TGI 2012 Results and Significant Developments March14 2013
Table of contents 1. EEB Overview 2. TGI Overview, History 3. Significant developments 4. Financial and operating highlights 5. Sizeable expansion projects are well underway 6. Questions and Answers Appendix Economic, industry and regulatory environment 1. Shareholders and management team 2. 2
1. EEB Overview
EEB Strategy and Overview Strategy Transportation and distribution of energy. Focus on Experienced Key facts natural management Regional leader in the energy sector; major player in the entire monopolies and partners electricity and natural gas value chains (except E&P). Operations in Colombia, Peru, and Guatemala. Ample access Growth in to capital controlled More than 100 years ’ experience in the sector; founded in 1896. markets subsidiaries Largest stockholder is the District of Bogota - 76.2%. Stock listed on the Colombia stock exchange; EEB adheres to global Ambitious Sound standards of corporate governance. projects in regulatory execution framework The EEB Group is one of the biggest issuers of equity and debt in Colombia. Electricity Natural Gas Generation Transmission Distribution Transportation Distribution 25% 51.5% * 51% 51.5% * 75% 68.1% 98.4% 100% 68.1% 82% 2.5% 15.6% 60% 99.94% 40% *EEB is not the controlling shareholder and is a party to 40% 40% 16.2% signed shareholder 25% agreements. 1.8% 4
2. TGI Overview and History
TGI Overview Stable and growing Colombian economy with sound investment environment Largest natural gas pipeline system in Colombia Strategically located pipeline network Natural monopoly in a regulated environment Constructive and stable regulatory framework Stable and predictable cash flow generation, strongly indexed to the US Dollar Strong and consistent financial performance Experienced management team with solid track record in the sector Expertise, financial strength and support of shareholders 6
TGI History Highlights Pipeline network Owns approximately 57% of the national North References 2.49 tcf pipeline network (3,957 km) and transports Producers: Natural gas reserves Chevron 48% of the gas consumed in the country City (population) Ecopetrol Valledupar (350k) − Serves approximately 70% of Colombia’s References Currumaní Pipeline owned by TGI population, reaching the most populated (27k) Pipeline owned by a third party BOMT areas. 1.19 tcf Center − Has access to the two main production Bucaramanga (1.1mm) Medellin regions, La Guajira and Cusiana/Cupiagua (3.3mm) Manizales 25% interest in Contugas (Peru) (430k) Bogota Pereira (7.9mm) 3.36 tcf (682k) − 30-year concession for natural gas Villavicencio Eastern transportation and distribution (384k) Cali (2.7mm) Neiva Producers: (477k) Ecopetrol & Equion Source: Company information South 0.02 tcf Company history and ANH. TGI was created as a result of the privatization of Ecogás and has experienced remarkable growth since then, under the leadership of its controlling shareholders, EEB and CVCI Ballena expansion begins Operations Ecogás awarded to EEB TGI assumes the O&M Creation of Ecogas 2012 of owned pipelines TGI-Transcogas merger Refinancing of 2007 Bond issue 2011 Cusiana expansion 2009 phase II begins 2010 operations (3Q) 2007 TGI assumes the O&M 2005 2008 of Compressor stations. Transfer of 2 nd BOMT (Centragas) and CVCI capitalization 2006 Creation of TGI and bond 1997 Moody ´ s and Fitch give issuance investment grade rating Cusiana expansion phase I Transfer of 1 st BOMT (GBS) to TGI begins operations and pipelines exchange with Alienation of Ecogas assets Promigas Subordinated debt is refinanced. Source: Company information. 7
3. Significant Developments
Key Updates Fitch upgraded TGI’s credit rating to BBB - on Nov. 2, 2012 Since 2H 2011, TGI designed a strategy to improve its credit ratings in order to (i) reduce financial expenses, (ii) provide better access to debt capital markets and (iii) broaden its potential investor base This is TGI’s second investment grade rating (M oody’s rated TGI Baa3 in March 2012) These ratings reflect TGI ´ s improving financial results, its stable and predictable cash flow generation, the conclusion of its expansion projects, and the constant improvement in its credit metrics TGI’s current ratings are as follows: Baa3 Stable Outlook BBB- Stable Outlook BB Positive Outlook 9
Key Updates Update on tariff review process with CREG In September 2011, CREG issued resolution 110 of 2011, updating TGI’s gas transportation tariffs • This new tariff scheme resulted in increased revenues for TGI and fully compensated the Company for its O&M expenses The expected increase in TGI’s regulated revenues was approximately 5% • However, TGI considered that Res. 110 did not correctly reflect the costs of its past investments and future investment plan • TGI therefore presented an appeal to CREG to review its decision This appeal put the application of the new tariffs on hold until it was resolved • The appeal process took 14 months and involved interaction with Government officials and international experts appointed by CREG In November 19 2012, CREG issued Resolution 121 where the appeal was solved and issued new tariffs that will apply for the next 5 years New tariffs are expected to increase TGI ´ s regulated revenues by approximately 10% • TGI is still not completely satisfied with the outcome and is taking all necessary legal actions to • further pursue its claims Despite the continuing legal actions, the new tariffs are being applied O&M tariffs have been in force since December 2012 • Investment tariffs are being gradually implemented, a process expected to end by March 2013 • 10
Key Updates Completion of Cusiana Phase II Expansion Project New compression stations Commercial Operation Date: August 2012 Existing compression stations to be repowered Barrancabermeja Loops Total cost: USD 296 million E.C Puente E.C. Vasconia Guillermo Vasconia Tunja Increased network length: 187 kms La Belleza Puerto Salgar Cusiana E.C. Padua E.C. Mariquita Increased transportation capacity:110 mmscfd. Miraflores Cogua E.C. Mariquita Bogota Ibagué % of additional capacity contracted: 91% Gualanday Natagaima Incremental revenues: Approx. US$ 56 million/year Cali Aipe Dina Neiva Capacity expansion successfully proven 11
Key Updates Takeover of the O&M Activities of the Compression Stations O &M activities for TGI’s compression stations had been subcontracted with a third party (Exterran) • This O&M contract expired on July 27, 2012 On April 2012, TGI’s board approved the direct takeover of the O&M activities of 12 of its 13 (1) compression stations Estimated annual savings of approximately US$ 3 million Helps the development of the Reliability-Centered Maintenance model (RCM) to improve O&M activities Strengthens TGI’s know -how in gas transportation systems O&M As a result, TGI hired 133 new employees During the past 6 months, results have been very positive • For the period Aug-Dec 2012 actual savings were approx. US$ 2,5 million (1) Under the Ecogas asset disposition plan, Apiay Compressor station must be operated by ECOPETROL. 12
4. Financial and operating highlights
Solid operational performance Network length Capacity Firm Contracted Capacity (km) (mmscfd) (mmscfd) 730 3,957 618 604 560 548 485 3,774 3,774 478 478 437 427 3,702 3,529 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Transported Volume Gas Losses Load factor (mmscfd) (%) (%) 0.57% 0.54% 0.52% 71.2% 69.1% 422 422 420 66.1% 58.9% 57.6% 396 0.20% 371 0.10% 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Source: Company information. 14
Largest natural gas pipeline system in Colombia TGI has a dominant market position, holding a natural monopoly with high barriers of entry Natural gas transportation market share (1) TGI is the largest natural gas transportation (% of natural gas transported volume) company in the country OTHERS 14% − Holds 48% (2) market share in the Colombian TGI natural gas transportation sector and owns 48% ~57% of the pipeline network PROMIGAS TGI’s extensive pipeline network (3,957 km) 38% allows the Company to take advantage of new business opportunities and participate in Source: Natural gas transportation companies ’ Electronic Bulletin of Operations expansion projects in different regions Natural gas transported volume (1) Other industry participants face high barriers of entry to access TGI’s gas transportation market (mmscfd) 422.2 in a cost-efficient manner 339.5 TGI initiated expansion plans outside Colombia by acquiring a 25% stake in Contugas (Peru) 45.0 36.2 22.9 11.9 4.8 − 30-year natural gas distribution concession − Expected to begin operations in 2H 2013 – 1H 2014. Source: Natural gas transportation companies ’ Electronic Bulletin of Operations Source: UPME and Company information. (1) As of December 31, 2012. 48% of market share of gas transported directly by TGI. Most of the 14% transported by “Others” is natural gas transported by TGI through the (2) TGI Pipeline System to other pipeline systems. 15
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