. Some items worth noting is the [indiscernible] smart measurements, meters that integrate communication systems and technologies, allowing 2-way communication with customers. Prepayment measurement. There are certain markets that can use prepayments according to the user's payment capacity. And we have cell phone apps where all our clients can view -- through our apps, they'll be able to view their account, their consumption, their performance, et cetera, also on-site invoicing and also be able to invoice consumption on-site. So we have a robot. So the service [indiscernible] is 24/7 where it answer clients' phone calls and provide the answers they require. The purposes of this transforming are to have a better customer service experience, having the best data intelligence, more rapport with our clients, reduce costs, reduce outstanding debts and nonoperational losses. This is our target. These are the objectives that we're aiming for. As for mobility, we can see the map of Colombia on the right. And as you can see, we have good coverage of natural gas and petrol stations in Colombia, which [ has allowed this sector to grow this ]. There was 190% increase in natural gas vehicles. Garbage collection companies are deciding to take the first steps using natural gas. Then -- and then there's 11% increase in volume compared to the first half of 2020. So next slide, please. As for energy services, in the first quarter of 2021, we have approved the energy services strategy. Promigas is aiming to become a leader in these services, including photovoltaic solar energy, cogeneration, energy efficiency and energy districts. We want to provide energy solutions through clean energy. And this is a business unit where we have very impressive growth that will be very important in the next 10 years. We are allies with clients in terms of energy needs. And we have the operation of Caribe Plaza on May 30 with an installed capacity of 1 megawatt is a reflection of this. You can see on the right, the more commercial targets for megawatt. In June 2021, we are at [ 235; 2020, 150 ]. The solar capacity under development had a growth of 49.5%, so that's 10.5 megawatts to 15.7 megawatts. And our operational capacity has also grown. And we have our most important allies, OLIMPICA, Aguas de Cartagena, Caribe Plaza, et cetera. As for Brilla, which is our nonbanking institution, we can also say that in the second quarter of '21, the unified quotas, leveling all companies with increases between 10% and 30%. Tools were enabled to strengthen the relationship with users in different financing lines. Improvements in the risk model with new allocation criteria according to payment behavior. And we started a process to digitalize Brilla credit, the launch of the new Brilla sales platform with digital transactions. Also acknowledged with Brilla is a company that is fully digitalized so that the client can access via apps [indiscernible] online. And this leads to efficiency. We anticipate that this will provide good results, 100,000 users were benefited. That's a growth of 490%, 3.9 million users since the beginning of the program. We have a [indiscernible] of COP 456.5 billion with [indiscernible] 119% and COP 1.17 billion with a portfolio growth of 18%. So these are benefited over 90 days, that's the accounts payable over 90 days only represent 4.43%. We have Brilla customers that are [ very disciplined ], which are using their quotas because of the benefits they received from this program. As for regulatory matters, [ overarching, really, to say that ] Law 2099 of 2021 was enacted to strengthen Law 1715 of 2014 regarding the energy transition, the revitalization of the energy market and the economic reactivation of the country. In electricity, considering the requirements of commercialization agents, that as of 2023, 10% of the annual energy purchases come from nonconventional sources of renewable energy through Resolution 40179 of 2021, the third long-term contract auction for electric power generation was called. As for natural gas, administrative acts in process for the definition of the distribution charge of Surtigas and GdO. All requirements have been met by CREG. Its approval is estimated by December 2021. CREG published a document, "Analysis of Wholesale Natural Gas Commercialization," where possible solutions to current market problems are defined, such as: efficient price formation, flexibilization of commercialization rules and establishment of complementary commercialization mechanisms. And Circular 043 of 2021 [ where the ] natural gas schedule for 2021 is published. In Peru, we also have Decree 12-2021 from the Ministry of Energy and Mining, regulation to optimize the use of natural gas and the creation of the natural gas manager. The purpose is to regulate the operations of the secondary natural gas market in order to ensure the efficient use of volumes and/or transport capacity of natural gas not used in firm obligations in the primary market. Corporate aspects. As we said initially, we are very pleased and we're very proud to be launching the new Promigas Foundation. This foundation will be operating in Colombia and in Peru, in all the regions where we are present. Here we have the map of Colombia. We have Antioquia, Santander, [indiscernible], Valle del Cauca and Cauca. And in Peru, we have the northern area. And the [ access of action ] of the Promigas Foundation are quality education, productive programs, local government and participation. All of this within the framework of [ all the elements ]. With this Foundation, we're pooling efforts from the regions in order to contribute to the improve the quality of life and well-being of our communities located in the areas of influence of Promigas and its subsidiaries in Colombia and Peru. Promigas is among 25 companies with the best private social investment in Colombia. Results were presented in the fifth version of the Private Social Investment Index, which recognizes the best practices of private social investment in Colombia. In total, 140 companies participated, and we were ranked #18 in the general ranking. Recognitions like this motivate us to continue working day by day for the welfare of society and the progress of the country. We're convinced that with passion, commitment and teamwork, we can continue to build territories that are always sustainable, always innovative and always humane. Promigas was also ranked as one of the 100 largest companies in Colombia and with greater resilience during the pandemic. In June 2021, Revista Semana recognized us as one of the 100 largest companies in Colombia [ that's one of the ] most resistant during the pandemic crisis. At Promigas, we always look forward. And despite the crisis left by the global pandemic, we managed to meet our goals. We do not fail our users with the provision of our services, and we advance in our projects without major obstacles. The health of our collaborators, guaranteeing the continuity of services we offer, showing solidarity with the most vulnerable communities and maintaining stability -- the financial stability of our companies. These were some of the main actions. I want to make a comment of recognition to the entire team of collaborators, the directors, our VPs, the managers in the various branches, the entire team working in this company for their commitments, for their dedication, for their positivity, for their [ good ] attitude, where as a team, we hope you feel proud to work with this company. So this has made it possible for us to present our results at our full satisfaction, a significant growth. And the road has been paved so that in the future, [ we will have success ], and we hope that this will be the case. As for the talent, as I was saying, we are proud to have this team that is very committed. Merco highlighted Promigas' talent as among top 5 companies in the sector in the Colombian [ coast ], all the people working for us, all the guys and within the population hope to work with our company or one of its branches. We have to highlight our teamwork, and results are measures of what I'm saying. But I'm very proud [ to be leading ] the team with [ this -- nothing less than excellent ]. This leads us to innovation, and I'd like to give the floor to our Operations VP. He's passionate about this matter, and I would like him to talk about what we're doing. So please, the floor is yours.

Thank you. As we mentioned earlier, Promigas [indiscernible] focus on 2 pillars, sustainability and innovation geared towards [ providing efficiency and pass security ]. So supported by the 4.0 technologies, which is [ for the sake ] of the industrial revolution, it focuses on connectivity, automation, automatic learning and real-time data. That is -- it is an application of the Internet of Things in the industry in terms of automation and improvement processes, and that's where we're focused. We have 2 clear lines of [indiscernible] with smart monitoring. We are developing a platform using satellite images, using advance analytics and georeferenced tours. We have assets that [indiscernible]. And with our smart model, we have been far more efficient and we provided more safety throughout our assets. Second, we have augmented reality. We are implementing this to support our operation and maintenance processes in compressor stations throughout the country. We started a pilot program at Atlántico in the Caracolí station, which is where we are deploying our information systems. We have completed our virtual reality model in one of our compressor stations. This is nothing less than the latest technology for [indiscernible]. We have recreated virtual reality in the entire operation in one of our stations. And it can be accessed from anywhere in the world and [indiscernible] at any time. And finally, we are designing an analytics center for [indiscernible] that is leveraging the Internet of Things, various sources of information for our systems to be deployed, to provide actionable analysis for decision-makers. This will allow us to make more accurate decisions since we will have better information. As an example of this, [indiscernible] this is something that [indiscernible] station at [indiscernible]. And this is [indiscernible]. This is a replica, a fully developed replica in full details. You can see on the image of the video of one of our stations. That is our technicians and engineers who'll be able to do [ client ] maintenance and operations. They will be able to train in virtual reality but from their workstations in our various branches. This is a great achievement. We're marked the first in the country to implement this, which is recreating a station in virtual reality. So this is what I wanted to mention about innovation. So [ that's all ]. Thank you.

Thank you, Alejandro. We're very excited about this. We're motivated. And we've entered into this new dimension of innovation and digitalization. This is a quote, and I want to read it. "The results of the semester confirm the strategic role that Promigas and its portfolio play in the energy matrix of Colombia and Peru and our capacity to recover in an environment full of challenges as well as the integral management developed in the different fronts in which we deploy our activities. Supported by the commitment and quality of our human group, with excellence, integrity and solidarity, values rooted in our organizational culture, we bring well-being to all our stakeholders." This is among our 3 core values. So we are very excited. We are very proud with what we've done so far. I will give floor to our Financial VP, who will be presenting the financial statements for the second quarter.

Thank you very much, Dr. Flesch. Good morning to everyone joining us on this call. Our financial statements and second quarter profit and loss show a revenue of 58%, while reaching COP 431.3 billion. We're talking about individual financial statements. EBITDA grew by 79%, reaching COP 376.3 billion. And the net income rose by 108%, amounting to COP 326.5 billion. As for the SPECs, we see that the income represented compliance of 113%, compared to what we expected for the budget in the year. [indiscernible] the operation revenue grew by 12% due to higher volumes transported in the nonregulated sector enhanced by virtue of greater deliveries by Canacol; an increase in the hiring of forwards, let's remember that we have a strict policy on exchange rate coverage to avoid volatility and risk in the financial statements. And we go from 70% of revenues, where -- amounting to COP 3.5 billion in 2020 to 78% with an average strike of COP 3,682 in 2011 -- 2021. The participation method, 140% compliance, notable by an increase that we have by application of IFRS 15, which reflects the construction of -- activities in Peru, Gases del Pacífico and Gases del Norte del Perú, recognizing a margin associated with the performance obligation to build the infrastructure of the concessions in our neighboring country. Likewise, the best results are contractual flexibilities granted to our transportation and distribution clients in 2020 as a result of the health emergency caused by COVID-19, where we provided great support to a lot of customers, considering the gravity of the situation in the COVID 2021. These have been the results of our affiliates. The EBITDA, as we said, we are about COP 376.3 billion. That's 120% more that we had budgeted. And this is due to the fact that there were higher operating income and the participation method as well as the decrease in cost and expenses due to lower provisions of the FNB business as a result of the improvement in the quality of the portfolio, which was affected in 2020 as a consequence of the economic crisis brought about by COVID-19. Net income by June 15 was COP 326.5 billion, that's 121% overbudget as a consequence of what we mentioned about EBITDA increase, also higher income from financial [ assets and ] macroeconomic variables. And also in 2021, we have [ higher income than ] in 2020. The efforts helped the communities to mitigate the effects generated by the pandemic. As for income in our financial statements, when we look at the entire [ set ], we had revenue increase of 30%, reaching COP 804.8 billion. The EBITDA grew by double digits, by 39%, reaching COP 697.4 billion. And net income showed an increase of 41%, reaching COP 597.4 billion. These revenues are 8% above what we expected in our budget for the reasons that I mentioned before: more transported volumes, due to thermal integration. As for the participation method, the holding -- the -- Promigas is a holding [indiscernible] in Peru that has had good results. It is [ we targeted spreadsheet. We applied law ] [indiscernible], which has already [ stayed ] showing better operating loss results as a result of the -- implementing the operations, of holding operations. Surtigas shows an increase due to higher results via the participation method of Peru, lower portfolio provisions and higher profit in the gas materials and financial. In GdO and Cauca neighboring areas, there was an increase due to their costs and lower portfolio provision expense and higher participation method [indiscernible]. Cálidda, it's the company that had the entire market of [ Lima and ] [indiscernible], showed an increase due to the improvements in the distribution business due to higher invoiced volume and installations attributable to higher income in internal and, likewise, a lower portfolio provision was recorded in [ '21 and ] the gradual recuperation of the economy -- recovery of the economy. The Promioriente [indiscernible] more consumption from Ecopetrol in the Barrancabermeja refinery. In 2020, there was an emergency in the Gibraltar gas pipeline and the flexibility in transport contracts [ for the clients ] in the face of the effects of COVID-19. There was relevant increase in execution, it's 13% above what we have budgeted, greater income due to the participation method in 2020 [indiscernible] all the corporate [indiscernible], lower banking financing due to our portfolio improvement, which was headed -- [ into ] the economic crisis. As a consequence, [indiscernible] despite major financial expenses due to the average debt, especially in Peru in compliance with contract obligations and [ lower tax benefit ] [indiscernible] as of 2009 so we have limitations due to COVID-19 in [ Brilla ], but this is not a must. It is only delayed until the time that we can make specific investments. As for balance sheet, we had assets for COP 8.9 trillion (sic) [ COP 8.9 billion ]. That's a growth of 7%, especially for current assets due to dividends decreed by related companies, which is also reflected in the performance of [indiscernible] 2020. In financial assets, there was a 5% increase and an update of the macroeconomic variables for the calculation of the financial asset and other assets that had an increase due to the [indiscernible], Promigas Peru, that's Gases del Pacífico and Gases del Norte and especially Promigas Peru to develop our investment plan for the massification of natural gas in this country; due to higher profits registered by our subsidiaries via the participation method and higher Representative Market Exchange Rate that affects the value of investments abroad. As for our liabilities, they would increase COP 4.5 trillion (sic) [ COP 4.5 billion ]. That's 11% with the June 30 cutoff date, especially due to the ordinary dividends decreed in 2021 in March, which increased by 19% compared to those we paid in 2020 and the transfer from the long term of bond series with short-term maturity. Well, we do have the long term, we saw an increase in TRM, which is important because we have -- it affects -- because it affects our loans in U.S. dollars. As for the debt and consolidated statements, we've had intense construction, especially in Peru, [ but we have on lesser degree ] our debt reached COP 6.3 trillion (sic) [ COP 6.3 billion ]. That's a decrease of 2% compared to June 2020. The average cost of debt, let's remember in the second quarter last year, that we issued bonds twice during the pandemic. In local international markets, we reduced our debt cost in almost 100 basis points. In terms of bonds, that's where most of the debt is but -- because [indiscernible] and with banks, which have always been our main allies, that's 25% by currency and 61% in Colombian pesos, 36% to the dollars and lesser percentage in Peruvian soles. Let's remember that Surtigas, one of our [indiscernible] industrial, affirmed the AAA rating by Fitch with a stable perspective, the highest in Colombia. So this is as per the financial statements. We can now [ turn it over ] to our President so that we may discuss better and we may answer any questions.

Thank you very much, Aquiles. Let's do our Q&A session. I'll ask Juliana, our Investment Director -- our Investor Relations Director. We think we need to have a break or can we get started? If there are any questions, then I suggest we could get started right away. We can't hear you, Juliana.

Mr. Flesch, we have a question from Ms. Steffania Mosquera from CrediCorp Capital. Which regulatory risks can you foresee in Peru?

Steffania, how are you? Today, August 26, in Peru, there's going to be the vote of confidence in Congress. Today, we received the news. We will have news about what's happening in Peru to see whether [ Garcia's ] administration will be confirmed or not by Congress. The Ministry of Foreign Affairs was [indiscernible]. There's not one that has been appointed yet. It is possible that [ the ministers ] will be changed in such a way that it is difficult to foresee what could happen. So we need to talk about risk. Of course, risks, they range from very [indiscernible] with full nationalization of the gas sector and the energy sector, which would be -- I think there's a low possibility of this happening in a country that has seen civil turmoil repeatedly, especially during the past years, but they've had a solid economy. There could also be regulatory changes. We think that a scenario could be that regulation changes will make an increase of taxes for our sector, a decrease in compensation, but we have nothing yet. We're still waiting to see which administration will take office and who will be the ministers. The influence of [indiscernible] is absolute. He's working behind the curtains. So the confusion -- there's absolute confusion because -- with the end of political sector in Peru. They all agree that in the next 2 or 3 months, there will be more clarity supported by facts to truly understand what the risks may be. We are proactively organizing an approach to the Colombian government -- to the Peruvian government once we know who's elected with the support of the business sector, the government of Colombia. We would like to introduce ourselves. [ We're going ] to countries closer in the -- in terms of legal stability and having clear rules. The gas and energy sector will have growth through investments. In the trajectory that it has gone in so far, it's very difficult to answer this question at this point. And we are assessing all sorts of scenarios up to the most catastrophic scenario that we can conceive.

Mr. Flesch, we have another question from Steffania Mosquera from CrediCorp. [ Could ] we ask more details about the damages in the liquefied natural gas plants in Peru?

To answer the question, I would like to turn the floor to our Distribution VP responsible for our operations in Peru. He can provide more details. Wilson, please go ahead.

On the 28th of April this year, there was a compressor damage event at the liquefaction plant in Peru and with the company [indiscernible] of supplying gas to the country. Basically, it's compressor damage. And Peru LNG didn't have good storage. They currently cover residential use for about 40 days. The damage was there for 32 days, wherein [indiscernible] in north Peru [indiscernible]. It was a nonsupply of natural gas [indiscernible] in the industrial sector, basically, and that has significant event for sales cost [indiscernible] and this [indiscernible] a measure which imposes Peru LNG to have storage for liquefied natural gas in order to meet the demand of these concessions in northern Peru for a 30-day period. So I think this would answer Steffania's question.

Thank you, Wilson, for your answer. We have a question from Davivienda [indiscernible]. Could you comment on your expectations regarding the impact of the [ common ] resolution for the gas transportation business and its possible impact on the company's profitability? How far are the expectations that we have from our proposals?

Rodrigo, I will give the floor to our Financial VP, Aquiles Mercado. Please go ahead, Aquiles.

Thank you, Rodrigo, for your question. Although we are seeing the details of the resolution that you were mentioning, we found that the profitability was below what we saw in gas transportation activities would provide. So with the methodology that we've been applying, we are introducing some changes, arguing and passing information, which could result in a decrease. You saw the legal and regulatory mechanisms. We have an open dialogue with regulatory authorities and then with oversight agencies in order to prevent any effect that could arise in our activities and our results. In effect, we have managed to be heard, provided that our arguments are well documented and the methodology that we could be using and the one that is universally applied are [ referred ] as per the regulatory entities in Colombia.

Thank you very much, Aquiles. We have another question from Rodrigo Sanchez [indiscernible]. Which [ island ] are you [indiscernible] in the coming quarters? And what additional capacity could this stand for?

Promigas has an open proposal to through [ Open Season ] to connect Córdoba with Antioquia. We are in a process that we hope will end in November to see whether the demand requires -- what the demand requires. Whether the production is going to be delivered, and we have more reserves to ship that gas with that project in Colombia, another project which we've been looking into. We have to make this public on some occasions, with the potential extension of the Cartagena regasifying plant. To the extent that we are able to foresee, there will be a gas deficit in [indiscernible] of Colombia. The regasifying plant can continue to be extended [indiscernible] 5 to 7 years. This is something that we've been studying. In order to flexibly supply gas to different geographies and for oil and gas users and specifically in the Lower Magdalena Valley on the coast, we would need to count on the pipeline going from Córdoba or Cartagena to Guajira in that direction and in the other way from Guajira to Cartagena as it is today. So that's a very important project. [indiscernible] on the part of the country. This is crucial for the country. This is indispensable. And Promigas has been working on the engineering. And [indiscernible], we have submitted our intention, and we're waiting for them to okay this process. I think that this will be coming. And finally, when I do that, we see that there are doubts about the economic feasibility of this regasifying plant. Promigas has always been there, closely doing -- the possibility of doing this or not. There -- all decision has been -- well, because we don't have the full information to allow us to make an informed decision, but these are the large projects in Colombia in the transportation sector that we can expect for the coming years.

Thank you, Dr. Flesch. We have a question from Diego Buitrago from Bancolombia. What is your tender process like for the Pacific regasification plant?

Yes. I was mentioning this. This project is very difficult because the Buenaventura area is small. So placing a regasifying plant there, well, the fleet are not large. We have few options. And it's also a navy base, but we could overcome this. Then we would have to go through the mountain range, it's expensive. It's an environmental challenge. Sociopolitical, it is also a challenge. And the government mentioned $700 million but I think this falls short [indiscernible]. We'll -- and we hope to [indiscernible]. Also, the government said that this would happen in 2024. And it was [indiscernible], and he said that this would happen in 2024. So there's been a delay in operations, so we will have to extend this. And the big question is that gas [ demands are not 102 meters in ]. In order to make a regasifying plant like this, once feasible, it would need a higher amount. So we would have to think about what to do with the surplus and who will pay for that gas. So these are questions that have no clear answers yet. That's why a very negative report was sent and potential interested parties have declined. So officially, we can safely say that we want to have more information. But frankly, you cannot foresee this in the short term. I think this will take longer, and we don't know how this will ultimately end with the project. So I hope this will answer your question.

We have time just for one final question. [indiscernible] to the address of [indiscernible]. Last question comes from Diego Buitrago from Bancolombia. In relation to a [indiscernible], what do you consider a [indiscernible] or threat to Promigas currently?

That's an excellent question. I would say that all companies have their risk matrices. And to be honest, I would say that we have improved today's [indiscernible]. I wouldn't say -- I wouldn't call it a risk yet because so far, nothing has happened. There is uncertainty, which should clear in the coming months. But Peru is an extraordinary country. In Peru, gas reserves are 17 [indiscernible], so you have far more gases here in Peru than in Colombia. And whereas in Colombia, gas has reached 80% of the population, they've only reached [ 10% ]. There's a lot to do in Peru. It is a very solid economy despite the fact that there has been political turmoil. So we are convinced and we are enthusiastic about Peru. We have many professional advisers in Peru to help us assess the risks. And in case of a change in the constitution or regulations, it would require over 2/3 of Congress. And unless there are radical changes in Congress, unless other people are reporting to Congress, and Congress still has [indiscernible] that is against the current governments in Peru, it's under alert more from uncertainty than risk. We are still very excited. And we're building a 300 kilometer pipeline, and this hasn't stopped. And we expect to see this through with no problems. I think that the big risk, not for Promigas but for the country, is to run out of gas in Colombia. That would be very serious for the country, very dire. According to [indiscernible], we have gas for the next 7 years, especially in the inner part of the country -- the inland part of the country, [ could ] start to see the deficiencies by 2025, and that is very serious. We have expectations from our pilot fracking test. We hope they will do well. And we hope that, that methodology to exploit gas will be validated in Colombia, and then we would have reserves for over 50 years in Colombia. This discussion is due and that is a risk. That could become political. Ultimately, we may not see positive results. So that's the main risk for the country with gas business with -- all in all. So Promigas, doesn't see other risks other than having -- especially in good conditions and [ gas risk catastrophes with operations ]. These are risks that are being controlled by our professionals, and this is all [ considered risk with the main base and the ] gas supply from [indiscernible]. And we hope that we can quickly overcome this issue in order to have peace of mind that we'll have gas for the next 50 years. Today, we are importing gasoline in the coast. That had not happened for a long time. It is not good [indiscernible], that's a message of weakness in the energy sector. In such a way that as Colombia [indiscernible], but what will happen with gas and oil reserves in the coming years, and this is reliant upon the discussion on fracking. I hope I have answered your question.

Mr. Flesch, unanswered questions will be answered by e-mail. If you have any additional questions, feel free to send them to Investor Relations at promigas.com. I'll give you the floor, again, so that you may wrap up.

So thank you, Juliana. On behalf of the VPs who are joining us today, on behalf of Juliana as our Investor Relations Director, and on my behalf, thank you all for joining us. [indiscernible] this technological [indiscernible] possible. We would like to thank you. And we hope that in 3 months -- we hope to be receiving good news in 3 months. Our communication channels are open. You are highly regarded by the company, and we thank you for joining us. And I wish you all a nice day and a warm greeting. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]