THOMSON REUTERS STREETEVENTS EDITED TRANSCRIPT **EPM - Q2 2013 EPM (Empresas Públicas de Medellín S.A. E.S.P) Earnings Conference Call EVENT DATE/TIME: SEPTEMBER 04, 2013 1 THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us © 2013 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. SEPTEMBER 04, 2013 / 03:00PM GMT, **EPM - Q2 2013 EPM (Empresas Públicas de MedellÃ-n S.A. E.S.P) Earnings Conference Call CORPORATE PARTICIPANTS Catalina Lopez EPM - IR Officer Juan Esteban Calle Restrepo EPM - CEO PRESENTATION Operator Welcome to the Second Quarter 2013 EPM Earnings Conference Call. My name is Loraine and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is recorded. The host and speaker will be Mr. Juan Esteban Calle Restrepo, EPM's CEO. Before I'll leave you with your host, we will give the floor to Catalina Lopez, Investor Relations Officer. Ms. Lopez, please proceed. Catalina Lopez - EPM - IR Officer Thank you, Loraine. Good morning to all of you and welcome to the EPM's conference call where we will be presenting the consolidated earnings results of EPM during the second quarter of 2013. Before we begin, it's important to mention that during this call, the management's comments may include forward-looking statements relating to future performance. Such statements do not constitute any guarantee of performance taking into account any risks or uncertainties that may occur or materialize. Consequently, EPM declines any responsibility in the event that the future results are other than the projections mentioned during this call. The conference call will be led by Mr. Juan Esteban Calle Restrepo, EPM's CEO. He's joined by several members of the company's senior management team. I will now like to turn the call over to Mr. Juan Esteban Calle. Juan Esteban Calle Restrepo - EPM - CEO Good morning to everybody and thank you for turning in. I would like to start by highlighting that our operations in Colombia during 2013 has been affected by lower than average rain precipitations that had affected our generation business unit. Our distribution business in Guatemala was also affected by lower energy demand. And our distribution business in Panama has experienced lower prices due to the decline in the international price of oil. Our hydro generation in Colombia has been 10% lower than the hydro generation in the first half of 2012. Colombian peso accumulated depreciation against the U.S. dollar was 9% compared to an appreciation of 8.1% in 2012. It has cost a negative foreign exchange impact of close to $90 million in our income statement. EPM won the bidding process for the renewal of the electricity distribution concession of ENSA, our Panamanian subsidiary and we will have that business until the year 2028. ENSA is the second largest power distribution in Panama with more than 380,000 clients and sales of close to 2,900 gigawatts hour per year. EPM and Millicom International concluded preliminary negotiations related to the structure and key terms for the integration of the operations of their companies UNE Telecomunicaciones and Colombia Movil. Negotiations are expected to be concluded before the end of September. And the integration of the companies are expected to start in the first quarter of the year 2014. We entered the Mexican market through the acquisition of [PIGSA], a family-owned construction and operating company of wastewater treatment plants. We will own 80% of the firm after closing. The value of the transaction will be close to $113 million. We also took a major step forward in our goal to consolidate our [grupo sa] 2 THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us © 2013 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. SEPTEMBER 04, 2013 / 03:00PM GMT, **EPM - Q2 2013 EPM (Empresas Públicas de MedellÃ-n S.A. E.S.P) Earnings Conference Call multi Latina when we enter the Chilean market last quarter on this month when our Board of Directors approved our strategic plan and our new [Mega] for the year 2022. We are expecting to achieve a revenue level of $16 billion before the end of the year 2022. In terms of macro figures, In Colombia, GDP growth was lower than GDP growth during the first quarter of 2012. GDP growth for the first quarter of 2013 was 2.8% which is significantly lower than the growth of our GDP during the same period in 2012. The CPI Index in Colombia continues on target and PPI has been trending higher which is positive for electricity rates. In Central America, GDP in Panama over Central American countries is starting to slow down and there is some potential uncertainty in Panama associated with the upcoming election of 2014. In terms of revenue, EPM accumulated consolidated revenues for the first half of June 2013 was $3.4 billion that is basically flat when we compare that figure to revenue of the first half of 2012. Revenues did not increase during the period as a result of lower hydro generation resulting from unseasonal dry weather in Colombia during the first half of the year. EPM generation decreased 10% in relation to the same period of 2012. EPM accumulated consolidated cost and expenses during the same period was $2.4 billion representing a 2% increase. Higher costs were due to energy purchases at higher energy prices in the spot market which were needed to cover long-term electricity contracts. EPM accumulated consolidated EBITDA was $1.07 billion representing a 4% decrease over the same period in 2012, 76% of total consolidated EBITDA continued coming from our energy business. The water business accounted for 8% of EBITDA and our Telco business accounted for 16% of consolidated EBITDA. Consolidated net income for the group totaled $410 million, a 30% quarter-over-quarter decrease. Expected net income for 2013 is $887 million. Net income was negatively affected by foreign exchange charges associated to the depreciation of the Colombian peso. We are expecting a better second half of the year due to better hydro conditions. During the second quarter of 2013, consolidated revenues did not increase compare with the same period of 2012. Some key facts are as follows. Our private company revenue increased 3% as a result of higher demand from the distribution business. Revenues from our Colombian energy subsidiaries decreased 2% over the same period in 2012 mainly due to lower energy demand in Caldas and QuindÃ-o. Revenues from our Central American subsidiaries decreased 4%. In Guatemala we experienced lower exports and a decrease in the PPI index which affected energy tariffs. In Panama, electricity prices were lower as a result of lower oil prices. DELSUR, our subsidiary in El Salvador presented an increase in revenues due to higher energy demand in that country. Our Telco revenues grew 3% associated with the growth in Internet and television services. Our energy business continued representing 75% of the consolidated revenues of the group. Our water business group accounted for 6% of consolidated revenues and our Telco business accounted for 19% of our consolidated revenues. EBITDA for the second quarter of 2013 presented an increase of 4% relative to the same period in 2012. EBITDA was negatively impacted by higher energy purchases in the spot market in Colombia to cover long-term contracts. The energy business accounted for 76% with the consolidated EBITDA, our water business accounted for 9% and our Telco business accounted for 16% of consolidated EBITDA. EPM's consolidated net income decreased 31% in relation to the same period in 2012. The results were impacted by lower EBITDA and $88 million of foreign exchange charges related to the peso devaluation and higher income taxes in Colombia. Total assets at the end of June were $18.8 billion presenting a 6% decrease. Total assets in Colombian pesos increased 3% in relation to the same period in 2012. Our energy business accounted for 62% of total assets. Our water business accounted for 13% of total assets and our Telco business accounted for 12% of total assets. Consolidated liabilities of the group amounted to $7.5 billion presenting a 1% growth over the same period of last year. Consolidated equity was $10.7 million at the end of the quarter presenting a 10% decrease over the same period of last year. At the end of the quarter, EPM's EBITDA margin was 31%, 200 basis points lower than our EBITDA margin during the same period of 2012. Total debt for the group was 40%, 300 basis points greater than the same index at the end of 2012. Our return on equity for the quarter was 7% lower than the 11% return on equity that we presented during the same period of last year. 3 THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us © 2013 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. SEPTEMBER 04, 2013 / 03:00PM GMT, **EPM - Q2 2013 EPM (Empresas Públicas de MedellÃ-n S.A. E.S.P) Earnings Conference Call Our EBITDA to interest rate ratio was 7.17 for the period and debt to EBITDA ratio was 2.1 for the same period. Basically as you can see, our results were affected by unseasonal dry weather in Colombia during the first half of 2013. We expect to have a much better second half of the year as a result of better hydro conditions. In terms of our ongoing projects, the Ituango Project is on track, access roads to main civil works present a 96% advance. Our major goal for in Ituango which is the deviation of the Cauca River, we are confident that we will be able to make the deviation of the Cauca River during the first quarter of 2014 so the deviation of the tunnel is underway, well underway. Access to a powerhouse excavations on the Intel to our portal, we finished already those works so the project is not expected to experience any delays. In terms of our main civil works, spillway and excavation, we have started those works some month ago and we are experiencing a 4.3% advance. In terms of electromechanical equipment, the -- order was given to our contractors and the gates for the deviation, adduction and tunnels of aspirations are also under way. Our second largest project, the Bello Wastewater Treatment Plant is also showing a good progress. In terms of the construction of the interceptors, it is showing an advance of 32.5% advance. We already finished the camps and the construction of the plant is showing a 4.2% advance. We are expecting to finish the works of the Bello Wastewater Treatment Plant in October of 2015. Those are our highlights for our result of the second quarter of 2013. I would like to open the call for questions. QUESTION AND ANSWER Operator Thank you. We will now begin the question-and-answer session. (Operator Instructions) And I will now turn the call back over to the host for closing remarks. Juan Esteban Calle Restrepo - EPM - CEO Thank you for tuning in and we expect to be back in our next conference call. Operator Thank you. And thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect. 4 THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us © 2013 Thomson Reuters. All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. 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