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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 Colombia’s 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 Ecogás 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
Moody’s and
Fitch
2010
Awarded
investment grade
rating by S&P
Headquarters
relocation from
Bucaramanga to
Bogotá
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
TGI´s 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 & Poor’s affirmed the TGI corporate debt and issuer rating in ‘BBB-‘,
perspective stable
On October 28th, Fitch Ratings upgraded TGI’s corporate debt and issuer rating from ‘BBB-’ to
‘BBB’, with stable perspective
TGI’s current ratings are as follows:
Baa3 Stable Outlook
BBB Stable Outlook
BBB- Stable Outlook
Fitch upgraded TGI’s 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
TGI’s 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
TGI’s 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 TGI’s 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, Ecopetrol´s refinery and Natural gas for Vehicles. (2) TGI calculations (3) Ecopetrol accounts for most of this revenue.
TGI’s 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
Source: Company information. Total debt includes senior debt, subordinated debt and mark-to-market. Note: Ratios calculated in local currency. (1) Senior Net debt excluding EEB´s short term intercompany Loans. Including the ICL the ratio lowers to 1.2x (2) Interest coverage ratio calculated as EBITDA / Net interest (3) Senior debt stands for the US$750 million Senior Unsecured Notes due 2022. Subordinated debt stands for intercompany loan with EEB.
Senior net debt (1) / EBITDA Interest coverage (2)
2.0 2.0 2.0 2.5
4.0
5.9 6.4
2008 2009 2010 2011 2012 2013 3Q-14
6.5
5.6 5.4 4.9
4.2 3.5 3.4
2008 2009 2010 2011 2012 2013 3Q-14
3.7 3.3 3.4
2.7 2.4
1.5 1,6
2008 2009 2010 2011 2012 2013 3Q-14
4. Questions and answers
16
Investor Relations
For more information about TGI contact our Investor Relations team:
Antonio José Angarita Vega
CFO
+57 (1) 3138400 - ext 2110
Sergio Andrés Hernández Acosta
Finance Manager
+57 (1) 3138400 - ext. 2450
Fabián Sánchez Aldana
IR Advisor - EEB
+57 (1) 3268000 - ext. 1827
http://www.tgi.com.co
Appendix 1 – Economic industry and regulatory environment
Source: Banco de la República, DNP, MINHACIENDA., Bloomberg
5-year CDS Foreign currency reserves
Real GDP growth and inflation Foreign direct investment
(US$ in billions) (% growth)
(%) (US$ in billions)
Stable and growing Colombian economy with sound investment environment
Despite the recent global economic slowdown, Colombia has experienced positive economic growth and an increase in industrial activity, supported by a steady flow of investment
5% 5%
7% 7%
4%
2%
4%
7%
4% 4% 4% 6% 5%
4%
6%
8%
2%
3% 4%
2% 2%
3%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(e)-
Real GDP growth
Inflation
0
100
200
300
400
500
600
700
01-0
4
06-0
4
11-0
4
04-0
5
09-0
5
02-0
6
07-0
6
12-0
6
05-0
7
10-0
7
03-0
8
08-0
8
01-0
9
06-0
9
11-0
9
04-1
0
09-1
0
02-1
1
07-1
1
12-1
1
05-1
2
10-1
2
03-1
3
08-1
3
01-1
4
06-1
4
9 10 11 11 14 15 15
21 24 25
28 32
37
44 47
-5.0%
5.0%
15.0%
25.0%
35.0%
45.0%
0
10
20
30
40
50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
International reservesDebt as % of GDP
2 3 2 2 3
10
7
9 11
7 6
15 15 16
5
-
3.0
6.0
9.0
12.0
15.0
18.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20142Q
695 731 723 810
860 892 905
1047 1072 1083
1270
2006 2007 2008 2009 2010 2011 2012 2013 2014-1H
2016 2018
CAGR: 2006-2013: 5,6%
CAGR: 2013-2018: 4,3%
…
Source: UPME, ANH, Concentra 1 Mining and Energy Planning Unit. Reserves as 2012. 2 National Hydrocarbons Agency. Reserves as 2012.
Energy sources 2012
Growing Demand of Natural Gas Significant Availability of Natural Gas
Reserves mostly located in the north and east regions of the
country
Key fields (Ballena, Chuchupa, Cusiana and Cupiagua)
concentrate virtually all of the natural gas production
Long distances between production and main consumption
areas
Minimal gas storage capacity across the country
Total
Domestic
Demand
(mmcf/d)
Expected
2013A-2018E
Growth by
Sector
Natural Gas in Colombia: Increasing Demand and Vast Reserves
(0.0)%
0.8% 1.9%
17.0%
6.3%
13.2%
Petro-chemical
Industrial Residential PowerGeneration
NGV Refinery
19
Data from UPME as of 31-Dec-2012 Data from ANH as of 31-Dec-2013
11.7
6.4
RESERVES PER UPME RESERVES PER ANH
Proved Probable + possible Yet to Find Conventional Non Conventional
Organic 9,1%
Coal 9,8%
Natural Gas
25,1%
Hydro 12,9%
Oil 43,2%
(Million Equivalent Oil Tons)
Regulatory framework established to attract private sector investment
Law 142 (1994) establishes system of open entry to the natural gas transportation sector − No term limitation for the provision
of the service − Assets used in the provision of the
service are not owned by the state but by the company providing such service
CREG required by law to seek input from market participants
CREG is an independent regulatory body that controls natural gas regulation − Sets tariffs, promotes competition
and monitors quality of service
Tariff calculation based on the principle of financial feasibility and economic efficiency
Tariffs are set in order to allow the service provider to: − Recover operational costs and
investments − Obtain a return on investment
comparable to what an efficient company would obtain in a sector of similar risk
Cost recovery, attractive regulated return on investment and protection against inflation
Transporters are given full recovery of operating and maintenance expenses − Adjusted by Colombian Price
Index (CPI) Dollar indexation of investment
remuneration tariff Different rates of return applied
when determining fixed and variable charges
Constructive and stable regulatory framework
Source: Company information.
The Colombian gas transportation regulatory framework was established to attract private strategic investors and to provide adequate cost recovery and regulated returns
CREG RESOLUTIONS 083 AND 112 OF 2014
Establishes regulations for natural gas market.
Definition of contractual arrangements in the primary market.
Definition of marketing mechanisms.
Defines secondary market with its respective regulations.
The following reliability aspects in the Decree have not yet been defined by the Regulatory Commission:
The CREG will establish the reliability criteria which shall secure the demand coverage and must set the rules for the evaluation and remuneration of these investment projects.
CREG RESOLUTION 047 OF 2014
Recent Regulatory Decisions
The regulatory framework for natural gas transportation in Colombia is in a stage of important definitions. The main recent regulatory decisions are:
CREG RESOLUTION 089 OF 2013
21
DECREE 2100 OF 2011
Establishes the principles that will be considered in the next natural gas transportation tariff update process.
The resolution mentions the principles that will be kept from the actual tariff methodology.
Remuneration based on contracts. Price cap methodology.
It also mentions aspects that must be evaluated.
System expansion based on government signals.
Tariff calculation based on historical demand and not projected.
The resolution CREG 083 proposes the methodology to determine the WACC for regulated activities including gas transportation.
The resolution CREG 112, proposes the value for the Beta Adjustment (Delta Beta - Δβ) , which recognizes the difference between the reference market in the USA and the Colombian Regulatory framework.
Both resolutions were available for agents comments’, and the final resolutions are expected to be issued at the end of the year.
Appendix 2 – Shareholders and management team
23
David Riaño
CEO
19 Electrical Engineer (Universidad de La Salle); Masters in Industrial Engineering
(Universidad de Los Andes); Masters in Economics (Pontificia Universidad Javeriana)
Over 19 years of experience in technical and economic regulation of gas and electricity
sector (CREG, Colombian Electricity Generators Association, Superintendency of Energy
and Gas, Superintendency of Public Services)
Former Regulatory Affairs Manager at TGI SA ESP
CEO of TGI since October 2014
Antonio J.
Angarita
CFO 20
Officer Key highlights Years of relevant experience
Experienced management team with solid track record in the sector TGI is led by an experienced and seasoned management team
Carlos A. Torres
Vice-President of
Legal Affairs
20 Lawyer (Universidad de Los Andes); Business Law (Universidad de Los Andes)
Over 20 years of experience in the Oil and Gas Industry
Former General Counsel at Petrobras Colombia
Degree in Civil Engineering and MBA from Universidad de los Andes (Bogotá)
Over 20 years of experience in financial management in different industries, former IRO in
EEB, CFO in Bayport Colombia, Regional CFO in Amnet Central America (Tigo Home),
Financial Controller and Financial Planning Manager in Colombia Movil (Tigo), Head of
Financial Planning in ETB, Head of Management Control in Codensa and Advisor of the CFO
in EEB.
TGI’s CFO since July 2014
Jorge Gonzalez
COO
20 Civil Engineer (Universidad de Los Andes); Specialization Studies in Finance (Universidad
de Los Andes)
Over 17 years of experience in the natural gas industry
Former NGV Manager at Gas Natural S.A.E.S.P.
Carlos Toledo
Vice-President for
Administration and
services
8 Degree in Law from the Universidad UNICIENCIA.
Degree in Electrical Engineering and specialization in telecommunications from Universidad
Industrial de Santander Master’s degree in Applied Political Studies from FIIAPP.
Master in Social Cohesion from Universidad de Mendez Pelayo, España.
Over 7 years serving the public and private sectors
Vice-President for Administration and Public Relations since May 2012.
Appendix 3 – EEB Overview
EEB Strategy and Overview Strategy
Transportation and distribution
of energy
Key facts
More than 100 years’ experience in the sector; founded in 1896.
Regional leader in the energy sector; major player in the entire electricity
and natural gas value chains (except E&P); operations in Colombia,
Peru, and Guatemala.
Largest stockholder is the District of Bogota - 76.2%.
Stock listed on the Colombia stock exchange; EEB adheres to global
standards of corporate governance.
The EEB Group is one of the largest issuers of equity and debt in
Colombia
USD Million 3Q 2014
Operating revenue 844.7
Operating profit 302.0
EBITDA LTM 974.5
Net Income 463.2
Consolidated - Covenants 3Q 2014
Leverage Ratio 2.33
Interest Coverage Ratio 10.22
Focus on
natural
monopolies
Ample access
to capital
markets
Ambitious
projects in
execution
Growth in
controlled
subsidiaries
Sound
regulatory
framework
Experienced
management
and partners
Disclaimer
This presentation contains statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are only predictions and are not guarantees of future performance. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements include, among other things, statements concerning the potential exposure of TGI, its consolidated subsidiaries and related companies to market risks and statements expressing management’ expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “objectives”, ”outlook”, “probably”, “project”, “will”, “seek”, “target”, “risks”, “goals”, “should” and similar terms and phrases. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Although TGI believes that the expectations and assumptions reflected in such forward-looking statements are reasonable based on information currently available to TGI’s management, such expectations and assumptions are necessarily speculative and subject to substantial uncertainty, and as a result, TGI cannot guarantee future results or events. TGI does not undertake any obligation to update any forward-looking statement or other information to reflect events or circumstances occurring after the date of this presentation or to reflect the occurrence of unanticipated events.
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