Tgi earnings call 3 q presentation

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  • October 2014

    Strictly Private and Confidential

    TGI 3Q RESULTS

  • 2

    Table of contents

    1. TGI overview and history

    2. Key updates

    3. Financial and operating highlights

    4. Questions and Answers

    Appendix

    1. Economic industry and regulatory environment

    2. Shareholders and management team

    3. EEB Overview

  • 1. TGI overview and history

  • 4

    Overview

    Stable and growing Colombian economy with sound investment environment

    Constructive and stable regulatory framework

    Largest natural gas pipeline system in Colombia

    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

    Natural monopoly in a regulated environment

    Strategically located pipeline network

  • Company history

    TGI history Pipeline network Highlights

    Owns ~61% of the national pipeline network (3,957 km) and transports 52% of the gas consumed in the country

    Serves ~70% of Colombias population, reaching the most populated areas (Bogota, Cali, Medellin, the coffee region and Piedemonte Llanero, among others)

    Has access to the two main production regions, La Guajira and Cusiana/Cupiagua

    25% interest in Contugas (Peru)

    30-year concession for natural gas transportation and distribution

    TGI was created as a result of the privatization of Ecogs and has experienced remarkable growth since then, under

    the leadership of its controlling shareholders, EEB and CVCI

    Creation of Ecogas

    1997

    2005

    Start of Ecogas Privatization Process

    2006

    Ecogas assets awarded to EEB

    Creation of TGI

    Inaugural bond issuance

    Transfer of first

    BOMT pipeline

    (GBS)

    Pipelines

    exchange with

    Promigas

    CVCI

    capitalization

    Transfer of

    second BOMT

    pipeline

    (Centragas)

    Cusiana

    expansion phase

    I: start of

    operations

    Refinancing of

    subordinated debt

    with EEB

    2008

    TGI takes over the O&M of owned pipelines

    Refinancing of

    bonds issued in

    2007

    Cusiana

    expansion

    phase II: start of

    operations

    TGI takes over

    the O&M of

    compressor

    stations

    Awarded

    investment

    grade rating by

    Moodys and Fitch

    2010

    Awarded

    investment grade

    rating by S&P

    Headquarters

    relocation from

    Bucaramanga to

    Bogot

    Redesign of

    organizational

    structure

    2012

    2013

    2007

    2009

    2011

    2014 EEB acquired

    31.92% stake in

    TGI from TRG

    (formerly CVCI)

    Cartagena Refinery

    Barrancabermeja Refinery Bucaramanga

    Bogota

    Neiva

    Cali

    Medellin

    3.15 tcf

    1.97 tcf

    Eastern Producers: Ecopetrol Equion

    Upper Magdalena Valley

    Lower and Middle Magdalena Valley

    Northern Producers: Chevron Ecopetrol 1.89 tcf

    References

    TGI Pipelines

    Natural Gas Reserves

    City

    Field Refinery

    Third Party Pipelines

    Source: Mining and Energy Planning Unit. National Hydrocarbons Agency.

    5

    Sabana Compressor

    starts operations

    Contugas Concession

    starts operations

    TGIs first dividend Payment

  • 2. Key Updates

    6

  • 7

    Key updates

    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

    On August 28th, Standard & Poors affirmed the TGI corporate debt and issuer rating in BBB-, perspective stable

    On October 28th, Fitch Ratings upgraded TGIs corporate debt and issuer rating from BBB- to BBB, with stable perspective

    TGIs current ratings are as follows:

    Baa3 Stable Outlook

    BBB Stable Outlook

    BBB- Stable Outlook

    Fitch upgraded TGIs credit rating to BBB on Oct 28, 2014

  • Hedge Restructuring

    Key updates

    During the first quarter of 2014, TGI executed synthetic unwinds to cap losses related to 3 of 4 cross-currency swaps booked in 2009

    On September 2014, TGI executed the forth synthetic unwind hedging the whole cross-currency swaps booked in 2009

  • TGIs acquisition

    9

    EEB closed the TGI 31,92% share acquisition on the first half of 2014

    To bridge the acquisition EEB used cash on hand and short term financings

    USD $ 645 MM were disbursed on September 2014 trough credit facilities to IELAH

    On September 2014 IELAH repaid to TGI the USD 129 MM short term loan that bridged the acquisition

    TGI is currently working on the merger with IELAH, this merger is expected to take place the 2Q 2015

    Key updates

    In ordinary session held on October 29th 2014, the General Shareholders Meeting approved the

    distribution of reserves and the net profits of the first eight months of 2014, amounting ~ USD 250

    mm

    Dividends Declared

    On July 7th TGI started operations of La Sabana Compression Station

    Civil work continues end up the project which to the date has a completion of 91%.

    La Sabana Compression Station

  • 3. Financial and operating highlights

    10

  • 11

    Solid operational performance

    (1)The trend line refers to the ratio: Firm contracted capacity/available capacity. The Available capacity differs from the Total Capacity as TGI requires a percentage of it for its own use. Source: Company information.

    Network length

    (km)

    Capacity

    (MMscfd)

    Firm Contracted Capacity(1)

    (MMscfd)

    Transported Volume Gas Losses Load factor

    (MMscfd) (%) (%)

    3,702

    3,529

    3,774 3,774

    3,957 3,957 3,957

    2008 2009 2010 2011 2012 2013 3Q-14

    478 478 548

    618

    730 730 730

    2008 2009 2010 2011 2012 2013 3Q-14

    427 437 485

    560 604 628

    652

    90% 92% 90% 92%

    85% 88%

    92%

    2008 2009 2010 2011 2012 2013 3Q-14

    371 396

    422 420 422 454

    500

    2008 2009 2010 2011 2012 2013 3Q-14

    0.1%

    0.2%

    0.6% 0.5% 0.5%

    0.4%

    0.0%

    2008 2009 2010 2011 2012 2013 3Q-14

    66% 69% 71%

    58% 59% 61% 63%

    2008 2009 2010 2011 2012 2013 3Q-14

  • 12

    Strong contract structure and stable and predictable cash flow generation

    TGIs revenues are highly predictable, with approximately 98% coming from regulated tariffs that are reviewed at least every 5 years, ensuring cash flow stability and attractive rates of return

    Main sectors served by the Company (72(1)% of revenues) present stable consumption patterns (no seasonality)

    The Company enjoys excellent contract quality

    100% of TGIs contracts are firm contracts with an average remaining life of 8 years

    82.8% of regulated revenues are fixed tariffs, not dependent on transported volume

    63%(2) of revenues denominated in US Dollars

    Revenues breakdown

    (% of revenues)

    Source: Company information. (1) Includes Distributors, Ecopetrols refinery and Natural gas for Vehicles. (2) TGI calculations (3) Ecopetrol accounts for most of this revenue.

    TGIs revenues are highly predictable as a result of regulated tariffs and stable consumption

    Source: TGI as of June 30- 2014

    By Client By Sector

    Ecopetrol 15%

    Gas Natural 19%

    Gases de Occidente

    16% EPM 12%

    Isagen 7%

    Others 31%

    Distributor 55%

    Refinery 13%

    Thermal 20%

    Commercial 3%

    Vehicles 4%

    Others* 6%

  • 13

    Strong and consistent financial performance

    Revenues EBITDA and EBITDA margin

    Funds from operations (1)

    (US$ in millions average exchange rate for each period)

    Source: Company information

    Historical Capex - YTD

    (US$ in millions average exchange rate for each period)

    (US$ in millions average exchange rate for each period) (US$ in millions average exchange rate for each period)

    (1)FFO calculated as net income plus depreciation, amortization and provisions, adjusted for effect from exchange rate and hedges.

    On 2012 FFO includes the LM transaction premium~ USD 69 million (one time event)

    238 252

    294

    338

    390

    465 480

    2008 2009 2010 2011 2012 2013 LTM-143Q

    194 196 222

    257

    289

    359 378

    82% 78%

    75% 76% 74% 77% 79%

    2008 2009 2010 2011 2012 2013 LTM-143Q

    84 96 104

    114 129

    268 254

    2008 2009 2010 2011 2012 2013 LTM-143Q

    13.9

    69.1

    174.1

    387.0

    185.1

    31.9 27.8

    2008 2009 2010 2011 2012 2013 3Q-14

  • 14

    Strong and consistent financial performance

    Total debt / EBITDA

    Financial debt breakdown (3)

    Subordination Agreement

    The lender is EEB (major shareholder)

    No repayment of principal allowed before payment of senior debt

    Interest can only be paid if there is no default or event of default and if the payment does not trigger any such scenario

    Subordinated debt acceleration is not allowed until senior debt is not repaid