Investors Report 2015 Bogotá D.C., March 8€¦ · generation in 83 GWh/day until November 2015 and 89 GWh/day from December 2015 to March 2016. This situation has indeed occurred,

Investors Report

2015

Investors Relations Office, Tel: +57(1) 3268000 ext 1675 / 1827 E mail:[email protected]

www.grupoenergiadebogota.com/inversionistas

1

Bogotá D.C., March 8th

, 2016

Index

1. EXECUTIVE SUMMARY AND HIGHLIGHTS ............................................................................................................. 2

1.1. Natural Gas market in Colombia..................................................................................................................... 2

1.2. Summary of Financial Results TGI 2015 ........................................................................................................ 2

1.3. Highlights ......................................................................................................................................................... 3

2. COMMERCIAL PERFORMANCE............................................................................................................................... 3

2.1. Sales by sector................................................................................................................................................. 4

2.2. Contractual Structure ...................................................................................................................................... 4

3. FINANCIAL PERFORMANCE .................................................................................................................................... 5

3.1. Financial results............................................................................................................................................... 5

3.2. Debt Indicators ................................................................................................................................................. 8

4. OPERATIONAL PERFFORMANCE ........................................................................................................................... 8

5. CAPITAL INVESTMENTS .......................................................................................................................................... 9

6. ANNEXES ................................................................................................................................................................ 11

Annex 1: Legal Notice and Clarifications.................................................................................................................. 11

Annex 2: Link to Consolidated Financial Statements 2015:................................................................................... 11

Annex 3: Outlook of Holding Company – EEB ......................................................................................................... 11

Annex 4: TGI’s overview............................................................................................................................................. 12

Annex 5: Terms and Definitions ................................................................................................................................ 12

Annex 6: Footnotes to Tables .................................................................................................................................... 13

Annex 7: Financial Results Statement and EBITDA ................................................................................................ 15

Annex 8: Financial Information of TGI’s Main Clients ............................................................................................. 16

Annex 9: Main impacts from IFRS Implementation ................................................................................................. 17

Annex 10: New Board of Directors ............................................................................................................................ 18

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1. EXECUTIVE SUMMARY AND HIGHLIGHTS

1.1. Natural Gas market in Colombia

During 2015, the natural gas market experienced a downturn of 6.0% when compared to the same period in 2014.

For instance, total demand during 2014 and 2013 decreased by 9.3%. For 2015, two main reasons explain its

downturn relate to the petrochemical sector and GNV consumption. Thermal electric consumption experienced a

decrease of 3.6%, although during 4Q it increased by 7.9%; this increase was the result of El Niño phenomenon,

which category has been maintained as strong, therefore thermal consumption during 4Q was greater when

compared to previous quarters in 2015. The market administrator – XM estimated that in October thermal

generation in 83 GWh/day until November 2015 and 89 GWh/day from December 2015 to March 2016. This

situation has indeed occurred, and it is evident in the consumption of fuel gas for thermal generation.

Approximately during the last months of 2015, 45% of the total consumed fuel thermoelectric plants accounted for

natural gas.

1.2. Summary of Financial Results TGI 2015

From 2015 the company adopted the International Financial Reporting Standards - IFRS, meeting the timelines

established by the Colombian Government regarding convergence to these standards, according to which, for

comparison purposes, 2014 was re-expressed from COLGAAP to IFRS. As a result of its analysis, the company

adopted as the functional currency for the financial statements, the dollar of the United States of America, USD.

This report presents the first comparative financial statements 2015 - 2014 under the International Financial

Reporting Standards – IFRS, figures are subject to General Shareholders Meeting approval.

For more information on the main specific impacts of IFRS implementation in TGI; please refer to annex 9 of this

report.

Table Nº 2 – TGI Selected indicators 2015 2014 Var %

Operating revenue – USD Thousands 439,133 467,987 -6.2

Operating profit - USD Thousands 271,944 291,985 -6.9

EBITDA YTD - USD Thousands 361,053 372,088 -3.0

Net Profit - USD million 44,917 68,876 -34.8

Transported volume - Mm cfd 522.0 494.5 5.6

Firm Contracted capacity - Mm cfd 672.0 647.3 3.8

Latest international credit ratings: S&P – Sep. 15: Fitch – Oct. 15:

Moody’s – Jun. 15:

BBB-, Negative BBB, Stable Baa3, Stable

Operational revenues at the closing of 2015 showed a reduction of 6.2%, when compared to the previous

year, mainly as a result of a high devaluation of the Colombian peso throughout the year, which affects

revenues in COP (33% of total: fixed charges on account of AOM and other operational revenues) when

Table N° 1 – Natural gas demand in Colombia Quarterly demand Year Demand

Demand (GBTUD) 4Q 15 4Q 14 Var. % 2015 2014 Var. % Var Dem

Thermal 364.3 337.8 7.9 330.2 342.7 -3.6 -12.5

Residential – commercial 181.9 187.8 -3.2 184.5 185.0 -0.3 -0.5

Industrial – refineries 415.5 376.0 10.5 401.1 379.5 5.7 21.6

Vehicle 87.1 108.4 -19.6 91.0 106.4 -14.5 -15.5

Petrochemical 13.3 16.6 -20.0 17.9 20.3 -12.1 -2.5

Others 24.6 24.6 0.3 24.5 24.9 -1.8 -0.4

Domestic Demand 1,086.7 1,051.1 3.4 1,049.0 1,058.8 -0.9 -9.8

Export - 83.0 -100.0 37.5 97.4 -61.5 -59.9

Total 1,086.7 1,134.1 -4.2 1,086.5 1,156.3 -6.0 -69.7

Source: Concentra

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converting them to US dollars. Additionally, due to regulatory constraints a reduction of revenues on account

of occasional charges.

Operational profits decreased by 6.9% when compared to 2014, mainly as a result of decreased operational

revenues despite decreases in operational costs and expenses of 5.3%.

Company’s net profit reached USD 44.9 million, which represents a reduction of USD 23.9 million when

compared to the IFRS closing of 2014, due mainly to operational factors aforementioned, a higher exchange

rate difference and an increase in deferred tax provision.

1.3. Highlights

TGI completed the transition process to IFRS – according to legal provisions in force in Colombia. The date to

issue the first comparative financial statements under IFRS is December 31st 2015.

Actually, the WACC calculation methodology for distribution and electric transmission and for transportation

and natural gas distribution is regulated by CREG 095 -2015 Resolution. Today, it has been issued the WACC

rate for gas distribution. The calculation methodology for the remuneration for transmission activities, electric

distribution and natural gas transportation, have not been issued.

On January 29th

2016, the Colombian Societies’ Superintendence, which authorized amendments to the

company’s bylaws related to the merger between IELAH, special purpose vehicle domiciled in Spain, through

which The Rohatyn Group (former Citi Venture Capital - CVCI), held a stake of 31.92% in TGI.

Moody’s Ratings and Fitch Ratings affirmed TGI’s corporate rating in local and foreign currencies, maintaining

the investment grade with stable outlook. On the other hand, Standard & Poor’s ratified corporate debt rating

and issuer rating in BBB-, negative outlook, in line with TGI’s outlook with its parent company EEB. Thus, TGI

in 2015 continued with its investment grade rating granted by the three most important international risk rating

agencies.

During 4Q 2015, TGI experienced maximum historic transport averages through its infrastructure as a result of

El Niño phenomenon, which led to sustained thermal generation during the second half of the year. At the

closing of 2015, the company maintained its average transported volume in 552 Mmcfd and its market quota

of 55.1% per transported volume.

In order to align future capacity needs to its clients, with the projects that the company currently is

undertaking, TGI submitted to its main clients three significant expansion infrastructure projects: i) Cusiana –

Vasconia Phase IV (100 and 150 MMSCFD), ii) Bidireccionality Ballena – Barrancabermeja (45, 100 and 150

MMSCFD) and iii) Mariquita - Gualanday (12.6 MMSCFD), with an estimated total CapEx of US$ 430 million.

Based on this information, the interested clients will submit their capacity requirements for each of these

projects and subsequently, TGI will revise its financial closing.

On January 27th

2016, the General Shareholders’ Meeting, elected new members to the Company’s Board of

Directors1.

On February 22nd

2016, TGI’s BoD appointed to Mr. Julian Garcia as company´s CEO, who has over 30 years’

experience in the oil and gas industry, holding executive positions in different companies namely Gran Tierra

INC (NY and Toronto listed), Emerald Energy PLC and Gold Oil PLC (listed in London) Carboandes, BP and

Ecopetrol. Mr Garcia is Civil Engineer from the Universidad de los Andes (Bogota), with master's degrees in

civil engineering at Colorado State University (USA) and Business Administration at the University of

Birmingham (England) and a Masters in Economics at the Universidad de Los Andes (Bogotá).

1 For further details of BoD’s Bios please review annex No. 10

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2. COMMERCIAL PERFORMANCE

2.1. Sales by sector

Regarding the distribution sector in 2015, which includes residential consumption, continues being the main

generator of revenues for the company, with a market share of 63%. The thermal sector decreased its

participation vis-à-vis total revenues, from 18% to 16% when compared to 2014. Average thermal generation for

4Q 2015 was 129.8 mcfd.

Carriers’ participation in sales did not experience significant changes during the period, which means that Gas

Natural, Gases de Occidente, Ecopetrol, EPM and Isagen continue being, in that order, TGI main customers

contributing with 73% of the company’s revenue generation.

Collection management during 2015 allowed the

company to reduce its delinquent index to 0.014%

with respect to invoiced revenues during the past

twelve months. There is evidence of a significant

reduction of such index, vis-à-vis 2014,

strengthening in this manner company’s cash

flow. The company is currently undergoing a

resolution of controversies proceeding with

thermal carriers, as a result of the new-paired

charges established at the beginning of 2013.

2.2. Contractual Structure

The main sectors serviced by TGI have stable consumption without seasonality. One hundred percent (100%) of

its contracts are take-or-pay and are agreed upon under paired charges comprising around 90% fixed charges

and 10% variable charges. At the end of the quarter, the company’s total contracted capacity in firm reached 672

Mmcfd, corresponding to 92% of available capacity.

Table N° 3 – Contractual structure

2015 2014

Type of contract No Contracted

Capacity Mm cfd

Average remaining (Average years)

No Contracted Capacity Mm cfd

Average remaining (Average years)

Firms (1) 1,422 672.0 9.5 195 647.3 8.3

Footnotes annex 6

Ir a Pies de página en anexo 6

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During 4Q 2015, 85 natural gas contracts expired their term; however, the market serviced through new contracts

or through other contracts of the same carrier. Moreover, to date it has 1,422 in firm natural gas transport

contracts, of which 350 correspond to transport contracts of expansion projects undertaken by the company. It is

worth remembering that the increase in the number of contracts vis-à-vis the same period of the previous year is

explained by regulatory changes affecting the company (CREG Resolution 089-2013), according to which carriers

must contract each stretch of the system with standard capacities in each of these stretches.

In 2015 the company has 40 customers, fewer compared to 2014, when he finished with 45 customers. During

the last half of 2015, 5 clients’ contracts expired and were not renewed because the markets were served by

other carriers.

3. FINANCIAL PERFORMANCE

3.1. Financial results

At the closing of 2015, operational revenues reached USD 439.1 million, plummeting by USD 28.9 million (-6.2%)

vis-à-vis those obtained in 2014. TGI’s natural gas transportation revenues, 86.9% were the result of fixed

charges obtained by take-or-pay contracts; 2.6% of those revenues are non-regulated revenues, hence, only

10.6% of revenues could be affected by potential fluctuations in demand.

Table N° 4 - Revenues Structure

USD Thousands Variation Share

2015 2014 USD % 2015 2014

Operating Revenue 439,133 467,987 (28.9) -6.2%

By currency

Revenues linked to USD (1) 294,966 279,639 15.3 5.5% 67.2% 59.8%

Revenues in COP (1) 144,167 188,348 (44.2) -23.5% 32.8% 40.2%

By type of charge

Capacity and AO&M charges (2) 381,468 390,025 (8.6) -2.2% 86.9% 83.3%

Variable charges (3) 46,396 52,120 (5.7) -11.0% 10.6% 11.1%

Complementary services (4) 11,269 25,842 (14.6) -56.4% 2.6% 5.5%

Footnotes annex 6

The current tariff scheme remunerates investments and is expressed in US dollars, USD. Revenues expressed in

US dollars show a 5.5% increase, when compared to 2014 and represent to date 67% of TGI total revenues.

Furthermore, revenues portion denominated in COP experienced a downturn of 23.5% when compared to the

previous year, as a result of the devaluation of the Colombian peso throughout 2015. Regarding fixed charges

revenues that remunerate investments, these represented 83.3% in 2014 and 86.9% in 2015, of total company

revenues.

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At the closing of 2015, fixed charges that remunerate investments and which are denominated in USD reached

USD 248.5 million compared to the closing of 2014, which amounted to USD 227.5 million, showing a positive

variation of 9.3%, due to a greater in firm contracted capacity in 2015. During 2015, the average contracted

capacity was 672 mcfd, whereas in 2014 it reached 647 mcfd, it means an increase of 3.9%. Likewise, the effect of

updating prices of capital goods producer by 0.91%, which was applied in 2015, contributed to such increase.

Now, regarding revenues that remunerate administration, operation and maintenance - AO&M – expenses and

which are expressed in Colombian pesos, reached USD 132.9 million in 2015, 18.2% lower when compared to

2014 - USD162.5 million. These revenues decreased mainly due to devaluation’s effect in 2015, because when re-

expressing these revenues in USD there is a reduction vis-à-vis 20142. When comparing these revenues in its

local currency (COP), there is an 11% increase, from COP 328,448 million in 2014 to COP 364,711 million in

2015, mainly explained by greater contracted capacity and COP tariffs update to the Colombian Price Index3 - CPI

of 3.66%, applied in 2015.

Regarding variable charges, these decreased by 11%, from USD 52.1 million in 2014 to USD 46.4 million in 2015.

Although transported volume showed an increase of 5.6% during 2015, closing 2015 in 522 Mmcfd compared with

the transported volume in 2014 which was 494.5 Mmcfd. In 2014, the company was still able to authorize detours

off the contracted route, which generated revenues for TGI, and this activity was restricted as of 4 March 2015. As

of this date, carriers have serviced these detours in the secondary market by means of other carriers with available

capacity, and such activity does not generate any revenues to the company.

Lastly, complementary services fell by USD 14.6 million, representing 56.4% less than in 2014, a decline that is

the result of lower revenue from non-recurring charges, which rose from USD 17 million in 2014 to only USD 1.2

million in 2015, due to the entry into force of the CREG Resolutions 089 of 2013 and 089 of 2014, which regulated

the entry into operation natural gas market administrator. To counteract these previously mentioned decreases, in

2015, the company began to promote new services, such as interruptible parking, generating additional revenues

amounting to USD 6 million.

2 Average exchange rate at the end of 2015 reached $2,771.15 per US$, while in 2014 it reached $2,017.85 per USD, a 37.4% increase.

3 Update Factor prices or rates in COP

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Table N° 5 – Financial Results 2015 4

USD Thousands Var COP Million Var

2015 2014 USD % 2015 2014 COP %

Operating Revenue 439,133 467,987 -28,854 -6.2% 1,215,232 946,752 268,480 28.4%

Operating costs and expenses (166,310) ( 175,543) -9,233 -5.3% (451,835) ( 353,571) 98,263 27.8%

Others Revenues/(Expenses) (879) (459) -420 91.5% (2,650) (876) -1,773 202.4%

Operating Profit 271,944 291,985 -20,041 -6.9% 760,747 592,304 168,443 28.4%

Operating Margin % 62% 62% 63% 63%

EBITDA YTD 361,053 372,088 -11,035 -3.0% 998,702 753,904 244,798 32.5%

EBITDA Margin% 82.2% 79.5% 82.2% 79.6%

Profit/(Loss) Non Operational Net (63,713) (65,529) 1,815 -2.8% (185,343) (132,148) (53,194) 40.3%

Foreign Exchange (43,588) (33,158) (10,430) 31.5% (119,580) (66,327) (53,253) 80.3%

Income Tax (6,103) (9,152) 3,409 -33.3% (16,742) (18,307) 1,565 -8.6%

Deferred Tax (113,623) (115,270) 1,647 -1.4% (311,713) (230,579) (81,134) 35.2%

Net Profit 44,917 68,876 (23,960) -34.8% 127,766 144,943 (17,178) -11.9%

Footnotes annex 6

While costs and operational expenses together declined 5.3% in USD during 2015, in local currency had an

increase of 27.8% mainly due to: i) devaluation’s impact in the depreciation expense (COP 57,058 million) because

from the adoption of IFRS, the account of property, plant and equipment is denominated in USD ii) registration of

the wealth tax in 2015 (COP 16,032 million), which under IFRS did not generate accounting expense in 2014 and

iii) attention of emergency in TGI’s infrastructure (COP 12,932 million). Despite these increases, the company also

achieved expense reduction namely buying fuel gas compressor stations (-USD 2.6 million), lower consumption of

spare parts (-USD 3.2 million) and reduced administrative expenses (-USD 4.9 million), thanks to efficient

management of costs and expenses.

Under functional currency USD operating profit

grew 6.9% compared to 2014, mainly due to the

reduction in operating revenue (6.2%) despite the

decrease in operating costs and expenses

together 5.3%

Regarding non-operational results, which

correspond to revenues/expenses that are not

directly linked to the subject matter of the

company, showed reduced expenses of USD 1.8

million when compared to the closing of 2014, mainly due to the net effect of the valuation of hedging operations

and lower financial results in non-operating revenues. In addition to the exchange rate difference expense, which

increased by USD10.4 million, resulting from the devaluation of the Colombian peso in 2015 (32%) when compared

to 2014 (24%), this expense is only for accounting purposes and is not the result of cash expenditures.

Regarding the income tax provision, it is worth highlight that both years 2015 and 2014, the biggest impact

corresponds to deferred tax IFRS, while the provision of the obligation to pay to the tax authority was settled in both

years by presumptive or minimal income, due to the impact of the devaluation in sort out results for tax purposes,

which is manage on COP, according to the current tax regulations in Colombia.

Finally, the net profit of the company reached US$44.9 million5, representing a decrease of USD 23.9 million

compared to the end of 2014, mainly due to i) reduction in revenue of USD 28.9 million ii) a greater expenditure of

4 TGI’s funcional currency is the US$. In addition, it submits the infromation of Currency of Presentation (Peso Colombiano-COP). For information

purposes, figures in the statement of results in US$ are converted to COP at market representative rate on the date in which such line-items are accounted for.

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8

exchange rate difference account for 2015 of USD 10.4 million and iii) deferred tax accounting for USD 113.6

million.

It is important to highlight that figures appearing in the statement of results in Colombian pesos show significant

increases, as opposed to what occurs with functional currency - USD. The foregoing is due to the effect to re-

express figures in local currency with the historic exchange rate6. Operating revenues experienced significant

growth (28.4%) as well as EBITDA (32.5%) under the currency of presentation.

3.2. Debt Indicators

The company continues complying with that set forth in the 2022 Bonds Indenture, as regards the two credit

metrics. Please be reminded that covenants of TGI 2022 Bonds are currently suspended due to the fact that its

credit rating is investment grade, as per the three most important credit rating agencies. Coupon reduction

achieved with the liability management operation on international bonds in 2012 and EBITDA growth have allowed

the company to easily meet those metrics.

During 2015, TGI granted three (3) intercompany loans to its main shareholder, EEB, amounting to COP$430,841

million and foresees payment thereof in March 2016.

Lastly, in July 2015, the Board of Directors approved granting a subordinate intercompany loan to its shareholder

IELAH, affiliate of EEB, for an amount of up to USD 364.4 million at a rate of Libor 6M + 1%, of which USD 184.9

million had been disbursed in September 2015 and were destined to partially prepay, USD 175 million, the long-

term syndicate loan entered into in 2014 by IELAH with international banks and the remaining to fund the interests

of the next period beside the administrative and tax expenses of that SPV. In the next interest payment date

(March 2016) TGI will disbursed to IELAH USD 175 MM to make another prepayment of the syndicated loan.

4. OPERATIONAL PERFFORMANCE

TGI maintains its leadership in the natural gas transport market in Colombia, enjoying a market share of 54.2%

and an increase of 5.6% in transported volume when compared to the previous year. At the closing of 2015, total

transported volume in the national system showed positive variations, due to the need of increasing dispatch for

thermal generation.

5 For more detail on the statement of results, please go to annex 7.

6 The historic rate, is the actual exchange rate when conducting transactions.

Table Nº 6- Debt Indicators 2015 2014 Unit

Net Senior Debt (1) / EBITDA LTM (2) OM: < 4,8 1.7 1.7 Times

EBITDA LTM (2) / Interest UDM (3) OM: > 1,7 6.3 6.0 Times

Debt structure Amount Currency Coupon (%) Maturity Senior – International bonds (4) 750 USD Mm 5.700% 20-mar-2022 Subordinated (5) 370 USD Mm 6.125% 21-dec-2022 Footnotes annex 6 |

Table Nº 7 - Indicators Detail USD Thousands 2015 2014 EBITDA LTM 361,053 372,088 Senior debt 868,635 860,859 Cash and cash equivalents 256,145 229,343 Senior Net debt 612,490 631,517

Interest Expenses LTM (1) 57,689 62,295 Footnotes annex 6 |

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At the closing of the period, increase of take-or-pay contracted capacity is explained by the company’s commercial

task on its quest for new contracts. Similarly, system enhancements and operating improvements to the system

have contributed to an increase in transport capacity. Likewise, system losses are below 1%, the figure accepted

by regulators.

Table Nº 10 – TGI Total capacity by section

By Section – Mmcfd Transport Capacity

Transported Volume Average

Ballena – Barrancabermeja 260.0 120.1

Mariquita – Gualanday 15.0 13.3

Gualanday – Neiva 11.0 8.0

Cusiana – Porvenir 392.0 341.8

Cusiana – Apiay 33.0 28.8

Apiay – Usme 17.8 5.9

Morichal – Yopal 5.0 3.7

Sur de Bolivar N.A. 0.3

TOTAL 733.8 522.0

5. CAPITAL INVESTMENTS

Table Nº 11 - Capex

USD Million

2015 2014

Investment (1) 26.3 31.8

Maintenance (2) 2.9 4.4

Footnotes annex 6

Table Nº 12 – Status of expansion projects in Colombia – 2015 Description Capex

(USD mm)

Enhancing Compression

(Mmpcd)

Execution (%)

Comming of stream

Cusiana Phase III Enhancing compression capacity of

the gas pipeline in the Cusiana –

Vasconia stretch, by means of the

supply and start up of operations of

three new natural gas compression

units

31.0 20 47.6% 1T 16

Cusiana- Apiay- Ocoa

The project will increase the transport

capacity of the gas pipeline Cusiana

– Apiay by 32 MMSCFD and the

48.0 39 7% 1T 17

Table Nº 8 – Volume by carrier – Mm cfd

2015 Part. % 2014 Part. %

TGI 566.0 54.2 494.5 49.1

Promigas 322.4 30.9 364.3 36.1

Others* 155.2 14.9 149.0 14.8

Total 1,043.6 100.0 1,007.9 100.0

Source: Concentra.Inteligencia en Energía *Industries directly linked to transport

Table Nº 9 - Selected operational indicators 2015 2014 Var % Total capacity – mm cfd (1) 733.8 730.3 0.5

Transported volume – mm cfd (2) 522 494.5 5.6

Firm contracted capacity – mm cfd (3) 672.0 647.3 3.8

Load factor - % (4) 66.9 62.3 7.4

Availability - % (5) 100.0 99.9 0.1

Losses - % (6)* 0.59 -

Gas pipeline length – Km 3,957.0 3,957.0

Pipeline length – Mi 2,459.0 2,459.0

Footnotes annex 6

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Ramal Apiay – Ocoa by 7 MMSCFD

Loop: Armenia / Dos Quebradas

Construction Loop Armenia 28 Km in 8” y

Loop Dos Quebradas 8 Km in 3”. 24.3 8.7 24.6% 2T 17

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6. ANNEXES

Annex 1: Legal Notice and Clarifications

This document contains words such as “anticipate”, “believe”, “expect”, “estimate” and others which meaning is similar.

Any historic information, including, but without limiting to that referring to the Company’s financial situation, its business

strategy, its plans and management objectives, relates to forecasts.

Forecasts in this report were made under assumptions related to the economic, competitive, regulatory and operational

environment of the business and took into account risks beyond the Company’s control. Forecasts are uncertain and

they may not materialize. One may also expect that unexpected events or circumstances occur. As a result of the

foregoing, actual results may differ significantly from forecasts herein contained. Accordingly, forecasts in this report

must not be considered as true facts. Potential investors must not take forecasts or assumptions in this report, neither

should they base their investment decisions upon them.

The Company expressly waives any obligation or commitment to distribute updates or reviews of any of the forecasts

herein contained.

Company’s past performance may not be considered as a pattern for future performance.

Clarifications to the report

As of 2015, TGI’s functional currency is the USD. All figures in the statement of results of 2014 and 2015

appearing in USD are converted to COP at the TRM at the date in which the different line items are accounted for.

Only for information purposes, we have converted Capex figures in this report to its USD equivalent using the end

of period representative rate as published by the Colombian Financial Superintendence. Exchange rates used are

as follows:

TRM as of 31 December 2014: 2,392.46

TRM as of 31 December 2015: 3,149.47

In the figures, a comma is used (,) to separate thousand and a full stop (.) is used to separate decimals.

EBITDA is not an acknowledged indicator under accounting standards in Colombia or the United States, and may

show some difficulties as an analytical tool. Therefore, it should not be taken into account in an isolated manner as

a company cash flow indicator.

EBITDA for the period was calculated taking operational profit (or loss), plus amortization of intangibles and

depreciation of fixed assets for said period.

Annex 2: Link to Consolidated Financial Statements 2015:

http://www.grupoenergiadebogota.com/inversionistas/estados-financieros

Annex 3: Outlook of Holding Company – EEB

EEB is an integrated company in the energy sector with operations in Colombia, Peru and Guatemala;

The Company was founded in 1896 and controlled by the District of Bogota – 76.2%. Due to the fact that EEB’s

share is listed in the Colombian public market, it abides by international standards of corporate governance.

EEB has in place an expansion strategy focused on transport and distribution of electric power in Colombia and

other countries within the American region.

EEB participates in the entire power value chain and in almost the entire value chain for natural gas; it does not

participate in E&P activities for this hydrocarbon.

Grupo EB is among the most important corporate debt issuers in international capital markets. In October 2007,

EEB and TGI conducted a corporate bond issuance in the 144A market, which amounted to US$ 1.36 billion in

http://www.grupoenergiadebogota.com/inversionistas/estados-financieros

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2012, TGI conducted a debt management operation to reduce coupon rate by 380 bps and extend debt term by five

additional years.

As of 2009, EEB’s share is traded in the Colombian stock market.

Annex 4: TGI’s overview

TGI is a key player in EEB’s growth strategy, it is the largest natural gas transport company in Colombia and

operates a natural monopoly in a sector with high growth potential and which development is of special

interest to the National Government. TGI is the only natural gas transport in Colombia connecting main

supply sources - Guajira and Cusiana – with main consumption centers.

TGI is subject to regulations from the Ministry of Mines and Energy and CREG. CREG defines the maximum

rates that TGI may charge its uses based on financial viability and economic efficiency principles. The rate

scheme is designed so investor may receive adequate return on investment and recover cooperation and

maintenance costs. Part of the rate that provides the return on investments is expressed in the COP/US$

exchange rate, providing the company with natural hedging vis-à-vis its obligations in foreign currency.

Almost all company sales are supported in in-firm and long-term contracts entered into with sound companies

operating in Colombia.

In 2013, TGI completed the most ambitious expansion plan of natural gas infrastructure in Colombia: the

enhancement of the Guajira and Cusiana gas pipelines, which cost amounted to US$650 million. TGI has a stock of 32.24% in the Peruvian company ConTUgas – the remaining 67.76% is property of EEB-.

This company has been awarded the concession to build the natural gas transport and distribution network in

the south of Peru – Ica department, estimated cost amounted to US$ 346 million. ConTUgas began full

commercial operation of the project on 30 April 2014.

Annex 5: Terms and Definitions

ANH: Agencia Nacional de Hidrocarburos, National Hydrocarbons Agency. Colombian entity responsible of defining hydrocarbon related policies.

BR: Banco de la República. Colombian Central Bank, responsible for monetary and exchange rate policies in the country.

Bln or bln: Billion of US$. Factor 109

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BOMT: Build, Operate, Maintain and Transfer Contract. COP / COP: Colombian pesos. CREG: Comisión de Regulación de Energía y Gas de Colombia – Colombian Energy and Gas Regulatory

Commission. State owned agency in charge of regulating electric power and natural gas household utilities in Colombia.

Cuota de Fomento – Development Quota: Relates to resources Ecogas collected from users to carry out new natural gas infrastructure projects.

DANE: Departamento Administrativo Nacional de Estadística. National Administrative Department of Statistics. Is the entity in charge of planning, surveying, processing, analyzing and disclosing official statistics in Colombia.

DNP: Departamento Nacional de Planeación – National Planning Department. Entity in charge of Economic Planning in the country.

EEB: Empresa de Energía de Bogotá. Holding shareholder of TGI. GNV: Gas natural vehicular – Vehicle natural gas. GPC: Giga cubic feet. Factor 109 IED: Foreign direct investment. IPC: Colombian consumer price index. Km: Kilometers MEM: Peruvian Ministry of Energy and Mines. Mi: US miles. Mm/mm: million Mlm / Mlm: trillion PBS: Basic points, equivalent to 0.01% Pcd or pcd: cubic feet per day. SF: Superintendencia Financiera. Financial Superintendence. State agency in charge of regulation, oversight and

control of the Colombian financial sector. TGI: Transportadora de Gas del Internacional Tpc / tpc: Tera cubic feet. Factor 1012 TRM: Tasa representativa del mercado – Market Representative Rate; is an average of prices in which peso-dollar

transactions are traded, calculated on a daily basis by the SF. R/P: Reserves production ratio UDM: Last twelve months UPME: State entity in charge of planning in the mines and energy sectors in Colombia. USD: US$

Annex 6: Footnotes to Tables

Footnote delinquent portfolio index table

(1) Delinquent index is calculated measuring in arrears portfolio – exceeding thirty days – on amounts invoiced in the

past twelve months.

Return

Footnotes Table Nº 3: Contractual structure

(1) Contractual modality ensuring maximum volume of transported gas during a specific period of time.

Remuneration of this type of contract may be per capacity and/or variable.

Return

Footnotes table Nº 4: Revenue structure

(1) Regulation for gas transport in Colombia divides the rate to users, one part acknowledges investments and the

other administration, operation and maintenance costs and expenses - AOM. The portion acknowledging

investments is expressed in US$ it’s adjusted annually with IPP “Capital Equipment” from the USA and payable in

COP at the TRM at the end of each month. Portion acknowledged by AOM is defined in pesos and expressed

annually with Colombian IPC.

(2) Capacity charges or fixed charges make carrier maintain an available transport capacity in the event the client so

requires. On the other hand, the client commits to paying such capacity irrespective of the volume transported.

(3) Variable charges make carrier maintain an available capacity in the event the client so requires. However, and

contrary to the foregoing, the client only pays what was transported but at a higher rate. In general terms, TGI

clients maintain contracting schemes combining fixed and variable charges.

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(4) Occasional charges are the result of a scheme that does not generate an obligation in firm for the carrier. In other

words, carrier has the right to interrupt when, for example, it deems fit to service in firm contracts.

(5) Additional services render by the company, such as new connections or odorization.

Return

Footnotes table Nº 6: Debt indicators

(1) According to the international notes contract, company’s net debt only takes into account TGI senior debt less

cash value and temporary investments.

(2) The sum of operational profit, amortizations, depreciations and reserves.

(3) Interests incurred derived from TGI’s financial debt.

(4) The value of notes issued by TGI Internacional and endorses by TGI.

(5) Corresponds to intercompany loans between TGI with EEB.

Return

Footnotes table Nº 7: Indicators detail

(1) The net financial expenses are net of revenues from the treasury and the coupons received by Opposite Swaps

contracted.

Return

Footnotes table Nº 9: Operational indicators in Colombia

(1) Nominal system transport capacity.

(2) Average of actual volume transported.

(3) A contracting modality binding TGI to maintain a determined volume available in its transport capacity when the

client so requires.

(4) It is the percentage usage of the gas pipeline and it is obtained as the ratio between nomination and transport

capacity.

(5) Is the actual gas transport capacity in a specific period vis-à-vis nominal capacity.

(6) It is the difference between gas volumes received less gas delivered taking into account changes in inventories. It

is measured in percentage terms as regards the volume received from clients. CREG acknowledges through its

rates maximum losses of 1%.

Return

Footnotes table Nº 11: Capex

(1) Corresponds to those investments aimed at increasing the company’s transport capacity.

(2) Correspond to those investments aimed at maintaining the adequate status of company assets to allow normal

working thereof and maintain transport capacity at its current levels.

Return

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Annex 7: Financial Results Statement and EBITDA

IFRS figures are subject to General Shareholders Meeting approval in March 2016.

Table N° 13 – Detailed Financial Results

USD Var

2015 2014 USD % Operating Revenues 439,133,099 467,987,124 (28,854,025) -6.2%

Costs of Sales (138,429,948) (143,594,976) 5,165,028 -3.6%

Operating and maintenance (59,611,889) (66,716,339) 7,104,450 -10.6%

Provisions, depreciation and amortization (78,818,059) (76,878,637) (1,939,422) 2.5%

Gross Profit 300,703,151 324,392,148 (23,688,997) -7.3%

Operating and Admin. Expenses (27,880,077) (31,948,208) 4,068,131 -12.7%

Personnel and general services (18,468,198) (29,183,112) 10,714,914 -36.7%

Provisions, depreciation and amortization (2,711,603) (2,765,096) 53,493 -1.9%

Equity tax (6,700,277) - (6,700,277)

Other Revenues / (Expenses) Net (878,830) (458,840) (419,990) 91.5%

Operating Profit 271,944,244 291,985,100 (20,040,856) -6.9%

Non-operating revenues 13,565,908 43,074,143 (29,508,235) -68.5%

Financial (1) 13,200,011 12,275,961 924,050 7.5%

Hedging Valuation (2) - 30,286,748 (30,286,748) -100.0%

Others (5) 365,897 511,433 (145,536) -28.5%

Non-operating expenses (77,279,153) (108,602,720) 31,323,567 -28.8%

Financial (3) (69,130,116) (71,640,660) 2,510,544 -3.5%

Permanent Investments Valuation (3,862,402) (14,702,217) 10,839,815 -73.7%

Hedging Valuation (2) (1,328,448) (19,598,914) 18,270,466 -93.2%

Others (2,958,186) (2,660,928) (297,258) 11.2%

Net Foreign Exchange (4) (43,588,280) (33,158,035) (10,430,245) 31.5%

Profit before income tax 164,642,719 193,298,488 (28,655,769) -14.8%

Income tax (119,726,164) (124,422,208) 4,696,044 -3.8%

Net Profit 44,916,555 68,876,280 (23,959,725) -34.8%

(1) Includes financial yields for temporary investments.

(2) Reflects the valuation of hedging contracted by the company to reduce risk of paying the capital of debt in foreign currency.

(3) Financial expenses related to company’s debt.

(4) Reflects the impact of the devaluation/revaluation on the conversion to USD of assets and liabilities of the company in

Colombian pesos.

(5) Includes amortized costs

Table Nº 14 – EBITDA Quarterly Breakdown

USD 1Q - 15 2Q – 15 3Q – 15 4T - 15 Revenues. 109,991,964 109,003,718 108,189,864 111,947,554

(-)Operating and maintenance exp. 9,456,741 8,706,511.70 19,448,983 19,044,556

(-)Personnel and general expenses7. 5,703,182 6,023,305 3,264,559 6,438,821

EBITDA 94,832,040 94,273,901 85,476,322 86,464,177

EBITDA Margin % 86% 86% 79% 77%

7 Those expenses do not include equity tax

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Annex 8: Financial Information of TGI’s Main Clients

Company Overview Main clients served

▪ Largest gas producer in Colombia.

▪ Integrated Company of the hydrocarbon sector

▪ Publicly traded company controlled by the

Colombian government

▪ It is part of the Group of 40 of the world's largest oil

companies.

▪ Shares listed on the public market in Colombia, New

York and Toronto Stock

▪ Ratings: Foreign: Baa2 (Moody’s) / BBB(Fitch) /

BBB(S&P) ; AAA local

▪ Firm contract for 11 years

▪ Refineries

▪ Thermal generators

▪ Trading

▪ Main gas distributor in Colombia

▪ Controlled by Spanish Gas Natural Fenosa; EEB

holds 25% of the company’s shares.

▪ Ratings: BBB (Fitch) / AAA local


▪ Residential (1)

▪ Small businesses.

▪ Industries

▪ Natural Gas for Vehicles

▪ 2.7 Million users

▪ Gas distributor in the Southwest region of Colombia

▪ Private company controlled by Promigas

▪ Provides its services to more than 900,000 users.

▪ Ratings: AAA local


▪ Residential (1)

▪ Industries

▪ Natural Gas for Vehicles

▪ 937K users

▪ Main electricity generator in Colombia and gas

distributor in the Northwest region of the country

▪ Integrated company with interests in electricity and

natural gas.

▪ Ratings: Foreign: Baa3 (Moody’s) / BBB+(Fitch) /

BBB- (S&P) ; AAA local.


▪ Residential (1)

▪ Thermal generation

▪ 877K users

▪ Third electricity generator in Colombia

▪ 57% controlled by the Colombian government

▪ Ratings: Foreign: Baa3 (Moody’s) / BBB- (Fitch)

BBB- (S&P); AA+/BB+ local


▪ Thermal generation

▪ Trading

Source: Company information. (1) Residential users refer to the number of residencies served, not the population, which would be approximately five times larger.

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Annex 9: Main impacts from IFRS Implementation

Transportadora de Gas Internacional S.A. ESP -TGI-, affiliate of Grupo Energia de Bogotá, in accordance with

provisions set forth in Law 1314 of 2009 and regulatory decree 2784 of December 2012, started the convergence

process of the Colombian GAAP to International Financial Reporting Standards - IFRS.

Given that the company belongs to group 1, the mandatory transition period began on January 1, 2014 and the

issuance date of the first comparative financial statements under IFRS will be December 31, 2015.

During the years 2013 and 2014, TGI carried out activities regarding the preparation and adaptation of the

resources needed to move forward in the process of convergence to IFRS pursuant to legal requirements.

TGI, with technical support from their accounting advisors, determined the effects that such changes will have on

the financial statements. For this process TGI was supported by KPMG and PWC, and specialized teams for SAP-

ERP.

Description IFRS/IAS

Applied Main Impact

Financial

impact

Complexity of

implementation

Deferred income tax IAS 12The deferred tax calculation was made under the balance

method obtaining temporary differences.

Property, plant and

equipmentIAS 16

TGI took the value of technical appraisal as attributed

cost. BOMT Contract (Mariquita - Cali), and some

inventories are included in PPE.

Functional Currency IAS 21Accourding to analysis, the functional currency is the

American dollar (USD).

Intangible asset IAS 38

Intangible assets (servitudes), with an indefinite useful

life are not amortized but the entity shall assess at the

end of each reporting period if there is any indication of

impairment in accordance with the IAS 36.

Equity IFRS 1The adjustments are recorded against equity in first-time

adoption of International Financial Reporting Standards.

Provision IAS 37TGI includes provisions for environmental licenses,

employee benefits, and legal processes.

Long term employee

Benefits IAS 19

The difference between preferential rate and market rate

of Loans to employees is registered as expense.

Financial obligation IAS 39 The costs of issuing bonds are amortized over time.

High Impact Lower Impact

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Annex 10: New Board of Directors

Current members to the Board of Directors were elected by the General Shareholders’ Assembly in special meeting dated 27 January 2016, for two-year periods as of the election date.

MAIN MEMBERS ALTERNATE

Gloria Astrid Alvarez Hernandez Diana Margarita Vivas Munar

Andres Camargo Ardila Jorge Pinzón Barragán

Raúl José Buitrago Arias Carlos Alberto Diaz Rueda

Oscar Edmundo Diaz Molina Alexandra Rojas

Dalila Astrid Hernandez Corzo Vacant

Hector Felipe Angel Carvajal Sergio Andres Gomez Navarro

Ernesto Moreno Restrepo Jaime Alfonso Orjuela Velez

Gloria Astrid Alvarez Hernandez: Civil engineer from Universidad Javeriana and a specialization diploma in

environmental engineering from Universidad de los Andes and MBA for Ohio University. Consultant with broad experience in strategic consulting to national and international companies, and in recent years she has concentrated on offshore projects in the hydrocarbons and strategy supply sectors. Mrs. Alvarez was General Manager of Empresa de Acueducto de Bogotá for six years during the former administrations of Enrique Peñalosa and Antanas Mockus. In Ecopetrol, Ms. Alvarez was in charge of implementing the strategic supply model as of which significant savings were obtained in addition to efficiencies in the company’s contract management. Andrés Camargo Ardila: Civil engineer from Pontificia Universidad Javeriana with a specialization diploma in

Financial Legislation from Universidad de los Andes – Colombia; Mr. Camargo has also worked as President in PREVEO S.A.S., EDIFICADORA GOMEZ S.A. EGSA, CONSTRUCTORA COLPATRIA S.A.; among other top executive positions, his experience has been oriented to the area of urban development. Raúl Jose Buitrago Arias: Economist from Universidad Nacional de Colombia, with a specialization diploma in

economic law from Universidad Externado de Colombia and masters’ in finance from Universidad de los Andes. Mr. Buitrago has ample experience in teaching in areas related to economic law, microeconomics and economics in the public sector. Oscar Edmundo Díaz: Finance and International Relations undergraduate from Universidad Externado de Colombia

and master’s degree in International Issues with emphasis in Business Administration and Finances from Columbia University, NY. Throughout his career. Mr. Diaz has been dedicated to urbanisms and transport in the fields of planning and implementation of mass transport systems, non-motorized transport, road safety and reducing transport impact favoring air quality and being mindful of climate change. Héctor Felipe Angel Carvajal: Business administrator from COLEGIO DE ESTUDIOS SUPERIORES DE

ADMINISTRACIÓN and MBA from Inalde – Universidad de La Sabana. Mr. Ángel has broad experience in the financial and industrial sectors, having been appointed Consulting Director of CESA; Treasury Manager of CREDICORP CAPITAL COLOMBIA, Administrative and CFO of JARDINES DE PAZ S.A, among others. Ernesto Moreno Restrepo: Electrical engineer from Universidad de los Andes with a specialization diploma in

business from Universidad del Rosario; ample experience in electric power generation and transmission activities, sound knowledge of Latin American electric power markets and specialized in the administration, operation and maintenance of electric infrastructure, corporate strategy, valuation of companies and infrastructure project management, EEB’s Electric Power Transmission VP.

Documents

Investors Report 2015 Bogotá D.C., March 8€¦ · generation in 83 GWh/day until November 2015 and 89 GWh/day from December 2015 to March 2016. This situation has indeed occurred,