Investors Report
2Q 11
1
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Bogota D.C, September 2011
Index
Executive summary and key developments.
Performance of controlled investments.
- EEB – Transmission
- TGI
- DECSA – EEC
- Cálidda Performance of Non - Controlled investments.
- Emgesa
- Codensa
- Promigas
- Gas natural
- REP y CTM EEB consolidated financial performance.
Annex 1: Legal notice and clarifications.
Annex 2: EEB´s consolidated and stand alone financial statements.
Annex 3: Overview of EEB
Annex 4: Technical and regulatory terms.
Annex 5: EBITDA LTM reconciliation.
Annex 6: Tables and graphics’ footnotes.
Executive summary and key developments
Table # 1 – Overview of the electricity sectors as of 2Q 11 Colombia Peru Guatemala Installed capacity – MW 13,814 7,516 2,181 Demand – GWh 27,944 9,119 3,503* Demand growth 2Q 11/2Q 10 % 0.29 6.2 5.7* Growth drivers Moderate demand growth
for routine maintenance in heavy users. Isolating this effect the growth would have been 3.5%.
The Peruvian economy continues to grow at a rate above 9%.
Industrial growth and rural electrification.
Sources: XM, UPME, COES - Peru, AMM – Guatemala *As of may
Table # 2 - Overview of the natural gas sectors as of 2Q 11 Colombia Peru Proven and probable reserves - TPC 8.5 24 Demand - mm cfd 823 404 Demand growth 2Q 11/2Q 10 % -17.4 64.9 Growth drivers Lower demand from thermo
generation due to the dissipation of El Niño.
Other sectors increased their demand.
Strong demand growth from industrial and vehicular sectors and new thermo generation plants in operation.
Increased residential demand in Lima and Callao.
Sources: UPME; CNO; MEM – Peru
Investors Report
2Q 11
2
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Table # 3 – EEB´s consolidated financial indicators COP mm As of 2Q 11 As of 2Q 10 F 10 Operating revenue 665,599 471,917 932,435 Operating income 253,466 214,054 268,288
Consolidated EBITDA 1,231,148 1,242,854 1,601,354
Dividends and reserves decreed to EEB 179,185 603,778 1,059,205
Net income 281,269 776,237 1,092,944
Dividends and reserves decreed by EEB 0 291,537 995,706
Last credit rating international bonds (144A) S&P – Jun 11: BB stable Fitch – Jan 11: BB stable
Operating income increased principally due to the result of (i) the consolidation of the results of Cálidda, the Peruvian gas
distribution company that operates in Lima and Callao, and (ii) improved operating income at TGI, as a result of the start
of operations of the Guajira and Cusiana Phase I natural gas transportation system expansions.
On March 30, 2011, the General Shareholders’ Meeting approved a 10:1 share split in order to improve the liquidity of the
shares. This split became effective June 20, 2011 on the Colombian Stock Exchange.
On May 17, 2011 EEB announced a public tender for TGI minority shareholdings, offering to purchase 1,333,309 shares
equivalent to 1.17% of the total shares. The tender offer was completed on June 14, with the purchase of 1,298,819
shares for COP 20,119 per share. As a result, EEB now owns 68.1% of TGI.
On June 16, 2011, the Board of Directors of EEB approved carrying out a liability management operation involving the
USD 610 million corporate bonds issued in 2007. The bond matures in October 2014 and is callable at 104.375% starting
October 31, 2011. The company is analyzing the best alternative to carry out this operation.
On August 9, 2011, a Shareholders’ Meeting approved the issuance of up to COP 1 billion in ordinary shares, or
approximately USD 530 million. The Shareholders’ Meeting delegated to the Board of Directors the oversight and timing
of the transaction.
Table # 4 - Summary of EEB´s expansion projects Project / company Country Sector Capex USD mm Status In operation: Guajira – TGI Colombia Natural gas transportation 200 In operation Since 3Q 10 Cusiana I – TGI Colombia Natural gas transportation 190 In operation Since 1Q 11 Cusiana II – TGI Colombia Natural gas transportation 260 Under construction 4Q 11 ICA - CoTUgas Peru Natural gas transportation and distribution 280 Under construction 3Q 13 Guatemala - Trecsa Guatemala Electricity transmission 376 Under construction 4Q 13 Lima – Cálidda Peru Natural gas distribution 160 Under construction 4Q 11 – 2Q 12 Reactors – EEB Colombia Electricity transmission 6.9 Under construction 2Q 12
Cusiana Phase II - TGI: Based on the advance in the construction, this project is expected to start operation by the end of
2011.
Guatemala – TRECSA:
- The company has received six of the environmental permits required to develop the project. TRECSA continues
working on obtaining the remaining required permits. The advance of the project is in line with the established
timetable.
ICA - ConTUgas:
- The company continues to advance in the contracting for the pipe and the civil works for the construction of the
system. The company is finalizing the negotiations for the transportation and commercial contracts for non-residential
clients. As of June 2011, the project was 43% completed.
Investors Report
2Q 11
3
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
- The company expects to be providing service to approximately 1,000 users by the end of 2011, out of the total of
50,000 that are expected to be connected six years after the project starts operation.
- The project’s financial plan contemplates 30% equity - 75% from EEB and 25% from TGI – and 70% debt. The latter
could include debt contracted in the Peruvian market, multilateral loans, and an intercompany loan from EEB. The
company has contracted the services of a Peruvian bank to structure the financing.
- As of the end of June 2011, total Capex invested in the project was USD 7.1 million, of a total of USD 108 million that
is expected to be invested in 2011.
Lima - Cálidda:
- The strategic objective of the company is to have 600,000 clients connected by the end of 2015.
- In the next two years, the company expects to invest USD 160 million in the construction and putting into service of
the new residential network that is part of the company’s expansion plan. This new network is expected to be in
operation by the first semester of 2012.
Reactors – EEB:
- As of June 30, 2011, the advance on the project was 29.3%, compared to an expected 32.2%.
Table # 5 - Selected financial indicators as of 2Q 11 - Non-controlled investments COP mm USD mm
Emgesa Codensa Gas Natural Promigas REP CTM
Operating revenue 897,013 1,439,205 540,722 627,084 49.2 16.4 Operating income 532,776 351,196 176,063 130,603 18.4 9.7 EBITDA LTM 1,199,078 1,046,272 368,874 378,922 32.9 27.1 Net income 313,483 209,510 130,465 92,242 9.5 8.2 Dividends and reserves decreed to EEB 80,537 69,214 17,593 33,134 0 0 Capital reductions to EEB 0 0 0 0 0 0
Table # 6 - Summary of expansion projects of non-controlled companies
Project Company Sector Country Capex USD mm In
operation: Quimbo Emgesa Electricity generation Colombia 837 14 Substations Codensa Electricity distribution Colombia 68 11 Expansions to concessions REP Electricity transmission Peru 72 11 Expansions to concessions and new concessions
CTM Electricity transmission Peru 748 11 - 13
Expansions Promigas Natural gas transportation and distribution
Colombia 192 14
El Quimbo - Emgesa: In mid-June the Ministry of the Environment announced preventive measures that stopped the
acquisition of land. These measures were lifted and did not affect the construction timetable. Start of operations is
scheduled for December 2014.
Expansion of the concession agreement of REP: The construction of the expansions advanced in line with the timetable,
except for Expansion No. 8, which is encountering some delays; however, activities were rescheduled in order to meet
the startup date of September 12, 2011.
Expansion of the Concession / New Concessions - CTM: In May 2011, the Independencia-Ica and Chilca-Planicie-
Zapallal projects entered service. The other projects of the company are advancing in line with their respective schedules.
Return to index
Investors Report
2Q 11
4
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Performance of controlling investments
Table # 7 – EEB´s selected transmission business indicators* As of 2Q 11
As of 2Q 10
Var % F 10
Operational Income 25,984 24,924 4.3 48,500 EBITDA LTM 33,147 31,891 3.9 63,191
Infrastructure availability - % (1) 99.90 99.88 0.02 99.9
Compensation for unavailability - % (2) 0.001 0.002 -50.0 0.0012
Maintenance program compliance - % (3) 100 100 0.0 100
Participation in Colombia’s transmission activity - % (4) 7.92 7.81 1.4 7.9
Investments - COP mm 1,793 1,604 11.8 4,994
*EEB operates directly this business. Footnotes in annex 6
The Transmission business continues showing excellent operational indicators.
Table # 8 – TGI´s selected indicators As of 2Q 11
As of 2Q 10
Var % F 10
Operating revenue -COP mm 307,489 277,682 10.7 559,414
Operating income -COP mm 183,426 168,582 8.8 194,564
EBITDA LTM - COP mm 442,948 418,496 5.8 422,699
Net income – COP mm 161,763 179,167 -9.7 69,831
Transported volume – mmcfd 424 422 0.2 422
Firm contracted capacity – mmcfd 540 420 28.6 485
International debt ratings S&P - Jun 11: BB; stable
Fitch - Jan 11: BB; stable
The increases in operating income, EBITDA, and contracted volume are principally the result of the increase in installed
and contracted capacity of the company as the result of the start of operation of the Guajira and Cusiana Phase I
expansions.
The reduction in net income is the result of lower non-operating revenues as the result of exchange differences. This is an
accounting effect, without effect on cash flow, related to the valuation of the financial debt of the company, which is
denominated, entirety, in U.S. dollars.
Investors Report
2Q 11
5
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Table # 9 – EEC´s selected indicators - Controlled by DECSA
As of 2Q 11
AS of 2Q 10
Var % F 10
Number of clients 243.441 236.428 3.0 239,077 Operating revenue - COP mm 125.264 147.803 -15.2 279,310 Operational income - COP mm 22.511 23.502 -4.2 33,790 EBITDA LTM - COP mm 27.000 28.523 -5.3 43,901 Net Income - COP mm 10.536 29.165 -63.9 43,723 Losses - % (1) 13.69 14.62 -6.4 13,27 Footnotes in annex 6
The decrease in operating revenues reflects the decision by the company to stop serving certain low margin non-
regulated clients. It should be noted that the decrease in operating income is much less that the decrease in revenues.
This reflects the impact of the cold wave on demand in EEC’s markets.
The performance of net income is the result of an accounting cleanup after taking control of EEC in 2009.
Table # 10 – Cálidda´s selected indicators
As of 2Q 11
AS of 2Q 10
Var % F 10
Number of clients 49,651 25,375 95.7 30,794 Operating revenue - COP mm 103,563 69,558 48.9 157,813 Operational income - COP mm 21,727 7,191 202.1 20,744 EBITDA LTM - COP mm 46,157 20,610 124.0 27,815 Net Income - COP mm 12,759 3,325 283.7 9,569 Footnotes in annex 6
The improved results of the company reflect the expansion plan. Currently, the company has 50,000 clients connected,
and the objective is the reach 600,0000 clients before the end of 2015.
In addition, the growth of the Peruvian economy increased energy demand by Cálidda’s industrial and power generation
clients.
Return to index
Performance of Non - controlled investments
Table # 11 – Overview of Emgesa
Installed capacity 2Q 11 – MW 2,866 Composition 10 hydro and 2 thermo
Generation 2Q 11 – Gwh 5,510 Sales 2Q 11 – Gwh 7,224 Operating revenue 2Q 11 - COP mm 897,013 EBITDA LTM 2Q 11 - COP mm 1,199,078 Controlled by Endesa – Spain EEB´s stake 51.5% - 37.4% ordinary shares; 14.1% preferred non-voting shares
Investors Report
2Q 11
6
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
5,434
1,705
7,138
5,080
2,144
7,224
Contracts Spot Total
Sales GWh
1S 10 1S 111.2%
-6.5%
25.7%
5,098
188
1,916 2,104
5,510
283
1,4921,775
Production Contracts Spot Total
Supply GWh
1S 10 1S 118.1%
-22.1%
50.2%
0.3%
As a result of the end of the El Niño phenomenon and the recovery of reservoir levels, the company increased production
and reduced spot market purchases. This had a strong benefit to the company’s operating margins.
Table # 12 – Capex
As of 2Q 11 As of 2Q 10 Var % F 10 COP mm 118,955 13,495 781.5 117,395
USD mm 66.82 7.04 849 59.0
Capex increased because of investments in El Quimbo. Through the first semester of 2011, the largest part of these was
for the construction of the diversion tunnels and civil works for the work camps.
Table # 13 - Selected financial indicators of Emgesa COP mm COP mm USD mm
2Q 11 2Q 10 Var % F 10 2Q 11 2Q 10 Operating revenue 897,013 979,203 -8.4 1,886,779 503.9 510.9 Cost of sales -348,966 -531,728 -34.4 -894,261 -196 277.5 Administrative expenses -14,987 -8,969 67.1 -21,790 -8.4 4.7 Operating income 533,060 438,505 21.6 970,728 299.4 228.8 EBITDA LTM (1) 1,199,078 1,035,153 15.7 1,109,312 673.6 540.3 Net income 313,483 264,049 18.7 571,977 176.1 137.8 Dividends and reserves decreed to EEB 80,537 251,769 -68.8 251,770 45.2 131.4 Capital reductions to EEB 0 229,143 N.A 229,120 0 119.6 Net debt (2) / EBITDA LTM N.D N.D 1.3 N.D N.D EBITDA LTM / Interest (3) N.D N.D 8.4 N.D N.D Footnotes in annex 6
Operating revenues decreased as a result of lower energy prices with the end of the El Niño phenomenon. Despite the
reduction in revenue, operating income increased as a result of a lower level of fuel used for generation and fewer
purchases of energy on the spot market.
The increase in administrative expenses reflects higher payments for the financial transaction tax, that was adjusted in
the December 2010 tax reform.
The reduction of dividends declared in favor of EEB reflects the fact that at the end of 2010, the company declared
dividends based on the period January-September 2010. As a result, the dividends declared by Emgesa in 2011 were for
the period Octuber-December 2010.
The 2010 tax reform eliminated the special deduction for investments in fixed assets. Thanks to the fact that Emgesa has
a stability agreement with El Quimbo, the elimination of this deduction did not have a significant effect on net income.
Investors Report
2Q 11
7
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Table # 14 – Overview of Codensa
Number of customers 2,461,027 Market share 2Q 11 - % 23.8% Codensa demand 2Q 11 – Gwh 6,671.6 Var. of Codensa´s demand 2Q 11/ 2Q 10 - % 3.1% Operational revenues F 10 - COP Mm 1,439,204 EBITDA LTM - COP Mm 1,046,272 Controlled by Endesa – Spain EEB´s stake 51.5% (36.4% ordinary shares; 15.1% preferred non-voting shares)
Codensa’s demand is growing at a rate faster than national demand thanks to the recovery of industrial production in
Colombia. It should be remembered that the company serves the region where the largest share of Colombia’s industrial
production is concentrated.
Table # 15 – Capex
As of 2Q 11 As of 2Q 10 Var % F 10 COP mm 92,074 68,793 33.8 299,282
USD mm 51,7 35,8 44.4 156.4
The increase in Capex is related to the construction of four projects in Bogota. These include new substations or the
rehabilitation of existing substations to bring the distribution infrastructure in line with the growth in demand. A portion of
Capex – approximately 18% – is linked to the new quality of service requirements issued by the CREG in 2008, and
which became effective in April 2011.
Codensa19%
National81%
Demand - Codensa and National
1.7%2.0%
-3.7%
3.3%
1.4%
-0.1%
-2.2%
2.2%
3Q 10 4Q 10 1Q 11 2Q 11
Demand Change - Codensa vs. National
Condensa National
Investors Report
2Q 11
8
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Table # 16 - Selected financial indicators of Codensa COP mm COP mm USD mm As of 2Q 11 As of 2Q 10 Var % F 10 As of 2Q 11 As of 2Q 10 Operating revenue 1,439,204 1,368,756 5.1 2,787,215 808.5 714.2 Cost of sales 1,050,617 992,254 5.9 -1,989,855 590.2 517.8 Administrative expenses 37,391 21,265 75.8 -54,943 21 1.1 Operational income 351,195 355,237 -1.1 742,417 197.3 185.4 EBITDA LTM (1) 1,046,272 997,079 4.9 993,362 587.8 520.4 Net income 209,510 229,895 -8.9 480,353 117.7 120.0 Dividends and reserves decreed to EEB 69,214 263,199 -280 443,189 38.9 137.3 Capital reductions to EEB 0 0 0 0 0 0 Net debt (2) / EBITDA LTM N.D N.D N.D 1.05 N.D N.D EBITDA LTM / Interests (3) N.D N.D N.D 9.98 N.D N.D Footnotes in annex 6
There was a slight reduction in the operating margin as a result of an increase in the energy that the company had to
acquire at a slightly higher price in order to meet growing demand and an increase in expenses related to the tax on
financial transactions, as a result of tax reform in December 2010.
Net income decreased more than the decrease in operating income. This is the result, mainly, of the elimination of the
30% deduction for investment in fixed assets. This special deduction was eliminated in the tax reform approved by the
Colombian Congress in December 2010.
The reduction of dividends declared in favor of EEB reflects the fact that at the end of 2010, the company declared
dividends based on January- September financials. As a result, the dividends declared for 2011 correspond only to the
period November-December 2010.
Table # 17 –Overview of Promigas
Number of customers 2,297,760
Sales in volume - mmcfd 405
Market share - % 39.8
Network – km 2,188
Operating revenue 2Q 11 - COP mm 665,599
EBITDA LTM - COP mm 1,231,181
Controlled by AEI
EEB´s stake 15.64%
Table # 18 – Capex
As of 2Q 11 As of 2Q 10 Var % F 10
COP mm 7,765 N.D N.A N.D USD mm 4.36 N.D N.A N.D
Investors Report
2Q 11
9
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Table # 19 - Selected financial indicators of Promigas COP mm COP mm USD mm
As of 2Q 11 As of 2Q 10 Var % F 10 As of 2Q 11 As of 2Q 10 Operating revenue 627,084 N.D N.A 1,483,027 352.3 N.D Cost of sales 419,439 N.D N.A 996,999 235.6 N.D Administrative expenses 77,042 N.D N.A 196,346 43.3 N.D Operational Income 130,603 N.D N.A 289,682 73.4 N.D EBITDA LTM (1) 378,922 N.D N.A 399,078 212.9 N.D Net income 92,242 N.D N.A 265,075 51.8 N.D Dividends and reserves decreed to EEB 33,134 0 0 18.6 N.D Capital reductions to EEB 0 0 0 N.D N.D Net debt (2) / EBITDA N.D N.D 3.27 N.D N.D EBITDA / Interests (3) N.D N.D 3.65 N.D N.D Footnotes in annex 6
Table # 20 –Overview of Gas Natural
Number of customers 1,726,426
Sales in volume - Mm cfd 134.7
Market share - % 29
Network – km 12,412
Operating revenue 1Q 11 - COP mm 519,282
EBITDA LTM - COP mm 368,874
Controlled by Gas Natural Fenosa - Spain
EEB´s stake 25%
Sale volume of natural gas rose principally as a result of the recovery in industrial demand and the elimination of
restrictions imposed in the first part of 2010 on supplying natural gas for vehicular and industrial use, in order to provide
greater supplies for thermal generation as a result of El Niño.
Residential29%
Commercial12%Industrial
43%
Vehicle16%
Sales by CustomerTotal: 134.6 mmpfd
2.6%
-1.9%
1.8%
6.3%
3Q 10 4Q10 1Q11 2Q11
Change in Sales
Investors Report
2Q 11
10
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
The company is expanding its distribution networks in the municipalities neighboring Bogotá.
Table # 22 - Selected financial indicators of Gas Natural COP mm COP mm USD mm
As of 2Q 11 As of 2Q 10 Var % F 10 As of 2Q 11 As of 2Q 10 Operating revenue 519,282 442,144 17.4 935,623 291.7 230.7 Cost of sales -296,864 -251,114 18.2 -533,243 -166.8 -131.0 Administrative expenses -51,735 -45,789 13.0 -93,724 -29.1 -23.9 Operational Income 170,682 145,241 17.5 308,585 95.9 75.8 EBITDA LTM (1) 368,874 343,349 7.4 340,492 207.2 179.2 Net income 130,465 120,088 8.6 259,034 73.3 62.7 Dividends and reserves decreed to EEB 17,593 69,004 -74.5 116,442 9.9 36.0 Capital reductions to EEB 0 0 N.A 0 0 0 Net debt (2) / EBITDA 1.16 0.67 N.D 1.3 N.D N.D EBITDA / Interests (3) 25.90 34.75 N.D 31.9 N.D N.D Footnotes in annex 6
The improved results are a consequence of the recovery of industrial demand in the region where the company
operates and the elimination of the restrictions imposed in 2010 on supply of gas for industrial and vehicular use as a
result of El Niño.
The reduction in dividends declared in favor of EEB reflects the fact that at the end of 2010, the company declared
dividends base don January-October financials, and dividends declared in 2011 correspond only to the period
November-December 2011.
Table # 23 - Overview Rep and CTM
REP CTM Network - km 5,837 1,490 Voltage – kv 220, 138, 60 220, 138
Control led by ISA Colombia EEB´s stake - % 40
Table # 21 – Capex
As of 2Q 11 As of 2Q 10 Var % F 10
COP mm 5,670 4,065 39.5 18,471 USD mm 3.2 2,1 38.5 9,7
Table # 24 - Selected financial indicators of REP USD mm USD mm
As of 2Q 11 As of 2Q 10 Var % F 10 Operating revenue 49.3 47.2 4.4 93.4
Cost of sales 30.8 24.8 24.2 -40.5
Operating income 18.4 22.4 -17.9 35.1
EBITDA LTM (1) 32.9 30.6 7.4 59.2
Net income 9.5 14.8 -35.8 19.8
Dividends decreed to EEB 0 0 0 0
Capital reductions to EEB 0 0 0 0
Net debt (2) / EBITDA ND ND ND 2.5 EBITDA / Interests (3) ND ND ND 8.1 Footnotes in annex 6
Investors Report
2Q 11
11
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
The reduction in operating income results from a higher level of amortization and depreciation as a result of the adoption
of international financial reporting standards (IFRS), and specifically IAS 37, which requires a monthly provision for
infrastructure maintenance. In 2010, this provision was recorded only in the month of December.
Despite this, operating revenues grew as a result of the start up of an expansion of the concession. The company expects
that during 2011 another two expansions will start operations.
Operating income decreased as a result of higher operating services costs and the maintenance provision. It should be
remembered that REP provides various services to CTM, including the supervision of construction of new projects.
Net income increased thanks to the loan of transmission services to third parties. These are private contracts for the
transmission of electricity that in accordance with IFRS are classified as non-operating revenues.
Return to index
Table # 25 - Selected financial indicators of CTM USD mm USD mm
As of 2Q 11 As of 2Q 10 Var % F 10 Operating revenue 16.1 15.8 1.9 183.0
Cost of sales -6.4 -4.8 33.3 -161.0
Operating income 9.7 11.0 -11.8 20.6
EBITDA LTM (1) 27.1 27.5 -1.5 27.0
Net income 8.2 7.3 12.3 15.4 Dividends decreed to EEB 0 0 N.A 0
Capital reductions to EEB 0 0 N.A 0
Net debt (2) / EBITDA N.D. N.D. N.D. 2.7 EBITDA / Interest (3) N.D. N.D. N.D. 3.3 Footnotes in annex 6
Investors Report
2Q 11
12
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
EEB´s Financial performance
Table # 26 - EEB´s consolidated results
COP mm Variación COP mm USD mm
2Q 11 2Q 10 % F 10 2Q 11 2Q 10 Operating revenue (1) 665,599 471,917 41.0 932,435 373.9 246.2
Electricity transmission 48,798 46,434 5.1 93,711 27.4 24.2
Electricity distribution 124,954 147,800 -15.5 279,310 70.2 77.1 Natural gas trans. and dist. 491,847 277,682 77.1 559,414 276.3 144.9
Cost of sales (2) -346,403 -220,862 56.8 -426,161 -194.6 115.2 Electricity transmission -20,419 -19,073 7.1 -39,094 -11.5 10.0 Electricity distribution -92,950 -109,739 -15.3 -199,893 -52.2 57.3 Natural gas trans. and dist. 233,034 -92,050 153.1 -187,174 -130.9 48.0
Gross income 319,196 251,055 27.1 506,274 179.3 131.0 Administrative expenses -65,729 37,001 77.7 -237,986 -36.9 19.3
Allocated to electricity transmission (3) -2,414 -3,957 -38.9 -6,117 -1.4 1.3 Electricity distribution -16,253 -19,361 -16.1 -55,524 -9.1 10.1
Natural gas trans. and dist. -47,062 -13,682 243.9 -176,344 -26.4 7.9 Operating income 253,466 214,054 18.4 268,288 142.4 111.7
Dividends (4) 179,186 635,447 -70.3 1,059,205 100.7 315.0 Interest on temp. investments & pension trusts (5)
28,258 31,669 -10.8 77,302 15.8 16.5
Net exchange difference (6) 148,071 166,764 -11.2 168,959 83.2 87.0 Net valuation of hedging contracts (7) -51,647 -23,512 119.7 -62,333 -29.0 -12.3
Other revenue (8) 10,558 26,891 -60.7 78,634 5.9 14.0 Administrative expenses (9) -57,831 -58,321 -0.8 -151,846 -32.5 -30.4
Financial expenses -134,239 -160,800 -2.2 -258,799 -75.4 -71.7 Other expenses -628 -3,566 -82.4 -7,747 -353 -1.8 Net income before taxes and minority interest
375,194 820,468 -54.3 1,171,663 210.8 428.1
Minority interest (8) -66,944 -19,215 248.4 -24,978 -37.6 -10.0
Provision for income tax -26,981 -25,016 7.9 -53,741 -15.2 -13.1 Net income 281,269 776,237 -63.8 1,092,944 158.0 405.0
Footnotes in annex 6
The increase in operating income reflects principally (i) the consolidation of Cálidda in the financial statements and (ii) the
additional revenue derived from the start of operations of TGI’s Guajira and Cusiana Phase I transport system
expansions.
On the other hand, the decrease in net income reflects the lower level of dividends declared in favor of EEB on the part of
companies in which EEB participates. Three of these - Emgesa, Codensa and Gas Natural - declared dividends based on
results for the last months of 2010 only, since at the end of 2010 they had already declared dividends for the January-
September for the case of Emgesa and Codensa and January-October for Gas Natural.
Investors Report
2Q 11
13
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Table # 27 – EEB’s Financial indicators COP mm COP mm USD mm 2Q 11 2Q 10 Var % F 10 2Q 11 2Q 10
EBITDA LTM (1) 1,232,148 1,242,854 -0.9 1,601,354 692.2 648.5 Adjusted EBITDA LTM (2) 1,232,148 1,471,974 -16.3 1,830,474 692.2 768.1 EBITDA margin % (3) 66.3 75.3 -12 77.4 66.3 75.3 Net debt (4) / EBITDA LTM (1) OM: < 4.5
1.89 1.58 33.5 1.44 1.89 1.58
EBITDA LTM (1) / Interest (5) OM: > 2.25
6.75 6.56 4.42 9.41 6.75 6.56
Footnotes in annex 6
1,242,8541,135,986
1,601,354
1,220,081 1,231,148
2T 10 3T10 4T10 1T11 2T11
EBITDA LTM –COP mm
-8.6%
40.97%
-23.81%
1%
1.58 1.63 1.441.65 1.89
4.5
2T 10 3T 10 4T 10 1T 11 2T 11
Net debt /EBITDA LTM OM<
6.566.49
9.41
7.28
6.75
2.25
2T 10 3T 10 4T 10 1T 11 2T 11
EBITDA LTM/ Interest OM>
Consolidated EBITDA for the last twelve months (LTM) was practically unchanged in comparison to the same period last
year. On the other hand, the reduction in operating income was offset by an increase in provisions. The performance of
these two items (operating income and provisions) is related to the asset revaluation process that TGI has to undertake
every three years. The last such revaluation took place in 2010, with effects on both the balance sheet and income
statement. In the income statement there was an increase in the provision for asset devaluations of COP 139,875 million,
in accordance with Colombian GAAP.
Investors Report
2Q 11
14
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
The Adjusted EBITDA LTM decreased as a result of the fact that the results for the period ending June 2011 do not
include the reduction in capital that EEB received from Emgesa in the prior year period, in the amount of COP 229,120
million.
The leverage ratio showed a slight deterioration in the second quarter of 2011 as a result of i) the less amount of
dividends declared to EEB due to the early dividend declaration. In the case of Emgesa, Codensa and Gas Natural, these
correspond to the last months of 2010, ii) an increase in consolidated debt as the result of the disbursement of a short-
term loan to EEB. These resources were used for the acquisition of the assets of Ashmore in Cálidda and Promigas. The
company plans to refinance this loan with long-term debt from the capital markets, and iii) the consolidation of Cálidda’s
debt in EEB’s financial statements.
The interest coverage ratio also decreased as compared to June 2010, principally as a result of the consolidation of
Cálidda’s interest expense.
Table # 28 - EEB Consolidated debt structure 2Q 11
COP mm Part.
% 2Q 10
COP mm Part.
% F 10
USD mm 2Q 11
USD mm 2Q 10
USD mm
Financial debt in COP 198,000 6.1 100,000 3.3 100,638 111 52 Financial debt in USD 2,841,826 87.3 2,805,329 92.0 2,801,083 1,596 1,464 Derivatives position 217,165 6.7 145,368 4.8 171,847 122 76 Total financial debt 3,256,991 100 3,050,696 100 3,073,568 1,830 1,592
Debt increased by COP 98,000 million as the result of a loan disbursed to EEB in February 2011 that was used for the
acquisition of Ashmore’s assets in Cálidda and Promigas. The company expects to refinance this debt funds from the
capital markets.
In addition, since the first quarter of 2011, the long-term obligations of Cálidda have been consolidated; these are all
dollar-denominated and total USD 114 million. Despite the increase in financial debt denominated in USD, the value
expressed in COP increased only 1.3%, as a result of the revaluation of the Colombian peso.
The valuation of derivatives positions was also affected by the revaluation of the Colombian peso.
Return to index
Investors Report
2Q 11
15
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Annex 1: Legal notice and clarifications
This document contains projections and estimates, using words such as “anticipate”, “believe”, “expect”, “estimate,” and
others having a similar meaning. Any information different from the historical data included in this submittal, including but
without limitation, that relative to the Company’s financial situation, its business strategy, plans, and objectives from
Management for future operations (including the development of plans and objectives relative to Company products and
services), corresponds to projections.
Such projections involve known and unknown risks, uncertainties and other important factors that may cause the Company’s
results, performance or actual achievements to be materially different from the results, performance or future achievements
that are expressed or implicit in the projections. Such projections are based on numerous assumptions concerning the
Company’s present and future business strategies, and the environment in which the Company will operate in the future.
These estimates pertain only to the date of this submittal. The Company expressly declares itself to be exempt from any
obligation or commitment to distribute updates or reviews of any projection contained in this submittal, so as to reflect any
change to the Company’s expectations regarding them or any change in the events, conditions or circumstances on which
these projections may be based.
Financial projections and other estimates contained in this report were based on economic, competitive, regulatory and
operational assumptions, and take into account risks that are beyond the control of the Company. Financial projections are
uncertain and it can be expected that one or more of the assumptions under which these projections and estimates were
based becomes invalid. Also unexpected events or circumstances may occur. For the foregoing reasons, actual results may
differ significantly from the projections contained herein. Consequently, the projections herein should not be considered as
statements of fact. Potential investors should not consider the forward-looking statements contained herein or rely on them to
make investment decisions.
The company’s past performance cannot be considered a guide for its future performance.
Clarifications
Only for information purposes, we have converted some of the figures in this report to their equivalent in USD, using the
TRM rate for the end of the period as published by the Colombian Financial Superintendency. The exchange rates used
are as follows:
− 2Q 11: 1,780.2 COP/USD
− 2Q 10: 1,916.5 COP/USD
In the figures submitted, a comma (,) is used to separate thousands and a point (.) to separate decimals.
EBITDA is not an acknowledged indicator under Colombian or US accounting standards and may show some difficulties
as an analytical tool. Therefore, it must not be taken on its own as an indicator of the company´s cash generation.
In accordance to the offer memorandum of the notes issued by EEB (USD 610 million; 8.75%; 2014); the company’s
consolidated EBITDA for a specific period is calculated taking operating revenues for such period and subtracting the cost
of sales, administrative expenses and interests generated in pension funds. One must add decreed dividends
(irrespective of whether they have been paid or not), interests of temporary investments, indirect taxes, amortization of
intangibles, depreciation of fixed assets and provisions and contributions made to pension funds.
Consolidated and adjusted EBITDA for a specific period is calculated taking the consolidated EBITDA for such period and
adding the cash coming from EEB attributable to capital reductions of those companies where EEB has shares.
Return to index
Investors Report
2Q 11
16
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Annex 2: Consolidated financial statements as of June
Investors Report
2Q 11
17
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Investors Report
2Q 11
18
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Return to index
Investors Report
2Q 11
19
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Investors Report
2Q 11
20
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Annex 3: EEB´s overview
EEB is an integrated energy company with interests in the natural gas and electricity sectors and operations in Colombia,
Peru and Guatemala;
The company was founded in 1896 and it is controlled by the District of Bogotá (81.5%; S&P BBB- rating);
EEB has an expansion strategy focused on the transmission and distribution of energy in Colombia and other countries
within the region.
EEB participates in the entire electricity value chain and in almost all the natural gas value chain, except for exploration
and production of this resource.
EEB is one of the most important Colombian corporate debt issuers. In 2007, EEB and TGI issued corporate bonds for
USD 1.36 billion in the 144A market.
Since 2009, EEB’s stock is traded in the Colombian Stock Exchange.
68.1% 25%
15.6%
Electricity
Transmission
40%
40%1.8%
98.4%
Generation
51.5%
2.5%
Distribution
51.5% 16.2%
51%
82%
DistributionTransportation
Natural Gas
25%
75%
60%
*
* * *
*
* EEB has the controlling interest
Return to index
Investors Report
2Q 11
21
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Annex 4: Technical and regulatory terms
BLN: U.S. billion (109)
CAG: Compound Annual Growth
COP: Colombian Peso.
CHB: Central Hidroeléctrica de Betania
CTM: Consorcio Transmantaro,
CREG: Comisión de Regulación de Energía y Gas de Colombia. (Colombia’s Energy and Gas Regulating Commission).
Colombia’s state agency in charge of regulating electric power and natural gas residential public utility services.
DANE: Departamento Administrativo Nacional de Estadística (National Administrative Statistics Department). Agency
responsible for planning, collecting, processing, analyzing, and disseminating official statistics in Colombia.
GWH: Gigawatt hour; unit of energy equivalent to 1,000,000 kwh,
GNV: Natural Gas for vehicles
IPC: Colombian Consumer Price Index.
KM: Kilometers
KWH: Unit of energy equivalent to the energy produced by a power of one kilowatt (kW) for one hour
MEM: Mercado de Energía Mayorista de Colombia; Wholesale Energy Market in Colombia
MM: million
Ml: Miles, thousand
MW: Megawatt, power unit or work which equals one million watts,
N.A. Not applicable.
NON REGULATED ELECTRICITY USER: electricity consumers who have a peak demand greater than 0,10 MW or a
minimum monthly consumption above 55,0 MWh,
NATURAL GAS NON REGULATED USER: user with consumption above 100 kcfd,
CFD: Cubic feet per day
Proinversión: Peruvian agency that promotes private investment in Peru.
SIN: Sistema Interconectado Nacional, National Interconnected System
STN: Sistema de Transmisión Nacional, National Transmission System
SF: Superintendencia Financiera – Financial Superintendency. State entity in charge of regulating, overseeing and
controlling the Colombian financial sector
TRM: Market Representative Exchange Rate; it is an average of the transactions carried out in peso–dollar, and it is
calculated daily by the SF.
UPME: State agency responsible for planning Colombia’s mining and energy sectors.
USD: U.S. dollars.
Return to index
Investors Report
2Q 11
22
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Annex 5: EBITDA reconciliation
COP mm Variation COP mm USD mm 2Q 11 2Q 10 % F 10 2Q 11 2Q 10
Operating income 307,700 408,295 -24.6 268,288 172.8 213.0 Operating depreciation 70,787 49,066 44.3 49,617 39.8 25.6 Operating amortization 42,939 54,802 -21.6 50,799 24.1 28.6 Operating taxes 2,299 3,576 -35.7 1,412 1.3 1.9 Dividends & interests earned 733,534 780,578 -6.0 1,161,571 412.1 407.3 Interests in autonomous equity -14,082 -18,675 -24.6 -16,441 -7.9 -9.7 Administration expenses -151,356 -113,608 33.2 -151,846 -85.0 -59.3 Retirement pensions 26,148 26,236 -0.3 26,145 14.7 13.7 Amortizations 15,238 22,713 -32.9 11,512 8.6 11.9 Depreciations 1,481 722 105.0 1,428 0.8 0.4 Provisions 159,822 14,326 1,015.6 169,337 89.8 7.5 Taxes 37,637 14,822 153.9 29,851 21.1 7.7
EBITDA LTM 1,232,148 1,242,854 -0.9 1,601,673 692.2 648.5
Return to index
Investors Report
2Q 11
23
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
Annex 6: Footnotes
Table # 7 - EEB´s transmission business indicators
(1) Percentage of the infrastructure available in a period of time.
(2) Percentage of the revenue discounted due to accumulated unavailability of specific assets above the regulatory target.
(3) Ratio between the number of maintenance operations carried out and number of scheduled maintenance operations to be executed as part of the semi-annual Maintenance Plan.
(4) Ratio of the number of transmission assets owned by EEB and the total number of transmission assets in Colombia. Return to table
Table # 9 – Selected financial indicators of EEC - DECSA
(1) Percentage of energy loses. Return to table
Table # 13 – Selected financial indicators of EMGESA
(1) EBITDA for the period under analysis was calculated by taking the operating profit and adding the amortization of intangibles and depreciation of fixed assets for such period.
(2) It is the result of the financial debt in force at the end of the period under analysis, less cash and temporary investments in the same period.
(3) Accrued interest on financial debts for the previous twelve months.
Return to table
Table # 16 – Selected financial indicators of Codensa
(1) EBITDA for the period under analysis was calculated by taking the operating profit and adding the amortization of intangibles and depreciation of fixed assets for such period.
(2) It is the result of the financial debt in force at the end of the period under analysis, less cash and temporary investments in the same period.
(3) Accrued interest on financial debts for the previous twelve months.
Return to table
Table # 19 – Selected financial indicators of Promigas
(1) EBITDA for the period under analysis was calculated by taking the operating profit and adding the amortization of intangibles and depreciation of fixed assets for such period.
(2) It is the result of the financial debt in force at the end of the period under analysis, less cash and temporary investments in the same period.
(3) Accrued interest on financial debts for the previous twelve months.
Table # 22 – Selected financial indicators of Promigas
(1) EBITDA for the period under analysis was calculated by taking the operating profit and adding the amortization of intangibles and depreciation of fixed assets for such period.
(2) It is the result of the financial debt in force at the end of the period under analysis, less cash and temporary investments in the same period.
Investors Report
2Q 11
24
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
(3) Accrued interest on financial debts for the previous twelve months.
Return to table
Table #24 – Selected financial indicators of REP
(1) EBITDA for the period under analysis was calculated by taking the operating profit and adding the amortization of intangibles and depreciation of fixed assets for such period.
(2) It is the result of the financial debt in force at the end of the period under analysis, less cash and temporary investments in the same period.
(3) Accrued interest on financial debts for the previous twelve months.
Return to table
Table # 25 – Selected financial indicators of CTM
(1) EBITDA for the period under analysis was calculated by taking the operating profit and adding the amortization of intangibles and depreciation of fixed assets for such period.
(2) It is the result of the financial debt in force at the end of the period under analysis, less cash and temporary investments in the same period.
(3) Accrued interest on financial debts for the previous twelve months.
Return to table
Table # 26 - Consolidated results of EEB
(1) Operating revenue for transmission services rendered directly by EEB, natural gas transmission and distribution of TGI and Cálidda, respectively; as well as energy distribution services that Decsa consolidates for his participation in EEC.
(2) Cost of sales of the transmission services rendered directly by EEB, natural gas transportation and distribution services and electricity distribution services conducted by its controlled companies. It includes personnel, materials, operation and maintenance costs, depreciation, amortization and insurances related to those activities.
(3) Transmission activity is operated directly by EEB. Administrative costs are allocated by the ABC system.
(4) Dividends decreed by non-controlled companies and temporary investors and pension funds autonomous equity.
(5) Interests of temporary investments that are generated by pension funds autonomous equity.
(6) Refers to net losses or earnings due to exchange rate variations and its impact on assets and liabilities expressed in foreign currency.
(7) Valuation of hedging operations contracted by EEB and TGI to reduce currency risk.
(8) Income from recovery of investments, leases and expenses.
(9) Expenses are not related to operational activities.
(10) Proportion of net income corresponding to minority investors in the company’s consolidated by EEB.
Return to table
Table # 27 - Financial indicators of EEB
(1) Consolidation of EEB income less cost of sales, administrative expenses, interest on pension funds autonomous equity, plus dividends of participated companies, interest of Accounts receivable investments, indirect taxes, amortization of intangibles, depreciation of fixed assets, pension payments and provisions for the last 12 months. It is consolidated EBITDA plus capital reeducations of participated companies.
(2) Consolidated EBITDA plus capital reductions of participated companies.
Investors Report
2Q 11
25
Contact: Juan Felipe González Rivera
Telephone: 571 3268000 ext 1546
E mail: [email protected]
(3) Is the result obtained when dividing consolidated EBITDA by operating income, added by dividends and accrued interests (without including interests received from investments made to autonomous equity of pension funds) of the last 12 months.
(4) Consolidated debt less free cash.
(5) Consolidated financial expenses of the past 12 months
Return to table
Return to index