Issuer:
Address:
Main Activity:
ISSUER
Celsia S.A. E.S.P.
Tax ID: 811030322-7
Main address: Carrera 43 A No. 1 A Sur 143 Piso 5. Edificio Santillana, Medellín, Antioquia.
The main activity of Celsia S.A. E.S.P. is the supply of public utilities of generation and sale of
electricity.
Class of Security Offered:
Nominal value:
Amount of ordinary bonds:
Total issue size:
Subscription price:
Number of series:
Maturity period:
Placement term and term of the offering
Law of circulation:
Minimum investment value:
Maximum interest rate:
Security rights:
Recipients of the offering:
Placement mechanism:
Type of listing:
Type of Offering:
Target Market:
Commissions and expenses to be paid by
subscribers:
Securities exchange:
Rating of ordinary bonds:
Issuance Management:
Bondholder Legal representative:
OFFERING OF ORDINARY BONDS
Ordinary Bonds
One million Colombian pesos legal currency (COP 1,000,000)
Eight hundred thousand (800,000) Ordinary Bonds
Eight hundred billion pesos legal currency (COP 800,000,000,000)
See Number 5, Section B, Chapter 1, Part One of this Prospectus
Information
6 series: A, B, C, D, E and F
Between 18 months and 20 years from the Issuance Date.
See Section H, Chapter 2, Part One of this Prospectus Information
Negotiable
See Number 4, Section B, Chapter 1, Part One of this Prospectus
Information
See Section C, Chapter 2, Part One of this Prospectus Information
See Section M, Chapter 1, Part One of this Prospectus Information
General public investors, including pension and severance pay funds
Best Efforts Placement
Normal listing
Public Offering
Primary Market
Investors will not have to pay commissions or other related expenses for
subscribing to the Securities
The ordinary bonds are listed on the Bolsa de Valores de Colombia S.A.
BRC Investor Services S.A. awarded an AA+ rating. See Annex D of Part IV
of this Prospectus Information
The issuance will be fully dematerialized and managed by Depósito
Centralizado de Valores Deceval S.A. Consequently, those who acquire
securities renounce the possibility of materializing the Ordinary Bonds
issued
Alianza Fiduciaria S.A.
The financial information contained in this Prospectus Information is updated to June 30, 2013. From this date, said information may be consulted on the National Registry of
Securities and Issuers (RNVE in its Spanish acronym) and on the website of the Financial Superintendence of Colombia (SFC in its Spanish acronym),
www.superfinanciera.gov.co and/or on Bolsa de Valores de Colombia S.A.
As of the date of the publication of this Prospectus Information, Celsia S.A. E.S.P. has a Corporate Governance Code, which may be consulted at: www.celsia.com.
Additionally, pursuant to External Circular 028 of 2007, amended by External Circular 056 of 2007 and External Circular 007 of 2011 of the Financial Superintendence of
Colombia, Celsia S.A. E.S.P. annually reports its corporate governance practices contained in the Código País survey.
This Prospectus Information contains all of the information the Financial Superintendence of Colombia considers relevant information to be disclosed.
NOTICE
READING THE PROSPECTUS INFORMATION IS CONSIDERED TO BE INDISPENSABLE FOR POTENTIAL INVESTORS TO ADEQUATELY ASSESS THE BENEFIT OF
THE INVESTMENT.
FINANCIERA
VIGILADO SUPERINTENDENCIA
DE COLOMBIA
LISTING ON THE NATIONAL REGISTRY OF SECURITIES AND ISSUERS AND THE AUTHORIZATION OF THE PUBLIC OFFERING DO NOT IMPLY A RATING OR ANY
RESPONSIBILITY BY THE FINANCIAL SUPERINTENDENCE OF COLOMBIA REGARDING THE INDIVIDUALS OR COMPANIES LISTED OR REGARDING THE PRICE,
ADVANTAGE OR NEGOTIABILITY OF THE SECURITY OR OF THE RESPECTIVE ISSUANCE, OR REGARDING THE ISSUER'S SOLVENCY.
LISTING OF SECURITIES ON BOLSA DE VALORES DE COLOMBIA S.A. DOES NOT IMPLY CERTIFICATION OF THE ADVANTAGE OF THE ORDINARY BONDS OR
THE ISSUER'S SOLVENCY.
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PRELIMINARY PROSPECTUS INFORMATION
THIS PROSPECTUS INFORMATION DOES NOT CONSTITUTE AN OFFER OR AN INVITATION BY OR IN THE NAME OF THE ISSUER, THE STRUCTURING AGENT,
THE LEGAL ADVISOR, THE LEAD PLACEMENT AGENT OR THE OTHER PLACEMENT AGENTS TO SUBSCRIBE FOR OR PURCHASE ANY OF THE SECURITIES
MENTIONED HEREIN.
THIS DOCUMENT IS NOT A BINDING PUBLIC OFFERING. THEREFORE, IT MAY BE ADDED TO OR CORRECTED. CONSEQUENTLY, NEGOTIATIONS CANNOT BE
MADE UNTIL THE PUBLIC OFFERING IS AUTHORIZED AND OFFICIALLY COMMUNICATED TO ITS RECIPIENTS.
Structuring Agent and Lead Placement
Agent
Placement Agent
Legal Advisor
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PRELIMINARY PROSPECTUS INFORMATION
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PRELIMINARY PROSPECTUS INFORMATION
TABLE OF CONTENTS
PART ONE - THE ORDINARY BONDS .............................................................................................. 18
CHAPTER 1 - CHARACTERISTICS OF THE ORDINARY BONDS, CONDITIONS AND RULES OF
THE ISSUANCE ..................................................................................................................................... 18
A. CLASS OF SECURITY OFFERED, CIRCULATION LAW AND SECONDARY TRADING ................................................................18
B. NUMBER OF ORDINARY BONDS OFFERED, DENOMINATION, NOMINAL VALUE, MINIMUM AMOUNT TO REQUEST
AND SUBSCRIPTION PRICE .............................................................................................................................................................18
C. TARGET AUDIENCE OF THE OFFERING.........................................................................................................................................19
D. ORDINARY BOND REPLENISHMENT, SPLITTING AND MERGING RULES ..................................................................................19
E. DEFINITION OF THE SUBSCRIPTION, ISSUE, ISSUANCE AND MATURITY DATES ...................................................................20
F. COMMISSIONS AND EXPENSES......................................................................................................................................................20
G. STOCK EXCHANGE WHERE THE ORDINARY BONDS WILL BE LISTED......................................................................................20
H. ECONOMIC AND FINANCIAL OBJECTIVES OF THE ISSUANCE ...................................................................................................20
I. MEANS THROUGH WHICH HOLDERS WILL BE PROVIDED WITH INFORMATION OF INTEREST ............................................20
J. TAX REGIMEN APPLICABLE TO THE ORDINARY BONDS .............................................................................................................20
K. ISSUANCE MANAGER ENTITY .........................................................................................................................................................21
L. FULL DEMATERIALIZATION OF THE ISSUANCE ............................................................................................................................23
M. ORDINARY BOND RIGHTS ................................................................................................................................................................24
N. BONDHOLDER RIGHTS .....................................................................................................................................................................24
O. BONDHOLDER OBLIGATIONS ..........................................................................................................................................................24
P. ISSUER OBLIGATIONS ......................................................................................................................................................................24
Q. COLLATERAL AND PRIORITY ...........................................................................................................................................................25
R. DUTIES, RIGHTS AND OBLIGATIONS OF LEGAL REPRESENTATIVE OF BONDHOLDERS.......................................................25
S. GENERAL BONDHOLDERS' MEETING ............................................................................................................................................27
CHAPTER 2 - FINANCIAL CONDITIONS OF ORDINARY BONDS, PUBLIC OFFERING AND
PLACEMENT ......................................................................................................................................... 30
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
SERIES INTO WHICH THE ISSUANCE IS DIVIDED .........................................................................................................................30
TERMS OF SECURITIES ...................................................................................................................................................................30
ORDINARY BOND YIELD ...................................................................................................................................................................30
INTEREST PAYMENT METHOD AND FREQUENCY .......................................................................................................................33
CAPITAL AMORTIZATION .................................................................................................................................................................33
PLACE OF PAYMENT OF CAPITAL AND INTEREST .......................................................................................................................34
ISSUANCE RATING ............................................................................................................................................................................34
TERM TO BID ON THE ORDINARY BONDS, VALIDITY PERIOD OF THE PUBLIC OFFERING AND PLACEMENT TERM .........34
METHOD TO PROCED WITH THE PUBLIC OFFERING ..................................................................................................................34
MEDIA USED TO MAKE THE PUBLIC OFFERING ...........................................................................................................................34
GENERAL RULES FOR PLACEMENT AND TRADING .....................................................................................................................34
PART TWO - ISSUER INFORMATION ............................................................................................... 38
CHAPTER 1 - GENERAL INFORMATION ............................................................................................ 38
A. COMPANY NAME, LEGAL STATUS, TERM AND GROUNDS FOR DISSOLUTION ........................................................................38
1.
Company Name ........................................................................................................................................................................ 38
2.
Legal Status and Term .............................................................................................................................................................. 38
3.
Grounds for Dissolution ............................................................................................................................................................. 38
B. LEGAL STRUCTURE AND REGULATIONS ......................................................................................................................................38
C. MAIN COMPANY DOMICILE AND MAIN ADDRESS .........................................................................................................................38
D. MAIN CORPORATE PURPOSE .........................................................................................................................................................39
E. HISTORY 39
F. SHARE STRUCTURE AND MAIN SHAREHOLDER INFORMATION................................................................................................40
G. CORPORATE GOVERNANCE PRACTICES......................................................................................................................................41
CHAPTER 2 - ORGANIZATIONAL STRUCTURE OF THE ISSUER ................................................... 42
A.
B.
C.
D.
ORGANIC STRUCTURE OF THE ISSUER ........................................................................................................................................42
SHAREHOLDERS' MEETING .............................................................................................................................................................42
BOARD OF DIRECTORS ....................................................................................................................................................................44
MECHANISMS ADOPTED TO ENSURE THE INDEPENDENCE OF BOARD OF DIRECTOR MEMBERS .....................................46
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PRELIMINARY PROSPECTUS INFORMATION
E.
F.
G.
H.
I.
J.
K.
L.
LINKS BETWEEN BOARD OF DIRECTOR MEMBERS AND THE COMPANY OR ITS RELATED COMPANIES ...........................46
MANAGEMENT ...................................................................................................................................................................................46
STATUTORY AUDITING .....................................................................................................................................................................49
BOARD OF DIRECTORS' AND EXECUTIVES' HOLDING SHARES OF THE ISSUER ....................................................................49
AGREEMENTS OR PROGRAMS TO GRANT EMPLOYEES SHARES OF THE ISSUER ...............................................................50
CONTROLLING COMPANY AND BUSINESS GROUP .....................................................................................................................50
RELATED COMPANIES AND COMPANIES IN WHICH THE ISSUER HOLDS SHARES ................................................................50
LABOR RELATIONS ...........................................................................................................................................................................53
CHAPTER 3 - ASPECTS RELATED TO THE ISSUER'S ACTIVITY ................................................... 54
A.
B.
C.
D.
E.
REGULATORY FRAMEWORK ...........................................................................................................................................................54
SECTOR DESCRIPTION ....................................................................................................................................................................55
BUSINESS DESCRIPTION .................................................................................................................................................................63
MAIN MARKETS IN WHICH IT PARTICIPATES ................................................................................................................................71
DEPENDENCE ON MAIN PROVIDERS AND CLIENTS. ...................................................................................................................72
CHAPTER 4 - FINANCIAL INFORMATION .......................................................................................... 74
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
L.
M.
N.
O.
P.
Q.
R.
S.
T.
U.
V.
W.
AUTHORIZED, SUBSCRIBED AND PAID-IN CAPITAL OF THE ISSUER AND NUMBER OF SHARES IN CIRCULATION ...........74
TAKEOVER BIDS FOR ISSUER'S SHARES CARRIED OUT LAST YEAR .......................................................................................74
PROVISIONS AND RESERVES FOR THE REPURCHASE OF SHARES ........................................................................................74
INFORMATION ON DIVIDENDS ........................................................................................................................................................74
INFORMATION ON EBITDA GENERATION OVER THE LAST THREE (3) YEARS AND AS AT THE CLOSING OF THE LAST
QUARTER 75
EVOLUTION OF SHARE CAPITAL OVER THE LAST THREE (3) YEARS .......................................................................................76
CONVERTIBLE BONDS .....................................................................................................................................................................76
MAJOR ASSETS OF THE ISSUER ....................................................................................................................................................76
INVESTMENTS EXCEEDING 10% OF THE ISSUER'S TOTAL ASSETS .........................................................................................79
RESTRICTIONS ON THE SALE OF ASSETS OF THE ISSUER'S INVESTMENT PORTFOLIO ......................................................79
MAJOR INVESTMENTS IN PROGRESS AND THEIR FINANCING METHODS ...............................................................................79
FIRM COMMITMENTS FOR THE ACQUISITION OF FUTURE INVESTMENTS ..............................................................................80
DESCRIPTION OF FIXED ASSETS SEPARATED INTO OWNED, LEASED, RENTED AND OTHERS ..........................................80
PATENTS, BRANDS AND OTHER ISSUER PROPERTY RIGHTS USED UNDER AGREEMENTS WITH THIRD PARTIES,
INDICATING ROYALTIES EARNED AND PAID.................................................................................................................................84
INFORMATION ABOUT GOVERNMENT PROTECTION OR INVESTMENT PROMOTION AFFECTING THE ISSUER ................84
OPERATIONS WITH RELATED PARTIES OF THE YEAR IMMEDIATELY PRIOR ..........................................................................84
LOANS OR CONTINGENCIES THAT REPRESENT FIVE PERCENT (5%) OR MORE OF THE TOTAL LIABILITIES OF THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE PREVIOUS FISCAL YEAR ......................................................................85
ISSUER OBLIGATIONS AT THE CLOSE OF THE CALENDAR QUARTER IMMEDIATELY PRIOR ...............................................88
RELEVANT PROCEEDINGS AGAINST THE ISSUER ......................................................................................................................88
SECURITIES REGISTERED IN THE RNVE .......................................................................................................................................89
CURRENT DEBT SECURITIES THAT HAVE BEEN PUBLICLY OFFERED AND HAVE NOT BEEN REDEEMED ........................89
SUM OF REAL COLLATERAL PROVIDED TO THIRD PARTIES .....................................................................................................89
CONSERVATIVE ASSESSMENT OF THE ISSUER'S PERSPECTIVES ..........................................................................................89
CHAPTER 5 - MANAGMENT'S COMMENTS AND ANALYSIS OF OPERATING RESULTS AND
THE FINANCIAL POSITION OF THE ISSUER AND OF ITS RELATED COMPANIES ...................... 90
A. KNOWN TRENDS, COMMITMENTS OR EVENTS THAT COULD OR WILL SIGNIFICANTLY AFFECT THE ISSUER'S
LIQUIDITY, ITS OPERATION RESULTS OR ITS FINANCIAL POSITION ........................................................................................90
B. BALANCE SHEET ...............................................................................................................................................................................90
C. OPERATING INCOME PERFORMANCE ...........................................................................................................................................91
D. ANALYSIS OF OPERATING RESULTS .............................................................................................................................................91
E. PENSION LIABILITY AND COMPENSATION CONTRIBUTIONS .....................................................................................................92
F. IMPACT OF INFLATION AND FLUCTUATIONS IN THE EXCHANGE RATE ...................................................................................92
G. THE ISSUER'S LOANS OR INVESTMENTS IN FOREIGN CURRENCY ..........................................................................................92
H. RESTRICTIONS AGREED WITH RELATED COMPANIES TO TRANSFER RESOURCES TO THE COMPANY ...........................93
I. INFORMATION REGARDING DEBT AT THE END OF THE LAST THREE (3) FISCAL YEARS.....................................................94
J. INFORMATION REGARDING TAX CREDITS OR DEBTS THE ISSUER HAD IN THE LAST FISCAL YEAR .................................95
K. INFORMATION REGARDING CAPITAL INVESTMENTS COMMITTED AT THE END OF THE LAST FISCAL YEAR AND THE
LAST QUARTER REPORTED ............................................................................................................................................................96
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PRELIMINARY PROSPECTUS INFORMATION
L. REPORT ON PROGRESS IN THE IMPLEMENTATION OF THE INTERNATIONAL FINANCIAL REPORTING STANDARDS
(IFRS).
96
CHAPTER 6 - INFORMATION ABOUT ISSUER RISKS ...................................................................... 97
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
L.
M.
N.
O.
P.
Q.
R.
S.
T.
U.
V.
W.
X.
MACROECONOMIC FACTOR RISKS ................................................................................................................................................97
DEPENDENCY ON KEY PERSONNEL ..............................................................................................................................................97
DEPENDENCY ON A SINGLE BUSINESS SEGMENT .....................................................................................................................98
INTERRUPTION OF THE ISSUER'S ACTIVITIES CAUSED BY FACTORS OTHER THAN LABOR RELATIONS ..........................98
ABSENCE OF A SECONDARY MARKET FOR SECURITIES OFFERED ........................................................................................99
ABSENCE OF A HISTORIC RECORD OF THE ISSUER'S OPERATIONS .......................................................................................99
OCCURRENCE OF NEGATIVE, NULL OR INSUFFICIENT OPERATING RESULTS IN THE LAST THREE YEARS .....................99
DEFAULT ON BANK AND STOCK LIABILITIES ................................................................................................................................99
LINE OF BUSINESS RISKS ................................................................................................................................................................99
COMPENSATION, PENSION, OR TRADE UNION RISKS ..............................................................................................................100
RISKS OF THE ISSUER'S CURRENT STRATEGY .........................................................................................................................100
ISSUER VULNERABILITY TO VARIATIONS IN THE INTEREST RATE, INFLATION AND/OR CURRENCY EXCHANGE
RATE
100
DEPENDENCY OF THE BUSINESS ON LICENSES, CONTRACTS, BRANDS AND OTHER VARIABLES NOT THE
PROPERTY OF THE ISSUER ..........................................................................................................................................................101
SITUATIONS RELATED TO THE COUNTRIES IN WHICH THE ISSUER OPERATES..................................................................101
ACQUISITION OF ASSETS OTHER THAN THOSE FOR THE ISSUER'S NORMAL COURSE OF BUSINESS ...........................101
EXPIRATION OF SUPPLY CONTRACTS ........................................................................................................................................101
IMPACT OF THE REGULATIONS AND NORMS THAT IMPLICATE THE ISSUER AND POSSIBLE CHANGES THERETO .......102
IMPACT OF ENVIRONMENTAL PROVISIONS................................................................................................................................102
LOANS THAT FORCE THE ISSUER TO SET ASIDE SPECIFIC AMOUNTS IN ITS FINANCIAL STRUCTURE ...........................103
OPERATIONS TO BE PERFORM THAT COULD AFFECT THE BUSINESS' NORMAL DEVELOPMENT ....................................103
POLITICAL FACTORS SUCH AS SOCIAL INSTABILITY, ECONOMIC EMERGENCIES, ETC. ....................................................103
COMMITMENTS KNOWN BY THE ISSUER THAT MAY IMPLY A CHANGE OF CONTROL OF ITS SHARES ............................103
POTENTIAL DILUTION OF INVESTORS .........................................................................................................................................103
RISKS RELATED TO THE SUPPLY AND ORDINARY BONDS ......................................................................................................103
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PRELIMINARY PROSPECTUS INFORMATION
NOTICE RELATED TO THE PRELIMINARY PROMOTION
Pursuant to that established in Article 6.2.1.1.1 of Decree 2555, it shall be noted that:
The process addressed in the preliminary promotion that is carried out with this Preliminary Prospectus Information is yet to be
authorized.
The Preliminary Prospectus Information is not a binding public offering. Thus, it may be added to or corrected.
Negotiations cannot be made until the public offering is authorized and officially communicated to its target.
NOTIFICATION
This document has been prepared with the sole objective of facilitating the general knowledge of potential investors regarding Celsia
S.A. E.S.P. and of the Public Offering. Therefore, for all legal purposes, any interested party must fully consult all the information
contained in the body of this Prospectus Information, before making any investment decisions.
The information contained in the Prospectus Information has been prepared to assist possible investors interested in making their own
assessment of this issuance and placement of ordinary bonds of Celsia S.A. E.S.P. (“Issuance”). This Prospectus Information contains
all the information required according to the applicable regulations. However, the prospectus does not claim to contain all the
information that a prospective investor could possibly require. Except when it otherwise indicated, the source of the figures and the
calculations included in this Prospectus Information is the Issuer.
The information contained in this Prospectus Information or later provided to any person, whether verbally or in writing, regarding a
transaction that involves securities issued by Celsia S.A. E.S.P. must not be considered to be legal, tax, fiscal, accounting, financial or
technical advice, or advice of any other nature for any of said persons by Celsia S.A. E.S.P., or by Banca de Inversión Bancolombia
S.A. Corporación Financiera (“Bancolombia Investment Banking” or the “Structuring Agent”), or by Prieto & Carrizosa S.A. (“Legal
Advisor”), or by Valores Bancolombia S.A. (“Bancolombia Securities”).
It shall be understood that references to laws, standards and other regulations quoted in the Prospectus Information shall be extended
to those which regulate, amend or replace them.
Neither Celsia S.A. E.S.P. nor its advisors shall be obliged to reimburse or compensate potential investors any cost or expense thereby
incurred on assessing the Prospectus Information, or incurred in another way regarding the subscription of Ordinary Bonds. Under no
circumstances can a lawsuit or claim of any nature be initiated against the Issuer or against any of its representatives, advisors or
employees as a result of the decision of whether to invest or not in the issued ordinary bonds.
As it is not within the scope of their functions, neither the Structuring Agent nor the Legal Advisor has independently audited the
information supplied by the Issuer that served as a basis for the preparation of this Prospectus Information. Therefore, they will not hold
any responsibility for any (explicit or implicit) omission, statement or certification contained therein.
The potential investors must only base their decisions on the information contained in this Prospectus Information. The Issuer,
Structuring Agent and Legal Advisor have not authorized any person to deliver information that is different or additional to that
contained in this Prospectus Information. If anyone supplies additional or different information, it must not be granted any validity.
Potential investors shall assume that the financial information of this Prospectus Information is accurate only as of the date that
appears on its cover, without taking into account the delivery date of this Prospectus Information or any later sale of the Ordinary
Bonds.
The financial situation, results of the transactions and the Prospectus Information may vary after the date that appears on the cover of
this Prospectus Information.
The full reading of this Prospectus Information is considered essential to allow an appropriate assessment of the investment by
potential investors.
At its full discretion and without having to provide any explanation, Celsia S.A. E.S.P. reserves the right to review the scheduling or
procedures related to any aspect of the process of listing Ordinary Bonds on the RNVE, or of the authorization of the public offering
before the SFC. Under no circumstances shall Celsia S.A. E.S.P. or any of its representatives, consultants or employees assume any
responsibility for the adoption of said decision.
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PRELIMINARY PROSPECTUS INFORMATION
FORWARED-LOOKING STATEMENTS
This Prospectus Information contains statements regarding the future of Celsia S.A. E.S.P., which are included in various sections
therein. These statements include information referring to current expectations or forecasts of Celsia S.A. E.S.P. related to its future
financial situation and operating results. Potential investors are warned that these forward-looking statements are not a guarantee of
the performance; that there is risk or uncertainty regarding what may occur in the future and that the results may substantially vary with
respect to the forecasts about the future, due to different factors.
APPROVALS AND AUTHORIZATIONS
According to Minutes No. 197 of September 26, 2013, the Board of Directors of Celsia S.A. E.S.P. approved the issuance and
placement of the Ordinary Bonds, as well as their listing on the RNVE and the Colombian Securities Exchange (BVC). In turn, the
Board of Directors approved the Issuance and Placement Regulations through Minutes No. 197 and 199 of September 26 and October
29, 2013, respectively.
The Ordinary Bonds were listed on the RNVE and their public offering was authorized through Resolution No. [__ of__ __, 2013],
issued by the SFC.
OTHER OFFERINGS OF SECURITIES BY THE ISSUER
Simultaneous to the application process for listing on the RNVE of the Ordinary Bonds and their issuance, the Issuer is not carrying out
other public or private offerings of securities.
The Issuer has also not requested other authorizations to prepare public or private offerings of securities. The competent authority is
still deliberating the public offering contemplated herein.
Celsia S.A. E.S.P. does not have current offerings of securities on the Public Stock Exchange of Colombia.
PEOPLE AUTHORIZED TO PROVIDE INFORMATION OR MAKE STATEMENTS ON THE CONTENT OF THE
PROSPECTUS INFORMATION
The people authorized to give information or make statements on the content of the prospectus information are:
ISSUER
Esteban Piedrahíta Montoya
Vice-president of Finance
Celsia S.A. E.S.P.
Carrera 43 A No. 1 A Sur 143, Piso 5, Medellín
epiedrahita@celsia.com
Carlos Mario Isaza Londoño
Corporate Finance Manager
Celsia S.A. E.S.P.
Carrera 43 A No. 1 A Sur 143, Piso 5, Medellín
cisaza@celsia.com
Juan Carlos Cabrera Galvis
Treasury Director
Celsia S.A. E.S.P.
Carrera 43 A No. 1 A Sur 143, Piso 5, Medellín
jcabrera@celsia.com
STRUCTURING AGENT
Camila Ayala Álvarez
Senior Project Manager
Capital Market Structuring
Banca de Inversión Bancolombia S.A. Corporación Financiera.
Calle 31 No. 6 - 39 Piso 14, Bogotá
caalvar@bancolombia.com.co
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PRELIMINARY PROSPECTUS INFORMATION
INFORMATION ABOUT THE PEOPLE WHO HAVE PARTICIPATED IN THE APPRAISAL, VALUATION OR
ASSEMENT OF THE ISSUER'S ASSETS OR LIABILITIES
The information contained in this Prospectus Information has been supplied by the Issuer and, in some cases, by different sources that
are duly identified in the body of this document.
Without prejudice to the relations disclosed in this document, none of the people who have participated in the valuation of the Issuer's
assets or liabilities have a direct or indirect economic interest that depends on the success of the placement of the Securities.
Below are the latest valuations of assets that were used in the preparation of the Issuer's financial reports.
Appraisal of Immovable Assets
The Issuer and its Related Companies have opted for property, plant and equipment to be valued by the net realizable value or market
value method and at the replacement cost, less the corresponding depreciation. Commercial appraisals are conducted to carry out the
net realizable or replacement value valuation. These must be carried out with at least every three calendar years. To carry out these
appraisals, by legal regulation, an exception is made for those assets with an adjusted value of less than twenty (20) legal minimum
monthly salaries.
Appraisals are carried out by people who have no relation with the Issuer or its Related Companies that could lead to conflicts of
interest. That means that there are no connections, relations or parallel transactions between the appraiser and the companies that
involve an interest that obstructs or potentially obstructs a fair and balanced declaration adjusted to the reality of the subject of the
appraisal. Based on the above, if the net adjusted cost of the property is greater that its net realizable value, an provision is made
charged against the results of the fiscal year; otherwise, a valuation is charged against the revaluation reserve.
The Issuer and its Related Companies carried out the appraisal of their assets in December 2010, 2011 and 2012. The appraisals were
prepared according to the criteria established in current legislation, Decree 1420 of 1998, by the independent appraisers of
Organización Noguera Camacho, Delta Ingeniería Ltda., Bienes y Desarrollos Ltda., with which there are no relations or transactions
that involve a relation with the Issuer and its Related Companies, using the new replacement cost and market value methodology.
Valuation of Acquired Assets
In its acquisition and assessment of projects underway, the Issuer has worked with different investment banks such as BNP Paribas,
Citibank S.A., Ágora, JP Morgan and Banca de Inversión Bancolombia S.A. Corporación Financiera, which are renowned companies of
the sector in this kind of assessment and consulting.
In addition to the processes mentioned above, Banca de Inversión Bancolombia S.A. Corporación Financiera has direct investment in
EPSA, a company in which the Issuer has a share greater than 50% of its subscribed and paid capital. Additionally, the Issuer has
several relations with Bancolombia S.A., which is the parent company of Banca de Inversión Bancolombia S.A. Corporación
Financiera. These entities maintain independence on the matters and are subject to the provisions of the SFC regarding conflicts of
interest.
Valuation Methods
The discounted free cash flow method was used for all the valuations. For the purposes of said valuations:
The forecast cash flows for the explicit period are brought to the present value using a discount rate that reflects the risk of
the activity and the country in which the transactions are carried out;
The business' terminal value is also discounted at the present value at the same discount rate, and this value is added to the
present cash flow values in the last year of forecasts;
The available cash is added, and the value of debt and other liabilities or contingencies is subtracted.
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PRELIMINARY PROSPECTUS INFORMATION
ECONOMIC INTEREST OF THE ADVISORS
The Structuring and Placement Agents have a direct economic interest that depends on the placement of Ordinary Bonds, according to
the terms of the structuring and best effort placement contract signed between the Issuer and Banca de Inversión Bancolombia and the
commercial placement offerings presented by the other brokerage firms of the securities exchange that act as Placement Agents to
Banca de Inversión Bancolombia S.A. Corporación Financiera.
There is no other advisor of the process that has a direct or indirect economic interest that depends on the success of the placement of
Ordinary Bonds.
INFORMATION ABOUT CONNECTIONS BETWEEN THE ISSUER AND ITS ADVISORS
None of the advisors involved in the preparation of this Prospectus Information are companies connected to the Issuer.
NOTICE
On their own account and prior to the acceptance of the Public Offering, investors interested in acquiring Ordinary Bonds shall obtain
any legal, governmental or corporate authorization or authorization of any other kind that may be required because of its specific
conditions.
In addition to those indicated above, this Prospectus Information does not require prior authorization in order for investors to participate
in the offering of the Ordinary Bonds.
This Prospectus Information alone does not constitute an offering or an invitation by or in the name of the Issuer, the Structuring Agent,
the Legal Advisor, the Lead Placement Agent or the other Placement Agents to subscribe for or to purchase any of the securities
mentioned herein.
Reading the Prospectus Information is considered to be indispensable for potential investors to adequately assess the benefit of
investing.
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PRELIMINARY PROSPECTUS INFORMATION
GLOSSARY
For the exclusive purpose of interpreting this Prospectus Information, the terms included in this Glossary or defined in other sections of
this document and that begin with a capital letter in the text of the Prospectus shall have the meaning assigned to them below. Terms
listed in singular also include the plural and vice versa, whenever required by the context. Any terms that are not expressly defined will
be understood in the sense attributed by the corresponding technical language or, in its absence, the natural and obvious meaning
according to the general use thereof.
Amount Offered: The number of Ordinary Bonds offered in the respective Public Offering Notification multiplied by the nominal value
thereof. The Amount Offered may not in any case exceed the Issue size.
ANLA: The National Authority for Environmental Licenses or the government authority acting as such.
ASIC: The Commercial Exchange System Administrator as defined in Resolution 11 / 2009 handed down by the CREG.
Banca de Inversión Bancolombia S.A. Corporación Financiera, an entity that is also acting in the capacity of Structuring Agent.
Bancolombia Financing: The financing granted by virtue of the loan agreement entered into by Celsia, in its capacity as the debtor, and
Bancolombia S.A. in its capacity as the creditor, dated June 3, 2010, for an approved value of up to COP 650,000 million due on June 3,
2020.
Best Efforts Placement: The Lead Placement Agent and the Placement Agents' commitment to the Issuer to make their best effort to place
all or part of the Issuance.
Board of Directors: The Issuer's Board of Directors as described in Section C, Chapter 2 of Part Two of this Prospectus Information.
Book Entry: The entry made of the rights or balances of Ordinary Bonds in the deposit accounts of Security holders by the Issuance
Manager.
Business Day: Any day of the year, other than Saturdays, Sundays and holidays in the Republic of Colombia.
BVC: Bolsa de Valores de Colombia S.A., a private infrastructure provider established to manage the stock, derivative and fixed income
securities market of the Colombian stock market. It is the entity responsible for the awarding and compliance of operations carried out
through stock brokerage firms.
CAC: The Commercialization Consultancy Committee as defined in Resolution 24 / 1995 or the government entity acting as such.
CETSA: Compañía de Electricidad de Tuluá S.A. E.S.P.
CND: The National Dispatch Center as defined in Resolution 11 / 2009 handed down by the CREG.
CNO: The National Electric Operations Council or the government authority acting as such.
CONPES: The National Council of Economic and Social Policy or the government authority acting as such.
Corporate Governance Code: It is the Issuer's Corporate Governance Code that is available at www.celsia.com. It may be amended from
time to time.
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Coupon Rate: The interest rate of the Ordinary Bonds corresponding to the percentage paid by the Issuer to the Holder of the Ordinary
Bonds (face rate), for each subseries offered in the Issuance. For purposes of this Prospectus Information, the coupon rate is the Cut-off
Rate when placed via the auction mechanism, and the Rate of Return Offered when placed via the firm demand mechanism.
CPI: The variation of the Consumer Price Index in Colombia, certified by the DANE for the past 12 months, expressed as an effective annual
rate.
CREG: The Energy and Gas Regulatory Commission or the government authority acting as such.
Cut-off Rate: The single rate of return for each subseries of the Issuance at which the Ordinary Bonds are awarded, when placed via the
auction mechanism.
DANE: The National Bureau of Statistics or the government authority acting as such.
Decree 2555: Decree 2555 / July 15, 2010 issued by the Colombian Ministry of Finance and Public Credit, contains and reissues the
standards for the financial, insurance and stock market sector, among other things, as amended, added to or replaced from time to time.
Dematerialized Issuance: An Issuance whose management has been commissioned to the Issuance Manager by means of electronic
systems. It issues certificates of deposit, which are the documents that legitimates the depositor to exercise his or her political or equity
rights, in the event that they become applicable. This document is issued by the Issuance Manager, at the request of the Direct Depositor in
accordance with the account entry; the document is merely declarative in nature and has no circulatory value.
DIAN: The National Directorate of Taxes and Customs - DIAN or the government authority acting as such.
Direct Depositors: Each of the entities that, in accordance with the Regulation of Operations, can directly access their services and have
entered into a securities deposit agreement, either on their own behalf and/or in the name of and on behalf of third parties.
DNP: The National Planning Department or the government authority acting as such.
Dollars or USD: The legal currency of the United States of America.
DTF: The weighted average of the effective 90-day deposit interest rates of the banks, financial corporations, and commercial financing
companies as defined in External Resolution 017 / 1993 issued by the Central Bank of Colombia. This rate is calculated and published
weekly by said Bank, expressed as a nominal quarterly rate.
E.S.P.: A Public Utility Company as defined by Law 142.
EBITDA: The financial indicator of Earnings before Interest, Taxes, Depreciation, and Amortization.
ENFICC: The Firm Energy for the Reliability Premium as defined in Resolution 071 / 2006 issued by the CREG, the maximum quantity of
electricity that can be delivered by a generation plant continually in conditions of decreased rainfall over a one year period.
EPSA: Empresa de Energía del Pacífico S.A. E.S.P.
GDP: The Gross Domestic Product certified by the DANE for each calendar year.
General Bondholders' Meeting: The General Meeting of Ordinary Bondholders, which may be called for by the Legal Representative of
Holders, whenever deemed appropriate, or at the request of the Issuer or of a group of Bondholders representing no less than ten percent
(10%) of the unpaid amount of the loan. The General Bondholders' Meeting may also be called for by the Colombian Financial
Superintendence (SFC) when it considers that there are serious matters that the bondholders should be aware of.
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GPPS: The Group of Projects with Greater Planning Periods as defined in Resolution 071 / 2006 handed down by the CREG.
Hidromontañitas: The Hidromontañitas hydroelectric power plant described in Chapter 3, Section C (1.1.3) of this Prospectus Information.
Holders: Each and every one of: (i) the Investors of the Primary Market who purchase and are holders of the Ordinary Bonds, and (ii) the
investors who, from time to time, purchase Ordinary Bonds on the secondary market.
IBR: The interbank rate that consists of the reference interest rate of the Colombian interbank market published by the Central Bank of
Colombia. It is a short-term interest rate for the Colombian peso, which reflects the price at which the agents participating in their framework
are prepared to offer or to acquire resources on the money market. For the effects of this Prospectus Information, the IBR will be expressed
in monthly terms.
IFRS: The International Financial Reporting Standards as defined in Law 1314 / 2009
Inflation: The measure of growth of the general price level of the economy, calculated monthly by the DANE based on the prices of a basic
basket of consumer goods and services for low- and middle-income households. An index known as the CPI index is calculated based on
these.
Investor: A person who requests and is awarded the Ordinary Bonds through Placement Agents.
Issuance and Placement Regulations: The document adopted by the Issuer that contains the general conditions of the Ordinary Bonds
and the Issuance on which this Prospectus Information is based. It was approved by the Issuer's Board of Directors on September 26, 2013
and subsequently amended on October 29, 2013.
Issuance Date: The Business Day following the date of publication of the first Public Offering Notification.
Issuance Manager: The Depósito Centralizado de Valores de Colombia Deceval S.A., an entity based in the city of Bogotá at the Avenida
Calle 26 No. 59 – 51 Torre 3 Oficina 501, Ciudad Empresarial Sarmiento Angulo, chosen on the date of this Prospectus Information by the
Issuer or the entity subsequently designated to perform the custody and administration and act as a paying agent of the Issuance. The
Issuance Manager is the entity responsible for carrying out all the operational activities arising from the Issue deposit, as well as all the
activities listed in this Information Prospectus in accordance with the rules applicable to central securities depositories in Colombia and the
terms and conditions agreed upon by the Issuer and the Issuance Administrator in the deposit and administration agreement entered into for
these effects
Issuance: The set of securities of the same kind issued by the Issuer in the terms of this Prospectus Information with the purpose of being
put into circulation on the Public Stock Exchange of the Republic of Colombia.
Issue date: The date on which the Book Entry and listing is made, either for the subscription of Ordinary Bonds or the electronic transfer
thereof, if the Issuance is dematerialized.
Issue Rating: A professional opinion issued by a credit rating firm, on an Issuer's capacity to repay the capital and interest of its obligations
in a timely manner. To do so, credit rating firms conduct their own studies, analyses and evaluations of issuers.
Issue size: The number of Ordinary Bonds of the Issuance authorized to be offered on the market multiplied by the nominal value thereof.
Issuer Shareholders' Meeting: The Issuer Shareholders' Meeting as described in Section B, Chapter 2 of Part Two of this Prospectus
Information.
Issuer: Celsia S.A. E.S.P., in its capacity as the issuer of the Ordinary Bonds.
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Law 142: Law 142 / 1994 establishes the system for domestic public utilities, as amended, added to or replaced from time to time.
Law 143: Law 143 / 1994 establishes the system for the generation, transmission, distribution and sale of electricity in Colombia, as
amended, added to or replaced from time to time.
Lead Placement Agent:
Legal Advisor: Prieto & Carrizosa S.A.
Legal Representative of the holders: Alianza Fiduciaria S.A., the entity responsible for the acts of administration and conservation that
may be necessary in order to exercise the rights and defend the common interests of the holders, in the terms of Article 6.4.1.1.9 of Decree
2555 or the entity designated thereafter.
Maturity Date: The date on which the Ordinary Bonds are due, counted from the Issuance Date.
MBTU: One thousand British thermal units.
MEC: The Colombian Electronic Market of the BVC.
MEM: The Wholesale Energy Market as defined in Resolution 055 / 1994 handed down by the CREG.
Meriléctrica: The thermal power plant described in Chapter 3, Section C (1.1.1) of this Prospectus Information.
MHCP: The Colombian Ministry of Finance and Public Credit or the government entity acting as such.
MME: The Colombian Ministry of Mines and Energy or the government entity acting as such.
Multilateral Bank Financing: The financing granted by virtue of the loan agreements entered into by Zona Franca Celsia, in its capacity as
the debtor, and the Issuer, in its capacity as the guarantor and sponsor, and the International Finance Corporation (IFC), the Andean
Development Corporation (CAF) and the Deutsche Investitions-Und -Endtwicklungsgesellschaft (DEG), in their capacity as creditors, dated
September 30, 2009, for a total of USD150 million due in May 2019.
MW: Megawatts, a unit of electrical power.
MWh: Megawatt-hours, a unit of measure of electrical energy.
Nominal Value: The monetary representation of the Ordinary Bonds, which will be indicated in the Public Offering Notification.
OCG: A gas purchase option by which a buyer pays a premium for the right to take up to a firm quantity of gas and a supply price at the time
of delivery of the nominated gas, whose values are agreed freely.
OEF: The binding firm energy obligations between those who offered energy assets capable of producing firm electricity in critical supply
conditions and those to which ASIC assigned the specific quantities to be delivered when the market price is higher than the Scarcity Price.
Ordinary Bonds: The credit securities listed at the National Registry of Securities and Issuers (RNVE) and the BVC referred to in this
Prospectus, issued by the issuer and placed through public offering in the terms of this Information Prospectus.
Over-allotment allowed: The number of Ordinary Bonds that the Issuer may allot in excess of the Amount Offered in a particular Public
Offering multiplied by the nominal value thereof. The Amount Offered plus the Over-allotment Allowed may not in any case exceed the Issue
size.
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Over-allotment: The possibility of awarding a number of Ordinary Bonds greater than the amount offered in the respective Public Offering
Notification, in the event that such a possibility has been mentioned in the Public Offering Notification and the total amount requested
exceeds the amount offered in the respective Public Offering Notification. The Issuer will have the authority to meet the unsatisfied demand
for up to the over-allotment allowed as determined in the respective Public Offering Notification, provided that the Amount Offered plus the
Over-allotment Allowed does not exceed the total amount authorized for the respective Issuance.
PCH: Stands for a Minor Hydroelectric Power Plant with an effective capacity of up to 20 MW that is not delivered centrally by the market
administrator.
Pesos: The legal currency of the Republic of Colombia.
Placement Agent: Banca de Inversión Bancolombia S.A. Corporación Financiera as the Lead Placement Agent, Valores Bancolombia S.A.
Comisionista de Bolsa as the Placement Agent and all other stock brokerage firms designated and approved by mutual agreement between
the Issuer and the Lead Placement Agent that are legally authorized to such effect. They will be the entities through which Ordinary Bonds
will be promoted and placed through Best Efforts.
Porvenir II Project: The hydroelectric project described in Chapter 4, Section K (1) of this Prospectus Information.
Primary Market: Negotiations of the securities listed in the RNVE as defined in Decree 2555.
Prospectus Information: Prospectus Information is defined as established in Article 5.2.1.1.4 of Decree 2555. It specifically refers to this
Prospectus Information on the Issuance and Placement of the Issuer's Ordinary Bonds.
Public Offering Notification: The notice published in a national newspaper or the Daily Bulletin of the Colombian Stock Exchange in which
the Ordinary Bonds of each of the Issuances will be offered to the target audience thereof, including the characteristics of the Ordinary
Bonds of the respective issuance in accordance with the provisions of Article 5.2.1.1.5 (c) of Decree 2555.
Public Offering: The offering of the Ordinary Bonds of the Issuance, addressed to the general investing public, defined in the terms set forth
in Article 6.1.1.1.1 of Decree 2555, and approved by the SFC.
Public Stock Exchange: The stock market on which the issuance, subscription, brokering and negotiation of the documents issued in
series or in mass can take place, with respect to which a public offering is made, granting holders the rights of credit, participation, and
possession or representation of goods. The main activities of the public securities market are the issuance and sale of securities; the
brokerage of securities; the administration of securities funds, investment funds, mutual investment funds and collective portfolios; the
deposit and the administration of securities; the administration of trading systems or listing of securities, futures, options and other
derivatives; the clearing and settlement of securities; risk rating; self-regulation discussed in Law 964 / 2005; the provision of information to
the securities market, including the collection and processing thereof; and all other activities provided in Law 964 / 2005 or determined by
the National Government, provided they are activities involving the management, use and investment of funds received from the public
through securities.
Rate of Return Offered: The single rate of return for each subseries of the Issuance at which the Ordinary Bonds are awarded, when
placed via the firm demand mechanism. This rate is determined in the Public Offering Notification.
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Regulation of Operations: The Regulation of Operations approved by Resolution 086 / 2011 of the SFC, which regulates the relationships
that arise between the Issuance Manager and the Direct Depositors, indirect depositors and other local or international central securities
depositories, with the trading or listing systems and other clearing and settlement systems, on the occasion of contracts entered into as part
of the fulfillment of the corporate purpose associated with the services of custody, administration, clearing, settlement and certification of the
book entry securities.
Related Companies: The following companies as of the date of this Prospectus Information, in which the Issuer has a shareholding of more
than 50% of the subscribed and paid-in capital: Zona Franca Celsia., Colener S.A.S., EPSA, CETSA, Celsia Panamá S.A., Epsa Inversiones
S.A.S., Empresa de Energía del Pacífico Panamá S.A.
Relevant Information: Information that every security issuer is required to disclose to the market, in a manner that is truthful, clear,
sufficient and timely through the SFC, in the manner set out in Article 5.2.4.1.5 of Decree 2555.
Reliability Premium: Remuneration paid to an energy generator for the availability of generation assets with the characteristics and
parameters declared for the calculation of the ENFICC, which ensures compliance with the Firm Energy Obligation (OEF) assigned thereto
in an Auction for the Allocation of Firm Energy Obligations or the mechanism replacing it. This energy is associated with the Backup
Generation Capacity discussed in Article 23 of Law 143 / 1994, and can be reserve to guarantee the reliability of the delivery of electricity to
users under critical conditions.
Río Piedras: The hydroelectric power plant described in Chapter 3, Section C (1.1.2) of this Prospectus Information that belongs to the
Issuer.
RNVE: The National Registry of Securities and Issuers kept by the SFC where the classes and types of securities are listed, along with the
issuers thereof and the issuances made, and certifies matters relating to the listing of those issuers, classes and types of securities. The
purpose of this registry is to maintain an adequate information system of the financial assets in circulation and issuers as the main players
on the Public Stock Exchange. The operation of the RNVE is assigned to the SFC, who is responsible for the organization, quality, adequacy
and updating of the information it contains.
San Andrés Project: The hydroelectric project described in Chapter 4, Section K (2) of this Prospectus Information.
Scarcity Price: The value defined by the CREG and updated monthly that determines the level of the stock price as of which the OEF
become payable and constitutes the maximum price at which this energy is reimbursed.
SDL: The Local Distribution System as defined in Resolution 97 / 2008 handed down by the CREG.
SFC: The Colombian Financial Superintendence or the government authority acting as such.
SIC: The Superintendence of Industry and Commerce or the government authority acting as such.
SIMEV: The Integrated Information System of the Stock Market or the system acting as such.
SIN: The National Electrical Grid as defined in Resolution 11 / 2008 handed down by the CREG.
SSPD: The Superintendence of Residential Public Utilities or the government authority acting as such.
STN: The National Transmission System as defined in Resolution 11 / 2008 handed down by the CREG.
STR: The Regional Transmission System as defined in Resolution 97 / 2008 handed down by the CREG.
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Structuring Agent: Banca de Inversión Bancolombia S.A. Corporación Financiera.
Subscription Date: The date on which each Ordinary Bond is paid in full for the first time, which shall be established in the respective Public
Offering Notification.
Subscription Price: The price paid by Investors as consideration for the subscription of Ordinary Bonds as set out in the Public Offering
Notification. The Subscription Price may be "at par" when it is equal to the nominal value of the Security "premium" when it is greater than
the nominal value, or "discounted" when it is less than the nominal value.
TRM: The representative exchange rate based on purchase and sale transactions of foreign currencies, calculated and certified by the SFC
based on the information available and in accordance with the methodology of the Central Bank of Colombia, published on the SFC website.
TWh: Terawatt-hours, a unit of measure of electrical energy.
UPME: The Mining and Energy Planning Unit or the government authority acting as such.
XM: Compañía de Expertos en Mercados XM S.A. E.S.P. or the entity acting as such.
Yield: The interest offered by the Issuer for each Security, which may be different for each of the series and for each term. This yield is
determined in the event of placement (i) by auction, as the Cut-off Rate, or (ii) by a firm mechanism, as the Rate of Return Offered by the
respective Public Offering Notification.
Zona Franca Celsia: Zona Franca Celsia S.A. E.S.P.
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PART ONE - THE ORDINARY BONDS
CHAPTER 1 - CHARACTERISTICS OF THE ORDINARY BONDS, CONDITIONS AND RULES OF THE
ISSUANCE
A. CLASS OF SECURITY OFFERED, CIRCULATION LAW AND SECONDARY TRADING
1.
Class of Security Offered
The securities of this Prospectus Information are ordinary bonds as defined in Decree 2555. The nominative, freely traded Ordinary
Bonds will be offered through Public Offering whose issuance and Issuance and Placement Regulations were approved by the Issuer's
Board of Directors as certified in Minutes 197 and 199 / September 26 and October 29, 2013, respectively.
2.
Circulation Law and Secondary Trading
The Ordinary Bonds shall be issued to order and the trading thereof shall be subject to the law and the regulations of the BVC.
Ownership shall be transferred by book entry or deposit sub-accounts handled by the Issuance Manager in accordance with Law 964 /
2005, the Regulation of Operations and other rules governing, modifying or replacing it.
The sale and transfer of individual rights shall be through entries and electronic data systems, in accordance with the procedure laid
down in the Regulation of Operations, which is considered accepted by the Investor and the Bondholders at the time of subscription
and/or acquisition of the Ordinary Bonds, as applicable.
The Ordinary Bonds will have a secondary market through the BVC and can be traded directly by the legitimate holders thereof. The
instructions to transfer of the Ordinary Bonds to the Issuance Manager must be carried out through the corresponding Direct Depositor,
in accordance with the provisions of the Regulation of Operations. The Ordinary Bonds may be traded on the secondary market once
they have been subscribed and paid in full by the respective Bondholder on the primary market.
Upon making a record or Book Entry in the Deposit Account of the holders, the Issuance Manager shall credit the Ordinary Bonds
subscribed by the respective Bondholder in the corresponding account.
The classification, valuation and accounting of Ordinary Bonds for the Bondholders that are entities subject to inspection and
monitoring by the SFC shall be carried out in accordance with Chapter 1 of the Basic Accounting and Financial Circular (External
Circular 100 / 1995 of the SFC).
The classification, valuation and accounting of Ordinary Bonds for the Bondholders that are real sector companies shall be carried out
in accordance with Decree 2649 / 1993 (accounting standards applicable to the real sector) and Decree 2650 / 1993 (Single Account
Plan). As of 2015, the classification, valuation and accounting of Ordinary Bonds shall be carried out as defined by the IFRS adopted
through Law 1314 / 2009 or the regulations amending or replacing them.
B. NUMBER OF ORDINARY BONDS OFFERED, DENOMINATION, NOMINAL VALUE, MINIMUM AMOUNT TO
REQUEST AND SUBSCRIPTION PRICE
1.
Number of Ordinary Bonds Offered and Issue size
The Issuer shall issue eight hundred thousand (800,000) Ordinary Bonds at a nominal value of one million Pesos legal tender
(COP1,000,000) each. The issue size of Ordinary Bonds will amount to eight hundred billion pesos legal tender (COP
800,000,000,000). The Issuance may be offered in several rounds. If the Public Offering Notification establishes the possibility of
applying an Over-allotment Clause, the total amount of the public offering, including the Over-allotment, shall not exceed the sum of
eight hundred billion pesos legal tender (COP 800,000,000,000).
2.
Denomination
The Ordinary Bonds shall be denominated in Pesos.
3.
Nominal Value
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The nominal value of each Ordinary Bond shall be one million Pesos (COP 1,000,000).
4.
Minimum Investment
The minimum investment will be the equivalent of ten (10) Ordinary Bonds, i.e. ten million pesos (COP 10,000,000). As a result,
transactions may not be carried out on the primary or secondary market for amounts less than ten million Pesos (COP 10,000,000).
The investment in Ordinary Bonds should be made, in accordance with the minimum investment, for a whole number of securities
being that they cannot be split.
5.
Subscription Price
The subscription price of the Ordinary Bonds will be the nominal value thereof. When subscribed on a date following the Issuance Date,
the subscription price of the Ordinary Bonds shall be composed of the nominal value thereof, plus the interests incurred and calculated
based on the nominal value of the Ordinary Bonds at the rate of the subseries to be subscribed, calculated during the lesser of the
following periods: (a) the period between the Issuance Date and Subscription Date; or (b) the period between the date of last payment
of interest and the Subscription Date.
The interest incurred shall be calculated using the following formula:
Interest incurred = [ ( 1 + rate ) ^ ( n / Base ) ] - 1
Where:
Rate: is the annual effective rate of the Ordinary Bond.
n: days elapsed from the Issuance Date up to the Subscription Date, when subscribed prior to the first interest payment, or days
elapsed from the date of the last payment of interest up to the Subscription Date in any other case, in accordance with the convention
corresponding to the subseries placed.
Base: 365 days or 360 days depending on the convention corresponding to the subseries placed in accordance with Section D,
Chapter 2 Part One of this Prospectus Information.
The Subscription Price of the Ordinary Bonds shall be defined in the corresponding Public Offering Notification. The value of each
Ordinary Bond must be paid in full at the time of subscription.
In the event that following the Issuance Date the Issuer offers new rounds of the Ordinary Bonds in subseries that were not initially
offered, the Issuer shall publish in the Public Offering Notification the maximum rate of return (auction mechanism) or the Rate of
Return Offered (firm mechanism), to be offered for said subseries. In the event that, following the Issuance Date, the Issuer offers new
rounds of the Ordinary Bonds on the subseries already offered, the offer will be made at the subscription price of the respective
Ordinary Bonds or at the discount rate used for the calculation thereof, while respecting the previously defined Coupon Rate.
The following are the formulas to be used to calculate the Subscription Price, as applicable:
Ordinary Bonds offered at par:
Subscription Price = Nominal Value * {1 + Interest incurred}
In the case of a discount:
Subscription Price = { [ Nominal Value x (1 - Discount) ] + [ Nominal Value * Interest incurred ] }
In the case of a premium:
Subscription Price = { [ Nominal Value x (1 + Premium) ] + [ Nominal Value * Interest incurred ] }
C. TARGET AUDIENCE OF THE OFFERING
The Ordinary Bonds shall target investors in general, including pension and severance funds
D. ORDINARY BOND REPLENISHMENT, SPLITTING AND MERGING RULES
There will be no replenishment or merging of Ordinary Bonds because they are dematerialized. Splitting is allowed as long as the
established minimums and multiples are maintained, subject to the Issuance and Placement Regulations and this Prospectus
Information.
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E.
DEFINITION OF THE SUBSCRIPTION, ISSUE, ISSUANCE AND MATURITY DATES
1.
Subscription Date
The date on which each Ordinary Bond is paid in full for the first time, which shall be established in the respective Public Offering
Notification.
2.
Issue date
The date on which the Book Entry and listing is made, either for the subscription of Ordinary Bonds or the electronic transfer thereof, if
the Issuance is dematerialized.
3.
Issuance Date
The Business Day following the date of publication of the first Public Offering Notification in which the Issuance is offered.
4.
Maturity Date
The date on which the Ordinary Bonds are due, counted from the Issuance Date.
F.
COMMISSIONS AND EXPENSES
Investors will not have to pay commissions or related expenses for the subscription of Ordinary Bonds, provided said Ordinary Bonds
are purchased in the primary offering.
G. STOCK EXCHANGE WHERE THE ORDINARY BONDS WILL BE LISTED
The Ordinary Bonds shall be listed in the BVC.
H. ECONOMIC AND FINANCIAL OBJECTIVES OF THE ISSUANCE
The resources from the placement of the Ordinary Bonds shall be used one hundred percent (100%) for the replacement of the Issuer's
financial liabilities.
In some cases, temporarily, the proceeds of the placement of the Issuance may be invested, while their application is materialized, in
fixed income financial instruments whose rating is no less than AA+ and/or collective high liquidity portfolios, managed by entities
supervised by the SFC.
In compliance with Section 6.1 (h) of Article Five of Resolution 2375 / 2006 issued by the SFC, it was reported that the proceeds of the
placement will not used in full or in part, for the payment of liabilities with the Issuer's Related Companies or Partners.
I.
MEANS THROUGH WHICH HOLDERS WILL BE PROVIDED WITH INFORMATION OF INTEREST
In accordance with article 5.2.4.1.5 of Decree 2555, the Issuer is required to disclose, in a manner that is truthful, clear, timely and
sufficient to the market through the SFC, any situation related thereto or to the Issuance that would have been taken into account by a
prudent and diligent expert in order to buy, sell or hold onto the Issuer's Ordinary Bonds or the time of exercising the rights inherent to
such Ordinary Bonds. Such information may be accessed through the website www.superfinanciera.gov.co by following the hyperlink
“Relevant Information”.
In addition, the Issuer, whenever deemed necessary, may provide information of interest to Holders through publication on its website.
J.
TAX REGIMEN APPLICABLE TO THE ORDINARY BONDS
The financial returns from the Ordinary Bonds shall be subject to tax withholding, in accordance with the tax regulations in force. If
appropriate, the beneficiary may provide proof that the payments in its favor are not subject to withholding. When the Ordinary Bond is
issued in the name of two (2) or more beneficiaries, they shall indicate their corresponding share in the rights derived therefrom. The
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payment of the withholding at the source reported to the DIAN and the issue of the corresponding certificates shall be the responsibility
of the Issuer.
For the purposes of the tax on financial transactions, it is important to remember that, in accordance with Article 879 (7) of the Tax
Code, the clearing and settlement carried out through the clearing and settlement systems administered by authorized entities with
respect to transactions performed on the market of securities, derivatives, foreign currencies or agricultural product exchanges or other
commodities, including collateral provided by participants and the payments corresponding to the administration of securities in the
central securities depositories, are exempt from this tax.
In the event that new taxes should arise following the placement of the Ordinary Bonds, affecting the possession thereof and/or
payments arising therefrom, such taxes shall be borne by the Bondholders.
K. ISSUANCE MANAGER ENTITY
The Issuance Manager will be responsible for the custody and administration of the Ordinary Bonds and will make the payments to
Holders on account of capital and interest on behalf of the Issuer. The custody and management of the Issuance are to be carried out
in accordance with the regulations applicable to central securities depositories in Colombia, the Regulation of operations and the terms
and conditions agreed upon by the Issuer and the Issuance Manager in the deposit and administration agreement entered into in
relation to the Issuance.
Similarly, the Issuance Manager shall carry out all the operational activities arising from the deposit of the Issuance, including the
following obligations and responsibilities of the Issuance Manager.
1.
Register the global bond representative of the Issuance, which includes the accounting entry of the Issuance, the custody,
administration and control of the global bond, which includes control over the circulating balance of the Issuance, issue size, and
the amount placed, outstanding, paid, to be placed and annulled. The global bond registered as indicated above will back the
amount actually placed on a daily basis.
To this effect, the Issuer agrees to provide the global bond within one Business Day prior to the issuance of the securities;
2.
List and make a book entry of information on:
2.1.
2.2.
2.3.
2.4.
The individual placement of the rights of the Issuance;
The sales and transfers of the rights entered in the deposit accounts or sub-accounts;
The procedure established in the Regulation of Operations will be followed for the entry of the sale of rights under bond;
The annulment of the Ordinary Bond rights in accordance with instructions given by the Issuer, in the terms laid down in
Regulation of operations;
2.5. The orders to issue the rights entered in the deposit accounts;
2.6. The encumbrances and charges, including the precautionary measures, on the rights entered in deposit accounts or subaccounts, in accordance with Law 27 / 1990, Law 964 / 2005 and Decree 2555, for which the holder or holders of the rights
shall follow the procedure established in Regulation of Operations.
When the information on sales or charges of securities comes from the Direct Depositor or from the competent authority, the
Issuance Manager will be required to inform the Issuer within three (3) business days following the date on which notification
of said circumstance was received, provided it involves nominative values; and
2.7. The outstanding balance based on the Book Entry mechanism.
3.
Charge the Issuer for the equity rights represented by Book Entries in favor of the respective beneficiaries, who are Direct
Depositors or represented by Direct Depositors with the service of security management. The payments for the Bondholders that
are Direct Depositors or are represented by Direct Depositors without the service of security administration, will be made directly
by the Issuer, upon presentation of the certificate for the collection of rights issued by the Issuance Manager for this purpose at
the request of the interested party;
3.1. To this effect, the Issuance Manager shall present two settlements: a preliminary settlement and the final settlement. The
preliminary settlement of the amounts to be drawn by the Issuer shall be submitted within five (5) business days prior to the
date of the corresponding draft. This settlement is to be justified indicating the balance of the Issuance circulating in
dematerialized form and the frequency of payment of interest;
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3.2. The Issuer shall verify the preliminary settlement prepared by the Issuance Manager and reach an agreement on the
corresponding adjustments in the event of discrepancies. To make the adjustments, both the Issuance Manager and the
Issuer shall refer to the characteristics of the Issuance as established in the minutes of the Board of Directors approving the
Issuance and Placement Regulations, this Prospectus Information and the respective Public Offering Notification.
3.3. Subsequently, the Issuance Manager shall submit to the Issuer, within two (2) business days prior to payment, a final
settlement on the securities on deposit under its responsibility;
3.4. The Issuer shall only pay the corresponding equity rights in the account of the Issuance Manager in the case of holders
linked to other Direct Depositors or Direct Depositors that provide security management services. To this effect, it will send
the Issuance Manager a copy of the final settlement of the payments made to the respective beneficiaries, after deducting
the amounts corresponding to withholding tax and any other tax applicable to each of them and deposit the amount of the
settlement by electronic transfer of funds in the account designated by the Issuance Manager, according to the rules laid
down in the Issuance and Placement Regulations and the respective Public Offering Notification for the payment of interest
and capital. Payments are to be made on the due date by 12:00 noon. Once the funds have been transferred in full by the
date indicated, the Issuance Manager shall validly pay the Direct or Indirect Depositors at the expense of the Issuer.
The payments for the Holders that are Direct Depositors or are represented by Direct Depositors that do not provide security
management services, will be made directly by the Issuer, upon submission of the certificate for the collection of rights
issued by the Issuance Manager for this purpose at the request of the interested party;
3.5. For the effects of compliance on behalf of the Issuer of the provisions contained in Article 6.16.1.1.2 of Decree 2555, the
Issuance Manager shall provide the Issuer with the following information:
3.5.1. Within 2 days following the placement of the Ordinary Bonds:
a.
Total value of the Ordinary Bonds placed;
b.
Information on the Holders during the primary placement; and
c.
Amount placed, term conditions and performance of the Ordinary Bonds
3.5.2. Once the primary placement has concluded and during the term of the deposit and management contract of the
Issuance signed by the Issuance Manager and the Issuer, the accountability reports in the terms indicated in said
agreement.
3.6. Report default on the payment of equity rights to the Direct Depositors and the regulatory authorities the business day
following the due date for the payment thereof when the Issuer does not provide the funds, in order for them to take the
actions applicable.
The Issuance Manager will not be held liable for the Issuer's responsibility if it does not provide the funds for the timely
payment of the Ordinary Bonds, or for the omissions or errors in the information provided by the Issuer or the Direct
Depositors, regarding the issue, subscription, transfer, charge or encumbrance orders of the security rights. Notwithstanding
the above, the Issuer shall not be held responsible for the Issuance Manager's failure to distribute the amounts due to the
Holders.
4.
Update the amount of the global bond as ordered by the Issuer following operations of issue, cancellation at maturity, annulments
and withdrawals of securities from the Deposit, for which the Issuance Manager will have broad power.
The deposit and administration contract of the Issuance signed by the Issuance Manager and the Issuer contains a set of Issuer
duties that, consequently, may be required by the Issuance Manager as listed below:
Inform the Issuance Manager of the individual placements and annulments that may affect the global bond;
Provide the Issuance Manager, for deposit, the global bond that represents the rights of the Issuance of the Securities in the
amount required to cover the issue thereof through the book entry system for the corresponding subscribers. These
securities must meet the requirements set forth in the law;
Provide the Issuance Manager, through the Lead Placement Agent of the Issuance, on the subscription date, with the
following information on the subscribers or investors, for which the Issuance Manager declares it complies with the
regulations on database administration of the Colombian legal system, Law 1581 / 2012, which includes the validation of the
personal information collected and preservation of the investor's authorization to process the information provided for the
Issuance Manager's database, including the collection, administration and circulation on the stock market of the personal
information required from each of them as follows:
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o
o
o
o
o
o
o
o
o
o
o
o
o
o
Subscriber's name and identification;
TIN and business name of the subscriber, or the identification number thereof, in accordance with the requirements of
Colombian law for Colombian nationals and passport or alien identification for non-nationals - the latter identification
document is required for residents -. For said identification, the requirements contained in the Issuer's regulations shall
also be taken into account, provided they do not contradict the legal and operational requirements and regulations that
the Issuance Manager is required to comply with;
Issuance Date;
Issue date;
Maturity Date;
Amount placed in units;
Current unit value;
Nominal value of the investment;
Direct Depositor to which the subscriber is associated;
Indicate whether it is a Direct Depositor;
City of residence;
Address and telephone number;
Interest rate; and
Redemption deadline.
Make the payments necessary, via electronic transfer of funds, for the payment on maturity of interest and capital no later
than 12:00 noon. on the due date thereof, to guarantee the respective payments to the beneficiaries or holders of the
Ordinary Bonds on presentation of invoice or certification of the value of payment by the Issuance Manager in the terms and
conditions set forth in (4.3) of the deposit and management contract of the Issuance;
Pay within the period indicated in the deposit and management agreement of the dematerialized issuance the remuneration
agreed with the Issuance Manager for the services provided, upon submission of the invoice issued by the Issuance
Manager;
Appoint an official with decision-making capacity, as the person in charge of addressing the requests made by the Issuance
Manager in order to effectively fulfill the obligations arising herefrom;
Calculate and pay the withholding tax applicable and issue the corresponding certificates;
Send the Issuance Manager, whenever the publication of the Public Offering Notification is required, a copy thereof no later
than the day of publication;
Inform the Issuance Manager in writing eight (8) days in advance in the event of prepayments or early cancellation of the
Ordinary Bonds; also, report in writing the number of units to be amortized and the new balance of each security affected
thereby; and
Inform the Issuance Manager, in the event of repurchase, the same day on which the operation is to take place at the BVC;
on such an event the Issuance Manager shall, within two business days, pay the balance repurchased (special amortization)
and in this event, the obligations of the Issuer will be extinguished due to confusion in the terms set forth in Article 2,
Paragraph 2 of Law 964 / 2005.
L.
FULL DEMATERIALIZATION OF THE ISSUANCE
The Issuance shall be carried out in dematerialized form, reason for which the purchasers of the Ordinary Bonds waive the possibility of
materializing the Ordinary Bonds issued.
All Holders must be associated with the Issuance Manager either as Direct Depositors or as clients through a Direct Depositor for the
effects of payment of the rights conferred by the Ordinary Bonds.
The custody and management of the Issuance shall be the responsibility of the Issuance Manager in accordance with the terms of the
dematerialized deposit and administration contract of the Issuance signed by the Issuance Manager and the Issuer.
Whenever there is a Dematerialized Issuance, the Issuance Manager shall provide a certificate of deposit of the securities representing
the Ordinary Bonds in the name of the subscriber to the corresponding Direct Depositor.
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M. ORDINARY BOND RIGHTS
The Holders shall be entitled to receive interest and the reimbursement of capital, in accordance with the terms set forth in this
Prospectus Information and the respective Public Offering Notification.
N. BONDHOLDER RIGHTS
In addition to the corresponding rights as the Issuer's creditors, the Holders are also entitled to the following:
1.
2.
3.
4.
Receive the interest set forth herein and the reimbursement of capital, in accordance with this Prospectus Information and the
respective Public Offering Notification;
Take part in the General Bondholders' Meeting. A group of Bondholders representing no less than ten percent (10%) of the
unpaid amount of the loan may require the Legal Representative of the Bondholders to call for a General Bondholders' Meeting
and if he fails to do so, the Bondholders may ask the SFC to announce the meeting;
Trade the Ordinary Bonds in accordance with the circulation law and pursuant to the regulations on the matter;
Any others arising from this Prospectus Information or Colombian law.
Bondholders may exercise their rights jointly or individually.
If for any legal or conventional reason an Ordinary Bond belongs to more than one person, they are to adhere to the provisions defined
in Paragraph Two of the Section below to exercise their rights.
O. BONDHOLDER OBLIGATIONS
The Holders shall have the obligations provided for in the law and the following in particular:
1.
2.
3.
4.
5.
6.
Submit and respond for the content, for all legal purposes, of the information provided to the Issuer, the Placement Agent or the
Issuance Manager, for the management of the Ordinary Bonds;
Act in the capacity of Direct Depositor that provides security management services or be represented by a Direct Depositor with
said service;
Pay the Subscription Price in full on the Subscription Date, in the case of Investors, as established in Part One, Chapter 1,
Section B (5) of this Prospectus Information;
Inform the Issuance Manager as soon as possible of any sale, lien or limitation on the ownership of the Ordinary Bonds
purchased;
Pay the taxes, fees, contributions and other charges existing or to be established in the future on the capital or interest of the
Ordinary Bonds;
Any others arising from this Prospectus Information or Colombian law.
The Ordinary Bonds are indivisible and, consequently, when they belong to more than one person due for legal or conventional
reasons, said persons shall designate a single representative who will exercise the rights corresponding to the legitimate holder of the
Ordinary Bond. If such designation is not made and reported to the Issuance Manager, it may accept as a representative, for all intents
and purposes, any of the holders of the Ordinary Bonds that has the corresponding certificate.
P.
ISSUER OBLIGATIONS
The Issuer's obligations include:
1.
2.
3.
4.
5.
Report to the SFC and the Legal Representative of the Holders any situation or circumstance that may be considered relevant
information in the terms of Decree 2555;
Fulfill the obligations referred to in this Prospectus Information and those arising from the Decree 2555, in relation to the
Issuance;
Comply with all the duties of reporting and other obligations arising from the listing in the RNVE;
Pay the interest and capital to the Holders in accordance with this Prospectus Information and the respective Public Offering
Notification;
Provide the Legal Representative of the Holders with the information required thereby for the performance of its functions and
allow it to inspect books, documents and other property to the extent necessary for the same purpose. Similarly, the Issuer as of
now instructs its internal auditor to provide the Legal Representative of the Holders with all the information required for the
performance of its duties;
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6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Provide the Legal Representative of the Holders with the resources necessary to carry out all acts of administration and
conservation that may be necessary to exercise the rights and defend the common interests of the Holders, including the value of
the professional fees to be paid to the lawyer it may need to hire to intervene to defend the rights of the Bondholders in judicial
proceedings. In this case, as the Legal Representative of the Holders, prior to agreeing to these fees, must obtain from the Issuer
written authorization, in terms of the amount of the fees that it can agree to and the form of payment thereof. In the event that the
authorization is not given within five (5) Business Days following the request submitted by the Legal Representative of the
Holders, it this will be free to contract in accordance with the fee proposal provided;
Cover the expenses incurred to call for and hold the General Bondholders' Meeting;
Comply with all the obligations contained in this Prospectus Information, in the contract of Legal Representation of the Holders,
Issuance deposit and management contract, and in any other contract entered into during the course of the Issuance process, as
well as any others provided by law;
Provide the Issuance Manager with the global bond representing the Ordinary Bonds for deposit;
Provide the Legal Representative of the Holders with truthful information in any publication made;
Send a list of the number of Ordinary Bonds placed, subscriber name and number of securities to the Legal Representative of the
Holders, on a monthly basis, during the term of the contract;
Invite the Legal Representative of the Holders to all meetings of the Issuer's Shareholders;
Register the appointment of the Legal Representative of the Holders in the chamber of commerce of the Issuer's main domicile,
with a copy of the administrative act issued by the public authority that authorized the Issuance, indicating that the entity was
designated as the Legal Representative of the Holders and it is not ineligible to carry out these duties and send, within twenty (20)
days following the signing of this contract, the chamber of commerce certificate indicating such registration, in accordance with
the provisions of Article 6.4.1.1.11 of Decree 2555;
Call for a General Bondholders' Meeting as soon as possible in the event of the resignation of the Legal Representative of the
Holders and subject to authorization by the SFC, decide on the replacement thereof; and
Make the corresponding appointment in case of removal or termination of the contract in accordance with the applicable
legislation and register the appointment of the new Legal Representative of the Holders in the business register kept by the
chamber of commerce of the Issuer's main business domicile.
Q. COLLATERAL AND PRIORITY
The Ordinary Bonds are not backed by any collateral and therefore, constitute unsecured obligations of the issuer, which will not entail
any legal privilege or priority.
R. DUTIES, RIGHTS AND OBLIGATIONS OF LEGAL REPRESENTATIVE OF BONDHOLDERS
Alianza Fiduciaria S.A. a company whose main domicile is in the city of Bogotá will act as the Legal Representative of the Holders. The
main objective of the Legal Representative of the Holders is to provide the maximum possible protection to the parties it represents,
which is why it must ensure at all times their rights and perform all the actions that may be necessary to defend their interests.
In accordance with the contract of Legal Representation of the Holders, the Legal Representative of the Holders is responsible for
carrying out all the acts necessary to exercise the rights and defend the common interests of the Holders, including but not limited to
the following duties and obligations:
1.
2.
3.
4.
5.
6.
7.
8.
Perform all acts of administration and conservation that may be necessary to exercise the rights and defend the common interests
of the Holders, which entails the strict monitoring of the fulfillment of the obligations arising from the Bonds and the financial
performance of the Issuer;
Make all the necessary arrangements to defend the common interests of the Holders in relation to the Issuer, the administrative or
judicial authorities and other third parties whenever applicable, including acting as the legal representation of the Holders;
Keep the book of minutes of the General Bondholders' Meetings;
Carry out the actions of disposal as authorized by the General Bondholders' Meeting in the terms of Decree 2555;
Take part in the Shareholders' Meetings of the Issuer with the right to speak but not vote;
Act on behalf of the Holders in the judicial proceedings in which they are involved and in the bankruptcy proceedings of the
Issuer's creditors, as well as in those carried out as a result of the seizing of assets or administrative intervention to which the
Issuer is subjected. For this purpose, the Legal Representative of the Holders should be a party of the respective process within
the legal term, which will be backed, as evidence of the loan, by an authentic copy of the contract of legal representation of the
bondholders and a certification based on their records of the unpaid amount of the loan and the interests thereof, and any other
document that may be required to demonstrate its legal capacity in accordance with the applicable law;
Represent the Holders in all matters concerning their common or collective interest;
Call for and preside over the General Bondholders' Meetings as necessary, for situations considered to be relevant for the
analysis, consideration and decision of the Holders, relating to compliance with the conditions of the corresponding Issuance of
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9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
Ordinary Bonds or special situations that may be reported by the Issuer, as well as in cases in which said meeting is required or
requested according to the applicable regulations;
Call for the General Meeting of the holders of Ordinary Bonds when requested by the Issuer or a plural number of Holders
representing no less than ten percent (10%) of the Ordinary Bonds in circulation. Should the Legal Representative of the Holders
fail to call for said meeting, the Holders may ask the SFC to make the call;
Immediately call for the General Meeting of the holders of Ordinary Bonds to decide on its replacement when, during the course
of the Issuance, it should incur in a situation rendering it ineligible to continue acting as the legal representative of the Holders.
This meeting should take place within five (5) business days following the occurrence or knowledge of said situation;
Request and receive from the Issuer any information that may be relevant in connection with the Issuance of the Ordinary Bonds,
which is of importance to the Holders;
Ensure the timely fulfillment of all the terms and formalities of the Issuance, taking into account the conditions indicated in the
Issuance and Placement Regulations, in the Prospectus Information and the respective Public Offering Notification, by carrying
out the following activities, among others:
12.1. Ask the Issuer, either directly or, if deemed necessary, through the SFC, for the reports it considers appropriate for the
performance of its duties and the necessary reviews of the accounting entries and any other supporting documents of the
Issuer's financial situation;
12.2. Verify the payment of the obligations by the Issuer under the Ordinary Bonds, particularly the payment of interest and capital
of the Ordinary Bonds; and
12.3. Verify that the ordinary bonds redeemed are annulled in the terms covered in the Regulation of Operations of the Issuance
Manager and the deposit and administration contract of the Issuance.
Inform the Holders, the Ordinary Bond rating firm and the SFC, as soon as possible and by appropriate means, of the Issuer's
failure to fulfill its obligations or the existence of any circumstance that may cause the reasonable fear of said non-fulfillment, as
well as any other event that affects or can significantly affect the Issuer's financial and/or legal situation;
Prepare a semi-annual report for the Holders and the General Bondholders' Meeting when necessary, regarding the Issuer's
situation, the performance and events of the Issuance, the initiatives taken to represent and defend the interests of the Holders
and any other facts that may be relevant to the Holders in relation to the Issuance. This report shall be made available to the
Holders through the Representative's website;
Provide, at the request of the Holders, the Issuer or the SFC, when appropriate, any additional reports required to keep Holders
properly informed of the performance and events of the Issuance and any other fact that may affect their rights as Holders,
including but not limited to the existence of any circumstance that may cause the reasonable fear that the Issuer will fail to fulfill its
obligations under the Ordinary Bonds, as well as any other event that affects or can significantly affect the Issuer's financial
and/or legal situation;
Ask the Issuer to issue the physical securities representing the Ordinary Bonds and in the name of the Holders if the deposit
contract of the Issuance entered into by the Issuer and the Issuance Manager is terminated beforehand in accordance with the
terms set forth therein and the Issuer does not designate a new entity to act as the depository before the due date of the next
payment of the Ordinary Bonds, in accordance with this Prospectus Information;
Fulfill any and all of the obligations under this Prospectus Information and any other obligation provided by the laws in force;
Maintain confidentiality in relation to the reports received with respect to the Issuer and the circumstances and details known
about the business thereof as long as it is not strictly necessary to disclose or disseminate them to protect the interests of the
Holders;
Address the SFC in order for it to require the Issuer to post special collateral, if deemed appropriate, and to take measures of
conservation and security as regards any encumbered assets in accordance with the request of the General Bondholders'
Meeting;
Report to the competent authorities any irregularities that may compromise the security or the interests of the Holders;
Render verified reports of its management at least once every six months, which will be sent to the Issuer by email or by the
means chosen by the Issuer, with the Legal Representative's digital signature; and
All others assigned by the General Bondholders' Meeting and any others that may be applicable by provision of the legislation in
force.
Within the scope of its duties as the Legal Representative of the Holders, it shall adopt the following rules of conduct that may be
applicable in accordance with the regulations in force, particularly:
1.
2.
Adjust its actions to the rules established in Decree 2555 and other provisions in force, revealing appropriately and in a timely
manner to the SFC and Holders all relevant information regarding the Issuer and/or itself;
Refrain from carrying out operations in which there is an interest involved that will actually or potentially be seen as contrary to the
interests of the holders of the Ordinary Bonds, giving rise to disregard of the common and collective interests thereof or the
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3.
4.
5.
6.
7.
8.
9.
S.
execution of acts of administration and conservation to the detriment of the rights and defense of the interests of each and every
one of them, favoring their private interests with said conduct;
Immediately inform the SFC of any situation or event that may involve conflict of interest in its actions in relation to the Holders. In
accordance with the provisions of Article 7.6.1.1.2 of Decree 2555, conflict of interest is understood as a situation in which a
person is faced with different alternatives of conduct with respect to conflicting interests while carrying out their duties, none of
which should take priority over the statutory or contractual obligations thereof. In the case of those acting as the Legal
Representatives of Holders, it is considered that there would be a conflict of interest when the situation involves the choice
between the following, among others:
3.1. Personal benefit and that of the Holders;
3.2. The benefit of the parent or controlling company and that of the Holders;
3.3. The benefit of a subordinate entity of the parent or controlling company and the profit or benefit of the Holders;
3.4. The benefit of third parties related to the Legal Representative of the Holders and the profit or benefit of said Holders; and
3.5. The benefit of another client or group of clients of the entity and the profit or benefit of the Holders.
Paragraph: In this case, the action of the Legal Representative of the Holders in relation to the situation that has caused the
conflict of interest shall be suspended, without generating any responsibility for the Legal Representative of the Holders, until the
SFC reaches a decision.
Abstain from acting as the legal representative of Holders of bonds issued by any entity that meets the disqualifications indicated
in Article 6.4.1.1.5 of Decree 2555;
Refrain from giving any preferential treatment to a Holder or group of Holders;
Call for the General Bondholders' Meeting whenever deemed appropriate, when requested by the Issuer or a plural number of
Holders representing no less than ten percent (10%) of the Ordinary Bonds in circulation. Should the Legal Representative of the
Holders fail to call for said meeting, they may ask the SFC to make the call;
Call for the General Bondholders' Meeting to decide on its replacement when, during the course of the Issuance it finds itself in a
situation that renders the entity ineligible to continue acting as its representative. This meeting should take place within five (5)
Business Days following the occurrence or knowledge of said situation;
Avoid incurring in any conduct that, in accordance with the law and/or the opinion of the SFC, goes against the proper
performance of its duties as the Legal Representative of the Holders; and
Call for a General Bondholders' Meeting, when ordered by the SFC in cases where there are serious events that should be known
by the Holders and that may lead to instructions for the Legal Representative of the Holders or the annulment of its appointment.
GENERAL BONDHOLDERS' MEETING
The Bondholders' Meetings shall be governed by the legal standards established for this purpose, in particular by Articles 6.4.1.1.17
through 6.4.1.1.24 of Decree 2555, External Circular 012 / 1998 (3) of the SFC, and the norms complementing, amending or replacing
them and any other instructions given by the SFC.
The General Bondholders' Meeting will be held in the city of Medellin, Department of Antioquia at the place indicated in the
announcement of the meeting.
1.
Announcement
There will be no ordinary General Bondholders' Meetings. Holders shall meet at the General Bondholders' Meeting by virtue of written
notice provided by the Legal Representative of the Holders when deemed appropriate. Also, the General Bondholders' Meeting will
meet based on the call made by the Legal Representative of the Holders at the request of the Issuer or a plural number of Holders
representing at least ten percent (10%) of the unpaid amount of the loan.
If the Legal Representative of the Holders does not call for the meeting at their request, the Issuer or the group of Holders that
requested the meeting, as applicable, may ask the SFC to do so.
In addition, the SFC may call for a General Bondholders' Meeting or order the Legal Representative of the Holders to do so when there
are serious events that should be known by the Holders and that may lead to instructions for the Legal Representative of the Holders or
the annulment of its appointment.
The call shall be made via a notice published at least eight (8) Business Days prior to the date of the corresponding meeting in a
national newspaper, or by any other suitable means at the discretion of the SFC, which will also ensure the widest possible
dissemination of the call for the meeting. Such notice shall be reduced to five (5) or three (3) Business Days in the events provided in
External Circular No. 012 / 1998 of the SFC in the case of second and third calls for meetings.
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The notice will indicate the place, date, time and agenda of the General Bondholders' Meeting and any other information or warning
applicable in accordance with Decree 2555. This term will not include the Business Day of the publication of the notice or the Business
Day on which the General Bondholders' Meeting is held.
The notice of the meeting is required to indicate at least the following:
1.1.
1.2.
1.3.
1.4.
1.5.
1.6.
Name of the entity or entities calling for the meeting.
Name of the Issuer.
Unpaid amount of the loan.
Whether it is the first, second or third call for the meeting.
The place, date and time of the meeting.
The agenda of the General Bondholders' Meeting explicitly indicating whether it is an informative meeting or a decision will
be submitted for consideration by the bondholders, clarifying the nature thereof.
1.7. The documentation to be submitted by the Holders or their proxies to prove their capacity as such, as indicated in Circular
012 / 1998 (3.7) of the SFC.
1.8. Any other information or notice that may be applicable in accordance with applicable regulations.
In accordance with Article 6.4.1.1.42 of Decree 2555, during the term of the Issuance, the Issuer may not change its corporate
purpose, split, merge, transform or decrease its capital with the reimbursement of contributions, unless otherwise approved by the
General Bondholders' Meeting with the majority necessary to approve the modification of the terms and conditions of the loan.
Notwithstanding the above, the Issuer may make these changes without the need for the authorization of the Bondholders, if it first
offers the Bondholders one of the options described in said article.
2.
Reporting
Whenever Bondholders are called to a meeting to decide on mergers, splits, integrations, transfer of assets, liabilities and contracts,
acquisitions and any other modifications to be carried out regarding the loan and other matters that require a special majority in
accordance with the provisions of Article 6.4.1.1.22 of Decree 2555 (1) of this section, the Issuer shall prepare a report to illustrate the
subject submitted for consideration by the General Bondholders' Meeting and the effects thereof on their interests, including all
financial, administrative, legal and any other information that may be necessary for this effect. This report is to be supplemented by the
opinion of the Legal Representative of the Bondholders.
The report shall be approved by the SFC and made available to the Bondholders at the offices of the Issuer, the Legal Representative
of the holders of Ordinary Bonds, the Issuance Manager, the BVC and the SFC, as of the date of the call for the General Bondholders'
Meeting and up to the date of the meeting. This report shall be presented to the General Bondholders' Meeting by a duly qualified
senior-level official of the Issuer with regard to the subject in question.
3.
Quorum
The General Bondholders' Meeting may deliberate validly with the presence of any plural number of holders representing no less than
fifty-one percent (51%) of the unpaid amount of total capital of the Ordinary Bonds. The decisions of the General Bondholders' Meeting
shall be adopted by the absolute majority of the votes present, unless a larger majority is provided in this Prospectus Information.
If the quorum to deliberate and decide is not met at the meeting on the first call, a new meeting may be called for, in accordance with
(1) of this Section; in that meeting, a quorum with any plural number of Holders will be sufficient to deliberate and decide validly, which
must be indicated clearly in the notice. In the case of the second call, the draft notification and media proposed for the dissemination
thereof must be submitted for consideration by the SFC, according to the rules provided for in External Circular 012 / 1998 with regard
to the date scheduled for publication or to call the meeting. The above is without prejudice to the events in which, in accordance with
the provisions of this Leaflet and the norms in force, a larger decision-making quorum is required.
4.
Special decision-making majorities
The General Bondholders' Meeting may make general decisions considering the common and collective protection of the Bondholders
in the events of Issuer insolvency.
The General Bondholders' Meeting, with the favorable vote of a plural number representing the numerical majority of the Bondholders
present and eighty percent (80%) of the unpaid amount of total capital of the Ordinary Bonds, may consent to changes in the conditions
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of the loan and, in particular, to authorize the Legal Representative of the Holders to enter into a transaction contract or to vote in favor
of a restructuring scheme.
If the quorum to deliberate and decide is not met at the meeting on the first call with respect to the topics mentioned in the above
paragraph, a second meeting may be called for, in which decisions can be made validly with the vote of a plural number representing
the numerical majority of the Bondholders present and forty percent (40%) of the unpaid amount of total capital of the Ordinary Bonds.
This must be indicated clearly in the notice. If the quorum to deliberate and decide is not met at the meeting on the second call, a new
meeting may be called for, in which the presence of any plural number of Bondholders will be sufficient to deliberate and decide validly,
which must be indicated clearly in the notice.
As regards meetings on the third call, the provisions for calls and notices to the SFC provided for second calls will apply.
Any modifications to the terms of the loan must also be authorized by the Issuer's Board of Directors.
The decisions made by the General Bondholders' Meeting subject to the law will be mandatory for the absent or dissenting members.
None of the provisions of the General Bondholders' Meeting may discriminate between Bondholders, impose new obligations or
provide for the mandatory conversion of Ordinary bonds into shares.
The decisions referred to in Article 6.4.1.1.22 of Decree 2555 must also be approved by the SFC.
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CHAPTER 2 - FINANCIAL CONDITIONS OF ORDINARY BONDS, PUBLIC OFFERING AND PLACEMENT
A. SERIES INTO WHICH THE ISSUANCE IS DIVIDED
The Issuance consists of up to 6 series with the following characteristics:
Series A: Ordinary Bonds will be issued in Colombian Pesos. They will accrue interest based on a fixed effective annual rate and its
capital will be paid in full on maturity.
Series B: Ordinary Bonds will be issued in Colombian Pesos. They will accrue interest based on a variable rate with reference to the
interest rate of 90-day deposit certificates certified by Colombia's Central Bank or the DTF, in accordance with the provisions in Section
C below. Its capital will be paid in full on maturity.
Series C: Ordinary Bonds will be issued in Colombian Pesos. They will accrue interest based on a variable rate with reference to the
CPI certified by DANE at the start of the period of causation of interest, in accordance with the provisions in Section C below. Its capital
will be paid in full on maturity.
Series D: Ordinary Bonds will be issued in Colombian Pesos. They will accrue interest based on a variable rate with reference to the
CPI certified by DANE at the end of the period of causation of interest, in accordance with the provisions in Section C below. Its capital
will be paid in full on maturity.
Series E: Ordinary Bonds will be issued in Colombian Pesos. They will accrue interest based on a variable rate with reference to the
IBR certified by Colombia's Central Bank at the start of the period of causation of interest, in accordance with the provisions in Section
C below. Its capital will be paid in full on maturity.
Series F: Ordinary Bonds will be issued in Colombian Pesos. They will accrue interest based on a variable rate with reference to the
IBR certified by Colombia's Central Bank at the end of the period of causation of interest, in accordance with the provisions in Section
C below. Its capital will be paid in full on maturity.
B. TERMS OF SECURITIES
All of the Ordinary Bonds series will have a capital redemption term of between eighteen (18) months and twenty (20) years counted
from the Issuance Date, as indicated in the respective Public Offering Notification. Each series will be divided into sub-series in
accordance with the redemption term, so that the letter corresponding to a particular series will match the corresponding redemption
term.
The redemption term for the Ordinary Bonds will start on the Issuance Date.
C. ORDINARY BOND YIELD
The maximum yield of the Ordinary Bonds for each sub-series will be determined by any of the legal representatives of the Issuer and
will be published in the respective Public Offering Notification. It must reflect the market conditions at the time of the offer, and must
comply with the guidelines set forth in the Issuance and Placement Regulations approved by the Issuer's Board of Directors.
In addition to interest, the Issuer may grant a discount or premium on the nominal value of the Ordinary Bonds in all series. Interest,
premium and discount will be determined by the Issuer when making the corresponding Public Offering and must be published in the
Public Offering Notification, in accordance with the general parameters for the issuance and placement of the Issuance established in
the Issuance and Placement Regulations.
Once the Ordinary Bonds have reached the Maturity Date they will be considered mature and will no longer accrue remunerative
interest.
Ordinary Bonds will accrue default interest in the cases and conditions provided for in current civil and commercial law. Pursuant to the
Regulation of Operations, it shall be understood that the Issuer's obligations have been breached when the liquidation of resources
cannot be made on the date stated in the respective Public Offering Notification. In this case, the Issuance Manager will proceed, no
later than the following Business Day, to report this situation to the Direct Depositors and to the control authorities.
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Series A
The yield of the Ordinary Bonds in series A shall be determined by a fixed rate in effective annual rate terms.
To calculate interest, the annual effective rate must be converted to an equivalent nominal rate in accordance with the interest payment
period established by the Issuer when making the respective public offering. This rate will be applied to the current capital amount for
the period that the corresponding Ordinary Bonds represent.
Series B
Yield of the series B Ordinary Bonds shall be determined according to a variable rate. For the purpose of the Issuance, the DTF shall
be used as reference rate added in percentage points, expressed as a quarterly rate.
The quarterly DTF will be used to calculate interest in effect for the week in which the respective term of causation of interest begins.
The points determined at the time of the corresponding public offering are added to this amount, and that shall be the base nominal
rate for the quarter. The equivalent rate is then used to calculate its effective annual rate. This rate shall become an equivalent nominal
rate according to the interest payment period established by the Issuer at the time of making the respective public offering. This
frequency shall be published in the respective Public Offering Notification. The rate thus obtained shall be applied to the amount of
capital owed under the Ordinary Bonds in the respective period.
If the DTF used at the date of causation for the liquidation of interest undergoes any modification, re-liquidation of interests shall not
occur.
If the DTF is eventually eliminated, it shall be replaced by an index defined as a replacement for said indicator by the competent
authority, as long as it takes into consideration similar economic suppositions.
Series C
Yield of the series C Ordinary Bonds shall be determined according to a variable rate. For the purpose of the Issuance, the CPI of
Colombia shall be used as reference rate added in percentage points, expressed as an annual effective rate.
To calculate interest, the annual CPI of the past 12 months known when the respective period of causation of interest begins is used. It
is based on the last official date supplied by DANE. The points (margin) determined at the time of the corresponding public offering is
added to this amount.
The following formula shall be used to calculate the interest rate:
Rate E.A. Yield (%) = ( 1 + CPI% E.A. ) * ( 1 + Margin% E.A. ) – 1
This rate shall become an equivalent nominal rate according to the frequency of interest payment established by the Issuer at the time
of making the respective public offering. This frequency shall be published in the respective Public Offering Notification. The rate thus
obtained shall be applied to the amount of capital owed under the Ordinary Bonds for the respective period.
If inflation used at the date of causation for the liquidation of interest undergoes any modification, re-liquidation of interests shall not
occur.
If the CPI is eventually eliminated, it shall be replaced by an index defined as a replacement for said indicator by the competent
authority, as long as it takes into consideration similar economic suppositions.
Series D
Yield of the series D Ordinary Bonds shall be determined according to a variable rate. For the purpose of the Issuance, the CPI shall be
used as reference rate added in percentage points, expressed as an annual effective rate.
To calculate interest, the annual CPI of the past 12 months known when the respective period of causation of interest ends is used. It is
based on the last official date supplied by DANE. The points (margin) determined at the time of the corresponding public offering is
added to this amount.
The following formula shall be used to calculate the interest rate:
Rate E.A. Yield (%) = ( 1 + CPI% E.A. ) * ( 1 + Margin% E.A. ) – 1
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This rate shall become an equivalent nominal rate according to the frequency of interest payment established by the Issuer at the time
of making the respective public offering. This frequency shall be published in the respective Public Offering Notification. The rate thus
obtained shall be applied to the amount of capital owed under the Ordinary Bonds in the respective period.
If inflation used at the date of causation for the liquidation of interest undergoes any modification, re-liquidation of interests shall not
occur.
If the CPI is eventually eliminated, it shall be replaced by an index defined as a replacement for said indicator by the competent
authority, as long as it takes into consideration similar economic suppositions.
Series E
Yield of the series E Ordinary Bonds shall be determined according to a variable rate. For the purpose of the Issuance, the IBR shall be
used as reference rate - one month term added in percentage points, expressed as a nominal rate a month in arrears (N.M.V.). The
IBR is calculated on the basis of 360 days and the rate is expressed in nominal terms.
The IBR is used to calculate the interest - one month term N.M.V. in effect on the date on which the respective period of causation of
interest begins, as indicated in Article 19 of the Interbank rate regulation, adding to this amount the point (margin) determined at the
time of the corresponding public offering, and that shall be the nominal rate for the prior month. The equivalent rate is then used to
calculate its effective annual rate.
The following formula shall be used to calculate the interest rate:
E.A. Rate Yield (%) = (( 1 + (( IBR% N.M.V. + Margin% N.M.V. ) / 12 )) ^ 12 ) - 1
This rate shall become an equivalent nominal rate according to the frequency of interest payment established by the Issuer at the time
of making the respective public offering. This frequency shall be published in the respective Public Offering Notification. The rate thus
obtained shall be applied to the amount of capital owed under the Ordinary Bonds for the respective period.
If the IBR used at the date of causation for the liquidation of interest undergoes any modification, re-liquidation of interests shall not
occur.
If the IBR is eventually eliminated, it shall be replaced by an index defined as a replacement for said indicator by the competent
authority, as long as it takes into consideration similar economic suppositions.
Series F:
Yield of the series F Ordinary Bonds shall be determined according to a variable rate. For the purpose of the Issuance, the IBR shall be
used as reference rate - one month term added in percentage points, expressed as a nominal rate a month in arrears (N.M.V.). The
IBR is calculated on the basis of 360 days and the rate is expressed in nominal terms.
The IBR is used to calculate the interest - one month term N.M.V. in effect on the date on which the respective period of causation of
interest ends, as indicated in Article 19 of the IBR regulation, adding to this amount the points (margin) determined at the time of the
corresponding public offering, and that shall be the nominal rate for the prior month. The equivalent rate is then used to calculate its
effective annual rate.
The following formula shall be used to calculate the interest rate:
E.A. Rate Yield (%) = (( 1 + (( IBR% N.M.V. + Margin% N.M.V. ) / 12 )) ^ 12 ) - 1
This rate shall become an equivalent nominal rate according to the frequency of interest payment established by the Issuer at the time
of making the respective public offering. This frequency shall be published in the respective Public Offering Notification. The rate thus
obtained shall be applied to the amount of capital owed under the Ordinary Bonds for the respective period.
If the IBR used at the date of causation for the liquidation of interest undergoes any modification, re-liquidation of interests shall not
occur.
If the IBR is eventually eliminated, it shall be replaced by an index defined as a replacement for said indicator by the competent
authority, as long as it takes into consideration similar economic suppositions.
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D. INTEREST PAYMENT METHOD AND FREQUENCY
The Ordinary Bonds interest payment method shall be in arrears.
Investors have the option of choosing the payment frequency of the Ordinary Bonds' interest from among the frequencies established
by the Issuer at the time of the respective public offering. Said frequencies may be: Month in arrears (MV), Quarter in arrears (TV),
Semi-annually in arrears (SV), or annually in arrears (AV). The Issuer reserves the right to offer said frequencies for each sub-series.
The frequency shall be set for the duration of the Ordinary Bond once it has been determined.
For the purpose of the Yield, one month is understood initially as the period encompassed between the Date of Issuance of the
Ordinary Bonds ad the same date one (1) month later, and so on. A quarter is understood initially as the period encompassed between
the Date of Issuance of the Ordinary Bonds ad the same date three (3) months later, and so on. A semester is understood initially as
the period between the date of Issuance of the Ordinary Bonds and the same date six (6) months later, and so on. One year is
understood initially as the period between the date of Issuance of the Ordinary Bonds and the same date one (1) year later, and so on.
The value corresponding to the resulting interest and interest to be paid on the Ordinary Bonds shall be adjusted to a whole number so
that when there are fractions in cents, these shall be rounded off to the highest or lowest whole amount expressed in Colombian pesos.
In the case of 50 cents of a peso, it shall be rounded off to the highest value expressed in pesos.
Pursuant to Article 6.1.1.1.5 of Decree 2555:
1.
2.
3.
4.
Interest may be paid only upon expiration of the period subject to remuneration.
Interest shall be calculated on the convention of 365/365, that is: 365 day years, twelve (12) month years, with the appropriate
calendar month duration, except for the duration of the month of February, which shall correspond to twenty-eight (28) days. For
the Series indexed to the IBR, the interest shall be calculated on the convention of 360/360, that is: 360 day year, twelve (12)
month year, with a duration of thirty (30) calendar days per month. Regardless, the convention for series indexed to the IBR may
be modified in accordance with the regulations dictated by authorities competent on the matter, in which case the respective
Public Offering Notification shall be made.
The Coupon Rate shall be expressed with two (2) decimals in a percentage notation, like this: (0.00%).
The factor used to calculate and liquidate the interest shall be six (6) decimals rounded off, either as a decimal fraction (0.000000)
or as a percentage (0.0000%).
Without prejudice of the provision of the last point of Section 1 of Article 6.1.1.1.5 of Decree 2555, in the event that the payment date
for interest falls on a non-business day, except for the maturity date, the payment of interest shall be made on the following business
day, without any adjustment to the interest.
If the maturity date falls on a non-business day, the Issuer shall impute interest through the following business day. The respective
payment shall be made on that date.
No interest shall be paid for delays in charging interest or capital.
If the Issuer fails to make the corresponding interest and capital payment on the stipulated date, the Ordinary Bonds shall accrue late
interest at the highest legal rate allowed by Colombian law.
For the purpose of the calculation of terms of the Ordinary Bonds, it shall be understood pursuant to Article 829 of the Code of
Commerce (Decree 410 of 1971), that: "When the term is in months or years, its maturity shall take place on the same corresponding
day of the month or year; if there is no such date, it shall expire on the last day of the respective month or year. When the maturity date
falls on a holiday, it shall be carried over to the following business day." The expiration date shall be a business day during regular
bank hours. Saturday is considered a non-business day.
E.
CAPITAL AMORTIZATION
The Ordinary Bonds' capital shall be paid in full when they mature.
After one (1) year from the Issuance Date, the Issuer may acquire the Ordinary Bonds of any of the series offered under the Issuance,
provided that this operation is made through the BVC. The possibility for the Issuer to re-acquire the Ordinary Bonds does not compel
the Holders to sell them. Said acquisition implies the extraordinary amortization of the Ordinary Bonds, which shall be delivered for their
annulment and may not be reissued or re-sold, for the reason that at this event, the Issuer's obligations under the Ordinary Bonds shall
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be extinct due to confusion under the terms established in the Civil Code and pursuant to the provisions of paragraph 2 of Article 2 of
Law 964 of 2005.
F.
PLACE OF PAYMENT OF CAPITAL AND INTEREST
The capital and interest of the Ordinary Bonds shall be paid by the Issuer through the Issuance Manager using the latter's payment
network. The above means that the resources received from the Issuer by the Issuance Manager shall be paid to the Direct Depositor
that manages the portfolio of the respective Holder. The Holders shall act in the capacity of Direct Depositor that provides security
management services or be represented by a Direct Depositor with said service.
Pursuant to Article 6.4.1.1.39 of Decree 2555, the shares for the collection of interest and capital of the Ordinary Bonds shall expire
four (4) years after their enforceability date.
G. ISSUANCE RATING
Pursuant to the provisions of paragraph 2, section 1 of Article 2.22.1.1.4 of Decree 2555, to be listed the RNVE and the public offering
be authorized, the Ordinary Bonds were subject to rating.
The technical rating committee of BRC Investor Services S.A. Credit Rating Firm, at a meeting on October 17, 2013 to assign a rating
on the Issuance of Ordinary Bonds, assigned a AA+ rating to the Ordinary Bond Issuance.
The reasons for the rating may be consulted in Annex D of this Prospectus Information.
H. TERM TO BID ON THE ORDINARY BONDS, VALIDITY PERIOD OF THE PUBLIC OFFERING AND PLACEMENT
TERM
1.
Term to bid on Ordinary Bonds
The period to publish the first Public Offering Notification of the Ordinary Bonds shall be one (1) year from the date of the resolution that
ordered the listing of the Ordinary Bonds in the RNVE and their public offering.
2.
Validity period of the Public Offering
The validity period of the Issuance of Ordinary Bonds shall be established in the respective Public Offering Notification.
3.
Placement Term
The placement term of the Issuance shall be two (2) years from the business day after the publication of the first Public Offering
Notification.
I.
METHOD TO PROCED WITH THE PUBLIC OFFERING
The placement of the Ordinary Bonds shall be made through Public Offering. The Public Offering of the Ordinary Bonds may be offered
in one or various lots, at the discretion of the Issuer.
J.
MEDIA USED TO MAKE THE PUBLIC OFFERING
Publication of the Public Offering Notification shall be made through a widely-distributed national newspaper. For the purpose of this
Prospectus Information, the newspapers that may publish said notification are: La República, El Tiempo, El Colombiano, and/or
Portafolio. Publication of Public Offering Notifications after the initial one shall be made through the BVC's Daily Bulletin.
K. GENERAL RULES FOR PLACEMENT AND TRADING
1.
Measures to Prevent and Control of Money Laundering and Terrorist Financing
Pursuant to Circular 060 of 2008 issued by the SFC, it shall be the responsibility of the Placement Agents to apply the instructions
relative to the administration of the risk of money laundering and terrorist financing, in accordance with the provisions of Chapter
Eleven of Title I of External Circular 007 of 1996. For this purpose, the Issuer has already established criteria to select Placement
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Agents that guarantee that said entities comply with the ends established in said provision. Moreover, the Issuer delegated the
obligation of consolidating Investor information to the Lead Placement Agent. In any case, each Placement Agent shall comply with the
instructions pertaining to the administration of the risk of money laundering and financing of terrorism, pursuant to the provisions of
Chapter Eleven of Title I of External Circular 007 of 1996, and individually prepare the reports described in said Chapter.
In order to comply with the provisions of the regulations to prevent and control money laundering and financing of terrorism, the
Investors interested in acquiring Ordinary Bonds must be enrolled as clients or submit a properly completed enrollment form with their
corresponding annexes in order to participate in the respective Ordinary Bonds placement process, which will be required by the
Placement Agents through which they intend to acquire the Ordinary Bonds.
The enrollment form and annexes shall be presented by the Investors within the timeframe indicated by each placement agent,
pursuant to its client enrollment policies. In dealing with placements through the auction mechanism, the aforementioned
documentation must be submitted no later than prior to the time stipulated to begin receipt of the claims.
Any potential investor that fails to submit the duly-completed enrollment form and its required annexes in a timely manner shall not
participate in the process of awarding the Ordinary Bonds.
2.
Placement Rules
The subscription of Ordinary Bonds can be done through the Lead Placement Agent and Placement Agents that are indicated in the
Public Offering Notification. Similarly, in development of the mandate provided by the Issuer, the Lead Placement Agent can designate
other stock market brokerage firms listed on the Colombian Securities Exchange (BVC) and or financial corporations to make up the
placement group through delegation or assignment. The above requires the Issuer's prior consent and response to any
recommendations or objections of the Issuer, if applicable.
The placement shall be made by virtue of the Best Efforts Placement method. The placement fees that shall be charged to the Issuer
and given to the Placement Agents shall be determined by the amount of effectively placed resources.
The value of the investment made shall be paid in full at the time of subscription of the Ordinary Bonds, which can be placed at a
nominal value or with the premium or discount established by the Issuer and published in the respective Public Offering Notification.
When the placement of Ordinary Bonds is done through the electronic awarding system of the BVC, these can be registered with a
term for their clearing of up to three Business Days counted from the day following the date the transaction was made. In this sense,
the Subscription Date of the Ordinary Bonds may differ from the Issuance Date, which shall be indicated in the respective Public
Offering Notification.
The awarding mechanism of the Ordinary Bonds may be by auction or the firm demand mechanism, according to how it is established
in the respective Public Offering Notification.
Each Public Offering Notification shall include the name of the Placement Agents to which the Investors must submit their demands, fax
number, phone number or address where they shall receive the purchase requests, the time from which they shall be received and the
deadline by which they shall be received.
In the event that the firm demand mechanism is used, the Public Offering Notification shall additionally include the mechanism through
which it shall inform the Investors of the amount awarded. Furthermore, it shall keep a record of the date and time of receipt of the
demands and the statutory auditor of the Lead Placement Agent must be present during the receipt of the demands and during the
awarding process for the purpose of certifying the compliance of the parameters established in the respective Public Offering
Notification. The certification issued by the statutory auditor must report the day of the placement to the SFC, using the relevant
information mechanism.
The Investors' demands for Ordinary Bonds can be made through the Placement Agents, which shall submit the Investors' demands,
which shall be binding, within the hours for the receipt of demands that are indicated in the respective Public Offering Notification. The
demands made directly by the Placement Agents or by those registered on the Colombian Electronic Market (MEC in its Spanish
acronym) are taken into account for awarding the bonds. The Issuer shall not be responsible if the Placement Agents do not submit the
received demands in the time frame established for that purpose. In this case, the Placement Agent shall respond to the Investor
pursuant to that established by the Public Stock Exchange regulations regarding that specific situation and particularly, by those
regulations regarding the duties required from the securities intermediaries.
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The demands can also be made directly by other agents registered on the MEC, provided that it is established as such in the
respective Public Offering Notification and in the operating instructions that the BVC issues for the Issuance.
The BVC shall be responsible for awarding the bonds pursuant to the terms and conditions of this Prospectus Information, the
respective Public Offering Notification and the respective operating instructions issued by the BVC, as well as the criteria to take into
account for the submission, rejection or awarding of the demands.
The Investors must submit their claims in the time indicated in the respective Public Offering Notification, under the conditions indicated
therein.
In the event that the Issuer offers more than one subseries, the respective Public Offering Notification shall establish the criteria for its
award in the event of overdemand.
According to the powers granted by the Board of Directors, any of the Issuer's Legal Representatives shall determine the financial
conditions of the Ordinary Bonds, according to the subseries offered in the respective Public Offering Notification. The Rate of Return
Offered shall be established in the respective Public Offering Notification when the bonds are awarded through the firm demand
mechanism, or the maximum rate of return offered shall be established in the respective Public Offering Notification, when the bonds
are awarded through the auction mechanism.
Once the Coupon Rate is established for each subseries offered, this shall be unchangeable for the whole term of the respective
Ordinary Bonds, except if the Issuer goes into bankruptcy. Therefore, in the event that the Issuer offers new rounds of the Ordinary
Bonds on the subseries already offered, the offer will be made at the Subscription Price of the respective Ordinary Bonds or at the
discount rate used for the calculation thereof, while respecting the previously defined Coupon Rate.
In the Issuance of Ordinary Bonds, in the event that there are unplaced balances, these may be offered in a subsequent round through
a new Public Offering Notification. The subsequent rounds may consist of previously offered subseries, only under the same conditions
in which they were initially offered and/or of different subseries.
3.
Placement Mechanisms
The Issuance can be placed using the following mechanisms:
Auction mechanism:
Auctions for awarding Ordinary Bonds shall be carried out using the electronic awarding system under the auction mechanism
developed by the BVC, with which the corresponding terms shall be agreed.
The auction's operating procedure shall be published in the respective Public Offering Notification and in the operating instructions that
the BVC shall issue for each auction available on the website: www.bvc.com.co. The bonds shall be awarded at the end of the hours
established for the entry of demands onto the electronic awarding system, indicating the respective Public Offering Notification, while
respecting the conditions specified therein.
Provided that it is notified in the respective Public Offering Notification, in the event that the total amount demanded is higher than the
amount offered in the Public Offering Notification, the Issuer can autonomously decide to respond to the unsatisfied demand for up to
the additional amount established in said notification (over-allotment amount) without exceeding the total issue size. The awarding of
the unsatisfied demand shall be done according to rate and term preference criteria for the Issuer and subject to the criteria established
for that purpose in the respective Public Offering Notification.
Provided that the demand is equal to or greater than one hundred percent (100%) of the offered amount in one or more of the offered
subseries, the Issuer can decide to not award partial amounts of the subseries offered, in accordance with the preference criteria for
the Issuer in terms of rate and term. In any case, the Issuer cannot award amounts of less than the offering amount reported in the
Public Offering Notification, except if the demands presented to the auction are less than the offering amount.
Firm demand mechanism:
The firm demand for awarding Ordinary Bonds shall be carried out using the electronic awarding system under the firm demand
mechanism developed by the BVC, with which the corresponding terms shall be agreed.
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The recipients of the offering shall submit their purchase demands to the Placement Agents on the Business Day(s) indicated in the
respective Public Offering Notification, which at the same time shall present said demands to the BVC. The amount awarded must be
established taking into account the maximum amount to be awarded by subseries, according to the amount offered by the Issuer in the
respective Public Offering Notification.
The Ordinary Bonds may be awarded to the recipients of the Offering on a first-come-first-served or pro rata basis, as established in
the respective Public Offering Notification.
In the event that the Ordinary Bonds are awarded to Investors pro rata, the demands shall be received by the BVC in the electronic
awarding system pursuant to that established in the operating instructions that the BVC issues for each placement.
The awarding of Ordinary Bonds to Investors can be done on a first-come-first-served basis, according to the receipt of demands by the
BVC in the electronic awarding system. In the event that the demand exceeds the offering and the awarding of the Ordinary Bonds has
been established on a first-come-first-served basis: i) If the total amount demanded is greater that the amount offered for the series, the
demand that fulfills the offered amount shall be broken down and the surplus shall be rejected; ii) In the event that two or more
demands are entered onto the system at the same time, the one with the highest demanded amount shall prevail; if the amounts are
equal, they shall be awarded in descending alphabetical order according to what is entered in the name or company name field; iii) In
the event that the demand exceeds the offering, prorated allocation shall not be authorized.
During the term of the offering, at the time in which the Ordinary Bonds are awarded, the respective Placement Agent through which
the demand was presented shall inform by phone all the Investors that sent offers, whether they were awarded bonds or not of the
Issuance through the electronic awarding system of the BVC and the amount that was awarded to them, in the time frame established
in the Public Offering Notification.
Secondary market and valuation methodology:
The Ordinary Bonds shall be freely traded on the BVC and the Holders shall be able to directly trade them on the secondary market, or
through it, taking into account and complying with the applicable regulations.
The entities supervised by the SFC that invest in Ordinary Bonds must carry out the valuation according to that established in Basic
Accounting and Financial Circular 100 of 1995 of said entity and all the regulations that amend it.
The other Holders shall carry out the valuation according to the current regulations that govern them. The valuation that is referred to in
this section does not imply any responsibility of the SFC, or the advantage, price or negotiability of the Ordinary Bonds.
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PART TWO - ISSUER INFORMATION
CHAPTER 1 - GENERAL INFORMATION
A. COMPANY NAME, LEGAL STATUS, TERM AND GROUNDS FOR DISSOLUTION
1.
Company Name
The Issuer's company name is Celsia S.A. E.S.P., a company incorporated through Public Deed No. 2912 of October 4, 2001, granted
at Notary 20 of Medellin, in the department of Antioquia, registered on October 8 of the same year, under number 1360 of Book 9 with
trade registration no. 9519 of the Medellin Chamber of Commerce, with its main domicile in the city of Medellin. The articles of
incorporation have been amended on several occasions, the latest amendment being granted through Deed no. 1030 of April 16, 2013,
at Notary 20 of Medellin. All of the amendments are recorded in public deeds disclosed in the Issuer's certificate of incorporation and
legal representation.
The Issuer's bylaws may be consulted in the public deeds that contain them on the website: www.celsia.com, or they may be requested
in the investor relations office, phone no.: (4) 326 66 00, ext. 14514, email: nmolina@celsia.com, inversionistas@celsia.com.
2.
Legal Status and Term
The Issuer does not have grounds for dissolution and its term is undefined, and may be dissolved in advance by the decision of the
Issuer's Shareholders' Meeting or by the occurrence of the events established in Article 457 of the Code of Commerce, or the
regulation that amends or revokes it.
Additionally, the Issuer may be subject to the procedures for taking possession and liquidation by the SSPD in the terms established in
Law 142.
3.
Grounds for Dissolution
Pursuant to article 59 of the bylaws and with that provided in articles 19 and 61 of Law 142, the Issuer shall be dissolved:
3.1. If it is impossible to fulfill its corporate purpose;
3.2. At any time, by decision of the Issuer's Shareholders' Meeting, adopted with votes corresponding to at least the majority
of the shares present at the meeting, legally recorded and processed;
3.3. By the decision of the SSPD;
3.4. In the event of losses that reduce net equity to less than fifty percent of the subscribed capital;
3.5. In the event that all the subscribed shares come to belong to one shareholder; and
3.6. On the other established and applicable grounds of the Code of Commerce or the regulations that amend or repeal it.
B. LEGAL STRUCTURE AND REGULATIONS
The Issuer is a limited company incorporated as a public utilities company according to Colombian law and therefore, it is governed by
the provisions of the Code of Commerce in terms of the regulations applicable to trading companies, as well as by Law 222 of 1995
and other complementary regulations.
Additionally, the Issuer is a company supervised by the SSPD and consequently it is subject to the regulations contained in Law 142
and Law 143.
Similarly, the Issuer is subject to the concurrent control of the SFC, because of its role as an Issuer registered on the RNVE.
Finally, the Issuer's activity related to the generation, sale, transmission and distribution of electricity is subject to the regulatory
provisions issued by the CREG.
C. MAIN COMPANY DOMICILE AND MAIN ADDRESS
The Issuer's main domicile is in Medellin at Carrera 43 A No. 1 A Sur 143 Piso 5.
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D. MAIN CORPORATE PURPOSE
The Issuer's main corporate purpose is to provide public services of the generation and sale of electricity, pursuant to Law 142 and Law
143 and the provisions that amend and/or add to them, as well as the provision of connected, complementary and related services to
the same activities of public services, according to the legal and regulatory framework.
In development of its corporate purpose, the company may implement any connected, additional or related activity to the generation
and sale of electricity, natural gas and any other fuel that it is allowed to carry out for entities of the same nature according to the laws
in force. It specifically has the power to:
1.
2.
3.
4.
5.
6.
7.
Carry out, promote, plan, exploit, operate and/or build electricity generation projects and power plants.
Participate in companies that develop the activity of the transmission, distribution, generation or sale of electricity, natural gas and
any other fuel, in the terms established by law and in the regulations.
Enter into any kind of agreement, convention, contract and legal transactions related to the development of its corporate purpose;
Develop activities related to the acquisition, transfer and transaction of derivatives, options, futures, swaps, pledges, preemptive
rights, price risk coverage instruments and sale of any security;
Develop and implement all legal transactions that public service companies may develop, pursuant to the law.
Carry out any commercial activity related to the sale of: (a) natural gas, including its transportation capacity; and (b) fuel including
its brokerage;
Carry out any kind of commercial transaction related to the energy sector.
Additionally, the Issuer has the power to work on managing, protecting and increasing its equity by strengthening and promoting
industrial and commercial activity, especially through investment in companies or other legal entities, regardless of their corporate
purpose, either participating as a founding partner in its incorporation, or making subsequent capital contributions or acquiring capital
shares. It may finance companies and any kind of legal entity in which the Issuer has an interest as an associate or partner, or their
subordinate companies. Similarly, it may acquire, own and exploit patents, trade names, brands, trade secrets, licenses or other
industrial property rights and grant or acquire the right to its exploitation by contract or license. It may also provide advice on economic,
administrative and financial subjects to every kind of company.
To comply with its corporate purpose, the company may acquire, transfer, encumber or limit any kind of movable or immovable
property and in general, sign any kind of agreement or contract of collaboration, management, disposal or guarantee that has the aim
of exercising the rights and/or complying with the obligations derived from the aforementioned activities.
E.
HISTORY
The Issuer's history begins in 1919 with the birth of Coltabaco, a company that in turn, in 2001, split its investments to give way to the
creation of Compañía Colombiana de Inversiones S.A., Colinversiones. After the creation of Colinversiones, there was a strategic
process of investments and divestments aimed at focusing the company in the electricity sector, in which it managed to quickly become
an important and distinguished player in Colombia. In 2012, with the aim to start a new stage of growth and expansion, it changed its
name to Celsia S.A. E.S.P. Below is a historical summary of the Issuer:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Compañía Colombiana de Tabaco S.A., Coltabaco, was born in 1919 from the merger of five regional tobacco companies;
To ensure it fulfilled the responsibilities of providing social welfare and pensions for its employees, Coltabaco created an
investment portfolio;
From the 60s, this portfolio grew and came to represent 50% of the company's assets;
By 2001, Coltabaco's assets were comprised of 70% in portfolio investments and 30% in the tobacco business. Consequently, the
shareholders made the decision to split the investment portfolio, under risk management criteria;
That is how Colinversiones was born, with the objective of managing said portfolio;
In 2005, the share in Coltabaco is sold to Philip Morris, thus ending its participation in the tobacco business, becoming a company
with a 100% investment portfolio;
In 2007, 80% of the investments were in minority shares without sufficient governance and 85% of the portfolio was listed on the
Colombian Public Stock Exchange.
Then, a process of strategic transformation was started aimed at focusing assets in a competitive sector, with a national and
international scope, which would represent an attractive equity story for the market and with sustainable development criteria, in
which the Issuer could have direct participation in the business, governance and other criteria of corporate governance.
In 2007, the Issuer analyzed different sectors of the economy to select the sector which presented the greatest potential for
generating value for its shareholders, thus choosing the power sector, specifically the electricity subsector. As a result, there was
a strategic investment and divestment process that continues to date, as follows:
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Related to the strategic investment process of the Issuer and its Related Companies, 5 successful acquisitions were made for the
investment amounts indicated in the following table:
Parallel to this, the Issuer and its Related Companies developed the following:
F.
SHARE STRUCTURE AND MAIN SHAREHOLDER INFORMATION
As of June 30, 2013, the Issuer's main shareholders were:
SHAREHOLDER
Grupo Argos S.A.
NUMBER OF SHARES SHARE (%)
361,051,665
50.18%
Fondo de Pensiones Obligatorias Protección moderado
86,776,524
12.06%
Fondo de Pensiones Obligatorias Porvenir moderado
45,393,416
6.31%
Fondo de Pensiones BBVA horizonte – moderado
34,940,739
4.86%
Fondo de Pensiones Obligatorias Colfondos moderado
27,935,275
3.88%
Fondo de Pensiones Obligatorias Skandia S.A.
11,960,848
1.66%
Fondo de Cesantías Protección - largo plazo
4,541,474
0.63%
Fondo de Cesantías Porvenir
3,976,553
0.55%
Caxdac – vejez
2,563,332
0.36%
Fondo de Pensiones Obligatorias Protección mayor riesgo
2,562,131
0.36%
Fondo de Pensiones Protección – RF Corto plazo
2,544,127
0.35%
Fondo de Pensiones Voluntarias Multifund Skandia
2,495,147
0.35%
Suramericana de Seguros de Vida S.A.
2,441,265
0.34%
Fondo de Pensiones Obligatorias Protección retiro programado
2,242,717
0.31%
Margarita Urrea Cortavarria
2,000,000
0.28%
Inversiones ME S.A.S
1,941,900
0.27%
Fondo de Cesantías Horizonte
1,900,714
0.26%
Lucelena Freydel de Mesa
1,870,050
0.26%
Cartera Colectiva Abierta Seguridad Bolívar
1,786,577
0.25%
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PRELIMINARY PROSPECTUS INFORMATION
SHAREHOLDER
Amalia Urrea Villegas
NUMBER OF SHARES SHARE (%)
1,673,562
0.23%
Other shareholders with a smaller share
116,986,484
16.25%
Total shares in circulation
719,584,500
100.00%
G. CORPORATE GOVERNANCE PRACTICES
The Issuer has a Corporate Governance Code, which is available to all Holders on the website: www.celsia.com.
The Issuer's adoption of the Corporate Governance Code aims to maintain a constant standardization between its content, and the
legal provisions and different recommendations that control entities formulate, in order to ensure stakeholders that the Issuer's activities
are carried out and decisions are made with total transparency and with the due respect of the procedures established in it.
External Circular 028 of 2007, amended by External Circular 056 of 2007 and External Circular 007 of 2011 of the SFC which adopts
the Colombian Code of Best Corporate Practices (Código País) for the entities listed or that have securities listed on the RNVE,
indicates some Corporate Governance parameters to which those entities voluntarily adhere and imposes the mandatory completion of
an annual survey on its compliance. The Issuer will opportunely disclose the results of the annual evaluation of compliance with these
commitments through the SFC's website: www.superfinanciera.gov.co
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CHAPTER 2 - ORGANIZATIONAL STRUCTURE OF THE ISSUER
A. ORGANIC STRUCTURE OF THE ISSUER
In accordance with its bylaws, the Issuer has the following bodies for the purposes of management, administration and representation:
1.
2.
3.
4.
Shareholders' Meeting;
Board of Directors;
CEO and legal representatives; and
Vice Presidents.
Each of these company bodies exercises the functions and powers set out in the Issuer's bylaws, subject to current legal, regulatory
and statutory provisions. The management, administration and representation bodies are organized as follows:
Shareholders'
Meeting
Board of
Directors
CEO
Juan Guillermo
Londoño P.
Corporate
Auditor
Juan
Fernando
Fernandez R.
Commerce
and
Operations
VP
Generation
Projects VP
Corporate
Development and
New Business VP
Regulatory
Affairs VP
Finance VP
Corporate Affairs
VP
Germán
García V.
Alberto Gutiérrez P.
Ana María Calle L.
Rafael Pérez C.
Esteban
Piedrahíta M.
Rafael Olivella V.
Human
Resources
and
Administratio
n VP
Claudia
Salazar P.
B. SHAREHOLDERS' MEETING
1. Composition of the Shareholders' Meeting
The Issuer's Shareholders' Meeting consists of the shareholders recorded in the shareholders' register, meeting with the quorum and in
the circumstances provided for in the Issuer's bylaws.
The Issuer's Ordinary Shareholders' Meeting is held annually in the first three (3) months of the year, no later than March thirty-first
(31). The Meeting aims to examine the Issuer's position, appoint administrators and other executives that it may choose, determine the
Issuer's economic directives, consider the accounts and financial statements of the previous fiscal year, decide on the distribution of
profits, and agree on all measures to ensure that the corporate purpose is fulfilled. The meeting date is set by the Board of Directors,
and notice is given by the chair, on the orders of the Board. The shareholders or their representatives are permitted to exercise the
right of inspection enshrined in the law during the twenty (20) business days prior to the meeting. If the meeting is not convened, the
shareholders meet in their own right on the first business day of April, at ten o'clock in the morning (10:00 a.m.) at the headquarters
where the management operates. In such a case, the shareholders present legitimately hold the meeting and make decisions,
regardless of the number of shares represented, except where the law or the bylaws mandate a special majority.
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Extraordinary Meetings will be held when required due to the Issuer's unforeseen or urgent needs, and notice will be given by the
Board of Directors, the CEO or the statutory auditor. They are also held when shareholders who represent no less than a quarter (1/4)
of the subscribed shares make a direct request of the Board of Directors, whenever information exists that reasonably leads to the
belief that said meeting is necessary to guarantee rights or to provide information that minority shareholders do not have access to.
They are also held by direct order or notice of the public authority that exercises the permanent control and monitoring of the Issuer, via
request of a number of shareholders that represents no less than a quarter (1/4) of the subscribed shares, and in all other cases
established by law.
These meetings may not deal with topics not included in the agenda attached to the meeting notice, except where agreed upon by the
majority of voters present at the meeting and once all topics included in the agenda have been dealt with.
The Issuer's Shareholders' Meetings are held in the Issuer's main domicile on the day, at the time and at the location indicated in the
notice.
Issuer's Shareholders' Meetings are presided over by the Issuer's CEO, or in his/her absence, by the person designated for this
purpose by the Shareholders' Meeting.
2. Functions of the Shareholders' Meeting
According to the provisions of Article 29 of the Issuer's bylaws, the functions of the Issuer's Shareholders' Meeting are as follows:
2.1. To freely elect the seven (7) members of the Board of Directors, the statutory auditor and his/her respective alternate, and to set
the method and amount of compensation.
2.2. To freely remove employees whose appointment is the responsibility of the Shareholders' Meeting, and order the corresponding
legal actions against the administrators, management or the statutory auditor;
2.3. To decide on mergers, splits, segregation, early dissolution or extension of the Company, its transformation and the adoption of all
other reforms to the company bylaws. Also, to decide on the transfer or leasing of all the establishments of which the company is
comprised, on the cancellation of shares in the RNVE and on the performance of relevant operations with economic associates,
except in the case of operations and conditions listed at Section 2.3.3, as outlined below:
2.3.1. For these purposes, segregation is understood to mean an operation through which the Issuer designates one of more parts
of its equity to the creation of one or more companies, or to the increase in capital of already existing companies, thereby
producing a significant change in the development of the corporate purpose of the Issuer. A significant change in the
development of the Issuer's corporate purpose exists when the net value of contributed assets is equivalent to or greater
than twenty-five percent (25%) of the total equity of the Issuer, or when the contributed assets generate thirty percent (30%)
or more of the operating income of the same. In both cases, figures are based on the financial statements corresponding to
the fiscal year immediately prior.
2.3.2. Relevant operations are understood to be those that, according to the existing norms, lead the Issuer to be obliged to report
relevant information to the stock market;
2.3.3. Approval from the Issuer's Shareholders' Meeting is not required for relevant operations with economic associates that meet
the following conditions:
d.
They are carried out at market rates established in general by the party acting as the supplier of the good or service
involved: and
e.
They are operations of the Issuer's regular course of business.
2.3.4. An economic associate is understood to be that which falls into one of the following categories:
a.
Entities of the business group to which the Issuer belongs, including its controlling company and subsidiaries;
b.
Directors, managers, administrators or liquidators of the Issuer and their spouses or relatives to the second degree of
consanguinity or affinity; and
c.
Anyone who is a real beneficiary of more than ten percent (10%) of the Issuer's shares.
2.4. To examine, approve or reject the financial statements for general purposes, as well as the accounts the administrators must
present annually, or whenever the Shareholders' Meeting demands it;
2.5. To consider and approve or reject the reports presented by the Board of Directors and the CEO on the economic and financial
situation of the Issuer and the state of business, and the statutory auditor's report;
2.6. To decree the distribution of profits, as established according to the relevant financial statements approved by the Shareholders'
Meeting, subject to legal provisions and the bylaws. Through exercising this power, it may create or increase occasional reserves,
determine their specific destination or vary this, and set the amount of the dividend as well as the method and term in which it will
be paid, within the term established by law.
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2.7. To designate, in the case of a dissolution of the Issuer, one or more liquidators and an alternate for each of them. To remove
these, to establish their remuneration and to issue the orders and instructions required by the liquidation, as well as to approve
their accounts;
2.8. To authorize the acquisition of its own shares, subject to the requirements established by law.
2.9. To assign line items with charitable purposes. The determination of beneficiaries and the individual amounts remains at the
discretion of the Board of Directors.
2.10.
To delegate to the Board of Directors, to the CEO, or to a special committee, when deemed appropriate or for specific
cases, one or more of those functions that are able to be delegated according to existing laws. The authority to reform the
company bylaws may not be delegated;
2.11.
To modify the nominal value of the Issuer's shares;
2.12.
All other functions established within the law or bylaws, which do not correspond to another corporate body.
C. BOARD OF DIRECTORS
1. Composition of the Board of Directors
The Issuer's Board of Directors consists of seven (7) members, all primaries, chosen by the Issuer's Shareholders' Meeting through a
vote from the proposed lists and through the voting mechanism established in the bylaws. As mentioned in Section D below, four of
these seven (7) members fulfill the regulatory requirement of being independent members.
The members of the Board of Directors are elected for periods of two (2) years and can be reelected indefinitely or freely removed
before the completion of their term.
The Board of Directors meets at least once every two (2) months and must also meet how ever many times the Board itself stipulates,
or when it is summoned by the CEO of the Issuer, by the chair of the Board of Directors, by the statutory auditor, or by two (2) of its
members. The meetings are held at the headquarters or in a location that, under special circumstances, the Board itself agrees upon.
The Issuer's Shareholders' Meeting, for the purposes of setting the compensation of the members of the Board of Directors, must take
into account the number and quality of its members, its structure, obligations, and responsibilities, as well as the personal and
professional qualities of its members, the time they dedicate to their activities and their experience, in such a way that said
compensation adequately rewards the contribution the Issuer expects from its board members.
The election of the members of the Board of Directors is governed by transparency criteria. A procedure has been established for
ensuring the transparency of public and open elections.
As established by its Corporate Governance Code, the Issuer must guarantee the participation of all shareholders in the nomination
and consideration of the lists of candidates they have presented.
At the Issuer's Shareholders' Meeting on March 19, 2013, the following Board of Directors was appointed for the period 2013 - 2015.
The decision was recorded in the Issuer's Shareholders' Meeting Minutes No. 14. The Board of Directors currently consists of the
following people:
Primary
José Alberto Vélez Cadavid
Gonzalo Alberto Pérez Rojas
Ricardo Andrés Sierra Fernández
María Fernanda Mejía Castro
María Luisa Mesa Zuleta
Manuel Ignacio Dussan Villaveces
Juan Benavides Estévez-Bretón
Independent
No
No
No
Yes
Yes
Yes
Yes
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2. Functions of the Board of Directors
According to the provisions of Article 35 of the Issuer's bylaws, the functions of the Board of Directors are as follows:
2.1. Each year appoint the Chair and Legal Representatives and set their compensation, as well as create jobs that it deems
necessary, and freely appoint and remove other employees from the Company, defining their functions and compensation.
Positions that are appointed or removed by the Issuer's Shareholders' Meeting are not covered;
2.2. The board may create one or several vice presidencies for the Issuer, appointing these and in each case indicating the functions
and remuneration of those appointed; Decide in resignations, removals, suspensions and licenses of the employees of the
Company whose appointment corresponds to the Board; Call the Issuer's ordinary and extraordinary Shareholders' Meetings when
required by unforeseen or urgent needs of the Company or when directly requested by shareholders that represent at least one
quarter (1/4) of the subscribed shares, whenever there is evidence that reasonably lead one to consider that said Meeting is
necessary to ensure rights or to provide information that is not available to minority shareholders. In the latter case, said request
must be presented in writing, with a clear and precise indication of the facts on which it is based, the reasons upon which it relies,
and the object or purpose of the meeting.
2.3. To consider and analyze the trial balance in order to approve, ahead of time, the general purpose financial statements, the
management report, and the proposed distribution of profits or the write off of losses that it must present, together with the CEO, to
the Issuer's shareholders at their Ordinary Shareholders Meetings.
2.4. To make available the issuance and placement of shares held in reserve, and to issue the corresponding regulations, respecting
the legal requirements and subject to the Issuer's bylaws.
2.5. To decree the issuance and placement of bonds, and to arrange, if applicable, for these to be guaranteed with pledge or a
mortgage on the Issuer's assets.
2.6. To decide on the opening or closing of branches or agencies, inside or outside of the headquarters.
2.7. To set the Company's policies in the different areas of business, especially in financial, economic and labor terms. To approve
investment plans. To establish general norms in terms of prices and policies regarding the sale of products with which the
Company does business. And to dictate norms and regulations for the organization and operation of all the dependencies of the
Company.
2.8. To intervene in the execution of any deed or contract whose amount exceeds five thousand (5,000) current minimum legal monthly
salaries, except where the deeds or contracts are related to (i) the provision of public services for the generation and sales of
electricity and their backup, and sales of natural gas, including its transport capacity, or any other fuel permitted; (ii) the granting of
taxes, deposits or guarantees related to the deeds or contracts that have to do with the activities described in Section (i) above;
and, derivatives from energy and gas coverage, which may be executed without the authorization of the Board of Directors,
regardless of their amount.
2.9. To authorize the CEO and legal representatives to appoint in- and out-of-court representatives for the Issuer before all kinds of
authorities, in the case of matters whose amount is greater than five thousand (5,000) legal minimum monthly salaries.
2.10.
To rule on all matters related to retirement pensions, group insurance, donations, benefits, bonuses, and extralegal loans, in
favor of Company personnel;
2.11.
To act as advisory body and consultant to the CEO and, in general, to exercise all other functions assigned to it in the
present bylaws or laws;
2.12.
To adopt the Corporate Governance Code, meeting the requirements established by said code, as well as to ensure its
effective fulfillment and to approve the modifications and updates that may be necessary, in compliance with the provisions of the
legal and regulatory norms that govern the matter. The Board must ensure respect for the rights of all its shareholders and other
securities investors in equal and fair conditions;
2.13.
To authorize in each case the execution of specialized audits on behalf of the shareholders or investors who request them,
and to establish the terms that regulate such audits, in accordance with that which is established in the bylaws, the law and the
Corporate Governance Code.
2.14.
To consider, duly examine and to respond in writing to the written proposals presented by a number of shareholders that
represent at least five percent (5%) of subscribed shares, as long as such proposals' objects are not matters related to industrial
secrets or strategic information for the development of the Issuer.
2.15.
To establish procedures whose object is the prevention, identification, management and disclosure of conflicts of interest
that shareholders, investors or employees may have. The corresponding procedures will be established in the Corporate
Governance Code, notwithstanding that which corresponds to the Issuer's Shareholders' Meeting on this issue.
2.16.
The creation, modification or elimination of internal committees of the Board of Directors that facilitate the administration and
the corporate governance of the Issuer.
The Issuer's Shareholders' Meeting makes decisions relating to conflicts of interest in those cases provided for in the law, and in all
other cases, the Board of Directors or the legal representative makes such decisions, as determined by the Board of Directors.
Any doubt with regard to the functions of the Board of Directors or the CEO shall always be resolved in favor of the Board of Directors.
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D. MECHANISMS ADOPTED TO ENSURE THE INDEPENDENCE OF BOARD OF DIRECTOR MEMBERS
To ensure that the appointment of independent members is in accordance with the Law, the Issuer's bylaws establish that at least
twenty-five percent (25%) of the Board of Directors shall be independent primary members, in the terms defined by the law. However,
the Corporate Governance Code establishes that most of the members of the Board of Directors must comply with the requirements to
be considered as independent members.
Pursuant to the foregoing, members of the Board of Directors shall be considered independent when:
1.
2.
3.
4.
5.
6.
7.
Neither the member nor his/her personal associates (understood as the spouse, relatives to the third degree of consanguinity,
second of affinity, and first of adoption relation) are employees or managers of the Issuer, its controlling company or Related
Companies, nor have they been during the three (3) previous years, except where this is a re-election of an independent member.
Neither the member nor his/her personal associates or Related Companies are shareholders who, directly or by virtue of an
agreement, manage, advise or control the majority of the voting rights of the Issuer, or who determine the majority composition of
the governing, managing or controlling bodies thereof.
Neither the member nor his/her personal associates are partners or employees of associations or companies that provide
consulting services to the Issuer or companies that belong to the same economic group, when the revenue on this account
represents twenty percent (20%) or more of their operating income.
Neither the member nor his/her personal associates are employees or executives of a foundation, association or company that
receives significant donations from the Issuer. Significant donation is understood as one that represents twenty percent (20%) or
more of the total of donations received by the respective entity.
Neither the member nor his/her personal associates are administrators of an entity in which a legal representative of Issuer is a
board member.
Neither the member nor his/her personal associates are persons that receive any remuneration from the Issuer other than the
fees he/she is entitled to as a member of the Board of Directors, the Audit Committee or any other committee created by the
Board of Directors.
Neither the member nor his/her personal associates or Related Companies are partners or employees of the firm that acts as
statutory auditor or internal auditor of the Issuer, the parent company or the subsidiaries of the latter, or have been such during
the previous three (3) years.
The Corporate Governance Code also establishes that independent member status is lost when the Board member has acted as an
independent member for more than five (5) consecutive periods. However, anyone who has lost independent status may be chosen as
a Board member without having this status. Additionally, the Corporate Governance Code establishes that the Issuer's sustainability
and corporate governance committee will review information regarding whether people that are proposed for the Board of Directors are
or are not independent and will give its opinion on this matter.
E.
LINKS BETWEEN BOARD OF DIRECTOR MEMBERS AND THE COMPANY OR ITS RELATED COMPANIES
Current members of the Board of Directors that have any relation to the Issuer or its Related Companies are listed below. Additionally,
a description of the current relation is included:
1.
2.
3.
José Alberto Vélez Cadavid (Chair of the Issuer's Board of Directors): Currently CEO of Grupo Argos S.A., the parent company of
the business group to which the Issuer belongs.
Gonzalo Alberto Pérez Rojas: Currently CEO of Suramericana S.A., an affiliate of Grupo de Inversiones Suramericana in which
the Issuer has shares.
Ricardo Sierra Fernández: Currently Vice President of Corporate Finance at Grupo Argos S.A., the parent company of the
business group to which the Issuer belongs.
F. MANAGEMENT
The following executives make up the Issuer's management:
Name
Juan Guillermo Londoño Posada
Rafael Pérez Cardona
Position
CEO
Advisor in Energy Markets and Business, and Vice President of
Regulatory Affairs
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Juan Fernando Fernández Restrepo
Germán García Valenzuela
Alberto Gutiérrez Posada
Ana María Calle López
Esteban Piedrahíta Montoya
Rafael José Olivella Vives
Claudia Inés Salazar Peláez
Corporate Auditor
Commercial and Operations Vice President
Vice President of Development of Generation Projects
Vice President of Corporate Development and New Business
Finance Vice President
Vice President of Corporate Affairs
Vice President of Human Resources and Administration
Below there is a summary of the resumes of each official of the Issuer's executive staff:
Juan Guillermo Londoño Posada
CEO
Juan Guillermo Londoño Posada has a business administration degree from EAFIT University. He managed Ramón H. Londoño Ltda.,
and was CEO of Coninsa & Ramón H. S.A.
He is currently the CEO of the Issuer and is a member of the Board of Directors at: EPSA, Urbanizadora Santafé de Bogotá S.A.
(URBANSA), Grupo de Inversiones Suramericana S.A., Cartón de Colombia S.A., Autofrancia Ltda., Interautos Ltda., Instituto
Tecnológico Metropolitano ITM, Comité Universidad-Empresa-Estado, Congreso de Empresarios para América Latina (CEAL),
Corporación Rut N-Innovación and Emprendimiento Municipio de Medellín, among others.
Rafael Pérez Cardona
Vice President of Regulatory Affairs
Rafael Pérez Cardona has an electronics engineering degree from the Universidad Pontificia Bolivariana, specialized in management
at the same university, and specialized in economic regulation and industrial organization at EAFIT University.
Between 1974 and 2007 he worked at E.P.M. E.S.P. as an assistant engineer, maintenance engineer for energy substations,
engineering coordinator for communications, and engineering coordinator for controls and protection. From 1980 to 1989 he headed
the Transmission and Transformation department until he was appointed head of the Energy Losses, Conservation and Control
division. Later he worked as an advisor to the CEO of the same company, assistant manager of energy operation and assistant
manager of energy transaction. Finally, in 2005 he was appointed assistant commercial manager of generation.
Juan Fernando Fernández
Corporate Auditor
The Issuer's Internal Auditing department is led by Juan Fernando Fernández Restrepo, who currently holds the position of corporate
auditor.
Juan Fernando Fernández Restrepo is a public accountant and specialized in capital markets at the Universidad de Medellín. He has
15 years of experience in auditing, seven of which were at PricewaterhouseCoopers where he rose to auditing manager. He has been
a corporate auditor at the Issuer for the last eight years.
Germán García Valenzuela
Commercial and Operations Vice President
Germán García Valenzuela has an electrical engineering degree from the Universidad Nacional de Colombia, a Master's Degree in
electricity generation systems from the Universidad del Valle, an Executive MBA in business administration from the Universidad de los
Andes, and an MBA in the Executive Development Program from Universidad ESADE in Madrid, Spain.
He was the coordinator of Electrogalvan's “Popayán” project, coordinator of Proyco, coordinator of the supervision and control
department in the Anchicayá River Hydroelectric Plant project, all of which are owned by Empresa de Energía de Bogotá S.A. He
worked as a project coordinator for energy loss reduction at Empresa de Energía del Pacifico S.A. E.S.P. (EPSA E.S.P.), where he
also worked as commercial operations manager and managing director. He has also been manager of Electrocosta S.A. E.S.P. and
Electricaribe S.A. E.S.P., and lecturer at Universidad del Valle.
He is currently part of the Steering Committee for the Celsia and EPSA Foundations.
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Alberto Gutiérrez Posada
Vice President of Development of Generation Projects
Alberto Gutiérrez has a civil engineering degree from Universidad Nacional de Colombia, Medellín Campus, and specialized in
management at the Universidad Pontificia Bolivariana.
He worked for Sedic S.A. as a design engineer for dams and related works in the Playas and Betania Hydroelectric Plants between
1979 and 1985. Later, he worked at the same company as head of civil works for the Playas hydroelectric plant from 1985 to 1989.
Between 1989 and 2012 he worked at E.P.M. E.S.P., initially as an engineer for energy generation projects, and was also head of the
Porce II Civil Works Department, assistant manager of the Nechi and La Sierra thermoelectric projects, head of the energy generation
projects department and energy generation projects control and programming department. Later, he was appointed assistant manager
of water projects and finally was appointed Metropolitan Director of Water.
Ana María Calle López
Vice President of Corporate Development and New Business
Ana María Calle López has an electrical engineering degree from the Universidad Pontificia Bolivariana, and specialized in finances
and project evaluation at the Universidad de Antioquia. She has a Master's Degree in administration from the Universidad EAFIT.
In 1986 she joined E.P.M. E.S.P. as an energy generation planning specialist, and later worked as a coordinator for the Energy
Generation Planning Unit, and planning advisor. Between 1997 and 2001 she worked as assistant manager of Energy Generation
Planning, later taking the position of corporate planning director in 2001. In 2005 she became director of business consolidation and,
finally, director of institutional finances. In 2006 she joined UNE EPM Telecomunicaciones S.A. as Director of Integration, and in 2007
became Manager of Corporate Development.
Esteban Piedrahita Montoya
Finance Vice President
Esteban Piedrahita Montoya has a Lead Engineer degree from the Escuela de Ingeniería de Antioquia, and has an MBA focusing on
international business from the Thunderbird School of Global Management and the Monterrey Institution of Technology.
He worked at Procter & Gamble as a manufacturing cost analyst and then as Manager of Plant Finances. Later, he joined Compañía
Colombiana de Inversiones S.A. E.S.P., now Celsia S.A. E.S.P., as Director of Projects and later as Planning Manager.
He is currently a member of the board of directors of EPSA, Promotora S.A., Progresa Capital and Corporación Superarse.
Rafael José Olivella Vives
Vice President of Corporate Affairs
Rafael José Olivella Vives graduated as an attorney from Universidad Pontificia Bolivariana, specializing in commercial law at
Universidad de los Andes.
He worked as an attorney at Ignacio Sanín Bernal & Cía. S.A. between 2003 and 2006, where he dealt with matters related to mergers,
acquisitions and restructurings of the largest companies in the country, in addition to fiscal planning processes for companies. In 2006
and 2007, he worked as an attorney at Cementos Argos S.A., where he participated in negotiations for different types of contracts,
dealt with processes and claims, company acquisitions and matters related to various types of financing. In 2008, he joined Compañía
Colombiana de Inversiones S.A. E.S.P., now Celsia S.A. E.S.P., as the Corporate Legal Manager and Chief Legal Officer. Later, he
took on the role of Legal Vice President of Celsia S.A. E.S.P. and has headed the Vice Presidency of Corporate Affairs since 2012,
where he has been responsible not only for legal matters, but also matters related to communications and brands, corporate
responsibility and the Issuer's sustainability strategy.
He has been a professor for the company law and tributary legislation certificate at the Universidad Pontificia Bolivariana.
He is currently a member of the Steering Committee for Fundación Codesarrollo, Fundación Celsia, Fundación EPSA and the EPSA
Board of Directors.
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PRELIMINARY PROSPECTUS INFORMATION
Claudia Inés Salazar Peláez
Vice President of Human Resources and Administration
Claudia Inés Salazar Peláez has a social worker degree from the Universidad Pontificia Bolivariana and later specialized in
management at the same university.
She worked as the National Coordinator of Social Wellbeing at Solla S.A., then joined Almacenes Éxito as Regional Coordinator of
Professional Wellbeing where she was the Regional Coordinator of Training, Head of the Employee Wellbeing Department, Head of the
Staff Training Department, Regional Head of Human Resources and, finally, National Director of Human Resources.
G. STATUTORY AUDITING
In the Issuer's Ordinary Shareholders' Meeting held on March 19, 2013, and recorded in minutes number 14, the firm Deloitte & Touche
Ltda was appointed as the statutory auditor of the Issuer. In turn this firm appointed Olga Liliana Cabrales Pinto as the main statutory
auditor and Juan David López Montoya as the alternate statutory auditor.
Primary Statutory Auditor
Professional License
Professional License issued on
Seniority
Professional Experience
Education
Entities where she performs or
has performed functions as a
statutory auditor
Alternate Statutory Auditor
Professional License
Professional License issued on
Seniority:
Professional Experience
Education
Entities where he performs or has
performed functions as a statutory
auditor
Olga Liliana Cabrales Pinto
92837-T
4/29/2003
Appointment recorded on March 28, 2011
Currently, Auditing Manager at Deloitte & Touche Ltda. 10 years of experience in auditing.
1. Public Accountancy - Universidad Central
2. Specialized in Financial Management and Organizational Development - Universidad
Central
3. International Accounting Standards/International Financial Reporting Standards - ICAEW
4. ACCA certified in IFRS.
CURRENT
Primary: Celsia S.A. E.S.P, Zona Franca Celsia, Grupo Argos S.A., Zona Franca Argos S.A.S.
Fundación Celsia
Alternate: None
PREVIOUS
Primary: Cementos Argos S.A., Reforestadora El Guasimo, Fundación Hospitalaria San
Vicente de Paúl.
Alternate: Zona Franca Argos S.A., Logística de Transporte
Juan David López Montoya
139197 –T
2/12/2009
Appointment recorded on March 28, 2011
Currently, Senior Auditor at Deloitte & Touche Ltda. 6 years of experience in auditing.
1. Public Account degree from Politécnico Colombiano Jaime Isaza Cadavid.
2. Senior Management Certificate. Universidad de Medellín.
3. International Accounting Standards/International Financial Reporting Standards - ICAEW.
CURRENT
Primary: Cementos Argos S.A., Fundación Mundial, Sator S.A.S.
Alternate: Inversiones Mundial S.A., Celsia S.A. E.S.P., Fundación Celsia, Fundación Argos
PREVIOUS
Primary: Colener S.A.S., Logística de Transporte S.A.
Alternate: Concretos Argos S.A., Zona Franca Celsia
H. BOARD OF DIRECTORS' AND EXECUTIVES' HOLDING SHARES OF THE ISSUER
The Issuer's Corporate Governance Code establishes the following restriction with regard to the possibility for members of the Board of
Directors, CEO, vice presidents and managers to trade the Issuer's shares:
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PRELIMINARY PROSPECTUS INFORMATION
"The Board of Directors will approve directors and employees to transfer or acquire shares and securities issued by the Company,
provided that these do not involve speculation.
Approval must be given prior to making transactions and must be issued with a favorable vote from two thirds of its members, excluding
the petitioner's vote where applicable. Authorization requests must be presented through the General Secretariat, where a record will
be kept of operations carried out by directors and employees, and the Board of Directors Sustainability and Corporate Governance
Committee will be informed.
Approval is Relevant Information that must be disclosed to the stock market.
Although authorization is always required from the Board of Directors in the terms indicated, directors and employees cannot carry out
operations related to shares and securities issued by the Company:
a) From the moment in which they access information with the quarterly results (consolidated and individual) until said information is
disclosed by the Company; and
b) During mergers, acquisitions, reorganizations or important business for the Company, from the moment in which they learn of the
event until this is reported publicly.
Authorization will not be required from the Board of Directors in the case of purchase or sales in primary issuances, with regard to
takeover bids (OPA in its Spanish acronym) for the Company's shares"
Pursuant to the foregoing, when members of the Board of Directors and managerial executives perform operations related to shares
and securities issued by the Issuer, they will be subject to the provisions of the Corporate Governance Code.
As at June 30, 2013, Fiduciaria Bancolombia S.A., the entity that manages the issuance of shares for the Issuer, certified that none of
the members of the company's Board of Directors or of the Steering Company held shares in the Issuer.
I.
AGREEMENTS OR PROGRAMS TO GRANT EMPLOYEES SHARES OF THE ISSUER
As at June 30, 2013, the Issuer did not have any agreements or programs to grant employees shares of its capital.
J.
CONTROLLING COMPANY AND BUSINESS GROUP
The Issuer is a subsidiary controlled by Grupo Argos S.A., a company that is in turn the controlling company of the Grupo Empresarial
Argos. The Issuer belongs to Grupo Empresarial Argos.
Because of the fact that Grupo Argos S.A. holds 50.2% of the Issuer's shares, it is subject to the control thereof.
Grupo Argos S.A. is a Colombian company headquartered in the city of Medellín. Its main activity is investment in all types of movable
and immovable assets and in particular in stock, securities, shares or any other security in companies, bodies, organizations, funds or
any other legal figure that allows investment of resources.
In addition to the Issuer, there are other companies and entities that are part of the Grupo Empresarial Argos. All of these are
registered as part of the business group in the Grupo Argos S.A. business registry held by the Medellín Chamber of Commerce.
K. RELATED COMPANIES AND COMPANIES IN WHICH THE ISSUER HOLDS SHARES
In accordance with the provisions of Articles 260 and 261 of the Commerce Code, amended by Articles 26 and 27 of Law 222 of 1995,
as at June 30, 2013, the Issuer held more than 50% of the subscribed and paid-in capital in the following companies:
Company
Name
Headquar
ters
Main
Activity
Direct
Share %
Zona
Franca
Celsia
Barranquilla
Industrial user of goods and
services, exclusively in a
special permanent free trade
zone, works in energy
99.9%
Indirec
t Share
%
Capital
Contribu
tion
(Millions
)
Reserv
es
(Millio
ns)
Result
Last
Fiscal
Year
(Million
s)
COP
66,095
COP
186,15
9
COP
72,370
as at
Decem
Divide
nds
Last
Fiscal
Year
(Millio
ns)
Does
not
receive
dividen
Divide
nds
Book
Value
(Million
s)
Con
solid
ated
COP 0
Yes
50
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PRELIMINARY PROSPECTUS INFORMATION
generation and electricity
sales.
Development and/or
execution of any commercial
activity allowed under the
laws of the Republic of
Colombia, including but not
limited to administrating,
protecting and increasing its
equity by strengthening and
promoting the industrial and
commercial activity, in
particular through
investment in companies or
other legal entities,
regardless of their corporate
purpose, either participating
as a founding partner in its
incorporation, or making
subsequent capital
contributions or acquiring
shares.
Colener
S.A.S.
Medellín
EPSA
Yumbo,
Valle del
Cauca
Provision of public services
in generation, transmission,
distribution and sales of
electricity and natural gas in
accordance with the
provisions of Law 142 and
Law 143, and provisions that
amend, add to and/or
regulate the same, as well
as the provision of services
that are connected,
complementary and related
to the aforementioned
activities, and the sales of
any other fuel permitted for
this type of company.
CETSA
Tuluá,
Valle
Provision of public services
in generation, distribution
and sales of electricity and
natural gas in accordance
with the provisions of Law
142 and Law 143 of 1994,
and provisions that amend,
add to and/or regulate the
same, as well as the
provision of services that are
connected, complementary
and related to the
aforementioned activities,
and the sales of any other
fuel permitted for this type of
company.
Celsia
Panamá
Panama
City,
Development or execution of
any civil or commercial
100%
100%
ber
2012
COP
121,071
as at
Decem
ber
2012
COP
78,410
COP
39,205
50.01%
COP
1,128,16
6
COP
393,62
0
COP
277,384
as at
Decem
ber
2012
86.91%
COP
3,319,94
0
COP
24,754
COP
12,748
as at
Decem
ber
2012
COP 0
COP 0
COP 0
ds
Given
that it
has an
equity
interest
,
revenu
e is
receive
d
throug
h the
equity
method
. In the
2012
fiscal
year,
this
was
COP
138,84
7.
Given
that it
has an
equity
interest
,
revenu
e is
receive
d
throug
h the
equity
method
. In the
2012
fiscal
year,
this
was
COP
11,080.
COP
1,201
as at
Decem
ber
2012.
Dividen
ds
receive
d in
compa
nies
with
minorit
y
interest
.
COP 0
COP
758 of
shortterm
investm
ents of
minority
interest
s
Yes
COP
2,741
of
shortterm
investm
ents for
minority
shareh
olders
Yes
COP
1,171
of
shortterm
investm
ents of
minority
shareh
olders
Yes
COP 0
No
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PRELIMINARY PROSPECTUS INFORMATION
S.A.
Republic
of
Panama
EPSA
Inversiones
S.A.S.
Empresa de
Energía del
Pacifico
Panamá
S.A.
Yumbo,
Valle del
Cauca
Panama
City,
Republic
of
Panama
activity allowed under the
laws of the Republic of
Panama, including but not
limited to administrating,
protecting and increasing its
equity by strengthening and
promoting the industrial and
commercial activity.
Therefore, it may carry out
any legal economic activity
both in the Republic of
Panama and abroad.
The development of any
legal commercial or civil
activity.
The main purpose of the
company is the development
or execution of any civil or
commercial activity allowed
under the laws of the
Republic of Panama,
including but not limited to
administrating, protecting
and increasing its equity by
strengthening and promoting
industrial and commercial
activity.
100%
COP 1
COP 0
COP 0
COP 0
COP 0
No
100%
COP 0
COP 0
COP 0
COP 0
COP 0
No
In order to comply with Section 8.2 (J) of Article 5 of Resolution 2375 of 2006 issued by the SFC and taking into account the situation of
the business group that is referred to in Section J above, the following table shows the subordination relations within the Grupo
Empresarial Argos to which the Issuer belongs:
With regard to non-subsidiary companies in which the Issuer holds less than a 50% share in their capital stock and where the
shareholding of said company in the Issuer's net consolidated result is higher than 20%, as at June 30, 2013, the Issuer held shares
with these characteristics in Suramericana S.A., with 10,311,822 shares, with a net book value of COP 391,231 million.
In addition to this investment, as at June 30, 2013, the Issuer did not hold a share less than 50% of companies representing a share
greater than 20% of its net consolidated results.
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PRELIMINARY PROSPECTUS INFORMATION
As at June 30, 2013, the Issuer did not own shares in companies, in its own name or through third parties, that represent at least 10%
of the capital in the company receiving the investment.
L. LABOR RELATIONS
The Issuer has a policy to always contract employees directly through indefinite work contracts, only using fixed-term contracts for
positions that are required for set periods (e.g. projects). The table below contains the total number of employees for each type of
relationship, number of temporary employees, variation in the total number of employees and in temporary employees compared to the
previous year:
Direct Employees and Workers
Type
June-12 June-13
Variation %
Employees
146
151
96%
Fixed Term
0
2
100%
138
141
97%
8
8
0%
Indefinite Term
Interns
Third Parties
Type
June-12
Temporary
4
June-13
6
Variation %
60%
The Issuer's employees work on shifts organized as follows:
1.
2.
The Issuer's headquarters is located in Medellín and its operating hours are 7:30 a.m. to 5:30 p.m. with one hour for lunch.
The administrative departments in the power plants have a work day from 7:00 a.m. to 5:00 p.m. with one hour for lunch.
The operations departments in the power plants have four work shifts of 8 hours each with one hour for lunch.
The Issuer has not entered into any collective agreement and its employees are not organized in unions.
The Issuer has not had total or partial interruptions of its activities in the last three years due to labor disputes.
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PRELIMINARY PROSPECTUS INFORMATION
CHAPTER 3 - ASPECTS RELATED TO THE ISSUER'S ACTIVITY
A. REGULATORY FRAMEWORK
Since 1991, the Political Constitution of Colombia has allowed direct private participation in the provision of public utilities, although the
State continues to be responsible for efficiency, availability and coverage in their provision. To ensure compliance with the State duties
above, the Political Constitution of Colombia grants the State great powers such as establishing public policy, supervision, oversight
and control and regulation of public utilities. Currently, the provision of public services in Colombia is an activity that primarily
corresponds to the private sector through public services companies.
In 1994, the Colombian Congress issued the two most important laws regarding the provision of public services and electricity: Law 142
and Law 143. These laws indicate the general structure for the provision of public services. The investment and participation of the
private sector in public services has been facilitated through these laws. Regulations for competition between private participation and
some public providers have increased the coverage and quality of public services in Colombia in recent years.
Law 142 consolidated the legal structure of public services, as follows: (i) reorganizing applicable legislation regarding residential public
services (water, sewage, garbage collection, electricity, distribution of gas fuel, basic public dial-up land line telephone and local cell
phone services in the rural sector); and (ii) establishing the regulatory and control principles in the regulations applicable to each
service and promoting private participation.
Under the provisions of Law 142, the providers of public services, consumers and other participants on the market operate according to
principles of efficiency, quality, coverage, financial stability and competition. Additionally, the regulated users are governed by a
contract of uniform conditions as a guarantee of the consumers' basic rights.
In turn, Law 143 contains the specific legal framework for every activity of the electricity sector's production chain: generation,
transmission, distribution and sale.
According to both laws, participation and access to the generation and sale activities is of free entry and general authorization. That is,
it does not require an authorization additional to the law to carry out one of these activities, such as a concession, license, contract or
other approval, beyond the compliance of the minimum conditions indicated in the law and some environmental aspects, when these
are applicable.
Furthermore, transmission and distribution (STN,STR and SDL) are treated as monopolies. These activities have to comply with a large
amount of regulations, including methodologies to calculate rates. Access to the networks is free but is subject to the payment of
regulated charges for its connection and use.
It must be taken into account that the electricity sector is segmented horizontally and vertically. To ensure efficiency in the provision of
services and to encourage private investment in the sector, protecting and fostering competition, Law 143 separated the activities in the
sectors' value chain into four main activities: generation, transmission, distribution and sale. Having said that, some companies formed
before Laws 142 and 143 came into effect, such as EPSA, and they can, in principle, continue to carry out all their activities in an
integrated way. To do so, they must keep separate accounts for each activity. As of December 31 of 2012, in Colombia, there were 44
electricity generation companies, 9 transmission companies, 26 distribution companies and 64 sales companies.
According to the vertical and horizontal integration limits, the generation, distribution and sales companies must operate separately and
are subject to different regulations. The only activity that these companies can carry out collectively is sales. Additionally, the CREG
has established participation limits in the share capital of other companies in the sector and participation in each one of the markets.
These limits include limits on the participation of an electricity generation company in distribution and transmission companies, as well
as on the participation of an agent in the generation and sales markets.
The constitutional duties and responsibilities of the State regarding the provision of the public service of electricity are carried out
through different authorities, some of which are:
1.
MME: Responsible for establishing the policies and supervising the general operations of the electricity sector.
2.
UPME: A special administrative unit of the MME responsible for the development, modernization and planning of the sector,
including the establishment of the Expansion Plan of the STN.
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.
PRELIMINARY PROSPECTUS INFORMATION
3.
DNP: Collectively with CONPES, it is a technical entity responsible for analysis and study and advice for the State on matters
related to national development, including infrastructure projects.
4.
MHCP: Its responsibilities include establishing the tax and customs policy, public credit and monetary policy.
5.
CREG: It is responsible for regulating the sector. Its duties include establishing the regulated and unregulated markets and
establishing the charge calculation methodologies for use of the STN, STR and SDL, as well as establishing the corresponding
rates.
6.
CNO: Responsible for establishing standard technical requirements to facilitate the integration and integrated operation of the
SIN.
7.
CAC: It is responsible for assisting the CREG in the evaluation and adjustments of the commercial aspects of the MEM.
8.
SSPD: It is responsible for the supervision, oversight and control of public services.
9.
XM: A subsidiary of Interconexión Eléctrica S.A. E.S.P. It is responsible for the planning and coordination of the SIN as well as the
CND, ASIC and liquidator and accounts manager.
B. SECTOR DESCRIPTION
The Issuer participates in the Colombian electricity sector. Said sector is comprised of a production chain that is arranged in three
physical segments and one commercial brokerage segment, as follows:
1.
Generation: The activity in which the producers use technology such as that which converts the potential energy of water,
kinetic energy of wind or chemical energy of fossil fuel into mechanical energy (a rotor turning around a stator) to produce
electricity. Electricity generation involves a supply chain of raw materials for energy such as natural gas, coal and liquid fuel
for thermal generation. The above implies sales activities of said energy.
2.
Transmission: The activity in which electricity is injected into a transportation network to efficiently carry it at high voltage
levels equal to or greater than 220 kV (without significant energy losses) from the production centers to the consumption
centers.
3.
Distribution: The activity in which transported energy is available at voltage levels of less than 220 kV to transport it
efficiently to the separate consumer centers or residential, commercial or public lighting end users, among others.
4.
Sales: The commercial mediation activity between the industry's production chain agents.
Electricity is traded as a commodity on the MEM. The MEM is basically divided into: (i) a spot or short-term market, which is highly
volatile given the low elasticity of the demand, the variation in the supply curve according to the seasons of rain and the concavity of
the supply curve when approaching peak demand; (ii) a long-term bilateral contract market to provide coverage for said price volatility;
and (iii) a market of sufficient capacity to encourage investment in the electricity generation power plants, stabilizing the generator's
revenue. The following graph presents the traded volumes in each one of the mentioned markets and the growth rates seen from 2009
to 2012.
55
.
PRELIMINARY PROSPECTUS INFORMATION
The electricity sector has specific features that differentiate it from other industries. These include:
1.
2.
3.
4.
5.
1.
Electricity is good that cannot be stored, at least not in economic terms at the scale of human consumption. This implies the
following specific feature:
There must constantly be a strict balance between supply and demand. If not, the imbalances in the system will cause
interruptions in the supply. In turn, this feature implies the following:
The industry is subject to rigorous levels of coordination to ensure response to the demand. Agents involved in the production
chain are coordinated by an entity that validates and verifies compliance with the dispatch schedules and availability according to
particularly technical and financial criteria.
It is an industry strongly regulated by the intensity of investments (highly intensive in capital goods compared to other industries),
the structure that it adopts (generally oligopolistic and/or economy of scale economy, such as in the case of transmission and
distribution) and the history it has (formerly an administrated industry and operated by the State).
It is an infrastructure business and therefore it has prolonged return-on-investment cycles, with the specific feature of a complex
commercial activity.
Generation
Electricity generation consists of producing electricity through different kinds of technology, hydropower and thermal power being those
most used in the country.
The Colombian electricity sector is interconnected and operates under the principle of the central economic dispatch. All the energy
generators connected to the SIN that have an effective capacity greater than 20 MW must deliver all the electricity they produce to the
SIN and carry out all their electricity transactions on the MEM.
The CREG established the commercial regulations for the operation of the MEM. The MEM is a market where energy is exchanged in
bulk in supply and demand conditions and where electricity is transacted. The generators, resellers and unregulated users participate in
this market. The MEM is comprised of two markets: (i) the energy market on which short-term hourly purchases and sales take place;
and (ii) the bilateral contracts in which long-term contracting occurs.
Energy generation in Colombia is mainly hydroelectric given the country's abundance of water resources. It also has a thermal power
generation plant which provides additional and backup electricity during periods of low water levels because of weather phenomena
such as "El Niño". The thermal power plants usually use natural gas, coal, different types of fuel oil (Coesgen, jet fuel) and diesel as
fuel. It is expected that liquid natural gas will also available as a fuel for thermal power plants in the future. Currently, the consumption
of natural gas represents around 80% of fuel used in this kind of energy generation, followed by coal, which represents just under 20%
of thermal energy generation. On a much smaller scale, wind is also used as a power generation resource.
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PRELIMINARY PROSPECTUS INFORMATION
Installed Capacity (MW)
Thermal
(Liquified)
Natural Gas
3.542
Thermal (Coal)
991
Co-generators
54
Minor (< 20
MW)
635
Hydroelectric
9.185
1.1. Energy Market Transactions
The energy market is an information center where generators and resellers meet to exchange energy in bulk in the short term (hourly in
Colombia). This market is accompanied by small complementary services markets to ensure the constant balance between supply and
demand.
It is a day-ahead market, with temporary intra-day hourly solutions, where in contrast to other markets, prices are bid (i.e. prices are not
declared). Every day, a sealed bid auction takes place with a uniform price to remunerate the generator agents that bid a single price
for the 24 hours of the following day and 24 availability units (one per hour).
The hydroelectricity agents bid a price that must reflect the cost of water availability (which varies according to the season and
expected water levels) and other variable generation costs. The thermal power agents must bid a price that reflects a variable cost of
energy generation (incremental cost of fuel, variable O&M costs, efficiency and start-up and stoppage costs {CAP in its Spanish
acronym}).
The agent's bids are ordered according to their economic merit, from lowest to highest, and the hourly market price is at the point
where the supply is equal to demand, without taking into account the system's restrictions, according to the following graph that shows
the dispatch in order of merit for the electricity market in Colombia:
1.2. Ideal Dispatch Method
The ideal dispatch process aims to ensure that the energy demand of the day after the bids are made is responded to on an hourly
basis, at a lower cost, omitting the restrictions of the transmission network and in compliance with the criteria of reliability, quality and
security of the system.
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PRELIMINARY PROSPECTUS INFORMATION
It estimates the forecast energy demand and determines the amount of energy needed to respond to said demand, at each hour of the
following day. For that purpose, the CND of Colombia first schedules the generation of the plants that are required for security
conditions, that is, to comply with the reliability, quality and security of the system, taking into account events that may cause the
networks to be unavailable.
Secondly, the CND schedules the generation of the other plants. To do so, it organizes them according to their bids, from the lowest to
the highest price.
With the plants organized this way and taking into account the amounts bid by each one, the CND covers the forecast demand for the
hour under analysis. The result of this process is the economic dispatch.
The price of the last plant that covers the forecast demand is called the hourly marginal price and it determines the Spot Market Price.
1.3. Economic Dispatch
At 3:05 pm, the CND publishes the hourly dispatch that must be met for the following day by the power generation plants that
participate in this centralized dispatch.
After the operating day, the power generation plants send the information of the generated hourly amounts to the CND. Moreover, the
CND receives the consumption readings per hour of the whole system.
The ASIC takes the prices and availability that were provided by the plants for the operating day that will be liquidated, altering the
availability according to the real availability of the resources throughout the operating day and orders them by price (from lowest to
highest, i.e., in "order of merit") until the real demand is covered. The result is called "Ideal Dispatch".
Generally, the real dispatch and ideal dispatch are different in that:
1.3.1. The ideal economic dispatch is considered to be the forecast demand (given that it has not yet taken place), while the
real dispatch is calculated once the demand that effectively took place is known.
1.3.2. Restrictions in the transmission system (unavailability of the lines, technical restrictions, maintenance, etc.) are not
taken into account in the ideal economic dispatch, while said restrictions are considered in the real dispatch.
The remuneration of energy generated in the ideal dispatch works as follows:
1.3.1. The generation of the plants dispatched by merit (i.e., those which were in the ideal dispatch) is remunerated at the spot
market price. Therefore:
a.
b.
The plants with bid prices that were below the spot market price will receive a higher price that the bid price. The
difference between the Spot Market Price and the bid price is a margin in favor of the plants that were in the ideal
dispatch.
The marginal plant (i.e., the plant with the bid that determined the spot market price) receives a price equal to the
bid price for generated electricity.
1.3.2. The plants that were not in the ideal dispatch do not receive remuneration for this concept.
1.3.3. This mechanism ensures that generators tend to base their bids on their marginal generation costs, because if a
generator bids a price higher than its marginal costs, it has the possibility of not being dispatched and therefore, it does
not make any profit.
1.4. Backup Generation and Reconciliations
In spite of all the plants that are connected the SIN, interruptions or limits can occur in the flows between some areas due to the
network capacity being saturated.
Therefore, the country has been divided into electricity areas, each one with a different capacity in the transmission networks and with
different supply, demand and voltage levels in the power supply.
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.
PRELIMINARY PROSPECTUS INFORMATION
In the ideal dispatch, users in the Caribbean area receive electricity from the plants in the San Carlos area. However, it is possible that
the electricity demand in the Caribbean area exceeds the transmission capacity of the lines that go from the San Carlos area to the
Caribbean areas and for backup, quality or reliability reasons, generation is required in the Caribbean area.
In that case, the Caribbean area's demand is served by a power generation plant located in the same area that was not in the ideal
dispatch. That generation is not produced in the ideal dispatch, but by restrictions.
Dispatch by restrictions implies dispatching a plant that was not in the ideal dispatch and turning off a plant that was in the ideal
dispatch, which is called real dispatch and results in reconciliations.
There can be two types of reconciliations: (i) The plants that were in the ideal dispatch, but not in the real dispatch (i.e., those that in
spite of their price bid are not dispatched), which comprise what is known as “negative reconciliation”; and (ii) the plants which were in
the real dispatch, but not in the ideal dispatch (i.e., those that in spite of having a price bid higher than the marginal price are required
to cover the restrictions), which comprise what is known as “positive reconciliation”.
The reconciliations have economic treatment that is determined by the regulation:
1.4.1. The generation of those plants that effectively provided the service but whose bids were not competitive to be in this
ideal dispatch, is considered to be backup generation. The electricity generated by restrictions is remunerated at a
regulated price that is calculated based on the methodology established in CREG Resolution 034 of 2001 as positive
reconciliation.
1.4.2. The ideal generation of those plants which are effectively dispatched in the ideal dispatch, but because of restrictions
could not be dispatched, is also remunerated at the spot market price. However, not having delivered the power,
generators with negative reconciliation must return part of this remuneration according to CREG resolutions 034 and
121 of 2001.
1.5. Long-term Contracts
They are long-term contracts for the purchase and sale of energy that are signed between the power generators and resellers and are
liquidated on the market. They serve as an instrument to cover market price risks, but they do not imply a real obligation of electricity
delivery. There are several types of transactions and those which stand out include “contract pay” or “pay on demand”.
In the following graph, the historical evolution of the volumes of electricity outlined on the market and in contracts is presented and it is
compared to the system' commercial demand.
Transactions in the market, contracts and demand
9,000.00
Transacciones
Spot Market en bolsa
Transactions
Transacciones
en contratos
Contract Transactions
Commercial
Demand
Demanda
comercial
8,000.00
7,000.00
GWh
6,000.00
5,000.00
4,000.00
3,000.00
2,000.00
1,000.00
0.00
Aug-97 Aug-98 Aug-99 Aug-00 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13
1.6. Reliability Premium
The reduction of the capacity margin and high exposure to dry or low rainfall conditions ("El Niño") reduce the reliability of the electricity
supply given the great dependency on hydroelectric power generation resources. To encourage investment in power generation assets,
in 1997, the capacity premium was created as a managed mechanism to encourage investment in new generation capacity and it
operated for 10 years (mostly to encourage the construction of natural gas power plants).
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PRELIMINARY PROSPECTUS INFORMATION
In 2006, that incentive mechanism was replaced by the Reliability Premium. Unlike the above, this is a market mechanism to
encourage investment in power generation units that effectively deliver firm energy to the system, for which it allocates the Firm Energy
Obligation (OEF), mainly through a dynamic auction.
The Reliability Premium is allocated to all those which were allocated the OEF. The OEFs are acquired by those which offered
generation assets capable of producing firm electricity in critical supply conditions and which were assigned specific quantities to be
delivered when the Spot Market Price is higher than the limit established by the CREG, called the Scarcity Price. Additionally, when the
OEF is required, the generator continues to receive the Reliability Premium and the Scarcity Price for each kWh generated and related
to its OEF.
The OEF amount that an agent can receive is calculated regarding the ENFICC that said agent has certified. The regulation establishes
a methodology to calculate the ENFICC depending on the technology (hydroelectric or thermal) of the agent's generation resources. An
agent can receive an OEF in equal or less proportion to its ENFICC, but not greater than it. Under this mechanism, the firm energy of
the Reliability Premium is the maximum electricity that a plant is capable of continuously delivering, in critical hydrological conditions
throughout the year. It is calculated according to regulatory definitions 1.
In principle, the dynamic auction is the classic Dutch auction that starts with a price equal to double the starting cost, previously
calculated and published by the CREG. The CREG also calculates and publishes the minimum price which will close the first round of
the auction. Between the starting cost and the closing cost of the first round, the agents develop their firm energy supply curves and
send them to the ASIC, which bids them and develops an added supply curve. By comparing this added supply curve with the demand
curve, the supply surplus that resulted in the closing price of the round is calculated, if applicable.
In this way, the ASIC calculates the closing price of the following round, which will be less than the closing price of the previous round,
and it reports it to the participants together with the supply surplus. Each agent sends its new bids, this time between the closing price
of the previous round and the closing price of the new round, withdrawing the firm energy that it is not prepared to bid at the new prices.
The suppliers can only maintain or reduce the amount of energy as the price descends. The same procedure is repeated until the
supply excess is minimal. When the supply and demand are equal, the auction's closing price is obtained. The closing price determines
the price at which the assigned OEFs will be remunerated, i.e., it determines the Reliability Premium.
The OEFs are assigned depending on the vertical or horizontal segment where the demand function meets the supply function. If it is in
the vertical segment, the OEFs are assigned to each one of the agents that did not withdraw from the auction at the closing price and in
the amounts of energy that they bid. If it is in the horizontal segment, they are assigned according to a formula established in the
regulation.
The CREG does not apply the classic Dutch dynamic auction in specific cases. In the periods with no auction, the OEFs are assigned,
pro rata among all the generators according to their last ENFICC declaration. In these cases, the Reliability Premium will be equal to
the closing price in the last auction carried out.
The last auction took place in December 2011. OEFs were assigned to possibly be required in the 2015 – 2016 terms, at a closing
price for the Reliability Premium of 15.7 USD/MWh. To date, CREG has calculated that a new invitation for auction is not necessary
until the 2019 period.
The OEFs serve as an obligation that binds the generator responsible for them.
The following graph shows the operation of OEF on the firm energy market and illustrates the maximum and minimum daily spot
market prices (compared to the daily average) and its development with respect to the scarcity price.
1
CREG Resolution 071 of 2006.
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.
PRELIMINARY PROSPECTUS INFORMATION
COP/kWh (current)
600.00
Spot Market Price vs. Scarcity Price
500.00
400.00
300.00
200.00
100.00
Feb-10
Aug-10
Feb-11
Daily Average Spot P.
Aug-11
Feb-12
Daily Min. Spot P.
Aug-12
Feb-13
Daily Max. Spot P.
Aug-13
Scarcity P.
The OEFs receive a fixed remuneration (closing price of the auctions) in exchange for delivering said OEF in periods of scarcity (Spot
market price > Scarcity price), at the scarcity price.
The alternative situation (trade-off) implies that the plants with ENFICC, but without assumed obligations do not receive said
remuneration, but in exchange for this sacrifice, their energy can be sold in situations of scarcity, at the spot market price.
The following graph illustrates the forecast of OEFs assigned by plants in the last auctions of the firm energy market in Colombia.
140
Target Demand*
ENFICC Forecast Demand vs. Existing Assignments and New Projects
Termonorte
Porvenir II
120
Tasajero 2
San Miguel
100
Carlos Lleras
TWh / year
Gecelca 32
80
Ambeima
Ituango
Quimbo
60
Cucuana
Sogamoso
40
Gecelca 3
Amoya
20
NDC w contracts
Porce III
Flores IV
Dec-37
Dec-36
Dec-35
Dec-34
Dec-33
Dec-32
Dec-31
Dec-30
Dec-29
Dec-28
Dec-27
Dec-26
Dec-25
Dec-24
Dec-23
Dec-22
Dec-21
Dec-20
Dec-19
Dec-18
Dec-17
Dec-16
Dec-15
Dec-14
Dec-13
Dec-12
Dec-11
Dec-10
0
Existing T ENFICC
Existing H ENFICC
As well as the Reliability Premium, there are other security measures, such as contingency mechanisms to ensure the reliability of the
supply. They are ordered as follows: Reliability Premium, OEF secondary market, voluntarily disconnectable demand, dispatch of last
instance generation assets and OEF reconfiguration auction.
2.
Transmission
In Colombia, transmission consists of the transportation of energy at voltage levels equal to or higher than 220 kV. This infrastructure
comprises the (STN). Because of its natural monopoly characteristics, its remuneration methodology is carried out based on a
regulated revenue (Revenue Cap). The cost of the service is uniform for the whole system.
3.
Distribution
The distribution activity consists of transporting power from the STN substation to the sites of consumption. Electricity distribution in
Colombia is a regulated natural monopoly in which the service provision is guaranteed at suitable prices and conditions, allowing free
access to networks. Simultaneous distribution and sales activities are carried out by 22 companies in Colombia, 8 companies develop
61
.
PRELIMINARY PROSPECTUS INFORMATION
generation, distribution and sales activities and 3 companies remain with total integration of all activities. One of which is EPSA, and
the Issuer holds a share of 50.01% thereof.
3.1. Characteristics of distribution:
3.1.1. It requires a high component of fixed costs.
3.1.2. It is regulated by the government and implies price determination (distribution charge) that can be applied to the
rate per transported unit of energy.
3.1.3. The administration, operation and maintenance expenses are regulated through incentives that provide indications
to improve quality.
3.2. Fundamental Variables of the Distribution Business
3.2.1. Loss control: transporting energy implies technical losses. Additionally, according to the market's socioeconomic
characteristic, nontechnical losses arise according to the scale of fraud and administrative losses.
3.2.2. Collection: this involves carrying out activities directed at managing monetary charges billed to users for the
provision of the distribution service. Collection activities include the development of legal and extrajudicial actions to
achieve the payment of the service.
3.2.3. Service quality: regulation of distribution requires some quality levels in the service. There are two measurements
for measuring quality:
a. Service quality: continuity of the service measured in time.
b. Power quality: quality of the "energy" product.
4.
Sales
The sale of electricity consists of the purchase and sale of electricity on the wholesale market and its sale to be used by other
operations in said market or to end users. The reseller is the individual or company with the main activity of selling electricity.
The reseller has 3 options to register itself on the wholesale market: as a generator - reseller, as a distributer - reseller or as a pure
reseller (broker).
4.1. Sales on the regulated market:
Distributors-resellers participate in the regulated market and supply regular clients, generators-resellers and independent resellers. In
this case, there is no bilateral negotiation. By regulation, public calls for bids are made in which the contract must be awarded to the
lowest bid price. The distributors-resellers with a demand that represents 5% or more than the system's total demand cannot cover
more than 60% of their requirements with their own electricity to supply their regulated clients.
Nor can these or other resellers have obligations to contract minimum amounts of energy in advance, i.e., they can opt to purchase on
the energy market. Their level of exposure on the spot market is their own decision. However, the resellers that purchase electricity for
their regulated clients aim to cover the entirety or the majority of their demand with contracts.
Sales are remunerated through a basic regulated sales cost (Co*), in COP per bill. This cost remunerates the reading, billing,
collection and customer service activities and is established by the CREG based on the efficient costs of each sales market. The Co*
varies by COP/kWh with the average consumption of regulated users.
4.2. Sales on the unregulated market:
Generators, resellers and unregulated users (those which have electricity consumption of 55 MWh or 0.1 capacity) participate in this
market, and they freely agree the price, the amount of electricity transacted and the term. The only regulatory requirement is that the
contracts have an hourly resolution so that they can be liquidated against effective generation.
In the unregulated market, the value of the sales cost is negotiated between the unregulated client and the reseller. The reseller
negotiates together with the generation and sales components (G+S) according to its strategy.
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.
PRELIMINARY PROSPECTUS INFORMATION
C. BUSINESS DESCRIPTION
The Issuer directly and indirectly participates in the Colombian electricity business. It directly participates as an electricity selling
generator. Through its Related Companies, it indirectly participates in the electricity generation, transmission, distribution and sales
markets. Additionally, the Issuer participates in the natural gas market as a reseller of it.
As a shareholding company, the Issuer provides strategic and operation support to the Related Companies and receives cash flow
from them through dividends, most coming from direct and indirect investments in Zona Franca Celsia, EPSA and CETSA. In the case
of Zona Franca Celsia, these dividends are favored by the special free-trade system applicable to the company, which is in force until
April 30, 2024. In the investments in these last two companies, acquiring revenue from electricity distribution and sales on the regulated
and unregulated market stands out.
The Issuer and its Related Companies participate in the following businesses:
1.
Generation
As of the date of this Prospectus Information, the Issuer is fourth largest in the Colombian energy generation market.
The location, startup and main characteristics of the energy generation assets owned by the Issuer and its Related Companies are
listed below:
1.1. The Issuer's Generation Assets
1.1.1. Meriléctrica: This is a thermal power plant owned by the Issuer. It is located in Barrancabermeja (Santander). It began
commercial operation in February 1998. It consists of a simple cycle thermal to gas unit that has the following
technical characteristics:
Generation Capacity
167 MW
Turbine
W501FD2
206 MVA, hydrogen-cooled, voltage rating.
Generator
13.8 kV
Benefits of the Power Plant:
1.
2.
Minimizes emissions that could harm the atmosphere, by means of a dry low NOx system.
Uses clean technologies and has an environmental management plan that allows procedures to be applied and
developed by the operation and maintenance team.
Merieléctrica is part of the group of generators that accessed the Reliability Premium under Colombia's energy regulation
system. In December 2009, due to a merger, this plant was absorbed by Colinversiones (now the Issuer). It currently has
energy sales contracts to SIN retailers through the energy market. Additionally, it has an active natural gas sales and
transportation business.
1.1.2. Piedras River: This is a hydroelectric power plant owned by the Issuer. It is located around 90 km south-east from
Medellín, in the jurisdiction of the Jericó Municipality (Antioquia). This plant began operation in March 2000. This
plant has the following technical characteristics
Basin Used
85 km²
Design Flow
4.0 m3/s
Generation Capacity
19.9 MW
Energy Generation
140 GWh/year
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PRELIMINARY PROSPECTUS INFORMATION
Machine Room
Underground (width: 13 m, height 11 m, length 48 m)
Intake Structure
Swell spillway: width 24 m, height 5 m Desander: Two modules of width 7.5 m and length
38 m.
Headrace
and Wells
Tunnel
Well
Tunnel
Tunnels Well
Tunnel
Well
Tunnel
Well 4: 202 m
1:
1:
2:
2:
3:
3:
4:
Turbines
Two 11.7 MW Pelton turbines
Generator
Two 13.8 kV voltage units (voltage leaving the generator)
809
76
230
123
410
180
470
m
m
m
m
m
m
m
The Piedras River Plant operates with a run-of-river intake, that is, it captures the water it needs to generate energy and the
rest continues to flow along the river bed.
Benefits of the Power Plant:
a.
b.
Uses a renewable resource such as water to generate energy in a clean and environmentally friendly way.
Improved the energy generation circuit of south-east Antioquia, that is, it stabilized the service to residences.
The Piedras River Plant was acquired by the Issuer in 2008, through a takeover bid for the shares of Generar S.A. E.S.P., the
company that owned the plant.
1.1.3. Hidromontañitas: This is a hydroelectric power plant owned by the Issuer. It is located between the Donmatías and
Santa Rosa de Osos border (Antioquia). It began commercial operation in 2012. The technical characteristics of this
power plant are:
Basin Used
150 km²
Design Flow
7.0 m3/s
Generation Capacity
19.9 MW
Energy Generation
174 GWh/year
Machine Room
Underground (width: 13 m, height 21 m, length 51 m)
Intake Structure
Desander: Two modules of width 15 m and length 40 m.
Overflow Spillway: width 40 m, height 5 m.
Headrace Tunnels and Wells
Upper: 3,316 m
Lower: 624 m
Penstock shaft: 324 m
Turbines
Two 13.3 MW Pelton turbines
Generator
Two 13.8 kV voltage units (voltage leaving the generator)
Benefits of the Power Plant:
a.
b.
During its construction phase it generated around 300 direct jobs (monthly average) including skilled and unskilled labor.
This figure includes people from the area of influence.
Investment of around COP 3,500 million in road maintenance. These ease transportation and reduce transportation
times for residents in the areas around the power plant.
1.2. Zona Franca Celsia Generation Assets
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PRELIMINARY PROSPECTUS INFORMATION
1.2.1. Flores I and Flores IV Units: These are thermal units owned by Zona Franca Celsia. The units are located in
Barranquilla (Atlántico). Flores I began operations in 1993, and Flores IV in 2011. Flores I and Flores IV are
characterized by:
Generation Capacity
610 MW
Flores I Unit
160 MW, combined cycle
Flores IV Unit
450 MW, combined cycle
Turbine
Flores I
CT1: Siemens W501D5
ST1: Mitsubishi, 50MW, model SCIF25AX/10CH-13
Flores IV
CT2: W501D5, 112 MW
CT3: W501FC+, 169 MW
ST: Siemens Steam Turbine SST700/900, 182 MW
Generator
CT1: Brush, 13.8 kV, 133 MVA, air-cooled
ST1: Brush, 13.8 kV, water-air cooled; 57 MVA
CT2: Westac Generator 150 MVA, air-cooled, voltage rated at 13.8 kV
CT3: Siemens Generator 224 MVA, hydrogen-cooled, voltage rated at 16 kV
ST2: Siemens Generator SGEN 6-1004-2P, 18 kV, 220 MW, air-cooled
Flores IV consisted in closing the cycle of the Flores II and Flores III generation units, by incorporating two heat recovery
steam generators and a steam turbine. Completion of this project and its startup allowed Zona Franca Celsia to position
itself as the second largest thermal plant in Colombia and also allowed it to access the following benefits:
a. A 43% increase in the efficiency of Flores II and Flores III Units, by requiring a lower gas consumption per energy unit
produced. This positioned it as the most efficient natural gas plant in the Caribbean region, optimizing the use of this
non-renewable natural resource and emitting nitrogen oxides to the atmosphere thus reducing the emission of
greenhouse gases such as carbon dioxide.
b. The startup of Flores IV implemented state-of-the-art technology, clean production, efficiency and competitiveness in the
Colombian market. This is highly important to ensure that the country's medium-term energy demand is met.
1.3. EPSA Generation Assets (Major assets)
EPSA and CETSA have 14 energy generation plants. These are located in the departments of Valle del Cauca, Cauca and Tolima. The
current installed capacity reaches 1,000 MW.
1.3.1. Alto Anchicayá
The Alto Anchicayá hydroelectric plant is located in the department of Valle del Cauca, 85 km west of Cali on the border of
the Buenaventura and Dagua municipalities. It began operations in 1974. The technical characteristics of this power plant
are:
Installed Capacity
355 MW
Average Energy/Year
1333.5 GWh
Reservoir
Total Capacity: 45 Mm3, usable capacity: 30 Mm3
Headrace Tunnel
8,500 m
Diameter
5m
Spillways
Turbine
3 radial gates and ski jump dissipater. Maximum capacity: 4,600 m3/s
Canadian General Electric ®
126 MVA/145 MVA, 13.8 kV, 450 rpm, 60 Hz
Dominion Engineering W. L. ® , Francis type, 160,000 HP (400 m)
Average Flow
44.7 m3/s
Average Drop
440 m
Generator
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PRELIMINARY PROSPECTUS INFORMATION
1.3.2. Bajo Anchicayá
The Bajo Anchicayá Plant is owned by EPSA. It is located on the perimeter of the Los Farallones National Park (Valle). It
began operation in 1955 with two 13 MW groups and later in 1957 with two 24 MW groups. The technical characteristics of
this power plant are:
Installed Capacity
Average Annual Energy
Reservoir
Headrace Tunnel
Spillway
Generator
Velocity
Turbine
Average Flow
Average Drop
74 MW
341.6 GWh
Total Capacity: 5 Mm3. Usable Capacity: 1 Mm3
Length: 1,367 m, with diameter: 6.3 m
Ski jump spillway with crest. Maximum capacity 5,700 m3/s
Westinghouse ®, Groups 1 and 2: 17 MVA, 6.9 kV
Brown Bovery ®, Groups 3 and 4: 28 MVA, 6.9 kV
257 rpm, 60 Hz
Francis. Morgan Smith ®, Groups 1 and 2 with 17,100 HP and Neyrpic
®, Groups 3 and 4 with 32,500 CV
83 m3/s
72 m
1.3.3. Salvajina
The Salvajina Plant is owned by EPSA. It is located 65 km south of Cali in the municipality of Suárez (Cauca). It began
operation in 1985. The technical characteristics of this power plant are:
Installed Capacity
Average Energy/Year
Reservoir
Penstock Tunnel
Spillway
Generator
Turbine
Average Drop
Average Flow
285 MW
1027 GWh
Total Capacity: 906 Mm3. Usable Capacity: 753 Mm3
Circular. Concrete (7.6 m diameter, 240.8 m length) and
shield (7.4 m diameter, 110.3 m length)
Open canal with 3 radial gates. Maximum capacity
3,500 m3/s
Toshiba ®: 100 MVA, 13.8 kV, 180 rpm, 60 Hz
Francis. Mitsubishi ®, 135 MW (120 m)
92m
131.4 m3/s
1.3.4. Prado
The Prado Plant is owned by EPSA. It is located 200 km from Bogotá and 4 kilometers from the municipal capital of Prado
(Tolima). It began operation in 1973. The technical characteristics of this power plant are:
Installed Capacity
Average Annual Energy
Reservoir
Headrace Tunnel
Overflow Channel
51 MW
204.1 GWh
Total Capacity: 1,050 Mm3, usable capacity: 450 Mm3
Length: 430 m. Diameter: 6.15 m
Concrete tunnel with 2 radial gates.
Maximum capacity: 750 m3/s, length: 562 m
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PRELIMINARY PROSPECTUS INFORMATION
Generator
Turbine
Average Flow
Average Drop
Diameter: 6.7 m
Mitsubishi ®:
Group 1, 2 and 3: 18 MVA, 6.6 kV, 300 rpm, 60 Hz
Group 4: 6 MVA, 4.16 kV, 400 rpm, 60 Hz
Type: Francis. Voest ®, Groups 1, 2 and 3 of 16,551 kW
(54.2 m) and Group 4 of 4,963 kW (46.15 m)
54.2 m3/s
53.5 m
1.3.5. Calima
The Calima Plant is owned by EPSA. It is located in the municipality of Calima (Valle). It began operation in 1965 with one 33
MW group and later in 1967 with two 33 MW groups. The technical characteristics of this power plant are:
Installed Capacity
Average Energy/Year
Reservoir
Penstock Tunnel
Spillway
Generator
Turbine
Average Flow
Average Drop
132 MW
167.6 GWh
Total Capacity: 581 Mm3, usable capacity: 437.5 Mm3
Length 78 m, diameter 4.55 m
Funnel type with capacity: 350 m3/s
Toshiba ®: 37.5 MVA; 13.8 kV; 450 rpm; 60 Hz
Francis type (vertical), Hitachi ®, 52,000 HP (215 m)
11.1 m3/s
215 m
1.4. EPSA Generation Assets (Minor assets)
1.4.1. Amaime
The Amaime Plant is owned by EPSA. It is located between the municipalities of Cerrito and Palmira (Valle). It began
operations in January 2011. The technical characteristics of this power plant are:
Installed Capacity
Average Annual Energy
Dam
Headrace Tunnel
Generator
Turbine
Average Flow
Average Drop
19.9 MW
84.5 GWh
N/A
4,870 m, diameter: 2.5 m
Indar ®: 11.513 MVA, 13.8 kV, 720 rpm, 60 Hz
Francis type (horizontal), Andritz ®, 10.67 MW (195.98
m)
7.4 m3/s
200 m
1.4.2. Tuluá Alto
The Tuluá Alto Plant is owned by EPSA. It is located 50 km from the municipality of Buga. It began operations in May 2012.
The technical characteristics of this power plant are:
Installed Capacity
Average Annual Energy
Dam
Penstock Tunnel
19.9 MW
30.1 GWh
Diversion dam
Length: 5,131 m and a container-style section of 3 m.
Pressure Pipe: 667.7 m length with diameter between 1.1
m and 1.8 m.
67
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PRELIMINARY PROSPECTUS INFORMATION
Generator
Turbine
Average Flow
Average Drop
Indar ®: 12.22 MVA, 720 rpm, 13.8 kV, 60 Hz
Francis type (horizontal), Andritz Hydro S.L. ®, 11.29
MW (271.26 m)
9.25 m3/s
257.3 m
1.4.3. Nima I
The Nima I Plant is owned by EPSA. It is located 13 km from the center of the city of Palmira (Valle). It began operations in
1914. The technical characteristics of this power plant are:
Installed Capacity
Average Annual Energy
Reservoir
Penstock Tunnel
Spillway
Generator
2 MW
5.3 GWh
6.4 Mm3 (for both power plants)
Length 190 m
Crest with 18" base valve
Siemens Schuckert ®: 2.5 MVA, 900 rpm
Turbine
Average Flow
Average Drop
Francis type (horizontal), J. M. Voith ®
3.95 m3/s
78 m
1.4.4. Nima II
The Nima II Plant is owned by EPSA. It is located 13 km from the center of the city of Palmira (Valle) and began operations
in 1942. The technical characteristics of this power plant are:
Installed Capacity
Average Annual Energy
Reservoir
Penstock Tunnel
Spillway
Generator
Turbine
Average Flow
Average Drop
4.7 MW
27.8 GWh
6.4 Mm3 (for both power plants)
Length: 1,130 m
Crest with 18" base valve
General Electric ®: 3 MVA; 360 rpm; 6.9 kV; 60 Hz
Pelton type, S. Morgan ®
1.75 m3/s
200 m
1.4.5. Cali River I
The Cali River I Plant is owned by EPSA. Located 2 km west of Cali (Valle). It began operations in 1910. The technical
characteristics of this power plant are:
Installed Capacity
Average Annual Energy
Intake Pipe
Flow Channel
Generator
Turbine
Average Flow
Average Drop
0.9 MW
5.4 GWh
Group 1: 84.7 m, Group 2: 82.4 m
Length: 1,900
Siemens Schuckert ®: 0.625 MVA; 900 rpm; 2.4 kV; 60
Hz
Francis type (horizontal), Pelton ®
2.7 m3/s
46 m
68
.
PRELIMINARY PROSPECTUS INFORMATION
1.4.6. Cali River II - 0.8 MW
The Cali River II Plant is owned by EPSA. Located 8 km west of Cali (Valle). It began operations in 1925. The technical
characteristics of this power plant are:
Installed Capacity
Average Annual Energy
Intake Pipe
Flow Channel
Generator
0.9 MW
8.5 GWh
Length until bypass: 165 m
Open, length: 2,400 m.
Westinghouse ®: 0.5 MVA; 600 rpm; 2.4 kV; 60 Hz
Turbine
Average Flow
Francis type (horizontal), Pelton ®
1.24 m3/s
Average Drop
100 m
1.5. CETSA Generation Assets:
1.5.1. Frío River I
The Frío River I Plant is owned by CETSA. It is located 2 km from the municipality of Riofrío on the road that leads to the
Trujillo Township, and 14 km west of the city of Tuluá (Valle). It began operations in 1954. The technical characteristics of
this power plant are:
Installed Capacity
Average Annual Energy
Intake Tank
Intake Pipe
Generator
Turbine
Average Flow
Average Drop
1.69 MW
7.5 GWh
980 m.a.s.l.
Length: 149 m. Diameter: 1 m
Brown Boveri ®: 1.055 MVA; 900 rpm; 0.5 kV; 60 Hz
Francis type, brand J.M. Voith ®
3.4 m3/s
38 m
1.5.2. Frío River II
The Frío River II Plant is owned by CETSA. It is located 3 km from the municipality of Riofrío on the road that leads to the
Salónica Township and 16 km to the west, separated by the municipality of Tuluá (Valle). It began operation in 1996. The
technical characteristics of this power plant are:
Installed Capacity
Average Annual Energy
Intake Tank
Pressure Pipe
Generator
Turbine
Average Flow
Average Drop
10 MW
53.7 GWh
1005.5 m.a.s.l.
Length: 335 m. Diameter: 1.5 m
ABB ®; 6.91 MVA; 720 rpm; 6.9 kV; 60 Hz
Francis type (horizontal), GEC Alsthom ®
6.5 m3/s
125 m
1.5.3. El Rumor
The El Rumor Hydroelectric Plant is owned by CETSA. It is located 5 km from the municipality of Tuluá (Valle). It was
repowered in 1999. The technical characteristics of this power plant are:
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PRELIMINARY PROSPECTUS INFORMATION
Installed Capacity
Average Annual Energy
Intake Tank
Pressure pipe
Generator
Turbine
Average Flow
Average Drop
2.5 MW
13.7 GWh
1,062 m.a.s.l.
Length: 64 m. Diameter: 1.45 m (internal)
Alstom ®: 3 MVA; 720 rpm; 4.16 kV; 60 Hz
Francis type (double horizontal), Alstom ®
5.8 m3/s
36 m
EPSA and CETSA produced 3,170 GWh in 2012.
2.
Distribution, Transmission and Sales
With regard to distribution and sales activities, the Related Companies EPSA and CETSA cover 39 municipalities in Valle del Cauca.
As of December 31, 2012 they had 526,172 clients including residential, commercial and industrial users. Moreover, on this date they
had 19,387 km of distribution networks and 69 distribution substations.
EPSA participates in the transmission business with 274 km of lines and seven substations.
2.1. Distribution and Transmission:
EPSA's and CETSA's distribution and transmission business as of December 31, 2012 is broken down below:
Transmission
Unit
220 kV Substations
Number
220 kV transmission lines
km
Distribution
2011
Unit
115 kV Substations
Number
115 kV Distribution lines
km
34.5/13.2 kV Substations
Number
34.5 kV Distribution lines
2012
7
7
274
274
2011
2012
20
21
969
970
47
48
km
1,000
1,000
13.2 kV Distribution lines
km
9,770
9,835
Low voltage lines
km
7,547
7,582
Retail Sales
Unit
2011
2012
Commercial offices
Payment and Service Centers
(PAP for its Spanish acronym)
Number
14
14
Number
13
14
Telephone Service Points
Number
52
51
Collection Points
Number
201
569
2.2. Sales
EPSA's and CETSA's sales as of December 31, 2012 broken down below:
Sales in the regulated market
Number
EPSA (Total)
471,192
Energy billed in GWh
927.7
70
.
PRELIMINARY PROSPECTUS INFORMATION
Residential clients
Commercial clients
Institutional clients
Industrial clients
Internal consumption
CETSA (Total)
Residential clients
Industrial clients
Commercial clients
Institutional clients
Internal consumption
444,098
2,741
22,278
1,965
110
54,980
51,116
370
3,313
171
10
127.9
Sales in the non-regulated market
Number
EPSA
CETSA
406
25
Energy billed in GWh
555.9
31.1
D. MAIN MARKETS IN WHICH IT PARTICIPATES
The Issuer has a consolidated installed capacity of 1,777 MW, of which 57% is hydro-power generation and 43% is thermal. It provides
12% of the energy on the Colombian market. Therefore, the Issuer (through its consolidated capacity) is the fourth largest in the
Colombian energy generation market. Additionally, the Issuer holds a 50.01% share in EPSA and 86.91% in CETSA, through which it
participates in the retail distribution and sales business.
With regard to energy generation, revenues come from spot market sales, contract sales, Reliability Premium and natural gas sales.
With regard to the distribution business (the activity conducted by EPSA), revenues come from retail sales and usage and connection
of networks.
The breakdown of the Issuer's operating income without the Related Companies as of June 30, 2013, is listed as follows:
Other
Operating
Services
5%
Natural Gas
Sales
24%
Generation and
Wholesale of
Energy
71%
The Issuer's consolidated operating income as of June 2013, is listed as follows:
Network Use
and Connection
9%
Retail Sale of
Electricity
24%
Natural Gas
Sales
3%
Other
Operating
Services
2%
Generation and
Wholesale of
Energy
63%
With regard to the distribution and transmission business, EPSA has 274 km in high-voltage lines with national transmission and covers
4% of the national demand for distribution. The electricity transportation lines are located in forested and rural zones, including
71
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PRELIMINARY PROSPECTUS INFORMATION
mountains, forest, disperse rural areas and urban areas in the department of Valle del Cauca. As a network operator the Issuer has
98.5% coverage of this area. Significant expansion projects are executed each year to cover the demand and ensure availability of
assets, control energy losses from the system and execute necessary replacement plans. Additionally, maintenance plans are
implemented focusing on reliability-based maintenance.
The following figure shows the share per activity of the top companies in each of the productive activities in the industrial chain as of
December 31, 2012:
Transmission - STN Charges (COP millions)
Generation - Installed Capacity (MW)
1,200,000
22.4%
3000
1,000,000
Capacity
20.0%
% market
15.0%
15.2%
400,000
6.9%
200,000
2,188
1,000
1,220
1,777
2,212
8.4%
2,914
% market
600,000
12.2%
3257.6
COP mm
800,000
2000
1000
71%
958,216
4000
10%
8%
6%
3%
1%
0.7%
-
0
EPM Emgesa Isagen
Celsia Gecelca AES
Others
Sales (GWh)
Distribution - Demand by Operator Network
25,000
Demand
22.2%
21.6%
2,183
15,000
14.4%
6.8%
4,140
8,710
13,086
13,427
10,000
5,000
31.5%
% Demand
3.6%
19,064
20,000
0
E.
DEPENDENCE ON MAIN PROVIDERS AND CLIENTS.
1.
Dependence on Main Providers
14,000 25.6%
Non23.1%
12,000
residencial
18.7%
10,000
Residential
8,000
11.3%
6,000
6.4% 5.8%
4,000
3.6% 3.2%
2.0%
2,000
0.2%
0
The Issuer's main providers and the degree of dependence (%) as of June 30, 2013 are broken down below:
MAIN PROVIDERS
Description
%
XM Compañía de Expertos en Mercados S.A. E.S.P.
Gases de Occidente S.A. E.S.P.
54%
Empresas Públicas de Medellín E.S.P.
11%
Equion Energia Limited
11%
5%
XM is recorded as a provider to the company due to its capacity as a ASIC.
Due to the nature of its business the Issuer's main providers are providers of fuels and maintenance services. In both cases there are
several providers that could supply the Issuer's needs.
72
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PRELIMINARY PROSPECTUS INFORMATION
2.
Dependence on Main Clients
MAIN CLIENTS
Description
%
XM Compañía de Expertos en Mercados S.A.
E.S.P.
37%
Electrificadora del Caribe S.A. E.S.P.
30%
Codensa S.A. E.S.P.
9%
Empresas Públicas de Medellín E.S.P.
6%
Mansarovar Energy Colombia Ltd.
3%
The Issuer's clients can be divided into 3 groups: Energy clients, gas supply and transportation clients, and XM as the market
representative. Several companies participate in the first 2 types of clients, therefore no type of direct dependence is identified. In the
case of XM, given that it is responsible for planning and coordination of the SIN as well as the CND, ASIC, liquidator and accounts
manager, there is a direct dependence with all agents in the sector in which the Issuer participates.
73
.
PRELIMINARY PROSPECTUS INFORMATION
CHAPTER 4 - FINANCIAL INFORMATION
A. AUTHORIZED, SUBSCRIBED AND PAID-IN CAPITAL OF THE ISSUER AND NUMBER OF SHARES IN
CIRCULATION
As at June 30, 2013, the following was the authorized, subscribed and paid-in capital of the Issuer, along with the number of shares in
circulation:
Capital
Value (COP)
No. of Shares
Authorized
300,000,000
1,200,000,000
Nominal Value
(COP)
0.25
Subscribed
179,896,125
719,584,500
0.25
Paid-in
179,896,125
719,584,500
0.25
In addition, as at June 30, 2013, the Issuer had 480,415,500 reserved shares and 719,584,500 shares in circulation.
B. TAKEOVER BIDS FOR ISSUER'S SHARES CARRIED OUT LAST YEAR
As of the date of this Prospectus Information, there have been no takeover bids for Shares issued by the Issuer over the past year.
C. PROVISIONS AND RESERVES FOR THE REPURCHASE OF SHARES
As at June 30, 2013, the Issuer did not have provisions and reserves for the repurchase of shares.
D. INFORMATION ON DIVIDENDS
1.
Issuer's Dividend Policy
The Issuer does not have an established dividend policy; however, it recognizes that any distribution of profits should be reasonable for
shareholders, at the same time that it should enable it to carry on with its plans for growth with profitability, both in greenfield projects
and through new investment opportunities in assets and operating assets.
2.
Decreed dividends of the last three (3) years
Listed below is the dividend decreed by the Issuer for the last three (3) years and the form of payment thereof:
Decreed dividends and form of payment for each year ending on December 31:
2010
Profit (in Millions of COP)
Dividend (in COP)
Earnings per Share (in
COP)
2011
2012
258,492
152,891
230,759
81
90
100
463.51
212.47
320.68
Below is the breakdown of the form of payment of the dividends over the last 3 years:
2.1.
2010: The dividend was one hundred percent (100%) non-taxable to the shareholder, at eighty one Colombian pesos and sixty
cents (81.60) per year per share, on 719,584,500 shares, which was incurred immediately following decree by the General
Shareholders' Meeting of the Issuer and paid in cash in 4 installments of twenty Colombian pesos and forty cents (20.40) per
share in April, July and October 2011 and January 2012, between the 14 and 25 of the respective months.
74
.
PRELIMINARY PROSPECTUS INFORMATION
2.2.
2011: The dividend was one hundred percent (100%) non-taxable to the shareholder, at ninety Colombian pesos (90) per year
per share, on 719,584,500 shares, which was incurred immediately following decree by the General Shareholders' Meeting of
the Issuer and paid in cash in 4 installments of twenty two Colombian pesos and fifty cents ($22.50) per share in April, July and
October 2012 and January 2013, between the 14 and 25 of the respective months.
2.3.
2012: The dividend was one hundred percent (100%) non-taxable to the shareholder, at one hundred Colombian pesos (100)
per year per share, on 719,584,500 shares, which was incurred immediately following decree by the General Shareholders'
Meeting of the Issuer and payment in cash was agreed in 4 installments of twenty five Colombian pesos (25) per share in April,
July and October 2013 and January 2014, between the 14 and 25 of the respective months.
3.
Issuer's Share Information
The information on the Issuer's shares and dividends for the past 3 years ending on December 31 is broken down below:
Figures in COP
Net profit of the year
Share Information
2010
258,491,518,351
2011
152,891,161,763
2012
230,759,842,291
Earnings Per Share
463.51
212.47
320.68
81.60
90
100
Dividend per share and form of payment
Percentage of profit distributed as a dividend
22.72%
42.36%
31.18%
3,731.22
3,683.43
4,037.62
Average market price
6,012
4,800
4,721.00
Annual closing market price
5,770
3,825
5,340
Market price / earnings per share
12.97
22.59
14.72
Market price / dividend per share
73.68
53.33
47.21
Equity value / earnings per share
5,792,599,020
12,474,899,055
9,060,017,654
Equity value / dividend per share
32,743,019,168
29,450,464,469
29,054,106,824
1.61
1.30
1.17
Equity value of the share
Market price / equity value
E.
INFORMATION ON EBITDA GENERATION OVER THE LAST THREE (3) YEARS AND AS AT THE CLOSING OF
THE LAST QUARTER
Below is the generation of EBITDA over the last 3 years and as at the closing of the last quarter for the Issuer and the explanation of
each of the variations.
Evolution of Individual EBITDA (Figures in millions of COP)
Celsia Individual EBITDA
140,000
127,843
115,929
120,000
100,000
80,000
60,000
43,631
39,741
40,000
20,000
2010
2011
2012
2Q-2013
75
.
PRELIMINARY PROSPECTUS INFORMATION
*Accumulated figures as at June 2013
The increase in EBITDA in 2011 compared to 2010 is mainly due to the increase in gas sales that generated significant margins, which
was restricted in 2010 by rationing. In addition, energy sales also accounted for the increase in the margin given the lower stock market
prices, which increased the earnings of this business.
A significant EBITDA was maintained in 2012 due to the increased generation of Meriléctrica paid at a higher price, the startup of
Hidromontañitas, and improved margins due to energy sales. These results came in spite of the fact that in the last quarter of 2012
long-term gas contracts ended, which reduced the gas sales business.
For the first half of 2013, consolidated and individual EBITDA has been positive due to the increased generation of plants, in particular
the thermal plants, along with higher market prices, which provide better margins.
Evolution of Consolidated EBITDA (Figures in millions of COP)
Celsia Consolidated EBITDA
800,000
700,000
669,343
713,776
731,174
600,000
500,000
439,199
400,000
300,000
200,000
100,000
2010
2011
2012
2Q-2013
*Accumulated figures as at June 2013
In 2012, consolidated EBITDA was COP 731,174 million, 2.4% higher than 2011. Although this change is moderate in comparison with
that of previous years, the increase is higher than expected considering the levels of rainfall.
F.
EVOLUTION OF SHARE CAPITAL OVER THE LAST THREE (3) YEARS
The following is the evolution of the Issuer's share capital over the past three (3) years ending on December 31:
Evolution of Share Capital (figures in COP)
Shareholder Equity
Subscribed and Paid-in Capital
2010
179,896,125
2011
179,896,125
2012
179,896,125
As reflected by the information in the table above, as at December 31 of the years 2010, 2011 and 2012, the Issuer has maintained the
value of the subscribed and paid in capital over the last 3 years.
G. CONVERTIBLE BONDS
As at June 30, 2013, the Issuer had no loans or convertible bonds, redeemable or bonds convertible into shares.
H. MAJOR ASSETS OF THE ISSUER
As at June 30, 2013, according to the Issuer's individual financial statements, the Issuer's major assets were: the items of permanent
investments, revaluations and property, plant and equipment which accounted for 84% of the total assets which amounted to COP
3,963,084 million as at that date. These assets are listed below:
76
.
PRELIMINARY PROSPECTUS INFORMATION
1.
Permanent investments
Permanent investments in shares for COP 2,892,664 million pesos, including the stakes in companies in which there is a share of more
than 50% of the subscribed and paid-in capital, make up 73% of the total assets. Listed below are the permanent investments and their
share percentages (figures in millions of COP):
Number of
Shares
Shares
Colener S.A.S.
78,410,460
10,399,999,99
6
Zona Franca Celsia S.A. E.S.P.
Concentra Inteligencia en Energía
S.A.S.
Grupo de Inversiones Suramericana
S.A.
Tablemac S.A.
Electrificadora del Caribe S.A.
E.S.P.
Other
TOTAL PERMANENT
INVESTMENTS IN SHARES
2.
Share
%
Book Value
Revaluation
Reserve
Provisions
Net Book Value
100
1,660,567
99.99
875,909
84
6.25
84
(7)
77
10,311,822
2.19
85,495
305,735
391,230
84,293,886
0.33
3,462
(2,881)
581
624,516
0.02
24
2
26
104
(42)
62
302,807
2,892,664
2
2,625,645
1,660,567
(35,788)2
840,121
(35,788)
Property, plant and equipment
Considering cost, depreciation, provision and revaluation, property, plant and equipment make up 11% of Issuer's total individual
assets. The following is the composition of property, plant and equipment as at June 30, 2013 (figures in millions of COP):
Property, plant and equipment, net
Value
Land
10,155
Projects under construction
13,273
Machinery, plant and equipment being installed
1,332
Buildings
129,463
Plants, pipelines and tunnels
244,292
Networks, lines and cables
Machinery and equipment
Medical and scientific equipment
3,328
965
12
Furniture, appliances and office equipment
3,652
Communication and computer equipment
2,330
Transport, traction and lifting equipment
1,275
Dining room, kitchen and pantry equipment
6
Property, plant and equipment total cost
410,083
Accumulated depreciation
(75,793)
Provision
Revaluation
(1,186)
COP 103,030
This is the Zona Franca Celsia provision was created because of the decrease in equity of the subsidiary due to the updated
revaluation of its generation assets.
2
77
.
PRELIMINARY PROSPECTUS INFORMATION
3.
Temporary investments
Temporary portfolio investments are made up of investments in (i) security funds in national currency for COP 190,684 million
corresponding to 4.8% of the total assets; (ii) security funds in foreign currencies for COP 22,347 million corresponding to 0.6% of the
total assets; and (iii) CDs and hedging investments in foreign currency for COP 5,281 million corresponding to 0.1% of total assets. The
above investments are described in detail below:
Security Funds National Currency
Book Value
(Figures in Millions of COP)
Ultrabursatiles S.A.
Valores Bancolombia S.A.
Serfinco S.A.
Credicorp / Correval S.A.
Corredores Asociados S.A.
BTG Pactual / Bolsa y Renta S.A.
Fondo de Capital Privado Progresa
Total
Security Funds Foreign Currency
784
63,019
143
36,571
7,906
81,144
1,117
190,684
USD
Book Value
(Figures in Millions of COP)
Morgan Stanley
5,640,367.92
Goldman Sachs
1,895,764.93
Centennial Absolute Fund SP Series I
2,499,631.01
Centennial Global Macro Fund SP Series 913,750.08
Centennial Absolute Fund SP Series II
635,163.09
Exchange difference as at June 2013
Total
CD Foreign Currency
Bancolombia Panamá
9,988
3,657
4,822
1,763
1,225
892
22,347
Expiration
Exchange
Rate
Investment
in
USD
Interest in
USD
Yield
Book Value
(Figures in
Millions of COP)
175 days
5/28/2013
1,929
2,700,000
4,826.25
1.95%
5,217
Book Value
(Figures in Millions
of COP)
Futures- liquidity operations (right) Bancolombia S.A.
2,724,236.69
5,255
Futures- liquidity operations (liability) Bancolombia S.A. (2,691,182.22)
(5,191)
Total
COP 64
Investments in USD with Hedging
USD
With regard to the Issuer's temporary investment portfolio, its management policy is governed by conservative principles seeking
maintenance and appreciation of capital in the medium and long-term, generating returns higher than those of savings accounts
payable on demand, but based on controlled value-at-risk indicators. The value at risk as at June 30, 2013 was 2.7%.
78
.
PRELIMINARY PROSPECTUS INFORMATION
I.
INVESTMENTS EXCEEDING 10% OF THE ISSUER'S TOTAL ASSETS
As at June 30, 2013, the Issuer had the following investments representing more than 10% of its total assets:
Shares
Book value (Figures in millions of COP)
Colener S.A.S.
Zona Franca Celsia S.A. E.S.P
TOTAL ASSETS
J.
1,660,567
840,121
Share % vs.
Assets
42%
21%
3,963,084
RESTRICTIONS ON THE SALE OF ASSETS OF THE ISSUER'S INVESTMENT PORTFOLIO
The Issuer has restrictions on the sale of assets under the following financing operations:
1.
In documents of Multilateral Bank Financing, the Issuer entered into the project funds and share retention agreement. In
accordance with the terms thereof, the Issuer agreed not to sell any shares in Zona Franca Celsia until the project completion
date of the Flores IV unit cycle of Zona Franca Celsia. Also, the Issuer agreed that, following the project completion date, it would
not sell shares in Zona Franca Celsia that imply that it would no longer be the owner of more than 50% of the outstanding shares
of Zona Franca Celsia. As of the date of this Prospectus Information, the Issuer is negotiating terms with the creditors to
document the project completion date since the Flores IV Unit of Zona Franca Celsia is already commercially operating. As at the
date of this Prospectus Information, no events of default have been declared under the Multilateral Bank Financing. Failure to
fulfill the obligations under the project funds and share retention agreement may generate a default under the Multilateral Bank
Financing.
2.
In the Bancolombia Financing documents, the Issuer entered into a loan agreement. In accordance with the terms thereof, the
Issuer agreed to cover 115% of the outstanding loan in the form of shares in EPSA for the term of the agreement, that is to say,
10 years as of June 3, 2010. The disposal of the shares resulting in the decrease in this percentage constitutes the grounds of
default under Bancolombia Financing.
The resources from the placement of the Ordinary Bonds shall be used one hundred percent (100%) for the replacement of the
Issuer's financial liabilities as mentioned above.
The issuer has no restrictions with regard to its permanent investments.
K. MAJOR INVESTMENTS IN PROGRESS AND THEIR FINANCING METHODS
The following are the Issuer's major investments and their respective financing methods:
1.
Porvenir II Project
The Porvenir II hydroelectric plant is a hydroelectric generation plant that will be located 142 kilometers from Medellín (Antioquia); it will
have an installed capacity of 352 MW and a budgeted investment of USD 733 million (the "Porvenir II Project"). The Porvenir II Project
was awarded OEFs for 1.44 TWh, for a 20-year period from January 1, 2018, at the GPSSS auction carried out by the CREG on
January 26, 2012. This project involves the construction of a dam hydroelectric power plant. The height of the screen will be
approximately 140 m arched and built in roller-compacted concrete with two generating units. It will also have an estimated load factor
of 66%.
To develop, operate, maintain and commercially exploit the Porvenir II Project, the Issuer entered into a purchase and sale agreement
with Int. A Dos S.A.S. for shares issued by Producción de Energía S.A.S. E.S.P., which is the owner of the listing of the Porvenir II
Project with the UPME.
The purchase of shares in Producción de Energía S.A.S. E.S.P. will be completed when the environmental license associated with the
hydroelectric project has been issued by July 14, 2014. At present, the environmental license is in the authorization process. Said
process is expected to be completed during the first half of 2014.
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The project was declared a public utility in 2013. The designs are currently in the completion stage and the owner thereof is moving
forward in the social management with the communities in the area of influence. In addition, the process of negotiating the land
required for the development thereof is currently underway and the environmental license granted by the ANLA is still pending.
For the potential funding of this project, the Issuer is analyzing the different alternatives to structure the project and ensure the proper
flow of resources. Among them, it is studying structures that, in addition to employing available cash, may involve divestments in nonstrategic assets. In terms of external financing, the possibility of resorting to loans with commercial banking, financing granted by export
credit agencies, loans granted by the multilateral bank, issuances on the public stock exchange, direct financing structures by providers
or a combination of these instruments is being analyzed.
The estimated Cap Ex for this project is COP 1.4 trillion.
2.
San Andrés
The San Andrés hydroelectric plant is a 19.9 MW project, of property of the Issuer, which will be located in the municipality of San
Andrés de Cuerquia, district of San Antonio, north of the Department of Antioquia, 126 km from the city of Medellin (Antioquia) (the
"San Andres Project"). The project is a run-of-river plant (with no reservoir), with surface and underground pipe sections and a surface
machine room on the left bank of the San Andrés River. The project captures water from the San Andres River at around the 2,368
m.a.s.l. line, and takes advantage of a gross head of about 565 m with a flow rate of 5 m 3/s, for an installed capacity of 19.9 MW. At
present, the process to amend the project's environmental license is being carried out through the ANLA in order to formalize the
adjustments to the final designs for construction. So far in 2013, progress has been made in the activities of socialization, the screening
of contractors and the request for bids for the development thereof.
The estimated Cap Ex for this project is COP 130 billion. To carry out this project, the Issuer is analyzing the different financing
alternatives, among which it is exploring the use of available cash and the funds generated internally in the Issuer's operation.
The project is expected to begin in the second quarter of 2014.
L.
FIRM COMMITMENTS FOR THE ACQUISITION OF FUTURE INVESTMENTS
Firm commitments for the acquisition of future investments are listed in Section K (1) and (2) in this Chapter.
M. DESCRIPTION OF FIXED ASSETS SEPARATED INTO OWNED, LEASED, RENTED AND OTHERS
All the Issuer's assets are the property thereof. The Issuer has no leasing operations in force.
By virtue of renting agreements, the Issuer has the following at its disposal: 8 motor vehicles. The registration in favor of the renting
company in relation to all the motor vehicles is at the department of motor vehicles in Medellín.
1.
Major fixed assets of the Issuer and Related Companies
The major fixed assets of the Issuer and Related Companies as described in Section C (1) of Chapter III in this Prospectus Information
are:
1.1. Major fixed assets of the Issuer:
1.1.1.
1.1.2.
1.1.3.
1.1.4.
Meriléctrica Power Plant
Piedras River Power Plant
Hidromontañitas Power Plant
Offices in the Centro Santillana Building3
3
Centro Santillana is located on a lot of 863.22 m2 (according to Public Deed No. 6342 / November 16, 2010) with entrances along the
Avenida El Poblado and Carrera 43 B. It has two (2) towers, identified as North Tower and South Tower. Although the buildings are
structurally separated, they are part of a corporate complex that is subject to horizontal property regulations. The South Tower has six
(6) floors and the North Tower has nine (9) floors. The main facades of the towers are along Avenida El Poblado and the secondary
facades are on Carrera 43B. The complex has four (4) basements through which they are connected. It also has a complementary
element that is the small plaza around which the towers were built, which serves as the pedestrian access with a modern urban design.
The Issuer is the owner of a total of 6,323.53 m2 of the Centro Santillana property, distributed as follows: (i) shops: 751.90 m2; (ii)
offices: 2,715.75 m2; (iii) deposits: 66.70 m2; (iv) Parking lots: 2,789.18 m2. It is used mainly as a corridor specializing in business and
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1.2. Major fixed assets of Zona Franca Celsia:
1.2.1. Flores I
1.2.2. Flores IV
1.3. EPSA Generation Assets (Major):
1.3.1.
1.3.2.
1.3.3.
1.3.4.
1.3.5.
Alto Anchicayá
Bajo Anchicayá
Salvajina
Prado
Calima
1.4. EPSA Generation Assets (Minor):
1.4.1.
1.4.2.
1.4.3.
1.4.4.
Amaime
Nima I and II
Alto Tuluá
Cali River I and II
1.5. CETSA Generation Assets:
1.5.1. Frío River I
1.5.2. Frío River II
1.5.3. El Rumor
1.6. EPSA Transmission Assets:
1.6.1. 7 Substations with a capacity of 220 kV
1.6.2. 274 Km of transmission lines with a capacity of 220 kV
1.7. EPSA Distribution Assets:
1.7.1. 18,898 km of distribution networks
1.7.2. 64 substations
1.8. CETSA Distribution Assets:
1.8.1. 489 km of distribution networks
1.8.2. 5 distribution substations
To date, the administrative offices of the Issuer located in the Centro Santillana building are ISO 9001 certified, and the Meriléctrica
power plant has the ISO 14001 certification. In addition, these fixed assets of the Issuer and the Related Companies have
environmental impact studies, environmental management plants, monitoring and tracking plans, and contingency plans to prevent,
correct, mitigate and/or compensate the environmental impacts that the construction and operation of the projects can cause on the
environment and communities established in the areas of influence.
The above-mentioned fixed assets have sufficient insurance coverage to cover mainly material damage caused by fire, explosion, short
circuit, natural disasters, terrorism and other risks. For this purpose, the Issuer and its Related Companies have taken various
insurance policies, including the following, among others:
financial management CR 43, which fosters the development of projects involving joint activities with uses that are complementary to
and compatible with financial and business activities. These assets have a remaining life of 30 years, according to the latest appraisal
of 2011. This asset has not been put up as collateral.
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Insured Property
Risk Covered
Value
Insured
USD
140,509
Expiration
Assets of the Meriléctrica Power Plant
associated with the operation (includes the assets mentioned in 1.1.1)
Assets of the Rio Piedras Power Plant
associated with the operation (includes the assets mentioned in 1.1.2)
Assets of the Hidromontañitas Power Plant
associated with the operation (includes the assets mentioned in 1.1.3)
Assets not associated with the operation of the
company (inventories, furniture and appliances) (includes the assets mentioned
in 1.1.4)
Material damage
and lost profit
Material damage
and lost profit
Material damage
and lost profit
Material damage
and lost profit
COP 87,900
Assets of the Zona Franca Celsia plants associated with the operation (includes
the assets mentioned in 1.2)
Material damage
and lost profit
USD
914,631
12/24/2013
Assets associated with the operation and the headquarters of EPSA and CETSA
(includes the assets mentioned in 1.3, 1.4, 1.5, 1.7 and 1.8)
Material damage
and lost profit
USD
2,332,918
12/24/2013
12/24/2013
USD 49,618
12/24/2013
USD 80,034
12/24/2013
7/15/2014
(*) Expressed in thousands of USD or millions of COP
In relation to other assets of the Issuer and its Related Companies, the following insurance policies are in effect:
Insured Property
Construction and assembly of the Cucuta
Hydroelectric Plant
Construction and assembly of the Bajo Tulua Power
Plant
Fidelity and Financial Risks of the Issuer and Zona
Franca Celsia
Works of art
Transport of merchandise
Offices and inventories
Risk Covered
Anticipated material
damage and lost
profit
Anticipated material
damage and lost
profit
Employee or third
party fraud
Material damage and
lost profit
Damage to insured
goods during
transport
Damage to goods
insured against any
risk (office equipment
and inventories)
Value
Insured
Expiration
USD 91,598
11/1/2014
USD 102,897
9/30/2014
COP 10,000
7/15/2013
COP 1,142
7/15/2014
COP 50,000
7/15/2014
COP 92,000
7/15/2014
CCI and Zona Franca Celsia
Non-contractual civil
liability
COP 30,000
9/09/2014
Transmission Line
Material damage to
the ZF underground
transmission line
USD 8
11/10/2013
COP 40,000
11/30/2013
Managers and administrators
Civil liability
(*) Expressed in thousands of USD or millions of COP
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2.
Assets pledged as collateral
The following is the breakdown of the assets pledged as collateral by the Issuer and its Related Companies:
2.1. Real collateral given by the Issuer
2.1.1. Pledge on EPSA shares
By virtue of the loan agreement related to Bancolombia Financing, the Issuer encumbered an undetermined but determinable number
of EPSA shares with a first-rate pledge in such a way that at any time there are encumbered shares that cover at least 115% of the
value of the loan. The pledge on shares contract does not grant the creditor any political or economic rights on the encumbered shares
in case of breach by Bancolombia Financing.
The breakdown of the Bancolombia Financing is found in Section Q, chapter 5, second part of this Prospectus Information.
As of December 31, 2012, there were 116,426,020 pledged shares covering a loan in the amount of COP 977,510 million.
The resources from the placement of the Ordinary Bonds shall be used one hundred percent (100%) for the replacement of the Issuer's
financial liabilities as mentioned above.
2.1.2. Pledge on Zona Franca Celsia shares
By virtue of the loan agreements related to Multilateral Bank Financing, the Issuer gave a first-rate commercial pledge, open without
placement, on the totality of the shares of its property in Zona Franca Celsia. The pledge on shares contract grants the creditors
political and economic rights on the encumbered shares in case of breach by Multilateral Bank Financing. The pledged rights include:
a.
b.
c.
d.
e.
The right to represent the shares in all of Zona Franca Celsia shareholders' ordinary and extraordinary meetings;
The right to vote inherent to the shares;
The right to receive dividends;
The right to inspect books and records; and
The right to vote is an insolvency process regardless of its nature.
The breakdown of the Multilateral Financing is found in Section Q, chapter 4, second part of this Prospectus Information.
2.2. Real collateral given by Related Companies
As of the date of this Prospectus Information, the only one of the Related Companies that has granted real collateral on its assets is
Zona Franca Celsia, according to the provisions set forth below:
2.2.1. Pledge on Zona Franca Celsia's business establishment
To guarantee the Multilateral Bank Financing, Zona Franca Celsia entered into a first-rate commercial pledge agreement, open and
without placement, on its business establishment that encompasses the totality of Zona Franca Celsia's present and future assets until
its obligations cease.
2.2.2. Trust on Zona Franca Celsia's revenue
As a result of the Multilateral Bank Financing, Zona Franca Celsia entered into an administration, guarantee and source of payment
trust agreement with the creditors and trustee HSBC Fiduciaria S.A., to which it transfered the right to receive the totality of Zona
Franca Celsia's present and future revenue, including, without limitation, revenue derived from the Reliability Premium, electricity
generation activities and sales of natural gas. Zona Franca Celsia's cash flows must be managed according to a cash flow waterfall
included in the Account Control Agreement executed between the Issuer, Zona Franca Celsia, the creditors, and HSB Fiduciaria, S.A.
This agreement stipulates that in the event of a breach of contract under the Multilateral Bank Financing, the creditors may accelerate
the debt and repay it with Zona Franca Celsia's revenue, subject to some exceptions to maintain a minimum level of operations at the
power plants.
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N. PATENTS, BRANDS AND OTHER ISSUER PROPERTY RIGHTS USED UNDER AGREEMENTS WITH THIRD
PARTIES, INDICATING ROYALTIES EARNED AND PAID
At this time, the Issuer has given use of its brand to Zona Franca Celsia and Fundación Celsia only. Because neither of these
institutions has a commercial display that implies making public use of the brand beyond its use on company letterhead, the Issuer
does not charge any amount or royalty for this concept.
O. INFORMATION ABOUT GOVERNMENT PROTECTION OR INVESTMENT PROMOTION AFFECTING THE
ISSUER
The Issuer does not have any government protections that benefit or diminish the company's situation, and there are no degrees of
investment promotion that affect the company or its activity.
P.
OPERATIONS WITH RELATED PARTIES OF THE YEAR IMMEDIATELY PRIOR
As of December 31, 2012, the Issuer's operations with its Related Companies encompassed:
Figures in millions of pesos
2012
COP
% on
assets
% on net
profit
2011
% on
% on
net
assets
profit
COP
With Related Companies
Empresa de Energía del Pacífico S.A. E.S.P.
Accounts receivable from sales
Revenue from technical assistance services
1,121
17,538
Cost of energy and gas purchases
(2,070)
Total net effect on results
15,468
0.00%
1,493
18,200
0.00%
6.70%
18,200
11.90%
Compañía Eléctrica de Tuluá S.A. E.S.P.
Accounts receivable from sales
Revenue from energy sales
771
4,047
Total net effect on results
4,047
0.00%
1.75%
-
0.00%
Zona Franca Celsia S.A. E.S.P.
Accounts receivable
79,627
2.01%
90,916
2.44%
Interest receivable
Accounts receivable from sales
10,482
5,859
0.20%
0.10%
6,580
37
0.10%
-
Accounts Payable
Purchase of property and equipment
2,307
-
-
5,265
0.10%
Revenue from gas sales
Revenue from interests
9,068
4,210
3,550
855
10
1,051
-
Cost of gas purchases
Cost of energy purchases
(9,246)
(2)
(6,666)
-
Total net effect on results
4,895
Revenue from energy sales
Other revenue
2.16% -
2,065
1.35%
Colener S.A.S
Accounts Payable
Dividends received
9,209
0.20%
136,194
3.44%
120,096
0.00%
3.22%
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Interest expense
(452)
Total net effect on results
(452)
0.10%
With shareholders
-
Grupo Argos S.A.
Dividends paid out
Revenue from leasing
31,719
0.88%
134
0.06%
25,716
-
0.69%
0.00%
Operations with related parties were carried out in market conditions and under parameters established in the Corporate Governance
Code and in the Issuer's bylaws.
None of the operations carried out with related parties and shareholders, administrators or legal representatives, directly or though their
related companies, had the following characteristics:
1.
2.
3.
4.
Operations whose characteristics differ from those carried out with third parties that imply differences in market prices for similar
operations.
Loans without interests or compensation.
Services or consultancies at no cost.
Transactions for other concepts, except for payments inherent to the direct enrollment of members of the Board of Directors, legal
representatives, and administrators.
With regard to the existence of debts between the Issuer and the members of its Board of Directors, executives or their families, none
have incurred debts with the Issuer or its Related Companies during the year immediately prior.
Q. LOANS OR CONTINGENCIES THAT REPRESENT FIVE PERCENT (5%) OR MORE OF THE TOTAL
LIABILITIES OF THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE PREVIOUS FISCAL YEAR
1.
Loans or contingencies that represent five percent (5%) or more of the total liabilities of the consolidated financial
statements for the previous fiscal year
Although the liabilities related to providers and accounts payable total COP 193,550 million as of December 31, 2012, which equals
7.85% of the total liabilities reflected in the consolidated financial statements, none of the liabilities by itself is greater than 5% of the
liabilities reflected in the consolidated financial statements. These liabilities correspond mainly to invoices for purchases of energy and
gas. Moreover, liabilities for taxes, encumbrances and fees total COP 65,778 million as of December 31, 2012, which equals 2.67%
and correspond to the income and related taxes imposed on the equity, and industry and commerce tax.
Now with regard to the balance of the borrowings which totals COP 1,106,454 million as of December 31, 2012, which equals 44.86%
of the total consolidated liabilities, none of these borrowings by itself is greater than 5% of the liabilities reflected in the consolidated
financial statements. All these obligations correspond to loans from national financial institutions and multilateral banks.
Notwithstanding the aforementioned, as it is considered material in view of the provisions of Decree 2649 of 1993, below is a list of the
borrowings of the Issuer and its short-term Related Companies as of December 31, 2012.
Figures in millions of pesos
Entity
Interest rate
Balance
Collateral
National financial institutions
Banco Davivienda S.A.
DTF (90 day FTD) + 2.85%
T.A. (quarterly in advance rate)
Banco de Bogotá S.A.
DTF + 2.5% T.A.
Bancolombia S.A. (Bancolombia Financing)
CPI + 5.8% E.A.
Renting Colombia S.A.
5.15% E.A.
SUBTOTAL
Without real
collateral
Without real
36,667
collateral
With real
13,604
collateral
21 Without real
collateral
94,959
44,667
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Foreign financial institutions
Corporación Andina de Fomento (CAF), USD 6,578,948
Corporación Financiera Internacional (IFC), USD 6,578,948
Deutsche Investitions-Und-Entwicklungsgesellschaft MBH
(DEG), USD 2,631,585
Libor + 4.7%
Libor + 6%
11,633
11,633
With real
4,654 collateral
Libor + 6%
(Multilateral Bank Financing)
SUBTOTAL
27,920
Other Entities
Medellín Archdiocese
13.5% E.A.
Ministry of Finance
3%
Without real
collateral
233 Without real
collateral
913
680
SUBTOTAL
Interests payable, includes USD 960,956
Without real
collateral
107 Without real
collateral
7,085
6,978
Bancolombia credit cards
SUBTOTAL
TOTAL short-term
borrowings
130,877
The long-term information for these borrowings by the Issuer and its Related Companies was as follows as of December 31, 2012:
Figures in millions of pesos
Entity
Interest rate
Balance
Maturity
date
Banco de Bogotá S.A.
DTF + 2.5% T.A.
36,667
36,667
2014
2015
Banco Davivienda S.A.
DTF + 2.85% T.A.
44,667
22,333
2014
2015
Bancolombia S.A.
CPI + 5.8% E.A.
17,533
2014
25,131
2015
526,582 2016 to 2020
Corporación Andina de Fomento (CAF), USD
42,763,158
Libor + 4.7%
2014
11,633
11,633
2015
11,633
2016
40,716 2017 - 2020
International Finance Corporation (IFC), USD
42,763,158
Libor + 6%
2014
11,633
11,633
2015
11,633
2016
40,716 2017 - 2020
Deutsche Investitions-Und-Entwicklungsgesellschaft
MBH
Libor + 6%
4,653
2014
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(DEG), USD 17,105,263
4,653
2015
4,653
2016
16,287 2017 – 2020
Banco de Occidente
TOTAL long-term borrowings
DTF + 4.0% E.A.
84,521
975,577
2017
Similarly, the bonds issued by EPSA as of December 31, 2012, corresponded to:
Figures in millions of pesos
2012
Bonds - 2010 issuance (1)
Interest
600,000
9,891
Total
609,891
Minus short-term portion
Long-term portion
(9,891)
600,000
(1) The issuance of bonds took place on April 2010, and it was placed in the Colombian Public Stock Exchange as indicated below:
2.
Ordinary
bonds
Interest rate
Value
7-year series
10-year series
20-year series
CPI + 4.58% T.V. (quarterly in arrears)
CPI + 5.05% T.V.
CPI + 6.08% T.V.
85,754
214,120
300,126
600,000
Maturity
date
2017
2020
2030
Collateral issued for the loans
2.1. With regard to contingent borrowings related to real collateral given by the Issuer and its Related Companies, the corresponding
information is included in section M of this Chapter. In relation to contingent borrowings associated with personal collateral,
because of the Multilateral Bank Financing the Issuer acquired the following obligations:
2.1.1. The execution of a sponsor or collateral contract under the which the Issuer, as primary obligor, guarantees the timely
payment of Zona Franca Celsia's borrowings, including interests, costs and expenses;
The execution of a subordination agreement under which all of Zona Franca Celsia's borrowings and payment rights in favor
of the Issuer are subordinated to the payment of the loans; and
2.1.2. The execution of an accounts control agreement, by virtue of which the Issuer is obligated to have a reserve account, which
is regulated.
3.
Other contingencies and provisions
In its consolidated financial statements at the close of December 31, 2012, the Issuer stipulates contingency provisions in the amount
of COP 335,027 million, which equal 13.58% of the total consolidated liabilities, totaling COP 2,466,596 million, and includes:
3.1. A provision for fiscal contingencies pertaining to a tax-related issue of Inversiones e Industria S.A. (a company that merged with
the Issuer in 2008), which is in process at the DIAN. Inversiones e Industria S.A. was notified in June 2008 of a revised official
assessment through which the income tax and penalty for inaccuracy are settled. Exercising caution, the Issuer considered it
necessary to provision COP 163,955 million.
As a result of the decree of Law 1607 of 2012, specifically regarding the possibility of reconciling the legal proceedings that tax
payers were involved in against the DIAN, and after studying the case, the Issuer filed a reconciliation request with this entity to
reconcile the total value of the penalties and interest discussed in the nullification and restoration of rights proceedings underway
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before the Antioquia Administrative Court. Pursuant to the aforementioned, the Issuer made a payment for a hundred percent
(100%) of the tax in question and signed the compromise with DIAN.
At this time, the Antioquia Administrative Court's decision is still pending. Once concluded, it will allow the Issuer to record a
recovery of provisions totaling COP 114,716 million associated with this case.
3.2. There is another provision of COP 163,371 million corresponding to estimates made by EPSA for probable contingencies for legal
proceedings underway, which includes the provision of the Bajo Anchicayá power plant proceedings, among others. Proceedings
are underway at the Administrative Appeals Court of Valle del Cauca due to the revocation of the ruling in the second instance in
its entirety by the Constitutional Court in 2012.
4.
Collateral recorded in suspense accounts
The Issuer contracts banking collateral or similar with financial institutions to back contractual commitments to purchase the supply and
transport of natural gas and to back its participation in the MEM. With regard to this financial collateral, the Issuer backs its contingent
commitments with blank promissory notes issued to the financial institutions. As of December 31, 2012, banking collateral issued
reached COP 63,594 million.
In addition, the Issuer has provided the real collateral that is described in Section V, Chapter 4 of Part Two of this Prospectus
Information.
5.
Status of borrowings
The Issuer and its Related Companies are up-to-date on the capital and interests payments for all their borrowings.
With regard to the priority of the loans and contingencies described in this Section, the Issuer is subject to the rules established in
Articles 2495 and subsequent of the Colombian Civil Code.
R. ISSUER OBLIGATIONS AT THE CLOSE OF THE CALENDAR QUARTER IMMEDIATELY PRIOR
Borrowings with financial sector institutions by the Issuer as of June 30, 2013 correspond to:
1. COP 576,259 million pesos borrowed from Bancolombia S.A. at a rate of CPI + 5.80% E.A.,S.V. (biannually in arrears)
amortization per semester to capital and interest (June and December every year), maturity June 2020.
2. COP 100,000 million pesos borrowed from Bancolombia S.A. at a rate of IBR + 2.55% N.A.M.V (quarterly in arrears nominal
annual rate), SV amortization per semester to capital (June and December every year), and monthly to interests maturity
December 2015.
3. COP 110,000 million pesos borrowed from Banco de Bogotá S.A. at a rate of IBR + 2.57% N.A.M.V.,SV amortization per semester
to capital and interest (June and December every year), maturity June 2015.
The Issuer has not contracted debt in foreign currency.
S.
RELEVANT PROCEEDINGS AGAINST THE ISSUER
As indicated in Section F of this Chapter, at the close of December 31, 2012, the Issuer has assets in the amount of COP 3,956,248
million, and annual revenue of COP 366,394 million. Based on that, the Issuer believes that relevant proceedings are (i) those that
represent an eventual conviction against the Issuer for an amount that exceeds COP 197,812 million, or 5% of its assets and COP
18,320 million, or 5% of its revenue; and/or (ii) proceedings against it that may imply the interruption, suspension, demolition, or closing
of its business.
Based on that, the Issuer believes that there are no legal proceedings against it that meet the relevance criteria described.
Notwithstanding the aforementioned, in accordance with the Issuer's financial statements at the close of December 31, 2012, the Issuer
has provisions totaling COP 114,716 million pesos for proceedings against the DIAN that deals with income tax settlement for
Inversiones e Industria S.A. (a company acquired by the Issuer) and the penalty for inaccuracy. With regard to these proceedings, it
should be noted that as a result of the approval of Law 1607 of 2012, specifically regarding the possibility of reconciling the
proceedings that tax payers were involved in against the DIAN, and after studying the case, the Issuer filed a reconciliation request with
this entity to reconcile the total value of the penalties and interest discussed in the nullification and restoration of rights proceedings
underway before the Antioquia Administrative Court. Pursuant to the aforementioned, the Issuer made a payment for a hundred
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percent (100%) of the tax in question and signed the compromise with DIAN. At this time, the Antioquia Administrative Court's decision
is still pending. Once concluded, it will allow the Issuer to record a recovery of provisions totaling COP 114,716 million associated with
this case.
T.
SECURITIES REGISTERED IN THE RNVE
As of the date of this Prospectus Information, the Issuer has ordinary shares registered in the RNVE by Resolution No. 683 of October
3, 2001 of the SFC.
The number of ordinary shares currently in circulation is 719,854,500.
U.
CURRENT DEBT SECURITIES THAT HAVE BEEN PUBLICLY OFFERED AND HAVE NOT BEEN REDEEMED
As of the date of this Prospectus Information, the Issuer has not offered any debt securities in any market.
V.
SUM OF REAL COLLATERAL PROVIDED TO THIRD PARTIES
As of June 30, 2013, the value of the real collateral given by the Issuer to third parties are as follows:
Guaranty
Shares issued by EPSA
Shares issued by Zona Franca Celsia
Number of shares Sum of collateral (in millions of pesos)
116,462,020
10,399,999,999
977,510
840,121
The kind of rights arising from this collateral, as well as the characteristics of the loans they back, are described in paragraph 2 of
Section M and paragraph 1 of Section Q of Chapter 4, respectively, of the second part of this Prospectus Information. Considering its
nature, it is necessary to proceed with the legal proceedings established in Colombian law in order to execute it.
W. CONSERVATIVE ASSESSMENT OF THE ISSUER'S PERSPECTIVES
1.
Investments in progress
The Issuer plans to make the investments described in Section K of this document.
2.
Other perspectives for the Issuer:
Moreover, the Issuer has notified the market through Relevant Information that together with its parent company Grupo Argos S.A. and
EPSA, it filed a pre-evaluation request with the SIC in order to participate in the competitive process for the eventual acquisition of
ordinary shares of Isagen S.A. E.S.P., pursuant to the provisions of Laws 155 of 1959, and 1340 of 2009, and Resolution 12193 of
2013 of the SIC. As the transfer of ordinary shares of Isagen S.A. E.S.P. progresses, the Issuer will proceed to inform the Stock
Exchange through Relevant Information of the relevant decisions concerning its participation therein.
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CHAPTER 5 - MANAGMENT'S COMMENTS AND ANALYSIS OF OPERATING RESULTS AND THE
FINANCIAL POSITION OF THE ISSUER AND OF ITS RELATED COMPANIES
A.
KNOWN TRENDS, COMMITMENTS OR EVENTS THAT COULD OR WILL SIGNIFICANTLY AFFECT THE ISSUER'S
LIQUIDITY, ITS OPERATION RESULTS OR ITS FINANCIAL POSITION
The Issuer's strategic objective is to grow in a sustainable and profitable way. Therefore, it seeks to improve efficiency, maximize
synergies, maintain an adequate mix of technologies and commercial strategies, maintain competitive margins and ensure
comprehensive personal development.
In order to maintain a good position in the market, the Issuer seeks to carry out all activities necessary to increase the energy
generation capacity, preferably in Colombia, in the Caribbean and in adjacent markets with potential for an electric interconnection with
Colombia.
To this end, the Issuer seeks new businesses that add value for its shareholders and, at the same time, it seeks to continue growing
organically through construction of generation plants, modernization of its assets and growth in energy sales volumes. In this search,
the Issuer will value efficient assets and those with positive forecasts that complement the business mix currently being created by the
organization.
The Issuer is currently evaluating growth alternatives available, mainly related to a portfolio of power plants of almost 1,000 MW and
including potential new generation plants in various study phases. These aspirations will materialize when the evaluated options
comply with the feasibility and value creation criteria that the Issuer has defined.
The Issuer's current capital structure and solid financial position support and facilitate this process, while giving hope for better growth
scenarios for the Issuer.
B.
BALANCE SHEET
The Issuer's total assets increased from COP 3.72 trillion in 2011 to COP 3.96 trillion in 2012, with a variation of 6.25%. This is due to
the increase in cash, long-term accounts receivable, expenses paid in advance and permanent investments. Moreover, with regard to
short-term accounts receivable, there were notable movements in advances and prepayments delivered for property improvements and
acquisition of replacement stock for energy generation units.
There was a 5.16% increase in property, plant and equipment investment, reaching COP 339,082 million. Within this, the investment
costs for construction of the Hidromontañitas Plant stand out, construction which ended in 2012. The acquisition of land in Santa Rosa,
Bolívar, and buildings in Barranquilla also stand out. Additionally, accumulated depreciation increased 21.51%, and in 2012 had a
balance of COP 68,838 million.
Another significant item covers other short-term assets that increased 216.03%, reaching COP 3,903 million in 2012. This increase
mainly occurred due to the same effect in expenses paid in advance for prepaid insurance, which went from COP 1,191 million in 2011
to COP 1,848 million in 2012. Other long-term assets include the increase in valuations both of permanent investments and property,
plant and equipment. These totaled COP 406,576 million with variation of 27.63%.
The total liability corresponds to the Issuer's obligations, totaling COP 1.07 trillion in 2011 and COP 1.05 trillion in 2012, and with a
variation of -2.07%. Within these obligations, the greatest variation occurs in the short-term liability which went from COP 112,804
million to COP 171,014 million in 2011 and 2012 respectively. On the contrary, the long-term liability decreased 8.37%, in particular due
to the reduction in the balance of accounts payable and borrowings.
Short-term borrowings reached COP 107,156 million in 2012, an increase of 111.17%. This is due to the increase of balances with the
banks (Banco de Bogotá, Davivienda and Bancolombia). The Issuer also acquired a new debt with the company Renting Colombia
S.A., totaling COP 21 million in 2012.
The Issuer's equity in 2012 is COP 2.9 trillion. This increased 9.62% compared to the 2011 period, due to the COP 230,760 million
profit received in the same period.
Reserves went from COP 1.8 trillion in 2011 to COP 1.9 trillion in 2012, due to the increase in reserves set aside to maintain the equity.
The subscribed and paid-in capital remained constant, therefore there was no variation that would affect shareholders' investment.
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C.
OPERATING INCOME PERFORMANCE
The evolution of sales, Issuer's operating costs and gross margin for the last 2 years from January to June are presented below:
Figures in millions of COP.
Issuer's Individual Information
June-12
June-13
Operating Income
D.
Market Sales
12,438
42,944
Reliability Premium
16,846
18,949
Wholesale Market Sales
66,646
73,844
Gas and Transport Sales
97,281
46,374
Other Operating Services
TOTAL Operating Revenue
9,246
202,458
10,015
192,125
Variable Costs
(94,099)
(120,500)
Fixed Costs
(9,258)
(17,836)
Sales Costs
(103,356)
(138,337)
GROSS PROFIT
99,101
53,789
GROSS MARGIN
48.95%
28.00%
PRODUCTION LEVELS
July-12
June-13
Actual Generation (GW)
13.7
47.9
Variable Costs (COP Millions)
(94,099)
(120,500)
Spot Market Price (COP/kWh)
87.70
141.22
ANALYSIS OF OPERATING RESULTS
The main variations in the Issuer's sales, sales costs, operating expenses, borrowing cost, tax provision and net profit are presented
below:
Operating Revenue
(Figures in Millions of COP)
Energy Sales on the Market
Reliability Premium
Energy Sales in Contracts
Natural Gas and Transport Capacity Sales
Other Operating Services
TOTAL OPERATING INCOME
2010
20,818
30,566
43,805
92,415
19,583
207,187
2011
27,941
25,476
113,480
162,873
18,343
348,113
Var (%)
2012
Var (%)
57,700
34,606
107%
159%
107,852
-5%
76%
148,346
17,890
366,394
-9%
34%
-17%
-6%
68%
As of June-13
-2%
42,944
18,949
73,844
46,374
10,015
5%
192,125
36%
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Operating income has increased in the last few years due to an improved performance in the Issuer's business. Energy sales and
revenue through generation activities have also increased due to the startup of the Hidromontañitas Plant and greater participation
from the Meriléctrica Plant.
Moreover, since 2011 the market price increased which has strengthened generation revenue.
Sales Cost (Figures in Millions of COP)
Sales Costs
2010
2011
134,761
Var (%)
196,403
2012
46%
Var (%)
214,289
As of June-13
9%
138,337
Sales costs have increased with the increase in revenue from stakes in the Merilectrica Plant and its associated costs, more gas
purchases to cover gas sales in 2011 and 2012, and higher costs in energy purchases for sales throughout the periods.
Other Items
(Figures in millions of COP)
2010
2011
Var (%)
2012
Var (%)
Administrative Expenses
34,760
37,671
8%
52,138
Financial Expenses
79,197
71,227
-10%
-
21,296
-
258,492
152,891
-41%
Income Tax Provision
Net profit
As of June-13
41%
22,867
78,401
10%
35,844
-
>100%
866
229,725
50%
129,392
Administrative expenses increased significantly in 2012 due to non-recurrent expenses incurred such as remodeling of the
headquarters, launch of a new brand and some provisions particular to that year. We must also take into account that the Issuer has
grown quickly and has obtained large-scale projects that require additional resources.
Financial expenses have not varied significantly given that the debt structure has not changed significantly in the last few years.
The net profit has varied significantly in the last few years, mainly due to non-operating results that present particular trends in each
year.
COP 111 billion of dividends were included in 2010 to which the company was entitled due to the first part of the shares purchase from
EPSA in 2009.
The sale of the industrial security business was included in 2012, which generated non-operating income of COP 66 billion.
E.
PENSION LIABILITY AND COMPENSATION CONTRIBUTIONS
The Issuer does not have a pension liability.
The Issuer makes regular contributions for severance and comprehensive social security: healthcare, professional risks and pensions,
to the respective private funds or the Instituto de Seguros Sociales (Social Security Institution) who assume all of these obligations. The
Issuer is current in compliance of its obligations related to its compensation contributions for its payroll.
F.
IMPACT OF INFLATION AND FLUCTUATIONS IN THE EXCHANGE RATE
In the case of the Issuer, the asset exposure to dollars is greater than the liability. Therefore, the currency exchange risk on obligations
in dollars does is not provided on the balance sheet given that this is compensated sufficiently with the asset exposure represented in
the investment portfolio.
In Zona Franca Celsia, where borrowings in dollars are significant and could generate a currency exchange risk, it seems that there is a
natural coverage given that revenues from the Reliability Premium are indexed at a rate in dollars and are sufficient to cover these
annual borrowings.
EPSA does not have borrowings in dollars, therefore there is no currency exchange risk.
G.
THE ISSUER'S LOANS OR INVESTMENTS IN FOREIGN CURRENCY
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The following chart shows the distribution of the consolidated debt as of June 2013 for each currency:
Debt (currency)
USD, 12.3%
COP, 87.7%
The Issuer's individual debt is entirely agreed in Colombian pesos.
With regard to the interest rate, the Issuer's consolidated debt is indexed at different rates as shown below with balances as of June
2013:
Debt (rate)
IBR, 11.4%
Libor, 11.6%
DTF, 13.2%
IPC, 63.8%
With regard to the Issuer's vulnerability to variations in the interest rate, the indexation of its debt is diversified in various indices that
allow it to efficiently absorb changes in monetary policy. This allows the Issuer to take advantage of macroeconomic scenarios of
interest rate reductions. Considering that the indexation indicator most representative of its debt is the CPI, it generates a natural cover
since there is a direct relation to the variations in its source of income.
H.
RESTRICTIONS AGREED WITH RELATED COMPANIES TO TRANSFER RESOURCES TO THE COMPANY
In accordance with the credit contracts related to Multilateral Bank Financing, Zona Franca Celsia has limitations on transferring
dividends and in general any type of resources to the Issuer, unless the following conditions are met:
1.
2.
3.
4.
5.
6.
That the project completion date has been met;
That the ratio of Zona Franca Celsia's historic debt service is more than 1.3 times when calculated from the last day of the last
quarter of the fiscal year, and using the financial statements for the same period and the last three quarters in the terms of the
contracts as a reference;
That the ratio of the debt service forecast for Zona Franca Celsia for the fiscal year in which dividends are decreed is forecast as
higher than 1.3 times.
That an event of default under the Multilateral Bank Financing is left unchecked and continues;
That, following the respective payment, the balance of accounts related to the project are or continue to be greater than the
balances that are required under the accounts control agreement; and
That at least 10 Business Days prior to and on the same date on which the payment will be made, the debtor certifies compliance
of each of the above conditions for each of the debtors.
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I.
INFORMATION REGARDING DEBT AT THE END OF THE LAST THREE (3) FISCAL YEARS
The Issuer's and its Related Companies' borrowings as of December 31 for the last three (3) fiscal years included:
The Issuer
National Banks
2012
2011
802,124
2010
828,460
828,521
Economic Associates
9,058
-
-
Interest Payable
4,852
5,287
5,121
680
680
680
21
-
5,330
Other Entities
Commercial Financing Companies
Total Borrowings
Minus Short-Term Borrowings
Long-Term Borrowings
816,735
834,427
839,652
(107,156)
(50,743)
(11,158)
709,579
783,684
828,494
For more information regarding the financial conditions of the Issuer's borrowings, please see Chapter 4, Section R of this Prospectus
Information
ZONA FRANCA CELSIA
Multilateral Bank
2012
211,095
National Banks
Parent Company
Parent Company Interests
2011
2010
262,847
289,316
1
-
4
79,627
90,916
79,614
10,482
6,580
3,278
Total Borrowings
301,205
360,343
372,212
Minus Short-Term Borrowings
(40,114)
(44,093)
(32,442)
Long-Term Borrowings
261,091
316,250
339,770
COLENER S.A.S
No Borrowings
EPSA
National Banks
2012
2011
2010
84,521
50,270
-
572
344
3
Other Entities
-
101,670
100,167
Commercial Financing Companies
-
3,133
6,372
Interest Payable
Total Borrowings
Minus Short-Term Borrowings
Long-Term Borrowings
85,093
155,417
106,542
(572)
(14,931)
(14,515)
84,521
140,486
92,027
600,000
600,000
600,000
BONDS
2010 Bond Issuance
Interest
Minus Short-Term Portion
9,891
10,638
9,321
609,891
610,638
609,321
(9,891)
(10,638)
(9,321)
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Long-Term Portion
600,000
CETSA
600,000
2012
National Banks
2011
2,500
Interest Payable
Other Entities
Total Borrowings
Minus Short-Term Borrowings
Long-Term Borrowings
600,000
2010
-
-
5
-
-
233
481
609
2,738
481
609
(2,738)
(248)
(138)
0
233
471
The following are the credit lines available to the Issuer as of June 30, 2013:
Figures in millions of COP
BANK
Bancolombia
Banco de Bogotá
Banco Davivienda
Banco Popular
Total
Current
Portfolio
Lines
Commercial
Loans Used
696,000
240,000
113,000
98,000
1,147,000
676,259
110,000
0
0
786,259
Available Line
6/30/2013
19,741
130,000
113,000
98,000
360,741
The Issuer's debt profile corresponds to structural loans acquired to finance growth projects. These are intensive in capital assets.
J.
INFORMATION REGARDING TAX CREDITS OR DEBTS THE ISSUER HAD IN THE LAST FISCAL YEAR
Payable taxes, encumbrances and fees as of December 31, 2012:
Figures in millions of COP
2012
Equity Tax
12,576
Sales Tax
505
Other Municipal Taxes
158
Contributions
Income Tax and Related Taxes
41
-
Total
13,280
Minus Short-Term Taxes, Encumbrances and Fees
(6,992)
Long-Term Taxes, Encumbrances and Fees (1)
6,288
(1) The balance of long-term taxes, emcumbrances and fees as of December 31, 2012, corresponds to two equity tax installments,
each for COP 3,144 million. It is due in 2014.
As of December 31, 2012, the Issuer has the following tax losses to be amortized:
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Figures in millions of COP
Period
29,615
2010
20,243
Total
49,858
Tax adjustments for the liquid loss
Tax loss to be amortized without time limit
K.
2012
2009
8,414
58,272
INFORMATION REGARDING CAPITAL INVESTMENTS COMMITTED AT THE END OF THE LAST FISCAL YEAR AND THE
LAST QUARTER REPORTED
The capital investments that the Issuer had committed are the San Andres Project and the Porvenir II Project explained in Chapter 4,
Section K of this Prospectus Information.
L.
REPORT ON PROGRESS IN THE IMPLEMENTATION OF THE INTERNATIONAL FINANCIAL REPORTING STANDARDS
(IFRS).
The Issuer has made progress in the IFRS implementation process. To this effect, the Issuer created a lead team for the project and a
structured training plan for all departments affected. It also contracted external expert consultants to adapt the systems and assist in an
audit.
The study phase of effects on the Issuer (assessment phase) is 100% complete. In this phase they identified and analyzed effects on
accounting and financial aspects, the Issuer's accounting policies and department's functional activities. The Issuer is making progress
in identifying effects on performance measurement, management indicators and corporate governance practices with an average
progress of 74%.
In the construction stage for the implementation project, the level of progress is as follows:
Adjustment or definition of new accounting policies
95%
Adjustment or definition of information systems
80%
Adjustment or change of procedure manuals
80%
Adjustment or change of job function manuals
80%
Adjustment or change of internal procedures
80%
Adjustment or change of internal control procedures
30%
Adjustment or generation of financial reports and management information
40%
As of the date of this Prospectus Information, the Issuer is in the implementation stage and expects to finish in December 2013.
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CHAPTER 6 - INFORMATION ABOUT ISSUER RISKS
Potential investors in this Issuance must consider the risks described below, as well as the additional information included in this
Prospectus Information.
The Issuer shall make every effort to mitigate the risks described herein, as well as any other that may arise in the execution of its
operations and of the operations implemented by its Related Companies. For that purpose, the Issuer engages in continuous
monitoring of industry risks, variations in the economic environment of the major markets wherein its subsidiaries operate, its own
capital solvency as well as that of its Related Companies, and compliance of the Issuer's agreements and those of its main Related
Companies for the purpose of taking the necessary measures to ensure that the Issuer and its Related Companies diversify, mitigate
and cover their risks diligently. Notwithstanding the aforementioned, the Issuer cannot guarantee that the risks described herein do not
materialize, affecting its revenue and results.
A. MACROECONOMIC FACTOR RISKS
The Issuer's results may depend on macroeconomic or political circumstances of a domestic or international nature, including variables
such as inflation, devaluation, interest rates, social instability, changes in Colombian legislation and government politics.
Given the direct correlation between the demand for energy and the economy's performance measured in terms of GDP, the latter
becomes a relevant factor to consider in the industry's performance in the future. Forecast scenarios for electricity demand seem
positive in the immediate horizon, with growth rates between 3.6% and 5.1% (most probable UPME scenario). However, less intense
growth is forecast hereinafter, with interest rates that decrease progressively from 4.5% in 2020 to 3.5% in 2030.
B. DEPENDENCY ON KEY PERSONNEL
The Issuer's organizational structure and plan to allocate responsibilities that was adopted, based on risk management, results in a set
of persons with the competencies and knowledge required to give continuity to the business and its critical activities in case of a
temporary or permanent absence of personnel with key functions.
The Issuer developed a strategic plan for career management and succession whose main objective is to support business continuity
through the identification of employees with potential, and successors for critical, key positions in accordance with the corporate
competitive strategy. This facilitates the conservation of knowledge within the Issuer, and allows professional growth and the retention
of key personnel.
The following diagram explains how the career management program functions:
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C. DEPENDENCY ON A SINGLE BUSINESS SEGMENT
The Issuer participates in different activities of the Colombian electricity sector, with significant direct participation in the energy
generation business, sales in the wholesale market, sales of natural gas, and in strategic and operational support activities that it
provides to companies in which it has a majority share that belong to the same sector.
Additionally, it receives cashflow from dividends, most of which come from investments in different companies in the electricity sector,
especially Zona Franca Celsia, EPSA and CETSA. In regard to its investment in these last two companies, acquiring revenue from
electricity distribution, sales and transmission on the regulated and unregulated market stands out.
It is important to note that the combination of the different electricity generation technologies obtained by the Issuer, together with the
Related Companies, allow it to maintain stability in total revenue, by being able to compensate the effects produced by the hydrological
changes on the levels of generation, and consequently on the operational income.
Thus it stands out that the Issuer does not have dependency on a single revenue source; on the contrary, it diversifies the source of
income.
D. INTERRUPTION OF THE ISSUER'S ACTIVITIES CAUSED BY FACTORS OTHER THAN LABOR RELATIONS
There has not been a total or partial interruption of the Issuer's activities in the last 3 years. While the electricity generation assets imply
risks inherent to their operation, geographical location and protection, the Issue has instituted a set of measures that allow it to diminish
the probability of occurrence of an interruption of operations; most significantly the insurance program, preventive maintenance plans,
physical protection measures, the geographical distribution of the assets, and especially the training plans for employees in charge of
the operational management. Moreover, it should be noted that the Issuer is certified by the Colombian Institute of Technical Standards
and Certification in activities of operation and maintenance of its power plants. This implies the orderly and controlled development of
the certified activities, minimizing the risk of human errors that result in interruption.
With regard to the activities that do not imply the operation of electrical assets, the Issuer has made every effort to strengthen the areas
of energy sales to the extent that in the event of an adverse change in the conditions of a business segment, it can continue to obtain
revenue from other sources. However, as energy and energy resources have become a key raw material in the development of the
country as well as in home consumption, no interruption is anticipated in the sales activities. The outlook is for a scenario of higher
possibilities over other resources to be sold in the markets of this nature.
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In the section of risks associated to the ordinary course of business, situations are described that can generate an interruption of the
Issuer's activities.
E.
ABSENCE OF A SECONDARY MARKET FOR SECURITIES OFFERED
The Ordinary Bonds offered are listed on the BVC, and thus they can be traded in the secondary market. Despite this listing, the
Ordinary Bonds can have limited trading amounts in the secondary market, as is the case with other private debt securities in the
Colombian market. A reduction of the Issuer's credit rating could affect the Ordinary Bonds' trading and prices.
F.
ABSENCE OF A HISTORIC RECORD OF THE ISSUER'S OPERATIONS
The Issuer has a complete history of its operations, which has mitigated the risk that could arise for Investors due to ignorance thereof.
Financial reports submitted to the Issuer's General Shareholders' Meeting, which present the management report, financial statements
and notes to the financial statements of the corresponding year, and the quarterly information, provide detailed information of the
Issuer's operations and may be consulted on the Issuer's webpage www.celsia.com, as well as on this Information Leaflet.
G. OCCURRENCE OF NEGATIVE, NULL OR INSUFFICIENT OPERATING RESULTS IN THE LAST THREE YEARS
As described below, the Issuer has not encountered negative, null or insufficient operating results in the last three (3) years.
Figures in millions of COP
Operating income
Gross profit
Operating profit
Profit before taxes
Net profit
2010
207,187
72,426
37,666
258,492
258,492
2011
348,113
151,710
114,039
174,187
152,891
2012
366,394
152,105
99,967
230,760
230,760
H. DEFAULT ON BANK AND STOCK LIABILITIES
The Issuer has always addressed its bank and stock liabilities per the terms of the agreements.
I.
LINE OF BUSINESS RISKS
Because of its public service provider activities, and particularly that of electricity generation and other similar activities, the Issuer is
exposed to diverse types of risk, such as:
1.
2.
3.
4.
Strategic risks: includes those situations that may affect compliance of the strategy and generation of value for shareholders, such
as those that impede the organic growth of the energy offer, the affectation of the price of energy in Colombia, delays in granting
environmental licenses to develop projects, inadequate association or relation in the process of asset acquisition for the
operation, the non-existence of fuels to generate or back the OEF assigned mainly to the thermal generation assets (Meriléctrica
power plant and Flores I and Flores IV power plants, the last two owned by Zona Franca Celsia);
Operating risks: includes situations that can impact organizational processes, projects, persons, compliance of laws and
regulations, among others. Significant in this category are situations that affect the operations of generation assets or the
development of activities that back the business;
Pure or fortuitous risks: includes events that can affect the company's operation and assets, among others, due to unpredictable
situations of damage to the assets. May include breakdown of machinery, flooding, fires, earthquakes and others; and
Financial risks: Includes all those events that can affect the companies' financial structure and their solid position in the market.
Significant in this category is breach of energy purchases and sales contracts by the counterpart.
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Although included in the strategic risk category, it should be noted that because of the nature of the businesses in which the Issuer
operates, there is a high exposure to natural phenomena that affect water levels of the rivers that provide the water flows to generate
electricity.
The strategic risks identified by the Issuer, which are controlled and monitored in order to prevent and mitigate situations that endanger
the business objectives, are:
1.
2.
3.
4.
5.
6.
J.
Changes in energy regulation in Colombia that adversely affect the operation of the assets, their profitability, or the subsequent
continuity of the business;
Social and environmental effects that impede, suspend or delay the operation and construction of power plants;
Non-compliance of the OEFs due to the inability to obtain fuel to back them;
The inability to restore operations related to the provision of public services or delays in addressing the demand;
Delays and cost overruns in project construction; and
Affectation of the water levels in the rivers that provide the water flows for energy generation, derived from natural phenomena
related to climate change.
COMPENSATION, PENSION, OR TRADE UNION RISKS
As pertains to the Issuer, there are no identified situations that imply the materialization of a risk as a result of a compensation or
pension burden, or by the creation or demands of trade unions. The Issuer respects the free right to associate and fully complies with
its employment and labor obligations. With regard to the Related Companies in which it holds a majority share, as is the case of EPSA
and CETSA, these companies do have convention and collective agreements resulting from the state origin inherent to these entities.
Moreover, the Issuer does not have pension liabilities that imply maintenance of actuarial provisions, as its employees are under the
so-called new social security system stipulated in Law 100 of 1993.
K. RISKS OF THE ISSUER'S CURRENT STRATEGY
The Issuer has defined the generation and distribution of electricity sectors as sectors in which it participates directly. That implies the
constant search for investment alternatives. However, as there are few existing alternatives on the target market, the Issuer may not be
effective in its expansion plan or may incur in assets or projects at a cost that does not generate the profitability expected. Additionally,
the Issuer is exposed to risks related to the construction of projects, with the resulting economic affectations implied by delays or errors
in design. The Issuer has defined a policy risk that establishes the general framework of actions to manage risks of all natures that may
affect the compliance of its objectives.
L.
ISSUER VULNERABILITY TO VARIATIONS IN THE INTEREST RATE, INFLATION AND/OR CURRENCY
EXCHANGE RATE
With regard to interest rates, the Issuer's consolidated debt, as established earlier, is indexed to different rates such as IBR, Libor,DTF,
and CPI. With regard to the Issuer's vulnerability to variations in the interest rate, the indexation of its debt is diversified in various
indices that allow it to efficiently absorb changes in monetary policy. This allows the Issuer to take advantage of macroeconomic
scenarios of interest rate reductions. Considering that the indexation indicator most representative of its debt is the CPI, it generates a
natural cover since there is a direct relation to the variations in its source of income.
Currently the Issuer's debt with the commercial banking system is 100% in Colombian pesos, thus it is not exposed to currency
exchange risks. Additionally, asset exposure to foreign currency is greater than liability at the balance level, mainly explained by the
asset position represented in the investment portfolio in USD.
In the case of Zona Franca Celsia, in which the borrowings are 100% in USD, the material situation could generate a currency
exchange risk. However, it seems that there is a natural coverage, as the income from the Reliability Premium is indexed to a rate in
dollars and could be sufficient to cover these borrowings.
With regard to EPSA, this company has no borrowings in dollars, therefore there is no currency exchange risk.
As stated above, the consolidated debt as of June 2013 is comprised of 88% in COP and the remaining 12% in USD.
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M. DEPENDENCY OF THE BUSINESS ON LICENSES, CONTRACTS, BRANDS AND OTHER VARIABLES NOT
THE PROPERTY OF THE ISSUER
In order to undertake its operating activities, the Issuer must abide by the regulatory provisions issued for the electricity sector in
Colombia. Moreover, and because its operation is subject to the use of natural resources, the Issuer must comply with obligations of an
environmental nature, especially in obtaining environmental licenses for the construction of electricity generation assets, and the
compliance of environmental management plans for the operation. Additionally, and in order to guarantee income from the Reliability
Premium, the Issuer must enter into fuel purchase agreements that allow it to back its OEF. Seeking to guarantee the continuity of its
operations, the Issuer has strengthened its regulatory and environmental management within the organization, endowing it with tools to
identify and control the use of resources subject to State supervision and control.
N. SITUATIONS RELATED TO THE COUNTRIES IN WHICH THE ISSUER OPERATES
The Issuer has no operations in countries other than Colombia, and therefore there is no risk for investment in Ordinary Bonds as a
result of situations pertaining to other countries.
Colombia has maintained political, economic, and social stability in recent years. However, an economic slowdown or significant
changes in legal or political aspects could have a negative impact on the companies' results.
Risks inherent to the operation in Colombia are described in this Chapter.
O. ACQUISITION OF ASSETS OTHER THAN THOSE FOR THE ISSUER'S NORMAL COURSE OF BUSINESS
The Issuer has not made, nor is planning to make, acquisitions of assets outside of its normal course of business.
P.
EXPIRATION OF SUPPLY CONTRACTS
1.
The Issuer's firm gas supply contracts for the period of December 1, 2012 to November 30, 2013 are as follows:
2.
Seller
Field
Amount (MBTUD)
Modality
Gas Natural
Gases de Occidente
Ecopetrol
Cusiana
Cusiana
Guajira
20,000
6,000
11,000
OCG
OCG
OCG
Issuer's gas supply contracts for the end of 2013 and 2014 are as follows:
Seller
Field
Amount (MBTUD)
Modality
Gas Natural
Ballena/Cusiana
20,000
OCG
Gases de Occidente
Ballena/Cusiana
7,000
OCG
EPM
Ballena/Cusiana
8,000
OCG
1,500
Ecopetrol
Ballena
6,500
OCG
Expiration dates
From December 1,
2013 to November 30,
2014
From December 1,
2013 to November 30,
2014
From December 1,
2013 to December 31,
2013
From January 1, 2014
to November 30, 2014
From January 1, 2014
to November 30, 2014
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To back the Reliability Premium of the Meriléctrica, the Issuer has OCG contracts for 36,000 MBTUD. These guarantee a
sum of natural gas transport and supply without interruption. For the operation, it uses a supply of natural gas that is not needed
by other power plants of Celsia and its Related Companies, or gas from the secondary market bought from wholesalers and industrials.
The Issuer's other power plants do not have any Reliability Premium assigned.
In light of CREG Resolution 089 of 2013, which regulates commercial aspects of the natural gas wholesale market and given the last
balance presented by UPME in a scenario of medium demand and low supply, there is no expectation of lack of gas supply until at
least Q2 of 2017, which will allow Meriléctrica and Zona Franca Celsia to operate with no problems with gas from the secondary market
through the various options set forth in the resolution, such as direct negotiations or "use it or sell it" processes.
Q. IMPACT OF THE REGULATIONS AND NORMS THAT IMPLICATE THE ISSUER AND POSSIBLE CHANGES
THERETO
Due to the nature of the electricity industry, it is highly regulated by the National Government through the CREG and the SSPD. This
regulatory framework has been evolving for some time with the goal of improving the energy supply and making the industry attractive
to private investment.
The Issuer has obeyed every regulation and continues to implement its best practices within this regulatory framework. However, it is
not possible to ensure that the business regulatory framework will continue in effect, nor that the financial statements will not be
affected as a result of some regulatory modification. The Government may issue new regulations that affect the Issuer's businesses,
operations, and situation. A review of pricing periods defined for the distribution business adopts the application of a methodology
defined by the regulator for that purpose, and must not be understood as a regulatory change.
R. IMPACT OF ENVIRONMENTAL PROVISIONS
A commitment to sustainability is incorporated into the Issuer's mission and vision. The Issuer is aware of its responsibility for the
impacts that its decisions and activities have on society and the environment. Thus, its behavior is ethical and transparent, and
contributes to sustainable development, including societal wellbeing. The Issuer knows the dimensions of sustainability in the energy
sector and assumes the challenges to achieve it.
The Issuer is an energy company that uses the knowledge of its people, grows with profitability, acts with responsibility to its
stakeholders, works continually to increase its customer service excellence, contributes to the development of the communities where it
operates, is committed to care for the environment, complies with environmental regulations, and fosters efficiency, quality and good
guidance of the State's intervention, and encourages the development of public-private-civil society interaction networks.
The Issuer understands that its sustainability depends on the way it manages the business through proper relationships with its
stakeholders. Considering the aforementioned, it has defined a philosophy of action with each one, seeking to balance their
expectations of the company.
Moreover, the Issuer enjoys harmonious relationships with the inhabitants, communities, local governments and public and private
institutions in its areas of influence. It does that by complying with its environmental commitments, inter-institutional work, community
co-management and self-management, and providing the necessary conditions for sustainable development of the regions wherein it
acts.
Its efforts in socio-environmental and occupational risk management are based on internal policies that allow the Issuer to build and
operate its energy generation plants with responsibility. To date, the administrative offices of the Issuer and Zona Franca Celsia are
ISO 9001 certified, and the Meriléctrica power plant has the ISO 14001 certification.
The Issuer's environmental policy is as follows:
"We are an energy company that acts with responsibility to the environment, complies with current environmental legislation,
and is committed to: Protect the environment and natural resources in the area of influence of our power plants through the
efficient use of resources, controlling environmental effects and improving the environmental design of our operations;
managing negative environmental effects, reducing them when technically and economically feasible, and fostering positive
effects."
The Issuer's occupational risk policy is as follows:
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"We are an electricity generation service provider and seller of energy and natural gas. We are committed to the
preservation of a work environment that is healthy and safe for all our employees, contractors, and visitors, continually
improving our performance in managing occupation risks in our operations and processes to prevent injuries, illness and
emergencies, complying with applicable legislation."
The Issuer adhered to the Global Compact, a voluntary initiative in which companies agree to align their strategies and operations with
human rights, labor standards, the environment and the fight against corruption, to ratify its commitment through corporate practices
based on universal principles that contribute to the construction of a global market that is more stable, fair and inclusive, and which
nurtures more prosperous societies.
The Issuer has not experience any environmental contingency that could have a material impact on the business. This is due to the
ongoing commitment to maintenance and monitoring and tracking of each of the process and facilities in a preventive manner to ensure
the protection of our natural resources.
All the power plants have environmental impact studies, environmental management plans, monitoring and tracking plans, and
contingency plans to prevent, correct, mitigate and/or compensate the environmental impacts that the construction and operation of the
projects can cause on the environment and communities established in the areas of influence.
S.
LOANS THAT FORCE THE ISSUER TO SET ASIDE SPECIFIC AMOUNTS IN ITS FINANCIAL STRUCTURE
The company's current loans have no restrictions to set aside any financial structure in particular.
T.
OPERATIONS TO BE PERFORM THAT COULD AFFECT THE BUSINESS' NORMAL DEVELOPMENT
The Issuer has plans to make various investments that could affect the normal course of its business. Detailed information of these
investments is found in Section K and W of Chapter 4 of this Prospectus Information
U. POLITICAL FACTORS SUCH AS SOCIAL INSTABILITY, ECONOMIC EMERGENCIES, ETC.
Considering that the Issuer provides a highly-regulated public service which has an overall impact on the population's living conditions,
it is subject to questions by the different stakeholders, mainly with regard to energy prices in Colombia. Notwithstanding the
aforementioned, the State has defended the current regulatory system because it is the only way to ensure future energy supply
continuity through the development of the electrical infrastructure.
The hydroelectricity generation assets are located in rural areas, which to a large extent are exposed to criminal acts and terrorism. In
addressing this, the Issuer has implemented physical protection plans for the assets which are strengthened with security measures
imposed by the Issuer to safeguard them.
The Issuer cannot guarantee that its business, financial position and operating results will not be affected by the occurrence of any of
these events.
V.
COMMITMENTS KNOWN BY THE ISSUER THAT MAY IMPLY A CHANGE OF CONTROL OF ITS SHARES
As of the date of this Prospectus Information, there are no Issuer commitments that would imply changes of control of its shares.
W. POTENTIAL DILUTION OF INVESTORS
As of the date of this Prospectus Information, there is no information about a potential dilution of investors.
X.
RISKS RELATED TO THE SUPPLY AND ORDINARY BONDS
The risks described in this chapter that could affect the Issuer could have a direct impact on the Ordinary Bonds that are part of the
Issuance. Among the main risks is that of a significant deterioration of the Issuer's financial indicators or of the sector in which it
operates, which could imply a change in the rating of its Ordinary Bonds. As stated, some of the Issuer's risks have mitigating
mechanisms that seek to moderate or reduce their effects at a certain time.
In the event that, because of market conditions, the Issuer is unable to place the Securities, it shall reach out to different sources of
financing such as local and international banks.
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