promigas s.a. e.s.p. and its subsidiaries...promigas s.a. e.s.p. and its subsidiaries notes to the...

Promigas S.A. E.S.P. and its subsidiaries

Consolidated Financial Statements as of

December 31 and June 30, 2013, and

Independent Auditor’s Report

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STATUTORY AUDITOR’S REPORT

To the Stockholders of

Promigas S.A. E.S.P.:

I have audited the accompanying consolidated financial statements of Promigas S.A. E.S.P.

and its subordinates, which comprise the consolidated balance sheet as of December 31 and

June 30, 2013 and the related consolidated statements of income, of changes in

shareholders´ equity, of changes in the financial position, and of cash flows for the six

months period then ended, and a summary of significant accounting policies and other

explanatory notes.

Management is responsible for the preparation and fair presentation of these consolidated

financial statements in accordance with accounting principles generally accepted in

Colombia. This responsibility includes: designing, implementing, and maintaining internal

control relevant to the preparation and fair presentation of financial statements that are free

of material misstatements, whether due to fraud or error; selecting and applying appropriate

accounting policies; and making accounting estimates that are reasonable in the

circumstances.

My responsibility is to express an opinion on these consolidated financial statements based

on my audits. I obtained the information necessary to comply with my functions and

conducted my audit in accordance with auditing standards generally accepted in Colombia.

Those standards require that I comply with ethical requirements, and plan and perform the

audit to obtain reasonable assurance about whether the consolidated financial statements are

free of material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the consolidated financial statements. The procedures selected depend on the

judgment of the statutory auditor, including the assessment of the risks of material

misstatement in the consolidated financial statements. In making those risk assessments, the

statutory auditor considers the internal control relevant to the entity´s preparation and fair

presentation of the consolidated financial statements in order to design audit procedures that

are appropriate in the circumstances. An audit also includes evaluating the appropriateness

of accounting policies used and the reasonableness of accounting estimates made by

Management, as well as evaluating the overall presentation of the consolidated financial

statements. I believe that the audit evidence obtained provides a reasonable basis to express

my opinion.

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In my opinion, the consolidated financial statements referred to above, present fairly, in all

material respects, the consolidated financial position of Promigas S.A. E.S.P. and its

subordinates as of December 31 and June 30, 2013, the consolidated results of its operations,

the consolidated changes in its financial position, and its consolidated cash flows for the six

months periods then ended, in accordance with accounting principles generally accepted in

Colombia, applied on a consistent basis.

These financial statements and notes to financial statements were translated into English

from statements originally issued in Spanish. The financial statements have been prepared in

accordance with accounting principles generally accepted in Colombia, which may differ

from accounting principles generally accepted in other countries.

Carmen Rosa Campo Hernández

Statutory Auditor of Promigas S.A. E.S.P.

T. P. 67994 - T

Member of KPMG Ltda.

March 17, 2014

PROMIGAS S.A. E.S.P. AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31 AND JUNE 30, 2013

(Expressed in thousands of Colombian pesos)

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1. REPORTING ENTITY

Promigas S.A. E.S.P. (hereinafter, “Promigas S.A. E.S.P.”, “Promigas” or “the

Company”) was established according to Colombian laws on December 27, 1974 and its

corporate purpose is the purchase, sale, transportation, distribution, exploitation and

exploration of natural gas, petroleum and hydrocarbons and the gas and oil activities in

all their forms. It can also sell or provide goods or financial and non-financial services to

third parties, and finance with their own resources the acquisition of goods or services by

third parties. Its corporate domicile is located in the city of Barranquilla (Colombia) and

its term of duration goes until December 27, 2074.

On March 18, 2013, the Ordinary General Stockholders’ Meeting modified the Company

bylaws and established the semi-annual account cut-off on June 30 and December 31,

every year, which formerly was once a year on December 31.

On January 31, 2013, Promigas S.A. E.S.P. and Fiducor S.A. entered into a purchase-sale

contract whereby Promigas transferred 100% of the shares of its subsidiary company

Promigas Telecomunicaciones S.A.S., complying with the commitments established in

the purchase-sale promise previously entered into on December 12, 2012. Fiducor S.A.

acts in its capacity as managing company of Fondo de Infraestructura Colombia Ashmore

IFCP and of Fondo de Co-Inversión with the Fondo de Infraestructura Ashmore I

Compartimento I.

This transaction amounted to $192.000.000, generating profits of $136.437.963 and was

made within the corporate strategy of Promigas S.A. E.S.P. of focusing its businesses on

the natural gas transportation and distribution activities, electric power distribution and

commercialization activities, and related businesses, to continue growing and

consolidating in the aforementioned sectors.

Promigas recorded its investment in Promigas Telecomunicaciones S.A. E.S.P. under the

equity method. The value of the assets, liabilities and equity as of December 31, 2012 and

the result of operations of Promigas Telecomunicaciones S.A.S.’ for the year then ended

were the following:

Assets Liabilities

Shareholder’s

Equity Net Income

$ 162.083.844 $ 87.924.371 $ 74.159.473 $ 10.758.761

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LEGAL AND REGULATORY FRAMEWORK

Promigas is mainly ruled by Law 142 of 1994, whereby it is established the Domiciliary

Public Utilities Regime, Law 689 of 2001 and Resolution CREG 071 of 1999, whereby it

is established the Sole Bylaws of Natural Gas Transportation – (RUT, for its Spanish

initials) in Colombia, other regulation, its bylaws and other norms contained in the Code

of Commerce.

Since it is a public utility company, the rates charged by the Company to its customers for

natural gas transportation and distribution services are regulated by the National

Government through the Energy and Gas Regulatory Commission (“Comisión de

Regulación de Energía and Gas - CREG”). The current distribution rates were revised in

2004 as per Resolution CREG 86 of 2004. In August 2010, the CREG issued Resolution

126 of 2010, which establishes the general remuneration criteria for the natural gas

transportation service and the general scheme of charges of the national transportation

system for the rate period. In September 2012, the CREG issued Resolution 117, whereby

it stated a new transportation rate. The resolution was subject to an appeal for reversal

filed by Promigas, which was resolved through Resolution 122 of November 2012.

Consequently, the new gas transportation tariff entered into effect and started to be

charged in the December 2012 billing. Given that the extension of the infrastructure built

in the Cartagena – Sincelejo trench was subject to review by the CREG, the investment to

be made was defined in a new administrative process that ended up with the issuance, in

last July, of Resolution 68 of 2013. Accordingly, the transportation tariffs of this trench

were set and are being charged as from August 2013.

The new methodology for determining the natural gas distribution tariffs during the next

five (5) years was issued on January 15, 2014, through Resolution CREG 202 of 2013.

The main operations of Promigas and its subsidiaries are basically the following:

Natural Gas Transportation and Services – Promigas and its subsidiaries dedicated to

these activities sell natural gas transportation capacity and related services to gas

producers, natural gas distribution companies and other large customers.

Natural Gas Distribution – The company´s subsidiaries dedicated to this activity

distribute and sell natural gas primarily to residential, industrial and commercial

customers.

Power generation and distribution - The subsidiaries devoted to this activity generate

and/or distribute and sell electricity primarily to residential, commercial, industrial

customers, free trade zones and to economically related parties.

Telecommunications – The subsidiaries devoted to this activity provide transmission

services to other carriers and telecommunication providers through their fiber optic cable

network.

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Ports management and related services - The subsidiary devoted to this activity invests in

construction, maintenance and management of ports and also services such as loading and

discharge, storage and others services related to port activities.

Following is a summary of Promigas and its main subsidiaries by their primary

operations:

Business Company

Natural Gas Transportation and Related

Services

- Promigas S.A. E.S.P.

- Transoccidente S.A. E.S.P.

- Transportadora de Metano S.A. E.S.P.

- Promioriente S.A.

- Promisol S.A.S.

Natural Gas Distribution - Surtidora de Gas del Caribe S.A.

E.S.P.

- Gases de Occidente S.A. E.S.P.

- Gases del Pacífico S.A.C.

- Gases del Norte del Perú S.A.C.

Power Generation and Distribution - Compañía Energética de Occidente

S.A. E.S.P. (CEOC)

- Enercolsa S.A.S.

- Zonagen S.A.

- Enerfranca S.A. E.S.P.

Telecommunications - Orion Call Center

Ports Management and Related Services - Sociedad Portuaria El Cayao S.A. E.S.P.

2. SIGNIFICANT ACCOUNTING POLICIES

These financial statements are the English translation of those originally prepared by the

Company in Spanish and presented in accordance with the accounting principles

generally accepted in Colombia, or Colombian GAAP. The effects of the differences

between Colombian GAAP and the accounting principles generally accepted in the

countries in which these financial statements are to be used have not been quantified.

Accordingly, the accompanying financial statements are not intended to present the

financial positions, results of operations, shareholders equity, and changes in

shareholders´ equity and in financial position or cash flows in accordance with

accounting principles generally accepted in the countries of users of the financial

statements, other than Colombia.

The consolidated financial statements of the Company and its subsidiaries were

prepared and presented in accordance with accounting principles generally accepted in

Colombia, which are prescribed by legal norms especially by Decree 2649 of 1993 and

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the norms issued by the Offices of the Colombia´s Superintendents of Finance, of

Public Utilities and of Corporations, as well as by other legal norms. Certain accounting

principles applied by the Company and its subsidiaries that conform to accounting

principles generally accepted in Colombia, might not conform to accounting principles

generally accepted in other countries.

Below, there is a description of the main accounting policies and practices applied by

the Company and its subsidiaries:

a. Consolidation of financial statements – The Company consolidates its financial

statements applying the method of global consolidation, which consists of

incorporating to the financial statements of the Company, all assets, liabilities, equity

and results of the subsidiaries, with the elimination of the investments and the

reciprocal operations. All operations between related companies were eliminated in

the consolidation. The consolidated financial statements as of December 31 and June

30, 2013, include the financial statements of Promigas S.A. E.S.P. and of those

entities controlled by Promigas (its subsidiaries, hereinafter, “the Companies”).

Control is achieved where Promigas has directly or indirectly the power to govern

the decision making process.

The consolidated companies are:

Percentage of Stock December 31, 2013 June 30, 2013

Company Direct Direct Direct Direct Direct Direct

Surtidora de Gas del Caribe S.A. E.S.P. 99.98% - 99.98% 99.98% - 99.98%

Transoccidente S.A. E.S.P. 69.00% - 69.00% 69.00% - 69.00%

Promioriente S.A. E.S.P. 73.27% - 73.27% 73.27% - 73.27%

Transportadora de Metano E.S.P. S.A. 99.66% - 99.66% 99.66% - 99.66%

Gases de Occidente S.A. E.S.P. 90.12% - 90.12% 90.12% - 90.12%

Compañía Energética de Occidente S.A. 49.00% 51.00% 100.00% 49.00% 51.00% 100.00%

Orion Call Center S.A.S. - 100.00% 100.00% - 100.00% 100.00%

Promisol S.A.S. 100.00% - 100.00% 100.00% - 100.00%

Enercolsa S.A.S. (1) - 51.00% 51.00% - 51.00% 51.00%

Gases del Pacífico S.A.C. (2) 75.00% 25.00% 100.00% - - -

Gases del Norte del Perú S.A.C. (3) 75.00% 25.00% 100.00% - - -

Enerfranca S.A. E.S.P (4) - 100.00% 100.00% - - -

Zonagen S.A. (5) - 99.58% 99.58% - - -

Sociedad Portuaria El Cayao S.A. E.S.P. (6) 50.00% - 50.00% - - -

(1) In the first semester of 2013, 936,734 shares were acquired corresponding to 51% of Enercolsa

S.A.S., an electric power service-providing company in the city of Cartagena. Total negotiation

amounted to $3.934.282, and a goodwill of $2.050.963 was generated. (See Note 11). As a result of

this transaction, at June 30, 2013, the investment was recorded under the equity method resulting a

related equity method surplus equivalent to $21.697 and $14.351, respectively. Dividends

amounting to $76.511 were received in May 2013.

(2) Promigas S.A. E.S.P. and Surtigas S.A. E.S.P. participated in the bid process launched by the

Promoting Agency of Private Investment in Peru “Proinversiones”, to give under concession the

distribution of natural gas in the northern part of Peru, which was awarded in their favor in

September 2013.

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(3) Gases del Norte del Perú S.A.C. was incorporated on November 12, 2013, as per Recording

Certificate No. 13125664, with an interest share of Promigas S.A. E.S.P. and Surtigas S.A. E.S.P. of

75% and 25%, respectively, with an initial capital of US$ 1,000.

(4) In November 2013, two hundred and fifty (250) shares corresponding to 100% of Enerfranca S.A.S.

were acquired for an amount of $250.000. Additionally, $29.250.000 was given on an advanced

payment basis for future capitalization, to pay-off the liabilities of Enerfranca; on November 27,

2013 the Extraordinary General Stockholders’ Meeting authorized its capitalization.

(5) In the second semester of 2013, thirty-three thousand nine hundred and five (33,905) shares

corresponding to 99.58% of Zonagen S.A. were acquired; the total value of the acquisition was

$3.403.400, and of this amount, $2.815.550 was actually paid.

(6) In February 2013, as per the Extraordinary General Stockholders’ Meetings minute No. 035, it was

approved the capitalization by all of the stockholders of 2,346,949 shares at a $10.000 per share

value. On December 19, 2013, Promigas S.A. E.S.P. completed the acquisition of a 50%, share

through the acquisition of 4.417.391 shares held by Colener S.A.S., which left Promigas S.A. E.S.P.

with a total of 8.834.784 shares.

The financial statements of foreign subsidiaries were translated into Colombian pesos

for consolidation purposes, as follows:

Assets and liabilities at the market representative exchange rate as of December 31 and

June 30, 2013; revenues, costs and expenses, using the monthly average exchange rate

of the respective month; and the shareholders’ equity using historical exchange rates.

Selected information from the separate balance sheets and income statements of the

consolidated subsidiaries for the semesters ended as of December 31 and June 30, 2013

are as follows:

December June

Company Assets Liabilities Company Assets Liabilities Company Assets Liabilities

Surtidora de Gas del Caribe S.A. E.S.P.

694.701.832

519.227.847

175.473.985

28.542.928

660.211.945

498.955.150

161.256.795

22.038.079

Transoccidente S.A. E.S.P. 13.373.374 935.725 12.437.649 858.607 13.289.333 801.175 12.488.158 810.816

Promioriente S.A. E.S.P. 506.549.852 324.623.635 181.926.217 10.534.032 525.666.493 346.264.149 179.402.344 6.924.105 Transportadora de Metano

E.S.P. S.A. 148.786.196 27.138.502 121.647.694 9.442.560 147.058.645 26.868.631 120.190.014 8.048.175

Gases de Occidente S.A. E.S.P. 871.580.993 572.158.134 299.422.859 45.663.118 806.880.415 548.701.088 258.179.327 46.898.697

Compañía Energética de

Occidente S.A. 453.381.647 237.425.795 215.955.852 14.250.852 432.722.149 216.195.186 216.526.963 14.897.643

Orion Call Center S.A.S. 2.934.541 703.628 2.230.913 210.367 2.777.938 757.392 2.020.546 189.349

Promisol S.A.S. 94.345.731 33.297.828 61.047.903 5.301.901 57.818.482 3.701.131 54.117.351 1.382.583

Enercolsa S.A.S. 4.290.919 248.342 4.042.577 279.110 4.159.270 395.803 3.763.467 42.543

Gases del Pacífico S.A.C. 9.892.924 500.712 9.392.212 (243.395) - - - -

Gases del Norte del Perú S.A.C. 1.901 - 1.901 - - - - -

Enerfranca S.A. E.S.P. - - 32.700.982 2.652.669 - - - -

Zonagen S.A. - - 2.421.711 (983.189) - - - -

Sociedad Portuaria El Cayao S.A. E.S.P.

41.110.265 15.352.386 25.757.879 (956.453) - - - -

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The effect of the consolidation in the financial statements of the company as of

December 31 and June 30, 2013 is as follows:

Individual Consolidated (1) Effect

December

Total assets $ 2.787.900.575 $ 4.503.026.837 $ 1.715.126.262

Total liabilities $ 1.180.142.345 $ 2.810.603.231 $ 1.630.460.886

June

Total assets $ 2.725.289.341 $ 4.255.207.707 $ 1.479.352.276

Total liabilities $ 1.206.404.722 $ 2.668.118.271 $ 1.461.713.549

(1) The non-controlling interest as of December 31 and June 30, 2013, is $ 97.359.998 and $

79.592.335, respectively.

b. Reporting currency – According to legal provisions, the reporting currency used by

the Company is the Colombian peso.

c. Foreign currency transactions – Foreign currency transactions and balances

denominated in a currency other than the Colombian pesos are translated into

Colombian pesos at the official exchange rate as certified by the Colombian

Financial Superintendency. The exchange gains and losses resulting from accounts

payable and liabilities denominated in foreign-currency that resulted from the

acquisition of assets are capitalized until the assets are in conditions to be used or

sold. All other exchange gains and losses are included in operations.

The official closing exchange rates used to translate the foreign currency assets and

liabilities were Col$1,926.83 per US$1 as of December 31, 2013 and Col$1,929.00

per US$1 as of June 30, 2013.

d. Investments – Temporary investments are initially recorded at cost and subsequently

valued at their net realizable value. Investments made in shares of non-controlled

companies are recorded at the acquisition cost and subsequently adjusted at their

intrinsic value through revaluations.

e. Allowance for doubtful accounts – The allowance for doubtful accounts is reviewed

and updated at the end of each period based upon aging analysis and individual

analyses of the credit-worthiness of the customers.

f. Inventories – Inventories are recorded at cost. The cost is determined based upon the

average cost method. The contingencies for losses are recognized through provisions

in order to adjust them at their net realization value.

g. Property, gas pipelines, plant and equipment – Recorded at cost and adjusted for

inflation through December 31, 2005. The carrying value of the assets includes all

expenditures and charges necessary to put them in conditions of being used, such as

engineering, supervision, taxes and financial expenses. Depreciation of most of these

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assets is calculated applying the straight-line method over their estimated useful

lives. Annual depreciation rates are the following:

Constructions and buildings 5%

Gas pipelines, plant and networks (1) 2%

Machinery and equipment (2) 6.7% - 10%

Transportation fleet and equipment 20%

Computer and communications equipment 20% - 25%

Office equipment 10%

Extraordinary improvements and repairs that extend the useful life of the asset are

capitalized; all other repairs and preventive maintenance are recorded in operations.

(1) In 2013, the Company changed the useful lives of gas pipelines, plants and networks, from 20 to 50

years, based on technical studies and currently in force accounting regulations in order to reflect a

better correlation of its revenues and costs.

The effect of the change in useful lives, charged to the depreciation expense as of June 30, 2013,

was as follows:

20 Years 50 Years Effect

Promigas $ 15.177.099 $ 3.089.036 $ 12.088.063

Transportadora de Metano E.S.P. S.A. 1.511.732 344.262 1.167.470

Transoccidente S.A. E.S.P. 205.980 47.941 158.039

Promioriente S.A. E.S.P. 10.463.298 3.940.960 6.522.338

Surtidora de Gas del Caribe S.A. E.S.P. 2.720.677 758.882 1.961.796

Gases de Occidente S.A. E.S.P. 2.849.475 800.387 2.049.088

$ 32.928.261 $ 8.981.468 $ 23.946.794

(2) Taking into account the upcoming convergence to International Financial Reporting Standards, in

the second semester of 2013, the Company decided to componetize certain assets that had been

considered as a single one. With the support of the technical area, it assigned different useful lives

to the compressor stations that as of June 30, 2013 had been assigned a 10-year useful life; the latter

with the purpose of reflecting better correlation of its revenues and costs. The effect of the change

in useful life as of December 31, 2013 was a lower expense equivalent to $360.995.

Component

Useful Life

Years Annual Rate

Turbine (30,000 hours) 11*

Compressor or motor-compressor (60,000 hours) 22*

Valve skid 20 5%

Auxiliary systems

Coolers 20 5%

Fire-fighting system 10 10%

Unit Control Panel 5 20%

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Component

Useful Life

Years Annual Rate

Auxiliary equipment

Fuel gas skid 20 5%

Air compressor skid 10 10%

Station’s control panel 5 20%

Motor Control Center 20 5%

Power generator 10 10%

Valves and accessories 20 5%

The equivalence is calculated based on the statistical percentage of use of each compressor station.

h. Deferred depreciation – The excess fiscal depreciation over book depreciation is

recorded as deferred depreciation and the corresponding tax effect is recorded as

deferred tax liability. To be entitled to the fiscal deduction, the Companies constitute

a reserve equivalent to 70% of the higher value requested for tax purposes.

i. Leasing – Leasing contracts are accounted for as follows:

Finance Leases

Assets held under finance leases are recognized as intangible assets at the present

value of the minimum lease payments including the purchase option. The

corresponding liability to the lessor is included in the balance sheet as a financial

obligation. Lease payments are apportioned between finance charges and

reduction of the lease obligation.

Depreciation is calculated under the straight line method over the useful life of

the asset and is recorded as amortization in the income statement. The useful life

of gas pipelines was changed from 20 to 50 years (see literal g); the effect

charged to amortization for gas pipelines under leasing, for the semester ended as

of June 30, 2013 is the following:

20 Years 50 Years Effect

Promigas $ 1.780.176 $ 506.113 $ 1.274.063

Transportadora de Metano E.S.P. S.A. 178.372 49.135 129.237

Promioriente S.A. E.S.P. 1.000.000 400.000 600.000

Surtidora de Gas del Caribe S.A. E.S.P. 2.214.991 872.451 1.342.540

Gases de Occidente S.A. E.S.P. 5.124.082 1.815.916 3.308.166

$ 10.297.621 $ 3.643.615 $ 6.654.006

Operating Lease

Rentals payable under operating leases are charged to profit or loss. Neither an

asset nor a liability is recognized for the assets received. The requirements and

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conditions for a contract to be recognized as an operating lease are stated by

Article 127 of the Tax Statute.

j. Intangibles – Correspond to the costs (adjusted for inflation until 2005) of software

and licenses which are amortized over 5 years and goodwill generated in the

acquisition of shares which is amortized over 20 years by the decline balance method

with a residual value. Goodwill is tested for impairment on an annual basis.

k. Deferred charges – They mainly correspond to:

Pre-operating costs and expenses incurred by Transmetano E.S.P. S.A. are

amortized using the straight-line method, considering the same useful life of the

gas pipeline.

Other deferred charges incurred in the Ili project which are amortized over 5

years, which expiration date is May of 2013.

Deferred income taxes.

l. Revaluations of assets – This account corresponds to the differences between: a) the

replacement value determined by technical appraisals and the net book value of

property, gas pipelines, plant and equipment; and b) the intrinsic value and the book

value of the investments.

Such revaluation of assets is recorded in the non-current assets account “Revaluation

of Assets” with the offsetting entry credited to the shareholders’ equity account

“Surplus from revaluation of assets”, which cannot be distributed. If the revaluation

results in a decrease in the book value of the asset the difference is charged against

income to the extent that it exceeds the balance, if any, held in the “surplus from

revaluation of assets” account; except for those related to investments made in non-

controlled companies, which are recorded in the account “Surplus from revaluation

of assets”, even if this account net balance ends up being negative.

Technical appraisals are prepared every three (3) years. During the interim, they are

updated based upon the consumer price index (CPI), stated by the National

Administrative Department of Statistics, DANE.

m. Labor obligations – Correspond to the Company’s obligations for mandatory and

voluntary employee benefits under applicable labor agreements.

Retirement pension obligations represent the present value of all future allowances

that the Company will pay to those employees that have fulfilled or that will fulfill

certain legal requirements regarding age, time of service and others, determined on

the basis of actuarial studies that the Company obtains every year, in accordance

with regulations issued by the Superintendence of Corporations, without the specific

investment of funds.

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For employees covered by the social security regime (Law 100 issued in 1993), the

companies cover their pension obligation through the payment of contributions to

Colpensiones (before Social Security Institute) and/or to the Private Pension Funds,

under the terms and conditions provided for in the aforementioned law.

n. Foreign currency forward agreements – Forward agreements are used by the

company to hedge against exchange rate fluctuation from foreign currency covering

a percentage of revenues in dollars, and are recorded at their nominal value on

memorandum accounts. Unsettled agreements are measured at fair value and

recognized in equity as far as they are qualified as effective, being effective those

with effectiveness range between 80% and 125%. The agreements are recorded at the

negotiation rate and the valuation of unrealized instruments is recorded in equity

accounts, provided that the ratio of the variation of the underlying divided by the

variation of the derivative is 100%. Otherwise, it is evaluated whether the variation

of the underlying is lower that the variation of the derivative with the purpose of

determining the effect on operations. Gains and losses are recognized in the income

statement at the time of settlement at each month’s closing.

o. Income taxes – The provisions for income tax and income tax for equity (CREE) are

determined based on the taxable profit or presumptive income, whichever is higher,

estimated at rates specified in the tax law. The effect of temporary differences that

implies the payment of a lower or higher tax in the current year, calculated at current

rates, is recorded as a deferred income tax asset or liability, as applicable, provided

that there is reasonable expectation that those differences will reverse in the

foreseeable future.

p. Memorandum accounts – Memorandum accounts mainly include the contingent

rights and liabilities, the differences between book and fiscal figures and fully

depreciated fixed assets.

q. Recognition of revenue, costs and expenses – Revenues are recognized in the month

when services are rendered. Likewise, costs and expenses are recorded on an accrual

basis.

r. Cash – For purposes of presentation in the statement of cash flows the Company

classifies temporary investments with a high liquidity such as trust mandates as cash

equivalents.

s. Accounting estimates – The preparation of consolidated financial statements in

conformity with accounting principles generally accepted in Colombia, requires

Management to make estimates that affect the reported amounts of assets and

liabilities and disclosure of contingent assets and liabilities as of the date of the

consolidated financial statements and the reported amounts of revenues and expenses

during the reporting period. Actual results could differ from those estimates.

t. Related parties – The assets, liabilities, and operations with companies belonging to

Promigas and its subsidiaries are presented as related parties.

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u. Reclassifications – Certain June 2013 amounts have been reclassified to conform to

the December 2013 presentation.

3. IFRS CONVERGENCE

According to Law 1314 of 2009 and Regulatory Decrees 2706 and 2784 of 2012, issued

by the Ministry of Commerce, Industry and Tourism, Promigas S.A. E.S.P. and its

Subsidiaries belong to Group 1. In February 28, 2013, Promigas issued to the

Superintendent of Public Utilities the implementation plan of International Financial

Reporting Standards (IFRS). The transition period started on January 1, 2014 and the

issuance of the first financial statements under International Financial Reporting

Standards will be in 2015.

Promigas and its Subsidiaries must file, on June 30, 2014 at the latest, the opening

statement of financial position prepared under IFRS as of January 1, 2014. The

implementation of IFRS is being oversought by the Office of the Superintendent of

Finance.

4. OPERATIONS IN FOREIGN CURRENCY

As of December 31 and June 30, 2013, the Companies had the following foreign-

currency denominated assets and liabilities, recorded at their Colombian-peso

equivalents:

Decmber June

US Dollars Col$ 000 US Dollars Col$ 000

Current assets $ 4,897,294 $ 9.436.254 $ 5,970,532 $ 11.517.156 Long – term assets 102,827,994 198.132.063 93,714,131 180.774.559 Total assets 107,725,288 207.568.317 99,684,663 192.291.715 Current liabilities 8,913,121 17.174.069 10,263,723 19.798.721 Long-term liabilities 41,055,000 79.106.006 44,370,000 85.589.730 Total liabilities 49,968,121 96.280.075 54,633,723 105.388.451 Net asset position $ 57,757,167 $ 111.288.242 $ 45,050,940 $ 86.903.264

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5. CASH AND BANKS

December June

Cash $ 707.229 $ 401.728

Banks:

Local 96.038.719 88.248.108

Foreing 8.685.250 325.949

Funds 41.042.091 63.779.091

$ 146.473.289 $ 152.754.876

6. TEMPORARY INVESTMENTS

Annual effective

Interest

December June December June

Term deposit certificates (1) 1,23% -

5,00% 1,20% - 5,79% $ 34.983.335 $ 15.240.914

Investment funds 3.20% 4,07% 45.515.368 44.226.323 Trust mandates (2) 2,07% -

3,53%

(2,98%) -

4,58% 33.028.402 17.212.689

Government bonds - - 247.505 -

Funding security operations 0,75% 1,50% 5.118 5.118

$ 113.779.728 $ 76.685.044

1) As of December 31, 2013, the increase mainly corresponds to the investment in the company

Sociedad Portuaria El Cayao S.A. E.S.P., amounting to $ 14.611.147.

2) As of December 31, 2013, Gases de Occidente S.A. E.S.P. transferred $18.588.908 from cash and

banks to temporary investments in order to obtain a better financial yield.

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7. ACCOUNTS RECEIVABLE

December June

Gas transportation and distribution (1) $ 288.385.936 $ 274.315.217

Energy commercialization, distribution and

subsidies (2)

104.658.483

109.616.035

Sale of gas and compressed natural gas equipment

and fuels

8.746.567

10.157.765

Non-banking financing (3) 153.469.170 145.683.919

Related parties 14.205.467 13.149.838

Loans made to third parties 11.572.263 12.307.941

Employee loans 2.396.746 2.605.442

Prepaid taxes and contributions (4) 3.863.821 22.527.201

Prepayments 69.250.810 69.219.898

Dividends receivable 132 254.289

Sundry debtors 23.784.968 26.525.155

Doubtful accounts 9.209.368 9.143.674

689.543.731 695.506.374

Less allowance for doubtful accounts (49.813.826) (47.466.699)

Current portion $ 639.729.905 $ 648.039.675

Gas transportation and distribution (1) $ 202.904.022 $ 196.808.376

Sale of gas and compressed natural gas equipment

and fuels 25.182 46.873

Non-banking financing (3) 116.583.878 112.444.564

Employee loans 10.096.551 10.165.558

Loans made to third parties 7.301.820 7.740.113

Prepayments - 830.624

Sundry debtors 380.699 381.564

Long-term portion $ 337.292.152 $ 328.417.672

Total $ 977.022.057 $ 976.457.347

(1) Includes the accounts receivable from users corresponding to the distribution and commercialization

of the natural gas public utility, the construction of internal networks and other associated services

for the companies Surtigas S.A. E.S.P., and Gases de Occidente S.A. E.S.P.

(2) In 2013 the portfolio of receivables of distribution and commercialization of power increases in

16%. The increase of these receivables amounts to $11.031.000 and is explained by 6.669 new

clients.

- 21 -

(3) It corresponds to accounts receivable with domiciliary gas customers related to the “Brilla” project,

payable over periods of 1 to 5 years. Interest rate applied is the maximum legal rate allowed by the

Superintendent of Finance.

(4) As of June 30, 2013, it corresponds to the prepayment of income tax for 2013 year of Promisol S.A.

As of December 31, 2013, there are no restrictions or encumbrances on the accounts

receivable.

As of December 31, 2013, the maturities of long-term accounts receivable are as follows:

From July 1st 2014 to June 30

th 2015 $ 160.304.600


th 2016 83.681.118


st 2017 52.476.634


st 2018 29.112.706


st 2019 and thereafter 11.717.094

$ 337.292.152

The movement of the allowance for doubtful accounts was as follows:

December June

Beginning balance $ (47.466.699) $ (44.072.982)

Charge to operations (13.226.078) (7.654.230)

Written-off receivables 8.700.073 2.623.322

Recoveries 2.178.878 1.637.191

$ (49.813.826) $ (47.466.699)

8. INVENTORIES

December June

Materials, spare parts and accessories $ 31.332.273 $ 32.509.510

Constructions available for sale 640.699 598.194

Inventories in transit 366.984 219.964

Inventory held by third parties 2.788.215 3.848.784

35.128.171 37.176.452

Inventories allowance (229.909) (19.988)

Current portion $ 34.898.262 $ 37.156.464

Materials, spare parts and accessories $ 12.001.184 $ 11.320.605

Inventories in transit 835.859 319.105

12.837.043 11.639.710

Inventories allowance (6.163) (6.092)

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December June


Total $ 47.729.142 $ 48.790.082

The inventory provision movement for the semesters ended on December 31 and June 30,

2013, was as follows:

December June

Begining balance $ (20.080) $ (20.388)

Provision increase (218.675) (5.692)

Writte-offs 8.863 - -

Saldo final $ (236.072) $ (26.080)

9. PERMANENT INVESTMENTS

As of December 31, 2013

Company Economic Activity Number of

Shares

% Held Book Value

Gas Natural de Lima y Callao (1) Gas distribution 88.211.399 40,00% $ 170.687.784

Gases del Caribe S.A. E.S.P. Gas distribution 5.440.488 30,99% 3.758.486

Sociedad de Acueducto, Alcantarillado y

Aseo de Barranquilla S.A. E.S.P. Water supply 474.271 0,65% 917.043

Aeropuerto de Barranquilla Services 33.000.000 9,76% 77.199

Colombiana de Extrusión S.A. Manufacturing 157.710 10,00% 1.212.546

Metrex, S.A. Manufacturing 240.000 7,70% 431.374

E2 - Energía Eficiente, S.A. E.S.P. Gas comercialization 293.138 32,62% 2.051.755

Concentra S.A.S

Information

management 420.000 23,80% 420.000

Complejo Energético del Este (3) Regasification of NLG 13.206 33,00% 2.861.343

Other minor 2.219.898 1,42% 991.453

Mnadatory bonds and other investments 24.279

183.433.262

Less – valuation allowance (1.373.463)

$ 182.059.799

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As of June 30, 2013

Company Economic Activity Number of

Shares

% Held Book Value

Gas Natural de Lima y Callao (1) Gas distribution 88.211.399 40,00% $ 170.879.204

Gases del Caribe S.A. E.S.P. Gas distribution 5.440.488 30,99% 3.758.486

Sociedad de Acueducto, Alcantarillado y

Aseo de Barranquilla S.A. E.S.P. Water supply 474.271 0,65% 917.043

Aeropuerto de Barranquilla Services 33.000.000 9,76% 77.199

GNC – Inversiones S.A.S. en Liquidación

(2) Investments 1.039.975 4,95% 1.039.975

Colombiana de Extrusión S.A. Manufacturing 157.710 10,00% 1.212.546

Metrex, S.A. Manufacturing 240.000 7,70% 431.374

Energía Eficiente, S.A. E.S.P. Gas comercialization 293.138 32,62% 1.813.493

Concentra S.A.S

Information

management 420.000 23,80% 420.000

Sociedad Portuaria el Cayao S.A.

E.S.P.(4)

Regasification of NLG 2.349.449 25,00% 3.815.692

Complejo Energético del Este S.A. Regasification of NLG 13.206 33,00% 2.547.432

Other minor 2.219.898 1,42% 1.074.023

Mnadatory bonds and other investments 21.760

188.008.227

Less – valuation allowance (2.629.938)

$ 185.378.289

(1) The second capital contribution to Gas Natural de Lima y Callao S.A. amounting to US$10,000,000,

was disbursed in February 2013. Also, in June 2013, as per the General Shareholders’ Board of Gas

Natural de Lima y Callao S.A., it was approved the capitalization of US$62,227,222, corresponding to

the retained earnings as of December 2012, proportional to the ownership share of each stockholder.

As a result, Promigas shares increased from 63,320,511 shares to 88,211,399 shares, thus increasing

its ownership share by 24,890,888 shares.

(2) In December 19, 2013, Promigas S.A. E.S.P., and Promisol S.A.S., sold to Organización Terpel S.A.

the interest shares of 4.95% and 0.05%, respectively, which they held in GNC Inversiones S.A..

(3) In May 2013, as per Minute of the Board of Stockholders, it was approved the capitalization of 13,206

shares at a US$100 value per share in the company Complejo Energético del Este S.A., participating in

33% of its equity.

(4) According to Minute No. 035 of the Extraordinary General Stockholders’ Meeting held in February, it

was approved the capitalization by all the stockholders of 2,346,949 shares at a $10.000 per share

value. On December 19, 2013, Promigas S.A. E.S.P. completed the acquisition of an interest share of

50%, through the acquisition of 4,417,391 shares held by Colener S.A.S., which left Promigas S.A.

E.S.P. with a total of 8,834,784 shares.

- 24 -

10. PROPERTY, GAS PIPELINES, PLANT AND EQUIPMENT

December June

Lands $ 14.667.814 $ 11.907.977

Livestock 9.400 9.400

Constructions in process (1) 65.495.262 155.087.539

Movable assets in the warehouse 5.226.219 955.065

Buildings 52.283.183 45.147.181

Computer and communications equipment 34.563.280 31.250.963

Furniture and fixtures 12.423.816 10.960.931

Transportation equipment 4.674.594 4.800.923

Machinery and equipment (2) 293.763.504 199.463.513

Gas pipelines, plants and networks (2) 1.782.204.336 1.662.490.081

2.265.311.408 2.122.073.573

Fiscal depreciation (2) (3) (1.089.278.113) (1.071.716.735)

Deferred depreciation 78.299.445 81.716.366

Total accumulated depreciation (1.010.978.668) (990.000.369)

Property, plant and equipment valuation

allowance (1.248.749) (1.358.847)

$ 1.253.083.991 $ 1.130.714.357

(1) During the second semester of 2013 the variation was mainly generated by the following movements:

a) In Promigas S.A. E.S.P., it includes additions for works of the sub-fluvial crossing of the Magdalena

river and capitalizations for the completion of the following projects: Extension of Palomino

station; Adapting of stand-by compressor - Caracolí Reficar; Gas quality measurement; lobular

meters; Km 0 Automation; Scada system; Sub-fluvial crossing – Gas pipeline Project.

b) Promioriente S.A. E.S.P. capitalized geotechnical works in the construction of trenches of the

Gibraltar-Bucaramanga gas pipeline.

(2) As of December 31, 2013, the variation was mainly generated by the following movements:

a) In Promigas, it increases by the capitalizations of the extension of the Palomino station and the

stand-by compressor - Caracolí Reficar.

b) As of December 31, 2013, the consolidated financials of Promigas include the company

Enerfranca S.A., by $23.413.573.

(3) In Promigas S.A. E.S.P., the increase corresponds to the capitalization made, in the second semester of

2013, of the sale of sub-fluvial crossing. Additionally, Promioriente SA. E.S.P., and Gases de

Occidente S.A. E.S.P., made investments in gas pipelines.

- 25 -

Total depreciation charged to operations for the semesters ended as of December 31 and

June 30, 2013 was $24.624.985 and $20.926.468, respectively.

11. OTHER ASSETS

December June

Revaluation of property, plant and equipment (1) $ 943.098.167 $ 901.852.941

Revaluation of permanent investments (2) 147.841.139 131.148.629

$ 1.090.939.306 $ 1.033.001.570

Deferred charges (1) $ 14.682.063 $ 1.003.468

Income tax 2.626.285 2.462.348

Software 754.133 674.335

Autonomous equity 24.290.669 39.455.070

Total Current Other Assets 42.353.150 43.595.221

Deferred charges (1) 71.699.874 59.329.073

Deferred income tax 17.365.075 17.643.971

Deferred monetary correction charge 2.687.737 2.862.974

Leasehold improvements (2) 180.520.031 143.067.893

Goodwill 155.177.427 155.257.113

Software 40.118.237 38.141.739

Rights 52.254.849 46.951.360

Other intangibles 13.245.847 12.812.342

Assets acquired under leasing (3) 202.225.649 201.839.534

Autonomous equity 2.221.730 1.637.648

737.516.456 679.543.647

Accumulated amortization (95.370.374) (86.784.450)

642.146.082 592.759.197

Other Assets $ 1.775.438.538 $ 1.669.355.988

(1) As of December 31, 2013 it increases mainly due to the studies conducted for the design and assembly

of the LNG Terminal in the city of Cartagena by Sociedad Portuaria El Callao S.A. E.S.P. amounting

to $13.679.576.

(2) As of December 31 and June 30, 2013, it mainly corresponds to the investment made by Compañía

Energética de Occidente S.A. E.S.P. in compliance with the the management contract amounting to

$149.208.000 and $114.895.000, respectively.

(3) As of December 31, and June 30, 2013, it mainly includes: $101.004.378 of financial leasing contracts

acquired by Gases de Occidente S.A. E.S.P. in 2008, 2009 and 2010 for the construction of external

distribution networks and regulation stations in the Departments/States of Cauca and Valle del Cauca;

- 26 -

$40.000.000 of financial leasing acquired in 2010 by Promioriente S.A. E.S.P. for the construction of a

trench of the Gibraltar-Bucaramanga gas pipeline and $55.831.325 of financial leasing acquired by

Promigas S.A. E.S.P. corresponding to the Caracolí-Heroica gas pipeline ($19.354.171 in 2010) and La

Creciente gas pipeline ($35.414.178 in 2009).

(4) The appraisals of property, plant and equipment were updated as of June 30, 2013 with a CPI of 1.49%

(index as of May 31, 2013) and depreciated taking into consideration the change in useful lives from

20 to 50 years.

Assets are revalued at least every three (3) years based on technical appraisals. Appraisals were

updated in 2013 for Promioriente S.A. E.S.P., in 2012 for Promigas S.A. E.S.P., Promisol S.A.S.,

Surtigas S.A. E.S.P., Gases de Occidente S.A. E.S.P.; and in 2011 for Transmetano E.S.P. S.A. and

Transoccidente S.A. E.S.P.

(5) As of December 31 and June 30, 2013, it mainly includes revaluation of investments held by Promigas

in Gases Del Caribe S.A. E.S.P. amounting to $126.783.847 and $119.783.789, respectively, and in

Gases de Occidente S.A. E.S.P. amounting to $17,364,296 for both periods. Additionally, as of

December 31, 2013, revaluation of investment held in Gas Natural de Lima y Callao S.A., amounting

to $18. 076.911.

Total amortization charged to operations for the period July 1st to December 31

st and

January 1st to June 30

th, 2013, were $9.577.601 and $8.476.400, respectively.

12. FINANCIAL OBLIGATIONS

December June

Local-currency liabilities $ 25.502.089 $ 25.414.158

Foreign-currency liabilities 12.774.883 16.165.020

Leasing 47.857.792 28.545.052

Interests payable 4.846.649 2.661.498

current portion $ 90.981.413 $ 72.785.728

Local-currency liabilities $ 461.386.733 $ 316.388.121

Foreign-currency liabilities 79.106.005 85.589.730

Leasing 137.420.083 170.580.020


Total $ 768.894.234 $ 645.343.599

During the second semester of 2013, Promigas S.A. E.S.P. made principal payments to

Helm Bank amounting to $3.024.221 corresponding to the lease-back operation of the

Caracolí - La Heroica trench. During the same period, Gases de Occidente S.A. E.S.P.

- 27 -

made principal payments to Leasing Bancolombia amounting to $6.155.672

corresponding to financial leases contracted for the financing of the infrastructure

construction in exclusive and non-exclusive service areas.

In January 2013, Promigas S.A. E.S.P. paid off credits obtained with financial entities

amounting to $450.816.859 with funds coming from the issuance of bonds and in

February, it paid off the loan contracted with Surtigas S.A. E.S.P. amounting to

$1.000.000. Additionally, in May it paid off a foreign currency credit to Banco de

Bogotá N.Y. amounting to US$ 18,800,000.

During the second semester of 2013, Surtigas S.A. E.S.P. and Compañía Energética de

Occidente S.A.S. E.S.P. acquired loans with several banks amounting to $78.500.000

and $53.150.809, respectively. Surtigas S.A. E.S.P. used the funds to pay-off of a

financial liability with Promigas S.A. E.S.P. amounting to $52.500.000 and for working

capital. Compañía Energética de Occidente S.A.S. E.S.P. used the funds in the

execution of projects under the scope of the management contract.

During the first semester of 2013, Surtigas S.A. E.S.P., paid off credits with diverse

financial entities amounting to $181.200.000 with funds coming from the issuance of

bonds carried out on February 12, 2013.

During the second semester of 2013, Promioriente S.A. E.S.P. made capital payments

for the syndicated credit and to Leasing Bancolombia amounting to $19.158.724 and

$3.704.053, respectively. These financial obligations were acquired to finance the

construction of the Gibraltar-Bucaramanga gas pipeline.

In December 2013, Promisol S.A.S, obtained a loan with Davivienda Bank amounting to

$18.000.000 for the acquisition of the 100% of Enerfranca S.A.

In October 2013, Transmetano E.S.P. S.A. obtained a credit with BBVA amounting to

$8.000.000 to pay off a financial obligation with Promigas S.A. E.S.P. Additionally,

during the second semester of 2013 it cancelled an obligation in dollars amounting to

$3.375.750 (US$1,750,000) and made payments to Leasing Bancolombia of $1.188.103

for the financing of the construction of the Ramal Oriente.

As of December 31, 2013, the interest rates of these liabilities range between 4.42%

E.A. - 10.27% E.A. and DTF + 1.30% - DTF + 5.50% (As of June 30, 2013 2.66% E.A.

- 10.75% E.A. and DTF + 1.82% - DTF + 5.50%).

During the six-month period ended as of December 31 and June 30, 2013, interest

accrued on the financial obligations amounted to $13.768.159 and $19.731.586,

respectively.

Promigas S.A. E.S.P. has pledged as collateral the trench of the Barranquilla -

Cartagena gas pipeline for the lease-back transaction entered into with Helm Bank.

Additionally, Promioriente S.A. E.S.P. has an autonomous equity, constituted in

Fiduciaria Corficolombiana, that serves as collateral for the Syndicated Loan.

- 28 -

Long-term liabilities maturity is as follows:

From January 1st to December 31st, 2015 $ 131.775.234

From January 1st to December 31st, 2016 179.898.477



From January 1st, 2019 and thereafter 164.293.841

$ 677.912.821

13. ACCOUNTS PAYABLE

December June

Suppliers $ 116.618.267 $ 123.487.973

Costs and expenses payable (1) 80.149.226 63.296.639

Dividends payable (2) 126.454.529 161.640.313

Related parties 912.997 966.511

Income taxes 58.934.055 33.462.336

Tax on equity (3) 9.188.989 8.242.029

Withholding taxes payable 9.378.336 6.511.153

Industry and Commerce Tax payable 7.752.569 4.053.284

Value Added Tax payable 2.130.889 1.823.513

Other taxes payable 7.578.259 7.089.774

Advances (4) 75.100.454 60.738.162

Current portion $ 494.198.570 $ 471.311.687

Advances (4) $ 7.289.998 $ -

Tax on equity (3) - 5.490.873


Total $ 501.488.568 $ 476.802.560

(1) As of December 31, 2013 it mainly includes the account payable from Promigas S.A. E.S.P. to the

company Colerne S.A.S. for the purchase of 25% share of Sociedad Portuaria El Cayao S.A. E.S.P.

amounting to $6.045.817, and the balance payable of Enerfranca S.A. E.S.P., a company that

consolidates as from the second semester amounting to $4.300.734. Additionally, it includes accounts

payable of Compañía Energética de Occidente S.A. E.S.P. corresponding to the contract FAER

amounting to $3.951.244 and services to Asea Brown Bonery Ltda amounting to $1.550.727.

(2) As of December 31, 2013, it includes dividends payable decreed at the Ordinary General

Stockholders’ Meeting of Promigas S.A. E.S.P. held in March 2013 amounting to $40.671.928 and

- 29 -

dividends decreed at the General Stockholders’ Meeting of Promigas S.A. E.S.P. held in September

2013 amounting to $81.308.387. As of June 30, it includes dividends payable decreed in the Ordinary

General Stockholders’ Meeting held in March 2013 amounting to $161.092.735.

(3) As of December 31, 2013, it includes the installments of the Tax on Equity, to be paid in 2014.

(4) As of December 31, and as of June 30, 2013, it includes deposits made by Compañía Energética de

Occidente S.A. E.S.P. for rural electrification projects for concepts such as: Law 178 of 1959 of

Cedelca S.A. E.S.P. amounting to $1.111.144 and $118.828; FAER funds received from the Ministry

of Mines and Energy amounting to $52.301.924 and $42.056. 995; PRONE funds received from the

Ministry of Mines and Energy amounting to $1.904.654 and $1.962.212, respectively. Additionally,

as of December 31, 2013 it includes advanced payments for future subscription of shares of Sociedad

Porturaria El Cayao S.A. E.S.P. in Barú Investments and TAM LNG Holdings amounting to

$3.646.874 and $3.643.125, respectively.

Income tax – The company and the subsidiaries are subject to income tax at a 25% rate

as of December 31 and June 30, 2013, applicable to net taxable income or presumptive

(minimum taxable) income, whichever is higher. For the calculation of presumptive

(minimum taxable) income, it is applied a 3% of the previous year’s net equity. The

income tax for equity (CREE) is created at a 9% rate between 2013 and 2015 and an 8%

rate as from 2016; the reconciliation made to the bases for determining this tax includes

some differences with respect to the one made for income tax purposes calculated

through ordinary income.

As of December 31, Promigas S.A. E.S.P. and its related companies, calculated and

recorded the income tax provision taking as a basis the net taxable income which

considers some adjustments to commercial profit. As of December 31 and June 30, 2013,

Promioriente S.A. E.S.P., calculated and recorded the income tax provision taking as a

basis the presumptive (minimum taxable) income.

Tax years 2012 and 2011 are open to the review by the tax authorities for Promigas S.A.

E.S.P., Promioriente S.A. E.S.P., Compañia Energética de Occidente S.A.S. E.S.P. and

Gases de Occidente S.A. Tax year 2012 is open to review for Transmetano E.S.P. S.A.,

Transoccidente S.A. E.S.P. and Promisol S.A.S.

Promigas S.A. E.S.P., entered into a Juridical/Legal Stability Agreement with the Nation

– Ministry of Mines and Energy, whereby it agrees to build a gas pipeline and other

transportation facilities amounting to $77.263.585, over a seven- (7) year term. The

contract term is twenty (20) years, during which as a consideration the Nation guarantees

Promigas S.A. E.S.P. the juridical/legal stability on certain provisions of the Tax Statute.

As of December 31, 2013, Promigas S.A. E.S.P., Promioriente S.A. E.S.P. and Promisol

S.A.S., had net tax loss carry-forwards pending to be utilized in subsequent tax years

amounting to $104.045.913 and $9.162.212, respectively.

Tax on equity – By means of Law 1111 of December 2006 the Colombian government

created a tax on equity for taxable years of 2007 to 2011. The taxable base of the equity

tax is comprised at the book value of the tax payer’s net equity owned on January 1,

2007 applying a rate of 1, 2%. Article 1 of Law 1370 of 2009, extended the application

- 30 -

of this tax until 2014. The Company and its subsidiaries recorded a tax on equity

amounting to $37.491.628, of which $29.648.075 was recognized against the equity

revaluation account and the remaining $7.843.553 was charged to income.

Consequently, Promigas and its subsidiaries paid the two installments of tax on equity

for the first and second semester of 2013.

On December, 2012, Promigas filed a lawsuit at Atlantico´s administrative tribunal

against the adverse resolution of the application for payment of a non-due amount. In

September 2013, Promigas expects to make the payments for the 2014 of the seventh

and eighth installments of the tax on equity (net worth) declared in 2011. Promigas

intention is to file a request of payment of undue amounts before the DIAN that

consolidates the last six payments made.

Tax Reform – The Congress of the Republic enacted Law 1607 of December 26, 2012,

which introduces important changes to the Colombian tax regulations, as follows:

The income tax rate is reduced from 33% to 25% as from 2013 and it is created

the income tax for equity (“Impuesto de Renta para la equidad - CREE”), with

a 9% rate between 2013 and 2015 and 8% as from 2016. The base to compute

this tax is different to the one used for purposes of the income tax calculation.

The taxpayers of the tax on income for equity are not obliged to pay the

contributions to SENA and to ICBF for the employees who earn less than ten

(10) minimum legal monthly wages. This exoneration will also cover the

contributions to the health contributing regime as from January 1, 2014.

The Law states the concept of permanent establishment, understood as a fixed

place whereby a foreign company develops businesses in the country.

The Law modifies the methodology to calculate the taxable and non-taxable

profits for the companies that distribute profits to their partners or shareholders.

Transfer pricing – In accordance with tax regulations, Promigas S.A. E.S.P. prepared

its 2011 transfer pricing informative return. No adjustments to the taxable income

resulted from that analysis.

Taking into consideration that there is no control over any foreign related company,

Promigas is not obliged to prepare a transfer pricing study for 2013.

- 31 -

14. LABOR OBLIGATIONS

December June

Consolidated severance $ 3.202.035 $ 2.293.745

Severance interest 427.469 155.135

Vacations 4.438.003 4.465.126

Extralegal benefits 4.347.931 4.263.228

Less – current portion $ 12.415.438 $ 11.177.234

Consolidated severance –Long term $ 449.115 $ 321.043

Total $ 12.864.553 $ 11.498.277

A consolidated breakdown of personnel and personnel expenses of the Company and its

subsidiaries for the semesters between July 1st

to December 31st and January 1

st and June

30th

, 2013 is the following:

December June

Number of employees:

Promigas S.A. E.S.P.

Management 6 5

Other 362 357

Subsidiaries

Management 115 110

Other 1.397 1.301

Personnel expenses

Promigas S.A. E.S.P.

Management $ 3.669.004 $ 1.999.960

Other 14.829.856 16.900.604

Subsidiaries

Management $ 8.387.994 $ 9.965.482

Other 27.612.447 25.557.650

- 32 -

15. BONDS

December June

Principal $ 25.500.000 $ 1.450.00-.000

Interest 11.872.345 11.525.411

Current portion $ 37.372.345 $ 11.525.411

Principal - Long-term portion $ 1.424.500.000 $ 1.450.000.000

Total $ 1.461.872.345 $ 1.461.525.411

Promigas S.A. E.S.P. - In January 29th, 2013, the Company issued notes with the

following characteristics:

Amount: $500.000.000

Purpose: Between 75% and 85% to substitute financial obligations and

the remaining percentage to finance the investment plan.

Par value: One million Colombian pesos each

Series, terms and

maturities:

Series A7, 7 years $99.821 million



Securities yield: Series A7: CPI + 3.05%

Series A10: CPI + 3.22%

Series A20: CPI + 3.64%

Interest payment form: Quarterly

The legal representative of holders is Helm Trust S.A.

In August 2009, through a public offering, the Company issued notes with the following

characteristics:

Amount: $400.000.000

Purpose: 100% to substitute liabilities

Par value: One million Colombian pesos each

Series and terms:

Maturities:

Series C7, C10 and C15 years

$ 80.000.000, on August 27, 2016

$150.000.000 on August 27, 2019

$170.000.000 on August 27, 2024

Securities yield: Series C7: CPI + 4.95%

Series C10: CPI + 5.40%

Series C15: CPI + 5.99%

Interest payment form: Quarterly

- 33 -

The legal representative of holders is Helm Trust S.A.

Gases de Occidente S.A. E.S.P. - Through a public offering dated December 11, 2012,

the Company issued bonds with the following characteristic:

Amount: $200.000.000

Purpose: Substitution of financial debt

Par value: One Million Colombian pesos each

Series and terms: Series A10 - 10 years

Series A20 - 20 years

Securities yield: Series A10 CPI + 3.75% E.A.

Series A20 CPI + 4.13% E.A.

Form of payment: Quarterly

Legal Representative of holders is Helm Trust S.A

Through a public offering dated July 23, 2009, the Company issued ordinary bonds with

the following characteristic:

Amount: $150.000.000




Series A7 - 7 years

Series A10 – 10 years.





Legal Representative of holders is Helm Trust S.A.

In July, 2014, the company must pay the series A5 (5 years) of this issuance amounting

to $25.500.00

Surtidora de Gas del Caribe S.A. E.S.P. - Through a public offering dated February 12,

2011, the Company issued bonds with the following characteristic:

Amount: $200.000.000




Series A20 - 20 years




- 34 -

Legal Representative of holders is Helm Trust S.A.

During the six months ended as of December 31 and June 30, 2013, interests accrued by

each company were the following:

December June

Promigas S.A. E.S.P. $ 22.359.045 $ 23.497.787

Surtidora de Gas del Caribe S.A. E.S.P. 5.458.850 4.048.689

Gases de Occidente S.A. E.S.P. 11.781.048 11.767.249

$ 39.598.943 $ 39.313.725

16. ACCRUED LIABILITIES

December June

Other contingencies - Current portion (1) $ 1.527.006 $ 5.499.605

Retirement pension (2) $ 871.382 $ 913.953

Other Contingencies (1) 293.799 341.666

Lawsuits and litigation (3) 4.714.743 6.288.741


Total $ 7.443.850 $ 13.043.965

(1) The variation in the second semester of 2013 was mainly due to:

a) The payment of $1.354.069 on equity tax, capital gain and ICA tax of Promitel

Telecomunicaciones S.A.S., as stated in the addendum of the sales contract of Promitel entered

into with Fondo de Infraestructura Colombia Ashmore IFCP and Fondo de Co-Inversión with

Fondo de Infraestructura Ashmore I Compartimento I that forced Promigas to pay any taxes

and/or sanctions resulting from the tax inspection of Promitel Telecomunicaciones S.A.S.’

income tax return for 2009. As of June 2013, the provision amounted to $2.195.365 and the

difference between this balance and the amount actually paid was reversed.

b) Utilization of $1.519.932 of the provision for dismantling of the trenches of the sub-fluvial

crossing gas pipeline and the gas pipeline built, due to an emergency, over the Laureano Gómez

bridge, to comply with environmental and safety standards. As of December 31, and as of June

30, 2013 the provision amounted to $615.289 and $2.135.221, respectively.

(2) The actuarial method used is the one established by Article 112 of the Tax Statute and the benefits

covered correspond to all payments of future retirement pensions.

- 35 -

The main factors used in the actuarial estimates as of December 31, 2013 were:

Number of people 5

DANE rate 3.73%

As per policy of Promigas and its subsidiaries, the actuarial estimate is made on an annual basis.

(3) In the second semester of 2013, Promigas S.A. E.S.P. reversed the provisions for collection of the

Scholarship Fund by the Ministry of Mines and Energy amounting to $715.193 and for the

coactive collection of the public lighting tax of the Santa Marta district amounting to $1.029.884.

As of June 30, 2013, it includes a provision for the following cases: A group action requesting

indemnities for the alleged damages caused as a consequence of the terrorist attack on Promigas’

gas pipeline in the city of Riohacha in 2001, which has been estimated to amount to $3.000.000;

Labor actions against Promigas filed by former workers amounting to $340.000; Charge of the so-

called Scholarships Fund by the Ministry of Mines and Energy, amounting to $715.193; Coactive

actions to collect public lighting tax filed by the municipalities Santiago de Tolúviejo,

Pueblonuevo, Sagahún and Distrito Santa Marta, amounting to $1.665.161

17. OTHER LIABILITIES

December June

Collection on behalf of third parties (1) $ 13.304.362 $ 14.839.475

Revenues received in advance 667.639 18.819

Deferred income 224.867 224.868

Deferred income tax (2) 5.910.679 4.886.583

Deferred monetary correction credit 46.169 46.169

Current portion $ 20.153.716 $ 20.015.914

Collection on behalf of third parties (1) $ 2.170.586 $ 2.845.523

Revenues received in advance 679.485 677.562

Deferred income 206.129 318.563

Deferred income tax (2) 31.040.964 31.917.765

Deferred monetary correction credit 3.825.721 4.129.132


Total $ 58.076.601 $ 59.904.459

(1) It corresponds to the unbalance of gas received from Chevron Texaco Petroleum Company and

includes collections in favor of the latter.

(2) For 2013, it corresponds to a deferred tax generated by the difference between the fiscal

amortization of the goodwill calculated by the decline balance method and the accounting

amortization over 25 years.

- 36 -

18. SHAREHOLDERS’ EQUITY

Common stock – As of December 31 and June 30, 2013, the authorized capital was

represented by 1,150,000,000 common shares, of a Col$ 100 par value each, of which

1,098,761,980 and 1,063,388,943, respectively, were subscribed and paid-in.

The General Stockholders’ Meeting held on September 26, 2013 authorized the

payment of dividend in shares at a rate of one share per each thirty shares subscribed as

of September 26, 2013, delivered at a $4.290 Colombian peso each, which were issued

on October 4, 2013. The latter generates a variation amounting to $3.544.361 and

$148.508.701 in the subscribed and paid-in capital stock and in the premium on

placement of shares, respectively.

On April 4, 2013, the General Stockholders’ Meeting authorized the capitalization of

$93.040.358 of the Equity Revaluation Account, through its distribution in shares,

delivered on a basis of seven shares for each one of those shares subscribed as of March

18, 2013.

Since 2005, and as of December 31, 2013 the company has reacquired 70.567 own

shares for an amount of $527.933. According to the provisions of the Code of

Commerce, all rights inherent to stock reacquired remain in suspense.

Reserves – The balance of reserves is broken down as follows:

December June

Legal $ 34.687.589 $ 6.649.268

Deferred depreciation reserve 4.768.029 14.868.791

Reserve for acquisition of shares 1.000.000 1.000.000

Reserve for future enlargements 127.616.380 144.680.182

Welfare reserve 380.543 380.543

Other reserves 32.490.000 32.490.000

$ 200.942.541 $ 200.068.784

Legal reserve – The Colombian code of commerce requires companies to appropriate at

least 10% of the net income of each year to a legal reserve until such reserve equals to at

least 50% of the paid-in capital. This reserve is not available for distribution as

dividends, but may be used to absorb losses.

Deferred depreciation reserve – As required by the tax statute, the Company

appropriated a reserve equivalent to 70% of the higher value of fixed assets depreciation

requested as tax deduction. That reserve may be capitalized or reduced in future years

when tax depreciation is lower than depreciation recorded for accounting purposes.

- 37 -

Reserve for reacquisition of shares – In 2002 and 2005 the Company appropriated a

reserve for reacquisition of own shares amounting to $1.527.933.

Other reserves – The reserves for future enlargements and for welfare are distributable

to the shareholders.

Equity revaluation – Equity revaluation may only be distributed as profits when the

Company is liquidated or such amount is capitalized according to legal norms. As stated

above, the capitalization of equity revaluation $93.040.358 through its distribution in

shares was approved in the Ordinary Stockholders’ Meeting held on April 4, 2013.

As established by Law 1111 of December 2006, the Company recorded the tax on

equity liquidated for 2011 amounting to $29.648.075 as a lower value of the equity

revaluation account.

19. MEMORANDUM ACCOUNTS

December June

Contingent rights:

Pledges on investments (1) $ 145.156.876 $ 105.611.693

Litigation and lawsuits ( Note 25) 303.071.251 290.694.901

Investments given under custody (2) 17.206.633 9.320.594

Forward contracts (3) 140.567.767 98.921.820

Purchase of Cedelca S.A. E.S.P. receivables (4) 56.415.520 63.414.352

Contractual guarantees (5) 81.484.352 82.341.711

Other contingent rights (6) 13.780.399 16.597.335

757.682.798 666.902.406

Contingent liabilities:

Litigation and lawsuits (Note 25) 146.210.899 159.172.308

Collection for third parties agreements (7) 15.712.951 15.133.039

Collaterals and bailments granted (8) 37.544.893 37.567.676

Juridical/Legal stability contract (9) 6.410.379 6.410.379

Other 19.568.863 19.103.000

225.447.985 237.386.402

Fiscal memorandum accounts (10) 2.104.306.711 2.042.591.285

Control memorandum accounts:

Loans to be received (11) 100.102.629 92.374.259

Capitalizations of equity revaluation 9.766.212 12.130.684

Financial lease payments (12) 16.372.945 16.372.945

Leasing contracts liabilities (13) 222.049.142 227.208.142

Other control debtors (14) 25.377.612 14.451.666

373.668.540 362.537.696

$ 3.461.106.034 $ 3.309.417.789

- 38 -

(1) As of December 31, 2013, it corresponds to the shares of Calidda S.A. pledged by Promigas as

collateral under the loan facility granted by IFC, CAF and ICF to Calidda S.A. amounting to US$

135,000,000 for the construction of a gas pipeline in Peru. It also includes funds under custody in

Valores Bancolombia denominated in foreign currency amounting to US$159,329, given as

guarantee in processes of annulment action and reestablishment of the right filed by Promigas

against the Department of Treasury of Dibulla – Department of La Guajira. As of December 31,

2013, the increase is due to performance bond (“garantías de seriedad”) with BBVA granted by

Promigas to the Mexican Energy Regulatory Commission within the process of International Public

Bid LIC. GAS 019-2012 amounting to US$ 950,000; with Citibank amounting to US$ 135,000, for

the Piura Concession in Peru and collateral for true fulfilment (“garantía de fiel cumplimiento”) with

Scotiabank in favor of the Ministry of Mines and Energy to guarantee compliance with the

obligations arising from the Concession Contract of the Natural Gas Distribution System in Peru

amounting to US$ 20,000,000, and its corresponding exchange difference.

(2) Corresponds to non-securitized CDTs given under custody to Valores Bancolombia, including the

accrued interest value.

(3) As of December 31, 2013, it corresponds to forward contract entered into to hedge future revenues

according to the companies’ budget. Promigas S.A. E.S.P. has contracts amounting to

US$49,662,760. Promioriente S.A E.S.P. with Banco de Bogotá, Bancolombia and Corficolombiana

amounting to $39.737.985, and Transmetano E.S.P. S.A. with Bancolombia amounting to

$2.860.819.

(4) Corresponds to a portfolio of receivables purchased by Compañia Energética de Occidente S.A.S.

E.S.P. from Cedelca S.A. E.S.P. This portfolio of receivables is in process to be recovered and it

basically consists of receivables of residential, stratum-1 customers.

(5) Corresponds to the bank collaterals and performance policies granted to Promigas by Termoflores

S.A., Abocol S.A.,Cabot S.A., Meichem Resinas Colombia S.A., Maltería S.A.,Reficar S.A., Gecelca

S.A., Zona Franca Celsia S.A. and Pacific Stratus Oil & Gas S.A.. As of December 31, 2013, the

amount of the performance policies of Pacific Stratus Oil & Gas S.A. decreased in US$6.586.500.

Additionally, as of December 31, 2013, it includes the collateral of Gecelca S.A. amounting to

US$2,889,143. It further includes the Legal Stability Contract (“Contrato de Estabilidad Jurídica”)

entered into by and between the Peruvian Government through the Agencia de Promoción de la

Inversión Privada (Proinversión) and Promigas S.A. E.S.P. amounting to US$ 24,000,000, whereby

Promigas S.A. E.S.P. agrees to make cash contributions to the company Gas Natural de Lima y

Callao and Proinversión guarantees to Promigas that the income tax they pay on dividends or any

other form of profit distribution agreed-upon in its favor, shall not be modified for as long as those

contracts are in force and effect. The increase is due to the exchange difference effect.

(6) As of December 31, 2013, it mainly includes $11.094.015 of Gases de Occidente SA E.S.P. for

outstanding client requests pending to install.

(7) Corresponds to the accounts receivable belonging to Cedelca S.A. E.S.P and managed by Compañia

Energética de Occidente S.A. E.S.P.

(8) As of December 31 and June 30, 2013, it corresponds to bank collateral granted by Promigas S.A.

E.S.P. in favor of Bancolombia corresponding to loans made to Compañía Energetica de Occidente

SA. E. S.P. amounting to $17.149.983. Additionally, it includes guarantees granted by Surtigas S.A.

E.S.P. to cover payments to Chevron - Texaco amounting to $20.229.910.

(9) As of December 31 and June 30, 2013, it corresponds to a contract entered into by and between the

Nation - Ministry of Mines and Energy and Promigas, with the purpose that the Nation guarantees

the stability of certain tax norms in exchange for a commitment by Promigas of making investments

until 2014.

- 39 -

(10) Fiscal memorandum accounts were updated based upon the differences between the income tax

return figures filed before the tax authorities and the book figures.

(11) As of December 31, 2013, it corresponds to financial leasing contracts entered into by Gases de

Occidente S.A. E.S.P. for the financing of the external networks and district stations system, as

follows:

Contract Company Year December June

98098 Leasing Bancolombia 2008 $ 13.074.905 $ 15.033.936

107166 Leasing Bancolombia 2009 34.307.843 40.476.806


$ 100.102.629 $ 92.374.259

(12) As of December 31, 2013, it includes interest payments of leasebacks entered into by Promigas S.A.

E.S.P. for the gas pipelines Caracolí Heroica amounting to $970.918 ($1.484.771 as at June 30,

2013) and for La Creciente amounting to $910.298 ($1.461.104 as at June 30, 2013). Additionally it

includes leasing contracts entered into by Surtidora de Gas Del Caribe under a leaseback modality.

Following there is a summary of the infrastructure leasing contracts as of December 31, 2013:

Value of Contract

Term

(months) Purchase Option

Interest

Rate Lease payments

$ 4.050.000 600 $ 405 DTF + 5,4 Between $216 and $318

6.500.000 600 7 DTF + 4,3 Between $1 and $713

7.000.000 600 7.000 DTF + 5,8 Between $1 and $758

8.200.000 144 82.000 DTF + 6,5 Between $40 and $150

The minimum future payments to be made in connection with these contracts as of June 30, 2013:

(13) As of December 31 and June 30, 2013, it mainly corresponds to the purchase options of the

contracts entered into by Promigas for the construction of La Creciente gas pipeline amounting to

$16.179.404 and for the leaseback of Caracolí Heroica gas pipeline amounting to $193.542.

Year Value

2014 $ 2.488.965

2015 2.409.736

2016 1.195.735

2017 436.661

2018 and thereafter 1.424.415

7.955.512

Less: Interes 1.743.054

Total capital $ 6.212.458

- 40 -

(14) As of December 31, 2013, it includes assets fully depreciated by Transmetano E.S.P. S.A. such as

the Sebastopol – Medellín gas pipeline amounting to $131.163.029 and other minors such as Scada

system amounting to $546.804, backhoe amounting to $146.823 and tractor amounting to $101.250.

Additionally, it includes leasing contracts entered into by Gases de Occidente S.A. E.S.P. to finance

external networks and district stations:

Contract Company Year December June

98098 Leasing Bancolombia 2008 $ 11.239.737 $ 12.576.535



$ 79.197.196 $ 84.675.997

20. REVENUES

A summary of operating revenues for the semesters ended as of December 31 and June 30,

2013, is as follows

December June

Gas Transportation $ 156.344.775 $ 146.967.694

Gas Distribution 617.990.552 567.050.341

Electric Power 137.383.170 132.796.136

Telecommunications services 35.535.243 35.829.093

Non-banking financing

27.410.471

25.059.507 $ 974.664.211 $ 907.702.771

21. COST OF SALES

A summary of cost of sales for the semesters ended as of December 31 and June 30, 2013, is

as follows:

December June

Gas Transportation $ 48.121.932 $ 43.808.773

Gas Distribution 460.354.587 424.571.208

Electric Power 90.024.107 89.403.980

Telecommunications services 6.126.434 5.829.848

Non-banking financing 6.008.102 5.157.773

Related parties 26.674.783 23.115.163

$ 637.309.945 $ 591.886.745

- 41 -

22. OPERATING EXPENSES

A summary of operating expenses for the semesters ended as of December 31 and June 30,

2013, is as follows:

December June

Personnel expenses $ 31.876.798 $ 30.317.300

Depreciation and amortization 7.527.803 6.287.704

Maintenance and others 3.188.066 2.039.088

Fees 11.035.283 9.704.715

Provisions 11.070.204 10.533.354

Taxes other than income tax 16.295.368 17.260.667

Insurance 1.029.358 991.439

Subscriptions – affiliations 769.766 688.954

Public utilities 1.839.944 1.728.428

Rentals/leases 3.506.273 2.856.033

Travel expenses 2.571.125 2.497.099

Advertising 957.555 1.249.084

Transportations, freights and tolls 550.773 452.538

Promotion and disclosure 93.811 241.692

Related parties 173.047 196.133

Sundry 5.399.060 5.630.075

$ 97.884.234 $ 92.674.303

23. FINANCIAL REVENUES

A summary of financial revenues for the semesters ended as of December 31 and June 30,

2013, is as follows:

December June

Interest, yields and other financial revenues (1) $ 24.192.273 $ 163.691.983

Exchange difference 5.735.053 3.217.835

$ 29. 954.974 $ 166.909.818

(1) As of June 30, 2013, it mainly corresponds to the subscription of the purchase-sale contract that the

company entered into on January 31, 2013 with Fiducor S.A., whereby it transfers 100% of the stock

of its affiliate company Promigas Telecomunicaciones S.A.S. This transaction amounted to

$192.000.000, generating profits of $136.437.963.

- 42 -

24. FINANCIAL EXPENSES

A summary of financial expenses for the semesters ended as of December 31 and June

30, 2013, is as follows:

December June

Interest $ 53.367.102 $ 59.045.312

Exchange difference 5.618.257 11.364.705

Other financial expenses 4.182.428 3.072.005

$ 63.170.875 $ 73.482.022

25. COMMITMENTS AND CONTINGENCIES

Commitments of Promigas S.A. E.S.P. – For the development of its corporate purpose,

the Company has entered into, among others, the following contracts:

a) Through Public Deed number 1629 dated September 16, 1976, the Company

obtained from the National Government the concession to build, operate, maintain,

exploit and administer a public utility gas pipeline for the transportation of

hydrocarbons from Ballenas, Department /State of La Guajira, to the cities of

Barranquilla and Cartagena, for a 50-year term extendable for a 25-year term.

Under the terms of the concession, the National Government has a preemptive right

for the transportation of these products through the gas pipeline, paying a current

rate and the Company is in the obligation of selling the gas pipeline to the Nation

upon completion of the first thirty (30) years of the contract (2006) or at the

termination thereof (2026) or at the termination of the extension according to the

contract terms, at the price agreed-upon by the parties or based upon the appraisal

of an independent appraiser. The Company may neither relinquish nor assign the

contract, either fully or partially, without the prior approval of the National

Government.

In a notice given to the Company dated on May 11, 2005, the Ministry of Mines

confirmed that they would not exercise the purchase option that was available for

2006 on the gas pipelines under concession.

b) Contracts with gas distributing companies, with power generating enterprises, and

industrial users with consumption in excess of 100,000 cubic feet per day,

corresponding to transportation of natural gas through the gas pipeline. These

contracts comply with the regulatory framework and their duration terms range

between five and ten years; and the required necessary and sufficient guarantees for

execution and stability thereof have been constituted.

The Company’s Management considers that there are no risks of significant losses in

the future as a result of the execution of these contracts and commitments.

- 43 -

Commitments of Gases de Occidente S.A. E.S.P. – The Company has entered into the

following contracts:

Leasing contracts to finance part of the gas pipeline developed in some sectors of Cali.

Through these contracts, the Leasing companies transfer to the constructors,

manufactures, or suppliers or, whoever Gases de Occidente S.A. E.S.P. shall define, on

an advanced payment basis, the amounts of money necessary to put the goods in the

conditions required by the Company; these amounts will be considered a greater value

of the goods covered by this contracts.

As of December 31 and June 30, 2013, the balance to be paid for these contracts

amounted to $79.082.927 and $85.217.646, respectively.

The interest rates agreed for the leasing contracts are compounds and the actual average

rate is DTF + 5% E.A.

Following there is a summary of the leasing contracts as of December 31, 2013.

Company Interest Maturity December June

Leasing Bancolombia S.A. DTF + 4.5% T.A. Diciembre 2013 $ 11.246.169 $ 12.576.535

Leasing Bancolombia S.A. DTF + 4.0% T.A. Diciembre 2014 30.583.278 35.235.971

Leasing Bancolombia S.A. DTF + 3.4% T.A. Diciembre 2020 37.253.480 37.405.140

$ 79.082.927 $ 85.217.646

Additionally in 2011 the Company entered into operating leasing contract with Leasing

Bancolombia, which includes licenses and technology for PETI (SAP-SMARFLEX)

project, contracts Nos. 118233, 123079, 127350 and 113408.

Gases de Occidente S.A. E.S.P. as the absorbing company by the merger process with

the absorbed company (Gases del Norte del Valle S.A. E.S.P.), assumes the financial

leasing contracts in the Lease Back modality, to partially finance infrastructure works

for gas pipelines in municipalities such as Tulúa, Palmira, Buga, Andalucía, Jamundí,

Pradera, Candelaria, Cerrito and Bugalagrande.

Trust Agreements. The company entered into a new contract of Irrevocable Mercantile

Trust for the Management of Resources with Corficolombiana Program GNCV II, for

2012-2013, pursuant to the provisions of the Agreement of the GNC-V Conversions

Bonus (entered into on July 9, 2012) of collaboration to promote the commercialization

distribution and consumption of vehicle compressed natural gas in the West market of

the country; in this contract, GDO has the responsibility of being an Administrative

Operator.

Commitments of Transmetano S.A. E.S.P. – For the development of its corporate

purpose, the Company has entered into, among others, the following contracts:

- 44 -

Through Public Deed No. 5433 of August 25, 1994, the Company obtained from the

National Government the concession to provide the public transportation service of

natural gas through the Sebastopol – Medellín gas pipleine.

The Company entered into a natural gas transportation contract through the Sebastopol -

Medellín gas pipeline with the company Empresas Públicas de Medelin S.A. E.S.P., by

which Transmetano E.S.P. S.A. has the obligation to receive the natural gas at the

previously agreed-upon reception point, transport it through the pipeline and deliver it at

the delivery points of Parque Las Aguas and Barbosa under the terms and conditions

established in such contract, according to the minimum specifications of quality

established by the Energy and Gas Regulatory Commission (“Comisión de Regulación

de Energía y Gas - CREG”). The contract term goes from December 29, 2012 to

December 31, 2017.

On July 22, 2009, the Company entered into a contract with Empresas Públicas de

Medellín S.A. E.S.P. for the enablement of a new exit point denominated “Parque de las

Aguas”, located in the municipality of Barbosa, with a 3”-diameter and designed for a

maximum operating pressure of 1,200 PSI, in such a way that natural gas can be

transported through the gas pipeline and delivered in such point under the agreed terms

and conditions.

On July 3, 2007, the Company entered into a 10 year natural gas transportation contract

through the connection to the Sebastopol-Medellín gas pipeline with Colombiana

Kimberly Colpapel S.A., whereby Transmetano E.S.P. S.A. agrees to receive the natural

gas at the reception point, conduct it through the connection and deliver it at the plant in

the terms and conditions stipulated in the contract, until a maximum transportation

capacity of 1,500 KPCD, and comply with the minimum specifications of quality

established by the Energy and Gas Regulatory Commission (“Comisión de Regulación

de Energía y Gas - CREG”).

The Company entered into a natural gas transportation agreement through the

Sebastopol - Medellín gas pipeline with Surtigas S.A. E.S.P. The contractual obligation

by Transmetano E.S.P. S.A. consists of receiving, conveying and delivering the gas at

the delivery points of Puerto Berrio, Cisneros and San José del Nus, in conformity with

the minimum specifications of quality established by the Energy and Gas Regulatory

Commission (CREG, for its Spanish initials).The contract term is from July 26, 2012 to

July 25, 2017.

On March 12, 2008, the Company entered into a natural gas transportation contract

through the Sebastopol-Medellín gas pipeline with Alcanos de Colombia S.A. E.S.P.

whereby Transmetano E.S.P. S.A. agrees to receive the natural gas at the reception

point, conduct it through the connection and deliver it at the delivery point of Tasajera

in the terms and conditions stipulated in the contract, according to the minimum

specifications of quality established by the Energy and Gas Regulatory Commission

(“Comisión de Regulación de Energía y Gas - CREG”). The contract expires on

December 31, 2015.

- 45 -

During the second semester of 2008, the Company started the execution of a natural gas

transportation contract through the Sebastopol-Medellín gas pipeline with Empresas

Públicas de Medellín S.A. E.S.P. whereby Transmetano E.S.P. S.A. agrees to receive the

natural gas at the reception point, conduct it through the connection and deliver it at the

delivery point of the municipality of Barbosa in the terms and conditions stipulated in

the contract, according to the minimum specifications of quality established by the

Energy and Gas Regulatory Commission (“Comisión de Regulación de Energía y Gas -

CREG”).

Commitments of Surtigas S. A. E.S.P. – For the development of its corporate purpose,

the Company has entered into, among others, the following contracts:

a) Concession contracts with the National Government to build, operate, and maintain

the gas pipelines for a 50-year term, extendable for a 20-year term.

The Company may neither relinquish nor assign the contract, partially or fully, without

the prior approval of the National Government:

District of Bolívar

Dossier No. at

Minminas

Public

Deed No. Date

Cartagena 3295 531 March 27, 1984

Arjona 3289 951 March 8, 1993

Santa Rosa, San Jacinto, San Juan de

Nepomuceno, Turbana, María la Baja,

Clemencia, Carmen de Bolívar

No number

3640 April 29, 1994

Talaigua Nuevo, El Retiro, El Limón,

Talaigua Viejo, Punta Cartagena, Mompox

No number

1520 December 6, 1994

Magangué, Juan Arias, Camilo Torres 3294 1738 August 22, 1995

Turbaco 3297 4410 September 17, 1991

District of Sucre

Dossier No. at

Minminas

Public

Deed No. Date

Sincelejo 3296 4790 September 5, 1988

Sampués 3292 2537 September 2, 1992

San Onofre 3290 746 March 8, 1993

Corozal 3752 891 February 21, 1994

Tolú, Toluviejo, San Pedro, Morroa, Ovejas 3869 0987 September 9, 1994

Buenavista, San Juan de Betulia, Sincé No number 11646 October 10, 1994

District of Córdoba

Dossier No. at

Minminas

Public

Deed No. Date

Montería 3291 5447 August 30, 1990

Chinú 3287 1416 June 5, 1992

Cienaga de Oro 3288 4578 September 8, 1992

San Andrés de Sotavento, Purísima, Chimá, No number 3351 April 28, 1994

- 46 -

District of Córdoba

Dossier No. at

Minminas

Public

Deed No. Date

Momil, Lorica, Planeta Rica

Montelibano 3339 1457 March 15, 1993

Cereté 3297 1268 April 28, 1994

b) Natural gas supply contract with Empresa Colombiana de Petróleos (Ecopetrol),

Chevron Petroleum Company, E2 Energia Eficiente S.A. E.S.P. and Gases de

Occidente S.A. E.S.P. and of gas transportation with Promigas S.A. E.S.P., TGI and

Transmetano S.A. E.S.P. These contracts comply with the regulatory framework,

their duration terms range between one and three years and the necessary and

required guarantees have been granted for the execution and stability of the

contracts.

c) Contracts with power generating companies and with industrial users with

consumption in excess of 100,000 cubic feet per day, corresponding to

commercialization of gas at wellhead, and commercialization of the client’s natural

gas transportation capacity. These contracts comply with the regulatory framework,

their duration term meets the temporary commercialization period defined by the

actual regulation, and the required guarantees have been granted for the execution

and stability of the contracts.

The Company’s Management considers that there are no risks of significant losses in

the future as a result of the execution of these contracts and commitments.

Commitments of Promisol S.A.S. – In the development of its corporate purpose, the

Company has entered into commercial/mercantile offerings, the most significant ones of

which are described below:

Mercantile Offering No. PSI - 001-2007 - The Company subscribed with CTPC the

mercantile offering of operation and maintenance services of the gas dehydration

system that is the property of CTPC, with the purpose of dehydrating the gas that CTPC

shall deliver to PDVSA GAS. The term goes from October 5, 2007 until December 31,

2011, which the parts have decided to extend until December 31, 2013 in accordance

with the addendum No. 3.

Mercantile Offering No. PSI - 002-2008 – The Company subscribed with CTPC a

mercantile offering of compression services in replacement of the commercial offering

PSI-007-2004. The term of this new mercantile offering is as from the start date (i.e.,

December 22, 2008) and the term of duration is five (5) years as from the initiation date.

As per the addendum No. 5 the parties have agreed to extend the services of

compression until December 31, 2014.

Mercantile Offering No. P.4.014-2006 – The Company subscribed with Promigas S.A.

E.S.P. the mercantile offering No. P.4.014-2006 of administration and/or advisory,

operation and maintenance services, whereby it was agreed that through its

entrepreneurial infrastructure, such Company performs the administration and/or

advisory of the company activities for the development and execution of its corporate

- 47 -

purpose, which includes, among other things, activities related to the commercial,

operation and maintenance, administrative, juridical, technical, accounting, financial,

treasury, and quality management areas. The term is five (5) years as from January 1,

2006. This offering continues to be in force and effect through the signing of an

“Otrosí” where it is agreed to automatically renew it on an annual basis for one-year

periods.

Gas Transfer Contract – The Company subscribed with CTPC the mercantile offering

of dehydrated gas transportation services through the gas transfer lines. At the start of

the contract and until its date of termination, the company CTPC is obliged to pay for

the service the tariff, which consists of an initial tariff and a monthly tariff- The term of

the contract is five (5) years as from September 1, 2010.

Joint Venture Incorporation Contract – In December 2011, the Company subscribed

with JS Construcciones Ltda. a joint venture denominated U.T. PSI - JS, for the

performance of lining change works in the Cartagena -Jobo and Ballena - Cartagena

gas pipelines that are the property of Promigas S.A. E.S.P. The Company share is 70%

and JS Construcciones Ltda. holds the remaining 30%. Through Minute N° 001 of

December 20, 2013, it was determined to dissolve the UT_PS_JS due to the termination

of the works that were received at full satisfaction by Promigas S.A. E.S.P. in October

2013.

Construction with Equipment-Supply Contract - In January 2012, the Company

subscribed with U.T. PSI - JS the contract for the supply of equipment, machinery and

tools necessary for the lining change works of trenches of the gas pipeline from the

Department/State of La Guajira to Cartagena and the trench Sincelejo – Jobo that is the

property of Promigas S.A. E.S.P. Through Minute N° 001 of December 20, 2013 it was

terminated the construction contract with supply of equipment due to the termination of

the works that were received at full satisfaction by Promigas S.A. E.S.P. in October

2013.

Infrastructure Leasing Contract - In November 2012, the Company entered into with

CTPC the contract for leasing of the dehydration head. The monthly rate invoiced for

the leasing is US$52,954, which increases on an annual basis using the PPI of the

United States of America. The term of the contract is until July 1, 2016.

Mercantile Offering No. PSI – 1209-2013 – The Company and Promigas S.A. E.S.P.

entered into the mercantile offering for the provision of construction and assembly

services for the 24”-Mini-loops Palomino-La Mami (9 km, approximately). This

offering has a validity term that goes until March 25, 2014.

Commitments of Transoccidente S.A. E.S.P. – For the development of its corporate

purpose, the Company has a gas pipeline located in the Valle del Cauca zone, acquired

in 1998 as a result of the spin-off process with Gases de Occidente S.A. E.S.P., to

provide natural gas transportation services to that region of the country, fundamentally

to Gases de Occidente S.A. E.S.P., a subsidiary of Promigas S.A. E.S.P. the main

- 48 -

stockholder of the Company. Currently, it also provides its services to Cartones

América S.A.

Transoccidente S.A. E.S.P. entered into natural gas transportation services agreements

with the companies mentioned in the previous paragraph in October and November

2000 and in February 2004. In compliance therewith, the Company is obliged to

receive, on a daily basis, natural gas from the remittent in the entry point, conduct it

through its transportation system and maintain it available for the remittent in the exit

point.

The tariffs of the natural gas transportation service charged by the Company are

regulated by the National Government through Resolution 035 of 2004 issued by the

Energy and Gas Regulatory Commission (“Comisión de Regulación de Energía y Gas -

CREG”). In August 2010, the CREG issued Resolution 126 of 2010, which establishes

the general criteria of remuneration for the natural gas transportation service and the

general scheme of charges of the National Transportation System for the tariff period

2010 - 2014. The CREG is currently in the process of reviewing the remedy filed.

In June 2001 the Company entered into a contract with Promigas S.A. E.S.P. for

administration and/or advisory, operation and maintenance services whereby it was

agreed that Promigas S.A. E.S.P. through its entrepreneurial infrastructure shall conduct

the administration and/or advisory of some activities of Transoccidente for the

development and partial execution of its corporate purpose, which includes, among

other things, activities related to the commercial area, accounting and finance, legal and

juridical aspects, operating and technical aspects, human resources, IT systems,

purchasing, and services in general.

In December 10, 2012, the representatives of Transoccidente and Gases de Occidente,

met and agreed to initiate the preventive maintenance works to the natural gas stations

and connections and perform their effective collection since September 1, 2012 and

until August 31, 2014 according to the mercantile offering OM.TSO - 01 - 2012 where

Transoccidente agrees to execute with its own means, materials, equipment and

personnel, independently and with full technical and administrative autonomy, the

Preventive Maintenance services of the connections that are the property of the Gases

de Occidente clients described in the offering.

Commitments of Compañía Energética de Occidente S.A.S. E.S.P. – For the

development of its corporate purpose, the Company has entered into, among others,

contracts with power generating and commercializing companies in order not to be

exposed to the purchase at energy exchange prices.

- 49 -

The following is a summary of the energy purchase contracts:

Company Contract Inicial Date Final Date

Termotasajero S.A. E.S.P. 10223 January 1, 2013 December 1, 2013

Generarco S.A. E.S.P. 11944 January 1, 2012 December 1, 2013

Traslado Compañía Del MNR Al MR 12169 January 1, 2013 December 1, 2013

Vatia S.A. E.S.P. 16164 January 1, 2013 December 1, 2013

Isagen S.A. E.S.P. 16260 January 1, 2013 December 1, 2013

Empresas Públicas De Medellín E.S.P. 7882 January 1, 2013 December 1, 2013

Energéticos S.A.S E.S.P Distribuidora,

Comercializadora De Energía, Gas E

Hidrocarburos. 8041

January 1, 2013 December 1, 2013

Energéticos S.A.S E.S.P Distribuidora,

Comercializadora De Energía, Gas E

Hidrocarburos. 8080

January 1, 2011 December 1, 2013

Isagen S.A. E.S.P. 8859 January 1, 2013 December 1, 2013

Proenca S.A. E.S.P. 9988 May 28, 2011 December 1, 2013

The following is a detail of the leasing contracts as of December 31, 2013:

Company

Obligation

value

Installments paid Opening

Date

Maturity

Date

Contracts balance at

December June December June

Operating

Leasing de Occidente $ 163.990 36 30 07/02/2011 07/02/2016 $ 74.433 $ 90.858

Leasing de Occidente 186.026 35 29 28/01/2011 28/01/2014 5.393 37.416

Leasing de Occidente 156.797 30 24 30/06/2011 30/06/2014 810 -



Leasing de Occidente 156.733 8 2 26/04/2013 26/04/2016 131.432 - -

$ 1.008.414

$ 317.535 $ 249.953

Financial

Leasing de Occidente $ 270.000 16 10 19/04/2012 19/04/2024 $ 250.578 $ 256.267

Commitments of Enerfranca S.A. E.S.P. - For the development of its corporate

purpose, the Company has entered into the following contracts, among others:

a) Mercantile Offering 08-0915: Sale of generation services and sale of electricity,

equipment operation and maintenance provided by Enerfranca S.A. E.S.P. to

Zonagen S.A. The period in force and term is 84 months as from August 27, 2009.

Through an additional clause (Otrosí No. 2) to the Mercantile Offering 08-0915

dated December 9, 2013, the parties agreed to the following:

- 50 -

For operating fails compensation, modify as from January 1, 2013 the monthly cost

of electric energy generation to one Colombian peso (Col$ 1.00) per kilowatt/hour

(formerly, $91.50 k/h)

Revert through a credit note the consumptions billed to Zonagen from January to

October 2013. In the January-October period, Enerfranca had invoiced an amount of

$3.836.900; the amount credited was $3.794.967. The latter caused a decrease in

accounts payable and in the cost of sales.

In a six-month period and as from January 1, 2014, once again evaluate the

performance and commitments acquired by Enerfranca. If the commitments are not

satisfactorily complied with, Zonagen may terminate in advance this offering without

giving rise to an indemnification of damages.

b) Contract 6.746-3: Supply of power capacity and electric energy to the company

Alfacer del Caribe S.A. located in the La Cayena Free Trade Zone. The term of this

contract is 5 years; operations started in April 2013.

c) Contract 7.010-1: The company and Asesores del Caribe Colombiana S.A.S.

entered into contract 7.010-1 “Contract for the Provision of Administration Services,

Operation, Maintenance, Workforce, and Supply of Input of the Power Generation

Plants Zonagen and Alfacer”, in conformity with Annex 14 to the Contract of Joint

Accounts entered into with the collective portfolio and by compartment Renting.

The term of the contract was until December 31, 2013.

Commitments of Zonagen S.A.- For the development of its corporate purpose, the

Company has entered into the following contracts, among others:

Mercantile Offering No. 08-0915-2012 – Its purpose is the sale of generation services

and sale of electricity, equipment operation and maintenance provided by Enerfranca

S.A. E.S.P. to Zonagen S.A. The period in force and term is 84 months as from August

27, 2009.

Through additional clause (Otrosí) No. 2 to the Mercantile Offering 08-0915 dated

December 9, 2013, the parties agreed to the following:

Clause one: As from January 1, 2013 the monthly cost of the electric energy generation

as well as the equipment subject matter of this mercantile offering shall be one

Colombian peso (Col$ 1.00) per kilowatt/hour.

Clause two: Due to a compensation of operating failures, revert through a credit note the

consumption invoiced to Zonagen from January to October 2013.

Clause three: In a 6-month term and as from January 1, 2014, evaluate once again the

management undertaken and commitments acquired by Enerfranca; if the commitments

are not complied with at full satisfaction, Zonagen may terminate in advance this

offering without giving place to the indemnification of damages.

- 51 -

Commitments of Promioriente S.A. E.S.P.- For the development of its corporate

purpose, the Company has entered into the following contracts, among others:

a) Through Decree number 1950 of August 7, 1994, the Company obtained from the

National Government the concession of the right to provide the public service of

natural gas transportation in the Department/State of Santander through the

construction, operation and maintenance of the Barrancabermeja – Bucaramanga

trunk gas pipeline, for a 50-year term extendable for a 20-year term. A Time Deposit

(CDT) was issued as collateral.

b) Leasing contracts, the following is a detail of the leasing contracts:

Company Asset Term

Value of the

option December June

Leasing Bancolombia Branch Gasoducto Gibraltar 60 months $ 400.000 $33.769.461 $37.247.931

Contingencies of Promigas S.A. E.S.P., Gases de Occidente S.A. E.S.P., Surtigas

S.A. E.S.P., Compañía Energética de Occidente S.A.S. E.S.P., Transmetano S.A.

E.S.P., and Promioriente S.A. E.S.P.

In the course of operations, the companies are subject to diverse legal regulations

inherent to public utility and environmental protection companies. In the Companies’

Management opinion, no situations have been identified that can indicate possible

breaches with those standards that may have significant impact on the financial

statements.

During the normal course of their operations, Gases de Occidente S.A. E.S.P. and

Surtidora de Gas del Caribe S.A. E.S.P. grant quality guarantees in the natural gas

installations to their clients for a one-year period, except for residential and commercial

meters, which are three (3) years. No significant claims have arisen in the past

regarding these guarantees and for this reason no accrued liability was calculated for

this concept as of December 31 and June 30, 2013.

Compañía Energética de Occidente S.A.S E.S.P. was incorporated on June 28, 2010,

with main office in Popayán. Its corporate purpose is “the celebration and execution of

the Management Contract for the performance of the administrative, operating,

technical and commercial management, the investment, extension of coverage,

rehabilitation and preventive and corrective maintenance of the service infrastructure

and other activities necessary for the provision of the electric power distribution and

commercialization services in the State/Department of Cauca. Share is 52.1% with an

accumulated contribution as of December 31, 2013, of $89.370.459. The company acts

as Managing Stockholder.

On July 4, 2013, it is renewed the performance bond number 1001312003102, whose

term is from July 4, 2013 until July 5, 2014, for the management contract entered into

by and between Compañía Energética de Occidente S.A.S E.S.P. and Centrales

Eléctricas del Cauca S.A. E.S.P., for an amount of $38.370.320. Since Gases de

Occidente S.A. E.S.P., acts as managing partner, it has recorded in other contingent

- 52 -

liabilities, 51% of the guarantee value for an amount of $19.568.863 as of December,

2013 and $19.103.000 as of June 2013.

Transmetano E.S.P. S.A. requested to the Municipality of Girardota the cancellation of

the registration as Industry and Commerce Taxpayer in that municipality and the refund

of the payments made in 2003 and 2004, grounded on the fact that the Company is not a

taxpayer of such tax, because the main activity (natural gas transportation) is not subject

to this tax, in conformity with the provisions of Article 16 of Decree 1056 of 1953 and

Article 1 of Decree 850 of 1965. The Municipality rejected the request of cancellation

of the registration of Transmetano E.S.P. S.A. as Industry and Commerce taxpayer and

did not make the refund of the taxes paid and not due. For that reason, Transmetano

E.S.P. S.A. filed two lawsuits of appeal for annulment and reestablishment of the right

before the Administrative Court of Antioquia for the decisions made by the

Municipality of Girardota.

The Administrative Court of Antioquia has issued the ruling in the process against the

Municipality of Girardota regarding the refund of those payments made on account of

the Industry and Commerce Tax, denying the claims of Transmetano E.S.P. S.A.

arguing that the public service of distribution and commercialization of gas, are

activities subject to this tax according to Law 142 of 1994, disallowing the fact that the

transportation of natural gas, which is the activity developed by Transmetano E.S.P.

S.A., is an exempt activity. The Company filed an appeal against this decision before

the Council of State and on September 3, 2009, Section Four of the Council of State

ruled in favor of Transmetano E.S.P. S.A., ordering to revoke the ruling issued by the

Administrative Court of Antioquia and further it decided to annul the Resolutions

whereby the Municipality of Girardota denied the petitions. Additionally, it ordered to

the Municipality of Girardota the refund of the Industry and Commerce Tax paid by

Transmetano E.S.P. S.A., together with the current and in-arrears interest in the terms

stated by Law. According to the foregoing, Transmetano E.S.P. S.A. recorded as a

certain and enforceable asset the figures corresponding to the recovery of the tax and the

accrual of current interest ordered in such ruling.

Likewise, in development of this process, in August 2007, the Company received a

payment mandate issued by the Treasury of Girardota, in which it asked the Company

to pay $1.415 million for the Industry and Commerce Tax of 2004, 2005, 2006 and

2007, to which several exceptions were filed. In 2011, the Municipality of Girardota

refunded to Transmetano S.A. E.S.P. a balance of $1.308.070; the municipality pays to

the Company on a semi-annual basis.

As of December 31 and June 30, 2013, the Companies had the following litigation and

individual lawsuits against them:

- 53 -

December June

Litigation and individual lawsuits

against

Number of

Claims Amount

Number of

Claims Amount

Right-of-way claims:

Between $1 and $1,000 23 $ 4.583.465 25 $ 5.146.805

$1,001 and above 4 18.725.203 3 17.377.202

Right of Way 27 23.308.668 28 22.524.007

Ordinary Processes:

Between $5 and $1,000 58 68.229.810 69 68.772.145

Between $1,001 and $3,000 5 7.644.163 5 7.644.163

From $3,001 and above 2 36.560.360 2 50.560.360

Ordinary (1) 65 112.434.333 76 126.976.668

Administrative 20 7.993.162 20 8.097.769

Labor 25 2.474736 24 1.573.865

Total processes 137 $ 146.210.899 148 $ 159.172.309

As of December 31, it decreased due to the withdrawal of some processes resulting from

first-instance rulings favorable to Promigas and from rejected lawsuits and the

reclassification of the process with the Ministry of Mines (annulment CREG Resolution

108 gas tariff) to contingent rights.

As of December 31 and June 30, 2013, a summary of contingent rights is as follows:

December June

Range Number of

Claims Value

Number of

Claims Value (million Colombian pesos)

Contingent rights 757 $ 303.002.256 780 $ 290.254.813

The variation of the second semester of 2013 was generated by the inclusion of the process with the

Ministry of Mines (annulment CREG Resolution 108 gas tariff), due to the fact that Promigas is the

plaintiff before the Ministry for a claim of $20,000,000 and the withdrawal of the Process of Promigas –

Minminas of the Juridical Stability Contract amounting to $7.174. 364; additionally, for the exchange

difference of the Nation - Minminas – CREG process.

In Surtigas it mainly includes a lawsuit for annulment of the administration actions issued by the Ministry

of Mines for the collection of contributions to the Scholarships Fund ($166.312), lawsuit of the

administrative action issued by the Social Security Institute for the collection of health contributions

($173.346), lawsuits against municipalities in Córdoba and Sucre, for the collection of public lighting tax

($947.013).

- 54 -

26. RELATED PARTIES TRANSACTIONS

Below there is a summary of the assets, liabilities, revenues, costs and expenses for the

semesters ended as of December 31 and June 30, 2013 of Promigas S.A. E.S.P. and its

subsidiaries resulting from the most important transactions conducted during the years

then ended with its main non-consolidated subsidiaries (Gases de Caribe S.A. E.S.P.,

Energía Eficiente S.A. E.S.P., Efigas S.A., Gases de la Guajira S.A., and Gas Natural de

Lima y Callao S.A.), shareholders, Board of Directors’ members and management:

December 31, 2013

Related Parties Shareholders

Board of

Directors Management

Assets:

Accounts receivable & loans $ 14.205.466 $ 7.966.605 $ - $ 1.798.929

Revaluations of assets 147.841.139 - - -

Investments 179.359.369 - - - - - -

$ 341.405.974 $ 7.966.605 $ - 0 $ 1.798.929

Liabilities:

Accounts payable $ 904.843 $ 212.596.527 $ - - $ - -

Revenues:

Dividends $ 17.411.198 $ - $ - $ -

Financial 54.271 149.356 - 6.092

Sales 27.410.471 17.771.001 - - 7.821

$ 44.875.940 $ 17.920.357 $ - - $ 13.913

Expenditures:

Salaries $ - $ - $ - $ 3.316.023

Administration costs and

expenses 6.181.149 36.644.719 94.320 11.549

Equity Method - - - 2.045.751

Financial - 571.091 - 84.141

Fees - - 2.483.784 295.302 23.801

$ 6.181.149 $ 39.699.594 $ 389.622 $ 5.481.265

- 55 -

June 30, 2013

Related Parties Shareholders

Board of

Directors Management

Assets:

Accounts receivable & loans $ 13.149.835 $ 4.135.860 $ - $ 1.840.263

Revaluations of assets 131.148.629 - - -

Investments 182.814.308 - - - - - -

$ 327.112.772 $ 4.135.860 $ - 0 $ 1.840.263

Liabilities:

Accounts payable 966.511 324.556.956 - - - -

$ 966.511 $ 324.556.956 $ - - $ - -

Revenues:

Dividends $ 54.215.979 $ - $ - $ -

Financial 38.214 356.985 - 6.009

Sales 25.059.507 14.850.330 - - 7.756

$ 79.313.700 $ 15.207.315 $ - 0 $ 13.765

Expenditures:

Salaries $ - $ - $ - $ 4.564.144

Administration costs and

expenses

5.353.906

31.992.270

-

40.917

Financial 89 336.814 - 69.019

Fees - - 2.901.351 290.868 31.735

$ 5.353.995 $ 35.230.435 $ 290.868 $ 4.705.815

As of June 30, 2013 and December 31, 2012, accounts receivable and loans made to

management are mainly mortgage loans at an average interest rate of 4.03% and 4.25%,

respectively.

- 56 -

27. FINANCIAL RATIOS

The main financial ratios of the Company for the semesters ended as of December 31 and

June 30, 2013, are as follows:

December June

Liquidity

Current ratio (times) 1,50 1,64 Solvency and coverage Indebtedness/total assets ratio With appraisals 64,58% 64,57% Without appraisals 85,23% 85,27%

EBITDA (Operating profit plus depreciation and

amortization

273.672.618 252.544.591

Coverage of EBITDA on financial expenses, including

exchange difference (times)

4,33 3,44

Financial Debt EBITDA (times)

8,01 8,30

Profitability

Net income/Revenues (%) 16,58% 30,89%

Operating profit/Revenues (%) 24,57% 24,58% Return on Total Assets at beginning of period

(without valorization) 5,02% 8,96%

Assets turnover (without valorization) (times)

0,30 0,29 Return on equity at beginning of the period (without

valorization) 27,15% 50,32%

Liquidity

Current ratio – There is an increase in the current portion of liabilities, due to the higher

maturities in 2013, showing a decrease of the ratio due to the consolidated portion

resulting from the current assets against current liabilities. The decrease in this ratio

means a lower Company’s liquidity, however the organization have an appropriate level

of indebtedness.

Solvency and coverage

Indebtedness ratio – This indicator shows the proportion of assets of the Company which

are financed through external creditors. It is convenient to keep an optimal indebtedness

and capital cost level. It is calculated in two ways: one includes the valorization of

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assets and the other does not. With or without revaluations, both ratios show stable due to

a proportional increase of the assets and liabilities in the consolidated financial.

EBITDA – There is an increase in EBITDA during the second semester of 2013, mainly

due to the greater EBITDA of Promigas S.A. E.S.P., Promisol S.A.S. and Surtigas S.A.

E.S.P., relieving the decrease in Promioriente S.A. E.S.P., due to emergencies in the

Gibraltar – Bucaramanga gas pipeline and the higher maintenance costs.

Coverage of EBITDA on financial expenses – This indicator increases, due to the higher

EBITDA recorded in the period, as a result of the decrease in financial expenses due to

the capitalization of a portion considered a component of the investment projects. The

increase in this ratio means a greater capacity by the company to comply with its

financial obligations.

Financial Debt / EBITDA – There was a decrease in the proportion of consolidated

financial liabilities with respect to EBITDA, mainly due to the increase in EBITDA of

Promigas S.A. E.S.P., Promisol S.A.S. and Surtigas S.A. E.S.P. This indicator shows the

number of times that the EBITDA represents the financial debt and a decrease in this

figure represents a lower indebtedness level.

Profitability

Net profit / Revenues ratio – There is decrease in the ratio in the second semester of 2013

despite de greater EBITDA, mainly due to lower net profits, resulting from the greater

non-operating revenues generated by the sale of Promitel S.A.S. and the dividends of Gas

Natural de Lima y Callao. This indicator represents the proportion of revenues that result

in profits available to the stockholders, after discounting interest and taxes.

Operating profit / Sales ratio – This ratio shows stable comparing to the immediately last

period, due to a proportional growth of the EBITDA comparing to the revenues.

Return on total assets at the beginning of the period – There was a decrease in the ratio,

resulting from the decrease in consolidated net profit for the period, resulting from the

greater non-operating revenues generated by the sale of Promitel S.A.S. and the dividends

of Gas Natural de Lima y Callao. The ratio shows the return generated in a period of time

by the assets invested in the consolidated companies.

Asset turnover – The ratio shows an increase resulting from the greater operating

revenues recorded.

Return on equity at the beginning of the period – There was a decrease in consolidated

net profit explained above, which generates the decrease of this ratio. The ratio indicates

the return generated by the resources of stockholders invested in the business.

promigas s.a. e.s.p. and its subsidiaries...promigas s.a. e.s.p. and its subsidiaries notes to the...

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