Investor Report First Quarter 2014

Transcription

1 Investor Report First Quarter 2014 Bogotá D.C., May 14, 2014 TABLE OF CONTENT 1. EXECUTIVE SUMMARY AND RELEVANT FACTS Overview of the electric and natural gas sectors Summary of EEB financial results Relevant facts of EEB and of Grupo Energía de Bogotá FINANCIAL PERFORMANCE GRUPO ENERGÍA DE BOGOTÁ PERFORMANCE OF CONTROLLED COMPANIES EEB Transmission Business DECSA EEC TGI CALIDDA CONTUGAS TRECSA EEBIS Guatemala and Perú PERMORMANCE OF NON-CONTROLLED COMPANIES EMGESA CODENSA PROMIGAS GAS NATURAL REP and CTM Perú Annexes Annex 1: Legal notice Annex 2: Definitions of EBITDA included in this report Annex 3: EEB Consolidated Adjusted EBITDA LTM and Quarterly Annex 4: Link to EEB s consolidated and stand-alone financial statements Anexo 5: Technical and regulatory terms Annex 6: Tables and graphics footnotes Annex 7: Overview of EEB... 29

2 1. EXECUTIVE SUMMARY AND RELEVANT FACTS 1.1 Overview of the electric and natural gas sectors Table N 1 - Overview of the electricity 1Q 14 Colombia Perú Guatemala Installed capacity MW 14,603 7,726 2,989 Demand - GWh 15,386 3,441 2,252 Demand growth 1Q 14 / 1Q 13 - % Growth drivers 1Q 14 / 1Q 13 The upturn in March of 2014 was primarily due to the impact of the new load of Rubiales and high temperatures in the country, which is reflected in the growth lodged in warm regions. Sources: XM, UPME, COES Perú, AMM Guatemala This variation (above the GDP growth) is mainly explained by the growth in demand for free customers, mainly driven by the entry into operation of mining projects Toromocho Puccamarca. as and Increased domiciliary installation as rate of population growths, and the expansion of the power network. distribution Table N 2 - Overview of the natural gas sectors 1Q 14 Colombia Perú Reserves, proved and probable - TCF (2012) Domestic demand - Mm cfd 1,097.5 GBTUD 1,217.0 MMCFD Change in domestic demand 1Q 14 / 1Q 13 - % Explanation for demand variation There are two main reasons for such growth in local demand. The first one relates to thermal electric consumption and the other one, to an increase in the consumption of NGV. Thermal electric consumption experienced an increase of 18% mainly due to hydrology conditions during this season. Regarding the consumption of GNV increased by 30.2% due to promotional policies in some companies of this sector, for driving the conversion of vehicles from fuel to natural gas. - The variation in demand 1Q14 to 1Q13 is 15.3 is mainly due to increased consumption of Lima. Approximately 50% goes to foreign markets and 50% to the local market, where Cálidda has approx. 80% market share. Sources: UPME, CON, MEM, Osinergim, Concentra. *Average Natural Gas Demand during.. 1

3 1.2 Summary of EEB financial results Table N 3 - EEB s consolidated financial indicators COP Million Al 1Q 14 Al 1Q 13 Operating revenue 542, ,468 Operating income 216, ,926 Consolidated Adjusted EBITDA Qtrly. 1,115,360 1,010,355 Consolidated Adjusted EBITDA LTM 1,880,913 1,604,916 Dividends and reserves declared to EEB 832, ,091 Net income 853, ,244 Dividends and reserves declared by EEB 590, ,604 Latest international credit ratings: S&P May 14 BBB-; estable Fitch April 14 BBB-; estable Moody s - April14 Baa3; estable At the closing of, consolidated net profit grew by 11.2% vis-à-vis the same period in 2013 and reached COP 853 billion. The above due mainly to growth of 20.6% in operating revenues, thanks to the good behavior of natural gas businesses, distribution in Peru and transport in Colombia. Operational profit grew by 26.8% and reached COP 216 billion, resulting from the excellent operational performance of TGI and the increase in internal installations and consumption of new clients connected to the natural gas distribution network in Cálidda (Perú). Regarding non-operational accounts, one may highlight growth in dividends received from non-consolidated affiliates, which reached a figure of COP 832 billion, representing growth of 6.1% vis-à-vis 1Q 2013, highlighting dividends decreed by Emgesa, Codensa and Gas Natural Fenosa. Similarly, an increase of 22.5% in financial expenses, due to greater consolidated debt of the group, resulting from loan contracted in 2013 for its subsidiaries in Peru (Contugas/Cálidda) and at the level of EEB (Reopening of Bond EEB 2021). On the other hand, the foreign exchange account, which reflects the impact of the balance of the debt contracted in dollars and expressed in local currency, represented a lower net expense of 35.6%, due to a reduction of the devaluation of COP during this year. On the other hand, EBITDA LTM continues growing significantly and reached COP 1.88 trillion, representing an increase of 17.2% with respect to the same period of the previous year, and 5.9% with respect to the closing of 2013, showing the permanent commitment of GEB with operational performance of its affiliates. Consolidated Adjusted quarterly EBITDA grew by 10.4%, vis-à-vis the first period of Relevant facts of EEB and of Grupo Energía de Bogotá regarding the announcement made on , about entering into a purchase agreement among Transportadora de Gas Internacional S.A., TGI S.A. E.S.P., subsidiary of Grupo Energía de Bogotá, with Tecpetrol International S.A., subsidiary of Organización Techint, whereby it purports to buy 23.61% of Transportadora de Gas del Perú, TGP, and 100% of Compañía Operadora de Gas del Amazonas, COGA, EEB reported that on the period established to exercise the acquisition rights for current TGP shareholders expired. The shareholder TGP, Carmen Corporation, controlled by Canada Pension Plan Investment Board, CPPIB, exercised its right for the total stake in TECPETROL in TGP and in COGA, as per that published in the Securities Market Superintendence of Peru s Web Site. 2

4 General Shareholders Assembly of Empresa Energía de Bogotá (EEB), headquarters to Grupo Energía de Bogotá, decreed dividends amounting to COP billion, equivalent to 70% of profits generated during Dividend per share for 2014 is COP and will be paid in three equal installments of COP per share, on May 27, June 26 and November 27, 2014, this payment to shareholders represents an increase of 46% of dividends per share as regards that decreed in The Capital District of Bogota, main shareholder of EEB holding 76.28% of total shares, will receive COP billion General Shareholders Assembly authorized EEB s legal representative to grant guaranties to its subsidiary in Guatemala, EEBIS for up to USD 83 million to partially finance the execution of transmission projects the company is currently undertaking in that country Empresa de Energía de Bogotá announced that its offer to acquire 31.92% stake in Transportadora de Gas Internacional (TGI) for USD 880 million, was accepted by The Rohatyn Group (formerly Citi Venture Capital International (CVCI) meaning the total shares of EEB in TGI amounts to 99.97%. The foregoing, as per decision of the Board of Directors of Empresa Energía de Bogotá, on 11 December 2013, who approved to offer on this transaction which is part of the investment plan valued in USD 7.5 billion, which the company is executing EEB has prequalified to participate in the process for % of total subscribed and paid-in capital of ISAGEN as per the times established in Decree 1609 of 2013 (Law 226 of 1995) by which the process to sell the shares of the Nation and the Ministry of Finance and Public Credit currently holds in ISAGEN S.A. E.S.P. On August 15, 2013 the Board of Directors of Empresa de Energía de Bogota had approved EEB s participation in the shareholding acquisition process. The process schedule is provisionally suspended by decision of the Consejo de Estado (High Court). The Trade and Industry Superintendence have not responded yet to the appealing filed by EEB on against the decision conditioning EEB s participation in ISAGEN s bidding process The Energy Mining Planning Unit (Upme) awarded to Empresa Energía de Bogotá (EEB), UPME Sogamoso Norte Nueva Esperanza project with an estimated investment of Net Present Value of revenues amounting USD 171. The project includes the design, acquisition of equipment, construction, operation and maintenance of the 500 kv North Substation and the 500kV transmission line Sogamoso Norte - Nueva Esperanza. This project is part of the Expansion Plan, UPME This project is amongst one of many that EEB currently develops in different areas of the country, and it is contemplated among the UPME Explansion Plan ( ) EEB presented an offer for the UPME 05 of 2012 Second circuit Cartagena Bolívar bidding process, which consists in the construction of a 220kV line from the Cartagena substation to Bolivar substation with a length of 21 kms and 1 bay line in each substation. As EEB was the only bidder, according to CREG Resolution , such award is still pending from UPME final decision Extraordinary Shareholders Assembly of Empresa de Energía de Bogotá (EEB) appointed new members to the Board of Directors. Within the independent members are Mauricio Cabrera, Mauricio Cardenas Müller, and Claudia Castellanos and within the members representing the majority shareholder are Gustavo Petro, Bogotá Mayor, Guillermo Perry, former Minister of Finance, Fernando Arbelaez Bolaños, Researcher and coordinator Observatory and Numerical Operations ODEON Economy of the University Externado of Colombia, Alberto Merlano Alcocer, Current manager of the Empresa de Acueducto y Alcantarillado de Bogotá, EAAB, Saul Kattan Cohen, CEO 3

5 of Empresa de Telecomunicaciones de Bogotá, ETB, and German Corredor Avella, coordinator Colombian Energy Observatory of National University. TGI - In January 2014, the Board of Directors ratified the company s CEO, Ing. Ricardo Roa, for a period comprising 25 February 2014 and 26 February In February 2014, the Board of Directors approved the Cusiana Phase III expansion project, which includes the beginning of the bidding process for the supply, transportation, nationalization and start-up of the operation of three new natural gas compression units (Miraflores, Puente Guillermo and Vasconia). The feasibility of the project depends on the final reception of the remitting companies. - The General Shareholders Assembly approved the project to distribute profits amounting to COP 130 billion, which were paid up on 24 th April to minority shareholders and the next May 26 th will be paid for the major shareholder. - TGI maintains a market share of 48.2% at the closing of. Cálidda In March, the Resolution of the Board of Osinergmin N OS/CD was published, approving the dissemination of the Resolution Project with sets a Unique Natural Gas Distribution Tariff by the Pipeline Network of Lima and Callao, which comprises the period May 8, 2014 May 7, On 31 March comments and observations of such publication were sent by Calidda and it hopes that approximately in July 2014 the final Resolution for the Setting of the Tariff is disseminated. Contugas The Commercial Start Up of Contugas Infrastructure was performed on after executing jointly with the Energy and Mines Ministry of Peru and Enbridge Technology INC, international inspector, the final test minutes certifying that works have been completed with applicable standards, declaring that the natural gas system is ready for service. The pipeline was tested in a section with pneumatic tests with natural gas constituting a milestone in the industry as very few pipelines in the world have used this scheme. At the closing of March 2014, the company has over 11,700 enabled customers (with over 26,158 households sales with 21,840 internal installations built, pending their enabling process). At the end of February 2014, the first industry that started natural gas consumption was enabled (Textiles del Valle). Subsequently, a GNV station has been enabled as well as a Paper mill company. At the beginning of 2Q 2014, some fishing and steel companies were connected. Regarding changes to BOOT Contract for Distribution in the ICA Department, at closing March 2014 it has managed to agree with the General Directorate of Hydrocarbons, entering into a new addendum to the aforementioned Contract. This change to the Contract is deemed vital for company activities as it eliminates the generation of potential contingencies and/or challenges from the Peruvian Government. To date, we are pending the Ministry s Resolution empowering the Peruvian Government to enter into such addendum. CTM In April, risk rating agencies Moody s [Baa3] and Fitch [BBB-] confirmed the investment grade of Consorcio Transmantaro with stable outlook. Promigas Promigas, together with five international companies namely electric, fuel, ground and maritime transport, executed a Development Agreement to assess the possibilities of building a terminal to import Liquefied Natural Gas -LNG- to the Dominican Republic and study options to supply this fuel to the country s industrial sector. 4

6 2. FINANCIAL PERFORMANCE GRUPO ENERGÍA DE BOGOTÁ Table N 4 - EEB s consolidated financial results COP Million Var. Var. USD Million Var. Var. 1Q 14 1Q 13 COP % 1Q 14 1Q 13 USD % Operating revenue 542, ,468 92, Cost of sales -271, ,143-42, Gross profit 270, ,325 50, Operating expenses -53,798-49,399-4, Operating profit 216, ,926 45, Dividends 832, ,091 47, Non-operating expenses -118, ,240 35, Net income before taxes and minority interest 930, , , Minority interest -28,541-13,782-14, Provision for income tax -49,045-20,751-28, Net income 853, ,244 86, Consolidated operational revenues of the Group grew by 20.6% in 2014 compared to the same period in 2013 as a result of: (i) Increase of revenues on account of natural gas distribution in Peru due to an increase in connections during the quarter with household and commercial clients enabled and connected to Calidda s network and to greater distributed and invoiced volume, (ii) sale of the first internal installations to residential clients and revenues on account of connection rights to industrial clients in Contugas, and (iii) Greater revenues on gas transport in TGI Colombia due to the tariff scheme in force which remunerates the investment and is indexed to USD. In Colombian Pesos, TGI sales expressed in dollars show an increase of 19.7%, when compared to the same period in 2013 (7.8% expressed in USD) and represent, to date 62% of total TGI sales. Operational profit grew at a faster pace than operational revenues given that operational costs and expenses showed a moderate increase, in (i) TGI operational costs and expenses decreased by 12.1%, jointly due mainly to a reduction in costs of fuel gas, and the elimination of occasional consumption, the reduction of costs in materials and supplies, personnel service provision and administrative expenses. (ii) On the other hand, Contugas and Cálidda show increases mainly in costs related to fees, maintenance activities in the gas network and the cost of internal installations by third parties in the gas distribution business in Peru, which showed a significant increase in connections and clients during. (iii) In the EEB transmission business, TRECSA and EEBIS Guatemala increased their expenses on account of fees and services, Procurement of supplies, wages, salaries and fringe benefits; and allocated expenses. As a result of the foregoing, operation profits during reached COP billion, increasing by 26.8% vis-à-vis the same period of the previous year. Regarding non-operational revenues and expenses the main variations corresponds to (i) dividends received from non-controlled companies amounted to COP billion which represent an increase of 6.1%; (ii) financial expenses increased as a result of debt operations contracted in 2013 by Cálidda/Contugas and the reopening of the 2021 bond; (iii) the reduction in devaluation of COP during 1Q had a positive impact in the foreign exchange account, moving from an expense of COP 87,480 million in March 2013 to an expense of COP 56,313 million in March 2014, as a result of updating the financial obligations of the Group expressed in USD, a record which has only accounting 5

7 effects and does not respond to cash expenditures. The Group continues working in structuring hedging operations to establish a limit to losses in coverages currently contracted at the level of some subsidiaries. Finally, net profit during 1Q closed at COP billion, representing an increase of 11.2% vis-à-vis the previous year. Table N 5 - EEB s Financial indicators COP Million USD Million 1Q 14 1Q 13 Var COP Var % 1Q 14 1Q 13 Var USD Var % Consolidated adjusted EBITDA Qtrly 1,115,360 1,010, , Consolidated adjusted EBITDA LTM 1,880,913 1,604, , Consolidated EBITDA margin % 62.2% 63.2% 62.2% 63.2% Quarterly Consolidates Adjusted EBITDA during, which includes dividends received from non-controlled subsidiaries reached COP 1.11 trillion, representing an increase of 10.4%, explained by (i) Greater dividends and interest earned, COP 54,641 million, and (ii) improved operational performance of COP 48,882 million. Consolidated adjusted EBITDA LTM reached COP 1.88 trillion, +17.2%, mainly due to (i) Greater dividends and interests of COP 96,429 million; (ii) better operational performance amounting to COP 61,224 million; and (iii) greater provisions for COP 65,404 million. Figure 1 - Consolidated Adjusted EBITDA LTM- COP Figure 2 - Quarterly Adjusted EBITDA - COP Consolidated Adjusted EBITDA Var. 1,010,355 1,115,360 Consolidated Adjusted EBITDA 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 1,604,916 1,621,817 1,668,543 1,775,908 1,880,913 Var. 25% 1% 3% 6% 6% 232, , ,226 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 Table N 6 - EEB s Consolidated debt structure 1Q 14 Part. 1Q 13 Part. 1Q 14 1Q 13 COP COP USD USD % % Million Million Million Million Financial debt in COP 101, , Financial debt in USD 4,308, ,230, , ,763.0 Derivatives position 221, , Total financial debt 4,631, ,473, , ,895.9 Net Debt/Consolidated Ajusted EBITDA LTM OM: < Consolidated Adjusted EBITDA LTM/ Interests OM: > Total consolidated financial debt grew by 33.3%, at comparative level from quarter to quarter may be explained by: (i) disbursement of new loan amounting to USD 280 million and repayment of short-term syndicate loan in Contugas (USD 215 million) net increase USD 65 million; ii) Issuance of bonds in Cálidda - USD 320 million, less repayment of debt 6

8 amounting to USD 197 million-; iii) Reopening of EEB 2021 bond - US$139 million, less repayment of debt with multilateral bank (CAF) amounting to USD 7 million-; iv) greater value of EEB and TGI debt due to increase in the exchange rate; and (v) indebtedness in EEC to finance short term needs. Figure 3 Debt indicators Net Debt / Consolidated Ajusted EBITDA Net Debt / Consolidated Ajusted EBITDA OM < Consolidated Adjusted EBITDA / Interests Consolidated Adjusted EBITDA / Interests OM > Q 13 2Q 13 3Q 13 4Q 13 1Q 14 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 In accordance with the definitions in the contract of the notes issued by EEB in November 2011, leverage indicators and coverage interest are calculated based on Consolidated Adjusted EBITDA, which includes capital reductions received by EEB from its affiliates. Net leverage indicator decreased due to more than proportionate increased in EBITDA (+17.2%) vis-à-vis a moderate increased in net debt (+6.7%). Interest coverage indicator shows a moderate reduction due to a greater increase in net financial expenses on account of interests (+33%) with respect to 17.2% increase in Consolidated Adjusted EBITDA. EEB Debt Maturity Profile

9 3. PERFORMANCE OF CONTROLLED COMPANIES Table N 7 Financial indicators of Controlled investments 1Q 14 COP Million USD Million EEB* TGI Calidda EEB TGI Calidda Operational revenue 27, , , Operational profit 15, ,822 28, EBITDA LTM 16, , , Net profit 10,297 59,675 16, *Figures of the EEB Transmission Business. Table N 8 - Overview of the EEB group Controlled Companies expansion projects: Executed Proyecto / Cía. Country Sector USD MM Status In Operation: La Sabana TGI Colombia T NG 55 Under construction 3T 14 ICA Perú Contugas Perú T + D NG 358 On stream On stream Lima Callao Cálidda Perú D NG pipeline expansion 500 Under construction Guatemala TRECSA Guatemala T E 376 Under construction Subestaciones EEB Colombia T E 322* Under construction Ingenios EEBIS Guatemala T E 44 Planning 15 T: Transportation; D: Distribution; NG: Natural Gas; E: Electricity * Sum of the net present value of project revenues awarded recently by the UPME to EEB. Figure 5 - CAPEX Executed - Controlled Companies 1Q 14 USD 74.4 MM EEBIS Guatemala; $ % Transmisión EEB; $8.9; 12.9% TRECSA; $11.0; 14.8% EEC; $4.1; 5.5% Contugas; $25.0; 33% TGI; $8.8; 11.7% Cálidda; $16.2; 21.8% 8

10 3.1. EEB Transmission Business Table N 9 - EEB s selected transmission business indicators 1Q 14 1Q 13 Var % Operating income - COP MM 15,644 13, EBITDA Qtrly. - COP MM 16,354 16, Investments - COP MM 17,455 4, Infrastructure availability - % (1) Compensation for unavailability - % (2) Maintenance program compliance - % (3) Participation in Colombia s transmission activity - % (4) Footnotes Annex 6 Technical indicators show stability as regards operating management of the company maintaining compliance in excess of those imposed by regulations without detriment to the Company. Period investments include amounts related to the construction of expansion projects in the National Transmission System in Colombia. Progress of EEB Investment Projects in the Transmission Business: UPME Armenia Project: Cutoff date as of 31 March 2014 continues pending the official statement from ANLA with respect to the issuance of the project s environmental license. The foregoing, taking into account that by means of official document 4416 of 23 December, this entity declared that it had gathered all the information required for such process, so as per the times stipulated for this stage of the procedure, it should have issued its comment on 30 January With respect to the supply of equipment, the line purchase has been completed and the substation equipment are already available for installation. Progress is at 54.92% vis-à-vis 69.24% expected. The project schedule was adjusted by extension in project implementation. UPME Tesalia Project: Cutoff date as of 31 March 2014, progress has been made in civil works of the transmission line Tesalia - Altamira and the reconfiguration of Betania Jamondino, which progress is at 25%. Furthermore, civil works in the Tesalia substation and the enhancement of the Altamira substation show progress of 70% and the mounting stage was activated. For the Tesalia - Alférez transmission line, 86% of its layout has been completed, and reconfiguration progresses at 77% and 94% of the route has been developed, the Previous consultation process is still in process in three indigenous communities present in the Tolima and Valle del Cauca departments. As regards fulfillment with environmental management license granted, follow-up activities are in progress as well as compliance with the Environmental Management Plan. Progress of the project is at 57.88% visà-vis 82.17% programmed. UPME NORTE Project: Cutoff date 31 March Detailed design of transmission lines has been completed in stretches Chivor-Chivor II and Chivor II-Norte. Completion of stretch Norte-Bacatá has not been possible to conclude. Progress on the design of lines is at 81%. Environmental Alternative Diagnosis was filed before ANLA on 31 October The project is pending of ANLA s opinion on the alternative selected. Progress is at 22%, although it was programmed to have reached 27%. 9

11 SVC TUNAL: Cutoff date as of 31 March 2014, this project shows progress of 38.5% vis-à-vis 43.7% programmed. Construction activities began by fixing the roads and excavations. By the end of March, 32% has been excavated and debris has been removed. Civil design and electromechanical reviews continue. EEB provided support during FAT tests on reactors and cooling system. A contingency plan is being implemented and is under execution to make-up for delays DECSA EEC Table N 10 - EEC s selected indicators - Controlled by DECSA* 1Q 14 1Q 13 Var % No. of Clients 268, , Operating Revenues - COP MM 72,760 70, Operating Profit - COP MM 12,011 13, Quarterly EBITDA 15,859 17, Net Profit COP MM 5,161 6, Dividends and Reserves Decreed to DECSA 0 8,898 - Losses - %(1) 3.71% 5.70% Net Debt / EBITDA LTM ,356.7 EBITDA LTM / Interest LTM * Controlled by DECSA Footnotes, Annex 6. Growth in operation revenues reached COP 2,121 million, evidencing an increase in energy sales amounting to COP 1,584 million and also growth in other revenues amounting to COP 537 million where an increase in equipment sales can be highlighted of COP 532 million. EEC demand grew 3.05% during 1 Q 2014 vis-à-vis the same period of the previous year. Operation profits decreased when compared to operational revenues, mainly by the increase experienced in fixed costs, which increase stems from inflation of contracts and restructuring of personnel during October The foregoing is offset by fewer contracts with third parties and a reduction in O&M costs. EBITDA decreased in COP 1,179 million when compared to the same quarter of 2013, explained mainly by a lesser distribution margin of COP 92 million, and an increase in fixed costs of COP 1,087 million, mainly by an increase in the headcount hired and an increase in prices in meter reading contracts, invoicing delivery, commercial revisions, network operation and maintenance among others. Finally, EEC continues fulfilling the investment plan aimed at improving quality and reliability of its distribution system, thus during it achieved a 93.8% execution of its investment plan, giving greater significance to the contingency plan to recover energy losses, and such investment is evidenced given that the company met its loss index goal reaching 10.68% at the closing of, a reduction of 1.91 percentage points with respect to the previous year. EEC decreed dividends amounting to COP 2,000 Million payable in November 2014 to all shareholders. 10

12 3.3. TGI Table N 11 - TGI s selected indicators 1Q 14 1Q13 Var % Operating revenue -COP MM 233, , Operating income -COP MM 162, , EBITDA LTM - COP MM 709, , Net income - COP MM 59,675 15, Transported volume - Mm cfd Firm contracted capacity - Mm cfd International debt ratings S&P - may. 13: Fitch - nov.13: Moody s mar. 12 BBB-, estable BBB-, estable Baa3, estable Operational revenues during first quarter 2014 show an increase of 13.3% when compared with the same period of the previous year. In addition to the tariff scheme in force and the coming on stream of Cusiana Phase II, this increase was the result mainly of (i)increase of transported volume, which grew by 10% with respect to 1Q (ii) Increase of in firm contracts. At the closing of the quarter, 20 more contracts were executed than those reported in the same period of the previous year, representing an increase of contracted volume of 24 mmcfd. This contracted volume represents 3.3% of the available capacity of the system (excluding the capacity that TGI requires for its operations). The variance in the number of contracts is due to the regulatory changes affecting the company, CREG Resolution, according to which carriers must contract for each stretch in the system and with standard capacities in each of these stretches. Compared with the same quarter of the previous year, at the closing of March 2014, operational profits grew 29.5% above operational revenues. This increase is the result of operational costs and expenses decreasing by 12.1%, mainly due to a decrease in personnel services and general services and fuel gas costs. Regarding non-operational accounts, revenues received on hedging valuation operations and the decrease in losses on foreign exchange account, which effect has only accounting impact but does not affect company s cash, represents the accounts with greatest impact during the period. As a result, company s net profit increased by 292.5% when compared with the same period in Progress in TGI investment project: La Sabana Station: The construction of La Sabana natural gas compression station, which is part of the gas pipeline expansion project having the same name, shows progress at 48.8%: As at March 31 project s detailed engineering has been completed. The first compression unit - MOPICO and its auxiliary services have arrived on site. The second compression unit is in the port of Cartagena pending to be transported to site. The construction of foundations for frequency inverters, transformers and compressors has started. Likewise, as of, the pre-manufacturing of pipeline and civil works in the gas pipeline connection bunker began. August 2014 is the estimated coming on stream date for this project. 11

13 Enhancement of Cusiana - Apiay San Fernando Currently, the company is assessing alternatives to make viable a project that aims to increase the capacity on the Cusiana-Apiay strecht, taking into consideration Ecopetrol s decision of not requiring natural gas transport capacity from Cusiana to San Fernando. The New Business and Commercial area conducted a presentation to TGI main customers, in order to promote the enhancements to the transport system CALIDDA Table N 12 - Cálidda s selected indicators 1Q 14 1Q 13 Var % Number of clients 185, , Operating revenue - USD Thousands 142,313 91, Operating income USD Thousands 15,924 12, EBITDA LTM USD Thousands 76,617 64, Net Income USD Thousands 8,448 6, During this 1Q, 22,124 connections have been made, 105% more when compared to 1Q In March, it reached a new connection record of 8,876 (3,663 vs. March 2013). Currently, Cálidda s local market share is 73%. Regarding Residential and Commercial segments, Cálidda increased the number of clients to 22,118, from different districts in Peru where the company operates, reaching a total of 182,550 clients in this segment. During 1Q, Cálidda increased its sales volume by 29% when compared to the same period of The foregoing, is explained by energy generators, which have joined Calidda s distribution system such as Fénix (82 MMCFD) and Termochilca (45 MMCFD). During, Cálidda has built 4 kilometers of high-pressure steel networks and 659 kilometers of a secondary polyethylene network. Calidda s distribution system reached a total of 4,067 kilometers of buried pipelines. The pace of expansion of the polyethylene network has increased considerably, reaching in 38,951 rings visà-vis 12,264 rings in 1Q As regards annual variation, Cálidda enjoyed greater revenues on account of sales of Gas and Transport due to greater volumes, (+16%, +USD 8 Million) and a reduced average tariff (-1%, -USD 1). Increased revenues on account of distribution services (+USD 6 Million). Increased revenues on account of installation services (+USD 6 Million) and increased number of installations (2013: 11,208 vs. 2014: 22,010). Greater revenues on account of the expansion of the network (+USD 32 Million). At the closing of, network penetration rate reached 50% as a result of Cálidda s commercial strategy focused mainly on districts characterized by having medium to low income households, where savings on account of natural gas vis-à-vis other alternate fuels are highly appreciated, and therefore this service enjoys greater acceptance. The objective by the end of 2014 is to reach 59%. Operation profit grew at a lesser pace than operational revenues due to increased costs in the sale and transport of gas as a result of increased volume (+16%, USD 8 Million) and a lower average tariff (-1%, -USD 1 Million). Greater costs on account of installation services and a greater number of installations and greater costs incurred on the enhancement of the main network. At the closing of 1Q, EBITDA (LTM) was greater than EBITDA LTM in 2013 by 7%, resulting from (i) increased invoicing due to two new energy generation plants (Fénix and Termochilca) and also to the volume sold in more 12

14 profitable segments such as Residential and Commercial, Industrial and GNV service stations, and (ii) greater revenues due to internal installation services in homes. EBITDA s adjusted margin decreased slightly due to (i) greater operational costs derived from an increased in tariffs offered by Calidda s contractors on account of internal installation services, which increased by 3% in August 2013, and (ii) a reduced average distribution tax tariff due to quarterly adjustments reflecting a reduction in international prices of steel and polyethylene products (-1,5 % when compared to Q1 2013). Progress in Cálidda s investment projects: There is continuity in projects, the start-up is individual and by stretches built. However, both the Enhancement of the Main Network and Chilca Generators have concluded CONTUGAS Commercial start-up of Contugas infrastructure was carried out on after executing a joint contract with the Ministry of Mines and Energy of Peru and Enbridge Technology INC, international inspector, completed the final minutes of tests certifying the works have met all applicable standards, declaring that the natural gas systems is ready for service. The Peruvian Government has granted 33 additional days on account of force majeure mainly due to lack of water from water sources foreseen to conduct hydrostatic tests of the gas pipeline. With these additional 33 days, the new date for the Startup of the Commercial Operation is The startup was achieved prior to such date, as previously mentioned. At the closing of March 2014, the company has over 11,700 enabled clients (with over 26,158 residential sales and 21,840 internal installations built, pending enabling). At the end of February 2014, the first industry that began the consumption of natural gas was enabled (Textiles del Valle). Subsequently, a GNV station has been enabled and a Paper mill company. At the beginning of 2Q 2014, some fishing and steel companies were connected. Progress of Contugas investment projects: Execution percentage at the closing of was 92% with a cumulative investment of USD 305 million. The project comprises over 340 km of main network and high-pressure stretches and over 700 kilometers of lowpressure polyethylene networks. The gas pipeline will have a capacity exceeding 300 MMCFD and will connect 50,000 residential clients during the first six years of Startup of Commercial Operation TRECSA Progress of Trecsa investment projects: project s progress is set at 67%. Project Permits of the Project 60 municipal endorsements (81%) 2,259 forest licenses obtained (ECUTs before INAB) representing 68% of total estimated files. 13

15 Agreements entered into with owners of 656 km of properties (79%), 598 kilometers have been granted title (72%) and 460 km are available (55%) for construction works in transmission lines. There are 1,140 available sites (56%) for construction of structures of transmission lines. Construction 882 (43%) civil works structures completed and 731 (36%) mounted structures. Progress of 53% in substations civil works (work conducted in 17 substations), 41% of montage (in 12 substations) and 23% in tests (3 substations) EEBIS Guatemala and Perú On 7 April 2011 Guatemala EEB Engineering and Services Sociedad Anónima is incorporated, which objective is to provide solutions of electrical engineering and related areas. Progress of EEBIS Guatemala investment projects: Currently the project under execution consists on the construction of 90km of transmission lines, 4 new substations and the enhancement of 3 existing ones, which is being developed with 5 sugar mills located in the southwestern area of the country. The respective contract became official as of 11 July Investment of the Project reached USD 43.4 million approximately. Progress is at 34% as of. Regarding technical issues, contract processes for construction, montage and start up services of substation has begun; and offers to contract transmission line services has also been received. Regarding environmental issues, archeological rescue tasks have been completed in the Madre Tierra Substation site, and environmental studies by the Environmental and Natural Resources Ministry have concluded. In terms of right of way, the sugar mills are defining the price to be paid on account of right of way on third party properties. Progress of EEBIS investment projects in Peru: The constitution of an affiliate in Peru was authorized by EEB s Board of Directors on 18 April 2013, to materialize market opportunities in that country in terms of engineering and project services, specifically the energy power sector (gas and electric power). The company was incorporated on 25 June Progress of EEB Mobility (Massive Transportation System) investment project: The EEB Board of Director authorized the company to participate in mobility projects that incorporate an important electrical component, once profitability and convenience are assessed. La Empresa de Movilidad de Bogotá SAS E.S.P. was established with the following objectives: (i) generation, distribution and sale of electric energy to massive transportation system of passengers, freight and other modalities; (ii) planning, preparation of studies and designs, supply construction, installation, supervision, operation and maintenance of electric and gas infrastructure; (iii) manage the electrical component and gas projects of massive transportation systems. Currently, the participation in massive transportation projects in Bogotá are been assessed through state-private partnership (APP Spanish acronym). 14

16 4. PERMORMANCE OF NON-CONTROLLED COMPANIES Table N 13 - Non-controlled investments financial indicators 1Q 14 COP Million USD Thousands Emgesa Codensa Gas Natural Promigas REP CTM Operating revenue 547, , ,136 80,996 31,074 24,118 Operating income 315, ,001 75,031 43,868 10,897 13,110 EBITDA LTM 352, ,706 83,723 49,790 20,450 19,613 Net income 197, ,460 59,497 85,290 6,034 5,806 Dividends and reserves declared to EEB 450, ,944 67,311 19, Capital reductions to EEB Table N 14 - Expansion projects of non-controlled companies CAPEX Executed USD Project Company Sector Country Million On Stream Quimbo Emgesa G Electricity Colombia S 15 Attention New Demand Codensa D Electricity Colombia Concession Extensions REP T Electricity Perú Extensions Concession and New CTM T Electricity Perú System Extensions PROMIGAS T + D natural gas Colombia Graph 6 - CAPEX Executed - Non - Controlled Companies 1Q 14 USD MM Gas Natural; REP; $14.3; 8% $1.4; 1% Promigas; $13.9; 8% Codensa; $20.4; 11% CTM; $24.2; 14% Emgesa Total; $102.1; 58% 4.1. EMGESA Table N 15 Overview of Emgesa 1Q 14 Installed Capacity - MW 2,975 Capacity Composition 11 Hydro y 2 thermo Generation Gwh 2,991 Sales Gwh Control EEB Participation 3,677 (Includes sales contracts and spot sales) Enel Energy Europe S.R.L. 51.5% % acciones ordinarias; 14.1% preferenciales sin derecho a voto- 15

17 2, % 2,533 Demand GWh 1Q 13 1Q % 3, % 3,677 1,211 1,144 Contracts Spot Total -1.4% Supply GWh 1Q 13 1Q 14 3,035 2, % -13.3% -15.3% Power Generation Contracts Spot Total Supply Emgesa total sales in the spot market and contracts decrease as a result of reduced own generation and due to low water levels in its dams (Pagua and Guavio) and maintenance in thermal plants (Cartagena and Termozipa). Sales make up was 69% through contracts with clients in the wholesale and non-regulated market and 31% remaining via contracts in the spot market through the AGC mechanism (Automatic Generation Control). Emgesa generation represented 19.09% of the total system and was slightly lower than the generation of the same period during In terms of gross installed capacity, Emgesa represents 20.3% of the country. Table N 16 - Selected financial indicators of Emgesa COP Million USD Million 1Q 14 1Q 13 Var % 1Q 14 1Q 13 Operating revenue 547, , Cost of sales 225, , Administrative expenses 6,348 6, Operating income 315, , EBITDA YTD 352, , EBITDA Margin 62.7% 63.5% 62.7% 63.5% Net Income 197, , Dividends and reserves declared to EEB 450, , Capital Reductions to EEB Debt / EBITDA EBITDA / Interests Footnotes Annex 6 16

18 Operation profit grew at a faster pace than operational revenues as a result of less water and thermal generation and therefore fewer power purchases in the spot market and reduced fuel consumption. Net profit showed an increase of 0.8% due mainly to improved operational results and lesser cost of sales resulting from reduced consumption of fuels. EMGESA S.A. ESP reported that by means of Resolution No of 12 March 2014, the Financial Superintendence of Colombia, which guideline became effective as of 11 April 2014, authorized an increase in total limit of the Issuance and Placement of ordinary bonds Program responsibility of Emgesa from eight hundred and fifty thousand million ($ million) to a global limit for the Program of (COP Million). Emgesa S.A ESP reported on 13 March 2014 that its Board of Directors approved an increase of US$256 million (2010 fixed exchange rate) for the investment of the Hydroelectric Project of El Quimbo, initially approved in April 2010 for USD 837 million (constant dollar value 2010). Thus, total project budget amounts to USD million (constant dollar value 2010). This increase is the result of different external events, modification and updates on specifications and designs, as well as reprogramming of works, which have compelled the project to conduct budgetary updates in the line items of the socio-environmental plan, dam, civil and engineering works. Emgesa S.A. ESP reported on 10 April the list of the Board of Directors approved by the General Shareholders Meeting. Likewise, Emgesa s Board of Directors decreed profits for 100% of net profits 2013 equivalent to COP 870,141 million of which COP 450,465 million correspond to EEB and will be paid in 3 equal installments. Progress of EMGESA investment project: Table N 17 Capex 1Q 14 1Q 13 Var % COP Million 200, , USD Million Expansion investments carried out by Emgesa focused in El Quimbo Hydroelectric Power Plant and revamping of the Salaco generation chain. Likewise, investments were carried out in preventive maintenance in hydraulic and thermal power stations of the company to ensure reliability and availability thereof. El Quimbo Hydroelectric Project: Investment to date in El Quimbo project amounts to USD million, progress is at 64.8% CODENSA Table N 18 - Overview of Codensa 1T 14 Number of Clients 2,709,610 Market Share - % 23.5% Codensa Demand Gwh 3,612 Var % Codensa Demand 1T 14 / 1T % Loss Index (%) 7.07% Control Enel Energy Europe S.R.L. EEB Participation 51.5% -36.4% ordinary shares; 15.1% preferred non-voting shares 17

19 Power demand in Codensa s area: grew by 1.98% on March 2014, resulting from the recovery of the regulated market (residential and commercial clients), manufacturing industry and the use of Codensa lines by other electric power vendors. Electric power National Demand: grew 3.43% as of March 2014, maintaining a slight recovery in the mining and manufacturing industry in the country s central region and high temperatures in the northern and eastern regions of the country. Table N 19 - Selected financial indicators of Codensa COP Million USD Million 1Q 14 1Q 13 Var % 1Q 14 1Q 13 Operating revenue 797, , Cost of sales 568, , Administrative expenses 20,775 18, Operating income 208, , EBITDA YTD 272, , EBITDA Margin 34.9% 32.4% 34.9% 32.4% Net Income 128, , Dividends and reserves declared to EEB 277, , Capital Reductions to EEB Debt / EBITDA EBITDA / Interests Footnotes Annex 6 During the period, Codensa generated operational revenues of approx. COP 798 billion, meaning 4.8% greater vis-àvis 1Q 2013, as a result of: (i) Growth of 1.98% of the demand in the area of influence, and (ii) Greater revenues related to the transfer of energy to the networks of other operators outside its area of influence. Cost of sales increased as a result of an increase on purchases of electric power to service demand. Codensa s EBITDA in reached COP 272,706 million, which represents growth of 10.6% with respect to 1Q 2013, mainly due to greater operational revenues. Company s financial debt experienced a decrease of 20.4% with respect to March 2013, mainly due to the expiration of local bonds amounting to COP 250,000 million in March Financial expenses increased as a result of increased average inflation rates during 2014 when compared with the same period of 2013, indicator to which 100% of Codensa s current debt is expressed. Codensa s net profit increased with respect to 2013 as a result of greater revenues on account of energy service sales (Energy Demand and Transfer to other operators network) together with an improved operational performance. Codensa managed to reach total loss index of 7.07% at the closing of. On 20 March 2014, Codensa S.A. ESP s Board of Directors, approved the enhancement to total limit of the issuance and placement of bonds program from COP 165,000 million to COP 950,000 million. Through Resolution No of 13 March 2014 the Colombian Financial Superintendence, whose authorization became effective on 14 April 2014, authorized the increase of the total limit of the ordinary bond Issuance and Placement Program in charge of Codensa in one hundred and eighty five billion (COP 185 billion) to seven hundred and eighty five billion COP 785 billion. Similarly, Codensa s Board of Directors decreed profits for 100% of its net profit in 2013 equivalent to COP billion, of which COP billion correspond to EEB and will be paid in 3 equal installments. 18

20 Table N 20 Capex 1Q 14 1Q 13 Var % COP Million 40,250 34, USD Million Progress of Codensa s investment projects: Investments focused mainly on: (i) Servicing growing demand to ensure electric power supply to the country, (ii) Improve the quality of service and its continuity and (iii) Control operative risks and non-technical loss control PROMIGAS Table N 21 - Overview of Promigas 1Q 14 Number of clients 10 Volume of sales - Mm cfd Market share - % 40 Network km 2,367 Operating Revenues - COP Million 80,996 EEB s stake - % 15.6 Table N 22 Capex Promigas 1Q 14 1Q 13 Var % COP Million 27,476 9, USD Million Table N 23- Selected indicators of Promigas COP Million USD Million 1Q 14 1Q 13 Var % 1Q 14 1Q 13 Operating Revenues 80,996 69, Cost of Sales 15,398 16, Administrative Expenses 21,730 22, Operating income 43,868 30, EBITDA Quarterly 49,790 37, EBITDA Margin 61.5% 53.1% 61.5% 53.1% Net Income 85, , Dividends and reserves declared to EEB 19,075 37, Capital Reductions to EEB Debt / EBITDA EBITDA / Interests Footnotes Annex 6 Greater revenues due to the fact that in 2014 the invoicing of Ecopetrol- Reficar began to take place resulting from an increase in contracted capacity. Net profit decreased 53.9% given profit in selling Promitel investment in 1Q 2013 (COP 136,438 Million). On 25 March 2014, General Shareholders General Meeting decreed to pay up dividends amounting to COP billion, of which COP 61,658 Million correspond to dividends on account of shares. EEB will receive, via its 19

21 investment vehicle EEBGAS the amount of COP 19,075 Million, one payment in April 2014, and five monthly installments from May 2014 to September Progress of Promigas investment projects: Promigas, together with five international companies in the electric power, fuels, ground and maritime transport sectors entered into a Development Agreement to assess the possibilities of building a terminal to import Liquefied Natural Gas - LNG- in the Dominican Republic and to assess options of supplying this fuel to the country s industrial sector. La Sociedad Portuaria El Cayao SA ESP, of which Promigas SA ESP owes 49.99% of outstanding shares and in which two private equity funds participate, both national and foreign equity, has been selected as Awardee within the bidding process organized by Grupo Terminco (made up by the main generators in the Caribbean regions) as Infrastructure Agent AI in charge of the construction, administration, operation and maintenance of the infrastructure that will render the services to receive imports of Liquefied Natural Gas LNG storage, regasification and placement at the entry point of the National Transport System. Proyecto Mini Loop consisting on the construction of two Loops between Palomino and Don Diego rivers, in 24, estimated length is 6 Km, to increase transport capacity. Progress is at 34% and start up is expected to occur in Project Loop 14 Hocol San Mateo Mamonal consisting on the construction of a gas pipeline between HOCOL and San Mateo wells in 12 in diameter and 22 kilometers in length approximately, a Loop between San Mateo and Mamonal of 14" in diameter and 163 Kilometers approximately, to transport 60 million cubic feet. The project s progress is at 2% and start up is expected in Microplanta LNG La Arenosa consisting on the construction of a micro plant for liquefied gas, with a 78,000 Gallon/day capacity to reach markets which are not serviced by the Traditional Gas pipeline System and servicing the vehicle market. Progress is at 49% and start up is foreseen for Enhancement Project SRT Loop Mamonal consisting on the construction of a Loop to service expansion projects and new requirements of clients in the industrial area of Mamonal. Progress is at 11% and start up is foreseen for Filtering System of Arenosa-Caracoli stretch consisting on the installation of a Filtering system in the Arenosa Station line that will connect the crossing of a 32 with an 18 to take gas to Caracolí. Project has not started yet and start up is foreseen for GAS NATURAL Table N 24 - Overview of Gas Natural 1Q 14 Number of clients 1,938,675 Volume of sales - Mm cfd Market share - % 93.7 Network km 12,791.8 Operating revenue - COP MM 356,136 EBITDA LTM - COP MM 83,723 Controlled by Gas Natural de España EEB s stake 25% 20