ENERGY MARKETING

CLIMATEACTION

AFFORDABLE AND CLEAN ENERGY

Committed to the SDGs

Luis Fernando Londono MejíaManager Energy Marketing

“We generate energy to contribute towards progress in the country's various regions, and we want to support our customers’ productivity by providing true added value. The task of marketing has a lot to do with strengthening trust-based relationships with customers, anticipating their expectations and needs, adapting commercial mechanisms and ensuring effective management on the Spot Market. ISAGEN and Colombia's growth presents us with very important challenges, especially regarding the inclusion of non-conventional renewable energies. We are ready for a situation where this growth is supported by the advance sale of energy, without increasing the levels of risk that we face in the

market”.

STRUCTURE

Commercial operation

Market management and regulation

Commercial service system

Challenges

25.67% share in the unregulated market.

100% achievement of the energy contracting target for 2017.

Achieved a customer satisfaction score of 4.81.

$757,571,487 invested in the Comprehensive Energy Management strategy, which contributes to the efficient use of energy and water among customers, as well as the reduction of their Greenhouse Gas (GHG) emissions.

2016 MILESTONES

We deliver our energy to the Colombian market, striving to meet the needs of large consumers (industrial end-customers) and distributors (wholesalers), which are located in various regions around the country. As part of our strategic planning, we have identified the following risks at the corporate level:

Commercial management risk, described as inadequate commercial management that prevents or hinders achievement of the EBITDA target.

Regulatory, legislative and compliance risk, described as non-compliance or lack of awareness regarding laws, standards and/or regulations.

Therefore:

We market energy through different channels in order to minimize risk and thus earn revenue to ensure the Company's long-term sustainability.

We provide our customers with a highly personal service, and this includes the supply of electricity, technical support regarding issues of electrical quality, reliability and safety, as well as advice on the implementation of energy management systems and projects, thus contributing to their productivity, competitiveness and environmental responsibility.

We are supported by a Technology Partner Network that works collaboratively under its own governance system, in order to provide alternatives to address the various technical requirements related to energy use in the industrial plants we serve.

We strive to spread our value promise throughout the country, through a strategy of geographic and customer diversification.

We actively participate in the development of regulatory proposals and discussions, seeking that the market's development ensures reliability from supply to demand, as well as the sustainability of the companies that form part of the energy supply chain.

We develop value propositions that bring together the capabilities of the Company, its partners and the customers themselves, always seeking relationships based on compliance, transparency and trust. The revenue obtained from the market is thanks to a platform of innovation and development that always seeks new opportunities.

This chapter sets our the main results and challenges relating to our commercial management in 2016:

ISAGEN's energy salesFind out more:

We successfully optimized the commercial operation thanks to water management in our reservoirs. This was in spite of the adverse conditions that arose during the year, which were associated with low water inputs to our power plants as a result of El Niño and the incident at the Guatapé power plant (owned by EPM) at the beginning of the year. Our commercial strategy consisted of partially offsetting the decrease in water inputs by using stored water during months with better Spot Market price expectations, as well as maximizing revenues from the frequency regulation service (AGC).

Moreover, we secured natural gas at competitive prices for the Termocentro power plant's generation, taking advantage of opportunities in the secondary gas market, minimizing the use of liquid fuels, and optimizing the thermal power plant's operating costs. The power plant generated 1,100.97 GWh/year, which enabled us to support our reservoirs' operation and contribute to energy optimization for the National Electricity System (SEN) in response to the adverse hydrological conditions faced during the first four months of year. We strengthened the option of generating using diesel to improve the integrity of Termocentro's operation, in the event the system required it, resulting in greater long-term reliability for the power plant's liquid fuel logistics.

The combined gas and liquid fuels support system has allowed us to be competitive in light of the regulator's announcement that they will open up Firm Energy for the Reliability Charge to competition.

The main challenge for the commercial operation in 2017 will be the reliable and efficient use of generation resources, in order to fulfill contractual commitments and maximize net revenue from the commercial operation. This will be achieved by adapting the operation to the regulatory changes that are expected in the market, which stem from the analyses conducted by the authorities in light of El Niño and

COMMERCIAL OPERATION

to improve competitiveness. With regard to Termocentro, the main challenge for 2017 will be to obtain the flexible gas necessary to maintain the power plant's Firm Energy Obligations. In the long term, we intend to continue our approaches to likely suppliers, in order to obtain natural gas purchase options that ensure the viability of the upcoming Reliability Charge allocations.

Sogamoso Hydroelectric Power Plant (820 MW).

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Energy and gas sales revenue (2015 - 2016)

2015 2016 Difference 2016 - 2015

Growth 2016 - 2015

$ Million

$ Million

$ Million %

Domestic contracts * 1,991,346.80 2,186,938.56 195,591.77 9.82

Foreign contracts 0.00 0.00 0.00 -

Spot Market Transactions 590,294.09 424,151.64 -166,142.45 -28.15

Start-up and Shutdown 0.00 0.00 0.00 -

Frequency Regulation (AGC) 373,912.12 210,081.86 -163,830.26 -43.82

Reliability Charge Reimbursement -159,613.46 -145,633.11 13,980.35 -8.76

Reliability Charge Backup 22,446.64 50,424.50 27,977.85 124.64

Deviations 3,739.01 2,798.41 -940.61 -25.16

Technical services 8,522.62 12,361.39 3,838.77 45.04

Gas 12,759.04 5,615.01 -7,144.03 -55.99

Other 615.24 684.58 69.34 11.27

Total revenue 2,844,022.10 2,747,422.83 -96,599.27 -3.40

* Domestic contract revenue includes related parties and does not include Reliability Charge backup.

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Energy and gas sales expenses (2015 - 2016)

2015 2016 Difference 2016 - 2015

Growth 2016 - 2015

$ Million

$ Million

$ Million %

Domestic contracts 53.60 0.00 -53.60 -100.00

Foreign contracts (Venezuela) 0.00 0.00 0.00 -

Spot Market Transactions 510,867.38 637,961.24 127,093.85 24.88

Start-up and Shutdown 15,719.39 0.00 -15,719.39 -100.00

Commercial Responsibility (AGC) 67,723.83 60,509.52 -7,214.31 -10.65

Reliability Charge Backup 0.00 2,149.08 2,149.08 -

Deviations 1,287.08 598.06 -689.02 -53.53

Restrictions 25,776.33 78,453.15 52,676.82 204.36

Use of STN, STR & SDL 202,792.00 258,704.11 55,912.11 27.57

STN Connection 14,586.94 15,069.67 482.73 3.31

Administrative services 13,294.28 13,649.69 355.41 2.67

Contributions under Law 99/93 50,184.96 46,762.32 -3,422.64 -6.82

FAZNI Contribution 15,564.19 21,500.80 5,936.62 38.14

Gas 309,038.54 241,595.68 -67,442.86 -21.82

Technical services 10,449.69 13,573.70 3,124.01 29.90

Total expenses 1,237,338.21 1,390,527.01 153,188.80 12.38

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Long-term contractsThrough long-term contracts, we serve the needs of 16 wholesale customers and 265 commercial frontiers relating to industrial end-customers. The total demand from our unregulated customers and sales to wholesalers accounted for 17.50% of total national demand (66,312.53 GWh).

Total demand from the unregulated market served by the Company increased considerably (28.74%) due to the addition of a large customer, in response to the increase in generation capacity following the Sogamoso Hydroelectric Power Plant (820 MW) entering operation at the end of 2014. We continue enjoying a significant share in this segment, totaling 25.67% in 2016.

Total sales in contracts during 2016 reached 11,601.44 GWh/year, representing a decrease of 2% compared to sales in 2015 (11,842.17 GWh/year). On the other hand, we surpassed the revenue achieved 2015 by 9.82%, with this totaling $2,186,938.56.

There were no energy exports to Venezuela during 2016.

Long-term contracts (2015 - 2016)

2015 2016 Difference 2016 - 2015

Growth 2016 - 2015

$ Million GWh

$ Million GWh

$ Million GWh

% $

% GWh

Domestic sales 1,991,346.80 11,842.17 2,186,938.56 11,601.44 195,591.77 -240.73 9.82 -2.03

Marketers 1,169,230.31 7,800.23 1,000,912.53 6,397.73 -168,317.79 -1,402.50 -14.40 -17.98

Large consumers 822,116.48 4,041.93 1,186,026.04 5,203.71 363,909.55 1,161.78 44.26 28.74

Foreign sales 0.00 0.00 0.00 0.00 0.00 0.00 - -

Total contract sales 1,991,346.80 11,842.17 2,186,938.56 11,601.44 195,591.77 -240.73 9.82 -2.03Total contract purchases 53.60 0.00 0,00 0,00 -53.60 0.00 -100.00 -

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Spot Market TransactionsSpot Market sales in 2016 totaled 1,466.10 GWh, which relates to the net value of energy transactions and restrictions. This figure was 23.90% lower than in 2015 (1,926.41 GWh) and represented 2.2% of demand in the National Interconnected System (SIN). Revenue from these sales accounted for 15% of our total revenue in 2016.

Purchases on the Spot Market were 48.14% higher than in 2015, totaling 2,169.48 GWh. Its value represented 46% of the commercial operation's expenses for 2016, compared to 40% in 2015.

Below are the figures in millions of pesos and in GWh for the energy traded on the Spot Market in 2015 and 2016:

Spot Market Transactions (2015 - 2016)

2015 2016 Difference 2016 - 2015

Growth 2016 - 2015

$ Million GWh

$ Million GWh

$ Million GWh % %

Spot Market Sales 590,294.09 1,926.41 424,151.64 1,466.10 -166,142.45 -460.32 -28.15 -23.90

Spot Market Purchases 498,551.92 1,464.43 637,961.24 2,169.48 139,409.31 705.05 27.96 48.14

Ties 12,315.46

Net 91,742.16 461.98 -213,809.60 -703.38 -305,551.76 -1,165.36 -333.05 -252.25

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Reliability Charge

The current methodology for remunerating reliability in the Colombian Electricity System has been in force since 2006 and was defined in CREG Resolution 071 of 2006. Its main objective is to compensate generating agents for the availability of generation assets possessing the characteristics and the declared parameters for calculation of Firm Energy for the Reliability Charge. For the 2015-2016 period, the allocation of Firm Energy Obligations for generation plants was conducted through the auctions relating to Firm Energy and Generators with Greater Planning Periods, which were carried out in May and July of 2008, respectively.

Revenue relating to the Reliability Charge is collected through the actual generation dispatched on the Spot Market, and when generation is greater than or equal to the Firm Energy Obligations for each plant this results in reimbursements, which are recorded as a reduction in revenue.

Below are the reimbursements for 2016, as well as the relevant figures for 2015:

Reliability Charge (2015 - 2016)

2015 2016 Difference 2016 - 2015

Growth 2016 - 2015

$ Million

$ Million

$ Million %

Reimbursements 159,613.46 -145,633.11 -305,246.569 -191.24

Net -159,613.46 145,633.1092 305,246.5692 -191.24

Meanwhile, in the Secondary Market for Firm Energy, we negotiated backup for Firm Energy for the Reliability Charge among generators to ensure fulfillment of the Firm Energy Obligations that each agent has allocated to them. We obtained net revenue of $48,275.42 million during the year through this market.

Charges for participating in the Wholesale Energy Market (2015 - 2016)

2015 2016 Difference 2016 - 2015

Growth 2016 - 2015

$ Million

$ Million

$ Million %

STN Use 90,,567.75 142,159.52 51,591.78 56.96

STR, SDL Use 112,224.25 116,544.59 4,320.33 3.85

Restrictions 25,776.33 78,453.15 52,676.82 204.36

STN Connection 14,586.94 15,069.67 482.73 3.31

Administrative services 13,294.28 13,649.69 355.41 2.67

Contributions under Law 99/93 50,185.42 46,762.32 -3,423.10 -6.82

FAZNI Contributions 15,564.19 21,500.80 5,936.62 38.14

Total Wholesale Energy Market charges 322,199.16 434,139.73 111,940.57 34.74

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In 2016, charges for the Company's participation in the Wholesale Energy Market were 34.74% higher than those recorded for the previous year. The largest increase occurred in the cost of restrictions, and this was due to the market situation during El Niño that affected the safety-margin generation required to meet demand, as well as the fact that charged to this item were a portion of the costs of the "It pays to switch off" program and part of the cost of generation using liquid fuels.

Charges for use of the National Transmission System (STN) also experienced a significant increase, which is explained by the addition of a large consumer. This increase is not seen in the STR because the aforementioned consumer is directly connected to the STN and does not pay charges for the use of distribution networks.

Operation using fuelsDuring 2016, we had firm fuel supply of 2,800 MBTUD until November, and 13,700 MBTU during the first quarter, with the rest coming from the secondary market with interruptible contracts for the Termocentro Thermal Power Plant. This was in order to offset the low levels of hydro generation in the first six months of the year, while the reservoirs recovered from El Niño. As such, the Power Plant achieved generation of 1,100.97 GWh/year, 43% lower than the energy produced in 2015. In turn, gas purchases to support such generation totaled 8,581 GBTU.

As a result of bilateral efforts with suppliers, during 2016's various monthly auctions we procured interruptible supply that made it possible to maintain the Termocentro power plant's generation using natural gas from the Cusiana/Cupiagua and Guajira fields, with a single unit.

We continued with the logistics for incorporating diesel into Termocentro, and achieved recovery of 100% of the JetA1 inventory value, resulting in savings of fixed fuel storage costs totaling approximately $370 million.

Regarding sales through bilateral contracts, during 2016 there was no firm availability for sale because Termocentro required everything that was available, given that the climatic conditions demanded all available resources.

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Natural gas sales revenue (2015 - 2016)

2015 2016 Deference 2016 - 2015

Growth 2016 - 2015

$ Million

$ Million

$ Million %

Wholesalers 12,094.79 5,615.01 -6,479.79 -53.58

Industrial end customers 664.25 0.00 -664.25 -100.00

Total sales 12,759.04 5,615.01 -7,144.03 -55.99

In 2016, gas sales revenue totaled $5,615.01 million, down 55.99% from the previous year. This revenue was achieved thanks to the recovery of costs for firm supply and gas transportation.

Natural gas sales expenses (2015 - 2016)

2015 2016 Difference 2016 - 2015

Growth 2016 - 2015

$ Million

$ Million

$ Million %

Expenses for purchases of supply 6,666.90 2,503.90 -4,163.00 -62.44

Expenses for purchases of transportation, distribution and development fees 1,158.77 1,050.86 -107.91 -9.31

Total expenses 7,825.67 3,554.76 -4,270.91 -54.58

In 2016, expenses for gas supply and transportation purchases that were not used in thermal generation, and were subsequently sold, totaled $3,554.76 million. This figure was 54.58% lower than the previous year.

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MARKET AND REGULATORY MANAGEMENTDuring 2016 and as a consequence of the crisis brought about by El Niño, we analized various market studies to identify aspects that need to be adjusted or improved. We actively participated in the discussions promoted by regulators such as the Energy and Gas Regulatory Commission (CREG), the National Planning Department (DNP), the Ministry of Mines and Energy (MME) and some of the associations we belong to.

This has allowed us to analyze, comment and make recommendations regarding the alternatives that have been proposed to adjust the market, and the best way to apply such alternatives within the Company and for industrial end-customers. Our regulatory efforts focus on the search for alternatives that promote the sustainability of the energy market and the Company, and that promote competitiveness in Colombian industry. In addition, we took part in the discussions relating to Collective Action among the Electricity Sector, as part of which a manual was produced on sector competition best practices, a matrix of competition risks was presented, and follow-up began regarding the electricity market monitoring tools being implemented by the Superintendence of Industry and Commerce (SIC).

Regulatory changes in the electricity sector

Energy and Gas Regulatory Commission (CREG): 2016 was an unusual year due to the crisis brought about by El Niño, certain power plants going offline, and the financial problems faced by certain thermal power plants. As a result, the CREG issued several temporary rules to alleviate the market situation and avoid electricity rationing, such as changes to scarcity prices, the Spot Market price limit, the subsidy for plants that generated energy using liquid fuels, the limit on electricity exports, the easing of conditions to facilitate the implementation of self-generation plants, adjustments to the AGC allocation procedure, the differentiated rate scheme for users showing a reduction or increase in their consumption (to encourage electricity saving), and adjustments to the declaration of generator availability, among others.

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Moreover, the application of the metering code began and some of its deadlines were extended.

In 2017, we expect regulations to be issued in relation to the following: the adjustment of the scarcity price, the rate formula, the approval of the new remuneration methodologies for the National Transmission System (STN) and the distribution charges, adjustments to the market for long-term energy contracts (seeking their standardization), changes to the Reliability Charge or the expansion mechanism that's established, the creation of a binding market linked to an intraday market, and the integration of non-conventional energy sources into the wholesale market.

Regulatory changes in the natural gas sector

In order to cope with the thermal generation crisis and expectations regarding gas availability in the medium term, the CREG made adjustments to the natural gas sector by allowing gas producer information to be updated in order to increase supply and make their sales and deadlines more flexible. The entity introduced changes to the Long-Term Use or Sell transportation auctions, seeking greater participation in these auctions.

The CREG also proposed adjustments to the quality indicators regarding the interchangeability of gases in the system, so that the characteristics of the gas do not result in negative effects on the thermal power plants that use this type of fuel. There is currently discussion on the general criteria regarding remuneration for the natural gas transportation service and adjustments to the Single Transportation Regulation for Natural Gas.

The UPME proposed the Indicative Natural Gas Supply Plan to agents, laying out the future guidelines for the expansion of the National Transportation System (SNT). Moreover, we see that from 2021 there will be a need for a regasification plant in the Pacific to meet thermal and non-thermal demand.

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The commercial relationship we have with our customers is based on transparent and direct communication, collaboration, compliance and service quality, so that we can offer long-term electricity supply contracts, comprehensive energy management, emergency service and advice on the market in which we operate. We implement relationship plans with electricity network operators, leading to improvements in the quality of service provided to our customers. All this is in order to contribute to their productivity and sustainability, maintain their loyalty and contribute to reducing their Greenhouse Gas (GHG) emissions. To fulfill this commitment, we analyze our customers' consumption profiles, industrial characteristics and commercial expectations, in order to make projections, establish trends and define long-term relationship strategies that generate high levels of satisfaction. Our customer service takes shape at three levels.

Basic serviceWe supply electricity to our customers as per their consumption, and also provide a service associated with the sale of these energy resources, which includes representing the commercial frontiers in respect of the network operators and the STN, as well as supporting these supply contracts through 24/7 emergency management, with participation from technology partners.

During 2016 we carried out 4,519 technical assistance contact sessions, of which 1,227 (27.17%) were related to emergency service, due mostly to unscheduled Network Operator outages, 43 less than the previous year.

COMMERCIAL SERVICE SYSTEM

Related servicesWe supported and advised our customers so that they could access a portfolio of technical energy management services provided by the Technology Partner Network, which consists of engineering firms, research centers and universities that offer: maintenance, expansion, production knowledge and efficiency. Maintenance services are aimed at ensuring the optimum operation of production processes. Expansion projects seek to expand production processes or facilities. Production knowledge services aim to capitalize on success stories and lessons learned. Finally, efficiency services aim to support optimization of the energy mix and the implementation of strategies for Comprehensive Energy Management.

Changes to the commercial service system

In 2016 we made the decision not to provide technical services under the structured brokerage scheme with the Technology Partner Network. Previously, our industrial customers would hire the technical services from us, and in turn, we would hire the suppliers. Thus, each service comprised two instances of hiring, invoicing and payment: from ISAGEN to its customers, and from the technology partner to ISAGEN. Under the new scheme, the supplier conducts the entire sales process directly with the customer, without the Company's direct participation in the transaction.

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We will continue with the Technology Partner Network, which has its own participation and governance system, promoting collaborative work and healthy competition. As such, it is able to adequately address all aspects that form part of our customers' energy management, covering the various national regions where we operate. During the year, the new members of the Network's Representation Committee were selected by a vote among the partners, and a first working session was held to establish the strategic guidelines for the new operating scheme. In addition, four Regional Committees were held to disseminate information, coordinate actions and listen to expectations and proposals. The main challenges for the Technology Partner Network relate to collaborative work with ISAGEN and among the suppliers themselves, so that they can interact commercially with our mutual industrial customers. The goal is to build productive and long-term relationships around energy management.

Our role will focus on:

Operational coordination of technology partners for service to our large consumers.

Developing these suppliers in terms of business and sustainability practices.

Recommending the Network to customers during the course of the technical support that we will continue to provide.

The ongoing evaluation of technical and service aspects.

The implementation of marketing opportunities and mechanisms such as business forums, virtual interactive spaces or direct promotions for customers.

Strengthening our sales team and focusing on activities that directly generate added value for the customer in terms of:

Technical and market-related advice and support.

Follow-up regarding the electricity supply contract.

Dedication to the Comprehensive Energy Management program, through which we want to contribute to our customers achieving greater productivity, efficiency and responsibility towards the environment.

This change to the commercial scheme stems from our need to focus on these value-generating activities, as well as the analysis of the risks we incurred as a result of providing technical services. We came to the conclusion that we could continue generating value in a different way, enabling the Network to take on an advice-related role, and not just a role as a seller of technical services.

Dialogue with the ‘technology partners’ stakeholder, in Bogota.

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Results for the provision of technical services

In 2016 we provided 915 technical services, 116 less than in 2015, as we stopped offering this type of service in September. In total, 39 of these services were related to energy efficiency issues. We generated sales in the amount of $12,361.39 million, 45.04% more than in 2015 ($8,522.62 million).

Technical service invoicing (2015 – 2016)

2015 2016 Difference 2016 - 2015

Growth 2016 - 2015

$ Million

$ Million

$ Million %

Total services 8,522.62 12,361.39 3,838.77 45.04

20144.90

20154.92

20164.91

Customer evaluation of technical services

(2016 - 2014)

Points

We conducted an evaluation of the technical services by following up on those provided by each technology partner, hiring a company specialized in telemarketing. The results reflect a satisfaction level of 4.91 on a 5-point scale. The aspects evaluated include the personnel in charge of providing the service and their knowledge, personal protective equipment, use of appropriate tools and equipment, and compliance with safety regulations, among other issues.

Comprehensive Energy Management

We have brought together a series of technical and energy management services that, when implemented systematically, help increase productivity, reduce energy and water consumption, as well as greenhouse gas (GHG) emissions, while also allowing for progress regarding an organization's energy mix. Below, we present the main results achieved in 2016, during which we met the challenges that had been set:

Phase 0. Organizational energy characterization: quantifies potential targets for savings in electricity consumption, thermal energy, CO2 emissions and increased productivity. Ten new customers joined the Comprehensive Energy Management strategy in 2016.

Phase 1. Organizational alignment: incorporates the structure, roles and skills of participants, energy objectives and targets, monitoring systems and the control of management and operational indicators regarding energy performance, among other aspects. In 2016, 33 energy performance indicator trees were designed, and 34 customers were trained on the use of energy management tools.

Phase 2. Comprehensive assessments: structures an assessment plan to be implemented regarding improvement areas representing null, low, medium and high investment. Such areas are identified in

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the monitoring and control for the performance indicators in phase 1. In 2016, 130 assessments were proposed for 22 customers.

Phase 3. Operational efficiency: implements projects for the efficient use of energy and/or distributed generation. During 2016 we managed the implementation of 10 high-investment energy solutions.

Phase 4. Management and control: completes the cycle for continuous energy improvement. We recognize that even if customers do not fully adopt ISAGEN's Comprehensive Energy Management strategy, they carry out various activities aimed at energy savings and sustainability. As a result, we continue to promote, support and advise customers on the identification and implementation of maintenance actions, technology upgrades, and the adoption of best practices in energy management.

Total investment in the Comprehensive Energy Management strategy was $757,571,487 during 2016, 17.88% less than in 2015 ($922,530,000), due in part to the expertise that ISAGEN's facilitators have gained in the use of standardized procedures, thanks to improvements to the methodology. In addition, customers have developed in terms of their ability to independently implement the strategy, and therefore require less support from ISAGEN.

The results for this strategy between 2011 and 2016 are set our below:

Number of customers in each phase of Comprehensive Energy Management (2011 - 2016)

Phase 0 Energy characterization 102Phase 1 Organizational alignment 63Phase 2 Comprehensive assessments 22Phase 3 Operational efficiency 15Phase 4 Management and control 6

Between 2011 and 2016, 102 industrial customers joined the Comprehensive Energy Management strategy, accounting for 56% of this group. Customers continued making strides regarding the consolidation of the energy management system, specifically in relation to:

Quantification of improvement potential regarding productivity levels and reductions in CO2 emissions, as well as the implementation of improvements.

Setting verifiable targets with a monitoring and control methodology.

Management and establishment of improvement groups, with the aim of developing the corporate culture through the rational and efficient use of energy.

Implementation of energy performance control systems (overall and by cost center), in addition to technology-related measures for energy efficiency.

Increase in technical skills for energy management.

Summary of results for companies that have joined the Comprehensive Energy Management strategy (2011 - 2016)

Reduction in electricity consumption (GWh/year) 126Reduction in thermal energy consumption (m3 natural gas x 1,000)/year 12,020,572

Reduction in GHG emissions (Ton CO2/year) 23,574Increase in productivity* (%) 2.1 - 17.8

* The range is presented from the lowest to highest value for the customer group.

These savings represent the result of implementing organizational and operational measures, such as the standardization of best practices in operation and maintenance, and the monitoring and control of performance indicators after improving the metering structure (by production center).

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During the course of implementing the Comprehensive Energy Management strategy, several customers identified savings and efficiency actions for the energy sources used in production cycles, which included projects comprising low and/or medium investment solutions, through to the identification and subsequent implementation of those which required greater investment.

Service responsibility

In 2016, we carried out activities with our customers aimed at sharing best practices and promoting managerial and operational skills. These activities focused on the efficient use of energy and natural resources. The training opportunities provided are set out below:

By providing services at customer facilities through our Technology Partner Network, we're sharing the responsibility for managing potential risks relating to electrical safety and environmental impact. As a result, during 2016 we sought advice from a specialist on the issue, who supported us in characterizing the physical and environmental risks arising from the activities that partners undertake when providing these services. The outcome was a matrix that considers three aspects: 1. Risk level. 2. Likelihood of impact on people and the environment. 3. Establishment of the appropriate controls for risk mitigation.

All technical services consider the variable of occupational health and safety. During the year, there were no incidents or fines relating to non-compliance with regulations, standards or voluntary codes regarding the provision of the service or impacts on health and safety, and there were no deaths or injuries among users of the service. A minor incident was reported regarding a subcontractor following non-compliance with the safety protocols, and

Training for customers in 2016

Issue Man-hours Number of attendees

Cultural transformation driven by values 85 min 59

Culture is the mirror that reflects your leaders' essence 50 min 59

Consumers like your business culture 50 min 59

Technologies that will revolutionize the industrial context 50 min 59

Cultures of innovation 50 min 59

Trends in the Colombian electricity system 50 min 59

Creation of an energy matrix for industry 50 min 59

Colombian electricity market 240 min 94

Use of statistical tools for energy control 300 min 136

Energy Management Systems - ISO 50001 600 min 26

Total man-hours 25.5 hours 669

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this was addressed based on the analysis performed by the Technology Partner Network's Ethics Committee and the internal analysis by the Service Chain team, applying the appropriate corrective measures. Due to the characteristics of the service that we offer and the customers we serve, there are no cultural barriers.

Service quality and reliabilityWe strive to improve the stability, quality and reliability of electricity supply, strengthening relations with all stakeholders in the energy supply chain and raising our awareness about how important continuous energy supply is to our country's productivity and competitiveness. In 2016, we received a total of 1,143 customer complaints related to outages and voltage fluctuations, in addition to 53 requests and nine claims relating to service from the Network Operators (the owners of the electricity network that distributes the energy). All of these were received through our commercial portal, and were duly handled and resolved. The most significant achievements are set out below:

We held 34 follow-up meetings regarding the state of the Network's infrastructure and operation, as well as on how specific events are addressed within the Network.

We established service level agreements with all network operators that deliver energy to our customers.

We supported our customers by reaching out to network operators, seeking to streamline and improve the quality of response.

Together with our managing partners, we supported: Genelec, Proing, Unión Eléctrica and OAG Ingeniería, adapting metering systems and the relevant documentation for our customers for compliance with the new Res Metering code. As such, we contributed to safety and information transparency in the National Electricity System (SEN).

We conducted training sessions for our customers in relation to market conditions, regulatory developments, the Spot Market's operation, and the impact of El Niño in 2015-2016.

We conducted 766 visits to our customers' plants in order to identify solutions that are aligned with their needs, as well as production improvements in terms of processes and technology, supported by our Technology Partner Network.

Information managementWe provide our customers with accurate and timely information regarding the services we provide, the status of the service, changes in regulation, as well as other relevant regulatory issues and how they are applied. Our customer communication includes a corporate plan and mechanisms such as the magazine Linea Viva (Live Line) and an exclusive section for them on the website, as well as an interactive area for comprehensive management of supply contracts. Similarly,

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we disseminate information about alternative energies, climate change, and the Company's growth strategy and management practices.

Security in the handling of customer information is of the utmost importance. We understand that their data (on energy consumption, rates, projects and, in general, all data processed during the implementation of the supply contract) comprises issues that have an impact on their competitiveness and sustainability. In accordance with current regulations, we encrypt the data that is downloaded from meters, as well as its subsequent submission to the market administrator. In addition, we conduct our daily activities in accordance with our commercial ethics code.

We activated 257 customers on the web tool so that they could check their energy consumption online. This online environment enjoys high levels of security thanks to user validation and a unique password for each customer. During 2016, a total of 162 (63.03%) customers were reported as regular users.

We did not breach any regulations or voluntary codes regarding information, nor did we detect leaks, thefts or losses of internal or external data. We were not subject to any sanctions or fines in relation to the standards or voluntary codes on communications and marketing, i.e. advertising, promotion and sponsorship.

Customer satisfaction evaluation

We employ various evaluations that comprise telephone and written surveys, analyzing a range of variables surrounding our service promise: satisfaction with the technical services provided, publications, training days, emergency service, and support from our staff. Below are the results of the satisfaction evaluation for the past three years (these results include the survey conducted by a specialized firm):

Satisfaction evaluation

(2015 - 2016)

Points

20164.81

4.792015

20144.84

The slight increase (0.02) in the overall satisfaction evaluation compared to the previous year, is mainly due to higher ratings among evaluations of the emergency service, where the average rose from 4.66 in 2015 to 4.93 in 2016. As in previous years, we have taken into account the feedback received from our customers as a basis for planning our activities, seeking to improve results in future evaluations.

131

"We are starting a new stage. Initially we focused on long term contracts and maintenance programs as we were undergoing a business transformation. We are hopeful that with ISAGEN's support, the Energy Integral Management program will be critical for our development (...). Energy for us is an important cost and, therefore, its

rationalizing and optimization are critical for our competitiveness”.

IDEAS WITH ENERGY

CLIENTS

Andrés Felipe Mejía General Manager

Mecánicos Unidos S.A.

Met

Reliably use the generation resources available during the latter stages of El Niño, and replace 50% of Termocentro's potential operation with liquid fuel in the first half of 2016.

Explore new business opportunities based on energy solutions such as consulting, primary or secondary energy sources, e.g. issues of distributed generation.

Establish Comprehensive Energy Management as a platform for identifying and promoting energy business opportunities in ISAGEN's areas of interest.

Extend energy management practices to all industrial end-customers, who will be trained in the methodology for controlling energy performance.

Strengthen and incorporate key aspects such as efficient water management, and create on-site mechanisms to offset the carbon footprint of industrial end-customers.

Make it possible for customers to check their energy consumption online.

2016CHALLENGES

Renew contracts among customers that form part of our target market, taking into account the conditions set out in the strategy and the competitive environment.

Optimize results for the commercial operation within the Spot Market, gas market, reliability market and ancillary services market, in order to contribute towards the achieving the revenue and cost target.

Manage cover for maintenance and shutdowns in order to maximize the Firm Energy Obligations allocated and sustain net revenue, as planned.

Obtain the maximum allocation of Firm Energy Obligations, in accordance with the established risk scenario, to achieve revenues that contribute to the fulfillment of the EBITDA target.

Gas procurement to support the Termocentro power plant.

Achieve 60% coverage for the Comprehensive Energy Management program among large energy consumers.

2017CHALLENGES