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Appendix 1.

BALANCE SHEET

2009

2010

2011

2012

2013

2014F

2015F

2016F

2017F

ASSETS
CURRENT ASSETS
Available

30.283

53.852

233.343

299.785

200.684

270.000

329.771

338.804

285.324

Temporary Investments

180.788

530.044

451.683

444.442

697.075

187.000

153.889

185.344

218.373

Receivables, net

160.363

291.912

342.842

273.375

305.748

455.000

464.448

504.448

544.448

Inventories

8.047

8.472

20.888

8.398

10.603

77.500

79.947

82.516

84.957

Expenses paid in advance

8.086

6.895

12.518

29.536

6.068

14.800

14.988

15.181

15.380

TOTAL CURRENT ASSETS

387.567

891.175

1.061.274

1.055.536

1.220.178

1.004.300

1.043.042

1.126.292

1.148.480

NON-CURRENT ASSETS
Receivables, net
Inventories
Permanent, net investment

2.486

1.874

3.502

12.390

7.650

9.013

8.263

7.551

43.101

45.129

38.488

47.298

46.605

52.447

55.016

57.457

1.627.957

204.938

101.812

102.606

101.060

96.007

91.207

95.767

100.555

818.905

3.053.296

3.202.796

3.268.328

3.342.856

5.170.182

5.236.354

5.246.370

5.257.272

Deferred, net charges

16.343

56.061

67.139

63.757

31.177

32.300

33.985

35.721

37.508

Assets acquired under finance leases, leasing

60.591

6.513

29.320

71.276

163.309

235.000

253.781

270.307

281.463

Intangibles, net

80.106

536.133

424.826

285.521

268.127

270.000

278.205

286.656

295.360

Other assets

10.507

28.146

768

825

810

810

835

860

887

627.039

1.919.994

1.867.730

1.941.359

2.140.033

2.250.000

2.491.195

2.608.722

2.734.533

TOTAL NON-CURRENT ASSETS

3.284.549

5.852.696

5.734.753

5.784.472

6.106.367

8.061.949

8.447.020

8.607.682

8.772.587

TOTAL ASSETS

3.672.116

6.743.871

6.796.027

6.840.008

7.326.545

9.066.249

9.490.062

9.733.974

9.921.067

714.378

27.907

98.713

130.877

33.845

--

9.320

10.638

9.891

11.607

109.993

367.554

338.862

193.550

74.672

51.931

1.678

7.036

9.176

10.185

67.908

90.069

Property, plant and equipment, net

Valuations and devaluations, net

LIABILITIES AND STOCKHOLDERS 'EQUITY


CURRENT LIABILITIES
Financial obligations
Bonds
Suppliers and accounts payable
Taxes, fees and charges
Employment and comprehensive social security obligations
Estimated liabilities and provisions
Retirement pensions

39.424

39.424

39.424

11.607

83.620

85.754

205.777

273.199

343.840

410.829

479.337

93.269

50.000

52.882

55.850

58.908

11.100

13.656

18.951

24.860

27.569

30.684

36.198

35.329

230.000

278.476

283.831

295.786

--

999

686

--

--

--

--

--

--

23

12.169

9.607

9.184

13.711

21.000

21.025

21.050

21.077

836.257

492.893

632.423

442.731

407.194

644.181

772.114

922.173

1.010.970

395.097

1.212.304

1.154.459

975.577

340.707

960.330

960.330

960.309

960.307

600.000

600.000

600.000

1.400.000

1.988.000

1.988.000

1.904.380

1.818.626

Other liabilities
TOTAL CURRENT LIABILITIES

39.424
11.607

NON-CURRENT LIABILITIES
Financial obligations
Bonds
Taxes, fees and charges

--

--

27.694

13.847

2.000

4.400

5.840

138.408

160.168

164.177

314.217

151.258

182.311

186.985

191.799

196.757

Retirement pensions

--

73.361

75.994

80.149

80.864

83.290

85.789

88.362

93.321

Other liabilities

--

42.019

40.993

40.075

36.040

40.975

42.204

43.471

44.775

533.505

2.087.852

2.063.317

2.023.865

2.008.869

3.254.906

3.265.308

3.192.721

3.119.626

1.369.762

2.580.745

2.695.740

2.466.596

2.416.063

3.899.087

4.037.421

4.114.894

4.130.596

Estimated liabilities and provisions

TOTAL NON-CURRENT LIABILITIES


TOTAL LIABILITIES
MINORITY INTEREST

10.622

1.478.198

1.449.745

1.468.001

1.622.157

1.667.128

1.671.491

1.704.234

1.725.262

SHAREHOLDERS 'EQUITY

2.291.732

2.684.928

2.650.542

2.905.411

3.288.325

3.500.034

3.781.150

3.914.847

4.065.209

TOTAL LIABILITIES AND SHAREHOLDERS 'EQUITY

3.672.116

6.743.871

6.796.027

6.840.008

7.326.545

9.066.248

9.490.062

9.733.974

9.921.067

Source: Team Estimates. CEL.CNs Reports.

Appendix 2.

INCOME STATEMENT

2009

2010

2011

2012

2013

2014F

2015F

2016F

2017F

1.891.637

1.803.939

1.849.505

2.023.672

2.381.116

2.678.462

3.204.217

3.272.458

3.375.665

1.891.637

1.803.939

1.849.505

2.023.672

2.381.116

2.678.462

3.204.217

3.272.458

3.375.665

1.891.637

1.803.939

1.849.505

2.023.672

2.381.116

2.678.462

3.204.217

3.272.458

3.375.665

Cost of Revenue, Total

537.584

1.083.789

1.162.762

1.311.372

1.540.165

1.607.077

1.762.319

1.799.852

1.856.616

Cost of Revenue

537.584

1.083.789

1.162.762

1.311.372

1.540.165

1.607.077

1.762.319

1.799.852

1.856.616

1.354.053

720.150

686.743

712.300

840.951

1.071.385

1.441.898

1.472.606

1.519.049

28,42%

60,08%

62,87%

64,80%

64,68%

60,00%

55,00%

55,00%

55,00%

85.727

131.328

76.529

90.497

94.520

102.241

110.648

104.544

99.200

85.727

131.328

37.112

59.287

59.906

65.897

72.486

65.238

58.714

Labor & Related Expense

--

--

39.417

29.792

32.848

34.490

36.215

37.301

38.420

Advertising Expense

--

--

--

1.418

1.766

1.854

1.947

2.005

2.066

34.586

26.517

28.268

28.435

25.992

27.758

29.919

29.713

30.223

5.106

7.247

5.783

5.867

5.936

6.055

8.477

8.646

8.819

--

--

22.485

22.568

20.056

21.703

21.442

21.067

21.404

Revenue
Net Sales
Total Revenue

Gross Profit
Cost-Revenue Relation
Selling/General/Admin. Expenses, Total
Selling/General/Administrative Expense

Depreciation/Amortization
Depreciation
Amortization of Intangibles

29.480

19.270

--

--

--

--

--

--

--

573

-17.063

-1.572

1.453

4.322

Impairment-Assets Held for Use

--

--

--

880

4.322

Impairment-Assets Held for Sale

--

--

392

--

--

Other Unusual Expense (Income)

573

-17.063

-1.964

573

--

658.470

1.224.571

1.265.987

1.431.757

1.664.999

1.737.076

1.902.886

1.934.110

1.986.039

Amortization of Acquisition Costs


Unusual Expense (Income)

Total Operating Expense

1.233.167

579.368

583.518

591.915

716.117

941.386

1.301.330

1.338.348

1.389.626

Interest Expense, Net Non-Operating

-83.702

-110.311

-118.213

-136.995

-121.326

-147.581

-149.939

-152.215

-152.936

Interest Expense - Non-Operating

-83.702

-110.311

-118.213

-136.995

-121.326

-147.581

-149.939

-152.215

-152.936

Interest/Invest Income - Non-Operating

-16.956

150.811

65.142

48.089

4.573

2.369

14.628

18.663

-19.325

136.183

46.479

48.089

4.573

27.332

15.257

-100.658

40.500

-53.071

-61.574

-101.496

0
-147.581

0
-149.939

0
-152.215

0
-152.936

3.275

-1.729

159

-18.663

-6.024

-67.222

-59.693

-143.227

1.480

100.864

-67.222

-59.693

-143.227

1.480

100.864

1.068.562

558.446

387.379

513.158

709.461

0
793.805

0
1.151.391

0
1.186.133

0
1.236.690

Operating Income

Interest Income - Non-Operating


Investment Income - Non-Operating
Interest Income(Exp), Net Non-Operating
Interest Inc.(Exp.),Net-Non-Op., Total
Gain (Loss) on Sale of Assets
Other, Net
Other Non-Operating Income (Expense)
Net Income Before Taxes

0,56%

27,42%

35,32%

27,71%

27,43%

27,57%

27,50%

27,53%

27,52%

6.031

153.149

136.830

142.193

194.597

218.845

316.621

326.591

340.294

1.062.531

405.297

250.549

370.965

514.864

574.960

834.770

859.543

896.396

-626

-146.287

-97.658

-140.205

-141.219

-145.456

-149.819

-154.314

-158.943

Net Income Before Extra. Items

1.061.905

259.010

152.891

230.760

373.645

429.504

684.951

705.229

737.453

Net Income

1.061.905

259.010

152.891

230.760

373.645

429.504

684.951

705.229

737.453

Normalized EBIT

1.233.740

562.305

581.946

593.368

720.439

941.386

1.301.330

1.338.348

1.389.626

Normalized EBITDA

1.286.154

682.706

713.033

731.341

851.535

1.021.842 1.083,152,52

1.131.268

1.160.315

Taxes- Net Income Before Taxes Relation


Provision for Income Taxes
Net Income After Taxes
Minority Interest

Source: Team Estimates. CEL.CNs Reports.

Appendix 3.
Operational Free Cash Flow
2009
Receivables

2010

160.363,00

Inventory

294.398,00

2011

2012

344.716,00

276.877,00

2013

2014 F

318.138,00

2015 F

2016 F

2017F

462.650,00

473.460,51

512.710,92

551.998,80
142.413,02

51.148,00

53.601,00

59.376,00

55.696,00

57.208,00

77.500,00

132.393,53

137.531,73

Payable

109.993,00

367.554,00

338.862,00

193.550,00

205.777,00

273.198,65

343.839,67

410.828,72

479.337,39

Properties, Plans and Equipment

818.905,00

3.053.296,00

3.202.796,00

3.268.328,00

3.342.856,00

5.170.181,68

5.236.354,29

5.246.369,84

5.257.272,21

Operating taxes Payable

74.672,00

51.931,00

93.269,00

50.000,00

52.882,01

55.850,48

58.908,01

Net Operating Assets N.O.A

1.140.409,00

3.768.849,00

4.020.422,00

3.846.382,00

4.017.248,00

6.033.530,33

6.238.930,02

6.363.291,69

6.489.929,43

Revenues

1.891.637,00

1.803.939,00

1.849.505,00

2.023.672,00

2.381.116,00

2.678.461,90

3.204.216,89

3.272.457,87

3.375.665,04

537.584,00

1.083.789,00

1.162.762,00

1.311.372,00

1.540.165,00

1.660.646,37

1.762.319,29

1.799.851,83

1.856.615,77

6.031,00

153.149,00

136.830,00

142.193,00

194.597,00

188.439,21

236.915,70

242.270,11

254.225,54

1.348.022,00

567.001,00

549.913,00

570.107,00

646.354,00

829.376,31

1.204.981,90

1.230.335,93

1.264.823,72

2.628.440,00

251.573,00

174.040,00

170.866,00

2.016.282,33

205.399,69

124.361,67

126.637,74

2.061.439,00

298.340,00

744.147,00

475.488,00

1.186.906,02

999.582,21

1.105.974,26

1.138.185,98

Cost of Revenues
Cost of Taxes
NOPAT

Variation of N.O.A
Operational FCF

Source: Team Estimates. CEL.CNs Reports.

Appendix 4.
Free Cash Flow Equity
2009

2010

2011

2012

2013

2014 F

2015 F

2016 F

2017F

Liabilities

395.097,00

1.812.304,00

1.754.459,00

1.575.577,00

1.740.707,00

2.948.330,00

2.948.330,00

2.864.689,00

2.778.933,00

Cash

211.071,00

583.896,00

685.026,00

744.227,00

897.759,00

457.000,00

483.659,84

524.148,22

503.696,80

180,00

180,00

180,00

180,00

180,00

180,00

180,00

180,00

180,00

1.061.905,00

259.010,00

152.891,00

230.760,00

373.645,00

390.703,48

684.951,23

705.228,92

737.452,83

Paying and Subscribed Capital


Net Income
Retained Earnings

615.530,00

811.378,00

1.843.925,00

1.929.817,00

2.088.618,00

2.345.747,48

2.614.616,02

3.085.975,61

3.571.289,61

NFO

2.737.259,00

2.364.434,00

2.179.663,00

2.034.706,00

842.948,00

2.491.330,00

2.464.670,16

2.340.540,78

2.275.236,20

Patrimonio

2.291.732,00

2.684.928,00

2.650.542,00

2.905.411,00

3.288.325,00

3.500.033,98

3.781.149,80

3.914.846,90

4.065.209,12

83.702,00

110.311,00

118.213,00

136.995,00

121.326,00

147.581,00

149.939,00

152.215,00

152.936,00

1.264.320,00

456.690,00

431.700,00

433.112,00

525.028,00

681.795,31

1.055.042,90

1.078.120,93

1.111.887,72

Gastos Financieros
FCFE

Source: Team Estimates. CEL.CNs Reports.

Appendix 5.
COMMON SIZE
BALANCE SHEET

2009

ASSETS
CURRENT ASSETS
Available
Temporary Investments
Receivables, net
Inventories
Expenses paid in advance
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables, net
Inventories
Permanent, net investment
Property, plant and equipment, net
Deferred, net charges
Assets acquired under finance leases, leasing
Intangibles, net
Other assets
Valuations and devaluations, net
TOTAL NON-CURRENT ASSETS

2010

2011

2012

2013

2014F

2015F

2016F

2017F

0,8%
4,9%
4,4%
0,2%
0,2%
0,10554323

0,8%
7,9%
4,3%
0,1%
0,1%
0,13214591

3,4%
6,6%
5,0%
0,3%
0,2%
0,15616095

4,4%
6,5%
4,0%
0,1%
0,4%
0,15431795

2,7%
9,5%
4,2%
0,1%
0,1%
0,16654207

3,0%
2,1%
5,0%
0,9%
0,2%
0,11077349

3,5%
1,6%
4,9%
0,8%
0,2%
0,10990884

3,5%
1,9%
5,2%
0,8%
0,2%
0,11570735

2,9%
2,2%
5,5%
0,9%
0,2%
0,11576179

0,0%
1,2%
44,3%
22,3%
0,4%
1,7%
2,2%
0,3%
17,1%
0,89445677
0,0%
100%

0,0%
0,7%
3,0%
45,3%
0,8%
0,1%
7,9%
0,4%
28,5%
0,86785409
0,0%
100%

0,0%
0,6%
1,5%
47,1%
1,0%
0,4%
6,3%
0,0%
27,5%
0,84383905
0,0%
100%

0,1%
0,7%
1,5%
47,8%
0,9%
1,0%
4,2%
0,0%
28,4%
0,84568205
0,0%
100%

0,2%
0,6%
1,4%
45,6%
0,4%
2,2%
3,7%
0,0%
29,2%
0,83345793
0,0%
100%

0,1%
0,0%
1,1%
57,0%
0,4%
2,6%
3,0%
0,0%
24,8%
0,88922651
0,0%
100%

0,1%
0,6%
1,0%
55,2%
0,4%
2,7%
2,9%
0,0%
26,3%
0,89009116
0,0%
100%

0,1%
0,6%
1,0%
53,9%
0,4%
2,8%
2,9%
0,0%
26,8%
0,88429265
0,0%
100%

0,1%
0,6%
1,0%
53,0%
0,4%
2,8%
3,0%
0,0%
27,6%
0,88423821
0,0%
100%

LIABILITIES AND STOCKHOLDERS 'EQUITY


CURRENT LIABILITIES
Financial obligations
Bonds
Suppliers and accounts payable
Taxes, fees and charges
Employment and comprehensive social security obligations
Estimated liabilities and provisions
Retirement pensions
Other liabilities
TOTAL CURRENT LIABILITIES

19,5%
0,0%
3,0%
0,0%
0,0%
0,3%
0,0%
0,0%
22,8%

0,4%
0,1%
5,5%
0,0%
0,1%
1,0%
0,0%
0,2%
7,3%

1,5%
0,2%
5,0%
1,1%
0,1%
1,3%
0,0%
0,1%
9,3%

1,9%
0,1%
2,8%
0,8%
0,2%
0,5%
0,0%
0,1%
6,5%

0,5%
0,2%
2,8%
1,3%
0,2%
0,5%
0,0%
0,2%
5,6%

0,4%
0,1%
3,0%
0,6%
0,2%
2,5%
0,0%
0,2%
7,1%

0,4%
0,1%
3,6%
0,6%
0,3%
2,9%
0,0%
0,2%
8,1%

0,4%
0,9%
4,2%
0,6%
0,3%
2,9%
0,0%
0,2%
9,5%

0,4%
0,9%
4,8%
0,6%
0,3%
3,0%
0,0%
0,2%
10,2%

NON-CURRENT LIABILITIES
Financial obligations
Bonds
Taxes, fees and charges
Estimated liabilities and provisions
Retirement pensions
Other liabilities
TOTAL NON-CURRENT LIABILITIES

0,0%
10,8%
0,0%
0,0%
3,8%
0,0%
0,0%
14,5%

0,0%
18,0%
8,9%
0,0%
2,4%
1,1%
0,6%
31,0%

0,0%
17,0%
8,8%
0,4%
2,4%
1,1%
0,6%
30,4%

0,0%
14,3%
8,8%
0,2%
4,6%
1,2%
0,6%
29,6%

0,0%
4,7%
19,1%
0,0%
2,1%
1,1%
0,5%
27,4%

0,0%
10,6%
21,9%
0,0%
2,0%
0,9%
0,5%
35,9%

0,0%
10,1%
20,9%
0,0%
2,0%
0,9%
0,4%
34,4%

0,0%
9,9%
19,6%
0,0%
2,0%
0,9%
0,4%
32,8%

0,0%
9,7%
18,3%
0,1%
2,0%
0,9%
0,5%
31,4%

TOTAL LIABILITIES

37,3%

38,3%

39,7%

36,1%

33,0%

43,0%

42,5%

42,3%

41,6%

MINORITY INTEREST
SHAREHOLDERS 'EQUITY

0,3%
62,4%

21,9%
39,8%

21,3%
39,0%

21,5%
42,5%

22,1%
44,9%

18,4%
38,6%

17,6%
39,8%

17,5%
40,2%

17,4%
41,0%

TOTAL LIABILITIES AND SHAREHOLDERS 'EQUITY

100%

100%

100%

100%

100%

100%

100%

100%

100%

TOTAL ASSETS

Source: Team Estimates. CEL.CNs Reports.

Appendix 6.
INCOME STATEMENT
Revenue

2009

2010

2011

2012

2013

2014F

2015F

2016F

2017F

Cost of Revenue, Total

100,0%
28,4%

100,0%
60,1%

100,0%
62,9%

100,0%
64,8%

100,0%
64,7%

100,0%
60,0%

100,0%
55,0%

100,0%
55,0%

100,0%
55,0%

Cost of Revenue

28,4%

60,1%

62,9%

64,8%

64,7%

60,0%

55,0%

55,0%

55,0%

71,6%
0,0%

39,9%
0,0%

37,1%
0,0%

35,2%
0,0%

35,3%
0,0%

40,0%
0,0%

45,0%
0,0%

45,0%
0,0%

45,0%
0,0%

Gross Profit
Cost-Revenue Relation

4,5%

7,3%

4,1%

4,5%

4,0%

3,8%

3,5%

3,2%

2,9%

Selling/General/Administrative Expense

4,5%

7,3%

2,0%

2,9%

2,5%

2,5%

2,3%

2,0%

1,7%

Labor & Related Expense

0,0%

0,0%

2,1%

1,5%

1,4%

1,3%

1,1%

1,1%

1,1%

Advertising Expense

0,0%

0,0%

0,0%

0,1%

0,1%

0,1%

0,1%

0,1%

0,1%

Depreciation/Amortization

1,8%

1,5%

1,5%

1,4%

1,1%

1,0%

0,9%

0,9%

0,9%

Depreciation

0,3%

0,4%

0,3%

0,3%

0,2%

0,2%

0,3%

0,3%

0,3%

Amortization of Intangibles

0,0%

0,0%

1,2%

1,1%

0,8%

0,8%

0,7%

0,6%

0,6%

Amortization of Acquisition Costs

1,6%

1,1%

0,0%

0,0%

0,0%

0,0%

0,0%

0,0%

0,0%

0,0%

-0,9%

-0,1%

0,1%

0,2%

0,0%

0,0%

0,0%

0,0%

Impairment-Assets Held for Use

0,0%

0,0%

0,0%

0,0%

0,2%

0,0%

0,0%

0,0%

0,0%

Impairment-Assets Held for Sale

0,0%

0,0%

0,0%

0,0%

0,0%

0,0%

0,0%

0,0%

0,0%

Other Unusual Expense (Income)

0,0%

-0,9%

-0,1%

0,0%

0,0%

0,0%

0,0%

0,0%

0,0%

Total Operating Expense

34,8%

67,9%

68,5%

70,8%

69,9%

64,9%

59,4%

59,1%

58,8%

Operating Income
Interest Expense, Net Non-Operating

65,2%
-4,4%

32,1%
-6,1%

31,5%
-6,4%

29,2%
-6,8%

30,1%
-5,1%

35,1%
-5,5%

40,6%
-4,7%

40,9%
-4,7%

41,2%
-4,5%

Selling/General/Admin. Expenses, Total

Unusual Expense (Income)

Interest Expense - Non-Operating

-4,4%

-6,1%

-6,4%

-6,8%

-5,1%

-5,5%

-4,7%

-4,7%

-4,5%

Interest/Invest Income - Non-Operating

-0,9%

8,4%

3,5%

2,4%

0,2%

0,0%

0,0%

0,0%

0,0%

Interest Income - Non-Operating

0,1%

0,8%

1,0%

0,0%

0,0%

0,0%

0,0%

0,0%

0,0%

Investment Income - Non-Operating

-1,0%

7,5%

2,5%

2,4%

0,2%

0,0%

0,0%

0,0%

0,0%

Interest Income(Exp), Net Non-Operating

0,0%

0,0%

0,0%

1,4%

0,6%

0,0%

0,0%

0,0%

0,0%

-5,3%

2,2%

-2,9%

-3,0%

-4,3%

-5,5%

-4,7%

-4,7%

-4,5%

Interest Inc.(Exp.),Net-Non-Op., Total


Gain (Loss) on Sale of Assets
Other, Net
Other Non-Operating Income (Expense)
Net Income Before Taxes
Taxes- Net Income Before Taxes Relation

0,2%

-0,1%

0,0%

-0,9%

-0,3%

0,0%

0,0%

0,0%

0,0%

-3,6%

-3,3%

-7,7%

0,1%

4,2%

0,0%

0,0%

0,0%

0,0%

-3,6%

-3,3%

-7,7%

0,1%

4,2%

0,0%

0,0%

0,0%

0,0%

56,5%
0,0%

31,0%
0,0%

20,9%
0,0%

25,4%
0,0%

29,8%
0,0%

29,6%
0,0%

35,9%
0,0%

36,2%
0,0%

36,6%
0,0%

0,3%

8,5%

7,4%

7,0%

8,2%

8,2%

9,9%

10,0%

10,1%

Minority Interest

56,2%
0,0%

22,5%
-8,1%

13,5%
-5,3%

18,3%
-6,9%

21,6%
-5,9%

21,5%
-5,4%

26,1%
-4,7%

26,3%
-4,7%

26,6%
-4,7%

Net Income Before Extra. Items

56,1%

14,4%

8,3%

11,4%

15,7%

16,0%

21,4%

21,6%

21,8%

Net Income

56,1%

14,4%

8,3%

11,4%

15,7%

16,0%

21,4%

21,6%

21,8%

Provision for Income Taxes


Net Income After Taxes

Source: Team Estimates. CEL.CNs Reports.

Appendix 7.
PROFITABILITY RATIOS
EBITDA Margin
Operating Profit Margin
Core Operating Margin
Net Profit Margin
Return of Equity
Return of Assets
LIQUIDITY
Current Ratio
Quick Ratio
Cash Ratio
ACTIVITY
DSO
DOH
Days of Payables
Cash Convertion Cycle
Total Asset Turnover
Fixed Asset Turnover
FINANCIAL LEVERAGE
Asset to Equity
Debt to equity
Debt to Assets
Long-term debt to Assets
Long-term debt to Equity
Interest Coverage
CASH FLOW
OCF/EARNINGS
SHAREHOLDER RATIOS
Earnings per Share
Dividend per Share
Dividend Payout Ratio

2010
37,8%
32,1%
39,9%
14,4%
10,4%
5,0%

2011
38,6%
31,5%
37,1%
8,3%
5,7%
2,3%

2012
36,1%
29,2%
35,2%
11,4%
8,3%
3,4%

2013
35,8%
30,1%
35,3%
15,7%
12,1%
5,3%

2014F
39,7%
35,1%
40,0%
16,0%
12,7%
5,2%

2015F
44,8%
40,6%
45,0%
21,4%
18,8%
7,4%

2016F
45,4%
40,9%
45,0%
21,6%
18,3%
7,3%

2017F
46,0%
41,2%
45,0%
21,8%
18,5%
7,3%

1,81
1,79
1,18

1,68
1,65
1,08

2,38
2,37
1,68

3,00
2,97
2,20

1,56
1,44
0,71

1,38
1,28
0,65

1,42
1,33
0,77

1,63
1,54
0,99

17,7
46,1
80,6
-16,8
0,35
0,93

17,8
63,2
111,2
-30,2
0,27
0,59

16,1
56,2
74,3
-2,0
0,30
0,63

13,4
45,7
47,4
11,7
0,34
0,72

15,3
53,3
54,5
14,1
0,33
0,63

21,8
53,5
64,1
11,2
0,34
0,62

27,4
55,1
76,7
5,9
0,34
0,62

27,6
57,7
87,7
-2,4
0,33
0,64

2,51
0,96
0,38
0,31
0,78
(14,5)

2,56
1,02
0,40
0,30
0,78
11,5

2,35
0,85
0,36
0,30
0,70
10,1

2,23
0,73
0,33
0,27
0,61
7,4

2,59
1,11
0,43
0,36
0,93
6,6

2,52
1,07
0,42
0,34
0,86
8,9

2,53
1,05
0,41
0,32
0,82
9,0

2,56
1,02
0,40
0,30
0,77
9,3

-1,14

0,16

0,37

0,20

-0,42

0,31

0,34

0,34

$ 360,24 $ 212,35 $ 320,50 $ 518,95 $ 596,53 $ 951,32 $ 979,48 $ 1.024,24


$ 81,67 $ 89,95 $ 99,94 $ 111,94 $ 123,13 $ 135,44 $ 148,99 $ 163,88
22,7%
42,4%
31,2%
21,6%
20,6%
14,2%
15,2%
16,0%

Source: Team Estimates. CEL.CNs Reports.

Appendix 8. Residual Income Model.

2009
Net Income
Equity
Residual Income
Ke

RESIDUAL INCOME
Present Value RI 14-17
PVPRI2014
EV
PR STOCK

2.291.732,00
-

2010
259.010,00
2.684.928,00
16.219,40
12,01%

324.305,26
1.071.352,86
4.683.983,12
6.505,53

Source: Team Estimates.

2011
152.891,00
2.650.542,00
158.320,82
11,59%

2012
230.760,00
2.905.411,00
80.653,97
11,75%

2,80%

2013
373.645,00
3.288.325,00
42.676,04
11,39%

2014 F
390.703,48
3.500.033,98
79.114,75
16,79%

2015 F
684.951,23
3.781.149,80
184.885,16
14,29%

2016 F
705.228,92
3.914.846,90
172.615,12
14,09%

2017F
737.452,83
4.065.209,12
186.963,64
14,06%

Appendix 9. DCF Model.

2014

2015

2016

2017

Residual Value

12.581.171,26

Operational FCF Vpn

WACC

2018

1.186.906,02

999.582,21

1.105.974,26

1.138.185,98

1.047.678,45

778.828,58

760.641,58

690.971,22

6.741.856,15

13,289%

Value Firm

7.924.619,08

PV Debt

3.054.789,23

Equity Value

4.869.829,85

Shares

2,80%

719.584.500

Stock Price

6.767,56

Source: Team Estimates.

Appendix 10. Relative Price Value.

P/E Average

14,82

CEL.CN Actual Price

5.800,00

Net Income 2014F

390.703.478.485,69

Number of Shares

719.584.500,00

EPS

542,96

CEL.CNs P/E

10,68

Comparative Ratio

2.678.461.895.135,78
3.722,23

CEL.CNs P/S

1,56

Average P/S

1,38

Comparative Ratio
Price P/S

0,13
5.029,56

0,39

Price P/E
CEL.CNs Equity

Projected Sales 14
Sales 2014F

8.048,47
3.517.084.551.083,75

Book Value PS

4.887,66

Average EV/EBITDA

9,93

CEL.CNs EV/EBITDA

8,26

CEL.CNs P/B

1,19

Comparative Ratio

Average P/B

1,50

Price EV/EBITDA

6.968,88

Precio Promedio

6.849,47

Comparative Ratio
Price P/B

Source: Team Estimates.

0,20

0,27
7.350,98

Appendix 11. Criteria For Peers Selection.

In order to select the peers to be used in the Star Mine Analysis, we chose companies that are in compliance with the
following criteria:
1.
2.
3.
4.
5.

Companies that belong to the utilities sector.


Companies that operate as energy utilities.
Companies publicly traded.
Companies that take part of a holding.
Companies with a market capitalization within a range from USD 1.189.808.318 to USD 3.189.808.318 and, since
CEL.CN market capitalization was USD 2.189.808.318 as of 6th October 2014.
6. Filter by enterprise value within a range from USD 2.468.000.000 to USD 4.468.000.000, since CEL.CN enterprise
value was USD 3.468.00.000 as of 6th October 2014.
7. Companies with an income structure closest to CEL.CN income structure.
8. Finally, we included Colombian CEL.CNs most important direct competitors listed in the stock exchange.

Appendix 12. Total Revenues.


TOTAL REVENUE
Energy Exchange Sales
Contract Energy Sales
Confiability Charge
Network Uses
Regulated Supply
Unregulated Supply
Gas Supply
Others
Foreign Subsidiaries

2010
1.805.495,00
683.525,00
93.354,00
173.524,00
167.540,00
368.822,00
137.042,00
94.012,00
87.676,00

VENTA DE ENERGIA EN BOLSA


VENTA DE ENERGIA EN CONTRATOS
CARGO POR CONFIABILIDAD
USO DE REDES
COMERCIALIZACION REGULADO
COMERCIALIZACION NO REGULADO
COMERCIALIZACION GAS NATURAL
OTROS
FILIALES EXTRANJERAS

Source: Team Estimates.

2011
1.849.505,00
471.050,00
275.127,00
205.226,00
194.974,00
373.563,00
143.635,00
167.639,00
18.291,00

2011
-31,09%
194,71%
18,27%
16,37%
3,00%
2,28%
11,11%
-79,14%
0%

2012
2.023.672,00
646.197,00
245.896,00
209.343,00
194.337,00
397.437,00
146.215,00
152.912,00
31.335,00

2012
37,18%
-10,62%
2,01%
-0,33%
3,06%
6,95%
30,00%
71,31%
0%

2013
2.385.922,00
1.067.708,00
236.050,00
221.617,00
197.408,00
397.437,00
177.637,00
52.655,00
35.410,00

Grows Table
2013
65,23%
-4,00%
5,86%
1,58%
3,36%
27,38%
-15,38%
13,00%
0%

2014 F
2.678.461,90
1.088.165,26
276.940,62
232.693,00
209.007,78
414.193,17
230.689,24
175.035,83
51.737,00

2015 F
3.204.216,89
965.738,55
293.557,06
240.552,00
213.974,91
434.842,11
233.081,57
175.035,83
52.255,00
595.179,87

2016 F
3.272.457,87
958.089,17
299.209,68
252.066,00
220.988,16
457.840,58
236.499,19
164.096,09
52.778,00
630.891,00

2017 F
3.375.665,04
956.919,23
308.475,08
268.144,00
229.481,60
461.287,50
254.270,80
175.035,83
53.306,00
668.745,00

2014

2015

2016

2017

5,00%
5,91%
2,85%
22,87%
45,13%
46,11%
0%

3,38%
5,88%
4,99%
1,00%
-1,53%
1,00%
0%

4,79%
5,88%
5,29%
1,45%
-7,02%
1,00%
6%

6,38%
5,88%
0,75%
7,48%
3,17%
1,00%
6%

Appendix 13. WACC

Costs
Bonds
LT Debts
ST Debts
Equity
WACC

2013
7,81%
11,78%
15,47%
11,39%
10,68%

2014 F
7,85%
11,80%
13,00%
16,79%
13,29%

2015 F
7,86%
11,81%
12,00%
14,29%
12,04%

2016 F
7,86%
11,81%
12,00%
14,09%
12,02%

2017 F
7,86%
11,81%
12,00%
14,06%
12,10%

Weight
Bonds
LT Debts
ST Debts
Equity

2013
20,95%
5,10%
0,46%
73,49%

2014 F
30,64%
14,80%
0,61%
53,95%

2015 F
29,37%
14,19%
0,58%
55,86%

2016 F
27,93%
14,08%
0,58%
57,41%

2017 F
26,42%
13,95%
0,57%
59,06%

Source: Team Estimates.

Appendix 14. Build Up Method (Cost of Equity).

Sector Prime
Prime
Debt Cost
Equity Cost

2010

2011

2012

2013

3,36%
8,65%
12,01%

-1,06%
8,65%
7,59%

3,10%
8,65%
11,75%

2,74%
8,65%
11,39%

2014
2,00%
5,60%
9,19%
16,79%

2015
2,00%
3,10%
9,19%
14,29%

2016
2,00%
2,86%
9,23%
14,09%

Source: Team Estimates.

Appendix 15.

BONDS
CELSIA
E3 IBR+ 2,17%
D6 IPC + 4,30%
D12 IPC + 5,00%
D20 IPC + 5,33%

Periodicity
Monthly
Quarterly
Quarterly
Quarterly

Maturity

EPSA
7 aos IPC + 4,58%
10 aos IPC + 5,05%
20 aos IPC + 6,08%

Periodicity
Quarterly
Quarterly
Quarterly

Maturity

Source: Team Estimates.

Yield
2016
2019
2025
2033

5,9%
6,4%
7,2%
8,3%

Yield
2017
2020
2030

7,30%
8,40%
9,40%

2017
2,00%
2,79%
9,27%
14,06%

Appendix 16. Revenues Projection.

Total Revenues

2014
2.678.461,90

Energy Exchange Sales

1.088.165,26 965.738,55

Contract Energy Sales

276.940,62

2015
3.204.216,89

293.557,06

2016
3.272.457,87

2017
3.375.665,04

958.089,17

956.919,23

299.209,68

308.475,08

Source: Team Estimates.

To project the sales in the Energy Exchange, we took into account a study realized by the UPME. Then, we
computed the historic average of sales from CEL.CN. The prices from the Energy Exchange were estimated
with an ARIMA with the characteristics of AR(1,12)I MA(13) DLX.

To project the energy sales by contracts, we assumed that CEL.CNs market share within this market
segment would remain unchanged, as of 2013. Demand was forecasted based on the cited UPME study.
Finally we determined an average price out of the historical prices of contracts.

Appendix 17. Weight Index

Drivers
Multiplos
FCFF
RI

Electrcity Prices GDP Growth


3
1
2

Source: Team Estimates.

1
3
2

Increase Infraestructure Ambiental Factors Fuel Prices (Costs) TOTAL


1
2
2
3
3
1
2
1
3

9
0,3
11 0,36666667
10 0,33333333

3 Lowest Sensitive
2 Neutral Sensitive
1 Most Sensitive

The index was constructed based on the sensibility of each model to the changes in the key drivers
of the sector. By changing the key drivers, Ceteris Paribus leaving the rest constant we
determined the sensitiveness of each model. If the model was very sensitive we ranked it with a 3.
On the contrary, we ranked the model with a 1.

Appendix 18. Starmine 1

Starmine: Shows how the company performs in contrast to its peers, in the key financial Ratios. Fundamentals

100%

12,0

90%

80%
70%

10,0
Celsia SA ESP
8,0

60%
50%

6,0

40%
30%
20%

4,0
2,0

10%
0%

Source: Team Estimates.

0,0

Empresa de
Energia de Bogota
SA ESP
Isagen SA ESP

Appendix 19. Starmine 2

Starmine: Shows how the company performs compared to its peers, by comparing a mix between the fundamentals ratios and
Market factors.
100%
10,0

90%
80%

8,0

8,0

70%

Celsia SA ESP

7,4

60%
6,1

6,0

50%
3,9

40%

4,0

3,6

30%

Competitors
Average

20%

2,0

10%
0%

0,0

Source: Team Estimates.

Appendix 20
Colombian last three years GDP percentage growth rate was higher than the Worlds and Latin America & Caribbeans
average, it was as well higher than Brazil GDP growth, which is the biggest economy in the region.
Moreover, for the next two years, according to the IMF, this behaviour is expected to continue.
7,0%

6,6%

6,0%
5,0%

4,3%

4,0%
3,0%

2,7%

2,8%

4,3%

4,0%

4,50%
3,80%
3,30%

2,8%
2,4%

2,0%
1,0%

1,0%

4,80%

2,5%2,4%
2,2%

2,20%
1,30%

1,40%

0,30%

0,0%
2011
Colombia

2012
2013
2014* F
2015* F
Brazil
Latin America & Caribbean
World Avarage
Source: Team estimates. World Bank Database

Appendix 21. CEL.CNs Organizational Mapping

Source: Team estimates.

Appendix 22. ARG.CNs Subsidiaries Geographical Location

Source: Team Estimates

Appendix 23. CEL.CNs Corporate Management


Managment Team
Juan Guillermo Londoo P. (CEO)

Celsia's president since June 2006.


Business Manager from the University EAFIT.
He was General Manager of Ramon H. Londoo SA, President of Coninsa &
Ramon
H.S.A,
ofdirectors
Colinversiones
Integrates
the
BoardsS.A.
of Grupo de Inversiones Suramericana S.A,
EPSA S.A E.S.P, Smurfit Kappa Carton de Colombia S.A, Urbansa S.A and Situm
S.A.S.

Ana Mara Calle (Chief Development Office)

Germn Garcia (Chief Operation Officer)

Part of the Boards of Directors of Higher Education of Antioquia, Andesco,


Acolgen, Finance Council of the Archidiocese of Medelln and Celsia and EPSA
Foundations.
Part of Celsia's management Committee since 2011.
Electrical Engineer from the Pontificia Bolivariana University, Specialist in
Finance and Project Evaluation from the Antioquia University and Master in
Management from Eafit University.
She has served as Manager of Corporate Development at UNE and Director
of Institutional Finance at EPM.
Electrical Engineer from the Universidad Nacional de Colombia, Master in
Electric Power Generation Systems in the Universidad del Valle, Executive MBA
in Business Administration at the Universidad de los Andes and MBA Executive Development Program at the Universidad ESADE in Madrid, Spain.
He was EPSA's Manager of Business Operations and Operational Director.
He also served as Manager of Electrocosta S.A. E.S.P., Electricaribe S.A. E.S.P. and
former professor at the Universidad del Valle

Claudia Salzar (Human Resources and Administration)

Graduated from Social Work at the Universidad Pontificia Bolivariana,


specialized in Management from the same University.
Served as National Coordinator of Social Welfare at Solla SA, later joined as
Regional Coordinator of Labour Welfare at Almacenes xito S.A., where she
served as Regional Training Coordinator, Head of Department of Labour
Welfare, Head of Personal Training, Regional Chief of Human Management
and finally, National Director of Human Resources.

Alberto Gutirrez P. (Chief Project Development


Officer)

Vice president of Generation Projects for Celsia since 2012.


Civil Engineer from the National University of Colombia and Management
Specialist from the Pontificia Bolivariana University.
He has served as Water manager for EPM, Water Projects assistant manager,
Energy Generation Projects assistant manager and Deputy Head of the Energy
Generation Projects, also in that company.
Electronic Engineer from the Pontificia Bolivariana University, Specialist in
Management from the same university and Specialist in Economic Regulation
and Industrial Organization from the Eafit University.
He was vice president of Energy with Colinversiones since the beginning of
the transformation of the company. He was president of the National Council
for Electrical Operation in 3 different years of Acolgen (Colombian Association
of Generators). Currently belongs to boards of directors of: Andesco (National
Association of utilities and communications) board of directors, Acolgen and
EPSA.
Graduated from Administrative Engineering from the Escuela de Ingeniera
de Antioquia, held a Global MBA with emphasis in International Business at
Thunderbird School of Global Management / Tecnolgico de Monterrey.

Rafael Prez C. (Chief Regulation Officer)

Esteban Piedrahita (Financial Vice-President)

Rafael Jos Olivella (Vice-President of Corporate Affairs)

Source: CEL.CN's Reports

Worked at Procter & Gamble, where he served as manufacturing cost analyst,


and later as Plant Finance Manager. Later joined Compania Colombiana de
Inversiones S.A. E.S.P.(now Celsia S.A. E.S.P.) as Project Manager and later as
Manager of Financial Planning.
Obtained his law degree at the Universidad Pontificia Bolivariana, specialized
in Commercial Law at the Universidad de los Andes.
During 2006 and 2007, he served as lawyer in Cementos Argos S.A., where he
participated in the negotiation of different types of contracts, care of
processes and claims, acquisition of companies and matters related to some
financing forms.
In 2008 he joined Compaia Colombiana de Inversiones S.A. as Corporate
Legal Manager and General Secretary.
He later became Legal Vice President of Celsia S.A. E.S.P. and since 2012 has
been in charge of the Vice Presidency of Corporate Affairs.

Corporate Auditing
Juan Fernando Fernndez (Corporate Auditor) He is Celsia Corporate Auditor since 2008
Public Accountant from the University of Medelln and Specialist in Finance and
stock Markets.
He has served as Audit Manager of Pricewatherhouse Coopers Ltda and Risk
Manager and Auditing of Colinversiones S.A., among others.
Source: CEL.CN's Reports

Board of Directors
Jos Alberto Vlez C. (President of Board)

Ricardo Sierrra Fernndez

Currently he is the President (CEO) of Grupo Argos S.A.


Business Engineer from Universidad Nacional de Colombia and Master of
Science in Engineering from University of California, UCLA, USA. He also taken
specialized courses at Harvard University, Northwestern University and
Massachusetts Institute of Technology, MIT.
Worked in Suramericana de Seguros for 19 years, where he was CEO during
his last 4 years in the company.
Member of the Board of Directors of Grupo Sura, Bancolombia, Cementos
Argos, Arcos Dorados.
He is part of the Private Council of Proantioquia, Codesarrollo, Fundacin
Suramericana, Fundacin Fraternidad Medelln and EAFIT University.
In 2012, after the split of Cementos Argos S.A, became Vice President of
Corporate Finance of Grupo Argos S.A.
Graduated in Business Administration at the Universidad EAFIT and
subsequently conducted a Degree in Politicla Studies at the same university.

Gonzalo Alberto Prez

Juan Benavides Estvez

Manuel Ignacio Dussan

He is currently enrolled in the Executive MBA TRIUM program of London


School Of Economics -LSE-, the Business School of Pars -HEC-, and New York
University -NYU-.
Currently President of Suramericana S.A
Obtained his law Degree at the Universidad de Medelln, specialized in
insurance.
He attended the CEO Management Program at Kellogg Graduate School of
Management. He was Vice President of Insurance and Vice President of
corporate Affair at Inversura S.A
Member of the Boards of Directors of Bancolombia S.A, Nutresa S.A,
Fundacin Suramericana and Fasecolda.
He currently directs the Interdisciplinary Center for Development Studies (CIDER)
of the Universidad de los Andes.
Electrical engineer from Universidad de los Andes, Specialist in Advanced
Mathematics of Universidad Nacional, Specialist in Energy Systems Management
from the Universidad de los Andes and Ph.D. in Mineral Economics.
He has worked in the electricity sector in Colombia and as Advisor Senior in
the Comisin Regulatoria de Energa y Gas (CREG) during establishment phase.
Has been a member of the Infrastructure Commission appointed by the President
of the Republic and belongs to the Council that is Structuring the Agencia Nacional
de Infraestructura (ANI).
Electrical engineer graduated from Universidad de los Andes,
with a master in Control Systems from Northwestern University (Evanston, USA).

He has an experience of over 35 years in the energy sector in Colombia, Latin


America and Eastern Europe, with emphasis on the design, development and
operation of energy markets (electricity, natural gas and petroleum), reforming and
privatizing of electricity sectors, preparation of national energy plans and evaluation
of projects for generation, transmission and distribution of electricity.
Mara Luisa Mesa

Mara Fernanda Meja

Source: CEL.CN's Reports

Graduated from Colegio Mayor de Nuestra Seora del Rosario, with experience in
the public, private and academic sector, with emphasis on the study and practice of
corporate and bussines law and aeronautic law.
Currently she is an alternate member of the Board of Directors of Casa Editorial El
Tiempo S.A., CEETV S.A. and Soprinsa S.A.
Public Accountant from Universidad Javeriana de Cali
She has more than 27 years working in Mac S.A., today EMA Holdings S.A., with
formation at External Auditing, Certified Management Systems, Corporate
Governance and Corporate Social Responsibility.

Appendix 24. CEL.CNs Corporate Governance


The Best Corporate Governance Practices for CEL.CN has been one of the main items in the policies of the company. Since the
company has established itself in the energy sector, after being a mix of inversions, there was always a policy of excellence in the
intern process, guided by its board of directors and team management, which are composed by professionals and highly qualified
people.
We determined the level of compliance with the Corporate Governance Practices after analyzing four main topics, understood in the
Colombian Country Code which, is based in the precepts of the OECD. These were: Shareholder Rights and Equitable Treatment,
Shareholders Meeting, Board of Directors and Financial and nonfinancial information.
In Shareholder Rights and Equitable Treatment several items were studied as adoption of one share-one vote policy, the Fair,
balanced and comparable permanent dissemination of corporate information, the disclosure of sufficient information to
shareholders, or mechanisms in place that protect minority shareholders.
Shareholders Meeting is considered as the supreme authority which has express and delegated powers. The deadlines are set
appropriately, as well the convocation mechanisms, schedule and functioning of the assembly. Involvement policy and decisions of
shareholders and institutional investors are also established. The
The Board of Directors is composed uniquely by professionals; it is the authority of management and establishes audit, risk,
governance, nomination and election committees. It publishes periodic reports on corporate governance and performance. The
board has established information on powers and scope of directors. Its responsible of the comprehensive enterprise wide
compliance program that is annually reviewed and disclosed. There is also a Power separation between chairman and president of
the board.
We highlighted in Financial and Nonfinancial Information the separated internal audit function, overseen by board, also that
CEL.CN point out relevant audit information. And finally, in 2014, IFRS was adopted.
After this analysis we found that CEL.CN has best practices of corporate governance, making its operation stronger and more stable.
Shareholder Rights and Equitable Treatment - CEL.CN established statutes guided on: 1) One-share-one-vote
policy 2) Submission to arbitration 3) Fair, balanced and comparable permanent dissemination of corporate
information 4) Preparation and disclosure of sufficient information to shareholders on extraordinary operations
that may affect their interests 5) Disclosed compensation policies and beneficial ownership of management. 6)
Mechanisms in place that protect minority shareholders 7) Pre-emptive right and right to dividends.
Shareholders Meeting - 1) Supreme authority, with express and delegated powers 2) Setting deadlines,
convocation mechanisms, schedule and functioning of the assembly 3) Involvement policy and decisions of
shareholders and institutional investors.
Board of Directors - 1) Authority of management 2) Established audit, risk, governance, nomination and election
committees 3) Periodic reports on corporate governance and performance 4) Information on powers and scope of
directors. 6) Comprehensive enterprise wide compliance program that is annually reviewed and disclosed 7)
Separation of powers between chairman and president of the board.
Financial and nonfinancial information - 1) Separated internal audit function, overseen by board. 2) Point out
relevant audit information. 3) In 2014, IFRS were adopted

100%

92,09%
87,80%

88,30%

Shareholders
Rights

Meeting of
Shareholders

87,20%

80%

60%

Source: Team Estimates

Board

Financial
information

Appendix 25. CEL.CNs Sustainability


The CEL.CNs sustainability policies are focused on creating value over time for all of its stakeholders, in an ethical and transparent
way that balances economic profits, social development, inclusion, and respect for the environment.

Economic Dimension: CEL.CN wants to provide profitable, quality and efficient energy, encouraging ethical and
transparent behavior, and managing its risks responsibly. CEL.CNs aim is providing timely and effective response to
energy demand through its human team, technology and financial resources which ensure the quality and availability of
the service in the medium and long term. Moreover, CEL.CN has established a framework of solid action regarding ethics
and integrity throughout the organization.

Social Dimension: This dimension is understood as the commitment to the comprehensive development of its employees,
its families and its communities where CEL.CN operates. This, in order to improve quality of life and to create
environments of mutual benefit, respect and trust.
There are practices and policies that improve the human capital. Also, CEL.CN establishes relationships with the
communities in its areas of influence during the planning, construction and operation of generation and distribution assets
in order to improve the quality of life and to contribute the social development, creating an environment of trust and
support. Here, we highlight the Celsia Foundation, which aid to improve the education in the company areas of influence.

Environmental Dimension: Within this dimension CEL.CN wants to achieve its results by optimizing the use of natural
resources, with the mitigation, off-set of the environmental impacts of its operations, and also with the promotion and
respect for the environment. CEL.CN has a policy of eco-efficency, looking to reduce negative impacts on the environment.
Is important to highlight the care and treatment of water basins and vegetation cover neighboring operations from
provision and use, to disposal and drainage.

Source: CEL.CNs reports

Appendix 26. Porters Five Forces Analysis


Five Forces Analysis on CELs Core Distribution Business

LEGEND

0 No threat to the business


1 Insignificant threat to the business
2 Low threat to the business
3 Moderate threat to the business
4 Significant threat to the business
5 High threat to the business

Threat of New Entrants | MODERATE


The regulation of the utilities business in Colombia determines that there are no entry barriers to participate in the energy market. However in
the power electric utilities business there is a license granted by the government to secure the supply of energy in the country. CEL has acquired a
part of these licenses ensuring its participation in the market for at least the next coming 10 years. Moreover the huge capital required to set up
its own infrastructure serves as a significant entry barrier. Due to that the unique entry barriers in the market are the huge capital investment
required. We consider as MODERATE the threat of new entrants.
Threat of Substitute Products | LOW
As was stated, the regulation in Colombia does not establish any entry barriers in the market. For this reason, any substitute product could appear
in the Colombian market. Substitutes could be power electric generation by renewable sources. However, the costs associated with these types of
power electric generation are higher than the costs associated with the traditional power electric generation, hydroelectric and thermoelectric.
While any substitute product could enter the market, the costs of implementation could mean a disincentive. We assess the substitutes threat to
be LOW
Bargaining Power of Customers | LOW
In all the zones of CELs influence as in all the country by regulation electric energy prices are established. Within the regulated market the tariff is
established according to the social stratum of the customers that have acquired the service. However, in the unregulated market the customers
have the possibility to trade the prices of the electric energy with any power electric utility company. Thus, with customers having no choice to
accept the prices that have been established in the regulated market and with the possibility to trade that the customers have in the unregulated
market; we assess the bargaining power of customers to be LOW.
Bargaining Power of Suppliers | LOW
The structure of CEL.CNs operation is developed with a vertically integrated process of the power electric business, because it includes the
generation and transmission (and commercialization with EPSA) of the electric power. The generation requires inputs for hydroelectric and
thermoelectric processes, but actually just the second one, thermoelectric, has supply agreements with the gas suppliers or liquid fuel suppliers,
because the hydroelectric process depends on the weather conditions. However, CEL.CN has acquired best supply agreements with its fuel or gas
suppliers, as a result of strategic connections in this market. The best supply agreements that CEL has acquired led us to assess the bargaining
power of suppliers as LOW.
Competitive Rivalry within the industry | MODERATE
The structure of the Colombian power electric business sector has established that the maximum market participation of any power electric utility
is 25%. CEL.CN has acquired a great position inside the Colombian market, because it is the fourth electric power generator, accounting for the
12% (6170 GWh) of the supply in Colombia and is also the fifth electric power distributor. Thus, CEL.CN has a big opportunity to grow in the
Colombian market. Competitors are important, especially of those that have big market participation, because they are a potential threat;
however, based on the Colombian market development, each power electric utility has completed an important process of establishing themselves
in specific zones, making them stronger in the places where they operate. The different projects of expansion of CEL.CN enables it to affront the
competitive rivalry of others participants of the power electric sector in the country. These factors makes our assessment to be MODERATE for
the competitive rivalry within the industry.

Appendix 27. CEL.CNs SWOT Analysis

Analysis SWOT
Strengths

Opportunities
Ability to rapidly adapt itself and to anticipate the
Diversification of its generation technologies.
challenges of its industry.
Simultaneous participation in the activities of Lower sensitivity to changes in hydrological
generation and distribution.
conditions compared to other market players.
Stable regulatory framework.

Foray into new geographies.

Best corporate governance practices.

Increased use of alternative energy sources.

Better use of competitive advantage derived from


its generation portfolio.
Capacity to deal favorable regulatory changes,
especially in climatic events.
Weaknesses
Threats
Implementation
of
hydroelectric
projects
High debt indicator compared to other companies
developed by its competitors (Quimbo, Ituango
with higher rating.
and Hidrosogamoso).
Lack of experience in the construction of projects High volatility in energy price traded in stocks
of high magnitude.
market.
Lower financial indicators than peers with higher Development of projects and uncontrollable events
rating.
by CEL.CN
Public order situation in the areas where CEL.CN
Gas supply until 2014 guaranteed.
operates.
Future unbalance between supply and demand of
gas according to UPME'S projections.
Source: BRC Investors Services S.A.
Listed on the BVC since 2001.

Appendix 28. Balance Sheet Accounts

Account

Assumption

Available

Elecricity Sells percentage - Operational Expenses percentage

Investment property

Forecasted according to historic performance.

Receivables, net

Percentage of incomes which is not payed in cash.

Inventories

Elecricity Sells percentage

Expenses paid in advance


Property, plant and equipment, net

Cash percentage
Accounts reclasification: "Construction in progress" pass "ducts and tunnels Plants".
GDF Suez assets acquisition.

Deferred, net charges

Accounts represented in the prepayd expenses values.

Assets acquired under finance leases, leasing


Intangibles, net

Forecasted according to initialising and on the run projects.


Forecasted according to on the run projects.

Other assets

Registered nominal quantities.

Suppliers and accounts payable

Retirement pensions

Electricity sells percentage.


Forecasted according to inflation rate.
Forecasted according to inflation rate.
Depends of net revenue before taxes. Provision is estimaed from here.
Forecasted according interests payments.
Forecasted by the calculation of cupons payments and bonds maturity.
Forecasted according to inflation rate.

Other liabilities

Forecasted by using historic growth rate, without distorted accounts.

Shareholder's Equity

Patron evident: reduction to future investment plans with equity

Taxes, fees and charges


Employment and comprehensive social security obligations
Estimated liabilities and provisions
Financial obligations
Bonds

Source: Team Estimates

Appendix 29. Income Statement Accounts

Account

Assumption

Cost of Revenue, Total


Selling/General/Admin. Expenses, Total

Percentage of total income


Comparison respect to 2010 was carried out, which give us an estimate growth rate same as this proportion

Depreciation/Amortization

By 2016 Suez's assets depreciation will be taken into consideration.

Interest Expense, Net Non-Operating

Forecasted according to the payments for the debt amortization

Interest/Invest Income - Non-Operating

We didn't forecasted it because it doesn't mean an high percentage of total income.

Provision for Income Taxes

Net revenue before taxes percentage.

Minority Interest

It will rise by a rate similar to the business growth rate.

Source: Team Estimates

Appendix 30. CEL.CNs Risks


In the following table there is a list of the risks which CEL.CN faces, and its mitigation policies.
Risk

Type

Changes in Colombian electric regulation, which


REGULATORY could affect the asset operation, the rentability or
the business continuity.

OPERATIONAL

OPERATIONAL

Mitigation Process
The company tracks variables that could cause adverse regulatory changes, in order to
prevent and mitigate its effects.
The company seeks the optimization of construction costs, involved with lines expansion,
minimizing the impact of the tariffs of assets.

Inability to restore operations related to providing


public services or delays in meeting demand.
The company perfoms maintenance plans to ensure the continuity of the operations.

Delays and over costs in the construction of


projects.

The company follows a strict program to be in complaince with the construction budget.
Furthermore, CEL.CN contracts providers with best technical qulifications.
Providers that manufacture equipment in the generation plants, pay supervision visits to
the place.
The company takes assurance policies to cover from adverse events during
transportation.

Affectation of the rivers hydrology levels, which


Strengthening of maintenance plans of watersheds that supply water to the generation
OPERATIONAL supply water flows for generation assets. Natural
plants.
phenomena associated with climate change.
Physical affecation of employees or company
OPERATIONAL properties , during the operation process or
projects development.

Required compliance of regulatory provisions of occupational health and industrial


safety, particulary for work at heights, confined locations and heavy machinery
operations.

Accelerated deterioration or obsolescence of


OPERATIONAL
operating assets.

Pemanently inversions in preventative maintenance programs, equipment


modernization, and finally, electrical and physical safeguards which ensure asset
durability oand the continuity of the operation

OPERATIONAL

To ensure risk management there is an risks area which applies a generally accepted
Not identifying or deal with issues that could affect
methodology. It ensures the identficatoin and treatment of possible risks which could
the achievement of organizational aims
affect organizational aims compliance.

OPERATIONAL Non compliance with reliability charges


OPERATIONAL

Affectation of organizational structure due to the


labor body breakdown

OPERATIONAL Human mistakes in electric assets operation


OPERATIONAL
LEGAL
OPERATIONAL
OPERATIONAL

Natural Disasters
Delay in achieving environmental licenses
Expiry of supply contracts
Delinquency / Terrorism
MARKET
Energy exchange prices volatility
OPERATIONAL Gas price volatility
Source: Team Estimates

Infrastructure strengthening, which is required to operate with different fuels, ensuring


through excellent maintenance schedule, the availability of assets
Development of management strategic plan of laboral life, aimed on give continuity to
the business. Identification of possible successors for company's critical positions.
Preservation
of knowledege.
Plant
operators
certification and training, which contributes to the ordely and controlled
development of certified activities. (Certification by the ICONTEC in the power plants
activities of operation and maintenance)
N/A
Rigorous monitoring and timely compliance dates of the program.
N/A
Tangible assets assurance
N/A
N/A

Appendix 31. Risks Matrix


Risks estimations were done based on management reports, where the studies and impact measurements are reported.
Likewise CEL.CN value sensibilities were estimated according to risk materialization, scenarios from financial data reported,
which shows the major change drivers of CEL.CN valuation.
Base on these estimates we show in the following matrix the results classified by the impact level and occurrence probability.

HIGH

LEGAL

REGULATORY

MARKET

OR5 Delay and


costs in building
projects

MEDIUM

OR6 Breach of
Firm Energy
Obligations

LR Delay in
achieving
environmental
licenses

OR2 High fuel


costs

OR3 Low levels of


hydrology

RR Changes in
Colombian
regulation of the
sector

MR Unfavorable
market conditions

LOW

IMPACT

OPERATIONAL

OR1 Fortuitous
events

OR4 Delayed meet


demand

LOW
Source: Team Estimates

MEDIUM
PROBABILITY

HIGH

Appendix 32. CEL.CNs Sensibility


We analyzed the target price sensibility to external and internal operational factors changes.

Long-term growth
rate

The Discounted Free Cash Flow to Firm valuation method is highly affected by the perpetual WACC rate and perpetual
growth rate.

7131,8255 10,50%
4,00% 11.272,35
3,50% 10.473,03
3,00% 9.808,61
2,80% 9.573,15
2,00% 8.766,76
1,00% 7.986,35
0,00% 7.379,37

11,00%
9.598,90
9.052,15
8.583,91
8.414,88
7.823,38
7.231,80
6.758,19

WACC (residual)
11,50%
12,10%
12,50%
8.417,41
7.325,41
6.860,26
8.020,82
7.046,19
6.624,66
7.673,86
6.797,08
6.412,74
7.546,92
6.704,80
6.333,82
7.095,53
6.371,58
6.046,97
6.632,64
6.021,48
5.742,40
6.253,63
5.728,35
5.484,84

13,00%
6.320,32
6.130,52
5.958,22
5.893,66
5.657,24
5.403,12
5.185,70

13,50%
5.880,62
5.724,25
5.581,28
5.527,46
5.329,16
5.113,91
4.927,98

Source: Team Estimates

Optimization of
process

External factors as price fluctuations in energy exchange and internal factors as the optimal MEGA plan execution, which
allows reducing operative costs.

13,00%
12,00%
11,00%
9,68%
9,00%
8,00%
7,00%

-3,00%
8.386,96
8.138,64
7.890,31
7.563,14
6.648,69
5.655,39
4.662,09

Source: Team Estimates

Change in forecast price in energy exchange in years 2015-2017


0,00%
3,00%
6,19%
9,00%
12,00%
8.094,42
7.805,45
7.452,56
7.238,20
6.959,90
7.853,27
7.571,39
7.227,16
7.018,07
6.746,61
7.612,12
7.337,33
7.001,77
6.797,94
6.533,31
7.294,40
7.028,95
6.704,80
6.507,91
6.252,30
6.406,36
6.167,02
5.874,78
5.697,27
5.441,76
5.441,76
5.230,78
4.973,18
4.816,74
4.613,67
4.477,16
4.294,53
4.071,59
3.936,21
4.477,16

15,00%
6.685,15
6.478,61
6.272,07
5.999,95
5.239,38
4.413,23
3.587,08

Appendix 33. Worlds Generation Portfolio

Source: CEL.CNs Reports

Appendix 34. ARG.CN Holding Structure

Source: ARG.CNs Reports

Appendix 35. DuPont Analysis.

Source: Team Estimates

Appendix 36. References


i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
xi.
xii.
xiii.
xiv.
xv.
xvi.
xvii.
xviii.
xix.
xx.
xxi.
xxii.
xxiii.
xxiv.
xxv.
xxvi.
xxvii.
xxviii.
xxix.
xxx.
xxxi.
xxxii.
xxxiii.
xxxiv.
xxxv.
xxxvi.
xxxvii.
xxxviii.
xxxix.

xl.

(Observatoire Mediterranen de l'Energie, 2007)


(IMF, IMF World Economic Outlook 2014- Chapter 2, 2014)
(FIIC, 2014)
(Universidad Nacional de Colombia, 2013)
(CEPAL, 2014)
(Inter-American Development Bank, 2008)
(BVC, 2013)
(Compact, The CEO Water Mandate, 2007)
(Compact, Boletn del Pacto Mundial de las Naciones Unidas, 2012)
(Banco de la Repblica-Colombia, 2014)
(IMF, World Economic Outlook - Update, 2014)
(Crdenas, 2014)
(BBVA-Research, 2014)
(World Bank Group, 2014)
(De Lima, 2014)
(EKN-Creating Confidence in your Exports, 2014)
(CRHOY-Noticias, 2014)
(Villar, 2014)
(Direccin General de Poltica Macroeconmica, 2014)
(UPME, Plan de Expansin de Referencia: Generacin-Transmisin 2014-2028, 2014)
(Crdenas, 2014)
(BBVA-Research, 2014)
(Ultraburstiles, 2014)
Ibit
(UPME, Plan de Expansin de Referencia: Generacin-Transmisin 2014-2028, 2014)
(DANE, 2013)
(UPME, Sistema de Informacin electrico colombiano, 2013)
(OECD, 2013)
(Portafolio, 2014)
(Colombian Congress, 1994)
(Colombian Congress, 1994)
(Ministerio de Minas y Energia, 2013)
(Regulacin Sector Elctrico, 2012)
(Colombian Congress, 1994)
(UPME, Plan de Expansin de Referencia: Generacin-Transmisin 2014-2028, 2014)
(Ministerio de Minas y Energia, 2013)
(DANE, 2013)
(UPME, Sistema de Informacin electrico colombiano, 2013)
(XM, 2014)
(Ministerio de Minas y Energia, 2013)
(Fedesarrollo, 2013)

(UPME, Proyecciones de la demanda de energa en Colombia, ltima revisin a julio de 2014, 2014)

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