Mateo Ochoa: Good morning. I am Mateo Ochoa, a member of ISA Investor Relations team. Thank you so much for joining us for the 2026 Q3 earnings conference call for ISA and its companies. During the presentation, please submit your questions through the window that appears on the right side of your screens. Please include your name and the company you represent.
Mateo Ochoa: At the end of the conference, our management team will address your questions. Let us move on to the next slide. Joining us today are Patricia Castaño, Interim CEO of ISA; Jaime Falquez, CFO; Gabriel Melguizo, VP of Power Transmission; Natalia Pineda, VP of Road Concessions; Juliana Suso, VP of Institutional Relations; Sonia Abuchar, Legal Affairs VP; and other support teams.
Mateo Ochoa: Patricia Castaño, the Interim CEO of ISA, will begin providing an overview of the key events of the Q3 2026, followed by an explanation of the financial results led by Jaime Falquez. Next, we will have an explanation of the financial results by Jaime Falquez, and then we will return to Patricia Castaño for some closing remarks, and we will end with a Q&A session.
Mateo Ochoa: Let us move on to the next slide, please, and let us give the floor to Patricia Castaño.
Patricia Castaño: Thank you, Mateo. Thank you and the team for providing us this space. Good morning, everyone, and thank you for joining us. Today, we will be presenting our results as of the end of September, starting with a brief overview of our progress so far this year.
Patricia Castaño: This way, we can give you a context for those that join us for the first time and also those that have been with us before to remember data of previous reports. Let us move on to the next slide, please. This year, we have had major advances for the business continuity.
Patricia Castaño: Firstly, we have been awarded projects with estimated investments of $2.7 billion, among which we would like to highlight the following. In Colombia, we will unbundle stakes, very urgent works to enhance the national grid, especially in the Caribbean coast, for a value of $800 million. In Brazil, we have an unbundling of stakes in Manaus, in which there were 1,700 points of reais. That is COP 20,000 billion.
Patricia Castaño: We told you back then that this is an energy transmission line after direct current that takes the energy from Madeira in Mato Grosso to the Araraquara station in São Paulo, with a total of 2,300, 700 kilometers. Also in Chile, we were awarded the Ruta de los Lagos concession, which connects Río Bueno with Puerto Montt, with a reference investment of approximately $821 million.
Patricia Castaño: Secondly, I would like to underscore that during the year, we have carried out several transactions to increase our financial capacity, enabling us to leverage growth. One example is the recent issuance of preferred shares in Brazil for BRL 1.2 billion. That is about COP 750 billion, intended primarily to finance the Madeira project that I mentioned before.
Patricia Castaño: Next, which is very relevant for this year, has to do with the commitments we have already made that go hand in hand with the commitments we have gained and meeting the times and schedules we have, as I will share with you later in this presentation. As evident, our operations continue to generate value, and this positive cycle is reinforced when we grow through awards and allocation of strategic projects, and we make progress and transform those investments into recurring revenue and sustainable value creation for the future.
Patricia Castaño: I would like to end these highlights at the end of September with something that shows our ISA built during the 60 years, and it is that at the end of September, we participated in Climate Week, an international platform that connects leaders and accelerates initiatives to address climate change. This was held for the first time in Medellín.
Patricia Castaño: There, we shared our sustainable infrastructure model and our contribution to energy transition through different activities such as TED Talks, executive participation in panels on energy storage and carbon markets, and organization of the event of infrastructure for sustainable resilient energy transition in Latin America. As I said, the previous slide, during the first nine months of the year, we were awarded projects with estimated investments of $2.7 billion.
Patricia Castaño: On the other hand, I told you that we have been executing investments according to the timetable to turn them into revenue when in operation. Turning specifically to the Q3, we commissioned several projects at ISA Energia Brasil. We have 13 upgrades and improvements put into operation to enhance the reliability of our circuits, with a reference investment of $81 million. That is close to COP 285 billion. This represents an estimated annual revenue of $9 million, which is about COP 31 billion.
Patricia Castaño: In Colombia, projects totaling $29.6 million, which is about COP 103 billion, came along. We are talking about the installation of SmartValves at Termoguajira, which is a technology that allows us to maximize the capacity of the existing infrastructure, providing stability and control to the transmission system in the Caribbean region.
Patricia Castaño: In terms of the projects that we have for the Q3, when it came to the previous slide, we saw the Madeira in Brazil. On 31 July, ISA Energia Brasil completed the share swap transaction, and as a result, acquired 49% of the remaining of IE Madeira, transferring its stake in Garanhuns with a net investment of BRL 1,167 million, which is about COP 720 billion.
Patricia Castaño: That is, this operation allowed ISA Energia Brasil to consolidate 100% of IE Madeira and consolidate its position in an asset that is quite attractive in the company's strategics, because it is the first project that uses direct current instead of alternating current, which is known as the HVDC technology that minimizes energy losses and really is the most relevant technological bet we have now.
Patricia Castaño: Also in Brazil, ISA Energia was awarded 15 reinforcement projects, one upgrade, and one connection contract, with a reference CapEx total of $152 million, or COP 531 billion. In Peru, ISA REP was awarded an expansion project with an estimated investment of COP 8 billion. Let us move on to the next slide. With the various transactions as of the end of September 2026, the investment commitments made through 2030 totaled COP 28.1 trillion.
Patricia Castaño: 85% of the investments through 2030 will be allocated to power transmission, 13% to the rail business, and 2% to telecommunications. The investments consist of different tenders. We have calls for proposals, awarded expansions in each of the countries where we operate, as well as optimizations, reinforcements, and improvements to the ISA Energia Brasil grid and equipment replacement, among others. Of these investments, 47% will be allocated to Brazil, 28% to Colombia, 15% to Chile, 8% to Peru, and 2% to Panama.
Patricia Castaño: If we look at these investments in terms of projects, today, we are advancing to build 37 projects distributed in 34 power transmission projects and three road projects, which will total more than 4,500km of circuit for the transmission business and interventions in 296km of roads. On the right-hand side, you can see the annual estimated projects to execute these projects.
Patricia Castaño: We have to clarify, of course, that the figure that you see of 2026 includes investments made between January and September, totaling COP 5.2 trillion, which we will explain on the next slide. Let's move on, please. Now, let's look at the execution of our investments in Q3.
Patricia Castaño: During Q3 2026, we executed investments totaling COP 2.1 trillion, up 24% compared to Q3 2025. The chart in the middle shows the breakdown of consolidated CapEx by region, and the one on the right shows the breakdown by business segment. 88% of investments are in the power transmission business, 11% in roads, and 1% in telecommunications.
Patricia Castaño: These figures include power transmission projects like Itatiaia and Serra Dourada in Brazil, Kimal-Lagunas in Chile, and La Loma-Sogamoso in Colombia, as well as the construction of the Panamericana Este Highway in Panama and Orbital Sur Highway in Chile.
Patricia Castaño: Let me end this part of my talk mentioning what Gabriel Melguizo will talk to you about, because several of the projects, like the SmartValves at Termoguajira, and a significant portion of 28% of our investments in Colombia, have one thing in common, the Caribbean region. It's really an area that's become strategic and critical for the country, and that's why I'd like to dedicate some time to it. Mateo, let's look at the next slide, please, and let's listen to Gabriel Melguizo, who is our leader of the transmission area.
Gabriel Melguizo: Thank you, Patricia.
Gabriel Melguizo: I'd like to tell you with regards to the Caribbean region, this today is the country's energy hub. The demand in the Caribbean region has been growing more than 7%, and it holds the greatest potential for renewable energy generation. But really, that potential can only be realized if there is robust transmission grid, and that's where ISA has been building for years. Today, more than 35% of our infrastructure in Colombia is set in this region, with assets nearly $2 billion in operation.
Gabriel Melguizo: Of that total, about $500 million correspond to projects set to come online from 2021 to 2026, including Cerromatoso-Chinú-Copey, Copey-Cuestecitas, and the new El Río substation, as well as the SmartValves at various substations. Not only that, we're accelerating. With more than $1.2 billion, the region accounts 86% of our portfolio currently under construction in Colombia.
Gabriel Melguizo: That is 18% of our consolidated portfolio of ISA, including synchronous compensators that provide 1,650 MVArs of stability to the road. This stability will allow us to integrate more renewable energy from the north of the country, make the most of our resources, and ensure Colombia's energy supply. What is coming next is even bigger.
Gabriel Melguizo: We expect more than $1.8 billion in upcoming projects, including the Colectora 2, which is Colombia's first high-voltage direct current project, and renovation and repowering work at key substations such as Barranquilla, Cartagena, Copey, and Sabanalarga. In all of them, ISA will indeed play an active role. All of this means that we have a more reliable and resilient system capable of meeting growing demand and accelerating the energy transition, and it is ISA's long-term commitment to the Caribbean and to the country.
Gabriel Melguizo: With this, I will wrap up and move on to the financial section and give the floor to Jaime Falquez.
Jaime Falquez: Next slide, please. Gabriel, thank you so much. Good morning, and thank you for joining our Q3 earnings call today. Let us move on to the next slide, please. Let us begin this financial chapter by highlighting the sound operating performance and financial results impacted by the revaluation of the Colombian peso against the regional currencies when you consolidate all the balances in this currency.
Jaime Falquez: As Patricia mentioned, we continued to invest at a significant pace in line with the 2040 strategy, reaching an investment of COP 2.1 trillion during the quarter, up 24% compared to the same quarter of the previous year. We continue also to actively manage our debt portfolio, always, of course, seeking to optimize financing terms and the company's cash flows.
Jaime Falquez: We are talking about those from our bonds in Brazil. Similarly, we have undertaken transactions to increase our financial capability or capacity to leverage growth, and this is very relevant, especially to serve the challenges with our 2040 strategy. For instance, the recent issuance of preferred shares in Brazil that total BRL 1.2 billion. Next slide, please. Looking at this slide, we are really looking at the EBITDA and net income for the first 9 months of the year.
Jaime Falquez: For this period, the EBITDA and net income for the first 9 months show the macroeconomic variables, especially the appreciation of the Colombian peso against regional currencies. Another important element that we can see on these results are the provisions for the RBSE account, which amounts to about COP 257 billion so far, 2026, and we have a cumulative total of COP 750 billion.
Jaime Falquez: Although when you make a comparison, you do not see a big difference because there was a big impact in 2025 and 2026, it is a relevant figure that has been reflected on the net results of the company. Likewise, in 2025, we experienced some special events in Brazil, primarily related to the update of the form of payment for the financial component of the RBSE, which is the basic grid of the existing system.
Jaime Falquez: This event reduced revenue for that period, but has no impact on the 2026 results. On the top, you can see the EBITDA, which is COP 7.1 trillion accumulated for this year as of September, and this represents an 8% increase compared to the same period in 2025.
Jaime Falquez: The increase in EBITDA is attributable to projects coming online, which we have been executing, the stronger growth in the contractual escalation clauses to which our revenue is indexed in the region. Also, the revenue from the acquisition of Madeira in Brazil on favorable terms, and this is new and is reflected in this period, given this acquisition on favorable terms.
Jaime Falquez: This means that we paid a value below the company's valuation, which is a benefit that is shown in the results of this period, and also is reflected because of higher construction profits after the developments of the projects that we are executing in the region. When it comes to the breakdown of the cumulative EBITDA by segment, 81% of our EBITDA focuses on the business of power transmission, 16% on transportation business, and 3% on the telecommunications business.
Jaime Falquez: On the lower right corner of the slide, we can see the performance of the net income, which stood at COP 1.8 trillion, reflecting a 3% decrease compared to the first nine months of 2025. Excluding the impact of currency translation and the special events I mentioned, the effect on net income would be 1%, so practically it is similar in terms of magnitude of COP 1.8 trillion.
Jaime Falquez: The change in net income is explained by two things. First, the increase in the EBITDA, and this is offset by a lower net financial income, as well as the higher financial expenses that we are financing our projects with in Brazil, and the monetary correction of the same debt. This is mainly because of the higher inflation that we have seen in the region, and we have debts indexed by the USD and CLP and the IPC in Colombia.
Jaime Falquez: In terms of the breakdown of our net income by country, Colombia, Chile, Peru, 20% about each, Brazil 34%, 6% in Panama and Bolivia. You can see that our operations are still creating value, and most importantly, we are advancing in the development and reaching our 2040 strategy. Next slide, please. In terms of the balance sheet, as of the end of September 2026, we can see our sound financial position.
Jaime Falquez: Where do we see this? Assets totaled COP 81.7 trillion, up 7% compared to what we saw at the end of 2025. This is primarily reflecting the consolidation of Madeira, progress made in the projects that we are building and that we told you in the previous slides about, the concession revenue generated during the period, and the recognition of the intangible asset related to Ruta de los Lagos in Chile.
Jaime Falquez: This is a new concession that we incorporated to our portfolio. It is in operation now with financing obligations in the future that we will reflect in this quarter, the obligations that we have to execute the future CapEx and the intangible assets that we will receive from this concession. In terms of liabilities, these increased by 11% compared to what we saw at the end of 2025.
Jaime Falquez: This is mainly due to financing transactions and the consolidation of Madeira. We have entirely incorporated it in our balance sheet, and the recognition of liabilities related to the Ruta de los Lagos concession. You can see the dividends that we declared in 2026 as well. This is partially offset by the translation effect of the consolidated figures into Colombian pesos.
Jaime Falquez: In terms of equity, as of the end of September this year, this stood at COP 17.2 trillion, down 4% due to the dividends that were declared by the general shareholders meeting, which moved from equity to liability, and the currency translation effect, which was partially offset by profits generated during the year. Next slide, please.
Jaime Falquez: As always, we share with you how we managed debt, which is fundamental for the growth and to achieve the strategy. As of September, the consolidated financial debt stood at COP 34.7 trillion, a 2% increase compared to the end of 2025.
Jaime Falquez: We are showing in this figure the net change in debt of COP 759 billion, and this is primarily attributable to disbursements made to finance the projects, the amortizations in accordance with the payment schedule, and the effect of currency conversion, given the appreciation of the Colombian peso against the US dollar, the Chilean peso, and the Brazilian real, mainly.
Jaime Falquez: The main transactions carried out were, first, in Brazil, ISA Energia Brasil carried out its 23rd debenture issuance, which are bonds in the capital market of Brazil, to finance projects. We are talking about BRL 1.5 billion. Also, when we had the share uncrossing process between IE Madeira and Garanhuns, this was carried out, and as a result, loans totaled BRL 535 million. In Colombia, through Transelca, we received a loan disbursement of COP 80 billion to support the company's financial and operating management of this subsidiary.
Jaime Falquez: In Peru, Consorcio Transmantaro received loan disbursements to keep financing its capital investments that we have been making in this country. While in Chile, the Kimal-Lagunas project received two disbursements totaling almost $15 million to advance the project's implementation. In Panama, we also made developments.
Jaime Falquez: Ruta del Este keeps advancing in its rehabilitation work, and the syndicated loan that we had that ended, it totaled $56 million so far this period. In terms of the gross debt to EBITDA ratio, we closed the period with an indicator of 3.6x, and this is within the range suggested by Fitch Ratings for investment grade entities. Also, our operating cash flow to net debt ratio was 23%, also very consistent with the benchmark metrics for a Baa3 rating, according to Moody's.
Jaime Falquez: In addition, the consolidated average maturity of ISA's debt is nine years, in line with the long-term nature of the company's businesses. Something else, the maturities of our debt are below 10% of total debt, closer to 7%. This is a message that is important because we have controlled the liquidity and refinancing risks.
Jaime Falquez: More than 90% of our debt has maturities in terms higher or longer than one year. Next slide. When it comes to the performance of ISA stock, as of the end of September, the stock rose 16%, reflecting a very positive market performance. Something that we monitor a lot, and it is quite relevant, is the stock's liquidity, which continued to strengthen, and this liquidity rose 27%. This is important for us because we moved from a daily trading volume of COP 7,665 million in 2025 to COP 9,740 million in 2026.
Jaime Falquez: At the end of September, the stock price stood at COP 28,500, ranging between COP 24,720 and COP 36,000 during the year, with an average of COP 29,344. On the closing price, the company reached a market capitalization of about USD 7 trillion. Also, we have included some stock market indicators comparing ISA with several peers in Latin America. ISA trades slightly above its Latin American peers, reflecting the market's recognition of the quality of its assets, the stability of its cash flows as well. With this, I conclude the financial section. I will turn the floor over to Patricia, who will share some closing remarks.
Patricia Castaño: Thank you, Jaime. I will wrap up this call summarizing the main takeaways from what we have discussed today. We remain focused on ISA's growth and are making progress on executing the investment commitments we have already secured for USD 8 billion through 2030.
Patricia Castaño: We are executing our investments plan, adding annual revenue from new projects coming online and new awards to maintain a dynamic pace of growth. We reaffirm our commitment to the Caribbean region through strategic investments that will strengthen the reliability of the electric grid, enable the integration of renewable energy, and provide the flexibility required in that region. The consolidated financial results reflect a sound performance, with figures impacted by the appreciation of the Colombian peso against other currencies in the region.
Patricia Castaño: ISA stock has performed very well so far this year, with a 16% gain as of the end of September. We continuously manage our capital structure, seeking the best conditions to leverage our growth. With this, I would like to thank you so much for joining us today. Now we can begin our Q&A session.
Mateo Ochoa: Patricia, thank you. Let us begin our Q&A session.
Mateo Ochoa: Let us begin with the first question we received from Juan Pablo Ramirez from Banco Davivienda. He says, "Thank you for the meeting. Has the group received resources, or do you expect to receive money from the last 2 months of 2026?" Pablo Franco, could you help us, please?
[Company Representative] (ISA): Good morning, Mateo. Yes, Juan Pablo, thank you for your question. Indeed, as of September 2026, the debt is COP 656 billion. Of these, COP 110 billion is Pretoma, and the rest is the post. It is important to keep in mind that this figure is provisioned, and still, the magnitude of the exposure does not commit the stability of ISA.
[Company Representative] (ISA): ISA constantly is in contact with the ministries and with the important players of the sector and actively participates to build solutions to serve the short-term liquidity needs and the accumulated debt that we mentioned, and that for the sector is at COP 4 billion. Now, it is also important to keep in mind that we have been managing in a determined, committed way with the authorities, especially with the Ministry of Mines and Energy, who will provide the resources of COP 300 billion that have been transferred to the fund.
[Company Representative] (ISA): We foresee to provide additional resource of COP 1.2 trillion, for a total value of COP 1.5 trillion that the government will be transferring to the corporate fund. It is also important to keep in mind that these resources will mainly be used to serve the immediate pressures of liquidity that we have with thermal generators.
[Company Representative] (ISA): So, there is no direct impact on ISA, but you can say that it is important for the creditors of the sector. Also, ISA is still carrying out the legal process for its assets, and it participates to build different public policies. Especially, we are including some initiatives for the financial sustainability of the sector with the new development plan. The situation of Air-e is a big challenge for the electrical sector and will require sustainable structural solutions to meet the demands with the creditors.
Mateo Ochoa: Pablo, thank you. Pablo, thank you for your answer. Let's continue with the second question, also from Juan Pablo Ramirez from Banco Davivienda. "With the El Niño phenomenon that began, the country's grid, especially in the coast, what challenges and what investments should be made?" Thank you, Gabriel Melguizo, for your help to answer this question.
Gabriel Melguizo: First, Juan Pablo, I would like to greet you and thank you for your question. Since April 2026, we have been executing a specific plan to mitigate the risks on our infrastructure. This plan is structured on three pillars: preparation, maintenance, and contingencies.
Gabriel Melguizo: The plan includes the evaluation monitor of critical assets to maintenance, monitoring the infrastructure with satellites, strategic availability of mobile stations, spare parts for emergencies, air support to review lines, and overall reinforcements for security and health in the work. These measures complement the work that we constantly do at ISA to guarantee a reliable transmission on a long-term basis with high technical standards.
Gabriel Melguizo: Now, Juan Pablo, beyond the actions that ISA carries out to face weather phenomenon like El Niño, has to do with an integrated or comprehensive management of the system to look at our infrastructure projects and to look at the new energy sources, especially renewable, so Colombia can have a reliable and accessible system in critical conditions. Thank you, Juan Pablo.
Mateo Ochoa: Thank you, Juan Pablo, and thank you, Gabriel, for your answer. Next question is also from Juan Pablo, from Banco Davivienda. And he says, "Considering that the EBITDA grew but the net income didn't, what is the strategy of hedges when it comes to the volatility of regional currencies on a short-term basis? What do you plan by the end of the year?" Jaime Falquez, please give us a hand with this question.
Jaime Falquez: Thank you, Mateo. Thank you, Juan Pablo, for your question, and it is quite relevant.
Jaime Falquez: I would answer this question with several messages. First, our hedges strategy is comprehensive, regional, and cross-sectional. Our first hedges line is natural. In each of the countries where we operate, we have levels of debt and currencies managed according to the revenue. Our debt is treated in the same currency, seeking profiles on a long-term basis in Brazil, in reais, in Chile, in dollars, and UF, if it is roads in Peru, in dollars, in Colombia, pesos and dollars, depending on our business composition.
Jaime Falquez: And this is very important because there you can see the cash flow generated. We have a hedge in force. We have, of course, the exchange rate when we take all these currencies and place them in pesos. There is a variation in time. Now we see a negative effect. Last year, it was neutral. 2022, 2023, it was positive.
Jaime Falquez: We estimate that for next year, the effect will be positive when it comes to the estimates that we are making of the different types of exchanges. This has to do with natural hedges and exchanges. We also have specific hedges, especially for the projects in Peru, in Chile, and Panama. We are making hedges from the moment in which we are awarded the businesses to have lower volatility of the rates in each of these countries.
Jaime Falquez: Another important element to keep in mind is diversification. 80% of the EBITDA is generated outside of Colombia, and this generates what we were saying. In terms of cost of debt, we have a cost that is consolidated in dollars, quite competitive. It could be below 7%. This is a consolidated exercise that we make in dollars, with a mean of 9 years.
Jaime Falquez: We hope to continue with this competitive, the investment grade of ISA also allows it to have access to all type of financing sources to guarantee the sources that are more competitive to finance the growth of the company. Thank you.
Mateo Ochoa: Thank you, Jaime. Next question from Simon Diaz. He is joining us from Protección, and he says, Could you provide me an update on the businesses of ISA in Peru? Gabriel Melguizo, please give us a hand with this question.
Gabriel Melguizo: Simon, good morning. Thank you for your question. Peru continues being a strategic region for ISA. Today, Peru contributes 19% of the net consolidated profit of ISA and 16% of the energy business. Also, we are advancing in projects to expand with commissioning between 2026 and 2028 with several projects that we have underway in Peru. Recently, we were awarded the extension 22, and we continue developing the project.
Gabriel Melguizo: It is a very long name, let me see. Tocache-Celendín-Celendín-Piura, which we mention as TOCESEPI, and we continue with this project, which is the largest energy transmission project built in Peru, and we advance in this project with the licensing, contracting, and permits. We have other opportunities close in time and in value, close to USD 305 million in Peru. So, Simon, overall, we have a sound position in Peru and a relevant growth portfolio in Peru. Thank you for your question.
Mateo Ochoa: Thank you, Simon, and thank you, Gabriel. Let us continue with the next question for Juan Pablo in Banco Davivienda. The transmission operation in Brazil, what is its market share of ISA, and is there regulatory change projected by the regulator in Brazil, and what can you tell us about that? Pablo Franco, could you please help us with this question?
[Company Representative] (ISA): Pablo, thank you for your question.
[Company Representative] (ISA): Sure, Brazil is a major market. Brazil, we have 18% there. 11 is ISA Energia Brasil, and the rest is with our share at ISA, which is shared with the MME, which is the state-owned company, Engie Namidais, and it is close to 51% of the EBITDA of the energy business. When it comes to the regular or periodic revision of the tariffs, by 2028, there were positive results for the company that were presented in the previous call.
[Company Representative] (ISA): The next revision is for 2028, 2033, and the company is preparing with value propositions to review and define the energy agency or MME. So currently, we do not see any special regulatory changes with any material impacts on the company, and we, of course, are still constantly monitoring the regulations and any types of signs of remuneration there.
Mateo Ochoa: Pablo, thank you, and Juan Pablo also. Thank you for your question.
Mateo Ochoa: Let's continue with the next question from Andres Duarte from Corficolombiana. "Please explain the increase of 7.5 basis points in the tax effective rate this year and the prior quarters."
Jaime Falquez: Thank you, Andres, for your question. The main factor that created this movement in the effective rate of tax in the quarter was the combination with IE Madeira. Here in Colombia, we recognized the tax in the consolidated. We recognize the deferred tax from the transaction.
Jaime Falquez: This has an impact only in this quarter. This will be aligned again with our effective tax cost in the next months. In addition, in Colombia, we recognized the Impuesto al Patrimonio, which was established for this year with an impact of about COP 46 billion, of which COP 15 billion were reflected also in this quarter. These are effects. They are not related to degradation of the operations.
Jaime Falquez: Particularly, this has to do with the Madeira transaction, and this gave the major change in this rate. Thank you.
Mateo Ochoa: Thank you, Jaime. Let's continue with the next question, also from Andres Duarte, who says, "You talked about electrical self-generation and storage. Self-generation for Ecopetrol, will ISA be in charge of this for Ecopetrol to lower its cost?" Patricia Castaño, Interim CEO, please give us a hand with this question.
Patricia Castaño: Thank you, Mateo, and thank you, Andres, for your question. As you know, Andres, and we have told everybody here at ISA and the companies, we are constantly analyzing new opportunities, of course, related to the strategy that we have, and we also test them regularly. Right now, what we can tell you is that our main focus is still on the energy transmission business. We have not announced any specific self-generation businesses for Ecopetrol.
Patricia Castaño: In any case, any opportunity will be evaluated under the strategic, regulatory, and of course, if they create value. So, Andres and everyone, any relevant decision will be shared with you on a timely basis through the proper channels.
Mateo Ochoa: Thank you, Patricia. Next question from Laura Sofia and Laura Fajardo from Acciones y Valores. "The consolidation of IE Madeira contributed to the EBITDA. What is the annual recurrent contribution of IE Madeira, excluding special effects, and how do you expect this to be attributed for the profit of the shareholders of ISA?"
Jaime Falquez: Laura, thank you for your question. The main effect that we have that was special and we recognized was the gain by combining the businesses, talking about COP 200 billion.
Jaime Falquez: Excluding this effect since August, we will incorporate in our results the recurrent operation of Madeira, and we are saying that Madeira has an annual RAP of BRL 696 million and a regulatory RAP of BRL 660 million. This is for the 2026 and 2027 cycle. So, this is what we will see ahead. In terms of the consolidated, since it was only consolidated in August, in this quarter, it contributed COP 37 billion of the EBITDA, but ahead, it will continue with the normal operation, and we will be reflecting the effect that I told you on a monthly basis. Thank you.
Mateo Ochoa: Thank you, Jaime, and thank you, Laura, for your question. Let's continue with the next question for Juan Pablo from Banco Davivienda.
Mateo Ochoa: With the acceleration of investments and the executions made in this quarter, which are the milestones of commercial commissionings of the mega projects awarded in Colombia, Brazil, and Chile for the coming months? How do you project to defend the ROE of 13.5% today with this higher level of leverage? We will answer this with Juliana Suso with the first part of this question. Let me remind you, what are the milestones with the commercial commissioning of mega projects awarded in Colombia, Brazil, and Chile for the coming months?
Gabriel Melguizo: Juan Pablo Ramirez, thank you for this question. Let me answer half of your first question, as Mateo Ochoa said. First, we have a robust portfolio of projects that will be commissioned between 2027, 2028.
Gabriel Melguizo: In Colombia, we can highlight projects like La Loma-Sogamoso, or Sola, the project Pasacaballos, Suria as well, and the reconversion of Sabanalarga, which will provide a big contribution to the reliability in the Caribbean. These projects have relevant milestones in 2027. If we look at Chile, there are projects underway with Kimal and the expansions of ISA InterChile in 2027.
Gabriel Melguizo: The project that will be commissioned in that period would be Kimal-Lagunas, which we call KILA, and the project Kimal-Lo Aguirre is still in the horizon of 2029. The projects look like the Kimal-Lagunas and the other, Lo Aguirre, which is of direct current, which will be in operation 2029. In Brazil, we are still executing 172 reinforcements and connections to the grid. These are actions to revamp equipment to reinforce and modernize the existing equipment, and this is very relevant.
Gabriel Melguizo: In addition to the projects, Itatiaia and Serra Dourada are also with milestones in 2027 and 2029. So this is an answer that kind of covers what you asked about. Now let us give the floor to Jaime Falquez to answer the second part of your question regarding the ROE.
Jaime Falquez: Thank you, Gabriel Melguizo. Here, the big message related to the return on investments is that we maintain, and we will continue to maintain, our discipline of capital for new investments. We have an investments portfolio that we are executing, we are financing, and we still, of course, have challenges when it comes to the strategy to keep growing and serving not only the needs with the energy transition, but also with the interconnection of the different regions. So we do have capital disciplines with new investments seeking that all these businesses will be profitable above the capital cost.
Jaime Falquez: A prudent management of the debt that will allow us to structurally have our investment grade. We know that our rating is also hit by the Colombia and sovereign, but our figures, our fundamentals, are still to have an investment grade and keeping debt levels that are reasonable and go hand in hand with their business. Lastly, keeping a liquidity and a hedge, natural hedge, especially in each country where we operate, that will allow us to guarantee that the returns go with the growth. This is like the strategy that we will follow to always have the returns that we are seeking.
Mateo Ochoa: Thank you. Jaime Falquez, thank you. Let us continue with the next question from Ricardo Sandoval from Bancolombia. The appreciation of the Colombian peso benefits the ratios of leverages, like the debt-EBITDA, or is it neutral? Could you give us some background on this? Thank you. Jaime Falquez, to give us a hand with this question.
Jaime Falquez: Ricardo, thank you for your question. When it comes to consolidated, it does have an impact. When you move the debt and the EBITDA of the different currencies to Colombian pesos, clearly there is an impact, either positive or negative, regarding the ratios. It is also something that the rating firms know of, keep in mind, and identify when there is a ratio movement.
Jaime Falquez: Is it from the conversion or structural? Because of the debt, that is why we insist on keeping the discipline on the functional currency in each of the country where we operate, and to keep a margin of tolerance. So in Colombia, we can compensate these movements, these exchange movements.
Jaime Falquez: But indeed, when we consolidate this, we will always have these movements, especially because the debt will follow the performance of the types of exchanges at the end of each period, and the EBITDA will collect the performance of that average exchange, and that gives way to a structural shift when you consolidate the results. Thank you.
Mateo Ochoa: Jaime, thank you. Let us continue with a question from Andres Duarte from Corficolombiana. "Do you foresee applying the technology HVDC in Colombia according to your current expansion plan?" Gabriel Melguizo, VP of Power Transmission, please help us.
Gabriel Melguizo: Thank you, Andres, for your question. Firstly, within the context, I would like to remind you that the direct current technology is not new for ISA.
Gabriel Melguizo: Once we built and operated and maintained, we own 100% of what was the connection, the largest direct current connection, the largest of the world, which has the generation from Madeira to Araraquara in Sao Paulo, with almost 2,400 kilometers long. That circuit was built by us. We operate it, and now we own it 100%. Also, we are now building in Chile a project of direct current, which is the largest transmission project in Latin America.
Gabriel Melguizo: It is almost of $2 billion that we are building in a consortium with Transelec in Chile, and CSGI, which is one of the, I would say, the second-largest Chinese company with a vast experience in direct current. Just for you to know, we have it, we know how to work with it, and we expect to do it in Colombia, where there are two projects that will arrive soon.
Gabriel Melguizo: One is Colectora 2. We mentioned it before, and this project will be in direct current. It is part of the expansion plan 2022-2036, and will allow 3,000 megawatts of renewable energy from La Guajira to the central and south of the country. This is powerful. It is a project that will have 1,500 kilometers long from northern Guajira to about the center of the country, Puerto Berrío, more or less.
Gabriel Melguizo: The technical definitions are still pending to be defined by UPME, and then we will have the tenders, but we will be building it as well. Logically, it is subject to tenders. And the second experience that we have in direct current, Andres, in Colombia, will be the Colombia-Panama interconnection project, a project that we have been doing with ETESA, and we expect to be developing by the end of 2029.
Gabriel Melguizo: We are very optimistic, and we are working on these two projects. Thank you.
Mateo Ochoa: Gabriel, thank you for your answer. Let us continue with a question from Andres Duarte from Corficolombiana. "Up to now, how do you see the change in the country's energy direction change? Will this affect ISA's businesses in Colombia? Will you have to review the strategic plan with this shift?" Patricia Castaño, please.
Patricia Castaño: Thank you, Mateo, and thank you for the question as well. As I said before, the revision of our strategic plan is also always subject to these evaluations made of our surroundings and the trends. Year after year, with our board of directors, we make a check of what we have in our strategy to see if it is enforced. Specifically regarding what is done in Colombia, we see great potential.
Patricia Castaño: Gabriel Melguizo already mentioned some of the projects that we are waiting for to be determined and that will be out to be in bids. For instance, we are focused on, of course, energy transmission and in the geographies where we operate. Colombia is one of these major focus with which we hope to meet our plan as it is. Will it require to be reviewed?
Patricia Castaño: Depending on the pace of these tenders and the trends that we see in Colombia and other countries, the big energy demand that we see and in which we are experts. If there are changes, it will be an uptrend, more investments in Colombia and where we operate, and we expect to expand our investment capacity. Logically, the trend and the variables that we see is towards growth.
Mateo Ochoa: Patricia, thank you for your answer, and with this, we end the conference call of earnings of the Q3 of ISA and its companies. Thank you all for joining us, for your questions, and we will see you next time. Thank you.
