2016 management report - promigas · supply electricity to around 350,000 users in 38 towns and...
TRANSCRIPT
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2016 MANAGEMENT REPORT
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CONTENTS
A. PROMIGAS B. OUR FUNDAMENTAL PRINCIPLES a. Corporate Governance b. Human Rights c. Risk Management d. Relations with interest groups C. OUR GOALS REPORT BY THE PRESIDENT TO OUR SHAREHOLDERS AND OUR INTEREST GROUPS
1. To grow in a profitable and sustainable manner, in line with the expectations of our shareholders.
2. To strengthen the value proposal for our customers. 3. To optimize productivity and guide the organization toward levels of operational excellence. 4. To reinforce management with suppliers and contractors. 5. To reinforce relations with the community. 6. To ensure an environmentally responsible management. 7. To guarantee a safe operation. 8. To strengthen the overall development of our staff and the corporate culture PROSPECTS OUR CHALLENGES IN 2017 ACKNOWLEDGEMENTS INTELLECTUAL PROPERTY, COPYRIGHT AND OTHER STANDARDS D. ATTACHMENTS
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Promigas G4-3
As we strive to connect markets to sources of energy, especially natural gas, we generate value by building long-term relations and mutual benefits with interest groups. We are an organization with a Latin American presence, and for more than 40 years we have brought progress and wellbeing to Colombia by performing our activities effectively and responsibly. This has enabled us to play an active and important role in the process of making natural gas available on a mass scale in Colombia1. We develop energy markets in Colombia and Latin America, directly and through our strategic transportation and distribution business groups (GEN). These consist, firstly, of organizations involved in the transportation of natural gas and Liquefied Natural Gas (LNG), the provision of integrated solutions for industry, and energy generation, and secondly, of natural gas distribution companies, electricity distributors and marketers, and the non-banking finance business. We transport 43% of the natural gas used in Colombia through more than 3,000 kilometers of gas pipelines belonging to ourselves and to our carriers, and we provide services for hydrocarbon producers and big industries that include natural gas compression and dehydration, the construction of gas pipelines and interconnection lines, and energy solutions such as generation, cogeneration and self-generation. We recently entered the LNG business with our affiliate Sociedad Portuaria El Cayao (SPEC), which will process more than 400 Mpcd at a floating regasification terminal permanently anchored at a port on Cartagena Bay. This terminal, which is the first of its kind in Colombia, will enable electricity generating companies to meet their natural gas needs at times of peak demand. In Colombia, we distribute natural gas to around 3.7 million users, 38% of the domestic market, meaning that we serve 11.5 million beneficiaries, while we have over 480,000 users in Peru through our share in Cálidda. We operate and maintain approximately 26,000 kilometers of electricity distribution network, and supply electricity to around 350,000 users in 38 towns and villages in the southern part of the country. We have AAA ratings for issues in Colombia and BBB- internationally for IDR local and foreign currency issues. We also hold ISO 9001 quality system certification, OHSAS 18001 occupational health and safety certification, and ISO 14001 environmental certification. We have been involved in the Vehicular Natural Gas (VNG) business for more than 24 years. We pioneered a business that has positive economic and environmental impacts due to the very characteristics of this fuel, and we continue to search for new growth opportunities. We are also continuing with our expansion in Peru through our affiliate Gases del Pacífico, and will serve 150,000 users in the north of the country in the next five years.
1 Promigas S.A. E.S.P. is a private company supervised by the Superintendency of Domestic Public Services and the Colombian Financial Superintendency. Its head office is in the city of Barranquilla, Colombia. G4–-5, G4–-7
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Promigas has led the natural gas revolution in Colombia, resulting in a positive economic, social and environmental impact.
OUR BUSINESSES G4-4, G4-8 (map), G4-9
GEN Transportation
GEN Transportation Employees: 511 Revenue: 1,140,951 million Assets: $8,139,931 million
Natural gas transportation
Promigas Promioriente Transmetano Transoccidente
Gas pipeline: 3,089 km. Capacity: 883.7 Mpcd Customers: 23, in different regions of Colombia,
Integrated solutions for industry and energy generation
Promisol Zonagen
Dehydration capacity: over 650 Mpcd Installed compression capacity: 24,000 hp Cogeneration plants: capacity over 60 MW
LNG Sociedad Portuaria El Cayao (SPEC)
Regasification capacity: 400 Mpcd Storage capacity: 170,000 m3
GEN Distribution
Employees: 2,698 Revenue: $2,517,336 million Assets: $2,668,972 million
Natural gas distribution Surtigas GdO Gases del Caribe Efigas Gases de La Guajira Cálidda Gases del Pacífico Versa
Accumulated users: 3,685,516 Gas sales: 9.4 million m3
Electricity distribution Compañía Energética de Occidente (CEO)
Customers: 348,081 Energy required: 578 GWh Networks: 25,963 km.
Non-banking finance Brilla Loans: 1,921,967 million Number of users: 1,997,222 beneficiaries Portfolio: 504,404 million
NOTE. Figures prior to eliminations; revenue includes financial assets and participation method plus dividends. GEN Distribution financial figures do not include companies that do not consolidate: Gases del Caribe (Efigas and Gases de la Guajira) and Cálidda.
17 companies, 3200 employees, Colombia, Peru G4-6
Principal GEN Transportation indicators
Operation Promigas Transmetano Promioriente Transoccidente
Gas pipeline length (km) 2556 189 333 11
Volume transported (Mpcd) 339.4 50.5 58.4** 42-9
Maximum capacity (Mpcd) 738 64.2 86.1*** 73.6
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Financial Promigas Transmetano* Promioriente * Transoccidente* Promisol****
Operating income (millions of pesos)
1,480,356 73,853 149,228 5,956 103.236
Cost of sales (millions of pesos)
539,668 11,586 29,406 1,186 83,442
General expenses (millions of pesos)
108,197 7,577 6,911 1,221 6,697
EBITDA (millions of pesos)
765,988 50,829 121,755 3,797 13,097
EBITDA margin (%) 52% 69% 82% 64% 13%
Net profit (millions of pesos)
614,185 38,045 77,970 2,332 6,364
Effective Promigas share (%)
99.67% 73.27% 68.99% 100%
* 2016 IFRS figures **Volume transported Gibraltar - Bucaramanga: 31.4 Mpcd. Volume transported Barrancabermeja - Payoa - Bucaramanga: 27.0 Mpcd. ***Maximum capacity Gibraltar - Bucaramanga: 49.9 Mpcd. Maximum capacity Barrancabermeja - Payoa - Bucaramanga: 36.2 Mpcd. **** 2016 IFRS figures
Principal GEN Distribution indicators
Operation GdO Surtigas Gases del Caribe
Efigas Gases de la Guajira
Cálidda CEO
Accumulated users 1,050,500 683,674 899,302 509,362 104,274 438,400 348,081
Number of towns/ villages 240 158 198 32 60 20 38
Potential market 1,349,682 892,524 1,031,670 664,492 131,466 2,327,400
Coverage (%) 83 97 90 80 86 59
Financial GdO Surtigas Gases del Caribe
Efigas Gases de la Guajira
Cálidda (USD
millions)
CEO
Operating income (millions of pesos)
1,125,404 857,731 1,359,120 354,358 53,911 535 406,101
Cost of sales (millions of pesos)
858,409 623,989 1,010,313 199,174 27,787 362 211,490
General expenses (millions of pesos)
122,273 121,323 143,022 52,849 16,109 48 104,142
EBITDA (millions of pesos) 160,786 139,936 237,924 111,277 12,923 124 90,469
EBITDA margin (%) 15 19 18 31 24 23 22.28
Net profit (millions of pesos)
72,204 44,241 144,911 58,446 6,977 55 18,545
Effective Promigas share (%)
90.12 99.99 30.99 23.61 26.93 40 94.96
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OUR PEOPLE
Transmetano Promioriente Transoccidente Promisol Zonagen Surtigas GdO CEO SPEC
M W M W M W M W M W M W M W M W M W
Staff 14 6 23 13 3 1 38 5 25 3 260 165 265 222 175 147 19 7
Promigas staff details G4-9, G4-10, G4-11
Staff by type of contract 2016
Number %
Indefinite term 365 96
Fixed term 15 4
Hired labor 0 0
TOTAL 380 100
Number of staff by organizational level and gender
2016
Men Women
Managerial 18 10
Non-managerial 234 118
TOTAL 252 128
Number of staff by geographical location
2016
Men Women
Atlantic coast 251 127
Bogotá 1 1
TOTAL 252 128
Number of staff by age range
2016
18 to 30 84
31 to 50 211
Over 50 85
TOTAL 380
Average age (years) 40.57
Average seniority (years) 12.34
G4-11
Staff by benefits group 2016
Number %
Collective pact 269 71
Comprehensive salary 97 25
Collective convention 14 4
TOTAL 380 100
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OUR SUPPLIERS Our companies as a whole have 5,985 suppliers, from whom goods and services totaling COP 572,774 million were purchased in 2016. G4-12/G4-EC9
2015 2016
Number Value of purchases in millions of pesos
Number Value of purchases in millions of pesos
Suppliers of goods
TOTAL 245 161,144 236 55,447
Foreign 21 12,535 10 4,591
Colombian 224 148,609 226 50,856
Suppliers of services
TOTAL 718 279,294 2,647 84,653
Foreign 77 6,131 194 6,043
Colombian 641 273,163 2,453 78,610
Suppliers by geographical location (consolidated)
2016
Number Value of purchases (millions of pesos
%
Foreign 204 10,634 8%
Colombian 2,679 129,466 92%
43% of the total Colombians are from the Caribbean region
Interior 677 73,869 57%
Caribbean region 2002 55,597 43%
81% of the total from the Caribbean region are from Barranquilla
Barranquilla 1,639 44,917 81%
Rest of the Caribbean region
363 10,680 19%
92% of purchases were made from Colombian suppliers. 43% of these were from suppliers in from the Caribbean region, 81% of them from Barranquilla. Promigas historical figures
Suppliers 2013 2014 2015 2016
Colombian Caribbean 97% 52% 89% 49% 96% 60% 92% 43%
Other 48% 51% 40% 57%
Foreign 3% 11% 4% 8%
Transmetano Promioriente Transoccidente Promisol Surtigas GdO CEO
Number of suppliers 357 347 57 325 766 781 469
Value of purchases (millions of pesos) 34,882 43,677 373 30,340 125,334 124,181 73,857
Note: Promigas information corresponds to new purchases of goods and services generated in 2016.
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ASSOCIATIONS WE BELONG TOG4-16
Promigas and its affiliates play an active role in associations and initiatives that help them achieve their goals and contribute to social and economic development in the regions where they operate. Promigas, Gases de Occidente, Surtigas and Compañía Energética de Occidente are thus signatories to the Global Compact. We are also active members of well-known international institutions in the gas sector, such as the American Gas Association (AGA) Gas Control Committee and the National Association of Corrosion Engineering (NACE) Committee, and numerous important Colombian institutions, notable among which are Naturgas, Andesco, World Energy Council (WEC), the Colombian Corrosion Engineers Association, the National Gas Operation Council (CNO Gas), the Colombian Safety Council, the Colombian Industrial and Personnel Relations Association (ACRIP), Grupo Apell, Concentra, Probono Foundation, ICONTEC, the National Accreditation Organization (ONAC), ANDI, Fenalco, and the Institute of Internal Auditors. We appreciate the value of institutional synergies in matters of local, regional and national interest for enriching public policies, and we accordingly play an active role, together with some of our companies, in organizations like Entrepreneurs for Education, the Business Foundations Association (AFE) and the Inter-American Network of Foundations and Entrepreneurial Action for Base Development (RedEAmerica).
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Comprehensive management with a sustainable approach G4–18, G4–19, G4–20, G4–21, G425, G426, G427
We strengthened our comprehensive management model by taking into account the expectations of our interest groups and, to this end, we established four fundamental cornerstones, coordinated with strategy, that guide our actions, in terms of approach and implementation, and we incorporated issues that are relevant to our management, measurement and communication at corporate level. We thus ensure that our accountability is viable and we report progress made on our management with a sustainable approach in terms of contribution to business (growth, productivity, risk mitigation, profitability) and interest group compliance. We constantly review our activities and compare ourselves against the highest sustainability standards, such as the Dow Jones Sustainability Index, and this enables us to work on areas where problems are identified with a view to improving the performance of our organization. We are also committed to the United Nations Global Compact and its principles, and to the Sustainable Development Objectives (SDO), which enable us to identify future growth opportunities, improve the value of company sustainability, use our resources in a more efficient manner, strengthen our relations with interested parties, and share a common language and a common goal. We have determined that the following SDOs are a priority for Promigas.
Objective 4. To guarantee fair, good quality, inclusive education and promote learning
opportunities for everyone throughout their lives.
Promigas and its Foundation work actively on developing skills and knowledge, and on
education programs that concentrate on training managerial staff, teachers and families,
in order to achieve the following:
• Good quality, fair education;
• An adequate transition from one education cycle to another, starting from early
childhood;
• Developing students’ moral, civic and intellectual skills to the maximum, and also
their commitment to their community and to protecting the planet;
• Developing protective contexts that contribute to the quality of school education;
• Providing the basics for a better scientific and technical education; and
• Training young people in entrepreneurship and making schools able to develop
those skills in their students.
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Objective 7. To guarantee that everyone has access to affordable, safe, sustainable and
modern energy.
Promigas is working to develop more efficient energy markets, with a view to increasing their share of the domestic market.
Objective 13. To adopt urgent measures to combat climate change and its effects.
We are committed to implementing measures that will mitigate risks associated with climate change, and climate change is hence a material issue in our comprehensive management with a sustainable approach. We have set in motion a plan to reduce our carbon footprint, to which end we are measuring greenhouse gas emissions and have committed ourselves to achieving a 10% reduction by 2025.
As part of our relationship with communities plan, we are working on training groups of
people who will understand the risks and draw up the necessary emergency response plans, and we provide them with equipment that will help them mitigate the effects of climate change.
Objective 15. To protect, reinstate and promote the sustainable use of land ecosystems,
to manage forests in a sustainable manner, to fight against desertification, to halt and
reverse the degradation of land, and to put a brake on the loss of biological diversity.
• We establish measures aimed at minimizing areas to be worked on and restoring
biodiversity through reforestation.
• We participate voluntarily in industry initiatives that set out to implement actions
to protect biodiversity and the development of communities in areas where we
operate.
• We support and finance special protection projects in natural parks by means of
reforestation and environmental education components.
• We select tracking alternatives for projects that cause the fewest environmental
effects and impacts.
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MATERIALITY, SCOPE AND COVERAGE G4–18, G4–19, G4–20, G4–21
Our material issues are corporate; in other words, they extend to the companies that make up our portfolio. Internally, they relate to our employees, while externally they relate to the target publics of each one.
Material issues External to the Organization
Economic performance Shareholders
Board of Directors
Government
Regulatory bodies
Development of new business opportunities
Legal and regulatory management
Development of competitive solutions Customers
Regulatory bodies Quality of service to customers
Service integrity and continuity Shareholders
Customers
Regulatory bodies
Sustainable management of suppliers (acquisition practices) Suppliers and contractors
Community
Promotion of local development (indirect economic
consequences)
Community
Contribution to education quality
Management of resources and waste (energy, water, emissions,
effluent and residues)
Community
Suppliers
Regulatory bodies Climate change
Caring for biodiversity
Safety in all processes (occupational health and safety) Community
Government
Suppliers and contractors
Overall development (job) Community
Knowledge management (education and training)
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Strengthening the organizational climate
OUR FUNDAMENTAL PRINCIPLES Corporate governance G4-56, G4-57, G4-58 ETHICAL CULTURE G4-DMA This is set out in the Conduct and Good Governance codes and in the Anti-Fraud and Anticorruption Policy. Its cornerstone is a culture centered on a sound system of principles and values and a commitment to do the right thing in the right way. The Code of Conduct, which is approved by the Board of Directors, provides key responses and tips that are to be used in everyday situations, with a view to guaranteeing that our principles and values are always reflected in our practices. The provisions established in our Good Governance Code ensure that the rights of our shareholders and other investors in the securities the company issues are respected. The Anti-Fraud and Anticorruption Policy, meanwhile, helps to reinforce controls and to provide assistance in preventing and detecting fraud, theft or abuses against Promigas. G4-57, G4-DMA The Compliance program of Promigas and its companies illustrates a commitment to an ethical way of doing business and a system that helps people to do what is right. The program consists of the following elements:
1. Top management commitment 2. Clear, written controls 3. Communication and training 4. Reliable reporting mechanisms 5. Permanent monitoring and reinforcement 6. Risk analysis and continuous improvement of the process
Compliance officers are required to periodically report to the Presidency / General Management and to the Board of Directors’ Audit, Risks and Good Corporate Governance Committee. The contracts of our suppliers of goods and services contain an ‘Ethical Commitment’ clause, which aims to ensure that our interest groups:
keep adequate controls;
Reveal any conflicts of interest that might arise;
Notify Promigas of any unethical conduct they might observe;
Comply with legislation relating to the ‘Prevention of Asset Laundering and the Financing of Terrorism (LA/FT)’, the ‘Corrupt Practices Abroad Law (FCPA)’, and other applicable policies.
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(N 3) Our principles and values
Current compliance management policies and procedures:
Corrupt Practices Abroad Law (FCPA)
Transaction Approval Policy (PAT)
Gifts and Attentions Policy
Anti-Fraud and Anticorruption Policy
Policy on Transactions with Parties Related to Administrators
Manual on the Prevention of Asset Laundering and the Financing of Terrorism
Due Diligence procedure for Promigas Board of Directors candidates
Training actions, for which compliance officers are responsible: Code of Conduct: annually for 100% of the organization’s personnel, and every two years for
suppliers and contractors selected by Administration Management and contract administrators because of their importance.
Corrupt Practices Abroad Law (FCPA) and Prevention of Asset Laundering and the Financing of Terrorism (LA/FT).
Anonymous reporting mechanisms. Prevention of fraud and bribes, among other matters: as required for personnel whose
duties within the organization require them to be aware of such things.
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RELIABLE REPORTING MECHANISMS G4-DMA, G4-58
Direct communication: based on the premises of confidentiality and non-retaliation, open
communication is promoted between workers and their immediate superiors or the
compliance officer.
Confidential reporting website and line: Promigas and its affiliated companies also have
these reporting mechanisms, which are outsources to a supplier abroad, thereby making
the process anonymous and confidential.
The Anonymous Reporting system has different categories for making reports that are updated in accordance with organizational requirements. Currently they include work practices, with a human rights component; finance and accounting; environment, health and safety; communities in the area of influence of the operation, consultations, etc.
Report statistics, as well as details of the more relevant cases, are submitted to the Audit, Risks and Good Corporate Governance Committee.
AUDITS The Compliance program includes an internal, SOX and external audit plan. This guarantees the Audit, Risks and Good Corporate Governance Committee objective assurance about situations of non-compliance that have been identified and resolved, and about how recurrences can be prevented. The audit plan, which is dynamic and independent, is evaluated constantly in order to guarantee that it adds value to the process and improves its efficiency.
CORPORATE GOVERNANCE STRUCTURE G4-34, G4-38 The corporate governance structure is as follows.
General Meeting of Shareholders. This is our highest social body, which held two ordinary
sessions and one extraordinary session in 2016.
Board of Directors. This is our supreme administrative body. It acts in representation of
the shareholders and to benefit sustained growth in the organization. Twelve meetings
were held in the course of the year.
Board of Directors Committees. The Audit, Risks and Good Corporate Governance
Committee and the Compensation and Development Committee. The former met six
times in 2016, four times in ordinary session and twice extraordinarily, while the latter
met twice.
Presidency and top management. They head the organization’s processes and activities
with support from internal committees that are responsible for evaluating and carrying
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out follow-up on those processes and activities. The Organizational Management
Committee follows up on matters relating to sustainable management.
Board of Directors G4-38, G4-39 Its members are independent, according to the legal definition, and non-executive, and they were elected for the period from March 2015 to March 2017. Promigas carried out an independent evaluation of the Board of Directors by a specialist firm in 2016, and the results of this are currently being analyzed. This exercise, which also looks at the performance of the Board as a collegiate body, the relevance, depth and duration of matters discussed, and the performance of Board committees, among other things, should help ensure that every level, every process and every element of the Board of Directors functions in an unbeatable manner. An induction session was also held for members of the Board of Directors who were appointed in 2016.
Name of Board member Post or role Other significant posts or commitments
Skills Attendance at Board meetings in 2016 (principal /
alternate)
Bernardo Noreña Ocampo* Principal - Chairman
President of Corporación Financiera Colombiana
Specialist in finance and accounting
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Carlos Caballero Argáez Principal Director of Alberto Lleras School of Governance, Los Andes University; former president of the Bogotá Stock Exchange; Director of Banco de la República; ex-Minister of Mines
Finance, good governance, and technical skills in the sector
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Luis Fernando Mejía Castro Principal Ex-Minister of Mines, member of the Ecopetrol Board of Directors
Technical skills in the sector, lawyer with MBA.
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Gloria Astrid Álvarez Hernández**
Principal President of Empresa de Energía de Bogotá
Civil engineer, environmental engineer with MBA
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Claudia Betancourt Azcárate Principal General Manager of Amalfi S.A. Economist, expert in risks 12
Carlos Arcesio Paz Bautista Alternate Manager of Proyenco Ltda. Business manager, specialization in marketing
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Gustavo Ramírez Galindo Alternate Vice-President, Investments, Corporación Financiera Colombiana
Electrical engineer with a master’s degree in Economics
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Mauricio Maldonado Alternate Vice-President, Strategy, Grupo Aval Acciones y Valores S.A.
Industrial engineer with a master’s degree in Business Management
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Leonardo Garnica Eljaiek** Alternate Vice-President, Investments, Empresa de Energía de Bogotá
Industrial engineer with an MBA, consultant and expert in investment and financial structuring projects
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Camilo De Francisco Valenzuela
Alternate Director of Projects and Investments, Amalfi S.A.
Business manager, expert in company appraisal
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* Appointed in May 2016 ** Appointed in March 2016
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Make-up of Board of Directors, by gender - 2015*
Number %
Men 8 80
Women 1 20
* Not belonging to minority group
Make-up of Board of Directors, by age - 2016
Number %
Between 30 and 50 4 40
Over 50 6 60
Our shareholders G4-56
Names % Share
Corporación Financiera Colombiana S.A. 34.22
EEB Gas S.A.S. 15.64
CFC Gas Holding S.A.S. 10.58
Amalfi S.A. 7.99
Consultorías de Inversiones S.A. 5.26
Promi CFC S.A.S. 4.95
Fondo de Pensiones Obligatorias Protección Moderado 4.12
Fondo de Pensiones Obligatorias Porvenir Moderado 2.66
Azurita S.A. 2.49
Inversiones Gloscar S.A.S. 2.25
Lipu & Cía. S.C.A. 2.06
Fondo de Pensiones Obligatorias Colfondos Moderado 1.23
Conscar & Cía. S.C.A. 1.07
Other 5.46
In addition to the Office for the Investor at Promigas in Barranquilla, since August 2016 Promigas shareholders have been able to receive full attention by Deceval through different channels. By using the new media, the aim is to increase the participation level and provision of information by Promigas, to increase satisfaction levels in the management of company shares, which have been dematerialized and held in custody by Deceval since 2003, and, principally, to mitigate falsification and other risks inherent in the process in order to protect investor equity. Administration
Antonio Celia Martínez Aparicio: President
Ricardo Fernández Malabet: Vice-President, Transportation Business
Rodolfo Anaya Abello: Vice-President, Distribution
Aquiles Mercado González: Vice-President. Finance and Administration
Eduardo Rosado Fernández de Castro: Vice-President, Corporate Affairs
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Relevant Facts
For the fourth consecutive year, Promigas won the BVC IR award for its adoption of ‘Best
Corporate Governance Practices’ and for its relations with its different interest groups.
The ‘conflicts of interest’ concept for Promigas officers and associated companies was
reinforced by presenting real life cases of conflict situations that were not revealed in our
companies, how they were resolved, and the action that was taken by management for
failing to comply with the Code of Conduct.
The Compliance Manager took part in the risk evaluation exercise in all branches, in order
to detect instances of fraud, corruption, FCPA policies and prevention of LA/FT.
All officers of Promigas and associated companies received virtual training in the Code of
Conduct, thus highlighting our commitment to ethics and transparency.
58% of goods and services suppliers who were sent the training took the course.
A total of 172 reports were received via the confidential reporting line. 76 of these were
confirmed, 65 were not confirmed, and 31 are under investigation. The most reported
issues were breach of corporate policies and labor practices related to contractors. The six
reports that were under investigation in 2015 were resolved in 2016. No reports relating
to Human Rights have been received. G4-LA16, G4-58.
INDICATORS CONFIRMED CORRUPTION INCIDENTS AND ACTION TAKEN
G4-SO5
2015 (number)
2016 (number)
Total number and nature of confirmed corruption incidents 0 4
Total number of confirmed incidents where employees were fired or penalized for corruption
0 14
Total number of confirmed cases where contracts with business partners were terminated or not renewed due to breaches related to corruption.
0 30
Report of public judicial cases of corruption filed against the organization or its employees during the period, and the results of such cases.
0 0
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The four confirmed cases of corruption occurred at one of our affiliates, and they were discovered as the result of an audit conducted by Promigas Corporate Control Management. Consequently, 14 staff had their contracts of employment terminated and the contracts of 30 suppliers were not renewed. Simultaneously, four reports were received via the confidential reporting mechanisms, and as these were related to this investigation, they were therefore not added to the statistics presented. ETHICS CULTURE DISSEMINATION AND TRAINING (Promigas and associated companies) G4-SO4: Communication and training in anticorruption procedures and policies
2015 2016
Hours training in matters relating to the Code of Conduct, the Good Governance Code, principles and values, ethical cornerstones, etc.
1,200 1,847
Total number of staff trained 484 2,020
2015
% 2016
%
Suppliers and contractors who received the Code of Conduct and other ethical practices of the company. (Dissemination to a greater number of suppliers every two years is envisaged)
40 58
Employees who were informed of the organization’s anticorruption policies and procedures. (Conflicts of interest)
100 73
Members of governance bodies who were informed of changes to the organization’s anticorruption policies and procedures (Shareholders and Board of Directors)
100 100
Business partners who were informed of the organization’s anticorruption policies and procedures. NOTE: This includes the affiliated companies Promisol, Gases de Occidente, Surtigas, Compañía Energética de Occidente, Gases del Pacífico, Transmetano, Transoccidente, Promioriente, Enercolsa and Zonagen.
100 100
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Human Rights G4-DMA
OUR DECLARATION OF HUMAN RIGHTS The human being is the focal point of everything we do, and we therefore have to respect his rights, promote them, and remedy any negative consequences, should this be necessary. We value diversity and recognize that rights are non-negotiable and inherent in all persons, who should be treated equally. At Promigas, we honor and experience rights in the following ways. Labor practices With respect to our staff, contractors and suppliers:
We encourage honesty, integrity, respect and trust.
We foster wellbeing and quality of life.
We provide safe and healthy conditions.
We recognize the right to freedom of association.
We offer equal opportunities: we promote fairness, impartiality and equal conditions.
We do not accept abuse of any kind. This includes, but is not limited to, forced labor,
discrimination, harassment and use of force.
We do not tolerate child labor.
We train our staff, contractors and suppliers to appropriate and respect human rights.
Territories where we operate With respect to communities and other social actors:
We act in accordance with public policies and we recognize the State as principal
guarantor of fundamental human rights.
We guarantee a safe environment while engaging in our operations.
We recognize property rights and work to preserve, protect and respect territories.
We help, with other actors, to contribute to the quality of life in communities in our area
of influence, respecting their autonomy in managing their development.
We value the culture and idiosyncrasies of communities, and to this end, we approach
their realities from a differentiated perspective.
We favor the building of trust.
We respond jointly to emergencies and humanitarian aid situations, in conjunction with
the corresponding institutions.
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We work with state security organizations to deal with public order situations that could
affect both the rendering of the public natural gas service and the conducting of initiatives
aimed at the common good.
We evaluate, prevent and mitigate the social, cultural and environmental impacts of our
operations.
Environment
We recognize that the environment is a common good.
We value the fight against climate change as essential action for living in balanced
surroundings, and we mitigate causes and adapt by adopting policies and practices to face
up to the respective effects.
We take on, in a proactive and responsible manner, environmental challenges that could
have an unfavorable impact on access to and the enjoyment of natural resources.
Ethics
We recognize the link between human rights and ethics based on practices that value
people’s dignity. We encourage our staff and contractors to adopt practices based on a
sound system of values and the commitment to do what is right in the right way.
We prevent fraud and corruption as part of our ethical principles.
We foster respectful, proactive and transparent communication with our interest groups,
in a context of dialogue.
Our management approach on this matter is preventive, one of zero tolerance and public
rejection of any type of human rights violation or breach of International Humanitarian
Law by the company or by unrelated interest groups, and support for the authorities in
order to prevent impunity.
INDICATORS G4-HR3, G4-LA16, G4-HR12 - In 2016, nine reports of harassment to companies in our portfolio were received through
the confidential reporting line, five of which were proved to be applicable and were resolved while three were not confirmed and one is still being investigated. All were received in the same period. None of the reports was against Promigas.
- No reports of discrimination, harassment at work or of any other kind were made to the Labor Harmony Committee.
- No complaints were received during the period about human rights impacts.
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Risk management G4-14 The purpose of Comprehensive Risk Management is to establish principles, guidelines and action plans that enable us to meet the strategic objectives of processes and projects, to prevent risks and mitigate them when they do occur, and to ensure that Promigas and its affiliated companies meet requirements applicable to its activities. Management Approach. Comprehensive Risk Management is a priority at Promigas, and Corporate Policy on the subject modulates all our activities. Each of its commitments stresses this management, taking the different interest groups into account. The following activities were carried out in 2016.
Risk interrelation exercise
Defining the methodology for establishing appetite for, tolerance of and ability to accept
risks.
Consideration of trends for identifying risks.
Diagnosis of risk management maturity, with the following results:
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INDICATOR (PROMIGAS 1)
Percentage compliance with mitigation action plans
2013 2014 2015 2016
Promigas 90% 95% 92% 96%
Percentage compliance with mitigation action plans (%)
Transmetano Promioriente Promisol Surtigas GdO CEO
95
77
98
96
87
83*
* Corresponds to strategic risks
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Relations with interest groups G424, G425, G426, G427
As we conduct our activities, we respect our interest groups, which we prioritized and selected some years ago on the basis of an evaluation by Promigas top management. From there we established mechanisms and procedures for receiving information from and consultations by our shareholders, employees, customers, suppliers and communities, all of which enables us to answer their queries, respond to their concerns, provide accountability and incorporate relationship levels that meet their expectations, so that each party can find value in an effective interaction that allows us to cultivate long-term relations with mutual benefits. In view of our intention of making progress in our economic, social and environmental performance, we greatly value their contributions and we take them into account when engaging in our activities. It is thanks to this relationship that we define our priorities or strategic fronts in terms of sustainability. Our interest groups Staff, Board of Directors, shareholders, customers, government, regulatory bodies, community, suppliers and contractors.
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MESSAGE FROM THE PRESIDENT TO OUR SHAREHOLDERS AND ALL OUR INTEREST GROUPS
G41, G42, G44, G415
A number of notable achievements in 2016 enabled us to consolidate our leading position in the sector in Colombia, despite various complex problems that arose during the year. The most important news was, unquestionably, the signing of the peace agreement with FARC. The end of the conflict deserves to be celebrated with optimism and the hope of a better country. 2016 was once again a year when Colombia’s natural gas sector had to face various difficult circumstances. The delays by CREG in making certain decisions, coupled to a severe El Niño phenomenon, brought the country very close to electricity rationing. There was a temporary shortage of gas in the Caribbean region, since the aforementioned delays meant that the new gas found could not be delivered, nor could gas be brought from Venezuela, as should have happened. Meanwhile, CREG Resolution 093 of 2016 annulled the approved methodology for calculating the remuneration for natural gas distribution, and this in turn led to longer delays in issuing tariffs, which expired eight years ago; indeed, thirteen years have passed since they were last reviewed. As far as gas transportation regulation is concerned, a proposed new methodology was issued that is currently open to review and comments, and we have made a special effort with this, since suitable conditions for the business to develop need to be maintained and are a vital factor in its expansion. We continued to build the South Loop (San Mateo - Mamonal Loop) and to carry out complementary works at the Sahagún and Filadelfia compression stations, with a view to transporting gas from the Hocol and Canacol production fields. These works enabled us to increase gas transportation capacity by 65 Mpcd by December 2016 and to reach 95 Mpcd in February 2017. We have had to overcome serious problems with this work, mainly resulting from matters relating to licenses and communities, due to the complex regulations currently in force in the country. Our affiliates Transmetano and Promioriente began construction work on compressor stations, progress on which at the year end was approximately 64%, and both will commence operations in the second half of 2017. In November 2016, operations began at the country’s first natural gas regasification plant: a historic landmark for the sector, and the fact that the plant operated at 100% capacity (400 Mpcd) during the testing phase is worth highlighting. This work guarantees full natural gas supplies for the country. It was also in November that an agreement was signed by Promigas and Canacol to expand the existing gas transportation network, increasing capacity by 100 Mpcd. This should begin operating in late 2018, to meet the demand for natural gas on the Caribbean coast.
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As far as our affiliate in Peru, Gases del Pacífico, is concerned, the necessary work has proceeded for distribution operations to start in July 2017. The financial results for the year exceeded expectations, and also reflected the commitment by ourselves and our associated companies to maintain highly efficient operating standards and aim for the optimal use of physical resources and funds. As an organization that is a signatory to the Global Compact, we have brought its principles relating to the environment and social dialogue into line with our corporate principles, and we are committed to directing our strategy and our operations in accordance with the ten principles enshrined in the four major fields, namely human rights, environment, anticorruption, and labor standards, and we are also committed to performing actions that support the widest United Nations objectives, including the Sustainable Development Objectives (SDO). We look for adequate returns for our investors in the long term and pursue a sense of responsibility and decency as we engage in our undertakings. Our foundations do great work supporting the quality of public education in dozens of communities. As part of our continuous improvement process, we have updated corporate strategy with advice from the firm McKinsey, and the results of this will be available for dissemination and implementation in the first quarter of 2017. This new strategic guidance will be applied in line with the values and principles that govern our everyday actions.
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1. To grow in a profitable and sustainable manner, in line with the expectations of our shareholders.
ECONOMIC PERFORMANCE
We foster the envisaged returns and sustained growth by effectively identifying
opportunities and managing investments and funds in line with risk levels. G4-DMA.
We endorse our essential commitment to adequately reward our shareholders and interest groups through our corporate vision, which implies making every effort that might be necessary to consolidate ourselves as an energy holding company in Colombia and Latin America. This vision is set out in the most recent version of our ‘2013 Long-Term Strategic Plan’, periodic reviews of which have been ratified. We want to continue developing new businesses that will help the organization to grow in a sustainable manner, so we can contribute to improving the quality of life of people living in the areas of influence of our activities.
Economic environment
2016 was one of the most complex years in memory in the political and economic sphere. On the international stage, the United Kingdom’s exit from the European Union (‘Brexit’), which saw the pound sterling fall to its lowest value against the dollar in more than 30 years, Donald Trump’s victory in the United States presidential elections, and the local situation after the ‘No’ vote in the plebiscite to endorse the peace agreements with the FARC, were but some of the ‘black swans’2 that appeared during the year. Despite this latter result, the peace process has gone on to become one of the most important events in our country’s recent history. During the year, the Colombian economy continued the downward trend that began in 2014, with a growth figure of less than 2.0%3. Low oil prices continued to have a negative influence on the country’s economic growth, firstly because they meant less capital investments were made in the oil sector and secondly because public expenditure was less, due to the drop in oil revenues. Household consumption also declined, because of the high interest rates that affected economic growth. The drop in oil prices led to a 24 thousand million peso shortfall in income for the country, and the government was therefore forced to cut expenses and also, at the end of the year, to present a structural tax reform. The aim of this reform is to redistribute the tax burden, reducing it for companies, which were paying over 80% of total revenue, and increasing it for private individuals. Under the reform, the Tax Code is simplified and the fight against tax evasion is reinforced. The reform was necessary in order to reduce the fiscal deficit, maintain the sovereign rating and
2 Term used by essayist Nassin Taleb as a metaphor when an improbable event that has a big impact occurs. 3 Estimated percentage
27
prevent a further increase in the country risk, and these objectives have been achieved, despite the reform not being structural in the end. Inflation over the twelve months reached a maximum of 8.97% in July, a figure not seen since 2000 and significantly higher than the Banco de la República target range of between 2% and 4%. This increase can be explained mainly by the effect that the El Niño phenomenon and the truck drivers’ strike had on food prices. With the aim of controlling the rise in inflation in the first half of the year, the Banco de la República Board of Directors gradually increased the intervention rate from 6.00% in January to 7.75% in July, and kept it there until November. In December it decided to reduce it by 25 basic points, since there was a downward trend in inflation. This rate is the base for other interest rates, such as the interbank rate, fixed-term deposits and the current maximum legal rate, which also rose during the year, with the consequent increase in the cost of consumer credit. The average dollar exchange rate in 2016 was 3,051 pesos, 11% up on the previous year’s average. The dollar fluctuated between 2,834 and 3,435 pesos, the latter a historic high that was recorded on February 12. The dollar is still influenced mainly by movements in the international oil price and FED decisions in the United States relating to changes in its interest rate. During the year, the FED only increased its rate by 25 basic points in December; however, this did not result in any further volatility in our currency after the decision was made, because analysts were already expecting this increase.
Natural gas consumption in Colombia
The average natural gas consumption figure in Colombia in 2016 was 1,018 Mpcd, 1% lower than the previous year. The sectors with the highest consumption figures were the thermoelectric, with a 27% share, and non-regulated industry, with 25%. Refining was the sector with the biggest increase in consumption compared to the previous year, the variation being 35%. The sectors with the biggest decrease were thermoelectric and compressed vehicular natural gas. Natural gas exports to Venezuela were suspended in July 2015. Exports in the first half of the year were an average of 36 Mpcd, and the average natural gas demand in Colombia therefore fell by 5%. In 2016, the service was provided to 394,506 new users in Colombia, making a total of 8,312,353 families: this means that approximately 65% of Colombia’s population have access to the service. 80% of these users are in the interior, 17% on the coast, and the remaining 3% in isolated areas. 98% of regulated users are domestic, 85% of them in income brackets 1, 2 and 3.
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Relevant corporate facts
The expanded South Loop Gas Pipeline (San Mateo - Mamonal Loop) commenced
operation in the first half of the year, enabling 95 Mpcd to enter the Transportation
System from the fields in the southern part of the coast.
Promigas took part in the fifth version of the ‘Colombia Insideout’ event held in London
and New York in May 2016, as one of 18 issuers invited by Bolsa de Valores de Colombia
(stock exchange) and Depósito Centralizado de Valores (Centralized Security Deposit -
Deceval). Around 300 worldwide investors attended the event, which was extremely
valuable for promoting Colombia as an important global investment destination, and
successful one-on-one meetings were held some of them, enabling our company to
become known and recognized in a relevant manner, which could have favorable
repercussions later in the event of international credit operations or issues.
In September, Promigas successfully placed ordinary bonds worth 500,000 million pesos,
with the issue being oversubscribed 2.25 times. The ordinary bonds had AAA rating by
rating agency Fitch Ratings Colombia S.A., thus reflecting their quality. The issue as
approved by the Board of Directors was for a total of 800,000 million pesos, and its
purpose is to obtain funds for completing the San Mateo - Mamonal Gas Pipeline project.
Operations commenced in December, on schedule, by our affiliate SPEC at the liquefied
natural gas regasification terminal, with the arrival in November of the Floating Storage
Regasification Unit (FSRU) at the terminal and the purchase of the first LNG cargo for
commissioning.
For the first time, Promigas took out a USD 200 million syndicated loan, which was
oversubscribed 1.95 times. 14 banks from different countries took part, including JP
Morgan, Banco de Crédito del Perú, Bank of America and Bank of Tokyo. This was an
important landmark in the company’s financing strategy, placing it on the international
financial market as it diversifies its sources of finance.
The Promigas Foundation, with its De Novo research group, was recognized once again in
the latest Colciencias group measurement process and its social communication of
knowledge and its cooperation between groups were highlighted.
As part of its Sustainable Mobility program, Promigas took part in the third version of the
‘Shared Car Week’ initiative came first in the country. This initiative is promoted as part of
the ‘Entrepreneurial Sustainable Mobility Plans’, headed by ANDI, the Chevrolet
Foundation, Los Andes University and the Bogotá Chamber of Commerce. Promigas, which
was the only company from the Atlantic coast joined in this initiative, got the highest
score, based on the number of people per vehicle on each trip.
Promigas was recognized as one of 91 highly innovative companies in Colombia. Sixteen
years committed to and interested in research, development and innovation (RDI)
strategies in multiple spheres resulted in Promigas being awarded this recognition. The
RDI unit, called the Center for Research and Innovation in Energy and Gas (CIIEG, in
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Spanish), focused its work on research and experimental development, innovation in
processes and services, business models and the setting up of new companies, and
reinforcing an innovative corporate culture.
Guajira 360° started out as the first think tank for developing and generating sound,
technical information in La Guajira, as a result of an alliance that was forged between
Promigas and Cerrejón through their respective foundations. The goal of the center is to
adopt a specialized view and therefore raise the level of public debate in order to
understand, propose, accompany and act toward the social and economic development of
La Guajira.
GEN TRANSPORTATION
With support from Davivienda and Corpbanca, SPEC was granted a USD 110 million loan
with a Project Finance structure to finance the first regasification plant in Colombia.
Progress was made on executing the Promioriente (Los Pinos) compressor project, to
increase system capacity, and the Transmetano (Malena) project, aimed at maintaining
EPM dispatch reliability.
In December 2016, Promioriente received a COP 30,000 MM insurance claim indemnity for
damage to the transportation infrastructure caused by the heavy rains in 2015.
With a view to continuing to reinforce the energy generation business, the merger
between Promisol and its affiliate Enercolsa, a company with more than ten years’
experience in the design, construction, operation and maintenance of cogeneration plants,
was made official in May 2016.
Increased income by Zonagen is highlighted, the result of a successful tariff renegotiation
process, a 14% increase in the amount of energy sold, and the sale of 100% its installed
capacity.
GEN DISTRIBUTION Natural gas distribution
The distribution companies connected 145,608 new users in 2016, making a total of
3,247,116 and a 38% share of the domestic market. Internationally, through our share in
Cálidda, in Peru, over 90,000 new users were connected during the same period, making a
total of 438,400 beneficiaries of the natural gas service.
In the first half of 2016, GdO began to become intensely involved in the gas marketing
business, which highly dynamic as a result of the El Niño phenomenon, since the thermal
power stations in the area needed natural gas to generate electricity.
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Likewise in the first half of 2016, Surtigas was recognized by the Organizational Behavior
Research Center (CINCEL, in Spanish) when it came third in for ‘Organizational Climate
Quality’ in the companies with more than 100 staff category.
Cálidda, meanwhile, reported 93,264 new connections, giving it a total of 438,400 users - a
27% increase. The distribution volume figure for this year is 9% up, largely due to the
increase in generators, which contracted higher volumes in the first quarter of the year.
On November 24, 2016, Peru’s General Hydrocarbons Division declared the draft
application submitted by Promigas affiliate Gases del Norte del Perú for the natural gas
distribution concession using the duct network in the Piura region applicable. The terms of
the concession agreement are currently at the review stage, with eventual signing
scheduled for the second quarter of 2017.
Electricity distribution
The company reached an accumulated total of 348,081 users in 2016, 4% up on the previous year.
As far as energy losses are concerned, CEO ended the year with a 16.3% loss indicator, which is within the parameters defined in the management agreement.
The company’s EBITDA and net profit were 36% and 38% up, respectively.
In commercial terms, the company’s over 90-day portfolio indicator improved this year, down from 54.55% in 2015 to 52.48% at the 2016 year end.
Non-banking finance
Because Brilla, our non-banking finance program, understands the needs of its customers,
it has generated trust and closeness over the ten years since it was introduced. It has thus
become a source of finance that meets specific household needs, principally households in
the lower income brackets. Today, Brilla has a social impact and is a profitable, sustainable
and inclusive business. The program has benefited around two million users, 94% of them
in the level 1, 2 and 3 income brackets, who have been granted loans totaling COP 1.9
thousand million. It has a portfolio of COP 540,404 million with an over 90-day portfolio
figure of 2.82%, which reflects the fact that users are committed to paying their gas bills.
The program’s EBITDA at December 2016 was COP 89,160 million, equivalent to 14% of
the consolidated EBITDA of Promigas’ related distributors.
Historic indicators
Loans placed (millions of pesos) 1,921,967
Number of beneficiary users 1,997,222
Portfolio (millions of pesos) 540,404
Percentage portfolio >60 days (%) 2.2%
Brilla beneficiaries, by income bracket
2016 (%)
Income bracket 1 41
Income bracket 2 38
Income bracket 3 16
Income bracket 4 3
Income bracket 5 1
Income bracket 6 0
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Financial statements
CORPORATE FINANCIAL AND ECONOMIC MANAGEMENT
The principal General Balance Sheet and Profit and Loss Statement figures at December 31, 2016, compared with the same figures at December 31, 2015 and stated in accordance with International Financial Reporting Standards (IFRS), are given below.
General Balance Sheet (Figures in millions of pesos)
ASSETS Dec. 2015 Dec. 2016 % Current Assets 225,510 339,743 50.7 Net Fixed Assets 91,821 158,896 73.0 Assets under Concession 944,536 1,089,347 15.3 Financial Assets 1,489,108 1,629,994 9.5 Other Assets 1,956,42 2,244,285 14.7 TOTAL ASSETS 4,707,396 5,462,264 16.0
LIABILITIES Current Liabilities 309,747 354,168 14.3 Long Term 1,846,979 2,356,861 27.6 TOTAL LIABILITIES 2,156,726 2,711,029 25.7
TOTAL EQUITY 2,550,670 2,751,236 7.9 LIABILITIES + EQUITY 4,707,396 5,462,264 16.0
The rise in Current Assets was due to the increase in Accounts Receivable by way of pending gas transportation invoices with Gecelca, with whom there is a payment agreement, and to the 35 Mpcd contract with Canacol coming into force. There was an increase in accounts receivable for services rendered to Promisol for the construction of a filtration, regulation and measurement station for receiving imported gas from Venezuela, and due to the registering of the current portion of the equipment lease agreement with Promisol for complying with its contract with Canacol. Additionally, the dividends receivable that were decreed by the companies for the first half of 2016 were recorded in September. Growth in Surtigas placements relating to the non-banking finance business are recorded. Fixed Assets increased due to the acquisition of gas treatment and operation equipment for the Promisol compression plants, which will be used for complying with the Promisol - Hocol contract The increase in Assets under Concession was due to the fact that investments were made in 2016 in projects like the South Gas Pipeline and repairs to Sahagún Compressor Station, the Filadelfia compressor, Cartagena Hub and the Sincelejo deviation, and expansion of Mamonal SRT.
Financial Assets from the transportation concession reflect the corresponding annual adjustment. Under Other Assets, the long-term debtor account increased because of the disbursement of loans in September to the following associated companies: COP 103,700 MM to GdO, COP 10,000 MM
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to Promisol and COP 10,000 MM to Transmetano, as a result of optimizing monies received from the COP 500,000 million bond issue in September. Additionally, the USD 18.3 million account receivable relating to the rental of equipment to Promisol under the contract with Canacol for rendering the compression service was registered in December. Total Liabilities increased as a result of the COP 500,000 million bond issue in September, the funds from which were used to pay off bank debts totaling COP 284,000 million, to make loans totaling COP 123,700 MM to affiliated companies, and to fund the investment projects included in the action plans for 2016 and part of 2017.
Summary Profit and Loss Statement (Figures in millions of pesos)
Dec. 2015
Dec. 2016 %
Operating Income 689,764 961,675 39.4% Financial Asset Income 120,926 141,480 17.0% Construction Income 35,863 377,201 951.8% Costs and Expenses 227,598 270,664 18.9% Construction Costs 35,863 377,201 951.8% EBITDA 655,044 765,988 16.9% Operating Profit 583,092 832,49 42.8% Other Income 52,509 44,4930 -1.53% Other Expenditure 121,852 173,384 42.3%
Net Profit 461,774 614,185 33.0% Gas transportation income rose in 2016 because of the higher exchange rate, which affects transportation income because the tariff is in dollars. It should be stressed that for both years, 2015 and 2016, Promigas contracted forwards for 100% of the estimated dollar invoice figure, and the average strikes contracted for 2016 were 36% higher than in 2015. Furthermore, a start was made in March 2016 on invoicing the contract with Canacol (Gecelca), and the contract with Reficar came into full force and effect. Profit income was higher under the participation method in the following companies: Transmetano, due to the higher exchange rate; Promioriente, because higher volumes were transported and because of the indemnity received from the insurance company for damage caused as a result of the rains in 2015; Promisol, because income from the construction business was higher, from projects like the South Gas Pipeline and the Filadelfia and Sahagún compressors for Promigas, as well as because compression income was received in December once the contract with Canacol was under way; and Sociedad Portuaria El Cayao (SPEC), because December 2016 was the first month when income was received after the terminal commenced operations and also because more income was generated due to the accumulated difference on exchange with respect to the dollar debt in the eleventh month of the year. Financial Assets income rose in line with the periodic adjustment under the regulatory procedure for calculating it, which involves variables like Weighted Average Cost of Capital (WACC) and present value of the corresponding cash flows.
33
Construction interest and cost, which are recorded with the same value under current accounting regulations, were up on 2015 due to the higher capitalizations in 2016: South Gas Pipeline, Sahagún Compressor Station, Filadelfia, Cartagena Hub, repairs to Palomino Station, etc. Costs and expenses rose by 18.9%, because more advisory services were contracted, such as those provided by McKinsey for drawing up the Promigas Strategic Plan, and also due to fees for carrying out projects in Peru. However, this expense has its cross entry in the form of income from when Repsol returned expenses incurred in the project, as established in the contract, if Promigas failed to win it. EBITDA and operating profit rose by 16.9% and 42.8%, respectively, with respect to the previous year, principally because more income was received from the transportation service, and in profits under the participation method. Other Non-Operating Income fell, since income was higher in 2015 because of the profit made on the sale of city gates to Surtigas, and also because of the indemnities received for damage suffered by the Palomino turbo-compressor and relocation of the gas pipeline, which were invoiced as the product of work by third parties. Other Expenditure rose by 42.3% as a result of higher financial expenses because of the COP 500,000 million bond issue in September and the higher current year CPI, which affects obligations linked to this index - mainly bonds. Additionally, the transfer to expenditure of the costs of the LNG micro-plant project are recorded. The net profit at December 2016 was COP 614,185 million, 33% up on the previous year, and it also represents a budget adherence figure of more than 121%.
Consolidate financial statements The consolidated IFRS financial results at December 31, 2016, compared with the same figures at December 31, 2015 and taking into account the Promigas share as shareholder in various related
companies, are given below.
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Consolidated General Balance Sheet (Figures in millions of pesos)
ASSETS Dec. 2015
Dec. 2016 %
Current Assets 918,343 1,423,745 55.0 Net Fixed Assets 1,252,375 1,241,805 -0.8 Assets under Concession 1,735,005 2,121,717 22.3 Financial Assets 1,898,553 2,079,199 9.5 Other Assets 1,208,808 2,398,681 98.4 TOTAL ASSETS 7,013,085 9,265,148 32.1
LIABILITIES Current Liabilities 908,337 1,298,962 43.0 Long Term 3,372,201 5,011,339 48.6 TOTAL LIABILITIES 4,208,538 6,310,302 47.4
TOTAL EQUITY 2,732,546 2,594,846 8.1 LIABILITIES + EQUITY 7,013,085 9,265,148 32.1
Assets are 32% up for 2017 as a result of operations commencing at Sociedad
Portuaria El Cayao (SPEC), with the corresponding financial lease on
contracts entered into with customers being recorded, and because of the gas
supplies used for the commissioning tests. Promigas recorded services
rendered to Promisol for building a station to receive gas from Venezuela, and
the lease agreement to Promisol for equipment so that it could adhere to its
contract with Canacol.
The increase in Liabilities is because the financial lease on the ship used by
SPEC to provide regasification services is recorded, and because of the COP
500,000 million Promigas bond issue in September 2016, the funds from which
were used to pay off obligations and for making loans to affiliated companies.
Consolidated Profit and Loss Statement
(Figures in millions of pesos)
Dec. 2015 Dec. 2016
Operating Income
Financial Asset Income
Costs and Expenses
Construction Costs
EBITDA
Operating Profit
Other Income
Other Expenditure
Net Profit
NOTA IMPORTANTE: En las cifras, hay que cambiar puntos por comas, y en los
porcentajes, cambiar comas por puntos.
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The increase in Operating Income is mainly due to the following.
* Operations commencing at SPEC, with income received for the first
time in December .
* Higher average Recommended Market Exchange Rate during the
period, which has a positive effect on gas transportation income.
* The forwards rate contracted by Promigas and carrier companies for
2016 was 48% higher than the corresponding rate for 2015.
* A start was made on Promigas invoicing 35 Mpcd under the contract
with Canacol.
* Income from the construction business at Promisol rose, with projects
like the South Gas Pipeline and the Filadelfia and Sahagún compressors
for Promigas.
* With energy distribution, Compañía Energética de Occidente energy
sales increased because of a higher tariff the gross profit on the sale of
energy to Termovalle.
* Increased distribution company invoicing, such as Gases de Occidente
and Surtigas.
The increase in Costs and Expenses is partly because SPEC commenced
operations, and also due to the recording of the construction cost, principally
by Promigas, for which there is a cross entry in the income for the same
amount, as there is for Gases del Pacífico, for progress on the project.
Other Income rose because of the indemnity that was received from the
insurance company for damage suffered by Promioriente due to the rains, and
because of income from the difference on exchange and higher financial
returns. Other Expenditure increased because of the bond issue.
DISCLOSURE SYSTEMS AND CONTROL OF FINANCIAL INFORMATION
At Promigas we implement internal controls and procedures for managing
business risks, preserving operational effectiveness and efficiency, and
ensuring promptness and reliability in the information we present to our
interest groups.
We continually check and evaluate internal control performance and
effectiveness against financial reports. These evaluations include analyzing
the design and effectiveness of controls that mitigate risks associated with the
generation of financial information, and they also aim to guarantee the
integrity of such information.
The monitoring mechanisms we have established in our Internal Control
system allow us to provide a reasonable guarantee that there were no
deficiencies in our internal controls in 2016 that might have prevented our
reporting, processing, summarizing and correctly presenting financial
36
information; similarly, we have no knowledge of any fraud, willful errors or
manipulations that might have affected the quality of such information.
DEVELOPMENT OF NEW BUSINESS
We identify, evaluate and develop new business opportunities in the context of
the growth horizons and Strategic Business Units defined in corporate
strategic planning.
Management approach
SPEC
* This company is responsible for the project to build the first liquefied
natural gas (LNG) regasification plant in Colombia, which will enable
gas to be imported in a liquid state and up to 400 million cubic feet to
be regasified per day. The plant commenced operation, on schedule, in
December 2016.
* The following are some of the most important landmarks in 2016:
* Free Zone declaration on October 31, 2016, in accordance with
Ministry of Commerce Resolution 2016.
* Arrival of the vessel FSRU Höegh Grace on November 1, 2016.
* Purchase of the first shipment of LNG from Mitsui - Termsheet
(between 130,000 and 160,000 m3).
* Work was done in close cooperation with communities in the area of
influence on making people aware that the project was to commence
operations and that new job opportunities would open up, plus
opportunities for services to be contracted, for the inhabitants of Barú,
Bocachica, Pasacaballos, Santa Ana, Ararca and Caño del Loro, in
Bolívar province, and this has resulted in eight production projects, 25
social projects, and more than 400 jobs.
PROMIGAS 3
Gases del Pacífico
* Work continued on adapting stations for regasification at city gates, to
make them ready for operations to commence in July 2017.
* USD 15.2 million were invested in 2016 in completing the project,
making an accumulated investment of USD 40.4 million since the
concession was granted.
LEGAL AND REGULATORY MANAGEMENT
We perform our operations in the context of applicable legal and regulatory
provisions.
G4-DMA
Regulatory aspects
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In 2015, CREG introduced ‘direct negotiation’ between buyers and sellers as a
new mechanism for marketing natural gas in Colombia, and it established a
schedule that stated the contract negotiation period. The information below
is a summary of contracts negotiated in the primary market natural gas
marketing process in 2016, between September 22 and October 5. Only firm
contracts for one year were signed; in other words, ones that guarantee an
uninterrupted supply of a maximum volume of gas. The figures shown are a
weighted average from November 2016 to November 2017.
The average of all contracts was 36,215 MBTUD, 61% of which related to La
Creciente field, 33% to Ballena and the remaining 6% to Cusiana. The weighted
average price at the negotiations was USD 4.16 / MBTU.
* The total amount contracted from La Creciente field was for the non-
regulated industry, with an average price of USD 3.95 / MBTU.
* One third of the gas contracted from Ballena was to meet regulated
residential demand, another third was for non-regulated commercial
demand, and the remaining third for to meet industrial and other non-
regulated demand, with an average price of USD 4.63 / MBTU.
* Finally, half of the gas contracted from Cusiana was for non-regulated
residential use and the other half for non-regulated CVNG, with an
average price of USD 3.70 / MBTU.
Natural gas transportation
* End of useful life tariff adjustment. In July 2016, the Energy and Gas
Regulation Commission (CREG) approved the transportation tariff
adjustment for the SRT Mamonal and regional Promigas gas pipeline
sections, and for the Barranca - Payoa - Bucaramanga section belonging
to affiliate Promioriente, since these assets have reached the end of
their useful lives.
* Start of administrative action for assets that have reached the regulatory end of
their useful lives. In December 2016, pursuant to Resolution 126 of 2010,
an application was submitted to CREG to start the administrative
process relating to the following assets, which have been operating
since 1997 and have reached the regulatory end of their working lives:
* Promigas: 12 regional gas pipelines
* Transmetano: Sebastopol – Medellín gas pipeline
* Promioriente: 8” section Payoa – Bucaramanga
* Remuneration for assets that have reached the regulatory end of their useful
lives. In December 2016, CREG issued the corresponding expert opinion
on the administrative process initiated in 2015 for remuneration for the
following gas pipelines that reached the regulatory end of their useful
lives in 2016: Corozal - San Juan Nepomuceno, Usiacurí Branch and La
Mami - Bureche Loop (Promigas), and Yumbo - Cali, belonging to
Transoccidente. A definitive resolution is expected to be issued in the
first half of 2017.
38
* Transitory Natural Gas Supply Plan’. With a view to identifying projects
that are necessary for guaranteeing natural gas service reliability and
supply security, the Ministry of Mines and Energy issued Resolution
40006, whereby it adopted for a period of ten years the Natural Gas
Supply Plan drawn up by the Mining and Energy Planning Unit
(UPME). By the end of June, the industry had seen two versions of the
plan, for which joint working groups (industry and the unit) had been
set up, and in November 2016 the definitive version was released,
containing seven projects that UPME would submit to open,
competitive mechanisms. The projects are:
* Construction of the Pacific Regasification Plant;
* Construction of the Buenaventura - Yumbo gas pipeline;
* Bidirectional operation Yumbo - Mariquita;
* Construction of 10” Mariquita - Gualanday Loop;
* Bidirectional operation Barrancabermeja – Ballena;
* Bidirectional operation Barranquilla – Ballena; and
* El Cerrito - Popayán compressors
* Transportation tariff methodology. In August 2016, the Commission issued
draft CREG Resolution 090, a proposed methodology for calculating the
transportation rate. The audiences offered by CREG were attended
during the course of the year. Meetings were also arranged with the
Commission, and relevant comments and proposals were submitted.
Work will continue with CREG during 2017, to get fair conditions for
the transportation business. The definitive resolution about the new
methodology is expected to be issued in the second half of 2017, so that
work can then start on drawing up the tariff files for all companies for
the next five years.
Transmetano
* New markets connected to the Transportation System: san Roque,
Yolombó, Santo Domingo and San Vicente.
* In December 2016, pursuant to Resolution 126 of 2010, Transmetano
asked CREG to start the respective administrative process relating to
the Sebastopol - Medellín gas pipeline, Under-River Crossing and
Tasajera Station, which have been in operation since 1997 and have
reached the end of their useful lives.
* Progress was made on the Malena Compressor Station project, the
rating base for which was approved in 2015 by means of CREG
Resolution 092. Operations are expected to begin in May 2017.
Promioriente
* By means of Resolution 086 of 2016, regulated charges for the 6” Payoa
- Bucaramanga section were adjusted, due to it having reached the
regulatory end of its useful life, and the decision was made to maintain
the gas pipeline for a further 20 years.
39
* In December 2016, pursuant to Resolution 126 of 2010, an application
was submitted to CREG to start the respective administrative process
relating to the 8” Payoa - Bucaramanga section, which has been in
operation since 1997 and has reached the end of its useful life.
* Work continued on Los Pinos Compressor Station, the rating base for
which was approved in 2015 by means of CREG Resolution 062 and
which is needed in order to guarantee the pipeline’s operational
stability and its growth prospects. Operations are expected to begin in
June 2017.
Transoccidente
* In December 2016, CREG issued the expert opinion on the
administrative process, which commenced in 2015, relating to the
Yumbo - Cali gas pipeline reaching the end of its useful life. A definitive
resolution is expected to be issued in the first half of 2017.
Natural gas distribution
* Natural gas distribution tariff. In July 2016, the Energy and Gas Regulation
Commission (CREG) issued Resolution 093, in which it partially
revoked Resolution 202 of 2013 and published for comments Resolution
095, which complements the revoked Resolution. It is envisaged that
CREG will publish the definitive Resolution in the second half of 2017.
* Natural gas marketing tariff. In accordance with the 2017 regulatory
agenda, the marketing methodology will be published in the first half of
2017. This methodology needs to be available so that distribution
charges can be applied in the relevant markets served by distribution
companies, where details have already been given of the respective
delays.
* Natural gas marketing. In August 2016, CREG published Resolution 094
for comments, the aim being to modify the marketing scheme that will
foster a competitive natural gas market. The scheme is not defined, and
it is estimated that a definitive Resolution will be published in the third
quarter of 2017.
* Transitory Natural Gas Supply Plan. In April, June and November 2016,
UPME published three versions of the Transitory Natural Gas Supply
Plan so that it could receive comments. In January 2017, the Ministry of
Mines and Energy published Resolution 40006, whereby it proposes to
adopt the November version of the Plan. It is estimated that the
definitive regulation governing the selection processes for executing
the projects included in the Plan will be published in the first quarter
of 2017.
* ‘BonoGas Peru’. A start was made in 2016 on applying ‘BonoGas’ in Peru,
in the context of the Mass Natural Gas Use Plan that forms part of the
Energy Social Inclusion Fund (FISE). This voucher offers families in the
lower income brackets significant internal installation subsidies.
40
Electricity distribution
* Electricity distribution tariff. Two draft resolutions relating to
remuneration for the electricity distribution activity were published
for comments in 2016. The initiative to change the investment
remuneration scheme from new replacement value to a depreciated
asset still remains. It is envisaged that the new tariff, which will be in
force for the next five years, will be defined in the first quarter of 2017.
CORPORATE INDICATORS
PROMIGAS 2
Company Contracted capacity (%)
Promigas 90
Promioriente 58.6
Transmetano 61.9
Transoccidente 73.6
* Compliance with regulations. No significant fines or sanctions were
imposed in 2016 in connection with legal or regulatory compliance or
with the rendering of our services. G4-SO8, G4-PR9.
G4-EC1
ECONOMIC VALUE CREATED AND
DISTRIBUTED
2016
(millions of
pesos
Direct economic value created (EVC)
Total consolidated income 4,217,957
Operating income 4,078,926
Other non-operating income 139,031
Economic value distributed (EVD)
Total salaries and social benefits for staff 203,147
Operating costs 2,806,888
Investments in the community 11,737
Payments to governments 47,847
Payments to suppliers of capital (dividends
credited to all types of shareholders)*
320,870
Total economic value distributed 3,390,490
Economic value retained (EVR) (EVC minus EVD) 827,467
Note: This figure, which is not consolidated, corresponds to dividends paid (cash) by
Promigas during 2015.
2. To strengthen the value proposal for our customers
COMPETITIVE SOLUTIONS AND CUSTOMER SERVICE QUALITY
41
We guarantee our customers a prompt, reliable and safe service, and we make
quality and customer service a fundamental part of our organization’s culture.
G4-DMA, Management Approach
Our management systems focus on the customer, and a service attitude is key
to each and every customer-related process. Our commercial policy and
current regulations form a framework for our relations with them.
Relevant facts
PROMIGAS
We finished building the South Loop, an infrastructure project that has
enabled us to expand capacity and deliver a further 95 Mpcd to the
Transportation System. The project consisted of forming a loop from San
Mateo to Mamonal, repowering and changing the flow in one compressor, and
adding a new compressor to the System. We therefore met our challenge of
“increasing capacity in our Transportation System and increasing the
availability of natural gas to our customers”.
Our gas pipeline system reached a length of 2,556 kilometers, an increase of
8% on its length in 2015, and achieved a maximum transportation capacity of
738.3 Mpcd, 29% up on 2015. The volume of gas transported was 339.4 Mpcd
(33% of Colombia’s total), slightly higher than the previous year. One feature
worth highlighting is that operations commenced on the expanded South
Loop Gas Pipeline in the second quarter of 2016, thus enabling 95 Mpcd to
enter the Transportation System from the fields in the south. Similarly,
operations commenced at the end of the year at the liquefied natural gas
regasification terminal belonging to our affiliate SPEC, and this provides
important strategic and operational backup in terms of supply security for the
thermal power stations, especially at times of peak demand such as when the
El Niño phenomenon occurs.
Meanwhile, the 17.6% and 9.4% decline in natural gas consumption by the
thermoelectric sector and in VNG, respectively, was due to higher
hydroelectric contributions in 2016, which meant that thermoelectric power
station requirements were fewer in the period, and natural gas being less
competitive than its competitors. Additionally, an increase can be seen in the
industrial market, due to consumption at the Ecopetrol refinery stabilizing.
The total capacity use figure for our Transportation System in 2016 was 52%,
while contracted capacity reached 96% of installed capacity.
Volume transported by sector 2015 (Mpcd) 2016 (Mpcd) Variation (%)
Thermoelectric 196.1 161.7 -17.6%
Industrial 77.8 121.9 56.8%
42
Domestic 43.2 42.9 -1.6%
VNG 14.3 13.0 -9.4%
Total 331.4 339.4 2.4%
AFFILIATES
* Transmetano contracted capacity was 3.4% up on the previous year,
from 58 Mpcd to 60 Mpcd, a reflection of the good dynamics in the
market the company serves. New markets connected to the
Transportation System are San Roque, Yolombó, Santo Domingo and
San Vicente. Progress was also made on executing the Malena
Compressor Station project, with operations expected to commence in
May 2017.
* Promioriente continued to execute the Los Pinos Compressor Station
project, which is needed for operational gas pipeline stability.
Operations are expected to commence in June 2017. In 2016, despite
problems caused by blockades by Uwa communities that resulted in
transportation from Gibraltar being suspended for 47 days,
Promioriente managed to transport a monthly average of 58.3 Mpcd,
12% up on the volume transported in 2015.
* Meanwhile, Transoccidente maintained its volume transported and
contracted capacity with GdO.
* Promisol provides Hocol and Canacol with a transportation service for
gas from the Sucre and Córdoba fields for 12 and 5 years, respectively.
In the context of the Ecopetrol contract, the necessary investments are
ready at Ballena station to provide a reception, compression and
delivery service for gas from Venezuela for 13 years.
* Associated distribution companies continued in 2016 with their aim of
achieving greater coverage in their areas of influence and providing a
quality service, which has resulted in customer satisfaction.
* GdO engaged in important gas marketing activities, which were highly
dynamic as a consequence of the El Niño phenomenon, given that
thermal power stations in the area needed natural gas to generate
electricity. Similarly, its continuity index remained at 100%, and the
average time taken to respond to emergencies remained at less than one
hour.
* Surtigas, meanwhile, continues to be one of the most highly favored and
well-known institutions in Cartagena. According to the results of the
2016 ‘Cartagena, How are We Doing?’ citizen perception survey, it came
first out of the ten institutions with the highest scores. The people of
Cartagena rated Surtigas the best public services company, with a
satisfaction score of 91%.
INDICATORS
Promigas
43
G4-PR5, PROMIGAS 4
Promigas results 2013 2014 2015 2016
Loyalty index 89% 90% 82% 85%
General quality of services 79% 69% 65% 76%
Customer satisfaction with processes 2013 2014 2015 2016
Billing 60% 69% 82% 77%
Commercial relationship 78% 72% 59% 79%
Nomination 78% 77% 70% 84%
Operation 73% 77% 83% 77%
Maintenance 82% 82% 87% 75%
Dealing with complaints and claims 63% 60% 42% 46%
Dealing with requests 78% 80% 67% 67%
Communications 77% 67% 58% 77%
GEN Transportation
Results of 2015
external customer
satisfaction study,
GEN Transportation
Transmetano Promioriente Transoccidente Promisol Zonagen
Customer loyalty* 73% 100% 100% 45% 81%
General quality of
services
63% 81% 75% 57% 69%
* Corresponds to attitudinal loyalty
NOTE: Sociedad Portuaria El Cayao has not commenced operations
Dealing with requests, complaints and claims by our customers
(PROMIGAS 5) 2016
Primary Transportation capacity applications Quantity Compliance (%)
Promigas 21 95
Transmetano 6 100
Promioriente 20 100
Transoccidente 1 100
2016
Technical connection feasibility Quantity Compliance (%)
Promigas 7 100
Transmetano 0 N/A
Promioriente 0 N/A
Transoccidente 0 N/A
2016
National Transportation System access quotation
applications / Entry points or exit points
Quantity Compliance (%)
Promigas 2 50
Transmetano 5 100
Promioriente 0 N/A
44
Transoccidente 0 N/A
NOTE: The definitive response time to certain applications exceeded the five days
stipulated.
In 2016, we received, administered and responded to 16 complaints and claims
from Promigas customers, four from Transmetano customers, two from
Transoccidente customers, one from a Promioriente customer and two from
Promisol customers, mostly within the 15 days stipulated in Law 142 of 1994.
GEN Distribution
Service
quality (%)
Requests
received
Requests
resolved
Average
resolution
time (days)
Complaints and
claims received
Complaints
and claims
resolved
Average
resolution
time (days)
Surtigas 91 975,173 971,067 1.89 43,473 43,178 10.55
GdO 96 809,065 807,614 8 49,086 49,086 6
CEO 67 378.723 478,261 1 211,949 221,700 5
3. To optimize productivity and guide the organization toward levels of operational
excellence
SERVICE INTEGRITY AND CONTINUITY
We provide reliable, quality services by applying high national and
international standards, effectively managing risks, and continually
improving our processes.
Management approach
Business continuity model
By implementing the Business Continuity Management Program, Promigas
shows its commitment to the continuity of its operations and to the effective
execution of its projects in the face of any type of adversity.
It is a holistic, systematic management model that identifies possible threats,
vulnerabilities and risks which compromise continuity of operations and
quantifies and appraises impacts deriving from risk materialization.
The organization has thus defined its reference framework, which consists of
overall risk management, continuity governance, the methodology for
managing continuity (which includes strategies for continuity, recuperation
and contingencies), planning the crisis management response (reputation and
image), managing emergencies (lives, environment) and administration of
operational continuity (processes), all in line with Corporate Policy.
45
With this strategic measure, Promigas demonstrates its corporate response
capability to render reliable, quality services by effectively managing risks
and preventing and mitigating impacts deriving from its operation.
Meanwhile, by virtue of the Infrastructure Integrity Management system, we
keep our gas pipelines in optimum condition, thus ensuring that they operate
safely. As part of this management system, a number of ‘major consequence’
areas have been identified, where a leak or rupture could have an adverse
effect on the community. Special prevention actions are carried out in these
areas, in addition to routine ones.
Gas transportation operations by Promigas and its transportation and
distribution companies are carried out to the highest national and
international standards.
Relevant facts
* A first stage of recommendations made in the analysis of improvements
designed in the context of the NT Gas Nomination Software Web
Usability project was implemented, aimed at improving application
accessibility in order to establish an experience in line with needs and
expectations. Notable features include a changed visual appearance for
a more friendly style, the availability of a self-help module for the
different processes carried out by users, and an improved flat file
nomination process.
* ICONTEC has maintained its ‘Quality Management’, ‘Environmental
Management’ and ‘Health and Occupational Management’ systems
certifications for Promigas and its companies.
INDICATORS
PROMIGAS 6, 7, 8, 9, 10 GEN Transportation
operations, 2016
Promigas Transmetano Promioriente Transoccidente
Service continuity
index (%)
99.99 100 100 100
Service reliability
index (%)
99.99 N/A 92.79 100
Gas losses (%) 0.74 1.13 0 0.13
Gas leaks (leaks/km/yr. 0.0054 0.002 0.00597 0.066
Number of service
interruption events
(attributable to
company)
2 0 0 0
Number of service
interruption events
1 0 6 0
46
(attributable to third
parties)
Historical Promigas figures 2013 2014 2015 2016
Number of service interruption events
(attributable to Promigas)
1* 1** 0 2***
Number of service interruption events
(attributable to third parties)
9 1 4 1
* The Mamonal Regional Transportation System was affected
** The Arroyo de Piedra ERM was affected.
*** The Mamonal Regional Transportation System was affected
Gen Distribution operating indicators
GdO Surtigas
DES: Duration equivalent
to service interruption in
hours
15.1 40.69
IRST: Technical services
response index (%)
100 100
CEO 2015 2016 Target
SAIDI (hours):: Duration of
each energy service
interruption
57.4 51.6 40
SAIFI (times): Number of
energy service interruptions
29.3 32.3 26.7
4. To reinforce management with suppliers and contractors.
SUSTAINABLE SUPPLIER MANAGEMENT
We have suppliers and contractors who offer the necessary goods and services
for the Promigas operation and that of its affiliates in the context of good
environmental and social practices. G4-DMA, Management approach
We administer our purchases in line with company requirements, in the
context of ethics, transparency and fairness and in our interest in doing
business under just, long-term and mutually beneficial conditions.
We continue to foster opportunities for communication and relating, with a
view to strengthening the performance of our suppliers. Periodic activities in
the form of face-to-face training workshops and online training sessions aim
to keep them up-to-date on safety, health and environmental matters. We also
train officers who are involved in different stages of the supply chain.
Relevant facts
47
* In 2016, we reviewed and adjusted our policies, procedures and
manuals, especially the procurement and related documents policy,
where the relationship with suppliers is regulated from the supply
perspective, in our efforts to provide environmental, social and good
governance issues with more coverage and to speed up response times
and the dissemination of information.
* Visits were made to suppliers of goods, in order to validate logistical
and operational matters and to share best practices, in response to a
suggestion made by suppliers in a survey in 2016. Aspects evaluated
include the following:
* Stationery suppliers: transportation system, backup servers,
compliance with social security payments
* Coated pipework suppliers: sharing good storage practices
* Accessories suppliers: tracking of materials, document
administration, use of personal protection equipment in
storerooms
* As part of the Sustainable Suppliers initiative, we held training
workshops and seminars on such matters as insurance (26%
participation) and labor relations (40.7% participation). We also held the
third annual gathering of suppliers, with a view to sharing relevant
information for improving relations, providing opportunities to listen,
and discussing matters of interest to the parties. There was a 56%
participation figure for this event.
* Two Contract Administrator Training program cycles were carried out,
aimed at coordinators and professionals from all branches (including
related companies) who perform such duties. A total of three cycles
have been carried out to date, and these have covered 72% of
administrators.
* We offered suppliers online training in the Code of Conduct, and
received answers from 74% of Promigas suppliers we established
contact with.
* We highlight the fact that our affiliate GdO has been invited to
participate in a pilot program that will be carried out in six regions of
the country and which aims to get large companies to support their
‘Mipymes’ (small and medium-sized businesses) so that, under a
cooperative, teamwork-based model, they can progress their processes.
One of its contractor companies thus achieved a compliance figure of
over 80% when implementing its Health and Safety at Work
Management system.
Indicators
Affiliates
Promigas 11, 12 and 13
Significant contractor HSE indicators
48
Promigas Promioriente Transmetano Transoccidente GdO Surtigas CEO
Progress on
significant
contractor
management
systems (%)
80 100 100 100 81 60 70
Contracts with
contractors that
include clauses
stipulating
meeting legal
health and safety
obligations (%)
100 100 100 100 100 100 100
Significant
suppliers that
receive health
and safety
training (%)
60 61 100 100 100 20 100
Promigas 14
Supplier performance evaluation 2015
Percentage of suppliers whose performance was evaluated
(of total target population)
76%
Average supplier score (out of 100) 92
NOTE: The information refers to the evaluation of 2015 that was conducted in
2016, and is a consolidation of the results for Promigas, Promisol,
Promioriente and Transmetano. The total target population for evaluation
was 374 suppliers, 283 of whom were eventually evaluated while 91 were not.
GEN Distribution
Supplier performance evaluation Average supplier score (out of
100)
GdO* 94
Surtigas** 86
Compañía Energética de
Occidente**
90
* GdO conducted its evaluation on a six-monthly basis. This figure corresponds to the
average for the first half year in 2016.
** The figures refer to the evaluation of 2015 that was conducted in 2016
Supplier loyalty
This measurement, which has been carried out every two years starting in
2014, aims to check the extent to which suppliers are committed to providing
Promigas with competitive products and services on terms that guarantee
service continuity to high standards in terms of quality and fair prices.
49
We hope that the results will enable us to have a system that helps us monitor
relations between Promigas and its suppliers by establishing, among other
things, our organization’s performance in the different processes relating to
them.
This study, which was conducted in August 2016, revealed that Promigas’
greatest strength lies in the fact that it is viewed as a supplier-oriented
company that promotes fair and mutually beneficial conditions with a quality
and customer service culture, and is committed to developing honorable
human talent.
Areas where there is room for improvement include the supplier registration
process and communication, especially once invoices have been received and
during the subsequent payment process.
Contract administrators are very well evaluated in terms of their skills,
although it is considered that there is room for improvement in their
performance, in the ease with which they can be contacted, and in the
provision of information.
PROMIGAS 15
Promigas relations model
TTB = % Extremely probable + Very probable
Continue Recommend
Loyalty
TTB = % totally in agreement + in agreement
Benefit Reputation
Prices Quality Supplier-oriented
TTB = % Excellent + very good
Registration Purchase Administrators Reception points
Reception invoices Payments Communication HSE Management
5. To reinforce relations with the community.
PROMOTING LOCAL DEVELOPMENT
We contribute to improving quality of life in regions where the company carries
out its operations through social management practices. G4-DMA,
Management approach
50
In line with corporate policy, we have manuals and procedures that provide
guidance for our interactions and our dealings with communities. We work to
strengthen relations and to fine-tune long-term, mutually beneficial links with
various social actors that have an impact on the development both of the areas
and of the communities in areas where we carry out our operations. G4-SO1
Action taken is within the context of the organization’s strategic management,
and is guided by our corporate strategic objectives, the sustainability
approach, material issues, and the following directives:
- respect for human rights;
- valuing knowledge contexts and local realities; and
- joint responsibility with the community for its development process.
Our practices are therefore aimed at the following.
- Supporting local government development plans. Acting with those
responsible for coordinating regional development plans and risk
management plans in efforts to coordinate the company’s social
investment, without replacing the state.
- Building development capabilities in social actors and communities. Leaving
capabilities installed in social actors and communities so they can work
in alliances in their search for progress and wellbeing, especially for
generating a culture of care and prevention with respect to natural
resources by supporting towns and provinces in drawing up and
implementing risk management plans.
- Acting as local development promotion agent. Using the projects as an
opportunity to boost community development and to foster long-term
links between social actors, through the following.
* Creating jobs by hiring at least 80% of non-qualified manpower
from the area.
* Hiring at least 30% of qualified manpower from the area, insofar
as the suitable quality is available in the regions where the
company carried out its projects and operations.
* Contracting goods and services locally, where available and
insofar as it is negotiable by the company.
* Investing in social projects that benefit the community.
* Supporting improvements in the quality of education.
* Generating development capabilities in local actors.
* Acting as good neighbor for the communities.
The following features of 2016 are highlighted.
* Risk Management training in Magdalena and Sucre provinces. In the
latter, 250 inhabitants of Corozal, Las Tinas, San Juan de Betulia, El
Socorro, Ovejas, Canutal, San Pedro, San Mateo, Oro Blanco, Tolú Viejo,
Cañito and El Pueblito received training in conjunction with the Sucre
51
branch of the Red Cross. These communities had no aid services, and as
a result of the training they now have operational groups that can
provide an initial response to any emergency. Each of these groups was
also provided with the necessary equipment for dealing with any
incident that might occur in their communities. The training
emphasized first aid, fire fighting and control, emergency evacuation,
and how to use the kits supplied.
* We supported victims of the strong hurricane-force winds caused by the
El Niño phenomenon, which lashed Sucre province. We provided the
affected community with building materials for their homes.
* We continued our Primary Health Care program, especially with
members of the Wayúu indigenous community. This combines training
health workers in the town of Manaure and training Wayúu sanitation
agents with health sessions with indigenous communities. This year the
program was recognized by Colsubsidio, and the Health Secretariat
arranged for funds to be provided by the Ministry of Health to expand
its sphere of action throughout the town of Manaure.
* We offered a 120-hour diploma course, which was completed
successfully by 38 people and certified by Universidad del Norte, and
we improved parasite removal and immunization indicators, with the
figure rising to around 90%.
* We arranged five health sessions in the towns of Manaure and Maicao,
in conjunction with the 45th District of the army’s Cartagena Battalion.
1,500 people benefited (1,200 children and 300 adults) from 41
indigenous communities. As a result of these sessions, we were able to
detect eight cases of severe malnutrition in time.
* We provided assistance in a drought emergency in 29 indigenous
communities by providing 182,000 liters of water and ten storage tanks,
each capable of holding 2,000 liters of water. A total of 3,000 people
benefited.
* We hired local, non-qualified manpower for building projects and
maintenance work. In 2016 we managed to hire approximately 80% of
the unqualified manpower we needed for our projects from the region,
as well as 20% of qualified personnel, and the aim is to reach a figure of
100% for unqualified manpower.
With support from our Promigas Foundation, we ran social programs in the
area of influence of the construction work on the new gas pipelines.
* Jobo - Majagua Loop: 100% historic coverage in towns in the area of
influence, where the environmental license process is currently in
progress.
* South Loop: 92.31% historic coverage in towns in the area of influence.
The coverage figure in 2016 was 25%, and work is projected to continue
in the towns of Arjona, María La Baja, San Juan de Betulia, Sincé and
Tolú Viejo.
Affiliates
52
* GdO, together with its Foundation, carried out social programs and
projects in 41% of the towns in its area of influence. Notable among these
was the ‘Get Connected to your Neighborhood’ initiative, which has
succeeded in working in two neighborhoods in Cali where vulnerability
and violence made it difficult to provide the service on a permanent
basis.
* Transmetano achieved 98% of its social management program, with an
annual coverage index of 73% of the communities in its area of
influence, and it maintained its 100% four-year coverage of beneficiary
communities in its area.
Construction of the San Mateo - Mamonal Loop (South Loop)
This construction project was of great importance to the country, since it
enabled the natural gas that was needed by thermal power stations to
generate electricity because of the water shortage caused by the El Niño
phenomenon, which meant that it was impossible for hydroelectric power
stations to generate, to be incorporated into the National Transportation
System.
Promigas has always been conscious of its responsibility to contribute to the
development of communities in areas where it operates while engaging in its
activities, and it therefore does more than is required of it in legal obligations
in its efforts to ensure that those communities associate the Promigas
presence with development opportunities. Social management therefore
became a fundamental part of the planning for this project right from the
start.
After completing the social and environmental studies, obtaining ethnic
community certification and carrying out prior consultations with a certified
ethnic community, it was awarded the environmental license for building and
operating the project. However, after work commenced, and despite voluntary
social investments being made in communities in the area of influence of the
project, some of these communities took legal action, claiming the right to
prior consultation, and this resulted in judges ordering new consultation
processes to be carried out, over and above what was established by the
Ministry of the Interior’s Prior Consultation Division, and in activities and the
environmental license for the project being suspended in areas around the
communities that had taken the legal action.
Although most of the works were finished, those relating to the El Dique Canal
crossing by directed horizontal drilling, which had already commenced, were
lost, despite efforts to maintain them.
In recent years, the administrative instruments that exist in Colombia have
not provided companies with the necessary guarantees for carrying out their
53
own business activities, and they therefore have to put up with tensions in
their relations with interested parties, precisely because of this lack of
regulations, and also to cope with the increased expectations of communities
that are looking for a suitable economic development climate that is in
harmony with social development and respect for the traditions and customs
of minority groups.
Indigenous and Afro-descendant communities
G4-DMA, G4-OG9
Relations with ethnic minorities, especially with indigenous and Afro-
descendant communities, are conducted in good faith and with respect for
their customs and legislation. Programs aimed at strengthening cultures
become a mechanism that reinforces the connection with these minority
groups. The prior consultation process is another mechanism that is respected
by the company, in that it forges a relationship that sets out to safeguard the
culture of these ethnic groups.
Indigenous groups in our area of influence are the Wayúu, in the towns of
Manaure, Maicao, Uribia, Riohacha and Dibulla, in La Guajira, the Koguis,
Arhuacos, Kankuamos and Wiwa, in Santa Marta, Ciénaga and the Banana
Zone, and the Zenúes, in Sucre, Córdoba and a small part of Bolívar. We find
Afro-descendant communities in Bolívar, the Banana Zone, and in Sucre.
Cauca province, meanwhile, which is the area of influence of our affiliate
Compañía Energética de Occidente (CEO), is noted for the fact that it has the
highest proportion of indigenous inhabitants in the country. 190,069 people
belonging to the Páez, Totoró, Guambiano (Misak), Yanacona, Kokonuco,
Eperara Siapidara, Inga and Pubenense communities live in 26 of the 42 towns
in Cauca, and represent around 20% of the total population of the province.
CEO has good relations with them, with permanent dialogue and always
respecting their dynamics, traditions and ancient authorities. One example of
this is the agreement that was reached with the Misak community, after six
years of talks, to pay COP 567 million by way of current and accumulated
portfolio, with a resulting normalization of the service for members of this
indigenous community.
CEO currently takes the needs and expectations of these communities into
account as it conducts its business, listening to them and agreeing with them
on scheduled activities, so much so that they are viewed as a common benefit.
This new approach has enabled CEO to carry out commercial and technical
activities in areas where formerly this was not possible because of public
order problems, to conclude negotiations with communities that have
historically put up civil resistance, and to get support from user organizations
that were previously opponents.
54
CONTRIBUTION TO THE QUALITY OF EDUCATION
We work hand-in-hand with allies and strategic partners, committed to quality
education for life that will boost the development of man and society.
The Promigas Foundation has specialized in developing skills in the public
school system, using its own approaches that are appropriate to each context,
and it works to achieve quality public education with fairness in order to
contribute to a fairer and more inclusive society.
Relevant facts
PROMIGAS
* The Promigas Talent scholarship had benefited 76 students by the start
of 2017, and in conjunction with Universidad del Norte, in Barranquilla,
it has changed their lives. The allowance covers 100% of the enrolment
fee for any undergraduate and language course at this university.
* ‘Healthy Readers’ seeks to accompany communities so that they can
administer their own change on health and care issues on the basis of
reflexive, context-based practice. Under the terms of the alliance
between Promigas and the Promigas Foundation, we set this initiative
in motion in the towns of Arjona, Turbana and María La Baja, with the
five communities that live there: Rocha, Ballestas, Flamenco, Níspero
and Correa. We have benefited 15 base organizations, six community
action boards, eight schools, and 2,240 students.
* We implemented the Risk Management School Plan project in ten
schools in Magdalena, so that they can identify and recognize the risks
to which they are exposed through prevention actions and the
preparation of emergency responses, and in order to foster a prevention
culture. We succeeded with this initiative in benefiting 270 people,
consisting of teaching staff, directors, parents and education
establishment administrators.
* 100 laptops were handed over to schools in Magdalena, Bolívar and
Sucre.
PROMIGAS FOUNDATION
G4-EC8
* Its knowledge development and management strategy has become a
focal point of learning for adding greater value to the core elements of
the study of changes in education and for meeting new challenges that
will lead to the social transformation of communities.
* As a way of helping to reinforce public policy and better-informed
decision-making in La Guajira, Guajira 360°, Thought Center for
Development was launched, in conjunction with Cerrejón, La Guajira
Chamber of Commerce, and Fundesarrollo.
55
* In an alliance with the Colombian Agency for Reintegration (ACR), an
initiative aimed at reconciliation and peace based on entrepreneurship
was designed, and through this, 200 businesses were given a boost
among demobilized groups and the receiving community in Soledad
(Atlántico).
* Its De Novo research group was recognized and placed in category C in
the latest Colciencias group measurement process. Its activities in the
field of social communication of knowledge, in the top quartile, and its
circulation of specialized knowledge, in quartile two, were particularly
notable.
In figures.
* The Foundation proceeded with 107 initiatives for change: 38 new ones
and 69 from the last two years.
* It made an impact in 61 towns in our whole area of influence, directly
in 45 of them (73.8%) and indirectly in 16 (26.2%). This corresponds to
38% of towns certified, 57% of the trunk gas pipeline and 24% of regional
gas pipelines in our area of influence.
G4-SO1
* It directly assisted 333 schools, 197 of them with Promigas and its
partners and 136 with Promiroriente, and 1,176 teachers and teaching
directors were trained, 959 with Promigas and its partners and 217 with
Promiroriente. These initiatives had an influence on 119,596 students,
113,961 with Promigas and its partners and 5,635 with Promiroriente.
* 97 schools benefited from the licensing of its work approaches and 2,922
teachers and teaching directors were influenced directly and indirectly,
with 53,996 students and 97,995 other beneficiaries, such as parents. The
projects licensed include Healthy Readers, to Propagas, in Santo
Domingo (Dominican Republic).
* It assisted the management of 821 businesses, influencing the quality of
life of 3,605 family members living in La Guajira, Magdalena, Atlántico
and Sucre. These businesses received loans totaling COP 137,500,000,
with a portfolio recuperation figure of 87%, and reported average
monthly sales of COP 1,982,321 and profits of COP 614,234.
INDICATORS
Promigas
PETITIONS, COMPLAINTS, REPORTS AND REQUESTS BY COMMUNITIES
G4-SO11, G4-EN34
Sub-classification TOTAL 2016
Petitions Establishment of the right to petition 2
Complaints
Damage to infrastructure or public service
areas
1
56
Damage to private property 0
Annoyances caused by company activities 4
Disagreement with agreement 1
Preventive
reports
Third party activities 3
Nearness to gas pipeline 6
Uncovered pipelines 0
Requests Requests by communities 48
TOTAL 66
2014 2015 2016
Petitions 3 6 2
Complaints 2 13 7
Reports 8 28 9
Requests 0 34 48
TOTAL 13 81 66
NOTE: 100% of claims were dealt with and resolved in 2016. Promigas has not broken
down data relating to petitions, complaints and reports for environmental claims,
given that any claim by the community is within the context of social/environmental
relations.
SOCIAL INVESTMENT
(PROMIGAS 16, 17)
Promigas 2015 (figures in pesos) 2016 (figures in pesos)
Development of education
activities
2,414,731,254 1,877,004,593
Territorial development 679,063,832 1,065,789,599
Knowledge development 609,550,393 819,923,456
Risk management in
communities
20,207,613 431,931,005
Donations and contributions 1,338,041,720 1,353,443,384
TOTAL 5,061,594,812 5,548,092,037
Affiliates
Transmetano Promioriente Transoccidente Promisol
Petitions,
complaints and
claims
77 68 0 43
Total Social Investment
(COP)
Investment in Education
(COP)
Transmetano 390,985,180 138,613,944
Promioriente 894,728,495 591,568,885
Surtigas 2,067,473,570 500,802,306
GdO 2,602,766,000 2,390,687,000
Compañía Energética de
Occidente
351,904,938 246,134,138
TOTAL 5,777,712,523 3,727,743,601
57
58
6. To ensure an environmentally responsible management
MANAGEMENT OF RESOURCES AND WASTE
We promote, prevent and minimize the environmental impacts of the
company’s operations. G4-DMA
We reduce the consumption of natural resources to a minimum, adequately
dispose of and exploit the waste generated by our activities, keep control of
energy and water consumption associated with all our processes, and foster
the use of other renewable energies.
Awareness sessions were held in 2016 with our staff, and actions were
established that are aimed at reducing the consumption of resources and
reaching the target of cutting water and electricity consumption by 10% in
2020, as well as waste and greenhouse gas emissions by the same percentage.
These actions will be implemented in 2017.
Our affiliate Promioriente produced a work plan to use biodegradable
products in its maintenance activities, and it accordingly chose a material
called “Wypall”, which guarantees that materials from sustainably managed
forests are used as raw material. Because of its characteristics, it can be
reused, with a resulting reduction in dangerous waste, water pollution and
CO2 emissions. It is also 80% biodegradable.
GdO, meanwhile, was recognized as one of 30 pioneering companies in Valle
del Cauca province with the Carbon Neutral Seal, awarded by the
Administrative Department for Managing the Environment (DAGMA).
CLIMATE CHANGE
We are committed to reducing and offsetting the organization’s carbon
footprint, and are therefore identifying opportunities to help reduce
greenhouse gas emissions. We control energy consumption in our activities, and
wherever possible we implement operations with renewable energy resources.
G4-DMA
Relevant facts
* We have signed the Caring for Climate global compact agreement and
we measure our environmental performance against the Carbon
Disclosure Project (CDP). Our results mean we are at level C, which
coincides with the average for our sector and is slightly higher than the
level for the region. Areas where there is room for improvement include
continuing to check our carbon footprint and getting top management
more involved in the objective of reducing our emissions.
59
CARING FOR BIODIVERSITY
As we go about our activities, we respect the flora and fauna in places where
we operate and we reduce intervention of vegetation to a minimum, respecting
protected areas and offsetting when negative effects occur. G4-DMA
We are committed to contributing in a responsible manner to the protection
of biodiversity and, in general, the conservation of nature, and from the early
stages of our projects and operations we control environmental risks and
reduce impacts to a minimum. We take action aimed at reducing the number
of trees to be worked on while we are executing our projects, and apply
measures to drive away and transfer biodiversity species. We also provide our
workers and communities with environmental education, and implement
other actions established in the environmental management plans and
forestry exploitation permits approved by the environmental authorities.
Relevant facts
In 2016, while constructing the San Mateo - Mamonal Loop, we rescued and
transferred 2,183 examples of bromeliads, orchids and lichens from areas
where we worked and relocated them in 6.2 hectares of the Coraza and Montes
de María Protective Forestry Reserve, in Colosó, Sucre, thus guaranteeing the
survival of 93% of them and also increasing their number by virtue of a 20%
reproduction rate.
The strategy was supported by workshops that were held in communities and
schools in the 46 villages in the area of influence, around the towns of Ovejas,
San Pedro, Sincé, San Juan de Betulia, Corozal, Sincelejo, Morroa, Tolú Viejo,
San Onofre, María La Baja, Arjona, Turbana and Cartagena. The Coraza
community was also included, with leisure tours in the relocation area so that
the community could participate in and understand the process, and also be
able to care for the biodiversity riches that the project was adding to the
ecosystem where they live.
Notable results include the fact that the amount of vegetation authorized to
be felled on the Heroica - Mamonal Loop, San Mateo - Mamonal Loop and
Filadelfia Compressor Station projects was reduced to 30%, with only 4,626
trees being felled instead of the 14,295 authorized in the permits. A number of
minor modifications were made to the route when building the San Mateo -
Mamonal Loop, with a view to reducing work on 66% of the trees to a
minimum.
We continue to take part in the Biodiversity and Development initiative run
by the National Industrialists Association (ANDI) with support from
Colombian National Parks and the Alexander von Humboldt Institute, the
objective of which is to generate a public-private work arrangement that will
contribute to comprehensive biodiversity management.
60
To this end, Promigas contributed a portfolio with 15 potential compensation
zones (360,211 hectares) in the area of influence of the San Mateo - Mamonal
Loop. This portfolio, which was submitted to the National Environmental
Licenses Authority (ANLA) for consideration, will serve as a reference for the
compensation projects that are required, both for Promigas and for other
companies in the region.
INDICATORS
INVESTMENT IN THE ENVIRONMENT
We invested COP 10,970 million in the environment for meeting legal
requirements, conducting environmental studies, applying for licenses and
permits and improving the Environmental Management system for existing
gas pipelines and projects currently being executed.
FINES AND SANCTIONS OF AN ENVIRONMENTAL NATURE
Promigas and its affiliates had no fines or sanctions imposed on them for this
concept during the year. However, we are waiting for a suspension of building
work on the San Mateo - Mamonal Loop in the area of influence of the
Pasacaballos Community Council to be lifted, in view of the legal proceedings
filed by the community. This is because of the Constitutional Court verdict on
those proceedings, which also ordered prior consultations to be carried out
with the Ma-Majari Níspero and Flamenco community councils. In response,
Promigas accepted the Court’s verdict, and in conjunction with the Ministry
of the Interior began the respective consultations. Those with the Níspero and
Flamenco community councils were completed in 2016, while the one with the
settlement of Pasacaballos continued into 2017.
ENERGY
G4-EN3, G4-OG3
Energy consumption by source
2016 GJ kWh
Energy from non-renewable sources, natural
gas**
2,646,053.54* 735,014,873.50*
Energy from renewable sources, solar
energy
12.09 3,358.03
Electricity at administrative
headquarters***
8,925 2,479,085.00
Electricity at stations and in networks 3,506 973,929.00
* Does not include energy consumption from the use of fuels for mobile sources, nor
gas consumption for domestic use at Headquarters 1.
61
** Increase in hours equipment operated at stations and in the natural gas used at
headquarters the previous year.
*** A 4% drop can be seen in annual energy consumption due to certain measures
implemented by the company due to the energy crisis announced by the government
in the first half of 2016. The Sustainable Management program, which identified
measures to help protect natural resources, was also disseminated.
Energy intensity
G4-EN5
Energy intensity 2016
Energy consumed in compression process (GJ)
Numerator
3,299.96**
Denominator 1: Mpc compressed 23,339.38
Energy intensity / compression ratio* 0.141*
Energy consumed, administrative headquarters (GJ) 9,876
Denominator 2: number of employees 381
Energy intensity / consumption headquarters ratio* 25.92
Energy consumed, transportation process (Gjoules) 6,818
Denominator 3: Mpcd transported 340.02
Energy intensity / transportation process ratio* 20.05
* Intensity is calculated by dividing energy consumed (the numerator) by the
denominator selected by the organization.
** There was a considerable increase due to the compressor equipment being used
more in the operation.
Total water consumption by source
G4-EN8 Total water catchment by
source
2016 (m3) Registration and control method
Surface sources 0 No water was captured from surface
sources
Deep well* 1,748.2 Daily measurements and pumping control
Municipal water
supply**
32,866 Continuous measurement and use of
saving devices
* Catchment with measurements, authorized by the environmental authorities.
Applicable for Sahagún and Palomino stations and administrative Headquarters 1.
** Relates to consumption at administrative headquarters in Barranquilla
Effluents and waste
G4-EN23
Type Description Place 2016
(tonnes)
How managed
Ordinary
waste
Administrative
headquarters and
158.80 Passed to the public waste
collection service for disposal
62
construction
projects
Waste
water
Sanitary water
from portable
bathrooms
Construction
projects and
facilities
1,569.03 Passed to companies
responsible for maintaining
portable bathrooms and
subsequent disposal in public
drains or third party
treatment systems
Recyclable
waste
Paper,
newspaper,
cardboard and
scrap
Office activities
and construction
projects
22.89 Passed to recycling
cooperatives in Barranquilla,
Riohacha and other towns for
processing
Rubble
Remains from
excavation and
demolition work
Construction
activities
6.10 Reused on works or at
authorized sites
Dangerous
waste
(RESPEL)
Electronic; oils
and solids
contaminated
with
hydrocarbons or
chemical
substances;
hospital and
similar
Office and
transportation
system operation
and maintenance
activities
274.24 Comprehensive management
system, separated at source
and preventing spills or leaks.
Electronic waste is delivered
to authorized recycling or
destruction companies.
Remaining RESPEL is
dispatched for treatment or
incineration; ashes disposed of
in safety cells.
EMISSIONS
G4-EN15 Greenhouse gas emissions
(scope 1)
2016 (tonnes CO2)
Greenhouse gas emissions 32,067.16
NOTE: Fuel from mobile sources (diesel, gasoline and natural gas) consumed by
contractors not included. Nor are emissions from the consumption of natural gas for
domestic use at Headquarters 1.
G4-EN16 Greenhouse gas emissions
(scope 2)
2016 (tonnes CO2)
Greenhouse gas emissions 687.15
Atmospheric emissions by type of chemical substance 2016 (CO2 equivalent tonnes)
CO2 13,482.92
CH4 19,153.14
N2O 6.68
Fluorine compounds 111.57
SF6 0.00
Total, scopes 1 and 2 32,754.31
63
We hold ICONTEC certification for greenhouse gas emissions in accordance
with ISO 14064 standards for 2013 - 2015 measurements
Actions we are carrying out as part of our climate strategy include the
Sustainable Mobility program, which seeks to reduce our workers’ carbon
footprint.
Biodiversity
Description of land adjacent to located within protected natural areas or
unprotected areas with high levels of biodiversity. G4-EN11
Description of land adjacent to
or within protected natural
areas or unprotected areas with
high levels of biodiversity
Location with
respect to
protected area
Gas
pipeline
section
(km2)
Type of area*
Bolívar province Interior 0.014 Los Corrales del Rosario
and San Bernardo
National Park
Magdalena province Interior 0.090 Sierra Nevada de Santa
Marta National Park
Magdalena province Interior 0.00003 Tayrona National Park
Magdalena province Adjacent 0.158 Tayrona National Park
buffer zone**
Magdalena province Interior 0.478 Isla Salamanca National
Park road
La Guajira province Interior 0.022 Los Flamencos Wildlife
Sanctuary
Law 2 of 1959 reserve zone DDV crosses
area
0.626 Forestry Reserve zone
Berlin integrated
management district
DDV crosses
area
0.322 Regional protected areas
Bucaramanga integrated
management district
DDV crosses
area
0.42 Regional protected areas
* Determined on the basis of maps supplied by National Parks and Promigas SIG.
** Determined on the basis of Tayrona National Park EMP, 2005-2009, and Promigas
SIG.
We support an agreement with Sucre University to research endangered
species in the area of influence of the San Mateo - Mamonal Loop and to define
strategies for conserving them.
Removal of soil and vegetation
2016
Length of areas worked on (construction,
maintenance and other) with removal of soil and
vegetation (km)
193.4
64
Total areas worked on with removal of soil and
vegetation (areas of considerable significance) (km)
330.43
Maintenance of the Transportation System network continued during the
year, and spot interventions were accordingly made that did not require any
forestry exploitation. 4,626 trees were felled, but only on new projects, and
this work was authorized by authorities like ANLA, EPA and Carsucre.
Affiliates
Transmetano Promioriente Surtigas GdO CEO
Environmental
investment (COP)
80,000,000 8,278,685,019 28,000,000 109,909,196 311,702,00
0
Total energy GJ* 629 516.88 4,105 6,532 1,389
Water consumption
(m3)
738 240 5,323 6,099 2,629
Ordinary waste (t) 36.17 10.24 55.25 10.47 5,7
Recyclable waste
(t)
13.42 3.14 12.53 9.29 3.7
Dangerous waste (t) 27.36 8.51 1.39 3.96 9
Emissions (scope 1)
Tonnes of CO2
5,373 481.44 53,825 N/A N/A
Emissions (scope 2)
Tonnes of CO2
47.55 28.68 28.68 294.84 N/A
* Only includes electricity consumption
NOTE: CEO uses an additional classification, namely exploitable waste, the 2016
figure for which was 82 tonnes. This covers all materials generated by the operation
that can be exploited, such as scrap, transformers, dielectric oil without PCB, meters,
etc., which are disposed of to an outside agent authorized by the environmental
authority.
--------------------
7. To guarantee a safe operation.
SAFETY IN ALL PROCESSES
We guarantee the safety of operations by providing adequate conditions and
reinforcing a culture of prevention and sound and safe behavior. G4-DMA.
Management approach
Annual health and safety at work planning takes risk management and
management system objectives into account. Among other things, procedures
and standards are designed for critical tasks, and these are implemented with
assistance by HSE leaders, who observe behavior and take on board feedback
so as to reinforce staff skills, using a methodology that follows an education
for care approach.
65
One example of this is the Care program, which aims to ensure that our staff
take this concept on board and therefore take care of themselves, of others,
and of the planet: in other words, that it goes beyond the work sphere and
includes the family and society. Care is an attitude that comes from thinking
and feeling, one that makes us responsible for our actions in our
surroundings.
Safety conditions are checked by means of inspections, and finally, indicators
are analyzed for how the system can be improved.
Integrated Operations Personnel Process Safety Rating Program
This was designed with a view to reducing to a minimum the impact of human
error resulting from a lack of knowledge or skills by a person while
performing certain tasks on the safety and integrity of the gas infrastructure.
It covers direct Promigas staff and its contractors whenever they perform
critical tasks and are liable to face abnormal operating conditions while
performing such activities on Promigas infrastructure.
45 critical tasks applicable to five posts were identified and documented in
2016. A new skills and training appraisal mechanism was then designed at the
Sahagún, Filadelfia, Caracolí and Palomino stations. A total of 24 technicians,
13 contractors and five evaluators were part of the process. The results were
detailed in reports, along with proposed plans of action for each individual.
This initiative will continue in 2017, with a view to consolidating a continuous
training program in 2018 based on our risks, so that this can become a
mechanism for preserving and promoting technical knowledge about our
operations.
Safety in our supply chain
We assist our contractors with audits, inspections and training, and every
year we conduct a cycle of HSE audits of major contractors and projects, in
order to detect areas where there is room for improvement and to strengthen
our management system. Every year we hold an update session on legal
requirements and issues like how to improve performance in terms of health,
safety and environment.
The care strategy was extended to contractors during the year, and we
therefore began HSE Leader Training with them, so that they could make
observations on behavior and safety inspections. These contractor HSE
leaders were given assistance in the field, together with a corresponding
improvement plan.
Our affiliate Surtigas developed a program called Human Factors
Intervention and the Human Being for those of its contractor companies that
had the highest accident rates. This industrial safety training plan led to a
66
20% fall accident rates, thereby reaching the target set. A total of 179 people
in the Bolívar, Córdoba and Sucre districts were trained.
Safety for communities in our area of influence
As part of an agreement with the Sucre branch of the Red Cross, in 2016 we
set in motion the Preparation for Emergencies and Comprehensive
Community Risk Management project in parts of the Promigas direct area of
influence, in ten communities in Sucre province, with a view to reinforcing
the risk knowledge, prevention and management capability, and how to
respond to emergency situations in communities in Sincelejo.
Together with members of these communities, under this project we formed
Comprehensive Risk Management Operating Groups, who are the first in their
areas to be capable of responding to emergencies. This training placed
emphasis on first aid, fire management and control, evacuation in
emergencies, and correct use of the kits provided.
We constantly carry out simulations in the area of influence of our
transportation and distribution systems, and also with communities, and aid
organizations, authorities and inhabitants all take part. It should be pointed
out that this year desktop simulations were also carried out in 23 towns in
Atlántico, La Guajira, Sucre, Bolívar and Córdoba provinces, with good
attendance by communities, risk management entities and aid organizations.
INDICATORS
Promigas
We maintained a zero work illness rate for both staff and contractors.
STAFF
PROMIGAS 18 2014 2015 2016
Safe behavior percentage (%) 98.75 97.4 96
Compliance with HSE conditions percentage
(%)
91.11 92.85 96
Target (%) 90 90 90
Total accidents 2014 2015 2016
M W M W M W
Caribbean coast 16 1 4 2 11 1
Bogotá 0 1 0 0 0 0
TOTAL 18 6 12
Debilitating accidents 2014 2015 2016
67
M W M W M W
Caribbean coast 9 0 1 1 4 0
Bogotá 0 1 0 0 0 0
TOTAL 10 2 4
Total number of days lost per
year due to disability
2014 2015 2016
M W M W M W
Caribbean coast 37 0 3 8 16 0
Bogotá 0 6 0 0 0 0
TOTAL 43 11 16
Accident rate (number of
accidents) / average staff) x 100
2014 2015 2016
M W M W M W
Caribbean coast 4.37% 0.27% 1.08% 0.54% 2.94% 0.26%
Bogotá 0 0.27% 0 0 0 0
TOTAL 4.91% 1.62% 3.22%
Accidents at work 2014 2015 2016
Accident rate (number of
accidents / total HHT
number) x 1,000,000
22.69% 7.54% 14.85%
Debilitating injury rate
(severity index x frequency
index / 1000
0.0273 0.0014 0.29
NOTE: Injuries were mostly bruises and sprains
CONTRACTORS
G4-LA6
Accidents at work, suppliers 2014 2015 2016
Total accidents 46 27 55
Debilitating accidents 42 9 12
Total number of days lost per
year due to disability
211 6,042* 117
Accident rate (number of
accidents / total number of
workers) x 100
5.18% 4.03% 5.3%
Accident rate (number of
accidents / total HHT
number) x 1,000,000
15.73% 14.87% 13.5%
Debilitating injury rate
(severity index x frequency
index / 1000
0.05 1.98 0.39
* In 2015 there was a traffic accident in which one of our safety contractors died. The
number of days stated in the law is indicated in these cases.
68
Affiliates
Staff Transmetano Promioriente Transoccidente Surtigas GdO CEO
Total accidents 6 1 0 6 20 14
Debilitating
accidents
4 1 0 6 18 14
Total number of
days lost per year
due to disability
41 2 15 72 263 53
Accident rate
(number of
accidents / total
number of
workers) x 100
28.57 3 0 1.39 4.2 3.9
Accident rate
(number of
accidents / total
HHT number) x
1,000,000
148.9 13.14 0 6.96 15.68 3.29
Debilitating
injury index
(severity index x
frequency index /
1000
4.04 0.01 0 0.581 0.11 0.04
Contractors Transmetano Promioriente Transoccidente Surtigas GdO CEO
Absenteeism 1.98% 0.98% 0.32% N/A 0.045 2.14
Accidents with
debilitating
injuries,
contractors
5 3 1 23 178 117
Days lost per year
due to disability
49 23 5 177 1,989 1,279
Accident rate
(number of
accidents / total
HHT number) x
1,000,000
25.55 0.110 79.97 7.37 42.86 11.3
Debilitating
injury index
(severity index x
frequency index /
1000
0.26 0.24 1.27 0.42 0.74 1.28
----------------
8. To strengthen the overall development of our staff and the corporate culture.
69
We aim to strengthen a sound corporate culture in conjunction with our
affiliates, one that influences the way we act and successfully meet our
strategic corporate objectives.
STRENGTHENING THE ORGANIZATIONAL CLIMATE
To conserve a positive labor climate by offering programs, allowances and
benefits that enable a life-work equilibrium to be achieved and the quality of
life of the Promigas team to be improved. Management approach. PROMIGAS
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Our aim is to provide our people with a positive, stimulating work
environment, one where there are opportunities, and in 2016 we focused our
efforts on assisting our work teams with opportunities to improve
organizational climate management and psychosocial factors through our
team leaders.
We began by handing over each branch’s climate report, with an invitation to
share the results with the team and to set targets in order to go on improving
every day.
The group of leaders was prepared with effective climate management tools
and practices for everyday work activities.
More than the numerical result for the company, it is important to identify the
realities or conduct that explain the results and give them a meaning, and we
therefore provided assistance to the six branches that requested it in
identifying those particular realities and in drawing up improvement plans
that were in line with the individual needs of each of their teams, in the form
of individual and nominal group interviews. As part of the process of
reinforcing these work groups, they were offered teamwork workshops, and
their heads were given coaching.
OVERALL DEVELOPMENT AND KNOWLEDGE MANAGEMENT
Guaranteeing that the organization has a competent, happy team for achieving
corporate objectives by promoting the comprehensive development of our people
in their intellectual, affective, physical and social dimensions, and an
organizational culture that is in line with corporate strategy. G4-DMA,
Management approach
At Promigas, we work to provide our people with working conditions where
they all feel respected, valued, motivated and proud to work with us.
In 2016, we built a concept called Connected with You for communicating with
our team. This shows, through five cornerstones, how Promigas contributes
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to their wellbeing and quality of life. Under each of these cornerstones, we
grouped the benefits that Promigas offers its staff.
* FINANCIAL OPPORTUNITIES. Promigas offers financial opportunities
for its staff to reach their targets, to save, and to see their dreams come
true.
* WELFARE AND LEISURE. Promigas has always promoted sport, leisure
and integration, places where people can enjoy themselves, where they
can work happily and enthusiastically.
* TRAINING. Promigas fosters and facilitates the overall development of
its people, convinced that education forges development in human
beings, in companies, and in society. Under this heading we group the
possibilities the company offers its staff to learn and expand their
knowledge.
* OVERALL HEALTH. Promigas has always committed itself to the
integrity of its people and to caring for them, not only in the work
environment, through health at work, but also by promoting and
facilitating comprehensive health care for its staff and their family
groups.
* CULTURE. To work at Promigas is to experience the principles and
values that govern our people’s actions, to contribute to having a
pleasant working environment and to making the organizational
culture a fundamental support for achieving strategic corporate
objectives.
Health
We carry out activities aimed at caring for the health of our staff and their
families and that help them to adopt healthy lifestyles, reduce the risk of
illness and strengthen family bonds, through the following programs.
* Quality of Life program. The aim of this is to consciously develop a
restructuring of self-care habits that can improve or reduce symptoms
which can have a harmful influence on physical, mental and emotional
health, and thus reduce accident indices in the operation to a minimum.
A number of habit restructuring indicators were designed for the
program in 2016, with a view to classifying participant profiles based on
their type of fatigue. For each type of fatigue a number of variables were
established, and these are then weighted according to the profile
identified in each one and compared to the mean defined for each case.
These indicators made it easier to identify problem areas and to draw
up individual plans of action for the type of fatigue to be worked on,
This was done with the participation and commitment of each
participant.
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The program envisages a series of individual follow-ups using tools that
have already been defined and which will enable each person to see the
progress made and to quantify it against the indicator.
In 2016, 61 people, both technicians and professionals at the Principal
Control Center, followed the intervention and individual follow-up
phases of the program.
* Healthy Working Environments. We use this name to refer to the
measurement of psychosocial factors in order to determine certain
characteristics of posts and how people perceive what goes on in their
work, since these could have effects on the health, performance,
development and wellbeing of our staff. These effects may be favorable
(Psychosocial Protective Factor) or unfavorable (Psychosocial Risk
Factor). Promigas is of the opinion that it is very important to know
these factors, given that it enables it to implement prevention strategies
and strategies that will generate quality of life within the company.
The result of the Labor Dimension Indicator indicates that, at
organization level, in most of the aspects evaluated there are strengths
that become protective factors and reduce effects on people’s health,
quality of life, performance and wellbeing. However a number of areas
were identified where there is room for improvement in four work
groups. Work was done with these groups in conjunction with work on
the organizational climate, because when there is a positive
organizational climate, psychosocial risk factors tend to be less, and a
positive climate can be considered to be a protective psychosocial
factor.
HEALTH AND SAFETY AT WORK PARITY COMMITTEE
* Number of meetings called: 12
* Number of meetings held: 10
* Average number of members attending each meeting: 6
* Cases received: 32 (16 of them received in December)
* Cases closed: 12
One of the challenges the Committee faced in 2016 was to make existing
communication mechanisms known to staff. In December, it therefore played
an active part in primary Maintenance Management groups, and 16 of the 32
cases were received for attention by the Committee.
Finally, the Committee attended company activities relating to health and
safety at work. During Comprehensive Management Week we had a stand that
was visited by 130 members of staff, who had everything explained to them
about our duties and who the representatives of the company and of the
workers are.
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Skills evaluation
G4-LA11
The platform, objectives and performance modules of the Success Factors tool
were implemented in 2016. This application concerns best practices for
administering human resources processes. The skills evaluation model was
also reviewed, with a view to determining information for drawing up more
specific development plans, and the next exercise was therefore scheduled for
the first quarter of 2017.
STAFF TRAINED
G4-LA9 Level 2016
Men Women
Director 19 12
Non-Director 248 133
TOTAL 267 145
Hours of training
Level Hours Average
Men Women
Director 1,204 746
Non-Director 15,851 8,530
TOTAL 17,055 9,276
Average
Average hours of training
G4-LA9 Director 62.9
Non-Director 64
Men 63.9
Women 64
TOTAL 63.91
INVESTMENT IN EMPLOYEE COMPREHENSIVE HEALTH AND EDUCATION
PROMIGAS 19
Concept Investment Beneficiaries
Employee health policy COP 708,876,025 380 employees
insured
Family member health policy COP
1,670,876,939
780 relatives insured
Medical expenses, employees and
relatives
COP
3,165,661,214
365 staff
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Scholarships for undergraduate
studies
G4-LA10
COP 110,509,013 23 staff
Scholarships for postgraduate studies
(does not include special English and
other courses
G4-LA10
COP 117,844,301 10
Other investments in training (all) G4-
LA10
COP 959,785,761 412 staff
Scholarships for workers’ children COP 959,242,766 173 child
beneficiaries
Pre-pension program participants (G4-
LA10) - ‘Active Retirement’ program*
COP 8,240,000 7
* This figure includes people who took part in the pre-pension program; that is, who
are no more than five years prior to pension age. This training account includes
workshops that are attended by people no more than 10 years prior to pension age,
but they only attend the Financial Planning workshop.
ABSENTEEISM RATE
G4-LA6
Absenteeism 2014 2015 2016
Absenteeism rate 1.46 1.51 1.75
NOTE: There were no professional illnesses or deaths among workers during the year
Staff turnover
G4-LA1
People who left their job in 2016, by
age range and gender
New staff hired in 2016, by age
range and gender
Men Women Men Women
18 to 30 1 3 10 10
31 to 40 7 2 6 4
41 to 50 5 1 2 0
51 to 60 1 2 0 0
Over 60 1 1 0 0
TOTAL 15 9 24 14
People who left their job in 2016, by
geographical location
New staff hired in 2016, by
geographical location
Men Women Men Women
Atlantic
coast
15 9 24 14
Bogotá 0 0 0 0
TOTAL 15 9 24 14
Rotation index 3.5
Promotions 17
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Affiliates
Staff Transmetano Promioriente Transoccidente Promisol Surtigas GdO CEO
Absenteeism
(%)
1.27 2.19 0.02 0.63 0.14 2.1 1.86
Investment in
health (COP)
109,883,862 127,910,520 13,750,990 51,607,488 2,157,049,176 2,452,350,594 488,853,157
Investment in
training (COP)
124,299,319 273,909,152 8,744,601 20,542,151 917,766,231 520,171,000 257,078,822
Staff trained 21 40 4 45 546 546 360
Hours of
training
2,059.5 3,897 328 1,116 13,562 13,562 7,803
Average hours 98.07 97.43 82 24.8 26.01 26.01 21.68
Turnover
index
0 2.78% 27.32% 0 5.2 5.2 12
Promotions 0 0 0 2 14 14 8
Organizational
climate*
65.6 75.3 44.3 50.1 65.2 65.2 52.2
Total staff 20 36 4 43 481 481 322
* This measurement is made every two years, the last time being in 2015
PROSPECTS FOR 2017
The country’s economic growth will be slightly better than in 2016 at around
2.5%, although this is low when compared to the growth figure for the last five
years (2011 - 2015: 4.6% average). The upturn in growth will be due to the
significant contribution made by fourth generation (4G) highway
infrastructure projects and other civil works. Additionally, with the
international oil price picking up, the negative effect of investments in oil
pipelines in 2016 will begin to revert. Private consumption is forecast to fall,
because although inflation and market interest rates are lower, the tax reform
will have a big effect.
The partial recovery in the international oil price, which ended 2016 above
the 50 dollar mark, will favor a revaluation of the Colombian peso, but the
pressures on international policies, mentioned earlier, will counteract this
effect, and an average exchange rate of around 3000 pesos per dollar is
therefore envisaged, with a moderate degree of volatility.
In the United States, uncertainty will continue during the first half of the year,
due to its economic and international trade policies. The FED is expected to
be wary of normalizing its target interest rate, and will no doubt keep it low
during the year, since the US economy is still showing signs of fragility. In
Europe, the negative impact of Brexit on economic growth will start to be felt,
both in the United Kingdom and in the Eurozone. As far as emerging
economies are concerned, the Chinese economy is expected to stabilize, while
an increase in raw materials prices will benefit them, to a large extent.
However, protectionist policies in the United States could affect how
emerging economies’ currency performs, and this would lead to dollar
volatility and devaluations.
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As far as inflation is concerned, the downward trend that began in August
2016 will continue, since the main factors that affected it last year, such as the
El Niño phenomenon and the truck drivers’ strike, are expected to have
disappeared. However, inflation will be affected by between 0.5% and 1..0%
because of the tax reform, with VAT rising from 16% to 19% and extra tax being
imposed on sugared drinks, cigarettes and fuel, among other things. Inflation
is expected to end the year at around 4.5%.
Foreseeing this fall in inflation, the Banco de la República Board is planning
a gradual reduction in the intervention rate, which could end the year at
around 6%. This could, in turn, lead to other market interest rates falling, such
as fixed-term deposit rate and the current maximum legal rate, which would
lower the cost of credit on the market.
Follow-up will be necessary on how the peace agreements are being
implemented, since this is an enormous challenge and also a great hope for a
better country. The end of the conflict, which is very good news for everyone,
benefits the business climate because it is essential for the growth and
wellbeing of all society. It is important for the government to look over its
energy policy. And CREG also needs improving, so that it can take less time to
make decisions. Correct regulatory signals should be maintained, so that
investments can continue to be made, and we believe there is a need to look
for a more flexible wellhead price scheme.
Economic activity
Natural gas transportation
* It is envisaged that in the first half of 2017 the question of the
applications submitted by Promigas for as-new values when assets
reach the end of their useful life, relating to the Corozal - San Juan
Nepomuceno, Usiacurí Branch, and La Mami - Bureche gas pipelines,
will be resolved, as will the similar application submitted by
Transoccidente for the Yumbo - Cali section.
* According to the Regulatory Agenda, in the first quarter of 2017 CREG
will issue the definitive remuneration methodology for the natural gas
transportation activity.
Natural gas distribution
* In July 2016, by means of CREG Resolution 093, the Energy and Gas
Regulation Commission partially revoked CREG Resolution 202 of 2013,
which establishes general criteria for remunerating the fuel gas
distribution activity via pipework networks, and published CREG
Resolution 095, which complements CREG Resolution 202 of 2013, for
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comments. It is envisaged that CREG will publish the definitive
Resolution in the first half of 2017.
* According to the Regulatory Agenda, in the first quarter of 2017 CREG
will issue the remuneration methodology for the fuel gas marketing
activity, which is needed for applying distribution charges.
Electricity distribution
* According to the CREG Regulatory Agenda for 2017, it is envisaged that
the definitive regulation will be published in the first quarter of the
year for remunerating the electricity distribution activity. Similarly, it
is envisaged that the rating formula for regulated users will be defined
in the first quarter. Additionally, other matters of vital importance to
the sector are on the agenda and are expected to be defined during the
year, such as the mechanisms for incorporating non-conventional
renewal sources of energy, shortage price adjustments, and standard
long-term contracts.
Against this background of prospects, we will go on looking for options to
continue our orderly, profitable growth, so as to benefit our shareholders and
interest groups.
OUR CHALLENGES IN 2017
* Construction of the Canacol gas pipeline and compressor stations, to
increase Transportation system capacity by 100 Mpcd.
* Reinforcing and optimizing the LNG business through SPEC and
generating synergies between related lines of business.
* Commercially commissioning Gases del Pacífico (Peru) in the second
half of 2017.
* Having the Malena (Transmetano) and Los Pinos (Promioriente)
compressor stations commence operation, in order to increase capacity
in these companies’ transportation systems.
* Unveiling the financing strategy that guarantees the availability of
funds for carrying out defined investment projects.
* Presenting the tariff application for Promigas and our companies, in
line with the CREG regulatory agenda, in the last quarter of 2017.
* Expanding and strengthening the non-banking finance sector by
encouraging greater use of credit quotas and optimizing distributor
databases.
* Finalizing the plan to resolve issues identified in the Dow Jones
measurement, with a view to strengthening our management model
with a sustainable approach.
* Disseminating details of the impact Promigas and the Promigas
Foundation have in areas of influence to key interest groups (public
entities, community groups and the media).
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* Strengthening the organization’s image and capability as a highly
innovative company, through its innovation center and the execution of
selected projects.
* Unveiling the revised Promigas strategy.
* Implementation and customization of, and follow-up on, corporate
policies in related companies.
* Implementation of the Information Security Management system, in
line with the corporate model, with a view to protecting its integrity
and reliability.
* Design and implementation of the S4Hana SAP tool, with a view to
adopting better business practices that will enable us to overcome
existing technological issues.
ACKNOWLEDGEMENTS
We finish this outline of our activities during the year that is coming to an
end, and also of our plans projects for 2017, by thanking our shareholders for
the confidence they have placed in us and for their constant support as we
have carried out our projects.
We also express our profound debt of gratitude to everyone at Promigas for
their continual efforts, quality, loyalty and commitment, all of which have
been fundamental to our achieving the results contained in this report.
And to our customers, the very raison d’être of every commercial interaction,
we must offer our thanks for the trust they have placed in us, which obliges
us to improve every year.
INTELLECTUAL PROPERTY, COPYRIGHT AND OTHER STANDARDS
The company has ensured that it uses duly-licensed software in all its
processes. It also complies with current provisions relating to copyright.
Pursuant to the provisions stipulated in Article 87 in Law 1676 of 2013, it is
hereby placed on record that the free circulation of invoices issued by sellers
and suppliers was not obstructed.
________________________________ _________________________________
Bernardo Noreña Ocampo Antonio Celia Martínez-
Aparicio
Chairman of the Board of Directors President, Promigas
NOTE: This report was read and approved unanimously by all directors at a Board of
Directors session on February 21, 2017, as accredited in the respective Minutes No.
459 dated February 21 2017.
_______________________________
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Eduardo Rosado Fernández de Castro
Secretary
REPORT PROFILE
The principal channel through which we submit accounts to our audiences
each year is the Management Report, which is drawn up in accordance with
reporting sustainability principles.
The content published was selected and prioritized on the basis of issues that
are relevant to Promigas and its interest groups, and includes business we
engaged in through companies that make up our strategic transportation and
distribution businesses4. The financial information also includes companies in
which we have a shareholding, but do not control. The indicators reported for
affiliates are for purposes of information and are not included in the scope of
the GRI Content Index. For further information, please consult the respective
company reports.
This report was drawn up by Promigas Corporate Communications
Management and verified by Deloitte & Touche Ltda., Colombia, in
accordance with version G4 of the Global Reporting Initiative guide for
producing sustainability reports, based on the essential “ conformity” with the
guide option. Please send your doubts and comments to
NOTE: The 2015 version of the Promigas Annual Management Report was published
in March 2016 and includes information relating to the period from January 1 to
December 31, 2015.
4 GEN Transportation: Promigas, Promisol, Promioriente, Transmetano,
Transoccidente, Sociedad Portuaria El Cayao.
GEN Distribution: Gases de Occidente, Surtigas, Compañia Energética de Occidente,
Gases del Pacífico, Gases del Caribe, Efigas, Gases de La Guajira, Cálidda.