Terpel Servicio: Cliente: Traducción Duración: 53 minutos N. Páginas 10 Descripción material enviado por el cliente:

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1 Cliente: Terpel Servicio: Traducción Duración: 53 minutos N. Páginas 10 Descripción material enviado por el cliente: Audio en formato MP3 Calidad material: Buena Fecha traducción: 5 de junio de 2017 Nombre archivo final: Trd_Resultados_1er_Trimestre_2017_Terpel_ENG_Final Operator: Good morning. My name is Richard and I will be the conference operator today. Welcome to the conference to present Organización Terpel s results for the first quarter of For your information, all lines will be silenced throughout the presentation. At the end, there will be a space for questions and answers. Instructions will be given at that time. Let us remind everyone that this is a call for investors and analysts, so if you are a member of the media, please contact Organización Terpel directly and do not take part in this call. Thank you very much. We would like to invite participants to see the presentation at through the link at the bottom of the page. If you find any difficulty to see the presentation, please contact the company after the call ( ), or guillermo.achury@terpel.com and the presentation will be sent to you. From this moment on, Ms. Sylvia Escovar, President of Organización Terpel, and Mr. Oscar Bravo, Vice President of Finance, will be in charge of the conference. I will now turn the call over to Ms. Sylvia Escovar. Sylvia Escovar: Thank you very much. I want to welcome all of those who are interested in knowing Organización Terpel's results for the first quarter of As our operator said, I will take some time to tell you about the main highlights of the organization for this quarter in comparison with 2016 and by the end of this presentation Oscar and I will solve any doubt or listen to any comment that you may have about these findings. Let's start by mentioning the most outstanding facts for us throughout this year. Let's start by talking about Organización Terpel's consolidated EBITDA. Our EBITDA has grown by 11%, meaning 16,000 additional millions in comparison to the same period last year. That growth has been driven, as we are going to see, by our results in Colombia. The second thing that I want to tell you about is that Organización Terpel s general shareholders meeting already took place and dividends of COP $541,59 pesos per share were approved then. The shareholders meeting was carried out in March and COP $98,251 million of ordinary dividends were declared on 181,424,505 shares, which were paid in April As it has been done previously by the company, this means a 50% distribution of the net profit in The third thing that I want to mention, because it is very meaningful for the company, is that Terpel is now listed by the RobecoSAM's Sustainability Yearbook thanks to its best practices

2 in the area. You probably already know that this yearbook is really important in terms of brand value and company credibility around the world. The company received the Bronze Award 2017 and was also recognized as an Industry Mover, which positions it as one of the leading companies in sustainability worldwide. It is the first fuel sector company in Colombia to receive these awards. This was accomplished because of our actions in relation to economic, social and environmental management. Also, it is always important to talk about our expansion. During this quarter, two new own stations and five affiliate stations became part of our network of liquid fuels in Colombia. We also have three new Altoque stores, for a total of 35 operating stores. We will see these numbers in detail later, but basically it means that we continue with our strategy of supplementing our service stations network with more stations and new services for users. Concerning share value, it increased by 8,85% in the first quarter. Its closing price in March was COP $12,300, which means a market capitalization of COP $2,2 billion. I must also refer to the impact of the tax reform on our company's results. The most important changes for this specific business were the new carbon tax, a higher VAT that went from 16 to 19% and a wholesale margin reduction. This reduction is given by our request to the Government for the possibility to handle VAT based on other taxes that we had to pay. The Government did not want this to have an impact on fuel price paid by end consumers, so we tried to have a net effect that would allow us to do the same in the future. This is very good news for the company from now on, but it also means a drop in wholesale margins as long as it is not released. Moving on to our quarterly presentation, as we can see item 1 is about regional coverage. I want to highlight our ranking in each country. In Mexico we are ranked first and in the Dominican Republic and Panama we are ranked second. I believe that we are going to be the number one player in Panama soon. Right now we are number two, according to figures released in March. We are the undisputed leader in Colombia. Ecuador is the only country where we are not the first or second most important player in the industry. We are ranked fifth in that country, with 58 service stations. In Peru, we are the second player and it is the only country where we have LPG. In general terms, that is our participation in the countries where we are present. In Colombia, Terpel is the number 1 player, as we saw. We have a 38% of market share in liquid fuels, including industry and service stations and we also have a 78% participation in the aviation industry and 46% in natural gas for vehicles (NGV). Similarly, in Mexico we are the first brand in the NGV station segment, with a 56% market share participation. It is worth noting that we have 100% of it, since we are the only player in Mexico City. This quarter has been especially important for Mexico, given the so-called "gasolinazo". Gasoline prices increased and therefore NGV became an even better fuel for the end consumer. Consequently, in Mexico City we have had a very successful quarter. We are present in Panama with a 23% of total participation. Clearly, it is one of the preferred brands in that country.

3 Throughout this year, as we mentioned before, the company increased its network of service stations in all countries and incorporated seven liquid service stations in Colombia. Two of them are our own. Also, three service stations were incorporated in Panama. Similarly, we built three new Altoque convenience stores in Colombia. As we mentioned when referring to this quarter's highlights, we already have 35 stores as part of the implementation of the company's strategy, focused on strengthening its service stations infrastructure and service. Let us move on to page 4 of the presentation. Here we have some of our brands. Perhaps some of you have not taken part in these calls in the past and are not familiar with them. We have the Gazel brand in countries like Mexico and Peru, where we are not present as Terpel. In the rest of countries, we are still incorporating our Gazel stations into the new Terpel canopies, so they are another service inside the familiar Terpel infrastructure. The last section is about Va & Ven. You may have seen that Altoque has the same look and feel of the store. However, this station is called Va & Ven because according to market research in Panama this name is more attractive than Altoque, which we use in Colombia. It is part of our strategy to adapt our formats to each country's culture. So this format, which is basically the same as that of an Altoque in Colombia, is called Va & Ven in Panama and it is one of the most successful stores that we have in Panama at present. Moving on to the slide on consolidated results, we can first see volume and EBITDA. Sales volume had a 1,7% variation. Let's focus on the right hand side. I would like to remind you that about 80% of the turnover is generated in Colombia, which is 79,08%, as you can see. It is followed by Panama with a 9,95%, then Ecuador with 6,05% and then the other countries. That does not change the EBITDA much, which is 80,7% for Colombia. However, in the case of Ecuador, although volume is 6,05%, we have a lower margin and therefore it only participates in 1,25% of the EBITDA. Colombia has about 80% of the volume and 80% of the EBITDA. Panama, as I mentioned before, is the second country in terms of the EBITDA, with 11%. As of March 31, as shown in figure 1, sales volume decreased by 1,7% in comparison with the same period last year. Although new stations were incorporated into the network in the last twelve months, in 30 stations in Colombia (16 of which are our own), 13 in Panama and 3 in Peru, the average sales volume per station has been affected. In Colombia, this has been mainly caused by a lower sales volume in border areas. As you may remember, last year was rather unusual but very favorable for us because the border was closed from November 2015 until the end of 2016, with a few openings. The border started to be affected and at this moment, because of an increased spread caused by the tax reform, which in turn made the carbon tax increase gas prices in Colombia, there is a lot of contraband. This is perhaps the main reason why all border stations are selling less on average. In total during the quarter we have sold 9 million gallons less in that area. Similarly, it has been caused by the metro construction in Panama. Same basis growth in Colombia has fallen by 5% in affiliates and 7% in own stations. In addition, industry growth both in Colombia and Panama has been affected by the cyclical nature of generation sales. Let's remember El Niño phenomenon last year. During El Niño phenomenon, there was a specific sale to one of the largest thermal generators in Colombia, which corresponds to 7

4 million gallons. I'm talking about Termocandelaria. And due to rainfall in Panama, this decrease was 6,1 million gallons. By contrast, with respect to EBITDA, it had an 11,1% growth in comparison with the same period last year. It means that this quarter we obtained COL $16,000 million more than last year. COL $11,000 million of this amount corresponds to Colombia, where in the first quarter of 2016 there were inventory losses amounting to COL $20,000 million. On the other hand, inventory profit this quarter was COL $3,000 million. Similarly, EBITDA grew COL $3,7 billion in Panama, mainly due to improved negotiations on fuel purchase. As you know, in Panama we buy fuel from Chevron. By late 206 we came to an agreement that allows us to have a greater margin from this year on and it is reflected in a higher EBITDA. To continue with our presentation, we will go over our operating results in Colombia. Here we see how liquid service stations in Colombia are again the most important business for the company, both in terms of volume and gross profit. As of March 31, volume in liquid stations, as we just saw, was driving total volume decrease, down by 2,74% in Colombia. I already explained that this decrease was given due to the decrease of 9 million gallons in the borders because of the two effects mentioned. First, because the border was opened more often and second, because it promoted contraband given the higher prices of fuels arising from the tax reform. On the other hand, the NGV segment, which participates with 5% volume and 14% of gross profit in Colombia, decreased by 1,7% in volume. Concerning this aspect, it is worth explaining that last year, as we have been mentioning in our previous calls, competitiveness of natural gas for vehicles has been diminishing for two reasons. First, the exchange rate has been affecting gas price in terms of well heads and transportation. These two values are expressed in dollars, so this increases gas price. On the other hand, we have gasoline falling as an effect of crude falling. As we all know, it decreased from over US $100 dollars to around US $20 and it has now increased to US $50. Given that the exchange rate has gone down a bit and gasoline has also been going up, we've been gaining some competitiveness, but it is still lower than what we normally had. That explains the fall in the natural gas for vehicles segment. However, this 1,7% decrease in volume is better than the one experienced in the last two years. In terms of market, it had been falling at about 7% annually, which means that a fall of about 2% is not so serious, even though demand is clearly being affected and it will remain like that until fuel price somehow recovers and maintains that 40 or 45% difference among fuels. On the other hand, we have the business industry in Colombia. It presents a 12,6% negative variation in volume in comparison with last year, which is the result of a very specific effect that I just explained and it was our sale to Termocandelaria during El Niño phenomenon. Although we can see that important fall because Termocandelaria implied the sale of 7 million gallons, the industry business has been recovering in other sectors. We have new customers and the oil sector has experienced some recovery. So although we see a fall due to that specific topic, the industry business is moving again at a higher rate than last year. In addition to the issue of Termocandelaria, we had a mining customer (Prodeco) who is being served by Ecopetrol, so we will not work with that customer for three more years, after

5 its contract with Ecopetrol ends. In the aviation segment we have a 1,4% growth. There is an impact arising from fuel demand by the airlines, given the tax carbon imposed on airlines by the tax reform. Therefore, airlines have been seeking for some tankering in areas that do not have to pay this tax. However, we see that demand continues to grow at 1,4%, as you can see. In terms of gross profit, inventory profits in this period are quite positive. They amount to COL $3,000 billion and in the first quarter of 2016 they were COL -$20,000 million. After that information, we will now refer to operational results in Colombia. In Colombia, as you can see in the first chart, we have a 10,11% EBITDA increase. This growth is given by the positive offset effect that we just mentioned. When comparing March 2016 with March 2017, we can see a 243 growth versus 275 in The increase in the wholesale margin moved from COL $341 pesos per gallon to COL $357 pesos per gallon. Concerning net profit, we have a 141,62% growth, which is mainly explained by the positive offset, as you can see in your graphs. In addition to the EBITDA growth, we see a decrease in financial expenditures due to the CPI decrease on a 12-month basis for the quarterly payment of coupons for corporate bonds which, as you know, were issued in 2013 and On the other hand, the equity tax for 2017 is COL $3,600 million, which is COL $7,000 million less than last year as a result of the tax reform. This was all the information about Colombia. Let's move on to Panama and its operating results. In Panama, just as in Colombia, liquid service stations are the most significant business in terms of volume and gross profit. As of March 31, volume growth of liquid service stations was 5,5%. This was the result of new service stations (13 in the last 12 months, as we saw previously) as well as improvements in average sales volume per station. Unlike Colombia, Panama's volume or throughput grew during this period. On the other hand, the industry business decreased in volume by 35%. As we already explained, this was also due to cyclical sales to generators, which correspond to 6 million gallons less because of rainfall in Panama. Panama's total volume without the generation gallons is 3% higher than the previous quarter and 6,9% lower if they are taken into account. The generation effect is very significant, as you can see. As I have mentioned, fuel purchase is more efficient now because of improved negotiations with Chevron. On the other hand, inventory losses have meant a higher gross profit (COL $400 million) if compared to last year. Concerning item 3, the EBITDA growth in Panama is 24%, which means COL $4,000 million more than last year. However, if we isolate the revaluation effect and the exchange rate effect, there is a 39% growth given that 2,100 corresponds to revaluation. Therefore, the market representative rate means COL $2,100 billion less when we look at it in pesos. Net income growth in Panama is determined by business growth and a lower offset, which we just mentioned. Finally, before analyzing debt, let's go over the consolidated balance sheet. We do not see any significant change in the balance. The company continues to maintain its position with COL $1,5 billion pesos, COL $4 billion assets and liabilities amounting to COL $2,5 billion pesos. We won't find any significant change in terms of debt either. Consolidated debt at the end of the quarter was COL $1,4 billion pesos, COL $15,000 million more than the same period last year. There is also an effect of COL $ -18,000 million due to the revaluation of the Colombian peso against the dollar specifically in countries other than Colombia, where borrowing is not denominated in pesos. The company's debt, as you already know and as we have mentioned many times, is mainly in Colombia. Indebtedness level in Colombia is COL

6 $1.1 billion pesos. All of these amounts are in Colombian pesos. Debt composition is diversified. 63% is tied to CPI and 19% is an IRR rate. If we analyze the profile of consolidated debt or debt maturities, all of them are long term and correspond to principal payments of bonds issued in 2013 and This affects the results of a company with debt indicators of about 2,2 times EBITDA and an EBITDA-tointerest coverage ratio of 5.9 times. After talking about the company's debt, we ll go over CAPEX. Just as in previous times, let me remind you that the company's CAPEX basically focuses on the expansion and strengthening of our service stations network and its complementary services. I'm talking about the stores that we have mainly in Colombia, but also in Panama. The rest of the CAPEX is earmarked to plant and airport maintenance, given the demand growth we are experiencing particularly in Colombia and Panama. With this, we can conclude our presentation about this quarter's main financial results. Oscar and I are ready for your questions or comments. Operator: Thank you for your attention. At this time, we will begin the question and answer session. If you have a question, please press * and then 1 on your phone. If you are using a speaker phone, you need to lift the handset before pressing the buttons. Again, if you have any questions, please press * and then 1 on your phone now. At this time we have no further questions. >>Everybody has left. Operator: There is a question from Juan Mejia, from Pamco. Sylvia Escovar: Juan Mejía? What is Pamco? Operator: Once again, if you want to ask a question, press * followed by 1 on your phone. The first question comes from Rodrigo Godoy, from Banco de Chile. Go ahead, please. Rodrigo Godoy: Good morning. Thank you very much for the conference. I would like to know about the company's CAPEX for this year and the next one. Please give us some details about its amount and how it is distributed in terms of expansion and strengthening of the service stations network, plant modernization and maintenance, etc. Thank you very much. Oscar Bravo: Hello, Rodrigo. Good morning. This is Oscar Bravo. Rodrigo Godoy: Thank you very much. Oscar Bravo: We made an adjustment to our dividend distribution policy. We agreed to distribute 50% of profits among shareholders. We also made an adjustment to our investment policy and in consequence we have allocated 50 to 60% of our consolidated EBITDA for reinvesting in CAPEX. That CAPEX normally has a 60 to 70% distribution in Colombia. As you saw when we were explaining the execution of CAPEX this year, most of it focuses on service stations and as such in the future, we expect that trend to continue, both as a percentage of the company's generated EBITDA and in terms of the distribution of future investments. In Colombia and Panama we have some specific material investments in what

7 we have called complementary services. They basically focus on convenience stores and the opening process of some new ones. That is the situation mainly in Colombia and Panama. In terms of maintenance CAPEX, we normally we have a certain value of pesos per gallon. That depends heavily on new projects. For example, in the past three years we undertook several growth projects concerning storage capacity. Some time ago, we bought several plants from one of Ecopetrol's subsidiaries and we developed a joint project along with Ecopetrol in Tocancipa, which is on the outskirts of Bogota, and another one in Apiay, in Llanos Orientales. In order to answer your question directly, I would say that we are talking about a 55 or 60% of CAPEX as a percentage of the EBITDA generated. What is happening? As you know, we are in the process of acquiring the three businesses that ExxonMobil has in the region. Obviously, once that process is approved we will have a task, which is analyze the composition of that CAPEX in terms of investments, because a very large lubricant business is coming, as well as new service station businesses in Ecuador and aviation agreements in Peru. If that deal is in fact closed, an analysis of the company's investment needs would be required, but to date we have not defined it. Therefore, I would say that our current investment policy could be modified and our dividend distribution policy could be used to finance our growth needs with our own funds. I hope I answered your question. Operator: Thank you. The next question comes from Luisa Arce, from Davivienda Corredores. Go ahead, please. Your line is open. Luisa Arce: Good morning. Thank you for the call. I would like to know if there are new dates for the purchase of ExxonMobil's businesses. On the other hand, what else can you tell us about the current quarter and the company's outlook in the short term? Thank you very much. Oscar Bravo: Hi, Luisa. This is Oscar Bravo again. Concerning the acquisition process of ExxonMobil's businesses, I can tell you that just as we did a few months ago, we continue to work very closely with the seller in what we call a transition plan, which is aimed at defining the people that we need to support those new operations, since most of them are supported by ExxonMobil through its centers of shared services in Europe and the United States. We have been working on the recruitment and training of those resources with ExxonMobil, as well as on the implementation of information systems, since the seller will take most of them with it. At the same time, we are working very closely with the SIC, the legal authority in Colombia. A few days ago we received a request for additional information for both parties. We had mentioned that the transaction was expected to close by early August. As of today, we think that it will take a couple of months, provided that the SIC information requirement goes well. This means that the transaction could be closed in October or maybe November, as long as approvals are obtained. We believe that this process will work as expected, since we have been working with authorities in various mitigation plans to ensure that the consumer is not affected by that fuel business acquisition in Colombia. In terms of projections or our forecast for the year, I'd say that we are also affected by the current economic situation. Sylvia discussed the impact of the Venezuelan contraband on our

8 volumes, which is obviously affecting local fuel consumption. In general, I would say that the other businesses are in line with our expectations. We believe that the second quarter's results will be similar to our initial expectations, although with a relative low growth. Fortunately, our subsidiaries in the Dominican Republic, Panama and Mexico have a very good performance. Business is going well and we can say that those economies have also supported this growth. That's what we can share with you about this year, when consumption and the economy in general has slowed down. Luisa Arce: Thank you very much, Oscar. Operator: The next question comes from María Isabel Luna, from Megeve. Maria, your line is open. Maria Isabel Luna: Hello? Can you hear me? Sylvia Escovar: Yes, we can hear you. Maria Isabel Luna: Good morning. Yes. Hello, good morning. I would like to have some more information regarding the Exxon process and the involved amounts, the potential capital increase or the potential sale of service stations. Sylvia Escovar: Hello, Maria Isabel, how are you? This is Sylvia. Maria Isabel Luna: Hello. Fine, thanks. Hello, Sylvia. Sylvia Escovar: The information that Oscar just gave us is what we know so far. I would like to emphasize that we are not going to keep ExxonMobil's stations. That should be absolutely clear. Despite requirements from the Superintendence of Industry and Commerce, the idea is to sell the fuel business as soon as possible and keep the lubricant business only. After we are notified by the Superintendence, we will actually know how to do so. The most important aspect for us is to always keep our AAA rating. No matter the business decision we make, we would never put that rating at risk. Oscar, do you want to add anything else? Oscar Bravo: No. I would perhaps just mention that it is too early to define our financing strategy. We have been working on this for some months now together with our majority shareholder. As Sylvia mentioned, we want to emphasize that both the majority shareholder and us are committed to maintaining the company's debt levels within the ranges needed to support the AAA rating that we have in Colombia, which obviously permeates Copec and Empresas Copec. From the point of view of having clear figures, one of the most important variables is what Sylvia mentioned, which is the sale of the fuels asset of Colombia, meaning Exxon's service station business. As of today, information about the amount or time required is uncertain, so we cannot give you further information at this point. Maria Isabel Luna: Perfect. Thank you very much.

9 Oscar Bravo: You are welcome. Operator: Thank you. We have Juan Mejia, from Pamco, on the line. Any questions? Juan Mejía: Good morning. No. The questions I had were already answered. I wanted to ask about the transaction involving new Exxon stations. Thank you very much. Sylvia Escovar: Thank you, Juan. Operator: Once again, if you have any question, press * followed by 1 on your touch tone phone. At this time we don't have any further questions. Now I will turn the call over to Ms. Escovar for final remarks. [Unintelligible - 0:48:22. 9] Sylvia Escovar: Well, thank you for your participation. It is a pleasure for us to have these calls in order to inform you about our company's management and results in the countries where it operates. We hope we have solved your doubts and concerns. We hope to see you next quarter. Thank you for your interest in Terpel. Operator: Thank you, ladies and gentlemen. Thank you for your presence and attention. You can send any additional requirement by mail: guillermo.achury@terpel.com. This concludes today's conference. Thank you everyone, you can disconnect.