Annual Report 2013
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Annual Report Emgesa Annual Report and Financial Statements Table of Contents 4 • BOARD OF DIRECTORS 4 • MANAGEMENT 5 • SHAREHOLDING STRUCTURE 6 • LETTER TO SHAREHOLDERS 12 • MACROECONOMIC OUTLOOK 14 • SALES MANAGEMENT 32 • PRODUCTION MANAGEMENT 46 • FINANCIAL MANAGEMENT 56 • EL QUIMBO HYDROELECTRIC PLANT 76 • BUSINESS DEVELOPMENT MANAGEMENT 80 • REGULATORY MANAGEMENT 82 • EQUITY AND GENERAL SERVICES MANAGEMENT 88 • SUPPLY MANAGEMENT 92 • LEGAL MANAGEMENT 94 • HUMAN RESOURCE MANAGEMENT 106 • INSTITUTIONAL RELATIONS AND COMMUNICATIONS MANAGEMENT 120 • FINANCIAL STATEMENTS 3 Board of Directors Primary Member Alternate Member Joaquín Galindo Vélez Omar Serrano Rueda Lucio Rubio Díaz Carlos Alberto Luna Restrepo José Antonio Vargas Lleras Juan Manuel Pardo Gómez Sandra Stella Fonseca Arenas Ernesto Moreno Restrepo Ricardo Roa Barragán Álvaro Torres Macías Ricardo Bonilla González Jose Alejandro Herrera Lozano Luisa Fernanda Lafaurie Andrés López Valderrama CHAIRMAN OF THE BOARD Lucio Rubio Díaz FIRST ALTERNATE CHAIRMAN Carlos Alberto Luna Restrepo SECOND ALTERNATE CHAIRMAN Fernando Javier Gutiérrez Medina Management Chief Executive Officer Lucio Rubio Díaz Generation Manager Colombia Carlos Alberto Luna Cabrera Administration, Finance and Control Manager Aurelio Ricardo Bustilho de Oliveira Supply Manager Raúl Gonzalo Puentes Barrera Legal and Corporate Affairs Manager Andrés Caldas Rico Audit Manager Mauricio Carvajal García Business Development Manager Diana Marcela Jiménez Rodríguez Energy and Sales Manager Fernando Javier Gutiérrez Medina Production Manager Carlos Alberto Mancilla Flores Human Resources and Organizational Manager Rafael Carbonell Blanco Environment and Regulations Manager Omar Serrano Rueda Institutional Relations Manager María Celina Restrepo Santamaría Occupational Health and Safety Manager for Colombia Robert Camilo Torres Vega Equity and General Services Manager Ana Lucía Moreno Moreno ICT Systems and Telecommunications Manager Ana Patricia Delgado Meza 4 2013 EMGESA ANNUAL REPORT Shareholder Structure Sound and Reliable Controlling Group Enel Energy Europe S.R.L.(Italia) 92.1% Endesa S.A. (Spain) 21.6% 60.6% 60% Empresa Nacional Enersis S.A. (Chile) de Electricidad S.A. (Endesa Chile) 26.9% Economic: 21.6% Economic: 26.9% Other Minority Vote: 25.1% Vote: 31.3% Empresa de Energía de Bogotá Shareholders Economic Power: 48.5% Grupo Endesa Voting Power: 56.4% Economic: 51.5% Economic: 0.005% Vote: 43.6% Vote: 0.006% 5 Letter to Shareholders Dear Shareholders: We are pleased to present the Company's results and the most important management events in 2013. With regard to the macroeconomic environment of our business, it is important to point out that in 2013 Colombia began to see a deceleration in Gross Domestic Product (GDP) growth. This began to show in the second half of 2012, although the year ended on a positive growth trend. While the Colombian economy had been growing at rates of 5.9% and 4.9% in the first and second quarters of 2012, respectively, this deceleration was reflected in growth rates of 2.8% and 3.3% in the third and fourth quarters of the same year. The growth rate hit its lowest point in the third quarter of 2013 (2.6%). Since then, the Colombian economy's performance has been improving, with growth rates of 3.9% and 5.1% in the second and third quarter of 2013. The latter was above the expectations of most economic analysts in the country. In the last quarter of 2013, although we do not yet have officialata, d the Colombian economy is expected to have continued performing strongly. Therefore, the technical team at the Central Bank of Colombia did not change its estimated growth range for 2013, between 3.5% and 4.5%, with a growth rate of around 4% being the most likely. Unlike the conditions that lead to the Colombian economic trends in the last couple of quarters of 2012 and the first months of 2013, marked by circumstantial restrictions on investments in civil works and construction, as well as uncertainty and weakening performance of the main developed economies, in the second half of 2013 there was a change in these conditions that encourages more optimism regarding our macroeconomic environment. Firstly, it is important to note that since the second half of 2013 the performance of the Colombian economy has been accompanied by a stronger construction sector (which grew to a historic rate of 21.3% in the third quarter of 2013), as well as the positive growth rates in public spending and consumption in Colombian homes. Moreover, there have also been clear signs that the US and Eurozone economies are slowly recovering. The good news regarding positive Colombian GDP performance in the second half of 2013, as well as positive outlooks for 2014, are fed by other significant economic events of 2013. One such event is that in October unemployment dropped to 7.8%, the lowest since the National Bureau of Statistics (DANE) began recording this indicator. With inflation as low as 1.94% at the close of 2013, it is a clear sign of the responsible macroeconomic management by our authorities. Moreover, the devaluation in the Colombian peso against the US dollar (an 8.97% devaluation in the representative exchange rate between the close of 2012 and of 2013) benefited the industrial ectors which has been showing signs of stagnation in recent years. 6 2013 EMGESA ANNUAL REPORT LETTER TO SHAREHOLDERS Although there is a strong possibility that Colombian In 2013, total energy sales amounted to 16,090 GWh, economic growth will be around 4% in 2013, representing down 1.3% compared to 2012. Of these, 8,428 GWh were GDP growth similar to that of 2012, the energy demand on contract sales on the wholesale energy market, 4,523 were the National Electrical Grid (SIN) did not follow the GDP trend. spot market sales (Spot market, reconciliations and AGC In 2013, the energy demand grew 2.8%, lower than the 3.8% service), and 3,139 GWh were sales to Non-regulated Market seen in 2012. The slower growth in the Colombian energy customers. 119 GWh of the total sales were to our own demand in 2013 is largely explained by significantly lower power consumption. The decrease in total sales in 2013 growth in the mining and quarries exploitation sector (20.6% compared to 2012 is mainly explained by fewer sales to the in 2012 compared to 1.2% in 2013). It is also important to energy market, in turn explained by the aforementioned note that the manufacturing sector, which has a greater change in water levels. While the higher water levels in 2012 share in demand from the Non-Regulated Market (Major (compared to the historical average) permitted us to offer Customers), only grew 1.4% in 2013. greater quantities to the spot market, in 2013 the supply to In regard to energy supply in Colombia, 2013 was this market was reduced due to lower water levels. characterized for being a relatively dry year, with water levels at 91% of the historical average for reservoirs connected With regard to our sales management to end clients on to the National Electric Grid (SIN). Unlike in 2012 when the the Non-regulated Market, it should be noted that in 2013 National Electric Grid reservoir water levels were at 103% company sales in this segment rose 3.4% compared to compared to the historical average (still feeling the effects 2012. One significant event was the award of an energy of La Niña in the first half of 2012), in 2013, although ENSO- supply contract to Ecopetrol S.A. (the biggest company in neutral conditions occurred, the relatively dry conditions were Colombia and one of the five biggest oil companies in Latin caused by the occurrence at various stages of the year of the America) for the period from April 2013 to November 2018. subsidence phase of the Madden-Julian Oscillation which This deal could represent an estimated total consumption of reduced national rainfall. 5,613 GWh for the contract period. Average consumption is forecast at 360 GWh/year for the first three years and 1,511 As was to be expected, the differences in water levels GWh/year for the last three years of the contract. between 2012 and 2013 were reflected in the spot market price trends. In 2012, the average accumulated price was $ One achievement of our customer-focus designed to satisfy 116.0/kWh. This was lower than the $ 177.3/kWh recorded in customers with regard to services for the Non-regulated 2013. Market is the improvement obtained in 2013 in the Quality Satisfaction Index (ISCAL) in which we achieved 87.5%. This Amid the aforementioned changing evolution of energy consolidated improvements in the index over recent years, supply and demand, the Company's sales management in up from 82.7% in 2011 and 86.1% in 2012. This shows that 2013 translated into very positive results, most importantly, we are working hard to satisfy our end clients. The 87.5% there was 7.2% growth in our variable margin. At all times, result on the ISCAL represents the percentage of EMGESA we have complied with the company's strict corporate risk end clients that rated satisfaction with the service offered management policies and have focused on our goal to by our Company in the two highest positions on the scale: provide the country with a competitive and reliable energy satisfied and very satisfied. supply. 7 The strong performance in our sales management was (for execution of the SALACO project), the high plant availability index based on the effective and efficient management of our of the plants (96.37%), optimization of maintenance times and a high power generation plants. The availability of our generation load factor (80.31%). infrastructure continued to improve in 2013 compared to previous years, amounting to an average weighted availability Consistent with the positive results in sales and operational in the EMGESA power plants of 92.1%.