Q1 2015 Gas Natural SDG SA Earnings Call
May 06, 2015 AM CEST
GAS.MC - Gas Natural SDG SA
Q1 2015 Gas Natural SDG SA Earnings Call
May 06, 2015 / 08:00AM GMT
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Corporate Participants
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* Luis Calvo
Gas Natural SDG SA - Head of IR
* Rafael Villaseca
Gas Natural SDG SA - CEO
* Carlos Alvarez
Gas Natural SDG SA - CFO
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Conference Call Participants
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* Fernando Garcia
MainFirst - Analyst
* Alejandro Vigil
Cygnus Asset Management - Analyst
* Sonia Ruiz De Garibay
BEKA Finance - Analyst
* Javier Suarez
Mediobanca - Analyst
* Jose Ruiz
Macquarie - Analyst
* Javier Garrido
JPMorgan - Analyst
* Jorge Alonso
Societe Generale - Analyst
* Manuel Palomo
BNP Paribas - Analyst
* Alberto Gandolfi
UBS - Analyst
* Martin Young
RBC - Analyst
* Hugh Wynne
Bernstein - Analyst
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Presentation
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Luis Calvo, Gas Natural SDG SA - Head of IR [1]
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(Interpreted). Everyone, welcome to the event, the presentation of Gas Natural Fenosa results for the first quarter of 2015. This presentation will be done by our CEO, Mr. Rafael Villaseca; together with the CFO, Mr. Carlos Alvarez; and the Director of Strategy, [Jon Lanutta].
After the presentation we'll have questions and answers. We'll begin with the room and then the questions that come to us through -- on the telephone and through the Internet.
So without further ado, I'm going to pass the floor to our CEO, Mr. Rafael Villaseca.
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Rafael Villaseca, Gas Natural SDG SA - CEO [2]
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(Interpreted). Good morning, everyone. Thank you for being here, physically or remotely, at this presentation of results for the first quarter of this year. The agenda today, first of all we're going to talk about the key figures, then highlights, operational and economic relevant to aspects, financials. Then we'll do an analysis of operations, the different lines of business. And then we'll have the questions and answers.
To begin with the main -- the key figures, the indicators are on this chart. The net income has grown by 0.5% and has reached EUR404m. The EBITDA of the Company has grown by 11.8% and has reached EUR1.3b. And investments have dropped by 14.7%, down to EUR313m. So we have to highlight that this drop has -- is due mainly to the fact that in the first quarter of last week, within this we included a new methane ship. And if we discount that atypical effect, there would have actually been a growth. Net debt is EUR17.3b.
It's important to point out the changes in the consolidation perimeter of our Company. First of all, you have to -- we have to tell you about the divestment of Gas Natural Telecommunications in June 2014. It was sold. So the comparison of the quarters this year and last year is no longer consistent. It was sold for EUR510m and with gross capital gains of EUR252m. This has affected the EBITDA in such a way that this quarter there's a drop of EUR18m, which would -- which was what this business gave us last year in the first quarter, or gave the EBITDA, contributed to the EBITDA in the first quarter of last year.
And it's very important to point out that there have been other changes in the consolidation perimeter. We've had the incorporation of the Chilean group CGE, which we bought last year with a public bid for 90% -- we got 96.7%.
You have here a graph of the organization of this group, this company that does transmission and distribution of electricity through a network, also distribution of natural gas through Metrogas and through -- and distribution and sale of GLP through the GASCO company. This holding has 57%. And GASCO has 52% of Metrogas, the gas distribution company, and 51% of Gasmar, which is the company for import of GLP in Chile.
We have to say that this operation has not diluted our figures in any way in the first quarter of this year. In spite of the financial expenses associated with the operation, this gave us a profit -- gave the bottom line of the accounts of the Company a positive -- made a positive contribution to them.
CGE, here you see the evolution of CGE, of its EBITDA, quarterly EBITDA and the quarter of this year -- first quarter of this year. You must remember the seasonality of -- the seasonal profile of this company, its results, because they're very directly influenced by the winter in the southern hemisphere and it has therefore lower levels during the spring and summer months in Chile.
The fourth quarter of last year was affected by non-recurring costs derived from the acquisition, from the purchase. You should also remember that this first quarter, the holding, this CGE, didn't get the atypical extraordinary profits that it got last year as regards the British Gas contract. So we cannot really compare this quarter with the quarter of last year.
As regards the business of natural gas, the situation's been affected by the general conditions of the behavior of commodities and hydro carbides. But in 2014, there were extraordinary atypical profits associated with the BG distribution contract that are not recurrent.
It's also important to point out the new gas regulation in Spain, which began and affects our accounts in the second half of last year. And although they've given us financial stability because they avoid future deficits, they make -- they give us a higher predictability and also six-year regulatory periods they introduced. But this has affected the remuneration in this first quarter by EUR26m.
That's an important significant figure. But the new system, as we explained, clearly incentivates growth by concentrating it and incentivating it within higher- or larger-volume customers and new municipalities and connection points. And it is based on a parametric formula and not a RAB-type formula. This will contribute to the growth of the sector, which, in spite of the crisis, had been growing in recent years, but it will speed up. And for this year we expect 120,000 new connections points to be added to our gas distribution network.
As regards the impact, there's a general view of the impacts on EBITDA. We must consider that the EBITDA for the period, on the basis of -- consistent basis, would increase by 2.5% if we bear in mind the increased activity. And we must add to this the EUR107m from the -- resulting from the change in the consolidation perimeter, the incorporation of CGE and the sale of the telecommunications branch.
And also differences in this case are positive this year because of the exchange rate between the euro and the dollar and the negative impact of the new regulation in Spain, gas regulation, which will affect the first and second quarters negatively, but not the second and third -- the third and fourth. So at the end of the day, the EBITDA has reached a growth of almost 12%.
And it's important to point out that if we did this analysis as regards net profit, profit would be almost flat on the basis of consistent or homogeneous basis. In spite of the fact that EBITDA has been slightly lower, the profit, net profit after taxes has been -- has practically doubled.
We also have to say that the Company launched in November an issuance of a hybrid, eight-year hybrid for EUR1b, with a 1.125% (sic - see slide 11 "4.125%") coupon. And this reinforced the structure of capital by giving support to the ratings that the Company has and has helped us to diversify financially. This has been accounted for under the chapter of non-controlling interests and it cost EUR10m as regards the net profit for this period.
We must also say that on April 21, the Company launched a second hybrid for EUR500m, a nine-year hybrid, with a 3.375% coupon. And this also will enjoy the same accounting treatment of the rest of our products. And both issuances have been given a 50% equity component by the rating companies.
If we look at the highlights of the Company, we have to look at commodity prices in -- which are affected by the price of Brent. You have to see the strong oscillations of prices, very strong as regards the previous year. The correction is about 50%.
And this correction or adjustment has been affected by the drops in Brent and Henry Hub. The references to gas markets are relative because, first of all, the Henry Hub market is moderate in LNG in the US. Our Company will have one of them. And the Brent market, obviously its depth and scope is not so great in our country.
But there is a correlation, which is not very strong, but there is a clear correlation between the drop in the Brent prices and the drop in the prices of Gas Natural products in the US and Europe. So there is a correlation, but not direct -- a direct -- strong direct correlation.
We've also shown the negative correlation between Brent and the dollar/euro correlation, 4-to-1 ratio. And that's been a factor that has contributed to mitigating the effect of this drop of prices on our accounts for sales and also for purchases, which are also indexed -- Brent indexed.
It is clear that the correlation has been felt in the markets and that we've suffered from it. But our gas -- natural gas and LNG businesses in the world have maintained the EBITDA level of the previous quarter. And we have to say that all our businesses are integrated in such a way that in spite of these negative -- of these problems, we can preserve a stable EBITDA, which shows that our business is doing well in this chapter. And we'll see this with further detail later.
I have to indicate too that -- I'd like to tell you about two of the parameters that are important to understand our business. You see on the left that the graph shows the exposure to commodity prices and to foreign currencies. On the left you see that our -- as regards our association with the commodity prices, our situation is very stable. Most purchases are oil-linked or indexed and also our sales. And in the chapter of others, we're talking about 30%. So volatility is residual. And it's a volatility which we administer very cautiously and never take on relevant risks.
As regards currencies, well the same happens. There's a slight -- there's a bigger imbalance between procurement and supply. But it allows management of risks using financial mechanisms in a very selective way and always mitigating the risk that might come from currency differences in these operations. But the management of this portfolio, this complex portfolio, which is part of one of our most important lines of business, is aimed at guaranteeing safety of our income, our investments and our profits.
We have to insist on a negative factor that's affected us in the first quarter and will continue to affect us in the second quarter, and that's the gap between -- especially in retail businesses in Spain, between purchases and sales, which leads to a negative result in these first two quarters. The difference in terms of reaction of the market to the drop in prices of sale and purchase is about six months. So the drops in Brent prices have not directly affected the formulas, our purchases or -- until -- and will not happen until the first -- or did not happen until the first quarter.
We've had a bad situation with the sales prices because they've gone down. But these decreases have not yet affected the formulas of acquisition. But that will start to change in the third quarter, although it's true, and we have to say this, that that is a quarter where sales are much lower than in the first quarter. So we won't recover completely from this problem until the end of the year. And we hope that at the end of the year we'll have recovery of margins, a progressive recovery of margins as a result of this change in -- these adjustments between the formula for purchase and for sale.
In terms of our efficiency plan, I have to say that we're on our way to complying with our strategic plan, which includes EUR300m by the end of this year. In 2013 we closed with EUR108m. Last year EUR228m. And this year we're at around EUR243m. We are continuing to try to reduce discretional costs, services, rationalizing commercial costs and operational costs and corporate costs in order to be in line with that figure. At the same time and within the framework of the new strategic plan, we're working on a new efficiency plan.
Another thing that we have to say is talk about the agreement with KIA, the Kuwait Investment Authority. We've signed -- subscribed to an agreement with them, by virtue of which Global Power Generation, GPG, which develops the generation businesses in all the world except Europe, that is going to increase capital by $250m (sic - see slide 16 "$550m") (technical difficulty) of that company. In such a way this [operator] have a sound investor, who knows now the company to have a sound investor who knows very well and is very familiar with the situation in [initial] partner and at the same time have help to make use of the growth of different energy markets.
You have on this chart a view of all the assets that are part of the company, which last year had an EBITDA of EUR222m (sic - see slide 17 "EUR221m") and invested EUR166m. They have a personnel of about 800 employees and their portfolio right now is 2.8 gigawatts.
More important than their current situation is the future of growth, which -- their future growth plans, which are going to start with the hydro plant, Torito hydro plant in Costa Rica, 50 megawatts; and also, in the mid term, the new projects coming from the 5-gigawatt capacity target in the medium term to be deployed in international markets in Asia. They have to do with coal, hydro plants and wind plants. The company is going to devote itself to greenfield or brownfield investments and also projects that have contracted or long-term PPA generation, which are the usual contracts in those areas of the world.
As regards CGE, the acquisition, the purchase we made at the end of last year, we've continued with that and we've reorganized and incorporated to our Group this group, electric and gas group from Chile. On April 1, the Director of Resources of our Company was named General Manager of CGE. Mr. Antonio Gallart has now moved to Chile and is the leader and head of our businesses in Chile. We also appointed a single manager for the electricity business, with main responsibilities in electricity distribution and transmission. And on March 6, we introduced organizational changes in CGE in transmission and distribution and GASCO. We did that in April.
So we have a more simplified organization. We're introducing common standards and we are convinced that that will improve the operational efficiency of all the Group's companies. With the help of BCG, the Boston Consulting Group, who've helped us in similar tasks in other places, including Spain, we're working on an efficiency plan, which will be incorporated to the new strategic plan of our Company.
I have to say something about the CGE regulatory environment. In terms of distribution and transmission of electricity, these are regulated activities that have a return -- regulated return of 10% before tax in real terms on the replacement value of investments. That means profitability after taxes in real terms of between 8% and 8.5%. And next year, an ordinary review is going to take place and we don't expect any major changes in the near future.
As regards the natural gas distribution, the activity has a maximum allowed return after tax, a cost of capital minimum 6% plus 500 basis points in real terms on replacement value of investments. And that's after tax. This regulation is now being reviewed.
And finally, the natural liquid gas is a liberalized business, 100%.
In terms of the regulatory reform for gas distribution in Chile, this is an update of an old law in Chile from the 1930s, which will start -- which will attempt to bring things up to date. The basic project, this is going slowly, but we hope that by the end of the year it's resolved, establishes a situation where rates are freely set and the allowed return will be capped at cost of capital, minimum 6%, plus 300 basis points in real terms after tax.
And there also are other changes, like, for instance, the internal connections will be considered part of the internal investments. And we have to wait and see a few months more to see what happens because -- but we're convinced that the -- this law will go through parliament and there'll be more -- will be updated and improved. The aim of the Chilean government is to promote -- continue to promote investment and development in natural gas, both domestically and -- or for house consumption and for other types of consumption.
There is a significant need for growth, generation growth in Chile of electricity. You see this graph, where we see clearly that for Gas Natural Fenosa, CGE must be a platform, will be an important significant growth platform because the demand for electricity over the next few years is going to grow until 2020 by 5% annually. That will require significant new generation abilities, both in conventional and renewable energy.
And our branch company, Global Power Generation, will try to make use of any opportunities that might come up, not just the opportunities in generation, because new generation, especially renewables, is about -- which accounts for about 45%, will require significant new investments in distribution and transmission. And for this year we expect that electric distribution of our Company in Chile will invest EUR78m, with a profitability or a return on investment of about 8% in real terms.
As I was saying, and you can see on this graph, a lot of this will correspond to renewable energies, just over half. The rest will be -- will include a lot of gas plants. And in terms of transmission, our Company in Chile expects to invest EUR45m, with a return of about 8% in real terms.
As regards gas, I was saying before, the plans of the country, the Energy Agenda published by the government foresees a very clear increase in the mix, generation mix and in domestic residential demand. We expect the annual accumulated growth rate to be about 5%. For this year the Company will invest about EUR46m in Chile.
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Carlos Alvarez, Gas Natural SDG SA - CFO [3]
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(Interpreted). Now, if we now turn to the financial results for this figure, this is the income statement. And our sales grew by 16% practically, our gross margin by 15%, and EBITDA by almost 12%. The main reasons for this growth are explained by CG, basically, but then I will give you further details. There's also an increase in amortizations because of the same reason, namely the incorporation of CGE. And operational profit grew by over 9%.
Our financial earnings increased because of the new debt for the acquisition of CGE, and the profit before tax grew by 6.5%. The tax is of an effective rate of 24.6%. And once the minority or the non-controlling interests are deducted, we get to a net income of EUR404m.
Now if we now turn to the breakdown of the EBITDA, we see interesting things. In terms of gas distribution, the EBITDA for this quarter, with respect to the previous quarter, went down by 1.3%. The main reason for this drop has to do with the reduction of EBITDA in Spain because of the new regulation I was talking about before, which entered into force in July last year.
In terms of electric distribution, there was an increase of EBITDA by 4.7%, basically because of the significant increase of more than 15% in the EBITDA in Latin America.
In terms of the gas business and infrastructures and supply, the figure is flat with respect to the previous quarter. And this means that we managed to resolved the shrinkage in prices and margins as a result of the situation of the commodities thanks to an increase in volumes and the optimization of the management of our logistics chain.
In terms of electricity, there was an increase of over 12%, both in Spain, because of market reasons I will discuss later, and also because of the significant increase in Global Power Generation, namely our international subsidiary because of the entry into service of the investments we implemented last year. So all of this explains this increase in EBITDA of around 12%.
Now as regards investments, as I was saying, investments dropped by 15%. But the reason is basically, well, quite particular, because last year we had this methane vessel, which is not here this year. But if we exclude this, investments have grown significantly, almost by 65%, to a large extent given that we now incorporate CGE investments of EUR54m this quarter.
Now the main focus of investment was gas distribution, which increased by 23%, and also electrical distribution, especially in Spain. After many years with limited investments in electrical distribution, the new regulatory framework and the increase in demand has been such that investments in this chapter have taken off.
And in terms of financial investments, let me make two remarks. First of all, we made investments in the capital of CGE and another investment in Torito in Costa Rica. So as a whole, I would like to say that the investments in Spain grew by 40%, but investments have grown by 90%. We will discuss this in greater detail in a minute.
Now if we turn to debt, there is an increase in debt because of the depreciation of the euro with respect to other currencies, especially the US dollar. This justifies this increase in EUR411m.
The total investments added to the existing debt, plus dividends, minus the cash generation, give us a figure of minus EUR400m. But exchange rate differences are such that this net debt increased by 2.3%, which includes EUR148m to do with the transient tariff deficit. And we hope that it -- this problem will be resolved soon because this corresponds to the transient deficit of 2014, which is still pending payment. So there's an increase of 2.3%, which would be 1.4% if we don't take into account this transient tariff deficit.
Now we have a comfortable debt maturity profile, so the debt that will mature from 2018 already accounts for 73%. And recent events make it even more robust. In January, we issued a 10-year bond with a 1.375% coupon. And last year we launched -- offered to acquire the preference shares that we issued recently. So our financial needs are fully covered until 2016.
And all of this has been done with a structure which is very efficient and with a very moderate risk profile. 77% is at a fixed rate and at a competitive rate. So the average of our debt is at 4.5% interest. 74% of our debt is in euros and 76% is debt obtained with direct appeal to capital markets.
But in addition to this, we have a very robust liquidity profile, which would allow us to resolve our financial obligations for two years approximately. And this is made up of undrawn money and also bank facilities. Add to this -- we should also add EUR500m that were recently issued. So we have a proactive policy to administer this liquidity.
If we now look at the different business areas, I will begin by gas distribution in Europe, which shows very significant growth, especially in Spain. You can see this clearly here regarding sales volumes. And we still have a growth policy -- a policy to grow connection points.
Sales have grown by 6%. The reason for this is temperature. But this is quite a robust reason because it's not that this year was too cold. This year the weather was normally cold, so the growth should be considered normal.
And in terms of the distribution network, there's still a growth of 1%, incentivated by the new regulation, which will make it very profitable to invest in capturing new customers and new populations.
So all in all, our investments have grown by almost 10%. So we have increased our gas network by over 1,300 kilometers and we have re-gasified two new municipalities. And on March 5 we won an award for a competition to re-gasify the island of Menorca.
All of this has been such that EBITDA has grown. But the growth has been slowed down by the new regulation that came into force on January 1 last year. This regulation will come in -- will have comparative negative effects on our accounts in the first and second quarters, but not in the third quarter because we already did this last year.
Let me highlight that the gas distribution business, as a result of the low level of gasification of the country and also because of the regulations that incentivates it, development has witnessed different signals of the market, with the acquisition by our competitors in Madrid by different companies. And this ratifies the strategic value of this business.
Now in terms of gas distribution in Latin America, I would like to insist on the high growth potential in that region. In fact, sales grew by 5.6%. And they grew at rates that were very high in many countries except for Argentina. And the growth was especially high in Brazil because of the hydro situation. But let me remind you of the significant growth in Colombia and Mexico in our sales.
Also connection points grew a lot in different countries, especially in Mexico, where we're growing at a rate higher than 7%. And on the whole in Latin America, we surpassed 6.6m connection points. This has been such that our investments are still growing at a salutary phase in all the different countries. As you can see, we have already increased our connection points in 283,000 -- by 283,000 in one quarter, which is a significant figure.
In Brazil the increase in customers has been higher than 35% and sales have increased by 25%. In Colombia, sales grew, especially because of the industrial areas. In Mexico we've had steady growth, especially in Mexico DF. And the increase in the customers in that area has been of over 50% and sales increased by almost 11%.
At the same time I would like to highlight the fact that at the end of last year we won concessions to gasify the new areas in the northwest of Sinaloa state, which have a potential market of about 1m new homes. So the EBITDA in this activity grew by a level of 5.4%.
Now, if we now talk about electric distribution, let me indicate that sales in Europe, that is basically Spain and there's a small component in Moldova, have grown by 2.2%. And in terms of the quality ratio, there was also a significant improvement given to better weather conditions.
Now in terms of investments, they have grown by 32%, especially because we had -- well the previous years' investments were really moderate because we were waiting for the publication of the new regulations for this business. And this will -- this should lead to an increase, a significant increase in EBITDA. Nowadays EBITDA is quite stable, but this is probably because of the lack of investment in the previous years. The number of connection points has exceeded, in Europe, 4.5m.
Now in terms of electricity distribution in Latin America, there's been a significant growth, both in sales and in connection points. Sales have grown by 3.5% and connection points exceeded 4%. This is the growth of connection points. We have evident growth potential in Colombia and Panama. Both countries have benefited by growth in investments. This growth in investments was related with the economic potential of these areas and the vitality these areas are having, especially in Colombia, but also in Panama. So on the whole, the result has been quite impressive.
EBITDA grew by 16%, but it has -- but Colombia's EBITDA did not grow. And the reason for this has to do with the approval of the wealth tax which came into force in January. And so we had to pay EUR4m more taxes. Now if this effect had not -- would not be -- would not have happened, we would have had a growth of 3%, which would reflect the efforts we have been doing to improve efficiency, especially regarding shrinkage and NPLs. Investment in this period is also increased by the revaluation of the Panama currency.
Now in terms of liberalized gas and electricity businesses, let me tell you that since January and for the first time in many years, demand figures in Spain have clearly shown a positive stance. The demands in electricity and -- has been highly positive. The total gas demand also has grown by 6.5% with respect to the previous year. And of that figure, 3.3% corresponds to the conventional market, industrial and residential.
Now in terms of electrical demand, it grew by 2.3% last quarter. If we take away the effect of the weather, the figure -- the growth figure is of about 1.5%.
Now as a result of all this and in terms of gas, our Company has increased its sales in Spain by 3.3%. Combined cycle sales have grown by almost 42%. Sales to the residential market increased by almost 20%. And sales in the industrial and third party sectors fell by 5%, basically because last year the new remunerations to cogeneration had not entered into force. They entered into force precisely on April 1.
Now in terms of gas marketing abroad, the sales of gas abroad, there was a growth of 15%. And we should mention the increase in Europe, which was of 24%. We're working really firmly, especially in Northern Europe, to establish powerful wholesale and retail networks to sell our products in that significant European market.
In that connection, international gas sales account for 45% of our total volume, and especially in the Americas, Asia and Northern Europe. We are still trying to diversify our supply to new markets through our fleet of vessels, which will be increased by two more vessels next year and further vessels later and with high operational flexibility that we provide.
Now in terms of retail activities, we're still working through our networks and we -- increasing the number of contracts that we have. And in Europe we have reached a figure of over 12m contracts, and not just in residential areas, not only in the residential market, but also in the SME market. We have grown by almost 3% in the SME market, increasing also our -- the number of maintenance contracts.
And so we have exceeded -- we have overcome the current situation of a disturbed market because of the problems with commodities thanks to the flexibility we provide in terms of our logistics and the work of our wholesale and retail commercial networks.
Now in terms of the electrical business in Spain, I was just telling you that generation in -- or the -- for generation, demand grew by 2.5%. Generation also grew by 2.5%. But in spite of this, because Natural Fenosa increased its production in the first quarter by 12.9%, which was -- which meant that the generation share of our Group reached 19% of total Spanish market.
Now wind generation and hydro-generation and cogeneration dropped significantly because of weather conditions in terms of wind power and hydropower and because of the new remuneration rules for combined cycles, which have paralyzed the sector. But combined cycles increased by almost 25% and production of coal multiplied by 5. And this increase is rather striking because it doesn't fit in very well with the climate change targets. But, well, that's the fact that I have to mention anyway.
Now in terms of the electricity business, sales increased by 5%.
Production increased by 19%, sales by 5%. Pool increased by 90%. The pool last year was incredibly low, atypically low because of the weather conditions and the regulatory conditions. The pool didn't -- stayed under EUR25 and this year it's around EUR40. So EBITDA increased by less than 4%. I should mention that the pool is still extremely volatile. And in spite of this growth of 90%, it's gone from a minimum level of EUR16 to maximum of EUR66. So this shows you its volatility. But this is only normal because of the nature of the generation mix.
Now in terms of cogeneration and renewable energies, it was a fall of 19.2% because of lower level of wind power and less hydro power, and because in terms of generation, because of the stoppages due to the regulatory situation. On March 17 this year we launched the Montouto wind park, which has six wind turbines and 14 megawatts. And this is a farm that operates without any type of public subsidies and is capable of generating 37 gigawatt-hour.
Now in terms of our international generation activity, this is Global Power Generation, production increased by 7% and investments went down. The reason for these two facts is the same. It has to do with the entry into service of Bii Hioxo, which increases our production. And when the product was completed this led to a reduction in investment. So investments went down and this activity, as you know, is 100% regulated because we basically operate in this company in terms of PPA, so there was an EBITDA of 46% because of the higher activity and lower costs because of the efficiency programs that we implemented.
Now if I now talk about our Chilean investments, the CGE Group, well, I want to mention first of all electricity. Distribution of electricity grew by almost 5%. The connection points increased by 2.8% and transported electricity increased by 5%. So the performance was clearly very positive.
And in terms of the gas distribution, sales increased by 5.7%, this is natural gas sales, and connection points increased by over 4%.
In terms of the GLP or the LPG business, propane and butane, wholesale sales dropped by 8.5% but final sales increased by 1.5%. You should remember that the fall in wholesale sales has to do with the fact that, in a lower operation or the LPG production plant because of imports from Argentina, so these figures are due to an operational factor. Final sales increased by 1.5%.
So to conclude, I would like to say to you that we are satisfied, because once again we have been able to -- seen how stable our business models are. The business models are extremely stable. They're highly diversified. And so with the contribution of CGE, we have managed to increase our EBITDA significantly and have a positive balance of 0.5% in terms of our net profit.
I also want to mention that the acquisition of CGE in Chile ratifies what we said. It is very positive in terms of bottom line from scratch. And it consolidates our business model and it opens up significant growth perspectives.
Also the -- an important agreement with KIA was concluded to enhance our Company's attractiveness as a partner to explore the growth in the power markets. And the strength of the LNG business has been shown. This Company has just the right size to be able to stand up to the significant challenges in the hydro carbide markets.
And all of that allows us to show that the models that our current plan rests upon are very solid and robust. And we are in a good position to comply with the strategic plan, whereby we should reach EUR5b in EBITDA at the end of the year and have profit of EUR1.5b. And the ratio of our EBITDA is 3 times and a payout of 62%. So we're working so that at the end of the year we can present to you a strategic plan that includes all the perimeter changes and, at the same time, modifications in the macroeconomic environment.
That's all I had to say. Thank you very much.
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Questions and Answers
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Luis Calvo, Gas Natural SDG SA - Head of IR [1]
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(Interpreted). Okay. We are now going to turn to the Q&A session. And we will start by questions asked in the floor. So before you ask your question, please identify yourselves.
Fernando, please.
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Fernando Garcia, MainFirst - Analyst [2]
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(Interpreted). Hello. Fernando Garcia from MainFirst. I have three questions. The first two questions have to do with LNG. First of all, in 2015 you mentioned there was a fall in EBITDA of one digit -- there would be a one-digit fall for 2015. Do you think that now that things have gone well, that figure could increase?
For 2016 you have many contracts that are going to hold you this year. I would like to know what's your take on the profitability of these businesses in the long term.
And also in terms of Metrogas in Chile, I would like to know what the impact is of that business on the EBITDA, taking into account the new regulatory framework.
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Rafael Villaseca, Gas Natural SDG SA - CEO [3]
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(Interpreted). Well in terms of the first question you asked, yes, the maximum expectation for worsening will be of one digit. It is true, of course, that we have broken the back of all of this. We won't notice any improvements until the fourth quarter. But let me mention three things.
Naturally, first of all, there's a negative -- there's a reduction in Brent prices, but the relationship is indirect and it's not direct. And the positive aspect is the euro/dollar parity. And also another positive aspect is that our supply contracts are tied to the Brent prices, and of course they're going to go down, but with a six-month lag. That's why I'm saying that we're only going to see them in the last quarter. But there's also been an improvement in markets, especially in the Spanish market in terms of volumes.
And so the scenario is volatile and quite fast-changing. But we don't see today more negative signs than last year. We have no doubt that natural gas is going to be a strategic fuel in the next few years throughout the world in spite of the short-term movements that could occur because of the price of Brent. And in that regard, we believe that next year we will start seeing positive effects for new supplies.
Why am I saying this? Well supplies, even if they are subjected to the volatility of indices, etc., are going to be better than we have seen so far. We could discuss as to what kind of improvements are -- accounts are going to have, but there is going to be improvement without any doubt. And so we are extremely optimistic about this.
As regards Metrogas, it's -- the Chilean government has a clear idea and they've said it publicly on several occasions that they're going to increase the gasification of the country. Chile has two characteristics. One is that it has no sources of energy. It has to import it, their source of their energy. And they want to increase gasification for residential purposes and for the important needs that they have.
They're going to cover half with renewables and the other half with an enormous amount of combined-cycle plants. And they're going to require a very sensible and well-ordered situation on the market. So we don't expect at the end of the regulation period that there'll be any problems.
I have to say that as regards to the results of EBITDA, we've mentioned that we, in this first quarter, could use the flexibility of our contracts, use less in Magreb, for instance, use more liquid -- natural liquid gas and spot. That's mitigated the gaps in our contracts. That's what's mitigated the effects that we had in the first quarter. And the second and third quarter, it's not going to be possible in such -- to such an extent.
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Luis Calvo, Gas Natural SDG SA - Head of IR [4]
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(Interpreted). Any more questions from the room? Yes.
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Alejandro Vigil, Cygnus Asset Management - Analyst [5]
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(Interpreted). Hello. Good morning. Alejandro Vigil from Asset Management. The first question is about the hybrid that you've just issued. There's been speculation as to the possibility of it being associated with non-organic growth possibilities. So is it just to reinforce the P&L account or the balance? What can you tell us about that?
And the second question is about I think that you are -- you foresee a new cycle of growth, organic growth. You've spoken about international generation. You're talking about Chile. And in that context we've seen the operation of Madrilena Red de Gas with very high figures. Do you see an opportunity there to do any kind of corporate operation in order to reinforce your funds and devote them to international growth?
And the final question is about dividend. 62% payout is reiterated. But if we look at the evolution of the free cash flow, CapEx, well what can you tell us about the future development of dividend?
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Rafael Villaseca, Gas Natural SDG SA - CEO [6]
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(Interpreted). Well I'll start with the last question. The dividend, we are -- this year is the end of our strategic plan. We're going to comply with it. That's our commitment. Circumstances have changed obviously. The situations are different and that within the framework of the new strategic plan we'll have to look at that issue again. And we're going to do it. I can tell you that at the moment. We want to comply with what we -- our commitments until now. And before the end of the year we've got to look at the strategic plan, which naturally will mean looking again at many things, including this.
As regards the new cycle of growth, we are optimistic in spite the volatility that is going through the energy sector right now. We believe we -- our businesses have potential for growth. And we want to make use of that. It's not just this operation, but other operations that show the great value of the line of businesses we have. The operation of Shell over British Gas, you can interpret what it means in terms of our activity within natural liquid gas.
We are in areas of business that are very interesting. But we're not looking at any operation like you mentioned. We will analyze all the growth potential -- growth possibilities within the framework of the new strategic plan.
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Carlos Alvarez, Gas Natural SDG SA - CFO [7]
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(Interpreted). Yes. We mentioned when we issued the hybrid, when we announced this issuance. This fits into the diversification plan and strengthening plan of the balance of the Company, and we're working on that. And also the conditions were quite favorable in terms of cost. The issuance of this hybrid was below 3.5, which is also very good because it hasn't made the cost more expensive. We will continue to see opportunities and that will be within the plan that we have.
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Luis Calvo, Gas Natural SDG SA - Head of IR [8]
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Good. Any more questions in the room?
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Sonia Ruiz De Garibay, BEKA Finance - Analyst [9]
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(Interpreted). Hello. Good morning. Sonia from BEKA Finance. Two questions. As regards supply, gas supply, I see that you've reclassified Italy, well I can see in a note here. Can you tell us about the impact that this has had, because the 251 is a flat performance as regards last year? But from what I see last year, Italy wasn't there and this year it is. So I would like to know what that means.
And Moldava issue, this negative impact on EBITDA, is that going to be recurrent or is it just a first-quarter issue?
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Rafael Villaseca, Gas Natural SDG SA - CEO [10]
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(Interpreted). Well Italy, that's a retail business in Italy. Historically, I'm talking about 2014, at the beginning was in the business of distribution in Italy. I think that the second quarter of the year before that, we changed that structure -- or the second quarter of last year, and we changed that. It's not that the quarter of the previous year is not there. It includes retail in Italy.
And as regards Moldova, well there's been a devaluation there and that's affected the results. We don't see any impact on our operations, as you've seen. It's in line with the stability that the business has there.
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Luis Calvo, Gas Natural SDG SA - Head of IR [11]
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(Interpreted). Any more questions in the room? No more questions? So we will go to the questions on the telephone. We'll start with the questions in Spanish.
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Operator [12]
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(Interpreted). Javier Suarez, Mediobanca.
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Javier Suarez, Mediobanca - Analyst [13]
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(Interpreted). Yes. Hello. Good morning to you all. Thank you for accepting my questions. I have three. The first one is as regards the slide number 14, on the indexation of your contracts to Brent and oil products. Could you tell us whether there's a significant difference in terms of the duration of the contracts for procurement and supply? Could you tell us what the Company could do to reduce that mismatch and reduce the volatility and the price of Brent in this division? That's the first question.
The second question is about Damietta, Egypt. We've read in the press that the Spanish government might have tried to reach an agreement with the Egyptian government. Could you give us an update about that, the situation of Damietta and the potential effect that it might have during 2015?
And the third question is as regards the financing of the Company. And we go back to the question before on the issuance of the hybrid. I still don't understand why the Company's issued a hybrid when the financial situation of the Company seems to be very sound, and a bond, traditional bond could have been issued at lower cost. What's the reason for that hybrid at this time? It's competitive but traditional issuance would have been superior.
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Rafael Villaseca, Gas Natural SDG SA - CEO [14]
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(Interpreted). As regards the first question, the contracts for procurement, between 10 and 15 years. They're indexed to Brent. But it's true that they're subject to ordinary reviews of prices, normally over three years, and then extraordinary using the bouleversement procedure when there are extraordinary situations. So contracts are 15 and they're subject -- 15 years and they're subject to those revisions and reviews that periodically lead us to negotiate with our providers.
As regards the sales contracts, it's a bit of everything. But maybe in two, three, four years, these could be averages, reasonable averages in terms of sales on markets, industrial, major wholesale markets internationally. That could be the picture of our portfolio.
As regards Damietta, well there's been press releases saying that during the recent visit of the Egyptian President to Madrid, as could be expected, one of the topics that was discussed was the -- our plant in Damietta. And I'd like to also say what has been said in the press too, positive comments by people in charge of the Egyptian government. They're working to try and find solutions. Our Company knows this and we've reacted in several ways.
The first thing is that, obviously, we started out the legal -- we've taken the legal measures to protect our interests. And also we've begun negotiations to try and solve the problem in the quickest and most efficient way. It's true that we're talking to people responsible for the government and companies in Egypt. And in that respect we refer you to the statements of the President himself when he visited Spain.
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Carlos Alvarez, Gas Natural SDG SA - CFO [15]
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(Interpreted). Well you can always have opinions about this and I respect your opinion about this, but I would say that it's not so simple. It's not such a binary proposition to say I'm going to issue a bond or a hybrid. You've got to look at the full picture and the whole situation of the Company, the possibilities that the hybrid offers in terms of strengthening the balance and to exhaust the European bond. In this case we've had very many issues. So bond issuance would -- might take us to the limit in that market.
Then there's the effect of -- there are many factors that, when you make a decision like this, you've got to bear in mind. And at this time we thought it was a good time to issue a hybrid. It complied with the expectations for diversification. And we did it. I don't know whether we've made a mistake, but we did it.
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Luis Calvo, Gas Natural SDG SA - Head of IR [16]
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(Interpreted). Let's go to the next question, please.
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Operator [17]
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(Interpreted). Jose Ruiz, Macquarie.
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Jose Ruiz, Macquarie - Analyst [18]
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(Interpreted). Yes. Good morning. Thank you for accepting my questions. I'll be very quick. First of all, could you give us the debt of [CPG] at the end of the first quarter?
And the second thing, I'd like a clarification. You've spoken about -- you've said that the Chilean government is talking about [WACC by] 360 basis points regulation. Are you talking about 8.6% real return before taxes? Thank you.
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Carlos Alvarez, Gas Natural SDG SA - CFO [19]
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(Interpreted). No. The project -- the law that's going through parliament, as I said, contemplates a maximum profitability that will control -- it will control using three-year periods. And the limit will be the capital cost plus 300 basis points in real terms after taxes. That's the situation that they're looking at right now.
The [CPG] debt is just above EUR300m.
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Luis Calvo, Gas Natural SDG SA - Head of IR [20]
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(Interpreted). Good. Next question?
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Operator [21]
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(Operator). Javier Garrido, JPMorgan.
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Javier Garrido, JPMorgan - Analyst [22]
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(Interpreted). Hello. Good morning. I have several questions regarding the regulatory reform in Chile as regards the changing of the accounting criteria. First of all, could you give us an estimate of the impact of that -- those accounting criteria if your appeal to the SVS does not prosper, does not have -- does not meet with success?
And secondly, what would the impact be on your regulated income? If I've understood correctly, I don't know whether I've understood the change that you proposed, but if I -- proposed correctly, the investments in connections will no longer be regulated investments and they'll be operating costs that will be met by customers to the extent that that is possible. Is that the change that you're proposing? Could you give us an indication of the impact they might have on your income and your profits?
And the second -- and the final question is since this change you're proposing retroactively, do you have any possibilities of claiming compensation from sellers of -- the CGE sellers for this change?
And then there's another thing which is very specific, which is the standard. I don't think you've -- the impact of the new standard, the [FIG 21] standard.
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Rafael Villaseca, Gas Natural SDG SA - CEO [23]
------------------------------
(Interpreted). Well, as regards Chile, it's too soon to know what the final situation will be. The law -- it's taking its time. They're taking their time to put this -- to prepare this law. We expect to comply with the aim of the law, which is to increase the gasification levels of the country. But what is the system -- regulation system in Chile is not based on a regulated remuneration; it's a free remuneration, but there's a profitability check.
As regards the connection expenses, that meant until now that the expenses were more active and now they'll be expenses that will be spread out through five years. But it's not clear to know -- it's not -- we cannot know exactly what the amount is, because in one case the amount -- in different cases the final result of the division will be different. But the idea is not to go above the maximum profitability level. So we cannot clearly establish an impact because unless you go above that, the regulation situation is free in Chile. That's an important thing.
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Carlos Alvarez, Gas Natural SDG SA - CFO [24]
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(Interpreted). From what I know, it's had no -- the standard that you mentioned has had no impact.
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Luis Calvo, Gas Natural SDG SA - Head of IR [25]
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(Interpreted). Good. Next question?
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Operator [26]
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(Interpreted). Jorge Alonso, Societe Generale.
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Jorge Alonso, Societe Generale - Analyst [27]
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(Interpreted). Good morning to everyone. I had a couple of questions. One as regards gas volumes sold in Europe and other international markets. We've seen quite significant increase. Perhaps you could tell us the percentages. How much was retail, large contracts, contracts that -- long contracts, smaller SMEs, so that we know what the market is doing?
And another question about the gas market. This year it seems that the Chubu and the GAIL operations in India are going to come to an end. Are you going to extend those agreements or you see that those volumes for 2016 have been -- what are the expectations for them, etc.? What is that portfolio looking like for 2016? Thank you.
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Rafael Villaseca, Gas Natural SDG SA - CEO [28]
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(Interpreted). Well as regards the second question, naturally we are renegotiating that, all the suppliers, usual and new suppliers in such a way that we hope that about -- around the summer we have 90% of our sales for next year covered. The negotiations are well advanced or advancing reasonably, and that's our aim. We think that by the summer, 90% of it will be sold.
Carlos, do you want to say anything about the sales portfolio?
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Carlos Alvarez, Gas Natural SDG SA - CFO [29]
------------------------------
(Interpreted). Well, on the graph that you can see, when we talk about Europe, we're talking about final customers. That includes the sale in Europe, north of Europe, France, Germany, etc., basically to SMEs and industrial customers. And then sales, retail sales that we have in Italy. I would say talking about, well it's about 40/60, 60/40 in terms of percentages, what would be included in that chapter.
The rest, which is about 53%, more or less, are wholesale LNG sales in Asia and South America. Those are the contracts that are now coming to an end, and the new ones that will start up, the 53% of those international sales.
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Luis Calvo, Gas Natural SDG SA - Head of IR [30]
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(Interpreted). Good. Let's go to the next question.
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Operator [31]
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(Interpreted). Manuel Palomo, BNP.
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Manuel Palomo, BNP Paribas - Analyst [32]
------------------------------
(Interpreted). Hello. Good morning to everyone. I just have one question. I saw that the liberalized gas business EBITDA is flat. But the volumes, if I'm not mistaken, are usually about 8%. My question is whether that increased volume is what you expect throughout the year or whether maybe, since we're more exposed to Europe and it's a bit colder now, the volumes will slow down.
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Rafael Villaseca, Gas Natural SDG SA - CEO [33]
------------------------------
(Interpreted). Well there's going to be a three-monthly or a quarterly volatility, because in the first quarter the home market in Spain and the whole world has a greater consumption. Forecasts for natural gas in Spain for the year are about 6%, which is very similar to 6.5% which we've had in the first quarter. So as regards the behavior of gas market, it seems that, yes, it will -- this year will be a significant growth. But there is a seasonal volatility, as could be expected.
And obviously it's true that one of the reasons that have contributed to these results in natural gas, one of the reasons has been the increase in volume and consumption, which has allowed us to use all the management ability in the whole business. And as Carlos said before, we can -- we've been able to optimize our approaches and make use of spot markets for purchase in this case.
That's a factor, which probably will continue throughout the rest of the year, but in the second, third quarter is not going to be -- there's not going to be such high levels of consumption obviously because of seasonal temperature, climate reasons. And then in the third quarter, the temperature variable will also -- will come into play once again, and then we'll have the effects of the gap as regards the procurement formula. All told, I think that's the picture of our business.
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Luis Calvo, Gas Natural SDG SA - Head of IR [34]
------------------------------
(Interpreted). Good. Let's go to the next question.
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Operator [35]
------------------------------
(Interpreted). Alberto Gandolfi, UBS.
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Alberto Gandolfi, UBS - Analyst [36]
------------------------------
(Interpreted). Good morning. Thank you very much for accepting my questions. I have three. I've got a question about the LNG business. Those contracts, the price in Asia, the spot price in Asia has dropped by almost 50%. Can you talk about the margins that you can achieve today in LNG contracts, for instance, as other -- as you'd said [another operates]?
Second question is about the energy manifesto of the party Podemos in Spain. It's one of the parties. There's a lot of time yet before the elections. But they talk about supply a lot and they talk about supply as a public service, energy and power supply. Now is it similar to the debate we've seen in England? In that respect the government is -- has begun to create a platform for gas interchange called [Milgas], and that trading is coming under attack in different areas. Could you give us what the margin would be in that activity or the EBITDA in this first quarter last year in terms of sales of gas in Spain to clarify the situation?
And the final question is could you tell us your expectation what you think the net debt will be by the end of the year and tell us whether those -- the hybrids are included or not in that aim.
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Rafael Villaseca, Gas Natural SDG SA - CEO [37]
------------------------------
(Interpreted). I will answer the first two questions. As regards the LNG market, we haven't issued or given margins of our activity for reasons that are obvious. But there's a comment that's very important. We are not on the spot market. Therefore the spot market -- we don't sell on the Asian spot market. We sell medium-term and long-term contracts. So the fact that it is high or low at a given time, it doesn't really affect us that much. The Asian market is an excellent market for our operations. We continue to think that. And apart from specific times and circumstances, we will continue to have good long- and medium-term contracts.
As regards the Podemos question, I understand what you say about the possible -- about them calling power public service, but I don't know what that means in practical terms. I don't really understand. I don't understand this EBITDA distribution because Spain is a country that doesn't have natural gas so it will have to import it on the international market at the prices that are established on that market. So I don't really know. I don't understand the question.
But irrespective of whether that -- that's a program of a political party. There'll be others. But I haven't read in that program -- I've not read anything exactly -- I've not read about what your question refers to really. But the margin is very limited. Spain once again doesn't have hydro carbides and anything -- we have to have a safe amount of energy guaranteed by resorting to the international markets. Anything else is not realistic at all.
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Carlos Alvarez, Gas Natural SDG SA - CFO [38]
------------------------------
(Interpreted). As regards the debt for this year, you've got the aim. We want to have a net debt/EBITDA of 3. In the presentation we've said that in accordance with the accounting system and criteria. When we talk about net debt/EBITDA ratio, we have explained that that includes non-controlling interest and doesn't include -- that's not included under debt or financial expenses in terms of the figures that are presented using the IFRS international accounting system.
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Luis Calvo, Gas Natural SDG SA - Head of IR [39]
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(Interpreted). Well let's go to the next question. There are no more questions in Spanish. Let's go to the questions in English.
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Operator [40]
------------------------------
Martin Young, RBC.
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Martin Young, RBC - Analyst [41]
------------------------------
Good morning to everybody. Just two questions on slide 8 from the presentation pack. The first relates to the extraordinary income in respect of BG in the first quarter of 2014. I wonder if you would be so good as to give us that amount of the extraordinary income.
And then secondly, I just wondered what your expectations were for EBITDA over the full year 2015 from CGE. Maybe you could just give us an approximate target number for 2015. Thank you.
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Carlos Alvarez, Gas Natural SDG SA - CFO [42]
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(Interpreted). Well as regards the first question, the first quarter of the year 2014, CGE had extraordinary compensations from the gas supply that were atypical and specific as a result of a general renegotiation of all the clauses in the contract. So in those conversations and for a limited period of time, they had extraordinary income that they will not continue to have and that corresponded to a very specific agreement that the Company had with BG at that time.
Regarding the second question, the EBITDA targets for this year have not been broken down and so we cannot give you any expectations for the current year.
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Luis Calvo, Gas Natural SDG SA - Head of IR [43]
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(Interpreted). Any further questions?
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Operator [44]
------------------------------
Hugh Wynne, Bernstein.
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Hugh Wynne, Bernstein - Analyst [45]
------------------------------
Good morning. Thank you for taking my questions. I just have three from my [side]. The first one, regarding the acquisition of CGE, we can see that your EBITDA increased due to the first-time consolidation, but net profit was flat. So was the dilution a bit higher than you expected? And do you still see CGE to be EPS-accretive for the first year?
Secondly, could you please update us on the progress of finding buyers for your Sabine Pass LNG volume? Was that in 2017? And if possible, the Corpus Christi volume in 2019 as well.
And lastly, sorry to come back on the LNG margin topic again, I understand that you don't sell on the spot market. But at the next round of your medium-term contract negotiation, will your buyers will look at the Asian spot price and say given the 50% drop in price, we would demand a much lower price and that will essentially affect your long-term margin as well? Thank you.
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Rafael Villaseca, Gas Natural SDG SA - CEO [46]
------------------------------
(Interpreted). I couldn't understand your last two questions, but I think the last question had to do with the contracts and the renewal that we're going to carry out. And I think that that question was already answered. We already mentioned that negotiations are advancing satisfactorily and our expectations to cover new contracts as we have done in the past and at conditions which are similar to the conditions at which we signed previous contracts.
Regarding your first question regarding your topic, it is true that in terms of EBITDA, the contribution is high. But if you look at the different participation, a significant part of the EBITDA is accounted for by non-controlling interest. So these are the participations. They're non-controlling participations in GASCO and Metrogas, which are 56% and 51% respectively. That's the first reason why the contribution of EBITDA in terms of net income is diluted in that respect. To that we should add acquisition cost and depreciation of [BPA] and acquisition -- for the acquisition of the assignment of the active goodwill.
But in this first quarter the contribution of CGE to the net income has been positive and has contributed to making the -- to enhancing the result -- the positive results of other activities. And so we would like to underscore the fact that the transaction has not led to any dilution now or will not lead to any other dilution in the future.
Now in terms of your second question, I'd like to ask you to send it by email so that we can answer it.
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Luis Calvo, Gas Natural SDG SA - Head of IR [47]
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(Interpreted). Any further questions in English?
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Operator [48]
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There are no further questions.
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Luis Calvo, Gas Natural SDG SA - Head of IR [49]
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(Interpreted). So we will now read questions asked through website. Most of them have been answered during the session. But there's two questions that have not been answered.
One of them is a group of three questions asked by a gentleman from BPI. The first one is whether you could give us some indication regarding the cost -- the expected cost of debt for 2015, especially taking into account the improvements achieved in [GLCG].
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Carlos Alvarez, Gas Natural SDG SA - CFO [50]
------------------------------
(Interpreted). In the first quarter, the cost of the debt was around 4.5%. And the idea when last year we were saying that we would stay in that environment, probably a little bit lower. And it's not of course possible to introduce improvements immediately, but we're working on that and we expect that we will go a little bit lower than that 4.5%.
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Luis Calvo, Gas Natural SDG SA - Head of IR [51]
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(Interpreted). The second question is whether you could tell us something about the current situation of Union Fenosa Gas and what its evolution is going to be in the next few months.
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Rafael Villaseca, Gas Natural SDG SA - CEO [52]
------------------------------
(Interpreted). Union Fenosa Gas is affected by the lack of supply by Egypt of its committed amount. So of course we have other businesses apart from the Egyptian operation. But of course the stoppage of the plant has had a huge impact upon the activities of the Company. So the Company's, on the one hand, defending its rights in different courts of justice. And at the same time it is negotiating with the Egyptian government to find medium- and long-term solutions to this problem.
I have to say that even if solutions have not yet been reached, they've got to underscore the interest of the Egyptian government to find those solutions. And in its recent visit to Spain, the President of Egypt has said that he hopes that developments or positive developments are going to take place and will make it possible to find a satisfactory solution.
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Luis Calvo, Gas Natural SDG SA - Head of IR [53]
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(Interpreted). The third question of this analyst is what expectations does the Company have about the [ICGEN] process and whether there's going to be any additional corporate activity in Latin America.
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Rafael Villaseca, Gas Natural SDG SA - CEO [54]
------------------------------
(Interpreted). No. We're not contemplating any activity -- any corporate activity in Latin America. And we're not going to be participating in the tender for [ICGEN].
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Luis Calvo, Gas Natural SDG SA - Head of IR [55]
------------------------------
(Interpreted). The last question is from Andrew Moulder from CreditSights. And the question is as follows. Do you intend to conduct an IPO for [CGC] to provide the company with funds for further growth or is the investment by KIA going to be enough to fund the current growth plans? Is the -- will the KIA investment be cycled specific growth or will it finance the growth of the Company in general?
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Rafael Villaseca, Gas Natural SDG SA - CEO [56]
------------------------------
(Interpreted). Well the contribution by KIA is for GPG and so it is going to be devoted to its -- the activities of GPG, which is international generation. We're not considering other target or rather destination for that money. And in principle the Company does not believe it is necessary. Nowadays it is not even considering any other transaction for getting further funds. And so we're not considering any IPO.
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Luis Calvo, Gas Natural SDG SA - Head of IR [57]
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(Interpreted). Okay. Thank you very much. We are going to adjourn the session and I will give the floor to our Chairman.
------------------------------
Rafael Villaseca, Gas Natural SDG SA - CEO [58]
------------------------------
(Interpreted). Thank you very much. I would like to thank you all for your attendance and see you next -- in the next.
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Editor [59]
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Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.
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