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Edited Transcript of CELSIA.BG earnings conference call or presentation 5-May-20 1:00pm GMT

Q1 2020 Celsia SA ESP Earnings Call

May 10, 2020 (Thomson StreetEvents) -- Edited Transcript of Celsia SA ESP earnings conference call or presentation Tuesday, May 5, 2020 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Esteban Piedrahita Montoya

CELSIA S.A. E.S.P. - CFO & VP of Finance

* Gonzalo Velásquez

CELSIA S.A. E.S.P. - Communications Manager

* Ricardo Andrés Sierra Fernández

CELSIA S.A. E.S.P. - CEO

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Conference Call Participants

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* Diego Alexander Buitrago Aguilar

Bancolombia S.A., Research Division - Energy and Gas Analyst

* Katherine Ortiz Sogamoso

Corredores Davivienda S.A., Research Division - Equity Research Leader

* Nicolás Erazo Arias

CrediCorp Capital, Research Division - Analyst

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Presentation

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Gonzalo Velásquez, CELSIA S.A. E.S.P. - Communications Manager [1]

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It's 8:00 a.m. so we're going to start our teleconference. Good morning. My name is Gonzalo Velásquez, the Communications Assistant. I want to welcome to the teleconference results of the first quarter 2020.

As you can see on the screen, we have here Ricardo Sierra, leader of Celsia; and Esteban Piedrahita, financial leader of the company. (Operator Instructions). In the end of the teleconference, we will have reserved a space for your questions and answers through the platform of Zoom. We appreciate to connect the conference. And I give the floor to Ricardo Sierra. Go ahead, Ricardo.

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [2]

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Gonzalo, thank you very much. Thank you all for joining us, this conference in 2020. Interesting moments we are living. And we are going to change a little bit the format, and we're going to provide you with details about the company, how we are facing the situation of COVID. I'm going to provide you with details, technical details, especially our customers, a little bit the explanation of what's going on regarding the juncture. And we're going to see the financial results and how we did this year.

So let's start. We have had a collective effort to implement all the measures to protect our customers, try to manage our company with a sustainable view. This kind of lockdown, it's been in the culture in Celsia to have the tools that allow us to continue growing our vendors and allies, growing in the region. The service is considered as essential in the juncture. We have abide to the conditions of the government to guarantee the health. Our strategy is framed in 5 big access. This is very important.

We determined these 5 access. First is to keep employment and take care of our employees, to take care of the customers the way we have never done because we know of the complex situation that we have had for this lockdown. And we have the dynamics to provide our customers with the services. We are here to help them with formulas, which is very important. We have a wide view. We are going to see the details of the issues, and it is vital to continue with the operations with financial flexibility.

Now speaking about Colombia, we have the biggest customer base. And for free, voluntarily, we provide service to more than 5,000 customers who have their services suspended.

In Tolima, it was more than 2,000 customers, Valle del Cauca, 2,800 customers. And we suspended disconnections during the lock down. Additionally, if any person that is disconnected because, there have been mayors on sites, they haven't let our works in. So we have asked the customers to call us, talk to the authorities to let them in, but it's a minority. We can say 100% of our customers in Valle and Tolima, they are connected spend with services.

Regarding the energy tariffs, the company in the beginning of the year applied the tariff option for Tolima, which we distributed the increase authorized by their regulation in a long-term to decrease the impact in the tariff of the customers from January to April 2020. The increase of the unit cost for our customers in Tolima was only 1.2%, coming from COP 300 per kilowatt to COP 600 per kilowatt. The social classes 1 and 2 didn't have any variation by the increase, they were assumed by the subsidies of the nation.

In tariffs the social class 1 and 2, that is more than the 30% of customers in Valle, they had increased 3% for the 6 months, the last 6 months had tariffs, and the rest of the social classes have had 5.8%. And the rest, they don't have any increased where cost of a kilowatt is COP 594. The tariff will not increase between April and July according to the rules, the laws of the national government. It is important to reinforce that the total value of the energy depends of the consumption of each store, each house for houses. So social class 1, 2, 3, they can increase either consumption or go the regular consumption of livelihood for each municipality. That is not a subsidy of the government. We invite our customers to an adequate use of their electric appliances to be able to control this. We have had campaigns for energy efficiency. So there have been news of increase. And I want to reiterate that Celsia's tariff in Tolima has increased very little in the last months for Tolima, only [5.08%] for different social classes and less than 1% for other social classes.

What we have noticed is that many customers due to the situation, they do not check the bills, the consumption. There are other charges in the bills: street lighting, cleansing, and that has generated a little noise. So we encourage them to handle the energy consumption for the billing. And we are very happy that our customers have a low consumption.

So the reading of the meters as well as the billing, they were suspended due to the COVID-19. So we prepared all the biosafety elements to protect our customers. And for 2 weeks, we had an exceptional mechanism. The billing doesn't affect the customer because once we have the billing of real consumption, we correct the consumption to the reality of each customer. Between 8th and 13th of April we went back with meters in Valle del Cauca and Tolima. That is very important. It generated some noise. We understand the customers, they complained. They said that we were not producing what the bill stated, but it was measure due to the safety, we couldn't have our employees without any protection. It is necessary during the COVID juncture.

You very well know, they went back to the street, we corrected our issues and no bill was deliver personally. And we are standardizing the cycle, we have been for more than a month. After that measure, we are giving the bill with the real consumption. So we are now sure that we have delivered the safety elements, and our employees are able to reach their meters.

We designed a plan with the national government with some benefits to alleviate their payment to the

(technical difficulty)

with subsidies. We need to remind, we see the subsidy for the social class 1, the subsidy is 60%. For the social class 2, it's 50%, social class 3 is 15%. The resources to pay the subsidies, they come from the taxes paid by social classes 5 and 6 and commercial customers the Decree 517 and the Law 058 established the consumption of the customers for social class 1 and 2 will be deferred 36 months with 2 months of grace period.

So COP 44,000 million will be the maximum volume employing the credit lines that we are working with Findeter, (inaudible) is very important because this financing will be available for the companies on the cycle to give the benefit of deferring the credit to 36 months, which is a great help for -- on the side of -- behalf of the national government. For social classes 3 and 4, the consumption would be deferred in 24 months with a period -- grace period that would be a very good rate, but it will not be 0%.

For social classes of 5, 6 and commercial stores, we are defining, depending on the situation, different options of financing to help them if needed. The company keeps the commitment for the customers. We have flexible payment options tailor-made for the customers and we count on digital media. We have, a 100%, nonpresential face-to-face model. And now it is a digital model. So the rate increased 30%, that is favorable to -- for the customers, we moved to the digital payment.

Our customer service is active, working remotely for the lockdown to take the complaints of the customers and to provide the customers with the service. So in the last month, we have had a decrease of complaints, 53% of claims, 9% in the country compared to what we saw in 2019.

Just to give you an idea of the transformation we had, we multiplied by 6 the amount of requests we had through the call center and digital media. So we needed to accommodate with the customer service. We started providing service remotely, and we have been able to face the requirements, but it's been a lot.

Likewise, we have improved the quality of the service in Tolima. During the 7 months of 2019, we operated with the assets, and we invested $100,000 million in maintenance and strengthening of network. We have $538,000 million for the next 5 years. And we are checking if we can accelerate this to improve our service indicators.

Thanks to these investments, we have been able to achieve the most difficult thing, that is to break the curve in the indicators of service, the SAIFI, we passed from 46 interruptions to 43. But it is not enough. Our goal is to take these indicators in the Valle del Cauca that is in average 13 hours of interruption of SAIDI at 9.4x of SAIFI interruptions.

As you can see, it's different. We have a lot to do to improve. It's important to mention that our availability in the distribution asset keeps 99.5% in Tolima. It is very important to mention that. The results are positive. The complaints due to the quality of service have decreased.

In Valle, the quality is very important. So this fosters to continue growing.

At Valle del Cauca, we invested $208,000 million, and we grew 351 kilometers in medium and high tension. We moved forward in the rural electrification, we have 1,800 (sic) [1,892] new families with benefit. 270 of this family, they didn't have this benefit. Our commitment is that in 4 years, we're going to have 100% of both departments completely covered. That is our goal. That is in line with the goals of the national government. So

the rest of the geography where we are supporting, the best way and understanding their particular realities of the reduction of energy consumption, in Panama, we have implemented with our industrial customers, tailor-made services for their consumption. So we are supporting other customers to make a hospital. And we are taking 100% of the value of the power of that hospital, [hotel].

The second front we have worked is the protection of employment. We have used all biosafety measures to protect our employees. Since the 12th of March, our teams have worked remotely with the national government. We started transferring our team to their homes. We have a new working scheme, shifts, biosafety measures, all you can imagine in the control centers, which are addressed at keeping the social distancing and the epidemiological protection. We have a very comprehensive protocol for the people who leave their job and they need to come back. We have, in the institution, our biosafety protection to ensure they are protected as we are doing in other company.

Likewise, something very important about the vendors. We have worked with our vendors jointly so that the total of the people employed by the companies, they continue to have income these days. The third working front has been regarding the sustainability continuity of the work. Jointly with different providers and vendors, we have used support to guarantee the supply of the services of the power and energy service. So when we started the lockdown, we had to continue operating, but many of our providers or vendors, they stopped operating. So we had to develop one-to-one work with other providers to guarantee the continuity of the services and products.

We provided our stock to avoid failures in the supply of the service. And we had a very good job that sums up with what I'm going to tell you, that we have supported in consultancy, health care, finances, risk management, the legal aspects and also supply.

We enabled the payment through digital platform to the small vendors that don't have bank accounts or don't have bank services. We used logistics for these vendors and we reached 350 vendors and providers. They are SMEs and natural people and critical vendors. With the early payment, we used a bump of COP 45,000 million for these vendors who supported the company, their investors, we selected all this chain of our ecosystem and 350 vendors, big and small, they continue their operation. So they kept employment, and we are happy for that. It has strengthened the relationship that we have with the vendors.

We have carried out the articulation so that all the providers keep operation at account with 100% of the possibility of their supply chain to work.

It's worth mentioning that solidarity the we have supported. We have used initiatives, generated options to support our presence, focused on the vulnerable population. The company has worked the reaction for COVID, hospital material, we have participated in the donation of more than 32 ventilators. We have done this in Valle, Antioquia, Tolima, covering it with ventilators through Grupo Argos; the hospitals of Vicente Lopez; the Fundacion Valle del Lili, through the Propacifico program; the Hospital Federico Lleras in Ibague, we supported with 8 beds.

Additionally, we handed over 9,000 food kits in La Guajira and Bolivar. We have handed over drinkable water. Additionally, we have delivered a robot for support to the test process. It eliminated a manual process to detect COVID. So now they can have 576 samples.

You can see in the slide how much we have reached and we wish we could do more. This company wants to support vendors, and we are committed to the development of the region.

This is a diagram of what we wanted to tell you what the company is doing to keep a sustainable operation with all the biosafety elements that allow our customers and employees to interact. We're going to start the reopening of our commercial venues and customer care. They are -- they have been arranged with the biosafety elements, so there's no restriction in the service. And I'd like to appreciate all the companies that have been paying in due time because that allows the government to finance the families that are in a difficult situation.

Now let us pass over to Esteban, so that he tells us about the results that are favorable, so that we have good track on what is to come for the year.

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Esteban Piedrahita Montoya, CELSIA S.A. E.S.P. - CFO & VP of Finance [3]

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Thank you, Ricardo. The detail of the general context of the industry, the operational results can be checked the reports we have issued in the investment website. And this location due to the changes we had in the operation in 2019, we're going to compare to the last quarter of the year that is the closest one to 2020. But in the report, you have the numbers of the quarter, 2019.

The income reached COP 928,000 million. The deconsolidation of the income associated to the assets of Plan5Caribe transferred to Caoba, and also the non registry of the retroactive resolution that we have in November last year, that represents 84% of the total income. And Central America contributes with 16%. Central America, the income by generation were COP 148,000 million. In Colombia, the income by generation added COP 228,000 million. The use of connection of network of grids was COP 74,000 million. And commercialization was COP 437,000 million. And other services, COP 21,000. Remember that the other operation services of the quarter is shown in the portfolio of new services that the company has developed.

The consolidated cost was COP 622,000 million, 3.8% above of the fourth quarter. The cost is increased in the business due to the payment of the availability at Tolima that are -- which -- whose ownership belongs to Caoba. The EBITDA was COP 330,000 million, similar to the last quarter due to Caribe company. And those are the property of Caoba Inversiones, have the retroactive income of COP 40,000 million. Colombia contributes with COP 290,000 million and Central America with COP 40,000 million. The financial expense was COP 96,000 million and the provision of taxes was COP 67,000 million. From the first quarter, we had an income of COP 87,000 million, and we discount the controller interest, it was COP 65,000 million.

Now speaking about the debt. The company closed the quarter with a debt of COP 4.3 million and leverage indicator of 3.2x net debt. The debt to the end at COP 3.8 million. It's important to mention that not all this debt belongs -- in Central America, for example, the quarter closed COP 385,000 million. This is an increase of $2.5 million compared to 2019 due to the development of Comayagua project in Honduras. Nevertheless, the debt in pesos in Central America increased COP 300,000 million due to the deferments of the exchange.

In Central America, the debt had a natural coverage-related income, that is in dollars, which the situation of leverage really hasn't changed in the quarter.

In Colombia, the debt passed from COP 2.55 billion in 2019 to COP 2.74 billion in the first quarter, that is COP 30,000 million [security] to building of central and COP 160,000 million belong to reimbursement to keep the financial -- due to the juncture of COVID-19. The company after the process of placement of the bonds doesn't have any due of the structure. So what we have is asset -- working asset that we have appraised before the operation or the ones we had before.

Up to 2022, we have 2 that we launched, to the third admission of bonds that belongs to government for the purchase of assets in Tolima.

The company, in general, keeps an average over 7. Our availability of cash is COP 284,000 million in Colombia and COP 219,000 million in Central America. So for the juncture, we have tried to keep flexibility. We have focused on the cash flow trying to keep the availability of the service and the availability of mechanical resources for the payment established by the national government. We have identified more than COP 360,000 million, reducing -- in cash flow reduction between cost and expenses as well as the investments for 2020.

Due to the juncture, to keep liquidity and flexibility, in April we disimbursed likewise, we worked with the current program that we have -- we are seeing the results. Thanks to this call placement, we paid COP 214,000 million from 2010. We have the necessary liquidity to all this month to become an engine of reactivation, either for customers and providers. The results of the company in the first quarter were positive, and they allow us to face the challenges. As Ricardo mentioned, we have a commitment with our stakeholders, that is important to reinforce the economy in the regions of countries we work.

And Ricardo, we will face the comment on the financial results.

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [4]

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Esteban, thank you very much. We are going to pass over to the Q&A. But before that, a couple of important news for the company. The first thing is that PCH San Andres. It took 2.5 years to build it, but it is now in operation. We are very happy. We were caught by COVID. We could have entered a month before to start working. The idea was to open it before, but we couldn't have the foreign technicians. So we had to not eventually. It worked very well. The plant is in operation. We have 24 megawatts for the generation of the country. So this is to close, we have also news about the plant that is ready. We are waiting for regulation issues to start operation, but we will add 10 more megawatts -- megabytes for -- we are going to continue working hard to keep the operation available for our customers to receive the support of the -- on behalf the company. We are always listening to them. We are supporting the national government with bigger measures. The important measures to keep sustainability of the utilities.

Let us open our session for Q&A, Gonzalo.

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Questions and Answers

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [1]

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I will answer the first question by Camilo. We are going to get ready for the logistics. of the Q&A session.

So the first thing he -- he's asking for the estimation of what we have lost. To understand better COP 24,000 collection in February would be the amount to finance for 36 months?

The answer, yes, that is the number for -- to be financed in 6 months. And I want to clarify that we modeled April in the worst scenario of collection, 0% and in the industrial and housing markets. And the collections has -- have been surrounding 35%. So the collateral is working very well despite the measures that have generated noise. The people are waiting to see they pay or not. But it's been better than what we hoped. So, Esteban, why don't you explain a little bit where this financing of this money comes from, and what is to come in the next quarter?

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Esteban Piedrahita Montoya, CELSIA S.A. E.S.P. - CFO & VP of Finance [2]

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Yes, as you said, the maximum, we estimate is COP 45,000 million per month. But as Ricardo mentioned, what we saw in April, where collection indicators positive. The market went over 60%. Non-standard market was -- we had a collection of 19%. So we have had the customers contributing with a payment.

And regarding the resources, along with the national government, we have basically 2 working lines for social classes 1, 2 and 3, 4. So in the social classes 1, 2, both working. Credit lines come from Findeter. The social class 1, 2 is the social class in which we're going to provide the customer with 0% interest for 36 months. But this matches with the conditions that Findeter is delivering. They provide us with credit for 36 months with 0% of interest rates, it is important because we're working in the decree all the mechanisms are guaranteed because the nation is going to take the payment of the customer. So we are going to use our liquidity immediately that we mentioned it as an example. We are like a bridge between the Findeter financing mechanism and the end customers. So we are like the bridge.

It's a kind of second floor bank. It is not for free, the financing. We offer the social class 1, 2 discount of 10% if they pay duly. So 2 things that for the customers, it ends up being a benefit of what we have estimated. Obviously, calculating the mean, the average for our customers of social class 1, 2 their bill is around COP 25,000. These -- for 2 months, if these customers abide to this differing the finance, they are going to pay COP 1,000. So it's very well handled to keep our payment culture ahead.

The social class 3 and 4, we are working with Findeter. Now the government says that the first part, we charge preferential rate calculated on the minimum of 2 rates, the cost of the financing or a preferential rate that they had suggested. After that, the President may decide it for social class 3 and 4. They assume the rate equivalent to the inflation and the government pays the rest. That is also with the resources of Findeter. The customers will see financing for 4 months and interest rate that is equivalent to the inflation and the rest is going to be paid by the government.

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [3]

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Perfect. So Gonzalo, let's go with more questions. And let's read all the questions we have in Zoom. We have 3 sources, the Q&A, the chat and the people who are raising their hands. So let me give the floor -- I'm sorry, for the ones we had coordination failures between the PowerPoint and the video, et cetera. So we apologize for the last minute changes.

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Gonzalo Velásquez, CELSIA S.A. E.S.P. - Communications Manager [4]

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Okay , let me give the floor to Katherine Ortiz, Davivienda Corredores has the floor now. Katherine?

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Katherine Ortiz Sogamoso, Corredores Davivienda S.A., Research Division - Equity Research Leader [5]

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Thank you for the presentation. Ricardo, I would like to understand. What can you foresee of the impact in terms of cash flow, due to the collection, the resolutions, the measures by the government? If you have heard or you have talked to the government of the possibility to delay the suspension of a collection for other -- some other months? And with that respect if Celsia, due to the debt, would have enough liquidity if this takes more additional months to the ones that were stated?

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [6]

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We are quiet with the collection because the government is helping us. A different thing would be if the government asked us to assume the payment. There are big companies in the market, like the Caribe, maybe they have restrictions in their financing. Some smaller ones have that situation. But for us, we have been something, not this horrible. But the situation that we have is that the government is providing us with the financing, guaranteeing the requirement on the behalf of the customer to assume that. So we have a privileged situation. And the government is doing that because the government knows they cannot leave people without proper utilities. So that is the measure that all the Colombian people is receiving. So we need to congratulate the government.

Based on that, we have covered the social class 4 and 5. It's 3% of the portfolio. And the nonregulated customer, they have very good portfolio behavior, collection behavior. We have designed special programs for the customers. So that win-win, where we balance the finance and other issues we have developed to provide them with the support they need. So we are happy, as Esteban told you. Esteban, if you would like to tell Katherine about our flexibility?

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Esteban Piedrahita Montoya, CELSIA S.A. E.S.P. - CFO & VP of Finance [7]

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As we mentioned, the structure of the company, our challenge was to reach COP 214,000 million of the bond. We are pending as the second payment of December, COP 440,000 million of resources for the quarter. And what we have done regarding the credit within the amount of the closing of the quarter is to have advanced liquidity, and that we are able to implement Findeter credit line so that we can access to what really we need. The rest of the liquidity due the juncture we need to lower to the levels we need.

The most important thing was the amount of the COP 200,000 million. We need to diminish the due amount that adds to the COP 200,000 million to generate the liquidity of the organization to have flexibility to be able to have different alternatives at the moment. The last question was about the deferring measure. We haven't heard anything about that, [Katherine], I'm sorry.

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Gonzalo Velásquez, CELSIA S.A. E.S.P. - Communications Manager [8]

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Let us speak about other question from Andres Moncada from BTG Pactual. The CREG issued a resolution on the activation of measures to ensure the provision of energy will be the effect of a compulsory service of (inaudible) resources.

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [9]

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Andres, well, let me tell you that this measure is a resolution that is aimed at trying to intervene the delivery of energy due to the situation of the dam. They are 30%, 31% of their capability. The trend, in the last 30 days, we are waiting for these dams to recover because we have had hydro costs last week. So the company is concerned of the condition of the dams. And in the end, the scheme tries to -- if you were paying the supply -- well, if you have energy power in the dam, and you use it for the delivery, this year is 15%, 20% available in the energy. If we use it and make (inaudible) be fine to control the delivery, this was issued within the auction of the delivery. So do not produce the energy, keep that in the dam. But that you were going to deliver, if you can deliver afterwards, it's going to be paid with the price of the current stock. There is a financial discussion. And the formula of the delivery was a discussion, too. But there are many things being discussed. We start all the guilds are gathering the requests of the stakeholders, but it is the payment of the energy that we could deliver later. I don't know, Esteban if you'd like to complement.

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Esteban Piedrahita Montoya, CELSIA S.A. E.S.P. - CFO & VP of Finance [10]

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Yes, I wanted to add that remember, we sold the duty free, we left a PPA option of the portion of the pricing, the context of the situation stated by Andres, it is an additional protection that the organization has an additional mechanism in the end. If we -- the PPA option will be activated in the first quarter, we did it in February. And the EBIT came from that option. That option is valuable for this month. It's an option for us to be able to sell if we reserve the energy, and we do not produce because that option is a good coverage. It's -- we wanted to keep coverage for our dams, while we have Tesorito. So that you remember that, that is there, too. It was used in the first quarter. And there is another question associated to these topics, too. So let us give the floor to [Roberto Paniagua]. Roberto, please, can you enable your mic?

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Unidentified Analyst, [11]

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First, congratulations for the accomplishments. And now speaking about the CapEx, the other thing is their current juncture, if you have scheduled anything about Tesorito for 2021.

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [12]

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Thank you very much for the social -- for the comment about the social achievements. We have the support from all the investors and companies. We are very happy for that. So speaking about the CapEx, that is a very important chapter. One of the first things we did in financial flexibility was to check our behavior in cost and expenses. We found an amount close to COP 60,000 million. Given by the juncture and many other things that we are defining and handling to provide with more flexibility and be ready, we will have that model. And we need to be ready for the worst and hope for the best. During this juncture, so COP 16,000 million is due to expenses. And CapEx is different. It is not that we are eliminating CapEx. We are deferring the CapEx due to different circumstances. The first one is projects for some customers, B2B. We say we're going to leave that for next year. The customers are aware of it because they have their own concerns. That is the kind of project.

The other projects, for example, are key to the company are the issues of solar farms, big solar farms. What we're doing is deferring basically, we have had problems in the supply chain. Many of these equipment came from China. So at the moment, that is generating delay in the product. So many of these projects that we had are to start in the mid of next year. So we have 2 other projects, the Tesorito project. That project, we are accelerating that project. We are going to start the project, we are in the final definitions of the teams. We have enormous advantages in this juncture. What we have achieved in the negotiation, the export banks of all the countries, especially the American banks, they are offering spectacular facilities to the buyers of those countries. So Esteban, why don't you speak about Tesorito?

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Esteban Piedrahita Montoya, CELSIA S.A. E.S.P. - CFO & VP of Finance [13]

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Okay. The largest projects, we do not see any delay in the big projects. It's a great CapEx, of course. We will see large problems. And when we were in the tendering of the Tesorito, all the vendors, no matter their origin, asked for payment schemes, giving 10% in the purchase order, 15% after 2 months, et cetera. So it was CapEx flow that was sorted. When we had the COVID juncture, we were the selection process, the 2 providers, leader both of them approached saying they have the possibility of offering changing their payments scheme. And the payment scheme was changed, about $1 million of CapEx payment this year, and it's 90% of the payment in delivery. We've modified everything, because they are worried about their industries. And that is part of the --

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Unidentified Analyst, [14]

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So when they are in operation, they will receive?

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Esteban Piedrahita Montoya, CELSIA S.A. E.S.P. - CFO & VP of Finance [15]

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Yes, when we are in operation, we pay 90% of the point of view of equipment, Roberto. Think of the financial flexibility that we had for the project, we -- I do remember, it was a $500 million related to equipment. So we had a favorable scheme. Also, we see the problem in the delay of the schedule of the project we have structured and we are handling very well. We are negotiating with the government. We have been able to go flat to the field. We haven't been able to finish the arrangement. So we continue with the teams. We're working in the engineering and the efficiency of the project with all the engineering. So that's...

(technical difficulty)

I believe we can include that in the project but it doesn't generate any benefit. Remember, the kind of contract and the delivery date. So that is covered already.

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [16]

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I'll take another question. We explained the investments planned. But the other thing is how we're going to accelerate the investment in Tolima. I believe we're not going to be able to accelerate the investment. The investment plan that we have delivered, we need to accelerate. And we did additional investments, but we would have to deliver them at the end of this year to be approved for the next year. We cannot modify those investment plans. So basically, that is -- we're going to present to improve Tolima for now, we are improving the investment plan.

So because of -- next, we had other question of the analyst, (inaudible) but she is raising the hand. So let us enable the microphone to [Tierra Mosquiera]

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Unidentified Analyst, [17]

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One of the questions we had was the one related to CapEx. But I have 2 additional questions. I would like to know if you can provide us with detail about the negotiations. You mentioned with the customer, nonregulated customers. And regarding that, to know if you have any scenario about the generation and distribution segment to see how it would be affected under the negotiation with the nonregulated customers.

I had another question with (inaudible). In the grace period of 2 months according to the regulations, would you receive any kind of help on behalf of (inaudible)? Or it is still the moment you defer, and those 36 months start running for the cases of social classes 1 and 2.

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [18]

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In the 2 -- in the period of 2 months of grace, will be April-May, the customer doesn't pay the first period of grace starts. So after the juncture, you start paying the deferred payment. So the effect is exactly the same. The people don't have a way to pay for it to extend both months with (inaudible). We are working with their liquidity. But we think (inaudible) is not included the 5 or the 2 months. We are working to serve these customers that have the options of their deferred bill. So we finish the process. We present to the customers who didn't pay and we would receive the resources of the customer.

And about nonregulated, it is a process, because the nonregulated is paying very well. We have interesting schemes. I think it is a competitive element that is interesting. So let's leave it there. Those nonregulated customers, we are helping them in an interesting way. I would add that what is not consumed, but they're not regulated, it is placed in stock. So from that point of view, there is certain natural coverage of the business.

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Gonzalo Velásquez, CELSIA S.A. E.S.P. - Communications Manager [19]

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So next, we'll give the floor to Nicols Erazo from CrediCorp.

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Nicolás Erazo Arias, CrediCorp Capital, Research Division - Analyst [20]

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I will go straight to the point. We saw the sales in Tolima had no behavior. Is this due to the situation with the extension of a lockdown, or it is due to the recurrent stational behavior. On the other hand, other aspect is that we see that the behavior they're not regulated. Demand had a fall starting April. How are you analyzing the behavior?

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Esteban Piedrahita Montoya, CELSIA S.A. E.S.P. - CFO & VP of Finance [21]

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This is a very delicate issue, it is the drop of that demand with the nonregulated, manufacture services are not operating that is generating a great disruption. The demand is falling 50%, 20%. In Tolima it is a nonregulated, small market. So it depends a lot on the tourism, because part of nonregulated is the hotel business, leisure business, the rice production business, manufacturing business in Tolima. They have kept their use with the exception of [Cemex]. So they are reactivating operations. So I believe that the amount of nonregulated, specifically in this quarter, you're going to see a complete drop. And we will have that situation of less consumption. But we hope that, step-by-step, it reactivates. And we hope it will be time B. We have a good amounts of demand of these big customers.

Now for us. For us, the situation how we support the customers. And they're nonregulated customer. On the other hand, our energy is higher completely. The prices are now COP 300, COP 350. So it should be kept like that. That would be the answer to Nicols.

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [22]

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Just let me add, Nicols, that we, in Tolima, did have nonregulated customers. Reality is nonregulated is generators that we -- they require energy. If we see comparison, we grew in the nonregulated, more than 40 gigawatts during the first quarter 2019 and the first quarter 2020, would be passed to 300 gigawatts and we are growing. But we do not break up that, the same we do with the regulated market because they have different dynamics defined by geographics. All the numbers aggregate, taken into account the geography. We offered for gigaspeed between 2019 and 2020, it is important to clarify, Esteban, because we see the growth of the amount of customers and energy, as explained by Esteban, the result of our commercial teams is very solid, and we have very good results with nonregulated customers.

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Gonzalo Velásquez, CELSIA S.A. E.S.P. - Communications Manager [23]

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[Juan Mayo] made a question but he's raising the hands. So let us give him the possibility to make a live question. So let us give him the floor.

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Unidentified Participant, [24]

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Three questions. One is related to the situation in Central America, if you can provide us with more details what's going on with the plans, thermal plants. If you had also the advancing the tenderings. And the other question is the amount of the net utility for the quarter. The third question is regarding the exchange rate, if you have evaluated the profitability of the wind and solar farms, take into account the CapEx of the project we launched to the imported equipment if you have assessed the CapEx, if you're going to make any change, you're going to do any change?

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [25]

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Let me take the first and second question. In May, we are hoping for projects, we assessed the projects to see what we had to do and how we had to react, particularly the projects of importing company like the wind farms and solar farms. Those are the ones we have an execution in construction, a lot of the equipment for the coming months is negotiated, is bought in process or in stock. So a lot of the portfolio didn't have the problem of the exchange rate. It makes a noise of 15% on a factor of equipment of 60%. So in the end, the cost increases 10%. But in the conversation with the vendors, it is better financial conditions and important reduction of the cost of the products due to the volumes that we are buying the supply equipment. We achieved interesting models. We see the profitability and feasibility of the projects and improvement of the cost and the financial schemes, we are very well balanced. So in the end, most of these projects are generating a balance to keep profitability levels. We like to be high and competitive in profitability.

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Unidentified Analyst, [26]

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So was there anything else about TRM?

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [27]

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Well, the negotiations in technology had very good costs. So in the long term, we need to be optimistic. We are at the juncture of the exchange rate. But also we try to keep some optimism that the exchange rate when we overcome the juncture, we come to normal -- we go back to normal levels. Maybe not 3,000, but we're going to have better moments. So we have positive programs for the project. So we need to be ready for the worst and hoping for the best. The projects are closing with the exchange rate over COP 4,000. That is the important thing. The situation of the thermic plants, we have [Las Minas] in Panama. We have a power contract that allows us to have certain stability for the next years, but with a detail, the fall of the price of the oil makes Las Minas to be a plant that is going out of the delivery. We have cheaper plants and gas. So they are putting us far from the delivery curve. Additionally, there is a big mining company that produces copper in Panama. They went out of production, and they used all their generation plants. It's very big, and they enter the delivery. So we are in that situation. You know that we hold 4 structural definitions for the second quarter of the year in that plant. And the operation of the other plant in Santander, Barrancabermeja, is a support plant with their gas contracts. That plant is not the most efficient one in the market. So for sure, there will be other plants entering before ours in Barranca. I don't know with if [written] amounts -- I can help with the EBITDA amount. We counted on the CapEx of the business. EBITDA is a very good proxy. Remember that the assets in the level 3 and 4 is a property of Caoba, it is not a property of our company. So for the quarter, the business in Tolima contributed with almost COP 26,000 million of EBITDA was a contribution of the operations, taking apart the Caoba issue that I mentioned.

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Gonzalo Velásquez, CELSIA S.A. E.S.P. - Communications Manager [28]

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Okay, very good. Next, Diego Buitrago from Bancolombia.

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Diego Alexander Buitrago Aguilar, Bancolombia S.A., Research Division - Energy and Gas Analyst [29]

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I'd like to know about 2 issues. First one is the regulation on the activities of regulation and transmission, the loss that have been issued have [learned the] possibilities for the market to defer payments. And I would like to know if Celsia is integrated in these businesses.

And in line with that, to understand the dynamics of the contracts because, as it was mentioned, the available on the dams and [Heidrick] contribution are undergoing a nonfavorable condition. So how could be the combined effect of the problems of generation after the juncture regarding the contracts? Also the negotiation of the contract because the demand is dropping. Customers don't need the power. So if you can explain on that.

And Caoba Inversiones, what we can hope for the rest of the year in Caoba Inversiones? We saw a quarter with -- I don't know if there were problems with the amount in the quarter.

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [30]

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So first, to answer the first question. First, we have a behavior in water contribution that is different from the other region of the country. And we have done very well. Last week, as an example, we had a contribution of 100%. We don't have big dams, so we don't have the pending cycles, we have lower dams. Our dams are relatively sensitive to short rain seasons. So we are privileged on that. We have problems in [Chica Ya]. They have dam in the cloud due to the conditions in the Pacific Coast. So we are watching for what is going to come. We have our forecast, they're higher in level, but we are living higher on rain. So we have any concern on the capability of generation in a scenario that we haven't foreseen. The forecast of neutrality, so we hope this is a volatile scenario that normalizes through the year. So we are very well protected.

We are integrated, and that is an advantage. And if there is affection, we have a component that provides us with less concern. Our business is predictable, more stable. So that is a general vision of the importance of (inaudible) integral comprehensive company that is powerfully GDP and a generation that is no -- not affected by hydrology problem. So we have had a very good hydrology this year.

Esteban, if you want to provide with any technical information.

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Esteban Piedrahita Montoya, CELSIA S.A. E.S.P. - CFO & VP of Finance [31]

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It's very well answered. Definitely, the fact that demand is falling, it allows us -- we can comply with the stock with more flexibility. Regarding regulation, we have a financing of 20% in the chain that is being structured. It is financing that belongs to everyone, all the generators. We have to finance 20% of the energy with fee traders. As you say, it depends on a bunch of finances because what it applies -- financing for others, we have a favorable financing. So we can say that we can end up on time.

We are very pretty happy with Caoba. Caoba, very well. In the quarter, we are compliant with the amounts with stable indicators. Caoba has an EBITDA of COP 33,000 million and a contribution of COP 33,000 million. So there was some adjustments in 2019. This is a society outside Celsia and our logic to close 2019 in Caoba. We have different timings. There were some adjustments of Caoba in the end for 2020. But it doesn't belong to the numbers of Caoba in the quarter. They were in line with the budget of COP 33,000 million in the EBITDA and a utility of COP 5,000 million

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [32]

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Perfect. Two additional questions that I will take, [Marisol Paredes Ochoa]. It's a customer. I wish you are an investor you said that you needed some consultancy because of the bill that you received was higher. So leave your number to contact you, but let me tell you that tariff of kilowatt in Tolima is the least that has increased in the country in the last 4 months. It has increased only 1.2%.

So let's see what happened in the consumption, maybe in the [Espinal], we had tariffs of other charges from other providers. There is another question. To explain the results of the first quarter, Esteban, because we have the main amount of the first quarter, but I'd ask Marcelo to communicate with [Natalia Marina] so that he receive the detail of the question.

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Esteban Piedrahita Montoya, CELSIA S.A. E.S.P. - CFO & VP of Finance [33]

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So a good name, Marcelo. So as we said in the closing of first quarter, we had COP 298,000 million, 16% from Central America. The other from Central Colombia. The business generation represents almost half of the consolidated income and the other half represented by transmission and distribution in the business of 500 each. The sales cost increased at 3.8%, COP 622,000 million. The consolidated EBITDA of the operations is COP 332,000 million. Colombia, with COP 990,000 contribution and the rest from Central America, financial expenses, COP 96,000 million and the taxes, cost of COP 70,000 million for this first part.

For utility, so utility less than COP 65,000. And the debt closes in COP 4.3 billion, over COP 3.8 billion compared to last year, fostered by the difference in exchange of the Central America debt in dollars.

Do we have any other questions?

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Gonzalo Velásquez, CELSIA S.A. E.S.P. - Communications Manager [34]

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Yes. There's an additional question to [Arigo Torres], (inaudible) Analytic. He had asked, was there a change in the utility to the juncture due to the juncture of COVID.

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [35]

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We are hoping for a similar result, maybe over what we had budgeted of income and utilities. Remember that this company, due to the COVID, hasn't stopped. We have been operating to ensure quality for all our customers. So there is the most complex issues of financial flexibility were handled by the addition of the months. We don't have any structural due and the risks we had for the point of view of the collection we have explained. The government has facilitated basically the financing lines and the resources for us to help the customers who will be the beneficiaries of the alleviation benefit. We are very happy with this situation. We understand it is a situation that is not typical due to the fact that it's a tool operation company at the moment. We have the situation and the results to help our customers. However, they need to overcome these months with help and flexibility on our behalf, the help we provide our small vendors, 350 small vendors that we are helping providing with resources, payment flexibility, creating a win-win condition in the long term in this juncture.

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Gonzalo Velásquez, CELSIA S.A. E.S.P. - Communications Manager [36]

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At the moment, we don't have any more questions in the chat. So we believe we can finish the teleconference. Esteban and Ricardo, I don't know if you want to make a final comment.

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Ricardo Andrés Sierra Fernández, CELSIA S.A. E.S.P. - CEO [37]

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On my side, I want to appreciate all of you to be here. We hope you are -- stay sound. We need to overcome this juncture. We need to contribute with our health and we have the team with the investors eager to help with any issue to be solved. Thank you very much.

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Gonzalo Velásquez, CELSIA S.A. E.S.P. - Communications Manager [38]

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Thank you very much. We have finish our conference. Thank you very much. Bye-bye. Jonathan, thank you for the logistics, partner logistics.