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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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.
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(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
From July 1st 2015 to June 30
th 2016 83.681.118
From July 1st 2016 to June 30
st 2017 52.476.634
From July 1st 2017 to June 30
st 2018 29.112.706
From July 1st 2018 to June 30
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
Long-term portion $ 12.830.880 $ 11.633.618
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.
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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
Long-term portion $ 677.912.821 $ 572.557.871
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 to December 31st, 2017 88.581.640
From January 1st to December 31st, 2018 113.363.628
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
Long-term portion $ 7.289.998 $ 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
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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
Series A10, 10 years $150.179 million
Series A20, 20 years $250.000 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
Purpose: Substitution of financial debt
Par value: One Million Colombian pesos each
Series and terms: Series A5 - 5 years
Series A7 - 7 years
Series A10 – 10 years.
Securities yield: Series A5 CPI + 4.79% E.A.
Series A7 CPI + 5.39% E.A.
Series A10 CPI + 5.89% E.A.
Form of payment: Quarterly
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
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 + 3.25% E.A.
Series A20 CPI + 3.64% E.A.
Form of payment: Quarterly
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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
Long-term portion $ 5.879.924 $ 7.544.360
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.
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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
Long-term portion $ 37.922.885 $ 39.888.545
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.
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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
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(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
118992 Leasing Bancolombia 2010 52.719.881 36.863.517
$ 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
107166 Leasing Bancolombia 2009 30.583.252 35.235.971
118992 Leasing Bancolombia 2010 37.374.207 36.863.491
$ 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
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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 179.868 29 23 29/07/2014 29/07/2014 7.601 7.756
Leasing de Occidente 165.000 37 31 11/02/2011 11/02/2016 97.866 113.923
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
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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.
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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.