MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read this discussion in conjunction with (i) the information set forth in Summary Financial and Operating Data and Selected Financial and Operating Data, (ii) the TgP Financial Statements, including the notes thereto, and (iii) the section entitled Peruvian Natural Gas Industry and Regulatory Framework, of the final offering memorandum dated April 23, 2013 (the Offering Memorandum ). All terms not defined herein shall have the meaning ascribed to them in the Offering Memorandum. This document contains forward-looking statements that involve risks and uncertainties. TgP s actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in Risk Factors and the matters set forth elsewhere in the Offering Memorandum. For additional information regarding forward-looking statements, see Forward-Looking Statements in the Offering Memorandum. Overview We are Peru s largest transporter of natural gas and natural gas liquids. For the year ended December 31, 2015, we delivered substantially all of the natural gas and natural gas liquids extracted from Block 56, Block 57 and Block 88, which in 2015 represented approximately 95% and 96%, respectively, of the country s total volume of natural gas and natural gas liquids produced during that period, based on information published by the MEM. Substantially all of our assets are located in Peru and all of our operating revenues and profits derive from our natural gas transportation business and our natural gas liquids transportation business in Peru. The TgP Gas Pipeline System consists of an open-access 729 Km (approximately 453 mi) pipeline that transports natural gas from the Camisea Fields, to the City Gate in Lurín, a town located near Lima, Peru s capital city and to Km 211 of the TgP Gas Pipeline System where natural gas is delivered to PLNG, for its subsequent liquefaction and export as LNG. The TgP Liquids Pipeline System consists of an open-access 557 Km (approximately 346 mi) pipeline that transports natural gas liquids from the Malvinas separation plant operated by Pluspetrol, located in the Department of Cusco to the natural gas liquids fractionation plant operated by Pluspetrol located in Playa Lobería in Pisco, a town located in Peru s central coast. The TgP Pipeline System is operated and maintained by COGA, an entity owned by Graña y Montero S.A.A., Enagas Internacional S.L.U., Carmen Corporation and Tecgas Inc., which is the qualified strategic operator of the TgP Pipeline System under our natural gas and natural gas liquids transportation BOOT concessions. See Business Material Agreements O&M Agreement in the Offering Memorandum. Our customers include some of the largest power generation, natural gas distribution and industrial companies in Peru. In addition, one of our customers, PLNG, is the largest gas exporter in Peru and one of the largest exporters of LNG in Latin America. See Summary Our Revenue Base in the Offering Memorandum. We provide natural gas and natural gas liquids transportation services to our customers pursuant to long-term natural gas transportation agreements (firm and interruptible) and long-term natural gas liquids transportation agreements. Our customer base is comprised of power generation companies (including Edegel, Kallpa Generación and Enersur), gas distribution companies (including Cálidda, Peru s largest gas distribution company) and industrial companies (including Alicorp, PLNG, Unacem, Owens-Illinois, and the Upstream Consortia, acting through its operator Pluspetrol). As of December 31, 2015, we had 21 long-term natural gas firm transportation agreements and 19 long-term natural gas interruptible transportation agreements. We provide natural gas liquids transportation services to the Upstream Consortia (acting through its operator, Pluspetrol) pursuant to two long-term ship-or-pay natural gas liquids transportation agreements with the Upstream Consortia and Pluspetrol, as operator of the Upstream Consortia. For the years ended December 31, 2015 and 2014, we had operating revenues of U.S.$ 544,454 thousand and U.S.$ 537,872 thousand, respectively, and profit for each year of U.S.$ 108,484 thousand and U.S.$ 107,043 1

thousand, respectively. Significant Factors Affecting TgP s Results of Operations Natural Gas Transportation Revenues Our Natural Gas Transportation Rates Under our natural gas transportation agreements, our firm capacity natural gas transportation rates are denominated in U.S. dollars and owed to us regardless of whether our customers use such contracted transportation capacity. In addition to firm capacity, we have the ability to provide interruptible natural gas transportation services for which we charge interruptible transportation rates, payable solely based on the actual volume of natural gas transported for our customers. The rates we may charge our customers for both firm and interruptible natural gas transportation services are subject to the maximum regulated rates set forth in the Natural Gas BOOT Concession Agreement, which are supervised by OSINERGMIN. The maximum rate we may charge our customers for firm natural gas transportation services is a fixed rate equal to the base rate, or the NG Base Rate. The NG Base Rate is subject to annual increases based on changes in the U.S. PPI. However, the NG Base Rate is not subject to reduction or adjustment based on our operating costs or our capital investments in the TgP Gas Pipeline System. The NG Base Rate is established in the Natural Gas BOOT Concession Agreement based on a contracted capacity of up to 920 MMCF/d. As of December 31, 2015, the NG Base Rate was U.S.$ 1.13 per MCF and the rate we charged for interruptible gas transportation services was U.S.$ 1.26 per MCF, which was approximately 11% higher than the NG Base Rate. In June 2010, pursuant to an amendment to the Natural Gas BOOT Concession Agreement, TgP agreed to increase the maximum pipeline capacity of the TgP Gas Pipeline System from 450 MMCF/d, as originally set forth in the Natural Gas BOOT Concession Agreement, to 850 MMCF/d, and to further increase the maximum pipeline capacity to 920 MMCF/d in case demand increased beyond 850 MMCF/d. This agreement considered the increase of TgP Gas Pipeline System Capacity through the construction of a 55 km south loop pipeline parallel to the existing one in the jungle and the construction of a compression plant with an installed power of 54,000 HP by KP 127 of the Gas Pipeline System. Then, in September 2013, due to security events in the jungle, the Peruvian government requested that TgP sign an additional amendment to the Natural Gas BOOT Concession Agreement to redefine the expansion project. Under this amendment, TgP agreed to increase the maximum pipeline capacity of the TgP Gas Pipeline System to 920 MMCF/d by adding more compression capacity to the compression plant at KP 127 resulting in an installed power capacity of 72,000 HP, the construction of a coast loop pipeline of 31 km and the cancellation of the south loop project. Under the terms of these amendments to the Natural Gas BOOT Concession Agreement, the NG Base Rate remained the same from that set in the Natural Gas BOOT Concession Agreement. As of December 31, 2015, the maximum transportation capacity of the TgP Gas Pipeline System was 655 MMCF/d. The NG Base Rate included in the Natural Gas BOOT Concession Agreement was set taken into account the amount offered by TgP s shareholders in the international bidding process carried out by the Peruvian government in 2000 for the construction and operation of the TgP Gas Pipeline System. This offered amount represented the cost of providing natural gas transportation services (which, in turn, was comprised of the investment cost and the operation and maintenance costs) over a period of 33 years (which is the initial term of TgP s natural gas concession) for a pipeline system with a maximum transportation capacity of 450 MMCF/d. For the years ended December 31, 2015, and 2014, we derived approximately 97% and 96.0%, respectively, of our natural gas transportation revenues from firm transportation services and approximately 3.0% and 4.0%, of our natural gas transportation revenues from interruptible transportation services. Our Natural Gas Liquids Transportation Rates In December 2003, we entered into a 30-year natural gas liquids transportation agreement with the Block 88 Upstream Consortium, and in June 2009, we entered into a 19-year natural gas liquids transportation agreement with the Block 56 Upstream Consortium. Both transportation agreements are firm capacity, ship-or-pay, transportation agreements for a certain Guaranteed Capacity, pursuant to which the Upstream Consortia, must pay a fixed monthly rate for the Guaranteed Capacity, independent of the actual volume of gas liquids transported through the TgP 2

Liquids Pipeline System. This monthly rate is adjusted based on the PPI. The rates we charge under each natural gas liquids transportation agreement are negotiated between us and our customers, as permitted under the Liquids BOOT Concession Agreement. As of December 31, 2015, the rate we charged under each of our natural gas liquids transportation agreements was U.S.$ 4.52 per Bbl. Under our natural gas liquids transportation agreements, subject to certain conditions established in such agreements, we have the right to provide interruptible natural gas liquids transportation services to the Upstream Consortia or to third parties that currently have no transportation agreements with us. The rate we charge for our interruptible natural gas liquids transportation services to the Upstream Consortia is equal to the rate we charge for firm transportation services under our natural gas liquids transportation agreements and the rates charged to third parties are negotiated on a case by case basis. Governmental Regulation and Actions Affecting the Natural Gas Transportation Market Our industry is highly regulated. Our results of operations are affected by legislative and regulatory reforms that the Peruvian government implements from time to time in order to ensure quality and safety standards and open access to our pipeline system by users of natural gas in Peru. However, this risk is mitigated by the fact that both the TgP Gas Pipeline System and the TgP Liquids Pipeline System are already in operation and were built in compliance with international HSE industry standards. The risk of future legislative and regulatory reforms concerning applicable rates is also mitigated by the fact that the BOOT Concession Agreements may not be amended by law and, as a result, the rate regimes set forth therein could not be unilaterally amended by the Peruvian government. Peruvian Economic Growth The Peruvian economy has experienced sustained economic growth with an average annual GDP growth of 5.0% for the five-year period from 2011 to 2015. Higher economic growth rates in Peru affect TgP s results of operations because increased economic activity generally results in increased demand and consumption of natural gas. GDP growth rates have contributed to an average 15% annual increase in the production of natural gas for consumption in Peru from 2010 to 2015. TgP s results of operations are affected by growth in the demand for natural gas transportation services in the geographic areas it serves. During 2015, these areas accounted for approximately 91.5% of the Peruvian demand for natural gas. Although TgP has long-term firm ship or pay contracts that allow revenues to be highly predictable, changes in economic growth may affect TgP s results of operation since fluctuations in electricity demand and consumption could affect TgP s interruptible transportation revenues. Currency Fluctuation, Interest Rates and Inflation TgP s results of operations and financial condition are affected by changes in currency fluctuations and, to a lesser extent to changes in interest rates. However, TgP s results of operations and financial condition are not significantly affected by inflation due to the fact that substantially all of its revenues are U.S. dollar-denominated and adjusted to reflect changes to the PPI. For the year ended December 31, 2015, all of TgP s revenues were denominated in U.S. dollars. As of December 31, 2015, TgP had U.S.$ 850,000 thousand of foreign currencydenominated debt and U.S.$ 107,783 thousand of soles-denominated debt outstanding. A portion of TgP s costs, including operation and maintenance costs, labor costs and other administrative costs, are denominated in soles. As of December 31, 2015, TgP had no foreign-currency hedging instruments since it had no material foreign-currency exposure aside from its soles-denominated debt. The following table shows the rate of inflation in Peru for the years ended December 31, 2015 and 2014: 3

For the years ended December 31, 2015 2014 Inflation........................................ 4.40% 3.22% Source: Central Reserve Bank of Peru. Our Customer Base As of December 31, 2015, approximately 53% and 23% of our revenues from natural gas transportation services derived from contracts entered into with power generation companies (such as Edegel, Kallpa Generación, Enersur, EGASA, EGESUR, SDF Energía, Fenix Power and Termochilca) and PLNG, respectively. All of our revenues from natural liquid gas transportation services derived from contracts entered into with the Upstream Consortia. As of December 31, 2015, approximately 15% of TgP s customer base (based on the volume of natural gas transported) was comprised of natural gas distribution companies and approximately 19% of our operating revenues from natural gas transportation services were derived from services provided to natural gas distribution companies for the year ended December 31, 2015. The average annual growth of the volume of natural gas delivered to natural gas distribution companies for the period from 2010 to 2015 was 18%. As of December 31, 2015, approximately 34% of TgP s customer base (based on the volume of natural gas transported) was comprised of power generation companies and approximately 53% of our operating revenues from natural gas transportation services were derived from services provided power generation companies. The average annual growth of the volume of natural gas delivered to power generation companies for the period from 2010 to 2015 was 14%. For additional information about the potential risks associated with TgP s high concentration of customers, see Risk Factors Risks Related to TgP and the Peruvian Natural Gas Industry TgP has a very high customer concentration and the failure by one or more of them to make payments under, or renew or extend, their natural gas transportation contracts with TgP may adversely affect TgP s revenues in the Offering Memorandum Availability of Natural Gas Reserves and Alternative Energy Sources TgP s long-term financial condition is dependent on the continuous availability of natural gas from the Camisea Reservoir for transportation in Peru. According to Peru s Ministry of Energy and Mines, Peru s total proven natural gas reserves reached 14.6 TCF as of December, 2014 from which 92% corresponded to the Camisea Basin. The Ministry of Energy and Mines also estimates that Peru s probable and possible natural gas reserves were 6.4 and 4.8 TCF, respectively as of December, 2014. In addition, changes in the cost of natural gas compared to alternative fuels affect the demand for natural gas and can, therefore, affect TgP s results of operations. The cost of natural gas delivered to users in Peru at distribution rates is currently less expensive than the cost of most alternative fuels, except coal. Alternative fuels are likely to continue to be used by both industrial customers, power plants, smaller commercial users and residential customers, for different reasons. Alternative fuels, primarily fuel oil and diesel oil are currently used by industrial customers and power plants when natural gas supply is unavailable or is interrupted. Alternative fuels, primarily liquefied petroleum gas, are currently used by smaller commercial users and residential customers due to their lower prices. While current rates and other advantages favor the use of natural gas over these alternative fuels, if the prices for alternative fuels decrease, the demand for natural gas consumption and natural gas transportation services could be adversely affected. See Risk Factors Risks Related to TgP and the Peruvian Natural Gas Industry An increase in alternative energy sources could adversely affect demand for natural gas in the Offering Memorandum. Description of Certain Line Items of the Statement of Profit and Loss Below is a description of certain line items of TgP s statement of profit and loss: 4

Operating Revenues Operating revenues consist of the following line items: Natural gas transportation. This item refers to charges for natural gas transportation services rendered in the domestic market to the end-users of the transportation system at the rates set forth in the Natural Gas BOOT Concession Agreement, under both firm and interruptible transportation agreements, and to PLNG, at the rates set forth in the applicable agreement. Natural gas liquids transportation. This item refers to charges for natural gas liquids transportation services provided to the Upstream Consortia, which includes (i) a fixed monthly fee (ship-or-pay revenue) for the natural gas liquids Guaranteed Capacity, and (ii) a variable fee for transportation in excess of the NGL Guaranteed Capacity. Cost of Service Cost of Service consists of the following line items: Operating costs. This item includes costs directly related to the operation and maintenance of the TgP Pipeline System, and includes insurance, contributions to OSINERGMIN and professional consulting services associated with the operation of the TgP Pipeline System, transport capacity rental fees due to PLNG, fuel gas for compressors, compression service fees and operation and maintenance fees paid to COGA, under the operation and maintenance agreement required by the BOOT Concession Agreements. Depreciation and provisions. Depreciation includes depreciation related to property, plant and equipment comprised by gas transportation assets and associated facilities owned by TgP. Provisions refer to allowances for lawsuits, penalties and unforeseen events. Administrative Expenses This item consists of general expenses not directly related to the provision of gas transportation services or the operation of the TgP Pipeline System, including administrative payroll, rentals and maintenance, legal advisory services and professional consulting services not directly related to gas transportation services or the operation of the TgP Pipeline System. It also includes depreciation related to property, plant and equipment comprised by assets other than those comprising the TgP Pipeline System, taxes on financial transactions and donations, among others. Other Income This item includes income derived from operating and maintenance services provided to other gas transportation companies, leasing of fiber optics capacity, asset sales and insurance payments for pipeline ruptures, among others. Other Expenses This item includes costs relating to suspended expansion projects, impairment of supplies and materials, reclassification of taxes, services provided by third parties and other expenses. Finance Expenses This item includes expenses derived from financial interest, such as interest from TgP s bond issuances, bank loans and interest related to the main grid guarantee and other expenses. Finance Income This item includes income derived from interest on time deposits. Exchange difference, net 5

This item refers to the impact in our statement of profit and loss of fluctuations in the value of the sol with respect to the value of the U.S. dollar, which can result in either an income or an expense. Income Tax Our income tax allowance consists of estimated current income tax and deferred income tax for the relevant period. Results of Operations Results of Operations for the Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014 The following table presents TgP s results of operations for the years ended December 31, 2015 and 2014: Operating Revenues For the years ended December 31, 2015 2014 Change % OPERATING REVENUES................... 544,454 537,872 1% Cost of service............................ (236,922) (221,390) 7% GROSS PROFIT.......................... 307,532 316,482 (3)% Administrative expenses..................... (19,730) (20,047) (2)% Other income............................ 3,557 5,478 (35)% Other expenses........................... (70,834) (80,220) (12)% Total operating income (expenses).............. (87,007) (94,789) (8)% OPERATING PROFIT...................... 220,525 221,693 (1)% Finance expenses.......................... (72,640) (74,846) (3)% Finance income........................... 49 33 48% Exchange difference, net.................... 8,594 7,518 14% Financial result, net........................ (63,997) (67,295) (5)% PROFIT BEFORE INCOME TAX.............. 156,528 154,398 1% Income tax.............................. (48,044) (47,355) 1% PROFIT FOR THE YEAR................... 108,484 107,043 1% Operating revenues for the year ended December 31, 2015 were U.S.$ 544,454 thousand, a 1% increase compared to operating revenues of U.S.$ 537,872 thousand for the year ended December 31, 2014, for the reasons discussed below. The following table shows a breakdown of our operating revenues for the years ended December 31, 2015 and December 31, 2014: For the years ended December 31, 2015 2014 Change % Natural gas transportation services............. 355,941 354,789 0% Natural gas liquids transportation services........ 188,513 183,083 3% Total................................... 544,454 537,872 1% Below is a brief discussion of the main changes in the components of our operating revenues: Revenues from natural gas transportation services for the year ended December 31, 2015 were U.S.$ 355,941 thousand, an increase of 0.3% compared to U.S.$ 354,789 thousand for the year ended December 31, 2014, primarily due the 655 MMCF/d capacity for the local market for the full year, compared to the capacity of 655 MMCF/d for the period between April and December of 2014, and a rate adjustment based 6

on an increase of PPI. Revenues from transportation of natural gas liquids services for the year ended December 31, 2015 were U.S.$ 188,513 thousand, a 3% increase compared to U.S.$ 183,083 thousand for the year ended December 31, 2014, primarily due to a rate adjustment based on an increase of PPI. Cost of Service Cost of service for the year ended December 31, 2015 was U.S.$ 236,922 thousand, a 7% increase compared to U.S.$ 221,390 thousand for the year ended December 31, 2014, for the reasons discussed below. The following table shows a breakdown of our cost of service for the years ended December 31, 2015 and December 31, 2014: For the years ended December 31, 2015 2014 Change % Services of operation and maintenance.......... 103,518 97,981 6% Depreciation............................. 68,765 69,558 (1)% Compression services....................... 19,598 10,723 83% Fuel................................... 25,042 24,780 1% Contributions to regulator................... 5,161 5,185 0% Insurance............................... 5,206 5,764 (10)% Provision for unforeseen events................ 3,086 1,627 90% Right to use transport capacity................ 2,501 2,501 0% Professional consulting services................ 1,060 780 36% Others.................................... 2,985 2,491 20% Total................................... 236,922 221,390 7% Below is a brief discussion of the main changes in the components of our cost of service: Services of operation and maintenance for the year ended December 31, 2015 were U.S.$ 103,518 thousand, an increase of 6% compared to U.S.$ 97,981 thousand for the year ended December 31, 2014, primarily due to increased geotechnical activities and its associated costs in 2015. Compression services for the year ended December 31, 2015 were U.S.$ 19,598 thousand, an increase of 83% compared to U.S.$ 10,723 thousand for the year ended December 31, 2014, primarily due to an increase in the volumes of natural gas transported through the TgP Pipeline System. Insurance for the year ended December 31, 2015 was U.S.$ 5,206 thousand, a decrease of 10% compared to U.S.$ 5,764 thousand for the year ended December 31, 2014, primarily due to a decrease in the premiums of our the international insurance policies. Provision for unforeseen events for the year ended December 31, 2015 was U.S.$ 3,086 thousand, an increase of 90% compared to U.S.$ 1,627 thousand for the year ended December 31, 2014, primarily due to an increase in casualty events. Professional consulting services for the year ended December 31, 2015 were U.S.$ 1,060 thousand, an increase of 36% compared to U.S.$ 780 thousand for the year ended December 31, 2014, primarily due to an increase in provisions for administrative services. Others for the year ended December 31, 2015 amounted to U.S.$ 2,985 thousand, an increase of 20% compared to U.S.$ 2,491 thousand for the year ended December 31, 2014, primarily due to an increase in security expenses as a result of increased maintenance and geotechnical activities. 7

Gross Profit As a result of the above factors, our gross profit for the year ended December 31, 2015 totaled U.S.$ 307,532 thousand, a 3% decrease compared to U.S.$ 316,482 thousand for the year ended December 31, 2014. Administrative Expenses Administrative expenses for the year ended December 31, 2015 totaled U.S.$ 19,730 thousand, a 2% decrease compared to U.S.$ 20,047 thousand for the year ended December 31, 2014, for the reasons discussed below. The following table shows a breakdown of our administrative expenses for the years ended December 31, 2015 and December 31, 2014: For the years ended December 31, 2015 2014 Change % Professional consulting services................ 1,778 1,792 (1)% Labor-related costs......................... 3,023 3,510 (14)% Donations and community actions.............. 7,715 4,441 74% Lease and maintenance..................... 3,559 2,919 22% Provision for lawsuits and penalties............. - 4,299 Legal advisory services...................... 363 421 (14)% Depreciation............................. 236 286 (17)% Amortization............................. 685 663 3% Others.................................. 2,371 1,716 38% Total................................... 19,730 20,047 (2)% Below is a brief discussion of the main changes in the components of our administrative expenses: Donations and community actions for the year ended December 31, 2015 was U.S.$ 7,715 thousand, an increase of 74% compared to U.S.$ 4,441 thousand for the year ended December 31, 2014, primarily due to increased initiatives in support of the local communities in the Jungle region. Leases and maintenance for the year ended December 31, 2015 was U.S.$ 3,559 thousand, an increase of 22% compared to U.S.$ 2,919 thousand for the year ended December 31, 2014, primarily due to an increase in maintenance activities performed on facilities and buildings. Provision for lawsuits and penalties for the year ended December 31, 2015 decreased to U.S.$ 0 compared to U.S.$ 4,299 thousand for the year ended December 31, 2014, primarily due to no new lawsuits and penalties in 2015.. Legal advisory services for the year ended December 31, 2015 was U.S.$ 363 thousand, a decrease of 14% compared to U.S.$ 421 thousand for the year ended December 31, 2014, primarily due to decrease in specialized legal consulting. Other Income For the year ended December 31, 2015, TgP had other income totaling U.S.$ 3,557 thousand, a 35% decrease compared to U.S.$ 5,478 thousand for the year ended December 31, 2014, primarily explained by a decrease in income from new derivations and interconnections services to clients, among others. Other Expenses Other expenses for the year ended December 31, 2015 totaled U.S.$ 70,834 thousand, a 12% decrease compared to U.S.$ 80,220 thousand for the year ended December 31, 2014, for the reasons discussed below. The following table shows a breakdown of our other expenses for the years ended December 31, 2015 and 8

December 31, 2014: For the years ended December 31, 2015 2014 Change % Provision for impairment of supplies for expansions............ 69,937 78,435 (11)% Provision of obsolescence of other supplies................... - 295 - Services provided by third parties........................... 339 465 (27)% Others................................................. 558 1,025 (46)% Total................................................. 70,834 80,220 (12)% Below is a brief discussion of the main changes in the components of our other expenses: Provision for impairment of supplies for expansions for the year ended December 31, 2015 was U.S.$ 69,937 thousand and U.S.$ 78,435 thousand for the year ended December 31, 2014. These provisions are the result of an impairment analysis conducted by TgP on certain expansion project supplies, in accordance with International Accounting Standard No. 36. Operating Profit As a result of the foregoing factors, TgP s operating profit for the year ended December 31, 2015 totaled U.S.$ 220,525 thousand, a 1% decrease from U.S.$ 221,693 thousand for the year ended December 31, 2014. Finance Expenses Finance expenses for the year ended December 31, 2015 totaled U.S.$ 72,640 thousand, a 3% decrease compared to U.S.$ 74,846 thousand for the year ended December 31, 2014, primarily due to a decrease in interest expenses related to TgP s VAC Bonds due to changes in the exchange rate. Finance Income Finance income for the year ended December 31, 2015 totaled U.S.$ 49 thousand, a 48% increase compared to U.S.$ 33 thousand for the year ended December 31, 2014, primarily due to increases in the applicable interest rate of time deposits. Exchange difference, net Exchange difference, net for the year ended December 31, 2015 resulted in a profit of U.S.$ 8,594 thousand, a 14% increase compared to a profit of U.S.$ 7,518 thousand for the year ended December 31, 2014, primarily due to increased depreciation of the sol. Financial Result, Net As a result of the foregoing factors, TgP s financial result, net for the year ended December 31, 2015, resulted in a loss of U.S.$ 63,997 thousand, which represented a 5% decrease compared to a loss of U.S.$ 67,295 thousand for the year ended December 31, 2014. Income Tax The income tax provision for the year ended December 31, 2015 was U.S.$ 48,044 thousand, a 1% increase compared to U.S.$ 47,355 thousand for the year ended December 31, 2014. Profit for the Year Profit for the year ended December 31, 2015 was U.S.$ 108,484 thousand, a 1% increase compared to U.S.$ 9

107,043 thousand for the year ended December 31, 2014, for the reasons discussed above. Critical Accounting Estimates and Policies Use of Estimates in Preparation of Financial Statements In preparing the TgP Financial Statements, the management of TgP makes estimates concerning a variety of matters. Some of these matters are highly uncertain, and the estimates involve judgments based on the information available to management at the time. In the discussion below, TgP s management has identified several matters for which its financial presentation would be materially affected if it had either used different estimates that could reasonably be used or in the future TgP changes its estimates in response to changes that are reasonably likely to occur. This discussion addresses only those estimates that TgP s management considers most important based on the degree of uncertainty and the likelihood of a material impact if a different estimate had been used. There are many other areas in which the estimates of management about uncertain matters are used, but the reasonably likely effect of changed or different estimates is deemed not material to TgP s financial presentation. See the notes to the TgP Financial Statements for a more detailed discussion of the application of these and other accounting policies. The following are the accounting policies that TgP believes are the most important to the presentation of TgP s financial condition and results of operations and that require subjective judgment to be made by management. Depreciation of property, plant and equipment The entire TgP Pipeline System is depreciated under the straight-line method over its estimated useful life (remaining years of the BOOT Concession Agreements) and on the basis of its residual value estimated as nil. Any change on the estimated useful life of the TgP Pipeline System, its components or its residual value would impact on the amount of depreciation charged to TgP s statement of profit and loss. Provisions for litigation and penalties Due to their nature, contingencies will only be resolved when one or more future events occur. Contingencies are calculated based on the amount claimed, considering the advice of legal advisors. Taxes Transactions and calculations exist for which the final outcome of the tax review is uncertain. If required, management recognizes liabilities for situations identified in tax reviews, based on estimates of potential additional tax payments. When the final outcome of such reviews is known, if they differ from the preliminary estimates, the adjustments made will affect the current and deferred income tax for the period in which the final outcome of the review is known. TgP s determination of income tax results from the application of tax legislation in place at the time of such determination and does not include the estimated provisions that will generate, in the future, differences regarding tax reviews. In this sense, management does not consider it necessary to include a sensibility analysis that simulates a variation in the calculation, since, in case differences arise, they will not be material to the financial statements as a whole. Application of IFRIC 12 Based on its assessment of IFRIC 12 ( Service Concession Arrangements ), TgP considers that the service it provides does not qualify as a public service because it does not meet the necessary characteristics (i.e., free access, low access cost, universalness and satisfaction of basic needs). Additionally, the grantor does not control or regulate what services TgP must provide with its infrastructure, because TgP can expand its operations without amending the agreed conditions of the BOOT Concession Agreements, nor can it control to whom TgP must provide these services. Right to receive compression services TgP maintains effective services agreements pursuant to which it has the right to receive future gas compression services. Management considers that the fixed fee component of these agreements meets the definition of asset under IFRS rules, recognizing it as such in TgP s financial statements, whereas the future obligation contracted under these agreements meets the qualifying criteria to be considered a provision under IAS 37 rules, and so presents it under other accounts payable (short- and long-term) in TgP s statement of financial position. A summary of TgP s significant accounting policies and practices is included in Note 4 to the TgP Financial Statements included elsewhere in the Offering Memorandum. 10

Liquidity and Capital Resources TgP s capital requirements are primarily for the following purposes: operation, maintenance and administration expenses; capital expenditures related to expansion projects; and debt service and taxes. TgP s sources for liquidity and capital resources are: Cash Flows funds generated by its business activities through the provision of natural gas and natural gas liquids transportation revenues and other revenues; and finance income from the investment of cash and available funds. The table below sets forth TgP s cash flows for the years ended December 31, 2015 and 2014: For the years ended December 31, 2015 2014 Cash provided by (used in) Operating activities....................... 190,368 257,965 Investing activities....................... (170,928) (121,595) Financing activities....................... (135,000) (200,000) Increase (decrease) in cash and cash equivalents... (115,560) (63,630) Cash Provided by Operating Activities Cash provided by operating activities for the years ended December 31, 2015 and 2014 was U.S.$ 190,368 thousand and U.S.$ 257,965 thousand, respectively. TgP s cash flow from operations during these periods was principally derived from (i) TgP s natural gas and natural gas liquids transportation services of U.S.$ 544,454 thousand and U.S.$ 537,872 thousand, respectively, (ii) an increase in payments to suppliers in 2015, (iii) an increase in income tax payments in 2015, and (iv) an increase in payments related to other operating activities in 2015. Cash Used in Investing Activities Cash used in investing activities was U.S.$ 170,928 thousand during the year ended December 31, 2015, and U.S.$ 121,595 thousand during the year ended December 31, 2014. During each of such periods, TgP s investing activities were primarily related to investments and expansion projects aimed at enhancing the operation of the TgP Pipeline System and increasing its transportation capacity, mainly through the construction of the KP 127 compression plant, an additional coastal loop and the Ayacucho branch. Cash Used in Financing Activities Cash used in financing activities for the years ended December 31, 2015 and 2014 was U.S.$ 135,000 thousand and U.S.$ 200,000 thousand, respectively. In 2014 and 2015, net cash used in financing activities was related to dividend payments. Contractual Obligations The following table summarizes TgP s contractual obligations as of December 31, 2015 as well as the maturity 11

of those obligations: Payments Due by Period Less than 1 year 1 to 2 years 2 to 5 years More than 5 years Total Loans (1)... 43,821 88,342 132,485 1,184,100 1,448,748 Others (2)... 37,202 - - - 37,202 Total Amount of Contractual Obligations. 81,023 88,342 132,485 1,184,100 1,485,950 (1) Includes principal and interest on TgP s total financial debt. (2) Trade accounts payable. Quantitative and Qualitative Disclosures of Market Risks TgP faces two main categories of primary market risk exposure: changes in the price of services and interest rate fluctuations. TgP is not exposed to commercial risks from changes in the price of services since the price of transportation services is set forth in the Natural Gas BOOT Concession Agreement and in the long-term agreements existing between TgP and its clients. TgP is not exposed to interest rate risk because all its floating rate debt was repaid in May 2013 in connection with its Liability Management Transaction. Given that substantially all of TgP s revenues, purchases and operating expenses are denominated in U.S. dollars, exchange rate fluctuations do not pose a substantial risk to TgP. Exchange Rate and Interest Rate Risk Foreign currency risk is the risk of incurring economic losses due to adverse changes in foreign currency exchange rates. Any foreign exchange risk for TgP arises from its exposure to currencies other than the U.S. dollar, since substantially all of its revenues, purchases and operating expenses are denominated in U.S. dollars. Although variations in the exchange rate of soles with respect to the U.S. dollar could affect TgP, as of December 31, 2015, none of its operating revenues and 40% of its operating costs and 11% of its financial liabilities were denominated in soles. As of December 31, 2015, TgP had not entered into any foreign currency hedging agreements. TgP is not exposed to interest rate risk because all its floating rate debt was repaid in May 2013 in connection with its Liability Management Transaction. Off-Balance Sheet Arrangements TgP had no off-balance sheet arrangements or interest in or relationship with any special purpose vehicles as of December 31, 2015. 12