Empresas Públicas De Medellín E.S.P. (An Empresa Industrial Y Comercial Del Estado Organized Under the Laws of the Republic of Colombia)

OFFERING MEMORANDUM Ps.965,745,000,000

7.625% Senior Notes due 2024 Empresas Públicas de Medellín E.S.P. (an Empresa Industrial y Comercial del Estado organized under the laws of the Republic of Colombia)

The 7.625% senior notes due 2024 (the ‘‘Notes’’) are being offered by Empresas Públicas de Medellín E.S.P., an Empresa Industrial y Comercial del Estado (industrial and commercial government-owned company) organized under the laws of the Republic of Colombia (‘‘EPM’’). The Notes will be the senior, unconditional, unsecured and unsubordinated obligations of EPM and will rank equally with all of EPM’s existing and future senior unsecured External Indebtedness (defined herein) and senior to EPM’s existing and future debt that by its terms is junior and subordinated in right of payment to the Notes. The Notes will bear interest at the rate of 7.625% per year and will be payable annually in arrears on September 10 of each year, commencing on September 10, 2015. The Notes will mature on September 10, 2024. Payment of principal, interest and any other amounts in respect of the Notes will be made in U.S. dollars, as calculated by the Calculation Agent by converting the Colombian peso amounts due into U.S. dollars at the Settlement Rate on the applicable Rate Calculation Date. See ‘‘Description of the Notes — The Notes and the Indenture.’’ EPM has applied to list the Notes on the Official List of the Luxembourg Stock Exchange and to trade the Notes on the Euro MTF Market of such exchange. Currently, there is no public market for the Notes. This offering memorandum constitutes a prospectus for the purpose of the Luxembourg Law dated July 10, 2005 on prospectuses for securities, as amended. The issuance of the Notes has been approved by the General Directorate of Public Credit and National Treasury (Dirección General de Crédito Público y Tesoro Nacional) of the Ministry of Finance and Public Credit (Ministerio de Hacienda y Crédito Público or ‘‘MHCP’’). Investing in the Notes involves risks. See ‘‘Risk Factors’’ beginning on page 24.

The Notes have not been, and will not be registered under the U.S. Securities Act of 1933, as amended (the ‘‘Securities Act’’), or any state securities laws in the United States of America (the ‘‘United States’’ or ‘‘U.S.’’). Therefore, the Notes may not be offered or sold within the United States or to, or for the account or benefit of, any U.S. person unless the offer or sale would qualify for a registration exemption from the Securities Act and applicable state securities laws. Accordingly, the Notes are being offered and sold in the United States only to qualified institutional buyers (‘‘QIBs’’), in accordance with Rule 144A under the Securities Act, and outside the United States to non-U.S. persons in accordance with Regulation S under the Securities Act. Prospective purchasers of the Notes in the United States that are QIBs are hereby notified that EPM may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. The Notes have not been and will not be registered with the Colombian National Registry of Securities and Issuers (Registro Nacional de Valores y Emisores) maintained by the Superintendence of Finance of Colombia (Superintendencia Financiera de Colombia, or the ‘‘SFC’’) and will not be listed on the Colombia Stock Exchange (Bolsa de Valores de Colombia). Accordingly, the Notes are not being, and will not be, offered or sold in Colombia, except under circumstances which do not constitute a public offering of securities under, and which are in full compliance with, applicable Colombian securities laws and regulations. For a description of certain restrictions on transfers of the Notes, see ‘‘Transfer Restrictions.’’ Price: 100.000% plus accrued interest, if any, from September 10, 2014 Purchasers will make the payment of the Price of the Notes in U.S. dollars based on an exchange rate for the conversion of Colombian pesos into U.S. dollars of Ps.1,931.49 per U.S.$1.00, which is the Representative Market Rate in effect on September 3, 2014. The Notes will be sold in minimum denominations of Ps.5 million and in integral multiples of Ps.1 million in excess thereof.

The Notes will be ready for delivery in book-entry form only through the facilities of The Depository Trust Company (‘‘DTC’’) in New York, New York, for the accounts of its direct and indirect participants, including Euroclear Bank S.A./N.V., as operator of the Euroclear System (‘‘Euroclear’’), and Clearstream Banking, société anonyme (‘‘Clearstream’’), against payment therefor, on or about September 10, 2014. Joint Lead Managers and Joint Bookrunners BofA Merrill Lynch HSBC Itaú BBA The date of this offering memorandum is September 3, 2014. Prospective purchasers should rely only on the information contained in this offering memorandum. No person has been authorized to provide prospective purchasers with different information. If anyone provides prospective purchasers with different or inconsistent information, prospective purchasers should not rely on it. None of EPM or any of Merrill Lynch, Pierce, Fenner & Smith Incorporated, HSBC Securities (USA) Inc. and Itau BBA USA Securities, Inc. (collectively, the ‘‘Initial Purchasers’’) is making an offer to sell the Notes in any jurisdiction where the offer or sale is not permitted. Prospective purchasers should not assume that the information contained in this offering memorandum is accurate as of any date other than the date on the front cover of this offering memorandum. EPM’s business, financial condition, results of operations and prospects may have changed since that date. None of EPM or any of the Initial Purchasers makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this offering memorandum after the date hereof.

In this offering memorandum, unless otherwise specified or the context otherwise requires, (i) all references to the ‘‘Company,’’ ‘‘EPM,’’ ‘‘we,’’ ‘‘our’’ or similar terms are to Empresas Públicas de Medellín E.S.P., its consolidated subsidiaries and any consolidated joint venture, (ii) all references to the ‘‘Issuer’’ are to Empresas Públicas de Medellín E.S.P, and (iii) all references to ‘‘UNE’’ are to UNE EPM Telecomunicaciones S.A. and its subsidiaries.

TABLE OF CONTENTS

Enforcement of Foreign Judgments...... v Available Information...... vii Market Information and Other Statistical Information ...... viii Forward-Looking Statements...... ix Presentation of Certain Financial and Other Information...... xi Note Regarding Non-GAAP Financial Measures ...... xiii Summary...... 1 The Offering ...... 14 Summary Financial And Key Operating Data ...... 17 Risk Factors ...... 24 Foreign Exchange Controls ...... 45 Use of Proceeds ...... 48 Capitalization ...... 49 Selected Financial and Key Operating Data ...... 50 Management’s Discussion and Analysis of Financial Condition and Results of Operations ...... 59 Description of Other Financial Obligations ...... 108 Industry...... 115 Business ...... 155 Relationship With the Municipal Government ...... 210 Corporate Structure and Management...... 213 Description of the Notes ...... 220 Certain U.S. Federal Income Tax Consequences to U.S. Holders ...... 243 Certain Colombian Tax Considerations...... 246 Plan of Distribution ...... 247 Transfer Restrictions ...... 252 Legal Matters ...... 255 Independent Auditors ...... 256 Listing and General Information ...... 257 Index to Consolidated Financial Statements ...... F-1 ANNEX A Summary of Certain Differences Between Colombian Public Utilities Companies GAAP and IFRS...... A-1 ANNEX B Subsidiaries and Certain Affiliates ...... B-1 ANNEX C Certain Defined Terms ...... C-1 This offering memorandum has been prepared solely for use in connection with the proposed offering of the Notes described in this offering memorandum. This offering memorandum does not constitute an offer to the public generally to subscribe for or otherwise acquire the Notes. You are not authorized to distribute this offering memorandum to any person other than a prospective purchaser and any person retained to advise such prospective purchaser with respect to a purchase, and you are prohibited from disclosing any of its contents without EPM’s prior written consent. Each prospective purchaser, by accepting delivery of this offering memorandum, agrees to the foregoing stipulations and to make no electronic or physical copies of any documents referred to in this offering memorandum. This offering memorandum is based on information provided by EPM and other sources that EPM believes to be reliable. EPM takes responsibility for the information provided by EPM and contained in this offering memorandum as of the date hereof. This offering memorandum summarizes certain documents and other sources of information, and EPM refers prospective investors in the Notes to those sources for a more complete understanding of the information contained therein. Copies of certain documents referred to herein will be made available to prospective purchasers upon request to EPM or the Initial Purchasers. By purchasing the Notes, prospective purchasers will be deemed to have made the acknowledgments, representations, warranties and agreements described in this offering memorandum. The Notes are subject to restrictions on transfer and resale and may not be transferred or resold except as permitted under the Securities Act and applicable state securities laws pursuant to registration or exemption therefrom. The Notes will bear a legend referring to such restrictions. See ‘‘Transfer Restrictions.’’ As a prospective purchaser, you should be aware that you may be required to bear the financial risks of this investment for an indefinite period of time. Please refer to the sections in this offering memorandum entitled ‘‘Plan of Distribution’’ and ‘‘Transfer Restrictions.’’ In connection with the issue of the Notes, the Initial Purchasers or persons acting on behalf of the Initial Purchasers may over allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Initial Purchasers (or persons acting on behalf of the Initial Purchasers) will undertake any stabilization action. Any stabilization action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the allotment of the Notes. THE NOTES WILL BE SOLELY EPM’S OBLIGATIONS, AND THE HOLDERS OF THE NOTES WILL HAVE NO RECOURSE AGAINST EPM’S OWNER, THE CITY OF MEDELLÍN, AND/OR AGAINST ANY OF ITS OWNER’S OFFICERS, DIRECTORS, EMPLOYEES, MEMBERS OR MANAGERS WITH RESPECT TO EPM’S OBLIGATIONS UNDER THE NOTES AND THE INDENTURE GOVERNING THE NOTES. You hereby acknowledge that (1) you have been afforded an opportunity to request from EPM, and have received, all information considered by you to be necessary to verify the accuracy of, or to supplement, the information contained herein, (2) you have not relied on the Initial Purchasers or any person affiliated with the Initial Purchasers in connection with your independent verification of the accuracy of such information or your investment decision and (3) no person has been authorized to give any information or to make any representation concerning EPM or the Notes other than those as set forth herein. In making an investment decision, you must rely on your own examination of EPM’s business and the terms of this offering, including the merits and risks involved. You should not construe anything in this offering memorandum as legal, business or tax advice. Before investing in any Note, you should consult with your own business, legal, accounting, regulatory and tax advisors to determine the appropriateness and consequences of an investment in the Notes in your specific circumstances and arrive at an independent evaluation of the investment based upon, among other things, your own views as to the risks associated with the Notes or EPM. If your investment authority is subject to legal restrictions you should consult your legal advisors to determine whether and to what extent the Notes constitute legal investments for you. None of EPM or any of the Initial Purchasers is making any representation to any purchaser of the Notes regarding the legality of an investment in the Notes by such purchaser under any legal investment or similar laws or regulations.

ii The Initial Purchasers are not making any representation or warranty as to the accuracy or completeness of the information contained in this offering memorandum, and nothing contained in this offering memorandum is, or shall be relied upon as, a promise or representation, whether as to the past or the future. The Initial Purchasers assume no responsibility for the accuracy or completeness of the information contained in this offering memorandum. YOU SHOULD NOT DISTRIBUTE THE DOCUMENTS RELATING TO THE OFFERING OF THE NOTES IN COLOMBIA, OR THE INFORMATION CONTAINED THEREIN, EXCEPT UNDER CIRCUMSTANCES WHICH DO NOT CONSTITUTE A PUBLIC OFFERING OF SECURITIES UNDER APPLICABLE COLOMBIAN SECURITIES LAWS OR REGULATIONS. NEITHER SHOULD YOU USE SUCH DOCUMENTS AND INFORMATION IN CONNECTION WITH ANY PUBLIC OFFER OF THE NOTES IN COLOMBIA. THE INITIAL PURCHASERS HAVE AGREED NOT TO OFFER OR SELL THE NOTES IN COLOMBIA, EXCEPT UNDER CIRCUMSTANCES WHICH DO NOT CONSTITUTE A PUBLIC OFFERING OF SECURITIES UNDER APPLICABLE COLOMBIAN SECURITIES LAWS AND REGULATIONS. NEITHER THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION NOR ANY OTHER REGULATORY AUTHORITY IN THE UNITED STATES HAS APPROVED OR DISAPPROVED THE NOTES NOR HAS ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OR THE ACCURACY OR ADEQUACY OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

iii NOTICE TO NEW HAMPSHIRE INVESTORS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER RSA 421-B WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE OR CAUSE TO BE MADE TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

NOTICE TO PROSPECTIVE PURCHASERS IN THE EUROPEAN ECONOMIC AREA This offering memorandum has been prepared on the basis that all offers of the Notes will be made pursuant to an exemption under Directive 2003/71/EC, as amended, as implemented in member states of the European Economic Area (‘‘EEA’’), from the requirement to produce a prospectus for offers of the Notes. Accordingly, any person making or intending to make any offer within the EEA of the Notes which are the subject of the placement contemplated in this offering memorandum should only do so in circumstances in which no obligation arises for EPM or the Initial Purchasers to produce a prospectus for such offer. None of EPM or the Initial Purchasers has authorized, nor do any of them authorize, the making of any offer of Notes through any financial intermediary, other than offers made by the Initial Purchasers which constitute the final placement of the Notes contemplated in this offering memorandum.

NOTICE TO PROSPECTIVE PURCHASERS IN THE UNITED KINGDOM This offering memorandum is being distributed only to and directed only at (i) persons who are outside the United Kingdom, (ii) investment professionals falling within Article 19(5) of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, or (iii) those persons to whom it may otherwise lawfully be distributed (all such persons together being referred to as ‘‘relevant persons’’). This offering memorandum is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this offering memorandum relates is available only to relevant persons and will be engaged in only with relevant persons.

NOTICE TO RESIDENTS IN THE REPUBLIC OF COLOMBIA The Notes may not be offered, sold or negotiated in Colombia, except under circumstances which do not constitute a public offering of securities under applicable Colombian securities laws and regulations. Pursuant to Article 6.12.1.1.1 of Decree 2555 of July 15, 2010, issued by the MHCP, the issuance of the Notes in the terms set forth in this offering memorandum requires no notice to, or previous authorization from, the SFC.

NOTICE TO RESIDENTS OF PERU THE NOTES WILL NOT BE SUBJECT TO A PUBLIC OFFERING IN PERU. THEREFORE, THIS OFFERING MEMORANDUM HAS NOT BEEN, AND WILL NOT BE, REGISTERED WITH THE PERUVIAN SUPERINTENDENCY OF SECURITIES (SUPERINTENDENCIA DEL MERCADO DE VALORES) OR THE LIMA STOCK EXCHANGE. THIS OFFERING MEMORANDUM AND OTHER OFFERING MATERIALS RELATING TO THIS OFFERING ARE BEING SUPPLIED TO THOSE PERUVIAN INSTITUTIONAL INVESTORS WHO HAVE EXPRESSLY REQUESTED IT. SUCH MATERIALS ARE STRICTLY CONFIDENTIAL AND MAY NOT BE DISTRIBUTED TO ANY PERSON OR ENTITY OTHER THAN THE INTENDED RECIPIENTS.

iv ENFORCEMENT OF FOREIGN JUDGMENTS EPM is organized under the laws of Colombia. EPM’s directors and most of its executive officers and controlling persons named in this offering memorandum are residents of Colombia, and substantially all of their assets are located outside the United States. Although EPM will appoint an agent for service of process in the United States, it may not be possible for you to effect service of process within the United States upon such persons or EPM, including with respect to matters arising under federal securities laws of the United States, or to enforce against such persons or EPM judgments of U.S. courts based on the civil liability provisions of the U.S. federal securities laws. EPM has been advised by Mosquera Abogados Ltda., its Colombian counsel, that Colombian courts will enforce a U.S. judgment predicated on the U.S. securities laws through a procedural system known under Colombian law as exequatur. Colombian courts will enforce a foreign judgment, without reconsideration of the merits, only if the judgment satisfies the following requirements set forth in Articles 693 through 695 of the Colombian Civil Procedure Code (Código de Procedimiento Civil) which will be abrogated by Articles 605 through 607 of Law 1564 of 2012 (Código General del Proceso) subject to the entry into force of Law 1564 of 2012 in the terms of Article 627, paragraph 6 thereof: 1. a treaty or convention exists between Colombia and the country where the judgment was granted relating to the recognition and enforcement of foreign judgments or, in the absence of such treaty or convention, there is reciprocity in the recognition of foreign jugments of the same nature between the courts of the relevant jurisdiction and the courts of Colombia; 2. the foreign judgment does not relate to ‘‘in rem’’ rights vested in assets that were located in Colombia at the time the suit was filed; 3. the foreign judgment does not contravene or conflict with Colombian laws relating to public order other than those governing judicial procedures; 4. the foreign judgment, in accordance with the laws of the country in which it was rendered, is final and not subject to appeal; 5. a duly certified and legalized copy of the judgment (together with an official translation into Spanish if the judgment is issued in a foreign language) has been presented to the Supreme Court of Colombia (Article 606 of law 1564 of 2012 only requires a legalized copy of the foreign judgment); 6. the foreign judgment does not refer to any matter upon which Colombian courts have exclusive jurisdiction; 7. no proceedings are pending in Colombia with respect to the same cause of action, and no final judgment has been awarded in any proceeding in Colombia on the same subject matter and between the same parties; 8. in the proceedings commenced before the foreign court that issued the judgment, the defendant was served process in accordance with the law of such jurisdiction and in a manner reasonably designed to give the defendant an opportunity to defend itself against the action; and 9. the legal requirements pertaining to the exequatur proceedings have been observed. Furthermore, even if you comply with all the requirements to obtain an exequatur, if the Colombian Superintendence of Domiciliary Public Utilities (Superintendencia de Servicios Públicos Domiciliarios or ‘‘SSPD’’) takes possession of EPM’s business or if, through any other means, EPM enters into bankruptcy, all judgments, including the exequatur, collecting activities, foreclosures and repossession of property will be subject to an automatic stay. EPM cannot predict how long this automatic stay would last, nor whether or when you would be able to enforce the exequatur in case of bankruptcy or administrative intervention. In addition, under Colombian law, if the enforcement of a judgment against any of the assets or properties that EPM uses in the provision of public utilities in Colombia could render EPM unable to provide the electricity, water, sewage, waste management or gas distribution services as required by law, and if such service is considered either critical to preserve the public or economic order or necessary to avoid damages to users or third parties, the SSPD may take possession and control of EPM’s management and operations.

v The United States and Colombia do not have a bilateral treaty providing for automatic reciprocal recognition and enforcement of judgments in civil and commercial matters. The Supreme Court of Colombia has in the past accepted that reciprocity exists when it has been proven that either a U.S. court has enforced a Colombian judgment or that a U.S. court would enforce a foreign judgment, including a judgment issued by a Colombian court. However, such enforceability decisions are considered by Colombian courts on a case-by-case basis. Proceedings for execution of a money judgment by attachment or execution against any assets or property located in Colombia would be within the exclusive jurisdiction of Colombian courts. In the course of the exequatur proceedings, both the plaintiff and the defendant are afforded the opportunity to request that evidence be collected in connection with the requirements listed above; also, before the judgment is rendered, each party may file final allegations in support of such party’s position. See ‘‘Risk Factors—Risk Factors Relating to the Republic of Colombia—It may be difficult or impossible to enforce judgements of courts of the United States and other jurisdictions against EPM, or any of EPM’s directors or officers or against the City of Medellin.’’

vi AVAILABLE INFORMATION EPM will make available to the prospective holders of the Notes at the offices of EPM, copies of the Indenture, the city council ordinances pursuant to which EPM was incorporated, the by-laws and all other agreements and documents referred to in this offering memorandum and EPM’s historical financial information for each of the three fiscal years ended December 31, 2013 and the six months ended June 30, 2014 and 2013, as included in this offering memorandum. So long as any of the Notes are ‘‘restricted securities’’ within the meaning of Rule 144(a)(3) under the Securities Act, holders of such restricted securities, and prospective purchasers (as designated by such holders) of such restricted securities, will have the right to obtain upon request any information required to be provided by Rule 144A(d)(4) under the Securities Act during any period in which EPM is not subject to and in compliance with Section 13 or 15(d) of the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’), or EPM is not exempt from such reporting requirements pursuant to and in compliance with Rule 12g3-2(b) under the Exchange Act.

vii MARKET INFORMATION AND OTHER STATISTICAL INFORMATION EPM obtained certain information contained in this offering memorandum regarding the electricity, gas, water, waste management and telecommunications industries in Colombia and the other countries where EPM operates and EPM’s participation in these industries from third-party sources believed to be reliable, including, among others, the Colombian Energy and Gas Regulatory Commission (Comisión de Regulación de Energía y Gas or ‘‘CREG’’), the Water and Sanitation Regulation Commission (Comisión de Regulación de Agua Potable y Sanemiento Básico or ‘‘CRA’’), the Colombian Mining and Energy Planning Unit (Unidad de Planeación Minero Energética or ‘‘UPME’’), the National Hydrocarbon Agency (Agencia Nacional de Hidrocarburos or ‘‘ANH’’), the Colombian Ministry of Mines and Energy (Ministerio de Minas y Energía or ‘‘MME’’), the Colombian Ministry of Information and Communications Technologies (Ministerio de las Tecnologías de la Información y las Comunicaciones or ‘‘MTIC’’), the Colombian Communications Regulation Commission (Comisión de Regulación de Comunicaciones or ‘‘CRC’’), the Colombian National Television Commission (Comisión Nacional de Televisión or ‘‘CNTV’’), which ceased to exist in 2011 and was replaced by the Colombian National Television Authority (Autoridad Nacional de Televisión or ‘‘ANTV’’) and the SSPD. None of EPM or any of the Initial Purchasers has independently verified such information and data and, therefore, they cannot assure you that such information is accurate or complete. EPM takes responsibility for the correct extraction and reproduction of such information.

viii FORWARD-LOOKING STATEMENTS This offering memorandum contains statements that constitute forward-looking statements within the meaning of the U.S. securities laws. Forward-looking statements include statements preceded by, followed by or that include expressions such as ‘‘believes,’’ ‘‘expects,’’ ‘‘intends,’’ ‘‘plans,’’ ‘‘projects,’’ ‘‘estimates,’’ or ‘‘anticipates’’ and variations of these words or similar expressions (or the negative versions of any such words) and appear in, among others, the sections in this offering memorandum entitled ‘‘Summary,’’ ‘‘Risk Factors,’’ ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations,’’ and ‘‘Business.’’ Although EPM believes that these forward-looking statements are based upon reasonable assumptions, these statements are subject to several risks and uncertainties and are made in light of information currently available to EPM. Forward-looking statements include, among others, statements regarding EPM’s intent, belief, plans, objectives or current or future expectations, as well as those of their directors or executive officers with respect to, but not limited to: • corporate strategy, plans, objectives or goals; • ability to realize the benefits of its acquisitions, investments and capital expenditures; • ability to complete large infrastructure and other projects in which EPM is or may be involved; • plans and prospects regarding its business units and international operations; • future operating income, net income (loss), financial position, cash flows, capital expenditures, dividends, capital structure or other financial items or ratios; • future growth, international expansion and development of the energy, gas, water and telecommunications industries; • expected demand for EPM’s services; • EPM’s future economic performance or that of Colombia, Chile, Costa Rica, El Salvador, Guatemala, Mexico, Panama, the United States and other markets, including emerging markets, that, directly or indirectly, can have an influence over EPM’s performance; • assumptions underlying any such statements; and • other statements contained in this offering memorandum regarding matters that are not historical facts. Such forward-looking statements include expectations with respect to EPM’s businesses following the completion of the offering and speak only as of the date of this offering memorandum. None of EPM or the Initial Purchasers can assure prospective purchasers of the Notes that these forward-looking statements, estimates, assumptions or intentions will prove to be correct or that the information, interpretations and understandings on which they are based will prove to be valid. The actual results of EPM’s forward-looking statements, estimates, assumptions or intentions may depend on factors beyond EPM’s control. None of EPM or the Initial Purchasers undertakes any obligation to release publicly any revisions to such forward-looking statements after completion of this offering to reflect later events or circumstances or to reflect the occurrence of unanticipated events even if new information, future events or other circumstances have made them incorrect or misleading. In light of the risks and uncertainties underlying the forward-looking statements, there can be no assurance that the events described or implied in the forward-looking statements contained in this offering memorandum will in fact transpire. Accordingly, readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date they were made. These cautionary statements should be considered in connection with any written or oral forward-looking statements that EPM or the Initial Purchasers may issue or make in the future. You should understand that the following important factors, in addition to those discussed about and in this offering memorandum, including those appearing in the sections entitled ‘‘Summary,’’ ‘‘Risk Factors,’’ ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations,’’ ‘‘Industry,’’ and ‘‘Business,’’ could affect EPM’s future results and could cause results to differ materially from those expressed in such forward-looking statements: • fluctuations in the value of the Colombian peso and/or the currencies of the countries where EPM operates;

ix • changes in the applicable laws and governmental regulations related to EPM, its activities and the services it renders; • fluctuations in import tariffs and interest rates in the markets where EPM operates; • EPM’s ability to retain certain personnel and hire additional key personnel; • high inflation in the countries where EPM operates; • EPM’s ability to avoid labor disputes, including strikes; • general economic, business, political, demographic, social and other conditions in Colombia, Colombia’s main trade partner countries, any of the countries where EPM operates, and in other emerging market countries; • the effect of world events, climate and extreme weather events, including floods and water shortages, or variations and natural disasters in Colombia or any of the countries where EPM operates; • market or other trends affecting EPM’s businesses, financial condition or results of operations; • EPM’s ability to identify and consummate acquisitions, joint ventures and strategic alliances and to realize the benefits of those acquisitions, joint ventures and strategic alliances; • EPM’s ability to complete new projects or make capital investments and realize the benefits from those new projects or capital investments; • EPM’s ability to exercise control over its material subsidiaries and the payment of dividends by EPM’s subsidiaries and related companies; • the results of the litigation proceedings in which EPM is currently involved or in which EPM may be involved in the future; • EPM’s ability to generate cash and the cost and availability of the financing required to fund its operations and capital expenditures; • the business skills and judgment of EPM’s personnel, including their expectations and estimates concerning EPM’s future financial performance; • the enactment of new and stricter regulations, including judicial or administrative decisions setting forth stricter interpretation of existing regulations, in the markets where EPM operates or offers its services; • the future impact of competition and regulations in the markets where EPM operates or offers its services; • EPM’s ability to maintain its existing concessions and licenses, when applicable, or to obtain new concessions or licenses that may be required to provide its services; • business interruptions or impairment of EPM’s assets; • future policies and resolutions adopted by the City of Medellín (‘‘Medellín’’), as the sole owner of EPM; • the potential for acts of terrorism, vandalism, wars or embargoes or other similar events that may affect the integrity of EPM’s assets or infrastructure; • extreme weather conditions affecting the areas where EPM operates; and • the current or future policies and actions of the government of Medellín in respect to the capitalization or change of control of government owned companies. In light of such limitations, you should not make any investment decision on the basis of the forward-looking statements contained herein.

x PRESENTATION OF CERTAIN FINANCIAL AND OTHER INFORMATION In this offering memorandum, (i) references to ‘‘dollars,’’ ‘‘U.S. dollars’’ and ‘‘U.S.$’’ are to the currency of the United States, (ii) references to ‘‘Colombian pesos,’’ and ‘‘Ps.’’ are to the currency of Colombia, (iii) references to ‘‘GTQ$’’ and ‘‘Guatemalan quetzals’’ are to the currency of Guatemala, (iv) references to ‘‘Mexican Pesos’’ are to the currency of Mexico, and (v) references to ‘‘Balboas’’ are to the currency of Panama. The meaning of the word billion in Spanish is different from that in American English. In the Spanish language, as used in Colombia, a billion is a million millions, which means 1,000,000,000,000. On the other hand, in American English a billion is a thousand millions, which means 1,000,000,000. In this offering memorandum EPM has not used the word billion in connection with figures denominated in Colombian pesos and, therefore, the meaning of that word as used in American English. Certain figures included in this offering memorandum have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an exact arithmetic aggregation of the numbers that precede them. EPM maintains its books and records in Colombian pesos. This offering memorandum contains (i) EPM’s consolidated financial statements as of December 31, 2012 and for the two years ended December 31, 2012, which were audited by PricewaterhouseCoopers Ltda, (ii) EPM’s consolidated financial statements as of and for the year ended December 31, 2013, which were audited by Deloitte & Touche Ltda, and (iii) EPM’s unaudited interim condensed consolidated financial statements as of June 30, 2014 and for the six months ended June 30, 2014 and 2013. EPM prepares its consolidated financial statements in Colombian pesos in accordance with generally accepted accounting principles in Colombia and instructions issued by the General Accounting Office of the Nation in Colombia (Contaduría General de la Nación or ‘‘CAO’’) (such standards, collectively, ‘‘Colombian Public Utilities Companies GAAP’’). Colombian Public Utilities Companies GAAP differs in certain material aspects from generally accepted accounting principles in the United States (‘‘U.S. GAAP’’) and from International Financial Reporting Standards (‘‘IFRS’’), as issued by the International Accounting Standards Board (‘‘IASB’’). Certain differences between Colombian Public Utilities Companies GAAP and IFRS, are discussed in ‘‘Annex A — Summary of Certain Differences Between Colombian Public Utilities Companies GAAP and IFRS.’’ On July 13, 2009, the Colombian congress enacted Law No. 1314, which was subsequently signed by the Colombian President. Law No. 1314, which is intended to further promote the internationalization of the Colombian economy, regulates the accounting, reporting and information assurance principles and standards that are generally accepted in Colombia (‘‘Colombian GAAP’’) and requires the gradual convergence of Colombian GAAP into IFRS, as issued by the IASB. In 2012, the mandate contained in Law No. 1314 was further developed through Decree No. 2784 and a deadline was set for the adoption of IFRS by Group 1 government-owned companies (such as EPM). In 2013, the technical regulatory financial reporting framework applicable to Group 1 government-owned companies contained in the Annex to Decree No. 2784 was partially amended and the CAO, through Resolution 743 of 2013, incorporated the rules and regulations set forth in the Annex to Decree No. 2784 of 2012 as an integral part of the Public Accounting Regime, applicable to Group 1 government-owned companies, and set December 31, 2015 as the IFRS reporting date deadline. Recently, EPM’s management approved a project to early adopt IFRS as issued by the IASB and set December 31, 2014 as its reporting date under IFRS, this early adoption is permitted by current regulations. See ‘‘Risk Factors — We are in the process of adopting new accounting standards, which may have a material impact on our consolidated financial statements.’’ U.S. dollar amounts presented in this offering memorandum have been translated from Colombian peso amounts solely for the convenience of the reader. No representation is being made that the peso or dollar amounts shown in this offering memorandum could have been or could be converted into U.S. dollars or Colombian pesos at the rates shown in this offering memorandum or at any other rate. The Federal Reserve Bank of New York does not report a buying rate for Colombian pesos. The translation of amounts expressed in Colombian pesos as of a specified date at the then prevailing exchange rate may result in presentation of U.S. dollar amounts that differ from U.S. dollar amounts that would have been obtained by translating Colombian pesos as of another specified date. Unless otherwise noted in this offering memorandum, all figures corresponding to 2013 have been translated into U.S. dollars at the year-end exchange rate of Ps.1,926.83 per U.S. $1.00, which was the rate published by the Colombian Central Bank (Banco de la República or the ‘‘Central Bank’’) as certified by the SFC. Colombian peso figures corresponding to June 30, 2014 have been translated into U.S. dollars at the exchange rate of Ps.1,881.19 per U.S.$1.00, which was the published rate at June 30, 2014 by the Central Bank as certified by the SFC. On September 2, 2014, the exchange rate between the Colombian peso and the U.S. dollar published by the Central Bank was Ps.1,918.62 per U.S.$1.00.

xi Furthermore, fluctuations in exchange rates significantly affect the comparability of the financial figures presented in U.S. dollars throughout this offering memorandum. The exchange rate between the Colombian peso and the U.S. dollar has had significant fluctuations during 2011, 2012, 2013 and the six months ended June 30, 2014. See ‘‘Foreign Exchange Controls.’’ Colombia experienced annual inflation rates of 3.73%, 2.44% and 1.94% for the years ended December 31, 2011, 2012 and 2013, respectively. Currently, neither the SFC nor Colombian Public Utilities Companies GAAP requires EPM to restate its financial statements, and therefore restated financial statements have not been used throughout this offering memorandum.

xii NOTE REGARDING NON-GAAP FINANCIAL MEASURES EPM includes certain non-GAAP financial measures in this offering memorandum, including Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA Margin. EPM believes that Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA Margin are useful for the purpose of understanding its financial performance as well as its ability to satisfy principal and interest payment obligations under its indebtedness and to fund capital expenditures and operation requirements. Even though commonly used as financial indicators in Colombia and abroad, Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA Margin are not measures of financial performance under Colombian Public Utilities Companies GAAP or IFRS. EPM calculates Consolidated Adjusted EBITDA by adding (i) depreciation and amortization costs included in the calculation of gross profit and (ii) provision, depreciation and amortization expenses included in the calculation of operating income (including (a) provisions for doubtful receivables, inventories, property, plant and equipment, (b) non-cash pension plan expense resulting from increases in pension contributions due to changes in actuarial calculations, and (c) other expenses which do not constitute cash charges), to operating income. EPM discloses Consolidated Adjusted EBITDA in this offering memorandum as its management believes, in accordance with industry practices, that these non-cash charges have similar effects as depreciation and amortization. EPM’s calculation of Consolidated Adjusted EBITDA excludes certain expenses that may be included in calculations of Consolidated Adjusted EBITDA provided by other companies and thus our computation of Consolidated Adjusted EBITDA may not be comparable to other similarly titled measures by other companies. In addition, EPM calculates the Adjusted EBITDA for each business unit (and each business segment of each business unit) (i) making the same adjustments to operating income of the relevant entities of each business unit (or each business segment of each business unit, as applicable) as the adjustments described in the preceding sentence, (ii) adding the Adjusted EBITDA of the relevant entities of each business unit (or each business segment of each business unit, as applicable), and (iii) adjusting for any applicable intercompany eliminations made in accordance with Colombian Public Utilities Companies GAAP for the consolidation of accounts. As a result of such intercompany eliminations, the sum of the Adjusted EBITDA of each business unit may not be equal to EPM’s Consolidated Adjusted EBITDA and the sum of the Adjusted EBITDA of each business segment may not be equal to the Adjusted EBITDA of the relevant business unit. Consolidated Adjusted EBITDA is calculated using EPM’s consolidated statements of financial, economic and social activities. Because Consolidated Adjusted EBITDA is calculated on the basis of EPM’s consolidated operating income rather than on the basis of EPM’s consolidated net income before taxes, it does not include reductions for minority interests in EPM’s less-than-wholly owned fully consolidated subsidiaries (i.e., Central Hidroeléctrica de Caldas S.A. E.S.P. (‘‘CHEC’’), Empresa de Energía del Quindío S.A. E.S.P. (‘‘EdeQ’’), Hidroecológica del Teribe S.A. (‘‘HET’’), Edatel S.A. E.S.P. (‘‘Edatel’’), Empresa de Telecomunicaciones de Pereira S.A. (‘‘ETP’’), Central Eléctricas del Norte de Santander S.A. E.S.P. (‘‘CENS’’) and Electrificadora de Santander S.A. E.S.P. (‘‘ESSA’’)). Minority interest represented 4.25% and 4.06% of operating income for the six months ended June 30, 2014 and the year ended December 31, 2013, respectively. EPM calculates Consolidated Adjusted EBITDA Margin by dividing Consolidated Adjusted EBITDA by revenues. In the course of its business and in the presentation of financial information, EPM relies on Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA Margin as indicators to assess operating performance. Since Consolidated Adjusted EBITDA excludes interest, tax, depreciation, amortization and allowances, it provides an indicator of general economic performance that is not affected by fluctuations of interest rates or effective income tax rates, provisions or levels of depreciation and amortization. Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA Margin are provided for information purposes only and should not be considered in isolation, or as a substitute for net income, as a measure of operating performance, as a substitute for cash flows from operations or as a measure of liquidity. Consolidated Adjusted EBITDA has material limitations as an analytical tool that impair its value as a measure of a company’s overall profitability since it does not address certain financial figures. Consolidated Adjusted EBITDA, Consolidated Adjusted EBITDA Margin and other non-GAAP financial measures included in this offering are not a substitute for the GAAP measures of financial performance. For a reconciliation of Consolidated Adjusted EBITDA to operating income, see ‘‘Selected Financial and Key Operating Data.’’

xiii SUMMARY This summary highlights information contained elsewhere in this offering memorandum. It does not contain all the information that you may consider important in making your investment decision. Therefore, you should read the entire offering memorandum carefully, including in particular the ‘‘Risk Factors’’section and the financial statements and the related notes thereto appearing elsewhere in this offering memorandum. For a list of certain defined technical and regulatory terms used in this offering memorandum, see ‘‘Annex C — Certain Defined Terms.’’

EPM EPM is an industrial and commercial government-owned company (Empresa Industrial y Comercial del Estado) founded in Medellín, Colombia, in 1955 to provide public utility services. Through EPM’s Business Units (Unidades de Negocios or ‘‘BUs’’), (i) the Energy BU and (ii) the Water BU, EPM currently participates in the generation, transmission, distribution and commercialization of electricity; distribution and commercialization of natural gas; and water, sewage and waste management businesses, with operations in Colombia and several other countries in Latin America. In addition, EPM participates in the telecommunications sector through its non-controlling equity interest in UNE EPM Telecomunicaciones S.A. (‘‘UNE’’). Until the consummation of the UNE-Millicom Merger (as defined below), EPM had a 100% equity interest in UNE and operated UNE and its subsidiaries as an independent BU. However, following the UNE-Millicom Merger and the transfer of EPM’s control over the business affairs of UNE to Millicom International Cellular S.A. (‘‘Millicom’’), the telecommunications business is now operated independently from EPM. Beginning on August 1, 2014, EPM ceased consolidating the assets, liabilities and results of operations of UNE with EPM’s assets, liabilities and results of operations. In future periods, EPM expects to record its investment in UNE under the equity method. See ‘‘Recent Developments — UNE-Millicom Merger.’’ Operations in Colombia. EPM is Colombia’s largest public utility services company, based on 2013 revenues, and the second largest company overall, based on total assets as of December 31, 2013. EPM provides its services principally in Medellín, Colombia’s second largest city, as well as in surrounding localities which are spread along the Aburrá Valley (Valle de Aburrá). EPM also operates in Colombia’s capital and largest city, Bogotá, as well as in the Colombian cities of Manizales, Armenia, Pereira, Bucaramanga, Cúcuta, Quibdó, Cartagena and Cali. International Operations. EPM currently provides electricity transmission, distribution and commercialization services through subsidiaries in El Salvador, Guatemala and Panama. EPM also provides waste water management services through subsidiaries in Mexico. In addition, EPM has recently completed the development of a wind power plant project in Chile and announced the establishment of a branch office in Costa Rica. See ‘‘— Recent Developments.’’ EPM is also developing a hydroelectric power plant project in Panama, which is expected to be operational in 2015. See ‘‘— Brief Summary of Ongoing Significant Projects.’’ The following table sets forth EPM’s consolidated revenues, net income and Consolidated Adjusted EBITDA for the years ended December 31, 2013, 2012 and 2011 and for the six months ended June 30, 2014 and 2013:

(1) For the definition of Consolidated Adjusted EBITDA, see ‘‘Note Regarding Non-GAAP Financial Measures.’’ EPM’s calculation of Consolidated Adjusted EBITDA may not be comparable to the Consolidated Adjusted EBITDA provided by other companies. As a company engaged in the provision of public utility services, EPM is subject to the regulatory regimes applicable to public service companies in Colombia and the other countries where EPM operates. Among other things, customer prices and returns on investment in EPM’s regulated energy, water and waste management services are in many instances fixed in accordance with regulations set forth by the CREG or the CRA in Colombia and regulatory agencies of the other countries where EPM operates. For more information on the regulatory regimes applicable to EPM, see ‘‘Industry.’’ EPM’s principal executive office is located at Carrera 58 No 42-125, Medellín, Colombia, and its investors relations telephone number is +57.4.380.5147 or +57.4.380.5871 and e-mail is [email protected]. EPM’s

1 website address is www.epm.com.co. Information contained on, or accessible through, EPM’s website is not incorporated in this offering memorandum and you should not consider any such information to be part of this offering memorandum.

Summary Structure of EPM’s Business Units and Segments EPM’s business is currently divided into two BUs: (i) the Energy BU and (ii) the Water BU. The following chart summarizes EPM’s BUs and their respective segments.

The following tables set forth (i) the consolidated revenues generated by each of EPM’s BUs and (ii) the revenues generated by each of EPM’s BUs as a percentage of EPM’s total revenues, in each case for the periods indicated: For the Six Months Ended June 30 For the Year Ended December 31, 2014 2013 2013 2012 2011 (Ps. in millions) Energy(1) ...... Ps.5,147,637 Ps.4,811,975 Ps. 9,728,411 Ps. 9,420,409 Ps. 8,722,202 Water (2) ...... 496,532 367,126 803,537 725,390 702,825 Other(3) ...... 36,391 33,324 80,737 100,453 12,730 Telecommunications(4) ...... 1,376,637 1,204,240 2,524,463 2,346,916 2,109,702 Eliminations(5)...... (68,171) (59,119) (150,682) (94,318) (39,439) Total revenues...... Ps.6,989,026 Ps.6,357,546 Ps.12,986,466 Ps.12,498,850 Ps.11,508,020

For the Six Months Ended June 30, For the Year Ended December 31, 2014 2013 2013 2012 2011 (Percentage of EPM’s total net revenues) Energy(1) ...... 73.7% 75.7% 74.9% 75.4% 75.8% Water(2) ...... 7.1% 5.8% 6.2% 5.8% 6.1% Other(3) ...... 0.5% 0.5% 0.6% 0.8% 0.1% Telecommunications(4) ...... 19.7% 18.9% 19.4% 18.8% 18.3% Eliminations(5)...... -1.0% -0.9% -1.2% -0.8% -0.3% Total ...... 100.0% 100.0% 100.0% 100.0% 100.0%

2 (4) Includes Local Telephone, Long-Distance, value-added, carrier and interconnection services provided by UNE. Beginning on August 1, 2014, EPM ceased consolidating the assets, liabilities and results of operations of UNE with EPM’s assets, liabilities and results of operations. In future periods, EPM expects to record its investment in UNE under the equity method. See ‘‘— Recent Developments — UNE-Millicom Merger.’’ (5) See ‘‘Note Regarding Non-GAAP Financial Measures.’’ For the six months ended June 30, 2014, EPM’s Consolidated Adjusted EBITDA was Ps.2,050,064 million, with the Adjusted EBITDA generated by the Energy BU representing 73.6%, the Adjusted EBITDA generated by the Water BU representing 10.0%, and the Adjusted EBITDA generated by the Telecommunications BU representing 17.0% of such Consolidated Adjusted EBITDA, respectively. For the definition of Consolidated Adjusted EBITDA, see ‘‘Note Regarding Non-GAAP Financial Measures.’’ EPM’s calculation of Consolidated Adjusted EBITDA may not be comparable to the Consolidated Adjusted EBITDA provided by other companies. For a reconciliation of Consolidated Adjusted EBITDA to operating income, see ‘‘Selected Financial and Key Operating Data.’’

The Energy BU EPM’s energy BU (‘‘Energy BU’’) comprises three segments: (i) electricity generation, (ii) electricity transmission, distribution, and commercialization, and (iii) natural gas distribution and commercialization. See ‘‘Business — Energy BU.’’ EPM operates its Energy BU directly and indirectly through several subsidiaries. The following chart summarizes the relevant entities of each segment in the Energy BU.

3 The following tables set forth (i) the consolidated revenues generated by each segment in the Energy BU and (ii) the gross revenues generated by each segment of the Energy BU as a percentage of the Energy BU’s total revenues, in each case for the periods indicated:

For the Six Months Ended June 30, For the Year Ended December 31, 2014 2013 2013 2012 2011 (Ps. in millions) Electricity generation ...... Ps.1,373,859 Ps.1,328,161 Ps.2,700,029 Ps.2,787,388 Ps.2,199,470 Electricity transmission, distribution and commercialization ...... 4,269,700 3,839,262 7,899,020 7,385,579 6,708,682 Natural gas distribution and commercialization ...... 272,350 262,162 564,894 448,551 405,694 Eliminations ...... (751,288) (575,405) (1,350,340) (1,097,677) (570,654) Total gross revenues...... 5,164,621 4,854,180 9,813,603 9,523,841 8,743,192 (-) Discounts(1) ...... 16,984 42,205 85,192 103,432 20,990 Total revenues, net ...... Ps.5,147,637 Ps.4,811,975 Ps.9,728,411 Ps.9,420,409 Ps.8,722,202

For the Six Months Ended June 30, For the Year Ended December 31, 2014 2013 2013 2012 2011 (Percentage of EPM’s Energy BU total revenues) Electricity generation ...... 26.7% 27.6% 27.8% 29.6% 25.2% Electricity transmission, distribution and commercialization ...... 82.9% 79.8% 81.2% 78.4% 76.9% Natural gas distribution and commercialization ...... 5.3% 5.4% 5.8% 4.8% 4.7% Eliminations ...... -14.6% -12.0% -13.9% -11.7% -6.5% Total gross revenues ...... 100.3% 100.9% 100.9% 101.1% 100.2% (-) Discounts(1) ...... 0.3% 0.9% 0.9% 1.1% 0.2% Total ...... 100.0% 100.0% 100.0% 100.0% 100.0%

(1) For a description of ‘‘Discounts’’ see ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Description of Principal Line Items — Discounts.’’ For the six months ended June 30, 2014, the Energy BU’s total Adjusted EBITDA was Ps.1,508,209, with the Adjusted EBITDA generated by the electricity generation business segment representing 47.9%, the Adjusted EBITDA generated by the electricity transmission, distribution and commercialization business segment representing 49.7%, and the Adjusted EBITDA generated by the natural gas distribution and commercialization business segment representing 2.4% of such total EBITDA, respectively. See ‘‘Note Regarding Non-GAAP Financial Measures.’’ EPM’s calculation of Consolidated Adjusted EBITDA may not be comparable to the Consolidated Adjusted EBITDA provided by other companies. For a reconciliation of Consolidated Adjusted EBITDA to operating income, see ‘‘Selected Financial and Key Operating Data.’’

Electricity Generation Through this segment, EPM generates electricity for its own downstream business, as well as for other electricity companies and large industrial customers. Any remaining generated electricity is sold on the Energy Spot Market, and any electricity contracted for but not generated by EPM is generally purchased from the Energy Spot Market. According to Compañía de Expertos de Mercados S.A. E.S.P. (‘‘XM’’), the entity responsible for planning and coordinating the operations in the Colombian interconnected system, EPM was the largest electricity generator in Colombia in terms of electricity generated and installed electricity generation capacity as of June 30, 2014. As of June 30, 2014, EPM had an installed electricity generation capacity of 3,579 MW, representing approximately 23.9% of the total installed electricity generation capacity in Colombia.

4 EPM also owns 13.1% of ISAGEN S.A. E.S.P (‘‘ISAGEN’’), a Colombian electricity generation company controlled by the Colombian Government. For the year ended December 31, 2013 and the six months ended June 30, 2014, EPM recognized Ps.24,460 million and Ps.28,131 million, respectively, in income from its investment in ISAGEN. EPM has recently completed the development of a wind power plant project in Chile and announced the establishment of a branch office in Costa Rica. See ‘‘— Recent Developments.’’

Electricity Transmission, Distribution and Commercialization The electricity transmission, distribution and commercialization segment consist of electricity transmission and distribution services and sales to end-users, including residential, commercial and small and medium sized industrial customers. EPM participates in the electricity transmission business in Colombia directly and indirectly through its subsidiaries and investments. According to XM, as of December 31, 2013, EPM’s electricity transmission network accounted for 25.7% of the Colombian Regional Transmission System (Sistema de Transmisión Regional) (‘‘STR’’) and 8.0% of the Colombian National Transmission System (Sistema de Transmisión Nacional) (‘‘STN’’). In addition, EPM owns 10.2% of Interconexión Eléctrica S.A. E.S.P. (‘‘ISA’’), Colombia’s largest electricity transmission company which is controlled by the Colombian Government. For the year ended December 31, 2013 and the six months ended June 30, 2014, EPM recognized Ps.21,170 million and Ps.24,098 million, respectively, in income from its investment in ISA. EPM participates in the electricity distribution business in Colombia directly and indirectly through its subsidiaries. As of June 30, 2014, EPM was the largest electricity commercialization group in Colombia, serving approximately 23.8% of Colombia’s commercialization market with 3,740,621 customers, of which 2,022,154 were located in the Department of Antioquia. EPM currently provides electricity transmission services in Guatemala through its subsidiary Transportista Eléctrica Centroamericana S.A. (‘‘Trelec’’). EPM currently provides electricity distribution and commercialization services in El Salvador, Guatemala and Panama through several subsidiaries.

Natural Gas Distribution and Commercialization EPM participates in the natural gas distribution and commercialization business in several cities of Antioquia, being the sole natural gas distributor in the Aburrá Valley. EPM has three business lines for the national gas distribution segment organized according to customer base: (i) Regulated Market, (ii) Unregulated Market, and (iii) Vehicular Natural Gas. In the last three years EPM’s number of new natural gas customers has increased significantly from 72,251 new customers in 2011 to 91,137 new customers in 2012 and 100,983 new customers in 2013. As of June 30, 2014, EPM had 837,734 natural gas customers.

5 The Water BU EPM’s water BU (‘‘Water BU’’) consists of the water, sewage and waste management services, which EPM conducts directly and through subsidiaries in Colombia and Mexico. See ‘‘Business — Water BU.’’ The following chart summarizes the business segments and relevant entities of the Water BU.

EPM directly operates water and sewage systems in Medellín and other cities of the Metropolitan Area. EPM also operates water and sewage systems in the Colombian cities of Apartadó, Chigorodó, Carepa, Turbo, Mutatá, Sopetrán, Santa Fe de Antioquia, San Jerónimo, Olaya, El Retiro, Quibdó and Malambo, through its regional subsidiaries. According to the SSPD, for the year ended December 31, 2012, EPM was the second largest water and sewage service provider in Colombia in terms of revenues. EPM also operates 11 waste water treatment plants in Mexico through its subsidiary TICSA. For the six months ended June 30, 2014, the Water BU’s total Adjusted EBITDA was Ps.207,478 million, with the Adjusted EBITDA generated by the water business segment representing 28.7%, the Adjusted EBITDA generated by the sewage business segment representing 60.4%, and the Adjusted EBITDA generated by the waste management business segment representing 10.3% of such total EBITDA, respectively. See ‘‘Note Regarding Non-GAAP Financial Measures.’’ EPM’s calculation of Consolidated Adjusted EBITDA may not be comparable to the Consolidated Adjusted EBITDA provided by other companies. For a reconciliation of Consolidated Adjusted EBITDA to operating income, see ‘‘Selected Financial and Key Operating Data.’’

EPM’s Participation in the Telecommunications Business EPM participates in the telecommunications sector through its non-controlling interest in UNE, a telecommunications company that provides Local Telephone services, Long-Distance services, Value-Added Services, carrier and interconnection services and pay television services, directly or through its subsidiaries. As of December 31, 2013, as measured by the MTIC, UNE was the third largest player in the information and communications technology industry in Colombia in terms of revenues, the second largest dedicated access internet services provider in terms of subscribers, the largest International Long-Distance telephone services provider in terms of minutes used, the second largest Long-Distance telephone services provider in terms of minutes used, the second

6 largest Long-Distance telephone services provider in terms of revenues, and the largest Local Telephone services provider in terms of lines in service and revenues. In addition, according to ANTV, UNE was the third largest subscription TV services provider in terms of revenues and the second largest in terms of subscribers as of December 31, 2013. In 2002, EPM entered the mobile telecommunications market through a joint venture with Empresa de Telecomunicaciones de Bogotá S.A. E.S.P. (‘‘ETB’’), which resulted in the formation of Colombia Móvil S.A. E.S.P. (‘‘Colombia Móvil’’). Prior to the UNE-Millicom Merger, (i) EPM had a 100% equity interest in UNE and operated UNE and its subsidiaries as an independent BU, and (ii) UNE owned 24.99%, ETB owned 24.99% and Millicom indirectly owned 50% plus one share of the capital stock of Colombia Móvil, one of nine mobile telecommunications companies operating in Colombia. Following the UNE-Millicom Merger and the resulting transfer of EPM’s control over the business affairs of UNE to Millicom, the telecommunications business is now operated independently from EPM. Beginning on August 1, 2014, EPM ceased consolidating the assets, liabilities and results of operations of UNE with EPM’s assets, liabilities and results of operations. In future periods, EPM expects to record its investment in UNE under the equity method. See ‘‘Recent Developments — UNE-Millicom Merger.’’ For the years ended December 31, 2013, 2012 and 2011 and for the six months ended June 30, 2014 and 2013, UNE’s revenues (after intercompany eliminations) were Ps.2,474,120 million, Ps.2,303,346 million, Ps.2,172,140 million, Ps.1,354,654 million and Ps.1,182,260 million, respectively, representing 19.1%, 18.4%, 18.7%, 19.4% and 18.6%, respectively, of EPM’s consolidated revenues. For the years ended December 31, 2013, 2012 and 2011 and for the six months ended June 30, 2014 and 2013, UNE’s cost of sales (after intercompany eliminations) were Ps.2,105,311 million, Ps.2,139,099 million, Ps.1,820,010 million, Ps.1,146,339 million and Ps.1,009,599 million, respectively, representing 23.2%, 24.3%, 23.1%, 23.2% and 23.0%, respectively, of EPM’s consolidated cost of sales. For the years ended December 31, 2013, 2012 and 2011 and for the six months ended June 30, 2014 and 2013, UNE’s net income (after intercompany eliminations) was Ps.27,496 million, Ps.-196,870 million, Ps.-63,215 million, Ps.22,531 million and Ps.-118 million, respectively, representing 1.7%, -12.4%, -4.2%, 2.7% and 0.2%, respectively, of EPM’s consolidated net income. As of June 30, 2014, UNE’s total assets (after intercompany eliminations) were Ps.4,677,208 million, representing 12.3% of EPM’s consolidated total assets. UNE did not distribute dividends in 2012 and only distributed dividends in 2013 as a result of the UNE-Millicom Merger.

Brief Summary of Significant Ongoing Projects Ituango Project EPM is developing the Ituango hydroelectric plant to be located in the northern region of Antioquia, Colombia (the ‘‘Ituango Project’’). The Ituango Project entails financing, building, owning, operating, maintaining and later transferring a hydroelectric power station to Hidroeléctrica Ituango S.A. E.S.P. (‘‘HidroItuango’’) through a Build, Own, Operate, Maintain and Transfer agreement (a ‘‘BOOMT Agreement’’). The Ituango Project is expected to be the largest hydrogeneration power station in Colombia, with a total installed capacity of 2,400 MW, to be achieved in two phases: the first phase (1,200 MW), which is expected to be operational in 2019 (with the first stage of this phase beginning operations in 2018), and the second phase (1,200 MW), wich is expected to be operational in 2022. The Ituango Project, which includes eight Francis power generation units and a reservoir with an operational storage volume of 975 million cubic meters is expected to generate on average 13,930 GWh of energy per year. The CREG allocated 4,567 GWh-year of Firm Energy to the Ituango Project, representing 53.0% of the 8,536 GWh-year of Firm Energy that HidroItuango declared to the CREG for the Ituango Project. In connection with the relevant Firm Energy auctions and in accordance with CREG’s regulations, HidroItuango provided an approximately U.S.$39.9 million guaranty to XM in connection with its Firm Energy obligations. On October 1, 2013, EPM’s board of directors approved a plan of investments relating to the Ituango project for an aggregate amount of Ps.10,510,277 million, which EPM currently estimates to be the total costs of the Ituango project (including (i) financing costs and (ii) an amount for contingencies for potential cost overruns and unforeseen events equivalent to 18% of such total estimated costs). EPM expects to finance 40% of the total costs of the Ituango project with funds from operations and the remaining 60% with debt financing. As of June 30, 2014, EPM had incurred Ps.1,917,778 million in costs relating to the Ituango Project. See ‘‘Business — Energy BU — Electricity Generation and Commercialization Business — Capital Expenditure Projects: Expansion of EPM’s Generation Capacity.’’

7 Bello Waste Water Treatment Plant Project The Bello waste water treatment plant (the ‘‘Bello Plant’’), is part of the group of projects for the sanitation of the Medellín River. The Bello Plant will be located on a parcel of 28.99 hectares in the Bello Municipality, in the northern part of the Metropolitan Area of the Aburrá Valley. EPM began the construction of the Bello Plant in 2011 and currently expects it to be operational in 2015. EPM estimates the total cost of the Bello Plant to be U.S.$581.5 million, and as of June 30, 2014, had invested a total of Ps.220,739 million on this project. For a detailed description of the Bello Plant, see ‘‘Business — Water BU — Capital Expenditures — Bello Waste Water Treatment Plant.’’ As of June 30, 2014, EPM had borrowed Ps 190,295 million under its U.S.$450 million credit facility with the Inter-American Development Bank (‘‘IADB’’) to partially finance the costs of this project. See ‘‘Description of Other Indebtedness.’’

Bonyic Hydroelectric Power Plant Project In 2003, EPM acquired 75.0% of the outstanding shares of common stock of HET, along with several minority partners with hydroelectric project development experience in Panama. The Bonyic hydroelectric power plant (the ‘‘Bonyic Plant’’) is located in the Province of Bocas del Toro, District of Changuinola, Panama (next to the Costa Rican border). The Bonyic Plant, which will consist of three Francis units, is expected to have an installed capacity of 30 MW. EPM currently expects the Bonyic Plant to be operational in 2015. EPM estimates the total cost of the Bonyic Plant to be U.S.$314 million, and as of June 30, 2014, had invested a total of U.S.$261 million on this project. For a detailed description of the Bonyic Plant project, see ‘‘Business — Energy BU — Electricity Generation and Commercialization Business — Capital Expenditure Projects: Expansion of EPM’s Generation Capacity.’’ EPM expects to finance this project with a combination of capital contributions and intercompany loans. Nueva Esperanza Electricity Transmission Project The Nueva Esperanza electricity transmission project (the ‘‘Nueva Esperanza Project’’) is part of the STN. The Ministry of Mining and Energy awarded the Nueva Esperanza Project to EPM in 2010 after a public bidding process with the purpose of increasing the power transmission capacity and reliability of the transmission system in the Department of Cundinamarca. The Nueva Esperanza Project consists of the installation and operation of (i) a 500,000 and 230,000 volts substation in the Municipality of Soacha, and (ii) two new transmission lines to be connected with the substations Bacatá and Guavio, respectively. EPM began the construction of the Nueva Esperanza Project in 2011 and currently expects it to be operational in 2015. EPM estimates the total cost of the Nueva Esperanza Project to be Ps.275,334 million, and as of June 30, 2014, had invested a total of Ps.110,894 million on this project. For a detailed description of the Nueva Esperanza Project, see ‘‘Business — Energy BU — Electricity Transmission, Distribution and Commercialization Business — Nueva Esperanza Electricity Transmission Project.’’ EPM expects to finance this project with a combination of cash flows from operations and bank financing. Bello-Ancon Electricity Transmission Project The Bello-Ancon electricity transmission project (the ‘‘Bello-Ancon Electricity Transmission Project’’) is part of the STN. In June 2014, the Ministry of Mining and Energy awarded the Bello-Ancon Electricity Transmission Project to EPM after a public bidding process with the purpose of increasing the power transmission capacity and reliability of the transmission system in the Municipality of Medellín. The Bello-Ancon Electricity Transmission Project consists of the installation and operation of (i) a 230,000 volts substation in the Guayabal area in Medellín and (ii) two new transmission lines to connect the new Guayabal substation with the substations Bello and Ancon. EPM expects to begin the construction of the Bello-Ancon Electricity Transmission Project in the third quarter of 2014 and currently expects it to be operational in November 2016. EPM estimates the total cost of the Bello-Ancon Electricity Transmission Project to be Ps.230,792 million. EPM expects to finance this project with a combination of cash flows from operations and bank financing. For a detailed description of the Bello-Ancon Electricity Transmission Project, see ‘‘Business — Energy BU — Electricity Transmission, Distribution and Commercialization Business —Bello-Ancon Electricity Transmission Project.’’

8 Medellín EPM is owned by the City of Medellín, Colombia’s second largest city located in the northwestern region of the country, in the Aburrá Valley, at approximately 1,479 meters above sea level, and occupies an area of 387 km2. According to the Colombian National Department of Statistics (Departamento Administrativo Nacional de Estadística or ‘‘DANE’’), the City of Medellín had a population of 2.4 million as of December 31, 2013, which represented approximately 5.31% of the total population of Colombia as of that date. The City of Medellín, and the other cities in the metropolitan area of Antioquia, which include Barbosa, Bello, Caldas, Copacabana, Envigado, La Estrella, Girardota, Itagüí and Sabaneta (the ‘‘Metropolitan Area’’), represented an estimated 13.1% of Colombia’s total Gross Domestic Product (‘‘GDP’’) in 2012. The City of Medellín is governed by a Mayor (Alcalde) and a City Council (Concejo Municipal), both of which are elected by popular vote every four years. The current Mayor and City Council’s term in office expires in December 2015. Distributions from EPM represent a significant source of cash for the City of Medellín. For the years ended December 31, 2013, 2012 and 2011, EPM transferred to the City of Medellín Ps.964,557 million, and Ps.839,842 million and Ps.797,500 million, respectively, which represented approximately 25% of the City of Medellín’s budget for each of those periods. Additionally, for the year ended December 31, 2013, EPM distributed an additional Ps.218,936 million to the City of Medellín as an extraordinary dividend in connection with and prior to the consummation of the UNE-Millicom Merger. This distribution will not be recurrent. As a result, EPM distributed an aggregate amount of Ps.1,183,493 million to the City of Medellín for the year ended December 31, 2013.

Competitive Strengths EPM believes that the following strengths will enable EPM to implement its business strategy: Multi-utility, vertically integrated operator. EPM is the leading multi-utility services company in Colombia providing electricity generation, transmission and distribution, gas distribution, water, sewage and waste management services. EPM has been able to achieve operational efficiencies from this diversified and vertically integrated service platform, as well as a deep base of operational and technical expertise, strong relationships with regulators and visibility and prominence among industry leaders. Furthermore, existing government regulations prohibit new players from becoming vertically integrated in the energy business in Colombia, thus limiting competitive challenges to EPM in its most important business lines. Consistent margins from regulated businesses and stable regulatory framework. EPM’s regulated businesses — particularly the retail energy and water services it provides — have stable margins which are to a large degree insulated from volatility in operating and other costs as well as customers’ rates. In addition, EPM believes that its principal regulators in Colombia have generally taken a commercially reasonable approach to industry regulation, which has in turn resulted in a stable regulatory environment. Furthermore, EPM’s relationship with these regulators has been and continues to be positive and constructive, and EPM actively cooperates with its regulators in addressing the challenges facing its industries. Expertise in developing and efficiently operating electricity generation, transmission and distribution systems. EPM has substantial experience in the development and operation of electricity generation, transmission and distribution systems. During the last 50 years EPM has been a significant participant in the energy industry and a key participant in the development of Colombia’s energy infrastructure. EPM has developed some of the most important infrastructure projects for Colombia’s electricity industry, including the only wind power generation facility. Further, EPM has received and maintains multiple ISO 9001 certifications on certain of its operational processes, including on the quality and safety of its services. Since 2003, the Regional Integration Energy Commission (Comisión de Integración Energética Regional or ‘‘CIER’’) has named EPM as one of the leading electricity companies in Latin America in terms of service quality standards. In 2013, EPM reached CIER’s Gold Category in the Satisfaction Index Quality among 35 participating companies in Latin America. In a June 2014 article published by The Economist, EPM was characterized as one of South America’s best run utility companies. Market leader in the Colombian electricity generation and commercialization businesses. According to XM, EPM was the largest electricity generator in Colombia in terms of electricity generated and electricity generation installed capacity as of June 30, 2014. During the six months ended June 30, 2014, EPM generated 23% of the total amount of electricity generated in the National Interconnected System (Sistema Interconectado Nacional or ‘‘SIN’’).

9 During 2013, 2012 and 2011, EPM generated 24.5%, 27.2% and 24.2% of the total amount of electricity generated in the SIN, respectively. Furthermore, EPM is developing the Ituango Project, which is expected to be the largest hydrogeneration power plant in Colombia, with a total installed capacity of 2,400 MW. For a detailed description of the Ituango Project, see ‘‘— Brief Summary of Ongoing Significant Projects — Ituango Project’’ and ‘‘Business — Energy BU — Electricity Generation and Commercialization Business — Capital Expenditure Projects: Expansion of EPM’s Generation Capacity.’’ With respect to the commercialization business, the area of coverage of EPM’s electricity commercialization activities includes the Departments of Antioquia, Caldas, Risaralda (excluding Pereira), Quindío, Norte de Santander and Santander. According to XM, for the six months ended June 30, 2014 and the year ended December 31, 2013, EPM’s share of the electricity commercialization market was approximately 23.8% and 23.9%, respectively, measured by GWh. Constructive relationship with Medellín and Strong Corporate Governance. On April 23, 2007, EPM and Medellín entered into the General Agreement for Corporate Governance (Convenio Marco de Relaciones). Pursuant to this agreement, Medellín agreed, among other things, (i) not to interact with EPM or officers of EPM other than through EPM’s board of directors, (ii) not to intervene in EPM’s contract negotiations, (iii) not to interfere with EPM’s financial planning and management, and (iv) to appoint no fewer than five independent directors. The purpose of the agreement is to curtail the potential for excessive political interference from Medellín in EPM’s business, to protect EPM’s autonomy and to align Medellín’s incentives with EPM’s strategic business objectives. Other regulations adopted in 2007 include (i) a Corporate Governance Code, and (ii) the annual corporate governance report. EPM’s Corporate Governance Code follows international standards regarding relationships with controlling entities, board of directors’ roles, control and disclosure of information. The corporate governance model that EPM has adopted has strengthened EPM’s relationship with Medellín by affording EPM the opportunity to independently manage its business while helping achieve the social objectives of Medellín, allowing EPM to have a long-term vision, with a stable management not subject to government changes. Strong Environmental and Social Commitment. EPM seeks to create value for its stakeholders on the basis of balanced financial, economic, social and environmental outcomes in the locations where EPM operates. EPM is committed to reaching territories and communities with sustainable development of projects and efficient provision of public utility services.

Business Strategy EPM seeks to continue to grow sustainably and expand internationally leveraging on its leading position in Colombia with the objective of becoming one of the fifty largest Latin American companies in terms of revenues by 2022. While achieving these objectives, EPM expects to continue contributing to the sustainable development and well-being of all its stakeholders in the areas where EPM operates. The key elements of EPM’s business strategy are the following: International expansion. EPM seeks to further expand its participation in the energy and water businesses in Latin America. In 2010, EPM entered the Guatemalan energy market with the acquisition of Distribuidora Eléctrica Centroamericana II S.A. (‘‘Deca II’’). In 2011, EPM entered the Salvadorian and Panamanian energy markets with the acquisitions of Distribuidora de Electricidad del Sur, S.A. de C.V. (‘‘Del Sur’’) and Elektra Noreste S.A. (‘‘ENSA’’), respectively. In 2013, EPM entered the Chilean energy market through its subsidiary EPM Chile S.A. (‘‘EPM Chile’’), owner of the 109.6 MW wind power plant Los Cururos and party to a turnkey contract with the Danish company Vestas. On June 10, 2014, EPM’s board of directors approved the establishment of a branch office in Costa Rica, one of EPM’s target countries in the region for its international expansion. EPM plans to make significant investments in the next four years for the international expansion of its Energy BU. These investments are expected to be targeted at acquiring electricity generation, distribution and transmission assets, and forming strategic alliances with international partners for the development of greenfield projects in Latin America. EPM’s international expansion plan considers countries such as Mexico, Brazil, Chile, Peru, Guatemala, El Salvador, Costa Rica and Panama, and southern United States. Enhance domestic position in energy. EPM plans to invest in new electricity generation, transmission, distribution and gas distribution assets in Colombia, including investments associated with the Ituango Project. In 2011, the hydroelectric power plant Porce III became operational and currently contributes 660 MW to Colombia’s national grid. The Ituango Project is expected to be the largest hydrogeneration power station in Colombia, with a total installed capacity of 2,400 MW to be achieved in two phases. The first phase (1,200 MW) is expected to be operational in 2019 (with the first stage of this phase beginning operations in 2018), and the second phase

10 (1,200 MW) is expected to be operational in 2022. EPM expects to increase its electricity generation capacity by over 67% upon the implementation of both phases of the Ituango Project. See ‘‘— Brief Summary of Ongoing Significant Projects — Ituango Project.’’ The completion of the Nueva Esperanza Project and the Bello-Ancon Electricity Transmission Project are expected to enhance EPM’s energy transmission business. See ‘‘— Brief Summary of Ongoing Significant Projects — The Nueva Esperanza Project’’ and ‘‘The Bello-Ancon Electricity Transmission Project.’’ EPM also seeks to increase its presence and share in the regional electricity distribution markets and to expand its gas distribution system to several regions of Antioquia. Continued growth in the Colombian water BU and internationalization of EPM’s water BU. EPM seeks to continue its growth in the Colombian water business. EPM began the construction of the Bello Plant in 2011 as part of the group of projects for the sanitation of the Medellín river. The Bello Plant is currently expected to be operational in 2015. In 2011, EPM acquired a 85% equity interest in Aguas de Malambo S.A. E.S.P., a public utility company with water operations in Barranquilla, Colombia. In 2013, EPM entered the collection of solid waste business with the acquisition of a 99.9% equity interest in Empresas Varias de Medellín S.A. E.S.P. (‘‘EMVARIAS’’), a leading company in the waste collection business in Colombia. EPM also seeks to further expand its water business internationally. In 2013, EPM entered the Mexican water market with the acquisition of a majority equity interest in Tecnología Intercontinental, S.A. de C.V. (‘‘TICSA’’), the holding company of a business group engaged in the design, construction, operation and development of waste water treatment plants in Mexico. EPM believes that the Latin American water, sewage and waste management businesses will continue to experience rapid growth, as a result of the limited access to water, sewage and waste management services for much of the population in the region. EPM intends to enter into operating arrangements with entities involved in existing water and sewage infrastructure, as well as seek opportunities to participate in new infrastructure development projects in and outside Colombia. EPM also seeks to increase its presence in the Colombian water and sewage business, which EPM believes will grow through increased penetration of these services in unserved populations. In addition, environmental concerns are driving plans to upgrade waste water treatment and management infrastructure. Improve operational efficiency in the energy and water BUs. EPM is working to further reduce transmission and distribution losses in its acquired electricity businesses by introducing the technology and loss mitigation techniques that EPM has developed for its existing businesses. These techniques are aimed at reducing both technical losses from the performance of the transmission and distribution systems, and commercial losses from power theft, billing, metering errors and fraud. These efforts include engineering and technical upgrades to existing power infrastructure, the use of more secure metering boxes to prevent metering fraud, better policing of infrastructure and the use of technology to rapidly detect and stop theft. EPM has historically been effective in improving the operational efficiency and quality service standards of its acquired companies and believes that it is possible to further reduce inefficiencies in some of its acquired electricity companies. EPM has also been implementing an efficiency plan in its water and sewage business, including a comprehensive water and sewage management project.

Recent Developments UNE-Millicom Merger In February 2013, EPM and Millicom entered into a non-binding memorandum of understanding for a potential merger between UNE and Millicom (the ‘‘UNE-Millicom Merger’’), with the objective of providing users with an integrated digital solutions alternative, including fixed and mobile telephone services, broadband and mobile internet and pay television, while leveraging on the complementary nature of the services provided by UNE and Colombia Móvil and the synergies that could result from an integration of both companies. In May 2013, the City Council of Medellín issued Agreement (Acuerdo) No. 17, which authorized (i) the change of UNE’s legal nature from a wholly government-owned commercial corporation (Sociedad Anónima Pública) into a mixed capital company (Sociedad de Economía Mixta), (ii) the modification of UNE’s shareholdings, and (iii) the assignment of the administrative and operational control of UNE to a shareholder other than EPM. In November 2013, after submission of the UNE-Millicom Merger to the Superintendence of Industry and Commerce (Superintendencia de Industria y Comercio or ‘‘SIC’’) for the SIC’s approval, the shareholders’ meetings of UNE and Millicom Spain Cable S.L. approved the terms of the UNE-Millicom Merger, which was subsequently submitted for the approval of several Colombian regulatory and governmental authorities, including the SFC and the ANTV.

11 On August 14, 2014, EPM and Millicom completed the UNE-Millicom Merger after obtaining all regulatory and governmental approvals and executing and registering the corresponding public deed with the Medellín Chamber of Commerce. As a result of the UNE-Millicom Merger, EPM (together with Instituto de Deportes y Recreación de Medellín — ‘‘INDER,’’ the ‘‘EPM UNE Shareholders’’) now own 50% plus one share of UNE’s capital stock while Millicom Spain S.L. (together with other four Millicom entities (Peak Record S.L., Peak Five S.L., Global Albión S.L. and Global Locronan S.L.), the ‘‘Millicom UNE Shareholders’’) own the remaining shares and has administrative and operational control of UNE. In addition, as a result of (i) the UNE-Millicom Merger and (ii) UNE’s purchase from ETB and Colvatel S.A. E.S.P. (‘‘Colvatel’’) of their shares in the capital stock of Colombia Móvil, which became effective prior to the completion of the UNE-Millicom Merger, UNE now owns (directly and indirectly) 100% of the shares of capital stock of Colombia Móvil. Following the UNE-Millicom Merger and the transfer of EPM’s administrative and operational control over the business affairs of UNE to Millicom, the telecommunications business is now operated independently from EPM. Beginning on August 1, 2014, EPM ceased consolidating the assets, liabilities and results of operations of UNE with EPM’s assets, liabilities and results of operations. In future periods, EPM expects to record its investment in UNE under the equity method. In connection with the UNE-Millicom Merger, EPM and Millicom entered into a shareholders’ agreement, which, among other, provides that: (i) as a general rule, the decisions to be adopted will require simple majority except for certain decisions that will require supermajority or the favorable vote of the government-owned shareholders of UNE; (ii) the president of UNE shall be elected by the simple majority of the members present in the meeting of its Board of Directors’; (iii) the chief financial officer of UNE must be elected from a list of two candidates proposed by Millicom and one candidate proposed by EPM, (iii) the chief accounting officer of UNE will be elected by the Shareholder Assembly based on the designation made by EPM; and (iv) Millicom will be entitled to elect four members and EPM three members of UNE’s seven-member board of directors, with the chairman of the board being elected from among EPM’s board members, and the vice-chairman of the board being elected from among Millicom’s board members. Pursuant to the shareholders’ agreement, the EPM UNE Shareholders will have the right to sell not less than all of their equity interest in UNE to third parties (i) at any time during the period from the third anniversary of the shareholders’ agreement becoming effective through the tenth anniversary of such date, subject to the EPM UNE Shareholders’ giving at least one year prior written notice to Millicom, and (ii) at any time before the third anniversary of the shareholders’ agreement becoming effective if there is a change of control in Millicom International Cellular S.A. (controlling company of Millicom). The shareholders’ agreement also provides that in the event of the sale by the EPM UNE Shareholders of its shares, they will have drag-along rights with respect to the shares owned by the Millicom UNE Shareholders. As part of the UNE-Millicom Merger, on November 7, 2013, EPM and the City of Medellín entered into an usufruct agreement (contrato de usufructo) with respect to UNE’s shares, agreement that was decided would come into force upon completion of certain conditions that were met on August 6, 2014. In August 2014, UNE declared an extraordinary dividend distribution in favor of EPM for an aggregate amount of Ps.1,074 billion corresponding to UNE’s retained earnings for its 2006 fiscal year, which, in furtherance of the usufruct agreement, were paid directly to the City of Medellín on August 21, 2014.

Los Cururos Wind Power Plant Project In March 2013, EPM and EPM Inversiones S.A. (‘‘EPM Inversiones’’) incorporated EPM Chile as a holding company to leverage EPM’s growth in the southern portion of the continent. EPM Chile subsequently acquired a 100% equity interest in each of Parque Eólico Pacífico S.A. and Parque Eólico La Cebada Ltda., which recently completed the construction of the 109.6 MW Los Cururos wind power plant project (‘‘Los Cururos Project’’) in the northern region of Chile. The Los Cururos Project, which became operational in July 2014, was developed in two different lots (Pacífico and Cebada) with 58 generators, for a total capacity of 109.6 MW. The Los Cururos Project currently supplies energy to Chile’s central interconnected system. The total cost of the Los Cururos Project was U.S.$208 million, of which U.S.$161 million had been incurred as of June 30, 2014.

12 Establishment of Branch Office in Costa Rica As part of EPM’s internationalization strategy, on June 10, 2014, EPM’s board of directors approved the establishment of a branch office in Costa Rica, one of the targeted countries in the region. EPM currently expects to participate in the energy, water, waste water treatment and solid waste management businesses in Costa Rica.

Recent Developments Relating to Our Indebtedness Since July 1, 2014, ENSA has incurred short-term debt for an aggregate amount of U.S.$42 million, which short-term debt is payable in 90 days. See ‘‘Description of Other Financial Obligations — ENSA Local Financing.’’ On July 10, 2014, CHEC entered into a loan agreement with Banco Bilbao Vizcaya Argentaria Colombia S.A. and Banco Corpbanca Colombia for Ps.67,000 million and Ps.51,000 million, respectively. See ‘‘Description of Other Financial Obligations — CHEC Local Financing.’’ On July 23, 2014 and August 19, 2014, Aguas de Uraba borrowed Ps.700 million and Ps.400 million, respectively, under the terms of a loan agreement with Banco Bilbao Vizcaya Argentaria Colombia S.A. See ‘‘Description of Other Financial Obligations — Water Subsidiaries.’’ On July 31, 2014, EPM issued Ps.500,000 million aggregate principal amount of notes in the Colombian capital markets under its Long Term Notes Program. The notes issued have maturities ranging from 6 to 20 years and bear interest at IPC plus a spread that may range from 3.57% to 4.50%. See ‘‘Description of Other Financial Obligations — Notes Under Long Term Notes Program.’’

Government Approval of this Offering EPM’s indebtedness is subject to oversight by the Colombian Government. EPM has obtained the required prior approval from the General Directorate of Public Credit and National Treasury (Dirección General de Crédito Público y Tesoro Nacional) of the MHCP for the issuance of the Notes offered hereby. This approval is required under the public debt laws and regulations of Colombia whenever government-owned companies incur foreign indebtedness. In connection with this approval, a favorable opinion of the transaction was sought and received from the National Department of Planning (Departamento Nacional de Planeación), which undertakes an economic and technical feasibility analysis of any proposed foreign indebtedness by government-owned companies.

13 THE OFFERING Issuer ...... Empresas Públicas de Medellín E.S.P. Securities Offered ...... Ps.965,745,000,000 7.625% Senior Notes due 2024 (the ‘‘Notes’’). Issue Price ...... 100.000% of the principal amount plus accrued interest, if any, from September 10, 2014. Purchasers will make the payment of the offering price of the Notes in U.S. dollars based on an exchange rate for the conversion of Colombian pesos into U.S. dollars of Ps. 1,931.49 per U.S.$1.00, which is the Representative Market Rate (tasa representativa del mercado) in effect on September 3, 2014. Issue Date ...... September 10, 2014. Maturity Date ...... September 10, 2024. Form and Denominations ...... The Notes will be issued in registered global form in minimum denominations of Ps.5 million and integral multiples of Ps.1 million in excess thereof. Interest ...... Interest on the Notes will accrue commencing on September 10, 2014 at the rate of 7.625% per annum; interest will be payable annually in arrears on September 10 of each year commencing on September 10, 2015. Interest on the Notes will be computed on the basis of the actual number of days elapsed, not to exceed 365, divided by 365, and will be payable to the holders of record on the close of business on the 15th calendar day immediately preceding the related interest payment date. Use of Proceeds ...... We intend to use the net proceeds from this offering to partially fund the investments required for the Ituango Project. See ‘‘Use of Proceeds.’’ Ranking ...... The Notes will be our senior, unconditional, unsecured and unsubordinated obligations. The Notes will rank equally without any preference among themselves and will rank equally with all our existing and future senior and unsecured External Indebtedness in right of payment and senior to our existing and future indebtedness that by its terms is junior and subordinated in right of payment to the Notes. ‘‘External Indebtedness’’ means Indebtedness other than Internal Indebtedness. ‘‘Internal Indebtedness’’ means any Indebtedness that is payable to Colombian residents in Colombian pesos. Payments of Principal ...... The principal amount of the Notes will be repaid in a single installment on the Maturity Date. Restrictive Covenants ...... We will issue the Notes under an Indenture with The Bank of New York Mellon, as Trustee. The Indenture will, among other things, restrict our ability to: • create liens; • enter into sale and leaseback transactions; and • enter into mergers or consolidations. These restrictions are subject to a number of important qualifications and exceptions. See ‘‘Description of the Notes.’’ Optional Redemption at Par ...... At any time or from time to time on or after June 10, 2024 (three months prior to the maturity date of the Notes) (the ‘‘par call

14 date’’), we will have the right to redeem the Notes in whole or in part, on at least 30 days’ but not more than 60 days’ notice, at a redemption price equal to 100% of the outstanding principal amount of the Notes plus accrued and unpaid interest to, but excluding, the redemption date. See ‘‘Description of the Notes — Optional Redemption at Par.’’ Optional Tax Redemption...... The Notes are redeemable at our option in whole but not in part, at any time, at the principal amount thereof plus accrued and unpaid interest and any Additional Amounts due thereon if the laws or regulations affecting taxes in Colombia or any jurisdictions through which payments are made change in certain respects. For more information, see ‘‘Description of the Notes — Optional Tax Redemption.’’ Transfer Restrictions ...... The Notes have not been, and will not be, registered under the U.S. Securities Act of 1933 or under any state securities laws and are subject to certain restrictions on transfer and resale. There is currently no market for the Notes and we cannot assure you that one will develop. Governing Law ...... State of New York, except that all matters relating to the authorization and execution by the Issuer of both the Notes and the Indenture will be governed by the laws of the Republic of Colombia. Initial Purchasers ...... Merrill Lynch, Pierce, Fenner & Smith Incorporated, HSBC Securities (USA) Inc. and Itau BBA USA Securities, Inc. Listing ...... We have applied to list the Notes on the Official List of the Luxembourg Stock Exchange and to trade the Notes on the Euro MTF Market. We cannot assure you that any such application will be successful or that any such listing will be granted or maintained. Additional Notes...... We may, without your consent, create and issue additional Notes, or Additional Notes, in one or more transactions, which have substantially identical terms (other than issue price, issue date and date from which the interest will accrue) as the Notes issued on the closing date of this offering. Any Additional Notes will be consolidated and form a single class with the Notes issued on the closing date of this offering, so that, among other things, holders of any Additional Notes will have the right to vote together with holders of Notes issued on the closing date of this offering as one class; provided that Additional Notes will not bear the same CUSIP number as the original Notes, unless such Additional Notes are fungible with the original Notes for U.S. federal income tax purposes. See ‘‘Description of the Notes — Additional Notes.’’ Clearance and Settlement ...... The Notes will be issued in book-entry form through the facilities of The Depository Trust Company (‘‘DTC’’) for the accounts of its participants, including Euroclear and Clearstream Luxembourg and will trade in DTC’s same-day funds settlement system. Owners of beneficial interests in the Notes held in book-entry form will not be entitled to receive physical delivery of certificated Notes, except in certain limited circumstances. For a description of certain factors relating to clearance and settlement, see ‘‘Book-Entry, Delivery and Form.’’

15 Trustee, Registrar, Transfer Agent and Paying Agent ...... The Bank of New York Mellon. Co-Paying Agent in the European Union . . The Bank of New York Mellon, acting through its London Branch. Listing Agent and Transfer Agent ...... The Bank of New York Mellon (Luxembourg) S.A. Common Code, CUSIP and ISIN ...... Common Code 110953496 (144A) and 110952937 (Reg S). CUSIP 29246BAC2 (144A) and P9379RAV9 (Reg S). ISIN US29246BAC28 (144A) and USP9379RAV98 (Reg S). Risk Factors...... You should carefully consider all of the information in this offering memorandum. See ‘‘Risk Factors’’for a description of the principal risks involved in making an investment in the Notes.

16 SUMMARY FINANCIAL AND KEY OPERATING DATA The following tables present summary historical financial information and operating data for EPM as of and for each of the periods indicated. This financial information is qualified in its entirety by reference to, and you should read it in conjunction with, EPM’s audited consolidated financial statements as of December 31, 2013 and 2012 and for the three years ended December 31, 2013 and the Notes thereto, EPM’s unaudited condensed consolidated financial statements as of June 30, 2014 and for the six months ended June 30, 2014 and 2013 and the notes thereto, and the section entitled ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations.’’ The summary financial information is presented in accordance with Colombian Public Utilities Companies GAAP, which differs in certain material respects from IFRS. See ‘‘Annex A — Summary of Certain Differences Between Colombian Public Utilities Companies GAAP and IFRS’’ for a description of the principal differences between Colombian Public Utilities Companies GAAP and IFRS. For the Year Ended December 31, % Change 2013 2013 2012 2011 2013-2012 2012-2011 (U.S.$ in millions)(1) (Ps. in millions) Consolidated statements of financial, economic, and social activities Revenues...... 6,740 12,986,466 12,498,850 11,508,020 3.9% 8.6% (-) Cost of sales ...... 4,216 8,123,451 7,703,343 6,947,489 5.5% 10.9% (-) Depreciation and amortizations. . . . 491 946,320 1,094,129 854,526 -13.5% 28.0% Gross profit ...... 2,033 3,916,695 3,701,378 3,706,005 5.8% -0.1% (-) Administrative expenses...... 555 1,069,680 1,025,631 908,410 4.3% 12.9% (-) Provision, depreciation and amortizations ...... 176 338,364 287,183 382,889 17.8% -25.0% Operating income ...... 1,302 2,508,651 2,388,564 2,414,706 5.0% -1.1% (+) Non operating revenues...... 429 827,025 856,093 607,977 -3.4% 40.8% (-) Non operating expenses ...... 524 1,009,906 927,383 824,209 8.9% 12.5% Total non-operating expenses, net. . . (95) (182,881) (71,290) (216,232) 156.5% -67.0% Net Income before taxes and minority interest ...... 1,207 2,325,770 2,317,274 2,198,474 0.4% 5.4% (-) Income tax ...... 311 599,016 629,013 592,403 -4.8% 6.2% Net income before minority interest . 896 1,726,754 1,688,261 1,606,071 2.3% 5.1% (-) Minority interest ...... 53 101,941 96,335 87,392 5.8% 10.2% Net income ...... 843 1,624,813 1,591,926 1,518,679 2.1% 4.8%

(1) Amounts are translated based on an exchange rate of Ps.1,926.83 per U.S. dollar as of December 31, 2013. Such translations should not be construed as representations that the Colombian peso amounts represent, or have been or could be converted into, U.S. dollars at that or any other rate. The following table presents, for the periods indicated, our calculations of Consolidated Adjusted EBITDA: For the Year Ended December 31, % Change 2013 2013 2012 2011 2013-2012 2012-2011 (U.S.$ in millions)(2) (Ps. in millions, except %) Operating income ...... U.S.$1,302 Ps.2,508,651 Ps.2,388,564 Ps.2,414,706 5.0% -1.1% (+) Total depreciation and amortizations cost...... 491 946,320 1,094,129 854,526 -13.5% 28.0% (+) Total provision, depreciation and amortizations expenses(1) ...... 176 338,364 322,885 382,889 4.8% -15.7% Consolidated Adjusted EBITDA(2)(3) .. U.S.$1,969 Ps.3,793,335 Ps.3,805,578 Ps.3,652,121 -0.3% 4.2% Consolidated Adjusted EBITDA Margin(4) ...... 29.2% 29.2% 30.4% 31.7%

(1) For 2012, includes the amortization of Ps.35,702 million in connection with studies and projects for the Porce IV project, recorded as administrative expenses. (2) For the definition of Consolidated Adjusted EBITDA, see ‘‘Note Regarding Non-GAAP Financial Measures.’’ EPM’s calculation of Consolidated Adjusted EBITDA may not be comparable to the Consolidated Adjusted EBITDA provided by other companies. (3) Amounts are translated based on an exchange rate of Ps.1,926.83 per U.S. dollar as of December 31, 2013. Such translations should not be construed as representations that the Colombian peso amounts represent, or have been or could be converted into, U.S. dollars at that or any other rate. (4) For the definition of Consolidated Adjusted EBITDA Margin, see ‘‘Note Regarding Non-GAAP Financial Measures.’’ EPM’s calculation of Consolidated Adjusted EBITDA Margin may not be comparable to the Consolidated Adjusted EBITDA Margin provided by other companies.

17 As of December 31, % Change 2013 2013 2012 2011 2013-2012 2012-2011 (U.S.$ in millions)(1) (Ps. in millions) Consolidated balance sheet data Assets Current assets Cash and cash equivalents . . . U.S.$ 678 Ps.1,306,580 Ps.1,496,488 Ps.961,755 -12.7% 55.6% Investments in securities. . . . . 669 1,289,538 1,901,168 2,218,248 -32.2% -14.3% Accounts receivable, net. . . . . 1,715 3,303,599 2,570,296 2,525,247 28.5% 1.8% Inventories, net ...... 134 258,083 242,503 205,824 6.4% 17.8% Prepaid expenses ...... 34 64,590 67,473 32,394 -4.3% 108.3% Other assets ...... 44 84,600 58,966 1,651 43.5% 3471.5% Total current assets ...... 3,273 6,306,990 6,336,894 5,945,119 -0.5% 6.6% Non-current assets Investments in securities. . . . . 4 8,185 9,672 66,516 -15.4% -85.5% Equity investments, net...... 260 501,370 507,177 505,917 -1.1% 0.2% Accounts receivable, net. . . . . 498 959,692 738,605 727,129 29.9% 1.6% Property, plant and equipment, net...... 8,316 16,023,149 14,154,412 13,489,367 13.2% 4.9% Pension plan asset ...... 382 736,183 741,441 716,148 -0.7% 3.5% Prepaid expenses ...... 104 200,678 133,625 173,475 50.2% -23.0% Other assets ...... 1,234 2,377,768 2,118,257 2,156,470 12.3% -1.8% Reappraisal of assets...... 5,805 11,184,664 10,537,826 10,255,752 6.1% 2.8% Total non-current assets ...... 16,603 31,991,689 28,941,015 28,090,774 10.5% 3.0% Total assets ...... 19,877 38,298,679 35,277,909 34,035,893 8.6% 3.6% Liabilities and Equity Current liabilities Financial obligations ...... 440 847,806 234,773 452,508 261.1% -48.1% Hedging operations ...... 17 32,803 75,711 58,930 -56.7% 28.5% Accounts payable ...... 1,102 2,123,326 1,591,823 1,865,739 33.4% -14.7% Taxes payable ...... 240 462,063 723,046 677,399 -36.1% 6.7% Labor liabilities ...... 82 157,774 132,592 125,950 19.0% 5.3% Pension plan obligations . . . . . 125 241,793 129,374 68,940 86.9% 87.7% Estimated liabilities...... 34 66,264 18,648 8,954 255.3% 108.3% Other liabilities ...... 126 241,988 181,920 180,325 33.0% 0.9% Total current liabilities ...... 2,166 4,173,817 3,087,887 3,438,745 35.2% -10.2% Non-current liabilities Financial obligations ...... 4,351 8,382,690 7,316,939 6,522,385 14.6% 12.2% Hedging operations ...... 18 35,635 85,438 124,768 -58.3% -31.5% Accounts payable ...... 156 300,941 112,600 200,731 167.3% -43.9% Taxes payable ...... 1 2,805 172,804 323,604 -98.4% -46.6% Labor liabilities ...... 35 67,194 71,162 67,379 -5.6% 5.6% Pension plan obligations . . . . . 601 1,157,999 1,171,465 1,225,010 -1.1% -4.4% Estimated liabilities...... 114 219,558 295,921 325,999 -25.8% -9.2% Other liabilities ...... 489 942,229 888,965 806,236 6.0% 10.3% Total non-current liabilities ... 5,765 11,109,051 10,115,294 9,596,112 9.8% 5.4% Total Liabilities ...... 7,932 15,282,868 13,203,181 13,034,857 15.8% 1.3% Minority interest ...... 503 968,297 1,014,999 1,107,612 -4.6% -8.4% Equity ...... 11,442 22,047,514 21,059,729 19,893,424 4.7% 5.9% Total liabilities and equity .... U.S.$19,877 Ps.38,298,679 Ps.35,277,909 Ps.34,035,893 8.6% 3.6% Memorandum accounts(2), net ...... 6,365 12,264,737 11,410,695 -2,518,119 7.5% -353.1%

(1) Amounts are translated based on the exchange rate of Ps.1,926.83 per U.S. dollar as of December 31, 2013. Such translations should not be construed as representations that the Colombian peso amounts represent, or have been or could be converted into, U.S. dollars at that or any other rate. (2) Corresponds to the Colombian Public Utilities Companies GAAP measure of memorandum accounts or cuentas de orden. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Memorandum Accounts.’’

18 For the Year Ended December 31, % Change 2013 2013 2012 2011 2013-2012 2012-2011 (U.S.$ in millions)(1) (Ps. in millions) Cash Flow Data Net cash provided by operating activities . . . 1,232 2,373,298 2,073,135 3,460,436 14.5% -40.1% Net cash used in investing activities ...... (1,613) (3,108,263) (1,782,098) (2,819,038) 74.4% -36.8% Net cash used in financing activities ...... (35) (66,573) (73,384) (70,830) -9.3% 3.6% Net decrease (increase) in cash and cash equivalents and investments in securities...... U.S.$(416) Ps.(801,538) Ps.217,653 Ps.570,568 -468.3% -61.9% Cash and cash equivalents and investments in securities at beginning of the year . . . . . 1,763 3,397,656 3,180,003 2,609,435 6.8% 21.9% Cash and cash equivalents and investments in securities at end of the year ...... 1,347 2,596,118 3,397,656 3,180,003 -23.6% 6.8%

For the Six Months Ended June 30, % Change 2014 2014 2013 2014-2013 (U.S.$ in (Ps. in millions) millions)(1) Consolidated statement of financial, economic and social activities Revenues ...... 3,715 6,989,026 6,357,546 9.9% (-) Cost of sales ...... 2,361 4,441,908 3,932,120 13.0% (-) Depreciation and amortizations ...... 263 494,096 463,741 6.5% Gross profit...... 1,091 2,053,022 1,961,685 4.7% (-) Administrative expenses...... 264 497,054 468,740 6.0% (-) Provision, depreciation and amortizations...... 80 149,769 177,407 -15.6% Operating income ...... 747 1,406,199 1,315,538 6.9% (+) Non operating revenues ...... 223 419,520 463,622 -9.5% (-) Non operating expenses ...... 287 539,970 626,347 -13.8% Total non-operating expenses, net ...... (64) (120,450) (162,725) -26.0% Net Income before taxes and minority interest ...... 683 1,285,749 1,152,813 11.5% (-) Income tax ...... 201 378,350 341,582 10.8% Net income before minority interest ...... 482 907,399 811,231 11.9% (-) Minority interest...... 32 59,771 61,665 -3.1% Net income ...... U.S.$450 Ps.847,628 Ps.749,566 13.1%

19 The following table presents, for the periods indicated, our calculations of Consolidated Adjusted EBITDA:

For the Six Months Ended June 30, % Change 2014 2014 2013 2014-2013 (U.S.$ in millions)(2) (Ps. in millions, except %) Operating income ...... U.S.$ 747 Ps.1,406,199 Ps.1,315,538 6.9% (+) Total depreciation and amortizations cost ...... 263 494,096 463,741 6.5% (+) Total provision, depreciation and amortizations expenses...... 80 149,769 177,407 -15.6% Consolidated Adjusted EBITDA(1)(2) ...... U.S.$1,090 Ps.2,050,064 Ps.1,956,686 4.8% Consolidated Adjusted EBITDA Margin(3) . . . 29% 29% 31% —

(1) For the definition of Consolidated Adjusted EBITDA, see ‘‘Note Regarding Non-GAAP Financial Measures.’’ EPM’s calculation of Consolidated Adjusted EBITDA may not be comparable to the Consolidated Adjusted EBITDA provided by other companies. (2) Amounts are translated based on the exchange rate of Ps.1,881.19 per U.S. dollar as of June 30, 2014. Such translations should not be construed as representations that the Colombian peso amounts represent, or have been or could be converted into, U.S. dollars at that or any other rate. (3) For the definition of Consolidated Adjusted EBITDA Margin, see ‘‘Note Regarding Non-GAAP Financial Measures.’’ EPM’s calculation of Consolidated Adjusted EBITDA Margin may not be comparable to the Consolidated Adjusted EBITDA Margin provided by other companies.

20 As of June 30, As of December 31, % Change 2014 2014 2013 2014-2013 (U.S.$ in millions)(1) (Ps. in millions) Consolidated balance sheet data Assets Current assets Cash and cash equivalents ...... U.S.$ 507 Ps. 953,757 Ps. 1,306,580 -27.0% Investments in securities ...... 375 706,125 1,289,538 -45.2% Accounts receivable, net ...... 1,847 3,473,734 3,303,599 5.1% Inventories, net...... 139 261,450 258,083 1.3% Prepaid expenses ...... 20 37,017 64,590 -42.7% Other assets ...... 45 84,722 84,600 0.1% Total current assets ...... 2,933 5,516,805 6,306,990 -12.5% Non-current assets Investments in securities ...... 4 7,396 8,185 -9.6% Equity investments, net ...... 266 501,331 501,370 0.0% Accounts receivable, net ...... 490 920,987 959,692 -4.0% Property, plant and equipment, net ...... 8,807 16,568,521 16,023,149 3.4% Pension plan asset ...... 389 731,959 736,183 -0.6% Prepaid expenses ...... 77 144,455 200,678 -28.0% Other assets ...... 1,259 2,368,173 2,377,768 -0.4% Reappraisal of assets ...... 5,918 11,132,657 11,184,664 -0.5% Total non-current assets...... 17,209 32,375,479 31,991,689 1.2% Total assets ...... 20,142 37,892,284 38,298,679 -1.1% Liabilities and equity Current liabilities Financial obligations ...... 476 895,210 847,806 5.6% Hedging operations ...... 16 31,028 32,803 -5.4% Accounts payable ...... 1,202 2,260,953 2,123,326 6.5% Taxes payable...... 183 344,474 462,063 -25.4% Labor liabilities ...... 110 207,842 157,774 31.7% Pension plan obligations ...... 109 204,378 241,793 -15.5% Estimated liabilities ...... 40 75,617 66,264 14.1% Other liabilities...... 141 265,076 241,988 9.5% Total current liabilities...... 2,278 4,284,578 4,173,817 2.7% Non-current liabilities Financial obligations ...... 4,240 7,976,931 8,382,690 -4.8% Hedging operations ...... 27 51,123 35,635 43.5% Accounts payable ...... 185 347,510 300,941 15.5% Taxes payable...... 1 2,109 2,805 -24.8% Labor liabilities ...... 21 40,323 67,194 -40.0% Pension plan obligations ...... 643 1,209,300 1,157,999 4.4% Estimated liabilities ...... 124 233,201 219,558 6.2% Other liabilities...... 524 985,577 942,229 4.6% Total non-current liabilities ...... 5,766 10,846,074 11,109,051 -2.4% Total liabilities ...... 8,042 15,130,652 15,282,868 -1.0% Minority interest...... 445 836,367 968,297 -13.6% Equity...... 11,655 21,925,265 22,047,514 -0.6% Total liabilities and equity ...... U.S.$20,142 Ps.37,892,284 Ps.38,298,679 -1.1% Memorandum accounts, net(2)...... 7,383 13,888,427 12,264,737 13.2%

(1) Amounts are translated based on an exchange rate of Ps.1,881.19 per U.S. dollar as of June 30, 2014. Such translations should not be construed as representations that the Colombian peso amounts represent, or have been or could be converted into, U.S. dollars at that or any other rate. (2) Corresponds to the Colombian Public Utilities Companies GAAP measure memorandum accounts or cuentas de orden. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Memorandum Accounts.’’

21 For the Six Months Ended June 30, % Change 2014 2014 2013 2014 (U.S.$ in millions)(1) (Ps. in millions) (U.S.$ in millions)(1) Cash flow data Net cash provided by operating activities ...... 545 1,025,792 985,762 4.1% Net cash used in investing activities ...... (576) (1,083,730) (1,815,714) 40.3% Net cash used in financing activities ...... (467) (878,298) (370,742) 136.9% Net decrease in cash and cash equivalents and investments in securities ...... (498) (936,236) (1,200,694) 22.0% Cash and cash equivalents and investments in securities at beginning of period(3) ...... 1,380 2,596,118 3,397,656 23.6% Cash and cash equivalents and investments in securities at end of period(3) ...... 882 1,659,882 2,196,962 24.4%

Selected Operating Data Selected Operating Data of EPM’s Electricity Generation Business

As of and for the Six Months Ended June 30, As of and for the Year Ended December 31, 2014 2013 2012 2011 Total installed net effective generation capacity (MW) . 3,579 3,594 3,594 3,524 Generation (GWh)(1) ...... 7,136 15,230 16,303 14,215 Sales (GWh) ...... 6,905 15,278 17,007 15,848 Firm Energy (GWh) ...... 7,822 15,775 15,534 12,137 Revenues (in millions of Ps.) ...... Ps.1,373,859 Ps.2,700,029 Ps.2,787,388 Ps.2,199,470

(1) Actual generation does not include generation from the Barranca I, II, and III plants, which are self-generators for Ecopetrol, and thus not a part of the market.

Selected Operating Data of EPM’s Electricity Transmission, Distribution and Commercialization Business

As of and for the Six Months Ended June 30, As of and for the Year Ended December 31, 2014 2013 2012 2011 Electricity distribution and commercialization Service Area (km2) ...... 177,384 177,384 177,185 176,994 Transmission Lines (110-115Kv)(km) ...... 2,825 2,825 2,760 2,730 Transmission Lines (69 Kv))(km) ...... 667 667 667 660 Distribution Lines (2.4-46 Kv))(km) ...... 101,170 99,535 94,676 88,775 Distribution Lines (240/120 V))(km) ...... 111,181 109,575 105,869 103,136 Purchases of Electricity from own generation units (bilateral) (GWh) ...... 1,655 3,312 4,097 4,325 Purchases of Electricity from third parties (bilateral) (GWh)...... 7,229 13,546 12,491 11,693 Purchases of Electricity on the Spot Market (GWh) ...... 2,091 2,506 2,127 1,804 Electricity Losses ...... 10.9% 10.8% 11.2% 12.2% Transmission Transmission Lines (220-230Kv) ...... 1,130 1,130 1,130 1,130 System Availability ...... 100.0% 99.9% 99.9% 98.2% Revenues (in millions of Ps.) ...... Ps.4,269,700 Ps.7,899,020 Ps.7,385,579 Ps.6,708,682

22 Selected Operating Data of EPM’s Natural Gas Distribution and Commercialization Business

As of and for the Six Months Ended June 30, As of and for the Year Ended December 31, 2014 2013 2012 2011 Distribution network (km) (km in steel) ...... 87 87 87 87 Distribution network (km in polyethylene) ...... 5,961 5,618 4,928 4,454 Sales to Unregulated Users (thousands of m3) . . . 54,823 158,732 179,763 150,338 Sales to Regulated Users (thousands of m3) . . . . . 114,310 229,263 215,210 195,989 Revenues (in millions of Ps.) ...... Ps.272,350 Ps.564,894 Ps.448,551 Ps.405,694

Selected Operating Data of EPM’s Water and Sewage Business

As of and for the Six Months Ended June 30, As of and for the Year Ended December 31, Unit 2014 2013 2012 2011 Aqueduct consumption ...... thousands m3 147,455,762 202,182,391 203,442,501 198,238,252 Water produced ...... thousands m3 113,039,269 318,322,339 321,050,729 316,726,774 Water losses...... thousands m3 51,771,826 115,955,227 117,689,727 117,921,630 Sewage discharge ...... thousands m3 103,730,983 200,948,071 202,067,586 197,050,693 Drinkable water treatment installed capacity ...... m3/s 17,255 17,255 17,255 17,255 Waste water treatment installed capacity ...... m3/s 2.03 2.03 2.03 2.03 Water quality index...... Yes/No(1) Yes Yes Yes Yes Water gross revenues ...... millions of Ps. Ps. 191,111 Ps. 368,365 Ps. 373,596 Ps. 351,008 Sewage gross revenues ...... millions of Ps. Ps. 238,592 Ps. 410,143 Ps. 357,313 Ps. 352,136

(1) Yes/No indicates whether EPM’s quality index is in compliance or not with applicable regulations.

Selected Operating Data of EPM’s Waste Management Business

As of and for the Six As of and for the Year Months Ended June 30, Ended December 31, Unit 2014 2013(1) Collected and disposed of waste ...... thousands of m3 286,613 564,279.97 Collection and transportation trucks...... No. 140 140 Cleaning and sweeping ...... Km/month 106,626 1,279,512 Waste disposed in the sanitary landfill...... Ton 373,000.28 704,509.4 Waste management gross revenues ...... millions of Ps. Ps. 77,619 Ps. 26,765

(1) Information for the years ended December 31, 2011 and 2012 is not included because the waste management business is conducted by EMVARIAS, which was acquired on November 1, 2013.

23 RISK FACTORS Before making any investment decision, you should read this offering memorandum and carefully consider, in light of your own financial circumstances and investment objectives, all of the information set forth in this offering memorandum and, in particular, certain matters relating to EPM and other matters associated with investments in securities of issuers in countries that do not have highly developed capital markets, including, without limitation, the risk factors set forth below. Additional risks not presently known to EPM or that it currently deems immaterial may also impair EPM’s business and operations. EPM’s business, financial condition, results of operations and ability to satisfy its obligations under the Notes, including EPM’s obligation to repay the Notes, could be materially adversely affected by any of these risks. The trading price of the Notes could decline due to these risks.

Risk Factors Relating to the Republic of Colombia A substantial portion of EPM’s assets is located in, and a substantial portion of EPM’s income is earned in, Colombia and, thus, EPM is highly dependent on economic and political conditions in Colombia. EPM is an Empresa Industrial y Comercial del Estado (industrial and commercial government-owned company) organized under the laws of Colombia. Although EPM has operations in countries other than Colombia, a substantial portion of its assets is located in Colombia and a substantial portion of its income is earned in Colombia and denominated in Colombian pesos. As are all assets and income located or earned in emerging market countries, EPM’s assets and income are subject to political, economic and other uncertainties, including expropriation, nationalization, renegotiation or voiding of existing contracts, currency exchange restrictions and international monetary fluctuations. Accordingly, EPM’s financial condition and results of operations depend significantly on macroeconomic and political conditions prevailing in Colombia.

The Colombian Government and the Central Bank exercise significant influence on the Colombian economy. Political and economic conditions may have an impact on EPM’s business, financial condition and results of operations. The Colombian Government and the Central Bank intervene frequently in Colombia’s economy and occasionally make significant changes in monetary, fiscal and regulatory policy. EPM’s business, financial condition and results of operations may be adversely affected by changes in government or fiscal policies, and other political, diplomatic, social and economic developments that may affect Colombia or the international markets. Possible developments include fluctuations in exchange rates, inflation, instability of prices, changes in interest rates, liquidity of domestic capital and debt markets, exchange controls, deposit requirements on foreign borrowings, controls on capital flows, and limits on foreign trade. The Colombian Government has considerable power to shape the Colombian economy and, consequently, affect the operations and financial performance of businesses. The Colombian Government may seek to implement new policies aimed at controlling further fluctuation of the Colombian peso against the U.S. dollar and fostering domestic price stability. EPM cannot predict what policies will be adopted by the Colombian Government and whether those policies would have a negative impact on the Colombian economy or EPM’s business, financial condition and results of operations. Furthermore, there can be no assurance that the Colombian peso will not depreciate or appreciate relative to other currencies in the future. See ‘‘Foreign Exchange Controls.’’

Natural disasters in Colombia could disrupt our businesses and impact our financial condition and results of operations. We are exposed to natural disasters in Colombia, such as earthquakes, volcanic eruptions, tornadoes, tropical storms and hurricanes. In particular, Colombia is exposed to recurring flooding and mudslides as a result of heavy rains attributable to the La Niña and El Niño weather patterns. In the event of a natural disaster, our disaster recovery plans may prove to be ineffective, which could have a material adverse impact on our ability to conduct our businesses, particularly if such an occurrence affects computer-based data processing, transmission, storage and retrieval systems or destroys customer or other data. In addition, if a significant number of our employees and senior managers were unavailable because of a natural disaster, our ability to conduct our businesses could be compromised. Natural disasters or similar events could also result in substantial volatility in our results of operations.

24 Colombia’s economy remains vulnerable to external shocks, including a global economic crisis and those that could be caused by future significant economic difficulties of its major regional trading partners or by more general ‘‘contagion’’ effects, which could have a material adverse effect on Colombia’s economic growth. In the past few years, Colombia has experienced a stable GDP growth of about 4%, although there is no guarantee that this economic performance will be maintained in the future. Vulnerability to negative moves in commodity prices and adverse events due to capital flights, among others, can affect Colombia’s economy. A significant decline in the economic growth of any of Colombia’s major trading partners, such as the United States, could have a material adverse impact on Colombia’s balance of trade and adversely affect Colombia’s economic growth. According to the Colombian Ministry of Commerce, the United States is Colombia’s largest export market. As of April 30, 2014, the United States accounted for 26.7% of Colombia’s total exports. As a result of the 2009 global financial and economic crisis, Colombia experienced its greatest contraction of exports in the decade. The decline in United States demand for imports has had a material adverse effect on Colombian exports and Colombia’s economic growth. We cannot assure you that any crisis such as those described above or similar events will not negatively affect investor confidence in emerging markets or the economies of the principal countries in Latin America, including Colombia and the other countries where we operate. Developments and the perception of risk in other countries may adversely affect the market price of securities issued by Colombian companies, including the Notes. Securities issued by Colombian companies may be affected by economic and market conditions in other countries, including the United States, other Latin American and emerging market countries. Securities issued by Colombian issuers are also likely to be affected by economic and political conditions in Colombia’s neighbors: Venezuela, Ecuador, Peru, Brazil and Panama. Although economic conditions in these Latin American and other emerging market countries may differ significantly from economic conditions in Colombia, investors’ reactions to developments in these other countries may have an adverse effect on the market value of securities of Colombian issuers, including the Notes. Due to financial and economic crises that may occur in countries around the world (such as the Asian financial crisis of 1997, the Russian financial crisis of 1998, the Argentine financial crisis of 2001 and the 2009 worldwide financial crisis) and which may have an adverse effect in the economies of emerging markets, investors may view investments in emerging markets with heightened caution. As a result of financial and economic crises in other countries including, among others, the United States or countries with emerging market economies, flows of investments into Colombia may be reduced. Crises in other countries may hamper investors’ enthusiasm for securities of Colombian issuers, which may in turn adversely affect the price for the Notes and make it difficult for EPM and its subsidiaries to access the international capital markets, finance our operations and capital expenditures and/or refinance our liabilities. Factors such as Colombia’s growing public debt and fluctuating exchange rates could adversely affect the Colombian economy. Colombia’s fiscal deficit and growing public debt could adversely affect the Colombian economy. In 2013 and 2012, the Colombian fiscal deficit was 2.4% of GDP and 2.3% of GDP, respectively. As of December 31, 2013, the Colombian Government’s total direct internal funded debt was approximately 27.1% of GDP, compared to approximately 23.5% of GDP at December 31, 2012. In addition, the U.S. dollar/Colombian peso exchange rate has shown some volatility in the last four years, particularly with the Colombian peso experiencing significant fluctuations during the last twelve months. We cannot assure you that any measures by the Colombian Government and the Central Bank will suffice to control any such volatility. In spite of the recovery of Colombia’s economy over the last four years, we cannot assure you that current growth and relative stability will be sustained. If the condition of the Colombian economy were to deteriorate, EPM’s business, financial condition and results of operations may be adversely affected. Historically, Colombia has experienced several periods of violence and political instability. Violence and political instability in Colombia may adversely affect the Colombian economy and EPM’s operations. Colombia has experienced several periods of violence over the past four decades, primarily due to the activities of guerrillas, paramilitary groups and drug cartels. In response, the Colombian Government has implemented various security policies and has strengthened its military and police forces, including the creation of specialized units.

25 Despite these efforts, drug related crime and guerrilla and paramilitary activity continue to exist in Colombia. Any possible escalation in the violence associated with these activities may have a negative impact on the Colombian economy in the future or on EPM, which may affect EPM’s customers, employees, assets or projects. This situation may have a negative impact on the credibility of the Colombian Government which could in turn have a negative impact on the Colombian economy or on EPM in the future.

Failure in the ongoing Peace Process between the Colombian government and the Revolutionary Armed Forces of Colombia (FARC, Colombia’s largest guerrilla group) may adversely affect the Colombian economy and EPM’s operations. Although the Colombian Peace Process continues and several preliminary agreements have already been reached, huge obstacles remain and we cannot assure you that the process will continue or that the agreements reached will be successfully implemented. A disruption in the negotiations could adversely affect Colombia’s risk perception which could in turn have a negative impact on the Colombian economy. EPM has several properties and assets located in regions with guerrilla presence. Failure in the ongoing Colombia Peace Process and increased guerrilla activities may impair EPM’s ability to operate its properties and assets located in such regions which, in turn, would have a negative impact on EPM’s financial condition and results of operations.

The Colombian Government could seize or expropriate EPM’s assets under certain circumstances. Pursuant to Article 58 of the Colombian constitution, the Colombian Government can exercise its eminent domain powers in respect of EPM’s assets in the event such action is deemed by the Colombian Government to be required in order to protect public interests. According to Law 388 of 1997, eminent domain powers may be exercised through: (i) an ordinary expropriation proceeding (expropiación ordinaria), (ii) an administrative expropriation (expropriación administrativa) or (iii) an expropriation for war reasons (expropiación en caso de guerra). In all cases EPM would be entitled to a fair compensation for the expropriated assets. Also, as a general rule, compensation must be paid before the asset is effectively expropriated. However, the compensation may be lower than the price for which the expropriated asset could be sold in a free-market sale or the value of the asset as part of an ongoing business.

It may be difficult or impossible to enforce judgments of courts of the United States and other jurisdictions against EPM, or any of EPM’s directors or officers or against the City of Medellín. EPM is organized under the laws of Colombia. EPM’s directors and most of its executive officers currently reside in Colombia. Furthermore, the majority of EPM’s assets are located in Colombia. Although EPM expects to appoint CT Corporation System as its agent for service of process in the state of New York, it may be difficult or impossible for you to effect service of process on, or to enforce judgments of U.S. courts against EPM or against its directors and officers based on the civil liability provisions of the U.S. federal securities laws. EPM has been advised by Mosquera Abogados Ltda, its Colombian counsel, that Colombian courts will enforce a U.S. judgment predicated on the U.S. securities laws through a procedural system known under Colombian law as exequatur. Colombian courts will enforce a foreign judgment, without reconsideration of the merits, only if the judgment satisfies the requirements of Articles 693, 694 and 695 of the Colombian Code of Civil Procedure (Código de Procedimiento Civil), (which will be superseded by articles 605 through 607 of Law 1564 of 2012 (Código General del Proceso), subject to the entry into force of said Law 1564 of 2012 in the terms of Article 627, paragraph 6 thereof), which provide that the foreign judgment will be enforced if certain conditions are met. See ‘‘Enforcement of Foreign Judgments.’’

We are subject to new and higher taxes resulting from changes in tax regulations or the interpretation thereof in Colombia. New tax laws and regulations, and uncertainties in the interpretation with respect to existing and future tax policies may affect EPM. In recent years, the Colombian Congress and tax authorities have imposed additional taxes and enacted modifications to existing taxes related to financial transactions, income, value added tax (VAT), and taxes on net worth. Changes in tax-related laws and regulations, and interpretations thereof, can provide for additional tax burdens on EPM and its businesses by increasing tax rates and fees, creating new taxes, limiting tax deductions, and/or eliminating tax-based incentives and non-taxed income. In addition, tax authorities and competent courts may interpret tax regulations differently than EPM, which could result in tax litigation and associated costs and penalties.

26 Risk Factors Relating to EPM’s International Operations EPM’s business, financial condition and results of operations may be adversely affected by economic, political, social or legal developments in the countries where EPM operates. EPM currently conducts operations in Chile, El Salvador, Guatemala, Mexico and Panama and may decide to expand its international operations to other countries in the future. As a result, EPM’s business, financial condition and results of operations may be adversely affected by general economic, political, social or legal developments in the countries where it operates. In general, operations in emerging market countries may be subject to different stresses than operations of businesses in countries such as the United States. These include conditions influenced by political events such as wars, social and civil unrest and significant changes in national economic policies, laws and regulations, all of which may be more likely to occur in an emerging market country. Some of the countries where EPM operates are affected by political, social, security and other problems and conditions, including, among others, drug trafficking, alien smuggling, organized crime, high crime rates, human rights concerns and a need to implement political, economic and social reforms. The Governments of these countries have exercised, and continue to exercise, significant influence over their respective economies and occasionally make significant changes in policy and regulations. Government actions to control inflation and other policies and regulations have often involved, among other measures, price controls, currency devaluations, capital controls and limits on imports. EPM does not have any control over, and is unable to predict, which measures or policies the Governments of the countries where it operates may adopt in the future. Governmental actions concerning the economies of the countries where EPM operates, including changes in policies, laws and regulations, could have a significant effect on EPM’s businesses, financial condition and results of operations. We cannot assure you that that future economic, political, social or legal developments in the countries where EPM currently operates, over which EPM has no control, will not have an adverse effect on EPM’s business, financial condition or results of operations.

EPM is subject to extensive controls and regulations imposed by the Governments of the countries where EPM operates and any changes in such controls and regulations may have an adverse effect on the business, financial condition and results of operations of EPM’s international subsidiaries. The services that EPM provides in the countries where it operates are subject to extensive controls and regulations imposed by various levels of governmental agencies. All current legislation is a matter of public record and EPM will be unable to predict what additional legislation or amendments may be enacted. Amendments to current laws, regulations and permits governing operations and activities of companies engaged in EPM’s businesses, including environmental laws and regulations which are evolving in these countries, or more stringent implementation thereof, could have a material adverse impact on EPM’s international operations and cause increases in expenditures and costs, affect EPM’s ability to expand or transfer existing operations or require EPM to abandon or delay the development of new businesses and/or projects.

Foreign currency exchange rate fluctuations may affect EPM’s financial results. As a result of EPM’s international operations, a significant amount of its revenues is generated in currencies other than the Colombian peso, EPM’s functional currency. Many of the operational and other expenses EPM incurs are paid in the local currency of the countries where it conducts operations. As a result, EPM may be exposed to foreign exchange and translation risk when local currency financial statements are translated to Colombian pesos, EPM’s functional currency. Exchange rates between the Colombian peso and the currencies of the countries where EPM operates have fluctuated significantly in the past and may do so in the future. The Colombian peso has also fluctuated significantly in the past as compared to the U.S. dollar. As currency exchange rates fluctuate, translation of the statements of income of international businesses into Colombian pesos will affect comparability of revenues and expenses between periods.

High inflation may adversely affect the business and operating results of EPM’s international operations. The countries where EPM operates have experienced periods of high inflation in the past and may experience periods of high inflation in the future. For instance, the inflation rate in Guatemala was 6.20% in 2011, 3.45% in 2012

27 and 4.39% in 2013, according to the Guatemalan Central Bank, and the inflation rate in El Salvador was 5.06% in 2011, 0.78% in 2012 and 0.79% in 2013, according to the Department of Statistics and Censuses (Dirección General de Estadística y Censos) of El Salvador. Inflationary pressures may adversely affect the business and results of operations of EPM’s international operations by adversely affecting consumer purchasing power and the demand for EPM’s services. In addition, because the local currency-based labor costs of EPM’s international operations and the costs of other local inputs increase as a result of inflation in the relevant country, if EPM is unable to pass on the increased costs to its customers, the real prices of EPM’s services will not keep pace with inflation.

EPM may become subject to exchange controls and restrictions on foreign currency remittance imposed by the countries where it operates. Exchange control risks include: (i) availability risk, the risk that even if EPM generates cash flows in local currencies that may be ultimately distributable to EPM, other currencies will not be available for conversion; (ii) convertibility risk, the risk that a governmental entity will restrict, condition or terminate EPM’s legal right to convert local currency into other currencies, including the Colombian peso or the U.S. dollar; and (iii) transferability risk, the risk that a governmental entity will allow EPM to convert local currency into other currencies, but will place restrictions or prohibitions on those other currencies leaving the country. The imposition of exchange controls and restrictions on foreign currency remittance in any of the countries where EPM operates could have a material adverse effect on EPM’s business and results of operations. The governments of the countries where EPM operates do not currently restrict the ability of local or foreign persons or entities to convert local currencies into other currencies. However, in the past, the countries where we operate have experienced balance of payment deficits and shortages in foreign exchange reserves, and the governments have responded by restricting the ability of local or foreign persons or entities to convert local currency to other currencies generally, and U.S. dollars in particular. EPM cannot assure you that any such restrictions will not be imposed in the future, nor can there be any assessment of the duration or impact of such restrictions if imposed. Any restrictive exchange control policy or law could adversely affect EPM’s ability to engage in foreign or local exchange activities and could also have a material adverse effect on EPM’s business, financial condition, or results of operations.

Exchange controls and new taxes could materially affect EPM’s ability to fund its operations and/or realize profits from its international operations. EPM’s international operations may require funding if their cash requirements exceed operating cash flow. To the extent that funding is required, there may be exchange controls limiting such funding or adverse tax consequences associated with such funding. In addition, taxes and exchange controls may affect the dividends that EPM receives from its international subsidiaries. Exchange controls may prevent our international subsidiaries from transferring funds to Colombia. There can be no assurance that the governmental authorities of the countries where EPM operates will not require prior authorization or will grant such authorization for EPM’s international subsidiaries to make dividend payments to EPM and/or EPM’s subsidiaries in other jurisdictions and EPM cannot assure you that there will not be a tax imposed with respect to the expatriation of the proceeds from its international subsidiaries. The implementation of a restrictive exchange control policy, including the imposition of restrictions on the repatriation of earnings to foreign entities, could affect EPM’s ability to engage in foreign exchange activities, and could also have a material adverse effect on its business, financial condition and results of operations.

El Salvador has experienced several periods of violence which could negatively affect the Salvadorian economy and EPM El Salvador. El Salvador has experienced high levels of violent crime caused by organized crime and mara youth gangs. Murder levels, for instance, reached a record 20-year high in 2011. Law enforcement institutions and the judiciary are weak, compounding the problem. These activities, their possible escalation and the violence associated with them may have a negative impact on the El Salvadorian economy or on EPM’s operations in El Salvador. Political and activist resistance to mining activities has been on the rise. The government has ambitious plans to make El Salvador a hub for logistics in the region, but crucial infrastructure works have run into severe delays in the past, and infrastructure and other agricultural and productive activities remain highly exposed to earthquakes, hurricanes and other natural disasters. The lack of an adequate transport infrastructure and a shortage of skilled labor further reduces the competitiveness of the country.

28 Because the Panamanian monetary system is dependent on the U.S. dollar, any downturns in the U.S. economy may adversely affect EPM’s operations in Panama. Public finance in Panama is heavily influenced by the U.S. dollar-based monetary arrangements in place since 1904. Panama has used the U.S. dollar as its legal tender since shortly after gaining its independence. The national currency, the Balboa, is used primarily as a unit of account linked to the U.S. dollar at a ratio of one dollar per one Balboa. The government of Panama does not print paper currency, although a limited amount of coinage is minted. Panama’s monetary system is limited in its ability to conduct a stimulative monetary policy and can finance public sector deficits only through borrowing. As a result, in recent years, Panama has enjoyed low inflation commensurate with levels of inflation generally prevailing in the U.S. However, we cannot assure you that these relatively low rates of inflation will continue. Although the absence of a printed national currency and the general absence of domestic budgetary financing through the banking system (other than from 1987 to 1989) reduce the risk of runaway inflation, they do impose constraints on fiscal and monetary policy, particularly for responding to external fluctuations, that are not present in countries that can finance their deficits by printing local currency. In addition, given the relationship of the Panamanian monetary system to the U.S. dollar and, indirectly, Panama’s dependence on the U.S. economy, EPM cannot assure you that the appreciation or depreciation of the U.S. dollar against other currencies or the existence of sustained higher levels of inflation in the U.S. economy (and the resultant effect on the value of the U.S. dollar) or increases or decreases in interest rates in the U.S. will not adversely affect the Panamanian monetary system or, indirectly, EPM’s operations in Panama.

EPM’s investments in Panama and Bermuda may be affected if such countries are considered ‘‘Tax Havens’’ for Colombian tax purposes. Pursuant to Colombian Decree 2193 of 2013, Panama, Bermuda and other countries may be considered as ‘‘Tax Havens’’ for Colombian tax purposes if Colombia and any such countries do not agree on a bilateral treaty for the exchange of tax information prior to October 7, 2014. If Panama and/or Bermuda are considered a ‘‘Tax Haven’’ by Colombia for Colombian tax purposes, the investment that EPM made in any such country may be affected due to higher taxes that Colombia will apply for payments that EPM made to, or received from, any such country. If this were to occur, the value of EPM’s investments and operations in such countries will be negatively affected. In addition, EPM’s reputation may be negatively affected.

Risks Relating to EPM’s Relationship with the City of Medellín The City of Medellín controls EPM, and its interests may differ from your interests as a holder of the Notes, including in the transfer of a portion of EPM’s net income to the City of Medellín. The City of Medellín owns EPM. The Mayor of Medellín, as legal representative of the City of Medellín, appoints all of the members of EPM’s board of directors. Under Colombian law, the maximum amount of net income that a government-owned company may, or may be required to distribute is 80.0% of the previous fiscal year’s net income. Pursuant to EPM’s by-laws and upon approval by the COMPES, EPM is required to distribute to the City of Medellín, EPM’s sole owner, no more than 30.0% of EPM’s net income for the previous fiscal year. Under certain circumstances, however, EPM may be required to distribute to the City of Medellín additional amounts in excess of 30.0%. All distributions in excess of 30.0% of EPM’s net income are subject to prior approval from the Medellín City Council, which involves a process that requires, among other things, EPM’s certification that the distribution of additional amounts has no effect on the financial condition and sustainability of EPM’s businesses, including its ability to service its debt. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Distributions’’ for a detailed description of EPM’s distributions for the years ended December 31, 2011, 2012 and 2013 and approved distributions for subsequent years. EPM cannot assure you that limits imposed on the Company’s distributions to the City of Medellín will remain in place or that distributions to the City of Medellín will not have a material adverse effect on EPM’s business, prospects, cash flow, financial condition or ability to make payments on the Notes. Distributions to the City of Medellín will not be limited under the terms of the Notes. Pursuant to Colombian law, the Medellín City Council and the government of the City of Medellín are responsible for establishing the rules regarding the preparation and execution of EPM’s budget, as well as the management of the Company’s excess liquidity. Also, EPM’s budget is subject to approval by the Council of Fiscal Policies of the City of Medellín (Consejo de Política Fiscal del Municipio de Medellín or ‘‘COMFIS’’), although

29 COMFIS is entitled to delegate, and has delegated, its approval duties to EPM’s board of directors. The City of Medellín’s budgeting policies may change and EPM’s ability to make new investments or incur additional debt may be restricted. The next elections for Mayor of Medellín are expected to take place in 2015 with the new Mayor taking office in 2016. Changes in the administration of the City of Medellín could lead to changes in EPM’s senior management, which in turn could lead to changes in EPM’s strategic direction. EPM’s status as a government-owned company may limit EPM’s ability to incur foreign indebtedness, as prior approval from the Colombian MHCP is required, or to otherwise make changes to its business and operations, and may subject EPM to public or political pressure. Any of the foregoing developments could have a material adverse effect on EPM’s prospects, business, financial condition, results of operation and ability to satisfy its obligations under the Notes.

The City of Medellín may transfer all or a portion of its ownership of EPM. Transfers and other distributions from EPM represent a significant source of income and cash flow for the City of Medellín. The City of Medellín has discussed in the past a potential transfer of the ownership of EPM and although those discussions have not led to a change of control at EPM, there is no assurance that the City of Medellín may not change its position regarding EPM in the future as a result of, among others, political pressures or new economic models or policies that may be adopted by future governments. A change of control at EPM requires compliance with laws and regulations applicable to the privatization of government-owned companies as well as approval from the Medellín City Council. The occurrence of any such event could have a material adverse effect on EPM’s results of operations and financial condition, which ultimately may impair EPM’s ability to make payments under the Notes. In the event the Republic of Colombia ceases to be the ultimate beneficial owner of EPM, each holder of Notes will have the right to require EPM to repurchase all or any part of the Notes. See ‘‘Description of the Notes — Repurchases at the Option of the Holders of the Notes Upon Change of Control.’’

EPM regularly enters into transactions with the City of Medellín and other Government-controlled entities. EPM has entered into certain transactions with the City of Medellín and other government or government- controlled parties. Many of these transactions occur in EPM’s ordinary course of business. Such transactions may create potential conflicts of interest that could adversely affect EPM or your interests as holder of the Notes. See ‘‘Relationship with the Municipal Government.’’ Furthermore, EPM cannot assure you that the transactions among EPM and these parties have been or will be conducted on an arm’s length basis so that such transactions would not adversely affect EPM or your interests as holder of the Notes.

Risk Factors Relating to EPM’s Business and Operations in General EPM’s operations are subject to significant operational risks. EPM’s operations are subject to risks normally associated with the industries in which EPM operates, including equipment failures and ruptures, human errors, explosions, pollution, release of toxic substances, fires, adverse weather conditions, geological risks and other hazards, each of which could result in damage to or destruction of EPM’s assets, or other damages to persons or property. Also, EPM’s assets may be the target of terrorist attacks. See ‘‘— Risk Factors Relating to EPM’s Energy Business — The Colombian energy industry has been affected by terrorist attacks in the past.’’ Although EPM maintains insurance coverage that it believes to be in accordance with industry standards, EPM cannot assure you that its insurance is sufficient to fully cover certain damages or losses arising out of EPM’s operational risks. See ‘‘— Risk Factors Relating to EPM’s Business and Operations in General — Insurance, guaranty and warranty coverage may not be adequate.’’ Damages and losses resulting from EPM’s operational risks may affect the Company’s business, financial condition and results of operations.

EPM may not be able to maintain its growth strategy through acquisitions or investments or realize the expected benefits of its past and future acquisitions or investments. EPM has made several acquisitions and investments in the past decade and intends to continue making acquisitions and investments in order to strengthen, develop and grow its existing operations. Any acquisitions or investments EPM has completed or may complete in the future are subject to integration and development risks. The success of EPM’s acquisition or investment strategy depends upon its ability to identify targets with growth potential, make reasonable projections of future cash flows, integrate them into EPM’s operations, complete acquisitions at an appropriate cost and achieve an acceptable rate of return from its acquisitions, including past acquisitions.

30 EPM may face difficulties or experience delays while integrating its businesses into the businesses it has acquired or may acquire or in realizing the expected benefits or synergies from past or future acquisitions. These risks include potential disruptions of its businesses. EPM may become liable, to the extent of its investment, for unexpected liabilities arising from acquired assets or businesses (including environmental liabilities). Indemnification agreements with the sellers of such assets may be nonexistent, unenforceable or insufficient to cover all potential liabilities. EPM may also be subject to regulatory interference, the imposition and maintenance of new regulatory controls, procedures and policies and the impairment of relationships with employees and counterparties should difficulties arise in integration. Moreover, the value of any business that EPM acquires or in which it invests may be less than the amount that EPM paid. EPM’s experience operating outside of Colombia is limited and EPM’s operations in countries where it has recently entered may be subject to operational, labor, regulatory, social, political or other risks unknown to EPM or in respect of which EPM may not have prior experience including, but not limited to, economic, political and regulatory conditions in any such country. For example, as part of EPM’s international expansion strategy, EPM entered the Central American market in 2011 and the Mexican and Chilean markets in 2013. EPM cannot assure you that it will be able to realize the expected benefits and synergies from any acquisition, merger, consolidation or from its international operations as a result of economic, political, regulatory and other risks, uncertainties and factors beyond EPM’s control.

EPM may not be successful in implementing its international expansion strategy. EPM’s business strategy involves the international expansion of its businesses to various countries in Latin America. EPM seeks to significantly grow revenues from this overseas expansion. EPM’s international expansion plan considers countries such as Mexico, Brazil, Chile, Peru, Guatemala, El Salvador, Costa Rica and Panama and southern United States, in the electricity distribution, power generation, renewable power generation, water supply and sewage business segments. The successful implementation of EPM’s internationalization strategy is subject to various risks including, among others, the following • the levels of economic, political and legal stability of the countries where EPM may acquire assets or establish operations; • the legal regulatory framework and legal regulatory stability of the countries where EPM may acquire assets or establish operations; • the failure to correctly assess the economic, political and regulatory conditions of the countries where EPM intends to expand its businesses; and • the limited experience operating in foreign countries where EPM may be subject to operational or other risks unknown to EPM or in respect of which EPM may not have prior experience. Any of these risks, among others, may affect EPM’s ability to achieve its business strategy, thereby impairing its results of operations.

The completion of EPM’s strategic projects is subject to several factors, some of which may be beyond EPM’s control. EPM’s ability to engage in any strategic project is subject to, among other factors, numerous business, economic, regulatory, competitive and political uncertainties beyond EPM’s control. EPM cannot assure you that it will undertake any expansion or extension project or, if undertaken, any such project would be successful. The success of any expansion or extension project may depend on, among others, the following factors: • a competitor could offer services that are more desirable because of costs, location, facilities or other factors; • customers may be unwilling to sign long-term contracts which would make use of a planned expansion; • supply of equipment may be subject to delays as a consequence of a limited number of providers of the equipment that EPM requires to develop its projects; • public protests and negative reactions concerning EPM’s projects in regions where EPM operates or intends to operate; • the effects of illegal armed groups and/or unlawful settlers in the region where the project is located;

31 • regulatory policy may change, resulting in reduced or eliminated returns from invested capital; and • EPM or any of its subsidiaries or related companies may be unable to obtain the requisite environmental and regulatory permits and approvals. For example, on December 7, 2010, EPM’s board of directors decided to indefinitely suspend the implementation of the Porce IV project due to force majeure conditions in the area of influence of the project that made its implementation economically and socially unviable. EPM had made significant investments in connection with the Porce IV project prior to deciding to suspend its implementation. As a result of the decision to indefinitely suspend the Porce IV project, (i) EPM will not receive the Reliability Charge relating to the Firm Energy that the CREG had allocated to the Porce IV project, (ii) XM enforced the U.S.$13.8 million guaranty provided by EPM in the June 2008 Firm Energy bidding process, and (iii) EPM may incur additional costs in connection with such suspension. In addition, during the construction of the Nueva Esperanza Project, issues such as delays in obtaining the relevant environmental licenses and impacts on the cultural patrimony within the zone resulted in delays in the project’s schedule. EPM is currently developing the Ituango Project under a BOOMT Agreement. The Ituango Project is expected to be the largest hydrogeneration power station in Colombia, with a total installed capacity of 2,400 MW. In connection with the relevant Firm Energy auctions and in accordance with CREG’s regulations, HidroItuango provided a U.S.$39.9 million guaranty to XM in connection with its Firm Energy obligations. On October 1, 2013, EPM’s board of directors approved a plan of investments relating to the Ituango project for an aggregate amount of Ps.10,510,277 million, which EPM currently estimates to be the total costs of the Ituango project (including financing costs). EPM expects to finance approximately 40% of the total costs of the Ituango project with funds from operations and the remaining approximately 60% with debt financing. As of June 30, 2014, EPM had incurred Ps.1,917,778 million in costs relating to the Ituango Project. EPM has no prior experience in developing projects of this size and there can be no assurance that EPM will be successful in obtaining the remaining financing for the project or that the development of this project will ultimately be completed. The completion of the Ituango Project may present significant challenges as a result of potential guerrilla-disruptive activities and complaints from the communities located in the area of influence of the project. If EPM is unable to complete or decides to discontinue the Ituango Project, EPM will not receive the Reliability Charge relating to its Firm Energy allocation and may be subject to enforcement of the guaranty provided to the XM. For more information about the Ituango Project see ‘‘Summary — Brief Summary of Ongoing Projects’’ and ‘‘Business — Energy BU — Electricity Generation and Commercialization Business — Capital Expenditure Projects: Expansion of EPM’S Generation Capacity — Ituango.’’ EPM may require additional capital to fund strategic projects, including the Ituango Project. If EPM fails to generate or secure sufficient funds in the future, it may have to delay or abandon strategic projects, including the Ituango Project. Also, a strategic project may cost more than planned to complete and such excess cost may not be recoverable. EPM’s inability to successfully complete any strategic project or to recover any costs or expenditures related thereto may adversely affect EPM’s financial condition and results of operations.

EPM depends on sophisticated information and processing systems to operate its businesses, the failure of which could adversely affect its financial condition and results of operations. Sophisticated information and processing systems are vital to EPM’s ability to monitor its network performance and adequate provision of its services, bill customers, detect fraud, provide customer service, control its costs, achieve operating efficiencies and meet its service targets and standards. EPM routinely evaluates, upgrades and modernizes its systems as needed. EPM’s billing and information systems are continuously being upgraded and modernized by both in-house technicians and outside service providers (including those that participate in the billing process). However, the failure of these technicians and outside service providers to successfully integrate and upgrade EPM’s systems, to adequately provide their services or the failure in the future of any of these systems to operate properly, could have a material adverse effect on EPM’s financial condition and results of operations.

EPM is subject to laws relating to safety and the protection of the environment which may increase the cost associated with operating its infrastructure or that may limit its ability to operate. EPM is subject to extensive national and local laws and regulations relating to the protection of the environment. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, imposition of remedial measures (which may include temporary or permanent closure of facilities) and the enforcement of injunctions to ensure future compliance. Liability under certain environmental laws is strict, joint and

32 several. Compliance with environmental regulations may require EPM to incur significant expenses to install and maintain pollution controls, or to limit its operations. The adoption of remedial measures may lead to significant costs associated with clean-up of the affected properties, as well as with the payment of damage claims arising out of the contamination of properties or impact on natural resources. Although EPM believes that its operations are in material compliance with applicable environmental and safety laws and regulations, risks of substantial costs and liabilities, including those from leaks and explosions, are inherent in EPM’s operations and significant costs and liabilities may be incurred, including those relating to claims for damages to property or injury or loss of life, resulting from operations of EPM’s assets. Further, it is possible that other developments, such as increasingly stringent national or local safety and environmental laws and enforcement policies could result in increased costs and liabilities to EPM. EPM cannot predict the effect that any future changes in safety laws or environmental laws may have on EPM’s cash flows, financial condition or results of operations. Other environmental occurrences or conditions may arise or be discovered in the future, which could be costly to remedy and could have a material adverse effect on EPM’s cash flows, financial condition and results of operations.

EPM’s businesses are subject to substantial regulation, and regulatory agencies could penalize or in certain cases assume control of EPM if it fails to comply with the regulations applicable to its businesses. Also, the agencies that regulate EPM’s businesses may take actions that adversely affect EPM’s operations and profitability. EPM’s businesses are subject to extensive energy, water, waste management, telecommunications, environmental and other laws and regulations at the national and local level affecting many aspects of its operations. Such laws and regulations may relate to, among other things, required licenses, permits and other approvals, the rates that EPM may charge for its services, the terms and conditions applicable to its services, its ability to recover various categories of costs and the acquisition, construction and disposition of facilities by EPM. EPM or any of its subsidiaries may not be able to renew or maintain any applicable licenses, permits and approvals required or that may be required to operate its businesses. The failure to renew or maintain any required licenses, permits or approvals or the inability of EPM or any of its subsidiaries or related companies to satisfy any applicable legal requirements may result in increased compliance costs, the need for additional capital expenditures or a suspension of operations, which could have a material adverse effect on EPM’s cash flows, financial condition and results of operations. EPM’s operations may not comply at any given time with all laws and regulations and all conditions established by applicable licenses, permits or approvals. The failure by EPM to meet the quality standards established by the relevant regulatory agencies, as applicable, may result in the imposition of penalties, fines and restrictions. In addition to these penalties, fines and restrictions, the SSPD may assume control of its operations to ensure the continued provision of public utility services and compliance with applicable laws and regulations. Any of the foregoing penalties, fines or restrictions, or the intervention of SSPD may, as the case may be, have a material adverse effect on EPM’s results of operations, financial condition and the ability of EPM to make payments under the Notes. See ‘‘— Risk Factors Relating to EPM’s Business and Operations in General — It may be difficult to enforce your rights under the Notes if the SSPD takes control of EPM or any of its business units in the Colombian energy, natural gas, water or telecommunications sectors.’’ If the services tariff rates were reduced or redesigned pursuant to regulations issued by CREG, CRA or CRC in the future, or if the many relevant aspects of the business including volume of business under currently permitted rates were decreased significantly, or if EPM were required to substantially discount the rates for its services because of regulatory pressure, the profitability of its businesses could be materially reduced. In addition, increased regulatory requirements relating to the integrity of EPM’s facilities or the quality of the services provided by it may require additional spending in order to meet these requirements and correct operational inefficiencies, which could have a material adverse effect on business, prospects, cash flow, financial condition and results of operations.

Restrictions in debt agreements that EPM has entered into may limit its ability to operate its business, pay dividends and incur additional indebtedness. The agreements governing EPM’s indebtedness impose restrictions on EPM’s operations and activities, as well as the ability of EPM or its subsidiaries to incur additional indebtedness or grant guarantees. These instruments contain a number of significant covenants, among others, that limit our ability to: • incur or guarantee additional indebtedness; • pay dividends or make other distributions;

33 • make certain restricted payments, including investments; • sell or otherwise dispose of assets, including capital stock of certain subsidiaries; • create liens; • enter into sale and lease back transactions; • enter into agreements that restrict dividends from subsidiaries; • enter into transactions with affiliates; and • enter into acquisitions, mergers or consolidations. These restrictions and covenants are subject to a number of important qualifications and exceptions. As of the date of this offering memorandum, pursuant to the indentures governing EPM’s notes issued in 2009 and 2011, EPM’s restrictive covenants are in suspension (‘‘Suspended Covenants’’). In the event that two rating agencies withdraw or downgrade their investment grade rating with respect to EPM, or a default or event of default occurs and is continuing with respect to such indentures, then EPM will again be subject to the Suspended Covenants with respect to future events. See ‘‘Description of Other Indebtedness.’’ These restrictions and covenants may limit EPM’s ability to operate its businesses and may prohibit or limit its ability to enhance its operations or take advantage of potential business opportunities as they arise. EPM’s breach of any of these covenants or its failure to meet any of these conditions could result in a default under any or all of such indebtedness. EPM’s ability to comply with these covenants may be affected by events beyond its control, including prevailing economic, financial and industry conditions. In addition, if EPM is unable to generate sufficient cash flow from operations, EPM may be required to refinance outstanding debt or to obtain additional financing. There can be no assurance that a refinancing would be possible or that any additional financing would be obtainable on acceptable terms or at all.

We are in the process of adopting new accounting standards, which may have a material impact on our consolidated financial statements. EPM prepares its consolidated financial statements in accordance with Colombian Public Utilities Companies GAAP. Certain of these accounting standards differ from IFRS. For a description of differences between Colombian Public Utilities Companies GAAP and IFRS, see ‘‘Annex A — Summary of Certain Differences Between Colombian Public Utilities Companies GAAP and IFRS for Non-Governmental Entities.’’ EPM cannot assure you that the summary of certain differences included in Annex A is accurate or complete or that they are or will be the only differences. On July 13, 2009, the Colombian congress enacted Law No. 1314, which was subsequently signed by the Colombian President. Law No. 1314, which is intended to further promote the internationalization of the Colombian economy, requires the gradual convergence of Colombian GAAP into IFRS, as issued by the IASB. In 2012, the mandate contained in Law No. 1314 was further developed through Decree No. 2784 and a deadline was set for the adoption of IFRS by Group 1 government-owned companies (such as EPM). In 2013, the technical regulatory financial reporting framework applicable to Group 1 government-owned companies contained in the Annex to Decree No. 2784 was partially amended and the CAO, through Resolution 743 of 2013, incorporated the rules and regulations set forth in the Annex to Decree No. 2784 of 2012 as an integral part of the Public Accounting Regime, applicable to Group 1 government-owned companies, and set December 31, 2015 as the IFRS reporting date deadline. Recently, EPM’s management approved a project to adopt IFRS as issued by the IASB and set December 31, 2014 as its reporting date under IFRS. Although IFRS are based on a conceptual framework similar to Colombian Public Utilities Companies GAAP, there are significant differences in recognition, measurement and disclosures. In order to prepare for the transition to IFRS, we have established an IFRS implementation team which includes senior levels of management from all relevant departments, and have engaged an external expert advisor. We have developed implementation solutions for some of the significant topics and are continuing to implement this transition. Comprehensive training has been provided to key employees and further investment in training and resources will be made throughout the transition to facilitate a timely and efficient conversion to IFRS. We continue to monitor and assess the impact of evolving differences between Colombian Public Utilities Companies GAAP and IFRS. The adoption will result in changes to our reported financial position and results of operations, and these changes may be material. Moreover, any restatement of historical financial statements for comparative purposes may be significant. In addition, IFRS could have an effect on the computation of our debt covenants and of certain other

34 contractual obligations. In particular, although the adoption of IFRS will not change our actual cash flows, our covenants linked to financial ratios may be affected by the adoption of IFRS in ways that are difficult to predict at this time.

It may be difficult to enforce your rights under the Notes if the SSPD takes control of EPM or any of its business units in the Colombian energy, natural gas or water sectors. As a provider of domiciliary public services, EPM is subject to Law 142 of 1994 (‘‘Law 142’’ or ‘‘LSPD’’). Under this law, the SSPD has the power to oversee EPM’s operations and the authority to take over the management of the Company, if necessary, to ensure the continued provision of adequate public utilities services. The SSPD may take over EPM’s management upon the occurrence of certain events, including: • material interruptions or failures in the rendering of public utilities services; • material violation of the laws governing EPM’s business or material breaches of the contracts to which EPM is a party; • revocation or expiration of the licenses, permits or concessions that EPM requires to operate its businesses to the extent that such events are deemed to be evidence of EPM’s intent of not complying with applicable laws and regulations; • increases in public catastrophes or disturbance of public order; • a general payments moratorium; and • in case EPM becomes subject to liquidation proceedings. Should the SSPD take possession and control of EPM’s businesses, it would then be either (i) managed by the SSPD’s designees or by a trustee or (ii) liquidated, in which case a liquidator will be appointed by the SSPD. In light of the broad powers of the SSPD, if the SSPD takes control of EPM’s business, EPM cannot assure you that the management appointed by the SSPD will not change EPM’s business strategy or that any changes implemented by such management will be successful. If, after taking control of EPM’s businesses, the SSPD decides to liquidate EPM, subordinated and unsubordinated creditors may have the same priority and, if such scenario were to occur, EPM cannot predict how long payments under the Notes could be delayed or whether or to what extent you would be compensated for any such delay.

Because substantially all of EPM’s assets are dedicated to the provision of essential public services, they may not be available for liquidation in the event of a bankruptcy and may not be subject to attachment to secure a judgment. EPM’s energy and gas distribution assets, water and sewage assets and waste management assets are used in connection with the provision of what is deemed to be an essential public service under Colombian laws. Pursuant to Law 142, those assets may not be available for liquidation in the event of bankruptcy, insolvency or attachment to secure a judgment, and, in case of EPM’s insolvency or bankruptcy, could, pursuant to Law 142, be transferred to another public services company in order to ensure the continued provision of the relevant public utility services. Although EPM believes it would be entitled to compensation in this event, EPM cannot predict when it will receive such compensation or the amount that may be paid as compensation may be lower than the amount necessary for EPM to fulfill its obligations, including its obligations under the Notes.

EPM is subject to significant litigation. EPM is subject to significant litigation, which, if determined adversely to its interests, may have a material adverse effect on its business, results of operations, financial condition and/or prospects. EPM is involved as defendant in several litigation proceedings involving, among others, a request by the Sindicato de Trabajadores de las Empresas de Servicios Públicos Domiciliarios, Complementarios y Conexos (Sinpro) to enjoin the UNE-Millicom Merger, claims related to public procurement proceedings brought by contractors that have not been awarded the respective contracts, contractual disputes with contractors and suppliers, labor claims and tax matters with the national and regional tax authorities. As of June 30, 2014, the aggregate amount of the claims under pending litigation against EPM was Ps.1,024,418 million. As of June 30, 2014, EPM had provisions for Ps.163,655 million, in connection with legal proceedings with probable adverse decisions against EPM. EPM believes that its provisions, in connection with legal proceedings with probable adverse decisions against EPM as evaluated by the Company’s

35 management and legal counsel, are sufficient to comply with EPM’s potential payment obligations thereunder. However, EPM cannot predict how other proceedings will be resolved and, if resolved contrary to its interests, what would be the impact on its business, financial condition and results of operations. See ‘‘Business — Legal Proceedings.’’ Labor strikes could adversely affect EPM’s business. As of June 30, 2014, EPM had 22,329 permanent employees, 674 apprentices and 231 students, with an average tenure of 15 years with the Company. In Colombia, as of June 30, 2014, EPM had 10,870 unionized employees affiliated with one or several of twelve EPM employee unions: SINTRAEMSDES, SINTRAESTATALES, SINPROESP, UNIGEEP, SINTRAELECOL, SINTRACHEC, Sindicato de Trabajadores de Empresas Varias de Medellín S.A. E.S.P., SIPROESSA, UNITRAE, SINTRAEDATEL, SINTRAEPMTELECOMUNICACIONES, and SINTRAUNE. As of June 30, 2014, SINTRAEMSDES had 5,163 members, 66 of whom were also affiliated with SINPROESP and 72 of whom were also affiliated with UNIGEEP. Members of SINTRAEMSDES include government workers and employees. The collective bargaining agreement with SINTRAEMSDES, which benefits 3,213 union members, expires on December 31, 2016. As of June 30, 2014, SINPROESP had 2,633 members, 66 of whom were also affiliated with SINTRAEMSDES and six of whom were also affiliated with UNIGEEP. The collective bargaining agreement with SINPROESP, which benefits 1,812 union members, expires on December 31, 2016. As of June 30, 2014, EPM had 1,813 employees outside Colombia, 347 of whom were affiliated with one of the following union organizations: SINDICATO LUZ Y FUERZA, SITIESPA or SIES. EPM believes that its relationship with its employees is satisfactory and over the past 30 years has never been subject to any work stoppage. Pursuant to the Colombian constitution and Law 142, work stoppages and strikes in public utilities companies are considered illegal. However, EPM cannot assure you that, regardless of such provision, a work stoppage or strike would not occur. A work stoppage or strike could adversely affect EPM’s revenues and earnings and could, in turn, limit or affect its ability to make payments under the Notes. See ‘‘Business — Employees.’’ Insurance, guaranty and warranty coverage may not be adequate. EPM believes that it currently maintains customary insurance for its property and assets of the types and amounts that are generally consistent with industry practice. However, there can be no assurance that such insurance coverage will continue to be available on commercially reasonable terms or that the amounts for which EPM is insured, or the proceeds of such insurance, will compensate EPM fully for its losses. In the event there is a total or partial loss of EPM’s facilities, any insurance proceeds that EPM may receive may not be sufficient in any particular situation to effect a restoration of its facilities to the condition that existed prior to such loss, which may affect EPM’s ability to satisfy its obligations under the Notes. In the event of a total or partial loss of EPM’s facilities, certain items of equipment may not be easily replaced since they may be too costly or system specific that they are not readily available. Accordingly, notwithstanding that EPM may have insurance, guaranty or warranty coverage over such equipment, the location of its facilities or limitations on its ability to procure replacement equipment may give rise to significant delays in replacement and thereby cause losses. This could have a materially adverse effect on EPM’s cash flows, financial condition and results of operations. Risk Factors Relating to EPM’s Energy Business A decline in GDP growth, and thus in domestic energy demand, in Colombia may adversely affect EPM’s operating results and financial condition. Economic conditions in Colombia have a significant impact on EPM’s operating results and financial condition. Historically, GDP and domestic energy demand growth have been highly correlated. Any decrease from expected energy demand can adversely affect EPM’s operating results. A contraction in energy demand, such as the contraction suffered in 1999 as a result of prevailing economic conditions in Colombia, could lead to a decline in system energy prices due to decreased demand in the market. EPM cannot assure you that these circumstances will not occur, which may adversely affect EPM’s operating results and financial condition and, therefore, its ability to make payments under the Notes.

36 Limited availability of energy will lead to rationing programs and therefore may affect EPM’s operations and business results. Colombia is highly dependent on hydroelectric power for its energy needs. As of June 30, 2014, Colombia’s total generation capacity was 14,989 MW. Out of Colombia’s total installed capacity, 64% is hydroelectric, while thermal plants represent 31%, and minor plants and cogeneration represent 5%. Limited availability of energy as a result of diminished hydroelectric or thermal generation may cause the Colombian Government to establish programs, for the reduction of energy consumption to avoid the interruption of energy supply. As a result of these programs, energy consumption usually declines and such decline could have a material adverse effect on EPM’s financial condition and results of operations. In 1992-1993, the Colombian Government established energy rationing programs in order to address the challenges posed by a dry season extended from 1991-1992. Other dry seasons occurred in 1997-1998, 2002-2003 and 2009-2010, with different intensities. Because the energy generation system has expanded since 1993 and thermal generation has been sufficient to serve energy demand, rationing programs were not established during these periods. From September 2012 through October 2013 the water streams contributing to EPM’s power generation systems were low. During only two months of the period water streams were slightly above the historical average levels primarily as a result of a moderate increase in the temperature of the Pacific Ocean. As a result, our power generation capacity decreased significantly during 2013 and the market price for electricity increased in the same period due to the higher use of water reserves. Since March 2014, the conditions of the Pacific Ocean have shown a clear evolution towards the initial stages of an El Niño event, with a significant increase in the temperature of deep sea waters of the equatorial belt associated with weakening of surface easterly winds in the same region. These conditions contribute to the heating of the sea surface which gives rise to a change in rainfall patterns over the Pacific Ocean and then on central and western Colombia. International information agencies have announced a 70% probability for an El Niño event to occur in the second half of 2014. Despite these conditions, EPM’s hydroelectric generation system has registered decreases in the flows of the main rivers that contribute to such system. For example, between April and June 2014, the Nare and Grande rivers contributing to the power generation plants Guatapé and La Tasajera had flows of 71% of their historical average and the entire EPM hydroelectric generation system recorded contributions of 81% of its historical average for the same period.

EPM is exposed to Energy Spot Market price fluctuations, which, depending on hydrological conditions in any given year, may adversely impact EPM’s operating results. During the period from 2011 through 2013, EPM sold an average approximately 7.1% of its total electricity generation on the Energy Spot Market, which in Colombia consists of a wholesale energy exchange with hourly spot market transactions. During the six months ended June 30, 2014, EPM sold approximately 9% of its total electricity generation on the Energy Spot Market. During the period from 2011 to June 30, 2014, EPM purchased on the Energy Spot Market, on average, approximately 11.6% of the electricity it distributes. As a participant in the electricity market, EPM must submit bids for the sale of its electricity generation. EPM’s electricity generation revenue from Energy Spot Market sales is subject to the variable price of electricity, which depends on current market and electric system conditions at any point in time. Energy Spot Market prices depend directly on, among other factors, hydrological weather conditions, with prices increasing during below average rainfall seasons and falling during years of high rainfall levels, the levels of regional, national and international supply and demand of energy, international oil and natural gas prices, energy laws and regulations, and taxes. As a result, EPM’s income from its electricity generation activities may fluctuate, and there can be no assurance that those fluctuations may not adversely affect EPM’s financial and operating results. Out of EPM’s total electricity generation during the six months ended June 30, 2014, approximately 91% was sold under electricity supply agreements and approximately 9% was sold in Energy Spot Market transactions. EPM may not be able to generate electricity that is sufficient to meet its obligations under current electricity supply agreements, as a result of hydrological, operational or other external causes. In such event, EPM may be required to purchase electricity on the Energy Spot Market or enter into electricity supply agreements with other generators or commercialization companies. Depending on market and system conditions at any point in time, such purchases may have to be made at higher Energy Spot Market prices than electricity supply agreement prices, which may in turn affect EPM’s financial and operating results. Also, if EPM fails to meet its system Firm Energy obligations, it may be required to pay to other electricity generators an amount equivalent to the difference between the scarcity price

37 and the Energy Spot Market price of the electricity that EPM failed to supply under its Firm Energy obligations and that was supplied by other electricity generators, which may in turn affect EPM’s financial and operating results. The volumes of natural gas that EPM distributes and trades may be affected by fluctuations in the demand and prices of natural gas. During the period between 1998 through 2014, the revenues of EPM’s gas distribution and commercialization business units derived from variable charges applied to the Company’s customers under natural gas supply agreements. Distributed and traded volumes are affected by the demand and price of natural gas. Increased natural gas prices could result in a reduction of the volumes of natural gas that EPM distributes and trades. Increased natural gas prices could also result in industrial plant shutdowns or load losses to alternative energy sources as well as gas distribution companies’ loss of customer base. EPM’s natural gas distribution business depends on the levels of natural gas reserves in Colombia. EPM’s natural gas distribution business depends on the availability at all times of natural gas in Colombia. EPM purchases the natural gas it distributes from natural gas producers and transportation companies such as Chevron Petroleum Company, Ecopetrol S.A. (‘‘Ecopetrol’’) and Equion Energia Limited (‘‘Equion Energy’’). If such natural gas producers and transportation companies were to suspend the supply of natural gas due to the exhaustion of gas reserves or decreases in reserves’ levels, EPM’s natural gas distribution business may be adversely affected. Regulatory changes may adversely affect EPM’s natural gas distribution business. Natural gas distribution business is subject to extensive controls and regulations imposed by various levels of governmental agencies. All current legislation is a matter of public record and EPM will be unable to predict what additional legislation or amendments may be enacted for the natural gas distribution industry. Amendments to current laws, regulations and permits governing operations and activities of companies engaged in natural gas distribution, including environmental laws and regulations which are evolving in the countries in which EPM has natural gas distribution operations, or more stringent implementation thereof, could have a material adverse impact on such operations. For example, such regulatory amendments may promote the entry of new competitors in the natural gas distribution markets where we operate and cause increases in expenditures and costs, or may promote the development of sources of energy that replace natural gas. In addition, new regulations may be enacted that may, among other things, generate opportunities for substitute products, thus incentivizing the entry of new competitors to the market. Such new regulations would modify the existing business conditions and affect the way in which EPM currently operates. The Colombian energy industry has been and may be affected by terrorist attacks. Guerrilla organizations have long been active in Colombia. In many remote regions of Colombia, guerrilla organizations have engaged in acts of terrorism to draw attention to their causes. Although most of this activity has been directed towards the oil industry, the energy industry has been affected as well. Attacks by guerrilla groups have disrupted power supplies, which disruption, in some cases, has led to short-term regional power outages. If any of these attacks were to damage EPM’s infrastructure related to its energy generation, transmission and distribution business, as well as infrastructure related to its natural gas distribution business, EPM’s financial condition and results of operations may be adversely affected, and therefore EPM’s ability to make payments under the Notes may be impaired. Although EPM’s infrastructure has not been subject to terrorist attacks since 2007, there is no assurance that such attacks will not occur in the future. During 2013, there has been an increase in the attacks by rebels against electricity distribution and generation infrastructure in Colombia. These attacks have been focused in regions of different departments where the Revolutionary Armed Forces of Colombia (FARC), the National Liberation Army (ELN), and the Popular Liberation Army (EPL) maintain presence and influence. In 2013 and the first half of 2014 there were a significant number of attacks on Colombian electricity distribution and generation infrastructure. Disruptions in key electricity distribution and generation infrastructure may increase electricity costs and indirectly negatively affect EPM’s electricity distribution and commercialization business. EPM may be held strictly liable for damages resulting from inadequate rendering of energy distribution services and the Company’s contracted insurance policies may not fully cover such damages. Under Colombian law, EPM is strictly liable for direct and indirect damages from the inadequate rendering of energy distribution services. In addition, EPM may be held liable for the damages caused to others as a result of

38 interruptions or disturbances arising from generation, transmission or distribution systems. Although EPM has general liability insurance against third parties covering material, physical and emotional distress damages resulting from accidents in EPM’s facilities and in its distribution grid, EPM cannot assure you that its insurance is sufficient to fully cover any liabilities effectively incurred in the course of EPM’s business or that this insurance will continue to be available in the future.

Energy losses may adversely affect EPM’s results of operations and EPM’s financial condition if EPM is unable to successfully control them. EPM experiences two types of energy losses: technical losses and non-technical losses. Technical losses are losses that occur in the ordinary course of EPM’s distribution of energy. Non-technical losses are losses that result from illegal connections, fraud, faulty metering and billing errors. EPM has experienced efficient loss levels in the last several years. In respect of EPM’s recently acquired subsidiaries, EPM is implementing programs to bring those subsidiaries to efficient loss levels. See ‘‘Business — Business Strategy.’’ There can be no assurance that EPM will continue to be successful in reducing its energy losses exceeding levels of efficiency. Under Colombian law, EPM may not be able to increase its electricity distribution charges to compensate for energy losses exceeding levels of efficiency, and therefore there can be no assurance that energy losses will not adversely affect EPM’s financial condition and results of operations.

The construction, expansion and operation of EPM’s energy generation, transmission and distribution infrastructure and equipment, as well as EPM’s natural gas distribution infrastructure, involve significant risks that could lead to loss of revenues or increased expenses. The construction, expansion and operation of EPM’s energy generation, transmission and distribution infrastructure and equipment, as well as its natural gas distribution infrastructure, involve many significant risks, including: • the inability to obtain required governmental permits and approvals or the inability to obtain these on a timely basis; • unforeseen engineering and environmental problems; • increases in energy losses, including technical and commercial losses; • construction and operational delays or unanticipated cost overruns; • law or regulatory changes or reforms that may increase the costs of expansion projects; • inability to acquire rights-of-way or real estate on a timely basis or within anticipated costs; • litigation involving the population in the areas where EPM’s projects are located; • breach of contract by EPM’s contractors and suppliers; • damages caused to third parties as a result of the development of our projects; • negative impact to the cultural heritage of the region where the project is located; • terrorist actions or willful misconduct from third parties; and • archeological findings or the discovery of common graves which may require the implementation of special procedures set forth by the applicable environmental standards or human rights instruments, which may delay or prevent the construction of the project. If EPM experiences any of these or other problems, EPM may not be able to start a project, completion of the relevant project may be delayed, and EPM may incur significant additional costs. For example, on December 7, 2010, EPM’s board of directors decided to indefinitely suspend the implementation of the Porce IV project due to force majeure conditions in the area of influence of the project that made its implementation economically and socially unviable. EPM had made significant investments in connection with the Porce IV project prior to its decision to suspend its implementation. As a result of the decision to indefinitely suspend the Porce IV project, (i) EPM will not receive the Reliability Charge relating to the Firm Energy that the CREG had allocated to the Porce IV project, (ii) XM enforced the U.S.$13.8 million guaranty provided by EPM in the June 2008 Firm Energy bidding process, and (iii) EPM may incur additional costs in connection with such suspension.

39 In addition, during the construction of the Nueva Esperanza Project, issues such as delays in obtaining the relevant environmental licenses and impacts on the cultural heritage within the zone resulted in delays in the project’s schedule.

EPM’s energy distribution and transmission rates may be subject to change. Distribution and transmission of energy in Colombia are regulated industries and, accordingly, EPM’s results of operations depend on the applicable regulatory framework and the interpretation and application of such framework by CREG. EPM may be subject in the future to adverse tariff adjustments. The rates EPM is permitted to charge are revised every five years, based on the efficiency of, and investments in, its operations, and, as a result of such ongoing review, may be adjusted upwards or downwards. See ‘‘Industry — Electricity Transmission — Revenues of Electricity Transmission Companies’’ and ‘‘Industry — Electricity Distribution — Key Characteristics of the Electricity Distribution Market.’’

Risk Factors Relating to EPM’s Water, Sewage and Waste Management Business EPM is subject to substantial water-related and sewage-related regulation imposed by CRA or local authorities related to the treatment of water, abstraction of water from, or discharge of sewage into, water resources. EPM is subject to substantial regulation by the various national and regional authorities in relation to its water-related and sewage-related activities, which can translate into, among other things: (i) substantial charges imposed as a result of the abstraction of water from, or dumping of sewage into, water resources, (ii) higher technical and environmental standards for the transportation and treatment of drinkable water and sewage and (iii) tariff and subsidy adjustments. Regulatory changes or non-compliance by EPM with any of the applicable regulations to its water business unit may adversely affect EPM’s financial condition and results of operations.

EPM is subject to substantial waste management-related regulation imposed by CRA or local authorities related to the collection, transportation and disposal of solid waste. EPM is subject to substantial regulation by the various national and regional authorities in relation to its waste management-related activities, which can translate into, among other things: (i) substantial charges imposed as a result of the incorrect collection or disposal of solid waste, (ii) higher technical and environmental standards for the transportation and disposal of solid waste and (iii) tariff and subsidy adjustments. Regulatory changes or non-compliance by EPM with any of the applicable regulations to its waste management business may adversely affect EPM’s financial condition and results of operations.

EPM may face difficulties in the recovery of fees. EPM’s water business, results of operations, financial condition and/or prospects depend on EPM’s ability to efficiently collect the fees charged for its services. EPM might experience difficulties in the collection of such fees in regions where poverty and low living standards prevail as well as in unsafe neighborhoods. Any impairment on EPM’s ability to collect fees resulting from its water business may adversely affect EPM’s results of operations, financial condition and/or prospects.

EPM may be required to allow competitors to provide water, sewage and waste management services through its networks. EPM may be legally required in the future to provide its competitors with access to its water and sewage networks, for purposes of fostering competition in the water, sewage and waste management businesses in Colombia. Although currently there is no existing regulation on the matter, there have been considerable discussions by local and national regulatory bodies in relation to this initiative. If EPM is required to open its water and sewage infrastructure to third parties, new competitors may be able to enter the markets where EPM operates and competition pressures may adversely affect EPM’s financial conditions and results of operations.

EPM may be exposed to droughts that may adversely affect its water supply systems. Weather and rainfall conditions in Colombia affect EPM’s water supply systems. In this respect, severe dry weather conditions can create a shortage of water supply that may prevent the Company from providing its water, sewage and waste management services on a normal basis and require the Company to incur increased operational costs for treatment of existing water reservoirs that as a consequence of drought conditions may require additional

40 treatment. Since March 2014, the conditions of the Pacific Ocean have shown a clear evolution towards the initial stages of an El Niño event. International information agencies have announced a 70% probability for the initial stages an El Niño event to occur in the second half of 2014, while Colombian local agencies estimate this probability increases to 83% for the last quarter of the year. There can be no assurance that future weather conditions in Colombia will be optimal to meet the actual or future demand for its water, sewage and waste management services. A shortage of water supply may adversely affect EPM’s financial condition and results of operations.

Changes in water consumption levels may affect EPM’s water business Changes in water consumption levels may affect EPM’s water business. There is a natural tendency to decrease water consumption levels per user, which impacts aggregate water consumption levels reported by EPM. A significant decrease in such water consumption levels would affect the results of operations of EPM’s water business.

The subsidies and contributions scheme applicable to the provision of water, sewage and waste management services may negatively impact EPM’s profitability The provision of water, sewage and waste management services is subject to local subsidies and contribution regulations. As a result, some sectors and users may be entitled to receive subsidies for the payment of water, sewage and/or waste management services. Eligibility for subsidies depends on the stratification in the relevant area where the services are provided (strata 1, 2 and 3 are subsidized, 4 pays the value of the service provided, and 5 and 6 pay an amount in excess of their applicable tariff to cover the subsidies for strata 0, 1, 2 and 3). Notwithstanding the existence of subsidies, in certain localities, the contributions from strata 5 and 6 may not cover the value of the subsidies granted for strata 1, 2 and 3. Because of this, EPM is required to request the local fund (Fondo de Solidaridad y Redistribución de Ingresos), which is funded through the corresponding locality’s budget, to cover any deficiencies between the contributions and the subsidies. In the event such local fund is insufficient to cover any deficiency, the corresponding local fund must request the national fund to cover any deficiencies (Fondo Nacional de Solidaridad de Agua Potable y Saneamiento Básico). Since this fund is not currently operational, and once it becomes operational it might be unavailable or insufficient, there is a possibility that the local funds be insufficient to cover the subsidies of the local funds in the locations where the water, sewage and waste management services are provided. This may adversely affect EPM´s financial conditions and results of operations.

Risk Factors Relating to EPM’s Participation in the Telecommunications Business Increased competition and shifting usage patterns could adversely affect UNE’s revenues. UNE’s services face increasing competition due to, among other things, shifting usage patterns resulting from the adoption of new technologies, including wireless devices for voice, data and other communications, IP-based services and the subsequent substitution of UNE’s services for these new technologies, as well as new market entrants, increased competition from existing competitors, the presence of global telecommunication providers of IP or internet voice services and industry consolidations. For example, UNE estimates that an increasing proportion of calls that previously would have been made over UNE’s landline network is now being made on wireless telephones outside UNE’s network, through other mobile devices or through IP or internet voice services provided by global telecom companies. Also, UNE faces significant competition in all the market segments in which it participates from established operators, including ETB, Teléfonos de México, S.A.B. de C.V. (‘‘Telmex’’) and Telefónica S.A. (‘‘Telefónica’’), as well as from new participants, which are expected to increase as a result of the reform to the telecommunications regime introduced by Law 1341 in 2009, which enables telecommunication operators to provide several telecommunication services under a General Operating License (habilitation). Increased competition could result in a loss of customers or lower prices, either of which would reduce UNE’s revenue, decrease its cash flow and negatively affect its operating margins. If UNE’s services are not competitive, its business, operating results and financial condition would be adversely affected which would, in turn, limit EPM’s ability to make payments under the Notes.

The continuing transformation of the telecommunications industry in Colombia and worldwide may strain UNE’s resources. The telecommunications industry in Colombia has experienced and may continue to experience profound changes in recent years. These changes include, among others, regulatory reforms, the entrance of new market participants, and availability of new technologies. If UNE fails to adapt its business to meet these changes in a timely

41 manner, it may be unable to compete efficiently, and its business, financial condition and results of operations may be affected, which in turn may adversely affect EPM’s financial condition, and ultimately affect EPM’s ability to make payments under the Notes. The Colombian telecommunications market is regulated and the agencies that regulate UNE’s business and customers may take actions affecting its business.

The UNE-Millicom integration process may not be able to generate the benefits and synergies expected. The integration of fixed and mobile services and convergence is a key success factor in the telecommunications industry. Failure to successfully complete the UNE-Millicom integration process, including the integration of a fixed-mobile portfolio would impair UNE’s ability to implement its strategy and may result in additional capital expenditures, which may adversely affect UNE’s financial condition and results of operations. EPM estimates that the UNE-Millicom Merger will result in synergies for approximately U.S.$1 billion. EPM cannot assure you that it will be able to achieve the synergies it currently expects to achieve as a result of the UNE-Millicom Merger or that the integration process post-merger will have the benefits currently expected in UNE’s telecommunications operations. If the expected benefits and/or synergies from the UNE-Millicom Merger are not achieved partially or at all, EPM’s ability to achieve its strategic objectives with respect to UNE’s telecommunications business may be impaired.

The UNE-Millicom Merger may be enjoined as a result of proceedings initiated by the Sindicato de Trabajadores de las Empresas de Servicios Públicos Domiciliarios, Complementarios y Conexos. On September 23, 2013, the Sindicato de Trabajadores de las Empresas de Servicios Públicos Domiciliarios, Complementarios y Conexos (Sinpro) filed a suit requesting the court to enjoin the UNE-Millicom Merger, claiming that, as a result of the merger, EPM is selling part of its equity interest in UNE, in violation of the provisions of Law 226 of 1995. If the UNE-Millicom Merger is enjoined, EPM will not be able to achieve the synergies expected from the merger, the implementation of EPM’s strategy relating to the telecommunications industry will be delayed, and its reputation may be adversely affected.

Risk Factors Relating to the Notes EPM may incur substantially more debt, including secured debt. Effective subordination of the Notes may reduce amounts available for payment of the Notes. As of June 30, 2014, EPM’s total consolidated financial obligations was Ps.8,872,141 million. To the extent new debt is added to EPM’s current debt levels, EPM may be required to use a greater portion of future cash flow from operations to service the principal and interest payments on EPM’s indebtedness, which will reduce the funds available for operations, including capital investments. This could make it difficult for EPM to refinance its indebtedness (or to refinance such indebtedness on acceptable terms) and/or increase the possibility of an event of default under the financial and operating covenants contained in EPM’s debt instruments. Any of these events could have a material adverse effect on EPM’s financial condition, results of operations and ability to make payments on the Notes. EPM may incur a substantial amount of secured debt under the Indenture governing the Notes. See ‘‘Description of the Notes — Certain Covenants — Limitation on Liens.’’ If EPM incurs secured debt in the future, the Notes will effectively rank junior to any such secured indebtedness to the extent of the assets securing such debt. In the event of bankruptcy, liquidation or similar proceedings, or if payment under any secured obligation is accelerated, claims of any secured creditors for the assets securing the obligation will be satisfied prior to any claim of the holders of the Notes for these assets. Also, under certain circumstances, the Colombian Government may require EPM to grant security interests in connection with the guarantees granted by the Republic of Colombia to guarantee obligations of EPM under credit agreements with multi-lateral financial institutions. See ‘‘Description of Other Indebtedness.’’ After the claims of the secured creditors are satisfied, there may not be enough assets remaining to satisfy EPM’s obligations under the Notes. In addition, creditors of EPM may hold negotiable instruments or other instruments governed by local law that grant rights to attach the assets of EPM at the inception of judicial proceedings in the relevant jurisdiction, which attachment is likely to result in priorities benefitting those creditors when compared to the rights of holders of the Notes.

42 EPM’s subsidiaries have not guaranteed the Notes and, therefore, the Notes are structurally subordinated to the indebtedness and other liabilities of EPM’s current and future subsidiaries. To the extent that EPM does not raise or generate sufficient funds, it may depend on dividends, payments and other distributions from its subsidiaries, or distributions in connection with the liquidation or reorganization of its subsidiaries, to make payments under the Notes. However, its subsidiaries are separate and distinct legal entities and do not guarantee EPM’s obligations under the Notes. As a result, EPM’s obligations under the Notes are structurally subordinated to the indebtedness and other liabilities of EPM’s subsidiaries. As of June 30, 2014, EPM’s subsidiaries had financial obligations outstanding of Ps.2,514,523 million, or 28% of EPM’s total consolidated debt. For the year ended December 31, 2013, Ps.7,677,120 million, representing 59.1% of EPM’s consolidated revenues, were generated by EPM’s subsidiaries. For the six months ended June 30, 2014, Ps.4,300,839 million, representing 61.5% of EPM’s consolidated revenues, were generated by EPM’s subsidiaries. Applicable laws or regulations may limit dividends, payments or other distributions from EPM’s subsidiaries to EPM. Upon the liquidation or reorganization of a subsidiary, EPM’s right to participate in any distribution of assets of such subsidiary (and thus the ability of the holders of the Notes to benefit indirectly from such distribution) would generally be subject to the prior claims of all creditors of such subsidiary and to the priority rights of the holders of preferred shares of such subsidiary, if any.

There is no existing market for the Notes, and there can be no assurance that an active trading market will develop. The Notes are a new issuance of securities and there is no active trading market for them. Although EPM has applied to admit the Notes for listing on the Official List of the Luxembourg Stock Exchange and for trading on the Euro MTF Market, there is no guarantee that EPM will be able to list the Notes on the Official List of the Luxembourg Stock Exchange or any other exchange. Even if the Notes are listed, there may be little or no secondary market for the Notes. Even if a secondary market for the Notes does develop, it may not provide significant liquidity. The Initial Purchasers have advised EPM that they presently intend to make a market for the Notes after completion of this offering. However, they are under no obligation to do so and may discontinue any market making activities at any time without notice. The price at which the Notes may trade will depend on many factors, including, but not limited to, prevailing interest rates, general economic conditions, EPM’s financial condition and the market for similar securities. Historically, the market for debt such as the Notes has been subject to disruptions that have caused substantial volatility in their prices. The market, if any, for the Notes may be subject to similar disruptions, which may have an adverse effect on the holders of the Notes.

Transferability of the Notes may be limited by restrictions on transfers under applicable securities laws. The Notes have not been registered under the Securities Act or the securities laws of any state of the United States or any other jurisdiction. Unless so registered, the Notes may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any applicable state securities laws or the laws of any other jurisdiction. See ‘‘Plan of Distribution’’ and ‘‘Transfer Restrictions.’’ If the Notes are traded after their initial issuance, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for similar securities and other factors, including general economic conditions and EPM’s financial condition and operations.

Payment of judgments entered against EPM in Colombia may be made in Colombian pesos, which may expose you to exchange rate risks. Article 79 of Regulation 8 of 2000 of the Central Bank provides that, in case of legal proceedings, the conversion of foreign currency-denominated obligations of Colombian residents, such as EPM, would be made by using the representative foreign exchange rate prevailing on the payment date. As a consequence, in the event that proceedings are brought against EPM in Colombia, either to enforce a judgment rendered outside Colombia or as a result of an action originally brought in Colombia, EPM may not be required to discharge these obligations in a currency other than Colombian pesos. As a result, prospective purchasers may suffer a U.S. dollar shortfall if they obtain a judgment or a distribution pursuant to proceedings in Colombia.

43 Payments of principal, interest and Additional Amounts, if any, on the Notes will depend on the exchange rate between the Colombian peso and the U.S. dollar at the time of the relevant payment You are assuming the foreign exchange risk in connection with payments on the Notes. Since the Notes are denominated in Colombian pesos, and the payments of principal, interest and Additional Amounts if any, we are required to make on the Notes is determined be reference to the Colombian peso-U.S. dollar exchange rate, you will bear all of the risk that the Colombian peso may depreciate, and if the Colombian peso were to depreciate over the life of the Notes, the payments of principal, interest and Additional Amounts, if any, you may receive on the Notes in U.S. dollars would decrease, perhaps significantly. If the Colombian peso were to depreciate against the U.S. dollar, the principal amount due at maturity, upon redemption or on the Change of Control Payment Date (as defined under the ‘‘Description of the Notes’’ section) could be significantly less than the initial amount you invested, and you could lose a significant portion of your investment in the Notes. For a history of the exchange rate between the Colombian peso and the U.S. dollar, see ‘‘Foreign Exchange Controls.’’

The ratings of the Notes may be downgraded or withdrawn depending on various factors, including the rating agency’s assessments of EPM’s financial strength and Colombian sovereign risk. One or more independent credit rating agencies are expected to assign credit ratings to the Notes. Ratings address the timely payment of interest on each payment date. The ratings of the Notes are not a recommendation to purchase, hold or sell the Notes and may be changed, suspended or withdrawn by the rating agency at any time and the ratings do not comment on market price or suitability of the Notes as an investment for a particular investor. EPM’s current ratings and the rating outlooks currently assigned to EPM are, and any ratings attributed to the Notes will be, dependent upon economic conditions and other factors affecting credit risk that are outside the control of EPM. Each rating should be evaluated independently of the others. Detailed explanations of the ratings may be obtained from the rating agencies.

The market value of the Notes may depend on economic conditions in Latin America or other emerging markets over which EPM has no control. The market value of securities issued or guaranteed by Colombian companies, including the Notes, may be affected to varying degrees by economic and market conditions in the United States, Europe and Asia, as well as in Latin American and emerging market countries. Although economic conditions in such countries may differ significantly from economic conditions in Colombia, investors’ reactions to developments in any of these other countries may have an adverse ‘‘contagion’’ effect on the market value of securities of Colombian companies. International financial markets have experienced volatility in the past due to a combination of international political and economic events. There can be no assurance that any future negative political and/or economic development(s) in such other countries will not adversely affect the market value of the Notes. The current global financial difficulties are adversely affecting and are likely to continue to affect the international capital markets, which may make it more difficult for issuers such as EPM to sell their debt obligations in such markets. As a result, the market value of the Notes and the return realized by investors in the Notes could be adversely affected.

EPM may not be able to obtain the funds required to repurchase the Notes upon a change of control. Under the Indenture, EPM is required to offer to purchase the Notes, at a price equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest, plus certain other amounts, to the date of purchase in the event of a change of control of EPM. The occurrence of a change of control is outside the control of EPM. If a change of control were to occur, EPM may not have sufficient funds available, or may not be able to obtain the funds needed, to pay the purchase price for all the Notes tendered by holders deciding to accept the repurchase offer. See ‘‘Description of the Notes — Repurchases at the Option of the Holders of the Notes Upon Change of Control.’’

44 FOREIGN EXCHANGE CONTROLS In 1990, the Colombian Government initiated a policy of gradual currency liberalization. Foreign currency holdings abroad were permitted and, in a series of decrees, control of the exchange rate was shifted from the Central Bank to the spot foreign exchange market. The general legal principles of Colombia’s foreign exchange controls and international investments regulations are set forth in Law 9 of 1991, which provides that the MHCP is in charge of regulating foreign investment while the board of directors of the Central Bank is in charge of regulating most of the transactions pertaining to the formal exchange market (including foreign investment). Pursuant to these powers, the Central Bank enacted Regulation 8 of 2000 and Regulation DCIN-83 and the MHCP enacted Decree 2080 of 2000, which together with Regulation 8 of 2000, as amended from time to time, are referred to in Colombia as the ‘‘foreign investment statute.’’ The foreign investment statute provides for two types of foreign currency exchange markets: (i) the commercial foreign exchange market (the ‘‘FX Market’’) and (ii) the so-called free market. Currently, the FX Market is the market where most trade and financial transactions must be carried out, as it consists of all foreign exchange transactions which must be mandatorily conducted through foreign exchange intermediaries (i.e., commercial and mortgage banks, financial corporations, commercial finance companies, Financiera Energética Nacional, Banco de Comercio Exterior, financial cooperatives and local stock broker dealers) or compensation accounts (i.e., offshore bank accounts registered with the Central Bank and subject to periodic reports before the Colombian authorities). Colombian residents are entitled to maintain foreign currency denominated accounts abroad, registered with the Central Bank as so-called compensation accounts, which may be used to make and receive foreign currency payments related to transactions required to be traded on the FX Market. Payments between Colombian and foreign residents in relation to foreign investments, imports, exports, foreign indebtedness, derivative transactions and guarantees in foreign currency, among others, must be conducted through the FX Market. Transactions conducted through the FX Market are made at market rates freely negotiated with authorized foreign exchange intermediaries (i.e., banks, financial corporations and others). The operations not required to be traded on the FX Market may be traded on the so-called free market. Colombian law allows the Central Bank to intervene in the foreign exchange market if the value of the Colombian peso is subject to significant volatility. The Central Bank may also limit the remittance of dividends and/or investments of foreign currency received by Colombian residents whenever the international reserves fall below an amount equal to three months of imports. See ‘‘Risk Factors — Risk Factors Relating to the Republic of Colombia — The Colombian Government and the Central Bank exercise significant influence on the Colombian economy. Political and economic conditions may have an impact on EPM’s business.’’ In addition to its past interventions in the exchange rate market, the Central Bank has also sought to prevent the public and private sectors from incurring excessive amounts of debt in foreign currencies as a means of controlling the fluctuation of the peso against the U.S. dollar. To this end, the Central Bank has on some occasions required a certain percentage of the debt incurred (depending on the maturity of the debt) to be deposited in Colombian pesos or foreign currency with the Central Bank in a non-interest-bearing account for a fixed period of time. As a result of this requirement, short-term capital flows fluctuated significantly from year to year. In order to further its policy of liberalizing the foreign exchange system, in April 2000, the Central Bank lifted this restriction. In 2002, a net inflow of approximately U.S.$2.7 billion was registered. The inflow in 2002 was primarily due to the liquidation of public sector external portfolio investments. In addition to the deposit requirements, the Central Bank has prohibited Colombian financial institutions from funding foreign currency loans with borrowings of shorter maturities; it has also set limits on a financial intermediary’s net foreign currency position, which is defined as foreign currency denominated assets minus foreign currency denominated liabilities. In 2003, net short term capital outflows totaled approximately U.S.$300 million. In December 2004, the Colombian Government enacted Decree 4210 requiring portfolio investments by foreign investors to remain in Colombia for at least one year.

Fluctuation of the Colombian Peso against the U.S. Dollar and Measures Adopted by the Colombian Government On May 6, 2007, the Central Bank adopted a set of measures intended to tighten monetary policy and control the fluctuation of the peso against the U.S. dollar. Adopted measures included, among others: an increase in the reserve requirements on current accounts from 13.0% to 27.0%, on savings accounts from 6.0% to 12.5% and on time deposits up to eighteen months from 2.5% to 5.0% (reserve requirements would only apply to accounts and deposits in excess of the level that banks had as of May 4, 2007, and the Central Bank will not pay any interest on the new

45 reserves); and a deposit requirement with respect to indebtedness in a foreign currency. Pursuant to this deposit requirement, Colombian borrowers were required to deposit with the Central Bank, in a non-interest bearing account, an amount in Colombian pesos equal to 40.0% of the proceeds of foreign currency denominated debt facilities granted by nonresident lenders (both in the form of loans and debt instruments, such as the Notes) or Colombian foreign exchange market intermediaries. On June 29, 2007, the Colombian Government issued Decree 2466 of 2007, which provided that the registration of the participations of non-residents in local private equity funds would be deemed as a form of foreign direct investment, and not as foreign portfolio investment. As a result, foreign investment in local private equity funds was not subject to the 40.0% interest-free deposit applicable to portfolio investment. In the same Decree, the Colombian Government excluded ADR and GDR programs of Colombian issuers, from the obligation to make the 40.0% deposit with the Colombian Central Bank. In addition to the measures mentioned above, during 2007 and 2008 both the MHCP and the Central Bank adopted several measures aimed at controlling the fluctuation of the Colombian peso against the U.S. dollar. These measures include, among others: • a 50.0% interest free deposit at the Central Bank, currently applicable to short term portfolio investments in assets other than shares or convertible bonds or collective investment funds that only invest in shares or convertible bonds, for a period of six months; • a 40.0% interest free deposit at the Central Bank applicable to corporate reorganization transactions, including mergers, acquisitions and spin-offs, if the successor thereof is a Colombian resident required to repay foreign indebtedness which would have otherwise been subject to the deposit requirement of Resolution 2 of May 6, 2007; • exemptions to the 40.0% interest free deposit requirement applicable to foreign investment in local private equity funds and ADR and GDR programs of Colombian Issuers; • restrictions on the repatriation of foreign direct investments; • increases to the reference rate (Repo Rate); and • interest-free deposits with the Central Bank applicable to the proceeds resulting from imports financings. On October 8, 2008 and October 9, 2008, through Decree 3913 and Resolution 10, issued by the Colombian Government and the Central Bank, respectively, the deposit requirement was set at 0.0% in connection with foreign portfolio investment and foreign indebtedness operations, including foreign loans, import financing and export financing. Additionally, on September 1, 2008 by means of Decree 3264, the Colombian Government eliminated restrictions on the repatriation of foreign direct investments. As a consequence of the appreciation of the Peso against the Dollar during the second half of 2009 and the first nine months of 2010, after attempts by the Central Bank to reduce such appreciation by making open dollar purchases in the exchange market, on November 5, 2010, by means of Decree 4145, the Colombian Government decided to eliminate the existing exemption in Colombia in relation to withholding tax on interest payments of foreign indebtedness operations, including foreign loans, debt offerings and international leasing payments, among others. As a result, interest payments of foreign indebtedness operations entered into by Colombian entities or disbursements of existing loans, made on or after November 5, 2010, are subject to withholding tax in Colombia at a rate of 33%. This rate was reduced to 14% in the most recent tax reform approved by the Colombian Congress, Law 1430 which became effective on December 29, 2010. In this regard, it must be noted that foreign indebtedness operations entered into by government-owned entities, such as EPM, are exempt from this new provision, based on the existing specific exemption in the Colombian tax statute for all interest payments related to foreign indebtedness operations entered into by government-owned entities in Colombia. Such exemption has already been ratified by the DIAN in official opinions. Pursuant to article 218 of Decree 624 of 1989 (Colombian Tax Code), payments of interest, commissions and other expenses in connection with foreign indebtedness loans and securities are exempt from all kinds of national taxes and contributions. In accordance with Article 10 of Law 533 of 1999, all documents and securities issued by

46 Colombian public entities giving right to the payment of a sum of money upon the expiration of a term of maturity are deemed public indebtedness securities. Thus, foreign public indebtedness operations by public entities, such as EPM, are exempt from any withholding in connection with national taxes. The Colombian Government has considerable power to determine governmental policies and actions that relate to the Colombian economy and, consequently, to affect the operations and financial performance of businesses. The Colombian Government may seek to implement additional measures aimed at controlling further fluctuation of the Colombian peso and fostering domestic price stability. A prediction cannot be made on the policies that may be adopted by the Colombian Government and whether those policies may negatively affect the Colombian economy or EPM’s business or financial performance. Furthermore, there can be no assurance that the Colombian peso will not depreciate or appreciate relative to other currencies in the future. See ‘‘Risk Factors — Risk Factors Relating to the Republic of Colombia — The Colombian Government and the Central Bank exercise significant influence on the Colombian economy. Political and economic conditions may have an impact on EPM’s business.’’ According to the end of month rates published by the Central Bank, the Colombian peso depreciated against the U.S. dollar by 8.97% during 2013 and appreciated by 2.4% for the six months ended June 30, 2014. The following table sets forth, for the periods and dates indicated, the period end and the Representative Market Exchange Rate (Tasa Representativa del Mercado or ‘‘TRM’’), expressed in Colombian pesos per U.S.$1.00.

Weighted Average Price Bid Offer Mid Period End (Colombian pesos per U.S. dollar) Year 2009 ...... 2,042.91 2,045.55 2,044.23 2,044.23 2010 ...... 1,912.43 1,915.54 1,914.77 1,913.98 2011 ...... 1,941.29 1,944.12 1,942.71 1,942.70 2012 ...... 1,767.10 1,769.36 1,768.23 1,768.23 2013 ...... 1,925.56 1,928.10 1,926.83 1,926.83 Month Ended March 30, 2014 ...... 1,964.68 1,965.96 1,965.32 1,965.32 April 30, 2014 ...... 1,934.37 1,935.90 1,935.14 1,935.14 May 31, 2014...... 1,899.98 1,901.29 1,900.64 1,900.64 June 30, 2014...... 1,880.39 1,881.98 1,881.19 1,881.19 July 31, 2014 ...... 1,871.49 1,873.36 1,872.43 1,872.43 August 31, 2014 ...... 1,918.04 1,919.21 1,918.63 1,918.62

Source: Central Bank. www.banrep.gov.co On June 30, 2014, the exchange rate published by the Central Bank between the Colombian peso and the U.S. dollar was Ps.1,881.19 per U.S.$1.00. On September 2, 2014, the exchange rate published by the Central Bank between the Colombian peso and the U.S. dollar was Ps.1,918.62 per U.S.$1.00.

47 USE OF PROCEEDS EPM expects to receive net proceeds of approximately Ps.957,807 million (approximately U.S.$495.89 million based on an exchange rate for the conversion of Colombian pesos into U.S. dollars of Ps.1,931.49 per U.S.$1.00, which is the TRM in effect on the date hereof) from this offering after paying the Initial Purchasers’ commissions and related expenses of this offering. EPM intends to use the net proceeds from this offering to partially fund the investments required for the Ituango Project.

48 CAPITALIZATION The following table sets forth EPM’s consolidated current financial obligations, consolidated non-current financial obligations and consolidated equity, computed on the basis of Colombian Public Utilities Companies GAAP (i) as of June 30, 2014 and (ii) as adjusted to give effect to (a) the issuance of additional indebtedness after June 30, 2014, and (b) the issuance of the Notes. This table should be read in conjunction with the unaudited financial statements and the Notes to those statements as of and for the six months ended June 30, 2014, included elsewhere in this offering memorandum and the section ‘‘Use of Proceeds’’ and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations.’’

As of June 30, 2014 Actual As Adjusted As Adjusted (Ps. in millions, except %) (U.S.$ in millions)(1)(5)

Current financial obligations: Bank loans (1) (2) ...... Ps. 745,210 824,220 438 Domestic market bonds...... 150,000 150,000 80 Total current financial obligations ...... 895,210 974,220 518 Non-current financial obligations: Bank loans (1) (2) ...... 3,392,272 3,511,372 1,867 Domestic market bonds (3)...... 1,961,390 2,461,390 1,308 Bonds (1) (4) ...... 2,623,269 2,623,269 1,394 Senior notes offered hereby ...... — 965,745 513 Total non-current financial obligations...... 7,976,931 9,561,776 5,083 Total financial obligations...... 8,872,141 10,535,996 5,601 Equity...... 21,925,265 21,917,327 11,651 Total capitalization (total financial obligations and equity) ...... Ps.30,797,406 Ps.32,453,323 U.S.$17,251 Total financial obligations as a percentage of total capitalization ...... 29% 32% 32%

(1) U.S. dollar-denominated debt amounts are translated based on the exchange rate of Ps.1,881.19 per U.S. dollar as of June 30, 2014. Such translations should not be construed as representations that the Colombian peso amounts represent, or have been or could be converted into, U.S. dollars at that or any other rate. (2) Since July 1, 2014, ENSA has incurred short-term debt for an aggregate amount of U.S.$42 million, which short-term debt is payable in 90 days. See ‘‘Description of Other Financial Obligations — ENSA Local Financing.’’ On July 10, 2014, CHEC entered into a loan agreement with Banco Bilbao Vizcaya Argentaria Colombia S.A. and Banco Corpbanca Colombia for Ps.67,000 million and Ps.51,000 million, respectively. See ‘‘Description of Other Financial Obligations — CHEC Local Financing.’’ On July 23, 2014 and August 19, 2014, Aguas de Uraba borrowed Ps.700 million and Ps.400 million under the terms of a loan agreement with Banco Bilbao Vizcaya Argentaria Colombia S.A. See ‘‘Description of Other Financial Obligations — Water Subsidiaries.’’ (3) On July 31, 2014, EPM issued Ps.500,000 million aggregate principal amount of additional notes in the Colombian capital markets under its Long Term Notes Program. See ‘‘Description of Other Financial Obligations — Notes Under Long Term Notes Program.’’ (4) Bonds include (i) EPM’s U.S.$500 million aggregate principal amount of senior notes due 2019, (ii) EPM’s Ps.1,250,000 million aggregate principal amount of senior notes due 2021, (iii) ENSA’s U.S.$100 million aggregate principal amount of senior notes due 2021, (iv) ENSA’s U.S.$80 million aggregate principal amount of private placement bonds due 2027, (v) ENSA’s U.S.$20 million aggregate principal amount of local bonds due 2018, and (vi) Del Sur’s U.S.$30 million aggregate principal amount of local bonds issued in three series with maturities in 2015 (second and third series) and 2020 (first series). (5) ‘‘As adjusted’’ column reflects Ps.7,938 million of EPM’s estimated total fees, commissions and expenses in connection with the issuance of the Notes, including the Initial Purchasers’ commissions.

49 SELECTED FINANCIAL AND KEY OPERATING DATA The following tables present summary historical financial information and operating data for EPM as of and for each of the periods indicated. This financial information is qualified in its entirety by reference to, and you should read it in conjunction with, EPM’s audited consolidated financial statements as of December 31, 2013 and 2012 and for the three years ended December 31, 2013 and the notes thereto, EPM’s unaudited condensed consolidated financial statements as of June 30, 2014 and for the six months ended June 30, 2014 and 2013 and the notes thereto, and the section entitled ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations.’’ The selected financial information is presented in accordance with Colombian Public Utilities Companies GAAP, which differs in certain material respects from IFRS. See ‘‘Annex A — Summary of Certain Differences Between Colombian Public Utilities Companies GAAP and IFRS’’ for a description of the principal differences between Colombian Public Utilities Companies GAAP and IFRS.

For the Year Ended December 31, % Change 2013 2013 2012 2011 2013-2012 2012-2011 (U.S.$ in millions)(1) (Ps. in millions) Consolidated statements of financial, economic, and social activities Revenues ...... 6,740 12,986,466 12,498,850 11,508,020 3.9% 8.6% (-) Cost of sales ...... 4,216 8,123,451 7,703,343 6,947,489 5.5% 10.9% (-) Depreciation and amortizations...... 491 946,320 1,094,129 854,526 -13.5% 28.0% Gross profit ...... 2,033 3,916,695 3,701,378 3,706,005 5.8% -0.1% (-) Administrative expenses . . . . . 555 1,069,680 1,025,631 908,410 4.3% 12.9% (-) Provision, depreciation and amortizations...... 176 338,364 287,183 382,889 17.8% -25.0% Operating income ...... 1,302 2,508,651 2,388,564 2,414,706 5.0% -1.1% (+) Non operating revenues . . . . . 429 827,025 856,093 607,977 -3.4% 40.8% (-) Non operating expenses . . . . . 524 1,009,906 927,383 824,209 8.9% 12.5% Total non-operating expenses, net ...... (95) (182,881) (71,290) (216,232) 156.5% -67.0% Net Income before taxes and minority interest ...... 1,207 2,325,770 2,317,274 2,198,474 0.4% 5.4% (-) Income tax...... 311 599,016 629,013 592,403 -4.8% 6.2% Net income before minority interest ...... 896 1,726,754 1,688,261 1,606,071 2.3% 5.1% (-) Minority interest ...... 53 101,941 96,335 87,392 5.8% 10.2% Net income...... 843 1,624,813 1,591,926 1,518,679 2.1% 4.8%

50 The following table presents, for the periods indicated, our calculations of Consolidated Adjusted EBITDA:

For the Year Ended December 31, % Change 2013 2013 2012 2011 2013-2012 2012-2011 (U.S.$ in (Ps. in millions, except %) millions)(2) Operating income ...... U.S.$1,302 Ps.2,508,651 Ps.2,388,564 Ps.2,414,706 5.0% -1.1% (+) Total depreciation and amortizations cost . . . . . 491 946,320 1,094,129 854,526 -13.5% 28.0% (+) Total provision, depreciation and amortizations expenses(1) ...... 176 338,364 322,885 382,889 4.8% -15.7% Consolidated Adjusted EBITDA(2)(3)...... U.S.$1,969 Ps.3,793,335 Ps.3,805,578 Ps.3,652,121 -0.3% 4.2% Consolidated Adjusted EBITDA Margin(4) ...... 29.2% 29.2% 30.4% 31.7%

51 As of December 31, % Change 2013 2013 2012 2011 2013-2012 2012-2011 (U.S.$ in millions)(1) (Ps. in millions) Consolidated balance sheet data Assets Current assets Cash and cash equivalents. U.S.$ 678 Ps.1,306,580 Ps.1,496,488 Ps.961,755 -12.7% 55.6% Investments in securities . . 669 1,289,538 1,901,168 2,218,248 -32.2% -14.3% Accounts receivable, net . . 1,715 3,303,599 2,570,296 2,525,247 28.5% 1.8% Inventories, net...... 134 258,083 242,503 205,824 6.4% 17.8% Prepaid expenses ...... 34 64,590 67,473 32,394 -4.3% 108.3% Other assets ...... 44 84,600 58,966 1,651 43.5% 3471.5% Total current assets ..... 3,273 6,306,990 6,336,894 5,945,119 -0.5% 6.6% Non-current assets Investments in securities . . 4 8,185 9,672 66,516 -15.4% -85.5% Equity investments, net . . . 260 501,370 507,177 505,917 -1.1% 0.2% Accounts receivable, net . . 498 959,692 738,605 727,129 29.9% 1.6% Property, plant and equipment, net ...... 8,316 16,023,149 14,154,412 13,489,367 13.2% 4.9% Pension plan asset...... 382 736,183 741,441 716,148 -0.7% 3.5% Prepaid expenses ...... 104 200,678 133,625 173,475 50.2% -23.0% Other assets ...... 1,234 2,377,768 2,118,257 2,156,470 12.3% -1.8% Reappraisal of assets. . . . . 5,805 11,184,664 10,537,826 10,255,752 6.1% 2.8% Total non-current assets . 16,603 31,991,689 28,941,015 28,090,774 10.5% 3.0% Total assets ...... 19,877 38,298,679 35,277,909 34,035,893 8.6% 3.6% Liabilities and Equity Current liabilities Financial obligations . . . . . 440 847,806 234,773 452,508 261.1% -48.1% Hedging operations ...... 17 32,803 75,711 58,930 -56.7% 28.5% Accounts payable ...... 1,102 2,123,326 1,591,823 1,865,739 33.4% -14.7% Taxes payable...... 240 462,063 723,046 677,399 -36.1% 6.7% Labor liabilities ...... 82 157,774 132,592 125,950 19.0% 5.3% Pension plan obligations . . 125 241,793 129,374 68,940 86.9% 87.7% Estimated liabilities...... 34 66,264 18,648 8,954 255.3% 108.3% Other liabilities...... 126 241,988 181,920 180,325 33.0% 0.9% Total current liabilities .. 2,166 4,173,817 3,087,887 3,438,745 35.2% -10.2% Non-current liabilities ...... Financial obligations . . . . . 4,351 8,382,690 7,316,939 6,522,385 14.6% 12.2% Hedging operations ...... 18 35,635 85,438 124,768 -58.3% -31.5% Accounts payable ...... 156 300,941 112,600 200,731 167.3% -43.9% Taxes payable...... 1 2,805 172,804 323,604 -98.4% -46.6% Labor liabilities ...... 35 67,194 71,162 67,379 -5.6% 5.6% Pension plan obligations . . 601 1,157,999 1,171,465 1,225,010 -1.1% -4.4% Estimated liabilities...... 114 219,558 295,921 325,999 -25.8% -9.2% Other liabilities...... 489 942,229 888,965 806,236 6.0% 10.3% Total non-current liabilities ...... 5,765 11,109,051 10,115,294 9,596,112 9.8% 5.4% Total Liabilities ...... 7,932 15,282,868 13,203,181 13,034,857 15.8% 1.3% Minority interest ...... 503 968,297 1,014,999 1,107,612 -4.6% -8.4% Equity ...... 11,442 22,047,514 21,059,729 19,893,424 4.7% 5.9% Total liabilities and equity.. U.S.$19,877 Ps.38,298,679 Ps.35,277,909 Ps.34,035,893 8.6% 3.6% Memorandum accounts(2), net ...... 6,365 12,264,737 11,410,695 -2,518,119 7.5% -353.1%

52 For the Year Ended December 31, % Change 2013 2013 2012 2011 2013-2012 2012-2011 (U.S.$ in (Ps. in millions) millions)(1) Cash Flow Data Net cash provided by operating activities ...... 1,232 2,373,298 2,073,135 3,460,436 14.5% -40.1% Net cash used in investing activities ...... (1,613) (3,108,263) (1,782,098) (2,819,038) 74.4% -36.8% Net cash used in financing activities ...... (35) (66,573) (73,384) (70,830) -9.3% 3.6% Net increase (decrease) in cash and cash equivalents and investments in securities ...... U.S.$(416) Ps.(801,538) Ps.217,653 Ps.570,568 -468.3% -61.9% Cash and cash equivalents and investments in securities at beginning of the year ...... 1,763 3,397,656 3,180,003 2,609,435 6.8% 21.9% Cash and cash equivalents and investments in securities at end of the year ...... 1,347 2,596,118 3,397,656 3,180,003 -23.6% 6.8%

For the Six Months Ended June 30, % Change 2014 2014 2013 2014-2013 (U.S.$ in (Ps. in millions) millions)(1) Consolidated statement of financial, economic and social activities Revenues ...... 3,715 6,989,026 6,357,546 9.9% (-) Cost of sales ...... 2,361 4,441,908 3,932,120 13.0% (-) Depreciation and amortizations...... 263 494,096 463,741 6.5% Gross profit ...... 1,091 2,053,022 1,961,685 4.7% (-) Administrative expenses ...... 264 497,054 468,740 6.0% (-) Provision, depreciation and amortizations ...... 80 149,769 177,407 -15.6% Operating income ...... 747 1,406,199 1,315,538 6.9% (+) Non operating revenues ...... 223 419,520 463,622 -9.5% (-) Non operating expenses ...... 287 539,970 626,347 -13.8% Total non-operating expenses, net...... (64) (120,450) (162,725) -26.0% Net Income before taxes and minority interest ..... 683 1,285,749 1,152,813 11.5% (-) Income tax ...... 201 378,350 341,582 10.8% Net income before minority interest...... 482 907,399 811,231 11.9% (-) Minority interest ...... 32 59,771 61,665 -3.1% Net income ...... U.S.$ 450 Ps. 847,628 Ps. 749,566 13.1%

53 The following table presents, for the periods indicated, our calculations of Consolidated Adjusted EBITDA:

For the Six Months Ended June 30, % Change 2014 2014 2013 2014-2013 (U.S.$ in (Ps. in millions, except %) millions)(2) Operating income ...... U.S.$ 747 Ps.1,406,199 Ps.1,315,538 6.9% (+) Total depreciation and amortizations cost ...... 263 494,096 463,741 6.5% (+) Total provision, depreciation and amortizations expenses ...... 80 149,769 177,407 -15.6% Consolidated Adjusted EBITDA(1)(2) ...... U.S.$1,090 Ps.2,050,064 Ps.1,956,686 4.8% Consolidated Adjusted EBITDA Margin(3)...... 29% 29% 31% —

(1) For the definition of Consolidated Adjusted EBITDA, see ‘‘Note Regarding Non-GAAP Financial Measures.’’ EPM’s calculation of Consolidated Adjusted EBITDA may not be comparable to the Consolidated Adjusted EBITDA provided by other companies. (2) Amounts are translated based on the exchange rate of Ps.1,881.19 per U.S. dollar as of June 30, 2014. Such translations should not be construed as representations that the Colombian peso amounts represent, or have been or could be converted into, U.S. dollars at that or any other rate. (3) For the definition of Consolidated Adjusted EBITDA Margin, see ‘‘Note Regarding Non-GAAP Financial Measures.’’ EPM’s calculation of Consolidated Adjusted EBITDA Margin may not be comparable to the Consolidated Adjusted EBITDA Margin provided by other companies.

As of June 30, As of December 31, % Change 2014 2014 2013 2014-2013 (U.S.$ in (Ps. in millions) millions)(1) Consolidated balance sheet data Assets Current assets Cash and cash equivalents ...... U.S.$ 507 Ps. 953,757 Ps. 1,306,580 -27.0% Investments in securities ...... 375 706,125 1,289,538 -45.2% Accounts receivable, net...... 1,847 3,473,734 3,303,599 5.1% Inventories, net ...... 139 261,450 258,083 1.3% Prepaid expenses...... 20 37,017 64,590 -42.7% Other assets...... 45 84,722 84,600 0.1% Total current assets...... 2,933 5,516,805 6,306,990 -12.5% Non-current assets Investments in securities ...... 4 7,396 8,185 -9.6% Equity investments, net ...... 266 501,331 501,370 0.0% Accounts receivable, net...... 490 920,987 959,692 -4.0% Property, plant and equipment, net ...... 8,807 16,568,521 16,023,149 3.4% Pension plan asset...... 389 731,959 736,183 -0.6% Prepaid expenses...... 77 144,455 200,678 -28.0% Other assets...... 1,259 2,368,173 2,377,768 -0.4% Reappraisal of assets ...... 5,918 11,132,657 11,184,664 -0.5% Total non-current assets...... 17,209 32,375,479 31,991,689 1.2% Total assets...... 20,142 37,892,284 38,298,679 -1.1%

54 As of June 30, As of December 31, % Change 2014 2014 2013 2014-2013 (U.S.$ in (Ps. in millions) millions)(1) Liabilities and equity Current liabilities Financial obligations...... 476 895,210 847,806 5.6% Hedging operations...... 16 31,028 32,803 -5.4% Accounts payable ...... 1,202 2,260,953 2,123,326 6.5% Taxes payable ...... 183 344,474 462,063 -25.4% Labor liabilities...... 110 207,842 157,774 31.7% Pension plan obligations...... 109 204,378 241,793 -15.5% Estimated liabilities ...... 40 75,617 66,264 14.1% Other liabilities ...... 141 265,076 241,988 9.5% Total current liabilities...... 2,278 4,284,578 4,173,817 2.7% Non-current liabilities Financial obligations...... 4,240 7,976,931 8,382,690 -4.8% Hedging operations...... 27 51,123 35,635 43.5% Accounts payable ...... 185 347,510 300,941 15.5% Taxes payable ...... 1 2,109 2,805 -24.8% Labor liabilities...... 21 40,323 67,194 -40.0% Pension plan obligations...... 643 1,209,300 1,157,999 4.4% Estimated liabilities ...... 124 233,201 219,558 6.2% Other liabilities ...... 524 985,577 942,229 4.6% Total non-current liabilities ...... 5,766 10,846,074 11,109,051 -2.4% Total liabilities ...... 8,042 15,130,652 15,282,868 -1.0% Minority interest ...... 445 836,367 968,297 -13.6% Equity ...... 11,655 21,925,265 22,047,514 -0.6% Total liabilities and equity ...... U.S.$20,142 Ps.37,892,284 Ps.38,298,679 -1.1% Memorandum accounts, net (2) ...... 7,383 13,888,427 12,264,737 13.2%

For the Six Months Ended June 30, % Change 2014 2014 2013 2014-2013 (U.S.$ in millions)(1) (Ps. in millions) Cash flow data Net cash provided by operating activities ...... 545 1,025,792 985,762 4.1% Net cash used in investing activities ...... (576) (1,083,730) (1,815,714) 40.3% Net cash used in financing activities ...... (467) (878,298) (370,742) 136.9% Net decrease in cash and cash equivalents and investments in securities ...... (498) (936,236) (1,200,694) 22.0% Cash and cash equivalents and investments in securities at beginning of period ...... 1,380 2,596,118 3,397,656 23.6% Cash and cash equivalents and investments in securities at end of period ...... 882 1,659,882 2,196,962 24.4%

55 Selected Operating Data Selected Operating Data of EPM’s Electricity Generation Business

As of and for the Six Months Ended June 30, As of and for the Year Ended December 31, 2014 2013 2012 2011 Total installed net effective generation capacity (MW) . . 3,579 3,594 3,594 3,524 Generation (GWh)(1) ...... 7,136 15,230 16,303 14,215 Sales (GWh) ...... 6,905 15,278 17,007 15,848 Firm Energy (GWh)...... 7,822 15,775 15,534 12,137 Revenues (in millions of Ps.)...... Ps.1,373,859 Ps.2,700,029 Ps.2,787,388 Ps.2,199,470

(1) Actual generation does not include generation from the Barranca I, II, and III plants, which are self-generators for Ecopetrol, and thus not a part of the market.

Selected Operating Data of EPM’s Electricity Transmission, Distribution and Commercialization Business

As of and for the Six Months Ended June 30, As of and for the Year Ended December 31, 2014 2013 2012 2011 Electricity distribution and commercialization Service Area (km2) ...... 177,384 177,384 177,185 176,994 Transmission Lines (110-115Kv)(km)...... 2,825 2,825 2,760 2,730 Transmission Lines (69 Kv))(km) ...... 667 667 667 660 Distribution Lines (2.4-46 Kv))(km) ...... 101,170 99,535 94,676 88,775 Distribution Lines (240/120 V))(km) ...... 111,181 109,575 105,869 103,136 Purchases of Electricity from own generation units (bilateral) (GWh) ...... 1,655 3,312 4,097 4,325 Purchases of Electricity from third parties (bilateral) (GWh) ...... 7,229 13,546 12,491 11,693 Purchases of Electricity on the Spot Market (GWh)...... 2,091 2,506 2,127 1,904 Electricity Losses ...... 10.9% 10.8% 11.2% 12.2% Transmission Transmission Lines (220-230Kv) ...... 1,130 1,130 1,130 1,130 System Availability...... 100.0% 99.9% 99.9% 98.2% Revenues (in millions of Ps.) ...... Ps.4,269,700 Ps.7,899,020 Ps.7,385,579 Ps.6,708,682

Selected Operating Data of EPM’s Natural Gas Distribution and Commercialization Business

As of and for the Six Months Ended June 30, As of and for the Year Ended December 31, 2014 2013 2012 2011 Distribution network (km in steel) ...... 87 87 87 87 Distribution network (km in polyethylene)...... 5,961 5,618 4,928 4,454 Sales to Unregulated Users (thousands of m3) ...... 54,823 158,732 179,763 150,338 Sales to Regulated Users (thousands of m3)...... 114,310 229,263 215,210 195,989 Revenues (in millions of Ps.) ...... Ps.272,350 Ps.564,894 Ps.448,551 Ps.405,694

56 Selected Operating Data of EPM’s Telecommunications Business

As of and for the Six Months Ended June 30, As of and for the Year Ended December 31, 2014 2013 2012 2011 Lines in service* ...... 1,941,030 1,955,194 1,909,191 2,024,753 Outgoing International Long-Distance minutes ...... 15,830,221 36,106,397 42,806,917 52,858,288 Incoming International Long-Distance minutes ...... 589,558,553 1,473,249,240 1,695,919,954 2,010,825,078 Domestic Long-Distance minutes ...... 157,300,718 309,884,748 312,089,829 313,870,272 Internet, broadband access and other Value-Added Services customers* ...... 1,340,575 1,310,803 1,164,150 1,014,837 Mobile broadband*...... 347,067 272,594 161,597 118,749 Television subscribers* ...... 1,032,293 1,061,995 1,071,937 1,071,177 IPTV services customers* ...... 171,224 173,845 174,326 164,143 Local Telephone services churn rates (monthly average)...... 1.50 1.37 1.79 1.13 Television services churn rates (monthly average) . . . . 2.01 2.13 2.11 1.98 Broadband services churn rates (monthly average) . . . 1.87 1.99 1.95 1.46 Revenues (in millions of Ps.) ...... Ps.1,376,637 Ps.2,524,463 Ps.2,346,916 Ps.2,109,702

* Includes customers of affiliates.

Selected Operating Data of EPM’s Water and Sewage Business

As of and for the Six Months Ended June 30, As of and for the Year Ended December 31, Unit 2014 2013 2012 2011 Aqueduct consumption ...... thousands m3 147,455,762 202,182,391 203,442,501 198,238,252 Water produced ...... thousands m3 113,039,269 318,322,339 321,050,729 316,726,774 Water losses ...... thousands m3 51,771,826 115,955,227 117,689,727 117,921,630 Sewage discharge ...... thousands m3 103,730,983 200,948,071 202,067,586 197,050,693 Drinkable water treatment installed capacity ...... m3/s 17,255 17,255 17,255 17,255 Waste water treatment installed capacity ...... m3/s 2.03 2.03 2.03 2.03 Water quality index...... Yes/No(1) Yes Yes Yes Yes Water gross revenues ...... millions of Ps. Ps. 191,111 Ps. 368,365 Ps. 373,596 Ps. 351,008 Sewage gross revenues...... millions of Ps. Ps. 238,592 Ps. 410,143 Ps. 357,313 Ps. 352,136

(1) Yes/No indicates whether EPM’s quality index is in compliance or not with applicable regulations.

57 Selected Operating Data of EPM’s Waste Management Business

As of and for the As of and for the Year Ended Six Months Ended June 30, December 31, Unit 2014 2013(1) Collected and disposed of waste ...... thousands of m3 286,613 564,279.97 Collection and transportation trucks . . . . . No. 140 140 Cleaning and sweeping ...... Km/month 106,626 1,279,512 Waste disposed in the sanitary landfill . . . Ton 373,000.28 707,509.4 Waste management gross revenues ...... millions of Ps. Ps. 77,619 Ps. 26,765

(1) Information for the years ended December 31, 2011 and 2012 is not included because the waste management business is conducted by EMVARIAS, which was acquired on November 1, 2013.

58 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with EPM’s audited consolidated financial statements as of December 31, 2013 and 2012 and for the three years ended December 31, 2013 and the notes thereto, EPM’s unaudited consolidated financial statements as of June 30, 2014 and for the six months ended June 30, 2014 and 2013 and the notes thereto, and the sections entitled ‘‘Selected Financial and Key Operating Data,’’ ‘‘Industry,’’ and ‘‘Business’’ of this offering memorandum. This section contains forward-looking statements that involve risks and uncertainties. EPM’s actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in the section ‘‘Risk Factors’’and the matters set forth in this offering memorandum. The following discussion is based on EPM’s consolidated results of operations and financial condition, unless otherwise specified or indicated. Certain figures included in this section have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the numbers that precede them.

Overview EPM is an industrial and commercial government-owned company founded in Medellín, Colombia, in 1955 to provide public utility services. Through EPM’s BUs, (i) the Energy BU, and (ii) the Water BU, EPM currently participates in the generation, transmission, distribution and commercialization of electricity; distribution and commercialization of natural gas; and water, sewage and waste management businesses, with operations in Colombia and several other countries in Latin America. Operations in Colombia. EPM is Colombia’s largest public utility services company, based on 2013 revenues, and the second largest company overall, based on total assets as of December 31, 2013. EPM provides its services principally in Medellín, Colombia’s second largest city, as well as in surrounding localities which are spread along the Aburrá Valley (Valle de Aburrá). EPM also operates in Colombia’s capital and largest city, Bogotá, as well as in the Colombian cities of Manizales, Armenia, Pereira, Bucaramanga, Cúcuta, Quibdó, Cartagena and Cali. International Operations. EPM currently provides transmission, distribution and commercialization of electricity services through subsidiaries in El Salvador, Guatemala and Panama. In addition, EPM currently provides waste water management services through subsidiaries in Mexico. EPM has recently completed the development of a wind power plant project in Chile and announced the establishment of a branch office in Costa Rica. See ‘‘— Recent Developments.’’ EPM is also developing a hydroelectric power plant project in Panama, which is expected to be operational in 2015. See ‘‘— Brief Summary of Ongoing Significant Projects.’’ The following table sets forth EPM’s consolidated revenues, net income and Consolidated Adjusted EBITDA for the years ended December 31, 2013, 2012 and 2011 and for the six months ended June 30, 2014 and 2013:

For the Six Months Ended June 30 For the Year Ended December 31, 2014 2013 2013 2012 2011 (Ps. in millions) Revenues ...... Ps.6,989,026 Ps.6,357,546 Ps.12,986,466 Ps.12,498,850 Ps.11,508,020 Net income ...... 847,628 749,566 1,624,813 1,591,926 1,518,679 Consolidated Adjusted EBITDA . . 2,050,064 1,956,686 3,793,335 3,805,578 3,652,121 The industries in which EPM operates are capital intensive. Thus, EPM owns and operates a large set of networks and related infrastructure. EPM’s electricity networks and facilities include 34 hydroelectric power plants, three thermal power plants and one wind power plant accounting for an aggregate installed capacity of 3,579 MW, 216,973 km of transmission and distribution lines and approximately 416 power substations throughout Colombia and the other countries where EPM operates. In addition, UNE owns approximately 3,760,654 pair-km of copper cable networks, 827,452 Digital Subscriber Line (‘‘DSL’’) ports, 2,836,832 Home Passed, 34 Cable Modem Termination Systems (‘‘CMTS’’), 3,004 Digital Subscriber Line Access Multiplexer (‘‘DSLAM’’), virtually covering the entire country, 1,122 radio bases 4G LTE and two data centers. EPM’s water networks and facilities include 163 storage tanks, 29 potable water plants, 27 laboratories, 4,585 km of potable water network and 4,983 km of sewage networks. The net book value of EPM’s consolidated property, plant and equipment totaled Ps.16,568,521 million as of June 30, 2014. See ‘‘Summary — Recent Developments.’’

59 The following table sets forth certain financial data of EPM as of the dates and for the periods indicated:

For the Six Months Ended June 30, For the Year Ended December 31, 2014 2013 2013 2012 2011 (Ps. in millions, except %) Revenues...... Ps.6,989,026 Ps.6,357,546 Ps.12,986,466 Ps.12,498,850 Ps.11,508,020 Consolidated Adjusted EBITDA . . 2,050,064 1,956,686 3,793,335 3,805,578 3,652,121 Net income ...... 847,628 749,566 1,624,813 1,591,926 1,518,679 Dividends from non-controlled subsidiaries and affiliates(1) . . . 28,137 21,179 45,643 52,389 41,526 Non-current investments in securities ...... 7,396 8,741 8,185 9,672 66,516 Non-current equity investments, net ...... 501,331 498,260 501,370 507,177 505,917 Equity investments reappraisal . . . . 1,808,553 1,423,304 1,840,799 1,628,588 1,639,507 Total assets ...... 37,892,284 36,363,000 38,298,679 35,277,909 34,035,893 Equity ...... 21,925,265 20,741,805 22,047,514 21,059,729 19,893,424 Ratios Consolidated Adjusted EBITDA Margin ...... 29.3% 30.8% 29.2% 30.4% 31.7% Net income to equity(2) ...... 3.9% 3.6% 7.4% 7.6% 7.6% Net income to total assets(3) . . . . . 2.2% 2.1% 4.2% 4.5% 4.5% Non-current investments to total assets(4) ...... 1.3% 1.4% 1.3% 1.5% 1.7% Non-current investments including equity investments reappraisal to total assets(5) ...... 6.13% 5.3% 6.1% 6.1% 6.5%

(1) Corresponds to dividends received from non-controlled subsidiaries and affiliates including ISA, ISAGEN and others. (2) ‘‘Net income to equity’’ is the result of dividing net income by total equity. (3) ‘‘Net income to total assets’’ is the result of dividing net income by total assets. (4) ‘‘Non-current investments to total assets’’ is the result of dividing non-current investments by total assets. (5) ‘‘Non-currrent investments including equity investment reappraisal to total assets’’ is the result of dividing non-current investments including equity investment reappraisal by total assets. As a company engaged in the provision of public utility services, EPM is subject to the regulatory regimes applicable to public utility services companies in the businesses and the countries in which it operates. See ‘‘Industry.’’ Distributions from EPM represent a significant source of revenues and cash flows for the City of Medellín. For the years ended December 31, 2013 and 2012, EPM transferred to the City of Medellín Ps.964,557 million, or 55% of net income, and Ps.839,842 million, or 55% of net income, respectively, which represented approximately 25.0% of the City’s revenues for those periods. Additionally, for the year ended December 31, 2013, EPM distributed an additional Ps.218,936 million to the City of Medellín as an extraordinary dividend in connection with and prior to the consummation of the UNE-Millicom Merger. This distribution will not be recurrent. As a result, EPM distributed an aggregate amount of Ps.1,183,493 million to the City of Medellín for the year ended December 31, 2013. See ‘‘Summary — Net Income Distribution Policy.’’

EPM’s Revenues EPM derives substantially all of its revenues from the generation, transmission, distribution and commercialization of energy, distribution and commercialization of natural gas, water, sewage and waste management services, and telecommunications services.

60 Energy Revenues Electricity Generation EPM’s electricity generation revenues consist mainly of (i) electricity sales to other generation or commercialization companies and Unregulated Users in the wholesale energy market (Mercado de Energía Mayorista or ‘‘MEM’’) through (x) long-term electricity supply contracts entered into with other electricity commercialization companies or Unregulated Users and (y) the Energy Spot Market, (ii) the Reliability Charge, which are fees paid to EPM by XM acting on behalf of other participants in the MEM, for maintaining certain levels of available electricity generating capacity, or as otherwise known Firm Energy, for periods affected by adverse hydrological conditions, and (iii) payments for Automatic Generation Control (Control Automático de Generación or ‘‘AGC’’), which are fees paid to EPM by XM acting on behalf of other participants in the MEM, for implementing technology that controls the frequency of electricity in order to guarantee the quality of electricity along the SIN.

Electricity Transmission, Distribution and Commercialization Revenues EPM’s electricity transmission, distribution and commercialization revenues consist mostly of (i) fees paid to EPM by other operators, through XM, for the transmission of electricity in the SIN in proportion to EPM’s network ownership in the SIN, (ii) fees paid to EPM by other operators for the distribution of electricity in the STR in proportion to EPM’s network ownership in the STR and fees paid by other operators for use of the Local Distribution System (Sistema de Distribución Local or ‘‘SDL’’), and (iii) fees paid by Regulated Users to EPM for sales of electricity (i.e. commercialization).

Natural Gas Distribution and Commercialization Revenues EPM’s natural gas distribution revenues consist of fees paid by end users to EPM in the natural gas regulated and unregulated markets for the sale of natural gas.

Telecommunications Services Revenues UNE’s telecommunications services revenues consist mostly of (i) revenues derived from the provision of local and Long-Distance telephony services, internet connection, Value-Added Services, television and Carrier Services paid directly to UNE by the end user, whether individual households or businesses, and (ii) revenues from charges paid by other domestic and foreign telecommunications companies for the use of UNE’s networks. As a result of the UNE-Millicom Merger, beginning on August 1, 2014, EPM ceased consolidating the assets, liabilities and results of operations of UNE with EPM’s assets, liabilities and results of operations. In future periods, EPM expects to record its investment in UNE under the equity method. See ‘‘Recent Developments—UNE-Millicom Merger.’’

Water, Sewage and Waste Management Services Revenues EPM’s water, sewage and waste management services revenues consist mostly of (i) fees paid by customers for the provision of potable water, (ii) fees paid by customers for sewage services, and (iii) fees paid by customers for waste management services.

Results by Business Units The following table presents EPM’s consolidated revenues by BUs for the periods indicated:

For the Six Months Ended June 30, For the Year Ended December 31, 2014 2013 2013 2012 2011 (Ps. in millions) Energy Electricity generation ...... Ps.1,373,859 Ps.1,328,161 Ps.2,700,029 Ps.2,787,388 Ps.2,199,470 Electricity transmission, distribution and commercialization ...... 4,269,700 3,839,262 7,899,020 7,385,579 6,708,682 Natural gas distribution and commercialization ...... 272,350 262,162 564,894 448,551 405,694 Eliminations ...... (751,288) (575,405) (1,350,340) (1,097,677) (570,654) Total energy gross revenues ...... 5,164,621 4,854,180 9,813,603 9,523,841 8,743,192 (-) Discounts(1) ...... 16,984 42,205 85,192 103,432 20,990 Total energy revenues, net ...... 5,147,637 4,811,975 9,728,411 9,420,409 Ps.8,722,202

61 For the Six Months Ended June 30, For the Year Ended December 31, 2014 2013 2013 2012 2011 (Ps. in millions) Telecommunications Local Telephone, value-added, television, and other services ...... 1,601,354 1,389,852 2,921,349 2,722,721 2,110,506 Eliminations ...... (224,643) (185,565) (396,585) (375,604) — Telecommunications gross revenues, net . 1,376,711 1,204,287 2,524,764 2,347,117 2,110,506 (-) Discounts(1) ...... 74 47 301 201 804 Total telecommunications revenues, net . 1,376,637 1,204,240 2,524,463 2,346,916 2,109,702 Water, sewage and waste management Water ...... 191,111 183,755 368,365 373,596 351,008 Sewage...... 238,592 182,980 410,143 357,313 352,136 Waste management...... 77,619 1,172 26,765 — — Eliminations ...... (10,776) (780) (1,728) (5,024) — Water, sewage and waste management gross revenues ...... 496,546 367,127 803,545 725,885 703,144 (-) Discounts(1) ...... 14 1 8 495 319 Total water, sewage and waste management revenues, net ...... 496,532 367,126 803,537 725,390 702,825 Other revenues Others, net ...... 36,391 33,324 80,737 100,453 12,730 Other revenues, net ...... 36,391 33,324 80,737 100,453 12,730 Eliminations ...... (68,171) (59,119) (150,682) (94,318) (39,439) Total revenues...... Ps.6,989,026 Ps.6,357,546 Ps.12,986,466 Ps.12,498,850 11,508,020

(1) For a description of ‘‘Discounts’’ see ‘‘— Description of Principal Line Items — Discounts.’’ The following table presents EPM’s gross consolidated revenues by BU as a percentage of EPM’s total revenues:

For the Six Months Ended June 30, For the Year Ended December 31, 2014 2013 2013 2012 2011 Energy Electricity generation ...... 19.7% 20.9% 20.8% 22.3% 19.1% Electricity transmission, distribution and commercialization ...... 61.1% 60.4% 60.8% 59.1% 58.3% Natural gas distribution and commercialization ...... 3.9% 4.1% 4.3% 3.6% 3.5% Eliminations ...... -10.7% -9.1% -10.4% -8.8% -5.0% Total energy gross revenues ...... 73.9% 76.4% 75.6% 76.2% 76.0% (-) Discounts(1)...... 0.2% 0.7% 0.7% 0.8% 0.2% Total energy revenues, net ...... 73.7% 75.7% 74.9% 75.4% 75.8% Telecommunications Local Telephone, value-added, television, and other services ...... 22.9% 21.9% 22.5% 21.8% 18.3% Eliminations ...... -3.2% -2.9% -3.1% -3.0% 0.0% Total telecommunications gross revenues... 19.7% 18.9% 19.4% 18.8% 18.2% (-) Discounts(1)...... 0.0% 0.0% 0.0% 0.0% 0.0% Total telecommunications revenues, net.... 19.7% 18.9% 19.4% 18.8% 18.3% Water, sewage and waste management Water...... 2.7% 2.9% 2.8% 3.0% 3.1% Sewage ...... 3.4% 2.9% 3.2% 2.9% 3.1% Waste management ...... 1.1% 0.0% 0.2% 0.0% 0.0% Eliminations ...... -0.2% 0.0% 0.0% 0.0% 0.0%

62 For the Six Months Ended June 30, For the Year Ended December 31, 2014 2013 2013 2012 2011 Water, sewage and waste management gross revenues ...... 7.1% 5.8% 6.2% 5.8% 6.1% (-) Discounts(1)...... 0.0% 0.0% 0.0% 0.0% 0.0% Total water and sewage and waste management revenues ...... 7.1% 5.8% 6.2% 5.8% 6.1% Other revenues Others, net...... 0.5% 0.5% 0.6% 0.8% 0.1% Other revenues, net ...... 0.5% 0.5% 0.6% 0.8% 0.1% Eliminations ...... -1.0% -0.9% -1.2% -0.8% -0.3% Total revenues ...... 100.0% 100.0% 100.0% 100.0% 100.0%

(1) For a description of ‘‘Discounts’’ see ‘‘— Description of Principal Line Items — Discounts.’’

Revenue Distribution between EPM and its Subsidiaries For the six months ended June 30, 2014, 38.5% of EPM’s total consolidated net revenues was generated directly by EPM on an unconsolidated basis, while 61.5% was generated by its subsidiaries, as compared to 40.9% and 59.1%, respectively, for the year ended December 31, 2013. The following table sets forth a breakdown of revenues generated directly by EPM and its subsidiaries for the periods indicated:

For the Six Months Ended June 30, For the Year Ended December 31, 2014 2013 Percentage of Percentage of Total Total Revenues in Consolidated Revenues in Consolidated Company U.S. Dollars Revenues in Ps. Revenues U.S. Dollars Revenues in Ps. Revenues EPM (unconsolidated) ...... US.$1,428.98 Ps.2,688,187 38.5% U.S.$ 2,755.48 Ps.5,309,346 40.9% Groups of subsidiaries Colombian energy subsidiaries . . . 478.98 901,057 12.9% 899.38 1,732,956 13.3% Colombian water subsidiaries . . . . 52.41 98,589 1.4% 35.30 68,010 0.5% International energy subsidiaries. . 1,015.04 1,909,491 27.3% 1,742.74 3,357,965 25.9% International water subsidiaries. . . 18.27 34,366 0.5% 19.98 38,507 0.3% Telecommunication subsidiaries . . 720.10 1,354,654 19.4% 1,284.04 2,474,121 19.0% Other subsidiaries ...... 1.43 2,682 0.0% 2.89 5,561 0.0% Total Subsidiaries...... 2,286.23 4,300,839 61.5% 3,984.33 7,677,120 59.1% Total revenues ...... U.S.$3,627.21 Ps.6,989,026 100% U.S.$6,739.81 Ps.12,986,466 100.0%

Significant Factors Affecting EPM’s Results of Operations and Financial Condition Events Affecting EPM’s Results of Operations for the Reported Periods In addition to factors that affect EPM’s operations on a regular basis, EPM’s operations for the reported periods were specifically affected by a number of material events which are described below:

Capital Investments in Connection with EPM’s Expansion Strategy EPM is in the process of expanding its operations through significant capital investments in infrastructure projects and strategic companies. For the six months ended June 30, 2014, EPM’s capital investments totaled Ps.986,711 million, its capital investments in strategic companies totaled Ps.0 million, and its investments in other assets totaled Ps.97,019 million, for total capital investments as of June 30, 2014 of Ps.1,083,730 million. In aggregate, EPM’s net cash used in investing activities, which includes investments in infrastructure and strategic companies from 2011 through 2013 was Ps.7,709,399 million. For more detail on EPM’s capital investments for each of the reported periods, see the discussion in this section under ‘‘— Capital Investments.’’

63 Capital Investments in Infrastructure Projects Capital investments in electricity infrastructure projects for the periods reported include investments in the Ituango Project, the Los Cururos project, the Nueva Esperanza Project, the Bello-Ancon Electricity Transmission Project, the Bonyic Plant and the Bello Plant and investments in generation equipment replacements, electricity transmission and distribution networks, and gas networks. For detailed information on our ongoing infrastructure projects see ‘‘Summary — Brief Summary of Ongoing Significant Projects’’ and ‘‘Business — Energy BU — Electricity Generation and Commercialization Business — Capital Expenditure Projects: Expansion of EPM’s Generation Capacity.’’ Capital investments in maintenance, replacement and expansion of EPM’s networks have a direct effect on its revenues, costs and expenses. In accordance with applicable regulation, water and basic sanitation companies can recover a portion of their capital investments made in networks and treatment plants that are under construction as a component of the tariff charged to end users. Regarding the assets in operation, the tariff reflects the corresponding costs of maintenance and operation. For example, the current tariff that EPM charges for its water services includes a component corresponding to the Bello Plant which construction began in 2011. When the Bello Plant enters into operation, which EPM expects will occur in 2015, the tariff will include a component to recognize its operation and maintenance costs. For detailed information about this project, see ‘‘Business — Water Services BU — Capital Expenditures — Bello Waste water Treatment Plant.’’ For details on EPM’s planned capital investments in 2014, see ‘‘— Capital Investments.’’

Capital Investments in Strategic Companies According to Colombian Public Utilities Companies GAAP, revenues originated by an acquired company (over which EPM exercises control) during the month in which the acquisition takes place are carried forward to the immediately subsequent month and are consolidated beginning on the first day of the month following the date of the acquisition.

Sale of share participations in Generadores Hidroeléctricos S. A. (Genhidro) and Hidronorte S. A. On November 28, 2012, DECA II formalized the sale of share participations received from EPM on Genhidro S. A. and Hidronorte S. A. The purchaser was AKIS International Ltd, subsidiary of Centro American Mezzanine Infrastructure Fund (CAMIF), a Canadian investment fund located in Washington D.C.

Acquisition of the Company Empresas Varias de Medellín S.A. E.S.P. On November 1, 2013, EPM acquired 99.90% of the shares of EMVARIAS for Ps.34,490 million. EMVARIAS was created 49 years ago. It provides municipal waste collection services, mainly solid waste and complementary activities of transportation, sweeping and cleaning of roads and public areas, treatment, use and final disposal of waste, cutting of grass and trimming of trees located in the roadways and public areas. It is a leader in the rendering of the domiciliary public service of cleaning and sanitation in the Valle de Aburrá. Creation of the EPM Chile and acquisition of the companies Parque Eólico Pacífico S.A. and Parque Eólico La Cebada S.A. In February 2013, EPM Chile was created with contributions from EPM and EPM Investments for Ps.61,628 million as of December 31, 2013. In March 2013, this affiliate acquired 100% of Parque Eólico La Cebada S.A. and Parque Eólico Los Cururos Ltda. (formerly Parque Eólico Pacífico), which recently completed the construction of a wind power plant of 109.6 MW in the region of Coquimbo, in northern Chile. The value of the transaction was Ps.31,803 million.

Capitalization of the Company Tecnología Intercontinental S.A. de C.V. On September 20, 2013, EPM made a capitalization equivalent to 80% of the shares of the Company Tecnología Intercontinental S.A. de C.V. (TICSA), through EPM Capital Mexico S.A. de C.V. TICSA is a holding company consisting of 14 companies, 11 of them engaged in the design, construction, operation and startup of the waste water treatment plants (PTAR). The value of the transaction was Ps.217,732 million.

64 Significant Factors Generally Affecting EPM’s Present and Future Results of Operations EPM’s present and future results of operations and financial condition may be generally affected by a variety of material factors, including, among others:

General Factors

Legal and Regulatory Developments Affecting the Industries where EPM Operates The agencies that regulate EPM’s businesses and customers may take actions which may affect EPM’s operations and profitability. Since EPM provides public utility services, its businesses are substantially regulated by the CREG, the CRA, the UPME, the ANH, the MME, the MTIC, the CRC, the ANTV, the SSPD and various other national, state and local regulatory agencies in Colombia and the other countries where EPM operates. The nature and degree of the regulation and legislation affecting natural gas, electricity, water, sewage and telecommunications companies in Colombia has become significantly more comprehensive during the past decade. Such laws and regulations relate to, among other things, required licenses, permits and other approvals, the fees that EPM may charge for its services, the terms and conditions which apply to EPM’s services contracts, EPM’s ability to recover various categories of costs and the acquisition, construction and disposition of facilities to provide services or to allow third parties to provide their services. In particular, CREG, CRC and CRA regulate the fees EPM is permitted to charge to its customers in connection with the provision of electricity transmission and distribution and natural gas distribution services, telecommunications services, and water, sewage and waste management services, respectively. For telecommunications services in particular, the CRC determines the costs in connection with the use and access of facilities for the provision of telecommunication services and determines the conditions that need to be fulfilled in order to charge a specific fee to the telecommunications users. If (i) the services tariff rates were reduced or redesigned pursuant to regulations issued by CREG, CRC or CRA in the future, (ii) the many relevant aspects of the business including volume of business under currently permitted rates were decreased significantly, or (iii) EPM is required to substantially discount the rates for its services because of regulatory pressure, the profitability of EPM’s businesses could be significantly affected. As a result of EPM’s international expansion in recent years, EPM is also subject to the regulatory framework and the several national, state and local agencies that regulate EPM’s businesses in each of the countries where EPM operates. For detailed information regarding recent regulatory developments in each of the industries where EPM operates, see ‘‘Industry — The Energy Industry — Regulatory Structure of the Electricity Market,’’ ‘‘Industry — Regulation of the Telecommunications Sector in Colombia’’ and ‘‘Industry — The Water, Sewage and Waste Management Services Industry — Government Regulation — Recent Regulatory Developments.’’ The pricing regime for the provision of telecommunications services in Colombia is set forth in Article 23 of Law 1341 of 2009, pursuant to which the providers of telecommunication services can freely establish the prices to be charged to users, provided the consumers are previously informed. The CRC can only regulate such prices when (i) there is not sufficient competition, (ii) a market failure occurs or (iii) the telecommunication services offered do not meet required quality levels. For detailed information regarding the Colombian telecommunications pricing model, see ‘‘Industry — The Telecommunications Industry — Regulation of the Telecommunications Sector in Colombia — Pricing.’’

Tax Reform On December 26, 2012 the Colombian Congress passed Law 1607, which includes certain tax reforms that came into force as of January 1, 2013. The following is a summary of the main aspects of such tax reforms: • Income tax and complementary income tax for equality (CREE): The effective income tax rate decreased from 33% to 25% and the CREE, a new tax, was introduced at a temporary rate of 9% for the years 2013 through 2015, and 8% from 2016 onwards. The overall result of such reforms is an increase of 1% in the aggregate marginal rate for the income tax and the CREE from 33% to 34% that will be in place from 2013 until 2015, and from 2016 onwards such aggregate marginal rate is to return to 33%. • For CREE taxpayers, the tax reform eliminated the following parafiscal contributions set as a percentage charge over the salary amount with respect to new and existing employees earning up to 10 minimum monthly legal wages in Colombia: (i) as of May 2013 the contribution to the National Learning Service (Servicio Nacional de Aprendizaje — SENA) (2%) and the National Institute for Family Benefit (Instituto

65 Colombiano de Bienestar Familiar — ICBF) (3%), and (ii) as of January 2014, the contribution to Health (8,5%). • For purposes of notes offerings, the following holders of such notes are deemed CREE taxpayers: (i) Colombian corporations, companies and other entities which are taxpayers of income tax with respect to income originated in Colombia, and (ii) foreign entities subject to income tax in Colombia by means of income derived through their branch offices or permanent establishments in Colombia. As a result of the stability contract EPM entered into with the Colombian Government, all energy generation-related investments made by EPM in Colombia benefit from a 40% tax deduction if made before June 2028. This legal stability contract protects EPM against adverse tax regulatory changes, and enables EPM to benefit from any new more favorable tax regulation. In addition to the 40% tax deduction on investments on fixed productive assets, pursuant to the legal stability contract, EPM and the Colombian Government agreed to: (i) a rate cap of 33% for income tax, (ii) payment of tax on current assets (patrimonio liquido) until 2010, (iii) a special deduction for science, technology and environmental development investments, and (iv) specific rules and guidelines for the determination of income. As consideration for this tax stabilization benefit, EPM paid the Colombian Government Ps.9,894 million. The legal stability contract has a non-renewable term of 20 years and expires in June, 2028.

EPM’s Expansion Strategy EPM seeks to further expand its participation in the electricity industry in Latin America. In addition to the countries where EPM currently operates, EPM plans to make investments in connection with the international expansion of its energy businesses. Such investments are targeted at acquiring electricity generation, distribution and transmission assets, and forming strategic alliances with international partners for the development of greenfield projects in the region. EPM’s international expansion plan considers countries such as Mexico, Brazil, Chile, Peru, Guatemala, El Salvador, Costa Rica and Panama, and the southern United States. EPM plans to invest approximately 4.7 billion from 2014 to 2018 in new electricity generation, transmission, distribution and gas distribution assets in Colombia, including investments associated with the Ituango Project. The Ituango Project is expected to be the largest hydrogeneration power station in Colombia, with a total installed capacity of 2,400 MW. For a detailed description of the Ituango Project, see ‘‘Business — Energy BU — Electricity Generation and Commercialization Business— Capital Expenditure Projects: Expansion of EPM’s Generation Capacity.’’ EPM also seeks to increase its presence and share in the regional electricity distribution markets and to expand its gas distribution system to other regions of Antioquia. EPM believes that the Latin American water business will continue to experience rapid growth, given the lack of access to water, sewage and waste management services for much of the population in the region. EPM is focusing on opportunities to enter into operating arrangements with respect to existing water and sewage infrastructure, as well as opportunities to participate in new infrastructure development projects.

Rate Regulation The rates that EPM is entitled to charge its customers for some of its services are subject to regulated pricing models and methodologies set forth by different governmental agencies. EPM’s capacity to transfer some of its costs to its customers is limited to a certain extent by some of these pricing restrictions. In addition, changes in pricing models or tariff methodologies may affect EPM’s profitability and results of operations. For a summary of some of the most important regulations governing the prices EPM may charge in the industries in which it operates, see ‘‘— Factors Affecting EPM’s Energy Business — Rate Regulation in the Energy Business,’’ ‘‘— Factors Affecting EPM’s Telecommunications Business — Rate Regulation in the Telecommunications Business,’’ and ‘‘— Factors Affecting EPM’s Water Business — Rate Regulation in the Water Business.’’

General Economic Conditions, GDP Growth and Inflation in Colombia EPM derives more than 70.0% of its revenues from its operations in Colombia. Both the revenues generated by companies in the industries where EPM operates and EPM’s revenues are largely correlated with GDP growth. During the last five years, Colombia’s GDP grew at an annual average rate of 4.1%, one of the highest in Latin America. According to the DANE, Colombia’s economy grew 4.3%, 4.0% and 6.6%, during the years ended December 31, 2013, 2012, and 2011, respectively. According to forecasts by the Colombian Government and

66 international institutions such as the IMF, the Colombian economy is expected to grow by 4.5%, 4.6% and 4.6% in 2014, 2015 and 2016, respectively. The following chart shows the historic and projected evolution of Colombia’s GDP, as applicable, for the periods indicated.

As of and for the Year Ended December 31, 2008 2009 2010 2011 2012 2013 2014(1) 2015(1) 2016(1) Colombia’s GDP Growth ...... 3.5% 1.7% 4.0% 6.6% 4.0% 4.3% 4.5% 4.6% 4.6%

(1) Forecast. Sources: DANE and DNP.

Historically, a slowdown in Colombia’s GDP growth has led to a slowdown in the demand for electricity and telecommunications services. An actual slowdown in GDP could affect EPM’s revenues and profitability. See ‘‘Risk Factors — Risk Factors Relating to EPM Energy Business — A decline in GDP growth, and thus in domestic energy demand, in Colombia may adversely affect EPM’s operating results and financial condition.’’ According to the DANE, Colombia’s annual overall inflation rate as measured by IPC was approximately 2.79% for the six months ended June 30, 2014, and 3.2%, 1.9% and 2.4% for the years ended December 31, 2014, 2013 and 2012, respectively. Even though some of EPM’s tariffs are benchmarked to IPC and other similar indicators of inflation, effects thereof are passed-through to end users, hence EPM does not consider inflation in Colombia to have had a material impact on its results of operations. The following chart shows the historic and projected evolution of Colombia’s inflation, as applicable, for the periods indicated.

As of and for the Year Ended December 31, 2008 2009 2010 2011 2012 2013 2014(1) 2015(1) 2016(1) Colombia’s Inflation ...... 7.7% 2.0% 3.2% 3.7% 2.4% 1.9% 3.2% 3.3% 3.1%

(1) Forecast. Sources: DANE and DNP.

General Macroeconomic Conditions in the Countries Where EPM Operates During the first quarter of 2014, Colombia’s GDP grew 6.4%, mainly driven by increased levels of consumption and investments in construction. According to the Cepal, Colombia’s expected GDP growth for 2014 is expected to be 4.5% or greater. Further, the DANE recently reviewed the results of Colombian economy’s growth for 2013, and increased it from 4.3% to 4.7%. As a result of recent economic developments, on July 31, 2014, the board of directors of the Central Bank readjusted the expected GDP growth for 2014 to a range between 4.2% and 5.8%. The board also increased the interest rate (repo rate) to 4.25% as a consequence of economic dynamics and the evolution of domestic prices, which have reached the Central Bank’s 3% target for 2014 earlier than expected. EPM expects overall annual inflation growth rates of 3.20% and 3.30% for 2014 and 2015, respectively. As a result of its recent international expansion, EPM derived near to 30.0% of its revenues from its operations outside Colombia. The general macroeconomic conditions of the countries where EPM operates, including GDP growth, inflation and labor market conditions, may affect EPM’s revenues derived from its international operations. See ‘‘Risk Factors — Risks Related to EPM’s International Operations — EPM’s business, financial condition and results of operations may be adversely affected by general economic, political, social or legal developments in the countries where EPM operates’’ and ‘‘— High inflation may adversely affect the business and operating results of EPM’s international operations.’’

67 Foreign Exchange Fluctuation EPM receives most of its income in Colombian pesos. A significant percentage of EPM’s debt is denominated in currencies other than the peso, principally U.S. dollars. For this reason a devaluation of the Colombian peso in respect to the dollar could negatively affect EPM’s financial condition. Also, some of EPM’s debt is denominated in Guatemalan Quetzal and Mexican Pesos, therefore its financial condition could also be affected by a devaluation of the Colombian peso in respect to these currencies. However, EPM actively manages its foreign currency risk position and has entered into several hedging operations in respect of short term and long term foreign currency exchange risk. As of June 30, 2014, EPM had entered into foreign exchange swaps, cross currency swaps and coupon swaps which aggregate notional amount represents 18% of EPM’s other than peso-denominated outstanding debt. See ‘‘— Qualitative and Quantitative Disclosure About Market Risk.’’ In addition, some of the fees that EPM charges for its services depend, in part, on the TRM. The price of gas, for instance, is benchmarked to the U.S. dollar price of fuel oil. As a result of its recent international expansion, EPM receives a portion of its revenues in the currencies of the countries where it operates. See ‘‘Risk Factors — Risks Related to EPM’s International Operations — Foreign currency exchange rate fluctuations may affect EPM’s financial results.’’

Net Income Distribution Policy Under Colombian law, the maximum amount of net income that a government-owned company may, or may be required to distribute is 80.0% of previous year’s net income. Pursuant to EPM’s by-laws and upon approval by the COMPES, EPM is required to distribute to the City of Medellín, EPM’s sole owner, no more than 30.0% of EPM’s net income for the previous year. Under certain circumstances, however, EPM may be required to distribute to the City of Medellín additional amounts in excess of 30.0%. All distributions in excess of 30.0% of EPM’s net income are subject to prior approval from the Medellín City Council, which involves a process that requires, among other things, EPM’s certification that the distribution of additional amounts has no effect on the financial condition and sustainability of EPM’s businesses, including its ability to service its debt. For a description of EPM’s net income distribution policy, see ‘‘Relationship with the Municipal Government — Medellín - Its Role as Owner of EPM — Net Income Distribution Policy.’’ For 2014 and subsequent years, the Medellín City Council approved additional extraordinary distributions for an amount not to exceed 25.0%, for a total of 55% of EPM’s net income. The following table shows distributions declared and paid by EPM in the years ended December 31, 2011, 2012 and 2013:

Paid Paid Total UNE-Millicom Ordinary Extraordinary Paid % of EPM’s Merger Total Paid Year Distributions(1) Distributions(2) Distributions Net Income(3) Distributions(4) Distributions (Ps. in millions) 2011 ...... 437,346 360,154 797,500 55% 797,500 2012 ...... 458,095 381,746 839,842 55% 839,841 2013 ...... 526,122 438,435 964,557 55% 218,936 1,183,493

(1) Refers to paid distributions for up to 30% of EPM’s net income for the previous fiscal year. (2) Refers to paid distributions in excess to 30% of EPM’s net income for the previous fiscal year. (3) Refers to EPM’s net income for the previous fiscal year. EPM expects to continue distributing up to 55% of its previous fiscal year’s net income in the upcoming years. (4) Refers to an extraordinary dividend paid to the City of Medellín in connection with and prior to the consummation of the UNE-Millicom Merger. This distribution will not be recurrent.

Factors Affecting EPM’s Energy Business

Rate Regulation in the Energy Sector CREG increased the statutory internal rate of return for investments in electricity transmission assets, from 9.0% to an 11.5% return before taxes effective from the second half of 2009. During 2006, CREG also replaced the ‘‘capacity charges’’ system with the ‘‘reliability charges’’ system. Capacity charges had been used by CREG since

68 1996 and sought to guarantee efficient availability of electricity supply by compensating electricity generation companies for their installed capacity. The ‘‘reliability charge’’ model set forth a bidding mechanism to insure that electricity supply during extreme hydrologic conditions meets demand at reasonable prices. For detailed information on the ‘‘reliability charge’’ model, see ‘‘Business — Energy BU — Electricity Generation and Commercialization Business — Electricity Generation and Commercialization Business In Colombia — The Reliability Charge.’’ In connection with electricity distribution, in 2008, the CREG approved a methodology to determine electricity distribution charges for the 2009-2013 period, which methodology continues to be in effect. We currently expect that the CREG will establish a new methodology for subsequent periods in 2015. In connection with electricity commercialization, the tariff regime established in 2008 continues to be in effect. Under this regime, the generation component of the tariff is calculated based on the average tariff for the immediately preceding month. We currently expect that the CREG will establish a new methodology in 2015. Other expected changes in the regulatory framework include the sharing of losses between the incumbent electricity distribution company and the independent commercialization company operating in the SDL. Currently, companies exclusively engaged in commercialization activities do not bear the financial burden of losses suffered by a distribution company. Going forward, losses are expected to be distributed among all the sector participants using the SDL.

Hydrological Conditions Affecting EPM’s Electricity Business The demand of electricity in Colombia has been historically met mainly by hydroelectric generation. As of June 30, 2014, Colombia’s total installed energy generation capacity was 14,989 MW, of which 64.3% was hydraulic, 30.6% was thermal, 4.4% was from minor plants and 0.7% was from co-generators. Colombian hydrology typically follows a dual season annual cycle, with one period of low levels of rain from December to March and high levels during the rest of the year. However, in the last couple of decades, Colombia’s hydrology has been affected by an abnormal and erratic climatic phenomenon that affects the regularity of the rainfall season and leads to droughts, known as the El Niño-Southern Oscillation (ENSO or ‘‘El Niño’’). For example, Colombia was severely affected by El Niño in 1992 and 1993 and the Colombian Government was forced to limit the electricity generation in the country, resulting in voluntary nation-wide blackouts at specific times of the day. In addition to El Niño, Colombia has also been affected by a similar but opposite phenomenon which leads to increased rain, known as the ‘‘La Niña’’. Such phenomenon was very severe in the second half of 2010. The effects of El Niño or La Niña can unevenly affect different regions in the country. For this reason, at any given time, certain generation plants can be affected by heavy rains while generation plants located elsewhere can be affected by droughts. The hydrologic anomalies described can lead to adverse effects in the electricity market in Colombia, including the following: • The El Niño phenomenon can lead to a decrease in the market’s hydroelectric generation capacity, thereby affecting the entire electricity supply in Colombia. • Limited supply of electricity as a result of diminished hydroelectric generation may cause the Colombian Government to intervene in the electricity generation market by promoting, for instance, electricity savings programs. As a result of these programs, electricity consumption can decline. • The La Niña can lead to an increase in the market’s hydroelectric generation capacity, which can result in lower electricity prices as a result of higher availability of hydroelectric generation capacity. • The irregularity of the occurrence of these anomalies and the fact that they can have uneven effects across the country, affecting some but not all the hydroelectric plants in the country, may lead to an increase in the volatility of the price of electricity. Companies, including EPM, may not adequately foresee the occurrence of any of these anomalies or the effects thereof and, therefore, may inefficiently invest in generation capacity. In addition, the decision whether to acquire or purchase electricity through bilateral long term agreements or in the Energy Spot Market largely depends on the ability of the companies, including EPM, to forecast hydrologic conditions. Therefore, the described anomalies, among other factors, may affect the ability of companies, including EPM, to structure profitable and efficient electricity portfolios.

69 • From September 2012 through October 2013 the water streams contributing to EPM’s power generation systems were low. During only two months of the period water streams were slightly above the historical average levels primarily as a result of a moderate increase in the temperature of the Pacific Ocean. As a result, our power generation capacity decreased significantly during 2013 and the market price for electricity increased in the same period due to the higher use of water reserves. • Since March 2014, the conditions of the Pacific Ocean have shown a clear evolution towards the initial stages of an El Niño event, with a significant increase in the temperature of deep sea waters of the equatorial belt associated with weakening of surface easterly winds in the same region. These conditions contribute to the heating of the sea surface which gives rise to a change in rainfall patterns over the Pacific Ocean and then on central and western Colombia. International information agencies have announced a 70% probability for an El Niño event to occur in the second half of 2014. Despite these conditions, EPM’s hydroelectric generation system has registered decreases in the flows of the main rivers that contribute to this system. For example, between April and June 2014, the Nare and Grande rivers contributing to the power generation plants Guatapé and La Tasajera had flows of 71% of their historical average and the entire EPM’s hydroelectric generation system recorded contributions of 81% of its historical average for the same period.

Electricity Spot Price Fluctuations A significant portion of EPM’s revenues depends on the price at which EPM purchases and sells electricity in the MEM. There are two main mechanisms through which EPM purchases and sells electricity: long-term contracts and spot market transactions. During the period from 2012 through 2013, 8% of EPM’s transactions for the purchase or sale of electricity were conducted on the Energy Spot Market, while the remaining 92% was committed under long-term contracts. See ‘‘Industry — The Energy Industry in Colombia — The Electricity Market.’’ The price of electricity acquired through spot market transactions (known as spot price) is somewhat volatile and depends directly on, among other factors, hydrological conditions, power generation units’ availability, the levels of regional, national and international supply and demand of electricity, international oil and natural gas prices, electricity laws and regulations and taxes. The revenues that EPM derives from its spot market transactions are, therefore, subject to these variations. Furthermore, the price of electricity under long-term contracts is also affected by the spot price. At any given point, parties to a long-term contract refer to the spot price and the expectations as to future fluctuations in the spot price to set forth the price under the corresponding agreement. Even though EPM is not engaged in arbitrage or speculation activities on the Energy Spot Market, EPM’s ability to acquire electricity at low prices and sell electricity at high prices depends, in part, on its ability to adequately foresee the fluctuations of the spot price. For more details on the fluctuation of the spot price, see ‘‘Industry — Electricity Generation in Colombia — Revenues of Electricity Generation Companies — Dispatch and Pricing’’. The following tables depict the evolution of energy prices in the Spot Market and in the prices of long-term contracts, respectively, for the five years ended December 31, 2013:

January February March April May June July August September October November December Average (Prices in the Spot Market in Ps./kWh) 2009. . 134,056 123,816 109,713 89,418 116,977 126,966 126,014 128,749 185,201 192,187 154,974 201,074 140,762 2010. . 154,049 198,819 191,380 198,199 151,406 91,470 83,368 85,127 112,502 137,035 92,575 69,250 130,432 2011 . . 89,718 106,300 81,379 76,036 60,005 61,333 56,677 91,270 94,084 75,213 72,289 56,624 76,744 2012. . 54,224 78,528 119,947 58,044 47,317 87,815 79,629 139,773 184,273 200,549 166,960 181,680 116,562 2013. . 185,280 182,539 138,676 234,850 140,216 142,228 236,842 152,553 144,229 218,658 214,361 163,144 179,465

January February March April May June July August September October November December Average (Prices of long-term contracts in Ps./kWh) 2009. . 114.89 112.32 114.85 114.21 113.71 112.51 107.54 109.15 108.61 107.29 108.59 106.25 110.828 2010. . 117.24 118.36 118.93 119.51 120.29 120.38 119.69 118.76 117.87 117.38 118.70 120.39 118.959 2011 . . 138.74 135.34 139.46 139.54 138.10 137.31 131.77 131.60 132.95 133.99 133.42 134.51 135.561 2012. . 132.69 132.63 131.99 132.79 133.21 130.71 130.63 131.13 132.22 131.85 130.80 129.95 131.716 2013. . 139.09 139.06 139.28 138.79 139.30 139.83 140.10 139.76 139.41 138.42 137.70 137.75 139.042

Source: XM.

70 Over-Installation of Generation Facilities In order to prevent scarcity of electricity supply, the Colombian Government set forth a program to increase Colombia’s installed generation capacity with the following projects: Estimated Year of Project Capacity (In MW) Completion(1) Hydroelectric plants Cucuana...... 60 2014 Quimbo ...... 396 2015 Sogamoso ...... 800 2014 Porvenir II...... 352 2017 Carlos Lleras...... 78.1 2015 San Miguel ...... 42 2015 Ituango (Phase 1) ...... 1,200 2019 Ituango (Phase 2) ...... 1,200 2022 Total ...... 4,128.1 Thermal plants Gecelca 3 ...... 164 2014 Termonorte ...... 88 2017 Tasajero II ...... 160 2015 Gecelca 3.2 ...... 250 2015 Total ...... 662 Total Hydroelectric ...... 4,128.1 86.2% Total thermal ...... 662 13.8% Total expected capacity ...... 4,790.1 100.0%

(1) Source: XM. The Colombian Government determined this expansion of Colombia’s installed capacity based on projected demand during this period. If actual demand varies from these projections, installed capacity may exceed the actual electricity needs of the country, which would lead to excess supply of electricity and lower prices, which would in turn adversely affect revenues from the generation of electricity. In addition, EPM has made significant investments in some of these projects (including Porce III and Ituango). If demand for electricity decreases, EPM may not be able to realize the expected returns on these projects.

Regulatory Market Restrictions Applicable to Electricity Commercialization Activities Individual commercialization companies may not, directly or indirectly, account for greater than 25.49% of the sector’s total electricity sales. If such limit is exceeded by a commercialization company, such commercialization company will have 12 months to adjust its participation back to within the regulatory limit. See ‘‘Industry — The Energy Industry in Colombia — Functional Segregation of the Electricity Sector.’’ After the acquisition of ESSA and CENS in March 2009, EPM’s total participation increased above the regulatory threshold, and therefore EPM was given 12 months to adjust its participation and return within the regulatory limit. As a result, EPM had to terminate certain commercialization agreements, mainly with large clients. During 2013, EPM’s participation in the commercialization market fluctuated between 23.9% and 24.5%, below the regulatory limit. In general, regulatory market limits may impair EPM’s ability to attract new customers, to acquire other companies and to expand in other markets in Colombia. In addition to the market regulatory limits, the CREG has issued regulation in connection with the required minimum amounts of net worth and power (either purchased or sold) in order to be entitled to purchase and sell electricity in the MEM (CREG Resolution 156 of 2012). As such, this indicator has become a prerequisite for companies in the market for the registry of long-term power purchase or sale contracts before the ASIC. If EPM´s indicators are below the regulatory limit, such situation may impair EPM’s ability to register new power purchase or sale contracts before the ASIC, or commercial frontiers from new users willing to connect to the national grid.

71 Price and Availability of Natural Gas Reserves Thermal plants, such as EPM’s La Sierra, are operated on natural gas and are subject to take or pay contracts, which are required for purposes of the Reliability Charge mechanism. Since thermal plants do not operate as base load but only when hydroelectric plants are insufficient to satisfy the demand, take or pay volumes not used for electricity generation may be sold in the secondary market at a lower price than that paid under take or pay contracts. A general increase in the price of natural gas can increase the price of thermal-generated electricity. Thermal plants operators may not always be able to sell electricity at a price sufficient to compensate for such higher prices of natural gas. Current regulations, however, allow operators to use additional alternatives to compensate for such higher prices, including importing or establishing strategic reserves of natural gas. Availability of long-term natural gas supply also affects EPM’s natural gas distribution business. According to CREG’s Resolution 89 of 2013, purchasers may enter into bilateral agreements or participate in auctions by natural gas producers in order to obtain natural gas, pursuant to the average of the supply-demand for the last three years. The conditions of such auctions and their closing prices may cause fluctuations in the price and terms of the natural gas supply agreements. This may affect EPM’s ability to secure a constant supply of natural gas at a stable price. EPM is currently a party to natural gas supply agreements that EPM believes will guaranty the supply of natural gas in the medium term for the regulated and unregulated markets. For the regulated market, EPM is party to a natural gas supply agreement with Chevron Petroleum Company until 2018 and for the unregulated market, EPM is party to natural gas supply agreements with Equion Energy until 2016 and with Ecopetrol until 2018. In addition, EPM is party to natural gas transportation agreements for the provision of this service until 2020 from the two main natural gas production fields in Colombia (i.e., Guajira and Cusiana).

Variations of the IPP Index Approximately 80.0% of the charges and fees in the electricity industry are adjusted in accordance with the variation of the Colombian Producer Price Index (Índice de Precios al Productor or ‘‘IPP’’), including the price of electricity agreed to under long-term contracts, prices charged to Unregulated Users and prices determined pursuant to electricity auctions in the MEM, among others. Even though the effects of the variations in the IPP index are passed to the end user, an increase in the IPP affects the nominal amount of revenues generated by EPM and may generate a mismatch with the IPC, which is the indicator commonly used to measure inflation in Colombia.

Decrease in the Demand for Natural Gas A decrease in Colombia’s demand for natural gas could have a negative effect on EPM’s revenues deriving from natural gas services. A decrease in the demand for natural gas could be triggered by (i) a decrease in the price of the substitutes for natural gas, such as GLP and Fuel Oil # 6, which according to applicable regulations can adapt faster to changes in the underlying factors that determine their price since they can be adjusted monthly, while natural gas can only be adjusted every year, and (ii) Colombia’s general economic condition, among other factors.

Factors Affecting EPM’s Participation in the Telecommunications Business

Rate Regulation in the Telecommunications Sector The pricing regime for the provision of telecommunications services in Colombia is set forth in Article 23 of Law 1341 of 2009, pursuant to which the providers of telecommunication services can freely establish the prices to be charged to users, provided they are previously informed. The CRC can only regulate such prices when (i) there is not sufficient competition, (ii) a market failure occurs or (iii) the telecommunication services offered do not meet required quality levels. The only declaration of market failure has been as a result of Claro’s (formerly, COMCEL) dominant position in the mobile voice market. For detailed information on the Colombian telecommunications pricing model, see ‘‘Industry — The Telecommunications Industry — Regulation of the Telecommunications Sector in Colombia — Pricing.’’

Shifting Patterns in the Telecommunications Business From the year 2000, traditional voice customers (local and Long-Distance customers), have increasingly been migrating to new generation services such as mobile telephone services and Internet. The proportional participation

72 of revenues derived from the provision of traditional voice services in relation to the overall revenues from the industry has been decreasing steadily since 2000. At the same time, the participation of new services, such as Internet and mobile telephone services, has been increasing. In 2005, for the first time in Colombia, the revenues generated by mobile services exceeded the revenues generated by traditional voice services. In addition, the provision of services is shifting from a network-based scheme to a network-neutral scheme. Likewise, telecommunications services are shifting from traditional distinctive service-based solutions towards packaged services and tailored solutions. See ‘‘Industry — The Telecommunications Industry in Colombia — Key Characteristics and Trends of the Colombian Telecommunications Market.’’ The following table sets forth historic information on the revenues generated by telecommunications companies in Colombia by service from 2010 to 2013:

Local Long-Distance Mobile Subscriber Data Other Telephone Services Services TV Broadband(2) Services Services Year(1) (Ps in millions) 2010...... Ps.2,765,574 Ps.869,003 Ps.6,916,047 Ps.2,024,435 Ps.3,087,148 Ps.1,205,538 Ps.2,808,924 2011...... Ps.2,734,728 Ps.764,037 Ps.7,275,130 Ps.2,200,797 Ps.3,583,975 Ps.1,696,621 Ps.5,181,593 2012...... Ps.2,629,742 Ps.686,644 Ps.7,515,317 Ps.2,268,553 Ps.3,798,571 Ps.2,308,403 Ps.6,051,589 2013...... Ps.2,645,255 Ps.652,519 Ps.7,755,893 Ps.2,512,846 Ps.3,929,608 Ps.2,854,555 Ps.7,306,879

Source: UNE, based on information of telecommunications service providers published by ANTV and MTIC.

Increased Competition in the Telecommunications Industry The Colombian telecommunications market is open to free competition. As set forth by Law 1341 of 2009, the provision of telecommunications services and networks is generally permitted to private parties. However, before providing these services, interested parties must first (i) complete an online registration proceeding before the MTIC in order to be recorded in the Telecommunications Network and Services Providers Registration (‘‘ICT Registry’’), and (ii) obtain prior approval from the MTIC for the use of radio electric spectrum. Despite the fact that the Colombian telecommunications market is highly concentrated in a few providers, with three telecommunications operators controlling approximately 83.3% of the market as of December 31, 2013, according to the MTIC, the sector remains highly competitive. Claro (Telmex and Comunicación Celular S.A. (‘‘Comcel’’)) and Telefónica (Movistar S.A. and Colombia Telecomunicaciones S.A. E.S.P. (‘‘Colombia Telecomunicaciones’’)) are the largest telecommunications operators in Colombia, followed by UNE, Colombia Móvil and ETB. EPM expects that competition will increase as new operators (e.g. Avantel S.A.S.) enter the market and existing ones make significant investments to develop their networks and increase their market share. Avantel S.A.S., Colombia Telecomunicaciones, Colombia Móvil, ETB and Claro where assigned radio electric frequencies for the use of radio electric spectrum to provide 4G telecommunication services, increasing competition in 4G telecommunications services. Moreover, competitors with greater financial resources, like Telmex and Telefónica, entered the market in recent years consolidating their market position through acquisitions of existing operators.

Growth in the Demand for Internet, Content-Based Broadband and Television Services UNE has been able to maintain its revenue levels largely because of the rapid expansion of its Internet and broadband access services. The number of Internet subscribers in Colombia increased 27.5% to 9,061,322 as of December 31 2013 from 7,107,813 as of December 31, 2012. UNE has been able to take advantage of this growth in demand by enlisting new subscribers and increasing its revenues from Internet services each year since 2007. UNE’s revenues from internet services increased 12.2% in the fiscal year ended December 31, 2013 as compared to the fiscal year ended December 31, 2012, 16.8% in the fiscal year ended December 31, 2012 as compared to the fiscal year ended December 31, 2011, and 11.3% in the six months ended June 30, 2014 as compared to the six months ended June 30, 2013. UNE has also increased its revenues from television services each year since 2008. UNE’s revenues from television services increased 11.3% in the fiscal year ended December 31, 2013 as compared to the fiscal year ended December 31, 2012, 22.6% in the fiscal year ended December 31, 2012 as compared to the fiscal year ended December 31, 2011 and 17.4% in the six months ended June 30, 2014 as compared to the six months ended June 30, 2013.

73 Domestic Long-Distance Domestic Long-Distance traffic has decreased from 1,770 million minutes in 2012 to 1,661 million minutes in 2013. Telefónica was the largest service provider in 2013, with a 62.9% market share. UNE increased its market share from 17.1% in 2012 to 17.8% in 2013, maintaining its ranking as the second largest service provider, according to SIUST.

UNE-Millicom Merger Failure to successfully complete the UNE-Millicom Merger integration process, including the integration of a fixed-mobile portfolio would impair UNE’s ability to implement its strategy and may result in additional capital expenditures, which may adversely affect UNE’s financial condition and results of operations. If the expected benefits and/or synergies from the UNE-Millicom Merger are not achieved partially or at all, EPM’s ability to achieve its strategic objectives with respect to its participation in UNE’s telecommunications business may be impaired.

Factors Affecting EPM’s Water Business

Rate Regulation in the Water, Sewage and Waste Management Sector Resolution 287 of 2004 issued by the CRA sets forth the current pricing regime for water, sewage and waste management services. In order to determine the methodology to set the maximum tariffs that water, sewage and waste management service providers could charge to their customers, the CRA uses a tariff model based on relative or comparative efficiency in the operational and administrative tariff components. For the investment component, the CRA set forth a rate of return mechanism. Furthermore, under this regime tariffs for water, sewage and waste management services can reflect cost increases in the market by increasing tariffs in accordance with the Colombian Consumer Price Index (Índice de Precios al Consumidor or ‘‘IPC’’) once it reaches at least 3%. For detailed information on this model, see ‘‘Industry — The Water, Sewage and Waste Management Services Industry — Government Regulation — Tariff Structure.’’ As a result of this pricing restriction, EPM carefully considers, monitors and controls its cost of sales associated with the provision of water, sewage and waste management services since there are limits to the extent to which increased costs can be transferred to the customer via the tariff. Pursuant to applicable regulations, tariff models can be reviewed by the CRA every five years. Resolution 287 of 2004 remains in effect until July 2015, when the new methodology for provision of water and sanitation services set forth by the CRA pursuant to Resolution 688 of 2014 will enter into effect. See ‘‘Industry — The Water, Sewage and Waste Management Services Industry — Government Regulation — Recent Regulatory Developments.’’ In connection with waste management services, CRA Resolution 351 of 2005 sets forth the price regulation schemes applicable to persons providing public cleaning services, and the methodology to calculate rates of solid waste services. To promote competition, pricing is based on a methodology of capped prices for each segment of the chain, especially in the activities of collection, transportation and sweeping. Other applicable regulations include the so called ‘‘PGIRS,’’ used to regulate the role of municipalities, as well as some provisions regarding competition, especially relevant when there is more than one provider in the same area.

Weather Conditions Affecting EPM’s Water and Sewage Business Weather and rainfall conditions in Colombia affect EPM’s water supply systems. In this respect, severe dry weather conditions, like those caused by El Niño, can create a shortage of water supply that may prevent EPM from providing its water, sewage and waste management services on a normal basis and require EPM to incur increased operational costs for treatment of existing water reservoirs which may require additional treatment. A shortage of water supply may adversely affect EPM’s financial condition and results of operations.

Decrease in the Demand for Water, Sewage and Waste Management Services Monthly per user demand for water (and consequently for sewage services) has been decreasing since 2005, from 18.9 cubic meters per user monthly in 2005, to 18.6 cubic meters per user monthly in 2006, 18.8 cubic meters per user monthly in 2007, 18.0 cubic meters per user monthly in 2008, 17.3 cubic meters per user monthly in 2009, 16.3 cubic meters per user monthly in 2010, 16.1 cubic meters per user monthly in 2011, 16.0 cubic meters per user monthly in 2012 and 15.5 cubic meters per user monthly in 2013. EPM believes that monthly per user demand for water may not increase substantially from these levels in future years. The decrease in monthly per user demand for water has had and could continue to have a direct negative effect on EPM’s water and sewage revenues.

74 Other Factors This section should be read in conjunction with the ‘‘Risk Factors’’ section of this offering memorandum, as other material events affecting EPM’s results of operations or that could affect its results of operations and financial condition in the future are described there.

Critical Accounting Policies In preparing its consolidated financial statements, EPM’s management is required to make certain estimates and assumptions that affect its reported amounts of assets, liabilities, revenues and expenses, as well as the related disclosure of contingent assets and liabilities. In some instances, EPM’s management could reasonably have used different accounting policies and estimates. In other instances, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from EPM’s estimates. To the extent that there are material differences between these estimates and actual results, EPM’s financial condition or results of operations will be affected. EPM establishes its estimates based on past experience and other assumptions that it believes are reasonable under the circumstances. These estimates are subject to ongoing review by EPM’s management. A summary of EPM’s significant accounting policies and practices is included in Note 2 to our audited consolidated financial statements included in this offering memorandum. EPM’s management estimates used in the preparation of its consolidated financial statements, include: • valuation of assets for determining the existence of losses resulting from deterioration thereof; • useful life of properties, plant and equipment, and intangible assets; • estimates used for calculating the fair value of property, plant and equipment; • valuation allowances and reappraisals of property, plant and equipment; • estimates regarding services rendered to customers, corresponding to certain billing cycles, in which an invoice is not issued and distributed within the cycle when the services were provided. As a result, EPM registers revenues therefrom in the cycle in which the services were provided on the basis of the meters readings and EPM computations. The revenues are recorded at the respective rates applicable to the specific service, on the basis that the services entitling EPM to payment have already been delivered; • some variables, particularly costs, applicable to the electricity sector; • estimates for deferred income taxes; deferred income taxes are generally recognized only for temporary differences in the income statement; deferred tax liabilities generally arise when tax relief is provided in advance of an accounting expense, or income is accrued but not taxed until received; • estimates used in the actuarial calculations of pension obligations; • estimates as to the amount of liability associated with potential contingencies, which may give rise to the creation of provisions; • estimates for recognizing the amounts of hedging derivatives; and • the determination of the fair market value of certain investments that are not publicly traded. These estimates are based on the principle of continued management, under the assumption that EPM’s activity is carried out for an indefinite period of time. Set forth below is a summary of EPM’s significant accounting policies and estimates:

Investments in Securities EPM invests its cash surplus in financial assets represented by fixed or variable income securities. These investments are made on the basis of several factors such as transparency, risks, profitability, liquidity and control of the issuer. These investments are not for speculative purposes and are planned taking into account budgetary or financial requirements aimed at optimizing the use of financial surpluses.

75 Investments are accounted for at fair value, with unrealized gains/losses recognized in the consolidated statement of financial, economic and social activity. Among other factors, the methodologies used to determine their value consider the stock market value, net present value for determination of market price or the internal profitability of the applicable security. The purchase of investments (fixed income liquidity administration) is recorded at its purchase price which is equal to its fair market value. The costs of these transactions are recognized as expenses when incurred. After their initial recognition, such costs are assessed at fair value taking into consideration the market value of the security on the market or exchange in which it is traded. The differences arising between each valuation increase or decrease their cost, with charge or credit to the financial income. When the value of the financial instrument is not easily realizable, its valuation is based on reference rates (Infoval in the case of financial instruments in local currency and the Bloomberg Trading System for foreign-currency instruments).

Equity Investments Equity investments are EPM’s investments in non-controlled entities which are accounted for using the cost method. Equity investments in non-controlled entities include securities classified as low liquidity securities or as unlisted securities. Ownership of these securities does not enable EPM to control, share or exert substantial influence over the issuing entity. They include membership fees paid to international organizations in order to obtain support services, the value of which may be recoverable in the future, and contributions to entities of the cooperative sector. Equity investments in non-controlled entities are valued using the cost method, whereby the original investment is recorded at cost. Income earned through dividends and payments to shareholders made in cash or shares, stocks or stake-holdings, up to the amount received as distributions of net accumulated earnings of the investing entity made after the purchase date are recognized as income. If the distributed earnings are generated prior to the purchase date, they are posted as a lesser amount of the investment. When investments are made in foreign currency, those investments are restated to account for exchange rate differences. Updates to the valuation of equity investments in non-controlled entities are made based on the periodic comparison of the investment’s original cost and its intrinsic value, when the investments are classified as low liquidity or unlisted investments or according to the stock market price if the investment is classified as having high or medium-level liquidity. If the intrinsic value or the stock market price is above the cost, a valuation adjustment (markup) is performed. Otherwise, any previous valuation adjustments are reversed until they are depleted, and if the updated price is below this amount, an expense is posted against provisions. If equity investments in non-controlled entities are listed on a stock exchange, their cost is updated on a monthly basis. Otherwise, those investments are updated whenever there is information available on the intrinsic value of the investment, which must occur at least once a year.

Allowance for Doubtful Accounts Accounts over six month past due or sent to legal collection are reclassified from current account receivables to doubtful accounts. Debtors classified as official entities are exempted from this reclassification. An administration provision is established for the protection of receivables, charged to the expense account of provision for debtors. When risks of recovery of debtor balances are evidenced, the calculation of this provision corresponds to a technical evaluation that allows the determination of the loss contingency or the risks of a potential insolvency of the debtor. Each month the collectability status is assessed using the cascade model; which requires a historic base of minimum 12 months to determine the non-collectability percentages. When there are rights which recovery is not possible through legal process, coercive jurisdiction, or ordinary channels, the write-off will apply to recognize the extinction of the account receivable in favor of EPM. The account receivable write-off does not release EPM from its responsibility to continue with the relevant collection efforts. The practice for the recognition of the receivable write-off, is, as it may correspond, a charge to the account of debtors provision and a credit to the account receivable from the customer or to doubtful accounts. The value of the account receivable to be cancelled against the provision is recorded in memorandum accounts. In an eventual recovery, the balance of the memorandum account is reduced and an income for recovery is recorded.

76 The value of the provision to cover the risk of uncollectibility of accounts receivable from companies providers of telecommunications services, is determined in general according to the following ranges: • For voice services, doubtful accounts are those that are over 240 days past due. For the remaining services, doubtful accounts are those that are due for over 120 days. The sums that are finally considered uncollectible are charged to the provision as write-offs, when they are duly authorized. • For value added services, the provision for balances past due is made as follows: 90% for expirations from 120 to 360 days and 100% for longer expirations. • For voice services, the provision for balances past due is made as follows: 90% for expirations from 240 to 360 days and 100% for longer expirations. • For the long distance service, 100% of the balance is provisioned after 120 days or if it is returned by operators and third parties.

Property, Plant and Equipment Overview Represents the tangible goods acquired, constructed or in process of construction, with the intention of using them permanently in operating activities for the production and rendering of services, to lease them or to use them as administrative support of the organization, that are not intended for sale in the normal course of business and which useful life exceeds one year. Pursuant to the provisions of Resolution 356 of September 2007, issued by the (Contaduría General de la Nación ‘‘CGN’’), the company updates the value of properties, plant and equipment by means of technical appraisals with the application of methodologies of recognized technical value, which consider among other criteria, their useful life, economic life and remaining life, the location, condition, productive capacity, market situation, degree of tradability, obsolescence and deterioration suffered by goods. The update of properties, plant and equipment is made every three years from the latest update made and the recording is made in the respective accounting period. However, if prior to the completion of this term the book value of properties, plant and equipment experiences significant changes with respect to the replacement cost, or the realization value, a new update is made, recording its effect in the respective accounting period.

Useful Lives Useful lives of fixed assets in EPM are defined taking into account technical criteria, in accordance with the characteristics of the asset, considering future economic benefits, the potential of asset service, its expected capacity or physical performance, as well as the physical and environmental conditions. Useful lives are determined taking into account the following factors: • The use of the asset or its physical wear and tear, which is estimated by reference to its expected capacity or physical yield. • The expected natural deterioration caused by reasons other than its use. • The geographic location of the asset. • Legal limits or similar restrictions on the use of the asset. In case no technical criteria are available, useful lives established by the CGN may be used as reference. The average general useful lives of EPM’s assets, expressed in years and by type of asset, are depicted in the following table:

77 Type of assets 2013 2012 Plants, ducts and tunnels Generation plants ...... 43 44 Treatment plants...... 48 49 Conduction plants ...... 45 47 Substations and regulation stations ...... 24 24 Water works and channeling ...... 30 30 Pumping stations ...... 27 27 Networks, lines and cables Distribution and air networks ...... 22 22 Wastewater collection networks ...... 35 32 Transmission lines and cables ...... 33 33 Machinery and equipment Construction equipment, industrial machinery ...... 7 7 Tools and accessories...... 7 7 Equipment for pumping stations ...... 7 7 Control center equipment ...... 13 12 Dredging machinery and equipment, cleaning equipment, other machinery and equipment . . . . 7 8 Medical and scientific equipment Research equipment ...... 6 6 Laboratory, medical and scientific equipment ...... 11 11 Furniture, fixtures and office equipment...... 7 7 Communications and computer equipment...... 5 5 Transportation traction and lifting equipment...... 5 5 Dining, kitchen, pantry and hotel equipment ...... 7 7

Categories Constructions in progress. This category contains all disbursements made by EPM to construct, expand, modernize, rehabilitate or replace, among other things, networks, plants and equipment. Disbursements are categorized as constructions in progress until such time the asset may be used to conduct operations. The value for which constructions in progress are recognized is determined by the total amount disbursements that are necessary for, and directly associated to, the acquisition or construction of the asset, from the date of initiation of construction until the date when the asset is ready for operation. Commissions, financial costs, interest and exchange differences for interest originated in loans obtained to finance constructions in progress are capitalized until the relevant assets are in operating conditions. Disbursements made during the pre-feasibility and feasibility assessments, on the contrary, are not capitalized but recorded in the expense accounts; if, however, fixed assets or intangibles are acquired during these phases, they are recorded as property, plant and equipment or intangibles, as appropriate. Movable goods in storage. This category covers movable goods acquired in any manner, which are characterized as permanent because they will be used in future production or administration activities at EPM. While they maintain this condition they are not subject to depreciation. Property, plant and equipment not in use. This category includes assets that, because of obsolescence, are not required for the operation of the business, as well as assets temporarily out of service, in rehabilitation process or waiting for a technical decision to be rehabilitated or retired. Movable assets retired due to obsolescence or because they are no longer required by the company are taken to the reuse warehouse where they are offered in public auctions. These assets are retired at the time they are reintegrated, except for vehicles, which are retired when sold. Buildings. This category represents the value of buildings and houses, offices, booths, parking lots, garages, warehouses, sports and recreational facilities, dams and storage tanks, among others, acquired by the Company to perform its functions and provide public utilities. Plants, ducts and tunnels. This category represents the value of plants, ducts and tunnels acquired by the company for the generation, transmission and distribution of energy, as well as the distribution of gas, provision of water and sanitation. In the operating infrastructure used by EPM in the power generation, transmission and distribution of power, natural gas, water supply and sanitation are, among others, the civil works and equipment of the generation, treatment, conduction plants, gas pipelines, power substations, channeling and pumping stations.

78 Networks, lines and cables. This category represents the value of the distribution networks of energy, waterworks, collection of wastewater, gas supply networks, power transmission and distribution lines used in the business operation. Depreciation. Depreciation is calculated on the basis of the historic cost under the straight-line method. The base used is the useful life determined according to technical criteria, such as additions or improvements, technological advances, maintenance and repairs policies, obsolescence, physical exposure of the goods and other factors. Deferred depreciation reflects the value obtained by the excess of the fiscal over the accounting depreciation expense, given that tax regulations provide for the use of depreciation methods and useful lives different from those used for accounting purposes, which permits that for tax purposes an asset will be depreciated in a more accelerated manner.

Reappraisals of Assets EPM determines the value of assets held at the end of the year in accordance with technical standards and the applicable laws. • Property, plant and equipment. Property, plant and equipment is marked up or down to its replacement or market value, compared to book value, based on technical appraisals that take into account the location, conditions, production capacity, market situation, negotiability, obsolescence and deterioration of the asset, among other criteria. The selection and application of the technical appraisal methods is performed based on the cost-benefit ratio to EPM. Updates on the value of property, plant and equipment are performed every three years following the latest update. Mark-ups are reflected as reappraisals; mark-downs as expenses. • Investments for liquidity management. These investments are updated based on methodologies established by the SFC for negotiable investments.

Estimated Liabilities EPM recognizes estimated liabilities when they meet the following conditions: • EPM has derived a benefit from the delivery of a good or service (but has not yet received the supplier’s invoice for formal posting). • EPM is obligated, pursuant to a legal agreement or an agreement with a supplier or creditor, to make a payment or to release funds in the future to make a payment on a date agreed upon between the parties. • The amount of the funds to be delivered or the payment to be made can be reasonably estimated and is very close to its actual value, because a prior agreement on prices has been made with the supplier or creditor. The main types of EPM’s estimated liabilities are the following: • Industry and Commerce Tax (Impuesto de Industria y Comercio). This is a tax at the territorial level for the benefit of the municipalities in which economic activity is carried out, that levies the income (ingresos) of businesses. This tax is recorded for accounting purposes as an effective expense for the period. • Pension Obligations. Pension obligations are computed on the basis of actuarial studies prepared in accordance with the applicable laws and regulations. For entities not subject to control and surveillance of the SFC, it assumes future salary and pension increases for each year.

Memorandum Accounts Colombian Public Utilities Companies GAAP requires that certain items be reported as memorandum accounts (or ‘‘cuentas de orden’’) and that such accounts be disclosed, but not recognized, in the balance sheet and in the notes to the financial statements. Memorandum accounts are not an IFRS measure. Memorandum accounts are contingent on future events; therefore, the future monetary impact of memorandum accounts on EPM’s results of operations and financial condition may vary substantially from the amounts reported on that account for any given period. The items included by EPM under this heading are the following: • Contingent obligations. Refers to potential obligations under guarantee contracts and to potential obligations generated under hedging transactions involving long positions in put options, particularly in connection with zero-cost collars.

79 • Contingent rights. Refers to potential rights generated under hedging transactions involving short positions in call options, particularly in connection with zero-cost collars. • Fiscal debit and credit accounts. Refers to the monetary difference between the application of accounting standards for reporting purposes and the application of tax standards. These amounts do not entail potential gains or losses for EPM and are only disclosed for control purposes. • Control credits. Corresponds to third-party property in possession of EPM, cash collected on behalf of third parties and undisbursed loans. This account is used for control purposes only. • Control debit. Corresponds to written-off depreciated assets and obsolete inventory, EPM’s contingent residual interest in certain trust assets, including certain assets transferred by the Empresa Antioqueña de Energía S.A. E.S.P. (‘‘EADE’’), before it was acquired by EPM, to a pension trust whose main purpose is to manage the funds required to pay the pensions of former EADE employees. All contingencies determined to be quantifiable and probable are recorded as liabilities, deferred tax assets are recorded for tax loss carry forwards until they are utilized or it becomes more likely than not that they will not be utilized, and items meeting the definition of ‘‘derivatives’’ are recorded at fair value.

Contingencies EPM records contingencies in connection with certain events that could give rise to losses contingent on one or more events occurring or failing to occur. The principal contingencies that EPM recognizes correspond to legal proceedings. EPM assesses and classifies the expected outcome of these legal proceedings as probable, possible or remote. A provision is recorded for any lawsuits in which EPM acts as defendant and in connection with which EPM estimates that an adverse judgment is probable. A memorandum account entry is recorded for lawsuits in which no initial court ruling has been issued, or which are classified as merely possible or remote. The amount of the claims where EPM acts as plaintiff is determined as probable and recorded in memorandum accounts as contingent rights.

Description of Principal Line Items The following is a brief description of the income and expenses that are included in the principal line items of EPM’s audited consolidated financial statements for the years ended December 31, 2013, 2012 and 2011 and of its interim unaudited consolidated financial statements for the six months ended June 30, 2014 and 2013.

Revenues EPM’s revenues in the years ended December 31, 2013, 2012 and 2011 and the six months ended June 30, 2014 and 2013 consisted of revenues resulting from its activities in the electricity industry, including, electricity generation, transmission, distribution and commercialization, distribution and commercialization of natural gas, as well as from the provision of water, sewage and waste management services, telecommunications services and other related revenues. EPM’s most significant energy-related revenue sources were the following: • Regulated market consumption: Based on payments made by end users for actual consumption on a kWh/month basis, which EPM collects directly through the service invoice. See ‘‘Industry — The Energy Industry in Colombia — The Electricity Market.’’ • Long-term sales: Revenues corresponding to the purchase price of EPM’s sales of electricity pursuant to long-term contracts with other operators, which EPM collects directly from its respective counterparty. • Power market sales: Based on the purchase price of EPM’s sales of electricity through the Colombian Energy Spot Market, which revenues are settled and paid to EPM by XM. See ‘‘Industry — The Energy Industry in Colombia — The Electricity Market.’’ • Complementary services: Revenues consisting of the sales generated by AGC services, settled and paid to EPM by XM. See ‘‘Business — Energy BU — Electricity Generation and Commercialization Business — Overview.’’

80 • Secondary power market sales: Revenues consisting of the purchase price settled and paid to EPM by XM in connection with EPM’s sales of electricity through spot market transactions. The purchase price of secondary market power sales is subject to the amount of electricity dispatched for any given hour. See ‘‘Industry — Electricity Generation — Contingency Mechanisms.’’ • STN networks use: Fees paid to EPM by the other commercialization companies, through XM, for the transmission of electricity in the STN in proportion to EPM’s network ownership in the STN. This charge is regulated and is adjusted to IPP monthly. See ‘‘Industry — The Energy Industry in Colombia — The Electricity Market.’’ • STR networks: Fees paid to EPM by electricity commercialization companies, upon settlement by XM, for the transmission of electricity in the STR, based on the amount of and the price applicable to the electricity transmitted on EPM’s portion of the STR. This charge is regulated and is adjusted to IPP monthly. See ‘‘Industry — The Energy Industry in Colombia — The Electricity Market.’’ • SDL networks use: Fees paid to EPM by electricity commercialization companies for the distribution of electricity in the SDL, based on the amount of and the price applicable to the electricity distributed on EPM’s portion of the SDL. This charge is regulated and is adjusted to IPP monthly. See ‘‘Industry — Electricity Distribution in Colombia — Overview.’’ • Public lighting revenues: Corresponds to revenues from supply and replacement of lighting posts for public lighting and highway lighting in the City of Medellín, which are directly collected from the City of Medellín or the corresponding concessionary. • Installations: Includes charges for internal network installations in the end users’ residence which are collected from end users through the service invoice. • Connections: Includes connection charges for the provision of electricity services which are collected from end users through the service invoice. • Natural gas network use: Corresponds to the charge paid by the end users for the use of EPM’s gas distribution networks, which charge is part of the tariff. • Natural gas regulated market fixed rate: Corresponds to fixed rate charges for the availability of the gas distribution network collected directly from end users through the service invoice. See ‘‘Industry — The Natural Gas Industry in Colombia.’’ • Natural gas internal revisions: Corresponds to revenues for the revisions of gas facilities and pipelines, which are charged directly to end users in the service invoice. • Natural gas unregulated market consumption: Corresponds to revenues consisting of the purchase price of EPM’s sales of gas pursuant to agreements with Unregulated Users, which EPM collects directly from its counterparty. • Vehicular natural gas consumption (GNV): Corresponds to revenues deriving from the sale of fuel gas to gas stations, which are charged directly to the gas stations. EPM’s most significant water and sewage-related revenue sources were the following: • Fixed rate: Corresponds to revenues deriving from fixed rates charged for the availability of the water and sewage networks, which rates are collected directly from end users through the service invoice. • Water consumption: Corresponds to variable fees paid by customers depending on actual water and sewage consumption, which are collected through the service invoice. • Reconnections: Includes the charges corresponding to reconnections and reinstallations of water utility services previously suspended. See ‘‘Industry — The Water, Sewage and Waste Management Services Industry in Colombia — Water Services.’’ EPM’s most significant waste management-related revenue sources, which were billed directly by EMVARIAS to end users, were the following: • Revenues regulated by the CRA and invoiced by EPM directly to the users, from the domiciliary services of recollection, transportation, and final disposal of solid waste, as well as the service of sweeping and

81 cleaning the public roads and spaces in the urban area of the City of Medellín and its five townships (corregimientos). Additionally, revenues from specialized recollection services provided to large industrial generators of waste. • Revenues from the service provided to operators from nearby municipalities consisting of final disposal in the landfill owned by EMVARIAS. These revenues are included in the tariffs regulated by the CRA. • Revenues from the following services within EPM’s area of influence: mowing of green zones, pruning and felling trees in public areas (and the associated graveling of plant material), and the recollection, transportation and final disposal of waste. These services are not included in the tariffs regulated by the CRA and are therefore paid for directly by the City of Medellín. • Revenues from specialized recollection services to the hospital sector and other specialized sanitary services, including transportation and incineration or deactivation of biomedical waste, sanitation for special city events, artistic, sports, or recreational events, road sanitation, disposal of dead animals from public roads, advisory services for the environmental management of solid waste, and recollection, transportation and disposal of carpentry residuals and waste. The tariffs for these services are unregulated and thus agreed to with and paid for directly by the users or the Municipality, as the case may be. EPM’s most significant telecommunications-related revenue sources, which were billed directly by UNE to end users, were the following: • Voice: Includes revenues from Local Telephone services, IP-based voice services, intelligent network, Long-Distance services, public telephony and prepaid cards. • Integrated solutions: Revenues deriving from the implementation of ICT projects by corporate and governmental customers that use not only their own but also third party technical support, including digital territory solutions, electoral processes, documentation management, unified communications, technical modernization and help lines, among others. • Connectivity: Includes revenues from services such as Lan to Lan, Virtual Private Networks (‘‘VPN’’), Carrier and Multilan. • Internet: Corresponds to revenues from narrowband, broadband and dedicated Internet services, and from other value-added services such as the ‘‘safe company’’ product and the ‘‘safe home’’ product. • Interconnection: Revenues from access charges and from the use of UNE’s infrastructure by other operators. • Data: Includes revenues from national connectivity services, national and international Carrier Services, internet data center services (dedicated hosting, shared hosting, as well as collocation services), multinet and Multitlan. • Data center: Corresponds to content specific services, such as equipment housing, dedicated hosting, web hosting, database hosting, mail hosting, virtual hard disk, among others. • Mobile: Revenues from products such as 3G mobile technology, 3G mobile internet, 4G mobile internet (LTE-based fourth generation mobile internet services allowing for high speed, high download capacity and in-movement connectivity). • Television services: Corresponds to revenues from television services, including, among others, digital television, mixed television (IPTV and HD) and basic hybrid fiber coaxial cable access television. As a result of the recently completed UNE-Millicom Merger, EPM ceased consolidating the assets, liabilities and results of operations of UNE into EPM’s results of operations. In future periods, Millicom will consolidate UNE’s results of operations and EPM expects to record its investment in UNE under the equity method. See ‘‘Summary — Recent Developments — UNE-Millicom Merger.’’ For the years ended December 31, 2013, 2012 and 2011 and for the six months ended June 30, 2014 and 2013, UNE´s revenues (after intercompany eliminations) were Ps.2,474,120 million, Ps.2,303,346 million, Ps.2,172,140 million, Ps.1,354,654 million and Ps.1,182,260 million, respectively, representing 19.1%, 18.4%, 18.7%, 19.4% and 18.6%, respectively, of EPM’s consolidated revenues.

Discounts Discounts correspond to subtractions from gross revenues applicable to all the services provided by EPM. Discounts for energy and water-related revenues correspond to tariff adjustments, if applicable, in order to meet

82 regulatory requirements or to achieve specific tariff targets. Discounts for telecommunications services, which represent the majority of consolidated discounts, include tariff adjustments for bundled services and promotions consisting of the provision of services at no charge for limited periods in connection with long-term contracts or tariff discounts aimed at attracting new Internet and subscriber television customers.

Cost of Sales In addition to general and customary costs of sales, the electricity industry specific costs of sales include: • Block and long-term purchases: Corresponds to electricity purchased from other generators or commercialization companies under long-term contracts for resale in the Unregulated Market and the Regulated Market. See ‘‘Industry — The Energy Industry in Colombia — The Electricity Market.’’ • Purchases in the Energy Spot Market: Corresponds to electricity purchases in the Energy Spot Market which are settled at the prevailing spot price and paid by EPM to XM. • Restrictions to Energy Spot Market purchases: Includes the surcharges of power purchases for the Unregulated Market and the Regulated Market made from the Colombian Administrator of the Commercial Exchange System (Administrador del Sistema de Intercambios Commerciales or ‘‘ASIC’’) corresponding to restrictions of the power network, which are settled by XM and paid by EPM in proportion to its hourly demand and charge. See ‘‘Industry — The Energy Industry in Colombia — The Electricity Market.’’ • Wind power energy exchange purchases: Corresponds to wind power (Jepirachi) purchases through the Energy Spot Market. • Reliability charge stock market purchases: Corresponds to transfers of money that EPM is required to make to XM belonging to other electricity generation companies under the reliability charge scheme in proportion to the Firm Energy each such company has committed under that scheme. • STN network use: Corresponds to the costs derived from EPM’s use of third-party electricity networks in the STN which are paid to and settled by XM. See ‘‘Industry — The Energy Industry in Colombia — The Electricity Market.’’ • SDL network use: Corresponds to the costs derived from EPM’s use of third-party medium to low voltage electricity networks in the SDL which are paid to and settled by XM. See ‘‘Industry — Electricity Distribution in Colombia — Overview.’’ • STR network use: Corresponds to fees paid to EPM by commercialization companies in proportion to the amount of their electricity that is transported through the STR which are paid to and settled by XM. See ‘‘Industry — The Energy Industry in Colombia — The Electricity Market.’’ The telecommunications industry specific costs of sales include: • Access charges and termination rates: Corresponds to charges paid by EPM to other operators for the termination of Long-Distance traffic. • Network use and program providers: Corresponds to charges paid by EPM to use third-party television networks and to international television content providers for subscriber television programs. • Interconnection charges: Corresponds to charges paid by EPM in order to interconnect its network to third-party telecommunications networks. As a result of the recently completed UNE-Millicom Merger, EPM ceased consolidating the assets, liabilities and results of operations of UNE into EPM’s results of operations. In future periods, Millicom will consolidate UNE’s results of operations and EPM expects to record its investment in UNE under the equity method. See ‘‘Summary—Recent Developments—UNE-Millicom Merger.’’ For the years ended December 31, 2013, 2012 and 2011 and for the six months ended June 30, 2014 and 2013, UNE’s cost of sales were Ps.2,105,311 million, Ps.2,139,099 million, Ps.1,820,010 million, Ps.1,146,339 million and Ps.1,009,599 million, respectively, representing 23.2%, 24.3%, 23.1%, 23.2% and 23.0%, respectively, of EPM’s consolidated cost of sales. The water and sewage industry specific costs of sales include: • Rates of use: Corresponds to EPM’s purchases of untreated water. • Rates of retribution: Corresponds to rates EPM is obligated to pay for disposal of waste water.

83 The waste management industry specific costs of sales include: • Hiring of personnel from third parties for sweeping, recollection and transportation tasks, as well as costs related to supervision contracting. • Operation and maintenance of the vehicular fleet used to service the various recollection routes. • Costs in connection with the adaptation of a site as a final disposition site or landfill, in compliance with the environmental standards set forth in the applicable regulations, including the development of a plant for the treatment of leachate.

Provisions, Depreciation and Amortization EPM registers the following provisions: • Allowance for doubtful accounts. Accounts over six month past due or sent to legal collection are reclassified from current account receivables to doubtful accounts. Debtors classified as official entities are exempted from this reclassification. An administration provision is established for the protection of receivables, charged to the expense account of provision for debtors. When risks of recovery of debtor balances are evidenced, the calculation of this provision corresponds to a technical evaluation that allows the determination of the loss contingency or the risks of a potential insolvency of the debtor. Each month the collectability status is assessed using the cascade model; which requires a historic base of minimum 12 months to determine the non-collectability percentages. When there are rights which recovery is not possible through legal process, coercive jurisdiction, or ordinary channels, the write-off will apply to recognize the extinction of the account receivable in favor of EPM. The account receivable write-off does not release EPM from its responsibility to continue with the relevant collection efforts. The practice for the recognition of the receivable write-off, is, as it may correspond, a charge to the account of debtors provision and a credit to the account receivable from the customer or to doubtful accounts. The value of the account receivable to be cancelled against the provision is recorded in memorandum accounts. In an eventual recovery, the balance of the memorandum account is reduced and an income for recovery is recorded. The value of the provision to cover the risk of uncollectibility of accounts receivable from companies providers of telecommunications services, is determined in general according to the following ranges: • For voice services, doubtful accounts are those that are over 240 days past due. For the remaining services, doubtful accounts are those that are due for over 120 days. The sums that are finally considered uncollectible are charged to the provision as write-offs, when they are duly authorized. • For value added services, the provision for balances past due is made as follows: 90% for expirations from 120 to 360 days and 100% for longer expirations. • For voice services, the provision for balances past due is made as follows: 90% for expirations from 240 to 360 days and 100% for longer expirations. • For the long distance service, 100% of the balance is provisioned after 120 days or if it is returned by operators and third parties. • Allowance for property, plant and equipment. Before 2007, EPM did not register provisions for property, plant and equipment since their decline in fair value was accounted for as a lower value of reappraisal of assets. Beginning in 2007, EPM began registering provisions for property, plant and equipment in order to account for the potential difference between the book value and the market value of property, plant and equipment. • Provisions for inventories. EPM registers provisions in connection with perishable inventory. • Taxes at the territorial level incurred in cities or municipal jurisdictions other than the City of Medellín, are recorded for accounting purposes as an effective expense in the period in which they were incurred. • Depreciation reflects the decrease in usefulness and value of a long-term tangible asset. Useful lives of fixed assets in EPM are defined taking into account technical criteria, in accordance with the characteristics of the asset, considering future economic benefits, the potential of asset service, its expected capacity or physical performance, as well as the physical and environmental conditions. See Management’s Discussion and Analysis of Financial Condtion and Results of Operations — Critial Accounting Policies and Estimates — Property, Plant and Equipment — Useful Lives.’’

84 The pension plan is one of EPM’s largest operating expenses. The actuarial calculation represents the present value of the future payments EPM is required to make to its pensioned employees, or to those employees that have acquired rights in accordance with applicable laws, EPM’s collective bargaining agreements and the contractual agreements in respect of pensions, pension bonds and quotas of pensions and pension bonds. The methodology used for making the actuarial calculation for pension and pension bonds must comply with the technical parameters and basis established by the competent authority.

Results of Operations Six months ended June 30, 2014 compared to the six months ended June 30, 2013 Overview EPM’s consolidated net income for the six months ended June 30, 2014 as compared to the six months ended June 30, 2013 were primarily affected by the following factors: (i) higher energy sales as a result of the increase of both demand and tariffs, (ii) the acquisition of TICSA and EMVARIAS in September and November of 2013, respectively, which affected EPM’s results of operations for the six months ended June 30, 2014, and (iii) changes in EPM’s administrative structure as a result of the implementation of measures recommended within the context of EPM’s ‘‘without borders’’ (sin fronteras) program. See ‘‘Business — EPM Group Without Borders Program.’’

As of and for the six months ended June 30, % Change 2014 2013 2014-2013 (Ps. in millions) Consolidated statement of financial, economic and social activities Revenues ...... 6,989,026 6,357,546 9.9% (-) Cost of sales ...... 4,441,908 3,932,120 13.0% (-) Depreciation and amortization...... 494,096 463,741 6.5% Gross profit...... 2,053,022 1,961,685 4.7% (-) Administrative expenses...... 497,054 468,740 6.0% (-) Provision, depreciation and amortization ...... 149,769 177,407 -15.6% Operating income ...... 1,406,199 1,315,538 6.9% (+) Non-operating revenues ...... 419,520 463,622 -9.5% (-) Non-operating expenses ...... 539,970 626,347 -13.8% Total non-operating expenses, net ...... (120,450) (162,725) -26.0% Net income before taxes and minority interest ...... 1,285,749 1,152,813 11.5% (-) Income tax ...... 378,350 341,582 10.8% Net income before minority interest ...... 907,399 811,231 11.9% (-) Minority interest...... 59,771 61,665 -3.1% Net income ...... Ps. 847,628 Ps. 749,566 13.1% Cash flow data Net cash provided by operating activities ...... 1,025,792 985,762 4.1% Net cash used in investing activities ...... (1,083,730) (1,815,714) 40.3% Net cash flows used in financing activities ...... (878,298) (370,742) 139.6% Net increase (decrease) in cash and cash equivalents and investments in securities ...... (936,236) (1,200,694) -22.0% Cash and cash equivalents and investments in securities at beginning of period ...... 2,596,118 3,397,656 -23.6% Cash and cash equivalents and investments in securities at end of period ...... 1,659,882 2,196,962 -24.4%

Revenues EPM’s consolidated revenues increased 9.9% during the six months ended June 30, 2014 compared to the same period in 2013, from Ps.6,357,546 million to Ps.6,989,026 million. Energy services represented the largest source of

85 revenues, representing 73.7% of EPM’s consolidated revenues, followed by telecommunications representing 19.7% and water, sewage and waste management representing 7.1%. The following table presents a breakdown of EPM’s consolidated revenues by business line unit for the six months ended June 30, 2014 and 2013:

For the Six Months Ended June 30, % Change 2014 2013 2014-2013 (Ps. in millions) Energy Electricity generation ...... 1,373,859 1,328,161 3.4% Electricity transmission, distribution and commercialization ...... 4,269,700 3,839,262 11.2% Natural gas distribution and commercialization ...... 272,350 262,162 3.9% Eliminations ...... (751,288) (575,405) 30.6% Total energy gross revenues ...... 5,164,621 4,854,180 6.4% (-) Discounts...... 16,984 42,205 -59.8% Total energy revenues, net...... 5,147,637 4,811,975 7.0% Telecommunications Local Telephone, value-added, television, and other services ...... 1,601,354 1,389,852 15.2% Eliminations ...... (224,643) (185,565) 21.1% Total telecommunications gross revenues ...... 1,376,711 1,204,287 14.3% (-) Discounts...... 74 47 57.4% Total telecommunications revenues, net ...... 1,376,637 1,204,240 14.3% Water, sewage and waste management Water...... 191,111 183,755 4.0% Sewage ...... 238,592 182,980 30.4% Waste management...... 77,619 1,172 100.0% Eliminations ...... (10,776) (780) 1281.5% Total water, sewage and waste management gross revenues ...... 496,546 367,127 35.3% (-) Discounts...... 14 1 1300.0% Total water, sewage and waste management revenues, net ...... 496,532 367,126 35.2% Other revenues(1) ...... Others, net ...... 36,391 33,324 9.2% Other revenues, net ...... 36,391 33,324 9.2% Eliminations ...... (68,171) (59,119) 15.3% Total revenues ...... 6,989,026 6,357,546 9.9%

(1) Includes other revenues resulting from the rendering of technical assistance services, information technology services, administration of electricity markets, billing services, sales of meters and sales of marketed goods.

Energy EPM’s consolidated revenues from its energy services increased 7.0% from Ps.4,811,975 million for the six months ended June 30, 2013 to Ps.5,147,637 million for the same period in 2014. This increase was mainly the result of (i) higher sales as a result of increased demand, (ii) higher prices due to an IPP increase, and (iii) an increase of the consumer base of the natural gas business.

86 Of the specific components of EPM’s consolidated revenues deriving from its energy business unit: • The 3.4% increase in EPM’s electricity generation revenues was primarily due to the combined effect of (i) higher revenues for the AGC business (ii) a decrease in contract sales in the MEM partially mitigated by the higher prices in long-term contracts driven by an IPP increase, and (iii) higher participation in the Energy Spot Market with higher prices. See ‘‘Industry — Electricity Generation in Colombia — Revenues of Electricity Generation Companies — Dispatch and Pricing.’’ • The 11.2% increase in EPM’s electricity transmission, distribution and commercialization revenues was primarily due to (i) higher sales in the regulated energy market, (ii) ENSA’s Ps.198,332 million, or 40% increase in sales due to higher demand and energy prices, and (iii) increased demand in the Antioquia market. • The 3.9% increase in EPM’s natural gas distribution and commercialization revenues was primarily due to (i) an increase of the consumer base, and (ii) an increase of natural gas sales in the secondary market. The following table sets forth EPM’s electricity purchases and losses for the periods indicated:

For the six months ended June 30, For The Year Ended December 31, 2014 2013 2012 2011 Purchases of electricity from own generation units (bilateral) (GWh/year) ...... 1,655 3,312 4,097 4,325 Purchases of electricity from third parties under long-term contracts (bilateral) (GWh/year) ...... 7,229 13,546 12,491 11,693 Purchases of electricity in the Energy Spot Market (GWh/year)...... 2,091 2,506 2,127 1,904 Electricity losses ...... 10.9% 10.8% 11.2% 12.2%

Telecommunications EPM’s consolidated revenues deriving from telecommunications services increased 14.3% from Ps.1,204,240 million for the six months ended June 30, 2013 to Ps.1,376,637 million for the same period in 2014. This increase was primarily driven by (i) an 11.3% increase in internet and broadband services as a result of an increased client base and the provision of 4G services, (ii) a 17.4% increase in television services due to expanded bundled services, and (iii) growth in solutions provided to clients in the industry sector.

Water, Sewage and Waste Management EPM’s consolidated revenues deriving from water, sewage and waste management services increased 35.2% from Ps.367,126 million for the six months ended June 30, 2013 to Ps.496,532 million for the same period in 2014. This increase was principally attributable to the acquisition of TICSA and EMVARIAS during the second half of 2013, which affected EPM’s results of operations for the six months ended June 30, 2014. Of the specific components of EPM’s consolidated revenues from its water, sewage and waste management business unit, (i) the 30.4% increase in EPM’s sewage revenues was primarily due to the acquisition of TICSA in September of 2013, and (ii) the significant increase in EPM’s waste management revenues was primarily due to the acquisition of EMVARIAS in November of 2013.

Cost of Sales EPM’s cost of sales, including provision, depreciation and amortization, increased 12.3%, from Ps.4,395,861 million during the six months ended June 30, 2013 to Ps.4,936,004 million during the same period in 2014. Costs of sales associated with the energy business accounted for 72% of EPM’s total cost of sales, followed by costs of sales associated with the telecommunications business, which accounted for 23%, and costs of sales associated with the water business which accounted for 5% of the total costs of sales. The main costs of sales associated with the energy business are related to electricity purchases, natural gas purchases and toll payments paid by EPM to use third-party electricity and gas networks.

87 The following table sets forth a breakdown of EPM’s costs of sales:

For the Six Months Ended June 30, % Change 2014 2013 2014-2013 (Ps. in millions) Energy Personnel cost ...... Ps. 175,034 Ps. 168,037 4.2% General costs ...... 3,098,473 2,795,140 10.9% Materials ...... 16,308 16,686 -2.3% Taxes...... 67,939 63,855 6.4% Provision, depreciation and amortization ...... 200,536 187,127 7.2% Total energy ...... 3,558,290 3,230,845 10.1% Telecommunications Personnel cost ...... 257,139 235,690 9.1% General costs ...... 588,679 493,097 19.4% Materials ...... 30,939 20,482 51.1% Taxes...... 40,175 36,557 9.9% Provision, depreciation and amortization ...... 246,532 234,053 5.3% Total telecommunications ...... 1,163,464 1,019,879 14.1% Water, sewage, and waste management Personnel cost ...... 51,695 48,022 7.6% General expenses...... 136,947 70,631 93.9% Materials ...... 4,363 4,471 -2.4% Taxes...... 15,002 10,737 39.7% Provision, depreciation and amortization ...... 46,700 42,361 10.2% Total water, sewage, and waste management ...... 254,707 176,222 44.5% Other cost of sales, net ...... 13,130 12,254 7.1% Eliminations...... (53,587) (43,339) 23.6% Total costs of sale including provision, depreciation and amortization ...... Ps.4,936,004 Ps.4,395,861 12.3%

Energy • The 4.2% increase in personnel expenses was primarily due to (i) an increase in salaries effective as of January 1, 2014 in compliance with applicable laws and the terms of the collective bargaining agreement requiring EPM to increase salaries by IPC + 135 bps on an annual basis, and (ii) changes in EPM’s administrative structure as a result of the implementation of measures recommended within the context of EPM’s ‘‘without borders’’ (sin fronteras) program. • The 10.9% increase in general costs was primarily due to higher prices in the Energy Spot Market as a result the lower hydraulic generation driven by the need to increase water reserves to face a potential El Niño event in the second half of 2014. • The 6.4% increase in taxes, rates and contributions was primarily due to higher real estate taxes. • The 7.2% increase in provision, depreciation and amortization was primarily due to (i) higher depreciation of networks, lines and equipment of distribution services as a result of the beginning of operations of seven substations with an aggregate value of Ps.22,295 million, and (ii) higher depreciation of networks, lines and cables as a result of natural gas services becoming available in several municipalities of Antioquia.

Telecommunications • The 9.1% increase in personnel expenses was primarily due to (i) an increase in salaries effective as of January 1, 2014 in compliance with applicable laws and the terms of the collective bargaining agreement requiring EPM to increase salaries by IPC + 135 bps on an annual basis, (ii) hiring of new personnel, (iii) increase in overtime work, and (iv) a significant increase of temporary personnel.

88 • The 19.4% increase in general costs was primarily due to higher customer-service costs, consistent with UNE’s customer satisfaction strategy. • The 51.1% increase in materials was primarily attributable to higher purchases of equipment required to provide 4G services. • The 9.9% increase in taxes, rates and contributions was primarily attributable to higher payments to the MTIC and to the stratification committee. • The 5.3% increase in provision, depreciation and amortization was primarily due to higher provisions for account receivables and write-offs.

Water, Sewage and Waste Management Given that the water pricing regime gives operators little flexibility to transfer costs to customers through the service tariff, variations in costs for service provided in Colombia are strictly controlled, and typically tied to inflation. The significant increase in operational costs was mainly due to the acquisition of TICSA and EMVARIAS during the second half of 2013, which affected EPM’s results of operations for the six months ended June 30, 2014. Other factors affecting the increase in operational costs include: • The 7.6% increase in personnel expenses was primarily due to (i) an increase in salaries effective as of January 1, 2014 in compliance with applicable laws and the terms of the collective bargaining agreement requiring EPM to increase salaries by IPC + 135 bps on an annual basis, (ii) the acquisition of TICSA in September of 2013 and EMVARIAS in November of 2013, which affected EPM’s results of operations for the six months ended June 30, 2014, and (iii) changes in EPM’s administrative structure as a result of the implementation of measures recommended within the context of EPM’s ‘‘without borders’’ (sin fronteras) program. • The 93.9% increase in general expenses was primarily due to (i) the acquisition of TICSA and EMVARIAS in the second half of 2013, which affected EPM’s results of operations for the six months ended June 30, 2014, and (ii) higher expenses related to fuel and lubricant supply to EMVARIAS’ vehicles. • The 39.7% increase in taxes was primarily attributable to the acquisition of TICSA and EMVARIAS. • The 10.2% increase in provisions, depreciation and amortization was primarily due to the acquisition of TICSA and EMVARIAS in the second half of 2013, which affected EPM’s results of operations for the six months ended June 30, 2014.

Administrative Expenses EPM’s administrative expenses, including provision and amortization, increased 0.1%, from Ps.646,147 million for the six months ended June 30, 2013 to Ps.646,823 million for the six months ended June 30, 2014. Personnel expenses and general expenses represented 61.2% of EPM’s total administrative expenses. The following table sets forth a breakdown of EPM’s administrative expenses:

For the six months ended June 30, % Change 2014 2013 2014-2013 (Ps. in millions) Personnel expenses ...... Ps.230,332 Ps.222,312 3.6% General expenses...... 165,653 159,518 3.8% Taxes ...... 101,069 86,910 16.3% Depreciation expense ...... 19,440 19,151 1.5% Provision and amortization ...... 68,690 89,119 -22.9% Pension plan expense ...... 61,639 69,137 -10.8% Total administrative expenses including provision and amortization ...... Ps.646,823 Ps.646,147 0.1%

89 Of the specific components of EPM’s administrative expenses: • The 3.6% increase in personnel expenses was primarily due to an increase in salaries effective as of January 1, 2014 in compliance with applicable laws and the terms of the collective bargaining agreement requiring EPM to increase salaries by IPC + 135 bps on an annual basis. • The 3.8% increase in general expenses was primarily due to increases in insurance expenses, as well as in maintenance and surveillance contracts, mainly due to the acquisition of TICSA and EMVARIAS. • The 16.3% increase in taxes, contributions and rates was due to (i) higher real estate taxes as a result of new appraisals conducted by the municipalities, (ii) payments to the municipality’s comptroller (Contraloría), and (iii) an increase in financial transactions taxes as a result of higher transaction volumes. • The 22.9% decrease in provisions and amortizations was principally due to a significant decrease in the amortization of intangibles, which was partially offset by a 13.4% increase in the provisions for account receivables. See ‘‘Business — Legal Proceedings.’’ • The 10.8% decrease in pension plan expenses was due to a decrease in the adjustment factors EPM used to calculate its pension plan expenses in the first six months of 2014 compared to those used in the first six months of 2013.

Non-Operating Revenue (Expenses), Net Non-operating expenses decreased from Ps.162,725 million for the six months ended June 30, 2013 to Ps.120,450 million for the same period in 2014. This decrease was mainly due to (i) a Ps.39,455 million increase in financial returns, and (ii) a Ps.161,924 million decrease in the adjustment for exchange rates differences as a result of the revaluation of the Colombian peso against the Dollar. The decrease in non-operating losses was partially offset by (i) a Ps.43,537 million increase in interest expense, mainly due to the disbursement of new credit facilities and interest rate fluctuations, (ii) a Ps.59,299 million decrease in other ordinary income, and (iii) a Ps.13,267 million increase in provisions.

Income Tax EPM’s income tax increased 10.8% from Ps.341,582 million as of June 30, 2013 to Ps.378,350 million as of June 30, 2014. This increase was mainly the result of lower deductions for investments in fixed productive assets as a result of delays in the investment schedule of the Ituango Project.

Consolidated Net Income EPM’s consolidated net income increased 13.1% from Ps.749,566 million for the six months ended June 30, 2013 to Ps.847,628 million for the same period in 2014 primarily due to a 6.9% increase in operating income, a 26% decrease in total non-operating losses and a 10.8 % increase of the income tax provision.

Year ended December 31, 2013 compared to the year ended December 31, 2012 Overview EPM’s consolidated net income for the year ended December 31, 2013 as compared to the year ended December 31, 2012 were primarily affected by the following factors: (i) the acquisition of TICSA in September of 2013, which affected EPM’s results of operations for three months during the 2013 fiscal year; (ii) the acquisition of EMVARIAS in November of 2013, which affected EPM’s results of operations for two months during the 2013 fiscal year; and (iii) a reduction of 1,108 GWh in electricity generation due to low rainfall in the first months of 2013.

As of and for the Year Ended December 31, % Change 2013 2012 2013-2012 (Ps. in millions) Consolidated statement of financial, economic and social activities Revenues ...... 12,986,466 12,498,850 3.9% (-) Cost of sales ...... 8,123,451 7,703,343 5.5% (-) Depreciation and amortization ...... 946,320 1,094,129 -13.5%

90 As of and for the Year Ended December 31, % Change 2013 2012 2013-2012 (Ps. in millions) Gross profit ...... 3,916,695 3,701,378 5.8% (-) Administrative expenses ...... 1,069,680 1,025,631 4.3% (-) Provision, depreciation and amortization...... 338,364 287,183 17,8% Operating income ...... 2,508,651 2,388,564 5.0% (+) Non-operating revenues ...... 827,025 856,093 -3.4% (-) Non-operating expenses ...... 1,009,906 927,383 8.9% Total non-operating expenses, net ...... (182,881) (71,290) 156.5% Net income before taxes and minority interest ...... 2,325,770 2,317,274 0.4% (-) Income tax...... 599,016 629,013 -4.8% Net income before minority interest ...... 1,726,754 1,688,261 2.3% (-) Minority interest ...... 101,941 96,335 5.8% Net income...... 1,624,813 1,591,926 2.1% Consolidated Cash Flow Data Net cash provided by operating activities...... 2,373,298 2,073,135 14.5% Net cash used in investing activities ...... (3,108,263) (1,782,098) 74.4% Net cash used in financing activities...... (66,573) (73,384) -9.3% Net increase (decrease) in cash and cash equivalents and investment securities ...... Ps.(801,538) Ps. 217,653 -468.3% Cash and cash equivalents and investments in securities at beginning of year ...... 3,397,656 3,180,003 6.8% Cash and cash equivalents and investments in securities at end of year ...... 2,596,118 3,397,656 -23.6%

Revenues EPM’s consolidated revenues increased 3.9% from Ps.12,498,850 million during the year ended December 31, 2012 to Ps.12,986,466 million during the year ended December 31, 2013. Energy services represented the largest source of revenues, representing 74.9% of EPM’s revenues in 2013, followed by telecommunications representing 19.4% and water, sewage and waste management representing 6.2%. The following table presents a breakdown of EPM’s consolidated revenues by BU for the years ended December 31, 2013 and 2012: For the Year Ended December 31, % Change 2013 2012 2013-2012 (Ps. in millions) Energy Electricity generation ...... Ps.2,700,029 Ps.2,787,388 -3.1% Electricity transmission, distribution and commercialization ...... 7,899,020 7,385,579 7.0% Natural gas distribution and commercialization ...... 564,894 448,551 25.9% Eliminations...... (1,350,340) (1,097,677) 23.0% Total energy gross revenues ...... 9,813,603 9,523,841 3.0% (-) Discounts ...... 85,192 103,432 -17.6% Total energy revenues, net ...... 9,728,411 9,420,409 3.3% Telecommunications Local Telephone, value-added, television, and other services ...... 2,921,349 2,722,721 7.3% Eliminations...... (396,585) (375,604) 5.6% Total telecommunications gross revenues, net...... 2,524,764 2,347,117 7.6% (-) Discounts ...... 301 201 49.8% Total telecommunications revenues...... 2,524,463 2,346,916 7.6%

91 For the Year Ended December 31, % Change 2013 2012 2013-2012 (Ps. in millions) Water, sewage, and waste management Water...... 368,365 373,596 -1.4% Sewage ...... 410,143 357,313 14.8% Waste management...... 26,765 - 100.0% Eliminations...... (1,728) (5,024) -65.6% Total water, sewage, and waste management gross revenues, net ... 803,545 725,885 10.7% (-) Discounts ...... 8 495 -98.4% Total water, sewage, and waste management revenues ...... 803,537 725,390 10.8% Other revenues(1) Others, net ...... 80,737 100,453 -19.6% Other revenues, net ...... 80,737 100,453 -19.6% Eliminations...... (150,682) (94,318) 59.8% Total revenues...... Ps.12,986,466 Ps.12,498,850 3.9%

Energy EPM’s revenues deriving from energy services increased 3.3% from Ps.9,420,409 million for the year ended December 31, 2012 to Ps.9,728,411 million for the year ended December 31, 2013. This increase was primarily due to: (i) an increase in EPM’s revenues arising from its electricity transmission, distribution and commercialization activities, (ii) the increase of EPM’s natural gas customer base as a result of EPM’s expansion plan, which resulted in 100,981 new customers and (iii) the provision of EPM’s services in new municipalities. Of the specific components of EPM’s consolidated revenues (without adjusting for discounts) deriving from the Energy BU: • The 3.1% decrease in EPM’s electricity generation revenues was primarily due to the low input from rivers and the low levels of the reservoirs, which affected the energy availability of the generation plants. Despite higher prices in 2013, the revenues from contract sales were lower because EPM committed less energy under contracts in 2013 than in 2012 as it decided to maintain high energy availability in the expectation of better prices than those that could be established under contracts. See ‘‘Industry — Electricity Generation in Colombia — Revenues of Electricity Generation Companies — Dispatch and Pricing.’’ • The 7.0% increase in EPM’s transmission, distribution and commercialization revenues was primarily due to (i) the indexation of the tariffs pursuant to applicable regulations and (ii) the application of ‘‘Center Distribution Area’’ or ‘‘CDA’’ (Área de Distribución Centro) throughout the entire year in 2013, compared to the application of CDA from May to December in 2012. • The 25.9% increase in EPM’s natural gas revenues was mainly due to (i) an increase of 14.7% in the active customer base, (ii) an increase of 24% in consumption due to higher sales in the secondary market and to large clients, and (iii) commencement of operations in five new municipalities of Antioquia: Amagá, Ciudad Bolivar, San Jerónimo, Santa Fe de Antioquia y Sopetrán.

Telecommunications EPM’s consolidated revenues deriving from telecommunications services increased 7.6% from Ps.2,346,916 million for the year ended December 31, 2012 to Ps.2,524,463 million for the year ended December 31, 2013. This increase was primarily the result of the revenue growth experienced by all of the telecommunications business segments, with the exception of the Long-Distance segment. Mobile services was one of the best performing business segments with a 120% increase in sales, reflecting the consolidation of the 4G LTE Internet service in Colombia. The Internet and basic telephone services grew at a rate of 10% and 2%, respectively.

92 Water, Sewage and Waste Management EPM’s consolidated revenues deriving from water services increased 10.8% from Ps.725,390 million for the year ended December 31, 2012 to Ps.803,537 million in 2013. This increase was mainly due to (i) an increase in the number of users and in the average revenue per user, (ii) the acquisition of TICSA in September of 2013, which affected EPM’s results of operations for three months during the 2013 fiscal year, and (iii) the acquisition of EMVARIAS in November of 2013, which affected EPM’s results of operations for two months during the 2013 fiscal year.

Cost of Sales EPM’s cost of sales, including provision, depreciation and amortization, increased 3.1%, from Ps.8,797,472 million for the year ended December 31, 2012 to Ps.9,069,771 million for the year ended December 31, 2013. Costs associated with the energy business accounted for 72.8% of EPM’s total cost of sales, followed by costs associated with the telecommunications business, which accounted for 23.7%, and costs associated with the water business which accounted for 4.5%. The main costs of sales associated with the energy business are related to electricity purchases, natural gas purchases and toll payments made by EPM to use third-party electricity and gas networks. The increase in cost of sales was primarily due to an increase of electricity purchases and an increase in fuel supply and fuel transportation costs. The following table sets forth a breakdown of EPM’s costs of sales for the years ended December 31, 2013 and 2012: For the Year Ended December 31, % Change 2013 2012 2013-2012 (Ps. in millions) Energy Personnel expenses ...... 321,900 319,808 0.7% General expenses...... 5,738,184 5,408,361 6.1% Materials ...... 34,348 36,200 -5.1% Taxes...... 131,956 120,356 9.6% Provision, depreciation and amortization...... 379,999 396,046 -4.1% Total energy ...... 6,606,387 6,280,771 5.2% Telecommunications Personnel expenses ...... 478,081 394,669 21.1% General expenses...... 1,042,857 1,048,051 -0.5% Materials ...... 71,272 42,990 65.8% Taxes...... 76,071 73,755 3.1% Provision, depreciation and amortization...... 478,740 611,941 -21.8% Total telecommunications ...... 2,147,021 2,171,406 -1.1% Water, sewage, and waste management Personnel expenses ...... 87,556 85,678 2.2% General expenses...... 202,313 140,030 44.5% Materials ...... 9,319 9,679 -3.7% Taxes...... 18,849 10,806 74.4% Provision, depreciation and amortization...... 87,151 85,375 2.1% Total water, sewage, and waste management...... 405,188 331,568 22.2% Other cost of sales ...... 26,666 52,057 -48.8% Eliminations ...... (115,491) (38,330) 201.3% Total cost of sales including provision, depreciation and amortization...... 9,069,771 8,797,472 3.1%

Energy EPM’s cost of sales deriving from Energy services increased 5.2% from Ps.6,280,771 million for the year ended December 31, 2012 to Ps.6,606,387 million for the same period in 2013. Of the specific components of EPM’s cost of sales deriving from energy services:

93 • The 6.1% increase in general expenses was primarily due to: (i) an increase in the number of municipalities with which EPM contracted for public lighting maintenance services, (ii) more houses provided with electricity services as part of the housing program ‘‘Programa de Habilitación Viviendas,’’ (iii) expenses incurred to repair damages caused by attacks in the area of the Ituango Project, and (iv) an increase of 18,636 in natural gas customers in 2013 compared to 2012. • The 9.6% of increase in taxes was primarily due to a significant increase in other contributions due to a reclassification of the contributions paid to SSPD which were accounted for as administrative expenses in prior years.

Telecommunications EPM’s cost of sales deriving from telecommunications services decreased 1.1% from Ps.2,171,406 million for the year ended December 31, 2012 to Ps.2,147,021 million for the same period in 2013. This decrease was primarily due to a significant decrease in depreciation as a consequence of certain technology assets becoming obsolete, partially offset by (i) an increase in the costs related to the deployment of the 4G network across Colombia, and (ii) an increase in costs related to EPM’s expansion plan. Of the specific components of EPM’s cost of sales deriving from telecommunications services: • The 21.1% increase in EPM’s personnel costs was primarily due to higher personnel costs in UNE’s subsidiaries. • The significant increase in materials was primarily due to the costs related to the deployment of the 4G network across and the costs related to EPM’s expansion plan. • The significant decrease in provision, depreciation and amortization was primarily due to a decrease in depreciation as a result of the implementation of accounting adjustments for the year 2012 in preparation for the full implementation of IFRS.

Water, Sewage and Waste Management EPM’s cost of sales deriving from its water, sewage and waste management services increased 22.2% from Ps.331,568 million for the year ended December 31, 2012 to Ps.405,188 million for the year ended December 31, 2013, primarily due to (i) the acquisition of TICSA in September of 2013, which affected EPM’s results of operations for three months during the 2013 fiscal year; and (ii) the acquisition of EMVARIAS in November of 2013, which affected EPM’s results of operations for two months during the 2013 fiscal year. Of the specific components of the EPM’s cost of sales derived from water, sewage and waste management services: • The 2.2% increase in personnel expenses was primarily due to the increase in salaries effective as of January 1, 2013 in compliance with applicable laws and the terms of the collective bargaining agreement requiring EPM to increase salaries by IPC + 150 bps on an annual basis. • The significant increase in general expenses (44.5%) was primarily due to an increase in maintenance and repair contracts, as a result of the acquisition of TICSA and EMVARIAS during the second half of 2013. • The 74.4% increase in taxes, rates and contributions was mainly due to a significant increase in other contributions due to a reclassification of the contributions paid to SSPD which were accounted for as administrative expenses in prior years.

Administrative Expenses EPM’s administrative expenses, including provisions, depreciation, and amortization, increased 7.3% from Ps.1,312,814 million for the year ended December 31, 2012 to Ps.1,408,044 million for the year ended December 31, 2013, primarily due to the significant increase in personnel expenses, provision and amortization and pension plan expenses.

94 The following table sets forth a breakdown of EPM’s administrative expenses for the years ended December 31, 2013 and 2012:

For the Year Ended December 31, % Change 2013 2012 2013-2012 (Ps. in millions) Personnel expenses ...... Ps. 468,293 Ps. 429,458 9.0% General expenses ...... 417,760 409,325 2.1% Taxes ...... 183,627 186,848 -1.7% Depreciation expenses ...... 36,892 33,234 11.0% Provision and amortization ...... 166,853 144,163 15.7% Pension plan expenses...... 134,619 109,786 22.6% Total administrative expenses, including provision and amortization ...... Ps.1,408,044 Ps.1,312,814 7.3%

Of the specific components of EPM’s administrative expenses: • The 9.0% increase in Personnel expenses was principally due to (i) the increase in salaries effective as of January 1, 2013 in compliance with applicable laws and the terms of the collective bargaining agreement requiring EPM to increase salaries by IPC + 150 bps on an annual basis, (ii) the acquisition of TICSA in September of 2013, which affected EPM’s results of operations for three months during the 2013 fiscal year, and (iii) the acquisition of EMVARIAS in November of 2013, which affected EPM’s results of operations for two months during the 2013 fiscal year. • The increases in the expenses of depreciation, provision and amortization and pension plan were primarily due to (i) the acquisition of TICSA in September of 2013, which affected EPM’s results of operations for three months during the 2013 fiscal year and (ii) the acquisition of EMVARIAS in November of 2013, which affected EPM’s results of operations for two months during the 2013 fiscal year.

Non-Operating Revenue (Expense), Net Non-operating revenues (expenses), net increased from a net loss of Ps.71,290 million for the year ended December 31, 2012 to a net loss of Ps.182,881 million for the year ended December 31, 2013. This increase was mainly due to (i) the devaluation of the Colombian peso against the U.S. dollar in 2013 with respect to 2012, which resulted in an adjustment to the cash balance in foreign currency, and (ii) a decrease in the market value of investments in debt securities.

Income Tax EPM’s income tax decreased 4.8% from Ps.629,013 million as of December 31, 2012 to Ps.599,016 million as of December 31, 2013. This decrease was due to a significant increase in deductions from the application of government tax benefits granted in connection with the construction or acquisition of productive fixed assets during 2013 mainly as a result of investments made in connection with the Ituango Project.

Net Income EPM’s consolidated net income increased 2.1% from Ps.1,591,926 million for the year ended December 31, 2012 to Ps.1,624,813 million for the year ended December 31, 2013, primarily due to the combined effect of (i) an increase of Ps.120,087 million in operating income, (ii) an increase of Ps.111,591 million in non-operating net losses mainly as a result of the devaluation of the Colombian peso against the U.S. dollar, and (iii) a decrease in income tax of Ps.29,997 million due to the application of government tax benefits.

95 Year ended December 31, 2012 compared to the year ended December 31, 2011 Overview EPM’s consolidated results of operations for the year ended December 31, 2012 as compared to the year ended December 31, 2011 were primarily affected by the following factors: (i) the acquisition of Generadores Hidroeléctricos S.A. (‘‘Genhidro’’), Hidronorte S.A. (‘‘Hidronorte’’), ENSA and Del Sur, which affected EPM’s results of operations for the full 2012 fiscal year as compared to ten months during the 2011 fiscal year; (ii) the 8.98% appreciation of the Colombian peso against the U.S. dollar, which resulted in a reduction in expenses through the adjustment of the exchange difference applied to foreign currency denominated indebtedness; and (iii) a -2.9% change in the IPP, which affected the indexation of the energy tariffs.

For the Year Ended December 31, % Change 2012 2011 2012-2011 (Ps. in millions) Consolidated statement of financial, economic and social activities Revenues ...... 12,498,850 11,508,020 8.6% (-) Cost of sales ...... 7,703,343 6,947,489 10.9% (-) Depreciation and amortizations ...... 1,094,129 854,526 28.0% Gross profit...... 3,701,378 3,706,005 -0.1% (-) Administrative expenses...... 1,025,631 908,410 12.9% (-) Provision, depreciation and amortization ...... 287,183 382,889 -25.0% Operating income ...... 2,388,564 2,414,706 -1.1% (+) Non-operating revenues ...... 856,093 607,977 40.8% (-) Non-operating expenses ...... 927,383 824,209 12.5% Total non-operating expenses, net ...... (71,290) (216,232) -67.0% Net income before taxes and minority interest ...... 2,317,274 2,198,474 5.4% (-) Income tax ...... 629,013 592,403 6.2% Net income before minority interest ...... 1,688,261 1,606,071 5.1% (-) Minority interest...... 96,335 87,392 10.2% Net income ...... 1,591,926 1,518,679 4.8% Consolidated Cash Flow Data Net cash provided by operating activities ...... 2,073,135 3,460,436 -40.1% Net cash used in investing activities ...... (1,782,098) (2,819,038) -36.8% Net cash used in financing activities ...... (73,384) (70,830) 3.6% Net increase in cash and cash equivalents and investments in securities ...... 217,653 570,568 -61.9% Cash and cash equivalents and investments in securities at beginning of year ...... 3,180,003 2,609,435 21.9% Cash and cash equivalents and investments in securities at end of year...... 3,397,656 3,180,003 6.8%

Revenues EPM’s consolidated revenues increased 8.6%, from Ps.11,508,020 million during the year ended December 31, 2011 to Ps.12,498,850 million during the year ended December 31, 2012. Energy services represented the largest source of revenues, representing 75.4% of EPM’s revenues in 2012, followed by telecommunications representing 18.8% and water, sewage and waste management representing 5.8%.

96 The following table presents a breakdown of EPM’s total consolidated revenues by BU for the years ended December 31, 2012 and 2011: For the Year Ended December 31 % Change 2012 2011 2012-2011 (Ps. in millions) Energy Electricity generation ...... 2,787,388 2,199,470 26.7% Electricity transmission, distribution and commercialization. . . . . 7,385,579 6,708,682 10.1% Natural gas distribution and commercialization ...... 448,551 405,694 10.6% Eliminations ...... (1,097,677) (570,654) 92.4% Total energy gross revenues ...... 9,523,841 8,743,192 8.9% (-) Discounts...... 103,432 20,990 392.8% Total energy revenues, net ...... 9,420,409 8,722,202 8.0% Telecommunications Local Telephone, value-added, television, and other services . . . . 2,722,721 2,110,506 29.0% Eliminations ...... (375,604) — 100.0% Total telecommunications gross revenues ...... 2,347,117 2,110,506 11.2% (-) Discounts...... 201 804 -75.0% Total telecommunications revenues, net ...... 2,346,916 2,109,702 11.2% Water, sewage, and waste management Water ...... 373,596 351,008 6.4% Sewage ...... 357,313 352,136 1.5% Waste management ...... — — 0.0% Eliminations ...... (5,024) — 100.0% Total water, sewage and waste management gross revenues .... 725,885 703,144 3.2% (-) Discounts...... 495 319 55.2% Total water, sewage, and waste management revenues, net ..... 725,390 702,825 3.2% Other revenues(1) Others, net ...... 100,453 12,730 689.1% Other revenues, net ...... 100,453 12,730 689.1% Eliminations ...... (94,318) (39,439) 139.1% Total revenues...... 12,498,850 11,508,020 8.6%

Energy EPM’s consolidated revenues deriving from energy services increased 8.0% from Ps.8,722,202 million for the year ended December 31, 2011 to Ps.9,420,409 million for the year ended December 31, 2012. This significant increase was primarily due to EPM’s acquisition of ENSA and Del Sur, which affected EPM’s net income for the full 2012 fiscal year as compared to ten months during the 2011 fiscal year. Other factors contributing to this increase were (i) increased sales of electricity due to an increase in demand, and (ii) the increase of EPM’s natural gas customer base as a result of EPM’s expansion plan, which resulted in 91,137 new customers. Of the specific components of EPM’s consolidated revenues (without adjusting for discounts) deriving from EPM’s energy business unit: • The 26.7% increase in EPM’s electricity generation revenues was primarily due to (i) an increase in the long-term sales contracts, with larger amounts sold, (ii) higher revenues from the AGC services due to an increase in the market price of energy, and (iii) higher sales in the Energy Spot Market driven by increases in generation and price.

97 • The 10.1% increase in EPM’s transmission, distribution and commercialization revenues was primarily due to (i) the expansion of EPM’s international markets in connection with EPM’s acquisition of ENSA and Del Sur, which resulted in an increased demand for electricity and the addition of nearly 680,000 customers, (ii) higher revenues due to increased demand, and (iii) an increase in electricity transmission charges pursuant to applicable regulations. • The 10.6% increase in EPM’s natural gas revenues was primarily due to (i) the increase in EPM’s customer base by 91.137 new customers during 2012, and (ii) EPM providing natural gas services in Sonsón, a municipality of Antioquia, and to a new large corporate client: Alpina.

Telecommunications EPM’s consolidated revenues deriving from telecommunications services increased 11.2% from Ps.2,109,702 million for the year ended December 31, 2011 to Ps.2,346,916 million for the same period in 2012. This increase was primarily the result of (i) growth in most telecommunications business segments, except long distance and voice, both of which remained at the same levels period to period, (ii) increased revenues in the mobile data segment, and (iii) the implementation of an expansion strategy together with the bundling of voice, Internet and Television services.

Water, Sewage and Waste Management EPM’s consolidated revenues deriving from water, sewage and waste management services increased 3.2% from Ps.702,825 million for the year ended December 31, 2011 to Ps.725,390 million for the same period in 2012. This increase was mainly due to a 2.3% increase of EPM’s water customer base and a 2.5% increase of EPM’s sewage customer base due to organic population growth in the locations where EPM operates.

Cost of Sales EPM’s cost of sales, including provision, depreciation and amortization, increased 12.8%, from Ps.7,802,015 million for the year ended December 31, 2011 to Ps.8,797,472 million for the year ended December 31, 2012. Costs associated with the energy business accounted for 71.4% of EPM’s total cost of sales, followed by costs associated with the telecommunications business, which accounted for 24.7% and costs associated with the water business which accounted for 3.8%. The main costs of sales associated with the energy business are related to electricity purchases, natural gas purchases and toll payments paid by EPM to use third-party electricity and gas networks. The increase in cost of sales was primarily due to an increase in costs associated with the operations of ENSA and Del Sur. The following table sets forth a breakdown of EPM’s costs of sales by business unit for the years ended December 31, 2012 and 2011:

For the Year Ended December 31, % Change 2012 2011 2012-2011 (Ps. in millions) Energy Personnel expenses ...... 319,808 319,171 0.2% General expenses ...... 5,408,361 5,112,607 5.8% Materials ...... 36,200 36,826 -1.7% Taxes ...... 120,356 100,855 19.3% Provision, depreciation and amortization ...... 396,046 417,691 -5.2% Total energy ...... 6,280,771 5,987,150 4.9% Telecommunications Personnel expenses ...... 394,669 287,445 37.3% General expenses ...... 1,048,051 1,046,467 0.2% Materials ...... 42,990 33,812 27.1% Taxes ...... 73,755 58,624 25.8% Provision, depreciation and amortization ...... 611,941 393,662 55.4% Total telecommunications ...... 2,171,406 1,820,010 19.3%

98 For the Year Ended December 31, % Change 2012 2011 2012-2011 (Ps. in millions) Water, sewage, and waste management Personnel expenses ...... 85,678 84,416 1.5% General expenses ...... 140,030 150,747 -7.1% Materials ...... 9,679 11,236 -13.9% Taxes ...... 10,806 9,868 9.5% Provision, depreciation and amortization ...... 85,375 81,197 5.1% Total water, sewage, and waste management...... 331,568 337,464 -1.7% Other cost of sales ...... 52,057 (310,662) -116.8% Eliminations ...... (38,330) (31,947) 20.0% Total cost of sales including provision, depreciation and amortization ...... 8,797,472 7,802,015 12.8%

Energy • The 5.8% increase in general expenses was primarily due to (i) the acquisition of ENSA and Del Sur, which affected EPM’s results of operations for the full 2012 fiscal year as compared to ten months during the 2011 fiscal year, (ii) an increase in energy purchases due to increased prices in the Energy Spot Market, (iii) an increase in the payments for the use of STR networks, and (iv) the application of the CDA. • The 19.3% increase in taxes, rates and contributions costs was primarily due to (i) an increase of 16.5% in the Environmental Tax (Law 99 of 1993) due to an increase in energy generation, and (ii) an increase of 21.2% in contributions to the Fund for the Financial Support of the Energization of Zones Lacking Interconnection or FAZNI (Fondo de Apoyo Financiero para la Energización de las Zonas No Interconectadas) which are levied on each kWh dispatched in the Energy Spot Market. • The 5.2% decrease in provision, depreciation and amortization was due to (i) a 1% decrease in depreciation and (ii) a 36% decrease in amortization.

Telecommunications EPM’s cost of sales deriving from telecommunications services increased 19.3% from Ps.1,820,010 million for the year ended December 31, 2011 to Ps.2,171,406 million for the same period in 2012. This significant increase was mainly the result of the following factors: (i) the development of the 4G LTE business, the digitalization of the Television network and infrastructure maintenance, (ii) additional costs in the mobile business segment, and (iii) a signficant increase in costs in the fixed telephone\business segment. Of the specific components of EPM’s cost of sales deriving from telecommunications services: • The 37.3% increase in EPM’s personnel costs was primarily due to higher personnel costs that resulted from the merger between UNE and UNE EPM Bogotá S.A. for a six months period. • The 55.4% increase in provision, depreciation and amortization was primarily the result of the following financial statements adjustments: (i) an amortization charge on the Long-Distance license in the amount of Ps.93,381 million, (ii) technology assets in the amount of Ps.66,753 million becoming obsolete, (iii) a change in the useful life of facilities, which generated an additional depreciation expense of Ps.64,394 million, and (iv) goodwill amortization in the amount of Ps.14,120 million.

Water, Sewage and Waste Management EPM’s costs of sales deriving from its water, sewage and waste management services decreased 1.7% from Ps.337,464 million for the year ended December 31, 2011 to Ps.331,568 million for the year ended December 31, 2012.

99 Administrative Expenses EPM’s administrative expenses, including provisions, depreciation, and amortization, increased 1.7% from Ps.1,291,299 million for the year ended December 31, 2011 to Ps.1,312,814 million for the year ended December 31, 2012, primarily due to a significant increase in general expenses and taxes, partially offset by a significant decrease in provision and amortization and pension plan expenses. The following table sets forth a breakdown of EPM’s administrative expenses for the years ended December 31, 2012 and 2011. For the Year Ended December 31, % Change 2012 2011 2012-2011 (Ps. in millions) Personnel expenses ...... Ps. 429,458 Ps.403,853 6.3% General expenses ...... 409,325 351,435 16.5% Taxes ...... 186,848 153,122 22.0% Depreciations ...... 33,234 32,147 3.4% Provision and amortization ...... 144,163 221,564 -34.9% Pension plan...... 109,786 129,178 -15.0% Total administrative expenses, including provision and amortization ...... Ps. 1,312,814 Ps.1,291,299 1.7%

Of the specific components of EPM’s administrative expenses: • The 6.3% increase in personnel expenses was due to (i) a 4.73% salary increase effective as of January 1, 2012 in accordance with applicable laws and the terms of the collective bargaining agreement requiring EPM to increase salaries by IPC + 100 bps on an annual basis and (ii) hiring of new personnel for vacancies. • The 16.5% increase in general expenses was due to higher fees paid in connection with consulting services and project-related studies conducted. • The 22.0% increase in taxes, contributions and rates was due to a reclassification of the industry and commerce tax, which was accounted for as a provision in 2011. • The 34.9% decrease in provision and amortization was due to a significant reduction in the allowance for doubtful accounts. • The 15.0% decrease in pension plan expenses was due to (i) the application of a lower rate to calculate the pension liability (weighted average rate of inflation according to applicable law) and (ii) a decrease in the number of persons included in the calculation due to the death of pension beneficiaries.

Non-Operating Revenue (Expense), Net Non-operating expenses, net decreased significantly from a net loss of Ps.216,232 million for the year ended December 31, 2011 to a net loss of Ps.71,290 million for the year ended December 31, 2012. This decrease was primarily due to (i) an increase in the market value of investments in debt securities, (ii) an increase in other financial revenues, and (iii) a decrease in financial expenses attributable to exchange difference adjustments for fluctuations in exchange rates.

Income Tax EPM’s income tax increased 6.2% from Ps.592,403 million as of December 31, 2011 to Ps.629,013 million as of December 31, 2012. This increase was due to (i) a significant increase in other non-deductible expenses and (ii) a significant increase in dividends from controlled companies.

Net Income EPM’s consolidated net income increased 4.8% from Ps.1,518,679 million for the year ended December 31, 2011 to Ps.1,591,926 million for the year ended December 31, 2012, primarily due to the combined effect of (i) a 67% decrease in non-operating net losses, (ii) a 1.1% decrease in operating income and (iii) a 6.2% increase in the income tax provision.

100 Liquidity and Capital Resources Liquidity and Working Capital As of June 30, 2014 and December 31, 2013, EPM had Ps.1,659,882 million and Ps.2,596,118 million in cash and cash equivalents and investments in securities, respectively. As of the same dates, EPM’s net working capital, defined as the difference between current assets and current liabilities, was Ps.1,232,228 million and Ps.2,133,173 million, respectively. EPM believes that its available cash and investments in securities and cash flow from operations will be sufficient to finance its working capital. EPM’s capital requirements are mainly: (i) operation, maintenance, enhancement and improvement of its networks for providing its services; (ii) capital expenditures, including investments in infrastructure and in strategic companies; (iii) financial obligations; and (iv) distributions of net income to the City of Medellín. EPM’s principal sources of liquidity and capital resources are: (i) revenues from its core services; (ii) financial income from the investment of its cash and liquid funds; and (iii) domestic and foreign currency borrowings and other indebtedness.

Cash Flows The following table summarizes EPM’s cash flows for each of the periods indicated, as well as its cash position at beginning and at the end of each of those periods:

As of and for the six months ended June 30, As of and for the Year Ended December 31, 2014 2013 2013 2012 2011 (Ps. in millions) Consolidated Cash Flow Data Net cash provided by operating activities...... Ps. 1,025,792 Ps. 985,762 Ps. 2,373,298 Ps. 2,073,135 Ps. 3,460,436 Net cash used in investing activities...... (1,083,730) (1,815,714) (3,108,263) (1,782,098) (2,819,038) Net cash used in financing activities...... (878,298) (370,742) (66,573) (73,384) (70,830) Net decrease (increase) in cash and cash equivalents and investments in securities...... Ps. (936,236) Ps. 1,200,694) Ps. (801,538) Ps. 217,653 Ps. 570,568 Cash and cash equivalents and investments in securities at beginning of period...... 2,596,118 3,397,656 3,397,656 3,180,003 2,609,435 Cash and cash equivalents and investments in securities at end of period ...... 1,659,882 2,196,962 2,596,118 3,397,656 3,180,003 EPM’s net cash provided by operating activities during the six months ended June 30, 2014 and for the years ended December 31, 2013, 2012 and 2011 were Ps.1,025,792 million, Ps.2,373,298 million, Ps.2,073,135 million and Ps.3,460,436 million, respectively. The most significant factors in the generation of EPM’s cash flows from operating activities are the revenues from the provision of its energy, water and telecommunications services, as well as the cost and expenses associated with such services. EPM’s cash flows from operations generated during these periods were mainly affected by an average growth of revenues of 6.2% during the period from 2011 through 2013, together with an average growth of cost of sales and administrative expenses of 7.3% during the same period. The increase in accounts receivable during the six months ended June 30, 2014 as compared to the same period in 2013 was mainly due to (i) an increase in receivables for services rendered, (ii) an increase in the income tax anticipated payment, and (iii) increases in other debt, all of which was partially mitigated by a decrease in receivables for assets delivered for management. EPM’s net cash flows used in investing activities during the six months ended June 30, 2014 and for the years ended December 31, 2013, 2012 and 2011 were Ps.1,083,730 million, Ps.3,108,263 million, Ps.1,782,098 million, and Ps.2,819,038 million, respectively. EPM’s investment activities were mainly related to (i) the development of the

101 Ituango Project; (ii) the acquisition of strategic companies such as (a) the acquisition of the Panamanian company Espíritu Santo Energy S. de R.L. for Ps.134,878 million in 2013 (this company was subsequently liquidated), (b) the acquisition of EMVARIAS for Ps.34,490 million in 2013 and, (c) the creation of the company EPM Chile and acquisition of the companies Parque Eólico Pacífico S.A. and Parque Eólico La Cebada S.A. for Ps.31,803 million in 2013; and (iii) investments in network infrastructure associated with each of EPM’s businesses. Capital investments had a significant impact on EPM’s property, plant and equipment, which increased from Ps.14,154,412 million as of December 31, 2012, to Ps.16,023,149 million as of December 31, 2013, and reached Ps.16,568,521 million as of June 30, 2014. EPM’s net cash used in (provided by) financing activities during the six months ended June 30, 2014 were Ps.878,298 million. Net cash flows (used in) provided by financing activities during the years ended December 31, 2013, 2012 and 2011 were Ps.66,573 million, Ps.73,384 million, and Ps.70,830 million, respectively. EPM’s financing activities are related to loan disbursements for financing its investment activities, the service of its financial obligations and distributions of net income to the City of Medellín. EPM’s net cash flows generated from financing activities have primarily been affected by the following loans disbursements: (i) U.S.$450.0 million to be disbursed between 2011 and 2016 under a loan with the IADB to finance the development of the Bello Plant (as of December 31, 2013 the total disbursed amount was U.S.$98.63 million), (ii) U.S.$349.0 million disbursed in 2012 under a loan with the International Finance Corporation (‘‘IFC’’) to finance the program ‘‘Antioquia Illuminated’’ and the plans for expansion and replacement of water piping and draining networks and energy transmission grids, (iii) the issuance of bonds in the local market under the Medium Term Note Program for an aggregate amount of Ps.367.280 million in 2013, and (iv) a Promotion loan with the French Development Agency (AFD) for U.S.$338 million to be disbursed between 2013 and 2015 to finance the growth and expansion projects related to energy and gas generation, and transmission and distribution businesses (as of December 31, 2013 the total disbursed amount was U.S.$195.0 million).

Financial Obligations and Other Liabilities As of June 30, 2014, the outstanding balance of EPM’s consolidated liabilities was Ps.15,130,652 million, including domestic and external foreign financial obligations totaling Ps.8,872,141 million. EPM’s total consolidated financial obligations as of June 30, 2014, December 31, 2013, December 31, 2012 and December 31, 2011 was Ps.8,872,141 million, Ps.9,230,496 million, Ps.7,551,712 million, and Ps.6,974,893 million respectively. Of these amounts, Ps.7,976,931 million (89.9%), Ps.8,382,690 million (90.8%), Ps.7,316,939 million (96.9%) and Ps.6,522,385 million (93.5%) were non-current financial obligations. Consolidated interest expense for the years ended December 31, 2013, 2012 and 2011 was Ps.523,173 million, Ps.523,893 million and Ps.495,030 million, respectively. Consolidated interest expense for the six months ended June 30, 2014 and 2013 was Ps.300,853 million and Ps.257,316 million, respectively. The agreements and instruments governing certain of EPM’s consolidated financial obligations contain provisions, including financial covenants, that require EPM to maintain compliance with certain financial ratios and that restrict EPM’s ability to, among other things, incur additional debt and make new investments. As of the date hereof, EPM is in material compliance with these covenants. Failure to comply with these provisions could result in defaults on EPM’s financial obligations and acceleration of principal repayment obligations, including under cross-default provisions. For a more detailed description of EPM’s financial obligations, see ‘‘— Qualitative and Quantitative Disclosure About Market Risk’’ and ‘‘Description of Other Indebtedness.’’

102 Contractual Commitments, Including Non-current Financial Obligations The following table summarizes EPM’s contractual commitments (exclusive of interest) as of June 30, 2014:

1 to 3 to More than 3 years 5 years 5 years Total Non-current financial obligations ...... In pesos (millions) ...... 688,894 1,120,170 2,745,898 4,554,962 In U.S. dollars (million) ...... 341 764 475 1,580 In Mexican Pesos (million) ...... 354 372 449 1,175 In Guatemalan quetzals (million) ...... 343 500 315 1,159 Total non-current financial obligations (in millions of pesos)(1)...... 1,464,546 2,732,012 3,780,374 7,976,931 Hedging operations ...... In pesos (million)...... 49,605 1,518 — 51,123 In U.S. dollars (million)...... Total non-current financial obligations and hedging operations (in million pesos) (1)...... 1,514,151 2,733,530 3,780,374 8,028,054

(1) Dollar amounts are translated based on an exchange rate of Ps.1,881.19 per dollar as of June 30, 2014. Mexican pesos are translated based on an exchange rate of Mexican pesos 12.97 per Dollar as of June 30, 2014. Guatemalan Quetzal amounts are translated based on an exchange rate of Guatemalan Quetzal 7.78 per Dollar as of June 30, 2014. Such translations should not be construed as representations that the dollar amounts represent, or have been or could be converted into, Colombian pesos, Mexican Pesos or Guatemalan Quetzals, as applicable, at that or any other rate.

Memorandum Accounts and Material Off-Balance Sheet Transactions EPM discloses but does not recognize in its financial statements certain transactions in memorandum accounts. Memorandum accounts are contingent on future events; thus, the future monetary impact of memorandum accounts in EPM’s results of operations and financial condition may vary substantially from the amounts reported on that account for any given period. For a description of the items recognized under memorandum accounts, see ‘‘— Critical Accounting Policies and Estimates.’’ The following table summarizes the net balance of EPM’s memorandum accounts as of the dates indicated:

As of June 30, As of December 31, 2014 2013 2013 2012 2011 (Ps. in millions) Debit memorandum accounts Contingent rights ...... Ps. 819,914 Ps. 880,801 Ps. 899,588 Ps. 850,579 Ps. 831,513 Fiscal debit accounts ...... 5,764,160 5,886,154 6,518,951 7,035,921 6,835,939 Control debit ...... 587,990 572,102 583,297 682,199 879,208 Total debit memorandum accounts ...... 7,172,064 7,339,057 8,001,836 8,568,699 8,546,660 Credit memorandum accounts Contingent liability ...... 1,146,537 659,175 254,144 733,198 1,423,087 Fiscal credit accounts ...... 18,788,098 18,013,582 19,021,106 18,527,797 3,604,765 Control credit...... 1,125,856 1,134,024 991,323 718,399 1,000,689 Total credit memorandum accounts ...... Ps.21,060,491 Ps.19,806,781 Ps.20,266,573 Ps.19,979,394 Ps.6,028,541 Memorandum accounts, net...... Ps.13,888,427 Ps.12,467,724 Ps.12,264,737 Ps.11,410,695 Ps.2,518,119

As mentioned elsewhere in this section, fiscal debit and credit accounts, and control debit and credit accounts do not represent potential gains or losses affecting EPM’s current or future financial condition and results of operations. Items in these accounts are disclosed for control purposes only.

103 EPM’s off-balance sheet transactions that have or are reasonably likely to have a current or future effect on EPM’s financial condition and results of operations are included in the line-item ‘‘contingent liability.’’ Set forth below is a brief description of the main off-balance sheet transactions disclosed as contingent liability in memorandum accounts.

Guarantees Counter-guarantee in connection with certain IADB loans. Certain loans granted to EPM by the IADB are guaranteed by the Republic of Colombia. Pursuant to Colombian law, whenever the Republic of Colombia issues a guarantee to secure the obligations of a government-owned company in respect of third parties, government-owned entities are required to issue a counter-guarantee in favor of the Republic of Colombia. Under the counter-guarantee, EPM agreed to (i) grant a lien on a portion of its revenues, resulting from the rendering of public utility services, (ii) execute a promissory note in favor of the Republic of Colombia, and (iii) make annual contributions to the Contingency Fund for government-owned entities, which are equivalent to 31.03 basis points calculated over amounts disbursed, payable on February 14 of each year. EPM discloses this amount as a contingent liability in memorandum accounts. The aggregate value of the counter-guarantees granted by EPM, calculated as 120.0% of debt service on the IADB loans, as of June 30, 2014 was Ps.67,540 million. For a description of the main terms and conditions of the instruments governing the counter-guarantees, see ‘‘Description of Other Indebtedness.’’

Capital Investments The following table describes EPM’s consolidated capital investments for the periods indicated:

As of and for the Six Months Ended As of and for the Year Ended June 30, December, 31 2014 2013 2013 2012 2011 (Ps. in millions) Payment for purchase of companies, net of cash acquired ...... 0 0 (62,980) 0 (344,880) Acquisitions of property, plant and equipment . . . (986,711) (1,692,645) (2,919,439) (1,866,903) (1,795,251) Acquisitions of other assets ...... (97,019) (123,069) (125,844) 84,805 (678,907) Total ...... (1,083,730) (1,815,714) (3,108,263) (1,782,098) (2,819,038)

EPM currently plans to make total capital expenditures of approximately U.S.$5.5 billion between 2014 and 2017. EPM currently expects that (i) approximately 81.9% and 18.1% of such capital expenditures will be made in its Energy BU and in its Water BU, respectively, and (ii) approximately 78.2% and 21.8% of such capital expenditures will be for use by the parent company and by its subsidiaries, respectively. Of the U.S.$5.5 billion in currently projected capital expenditures, EPM has earmarked approximately U.S.$3.5 billion both domestically and internationally for a combination of acquisitions and new greenfield projects. However, EPM reviews its capital expenditures plans periodically and, therefore, EPM cannot assure you that its actual capital expenditures and/or that the actual breakdown of such capital expenditures between its BUs and/or parent company and subsidiaries’ expenditures will be consistent with the figures shown above. For additional information regarding EPM’s planned capital expenditures, see ‘‘— Significant Factors Affecting EPM’s Results of Operations and Financial Condition — Significant Factors Generally Affecting EPM’s Present and Future Results of Operations — General Factors — EPM’s Expansion Strategy.’’ For details of the nature of EPM’s historical and planned capital expenditures, see ‘‘Business — Energy BU — Electricity Generation and Commercialization Business — Capital Expenditure Projects: Expansion of EPM’s Generation Capacity,’’ ‘‘Business — Energy BU — Electricity Transmission, Distribution and Commercialization Business — Capital Expenditure Projects,’’ ‘‘Business — Telecommunications BU — UNE’s Network,’’ and ‘‘Business — Water Services BU — Capital Expenditures.’’

104 Qualitative and Quantitative Disclosure About Market Risk EPM’s principal exposures to market risks are in connection with foreign exchange risk, interest rate risk and, to a minor extent, commodity price risks.

Foreign Exchange and Interest Rate Risk To the extent some of its financial obligations are denominated in other currencies, mainly dollars, and bear interest at floating rates, EPM’s financial condition and results of operations may be affected by changes in foreign currency exchange rates, primarily the U.S. dollar/Colombian peso rate, and market rates of interest such as the DTF, LIBOR and IPC, which are the base interest rates for most of EPM’s floating rate indebtedness. As of June 30, 2014, EPM had outstanding dollar-denominated financial obligations for U.S.$1,870 million of which U.S.$243.7 million bears interest at an adjustable rate set forth by IADB, U.S.$481.2 million bears interest at LIBOR plus a spread ranging from 0.95% to 2.375% and U.S.$1,145.1 million bears interest at fixed rates ranging from 4% to 8.5%. As of June 30, 2014, EPM had outstanding peso-denominated financial obligations for Ps.4,903,913 million, of which Ps.1,180,852 million bears interest at DTF plus a spread that ranges between -1% and 3.5%, Ps.2,094,690 million bears interest at IPC plus a spread that ranges between 3.25% and 7.12% and Ps1,628,370 million bears interest at fixed rate with spreads ranging from 6.27% to 13.80%. As of June 30, 2014, EPM had (i) outstanding Guatemalan quetzal-denominated financial obligations for GTQ$1,159 million, all of which bears interest at TAPP (tasa activa promedio ponderada) minus a spread that ranges between 6% and 6.56%, and (ii) Mexican Peso-denominated financial obligations for 1,175 million Mexican Pesos, of which 968 million Mexican Pesos bears interest at TIIE (tasa de interés interbancaria de equilibrio) plus a spread that ranges between 2.75% and 4.07%, and 206 million Mexican Pesos bears interest at fixed rate with spreads ranging from 8.16% to 11.47%.

Commodity Price Risks During the period 2011-2013, EPM sold on average approximately 7.1% of its total electricity generation on the Energy Spot Market. Also, during the same period, EPM purchased on the Energy Spot Market, on average, approximately 10.0% of the electricity it distributes. As a participant in the electricity market, EPM must submit bids for the sale of its electricity generation. EPM’s electricity generation revenue from spot market sales is subject to the variable price of electricity, which depends on current market and electric system conditions at any point in time. Spot market prices depend directly on, among other factors, hydrological conditions, with prices increasing during below-average rainfall seasons and falling during years of high rainfall levels, the levels of regional, national and international supply and demand of energy, international oil and natural gas prices, energy laws and regulations, and taxes. As a result, EPM’s income from its electricity generation activities may fluctuate, and there can be no assurance that those fluctuations may not adversely affect EPM’s financial and operating results. Out of EPM’s total electricity generation in 2013, approximately 92% was sold under energy supply agreements and approximately 8% was sold in Energy Spot Market transactions. EPM may not be able to generate energy that is sufficient to meet its obligations under current energy supply agreements, as a result of hydrological, operational or other external causes. In such event, EPM may be required to purchase electricity on the Energy Spot Market or enter into energy supply agreements with other generators or commercialization companies. Depending on market and system conditions at any point in time, such purchases may have to be made at higher spot prices than energy supply agreement prices, which may in turn affect EPM’s financial and operating results. Also, if EPM fails to meet its Firm Energy obligations, it may be required to pay to other electricity generators an amount equivalent to the difference between the scarcity price and the spot market price of the electricity that EPM failed to supply under its Firm Energy obligations and that was supplied by other electricity generators, which may in turn affect EPM’s financial and operating results. To a minor degree, EPM is exposed to other commodity price risks, including changes in the price of fuel oil. EPM does not enter into any transactions to hedge this risk.

105 Derivative Financial Instruments In an effort to hedge EPM’s exposure to market risk derived from its foreign currency denominated debt, EPM has entered into various derivative financial instrument transactions with foreign and domestic counterparties. EPM actively evaluates the creditworthiness of the financial institutions and corporations that are counterparties to its derivative financial instruments and believes that they have the financial capacity to honor their obligations in connection with such instruments. EPM has entered into swaps to hedge some of its exposure to fluctuations of the dollar and interest rates. EPM has not entered into swaps in order to hedge its exposure to fluctuations in interest rates affecting its peso denominated debt principally because of unavailability of coverage for DTF benchmarked debt and because exposure to IPC fluctuation is mitigated by the fact that he tariffs that EPM charges for its services are partially indexed to IPC. Under Colombian Public Utilities Companies GAAP, obligations and rights in respect of derivative financial instruments (except for options) are registered on EPM’s balance sheet as liabilities or assets in the line-item financial liabilities, depending on whether the net amount is an amount hypothetically owed by or to EPM, and in order to determine the corresponding outstanding amount they are hypothetically liquidated at the exchange rate or interest rate in effect as of the balance sheet date. EPM registers the difference attributable to foreign exchange fluctuation between obligations and rights deriving from derivative instruments (e.g. dollar and peso denominated obligations) in its income statement as non-operating revenues or non-operating expenses, as the case may be. The notional amounts of derivative financial instrument agreements are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss. EPM does not apply hedging accountings in connection with its derivative instruments and is not engaged in speculating or trading with derivative instruments. As of the date hereof, energy derivatives are not traded locally in Colombia and EPM is not a party to any such derivatives. EPM is a party to two fuel distribution agreements under which it buys gas or liquid fuel. None of these agreements include price adjustment mechanisms or can be otherwise characterized as including embedded derivatives. The following tables set forth detailed information on EPM’s derivatives: Agreed Registered Derivative Exchange Interest Interest Notional Value as of Instruments Rate Rate (USD) Rate (Ps.) Amount June 30, 2014 Maturity Date Counterparty (Ps./U.S.$) (In U.S.$) (Ps. in millions) Citibank...... Swap 2,906,0 — IPC+2.0% 29,000,000 (29,719.4) January 12, 2016 Citibank...... Swap 2,881,0 — IPC+1.0% 17,654,179 (17,650.8) July 12, 2014 Citibank...... Swap 2,881,0 — IPC+1.1% 4,576,231 (4,575.4) January 12, 2015 Citibank...... Swap 2,881,0 — IPC+1.1% 4,454,365 (4,453.5) July 12, 2015 Bancolombia...... Cross-currency swap 1,957.0 Libor 6 m 3.7% 20,000,000 (189.5) September 29, 2015 Bancolombia...... Cross-currency swap 1,845.0 Libor 6 m 2.9% 30,000,000 135.7 September 29, 2015 Bancolombia...... Cross Currency Swap 1,810.0 Libor 6 m 2.7% 20,000,000 177.9 September 29, 2015 BBVA...... Cross Currency Swap 1,945.0 Libor 6 m 3.6% 30,000,000 (239.2) September 29, 2015 JP Morgan ...... Cross Currency Swap 1,786.0 Libor 6 m 2.2% 50,000,000 594.9 September 29, 2015 BBVA...... Cross Currency Swap 1,810.0 Libor 6 m 2.0% 50,000,000 444.9 September 29, 2015 BNP Paribas ...... Cross Currency Swap 2,029.0 Libor 6 m + 1.875 4.8% 50,000,000 (6,163.7) September 15, 2016 JP Morgan ...... Cross Currency Swap 2,034.0 Libor 6 m + 1.875 6.0% 30,000,000 (4,584.3) September 15, 2016 JP Morgan ...... Cross Currency Swap 2,011.0 Libor 6 m + 1.875 5.9% 70,080,000 (9,097.1) September 15, 2016 BBVA...... Cross Currency Swap 1,928.0 Libor 6 m + 2.15 6.0% 60,000,000 (2,808.6) September 17, 2018 BNP Paribas ...... Cross Currency Swap 1,923.0 Libor 6 m + 2.15 6.9% 50,000,000 (2,090.5) September 17, 2018 BNP Paribas ...... Cross Currency Swap 1,919.0 Libor 6 m + 2.15 6.9% 51,100,000 (1,932) September 17, 2018

(1) Through a local master agreement entered into between EPM and Conavi.

106 The following table sets forth the aggregate rights, liabilities and net value of the foreign exchange derivative financial instruments entered into by EPM, as of June 30, 2014, for the amortization periods indicated, and their sensibility to a hypothetical increase or decrease in foreign exchange rate. As of June 30, 2014 Upon a Hypothetical 1% Increase in Upon a Hypothetical 1% Decrease in Actual Foreign Exchange Rate Foreign Exchange Rate Rights(1) Liabilities Net(2) Rights(1) Liabilities Net(2) Rights(1) Liabilities Net(2) (Ps. in millions) 2014 . . . . . 135,649 157,700.10 (22,051.54) 137,005 157,700.10 (20,695.06) 134,292.07 157,700.10 (23,408.03) 2015 . . . . . 221,864 239,693.97 (17,830.32) 224,082 239,693.97 (15,611.68) 219,645.02 239,693.97 (20,048.96) 2016 . . . . . 229,355 268,587.35 (39,232.67) 231,648 268,587.35 (36,939.12) 227,061.14 268,587.35 (41,526.21) 2017 . . . . . 67,347 68,864.64 (1,518.04) 68,020 68,864.64 (844.58) 66,673.14 68,864.64 (2,191.51) 2018 . . . . . 67,347 68,864.64 (1,518.04) 68,020 68,864.64 (844.58) 66,673.14 68,864.64 (2,191.51) Total ..... 721,560.10 803,710.71 (82,150.61) 728,775.70 803,710.71 (74,935.01) 714,344.50 803,710.71 (89,366.22)

(1) The notional collectable amount is expressed in U.S. dollars and translated based on the exchange rate of Ps.1,881.19 per U.S. dollar as of June 30, 2014. Such translations should not be construed as representations that the Colombian peso amounts represent, or have been or could be converted into, U.S. dollars at that or any other rate. (2) Rights minus liabilities. Net exposure of EPM. The following table sets forth the aggregate rights, liabilities and net value of the foreign exchange derivative instruments entered into by EPM, as of December 31, 2013, for the amortization periods indicated and their sensibility to a hypothetical increase or decrease in foreign exchange rate. As of December 31, 2013 Upon a Hypothetical 1% Increase in Upon a Hypothetical 1% Decrease in Actual Foreign Exchange Rate Foreign Exchange Rate Rights(1) Liabilities Net(2) Rights(1) Liabilities Net(2) Rights(1) Liabilities Net(2) (Ps. in millions) 2014 . . . . . 101,137 133,940 (32,803) 102,148 133,940 (31,791) 100,126 133,940 (33,814) 2015 . . . . . 49,516 56,755 (7,239) 50,011 56,755 (6,744) 49,020 56,755 (7,734) 2016 . . . . . 55,878 84,274 (28,396) 56,437 84,274 (27,837) 55,319 84,274 (28,955) 2017 . . . . . 206,531 274,969 (68,438) 208,596 274,969 (66,373) 204,465 274,969 (70,503) Total ..... 413,062 549,938 (136,876) 417,192 549,938 (132,745) 408,930 549,938 (141,006)

(1) The notional collectable amount is expressed in U.S. dollars and translated based on the exchange rate of Ps.1,926.83 per dollar as of December 31, 2013. Such translations should not be construed as representations that the U.S. dollar amounts represent, or have been or could be converted into, Colombian pesos at that or any other rate. (2) Rights minus liabilities. Net exposure of EPM.

Seasonality Colombian hydrology typically follows a dual season annual cycle, with one period of low levels of rain from December to March and high levels during the rest of the year. In addition, in the last couple of decades Colombia’s hydrology has been affected by El Niño and La Niña events. Rainfall seasonality can affect electricity generation capacity of all generation companies in Colombia, including EPM, and the spot price of electricity in the MEM. EPM believes that adverse effects deriving from seasonality of rainfall are mitigated due to (i) the Firm Energy program set forth by the Colombian Government in 2007; (ii) EPM’s reservoir reserve policies and its ability to generate thermal electricity through its plant La Sierra; and (iii) EPM’s strategy pursuant to which it sells and purchases electricity mostly through long-term contracts and only to a lesser degree on the Energy Spot Market, which mitigates the risk from fluctuations on the Energy Spot Market. Although rainfall seasonality can also affect EPM’s water services, EPM believes it has sufficient water supply sources and, therefore, seasonality does not materially impact its revenues from water services. EPM believes demand or supply for gas and telecommunications services are not materially affected by seasonality.

107 DESCRIPTION OF OTHER FINANCIAL OBLIGATIONS

EPM’s Other Financial Obligations The table below presents the outstanding balance of EPM’s consolidated other financial obligations as of June 30, 2014. The table excludes current bank loans (treasury loans) but includes commercial paper outstanding.

Amount Total U.S. dollar-denominated financial obligations (in millions) ...... U.S.$ 1,580 Total Guatemalan quetzals-denominated financial obligations (in millions) ...... GTQ$. 1,159 Total Colombian Peso-denominated financial obligations (in millions) ...... Ps. 4,554,962 Total Mexican Peso-denominated financial obligations (in millions) ...... MXN. 1,175 The tables below present the amortization schedule under EPM’s other non-current consolidated financial obligations:

U.S. dollar - Denominated Financial Obligations

As of June 30, 2014 Total 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025-2027 (U.S.$ in millions) IFC ...... 210.6 46.1 92.9 35.8 35.8 — — — — — — — IAD...... 203.7 12.9 25.7 25.7 23.5 23.5 15.4 15.4 15.4 15.4 15.4 15.4 U.S. Dollar Denominated Notes . . . . . 730 9 — — 20 500 21 100 — — — 80 Bank of Tokyo and BBVA Tokyo . . . . . 141.9 8.3 16.7 16.7 16.7 16.7 16.7 16.7 16.7 16.7 — — French Agency for Development ...... 268.8 — 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4 22.4 67.25 Banco Davivienda ...... 25.1 1.3 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 1.3

Guatemalan quetzal - Denominated Financial Obligations

As of June 30, 2014 Total 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 (GTQ$ in millions) Banco Industrial, S.A ...... 497 — 70.9 70.9 70.9 70.9 70.9 70.9 70.9 — — — Banco G&T Continental ...... 323 — 46 46 46 46 46 46 47 — — — Banco Reformador ...... 130 — 20 20 20 20 20 20 10.4 — — — Banco Internacional...... 33 5.6 5.6 5.6 5.6 5.5 5.5 — — — — — Banco Agromercantil de Guatemala . . . . . 175 — 25 25 25 25 25 25 25 — — —

Colombian Peso - Denominated Financial Obligations

As of June 30, 2014 Total 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025-2027 (Ps. in millions) Banco Agrario . . . . 116,000 — — — — — 5,800 11,600 11,600 11,600 11,600 63,800 Banco Davivienda. . 212,143 19,288 38,571 38,571 38,571 38,571 38,571 — — — — — Banco de Bogotá . . 214,900 18,550 40,900 44,700 44,700 44,700 17,550 3,800 — — — — Banco Popular . . . . 14,099 297 1,348 1,548 1,548 1,548 1,548 1,548 1,548 1,548 1,123 495 Bancolombia . . . . . 39,224 7,058 13,708 13,708 2,875 375 375 375 375 375 — — BBVA ...... 145,386 13,940 27,652 25,839 25,839 25,839 25,839 125 125 125 63 — IADB 2120-1. . . . . 190,295 — — — — — — — — 190,295 — — EPM Bonds...... 1,511,390 — 112,700 — 274,290 213,300 — — 119,900 96,210 198,400 496,590 Internacionales Bonds ...... 1,250,000 — — — — — — 1,250,000 — — — — UNE Bonds...... 450,000 — 150,000 — — — 150,000 — — 150,000 — — Corpbanca...... 56,573 5,143 10,286 10,286 10,286 10,286 10,286 — — — — — Helm Bank ...... 34,710 2,912 5,824 5,824 5,824 5,824 5,824 824 824 824 206 — ICEL ...... 242 125 117 Sindicado Local UNE...... 320,000 — — 80,000 80,000 40,000 — 80,000 40,000 — — —

108 Mexican Peso - Denominated Financial Obligations

As of June 30, 2014 Total 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025-2027 (MXN in millions) Banobras ...... 206 11.6 25.6 29.1 21.2 17.6 20 22.6 25.6 22.1 11 — — Interacciones ...... 641 22.4 51.3 57.4 87.4 97 105.9 52.5 36.4 57.4 36.7 36.8 — Banorte ...... 126 2.9 5.9 6.4 6.9 7.4 8.1 8.7 9.5 10.2 11.1 12 37 Banco del Bajío ...... 201 — 9.9 10.5 11.2 12 12.8 13.7 14.6 15.6 16.6 17.7 66 The following is a summary of the general terms of EPM’s main other financial obligations:

Notes Under Long Term Notes Program In June 2007, EPM established a long term notes program (the ‘‘Long Term Notes Program’’) under which it could initially issue up to Ps.1,000,000 million of notes listed and traded on the Colombian Stock Exchange. In September 2013 such amount was increased to Ps.3,000,000 million. The notes issued under the Long Term Notes Program bear interest at rates that may be floating or fixed, depending on the series of notes that is issued. Also, EPM may issue U.S. dollar denominated notes that bear interest at a fixed interest rate. Floating interest rates use the DTF, the IPC or Real Value Units (Unidades de Valor Real or ‘‘UVR’’) indexes as base rates. Interests are payable in arrears on a monthly, quarterly, semi-annual or annual basis depending on the terms of a particular series of notes. Maturities of the notes issued under the Long Term Notes Program may range from 1 to 20 years. Under certain circumstances, prepayment of the notes may require the payment of premiums or penalties. The notes issued under the Long Term Notes Program do not provide for any significant restrictive, affirmative or negative covenants. EPM has issued several series under the Long Term Notes Program. As of June 30, 2014, the total outstanding balance under the Long Term Notes Program was Ps.1,511,390 million. Maturities of the notes issued under the program before June 30, 2014 range from 5 to 20 years and bear interest at IPC plus a spread that may range from 3.82% to 5.03% which is payable in arrears on a quarterly basis. On July 31, 2014 EPM issued notes for a principal amount of Ps.500.000 million under the Long Term Notes Program. Maturities of the notes under this issuance range from 6 to 20 years and bear interest at IPC plus a spread that may range from 3.57% to 4.50% which is payable in arrears on a quarterly basis.

Club Loan Deal On October 26, 2010, EPM entered into a club loan deal with the following Colombian banks: Banco Davivienda S.A., Banco Bilbao Vizcaya Argentaria Colombia S.A., Banco Santander Colombia S.A, and Helm Bank S.A, for an amount of Ps.557,000 million. The term of the loan is 10 years. The loan provided for a grace period of three years and an interest rate of DTF plus 3.4%, which was lowered to DTF plus 2.7% on August 22, 2013, payable semi-annually in arrears. The loan agreement does not contain any restrictive covenants. As of June 30, 2014, the total outstanding balance under the loan was Ps.517,214 million.

Senior Notes Offering On July 29, 2009, EPM issued U.S.$500 million aggregate principal amount of its 7.625% senior notes due 2019 (the ‘‘2019 Notes’’), in transactions exempt from registration pursuant to Rule 144A and Regulation S of the Securities Act. Interest on the 2019 Notes are computed on the basis of a 360-day year comprised of twelve 30-day months, and are paid semiannually in arrears on January 29 and July 29 of each year to the holders of record on the close of business on the 15th calendar day immediately preceding the related interest payment date. The 2019 Notes represent senior, unsubordinated, unsecured and unconditional general obligations, and are ranked equally without any preference among themselves and equally with all existing and future senior unsecured External Indebtedness of EPM, and senior to any existing or future indebtedness that by its terms is junior and subordinated in right of payment to the 2019 Notes. Payment of principal of the 2019 Notes will be made in a single installment on the maturity date, July 29, 2019. The indenture governing the 2019 Notes contains certain restrictions and limitations, including, but not limited to, restrictions on the ability of EPM to (i) incur or guarantee additional indebtedness, (ii) pay dividends or make distributions on, or redeem, or repurchase capital stock or subordinated indebtedness, (iii) make restricted payments including investments, create certain liens, sell or otherwise dispose of assets, (iv) enter into arrangements that restrict dividends from subsidiaries, (v) enter into transactions with affiliates, (vi) enter into sale and lease back

109 transactions, and (vii) enter into mergers or consolidations. Most of these restrictions, however, currently do not apply to EPM because certain covenants were suspended when the 2019 Notes obtained an investment grade rating from Fitch Ratings and Moody’s Investors. As of June 30, 2014, EPM had an aggregate principal amount of U.S.$500 million of 2019 Notes outstanding.

Loan Agreement with the Japan Bank for International Cooperation On September 29, 2008, EPM entered into a syndicated loan agreement with two financial institutions, The Bank of Tokyo-Mitsubishi UFJ, LTD, acting as facility and collection agent, and The Bank of Tokyo-Mitsubishi UFJ, LTD and Banco Bilbao Vizcaya Argentaria, S.A., Tokyo Branch, acting as joint lead arrangers (the ‘‘Japan Bank Loan’’). The Japan Bank Loan is guaranteed by the Japan Bank for International Cooperation. As of June 30, 2014, the outstanding principal amount under the Japan Bank Loan was U.S.$158 million. The Japan Bank Loan bears interest at LIBOR plus (i) 0.375% per annum during the period commencing on September 29, 2008 through, but not including the third anniversary thereof and (ii) 0.95% per annum during the period commencing on the third anniversary of the agreement. EPM may voluntarily prepay the Japan Bank Loan at any time, without premium or penalty (except for mandatory prepayment break funding costs in case prepayments are made on a date other than on an interest payment date). Amounts prepaid or repaid under the Japan Bank Loan cannot be re-borrowed. All payment obligations under the Japan Bank Loan rank at least pari passu with all of EPM’s unsecured and unsubordinated External Indebtedness. The Japan Bank Loan contains both affirmative and negative covenants and provides for certain cross default events, including defaults under agreements guaranteed by the Japan Bank for International Cooperation or defaults under any of EPM’s External Indebtedness. On May 29, 2013, EPM and the Japan Bank for International Cooperation entered into an Indemnity Agreement, which provides for certain financial covenants, including covenants pursuant to which EPM may not allow its long-term financial debt to shareholders’ equity ratio to exceed 1.5:1.0 or its total financial debt to consolidated EBITDA ratio to exceed 3.5:1.0.

Inter-American Development Bank Loans EPM has entered into several loan agreements with the IADB guaranteed by Colombia. As of June 30, 2014, the total outstanding balance under such loans was U.S.$345 million. Generally, these loans have been entered into in connection with certain of EPM’s infrastructure projects, including the expansion of water and sewage infrastructure in the City of Medellín, the Medellín river clean-up program and the Porce III hydroelectric project. In relation to the Medellín river clean-up program, on March 25, 2009, EPM and the IADB entered into a 25-year credit facility for up to U.S.$450 million. As of June 30, 2014, EPM had borrowed Ps.190,295 million under this credit facility. These loans provide for an interest rate of (i) LIBOR plus a fixed rate and/or (ii) the IADB lending spread, semi-annual interest payments, cross-defaults in respect of other indebtedness with the IADB and voluntary prepayments. Also, under certain loan agreements, EPM is (i) prohibited from incurring new indebtedness with maturities longer than one year, as a result of which EPM’s total financial indebtedness/consolidated EBITDA ratio exceeds to 3.5, and (ii) required to maintain a long-term indebtedness/net worth ratio not to exceed 1.5 times EPM’s net worth. Other restrictive covenants include limitations on liens, limitations on the sale of assets and limitations on investments. The IADB loan agreements allow EPM to convert the currency of the outstanding balance, with the authorization of the loan’s guarantor. On July 2013, the MHCP authorized EPM to convert the currency of the IADB 2120 loan and on May 27, 2014, EPM converted the outstanding balance of U.S.$98.6 million to Ps.190,295 million with a fixed the interest rate of 6.2716%.

Loan Agreement with International Finance Corporation On December 29, 2011, EPM entered into a loan agreement with IFC for loans with a total principal amount of U.S.$349 million and a two-year grace period. The IFC loans bear interest at LIBOR plus 1.875% and 2.15% per annum, payable semi-annually in arrears, and mature in September 2016 and September 2018. EPM may voluntarily prepay the IFC loans at any time, without premium or penalty (except for mandatory prepayment break funding costs in case prepayments are made on a date other than on an interest payment date). As of June 30, 2014, the total outstanding balance under such loans was U.S.$303 million. The IFC loan provides for financial covenants pursuant to which EPM must maintain a ratio of EBITDA to interest expense of no less than 3.0:1.0, and a debt to EBITDA ratio of no more than 3.5:1.0. Other restrictive covenants include limitations on liens, limitations on the sale of assets and limitations on corporate reorganizations.

110 Credit Facility with Agence Française de Developpement On August 10, 2012, EPM entered into a credit facility with Agence Française de Developpement (‘‘AFD’’) for a total principal amount of approximately U.S.$338 million, with a three-year grace period. As of June 30, 2014, the total outstanding balance under such loan was U.S.$269 million. The AFD loan bears interest, at EPM’s discretion for each drawdown, at either a floating rate equal to LIBOR plus 2.10% per annum or a fixed rate determined based on the present value of all pending principal and interest payments. EPM has made two drawdowns: one on June 24, 2014 for U.S.$195 million with a fixed rate of 4.32% payable semi-annually in arrears, and the other on June 20, 2014 for U.S.$195 million with fixed rate of 4.50% payable semi-annually in arrears. The AFD loan matures in July 2027 and, after January 31, 2016, EPM may voluntarily prepay the AFD loan at any time, without premium or penalty (except for mandatory prepayment break funding costs in case prepayments are made on a date other than on an interest payment date). All payment obligations under the AFD loan rank at least pari passu with all of EPM’s unsecured and unsubordinated external financial obligations. The AFD loan provides for certain financial covenants, including covenants pursuant to which EPM shall maintain and interest coverage ratio of no less than 3.0 and an indebtedness to EBITDA ratio of no more than 3.5. Other restrictive covenants include limitations on liens and limitations on the sale of assets.

EPM’s Subsidiaries’ Other Financial Obligations The following is a summary of the general terms of EPM’s subsidiaries main other financial obligations:

UNE Notes In March 2010, UNE issued Ps.300,000 million of notes in two series, A5 and A10, each in an aggregate principal amount of Ps.150,000 million. Such notes are listed and traded on the Colombian Stock Exchange and bear interest at floating rates, composed of IPC plus 3.99% and 5.10% for the A5 and A10 series, respectively, payable quarterly in arrears. The notes have maturities of 5 and 10 years for the A5 and A10 series, respectively. Under certain circumstances, prepayment of the notes may require the payment of premiums or penalties. The notes do not provide for any significant restrictive affirmative or negative covenants. In October 2011, UNE issued Ps.300,000 million of notes in two series, A5 and A12, each in an aggregate principal amount of Ps.150,000 million. Such notes are listed and traded on the Colombian Stock Exchange and bear interest at floating rates, composed of IPC plus 3.67% and 4.76% for the A5 and A12 series, respectively, payable quarterly in arrears. The notes have maturities of 5 and 12 years for the A5 and A12 series, respectively. Under certain circumstances, prepayment of the notes may require the payment of premiums or penalties. The notes do not provide for any significant restrictive affirmative or negative covenants. As of June 30, 2014, UNE had outstanding notes in an aggregate principal amount of Ps.600,000 million. Pursuant to Colombian Public Services Companies GAAP, EPM ceased consolidating this financial obligation on August 1, 2014 as a result of the UNE-Millicom Merger. See ‘‘Summary — Recent Developments.’’

UNE Club Loan Deal On July 24, 2012, UNE entered into a club loan deal with the following Colombian banks: Banco Bogotá S.A., Banco Bilbao Vizcaya Argentaria Colombia S.A., Bancolombia S.A., Banco Santander Colombia S.A. (subsequently acquired by Banco Corpbanca Colombia S.A.), and Banco Popular S.A., for an amount of Ps.400,000 million. The term of the loan is 10 years. The loan provides for a grace period of one year and an interest rate of DTF plus 3.9%, which was subsequently lowered to 3.45%, payable semi-annually in arrears. The loan agreement does not contain any significant restrictive covenants. As of June 30, 2014, the total outstanding balance under the loan was Ps.360,000 million. Pursuant to Colombian Public Services Companies GAAP, EPM ceased consolidating this financial obligation on August 1, 2014 as a result of the UNE-Millicom Merger. See ‘‘Summary — Recent Developments.’’

EdeQ Local Financings On July 15, 2011, EdeQ entered into a loan agreement with Banco Bilbao Vizcaya Argentaria Colombia S.A., for an amount of Ps.16,500 million and a term of five years. The loan provides for a grace period of two years and an interest rate of DTF plus 2.90%, payable quarterly in arrears.

111 On October 26, 2012, EdeQ entered into a loan agreement with Bancolombia S.A. for an amount of Ps.10,000 million, with a five-year term, a grace period of two years and an interest rate of DTF plus 2.70%, payable quarterly in arrears. This loan agreement does not contain restrictive covenants. As of June 30, 2014, the total outstanding balance under this loan was of Ps.18,800 million. ESSA Local Financing On January 3, 2013, ESSA entered into loan agreements with Banco de Bogotá S.A. for Ps.240,000 million, with a seven-year maturity and a grace period of two years. This loan bears interest at DTF plus 2.84% per annum, payable quarterly in arrears. These agreements do not contain any financial covenants. As of June 30, 2014, the total outstanding balance under these loans was Ps.183,500 million. CENS Local Financing On December 21, 2010, CENS entered into a loan agreement with Bancolombia S.A. for Ps.100,000 million, with a seven-year term, a two-year grace period and an interest rate of DTF plus 3.3% per annum, payable semi-annually in arrears. Additionally, on August 1, 2012, CENS entered into another loan agreement with Banco de Bogotá S.A. for Ps.50,000 million, with a seven-year term, a two-year grace period and an interest rate of DTF plus 3.0% per annum, payable semi-annually in arrears. These loans do not contain any financial covenants. As of June 30, 2014, the total outstanding balance under these loans was Ps.75,000 million. CHEC Local Financing On July 10, 2014, CHEC entered into a loan agreement with Banco Bilbao Vizcaya Argentaria Colombia S.A., for an amount of Ps.67,000 million and Banco Corpbanca Colombia S.A, for an amount of Ps.51,000 million with a ten years term. The loan provides for a grace period of two years and an interest rate of IPC plus 4.50%, payable quarterly in arrears. Water Subsidiaries The water subsidiaries have loans for Ps.34,921 million. Regional Occidente entered into two loan agreements with Banco Popular and Bancolombia for an aggregate amount of Ps.8,200 million, with a 10-year term, a two-year grace period and an interest rate of DTF plus 2.75% per annum, payable quarterly in arrears. Aguas de Uraba has loans for Ps.26,721 million with Helm Bank S.A., Banco Popular S.A. and Banco Bilbao Vizcaya Argentaria Colombia S.A. The terms of these loans range from 10 to 12 years, with a two-year grace period and interest rates ranging from DTF minus 0.70% to DTF plus 3.90% per annum, payable quarterly in arrears. These loans do not contain any covenants. As of June 30, 2014, the total outstanding balance under these loans was Ps.18,638 million. EEGSA Citibank Loan On December 21, 2004, Empresa Eléctrica de Guatemala S.A. (‘‘EEGSA’’) entered into a loan agreement with Citibank N.A. for a total principal amount of U.S.$100 million. The loan with Citibank N.A. bears an interest at a fixed rate of 8.5% per annum and matures in December 2014. As of June 30, 2014, the total outstanding balance under this loan was U.S.$97 million. The loan with Citibank N.A. contains both affirmative and negative covenants. The financial covenants prevent EEGSA from incurring new financial obligations if (i) its ratio of indebtedness to adjusted EBITDA is lower than 5.0:1 and (ii) its EBITDA/interest expense ratio is higher than 3.0:1.0. Other restrictive covenants include limitations on liens, limitations on the sale of assets and on corporate reorganizations, limitations on affiliate transactions and payments of dividends and other distributions in certain circumstances, and limitations to allow subsidiaries to suffer restrictions to make loans and distributions or to transfer their property. The Citibank loan was entered into in connection with the notes issued by ‘‘Guatemala Electricity Trust,’’ a trust created by EEGSA to issue Rule 144A/Regulation S notes for an amount of U.S.$100 million (the ‘‘GET Notes’’) in December 2004. The GET Notes are guaranteed by EEGSA and COMGESA and mature in December 2014. The GET Notes bear an annual interest of 8.5%, payable semiannually in arrears. The GET Notes represent senior, unsubordinated, unsecured and unconditional general obligations, and rank equally without any preference among themselves and equally with all existing and future senior unsecured indebtedness of the issuer. EEGSA Local Financing On October 29, 2012, EEGSA entered into several local currency loan agreements for a principal amount of GTQ$1,125 million with (i) Agro Mercantil de Guatemala S.A., (ii) Banco Industrial S.A., (iii) Grupo Banco G&T Continental S.A., and (iv) Banco Reformador S.A. to refinance existing debt of the company. These loans bear

112 interest at an average quarterly active rate (tasa activa promedio del trimestre) minus 6.56% rate per annum, and have maturities of 10 years and grace periods of three and a half years. The loans contain customary affirmative and negative covenants. As of June 30, 2014, the total outstanding balance under these loans was GTQ$1,159 million.

ENSA Senior Notes Offering In July 2006, ENSA issued U.S.$100 million of notes (the ‘‘ENSA 2021 Notes’’). The ENSA 2021 Notes are listed and traded on the Panama Stock Exchange and were offered and sold to investors in the U.S. and outside the U.S. in transactions exempt from registration pursuant to Rule 144A and Regulation S of the Securities Act. The ENSA 2021 Notes bear interest at 7.60%, payable semi-annually in arrears, mature in 2021 and contain covenants that, among other things, prohibit ENSA from exceeding a Debt/EBITDA ratio of 3.25x.

ENSA Private Placement Bonds In December 2012, ENSA issued an aggregate principal amount of U.S.$80 million private placement notes, which bear interest at a rate of 4.73% payable semiannually in arrears and mature on December 13, 2027. The notes contain customary covenants that, among other things, prohibit ENSA from exceeding a Debt/EBITDA ration of 3.5x. Other restrictive covenants include limitations on liens, indebtedness and corporate reorganizations.

ENSA Local Bonds In October 2008, ENSA issued U.S.$40 million of notes (the ‘‘ENSA 2018 Notes’’). The ENSA 2018 Notes are listed and traded on the Panama Stock Exchange and bear interest at a floating rates, composed of LIBOR plus 2.375%, payable quarterly in arrears. The ENSA 2018 Notes mature on October 20, 2018. The ENSA 2018 Notes contain certain customary covenants that, among other things, require ENSA to maintain an indebtedness to EBITDA ratio of no less than 3.25:1.0. Other restrictive covenants include limitations on the ability of ENSA’s subsidiaries to incur debt, as well as limitations on the sale and leaseback of assets and corporate reorganizations.

ENSA Local Financing Since July 1, 2014, ENSA has incurred short-term debt for an aggregate amount of U.S.$42 million, which short-term debt is payable in 90 days.

Del Sur Local Bonds In August and October 2010, Del Sur issued U.S.$30 million of notes (the ‘‘Del Sur Notes’’), in three different series. The Del Sur Notes are listed and traded on the Salvador Stock Exchange and bear interest at floating rates, composed of LIBOR plus 4.50% to 8.00%, payable quarterly in arrears. The Del Sur Notes have maturities of 5 years for the 2nd and 3rd series and 10 years for the 1st series, respectively.

Del Sur Local Financing On August 26, 2013, Del Sur entered into a U.S.$25 million loan agreement with Banco Davivienda Salvadoreño, S.A. This loan bears interest at LIBOR plus 3.7% rate per annum payable semi-annually in arrears, has a two-year grace period and matures in 2023. The loan contains customary covenants, including financial covenants that require Del Sur to maintain a net financial debt/EBITDA ratio not higher than 3.5, an EBITDA/debt service ratio of not less than 2.5, and a debt/net worth ratio of not less than 3.0. As of June 30, 2014, the total outstanding balance under this loan was U.S.$25 million.

TICSA Local Financing TICSA has entered into several loan agreements with Banco Nacional de Obras y Servicios Públicos (‘‘Banobras’’), for an aggregate principal amount of 325 million Mexican Pesos, Banco Interacciones S.A., for an aggregate principal amount of 1,911 million Mexican Pesos, Banco Mercantil del Norte S.A. (‘‘Banorte’’) for a principal amount of 145 million Mexican Pesos, and Banco del Bajío S.A. for a principal amount of 360 million Mexican Pesos. The loans with Banobras have a term of between 118 and 186 months. The loans with Banco Interacciones S.A. have a term of between 96 and 256 months. The loan with Banorte has a term of 195 months. The loan with Banco Bajío S.A. has a term of 176 months. The loans with Banobras bear interest at a fixed rate of between

113 8.16% and 11.47% per annum. The loans with Banco Interacciones S.A., Banorte and Banco Bajío S.A. bear interest at a rate of TIIE plus a margin ranging between 2.0% and 4.07% per annum. These loan agreements contain customary restrictive covenants and cross-default provisions. TICSA has also entered into a several loan agreements with different local banks for an aggregate amount of 1,707 million Mexican Pesos, of which a significant amount has been borrowed from Banco Nacional de Obras y Servicios Públicos and Banco Interacciones S.A. The terms of the loans range from 118 to 186 months, and their interest rates are based on the TIIE plus a margin ranging from 2.75% to 4.5% per annum, payable monthly in arrears. These loan agreements contain customary restrictive covenants and cross-default provisions. As of June 30, 2014, the total outstanding balance under these loans was 1,175 million Mexican Pesos.

Current Financial Obligations and Repo Transactions As of June 30, 2014, EPM had current financial obligations with CHEC for an amount of Ps.55,000 million, and with ENSA for an amount U.S.$44 million.

114 INDUSTRY

The Colombian Public Utilities Industry Overview Under the Colombian constitution, the Colombian Government is responsible for ensuring the provision of public utility services. In order to enable the Colombian Government to fulfill its obligations, the constitution grants the Colombian Government significant powers to monitor and regulate public utility companies to ensure the continued availability of such services. Prior to 1991, the Colombian Government either provided public utility services directly through specialized providers, or granted concessions to private parties to provide such services. After 1991, the Colombian constitution allowed private parties to provide public utility services, although the Colombian Government remains ultimately responsible for the efficiency and availability of such services. The LSPD established the fundamental regulatory framework for the provision of public utility services in Colombia. The regulatory regime developed under the LSPD has facilitated investment, allowed for the entry of new private participants and promoted growth in the sector. Competition among private and government-owned providers has led to a substantial increase in the coverage and quality of public utility services in recent years. The LSPD framework created different regulatory authorities responsible for overseeing different services: the CREG for energy, the CRC for telecommunications, and the CRA for water, sewage and waste management. The SSPD is the supervisory agency which monitors and controls the provision of all public utility services. Pursuant to Law 1341 of 2009, telecommunication services are no longer considered public utility services and are therefore no longer under the jurisdiction of the SSPD.

General Regulatory Framework of the Public Utilities Industry — Multi-Utilities Companies Prior to the LSPD, public utilities services were regulated through an assortment of decrees, resolutions and statutes issued by various authorities and addressing particular types of services. The LSPD consolidated this framework by: (i) reorganizing regulations around defined utility services (water, sewage, sanitation, electricity, gas and telephony) and (ii) establishing regulatory and control principles governing each service, including a private law regime which fostered competition and promoted industry growth. Under the LSPD, service providers, consumers and other market participants operate under a uniform set of rules guided by principles of efficiency, quality, improved service coverage, financial sustainability and fair and equitable participation regardless of government affiliation. The current regulatory regime promotes competition for the benefit of consumers in areas such as pricing, quality and coverage. Government entities and government-owned entities that provide public utility services must ensure that they remain competitive in these areas, without solely relying on their dominant position. The LSPD is the authoritative regulatory framework for the public utilities sector in the event of a conflict with another regulation or law. The relationship between consumers and service providers (regardless of government affiliation) is defined by a special public utilities contract that guarantees the basic rights of the consumer.

115 The Energy Industry in Colombia Electricity Generation, Transmission, Distribution and Commercialization — Overview Demand for energy in Colombia is closely correlated to Colombia’s national GDP. The chart below illustrates the relationship between Colombia’s GDP growth and electricity demand in Colombia for the period 2005-2014:

Source: Dane, UPME, XM. As of June 30, 2014, the total installed electricity generation capacity of the Colombian electricity system was 14,989 MW. Colombia’s total installed electricity generation capacity is comprised of 9,637.76 MW (64.3%) from hydroelectric sources, 4,586.55MW (30.6%) from thermoelectric sources and 764.43 MW (5.0%) from cogeneration facilities and wind power plants. The Colombian power grid is interconnected at three points with the Venezuelan power grid, and at two points with the Ecuadorian power grid. In 2013, Colombia imported 0 GWh and exported 714.9 GWh from and to Venezuela, respectively. From January 1 to June 30, 2014, Colombia imported 0 GWh and exported 24.3 GWh from and to Venezuela, respectively. In 2013, Colombia imported 28.5 GWh and exported 662.3 GWh from and to Ecuador, respectively. From January 1 to June 30, 2014, Colombia imported 8.6 GWh and exported 361.2 GWh from and to Ecuador, respectively. The STN is an interconnected system for electricity transmission formed by 13,928 km of transmission lines that operate at 220 kV or above. Out of the total network of transmission lines that comprise the STN, 2,437 km operate at 500 kV, and 11,491 km operate at 220-230 kV. The STN is an interconnected system for electricity transmission formed by three subsystems, one in Colombia’s Atlantic coast region, one in Colombia’s central region and one in Colombia’s southwest region. The three subsystems are interconnected by 500 kV and 220-230 kV lines. The STN integrates Colombia’s local and regional electricity and distribution networks into a single network. The Colombian electricity sector includes many market participants, including generation, transmission, distribution and commercialization companies. As of December, 2013, there were 43 generation companies, nine transmission companies, 29 distribution companies and 67 commercialization companies. Colombian law provides for a functional separation between different types of market participants. Under the functional separation regime, electricity generation, transmission, distribution and commercialization businesses are required to operate separately and are subject to different regulatory regimes. For example, electricity generation companies cannot operate electricity distribution businesses, and vice versa, unless those companies were engaged in both activities before the legal reform of the electricity sector entered into effect in 1994, as in the case of EPM. See ‘‘— Functional Segregation of the Electricity Sector.’’ CREG regulations have established certain other ownership and market share restrictions that, among other limitations, place limits on the ownership interest that an electricity generation company may take in an electricity distribution company and on the maximum market share of Colombia’s Firm Energy held by a single market participant. However, electricity generators and distributors are entitled to act as electricity traders. Although any company may in principal enter the electricity transmission business, electricity

116 transmission companies cannot trade electricity, decide on the level of investments that are required to expand the electricity transmission network or establish rights to the utilization of the electricity transmission network. These decisions are made by the UPME. Also, electricity transmission companies cannot engage in generation, distribution or commercialization of electricity. The following diagram illustrates the structure of the electricity sector in Colombia, indicating the main characteristics of each of the component segments.

In 2013, Colombia’s total demand for electricity reached 60,890 GWh. During the period from 2012 to 2013, electricity demand grew at a rate of 2.56%. The UPME estimates that Colombia’s electricity demand will grow at an annually compounded rate of 4.35% during the period from 2013 to 2015. According to UPME’s estimates, Colombia’s electricity generation capacity is expected to reach 17,266 MW by 2019 (with the first phase of the Ituango project) and 18,466 MW in 2022 (with the second phase of the Ituango project). Also, interconnections with other nations’ power grids are expected to increase from five to six by 2014 due to construction of the interconnection grid with Panama’s infrastructure. A substantial portion of the electricity generated in Colombia is initially sold to commercialization companies at unregulated prices. Such commercialization companies then deliver the electricity either to other commercialization companies at freely negotiated prices, to Unregulated Users, also at freely negotiated prices, or to distributors who deliver it to their Regulated Users, at regulated prices. Generally, electricity is delivered to end-users through the networks of local distribution companies, although some large end-users have direct interconnections to regional transmission networks or the national grid.

117 History, Government Role and Private Sector Participation From the end of the 1980s to the beginning of the 1990s, the electricity sector in Colombia experienced a crisis due to the high debt burdens and poor management of companies in the sector. This period of crisis resulted in a scarcity of electricity from March 1992 through April 1993. The Colombian electricity sector was vertically integrated until 1994. During the years prior to 1994, the electricity industry was a government monopoly. In 1994, the Colombian Congress passed significant reforms to the public utilities industry. These reforms, contained in Law 142 and Law 143, were the result of constitutional amendments made in 1991 and created the basic legal framework that currently governs the electricity sector in Colombia. The most significant reforms included the opening of the electricity industry to private sector participation, the functional segregation of the electricity sector into generation, transmission, distribution and commercialization activities, the creation of an open and competitive wholesale electricity market, the regulation of transmission and distribution activities as regulated monopolies, and the adoption of universal access principles applicable to transmission and distribution networks. As a result of the substantial restructuring of the electricity industry, the Colombian Government assumed a regulatory and oversight role with respect to the industry and abandoned its traditional role as an operator of electricity utilities. Also, new regulatory and oversight authorities were created, as well as an independent policy-making agency. These entities operate relatively independently of the Colombian Government’s commercial and political interests. The major private sector participants in the electricity industry include, among others, Grupo ENDESA (‘‘ENDESA’’) (19.6%), Celsia S.A. E.S.P. (12.4%), and AES Chivor & Cia S.C.A. E.S.P. (‘‘AES’’) (6.9%). Even though legal barriers to entry have been eliminated, the electricity transmission business continues to be a government monopoly due to natural barriers to entry.

Regulatory Structure of the Electricity Market The constitutional duties and responsibilities of the Colombian Government with respect to the electricity sector are carried out through several governmental entities, including the following:

ASIC The ASIC is responsible for the registration of contracts and the settlement and billing of all transactions that take place at the MEM.

CAC The Commercialization Advisory Committee (Comité Asesor de Comercialización) is responsible for assisting the CREG in evaluating and adjusting the commercial aspects of the MEM.

CND The National Dispatch Center (Centro Nacional de Despacho or ‘‘CND’’) is responsible for the planning, supervision and control of the operations of the SIN.

CNO The National Operation Council (Consejo Nacional de Operación) is responsible for establishing technical standards to facilitate the efficient integration and operation of the SIN.

CREG The CREG is responsible for (i) promoting market competition; (ii) approving interconnection and Distribution Usage Charges for the transmission and distribution of electricity; (iii) establishing methodologies for calculating Distribution Usage Charges for the Regulated Market; (iv) defining the Regulated and Unregulated end-user markets; (v) establishing regulations for the planning and coordination of the operation of the STN; (vi) establishing technical criteria relating to the quality, reliability and security of electricity supply; and (vii) protecting users’ and customers’ rights.

118 DNP DNP, together with CONPES, is a technical entity responsible for conducting studies and advising the Colombian Government on matters related to Colombia’s development, which include, for instance, the development of infrastructure projects.

MHCP The MHCP is responsible for, among other issues, establishing Colombia’s tax, customs, public credit and monetary policies.

MME The MME is responsible for the policy-making and supervision of the electricity sector. The MME oversees the generation, distribution, transmission, commercialization and interconnection of electricity in Colombia, and approves generation and transmission programs. Direct supervisory authority over the electricity sector is entrusted to a number of agencies under the MME’s control, including the CREG and the UPME.

SSPD The SSPD is responsible for overseeing all public utilities companies. The SSPD monitors the efficiency of all public services companies and the quality of services, but does not issue regulations for the electricity industry. The SSPD can also assume control over public utilities companies when the availability of public utility services or the viability of such companies is at risk.

UPME The UPME is a special administrative unit of the MME and is responsible for developing and updating the national electricity plan and the national reference expansion plans. The UPME is also responsible for forecasting Colombia’s electricity needs and developing and implementing strategies to meet Colombia’s electricity requirements. All electricity transmission companies are required to prepare and submit information to the UPME upon its request.

XM XM is responsible for planning and coordinating the SIN’s operations, managing the commercial exchanges in the MEM and billing for the use of the SIN.

Functional Segregation of the Electricity Sector Pursuant to applicable rules and regulations, the Colombian electricity sector is largely vertically segregated. In order to achieve efficiency in the provision of electricity services and encourage private sector investment, Law 143 segregated the electricity industry into four main activities: power generation, transmission, distribution and commercialization. The electricity utilities companies that were vertically integrated prior to the enactment of Law 142, including EPM and some other regional and municipal companies, are entitled to continue to engage in all of the functions in which they were previously engaged provided they maintain separate accounting records for each business activity. Generation activities consist of the production of electricity through hydroelectric and thermal plants and all other plants connected to the SIN. Pursuant to CREG regulations, electricity generation companies are subject to several restrictions: • a 30.0% limit on any market participant’s share of Colombia’s total Firm Energy. If an electricity generation company’s share of Colombia’s total Firm Energy ranges from 25.0% to 30.0% and the market’s Herfindahl Hirschman Index, a measure of market concentration, is equal to or higher than 1,800, such company becomes subject to monitoring by the SSPD. If an electricity generation company’s share of Colombia’s total Firm Energy exceeds 30.0%, such company may be required to sell the electricity exceeding such threshold; • a 25.0% ownership restriction in respect of electricity commercialization companies. This ownership restriction does not apply to affiliates or subsidiaries of electricity generation companies;

119 • the annual average consolidated installed capacity of (i) electricity generation companies and (ii) affiliates under their control resulting from acquisitions, mergers or other forms of corporate restructuring, cannot exceed the power band (franja de potencia) adopted by the CREG; and Transmission activities consist of transporting electricity through the STN by using national transmission networks that operate at voltages higher than 220 kV. Although, in principle, any company may enter the electricity transmission business, such companies cannot trade electricity, decide on the level of investments that are necessary to expand the electricity transmission network or establish rights to the utilization of the electricity transmission network. These decisions are reserved to the UPME. Electricity generation, distribution, commercialization companies and integrated companies may own more than 15.0% of the capital stock of an electricity transmission company, provided that the income of such electricity transmission company attributable to transmission activities is less than 2.0% of the total income from electricity transmission of the STN. Distribution activities consist of transporting and delivering electricity to end-users through the STR and the ‘‘SDL. Pursuant to CREG regulations, electricity distribution companies cannot have direct or indirect ownership interests in electricity generation companies in excess of 25.0%. This ownership restriction is not applicable to affiliates or subsidiaries of the relevant electricity distribution company. Also, electricity distribution companies may have ownership interests in excess of 25.0% of the shareholdings of integrated companies that perform electricity generation, distribution and commercialization activities, provided that the integrated company’s electricity generating capacity does not exceed 2.0% of the total Firm Energy declared for purposes of the Reliability Charge mechanism, as described below. Commercialization activities consist of the purchase of electricity in the wholesale market and the subsequent resale to other market participants or to end-users, both Regulated and Unregulated. Individual commercialization companies may not, directly or indirectly, account for over 25.5% of the sector’s total electricity sales at any time. If a commercialization company exceeds such restriction, it may be required to reduce its market share to less than 25.5% of the sector’s total electricity sales within a term of one year. While Law 143 restricts vertical integration between electricity generators and distributors, it allows both types of entities to participate in electricity commercialization activities. In order to determine whether an electricity generation or commercialization company is in compliance with Colombia’s Firm Energy limitations or maximum ownership interests permitted, the applicable CREG regulations provide that ownership interests that any given company may have must be added to those of other companies that are controlled by or under common control with such company. As of June 30, 2014, EPM, on a consolidated basis, had a 21.6% share of Colombia’s Firm Energy and a 23.8% share of the commercialization market.

The Electricity Market The MEM is based on a competitive market model and operates under open access principles. The Colombian Government participates in this market through an institutional structure that is responsible for setting forth policies and regulations, as well as for exercising surveillance and control powers in respect of market participants. See ‘‘— Operation of the MEM.’’ The MEM relies for its effective operation on a central agency known as ASIC. This agency is in charge of the registration of contracts and the settlement and billing of all the transactions that take place at the MEM. The MEM is formed by various systems for the exchange of information between electricity generation and commercialization companies operating in the SIN. These systems are designed to enable market participants to make short- and long-term electricity transactions. All of the electricity supply offered by generation companies connected to the SIN and all the electricity requirements of end-users, whose demand is represented by commercialization companies, is traded at the MEM. The SIN is formed by generation plants, the STN, the regional and inter-regional transmission lines, the distribution lines and the electrical loading points of the users. Substantially all of the electricity generated in Colombia is initially purchased on a wholesale basis through the MEM. XM, through CND, conducts the planning, supervision and control of the operation of the resources of the SIN. Also, XM manages the ASIC and is in charge of the settlement and administration of the charges for the use of networks (STN and STR) in the SIN. The designated participants of the MEM are generation and commercialization companies. Generation companies are required to participate in the MEM with all their generation plants or units connected to the SIN with capacities equivalent to or exceeding 20 MW. This electricity is centrally dispatched by the CND. All commercialization companies, which deal with end-users connected to the SIN, are required to conduct their electricity transactions through the MEM. Unlike other market participants, electricity transmission companies do not

120 enter into agreements with other market participants. The only agreements entered into by electricity transmission companies are mandates granted to XM. The electricity transactions in the MEM are carried out under the following modalities: the Energy Spot Market, bilateral contracts and Firm Energy auctions. All generation companies in the MEM can freely enter into any or all of these transactions. The Colombian electricity market is divided into two market segments: the Regulated Market and the Unregulated Market. The tariffs applicable to the Regulated Market are set forth by the CREG according to certain formulae. The current applicable tariff for a unit of cost or costo unitario (‘‘CU’’) of the service applicable to the Regulated Market is:

CU = G + T + D + R+ C+ P Where:

G Is the purchase cost of electricity from the generator. T Is the cost for the use of the STN. D Is the cost for the use of the distribution network. R Is the cost of restrictions and ancillary services related to electricity generation. C Is the cost of the commercialization service. P Is the cost of electricity losses. The framework and rules of operation have remained stable since the introduction of the MEM, undergoing only necessary modifications to further promote market competition and efficiency. Since the creation of the wholesale electricity market in 1995, relatively stable amounts of electricity have been exchanged between generators and distribution companies, acting in their capacity as traders. Initially, electricity distribution-commercialization companies were required to enter into contracts to supply 100.0% of their Regulated Market and, although this requirement has gradually been reduced, distribution companies acting in their capacity as commercialization companies still tend to secure contracts for a large proportion of their Regulated Market.

Energy Spot Market The MEM relies on a single node system. In this market, the transmission network is considered as neutral, which implies that the generator sets its daily price offer and its hourly availability declaration without considering the physical and technical restrictions of the transmission network. Electricity resources to be dispatched at a particular time are selected based on the lowest price offers. This mechanism is known as the ideal dispatch, and differs from the real dispatch because in the latter the CND takes into account the restrictions that may affect the transmission network. The price offered by generation companies that participate in the MEM reflects the variable costs of generation as well as opportunity costs. The price of the last resource used to meet the total demand in each hour is the one that sets the price to be used to pay all the inframarginal resources at the same hour, and it is known as the spot price. Electricity demand from commercialization companies that is not covered by bilateral contracts is settled at the spot price. Since December 1, 2006, electricity generators connected to the SIN are entitled to a payment known as the Reliability Charge. See ‘‘— Electricity Generation in Colombia — Revenues of Electricity Generation Companies — The Reliability Charge.’’

Bilateral Financial Contracts Market In the bilateral contracts market, generation and commercialization companies sell and purchase electricity under the terms of mutually and freely agreed contracts. The market for bilateral contracts is essentially a medium-term and long-term financial market. The purpose of these contracts is to reduce the purchasers’ and sellers’ exposure of both the supplier and the end-user of electricity to short-term price volatility. The generation and commercialization companies that initially entered into the agreement deliver the electricity committed under these contracts through the Energy Spot Market. Pursuant to CROM requirements (which set forth limits to register contracts to purchase or sell contracts in the MEM), the capacity to purchase or sell energy in the market (as established in CREG Resolution 156 of 2012) must be positive before registering any new contract.

121 The purchase of electricity by commercialization companies through bilateral contracts to supply the demand of Regulated Users is subject to certain rules aimed at ensuring fair competition among generation and commercialization companies, and the only criteria to adjudicate is lowest price. On the other hand, the purchase of electricity by commercialization companies through bilateral contracts to supply the demand of Unregulated Users is freely negotiated between the parties to the contract. The only components included in the tariff, which are subject to free negotiation, are the G and C components. see —‘‘The Electricity Market.’’). Companies engaged in both the generation and the commercialization businesses may only purchase up to 60.0% of their own electricity for sale on the Regulated Market, and are required to participate in the electricity market on the same terms as any other generator in order to purchase the additional electricity that they may require.

Firm Energy Auctions Firm Energy auctions are aimed at allocating Firm Energy among generators and investors in order to ensure a reliable and price-efficient supply of Firm Energy in the long term. The allocation of Firm Energy among generators and investors is conducted through a dynamic auction mechanism. The electricity demand of end-users connected to the SIN is determined by a price/quantity function established by the CREG in anticipation of the auction. Firm Energy auctions are conducted four years in advance of the date on which the Firm Energy obligation is due. The price of Firm Energy obligations is established through descending clock Dutch auctions. In order to provide a funding mechanism for electricity projects for which development may take longer than the planning period, generators and investors are authorized to sell a portion of their future Firm Energy under special circumstances, in auctions that take place within five to ten years before the Firm Energy of their projects becomes available. Once generators and investors have sold part of their future Firm Energy under the special mechanism created by the CREG, they are required to participate in the auctions with the Firm Energy that has not been committed under the same rules applicable to all other participants. CREG Resolution 071 of 2006 established the regulation for the Reliability Charge, which remunerates a generator’s commitment to deliver Firm Energy. The first Firm Energy auction took place in May 2008 and allocated Firm Energy commitments from December 2012 to November 2013. In addition, there was an allocation of Firm Energy commitments relating to three generation projects for 3,017 GWh from December 2012 to November 2032. These projects represent an installed capacity of 430 MW (78 MW hydro, 150 MW thermal and 202 MW fuel oil). In June 2008, through an auction mechanism for generation projects with construction periods longer than the first auction, new Firm Energy commitments were sought to cover long-term energy requirements (i.e., at least 20 years from December 2014). As a result, six projects were allocated Firm Energy commitments, including the first phase of the Ituango Project. On December 2011, the CREG convened the second reliability charge auction to cover a 70,000 GWh per year target demand required to cover the country’s energy needs for the 2015-2016 period. Through a ‘‘descending clock auction,’’ five new projects were awarded with an additional capacity to the system of 575 MW and additional firm energy — ENFICC (Energía en Firme por Cargo de Confiabilidad) — of 3,710 GWh per year. In a closed envelop auction for plants requiring longer construction periods — GPPS — four projects were awarded which committed to deliver additional firm energy of 6,075 GWh per year.

Operation of the MEM Access to the MEM is granted to generation and commercialization companies pursuant to agreements executed with XM. These agreements, also known as mandates, enable XM to act on behalf of generation and commercialization companies in the transactions conducted at the MEM and entitle XM to collect and distribute revenues resulting from the charges for the use of the STN and from transactions conducted in the Energy Spot Market. Essentially, XM acts as a clearing house. The mandates granted to XM include transmission, distribution, generation and commercialization mandates. Under the transmission and distribution mandates, XM conducts the billing, collection, payment and settlement of charges for the use of transmission assets owned by electricity transmission companies and billing and settlement of charges by electricity regional transmission companies. Under the generation mandates, XM undertakes the clearing and settlement of electricity purchases and the billing and collection of amounts owed by purchasers to electricity generators as a result of transactions carried out at the MEM. Under the commercialization mandates, XM undertakes

122 the clearing and settlement of electricity purchases and the billing and collection of amounts owed by purchasers to electricity traders as a result of transactions carried out at the Energy Spot Market. XM also records all the hedging contracts entered into by electricity generators and commercialization companies, analyzes dispatch on an hourly basis and calculates the amounts owed to or by generators and commercialization companies under bilateral contracts or as a result of spot transactions. XM only bills and collects the amounts owed with respect to transactions executed at the MEM. The transmission regulated revenues are paid solely by commercialization companies and received by electricity transmission companies through settlement on the MEM. See ‘‘— Electricity Transmission in Colombia — Revenues of Electricity Transmission Companies.’’ The chart below illustrates the operation of the MEM:

Electricity Generation in Colombia Overview Generation activities consist of the production of electricity through hydroelectric or thermal plants connected to the SIN. There are also minor hydraulic plants or wind plants, and plants called ‘‘co-generators,’’ which auto generate electricity for a particular business with sources such as water, wind or biomass, and deliver the remaining electricity to the SIN through the SDL or through the STR. As of June 30, 2014, Colombia’s total installed energy generation capacity was 14,989 MW, of which 64.3% was hydraulic, 30.6% was thermal, 4.4% was from minor plants and 0.7% was from co-generators. The chart below illustrates the evolution of Colombia’s net effective generation capacity during the period 2009-2013:

Net Effective Generation Year Capacity in MW 2009...... 13,496 2010...... 13,289 2011...... 14,420 2012...... 14,361 2013...... 14,559 June 2014 ...... 14,989

Source: XM and UPME

123 We currently expect that (i) 916 MW of hydraulic energy and 150 MW of thermal energy will come into service in the last quarter of 2014, and (ii) 516 MW and 160 MW of hydraulic and thermal energy, respectively, will come into service in 2015, which will increase the SIN’s net capacity by 11.8% during the next 18 months. These figures do not take into account the small centrals that will start operations during the same time period. In 2013, 62,196.6 GWh were generated in the Colombian SIN, of which 67.3% were obtained from hydraulic plants, 27.1% from thermal plants, 5.1% from minor plants and 0.5 from the co-generators. Generation in 2013 increased by 3.7% with respect to 2012. The following table shows the amounts of energy by technology, the SIN’s totals and the increases with respect to 2012:

Generation by Technology Type 2013

SIN Operation Variables

Variables 2012 2013 Variation Growth Hydraulic (GWh)...... 44,923.6 41,835.9 -3,087.7 -6.9% Thermal (GWh) ...... 11,506.0 16,838.6 5,332.7 46.3% Minor Plants (GWh) ...... 3,212.6 3,170.0 -42.6 -1.3% Co-generators (GWh) ...... 346.6 352.0 5.3 1.5% TOTAL (GWh) ...... 59,988.9 62,196.6 2,207.7 3.7%

Source: Operational Report 2013.

Market Participants The electricity generation market in Colombia is an oligopoly. Approximately 72% of the generation market is controlled by four companies: EPM, Emgesa S.A. E.S.P. (‘‘Emgesa’’), GECEICA and ISAGEN. The following chart illustrates the distribution of the electricity generation market in terms of electricity generated in the SIN for the year ended December 31, 2013 (total of 62,196.6 GWh):

Generation by Agent 2013

Generation Participation Generator GWh % EPM...... 14,518.04 23.3% EMGESA ...... 12,876.98 20.7% ISAGEN...... 10,322.35 16.6% GECELCA ...... 6,833.87 11.0% EPSA...... 3,461.28 5.6% CHIVOR ...... 3,372.68 5.4% CELSIA ...... 2,473.82 4.0% OTHERS ...... 8,337.58 13.4% Total...... 62,196.6 100.0

Source: XM. For more information on the electricity generation market participants, see ‘‘Business — Energy BU — Electricity Generation and Commercialization Business — Electricity Generation and Commercialization Business in Colombia — Competition and Market Share.’’

124 Revenues of Electricity Generation Companies The revenues of electricity generation companies consist of the revenues resulting from electricity sales at the Energy Spot Market and the Reliability Charge mechanism, as described below.

Dispatch and Pricing The main purpose of the Energy Spot Market is to enable participants (generators, traders and distributors (acting as traders)) to purchase and sell electricity. The Energy Spot Market provides the means for conducting sales of excess electricity that has not otherwise been committed under contracts or spot sales. The spot price for electricity traded at the Energy Spot Market is the price of the highest priced generating unit dispatched in hourly periods based on the Optimal Dispatch mechanism to cover the demand. Electricity generators in the Energy Spot Market submit supply bids to XM daily in which they establish the daily prices for the electricity they generate and the available capacity, on an hourly basis, for the next day. Based on those bids, XM ranks generators using the Optimal Dispatch system, which is a system that assumes unlimited transmission capacity through the SIN and disregards network restrictions. The ranking starts with the lowest bids and establishes, on an hourly basis, the merit order in which generators would be dispatched on the following day to meet expected electricity demand. The price ranking system is intended to ensure that national demand, including international demand, is satisfied by the lowest cost combination of available generating units in Colombia. Besides the Optimal Dispatch mechanism, XM also uses a planned dispatch mechanism that takes into account the restrictions of the SIN as well as every other condition necessary to supply electricity demand expected for the following day in a predictable, reliable and cost efficient manner. XM periodically reviews the planned dispatch mechanism in response to changes that may affect the system throughout the day, including demand, availability and system restrictions, among other changes. The differences between real dispatch capacity and Optimal Dispatch are known as ‘‘restrictions.’’ Restricted Generators, which are generators whose actual generation is lower than Optimal Dispatch, are charged with the maximum offered price given total demand. Out-of-Merit Generators, which are generators whose actual generation is greater than Optimal Dispatch, are credited, taking into account the Energy Spot Market price for hydrogenerators and the regulated pricing mechanics set by the CREG for thermal-generators. The net value of these restrictions is allocated proportionally among traders within the SIN in light of their electricity demand. The unavailability of electricity transmission assets, for reasons such as technical limitations or as a result of terrorist attacks, leads to significant increases in network restrictions. These restrictions, in turn, lead to increases in customers’ claims related to tariff increases.

The Reliability Charge Colombia’s electricity supply largely relies on hydro-generation plants. The dependency on hydroelectric sources has led, on several occasions, to shortages of electricity supply during drought periods caused by changes in atmospheric conditions such as the El Niño phenomenon and by climate seasonality (7 months rain and 5 months dry period). Colombia has experienced severe dry periods which have led to higher volatility of electricity prices. The volatility of electricity prices poses a considerable risk for generation companies seeking to finance generation projects. In order to reduce the exposure of electricity generation companies to volatile electricity prices and to ensure the continued supply of electricity even throughout periods of electricity scarcity, in December 2006 the CREG adopted the Reliability Charge mechanism. This mechanism replaced the Capacity Charge mechanism that was in place for approximately ten years. The Reliability Charge is intended to compensate electricity generation plants that contribute to the predictability and stability of electricity generation during certain periods through a system under which Firm Energy Generators awarded with Firm Energy are entitled to compensation during certain periods of time and, in consideration for such compensation, are required to deliver the awarded Firm Energy when the electricity spot price is higher than the scarcity price. ASIC settles and collects such compensation, which is paid by all the end-users of the SIN through fees charged by commercialization companies. The central element of the Reliability Charge mechanism is Firm Energy. Firm Energy is the maximum amount of electricity that a given generation plant is able to produce, on a permanent and continuous basis, under extreme hydrological conditions during a period of time. Firm Energy is a product that has been designed to guarantee the reliability and efficiency of the supply of electricity in the long term, providing investment incentives, electricity back-up during critical periods and peak price hedging. See ‘‘Business — Energy BU — Electricity Generation and

125 Commercialization Business — Electricity Generation and Commercialization Business in Colombia — The Reliability Charge.’’ The obligation to supply Firm Energy arises when the spot price reaches the scarcity price. Under this circumstance, generation companies with Firm Energy allocations are required to supply a certain daily quantity of electricity at the scarcity price. The scarcity price, which is established by the CREG and updated monthly based on the variation of the Fuel Price Index, has a twofold purpose. On one hand, it indicates the time when the different generation units or plants will be required to fulfill their Firm Energy commitments, which happens when the spot price exceeds the scarcity price, and on the other hand, it is the purchase price for this electricity. Firm Energy can be acquired through centralized transactions at the ASIC. Firm Energy is auctioned and allocated only among generators or investors that have or are planning to own generation assets. See ‘‘Business — Energy BU — Electricity Generation and Commercialization Business — Electricity Generation and Commercialization Business in Colombia — The Reliability Charge.’’

Contingency Mechanisms The contingency mechanisms are market instruments aimed at facilitating the supply of electricity during scarcity periods and compliance by generators with their Firm Energy obligations. The graphic below illustrates the several levels of contingency mechanisms:

Source: Resolution 071 of 2006 issued by the CREG. Secondary Market. The secondary market for Firm Energy is a bilateral contracts market, where only the generators participate. The generators who offer their generation are those with Firm Energy that has not been auctioned or that has not been committed under secondary market contracts. The generators that demand generation supply are those that temporarily require Firm Energy to comply with their Firm Energy obligations. Voluntary Disconnectable Demand. Generators that may not have enough electricity to meet their Firm Energy requirements may approach end-users of the SIN with back-up generation equipment or with the ability to modify their productive process, in order to have these end-users reduce their electricity demand. In this case, the demand reduction done by end-users is deducted from the generator’s obligation and, in exchange, the generator is required to compensate the commercialization company that represents these end-users, at a price previously agreed upon between these two parties. Generation Auction of Last Resource. This mechanism involves generation assets that do not participate in electricity auctions or in the MEM. These generation resources are utilized exclusively to totally or partially cover the Firm Energy that has already been allocated to a generator.

126 Reconfiguration Auction. Based on the latest electricity demand projections for the year ‘‘t,’’ the CREG evaluates in years ‘‘t-2’’ and ‘‘t-1’’ whether the Firm Energy allocated for ‘‘t’’ is sufficient to cover the demand for that year. If the CREG considers it necessary to adjust the Firm Energy allocations, it may announce a date for a reconfiguration auction to purchase (if it is a shortfall situation) or a reconfiguration auction to sell (if it is a Firm Energy surplus).

Electricity International Transactions Electricity international transactions are currently in place with Ecuador and Venezuela under different regulatory regimes. With respect to Ecuador, the regime is known as ‘‘TIES,’’ which is a short-term operational and commercial energy exchange. This regime takes into account the difference of electricity prices between countries. This difference in prices results in what is known as congestion rents or rentas de congestión. International interconnection payments are made through charges for the use of the STN. With respect to Venezuela, electricity international transactions are agreed to under bilateral contracts between market participants. International interconnections with Venezuela are considered connectivity assets, although they are not deemed to be part of the STN. Interconnection fees are freely agreed to between the parties.

Electricity Transmission in Colombia Overview Transmission activities consist of transporting electricity through the STN by using national and regional transmission networks that operate at voltages higher than 220 kV.Any company may in principle enter the electricity transmission business. In Colombia, however, electricity transmission services are a natural monopoly regulated by the CREG. The SIN is the system that interconnects the STN, STR, SDL and end-users.

Market Participants The electricity transmission business is a natural monopoly. In Colombia, there are nine transmission companies, the largest being the government-owned Intercolombia S.A. E.S.P., which in 2014 controlled 70.61% of the electricity transmission market. Other market participants include Transelca S.A. E.S.P. (‘‘Transelca’’), Empresa de Energía de Bogotá S.A. E.S.P. (‘‘EEB’’), EPM, and Empresa de Energía del Pacífico S.A. (‘‘EPSA’’), which in 2014 controlled 9.98%, 8.29%, 8.0% and 2.56% of Colombia’s transmission market, respectively. In terms of private investment in electricity transmission companies, private investors control less than 2.9% of the electricity transmission market. The table below illustrates each market participant’s percentage of participation in the income of the STN.

Percentage of Participation Company in the STN Income Intercolombia ...... 70.61% TRANSELCA ...... 9.98% EEB...... 8.29% EPM ...... 8.0% EPSA...... 2.56% DISTASA ...... 0.34% EBSA ...... 0.19% Total ...... 100%

Source: XM, calculations by EPM. For more information on the electricity transmission market, see ‘‘Business — Energy BU — Electricity Transmission, Distribution and Commercialization Business.’’

Key Characteristics of the Electricity Transmission Market and the Transmission Network The transmission of electricity in Colombia is a highly regulated business due to its status as a natural monopoly. The key characteristics of the electricity transmission market and the transmission network are: • The STN is owned by nine electricity transmission companies. Although the Colombian Government partially owns the STN through different government owned companies, the Colombian electricity transmission system operates as a centralized system administered by XM. The centralized operation of the system ensures lower costs of operation and economies of scale.

127 • The STN operates under open access principles. All market participants in the electricity industry are entitled to access the STN to the extent that they comply with legal, technical and certain payment obligations, including the payment of interconnection and usage charges. • Electricity transmission companies have a less active role than other participants in the electricity industry. The main role of electricity transmission companies is to reach end users via the STN, while maintaining required quality standards and asset availability. Electricity transmission companies cannot engage in the purchase or sale of electricity. Also, these companies have no decision-making power in respect of the expansion of the STN or in respect of the STN’s utilization parameters. These decisions are made by MME following studies and recommendations made by the UPME. The revenues of electricity transmission companies are aimed at recouping their investments in the STN, as well as their operation and maintenance costs.

Asset Availability and Service Quality Requirements Electricity transmission companies are required to comply with certain asset availability and service quality standards set forth by the CREG. These standards were reviewed by CREG Resolutions 011 of 2009 and 093 of 2012, for the regulatory period that began in 2011. Companies that fail to comply with these standards are subject to reductions of their regulated income, which in turn translates into lower charges for the use of the STN. The following table shows the asset availability standards currently applicable:

Annual Maximum of Unavailable Hours (Máximas Horas Anuales de Assets Indisponibilidad) (MHAI) Assets Connecting to STN ...... 48 Line Unit ...... 15 Transformation Unit...... 15 Autotransformer ...... 48 Compensation Unit ...... 15 Compensation Modules ...... 48 Line of 500 kV ...... 72 Line of 220 or 230 kV — > 100 km ...... 36 Line of 220 or 230 kV — ≤ 100 km ...... 24 The methodology for establishing whether an electricity transmission company complies with the asset availability and service quality requirements consists of measuring the availability of each of the system’s assets within a 52-week period and comparing it with the targets established by the CREG. If the asset fails to reach the CREG’s targets, a Weekly Asset Compensation Percentage (Porcentaje de Compensación Semanal del Activo, or ‘‘PCSA’’) is incurred by the electricity transmission company. Since the revenue for Usage Charges is calculated monthly, the PCSAs incurred on a monthly basis are averaged at the end of each month to determine the applicable Monthly Asset Compensation Percentage (Porcentaje de Compensación Mensual del Activo), which corresponds to the percentage by which the revenue of that particular asset is reduced for that month.

Expansion of the STN Under Colombian law, the MME is responsible for overseeing the expansion of the STN, rationalizing government and private efforts to meet domestic electricity demand in a manner that is consistent with the National Development Plan (Plan Nacional de Desarrollo) and the National Energy Plan (Plan Energético Nacional, or ‘‘PEN’’). The UPME undertakes the technical and administrative oversight of the STN expansion, including the selection of investors through public bidding processes to undertake projects that have been previously approved by the MME in accordance with the STN expansion plans. Both the Colombian Transmission Planning Advisory Committee (‘‘CAPT’’) and the CND are responsible for assisting the UPME in planning the STN expansion and for setting the criteria, strategy and methodology for expanding the STN.

128 The STN expansion plans must be flexible, both in the medium and long term, and adaptable to changes resulting from technical, economic, financial and environmental conditions, while complying with STN’s quality, reliability and safety requirements. The projects proposed in the STN expansion plans must be technically and economically feasible and must have the approval of the relevant environmental authorities. The STN expansion procedure guarantees a competitive bidding process with respect to the construction, operation and maintenance of new electricity transmission expansion projects. Bidders submit estimated annual revenues in U.S. dollars for each of the 25 years following the commissioning of the project. Proposals are compared calculating the present value of the estimated annual revenue for each of the 25 years, applying a discount rate approved by the CREG. Estimates submitted by bidders include costs related to pre-construction works, such as design, rights of way, environmental studies and licenses; construction works, including independent engineering and all works required for the project’s environmental feasibility; the opportunity cost of capital invested, and corresponding administration, operation and maintenance expenses.

Revenues of Electricity Transmission Companies The revenues of electricity transmission companies consist of payments made by electricity commercialization companies in connection with charges applied for the use of the STN as well as interconnection charges when the connection is considered an asset. While the transmission regulated revenues are established pursuant to methodologies set forth by the CREG or as a result of bidding processes for the awarding of contracts for the construction, operation and maintenance of electricity transmission assets, interconnection charges are established on a contractual basis between the parties to interconnection agreements. Pursuant to Colombian law, the CREG regulates transmission revenues by establishing their components, the applicable calculation methodologies and the annual maximum amounts. According to Law 143, transmission regulated revenues must be set at a level that reflects the cost of investments made in transmission assets or assets actually owned by electricity transmission companies, including an assumed cost of capital for such companies and the costs incurred to maintain, operate and administer the STN. The regulated revenues system is aimed at ensuring that the electricity transmission industry in Colombia is financially and operationally viable. The methodology for calculating the revenues to which electricity transmission companies are entitled is reviewed by the CREG periodically taking into account, among other considerations, the cost of equipment, capital costs, and the cost of lands. See ‘‘Business — Energy BU — Electricity Transmission, Distribution and Commercialization Business — Electricity Transmission Business in Colombia — Tariffs and Revenue.’’ Since 1994, this methodology has been reviewed and amended twice, in 1998 and 2008. Currently, there are two different methods for calculating the revenues of electricity transmission companies, depending on whether those companies made electricity transmission assets available to the STN before or after 2000. The main difference between the two methodologies is that while the methodology applicable to transmission assets made available to the STN prior to January 2000 involves the application of a formula that takes into account several factors, the methodology applicable to transmission assets made available to the STN after 2000 provides for the payment of transmission regulated revenues proposed by electricity transmission companies in their bids to be awarded with the construction, operation and maintenance of electricity transmission assets for a period of 25 years. Transmission regulated revenues are paid by commercialization companies, in proportion to their demand, to electricity transmission companies on a monthly basis and subject to adjustments of the replacement value (valor a reposición a nuevo) to reflect changes in the IPP and unavailability penalties applicable during the relevant month. XM bills the electricity commercialization companies and collects the revenues on behalf of the electricity transmission companies.

Transmission Regulated Revenues for Assets made available to the STN prior to January 2000 The transmission regulated revenues for assets made available to the STN prior to January 2000 are determined in accordance with a formula that takes into account (i) the cost of replacing investments in assets made available to the STN, as adjusted from time to time, which assumes certain pre-established costs by the CREG; (ii) an internal rate of return for investments in electricity transmission assets, which will be increased to a net 11.5% return before taxes in the second half of 2010; (iii) a specified useful life of assets, 30 years for substation equipment and 40 years for transmission lines; (iv) operating and maintenance expenses set at a percentage of the value of electricity transmission assets; (v) investments in non-electrical assets; and (vi) penalties resulting from the unavailability of

129 transmission assets. The formula for calculating the amount of transmission regulated revenues payable to electricity transmission companies for assets made available to the STN prior to January 2000 is as follows:

IA = CAEA*(1+%ANE)+CAET+CAES+CRE*%AOM Where:

IA. Is the annual income or ingreso anual. CAEA. Is the equivalent annual cost of the electricity transmission assets and non-electricity assets (valued at rates determined by the CREG). CAES. Is the equivalent annual cost of easements. CAET. Is the equivalent annual cost of land applicable only to substation constructive units. CRE. Is the replacement cost of electricity transmission assets. %ANE. Is the percentage rate for non-electricity assets. %AOM. Is the percentage rate for expenses in the administration, operation and maintenance of electricity transmission assets.

Transmission Regulated Revenues for Assets Made Available to the STN through a Public Bidding Process In 1999, the CREG adopted a competitive bidding mechanism for awarding construction, operation and maintenance contracts with respect to electricity transmission assets. This mechanism is used each time the UPME establishes new expansion projects for the STN. As of September 30, 2010, three public bids were placed for projects of different sizes. The bids submitted by the bidding investors, which may be domestic or international, are required to include a comprehensive plan for constructing, operating and maintaining new electricity transmission assets in consideration for their proposed amount of transmission regulated revenues. As part of their bids, bidders are required to submit a proposed amount of transmission regulated revenues for a period of 25 years. The bidders that are awarded contracts for the construction, operation and maintenance of electricity transmission projects are entitled to the payment of the transmission regulated revenues set forth in their proposals for a 25-year period. Once the 25-year period expires, the transmission regulated revenues are calculated using the methodology applicable to electricity transmission assets made available to the STN before January 2000.

Interconnection Revenues Interconnection charges are those that determine the revenues from interconnections considered connection assets (as in the case of interconnections with Venezuela). These charges are established on a contractual basis between the parties to an interconnection agreement. In order to determine these charges, the parties to an interconnection agreement are required to take into account, as a reference, the methodologies set forth by the CREG regarding the calculation of interconnection charges for each interconnection point, as payment for the utilization of the STN.

Ongoing Revenue Review The transmission regulated revenues are subject to an ongoing review by the CREG. Pursuant to the CREG’s ongoing review authority, transmission regulated revenues for assets made available to the STN before 2000 are reviewed by the CREG every five years. The transmission regulated revenues methodology currently applicable was the result of a review that took place in 2009 and entered into effect since the second half of 2010. In the last review conducted by the CREG, the remuneration rate was increased from 9.0% to 11.5% before taxes, and the useful life of assets was increased from 25 years to 30 years for substation equipment and from 25 years to 40 years for transmission lines.

Electricity Distribution in Colombia Overview Electricity distribution consists of the transmission of electricity through the STR or SDL. Electricity distribution services are a natural monopoly and a highly regulated activity. The STR is an electricity transmission system formed by transmission lines and substations that operate between 57.5 kV and below 220 kV. The STR has 10,383 km of 110-138 kV transmission lines. The SDL is an electricity

130 transmission system formed by transmission lines and substations that operate at voltages lower than 57.5 kV (Levels 1, 2 and 3) and which are devoted to the rendering of electricity services in one or more commercialization markets. Any user may have access to the SDL provided that it pays a connection charge.

Market Participants and Market Structure In Colombia, there are 38 distribution companies, with nine of them serving approximately 77.5% of the distribution market in Colombia. 49.2% of the market is served by private companies. The chart below illustrates the shares of the electricity distribution market as of June 30, 2014 based on the percentage of consumption by operators of the network:

Source: XM. For more information on the electricity distribution market, see ‘‘Business — Energy BU — Electricity Transmission, Distribution and Commercialization Business — Electricity Transmission, Distribution and Commercialization Business in Colombia — Competition and Market Share of the Distribution and Commercialization Market.’’

Key Characteristics of the Electricity Distribution Market Distribution activities consist of transporting and delivering electricity to end-users through the STR and SDL. The distribution is made by network operators (operadores de red or ‘‘ORs’’). ORs are in charge of planning the expansion, investment, operation and maintenance of all or part of the STR or SDL. Assets may be owned by ORs or by third parties, although the expansion of the system is the responsibility of the ORs. An STR may be owned by one or more ORs. The CREG is responsible for establishing the Usage Charges for the distribution of electricity. Such charges are reviewed every five years. The methodology applicable to the calculation of distribution charges related to Level 4 is a regulated revenue methodology, while the methodology applicable to the calculation of distribution charges related to Levels 1, 2 and 3 consists of a maximum price. In the case of Level 4, income of the OR is guaranteed without considering demand. In the cases of Levels 1, 2 and 3, income of the OR is guaranteed but with an associated risk of demand. Distribution Usage Charges of all levels are calculated as the quotient between yearly assets, administration, operation and maintenance expenses, and the electricity transmitted. With respect to assets, constructive units (physical amounts) are defined and valued as cost of reposition. The administration, operation and maintenance expenses are calculated as a percentage of the value of the assets, which, with the methodology set forth in 2008, varies annually. For 2009, the CREG calculated a reference percentage of administration, operation and maintenance expenses per company, based on the actual costs for the years 2004 to 2007 and, since September 1, 2010 such percentage is updated considering actual costs for 2009 and the evolution of quality service indicators with respect

131 to the prior year. The CREG also defines the value of WACC (weighted average cost of capital), which is the discount rate used for obtaining annual revenues. The measure of electricity transmitted also takes electricity efficiency losses into account. Once the methodology is defined, charges of distribution by level of tension are approved for each OR.

Asset Availability and Service Quality Requirements Electricity distribution companies are required to comply with certain asset availability and service quality standards for the STR, revised by CREG Resolution 094 of 2012. Asset availability and service quality are measured by standards that measure the number and duration of interruptions in a certain period of time. The following table shows the asset availability and quality service standards currently applicable:

Annual Maximum of Assets Unavailable Hours Assets Connected to STN ...... 51 Compensation equipment...... 31 Line voltage Level 4 ...... 38 Electrical connectors Without bays maneuvers ...... 15 With bays maneuvers ...... 30 The methodology for establishing whether an electricity distribution company complies with the asset availability and service quality requirements was amended through CREG Resolution 097 of 2008. Under the new methodology, the quality of service of the SDL is reviewed on a quarterly basis. Reviews are made in terms of average quality of services of an OR for users connected at Level 1 and, in an aggregate form, for users connected at Levels 2 and 3. Such average is then compared to a reference of average quality. Such average quality measures are expressed as an Index of Discontinuity or Indices de Discontinuidad that reflects the average amount of Non-Transmitted Electricity (Energía No Suministrada or ‘‘ENS’’) by an OR per unit of electricity transmitted or energía suministrada by an OR. Depending on the amount of ENS in a given three-month period, the OR may be entitled to receive incentives that may reduce the Distribution Usage Charge for the corresponding tension level, or increase it during the next immediate three-month period following the evaluation. The incentives are matched with compensation granted to ‘‘worst-served’’ users, which is intended to reduce the frequency of low quality service delivered by an OR vs. quality average, with the purpose of guaranteeing a minimum level of quality to the end-users. EPM and CHEC have been applying the incentives scheme and compensations regime since 2010, and EdeQ and CENS have been doing so since 2011.

Expansion of the STR and the SDL The expansion of the STR and SDL is subject to the criteria and regulations set forth by the CREG. According to these regulations, the distribution companies are responsible for designing and implementing the expansion plans for the systems they operate in accordance with their strategic and financial plans. These plans shall be prepared based on certain criteria including, among other items, the demand, adaptability, flexibility, environmental feasibility, economic efficiency, quality and continuance of the service. Distribution companies are required to include in their expansion plans all the projects required by the systems they operate, including third-party requests that are financially feasible. With respect to the STR expansion, in 2013 the CREG issued Resolution 024 which establishes a summons mechanism should it be necessary.

Revenues of Electricity Distribution Companies The revenues of electricity distribution companies consist of distribution charges paid by end-users, which may be either Unregulated or Regulated Users. The basic components of the electricity distribution charges provide for the recovery of reasonable operating, administrative, maintenance and capital costs incurred by the electricity distribution companies. The methodology applicable to the calculation of distribution charges varies depending on the voltage levels of the SDL. The methodology applicable to the calculation of distribution charges related to Level 4 is a regulated revenue methodology, while the methodology applicable to the calculation of distribution charges related to Levels 1, 2 and 3

132 consists of a maximum price. In 2012, the MME issued Resolution 18 0574, which provides that the CDA shall be comprised by the distribution systems of ESSA, CENS, EPM, EdeQ, CHEC, Empresa de Energía de Pereira S.A. E.S.P and Ruitoque S.A. E.S.P.

Ongoing Revenue Review The revenues of electricity distribution companies are subject to ongoing review by the CREG. The purpose of the review is to update, among other items, recognized unit costs, constructive units, capital costs, percentage of administration, operation and maintenance and quality requirements. The last review to the distribution charges methodologies took place in 2008 and the next review is expected to take place in 2014.

Electricity Commercialization in Colombia Electricity commercialization can be performed by both generators and distribution companies, as well as by pure commercialization companies. The commercialization activity consists of the intermediation between end-users and all other agents that are involved in the electricity chain (generation, distribution and market administrators, among others). The commercialization company purchases electricity in the wholesale market to resell it to end-users. Also, commercialization companies provide services such as billing and collection, metering and customer services, among others.

Law 143 divides the market into two market segments: the Regulated Market and the Unregulated Market Regulated Market The Regulated Market is comprised of individual customers and industrial users, residential or commercial, with electricity demands below 0.10 MW or monthly consumption lower than 55.0 megawatt-hours (‘‘MWh’’). Regulated Users are free to select any service provider. However, tariffs are subject to a regulated liberty or libertad regulada regime, whereby they are required to follow the criteria and methodology set forth by the CREG, that establishes the parameters that must be used by electricity companies in setting forth their maximum applicable charges for the services they provide. The tariffs applicable to the Regulated Market are set forth by the CREG according to predetermined formulae. Purchases of electricity in the Regulated Market are made through public bids in order to ensure open and free access. Companies engaged in both the generation and the commercialization businesses may only purchase up to 60.0% of their own electricity for sale to the Regulated Market.

Unregulated Market The Unregulated Market is comprised of electricity consumers that either have a peak demand greater than 0.10 MW or a minimum monthly consumption greater than 55.0 MWh. This segment is attended by generation and commercialization companies. Purchases of electricity in this segment can be freely made among participants at freely negotiated prices for the C and G components of the tariff.

The Natural Gas Industry in Colombia Overview In 1991, CONPES approved the Gas Massification Plan, or Programa para la Masificación del Consumo de Gas, in order to promote the use of gas as a substitute for high cost energy resources. The main objective of the plan was to promote consumption of natural and propane gas in order to increase energy savings in terms of costs and amounts, to secure sufficient and diversified energy sources and to encourage private sector participation.

Government Regulation and Regulatory Framework The natural gas industry in Colombia is highly regulated. The reform to the public utilities industry in 1994 also had a significant impact on the natural gas industry which has led to its consolidation. Ecopetrol, which was the government-owned company responsible for executing the Gas Massification Plan, is now dedicated instead to the exploration and exploitation of hydrocarbons. Ecopetrol’s natural gas transportation assets were spun off and transferred as a capital contribution to the Empresa Colombiana de Gas S.A. (‘‘Ecogas’’) which later became Transportadora de Gas de Interior S.A. and subsequently, became Transportadora de Gas Internacional S.A. E.S.P. (‘‘TGI’’). Furthermore, during recent years, private sector participation in the natural gas industry has increased.

133 Law 142 defines the regulatory framework for the provision of public utility services, including the provision of natural gas. The CREG is the government entity responsible for developing regulations for natural gas-related activities. However, the Oil Code of 1953 (Código de Petróleo or Decreto 1056 of 1953) and the Contract of Association of 1969 (Contrato de Asociación de 1969), as amended in 1999, continue to govern the exploration, exploitation and production of natural gas, and these activities fall outside the scope of the CREG’s regulatory authority. Regulatory Authorities The CREG is the regulator responsible for oversight of the natural gas industry. The CREG is responsible for developing regulations for all activities related to the natural gas sector, including production, transportation, distribution and commercialization. The MME also regulates the production of natural gas, while the ANH manages the gas resources. Gas Sector Activities The CREG established the regulatory framework for the provision of natural gas services and divided the industry into the following activities: Production-Commercialization Activities or the Supply of Natural Gas This activity consists of supplying natural gas obtained from different production sites located throughout Colombia. The gas commercialization activity in the wholesale market has been subject to change with the purpose of ensuring the service to meet the internal demand. Some of the relevant modifications are the following: • Change of sales prices: with the issuance of CREG Resolution 088 of 2013, the price of natural gas delivered at any point of the National Transport System (with the exception of gas from the Opon field which is still subject to regulation) was liberated so gas prices are now determined by Producers and Distributors in market conditions. • Commercialization in the wholesale market: after the issuance of CREG Resolution 089 of 2013, the natural gas commercialization scheme depends on the level of national production and the demand forecasts made by the UPME (Unidad de Planeación Minero Energética) in the lower scenarios. • Other commercialization matters: the CREG will conduct a demand and offer analysis and, should the offer be higher than the demand for at least three of the five years following the measurement, the commercialization will take place through bilateral contracts. If the demand is higher, commercialization will take place through an ‘‘upward clock’’ auction mechanism. • Permitted types of contracts: currently permitted types of contracts are Firm Contracts, Purchase Options, Firm Conditioned and Uninterruptible, with terms from one to five years in the case of auctions, and one, five or more years in the case of bilateral contracting. • With respect to commercialization in the wholesale market, non-regulated users are given the possibility to directly purchase the natural gas they require for their activities. On this basis, production commercialization companies in production areas subject to maximum price limits are required to offer their gas in the Regulated Market through a process that gives priority to firm contracts (contratos en firme) with residential and small commercial users over regulated industrial users. Any surplus of natural gas remaining after providing for the Regulated Market must be made available to other agents in order to supply the Unregulated Market. Under Resolution 07 of 2000, consumers with gas requirements greater than 85,000 m3/month are considered Unregulated Users. Natural Gas Transportation Natural gas transportation activities consist of transporting natural gas through steel pipelines at high levels of pressure from natural gas production sites to the entrances to large cities (puerta de ciudad) and to large consumers (thermoelectric plants and large industries). These pipelines form part of the National Transportation System (Sistema Nacional de Transporte or ‘‘SNT’’). Natural gas transportation is considered a natural monopoly and is regulated in price, quality and access. Distribution and Commercialization of Natural Gas The natural gas distribution activity consists of conducting gas from city entrances to end-users through lower and mid-level pressure pipelines, mostly made of polyethylene. The commercialization activity consists of sales of

134 natural gas to the end-users. Depending on the distribution area, natural gas distribution tariffs may be subject to either a lowest price methodology, applicable in exclusive service areas, or to tariff formulae, applicable in non-exclusive service areas. Provision of natural gas distribution services in exclusive service areas is subject to the terms of concessions awarded after public bids conducted by the Colombian Government. These concessions will expire by the end of 2014 and the provision of services in such areas will be subject to the methodology applicable to non-exclusive service areas. Distribution of natural gas through pipe networks is considered a natural monopoly, regulated by the CREG with respect to prices, structure, quality and access. Compensation is based on the calculation of a medium-term, medium cost, applied to the demand through a Tariff Basket methodology, the general characteristics of which are defined by the CREG. With the issuance of CREG Resolution 202 of 2013 the compensation methodology was modified and two distribution charges were defined: one applicable to the residential sector and the other to the non-residential one, where the basket methodology is only applicable to the latter. These charges are calculated on the basis of a historical medium cost for markets where approved charges already exist, and of medium-term medium costs for new markets. However, although the compensation methodology for this activity is already defined by the applicable Resolution, such Resolution will only become effective once the CREG approves the new charges the companies will request under the new methodology. New charges are expected to be approved in the first quarter of 2015 since the variables relevant to the calculation, such as the WACC and efficiency costs of AOM and other assets, are not currently available. The compensation for the commercialization activity, currently done on the basis of a fixed charge, will be done on the basis of a fixed and a variable charge. The rights and responsibilities of distributors, commercialization companies and users, the criteria for infrastructure expansion, the conditions for free access to the distribution network and the minimum security and quality standards of the distribution service are established in the Gas Distribution Code or Resolution 067 of 1995.

Market Participation Restrictions Colombian law provides for certain restrictions applicable to the activities that companies in the natural gas industry may undertake. Pursuant to CREG Resolutions 057 of 1996 and 071 of 1998, natural gas production companies may own up to 25.0% of a natural gas transportation business and vice versa, and up to 30.0% in the natural gas distribution business, and natural gas transportation companies may own up to 25% of a natural gas distribution business and vice versa. In addition, pursuant to CREG Resolution 112 of 2007, natural gas distribution and commercialization companies may participate without limits in the retail market.

Natural Gas Quality CREG Resolution 100 of 2003 established certain quality standards applicable to the supply of natural gas. These standards measure service quality in terms of service interruptions and response times, as well as in terms of specific indices related to odorization and the pressure of pipelines.

Tariff Regime For the Regulated Market, tariffs are calculated according to a formula established by the CREG. The formula currently in effect was established under CREG Resolution 137 de 2013, which was intended to be in effect for a period of five years. The current formula will expire when the new methodology is defined and the new charges are therefore established. The cost for providing service is the sum of all costs involved in each of the activities of the sector: average gas purchase costs, average costs for transportation and charges for distribution and commercialization. In the unregulated natural gas market, tariffs are subject to a monitored-free regime and therefore specific formulae are not applicable. However, as in the Regulated Market, costs in this market take into account the costs of the regulated transportation and distribution components, as well as factors related to the purchase and commercialization of natural gas, in accordance with tariffs agreed among users and commercialization companies. In addition, the current legal framework, which is guided by principles of solidarity and income redistribution, requires the natural gas sector to participate in a subsidy and contribution program. Under the program, users in the lower socioeconomic strata (1 and 2) are charged tariffs which are lower than the actual value of services provided.

135 Customers in the higher socioeconomic strata (5 and 6), and those in the industrial and commercial sector, are charged an amount greater than the actual value of services provided in order to cover some of the cost of subsidies granted to the low-income population. Users in the mid-level socioeconomic strata (3 and 4) are exempt from the program and thus neither receive subsidies nor contribute to the program. Under Law 1450 of 2011, as regulated by Decree 654 of 2013, industrial end users are exempt from the solidarity contribution since January 1, 2012. The key characteristics of the subsidy and contribution program are as follows: • Tariffs for users in strata 1 and 2, with consumption levels below 20 m3/month, may be increased monthly, although increases cannot exceed inflation levels. In this respect, when tariffs are increased at rates exceeding inflation rates, higher subsidies are granted to these users. Subsidies cannot exceed 60.0% and 50.0% of the tariffs applicable to users in strata 1 and 2, respectively, pursuant to Law 1117 of 2006. • Natural gas customers in strata 3 and 4 do not receive the subsidy and are also exempt by law from having to pay a contribution. • Customers in strata 5 and 6 pay a contribution of 20.0% over the cost of the service. • Commercial consumers contribute 8.9% above the value of the service pursuant to CREG Resolution 015 of 1997. Gas based energy generators, the petrochemical industry and the vehicular compressed natural gas industry are exempt from contributions. Under Law 142, gas commercialization companies are required to contribute to a solidarity fund, which is financed by surpluses existing after balancing subsidies and contributions in the markets they serve. If the balance of the fund is insufficient to cover the balance of subsidies, public utility companies are entitled to take measures aimed at ensuring that payments from users are sufficient to cover the cost of providing the service.

Distribution of Gas in Colombia The Colombian Government issued Decree 2730 of 2010, subsequently replaced by Decree 2100 of 2011, which sets forth the mechanisms to ensure the national natural gas supply. Some of the more relevant aspects of this regulation are the following: • Internal consumption is given priority over exports. Thus, suppliers must first meet the internal demand in cases of restrictions, permanent and transitory events of grave emergency, and programmed service suspensions. Also, natural gas owned by the State and the ANH participations must be primarily destined to meet the internal demand. The CREG defines the opportunity cost of the gas that is not exported, which cost is to be recognized to the producers who are forced to breach their firm export commitments to meet the internal gas demand. Further, an indicator is established which relates reserves, internal demand, exports and imports, allowing to monitor the convenience of maintaining the non-restricted ability to export gas. In this regard, through Resolution 181704 of 2011, the MME established the calculation methodology to determine the natural gas supply index. • Essential demand (residential users and small merchants of the distribution network, GNV demand, the demand for the operation of the compressor stations of the SNT and the refinery demand) must be guaranteed by contracts with a physical support. In case of emergency, agents responsible to meet the essential demand not having firm contracts must directly assume the costs incurred by the affected users. • Producers and commercializers-producers must declare, on a monthly basis, their information for the next 10 years regarding (i) their own consumption, (ii) the total production available for sale (PTDV), (iii) the committed production (PC), (iv) each field’s potential production (PP), (v) the participation percentages of the different producers and the State on the production of each field, and (vi) export contracts. The CREG will define the commercialization mechanisms for the PTDV and the imported quantities available for sale (CIDV) destined to internal consumption. Production from minor fields, non-commercial extensive tests fields and non-conventional fields are not subject to these commercialization mechanisms. • The CREG will define the reliability criteria to be met for the attention of the users of the natural gas public service, and will determine the evaluation and compensation rules applicable to the related investment projects submitted by the agents.

136 • The commercialization of imported gas destined to the public domiciliary service must comply with the provisions applicable to the commercialization of national gas. • The price of the imported or exported gas is to be freely determined by the parties.

The Energy Industries Outside of Colombia in Which EPM Participates Panama Regulatory Structure of the Electricity Market The entities involved in the regulation of the electricity sector in Panama are the following: • The Secretary of Energy (Secretaria de Energía), which sets forth the Panamanian Government’s policies for the energy sector. • The Panamanian Public Utilities Regulating Authority (‘‘ASEP’’), which regulates power generation, transmission, interconnection and distribution activities in the electric power sector; approves the generation and transmission programs; and promotes competition within the different areas of the energy sector. Its responsibilities include:(i) evaluating the efficiency of the provision of services; (ii) determining the tariff structure for the services; (iii) determining the tariff structure for access to, and use of, the grids and dispatch charges; (iv) classifying which consumers of electricity are subject to tariff regulation; and (v) determining the rules for the planning and coordination of the Panamanian National Interconnected System. • The National Dispatch Center (‘‘CND’’), an entity operated by Empresa de Transmisión Eléctrica S.A. (‘‘ETESA’’), which is responsible for planning, supervising and controlling the integrated operation of the Panamanian National Interconnected System and ensuring its safe and reliable operation. • ETESA’s Planning Unit, which is responsible for the National Energy Plan and National Reference Expansion Plans. Utility companies are required to prepare and submit their business plans to the ETESA Planning Unit.

Electricity Transmission Transmission activities in Panama consist of electricity transportation through the National Integrated System by using national and regional transmission networks operating at voltages above 115 kV. The National Integrated System integrates the generators with the different transmission and distribution networks. Transmission services are regulated by the ASEP and transmission concessions are granted for 25 years. Currently, ETESA, the government owned transmission Company, is the only concessionaire, with a concession to exclusively operate the transmission grid for 25 years.

Electricity Distribution

Overview Distribution companies in Panama are permitted to distribute electricity to regulated and unregulated customers within their respective concession areas. Regulated customers purchase their electricity through the distribution network and pay a regulated tariff, while unregulated customers purchase their electricity directly through electricity generators and pay a regulated distribution charge. Electricity distributed is generated by unrelated third-party electricity generation companies and is transmitted by ETESA. ENSA’s distribution operations are governed by the concession agreement between ENSA and the ASEP, which defines a concession zone in Panama over which ENSA has exclusive rights to provide electricity distribution services to regulated and unregulated customers. The Panamanian distribution network is split between ENSA and two other companies: Metro Oeste, which serves the western area of Panama City and the central region of the country, and Empresa de Distribución Chiriquí S.A., which serves the region next to the Costa Rican border.

137 The following table contains a summary of the information regarding the three companies that serve the Panamanian distribution network: Distribution Companies – 2013 Summary Information

Annual Share of Average Market Energy Sales Energy Sales Consumption Supplied at Distributor Customers Share (%) (GWh) (%) High Tension Medium Tension Low Tension Metro Oeste . . . . 400,272 44.4 3,620 51.0 0% 21% 79% EDE Chiriquí . . . 118,598 13.1 617 8.7 0% 23% 77% ENSA ...... 383,292 42.5 2,859 40.3 5% 23% 72% Source: ASEP Tariff Structure For distributor purchases, ETESA arranges, on its own behalf, the Short Term and Long Term Competitive Concurrence Acts (Actos Competitivos de Concurrencia para el Corto Plazo y para el Largo Plazo ) in terms and conditions predetermined by the ASEP. Producing agents sell their energy production and their firm power through Concurrence Acts (Actos de Concuerrencia) to large Consumers or in the spot market, where they may also purchase the energy and/or power shortfall through contracts or in the spot market when their commitments exceed their production capacity. ASEP establishes the maximum distribution tariff (‘‘VAD’’) distribution companies are allowed to charge to their customers. The VAD is set at a level which, based on estimates at the beginning of the four-year tariff period, allows the generation of revenues to cover for efficient investments, operating, maintenance, administrative and commercial expenses (including metering, billing and customer service), a standard level of loss and a reasonable return on invested capital. In addition to the VAD tariff component, the tariffs for regulated customers have a separate component that includes the weighted average cost of energy purchased from generators and in the spot market, transmission tolls paid to ETESA and public lighting energy consumption. This energy component is established by ASEP as a pass through of energy costs to customers and is adjusted monthly and every six months to reflect the actual costs of energy due to the fluctuation in fuel costs and energy prices in the spot market. Resolution JD-5863 of 2006 issued by the ASEP approves the tariff regime for the public service of distribution and commercialization of energy. The Resolution sets forth the rules in connection with the procedures, methodologies, formulae, structures and, generally, all aspects determining the tariffs subject to regulation. The electricity tariffs are currently as follows: • The ‘‘simple tariff.’’ which is an energy per kW hour tariff restricted to customers with low tension lines and with a demand of 15 kW or below. • The ‘‘low tension maximum demand tariff’’ and the ‘‘low tension time of use tariff,’’ which apply to regulated commercial, industrial and residential customers that are connected at a voltage level at or below 600 V and also have a predictable level of demand higher than 15 kW. • The ‘‘medium tension maximum demand tariff’’ and ‘‘medium tension time of use tariff,’’ which apply to customers that take delivery of electricity at a voltage level higher than 600 V and lower than 115 kV. • The ‘‘high tension maximum demand tariff’’ and ‘‘high tension time of use tariff,’’ which apply to customers that take delivery of electricity at a voltage level higher than 115 kV. • Unregulated customers purchasing energy in the wholesale market directly from the generators, or in the spot market, must pay the distribution company serving their location a capacity and energy charge, or a wheeling charge, for the distribution, plus a commercial tariff component. • Charges for public lighting, including a return on capital, operating and maintenance expenses and energy consumption costs are built in to the customers’ regulated tariff. Guatemala Overview The Guatemalan electrical system comprises the electricity generation, transportation and distribution activities, and is regulated and supervised by the Guatemalan National Energy Commission. The generation system consists of

138 hydroelectric power plants, steam turbines, gas turbines, engines, and internal combustion and geothermal plants. The transportation system consists of a main system, shared among generators and interconnections to other countries, operating primarily at 230kV, 138kV and 69kV voltage levels, and a secondary system used to interconnect generators to the main network. Finally, the distribution system consists of medium-voltage networks, medium-to- low-voltage transformers, low-voltage networks, connections and power meters. Three companies currently provide services in the Guatemalan distribution market: EEGSA, Energuate Distribuidora de Electricidad de Occidente (‘‘DEOCSA’’) and Energuate Distribuidora de Electricidad de Oriente (‘‘DEORSA’’).

Tariff Structure in the Distribution Sector In Guatemala, distributor prices are determined pursuant to a regulated price cap system. Currently, the tariff structure has the following rate categories: • Simple rate for users connected at low voltage, with demand charge (BTS). • Rate measurement of peak demand, with participation in the top, to users connected at low voltage (BTDp) • Rate measurement of peak demand with low participation in the top, to users connected at low voltage (BTDfp) • Hourly rate measuring or checking the maximum power demand in peak hours, for users connected at low voltage (BTH) • Rate measurement of peak demand, with participation in the top, to users connected at medium voltage (MTDP) • Rate measurement of peak demand, low participation in the top, to users connected at medium voltage (MTDfp) • Hourly rate measuring or checking the maximum power demand in peak hours, users connected to medium voltage (MTH) • Reconnection fees. • Fee-lighting and outdoor lighting.

El Salvador Overview of the Electricity Distribution Sector The General Electricity Law enacted en 1996 allows private sector participation in generation, transmission, distribution and commercialization activities. The General Electricity Law allows any company to develop generation, transmission, distribution and commercialization activities, provided that it establishes separate accounting systems for each one of them, and that they are registered as such at the regulatory body. With this new structure, the Superintendence of Electricity and Telecommunications (‘‘SIGET’’) was created as the regulatory body responsible of applying and enforcing compliance of the General Electricity Law , as well of approving electricity rates. The following are three of the main characteristics of the distribution market in El Salvador: • Both power and energy are negotiated. • The market works based on bilateral contracts and a System Regulator Market (MRS or spot market), where operators selling energy make monomic price offers, dispatched in an order based on economic merit. • Long-term energy purchases destined to the MR are undertaken by distributor companies under the coordination of the SIGET. Since 2012, distributors must enter into long-term agreements through competitive processes for no less than 50% of the maximum power and associated energy demand. Such contracts have terms ranging from 5 to 15 years.

139 Market Participants There are eight distribution companies in El Salvador: Delsur, Compañía de Alumbrado Eléctrico de San Salvador, Compañía de Luz Eléctrica de Santa Ana, Distribuidora Eléctrica de Usulután, Empresa Eléctrica de Oriente, Empresa Distribuidora Eléctrica Salvadoreña, Grupo ABRUZZO and B&D Servicios Técnicos (B&D). The table below illustrates the participation of each distribution company in the distribution market:

Annual Energy Distribution Company Customers (MW) % Energy Delsur...... 339,541 1,273,387 26,2% Compañía de Alumbrado de San Salvador...... 558,578 2,050,703 42,2% Compañía de Luz Eléctrica de Santa Ana ...... 342,390 832,655 17,2% Distribuidora Eléctrica de Usulután ...... 68,702 116,647 2,4% Empresa Eléctrica de Oriente ...... 270,116 496,122 10,2% Empresa Distribuidora Eléctrica Salvadoreña ...... 11,750 54,162 1,1% Grupo ABRUZZO ...... 115 2,247 0,0% B&D Servicios Técnicos ...... 429 28,587 0,6% Total...... 1,591,621 4,854,510 100%

Source: SIGET, ‘‘Boletín de Estadísticas Eléctricas No. 14 2012’’, calculations by DELSUR.

Tariff Structure Distribution activities consist of delivering electricity through the distribution networks that operate at medium and low voltages levels. The regulation of the distribution activities sets forth three regulated charges: • The ‘‘energy charge,’’ a pass through charge that distributions companies bill to their customers that is adjusted every 3 months according to the electricity prices in the wholesale market. • The ‘‘distribution charge,’’ which remunerates the investments, maintenance and operational cost of distributing electricity and is reviewed every five years • The ‘‘commercialization charge,’’ which compensates the cost associated to the commercial activities. such as billing and customer service, and is reviewed every five years.

Distribution Tariff System With respect to tariffs, Agreement 587-E-2012 issued by the SIGET approved the rules to determine the charges for use of distribution networks and the commercialization charges, in both cases for the 2013-2017 period. The Agreement also sets forth the calculation methodologies, rules, procedures and other aspects determining the distributor tariffs subject to regulation in El Salvador. Afterwards, Agreement 78-E-2013 issued by the SIGET approved the following for DELSUR: • Distribution and commercialization charges proposed by the distributor. • The energy loss percentages proposed by the distributor. • The determination of the distribution and commercialization charges with respect to complimentary costs and network investments. • The Tariffs Schedule and the terms and conditions applicable by the distributor starting January 1, 2013. • The factors to be used in distribution charges the indexing formula for the 2013-2017 period.

The Water, Sewage and Waste Management Services Industry in Colombia Overview The water and sewage industry in Colombia is highly fragmented. According to official data from the SSPD, in 2010 water services providers served 6.4 million clients and sewage service providers served 6 million clients. As of December 31, 2012, the total number of users of water, sewage and waste management services was 7.6 million and 6.9 million, respectively.

140 The structure of the public utility services stratum in Colombia follows a socioeconomic classification system of six different stratums according to both physical and location household conditions. The LSPD has established the socioeconomic stratification as the guiding indicator to govern the tariff policy in Colombia for public utility domiciliary services. This stratification system has been designed for purposes of facilitating the application of differential tariffs for users of public utility domiciliary services, with the objective of allowing the selection of lower income populations as beneficiaries of such differential tariffs, and of promoting social programs. These six stratums have the following characteristics: • Stratum 1 (Low — Low). Households located in shantytowns and high risk areas. • Stratum 2 (Low). Households located in areas that were previously considered shantytowns and high risk areas, where urban development has improved their conditions. • Stratum 3 (Medium — Low). Households located in areas that have construction licenses and basic access infrastructure. Materials of the households are of good quality. • Stratum 4 (Medium). Households located in areas where urbanizations have been developed, and have very good urban infrastructure of above average quality in all respects. Households have good specifications in relation to the constructed area and have all public utility services available. • Stratum 5 (Medium — High). Households located in areas with urban infrastructure of excellent quality in relation to access infrastructure. Households with architectural designs that comprise various plans, gardens, windows, garages and excellent quality materials. • Stratum 6 (High). Households located in areas with good environmental quality, urbanizations with in large areas with gardens and private gardens. Households in this stratum also have private recreation areas (pools, gyms and children’s games, among others) that are not shared with other owners. The following table presents a breakdown of water and sewage customers according to their social situation for the periods indicated:

As of and for the Year Ended December 31, Total Water Customers 2011-2012 2012 % 2011 % Stratum 1 ...... 1,328,899 17.3% 1,334,159 17.7% Stratum 2 ...... 2,466,514 32.2% 2,416,965 32.1% Stratum 3 ...... 2,059,117 26.9% 2,018,524 26.9% Stratum 4 ...... 716,333 9.4% 686,463 9.1% Stratum 5 ...... 297,535 3.9% 289,441 3.9% Stratum 6 ...... 177,268 2.3% 171,313 2.3% Industrial ...... 21,217 0.3% 21,331 0.3% Commercial ...... 476,768 6.2% 465,289 6.2% Government ...... 30,404 0.4% 30,485 0.4% Others ...... 86,949 1.1% 82,841 1.1% Total ...... 7,661,004 100% 7,516,811 100%

As of and for the Year Ended December 31, Total Sewage Customers 2011-2012 2012 % 2011 % Stratum 1 ...... 924,649 13.3% 948,105 14.0% Stratum 2 ...... 2,271,184 32.7% 2,191,352 32.4% Stratum 3 ...... 2,006,466 28.9% 1,937,908 28.7% Stratum 4 ...... 702,599 10.1% 668,114 9.9% Stratum 5 ...... 289,884 4.2% 280,732 4.2% Stratum 6 ...... 171,946 2.5% 163,147 2.4% Industrial ...... 19,063 0.3% 18,486 0.3% Commercial ...... 453,726 6.5% 442,892 6.6% Government ...... 25,705 0.4% 25,770 0.4% Others ...... 79,498 1.1% 76,382 1.1% Total ...... 6,944,720 100% 6,752,888 100.0%

Source: SUI-SSPD (Latest information available as of December 31, 2012)

141 According to the 2010 National Water Report, the farming sector represents 54% of the national hydric demand, with services, industrial and domestic uses representing 13.2%. The detailed figures from the report are shown below:

Water Use Total (m3) Participation (%) Services ...... 528 1.5 Industry ...... 1,577 4.4 Livestock...... 2,220 6.2 Aquatic ...... 2,584 7.2 Domestic ...... 2,606 7.3 Energy...... 6,976 19.4 Farming ...... 19,386 54.0 Total ...... 35,877 100

Source: 2010 Ideam National Water Report. Although Colombia has an abundant water supply in its many lakes, rivers and streams, diverse geographical conditions result in uneven distribution of water resources. Thus, there are water-deficient areas which present challenges for the provision of water and other public utilities, as well as areas with excessive concentrations of water which are prone to floods.

Water and Sewage Networks Water and sewage networks are local in nature. Few interconnected systems cover more than eight cities, with EPM’s system being one of the exceptions. As such, the maintenance and operating condition of networks and the quality and quantity of water distributed or collected through such networks is the exclusive responsibility of the water and sewage operator in a particular area.

Industry Participants The local nature of the Colombian water and sewage industry has resulted in low levels of market competition and high fragmentation due to the large number of service providers. Cities are ultimately responsible for the provision of water, sewage and waste management services and choose their service providers through public bidding processes. These bidding processes generate competition, and when price is the key determining factor for the concession to be awarded, the price can be set independently of the pricing methodology established by the CRA. See ‘‘— Government Regulation — Tariff Structure.’’

Participants As of December 31, 2012, according to SSPD publications, a total of 2,371 providers were registered, of which approximately 10% service more than 2,500 subscribers. From these subset, it was identified that 54% corresponds to companies, 36% are State Industrial and Commercial Companies (Empresas Industriales y Comerciales del Estado) and 5.6% are municipalities that directly provide the service. This distribution is shown in the graph below:

Market Share as of December 31, Company 2012 EAAB ...... 25.8% EPM...... 13.3% EMCALI ...... 7.5% Triple A de Barranquilla ...... 5.1% Aguas de Cartagena S.A. E.S.P...... 2.5% Aguas Kpital Cúcuta S.A. E.S.P...... 2.0% Acuavalle...... 1.9% Aguas y Aguas de Pereira ...... 1.7% Bucaramanga ...... 1.5% IBAL S.A. E.S.P...... 1.5% Empresa Publica De Santander E.S.P ...... 1.5% Aguas de Manizales ...... 1.2% Other...... 34.5%

Source: SUI/SSPD

142 The sector is dominated by government-owned companies even though it is open to competition and private-sector investments.

Water Services Overview Under the LSPD, the provision of water services consists of the municipal distribution of drinkable water and complementary activities such as collecting, processing, treating, storing and transporting water.

Water Networks Coverage In 2012, the level of coverage of public water services in all municipalities in Colombia level was of 94.24%. In the case of sewage services, 36% of the departments have coverages above 95%, with coverages above 99% in Bogota and the departments of Boyacá, Cundinamarca, Quindío, Caldas and Risaralda. Urban coverage in the department capitals equals 97% for water service. Of the 33 department capitals, 12 have sewage coverages above 99%. The provision of water services in Colombia is dependent upon the conditions of the water distribution networks. Maintaining these networks in operating condition requires macro measurement, micro measurement, water pressure control, inventory, modeling, hydraulic segmentation of the network, leak control, network damage repair and other actions.

Water Demand In 2012 and 2013, approximately 1,447 million cubic meters of water were consumed in Colombia. Out of Colombia’s total consumption, 80.4%, or 1,163 million cubic meters, consisted of residential consumption, and 19.6% consisted of non-residential consumption. The population in the low to mid-level socioeconomic strata (2 and 3) represented 50.6% of total water consumption (including non-residential consumption) and 62.9% of total residential consumption. In the non-residential sector, commercial establishments represented 8.9% of the total consumption. The following charts illustrate the levels of consumption in cubic meters and as a percentage of total consumption, per type of user, for the periods above indicated:

Stratum 1 Stratum 2 Stratum 3 Stratum 4 Stratum 5 Stratum 6 Industrial Commercial Gov. Other Total Consumption (m3). . 224,025,640 403,464,077 328,802,788 115,513,999 53,571,936 37,982,907 51,687,183 128,152,077 72,829,159 31,556,944 1,447,586,710 % . . . . 15.5% 27.9% 22.7% 8.0% 3.7% 2.6% 3.6% 8.9% 5.0% 2.2%

450,000,000 400,000,000 350,000,000 300,000,000 250,000,000 200,000,000 150,000,000 100,000,000 50,000,000 -

(1) Source: Source: SUI, Report 2012.

143 Government, Other, 2.2% Commercial, 5.0% Stratum 1, 8.9% 15.5% Industrial, 3.6% Stratum 6, Stratum2.6% 5, 3.7% Stratum 4, Stratum 2, 8.0% 27.9%

Stratum 3, 22.7%

(1) Source: SSPD, Annual Report 2012 According to SSPD, the socioeconomic stratum with the highest residential consumption per capita is the sixth stratum, which averaged 17.9 m3/month in 2013. However, due to the size of the sixth stratum, overall consumption was significantly higher than in the lower strata. In terms of residential consumption (including stratum 1 to 6), the average consumption for 2012 was 14.5 m3/month. The following table presents average water consumption levels by category for the periods indicated:

As of and for the year ended December 31 2012 2011 Annual Monthly Annual Monthly Stratum 1 ...... 169 14.0 161 13.4 Stratum 2 ...... 164 13.6 198 16.5 Stratum 3 ...... 160 13.3 159 13.3 Stratum 4 ...... 161 13.4 166 13.8 Stratum 5 ...... 180 15.0 186 15.5 Stratum 6 ...... 214 17.9 220 18.4 Industrial ...... 2,436 203.0 2,632 219.3 Commercial ...... 269 22.4 269 22.4 Government ...... 2,395 199.6 2,247 187.3 Other ...... 363 30.2 367 30.6

Source: SUI from information reported by the Public Utility Service Providers (latest information available as of December 31, 2012). The government and industrial sectors have the highest water consumption average, with an average of 199.6 m3/month and 203 m3/month in 2012, respectively.

Sewage Services Overview According to the LSPD, the provision of sewage services consists of collecting municipal waste water, mainly liquids and rainwater. The segment also includes complementary activities such as the transportation, treatment and disposal of waste water. In 2012, the level of coverage of water and sewage public utilities at the urban level for all Colombian municipalities was of 94.24% and 89.03%, respectively. In the case of water services, 36% of the departments, and, in the case of sewage services, 27% of the departments, had levels of coverage above 95%, with water coverages above 99% in Bogota and the departments of Boyacá, Cundinamarca, Quindío, Caldas and Risaralda, and sewage coverage above that level in Risaralda and Quindío. Urban coverage in the department capitals was 97% for water services and 94% for sewage services. Of the 33 department capitals, 12 had levels of water coverage and seven had levels of sewage coverage above 99%.

144 According to the SSPD report, 47% of the existing waste water treatment systems, that is, 141 systems based on confirmed data, have treatment flow volumes between 1l/s and 20l/s. These 141 systems group only 5% (1.2 m3/sec) of the total flow volume treated. 21% of the systems have treated flow volumes between the 20l/s and 50l/s, of which 8% have a flow volume between 50l/s and 100l/s, 4% between 100l/s and 500l/s and only 2% — six structures — have output flows above 500l/s. Processing systems with higher output rates refer to waste water treatment systems in Cali, Bogota, Valle de Aburrá-EPM, Barranquilla, Santa Marta and Valledupar. These six sets group 66% of the total flow of waste water treatment in Colombia in 2010.

PTAR Installed Capacity PTAR Installed Capacity in Main Cities (In l/s) Bogotá ...... 4,000 Medellín — Metropolitan Area ...... 1,800 Cali...... 7,600 Barranquilla ...... 1,098 Valledupar...... 1,060 Santa Marta ...... 2,100 Bucaramanga — Metropolitan Area ...... 720 Total ...... 18,378

Source: SSPD, waste water treatment technical report, October 2012.

Sewer System Networks In recent years Colombia increased its investments in sewer service aimed at overcoming the shortage of coverage and improving the quality of water discharged into receiving sources. This effort has been accompanied by an assertive intervention by regulatory authorities, which has allowed an improvement in integrated water management. According to reports from the SSPD, as of 2012, most sewage systems are combined in Colombia. These systems accounted for 71.87% of the networks reported with the SSPD. Below are the percentages of networks presented by type:

Percentage of Type of Sewage Network Systems Combined ...... 71.87% Separate ...... 10.7% Sanitary...... 10.7% N/D...... 5.2% Sanitary and combined tracks ...... 1.53% Total ...... 100%

Source: SSPD Report, 2012.

Sewer Service Demand The current levels of demand for sewage services are similar to those seen in the water segment. In 2012, approximately 1,450 million cubic meters of sewage were discharged in Colombia, with 78.8%, or 1,142 million cubic meters, discharged by the residential sector and 21.2%, or 307 million cubic meters, discharged by the non-residential sector.

Government Regulation Overview Under the Colombian constitution, the government is responsible for ensuring the provision of public utility services. The LSPD established the fundamental framework for the provision of public utility services including water, sewage and sanitation. The water sector’s regulatory framework is designed to promote efficiency, quality, financial viability and the participation of the private sector.

145 Regulatory Agencies The Colombian water, sewage and waste management services industry is highly regulated. The main authorities governing the industry are the Colombian Ministry of Environment, Housing and Development (Ministerio de Ambiente, Vivienda y Desarollo Territorial or ‘‘MAVDT’’), the CRA and the SSPD. The MAVDT, which acts through the Vice-Ministry of Water and Sanitation (Viceministerio de Agua y Saneamiento), is responsible for policy making, overseeing the finances related to municipal subsidies, establishing technical standards and providing technical assistance. The CRA is responsible for regulating the industry, and the SSPD is responsible for monitoring the sector. The SSPD has a special office focused on the regulation of the water and sewage industries and which has enforcement powers. The CRA is responsible for regulating the economic aspects of the water, sewage and waste management services and as such develops pricing methodologies, establishes service quality guidelines, develops methodologies for evaluating the efficiency and quality of management and regulates monopolies and markets. The MAVDT gave the Autonomous Regional Corporations (Corporaciones Autónomas Regionales) and the environmental authorities the power to implement and enforce the current environmental regulatory framework. The Autonomous Regional Corporations and environmental authorities study environmental issues and issue region- specific regulations which cannot be less stringent than any national MAVDT regulation. The Ministry of Social Protection is responsible for the establishment, monitoring and control of drinking water standards.

Departmental Plans The Departmental Plans are the result of efforts by several regulatory agencies to implement the ‘‘Water and Sewage Sector Development Plan,’’ which seeks to address industry concerns regarding the lack of a centralized structure, lack of economies of scale, depletion of resources, slow modernization and insufficient planning and pre-investment practices which have resulted in fragmented, non-integrated investments. The Departmental Plans use Departments as coordinators to implement structured plans that address these issues. The Plans involve full assessments of the existing water, sewage and maintenance services in order to identify a region’s investment needs.

Tariff Structure The methodology used to set tariffs in the regulated segment of the water, sewage and waste management services combines different regulatory mechanisms to produce a non-linear pricing structure which includes a fixed charge per user as well as a variable charge based on consumption. The different elements of the fixed charge correspond to variables which affect the tariff, including external variables, internal variables or both. The methodology to establish the fixed charge applies industry yardsticks and reference patterns through a relative efficiency model, in order to reach a price point which accurately reflects administrative and commercial costs incurred by service providers. In order to establish the fixed charge, the Data Envelopment Analysis (‘‘DEA’’) methodology is applied to calculate costs. The fixed charge also has an ICTA sub-component that includes contributions, taxes and fees. This sub-component is recognized as a pass-through due to the inability to control external factors which affect the data. The fixed charge represents a price ceiling in effect for five-year periods which incentivizes the reduction of costs by eliminating the direct relationship between increased expenses and increased tariffs and by allowing providers to benefit from reduced costs. Although the variable charge was intended to change incrementally, it actually represents a median cost related to three aspects of the costs of providing the service: costs of operations and maintenance, the present value of future investments and the current value of recovering past investments, which incorporates remuneration rates that are split when customers are billed. Operations and maintenance costs, as opposed to pumping and chemical input expenses, are recognized as a median actual cost and are defined using the yardstick method, the relative efficiency model and the DEA methodology. Energy expenses incurred in pumping activities and chemical input are recognized as pass-through using efficiency criteria.

146 Investments, a sub-component of the variable charge, are recognized using the return rate method, which compensates invested capital at a maximum return rate of 13.92% (using the Company’s cost of capital as a base) and is normally calculated using the weighted average cost of capital method. Currently, investment plans are projected over a period of 10 years. Due to the precise nature of investments, the projection period used to obtain the median long-term cost and recover expenses varies and is estimated according to the service life of the system. Past investments are recognized using the variable of devalued assets, i.e., ‘‘market value or book value.’’ Although the return rate regulatory mechanism provides few incentives to reduce costs or improve management and can lead to over-investment, it provides benefits related to the variables controlled by regulators. Further, when the maximum fixed rate is below the real cost of capital, over-investment will not take place. On the contrary, it creates a perception that investments in the sector have high risk, which could ultimately result in the sector being dominated by providers and a lack of investors.

Recent Regulatory Developments In 2014, it is expected that the CRA will introduce a new tariff calculation methodology. The preliminary document issued to the public that sets the basis for the new methodology, defined a tariff calculation methodology that focuses on four areas: (i) Investments: Investment projections should incorporate efficiency criteria as well as references to unit costs or costs per type of structure. Further, the investments should be balanced in a way that allows companies to identify gaps between what has been performed and tariff revenues received from the investment; (ii) Quality, discounts and repairs: Tariffs should reflect the variations in different levels of service so that service quality and tariffs are more closely related. Small municipalities will have a one-year transition period to install the technology needed to measure operational indicators. Tariffs will be reduced if companies fail to meet goals related to operational and administrative indicators; (iii) Water losses: The new regulation defines a methodology for each provider to identify its optimal water loss levels but the methodology is not clear from the preliminary document; and (iv) DEA: although this methodology will still be used to measure relative efficiency, other techniques may be explored and new variables may be added to arrive at costs. The CRA plans to harmonize the new tariff model with the Departmental Plans. No change is planned with regard to the fixed charge methodology or the return rates for investments. EPM expects a new regulatory framework governing the quality in the rendering of water, sewage and waste management services to be implemented by the CRA in 2014. As a result of the forecast for the second half of 2014, where an imminent arrival of the climate phenomenon of El Niño is expected, and which in the past caused severe shortage of the water service in various regions in the country, the CRA is expected to take precautionary measures similar to those in previous years. In this regard, on February 2010, the CRA issued Resolution 493, whereby the principles of efficient use and consumption conservation included in Decree 5051 of 2009 issued by the MAVDT, were applied. This resolution imposed an economic disincentive for residential consumption in excess of 28 cubic meters per month in cities and municipalities above 2,000 meters above sea level, 34 cubic meters per month in cities and municipalities between 1,000 and 2,000 meters above sea level and 35 cubic meters per month in cities and municipalities below 1,000 meters. The disincentive corresponds to twice the reference charge cost for consumption, and will be applicable in those areas, and during those times, that the IDEAM determines there is a risk of decreased rain levels. In relation to the consumer base served by EPM, the percentage of residential users who have registered excessive consumption does not exceed 4% and the trend is expected to remain at low levels. However, recently the CRA has submitted for public review and comments a proposed resolution (CRA Resolution 692) intended to amend Resolution 493 of 2010, whereby, among others matters, there are proposals to (i) eliminate the requirement of the prior concept from IDEAM in order to apply the economic disincentives set forth in Resolution 493, (ii) lower the consumption indicators for considering any excessive consumption on a monthly basis (in excess of 26 cubic meters per month in cities and municipalities above 2,000 meters above sea level, 28 cubic meters per month in cities and municipalities between 1,000 and 2,000 meters above sea level and 32 cubic meters per month in cities and municipalities below 1,000 meters); and (iii) establish those specific areas in the country where the resolution will be applied (the Department of Antioquia, including the city of Medellín, is currently being excluded from these areas). No restrictions apply to those regions not covered by the Resolution. However, public utilities companies in Colombia remain subject in their operations to the principles of efficient use and consumption conservation included in Decree 5051 of 2009.

147 The Water, Sewage and Waste Management Services Industry in Mexico EPM currently undertakes the following activities in Mexico pursuant to applicable Mexican regulations: abstraction, purification, distribution and supply of water (excluding irrigation), and development of urbanization works, including the construction of transport lines and distribution networks, drainages, water purification and treatment plants and drilling wells.

Market Participants The main competitors in the waste water management business in Mexico are (i) Degremont, (ii) Fypasa, (iii) Atlatec, (iv) Abengoa, (v) Acciona, (vi) OHL, (vii) ICA, and (viii) Veolia.

Regulatory Framework The main laws and regulations governing the provision of water services and investment in the water sector in Mexico are the following: • The Federal Constitution of the United Mexican States, which provides that Mexican municipal authorities are responsible for providing potable water and waste water management services. • The National Water Act and related regulations, pursuant to which the Mexican Federal Government has authority over, and management of, national waters and public goods, to be managed in coordination with Mexican States and Municipalities. • The Federal Rights Act, which creates the Public Registry of Water Rights and the National Water Commission — CAN. • The Ecological Equilibrium and Environmental Protection Act, which provides incentives, in the form of tax benefits, for those who assume the environmental benefits and costs generated by their business activities. • The Public Works Act (LOP).

Schemes of operation with the municipalities To operate with the municipalities, the relevant special purpose entity and the decentralized municipal entity responsible for water management in the respective municipality enter into a ‘‘Service Contract’’ for the treatment of waste water, which includes operation, preservation and maintenance activities, generally for periods ranging from 20 to 30 years. The scheme includes several types of trusts that guarantee payment of the services rendered and the return on investment. If the decentralized municipal entity does not have funds to pay, an ‘‘Irrevocable Revolving Contingent Credit Line’’ guarantees payments to the special purpose entity and then collects from the respective agency. The tariff comprises three elements: (i) a fee that compensates the capital at risk and the credit necessary to ensure the construction of the PTAR, (ii) a fee that pays total fixed costs, previously agreed and based on the bid winning the public tender, and (iii) a fee that pays variable costs per treated cubic meter.

The Waste Management Services Industry in Colombia Overview In Colombia the cleaning service is defined as a domiciliary public service. This service includes municipal waste collection, mainly in connection with solids. The applicable regulations also apply to the complementary activities of transportation, treatment, use and disposal of such waste. It also includes, among others, the mowing and pruning of trees located on roads and public areas, cleaning of these areas, transfer, treatment and recovery. The cleaning service is subject to regulation by the National Government and competition oversight by the SIC. It consists of the following value chain:

Sweeping and Treatment and Recollection Transfer Transportation cleaning final disposition

148 Sweeping and Cleaning — This activity does not involve no sunk costs, it is highly labor intensive and requires low capital. Its cost is set in Ps per swept kilometer, divided into the number of users of urban land in the municipality. Collection, transfer and transportation — The purchase and replacement of vehicles makes this activity capital intensive. The return on investment occurs in the short to medium term, ranging from 5 to 10 years. The cost is set per ton and it includes the collection and transportation of waste, equipment deterioration caused by salinity in coastal cities (representing an increase of 2.53%), 2 to 3 weekly frequencies and toll collection. An additional rate component for these activities consists of the cost of excess tract, which covers the cost of transportation for those tracts exceeding a 20 kilometers trip to the disposal site. Treatment and Final Disposal — This is a capital-intensive, high-sunk-costs activity, with a return on investment ranging from 20 to 30 years. It faces high negative externalities, high transaction costs and strong environmental regulatory measures. Prices are capped in terms of disposed-of tons per month and the costs resulting from the environmental license requirements. Where there is more than one final disposal site in the excess tract, the site must be chosen such that the cost of the sum of the excess tract and the cost of treatment and disposal is lower. In addition, the CRA, in the new methodology, is establishing incentives for the treatment and recycling activities of waste management. Commercialization — This is a no-sunk-costs, highly labor-intensive activity that requires a low capital, and is mainly based on the joint billing with other services.

Participants According to reports from the SSPD, waste generated in Colombia in 2013 amounted to 26,726 tons per day, with Bogota and Medellín being the cities that generated more waste. Also, according to information reported by the SSPD to the SUI, in 2013 EMVARIAS was the second grooming services provider in the country, with a share of 9.3% of the market.

Participation Companies — 2013 % Empresa de Acueducto, Alcantarillado y Aseo de Bogotá E.S.P ...... 19.5% Empresas Varias de Medellín S.A. E.S.P...... 9.3% Ciudad Limpia Bogotá S.A. E.S.P...... 6.3% Interaseo S.A E.S.P...... 4.8% Sociedad de Acueducto, Alcantarillado y Aseo de Barranquilla S.A. E.S.P...... 3.8% Promoambiental Cali S.A. E.S.P...... 2.4% Empresa Metropolitana de Aseo de Cali S.A. E. S. P...... 2.2% Promoambiental Valle S.A. E.S.P...... 2.0% Atesa de Occidente S.A E.S.P...... 1.9% Servicios Generales Empresa de Servicios Publicos de Caracter Privado S.A. E.S.P...... 1.8% Aseo Urbano S.A.S. E.S.P...... 1.8% Bioagricola del llano S.A. Empresa de Servicios Publicos ...... 1.7% Promoambiental Caribe S.A. E.S.P...... 1.6% Empresa de Aseo de Bucaramanga S.A. E.S.P...... 1.6% Other...... 39.3% Total ...... 100.0%

Regulatory Agency Cleaning services are regulated by the CRA, while the control, inspection and surveillance of operators is undertaken by the Superintendence of SSPD, who has the duty to enforce legislation to which operators are subject. According to the existing regulations, cleaning services may be provided (i) within a free competition scheme, which is the general rule, (ii) in exclusive service areas or ASEs, or (iii) directly by the municipality where there are no other providers and the applicable legal requirements are met.

Tariff Structure The public cleaning service is characterized by very low vertical integration due to the economic diversity of the activities it comprises. Different operators may service one or more phases of the business, whether it be

149 collecting ordinary waste, sweeping and cleaning of public areas or disposal of solid waste, as well as activities such as transfer, treatment or recovery. Regulation of conduct, as opposed to structure, clearly differentiates regulated and unregulated services. The regulatory scheme contemplates regulated freedom for urban areas and freedom subject to surveillance in rural areas. CRA Resolution 351 of 2005 sets the price regulation schemes applicable to persons providing public cleaning services and the methodology to be used to calculate rates of solid waste services within the regulatory framework. Pricing is based on a methodology of capped prices for each segment of the chain, in order to promote competition, especially in the activities of collection, transportation and sweeping. Other applicable regulations include the PGIRs, which are a way to regulate the role of municipalities, as well as some provisions regarding competition, especially relevant when there is more than one provider in the same area. The methodology provides for (i) a fixed fee per subscriber for sweeping and cleaning activities, commercialization and management of the fixed fee, and (ii) a charge per ton for collection and transportation activities, excess tract, disposal, and management of the variable fee. Variable fees are a function of the size of the market. In this service, municipalities intervene with the solidarity subsidy schemes and further cooperate among themselves for the regionalization of the final disposal. Individual measurement is expensive for sweeping services. Thus, the fee depends on the amount of waste generated by the community, based on weight measurements at the final disposal sites, distributed among subscribers of each route according to factors that assume a higher output for higher strata since their members have greater purchasing power. This weight per stratum is updated every 4 months. The costs of public hygiene services are updated by different price indices for each component according to their characteristics. A general scheme of tariff composition for cleaning services is provided below:

The Telecommunications Industry in Colombia Overview Since 2011, the performance curve of the industry has had a strong correlation with the Colombian GDP curve. This is due to the fact that both fixed and mobile services have reached high degrees of maturity. In 2012, the GDP registered a 4.3% growth while the telecommunications sector registered a 2.56% growth. In 2013 the GDP grew 4.9% while telecommunications grew 2.6%. This is illustrated by the next graph: As of December 31, 2013 and 2012, the total revenues of the telecommunications industry in Colombia were Ps.27,658 billion and Ps.25,259 billion, respectively, which represented a 9.5% increase in revenues in 2013 from 2012.

Key Characteristics and Trends of the Colombian Telecommunications Market According to the CRC, the key characteristics and trends of the market in which UNE operates are the following: Significant industry growth. The growth of the mobile services sector, which generates the highest revenues for the telecommunications industry, as well as the growth of internet services and dedicated broadband access, have been the key drivers of growth in the Colombian telecommunications industry as a whole. Revenue substitution and expanding market segments. Since 2000, the industry has experienced a revenue substitution trend due to the migration of traditional voice customers, i.e., local and long-distance customers, new generation services such as mobile telephone and internet services. Transition towards Next Generation Networks. Colombian telecommunications providers, which traditionally have used multiple networks for their various services, are integrating their networks into Next Generation Networks (‘‘NGNs’’). Another important step in the industry was the entry of 4G wireless technologies, which enable the development of applications and content with greater demands of speed and bandwidth that cannot be provided by current existing 3G networks. To enhance these services the MTIC has granted, through an auction mechanism, spectrum licenses top five operators (Comcel, Telefónica, Avantel S.A.S., DirecTV Colombia Ltda., and Colombia Móvil-ETB) besides UNE, which was the operator to have this license.

150 High levels of Internet access penetration. The penetration in Colombia of internet and broadband access services has significantly increased in recent years due to increased availability of personal computers in Colombia and the efforts of the Colombian Government to promote the use of internet technologies. Transition towards IP-based converging telecommunications solutions. The telecommunications industry is rapidly transitioning towards networks neutrality, allowing the implementation of IP-based integrated telecommunications solutions. High levels of regulation and transition from a service-based regulatory framework towards a regulatory framework for an integrated market. Telecommunications services in Colombia are regulated through several laws, decrees and regulations. These laws and regulations are designed to protect consumers and grant powers to several authorities to oversee the activities of telecommunications providers. In general, the Colombian telecommunications regulations are aimed at promoting service quality, universal access, free competition, restricting anti-competitive practices, ensuring the correct use of scarce technology and network neutrality. The following table illustrates the share of the total revenues of the industry by each of the service sectors for periods indicated therein:

2010 2011 2012 2013 Voice...... 14% 12% 10% 10% LD...... 4% 3% 3% 2% Mobile Services ...... 35% 31% 30% 28% T.V...... 10% 9% 9% 9% Broadband ...... 16% 15% 15% 14% Data Services ...... 6% 7% 9% 10% Other Services ...... 14% 22% 24% 26% Total ...... 100% 100% 100% 100%

Source: CRT Recent Industry Highlights • In the ‘‘4G auction,’’ the MTIC allocated 90 MHz in the AWS band for Ps.501,000 million and 100 MHz in the 2.5 GHz by Ps.269,000 million. This implies that, in 2014, three operators (Movistar, TIGO-ETB and Avantel) will enter the 4G LTE market on AWS, and two (Comcel and DirecTV Colombia Ltda.) on 2.5 GHz networks. • In August 2013, the Constitutional Court issued Decision C-555 of 2013, in which it found that the reversion clause agreed in contracts executed before de expedition of Law 422 of 1999 and Law 1341 of 2009 between the State and the mobile phone services concessionaires is in force and applicable. Under the reversion clause, all mobile phone services concessionaries that executed a contract before 1998 are required to return to the State, at the date of expiration of the concession agreement, both the frequencies used and the installed infrastructure. This clause sets forth that cellular networks shall become the property of the State in March 2014, date of expiration of the 20-year concessions. Conversations among the Colombian Government and the mobile phone services concessionaries are ongoing with respect to this decision.

Competition and Providers The Colombian telecommunications market is open to free competition. As set forth in Law 1341 of 2009, the provision of telecommunications networks and services is generally permitted to private parties. However, prior to the provision of these services, interested parties must first (i) complete an online registration proceeding before the MTIC in order to be recorded in the ICT Registry, and (ii) obtain prior approval from the MTIC for the use of radio electric spectrum. However, the Colombian telecommunications market is highly concentrated in a few providers, including Claro (Comcel and Telmex), Telefónica (Colombia Telecomunicaciones and Movistar), UNE, ETB, Colombia Móvil (Tigo). The Colombian telecommunications market is undergoing consolidation through mergers, acquisitions and privatizations of government-owned service providers. Although the Colombian telecommunications market is

151 already highly competitive, EPM expects a significant increase in competition as a result of new providers entering the market, the consolidation of existing service providers and increased availability of new services. See ‘‘Recent Developments-UNE-Millicom Merger.’’ Telephone Services As of December 31, 2013, Local Telephone services represented approximately 9.6% of the revenues of the Colombian telecommunications industry. Domestic Long-Distance accumulated traffic decreased from 1,770 million minutes in 2012 to 1,661 million minutes in 2013. Telefónica was the largest service provider in 2013, with a 62.9% market share. UNE increased its market share from 17.1% in 2012 to 17.8% in 2013, maintaining its ranking as the second largest service provider. EPM expects that Long-Distance traffic and revenues will further decline in the future due to the substitution of IP technologies for traditional voice channels and the further expansion of the mobile market. Internet The internet services market in Colombia has grown rapidly in the last several years. According to the CRC Annual Industry Reports for 2005 and 2013, the subscriber base has grown from 1,381,473 subscribers as of December 2007 to 9,061,322 subscribers as of December 2013. For the period from December 2007 to December 2013, this represented an increase in the subscriber base of 556%. In 2012 and 2013 dedicated access subscribers increased by 15.4% and mobile access subscribers increased by 42.2%, with more than 4,500,000 subscribers. This rapid growth has positioned Colombia as one of the world’s leading countries in terms of the growth rates for dedicated internet access services. In 2013, revenue in the Value-Added Services sector, which includes broadband internet access, increased by 11.1% from 2012, to Ps.6.7 billion. EPM believes that the internet services and broadband access market will continue to grow in the years to come due to lower costs of computing hardware, higher penetration rates, service rate reductions, new technologies, the convergence of services and networks and the entry of data services and fourth generation mobile networks. Television Main Characteristics of the Industry The television industry in Colombia has experienced growth exceeding that of the telecommunications industry as a whole. Such growth is due to technological advances, expansion of coverage networks and a strategy of packaging services, which has led to the expansion of the user base. The consolidation of pay television has led to the market dominance of four national providers and two satellite television providers, and has been accompanied by an exponential growth of the user base. Pay Television Currently, there is no specific regulation for pay television services through IPTV, nor has IPTV been considered as a television service. However, the possibility of pay television providers to use new technologies for transmission has been recognized. The provision of pay television services in Colombia requires (i) obtaining a license, (ii) updating the technology of telephone networks and (iii) commercialization of the service. These stages have already been completed by UNE. According to reports from ANTV, the evolution of the pay television user base has grown at an annual rate of 9.6% in 2010, 10.3% in 2011, 11.3% in 2012 and 8.3% in 2013, showing a slow growth during this period. According to information delivered by the main pay television providers and income estimates in the community television sector, income of pay television for the years 2011 through 2013 was Ps.2.2 billion, Ps.2.3 billion, and Ps.2.5 billion, respectively. Such income estimates reflect a growth rate of approximately 8.7%, in 2011, 3.1% in 2012, and 10.8% in 2013. Regulation of the Telecommunications Sector in Colombia In 2009, Law 1341 of 2009, known as TIC Law or ‘‘Ley de TIC,’’ an initiative from the MTIC recognized as a substantial advance in the telecommunications market in Colombia, was approved by Congress. This regulation made a substantive change in the telecommunications sector, by shifting from a regulation of services to a general

152 regulation based on network neutrality. Law 1341 of 2009 provided for structural reorganization changes in the telecommunications’ authorities and a general habilitation permit for providing telecommunications services (the ICT Registry). Law 1341 of 2009, however, recognized that for the use of radio electric spectrum, telecommunications service providers are required to obtain an express authorization, permit or license from MTIC. In addition to this structural change, other significant amendments in this new regime were those related to the reorganization of the former Ministry of Communications into the MTIC, the integration and homologation of the contributions’ regime, the removal of Local Telephone services from the public utility domiciliary services regime set forth in Law 142, the regulation of the spectrum, and the creation of the National Spectrum Agency (Agencia Nacional del Espectro or ‘‘ANE’’). In 2011, the Colombian Congress, through legislative Act No. 2 of 2011, amended the 1991 Constitution, particularly with respect to the authority in charge of overseeing television services. In such act, the Colombian Congress ordered the elimination of the CNTV entity and the issuance of a law re-distributing the attributions formerly conferred upon the CNTV. Thus, Law 1507 of 2012 created the National Television Authority (ANTV), which is primarily responsible for providing the tools for the implementation of plans and programs for the provision of public television service, so as to ensure access to television, ensuring pluralism and informative impartiality, competence and efficiency in the service, and prevent monopolistic practices in its operation and exploitation. Additionally, the Law distributed attributions in matters regarding television to the ANTV the ANE, the SIC and the CRC. In mid-2013, the MTIC auctioned 4G spectrum and awarded licenses to Avantel, Claro, DirecTV Colombia Ltda., Consortium ETB-Colombia Móvil and Movistar. According to Decree 2980 of 2011, spectrum caps currently in force are (i) 85 MHz for the higher bands. (Between 1710 MHz and 2690 MHz) and (ii) 30 MHz for the lower band (between 698 MHz and 960 MHz). Regulatory Authorities The MTIC, the CRC and the ANTV are the primary regulatory authorities in the Colombian telecommunications industry. Other authorities, such as the ANE, and the SIC, govern particular aspects. The MTIC establishes and administers the national telecommunications policy, establishes the legal framework for telecommunications licensing, except for television services, and allocates electromagnetic spectrum resources. As the licensing authority, the MTIC grants licenses and oversees the operations of telecommunications service providers in order to ensure that they comply with their obligations. The CRC, (formerly the CRT), primarily regulates and promotes competition in the telecommunications industry, ensuring service quality and protecting consumers. It is also responsible for interconnection matters, technical standards and establishing pricing methodologies. CRC oversees all companies providing telecommunications services. Its functions in television matters include, among others, promoting competition, preventing abuses of dominant position, regulating network markets and communications services, and setting out the classification of television services. The ANE provides the required technical support to the MTIC for the management, planning, control and surveillance of the radio electric spectrum. It is also the entity charged to conduct the State intervention in the electromagnetic spectrum destined to public television services. The ANTV is one of the regulatory entities for the television services market. Its powers include licensing matters. The SIC is the highest authority on antitrust and consumer protection matters in Colombia. As per the enactment of Law 1341 of 2009, Local Telephone services are not considered public utility domiciliary services, the prior powers granted to the SSPD in respect of anti-trust practices in relation to providers that offered such services are now subject to surveillance from the SIC, the authority that exercises today all surveillance and control in relation to anti-trust practices among all services offered by the telecommunication service providers in the country. With respect to television, in accordance with Law 1507 of 2012, the SIC is the entity in charge of monitoring restrictive practices and economic integrations. Service Regulation As of the enactment of Law 1341 of 2009, Colombian telecommunications market is more in line with the current world market trend, whereby telecommunication providers have started developing and providing consumers

153 with various competing services through one single network, supported by various technologies. In light of this circumstance, the telecommunications regime was amended to adequately provide for this convergent effect experienced in the sector. Pricing Law 1341 of 2009 has established a free pricing model for network and telecommunications services, subject to the possible intervention of the CRC in the event of (i) a lack of sufficient competition, (ii) collapse or failure in the market, or (iii) when the quality of the service in the market does not conform to the required service standards. General Habilitation Regime Contrary to the previous system of required licensing for type of service, the new telecommunications’ regime in Colombia provides for an ICT Registry that allows companies to offer network and telecommunication services through any network. The requirements for obtaining the ICT Registry (established by Decree 4948 of 2009 from the MTIC) consist in a limited set of formal requirements and a registration process before the MTIC. The ICT Registry does not per se include the regulatory approval to use the service spectrum. Such approval must be obtained from the MTIC, which uses an objective selection process to grant approvals to interested services providers. Interconnection As set forth in Resolution 3101 of 2011, telecommunications service providers are required to ensure and allow the interconnection of other telecommunication service providers to their own networks, in order to provide for network interfunctionality and services interoperability. This means that telecommunications service providers have a right to access the essential facilities of telecommunications services and networks providers for the purpose of providing their own telecommunications services, networks, applications and/or contents. Although interconnection is mandatory, telecommunications service providers allowing other service providers to connect to their networks are entitled to an interconnection fee. Dominant Operator According to Law 1341 of 2009 and Resolution 2058 of 2009 of the CRC, a service provider is considered dominant if it can increase the prices on a permanent and profitable basis in a defined market. The analysis to determine if a service provider is ‘‘dominant’’ includes elasticity tests, markups analysis and critical-loss analysis. Television Services Television services are characterized as non-domiciliary public telecommunications services. The main rules and regulations governing television services in Colombia are Law 182 of 1995, Law 336 of 1998, Law 680 of 2001 and Agreements 10 of 2006 and 06 of 2008 regarding pay television services. The ANTV is the main planning and oversight governmental entity in the television industry. The ANTV, the CRC, the National Spectrum Agency (Agencia Nacional del Espectro or ‘‘ANE’’) and the SIC are in charge of developing and executing Colombian Government policy in connection with the television industry. Television services are subject to a concession regime according to which subscription television services can only be rendered upon previous concession from the ANTV. Pay television tariffs are based on a scheme of supervised liberty or libertad vigilada and as such the only obligation of the providers is to give the ANTV notice of the tariffs for each year. Pursuant to applicable regulations, the ANTV has the power to regulate tariffs of pay television services, but the ANTV has not done so.

154 BUSINESS Overview EPM is an industrial and commercial government-owned company (Empresa Industrial y Comercial) founded in the City of Medellín, Colombia, in 1955 to provide public utility services. Through EPM’s BUs, (i) the Energy BU and (ii) the Water BU, EPM currently participates in the generation, transmission, distribution and commercialization of electricity; distribution and commercialization of natural gas; and water, sewage and waste management businesses, with operations in Colombia and several other countries in Latin America. In addition, EPM participates in the telecommunications sector through its non-controlling equity interest in UNE. Until the consummation of the UNE-Millicom Merger, EPM had a 100% equity interest in UNE and operated UNE and its subsidiaries as an independent BU. However, following the UNE-Millicom Merger and the transfer of EPM’s control over the business affairs of UNE to Millicom, the telecommunications business is now operated independently from EPM. Beginning on August 1, 2014, EPM ceased consolidating the assets, liabilities and results of operations of UNE with EPM’s assets, liabilities and results of operations. In future periods, EPM expects to record its investment in UNE under the equity method. See ‘‘Recent Developments—UNE-Millicom Merger.’’ Operations in Colombia. EPM is Colombia’s largest public utility services company, based on 2013 revenues, and the second largest company overall, based on total assets as of December 31, 2013. EPM provides its services principally in the City of Medellín, Colombia’s second largest city, as well as in surrounding localities which are spread along the Aburrá Valley (Valle de Aburrá). EPM also operates in Colombia’s capital and largest city, Bogotá, as well as in the Colombian cities of Manizales, Armenia, Pereira, Bucaramanga, Cúcuta, Quibdó, Cartagena and Cali. International Operations. EPM currently provides electricity transmission, distribution and commercialization services through subsidiaries in El Salvador, Guatemala and Panama. In addition, EPM currently provides waste water management services through subsidiaries in Mexico. EPM has recently completed the development of a wind power plant project in Chile and announced the establishment of a branch office in Costa Rica. See ‘‘Summary— Recent Developments.’’ EPM is also developing a hydroelectric power plant project in Panama, which is expected to be operational in 2015. See ‘‘Summary — Brief Summary of Ongoing Significant Projects.’’ The following table sets forth EPM’s consolidated revenues, net income and Consolidated Adjusted EBITDA for the years ended December 31, 2013, 2012 and 2011 and for the six months ended June 30, 2014 and 2013:

For the Six Months Ended June 30 For the Year Ended December 31, 2014 2013 2013 2012 2011 (Ps. in millions) Revenues ...... Ps. 6,989,026 Ps. 6,357,546 Ps. 12,986,466 Ps. 12,498,850 Ps. 11,508,020 Net income ...... 847,628 749,566 1,624,813 1,591,926 1,518,679 Consolidated Adjusted EBITDA . . 2,050,064 1,956,686 3,793,335 3,805,578 3,652,121 EPM operates its business directly and indirectly through several subsidiaries. For a list of EPM’s subsidiaries and of certain affiliates, see ‘‘Annex B — Subsidiaries and Certain Affiliates.’’ For the year ended December 31, 2013, Ps.5,309,346 million, representing 40.9% of EPM’s consolidated net operating revenues, were generated directly by EPM, while Ps.7,677,120 million, representing 59.1% of its consolidated net operating revenues, were generated by its subsidiaries. For the six months ended June 30, 2014, Ps.2,688,187 million, representing 38.5% of EPM’s consolidated net operating revenues, were generated directly by EPM, while Ps.4,300,839 million, representing 61.5% of its consolidated net operating revenues, were generated by its subsidiaries. As a company engaged in the provision of public services, EPM is subject to the regulatory regimes applicable to public service companies in Colombia and the other countries where EPM operates. Among other things, customer prices and returns on investment in EPM’s regulated energy and water businesses are in many instances fixed in accordance with regulations set forth by the CREG or the CRA in Colombia and regulatory agencies of the other countries where EPM operates. For more information on the regulatory regimes applicable to EPM, see ‘‘Industry.’’ EPM’s electricity assets include 35 hydroelectric plants, three thermal plants and one wind power plant, 216,973 km of transmission and distribution lines and approximately 416 power substations throughout Colombia and outside such country. UNE owns approximately 3,760,654 pair-km of copper cable networks, 827,452 DSL ports, 2,836,832 Home Passed, 34 CMTS and 3,004 DSLAM virtually covering the entire Colombia 1,122 radio bases 4G LTE and

155 two data centers. EPM’s water networks and facilities include 163 storage tanks, 29 potable water plants, 27 laboratories, 4,585 km of potable water network and 4,983 km of sewage networks. The net value of EPM’s net consolidated property, plant and equipment totaled Ps.16,568,521 million as of June 30, 2014. EPM’s principal executive office is located at Carrera 58 No 42-125, Medellín, Colombia, and its investors’ relations’ telephone number is +57.4.380.5147 or +57.4.380.5871 and e-mail is [email protected]. EPM’s website address is www.epm.com.co. Information contained on, or accessible through, EPM’s website is not incorporated in this offering memorandum and you should not consider any such information to be part of this offering memorandum. The following table sets forth the principal operating indicators of EPM for the periods indicated:

For the Six Months Ended June 30, For the Year Ended December 31, 2014 2013 2013 2012 2011 (Ps. in millions, except %) Revenues ...... Ps.6,989,026 Ps.6,357,546 Ps.12,986,466 Ps.12,498,850 Ps.11,508,020 Consolidated Adjusted EBITDA . . 2,050,064 1,956,686 3,793,335 3,805,578 3,652,120 Net income ...... 847,628 749,566 1,624,813 1,591,926 1,518,679 Dividends from non-controlled subsidiaries and affiliates(1) . . . . 28,137 21,179 45,643 52,389 41,526 Consolidated Adjusted EBITDA Margin ...... 29.3% 30.8% 29.2% 30.4% 31.7% Non-current investments in securities ...... 7,396 8,741 8,185 9,672 66,516 Non-current equity investments, net ...... 501,331 498,260 501,370 507,177 505,917 Equity investments reappraisal . . . . 1,808,553 1,423,304 1,840,799 1,628,588 1,639,507 Total assets ...... 37,892,284 36,363,000 38,298,679 35,277,909 34,035,893 Equity ...... 21,925,265 20,741,805 22,047,514 21,059,729 19,893,424 Net income to equity(2) ...... 3.9% 3.6% 7.4% 7.6% 7.6% Net income to total assets(3) . . . . . 2.2% 2.1% 4.2% 4.5% 4.5% Non-current investments to total assets(4) ...... 1.3% 1.4% 1.3% 1.5% 1.7% Non-current investments including reappraisal to total assets(5) . . . . 1.3% 5.3% 6.1% 6.1% 6.5%

(1) Dividends received from non-controlled affiliates including ISA, ISAGEN and others. (2) ‘‘Net income to equity’’ is equal to net income divided by total equity. (3) ‘‘Net income to total assets’’ is equal to net income divided by total assets. (4) ‘‘Non-current investments to total assets’’ is equal to current investments divided by total assets. (5) ‘‘Non-current investments including equity investments reappraisal to total assets’’ is equal to Non-current investments, including equity investments reappraisal, divided by total assets.

156 EPM’s BUs and Segments EPM’s business is currently divided into two BUs: (i) the Energy BU, and (ii) the Water BU. The following chart summarizes EPM’s BUs and its respective segments.

The following tables set forth (i) the consolidated revenues generated by each of EPM’s BUs and (ii) the revenues generated by each of EPM’s BUs as a percentage of EPM’s total revenues, in each case for the periods indicated: For the Six Months Ended June 30 For the Year Ended December 31, 2014 2013 2013 2012 2011 (Ps. in millions) Energy(1) ...... Ps.5,147,637 Ps.4,811,975 Ps.9,728,411 Ps.9,420,409 Ps.8,722,202 Water (2)...... 496,532 367,126 803,537 725,390 702,825 Other(3)...... 36,391 33,324 80,737 100,453 12,730 Telecommunications(4) ...... 1,376,637 1,204,240 2,524,463 2,346,916 2,109,702 Eliminations ...... (68,171) (59,119) (150,682) (94,318) (39,439) Total revenues ...... Ps.6,989,026 Ps.6,357,546 Ps.12,986,466 Ps.12,498,850 Ps.11,508,020

For the Six Months For the Year Ended Ended June 30, December 31, 2014 2013 2013 2012 2011 (Percentage of EPM’s total net revenues) Energy(1) ...... 73.7% 75.7% 74.9% 75.4% 75.8% Water(2) ...... 7.1% 5.8% 6.2% 5.8% 6.1% Other(3)...... 0.5% 0.5% 0.6% 0.8% 0.1% Telecommunications(4) ...... 19.7% 18.9% 19.4% 18.8% 18.3% Eliminations ...... -1.0% -0.9% -1.2% -0.8% -0.3% Total ...... 100.0% 100.0% 100.0% 100.0% 100.0%

(1) Includes generation, transmission, distribution and commercialization of energy as well as gas distribution and commercialization services. (2) Includes aqueduct, sewage services and waste management. (3) Includes technical assistance, IT services, management and operation of the energy market, fees charged to third parties for billing services, sales of equipment and medical department services. (4) Includes Local Telephone, Long-Distance, value-added, carrier and interconnection services provided by UNE. Beginning on August 1, 2014, EPM ceased consolidating the assets, liabilities and results of operations of UNE with EPM’s assets, liabilities and results of operations. In future periods, EPM expects to record its investment in UNE under the equity method. See ‘‘— Recent Developments — UNE-Millicom Merger.’’

157 For the six months ended June 30, 2014, EPM’s Consolidated Adjusted EBITDA was Ps.2,050,064 million, with the Adjusted EBITDA generated by the Energy BU representing 73.6%, the Adjusted EBITDA generated by the Water BU representing 10.0%, and the Adjusted EBITDA generated by the Telecommunications BU representing 17.0% of such Consolidated Adjusted EBITDA, respectively. For the definition of Consolidated Adjusted EBITDA, see ‘‘Note Regarding Non-GAAP Financial Measures.’’ EPM’s calculation of Consolidated Adjusted EBITDA may not be comparable to the Consolidated Adjusted EBITDA provided by other companies. For a reconciliation of Consolidated Adjusted EBITDA to operating income, see ‘‘Selected Financial and Key Operating Data.’’

The Energy BU The Energy BU comprises three business units: (i) electricity generation, (ii) electricity transmission, distribution, and commercialization, and (iii) natural gas distribution and commercialization. EPM operates its Energy BU directly and indirectly through several subsidiaries. The following chart summarizes the relevant entities of each business unit in the Energy BU.

158 The following tables set forth (i) the consolidated revenues generated by each segment in the Energy BU and (ii) the gross revenues generated by each segment of the Energy BU as a percentage of EPM’s Energy BU total revenues, in each case for the periods indicated:

For the Six Months Ended June 30, For the Year Ended December 31, 2014 2013 2013 2012 2011 (Ps. in millions) Electricity generation ...... Ps. 1,373,859 Ps.1,328,161 Ps.2,700,029 Ps.2,787,388 Ps.2,199,470 Electricity transmission, distribution and commercialization ...... 4,269,700 3,839,262 7,899,020 7,385,579 6,708,682 Natural gas distribution and commercialization ...... 272,350 262,162 564,894 448,551 405,694 Eliminations...... (751,288) (575,405) (1,350,340) (1,097,677) (570,654) Total gross revenues ...... 5,164,621 4,854,180 9,813,603 9,523,841 8,743,192 (-) Discounts(1) ...... 16,984 42,205 85,192 103,432 20,990 Total revenues, net ...... Ps.5,147,637 Ps.4,811,975 Ps.9,728,411 Ps.9,420,409 Ps.8,722,202

For the Six Months Ended June 30, For the Year Ended December 31, 2014 2013 2013 2012 2011 (Percentage of EPM’s Energy BU total revenues) Electricity generation ...... 26.7% 27.6% 27.8% 29.6% 25.2% Electricity transmission, distribution and commercialization ...... 82.9% 79.8% 81.2% 78.4% 76.9% Natural gas distribution and commercialization ...... 5.3% 5.4% 5.8% 4.8% 4.7% Eliminations...... -14.6% -12.0% -13.9% -11.7% -6.5% Total gross revenues ...... 100.3% 100.9% 100.9% 101.1% 100.2% (-) Discounts(1) ...... 0.3% 0.9% 0.9% 1.1% 0.2% Total ...... 100.0% 100.0% 100.0% 100.0% 100.0%

159 According to XM, the entity responsible for planning and coordinating the operations in the Colombian interconnected system, EPM was the largest electricity generator in Colombia in terms of electricity generated and installed electricity generation capacity as of June 30, 2014. As of June 30, 2014, EPM had an installed electricity generation capacity of 3,579 MW representing approximately 23.9% of the total installed electricity generation capacity in Colombia. EPM also owns 13.1% of ISAGEN, a Colombian electricity generation company controlled by the Colombian Government. For the year ended December 31, 2013 and the six months ended June 30, 2014, EPM recognized Ps.24,460 million and Ps.28,131 million, respectively, in income from its investment in ISAGEN. See ‘‘Summary — Recent Developments.’’ Law 1715 of 2014 allows the use of renewable power sources (such as wind energy, sea energy, biomass energy, solar energy, geothermal energy, etc.) for the production of electricity and for such power production to be connected to the national grid. Consequently, power generation activities may be subject to changes in regulation during the course of the following years, establishing specific regulatory terms pursuant to which the different power generating units using renewable energy sources may be able to connect to the national grid. This situation may open new business areas for EPM. EPM has recently completed the development of a wind power plant project in Chile and announced the establishment of a branch office in Costa Rica. See ‘‘Summary — Recent Developments.’’

Electricity Transmission, Distribution and Commercialization The electricity transmission, distribution and commercialization segment consist of electricity transmission and distribution services and sales to end-users, including residential, commercial and small and medium sized industrial customers. EPM participates in the electricity transmission business in Colombia directly and indirectly through its subsidiaries and investments. According to XM, as of December 31, 2013, EPM’s electricity transmission network accounted for 25.7% of the STR and 8.0% of the STN. In addition, EPM owns 10.2% of ISA, Colombia’s largest electricity transmission company which is controlled by the Colombian Government. For the year ended December 31, 2013 and the six months ended June 30, 2014, EPM recognized Ps.21,170 million and Ps.24,098 million, respectively, in income from its investment in ISA. EPM participates in the electricity distribution business in Colombia directly and indirectly through its subsidiaries. As of June 30, 2014, EPM was the largest electricity commercialization group in Colombia, serving approximately 23.8% of Colombia’s commercialization market with approximately 3,740,621 customers, of which 2,022,154 customers were located in the Department of Antioquia. EPM currently provides electricity transmission services in Guatemala through its subsidiary Trelec. EPM currently provides electricity distribution and commercialization services in El Salvador, Guatemala and Panama through several subsidiaries.

160 The Water BU EPM’s Water BU consists of the water, sewage and waste management services, which EPM conducts directly and through subsidiaries in Colombia and Mexico. See ‘‘Business — Water BU.’’ The following chart summarizes the business segments and relevant entities of the Water BU.

EPM directly operates water and sewage systems in the City of Medellín and other cities of the Metropolitan Area. EPM also operates water and sewage systems in the Colombian cities of Apartadó, Chigorodó, Carepa, Turbo, Mutatá, Sopetrán, Santa Fe de Antioquia, San Jerónimo, Olaya, El Retiro, Quibdó and Malambo, through its regional subsidiaries. According to the SSPD, for the year ended December 31, 2012, EPM was the second largest water and sewage service provider in Colombia in terms of revenues. EPM also operates 11 waste water treatment plants in Mexico through its subsidiary TICSA. EPM also provides waste management services in Colombia through its subsidiary EMVARIAS. The water business unit in Colombia extracts water from various sources and conducts the subsequent treatment and distribution to customers’ premises. EPM draws from water sources and water collection systems with enough capacity to serve the population in the Metropolitan Area as well as those regions serviced through its regional subsidiaries. In 2013, EPM’s production in Colombia reached approximately 285.7 million cubic meters of water in its Metropolitan Area operation and 32.5 million cubic meters through its regional subsidiaries. EPM’s water treatment structure in Colombia consists of reservoirs, treatment plants, primary distribution networks and water pipes, pumping stations, storage tanks and secondary distribution networks. EPM’s water infrastructure is complemented by a control center and water-quality-control and micro-measurement-calibration laboratories. The sewage business unit in Colombia is in charge of the collection and removal of sewage through EPM’s sewage systems and of its subsequent disposal, with or without prior treatment. EPM conducts its sewage activities in the same areas in which the Company conducts its water and distribution services. In the urban regions of the Metropolitan Area, EPM has a coverage ratio of 100.0%. As of December 31, 2013, the Company collected 100.0% of all the sewage technically feasible for collection produced in the Colombian cities in which it operates.

161 For the six months ended June 30, 2014 and the years ended December 31, 2013, 2012 and 2011, revenues generated by the Water BU totaled Ps.496,532 million, Ps.803,537 million, Ps.725,390 million and Ps.702,825 million, respectively. For the six months ended June 30, 2014, the Water BU’s total Adjusted EBITDA was Ps.207,478 million, with the Adjusted EBITDA generated by the water business segment representing 28.7%, the Adjusted EBITDA generated by the sewage business segment representing 60.4%, and the Adjusted EBITDA generated by the waste management business segment representing 10.3% of such total EBITDA, respectively. See ‘‘Note Regarding Non-GAAP Financial Measures.’’ EPM’s calculation of Consolidated Adjusted EBITDA may not be comparable to the Consolidated Adjusted EBITDA provided by other companies. For a reconciliation of Consolidated Adjusted EBITDA to operating income, see ‘‘Selected Financial and Key Operating Data.’’ Competitive Strengths EPM believes that the following strengths will enable EPM to implement its business strategy: Multi-utility, vertically integrated operator. EPM is the leading multi-utility services company in Colombia providing electricity generation, transmission and distribution, gas distribution, water, sewage and waste management services. EPM has been able to achieve operational efficiencies from this diversified and vertically integrated service platform, as well as a deep base of operational and technical expertise, strong relationships with regulators and visibility and prominence among industry leaders. Furthermore, existing government regulations prohibit new players from becoming vertically integrated in the energy business in Colombia, thus limiting competitive challenges to EPM in its most important business lines. Consistent margins from regulated businesses and stable regulatory framework. EPM’s regulated businesses – particularly the retail energy and water services it provides – have stable margins which are to a large degree insulated from volatility in operating and other costs as well as customers’ rates. In addition, EPM believes that its principal regulators in Colombia have generally taken a commercially reasonable approach to industry regulation, which has in turn resulted in a stable regulatory environment. Furthermore, EPM’s relationship with these regulators has been and continues to be positive and constructive, and EPM actively cooperates with its regulators in addressing the challenges facing its industries. Expertise in developing and efficiently operating electricity generation, transmission and distribution systems. EPM has substantial experience in the development and operation of electricity generation, transmission and distribution systems. During the last 50 years EPM has been a significant participant in the energy industry and a key participant in the development of Colombia’s energy infrastructure. EPM has developed some of the most important infrastructure projects for Colombia’s electricity industry, including the only wind power generation facility. Further, EPM has received and maintains multiple ISO 9001 certifications on certain of its operational processes, including on the quality and safety of its services. Since 2003, the CIER has named EPM as one of the leading electricity companies in Latin America in terms of service quality standards. In 2013, EPM reached CIER’s Gold Category in the Satisfaction Index Quality among 35 participating companies in Latin America. In a June 2014 article published by The Economist, EPM was characterized as one of South America’s best run utility companies. Market leader in the Colombian electricity generation and commercialization businesses. According to XM, EPM was the largest electricity generator in Colombia in terms of electricity generated and electricity generation installed capacity as of June 30, 2014. During the six months ended June 30, 2014, EPM generated 23% of the total amount of electricity generated in the National Interconnected System (Sistema Interconectado Nacional or ‘‘SIN’’). During 2013, 2012 and 2011, EPM generated 24.5%, 27.2% and 24.2% of the total amount of electricity generated in the SIN, respectively. Furthermore, EPM is developing the Ituango Project, which is expected to be the largest hydrogeneration power plant in Colombia, with a total installed capacity of 2,400 MW. For a detailed description of the Ituango Project, see ‘‘ —Brief Summary of Ongoing Significant Projects—Ituango Project’’ and ‘‘Business — Energy BU — Electricity Generation and Commercialization Business — Capital Expenditure Projects: Expansion of EPM’s Generation Capacity.’’ With respect to the commercialization business, the area of coverage of EPM’s electricity commercialization activities includes the Departments of Antioquia, Caldas, Risaralda (excluding Pereira), Quindío, Norte de Santander and Santander. According to XM, for the six months ended June 30, 2014 and the year ended December 31, 2013, EPM’s share of the electricity commercialization market was approximately 23.8% and 23.9%, respectively, measured by GWh. Constructive relationship with the City of Medellín and Strong Corporate Governance. On April 23, 2007, EPM and the City of Medellín entered into the General Agreement for Corporate Governance (Convenio Marco de

162 Relaciones). Pursuant to this agreement, the City of Medellín agreed, among other things, (i) not to interact with EPM or officers of EPM other than through EPM’s board of directors, (ii) not to intervene in EPM’s contract negotiations, (iii) not to interfere with EPM’s financial planning and management, and (iv) to appoint no fewer than five independent directors. The purpose of the agreement is to curtail the potential for excessive political interference from the City of Medellín in EPM’s business, to protect EPM’s autonomy and to align the City of Medellín’s incentives with EPM’s strategic business objectives. Other regulations adopted in 2007 comprise (i) a Corporate Governance Code, and (ii) the annual corporate governance report. EPM’s Corporate Governance Code follows international standards regarding relationships with controlling entities, board of directors’ roles, control and disclosure of information. The corporate governance model that EPM has adopted has strengthened the relationship between EPM and the City of Medellín by affording EPM the opportunity to independently manage its business while achieving the social objectives of the City of Medellín, which has allowed the Company to have a long-term vision, with a stable management not subject to government changes. Strong Environmental and Social Commitment. EPM seeks to create value for its stakeholders on the basis of balanced financial, economic, social and environmental outcomes in the locations where the EPM operates. EPM is committed to reaching territories and communities with sustainable development of projects and the efficient provision of public utility services.

Business Strategy EPM seeks to continue to grow sustainably and expand internationally leveraging on its leading position in Colombia with the objective of becoming one of the fifty largest Latin American companies in terms of revenues by 2022. While achieving these objectives, EPM expects to continue contributing to the sustainable development and well-being of all its stakeholders in the areas where EPM operates. The key elements of EPM’s business strategy are the following: International expansion. EPM seeks to further expand its participation in the energy and water businesses in Latin America. In 2010, EPM entered the Guatemalan energy market with the acquisition of Deca II. In 2011, EPM entered the Salvadorian and Panamanian energy markets with the acquisitions of Del Sur and ENSA, respectively. In 2013, EPM entered the Chilean energy market through its subsidiary EPM Chile, owner of the 109.6 MW wind power plant Los Cururos and party to a turnkey contract with the Danish company Vestas. On June 10, 2014, EPM’s board of directors approved the establishment of a branch office in Costa Rica, one of EPM’s target countries in the region for its international expansion. EPM plans to make significant investments in the next four years for the international expansion of its Energy BU. These investments are expected to be targeted at acquiring electricity generation, distribution and transmission assets, and forming strategic alliances with international partners for the development of greenfield projects in Latin America. EPM’s international expansion plan considers countries such as Mexico, Brazil, Chile, Peru, Guatemala, El Salvador, Costa Rica and Panama, and southern United States. Enhance domestic position in energy. EPM plans to invest in new electricity generation, transmission, distribution and gas distribution assets in Colombia, including investments associated with the Ituango Project. In 2011, the hydroelectric power plant Porce III became operational and currently contributes 660 MW to Colombia’s national grid. The Ituango Project is expected to be the largest hydrogeneration power station in Colombia, with a total installed capacity of 2,400 MW to be achieved in two phases. The first phase (1,200 MW) is expected to be operational in 2019 (with the first stage of this phase beginning operations in 2018), and the second phase (1,200 MW) is expected to be operational in 2022. EPM expects to increase its electricity generation capacity by over 67% upon the implementation of both phases of the Ituango Project. See ‘‘—Brief Summary of Ongoing Significant Projects — Ituango Project.’’ The completion of the Nueva Esperanza Project and the Bello-Ancon Electricity Transmission Project are expected to enhance EPM’s energy transmission business. See ‘‘— Brief Summary of Ongoing Significant Projects — The Nueva Esperanza Project’’ and ‘‘The Bello-Ancon Electricity Transmission Project.’’ EPM also seeks to increase its presence and share in the regional electricity distribution markets and to expand its gas distribution system to several regions of Antioquia. Continued growth in the Colombian water business and internationalization of EPM’s water BU. EPM seeks to continue its growth in the Colombian water business. EPM began the construction of the Bello Plant in 2011 as part of the group of projects for the sanitation of the Medellín river. The Bello Plant is currently expected to be operational

163 in 2015. In 2011, EPM acquired a 85% equity interest in Aguas de Malambo S.A. E.S.P., a public utility company with water operations in Barranquilla, Colombia. In 2013, EPM entered the collection of solid waste business with the acquisition of a 99.9% equity interest in EMVARIAS, a leading company in the waste collection business in Colombia. EPM also seeks to further expand its water business internationally. In 2013, EPM entered the Mexican water market with the acquisition of a majority equity interest in TICSA, the holding company of a business group engaged in the design, construction, operation and development of waste water treatment plants in Mexico. EPM believes that the Latin American water, sewage and waste management business will continue to experience rapid growth, as a result of the limited access to water, sewage and waste management services for much of the population in the region. EPM intends to enter into operating arrangements with entities involved in existing water and sewage infrastructure, as well as seek opportunities to participate in new infrastructure development projects in and outside Colombia. EPM also seeks to increase its presence in the Colombian water and sewage business, which EPM believes will grow through increased penetration of these services in unserved populations. In addition, environmental concerns are driving plans to upgrade waste water treatment and management infrastructure. Improve operational efficiency in energy and water BUs. EPM is working to further reduce transmission and distribution losses in its acquired electricity businesses by introducing the technology and loss mitigation techniques that EPM has developed for its existing businesses. These techniques are aimed at reducing both technical losses from the performance of the transmission and distribution systems, and commercial losses from power theft, billing, metering errors and fraud. These efforts include engineering and technical upgrades to existing power infrastructure, the use of more secure metering boxes to prevent metering fraud, better policing of infrastructure and the use of technology to rapidly detect and stop theft. EPM has historically been effective in improving the operational efficiency and quality service standards of its acquired companies and believes that it is possible to further reduce inefficiencies in some of its acquired electricity companies. EPM has also been implementing an efficiency plan in its water and sewage business, including a comprehensive water and sewage management project.

Corporate Social Responsibility EPM has always had a commitment not only to supply efficient and high-quality services, but also to contribute to the welfare of the communities in which it operates. As a result, EPM has established a number of social responsibility programs. These programs include financial assistance for low-income students, the expansion of electricity coverage to households in rural areas in Antioquia, improvement of low-income housing conditions, prepaid energy programs for low-income customers and the promotion of employment in, and the development of, underdeveloped regions. In the last five years, EPM has increased the electricity coverage to 90,660 households in rural areas in Antioquia and developed prepaid energy programs for 167,343 low-income customers. For the implementation of the prepaid water system, EPM received the fee regulation from the CRA in order to provide water, sewage and waste management services under this system, including the conditions for the payment of the sanitation service by users.

Property, Plant and Equipment As of June 30, 2014 and as of December 31, 2013, the net book value of EPM’s plant, property and equipment totaled Ps.16,568,521 million and Ps.16,023,149 million, respectively. Plant, property and equipment and asset reappraisal, represented 73.1% of EPM’s total consolidated assets as of June 30, 2014.

Legal Proceedings EPM is currently involved in contractual, commercial, civil, administrative, tax and labor litigation. As of June 30, 2014, the aggregate amount of claims against EPM under pending litigation was Ps.1,024,418 million. EPM is also a party to a number of class action suits in connection with the provision of public utility services or in connection with claims of the population in areas where EPM is developing certain projects. These class action claims are not included within the approximate aggregate amount of claims under pending litigation referred to above. EPM believes that except for the claims described below, none of the other claims brought against EPM, either individually or in the aggregate, is likely to have a material adverse effect on EPM’s business, financial condition or results of operations. In order to determine whether to create a specific allowance in connection with legal proceedings in which EPM may be involved, EPM’s management and legal counsel evaluates and classifies the

164 potential outcomes of such legal proceedings. The expected outcome of legal proceedings may be classified as probable, possible or remote. If an adverse outcome is classified as probable, EPM is required to create an allowance reflecting the probable value of such contingency. If an adverse outcome is classified as possible, it is recorded as a memorandum account. Set forth below is a brief description of EPM and its subsidiaries’ most significant legal proceedings and with respect to which EPM currently believes that a resolution adverse to EPM is either probable or possible:

EPM John Jairo Velásquez Agudelo. On April 25, 2013, John Jairo Velásquez Agudelo, as plaintiff, filed a suit before the municipal civil courts of the City of Medellín, claiming the nullity of the decisions adopted by the extraordinary shareholders meeting of EPM Ituango S.A. E.S.P. and seeking an order against EPM to restore the BOOMT Agreement entered into with HidroItuango to EPM Ituango S.A. E.S.P., together with any proceeds accrued from January 11, 2013, until the date of compliance with the judicial order. The amount of the claim for damages is approximately Ps.23,655 million. The matter is currently in the evidentiary stage. Aura der Jesús Salazar Mazo et al. On October 5, 2012, 114 individuals, claiming to be residents of the Alto de Chiri village in the Briceño municipality, filed a class action against HidroItuango, EPM Ituango S.A. E.S.P. and EPM, claiming payment of the environmental losses and the damages caused to the ancestral paths providing access to the community. The amount of the claim for damages is approximately Ps.23,151 million. This matter is currently in the stage of notices to the community. Sindicato de Trabajadores de las Empresas de Servicios Públicos Domiciliarios, Complementarios y Conexos – Sinpro. On September 23, 2013, Sinpro filed a suit claiming EPM is selling its shares of UNE, in violation of the provisions of Law 226 of 1995, and requesting the court to enjoin the alleged sale to Millicom. Millicom and EPM have appealed the court’s decision pursuant to which Millicom is deemed to have received service of process by way of conclusive conduct. Consorcio CCC Porce III. On February 4, 2014, Consorcio CCC Porce III, as plaintiff, sued EPM, claiming the breach of two contracts in connection with the construction of the underground central and the dam for the Porce III project. The amount of Consorcio CCC Porce III’s claim is approximately Ps.40,373 million. EPM, in turn, filed a claim against Consorcio CCC Porce III in connection with the liquidation minutes relating to the two contracts. The amount of EPM’s claim is approximately Ps.7,230 million. The parties are discussing a potential settlement that would result in EPM paying approximately Ps.11,774 million to Consorcio CCC Porce III. Marisol Aristizabal Tuberquia. On November 30, 2011, Marisol Ariztizabal Tuberquia, as plaintiff, sued EPM claiming payment of damages allegedly caused by the operation of the El Peñol dam to the premises where the Los Recuerdos hostel operates. The amount of the claim is approximately Ps.7,070 million. The matter is currently in the evidentiary stage. Astrid Helena Álvarez Arroyave et al. On October 7, 2011, 45 families filed a class action against the Bello municipality and EPM, claiming payment of the damages allegedly caused to their homes by the alleged lack of preventive measures in connection with the geological conditions of the area. The amount of the claim is approximately Ps.10,440 million. The matter is currently in the evidentiary stage. Carmen María Alzate Rivera et al. On August 30, 2000, 41 families filed a class action against EPM, claiming payment of the damages allegedly caused by the water discharges from a hydroelectric power station owned by EPM. More families subsequently joined the class action, which currently involves 201 families. The amount of the claim is approximately Ps.7,633 million. The trial court dismissed the claims arguing the applicable statute of limitations had expired and the plaintiffs appealed the decision. The appeal is currently pending. Consorcio Dragados Porce II. On August 20, 2007, Consorcio Dragados Porce II, as plaintiff, sued EPM, claiming the breach of a contract in connection with the completion and the installation of water lock gates for the Porce II project. The plaintiff claims that EPM delivered defective lock gates that prevented the claimant from performing an adequate installation. The amount of the claim is approximately Ps.14,440 million. The matter is currently in the evidentiary stage. Trainco S.A. On April 15, 1996, Trainco S.A., as plaintiff, sued EPM for damages for an amount of Ps.2,662 million, claiming EPM breached the agreement for the construction and pavement of the road from Cancana to La Draga. The parties have been requested to submit their final allegations to the court of appeals.

165 Carlos Arturo Galvis Hernández et al. On June 12, 2008, a group of miners filed a class action against EPM, claiming damages caused by the alleged eviction from the Porce III influence area, which allegedly prevented them from conducting mining activities in such area during the entire period of their environmental license. The amount of the claim is approximately Ps.2,225 million. The matter is currently in the evidentiary stage.

Colombian Subsidiaries EPM’s subsidiaries are subject to several proceedings for an estimated aggregate amount of approximately Ps.195,316 million. These proceedings include an unjust enrichment claim against CENS, one class action against CHEC and another against ESSA, and several breach of contract claims against ESSA and UNE.

International Subsidiaries On September 10, 2013, the Salvadorian tax authority (Dirección General de Impuestos Internos) began an audit process with respect to the income tax statement filed by Del Sur for the fiscal year 2010. On February 17, 2014 the tax authority decided that Del Sur had to pay a complementary income tax for an amount of approximately U.S.$6.6 million. On February 25, 2014 Del Sur appealed the decision. Currently Del Sur is waiting to submit its final allegations.

Environmental Matters EPM has always been committed to complying with applicable environmental laws, standards, rules and regulations at the various levels in Colombia and the other countries where EPM operates, and believes that its current operations are substantially in compliance with such laws, standards, rules and regulations as they have historically been interpreted and enforced. Notwithstanding the fact that environmental laws in Colombia and other Latin American countries where EPM operates are currently less strict than those applied in many other countries, EPM believes that its operations eventually will be required to meet stricter standards that are comparable in many respects to those in effect in the United States and in Europe. As environmental laws, standards, rules and regulations in the countries where EPM operates have been increasingly more stringent, EPM continues to be committed to environmental compliance. In compliance with its environmental and corporate social responsibility policies, EPM develops programs and voluntary actions to improve the environment.

Research, Development and Innovation In order to help the improvement in business productivity and, at the same time, to generate inter-institutional synergies and the strength of the R&D+I system in the country; EPM promotes continuously research, development and innovation activities. In this regard, the organization supports projects related to energy efficiency, energy innovation, renewable energy, water, climate change and wildlife. The management of this field is mainly done in collaboration with specialized institutions, among which are included the Center for Energy Research and Innovation (CIIEN), local and regional universities, institutions, private companies and consultants. Ruta N is a corporation created by the City of Medellín, UNE and EPM, to promote the development of innovative technology-based businesses, with an estimated investment of U.S.$45 million to boost new knowledge- based businesses with international participation, through the promotion, development and strengthening of the ecosystem, science, technology and innovation. This initiative has contributed in the recent recognition obtained by the City of Medellín as the City of the Year in innovation worldwide, among New York, Tel Aviv and a group of more than 200 cities that initially were nominated within the competition, which was led by Citi Group, the Wall Street Journal, and the Urban Land Institute. Private Equity Fund for Entrepreneurship and Innovation is a fund with an investment of up to U.S.$50 million through which EPM supports the development of Colombian companies working in entrepreneurship and innovation processes related to public services, in order to enhance their growth. EPM, in partnership with EAFIT University, built the first solar vehicle, which has participated successfully in the World Solar Challenge 2013 in Australia, the most famous solar race in the world, and recently won the Premio Nacional de Ingeniería awarded by Sociedad Colombiana de Ingenieros.

166 EPM was chosen as the most innovative company in Colombia, for the third year in a row in the ‘‘Elite Empresarial 2014’’ survey conducted by the firm Datexco employers of Colombia, which publishes the newspaper Portafolio.

Intellectual Property EPM owns the trademarks which identify the Company, and holds licenses over the other intellectual property it uses or produces in its corporate activities, which require prior authorization before being used by third parties. EPM currently holds a total of 404 registered trademarks in several countries including Colombia, Venezuela, Brazil, Argentina, Guatemala, Puerto Rico, Honduras, Mexico and Bolivia and three registered patents: the method for cellular tissue multiplication from jatropha curcas, in the United States, Colombia and other countries, the system for controlled aging of electrical windings, in the United States and Colombia, and the auto regenerative furnace for melting non-ferrous materials and heat treatment, in Colombia. UNE provides its services mainly under the trademark UNEtm.

Insurance EPM currently maintains insurance on assets negotiated directly with the reinsurance market and believes that the coverage and insured amounts in such insurance are in accordance with global practices for companies with risks similar to those of EPM. EPM also maintains insurance with Colombian insurers and the coverage and insured amounts of such local insurance have been tailored to the particularities of the risks involved. Therefore, EPM believes that it currently maintains customary insurance of the types and amounts that are generally consistent with industry practice. EPM maintains insurance policies covering risks related to damage to property, equipment, business interruption, natural disasters, third party liability (including coverage for product liability), crime, directors and officers, erection and construction, among others. EPM has implemented an internal risk management system pursuant to which EPM identifies, evaluates, controls and transfers the risks that affect people, assets and income related to its business. Once a risk is identified, EPM adopts the relevant mitigation measures and decides whether the risk should be transferred (either to an insurance company or another party) or retained. Additionally, EPM has a captive reinsurance unit (cautiva de reaseguro) called Maxseguros EPM Ltd., a company constituted under, and governed by, the laws of Bermuda, that accesses the reinsurance market.

Employees As of June 30, 2014, EPM had 22,329 permanent employees, 674 apprentices and 231 students, with an average tenure of 15 years with the Company. In Colombia, as of June 30, 2014, EPM had 10,870 unionized employees affiliated to one or several of twelve EPM employee unions: SINTRAEMSDES, SINTRAESTATALES, SINPROESP, UNIGEEP, SINTRAELECOL, SINTRACHEC, Sindicato de Trabajadores de Empresas Varias de Medellín S.A. E.S.P., SIPROESSA, UNITRAE, SINTRAEDATEL, SINTRAEPMTELECOMUNICACIONES, and SINTRAUNE. As of June 30, 2014, SINTRAEMSDES had 5,163 members, 66 of whom were also affiliated to SINPROESP and 72 of whom were also affiliated to UNIGEEP. Members of SINTRAEMSDES include government workers and employees. The collective bargaining agreement with SINTRAEMSDES, which benefits 3,213 union members, expires on December 31, 2016. As of June 30, 2014, SINPROESP had 2,633 members, 66 of whom were also affiliated to SINTRAEMSDES and 6 of whom were also affiliated to UNIGEEP. The collective bargaining agreement with SINPROESP, which benefits 1,812 union members, expires on December 31, 2016. As of June 30, 2014, EPM had 1,813 employees outside Colombia, 347 of whom were affiliated to one of the following union organizations: SINDICATO LUZ Y FUERZA, SITIESPA or SIES.

167 The following table sets forth the EPM’s existing unions in Colombia and the number of affiliated employees as of June 30, 2014:

Number of Affiliated Union Employees SINTRAEMSDES ...... 5,163 SINPROES...... 2,633 UNIGEEP ...... 258 SINTRAELECOL ...... 1,917 SINTRACHEC ...... 25 Sindicato de Trabajadores de Empresas Varias de Medellín S.A. E.S.P. . . 246 SIPROESSA ...... 86 UNITRAE ...... 46 SINTRAEDATEL ...... 273 SINTRAEDATEL / UNITRAE...... 75 SINTRAEPMTELECOMUNICACIONES...... 26 SINTRAUNE...... 121 SINTRAESTATALES ...... 1 Total...... 10,870

The following table sets forth the EPM’s existing unions outside Colombia and the number of affiliated employees as of June 30, 2014:

Number of Affiliated Union Employees Sindicato Luz y Fuerza ...... 64 Sindicato de Trabajadores de la Industria Eléctrica y Similares de la República de Panamá (SITIESPA) ...... 152 Sindicato de la Industria Eléctrica de El Salvador (SIES) ...... 131 Total...... 347

As of June 30, 2014, UNE had 2,617 employees throughout the cities of Medellín, Bogotá, Cali, Barranquilla, Cartagena, Manizales, Pereira and Bucaramanga.

EPM Group Without Borders Program. In 2012, EPM launched its without borders program, which defined a new organizational model to ensure the growth and the sustainability of EPM’s business group. The objective of the program is to improve the Group’s governance and competitiveness.

Energy BU Overview The Energy BU comprises three segments: (i) electricity generation, (ii) electricity transmission, distribution, and commercialization, and (iii) natural gas distribution and commercialization. Electricity generation. Through this segment, EPM generates electricity for its own downstream business, as well as for other electricity companies and large industrial customers. Any remaining generated electricity is sold on the Energy Spot Market, and any electricity contracted for but not generated by EPM is generally purchased from the Energy Spot Market. Electricity transmission, distribution and commercialization. The electricity transmission, distribution and commercialization segment consist of electricity transmission and distribution services and sales to end-users, including residential, commercial and small and medium-sized industrial customers. Natural gas distribution and commercialization. The natural gas distribution and commercialization segment focuses on the distribution and commercialization of natural gas. EPM has four business segments for the national

168 gas distribution business organized according to customer base: (i) residential, (ii) regulated non-residential (which includes businesses and small and medium industries), (iii) Unregulated Market (which includes large industries and companies with consumption levels of more than 85,000 m3/month) and (iv) Vehicular Natural Gas.

Acquisitions and Strategic Interests in Energy Companies During the last five years EPM acquired controlling interests in a number of energy companies, including, CHEC, EdeQ, ESSA, CENS, Deca II, AEI El Salvador Holdings Limited, Gestión de Empresas Eléctricas (‘‘Gesa’’), Espíritu Santo SAS and EPM Chile. Central Hidroeléctrica de Caldas S.A. E.S.P. – CHEC. In September 2003, the general shareholders’ meetings of EPM and EPM Inversiones approved the acquisition of shares of CHEC, an energy generation, distribution and commercialization company. Through the acquisition and a capital increase, EPM and EPM Inversiones acquired 56% of CHEC’s capital stock. Through subsequent acquisitions, EPM and EPM Inversiones increased their aggregate shareholdings in CHEC to 80.09%. CHEC currently serves 442.101 customers in the departments of Caldas and Risaralda. Empresa de Energía del Quindío – EdeQ. In September 2003, the Colombian government accepted EPM’s proposal to capitalize EdeQ, an energy distribution and commercialization company. Through the capital increase and subsequent acquisitions, EPM and EPM Inversiones currently hold 92.85% of EdeQ’s capital stock. EdeQ currently serves 166.644 customers in the departments of Quindío. Electrificadora de Santander S.A. E.S.P. − ESSA. In February 2009, EPM indirectly acquired 73.7% of ESSA’s capital stock from the Colombian Government. Since ESSA is an energy generation, transmission, distribution and commercialization company. EPM holds its ownership indirectly through EPM Inversiones. EPM subsequently acquired minority shareholdings increasing its aggregate participation in the capital stock of ESSA to 74.04%. On March, 2013, ESSA divested certain assets into a newly created company called ESSA Capital, which was subsequently liquidated in 2014. ESSA currently serves 681.850 customers in the Department of Santander. Centrales Hidroeléctricas de Norte de Santander S.A. E.S.P. – CENS. In February 2009, EPM indirectly acquired 78.9% of CENS’ capital stock from the Colombian Government. Since CENS is an electricity distribution and commercialization company with transmission assets, EPM holds its ownership indirectly through EPM Inversiones. The same year, EPM purchased from the Federación de Cafeteros their 12% shareholding in CENS, increasing EPM’s aggregate participation in the capital stock of CENS to 91.52%. On February 21, 2011, the general shareholders meeting of CENS approved the divestiture of certain assets to create a company called CENS Inversiones S.A., which was subsequently liquidated on 2013. CENS currently serves approximately 427.872 customers in the Department of Norte de Santander. Distribución Eléctrica de Centroamérica II – DECA II. In October 2010, EPM and EPM Inversiones acquired 100% of Deca II’s capital stock from a consortium integrated by Iberdrola Energía, S.A., TPS de Ultramar Ltd., a subsidiary of Teco Energy Inc., and EDP-Energias de Portugal, S.A. DECA II owns 80.88% of the shares of Empresa Eléctrica de Guatemala S.A., the largest distributor of electricity in Central America with over 1.086.973 clients, and 78.90% of the shares of COMEGSA, the main commercialization company in the region. DECA II also holds majority shareholdings in Trelec, a Guatemalan transmission company, and other four service companies. The transaction also included the purchase of 100% of the shares of Gesa, a company dedicated to the exploration and development of new electrical businesses. Panama Distribution Group S.A. and AEI El Salvador Holdings Limited. In January 2011, EPM acquired from Ashmore Energy International (i) 100% of the shares in Panama Distribution Group S.A., a company holding 51.0% of the capital stock of ENSA, the second largest electricity distributor in Panama an exclusive concession to service the northeast region of the country, and (ii) 100% of the shares of AEI El Salvador Holdings Limited, a company holding 86.41% of the capital stock of Del Sur, the second largest electricity distributor in El Salvador. The transaction also included the acquisition of controlling shareholdings in four other companies that provide services to Del Sur: Electricidad de Centroamérica Ltda. de C.V., PPLG El Salvador II and Innova Tecnología y Negocios S.A. de C.V. Espíritu Santo SAS. In January 2013, EPM and EPM Inversiones acquired Espíritu Santo Energy S. de R.L., a Panamanian company holding 99.99% of the shares of Espíritu Santo SAS E.S.P., a Colombian company that owned the right to develop the Espíritu Santo hydroelectric project in the Northern Region of Antioquia, Colombia. From October to November 2013, Espíritu Santo Energy S. de R.L and Espíritu Santo SAS E.S.P. were liquidated, so the

169 hydroelectric project will be developed directly by EPM. In connection with this project, EPM has entered into key contracts with (i) construçoes e Comercio Camargo Correa S.A., Conconcreto S.A. and Cominsa Ramon HAS for main civil works, (ii) Alstrom Brasil for turbines and generators and (iii) Siemmens Transformer Limited for transformers. EPM Chile. In February 2013, EPM and EPM Inversiones incorporated EPM Chile, which then acquired 100% of the shares of Parque Eólico Pacífico S.A. and Parque Eólico la Cebada Ltda. Both of these companies recently completed the construction of a 110 MW aeolian park in the northern region of Chile.

Operating Data As of December 31, 2011, EPM’s net effective electricity generation capacity (‘‘NEC’’) was 3,524 MW, after the Porce III 660 MW plant began operations. As of December 31, 2012, EPM’s NEC was 3,594 MW, after the Barranca (I, II and III) plant began operations. As of December 31, 2013, EPM’s NEC remained at 3,594 MW. As of June 30, 2014, EPM’s NEC decreased to 3,579 MW, a difference of 15 MW due to changes in La Sierra’s NEC thermoelectric plant. EPM’s average hydroelectric generation availability was 94.86%, 94.67% and 95.07% for the years ended December 31 2011, 2012 and 2013, respectively. EPM’s average hydroelectric generation availability was 95.2% for the six months ended June 30, 2014. EPM’s average thermal generation availability for the years ended December 31, 2011, 2012 and 2013 was 84.73%, 86.01%, and 93.66%, respectively. EPM’s average thermal generation availability was 96.87% for the six months ended June 30, 2014. The table below sets forth EPM’s principal indicators regarding EPM’s energy BU for the periods indicated:

As of and for the Six Months Ended June 30, As of and for the Year Ended December 31, 2014 2013 2012 2011 Electricity generation Total installed net effective generation capacity (MW) . . 3,579 3,594 3,594 3,524 Hydraulic Generation (GWh)...... 6,806 14,738 15,600 14,108 Thermal Generation (GWh) ...... 291 435 647 65 Wind Generation (GWh) ...... 39 58 55 41 Generation (GWh)(1) ...... 7,136 15,230 16,303 14,215 Sales (GWh) ...... 6,905 15,278 17,007 15,848 Firm Energy (GWh)...... 7,822 15,775 15,534 12,137 Electricity Generation revenues (in millions of Ps.). . . . . 1,373,859 2,700,029 2,787,388 2,199,470 Electricity distribution and commercialization Service Area (km2) ...... 177,384 177,384 177,185 176,994 Transmission Lines (110-115Kv)(km) ...... 2,825 2,825 2,760 2,730 Transmission Lines (69 Kv))(km) ...... 667 667 667 660 Distribution Lines (2.4-46 Kv))(km) ...... 101,170 99,535 94,676 88,775 Distribution Lines (240/120 V))(km) ...... 111,181 109,575 105,869 103,136 Purchases of Electricity from own generation units (bilateral) (GWh) ...... 1,655 3,312 4,097 4,325 Purchases of Electricity from third parties (bilateral) (GWh) ...... 7,229 13,546 12,491 11,693 Purchases of Electricity on the Spot Market (GWh) . . 2,091 2,506 2,127 1,904 Electricity Losses...... 10.9% 10.8% 11.2% 12.2% Electricity transmission Transmission Lines (220-230Kv) ...... 1,130 1,130 1,130 1,130 System Availability ...... 100.0% 99.9% 99.9% 98.2% Revenues (in millions of Ps.)...... Ps.4,269,700 Ps.7,899,020 Ps.7,385,579 Ps.6,708,682

(1) Actual generation does not include generation from the Barranca I, II, and III plants, which are self-generators for Ecopetrol, and thus not a part of the market.

170 Electricity Generation Segment Overview EPM participates in the electricity generation business in Colombia directly and indirectly through its subsidiaries CHEC and ESSA. EPM also has a 13.1% minority interest in ISAGEN, a Colombian electricity generation company controlled by the Colombian Government. See ‘‘Summary — Recent Developments.’’ EPM’s electricity generation business unit generates electricity for its own downstream business, as well as for large customers, which include other electricity companies and industrial companies with consumption levels above 55.0 MWh/month. The terms of electricity supply contracts include pricing terms that are determined either through public bids or direct bilateral negotiations. Any remaining generated electricity is sold in the Energy Spot Market, and any electricity deliverable but not internally generated is generally purchased in the Energy Spot Market. Generation revenues derive from (i) electricity sales, (ii) the Reliability Charge, which are fees paid to electricity generation companies for maintaining certain levels of available electricity capacity during scarcity periods, and (iii) payments for AGC, which are fees paid in connection with the implementation of technology that moderates the frequency of electricity in order to guaranty the quality of electricity along the STN. For the six months ended June 30, 2014 and the years ended December 31, 2013, 2012, and 2011, revenues generated from EPM’s electricity generation activities totaled Ps.1,373,859 million, Ps.2,700,029 million, Ps.2,787,388 million and Ps.2,199,470 million, respectively. For the six months ended June 30, 2014, EPM’s revenues from electricity generation activities represented 26.6% of EPM’s electricity revenues and 19.7% of EPM’s total revenues. For the year ended December 31, 2013, EPM’s revenues from electricity generation represented 27.5% of EPM’s electricity revenues and 20.8% of EPM’s total revenues.

Operations As of June 30, 2014, EPM, with 7,136 GWh, delivered 22.6% of the SIN’s total generation, with a 3,579 MW NEC, representing 23.9% of the SIN’s total NEC. As of June 30, 2014, 95% of EPM’s generation was hydraulic, 4% was thermal and 1% was wind power. Additionally, the Colombian subsidiaries CHEC and ESSA have a NEC of 240 MW and 105 MW, respectively. The thermal electricity that EPM generates is used to cover peaks in electricity demand and any shortfalls in EPM’s hydroelectric plants as a result of insufficient water resources. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Significant Factors Affecting EPM’s Results of Operations and Financial Condition — Significant Factors Generally Affecting EPM’s Present and Future Results of Operations — Factors Affecting EPM’s Energy Business — Price and Availability of Natural Gas Reserves.’’ EPM’s installed generation infrastructure in Colombia is currently comprised of 38 generation facilities, of which 34 are hydroelectric, three are thermal and one is wind power. The 34 hydroelectric facilities are grouped as follows: (i) 24 small plants, with a total installed capacity of up to 20 MW each, (ii) two plants with a total installed capacity between 20 MW and 200 MW (San Francisco 135 MW and Esmeralda 30 MW), which are not centrally dispatched, and (iii) eight plants with a total installed capacity between 200 MW and 660 MW (Porce III 660 MW, Guatapé 560 MW, Guatrón 512 MW (which includes Troneras, Guadalupe 3 and Guadalupe 4), Porce II 405 MW, La Tasajera 306 MW and Playas 201 MW). EPM’s current installed thermal generation capacity in Colombia is provided by Termosierra with a total installed capacity of 445 MW with gas (or 364 MW with fuel oil), Termodorada 51 MW and Termobarranca 87 MW. Termobarranca is not connected to the SIN and provides electricity to an industrial client. EPM’s facilities also include the Jepirachi wind power farm located in the Department of La Guajira, with a total installed capacity of 19.5 MW.

171 adopted the Reliability Charge mechanism. This mechanism replaced the Capacity Charge mechanism that was in place for approximately ten years. The Reliability Charge is intended to compensate electricity generation plants that contribute to the predictability and stability of electricity generation during certain periods through a system of Firm Energy Generators awarded with Firm Energy are entitled to compensation during certain periods of time and, in consideration for such compensation, are required to deliver the awarded Firm Energy when the electricity spot price is higher than the scarcity price. ASIC settles and collects such compensation, which is paid by all the end-users of the SIN through fees charged by commercialization companies. The central element of the Reliability Charge mechanism is Firm Energy. Firm Energy is the maximum amount of electricity that a given generation plant is able to produce, on a permanent and continuous basis, under extreme hydrological conditions during a period of time. Firm Energy is a product that has been designed to guarantee the reliability and efficiency of the supply of electricity in the long term, providing investment incentives, electricity back-up during critical periods and peak price hedging. The obligation to supply Firm Energy arises when the spot price reaches the scarcity price. Under this circumstance, generation companies with Firm Energy allocations are required to supply a certain daily quantity of electricity at the scarcity price. The scarcity price, which is established by the CREG and updated monthly based on the variation of the Fuel Price Index, has a twofold purpose. On one hand, it indicates the time when the different generation units or plants will be required to fulfill their Firm Energy commitments, which happens when the spot price exceeds the scarcity price, and on the other hand, it is the purchase price for this electricity. The following are EPM’s Firm Energy Obligations (FEOs) for the period 2011-2038:

EPM

Price per associated FEO reliability charge Plant (KWH-year) Period (U.S.$/MWH) Guatapé...... 1,770,421,658.00 12/1/2013 - 11/30/2014 13.998 Guatrón ...... 2,293,933,205.76 12/1/2013 - 11/30/2014 13.998 La Tasajera ...... 1,171,843,929.96 12/1/2013 - 11/30/2014 13.998 Playas ...... 1,060,305,352.71 12/1/2013 - 11/30/2014 13.998 Porce II ...... 1,176,936,032.84 12/1/2013 - 11/30/2014 13.998 Termosierra...... 2,917,138,277.00 12/1/2013 - 11/30/2014 13.998 Guatapé...... 1,882,241,117.47 12/1/2014 - 11/30/2015 13.998 Guatrón ...... 2,143,834,453.64 12/1/2014 - 11/30/2015 13.998 La Tasajera ...... 1,245,857,346.05 12/1/2014 - 11/30/2015 13.998 Playas ...... 1,127,274,015.73 12/1/2014 - 11/30/2015 13.998 Porce II ...... 1,376,753,485.55 12/1/2014 - 11/30/2015 13.998 Termosierra...... 2,714,805,889.43 12/1/2014 - 11/30/2015 13.998 Porce III (366-day year)...... 3,363,482,538.00 12/1/2011 - 11/30/2021 13.045 Porce III (366-day year)...... 3,354,292,695.00 12/1/2011 - 11/30/2021 13.045 Guatapé...... 5,478,044.00 12/1/2015 - 11/30/2016 15.700 Guatrón ...... 7,097,895.00 12/1/2015 - 11/30/2016 15.700 La Tasajera ...... 3,625,923.00 12/1/2015 - 11/30/2016 15.700 Playas ...... 3,280,800.00 12/1/2015 - 11/30/2016 15.700 Porce II ...... 3,641,679.00 12/1/2015 - 11/30/2016 15.700 Termosierra...... 6,905,160.00 12/1/2015 - 11/30/2016 15.700 Ituango Project ...... 9,540,821.91 12/1/2021 - 30/11/2038 15.700 Ituango Project ...... 2,972,603.00 12/1/2021 - 30/11/2038 13.988

172 CHEC

Price per associated FEO reliability charge Plant (KWH-year) Period (U.S.$/MWH) Esmeralda ...... 140,056,744.96 12/1/2013 - 11/30/2014 13.998 San Francisco ...... 179,003,123.11 12/1/2013 - 11/30/2014 13.998 Termodorada...... 287,792,042.37 12/1/2013 - 11/30/2014 13.998 Termodorada1...... 367,422,334.78 12/1/2014 - 11/30/2015 13.998 San Francisco ...... 190,308,922.71 12/1/2014 - 11/30/2015 13.998 Esmeralda ...... 148,902,699.51 12/1/2014 - 11/30/2015 13.998 Esmeralda ...... 433,364.00 12/1/2015 - 11/30/2016 15.700 San Francisco ...... 553,872.00 12/1/2015 - 11/30/2016 15.700 Termodorada...... 890,487.00 12/1/2015 - 11/30/2016 15.700

Sales of Electricity under Supply Agreements EPM’s electricity generation business revenues primarily derive from (i) sales of electricity under bilateral electricity agreements with electricity companies, (ii) sales of electricity under supply agreements with industrial companies in the Unregulated Market and (iii) sales in the Energy Spot Market that are carried out through agreements known as mandates entered into with XM. See ‘‘Industry — Electricity Generation in Colombia.’’ EPM enters into bilateral electricity supply agreements, the terms of which vary depending on whether the customers are regulated or Unregulated Users. Prices under electricity supply agreements with Unregulated Users are freely negotiated between electricity generators and the Unregulated Users. Supply agreements with Unregulated Users are also not subject to any limitations or requirements established by the CREG, do not need to be priced through competitive bidding, and usually have a term of at least one year. Prices under supply agreements with Regulated Users, in which electricity is sold to electricity commercialization/distribution companies for resale to regulated end-users, must be determined based on a competitive bidding process conducted by the purchaser. This bidding process is governed by rules and regulations issued by the CREG pursuant to which the lowest bidder is assigned 100.0% of the electricity supply demanded by the purchaser. Supply agreements entered into with Regulated Users usually have a term ranging from one to two years. EPM also conducts operations in the Energy Spot Market where prices are determined by market conditions. The following are the main categories of contractual electricity supply arrangements that EPM enters into with its customers: ‘‘Take or pay.’’ The purchaser commits to pay for all the electricity for which it has contracted, regardless of actual consumption. If consumption is higher than the contracted volume, the purchaser generally acquires the additional supply of electricity in the Energy Spot Market or through additional electricity supply agreements with the same or another electricity generation company. If consumption is lower than the contracted amount, the purchaser may sell the surplus electricity in the Energy Spot Market at the applicable spot price. ‘‘Take and pay.’’ The purchaser only pays for the electricity that it consumes at the contract price for a specified period, without a maximum cap. ‘‘Capped take and pay.’’ The purchaser pays for the electricity that it consumes up to a maximum volume, or cap, at the contract price. The purchaser’s electricity requirements in excess of such cap may be acquired by the purchaser in the spot market or through additional electricity supply agreements. As of June 30, 2014, EPM was a party to the following supply agreements with its five main regulated generation customers:

Customer GWh sales 2014 2015 2016 EPM MR PLC...... 2,936 2,452 3,308 Electrificadora del Caribe — PLC ...... 900 700 500 Codensa — PLC ...... 1,050 2,000 300 Electrificadora de Santander — PLC...... 836 611 800 Centrales Eléctricas de Norte de Santander — PLC...... 396 331 283

Source: EPM

173 Generation Customers EPM sells electricity to (i) large clients which include customers in the Regulated Market (mainly electricity commercialization and generation companies), (ii) the Unregulated Users market (mainly large industrial companies and governmental entities with consumption levels equal to or above 55.0 MWh and other generation and distribution companies), and (iii) other electricity generation companies either under bilateral contracts or through sales at the Energy Spot Market. For the year ended December 31, 2013, EPM had (i) total sales in the Regulated Market of 8,578 GWh, for an approximate market share of 27.6% of the total long-term sales of electricity, (ii) total sales to Unregulated Users (including other distributors, generators and industrial customers) of 5,506 GWh, for an approximate market share of 19.4% of the total long-term sales of electricity and (iii) total sales of 1,377 GWh in the Energy Spot Market, for an approximate market share of 11% of that market. For the six months ended June 30, 2014, EPM had (i) total sales in the Regulated Market of 3,566 GWh, for an approximate market share of 23.8% of the total long-term sales of electricity, (ii) total sales to Unregulated Users of 2,769 GWh, for an approximate market share of 19.9% of the total long-term sales of electricity and (iii) total sales of 748 GWh in the Energy Spot Market, for an approximate market share of 11% of that market. The following table lists EPM’s largest customers, as measured by total electricity consumption, for the year ended December 31, 2013:

As of and for the Year Ended Customer December 31, 2013 (in GWh) EPM Non — Regulated distributor/commercialization company ...... 3,988 EPM Regulated distributor/commercialization company...... 2,751 Electricaribe ...... 2,383 Empresas Municipales de Cali ...... 1,308 Codensa ...... 784 Electrificadora de Santander ...... 526 Electrificadora del Meta ...... 382 CENS...... 382 Distribuidora y Comercializadora de Energía ...... 295 Energía Empresarial ...... 263 Empresa Distribuidora del Pacífico ...... 172 Empresa de Energía del Arauca ...... 138 Compañía Energética del Tolima ...... 136 Compañía Energética de Occidente ...... 131 EdeQ ...... 129 Empresas Municipales de Cartago ...... 107 Central Hidroelectrica de Caldas ...... 97 Ruitoque...... 116 Electrificadora del Huila ...... 80 E2 Energia Eficiente ...... 73 Italcol Energia ...... 35 Colenergia ...... 13

Source: AGC files and EPM

174 The table below lists EPM’s largest industrial electricity generation and commercialization customers, as measured by total electricity consumption, for the periods indicated:

As of and for the Six Months As of and for Ended June 30, the Year Ended December 31, Customer 2014 2013 2012 2011 (GWh) Alumbrado de Medellín* ...... 53 107 105 100 Cartón Colombia*...... 54 140 105 104 Enka* ...... 31 107 112 122 Peldar* ...... 62 110 128 138 Río Claro*...... 39 68 74 81 Sidenal*...... 61 137 134 148 Cerrejon...... 143 288 0 0

* Source: GCE information. Consumption indicated above refers to customers’ consumption per facility and not to the total facilities of each company.

Contracts with other Electricity Companies Under contracts with other electricity commercialization companies in the Regulated Market, EPM sells and delivers electricity, as electricity financial obligations, in the amounts and prices agreed to by the parties. The following table summarizes the largest electricity supply agreements with other electricity companies:

As of December 31, 2013 Customer (in GWh) Electricaribe ...... 2,355 Codensa...... 712 EMCALI...... 650 Electrificadora de Santander S.A...... 494 Electrificadora del Meta...... 350 Contracts with EPM’s Largest Customers As of June 30, 2014, sales of generated electricity to EPM’s ten largest customers totaled 976.40 GWh and represented 49% of total electricity sales in the Unregulated Market. The following table summarizes the agreements with the ten largest industrial customers:

As of June 30, Customer 2014 Term (GWh) Alum Mede ...... 160.00 6/30/2016 Carton Colombia ...... 416.96 12/31/2016 Cerrejon...... 431.38 12/31/2022 Corona...... 813.21 12/31/2015 Ecopetrol ...... 385.41 11/30/2018 Enka...... 137.51 12/31/2017 Exito...... 184.52 12/31/2015 GEA Alimentos ...... 450.50 12/31/2016 GEA Cemento ...... 124.17 12/31/2015 GEA Comercio ...... 83.63 2016/12/31 Metro...... 115.28 2015/10/31 Peldar ...... 62.38 2016/12/31 Sidenal...... 331.48 2014/12/31 Sidoc...... 51.66 2016/12/31

175 Competition and Market Share The following table shows the composition of the electricity generation market as of June 30, 2014, as measured by Firm Energy:

As of June 30, 2014 Customer Firm Energy Participation (GWh) % EMGESA ...... 6,776 18.7% EPM...... 7,822 21.6% Gecelca ...... 5,222 14.4% ISAGEN ...... 4,347 12.0% EPSA...... 1,624 4.5% CELSIA...... 3,191 8.8% AES...... 1,451 4.0% Other...... 6,091 16% Total ...... 36,524 100.0%

Source: XM The following table summarizes EPM’s market share during 2013, 2012 and 2011 in terms of actual generation capacity, AGC service fees, and Reliability Charges:

As of and for the Six Months Market Ended June 30, As of and for the Year Ended December 31, 2014 2013 2012 2011 EPM actual capacity (MW) ...... 3,579 3,594 3,594 3,524 Market share (%)...... 23.9 24.7% 25% 24.4% AGC charges (GWh)...... 240 511 807 953 Market share (%)...... 19.2% 20.2% 31.6% 37.6% Generation (GWh)(1) ...... 7,136 15,230 16,303 14,215 Market share (%)...... 22.6% 24.5% 27.2% 24.2% Firm Energy (GWh) ...... 7,822 15,775 15,534 12,137 Market share (%)...... 21.6% 21% 22.1% 21.7%

Source: XM (1) Actual generation does not include generation from the Barranca I, II, and III plants, which are self-generators for Ecopetrol, and thus not a part of the market. As shown in the table above, EPM’s market shares in terms of generation capacity have remained relatively stable for the years ended December 31, 2013, 2012 and 2011. The participation in AGC services has decreased as a result of their low profitability. Actual generation capacity lowers from 2012 to 2013 due to the decrease in hydro levels. On the other hand, there is an increase in Firm Energy from 2011 to 2012 as a result of the beginning of operations of the Porce III plant.

176 The following table shows the market share of electricity generation companies in terms of long-term electricity supply contracts with customers in the Unregulated Market:

As of and for the Six Months Ended June 30, As of and for the Year Ended December 31, 2014 2013 2012 2011 Company (GWh) % (GWh) % (GWh) % (GWh) % EPM ...... 2,769 20% 5,506 19% 4,502 17% 5,489 22% CHEC ...... 24 0% 232 1% 242 1% 95 0% ESSA ...... 2 0% 0 0% 0 0% 0 0% CHIVOR...... 162 1% 230 1% 187 1% 245 1% PROELECTRICA...... 465 3% 718 3% 720 3% 70 0% URRA ...... 544 4% 1.516 5% 1,718 6% 1,695 7% ISAGEN ...... 2,626 19% 5,058 18% 4824 18% 4,609 19% ENDESA ...... 1,796 13% 3,463 12% 3,324 12% 3,098 13% EMCALI ...... 103 1% 0 0% 0 0% 68 0% GECELCA ...... 2,643 19% 5,869 21% 5,805 22% 4,286 17% FACELCO ...... 57 0% 228 1% 36 0% 9 0% EPSA ...... 434 3% 737 3% 596 2% 592 2% Others ...... 2,309 17% 4,872 17% 4,909 18% 4,284 17% Total ...... 13,933 100% 28,430 100%26,863 100%24,540 100%

Source: EPM.

Capital Expenditure Projects: Expansion of EPM’s Generation Capacity EPM is in the process of developing two hydroelectric power generation projects, which are expected to be completed between 2014 and 2022. Upon completion, the projects are expected to increase EPM’s installed electricity generation capacity by more than 2,431 MW. The two hydroelectric projects under development are the Bonyic project in Panama and the Ituango Project in Colombia. Set forth below is a brief description of these projects: Bonyic Plant: In 2003, EPM acquired 75.0% of the outstanding shares of common stock of HET, along with several minority partners with hydroelectric project development experience in Panama. The Bonyic hydroelectric power plant (the ‘‘Bonyic Plant’’) is located in the Province of Bocas del Toro, District of Changuinola, Panama (next to the Costa Rican border). The Bonyic Plant, which will consist of three Francis units, is expected to have an installed capacity of 30 MW. EPM currently expects the Bonyic Plant to be operational in 2015. EPM estimates the total cost of the Bonyic Plant to be U.S.$313.9 million, and as of June 30, 2014, had invested a total of U.S.$261 million on this project. Ituango Project: EPM is developing the Ituango Project in the northern region of Antioquia, Colombia. The Ituango Project entails financing, building, owning, operating, maintaining and later transferring a hydroelectric power station to HidroItuango through a BOOMT Agreement. The Ituango Project is expected to be the largest hydrogeneration power station in Colombia, with a total installed capacity of 2,400 MW, to be achieved in two phases. One of the initial stages of the first phase is expected to be operational in 2018, with the remaining stages of the first phase (1,200 MW) expected to be operational in 2019. The second phase (1,200 MW) is currently expected to be operational in 2022. The Ituango Project, which includes eight Francis power generation units and a reservoir with an operational storage volume of 975 million of cubic meters, is expected to generate on average 13,930 GWh of energy per year. The CREG allocated 4,567 GWh of Firm Energy to the Ituango Project, representing 53.0% of the 8,536 GWh of Firm Energy that HidroItuango declared to the CREG for the Ituango Project. In connection with the relevant Firm Energy auctions and in accordance with CREG’s regulations, HidroItuango provided an approximately U.S.$39.9 million guaranty to XM in connection with its Firm Energy obligations. On January 19, 2013, EPM Ituango S.A. E.S.P. (‘‘EPM Ituango’’) assigned to EPM the BOOMT Agreement between EPM Ituango and HidroItuango, together with all other agreements concerning the project and all liabilities

177 in connection with claims related to the project. On February 7, 2013, EPM Ituango sold to EPM all the assets related to the Ituango Project. EPM Ituango’s liquidation was completed on January 13, 2014. As a result, EPM will directly develop the Ituango Project. On October 1, 2013, EPM’s board of directors approved a plan of investments relating to the Ituango Project for an aggregate amount of Ps.10,510,277 million, which EPM currently estimates to be the total costs of the Ituango Project (including financing costs). EPM expects to finance approximately 40% of the total costs of the Ituango Project with funds from operations and the remaining approximately 60% with debt financing. As of June 30, 2014, EPM had incurred Ps.1,917,778 million in costs relating to the Ituango Project. Espíritu Santo: On January, 2013, EPM and EPM Inversiones acquired Espíritu Santo Energy S. de R.L., a Panamanian company holding 99.99% of the shares of Espíritu Santo SAS E.S.P., a Colombian company that owned the right to develop the Espíritu Santo hydroelectric project in the Northern Region of Antioquia, Colombia, next to the Cauca river. Following the liquidation of Espíritu Santo Energy S. de R.L and Espíritu Santo SAS E.S.P. in October and November of 2013, the hydroelectric project will be developed directly by EPM. The Espíritu Santo project, which is currently expected to be operational in 2024, will have 600 MW of installed capacity and is expected to generate 4,098 GWh of energy per year. Given its location near the Ituango Project we expect to achieve substantial construction and operational synergies between the two projects.

Electricity Transmission, Distribution and Commercialization Segment Overview EPM’s transmission, distribution and commercialization strategic business unit focuses on two activities: (i) the transportation of electricity through the STN, the STR, and the SDL and (ii) sales to end-users (i.e., commercialization) in the Regulated Market, including, residential, commercial and SMEs. For the six months ended June 30, 2014, EPM was the largest electricity commercialization company in terms of supplied demand and the fourth largest electricity transmission company in terms of participation in STN assets. EPM currently provides (i) electricity transmission services in Guatemala through its subsidiary Trelec and (ii) electricity distribution and commercialization services in El Salvador, Guatemala and Panama through several subsidiaries.

Operations

Distribution and Commercialization EPM participates in the electricity distribution and commercialization business in Colombia directly and indirectly through its subsidiaries EdeQ, CENS, CHEC, and ESSA, and in Central America with subsidiaries ENSA, EEGSA (COMEGSA) and Del Sur. In addition, as of June 30, 2014, EPM’s distribution and commercialization revenues in Colombia are derived mainly from sales to end-users, which include residential and commercial clients as well as small and medium sized industries, all of which belong to the Regulated Market. In connection with the reorganization of EPM’s Energy BU, in 2006 EPM divided its customer base into large customers (including large industrial companies and governmental entities with consumption levels above 55.0 MWh/month and other electricity companies) and end-users or Regulated Users (including residential and small commercial clients and SMEs). In the context of this reorganization, large customers were allocated to the electricity generation strategic business unit while end-users continued to be the responsibility of the transmission, distribution and commercialization strategic business unit. Distribution revenues also derive from the fee paid by commercialization companies for the use of EPM’s regional and local networks for the delivery of electricity to end-users.

Distribution and Commercialization Service Area EPM is currently the largest electricity commercialization company in Colombia and Central America with approximately 5,579,517 customers, with 3,740,621 customers in Colombia, covering approximately 23.8% of Colombia’s total commercialization market, and 1,838,896 clients in Central America, out of which 397,165 are in Panama, covering 40.3% of the local market, 1,086,973 are in Guatemala, covering 45.6% of the local market, and 354,758 are in El Salvador, covering 26.0% of the local market. EPM serves a region of approximately 177,384 km2

178 in Colombia comprising 454 municipalities. EPM’s service area covers more than 5.6 million customers. In Colombia, EPM’s service area is largely within the Department of Antioquia, the Department of Caldas, the Department of Risaralda (excluding the municipality of Pereira), the Department of Quindío, the Department of Santander and the Department of North of Santander in Colombia. In Central America, EPM’s service area is largely within, in Panamá, the east sector of Panama City, the provinces of Colón, Darién, Kuna Yala and the Pacific Islands, in Guatemala, the Departments of Guatemala (including Ciudad de Guatemala, the country’s capital) Sacatepéquez y Escuintla, and in El Salvador, the Departments of La Libertad, San Salvador, La Paz, San Vicente and Cuscatlán. EPM’s distribution and commercialization services coverage in Colombia and Central America is 75.5% in urban areas, while coverage in rural areas is 24.5% The following table presents EPM’s service area as of June 30, 2014:

Service Area As of June 30, 2014 Number of municipalities served ...... 454 Region served in km2...... 177,384 Total customers ...... 5,579,517 % of customers located in urban areas ...... 75.5% % of customers located in rural areas ...... 24.5% Number of customers per km2...... 59 Number of attention centers ...... 379

Distribution Services EPM’s distribution business consists of transporting electricity through its regional and local network for commercialization companies. Commercialization companies pay EPM fees for the use of its local system pursuant to regulated fee structures based on the number of electricity units in the distributor’s possession.

Transmission and Distribution Network EPM’s electricity transmission and distribution infrastructure comprises 216,973 km of transmission and distribution lines, 307,194 distribution transformers and 416 substations. In Colombia, according to XM, as of June 30, 2014, EPM’s electricity transmission network accounted for 25.7% of the STR and 8.0% of the STN.

Distribution System Performance EPM’s results of operations are affected by electricity losses. Electricity losses are equivalent to the difference between electricity purchased from suppliers and electricity invoiced, and may be classified as technical and non-technical losses. Technical losses relate to electricity losses that occur because of certain technical conditions, including, among other factors, the natural heating of the electrical conductors which transmit electricity from the generating plants to the customers on processes such as voltage transformation. Technical losses are a normal occurrence and while these may be reduced by improvements in the network, their complete elimination is economically impracticable. Non-technical losses relate to losses primarily resulting from fraud, failure of metering systems and administrative errors. All electricity losses have adverse effects on electricity distribution companies. Electricity losses require the purchase of additional electricity to satisfy load requirements but generate no revenue. Furthermore, illegally connected customers typically register abnormally high levels of electricity consumption. The reduction of electricity losses may reduce the volumes of electricity that distribution companies must purchase to meet demand, and for non-technical losses, generally, increases the amount of electricity sold. A portion of the costs resulting from electricity losses, technical and non-technical, may be passed on to customers via tariffs to the extent that those electricity losses are within the permitted levels of efficiency set forth and periodically reviewed by CREG. Reducing electricity losses has been, and continues to be, a priority of EPM. In 2013, EPM had electricity losses of 10.8% compared to 11.2% in 2012 and 12.2% in 2011 and 2012, respectively. Considering EPM’s business in rural and urban areas, EPM’s electricity loss percentages are substantially lower than the national electricity loss average according to data published by SSPD.

179 Competition and Market Share of the Distribution and Commercialization Market Electricity commercialization in Colombia is a highly competitive business with approximately 67 participants as of December 31, 2013. The market shares of the most significant participants in the electricity commercialization business as measured by GWh are shown below:

Company For the Year Ended December 31, 2013 GWh/year Participation % EPM...... 9,772 16.7% ELECTRICARIBE ...... 9,148 15.6% CODENSA ...... 8,882 15.1% ISAGEN ...... 3,950 6.7% EMCALI...... 3,253 5.5% EMGESA ...... 3,004 5.1% ESSA...... 1,932 3.3% EPSA...... 1,751 3.0% CENS...... 1,340 2.3% CHEC...... 980 1.7% Other...... 14,643 25.0% Total ...... 58,656 100%

Source: XM The electricity distribution activity is a natural regulated monopoly with 29 market participants as of December 31, 2014. The following table presents the areas of coverage of the main market participants:

Company Coverage EPM...... Antioquia CHEC* ...... Caldas and Risaralda excluding the City of Pereira EdeQ* ...... Quindío ESSA* ...... Santander CENS*...... Northern Santander Codensa ...... Bogotá and other Cundinamarca cities Electricaribe...... Atlantic coast EPSA ...... Valle del Cauca excluding the City of Cali EMCALI ...... Cali Colombian Government ...... Participation in different companies covering Nariño, Cauca, Huila, Caquetá, Meta and Boyacá Departments

* EPM subsidiary

Purchases of Electricity During 2013, EPM purchased approximately 70.0% of its electricity requirements through long-term supply agreements, which include agreements at a fixed price in the Regulated Market resulting from bidding processes and bilateral supply agreements. In the six months ended June 30, 2014, EPM covered approximately 19.1% through Energy Spot Market purchases. The prices of electricity purchased by EPM in the Regulated Market are determined based on competitive auctions conducted by EPM’s electricity purchases division. Prices for electricity purchased by EPM in the Unregulated Market are freely determined by the parties to the relevant agreement. EPM’s strategy is to purchase electricity at prices that are lower than the prices for electricity offered in the Energy Spot Market. Any electricity supply that EPM does not purchase under long-term supply contracts or bilateral negotiations must generally be purchased in the Energy Spot Market. Given Colombia’s dependence on hydroelectric power generation, EPM seeks to increase its contracted electricity supply in the low rainfall season and to maintain at all times an

180 exposure to spot market electricity which does not exceed 10.0% of its total electricity needs. EPM considers projections of its average electricity supply requirements for the following three years when determining the amount of electricity to purchase through long term supply agreements. EPM adjusts its purchases each year according to actual requirements. For the six months ended June 30, 2014, EPM purchased 1,655 GWh from its own electricity generation units, compared to 3,312 GWh in 2013 and 4,096 GWh/year in 2012. Of such total, EPM purchased 7,229 GWh for the six months ended June 30, 2014, compared to 13,546 GWh/year in 2013 and 12,491 GWh/year in 2012, under long term supply contracts or through bilateral negotiations. Also, EPM purchased 2,091 GWh/year in the Energy Spot Market for the six months ended June 30, 2014, compared to 2,506 GWh in 2013 and 2,127 GWh/year in 2012.

Customers As of June 30, 2014, EPM served approximately 5,579,517 customers including Regulated and Unregulated Users.

Distribution and Commercialization Tariffs EPM’s electricity distribution and commercialization tariffs for Regulated Users are set in accordance with calculation methodologies determined by CREG. These calculation methodologies consider the cost of electricity purchases, the cost of transmission services, an assumed level of electricity losses (recognized losses) that are compensated by a portion of the tariff, and compensation for investments made in distribution assets. Distribution tariffs are adjusted on a monthly basis in order to reflect changes in the IPP. Also, the methodologies for calculating the tariffs applicable to distribution services are subject to ongoing review every five years. In addition, distribution companies are entitled to a tariff increase in order to account new investments in lines that become available to the users of the distribution network, for investments in distribution lines with voltages of 57.5 kV and 115 kV. See ‘‘Industry— Electricity Distribution in Colombia — Key Characteristics of the Electricity Distribution Market.’’

Distribution and Commercialization Billing Procedures Meter readings and invoicing take place on a monthly basis, as authorized by relevant regulation. Bills are prepared from meter readings or on the basis of estimated usage. Customers are billed within 10 calendar days after the meter reading, with payment required within five business days after the invoice date. In addition to the above, EPM has adopted several other tariff policies. These include: • EPM implemented a policy of integrating the tariffs applicable to rural and urban areas in Antioquia, Colombia. • Educational programs for the safe and efficient use of electricity infrastructure. • Financing programs for customers with payment difficulties.

Capital Expenditure Projects EPM’s expansion plan also includes the increase of its area coverage to currently unserved rural areas in Antioquia through a project known as Antioquia Iluminada. The Antioquia Iluminada Project was undertaken in furtherance of EPM’s goal to provide universal coverage. Under this project EPM expects to extend the coverage of its electricity services to approximately 78,566 housing units located in rural areas. EPM estimates that its total investments in this project will be approximately Ps.289,831 million.

Electricity Transmission Business

Overview EPM participates directly in the electricity transmission business in Colombia. Electricity transmission revenues result from the fees paid by electricity generation companies in connection with the use of the STN and the fees paid by commercialization companies for electricity delivered to them over the STN. CREG establishes the total amount of fees for electricity transmission to be paid in each year by electricity generation and commercialization companies. The revenues collected by ASIC from electricity generation companies are allocated to the owners of the STN in

181 proportion to their ownership of STN assets, less penalties for non-availability of transmission services that exceed certain prescribed limits. See ‘‘Industry — Electricity Transmission in Colombia.’’ In 2014, EPM directly accounted for 6.54% of the STN’s total revenues, and ESSA and CENS accounted for 1.27% and 0.18%, respectively.

EPM’s Transmission and Distribution Network As of June 30, 2014, EPM owned electricity transmission and distribution lines totaling 216,973 km (134,827 miles) and 416 substations. The following chart shows EPM’s transmission and distribution lines by extension (kilometers and miles) and the voltages at which they operate:

As of June 30, 2014 (in kilometers) (in miles) 220-230 kV ...... 1,130 702 110-115 kV ...... 2,825 1,755 69 kV ...... 667 414 44-46 kV ...... 2,576 1,601 34.5 kV ...... 2,952 1,834 23 kV ...... 2,040 1,268 13.2-13.8 kV ...... 93,461 58,074 12 kV ...... 18 11 4.1-6.9 kV ...... 58 36 2.4 kV ...... 65 41 240/220 V ...... 111,181 69,084 Total...... 216,973 134,827

EPM’s transmission and distribution lines represent 8.0% of the STN’s total lines in Colombia. The average availability of EPM’s electricity transmission lines for 2013, excluding unavailability resulting from terrorist attacks, was 99.94%. EPM’s electricity transmission network is administered through one regional electricity transmission center, located in the ‘‘Colombia’’ substation in Antioquia. During the year ended December 31, 2013, EPM invested Ps.292,926 million in network infrastructure. These investments were focused on the expansion of EPM’s electricity transmission and distribution network. EPM’s expansion plan contemplates investments in equipment and infrastructure replacement, expansion and modernization at several locations and the connection of at least 900 MW of new hydroelectric generation. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Investments.’’

Tariffs and Revenue Transmission revenues are the charges paid by commercialization and distribution companies in connection with the use of the STN. The methodologies and formulae set forth by CREG in order to establish the amount of transmission charges provide for several elements, including, the cost of equipment, financing and lands. Transmission revenues are allocated among transmission companies in proportion to their ownership of the STN. Distribution revenues also derive from the fee paid by commercialization companies for the use of EPM’s regional and local networks for the delivery of electricity to end-users. The following table presents EPM’s transmission and distribution revenues derived from its participation in the STN, SDL and STR from 2011 through 2013:

For the Year Ended December 31, 2011 2012 2013 EPM revenues for its participation in the STN ...... Ps.100,714 Ps.104,096 Ps.108,946 EPM’s revenues for its participation in local distribution (SDL) and regional transmission systems (STR)*...... 243,035 274,518 257,044 Total ...... Ps.343,749 Ps.378,614 Ps.365,990

Source: EPM

182 Interconnection EPM’s interconnection business consists of providing electricity generation companies, regional transmission companies, local distribution companies and large electricity customers with a physical interconnection to the STN and assigning to the customers’ interconnection points sufficient transmission capacity to meet their requirements. In the case of electricity generation companies, interconnection requires a line from the generator to the STN and a transformer to adjust the voltage of the generator’s output to the network voltage. The interconnection equipment also includes the necessary switch gear and supervisory, protection and control equipment. Similar equipment is required for regional transmission companies, local distribution companies and large electricity consumers, although, in such cases, the transformer’s function is to adjust the network voltage to that required by the receiver of the electricity. Each user of the STN is responsible for its own interconnection to the system and is free to build its own interconnection infrastructure or contract with EPM or a third party to do so. Interconnection services generally consist in the first instance of planning and constructing the required interconnection assets. Thereafter, the service generally consists of maintaining and operating the interconnection assets. Interconnection customers may tailor the services purchased from EPM only to plan and construct the interconnection infrastructure and then to contract with a separate entity (which could be a competitor of EPM) to maintain and operate the interconnection. All of EPM’s interconnection customers have elected to have EPM’s plan, build, operate and maintain their interconnections.

Nueva Esperanza Project The Nueva Esperanza Project is part of the STN. The MME awarded the Nueva Esperanza Project to EPM in 2010 after a public bidding process with the purpose of increasing the power transmission capacity and reliability of the transmission system in the Department of Cundinamarca. The Nueva Esperanza Project consists of the installation and operation of (i) a 500,000 and 230,000 volts substation in the Municipality of Soacha, and (ii) two new transmission lines to be connected with the substations Bacatá and Guavio, respectively. We began the construction of the Nueva Esperanza Project in 2011 and currently expect it to be operational in 2015. We estimate the total cost of the Nueva Esperanza Project to be Ps.275,334 million, and as of June 30, 2014, had invested a total of Ps.110,894 million on this project. During the construction of the Nueva Esperanza Project, issues such as delays to obtain the relevant environmental licenses and impacts on the cultural heritage within the zone resulted in delays in the project’s schedule. This project was designed to increase the power transportation capacity of the STN and enhance the reliability of the electric system in the eastern center region of Colombia (Cundinamarca-Bogotá, Meta, Guaviare and north of Tolima). The Nueva Esperanza Project is one of the priority infrastructure project of the Colombian government (Proyecto de Interés Nacional Estratégico) and the MME expects more than 12 million people to benefit from the project.

Bello-Ancon Electricity Transmission Project The Bello-Ancon Electricity Transmission Project is part of the STN. In June 2014, the Ministry of Mining and Energy awarded the Bello-Ancon Electricity Transmission Project to EPM after a public bidding process with the purpose of increasing the power transmission capacity and reliability of the transmission system in the Municipality of Medellín. The Bello-Ancon Electricity Transmission Project consists of the installation and operation of (i) a 230,000 volts substation in the Guayabal area in Medellín and (ii) two new transmission lines to connect the new Guayabal substation with the substations Bello and Ancon. EPM expects to begin the construction of the Bello-Ancon Electricity Transmission Project in the third quarter of 2014 and currently expects it to be operational in November 2016. This project was designed to increase the power transportation capacity of the STN and enhance the reliability of the electric system in the Municipality of Medellín. The MME expects more than 3.3 million people to benefit from this project. EPM currently estimates the total cost of the Bello-Ancon Electricity Transmission Project to be Ps.230,792 million. EPM expects to finance this project with a combination of cash flows from operations and bank financing.

Interconnection Charges Interconnection charges are established on a contractual basis for each interconnection point to the STN in accordance with the methodology established in CREG Resolutions 25 of 1995 and 30 of 1996. Interconnection

183 charges reflect EPM’s investments in the equipment at that connection point and the cost of administering, operating and maintaining the equipment. For a further discussion of interconnection revenues, see ‘‘Industry — Electricity Transmission in Colombia — Revenues of Electricity Transmission Companies.’’

Network Maintenance and Operations EPM electricity transmission network consists of various kinds of equipment that require specialized and regular maintenance by trained personnel to ensure functionality and reliability. EPM continuously analyzes the operating condition of its network and undertakes preventive and corrective maintenance in order to improve the efficiency and reliability of its electricity transmission processes and repair damaged equipment. The maintenance of EPM’s transmission network has been partially outsourced to several providers, and independent contractors with significant experience in the maintenance of electricity transmission lines and substations. EPM has developed extensive plans to mitigate the effects of natural disasters, acts of terrorism or other types of unplanned outages on its network. These contingency plans include security measures, such as access permits, military support, availability of emergency-trained personnel and air and land transportation of equipment and other logistical support needed to restore interrupted service promptly. In addition, EPM works with local communities to increase security by distributing information regarding EPM’s projects under development, providing the infrastructure in rural areas and creating opportunities relating to easement maintenance to community organizations.

Competition The electricity transmission business is a regulated monopoly in Colombia. There are nine transmission companies. The majority of system assets are owned by the following companies: Intercolombia S.A. E.S.P., Transelca, EEB and EPM, with EPM having an 8.0% participation (including CENS and ESSA subsidiaries). Transmission companies also compete for the construction, administration, operation and maintenance of new expansion projects of the STN, which are allocated between the market agents through auctions organized by the UPME. See ‘‘Industry — Electricity Transmission in Colombia — Expansion of the STN.’’

Public Lighting EPM has entered into two agreements with the City of Medellín and its related entities for a total aggregate amount of Ps.33,268 million. The purpose of these contracts is to supply electricity for public lighting and street lights, as well as system maintenance and expansion in the City of Medellín.

Natural Gas Distribution Business Overview EPM participates directly in the natural gas distribution business in Colombia. The natural gas distribution activities are complemented by commercialization capability. Through these activities EPM distributes gas from city entrances to end-users through lower and mid-level pressure pipes, mostly made of polyethylene. EPM is also responsible for consumption measurement through gas meters, billing and, in general, all activities related to customer’s service. EPM is responsible for the collection of bills relating to providing natural gas distribution services, but EPM must make all payments to other agents in the natural gas supply chain (producers and transportation companies) regardless of whether users have paid for the service. The distribution and commercialization of natural gas are regulated activities. As such, the regulating entity governing the rendering of the services establishes the tariffs providers can charge for each of these services. See ‘‘— Energy BU — Electricity Transmission, Distribution and Commercialization Business — Natural Gas Distribution Business in Colombia — Tariffs.’’ EPM also attends the Vehicular Natural Gas segment which consists of supplying natural gas to gas-operated vehicles. Likewise, EPM also distributes compressed natural gas through module transportation trucks.

Operations EPM is the sole natural gas distributor in the Aburrá Valley. The Aburrá Valley has an area of approximately 1,164 km2 (449.42 mi2) and comprises the 10 cities of Barbosa, Girardota, Copacabana, Bello, Medellín, Envigado, Itagüi, Sabaneta, La Estrella and Caldas. The population of the Aburrá Valley is 2,945,034 million people.

184 The natural gas is supplied to the Aburrá Valley through the Sebastopol-Medellín gas pipeline owned Transmetano, S.A., a gas transportation company. The trunk line of the Sebastopol-Medellín pipeline consists of a steel pipeline with an extension of 148 kilometers and a diameter of 12 and 14 inches. The pipeline starts in the Sebastopol operational center which is part of the Centro Oriente pipeline owned by TGI and is located in the right side of the Magdalena river in the Department of Santander. The Sebastopol-Medellín pipeline ends in the delivery station or city gate for the cities of the Aburrá Valley which is located near Parque de las Aguas in the Girardota-Antioquia municipality. As of June 2014, EPM’s infrastructure for the distribution of natural gas in the Aburrá Valley includes 87 km of steel network, 4,430 km of polyethylene network and 27 measurement and regulation stations. This infrastructure has reached a penetration of 74.9% of potential customers. Since EPM began providing services to other municipalities of Antioquia, it has recorded, as of June 2014, the construction of 1,521 km of polyethylene networks in 39 locations outside the Aburrá Valley and 38 decompressing stations and 2 natural gas compressing stations, located in the municipality of Barbosa. As of June 2014, it has reached a coverage of 153,941 potential customers, of which 93,240 customers, representing 60.6% of potential customers, have connected to the network

Natural Gas Distribution Suppliers EPM distributes natural gas purchased from producers and transportation companies. Natural gas production is concentrated in a few producers such as Chevron Petroleum Company, Ecopetrol, Equion and Pacific Rubiales Energy Corp. According to the National Hydrocarbons Association (Asociación Nacional de Hidrocarburos), as of 2012, Colombia had available approximately 6.8 TPC, approximately 200 GPC more than in 2011. Colombia gas reserves have maintained relatively stable in levels close to 7 TPC, without considering the volume produced (approximately 0.9 TPC on average per year), which represents an average increase of 1% per year. Institutional changes in the organization of the Colombian hydrocarbons industry since 2005 have boosted the hydrocarbons exploration and production activities. Since then, Colombia’s natural gas reserves have increased and it is expected that they will continue increasing as a result of new exploration techniques and technologies, particularly those for offshore gas deposits. EPM has entered into agreements with, among others, Chevron Petroleum Company, Ecopetrol, Equion and Pacific Rubiales Energy Corp., for the purchase of natural gas. EPM has also entered into agreements with, among others, Transportadora de Gas Internacional S.A. E.S.P. and Transmetano S.A. E.S.P. for the transportation of natural gas. See ‘‘Business — Energy BU — Electricity Transmission, Distribution and Commercialization Business — Natural Gas Distribution Business in Colombia — Operations.’’

Natural Gas Distribution Customers EPM has three business lines for the national gas distribution business segment organized according to customer base: Regulated Market, Unregulated Market and Vehicular Natural Gas. The increased penetration of the natural gas business has led both to increased client retention and increased volumes of natural gas sold during recent years. The number of billable customers has grown at an annual rate of 14.6% over the last three years. In particular, in the last three years the number of new customers has increased significantly from 72,251 new customers in 2011, to 91,137 new customers in 2012 and 100,983 new customers in 2013. As of June 30, 2014 we had 837,734 customers. The following chart sets forth the number of natural gas distribution customers per market for the periods indicated:

As of and for the Six Months Ended June 30, As of the Year Ended December 31, 2014 2013 2013 2012 2011 Customers % Customers % Customers % Customers % Customers % Residential ...... 823,083 98% 720,057 98% 772,228 98% 672,966 98% 583,938 98% Regulated non-residential . . 14,583 2% 12,895 2% 13,833 2% 12,110 2% 9,978 2% Unregulated market ...... 38 0% 43 0% 43 0% 40 0% 35 0% Vehicular natural gas . . . . . 30 0% 29 0% 29 0% 34 0% 62 0% Total...... 837,734 100% 733,024 100% 786,133 100% 685,150 100% 594,013 100%

185 The following chart sets forth the consumption of EPM’s natural gas distribution clients per market:

For the Six Months Ended June 30, For the Year Ended December 31, 2014 2013 2013 2012 2011 C(1) % C(1) % C(1) % C(1) % C(1) % Regulated market...... 114,310 50% 109,069 48% 229,263 50% 215,210 51% 195,989 48% Unregulated market ...... 95,085 42% 108,555 47% 202,905 44% 179,763 42% 150,338 37% Vehicular natural gas . . . . . 18,253 8% 12,487 5% 26,825 6% 30,499 7% 59,409 15% Total...... 227,648 100% 230,111 100% 458,992 100% 425,472 100% 405,736 100%

(1) Consumption in thousands of cubic meters. The following chart sets forth EPM’s revenues from its natural gas distribution business for the periods indicated:

For the six months ended June 30, For The Year Ended December 31, 2014 2013 2012 2011 Customer % Customer % Customer % Customer % (Ps. in millions, except %) Regulated market ...... Ps.117,162 52% 107,858 41% Ps. 193,087 43% Ps.158,282 42% Unregulated market...... 34,114 15% 50,914 19% 113,471 25% 99,273 26% Vehicular natural gas...... 15,426 7% 11,068 4% 27,315 6% 46,676 12% Installation and connection . . . . 39,541 18% 40,841 16% 67,544 15% 53,371 14% Others ...... 19,056 8% 51,065 20% 44,268 10% 17,445 5% Total ...... Ps.225,299 100% 261,746 100% 445,685 100% Ps.375,047 100%

Source: annual Finance Documents (PxQ): Natural Gas 2011, 2012, 2014. Market Share of the National Gas Market According to the ‘‘Natural Gas Sector 2012 Report XIV Edition,’’ prepared by Promigas, EPM participates in the market with 12% of users connected as of December 2013, provides services in 38 localities in the department of Antioquia and has a residential coverage of 60%. Tariffs EPM bases its rates in the applicable natural gas regulatory and tariffs framework set forth by the CREG. The transportation and purchase of gas accounted for approximately 70% of the cost of the gas in 2013 and the six months ended June 30, 2014, and both elements are generally applied as a pass-through on gas rates. To determine the cost of distribution, the CREG applies a methodology based on medium-cost of medium-term (costo medio de mediano plazo) which takes into account investments, efficient and low cost of administration, operation and maintenance and demand in each market. Currently, the CREG approved an average price for distribution of Ps.140.01/m3 in the Aburrá Valley, referring to prices as of 2002 approved through Resolution 087 of 2004, updated to Ps.177.10/m3 for invoices as of June 2014. The price is updated monthly using the IPP minus the productivity index of 0.00106% established by the CREG. The CREG approved an average price for marketing (applicable to the regulated non-residential market) of Ps.1,887.65/invoice, referring to prices as of December 2002, updated to Ps.2,671.67/ invoice as of June 2014. The price is updated monthly using the IPC minus the productivity index of 0.00125% established by the CREG. In the Unregulated Market, a margin of pesos per cubic meter (Ps./m3) is applied in place of a fixed peso per client charge (Ps./client) as in the case of the Regulated Market. The margins applied to invoices continue to be applied due to the fact that they reflect customer characteristics and contractual conditions. Recently, the CREG issued a resolution to determine the distribution and marketing costs based on historical average costs. This methodology will apply beginning in 2015 once the CREG approves the fees payable by distributors of natural gas in Colombia. Capital Expenditure Projects in Colombia EPM has in place an expansion project for each line of business. With respect to the residential business line, EPM has a long-term coverage (penetration) goal of 75.0% in the Aburrá Valley. EPM expects to reach that goal over

186 a period of one year. EPM’s objective for 2014 is to reach a penetration level of 74.5% in the Aburra Valley and 64.5% in the rest of Antioquia. EPM has developed and implemented several strategies to accomplish this objective, including: • The gas household habilitation plan for the 1st, 2nd and 3rd income strata which consists of financing the clients’ connection costs; • The execution of contracts and agreements with governmental entities whether national, departmental or municipal, such as the MME, the Government of Antioquia, the Mayoralties of Medellín and Barbosa, for the granting of non-refundable subsidies for the connection of customers in strata 1, 2 and 3 of the new regions being reached by the natural gas distribution network; • The launching of new products such as tailored solutions (multifamily and single family clients in strata 4, 5 and 6), and products for tenants; • Creation of new sales channels both directly and through third parties such as merchants and single mothers in specific localities or belonging to cooperatives; • Marketing campaigns for positioning gas products by explaining the benefits of using natural gas. With respect to the regulated non-residential business line, EPM’s objective for 2014 is to serve 1,513 new clients. EPM has developed and implemented several strategies to accomplish these objectives, including: • Segmentation and identification of clients based on economic activity and potential consumption; • Structure offers based on the fuel being replaced and the definition of the segment; • Special attention to clients with a consumption level between 20,000 and 85,000 m3/month, through a special account executive; • Product development through tailored solutions for tenant businesses and street vendors; • Client retention policies; and • Use of natural gas powered equipment in the conservation and refrigeration of food, drinks, raw materials or products. With respect to the Unregulated Market, EPM’s long and short-term objectives are the promotion of customer loyalty and the retention of current customers. Retention of existing customers, rather than acquisition of new customers in the Unregulated Market, is a priority since, in the Aburrá Valley, natural gas has already been adopted by most large industries, which limits the potential for further expansion of the customer base in the Unregulated Market. EPM has developed and implemented several strategies to reach these goals, including: • Individual and specialized service for each client; • Individual strategies to develop customer loyalty; and • Searching for new clients through the development of new products such as those designed to replace carbon or enhance energy efficiency with alternative schemes, such as auto generation and cogeneration. With respect to the Vehicular Natural Gas business line, EPM’s objective for 2014 is to convert 4,800 vehicles to the use of natural gas. EPM has developed and implemented several strategies to reach this goal, including: • Creation of new commercial strategies based on the Company’s experience and customer satisfaction evaluations; • Increase the market share by having presence across the value chain through the construction of service stations, acquisitions and/or partnerships with stations owned by third parties; • Standardize EPM’s service strategy in service centers owned and operated by partners (exclusive workshops and EPM service centers), in order to add value to customers and strengthen brand recognition; • Offer new financing alternatives to effectively impact different customers; • Structure economic compensation programs aimed towards clients that potentially are able to create additional value for EPM; • Capture conversions and consumption of different corporate vehicular fleets from Aburrá Valley through promotions that create added value for the customers;

187 • Annual certification strategy to increase the number of customers in the network. The strategy will allow current users of compressed natural gas to obtain the annual certification of their vehicle without disbursing money, through a ‘‘bonus certification’’; • Promotion of the advantages of Vehicular Natural Gas aside from its economic benefits, such as environmental friendliness; • Maintaining quality and low prices for end-users; • Supporting and following up with existing projects such as Metroplús and EEVV (Diesel); and • Increasing the number of Vehicular Natural Gas dealers with 0 km offers. EPM has also created expansion strategies for other projects such as the proyecto oriente which takes advantage of the potential for expansion of the business in the highway connecting Medellín to Bogotá, in the cities of Guarne, Rionegro and Marinilla, and the compressed natural gas distribution system project. EPM continues its expansion within the Department of Antioquia. Currently, EPM has presence in 43 regions out of the Aburra Valley for a total of 53 regions, virtually all the subregions of the Department of Antioquia, including the region of Urabia. With respect to the development of new products and services, EPM has consolidated the project named ‘‘Distrito Termico de La Alpujarra’’ in Medellín. The project consists in offering cold water for the air conditioning system to five governmental entities within the Aburra Valley. In addition to these key projects, EPM is considering other markets of interest which are in the evaluation stage and as such are not reflected in the business’ expansion plan. These markets will continue to be under evaluation in 2014 since EPM believes that they offer potential to expand the business. Water Services BU Overview The Water BU consists of the water, sewage and waste management business, which EPM conducts directly and through subsidiaries in Colombia and internationally in Mexico. The following chart summarizes the relevant entities of the Water BU.

188 EPM’s water services business provides water, sewage and waste management services in Colombia. According to the SSPD, in terms of revenues, as of December 31, 2012, EPM was the second largest water and sewage service provider in Colombia. EPM directly operates water and sewage systems in the City of Medellín and the other cities in the Metropolitan Area. EPM also operates systems in the cities of Apartadó, Chigorodó, Carepa, Turbo, Mutatá, Sopetrán, Santa Fe de Antioquia, San Jerónimo, Olaya, El Retiro, Quibdó and Malambo.

Summary Revenue Information and Operating Data The following table summarizes the water services business’s total revenues for each of its strategic business units for the years ended December, 31 2013, 2012, and 2011, and for the six months ended June 30, 2014 and 2013:

For the six months ended June 30, For the Year Ended December 31, 2014 2013 2013 2012 2011 (Ps. in millions) Water ...... Ps.191,111 Ps.183,755 Ps.368,365 Ps.373,596 Ps.351,008 Sewage ...... 238,592 182,980 410,143 357,313 352,136 Waste management ...... 77,619 1,172 26,765 — — Eliminations ...... (10,776) (780) (1,728) (5,024) — Total water, sewage and waste management gross revenues ...... 496,546 367,127 803,545 725,885 703,144 (–) Discounts(1) ...... 14 1 8 495 319 Total water, sewage and waste management revenues, net...... Ps.496,532 Ps.367,126 Ps.803,537 Ps.725,390 Ps.702,825

(1) For a description of ‘‘Discounts’’ see ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Principal Line Items — Discounts.’’

Operations Water Sources and Infrastructure To supply water to its customers, EPM draws water from various sources, treats it and distributes it to customers’ premises. In the year ended December 31, 2013, EPM produced approximately 285.7 million cubic meters of water in its Metropolitan Area operation and 32.5 million cubic meters through its Regional Water Subsidiaries. The Metropolitan Area currently is, and has historically been, EPM’s core market, accounting for approximately 99.34% of water invoiced by volume in the year ended December 31, 2013. EPM’s water infrastructure is made up principally of reservoirs, treatment plants, primary distribution networks and water pipes, pumping stations, storage tanks, and secondary distribution networks. For the performance of operations, EPM’s water infrastructure is complemented by a control center and water quality control and micro measurement calibration laboratories. The following table sets forth EPM’s reservoirs currently in operation:

First Year of Reservoir Location Operations Description Ríogrande II ...... Northeast of the City Medellín, 1991 Used for electricity generation and near the City of Don Matías provides water used for drinkable water treatment. Storage capacity of 151 million cubic meters of water. La Fé ...... East of Medellín, five kilometers 1974 Provides water. Storage capacity of from the City of El Retiro 12 million cubic meters of water. Piedras Blancas ...... Northeast of Medellín, six 1952 kilometers from the City of Provides water. Storage capacity of Guarne 1.2 million cubic meters of water. Further, EPM’s water control center is responsible for planning, coordinating, operating and automatically optimizing, both the supply of water and the treatment of waste water. The center is the first of its kind in Colombia and is located in the San Fernando Waste water Treatment Plant. The center enables EPM to exercise total control

189 over the transport network and guarantee operational efficiency under the highest quality service standards. The center is responsible for controlling and supervising the complete operation of the water network and the storage of all information related to the control elements of the infrastructure (valves, pumping systems, micro centrals, conductions, among others). Interadministrative Agreements for the Rendering of Water, Sewage and Waste Management Services Under the Colombian constitution, and municipal governments are responsible for assuring the efficient provision of water, sewage and waste management services to their residents. To do so, they enter into interadministrative agreements with water, sewage and waste management services companies pursuant to which such companies are granted long-term rights to operate in the relevant city or municipality their water and sewage networks. In the Metropolitan Area, these rights have been granted to EPM without charge. In exchange, EPM has committed to provide water, sewage and waste management services in compliance with legal standards and provide maintenance of the several water and sewage networks. The rights that EPM currently has are derived from contracts entered into between EPM and the relevant city or municipality. The principal terms of these agreements are as follows: • EPM assumes all responsibility for providing water, sewage and waste management services in a specific urban area of the city; • EPM may collect the tariffs for its services without any payment to the city; • The assets comprising the existing municipal water and sewage systems are transferred to EPM as a form of gratuitous loan; • EPM is exempt from municipal taxes in connection with its operation, and no royalty is payable to the city with respect to these agreements; • EPM is granted rights of way on municipal property for the installation of water pipes, mains and sewer lines; • Upon termination of the interadministrative agreement, EPM is required to return the water and sewage system assets to the city; and • Each city authorizes EPM to administer, operate and maintain new networks it may build. Under these agreements, cities and municipalities are entitled to terminate them prior to their agreed expiration. To this date, no cities have terminated their operation contracts with EPM, nor does EPM currently anticipate that any cities will seek to terminate them. Further, should a city decide to change its water and sewage provider, it would have to conduct a public bidding process in which EPM could participate. The cities or municipalities are not entitled under these agreements to unilateral termination powers and contract termination is subject to the general obligations law. However, EPM cannot be certain that cities will not seek to terminate, or cease to renew upon termination, their agreements in the future. The table below shows the loan agreements currently in effect for EPM’s operation of infrastructures for cities in the Metropolitan Area, together with their respective terms:

Date of City Initiation Term Expiration Caldas...... 1997 30 years 2027 Barbosa ...... 1997 30 years 2027 Sabaneta ...... 1984 10 years 2024 Bello...... 1973 10 years 2023 La Estrella ...... 1984 10 years 2024 Envigado ...... 1977 10 years 2017 Girardota ...... 1993 20 years 2033 Copacabana ...... 2010 20 years 2030 Itagüí ...... 1978 Indefinite

* The contracts with the municipalities of Sabaneta, La Estrella, Envigado, Girardota, Copacabana and Bello will be extend for equal and successive periods

190 For the cities outside the Metropolitan Area, usage rights granted to EPM’s Regional Water Subsidiaries have also been granted without charge. However, such usage rights were priced and assigned by the cities as capital contributions to the Regional Water Subsidiaries, giving the cities a minority participation in the regional companies. The table below shows the usufructuary rights currently in effect for EPM’s operations of infrastructure through its Regional Water Subsidiaries, in the cities outside the Metropolitan Area, together with their respective terms:

Aguas de Urabá S.A. E.S.P. Date of Cities Initiation Expiration Carepa ...... 2007 2037 Chigorodó ...... 2007 2037 Turbo...... 2007 2037 Apartadó ...... 2007 2037 Mutatá ...... 2007 2037

Regional de Occidente S.A E.S.P. Date of Cities Initiation Expiration Olaya...... 2007 2037 San Jerónimo ...... 2007 2037 Santa Fe de Antioquia ...... 2007 2037 Sopetrán ...... 2007 2037

Aguas de Malambo S. A E.S.P. Date of Cities Initiation Expiration Malambo ...... 2011 On the date on which the company is liquidated

Aguas del Oriente S. A E.S.P. Date of Cities Initiation Expiration El Retiro ...... 2003 On the date on which the company is liquidated Similar to the cities in the Metropolitan Area, EPM currently does not anticipate that any cities served through its Regional Water Subsidiaries will seek to terminate, or upon expiration of the respective terms, cease to renew, these usage rights.

Water Abstraction EPM can abstract water to the extent permitted by the limits (measured in cubic meters or liters per second) set forth in the corresponding concessions granted to EPM by the regional environmental authorities such as, Corporación Autónoma Regional Nare — CORNARE and CORANTIOQUIA. The concessions that have been granted to EPM have expiration dates ranging from 2012 to 2047 and EPM has filed and expects to file, when necessary, renewal applications with the relevant regional authorities in anticipation to such expiration dates. EPM is in material compliance with all these water abstraction concessions. The Company has never been sanctioned or fined for the usage of its water sources.

Sources EPM currently abstracts substantially all of its water supply from rivers and reservoirs. EPM’s reservoirs draw water from rivers and streams. Local and national agencies charge entities such as EPM for the abstraction of water (usage charges) or the discharge of sewage into water resources (retribution charges). Usage charges are paid to the concession-granting environmental authorities (CORANTIOQUIA and CORNARE), while retribution charges are paid to the Metropolitan Area. EPM has paid retribution charges since 2000 and usage charges since 2002. EPM’s tariff readjustment formula incorporates these expenses and EPM expects to continue to pass these expenses on to its customers. However, EPM is uncertain regarding the amount of future usage and retribution charges, or whether it will be able to continue to pass on these costs to customers. For more information on water usage regulation see ‘‘Industry — The Water, Sewage and Waste Management Services Industry in Colombia — Government Regulation.’’

191 To supply water to customers, EPM has 74 pumping stations and 163 treated water storage tanks, with a capacity of 470,674 cubic meters. Total current capacity, or the volume of water that can be treated from EPM’s water systems, including EPM’s Regional Water Subsidiaries, is 19.05 m3/sec. volume treated during the first six months of 2014 was 113 million cubic meters. The following table presents the water production systems from which EPM produces water for the Metropolitan Area:

As of June 30, 2014 System Production Rate(1) (in m3/sec) Ayurá Plant ...... 9.20 Manantiales ...... 6.00 Villa Hermosa ...... 0.95 La Montaña ...... 0.38 La Cascada...... 0.10 San Cristobal ...... 0.23 San Antonio de Prado ...... 0.10 Aguas Frias ...... 0.03 Barbosa ...... 0.06 Caldas...... 0.20 Palmitas ...... 0.003 Total production rate ...... 17.253

EPM owns all of the reservoirs, raw and drinking water pumping systems, sewage channels and conduction systems, water and sewage treatment plants, storage tanks and primary networks between treatment facilities, while most of the sewage secondary network, other than the one in the City of Medellín, is owned by the respective cities. EPM currently does not pay any charges for the use of third-party water and sewage infrastructure either in the Metropolitan Area or in the cities served through its Regional Water Subsidiaries. EPM’s principal source of water consists of surface water from nearby rivers. In 2010, 2011, 2012, 2013 and in the five months ended May 31, 2014, EPM was able to meet water demand in all its regions of service due to the sufficient water resources and adequate capacity in its infrastructure. Before reaching customers, water is stored and transported through a complex interconnected system. In the Metropolitan Area, this system is comprised of 263.86 km of primary networks and 3,426.38 km of secondary networks as of June 30, 2014, while in the regional water subsidiaries, the network comprises 105.05 km of primary networks and 789.77 km of secondary distribution networks from reservoir tanks to customers. This water system requires constant supervision, engineering inspection, maintenance, quality monitoring and measurement control.

Water Treatment EPM uses methods in compliance with norms established by the American Public Health Association (‘‘APHA’’) to treat its water for human consumption. Prior to placing the water into its primary and secondary distribution networks, EPM treats all of its water at its water treatment facilities, which include 11 facilities throughout the Aburrá Valley and 19 through its Regional Water Subsidiaries. The largest facility, the La Ayurá water treatment plant in Envigado, has an installed treatment capacity of nearly 9.20 m3/sec. A waste water treatment plant located in the City of El Retiro treats water from the La Fé reservoir and prepares it for additional treatment at the La Ayurá treatment plant. As of June 30, 2014, EPM had a total water treatment capacity in the Metropolitan Area of 17.25 m3/sec and produced approximately 96.5 million cubic meters of drinking water, while capacity in the cities served through its Regional Water Subsidiaries was 1.58 l/sec, enough to produce approximately 16.5 million cubic meters of drinking water. In 1999, EPM’s process for the water treatment in the Metropolitan Area received a Quality Assurance Certificate from the Colombian Institute of Technical Norms (Instituto Colombiano de Normas Tecnicas y Certificación or ‘‘ICONTEC’’) which is still in effect.

192 The Ministry of Social Protection establishes water potability standards, including standards for turbidity, color, PH, conductivity, free residual chlorine, total organic carbon, nitrates and bacteriological spectrum, as well as the monitoring of pollutants, pesticides and heavy metals. In 2013, EPM’s urban water and sewage system covered 100.0% of the 3.38 million inhabitants in the Metropolitan Area and had a continuity index (service reliability) of 99.93%. Water treatment coverage outside the urban areas of the cities in the Metropolitan Area, which include their rural vicinities, is provided through regional water treatment facilities, which are not directly owned by EPM. Although the EPM provides training for personnel and the plants’ operations, each city is responsible for the operation of these plants. EPM requires that all materials used in water treatment comply with ISO and American Water Works Association (‘‘AWWA’’) quality standards. EPM requires a supplier’s quality certificate with each shipment of materials, which the Company then verifies in its laboratories on a monthly basis. Further, all materials, technologies and products used in the water treatment process must comply with the Ministry of Social Protection’s current certification process standards.

Water Distribution EPM distributes water through its proprietary network of water pipes and mains operating at an altitude between 1,420 and 2,120 meters above sea level. Storage tanks and pumping stations regulate the volume of water flowing through the networks to maintain adequate pressure and continuous water supply. As of June 30, 2014, EPM’s water network in the Metropolitan Area contained 263.86 km of primary networks and 3,426.38 km of secondary distribution networks and 1,035,960 water connections. As of the same date, EPM’s Regional Water Subsidiaries’ water network contained 105.05 km of primary networks and 789.77 km of secondary distribution networks and 101,420 water customers. Overall, EPM has 163 drinking water storage tanks with a total capacity of 470,674 cubic meters. In addition, in the Metropolitan Area EPM has 38 pumping stations in its system and 36 pumping stations in its subsidiaries. EPM is currently developing a project for the automated control of water pressure gauges. EPM cleans and relines water mains in need of maintenance. EPM constantly monitors its infrastructure in order to prevent and attend to water main fractures, leakage or breaks. Additionally, EPM has set up a toll-free number where the public can report problems in the system. EPM has entered in 2013 into several construction and maintenance agreements with third parties to ensure the construction and maintenance of the water and sewage networks it operates. The approximate aggregate value of these agreements is Ps.34,976 million. Under Colombian law, customers are responsible for the costs involved in connecting to EPM’s water distribution network. EPM’s water connection policy requires customers to pay the installation cost of the connection from EPM’s distribution network to the connection point, including any remainder, as well as all costs related to the connection to the network from the customer’s residence, including costs related to the purchase and installation of the water meter, and related labor costs. Similarly, industrial customers are responsible for the entire connection cost. EPM, through third party contractors, installs the meters and conducts periodical inspections and measurements. Upon installation, the customer is responsible for the water meter.

Water Losses EPM currently works under a system that recognizes four types of water losses: • technical losses correspond to all physical leakages present anywhere in the water systems; • commercial losses refer to losses experienced either in: (a) mistakes in meter readings, (b) fraud (understood as unauthorized consumption from current customers), (c) clandestine usage (understood as unauthorized consumption from individuals who are not customer), and (d) administrative losses (understood as losses due to billing or administrative errors); • authorized technical consumption corresponds to water used for maintenance of the network and equipment, EPM’s infrastructure usage, and resources for hydrants; and • authorized commercial consumption, refers to: (a) provisional connections, including meter replacements, new households or office construction where meter reading is unavailable and consumption must be

193 estimated and (b) subnormal or high risk sectors in the City of Medellín (comunas), where the lack of construction licenses for existing households prevent the Company from formally adding consumers to its client base and charging for water and sewage consumption. The difference between the amount of water produced and the amount of water invoiced generally represents both technical and commercial water losses. Under the current CRA guidelines, water loss percentage represents the quotient of: (1) the difference between (a) the total amount of water produced by EPM minus (b) the total amount of water invoiced to customers divided by (2) the total amount of water produced by EPM. Currently, regulations do not allow the exclusion of commercial losses in calculating water losses. Using the current calculation method, for the twelve months ended December 31, 2013, EPM experienced water losses of 98,236,008 cubic meters, which correspond to average water losses of 34.38%. EPM has implemented a number of measures in an effort to reduce water losses in its network between 85 million cubic meters to 90 million cubic meters by 2017, which correspond to an annual average of approximately 30.07%. In addition to the CRA’s water loss calculation methodology, EPM uses water loss indicators, including IPUF (Indice de Pérdidas por Usuario Facturado — Billed Consumer Loss Index), which is calculated by dividing (1) the amount of water produced minus the invoiced water amount by (2) the number of consumers. As of December 31, 2013 the cumulative average monthly loss by user under this methodology was 8.11 m3/user.

Water Quality EPM supplies high quality drinking water that complies with Colombian and international standards set by the Ministry of Social Protection, the APHA, the EPA and the European Union. EPM’s operations involving the collection, primary distribution and secondary distribution of drinking water and the collection, transport and treatment of waste water are currently certified under an ICONTEC Certificate of Quality Assurance. EPM’s water quality control team is responsible for managing and controlling water quality from its inception and collection to delivery to the customer. The water supply team is responsible for the tasks of planning, control, coordination and operation of treated water from the control center located in the San Fernando Waste Water Treatment Plant and the Villa Hermosa Drinking Water Treatment Plant. The water control center is responsible for planning, controlling, coordinating and operating the automated delivery of drinking water and the treatment of waste water. The control center controls and supervises the entire operation of the water network and the storage of information for every control mechanism within the infrastructure (valves, pumps, power stations, pipes, etc.). Water quality is monitored in all stages of the distribution process, including water sources, water treatment facilities and in the distribution network. EPM has a central laboratory located in the San Fernando Waste water Treatment Plant which, together with a laboratory facility in Villa Hermosa, monitors water quality and purity and employs approximately 24 professionals, assistants and technicians. EPM’s central laboratory located in the San Fernando Waste Water Treatment Plant is responsible for the physiochemical analyses, organic compound and heavy metals analyses, using the chromatographic technique and atomic absorption technique. EPM’s central laboratory has been awarded ISO 17025 certification by the Colombian Institute of Hydrology, Meteorology and Environmental Studies (‘‘IDEAM’’), with respect to the quality of its management systems and technical competence. EPM also has 13 laboratories located in each water treatment facility in the Metropolitan Area and a regional laboratory installed in each treatment facility for each Regional Water Subsidiary. These facilities monitor water quality and purity and employ approximately 56 technicians, biologists, engineers and chemists. Samples are collected from the distribution network at specific points (not in residences) as set forth by MVADT and Ministry of Social Protection Regulation. All physical, chemical, organic compound and heavy metals analyses are conducted at the Company’s central laboratory located in the San Fernando Waste Water Treatment Plant, while all the microbiological analyses take place at the Villahermosa Water Treatment Plant center.

Sewage Operations Revenues from Sewage Operations For the six months ended June 30, 2014 and the years ended December 31, 2013, 2012 and 2011, gross revenues generated from sewage services totaled Ps.238,592 million, Ps.410,143 million, Ps.357,313 million and Ps.352,136

194 million, respectively. As of June 30, 2014, EPM’s revenues from sewage services represented 48.1% of EPM’s total water, sewage and waste management services and 3.4% of EPM’s total revenues. As of December 31, 2013, EPM’s revenues from sewage services represented 51.0% of EPM’s total water and sewage revenues and 3.2% of EPM’s total revenues. Sewage System EPM is responsible for the collection and removal of sewage through its sewage systems and for its subsequent disposal, with or without prior treatment. EPM conducts its sewage activities in the same areas in which it conducts its water and distribution services. In the urban regions of the Metropolitan Area, EPM has a coverage ratio of 100.0%. As of December 31, 2013, EPM collected 100.0% of all of the technically collectible sewage in the cities in which it operates. EPM’s sewage system is designed for the collection, transport, removal and disposal of sewage. EPM’s sewage system infrastructure is composed of the pipes, lines and other structures which form part of water treatment systems and systems dedicated to the collection, disposal and maintenance of residual water, rainwater and combined water. The system functions by collecting water from secondary networks (combined water, residual water and rainwater), transporting it to collectors and interceptors, and finally delivering the water to EPM’s waste water treatment plants. As of June 30, 2014, EPM was responsible for the operation and maintenance of 4,469 km of sewer lines in the Metropolitan Area, composed of 357 km of conduction for the transportation of waste water and 4,112 km for the collection of mixed water, while in the cities it services through its Regional Water Subsidiaries, EPM was responsible for the operation and maintenance of 513.82 km of sewer lines. EPM’s sewage system comprises a number of systems composed primarily of clay pipes and, more recently, concrete pipes. EPM’s sewage system is designed to operate by gravitational flow, although pumping stations are used to ensure the entry of sewage to the treatment facilities. Industrial sewage can vary in nature and concentration of contaminants. EPM fully complies with the standards for disposal of industrial effluents set forth by the Ministry of Social Protection. However, in addition to these standards, EPM has opted to subject its treatment processes to EPA standards for the handling and analysis of bio solids. Industrial effluents interfere with the natural biological process at sewage treatment facilities and must be treated specially. Colombian law requires industries that produce industrial sewage to pre-treat the sewage so that indicators including pH, temperature, sediments, grease, oil and metals are reduced to environmentally sound levels prior to release into EPM’s sewer lines. To ensure compliance with the law, EPM periodically analyzes sewage produced by each industrial customer to verify whether the customer has complied with the requirements of the decree. Although EPM may take certain actions which include imposing penalties or cutting a customer’s connection in the event that the customer continues to not be in compliance, EPM is not responsible for, and is not obligated to, ensure compliance of its customers with law requirements, a role which is exercised by the environmental authorities in the regions served by EPM. Effluents from EPM’s sewage treatment facilities must comply with discharge standards under both national and regional regulations. From 2011 to 2013 80.7% of the pollutants in San Fernando Waste Water Treatment Plant effluents were removed. Moreover, to prevent the deterioration of the sewer lines due to an increasing volume of sewage collected from larger populations and increased commercial and industrial development, EPM continually improves the capacity and maintenance of its sewer lines to prevent future obstructions caused by system overloads. The procedure for new sewage connections is made on substantially the same basis as connections to water lines in the sense that customers (residential or non-residential) assume the entire cost of connection to the sewage network. However, EPM sometimes finances these costs for customers. The following table sets forth projected new sewage connections for the periods indicated.

Projected New Sewage Connections 2014 2015 2016 2017 2018 (In thousands) Metropolitan Area ...... 1,026 1,072 1,107 1,131 1,150

195 Sewage Treatment and Disposal For the year ended December 31, 2013, EPM collected 100.0% of all possible sewage collection in the areas where it operates its sewage services. The 23.8% of the total waste water invoiced was treated at San Fernando Waste Water Treatment Plant and discharged into the Medellín river in accordance with Colombian law. EPM’s sewage treatment facilities have a finite capacity. Flows in excess of this capacity are discharged directly, untreated, to the Medellín River. Sewage is treated to reduce its environmental impact in accordance with MVADT regulations, despite variations on flow and composition of the sewage arriving at treatment facilities. EPM’s sewage treatment procedures rely on physical separation processes and natural biological processes to break down organic matter and reduce the amount of harmful organisms and chemicals. The primary treatment process is the principal separation process for suspended solid material present in untreated sewage. The sewage is passed into sedimentation tanks. Solid matter that settles at the bottom of the tanks is removed as sludge and is then transferred to the sludge treatment process. The sewage remaining after this sedimentation process is given activated sludge treatment. The activated sludge treatment process, the principal method for secondary treatment of sewage used by EPM, relies on natural bacterial activity to break down the organic matter in sewage and, where required, to remove ammonia. In the activated sludge treatment process, the sewage from primary treatment is passed into aeration tanks that are continuously replenished with re-circulated activated sludge. The mixture in the tanks is agitated and aerated, enabling the micro-organisms in the activated sludge to digest organic material contained in the incoming sewage. The effluent and activated sludge mixture produced by this process flows over to the final sedimentation stage. EPM currently operates one sewage secondary treatment facility. The San Fernando Waste Water Treatment Plant is located in the City of Itagüí and has a treatment capacity of approximately 1.8 m3/sec. By the year 2016, EPM plans to open the Bello Plant with a secondary treatment capacity of 5.0 m3/sec, which is expected to be the largest treatment capacity in the country. Similarly, EPM plans to open a plant in Girardota for primary treatment with an estimated treatment capacity of 0.2 m3/sec and another primary treatment plant in Barbosa with a treatment capacity of 0.04 m3/sec. EPM has developed a system that captures methane gas produced by the treatment process in order to use it as fuel for the San Fernando Waste Water Treatment Plant. Currently, such methane gas provides 30.0% of the total energy demand of such treatment facility.

Sludge Disposal Sludge removed from the primary and secondary treatment processes typically contains water and a very small proportion of solids. EPM uses centrifuges to abstract the water from the sludge. From January 31, 2011 to December 31, 2013, EPM produced approximately 89,578 tons of bio solids wet basis, 62.17% of which was used for agricultural purposes, 6.51% in soil restoration, 13.77% in composting, 1.15% in forest and 16.4% for other uses. In addition, EPM is testing new technologies for the disposal of sludge as fertilizer in forest projects.

Maintenance Water pipes and mains for water services in high pressure areas are more susceptible to degradation and breakage than those in low pressure areas, while sewage water pipes and mains in areas of reduced inclination, since the sewage network relies on gravitational flow, are susceptible to more degradation and clogging than those in areas where inclination provides for strong current flow. To counteract these effects, EPM has a water pipe and main maintenance program intended to deal with anticipated fractures and clogs as well as ensure water quality.

Customers and Consumption As of June 30 of 2014, residential customers accounted for 92.2% of the total consumption of water in the Metropolitan Area, of which 76.9 % were customers with middle to low levels of income. During the same period, non-residential customers accounted for the remaining 7.8%, of which 86.5%, 9.5% and 2.4% were customers in the commercial, industry and governmental sector, respectively.

196 As of June 30 of 2014, EPM provided 113 million cubic meters of water to approximately 1,137,380 customers, through approximately 4,585 km of water pipes and mains. As of June 30, 2014, EPM provided sewage services to approximately 1,087,853 customers, through 4,983 km of sewer lines. For the five months ended May 31, 2014, EPM’s aggregate invoiced water amounted to approximately 80.6 million cubic meters, while sewage consumption was 80.7 million cubic meters of water. In the Metropolitan Area, average water consumption decreased to a level of 15.68 cubic meters of water per user per month, while sewage consumption averaged 16.08 cubic meters of water per user per month. Median income for water services amounted to Ps.1,626 per cubic meters, while the median income in the provision of the sewage service was Ps.1,890 per cubic meters.

Regional Water Subsidiaries In order to better serve its customers, EPM’s Water BU has made significant investments in various subsidiaries that provide focused water, sewage and waste management services to different cities outside the Metropolitan Area. Although these investments have not materially increased the profitability of EPM’s water businesses, they have allowed EPM to expand its role as a leading Colombian water service provider and partner provider, with promising potential for growth in the near future. EPM’s Water Regional Subsidiaries are:

EPM’s Percentage of Entity Ownership Empresa de Aguas del Oriente Antioqueño S.A. E.S.P...... 56.00% Aguas Nacionales EPM S.A. E.S.P. (f/k/a EPM Bogotá Aguas) ...... 99.96% Aguas de Urabá S.A. E.S.P...... 59.27% Regional de Occidente S.A. E.S.P...... 59.98% Empresas Públicas de Oriente Antioqueño S.A E.S.P...... 56.00% Aguas de Urabá S.A. E.S.P...... 84.00% Regional de Occidente S.A. E.S.P...... 99.99%

Market Share According to the SSPD, in terms of revenues, as of December 31, 2013, EPM was the second largest water and sewage service provider in Colombia as measured by customers served. EPM directly and through its subsidiaries provides water, sewage and waste management services to a broad range of residential, commercial, industrial and governmental customers.

Competition EPM does not face competition in the cities in which it provides water, sewage and waste management services due to the services being a natural monopoly. However, governments in these cities may decide to compete with EPM by terminating the agreements entered into with EPM and providing these services directly to the local population. EPM faces a limited level of competition in the market of large customers. This is due to the increasing trend of self-sufficiency by industrial customers who use their own wells for water. In light of this trend, EPM now offers large self-supplying customers the option of leasing EPM’s private treatment facilities, operating them and providing water services.

Tariffs EPM divides tariffs into two categories: residential and non-residential. The residential category is divided into six socioeconomic stratums. Each category and class of customer pays tariffs according to its level of income, categorized in six different income strata for residential users (stratum 1 through stratum 6) and in three groups for non-residential users (commercial, industrial and official). The CRA has adopted a ‘‘regulated liberty’’ tariff regime in which prices are determined by the applicable local pricing body. The current prices in effect adopted by EPM were approved pursuant to CRA regulations in December of 2005 and modified in June 2007.

197 EPM’s water and sewage service tariffs include a fixed charge as well as a variable charge based on consumption. The fixed charge reflects the costs incurred by EPM in ensuring the uninterrupted provision of services, including administrative costs, adjusted by efficiency calculations resulting from a DEA analysis. Consumption based charges reflect the costs associated with the operation and maintenance of the system, as well as infrastructure investment, replacement and rehabilitation costs. This charge also takes into account environmental taxes which reflect the depletion of the water resource and are regulated by the MAVDT. For additional information on pricing methodologies, see ‘‘Industry — The Water, Sewage and Waste Management Services Industry in Colombia — Government Regulation.’’ The most recently implemented tariff regulations allow EPM to set aggressive tariffs that cover its operational costs. In addition, the regulations allow EPM to better tailor tariffs to each specific service, the diversity of each region and the situation of each customer. The CRA imposed a mandatory transition period related to the tariff methodology for water, sewage and waste management services from 2006 to June 2009. Tariffs for these services should be adjusted to gradually reach a medium according to the new methodology and, depending on the prior tariff for each service, EPM shall recover or return, as applicable and on a gradual basis, the deficiency or excess of the tariff charged to customers in comparison to the tariff medium. In accordance with CRA regulations, EPM indexes its prices when inflation levels rise above 3.0%. EPM increased tariffs for water, sewage and waste management services by 3.4% in 2007, 9.4% in 2008, 4.6% in 2009, 3.042% in August 2010, 3.2326% in June 2011, 3.1131% in May 2012 and 3.6% in February 2014 as a result of IPC variation. The sum of the price per cubic meter for both water and sewage has remained relatively stable over the years without taking into account the increases from IPC variation. The price per cubic meter of sewage is higher than that of water services. This is due to the cost of projected investments in the treatment of the Medellín River. Although EPM must set its tariffs according to CRA methodology as a result of its participation in the Regulated Market, its board of directors may intervene in EPM’s tariff adjustment by, for example, preventing the application of the IPC adjustment, as long as the financial sustainability of the business is not jeopardized. In 2001 and 2002 EPM did not increase tariffs, but EPM has indexed them since 2003. EPM’s sewage service tariff policy grants discounts to commercial and industrial customers that use at least 15,000 m3/month, based on density and economies of scale. This special tariff consists of a reduction applied to the variable cost component of the tariff, subject to a discount based on predefined amounts of consumption. For consumption between 0 and 15,000 m3/month, the cost component of the tariff is charged in full. For consumption between 15,000 to 30,000 m3/month, 90.0% of the cost component is applied. For consumption between 30,001 to 50,000 m3/month, 80.0% of the cost component is applied. For consumption between 50,001 to 100,000 m3/month, 70.0% of the cost component is applied. For consumption between 100,001 m3/month to 200,000 m3/month, 60% of the cost component is applied, and for consumption of more than 200,000 m3/month, only 40.0% of the cost component is applied. Retributive charges resulting from environmental taxes or fees are not subject to discounts.

Subsidies EPM follows each city’s subsidy policy for low-income customers, subject to the limits set forth in the applicable LSPD regulations. Each tariff program incorporates regional cross-subsidies, taking into account the customers’ income strata. Tariffs paid by high-income customers are higher than EPM’s costs of providing the water service. EPM uses the excess tariff billed to high-income customers, together with the city contributions, to compensate for the lower tariffs paid by low-income customers. Similarly, tariffs for non-residential customers (commercial and industrial strata) are established at levels that subsidize low-income customers. Under current regulation, EPM provides subsidies to residential customers in income strata 1 through 3. Income stratum 4 customers and governmental entities do not contribute to these subsidies, while contributions in the form of higher tariffs from strata 5 and 6 customers are grouped with city contributions to pay for subsidies given to the lower income customers.

198 Billing and Payment Billing and payment for EPM’s water, sewage and waste management services is uniform across all of EPM’s customer categories. Both water and sewage billing are based on water usage determined by monthly water meter readings. EPM outsources its bill delivery and meter reading functions to outside contractors. EPM considers payments with delays of more than seven months to be of difficult recovery (difícil cobro), after which EPM establishes an administrative accounting allowance to cover its exposure to the outstanding debt. Since December 1987, EPM monitors water meter readings through hand-held computers and transmitters. The hand-held computers track water consumption usage at each metered location and prepare bills based on meter readings. EPM outsources this reading system to third-party contractors that employ and train their own meter readers under EPM’s supervision.

Capital Expenditures In order to improve and maintain EPM’s position as a leading provider of water, sewage and waste management services, in the last several years EPM has designed and/or implemented several projects related to its infrastructure, operations, and the environment. The following is a sample of some of the most significant initiatives which have been recently completed or are currently under development:

Water Plans EPM is making significant investments to improve the infrastructure of its water delivery system. EPM plans to invest in modernizing and updating the water infrastructure by adding kilometers of water pipes and mains to the network as well as adding reinforcement rings throughout the delivery system. Ultimately, EPM would like to reduce the rate of damage throughout the system and its related electromechanical equipment in order to increase delivery efficiency. Further, from an environmental standpoint, EPM is focused on the efficient use of water, including management of unaccounted water in EPM’s technical and commercial segments, as well as public educational campaigns related to responsible water use.

Water Replacement Plan EPM intends to replace a large part of its water infrastructure in order to maintain the system’s operating capacity and prevent future damage. EPM invested nearly Ps.149,526 million between 2011-2013 in an effort to replace the infrastructure in poor condition. EPM has defined specific criteria to be used during the analytical evaluation process, including the system’s current state, useful life, damage history, materials, corrosion and the obsolescence of certain materials. Additionally, the Water Replacement Plan will take into consideration the following factors: (a) remaining useful technical life (equipments and networks), (b) increases in faults and ruptures in networks, (c) increases in operation and maintenance costs, (d) increases in unaccounted water, and (e) materials vulnerable to corrosion. Overall, the Water Replacement Plan will bring significant changes to EPM’s primary and secondary networks and electromechanical systems including its pumping stations, electronic equipment, water treatment equipment and some concrete structures.

Water Modernization Plan EPM’s Water Modernization Plan addresses the growth and expansion of the system, as well as the improvement of the service, in compliance with regulations governing the provision of the service. The Plan contemplates the implementation of new technology in order to increase the capacity of EPM’s water networks and electromechanical equipment in order to improve operational efficiency, optimize costs and raise service continuity and coverage rates. Within the primary water distribution networks, the Plan is focused on implementing multiple water supplies for water storage tanks, allowing water storage tanks to draw water from two or more treatment plants. Overall, EPM expects to invest nearly Ps.224,869 million between 2011-2013.

199 San Fernando Waste Water Treatment Plant The San Fernando Waste Water Treatment Plant, authorized to operate pursuant to applicable law, is a secondary treatment plant with a current treatment capacity of 1.8 m3/sec. The plant receives and treats waste water from cities in the southern part of the Aburrá Valley: Itagüi, Envigado, Sabaneta, La Estrella, part of Medellín and, in the future, Caldas. Between 2010-2013, EPM plans to invest nearly Ps.24,187 million in order to optimize and modernize the equipment used in the treatment plant.

Bello Waste water Treatment Plant The Bello Plant, is part of the group of projects for the sanitation of the Medellín river. The Bello Plant will be located in the Bello Municipality, in the northern part of the Metropolitan area of Aburrá Valley, in a parcel of 28.99 hectares. The Bello Plant has two components. One component for the collection and transportation of waste water, which includes a pipeline of 2.4 meters of diameter named Interceptor Norte, with its corresponding joints and collector branches. The purpose of this component is to transport waste water from the Medellín river’s discharge point located in the neighborhood of Moravia to the Bello Plant. The second component is the treatment plant for water and bio solids. We expect that the Bello Plant begins operations by September 2015. The Bello Plant has an estimated cost of U.S.$581.5 million and we expect to finance such project with debt under a U.S.$450 million loan facility entered into with the IADB dated March 25, 2009 and cash generated by the Bello Plant. As of June 30, 2014, 25% of the Bello Plant had been completed and 24.82% of the funds required for the project had been used.

Sanitation and Discharge Management Plan EPM’s sanitation and discharge management plan was approved on February 2, 2006. The Plan is comprised of projects, programs, activities and investments designed to improve EPM’s sanitation and discharge treatment services, including the collection, transport and disposal of the rainwater and residual water which runs through EPM’s sewer system. The Plan is focused on the development of projects with three key areas: (a) sanitation of catchment basins, (b) the building of water interceptors and (c) the treatment of waste water. The Plan’s ultimate goal is the removal of 160 tons per day of DBO from the Medellín River and to raise the level of dissolved oxygen to a minimum level of 5 milligrams per liter by the year 2014. EPM began implementing the Plan in 2009. Projects planned under the plan between 2011-2013 are currently valued at nearly Ps.231,731 million, using prices as of June 2010. Currently, the Plan contemplates the construction of 130.2 km of water networks in basins.

Waste Management Services In 2013, EPM entered the market of collection of solid wastes with the acquisition of a 99.9% equity interest in EMVARIAS, one of the leading companies in the waste collection business in Colombia. EMVARIAS was incorporated on September 11, 1964 by the Medellín City Council. EMVARIAS existed as a government-owned company until the City of Medellín changed its corporate regime in 2013 and sold it to EPM. EMVARIAS main corporate purpose is the waste collection and management of solid wastes. As of December 31, 2013, EMVARIAS had 707,774 customers distributed as shown in the graph below. The average rate for waste collection services in the City of Medellín (which is part of Stratum 4) was Ps.13,682.

200 6%1% 4% 8% Stratum 1 Stratum 2 8% Stratum 3 Stratum 4 11% Stratum 5 32% Stratum 6 Commercial 30% Industrial

EMVARIAS provides services in the City of Medellín and in San Antonio de Prado, Altavista, Santa Elena, San Cristóbal and Palmitas. To provide waste collection services, EMVARIAS owns a fleet of 116 double trucks and 24 single trucks and employs 232 drivers and 404 associates. For residential regions, EMVARIAS provides waste collection services with a frequency of two times a day, and such frequency range between three and 21 collections per day for commercial and industrial regions. Each day EMVARIAS collects and transports 1,800 tons of waste. For the year ended December 31, 2013, EMVARIAS collected approximately 564,279 tons. In addition to the waste collection services, EMVARIAS provides cleaning services for roads and public spaces. To provide waste collection services, EMVARIAS owns a fleet of seven sweepers and employs 836 associates. For residential regions, EMVARIAS provides cleaning services with a frequency of two times a day, and such frequency range between six and 21 times per day for commercial and industrial regions. Each month EMVARIAS sweeps 106,626 km. For the final disposition of the solid wastes, EMVARIAS uses a landfill located 57 km to the north of Medellín called La Pradera. Since the beginning of 2014 EPM has been working on the implementation of the ‘‘Linda Calle Siglo XXI’’ project, which involves the investment of up to Ps.$180,000 million during the next eight years for the renewal of the fleet, the construction of an operations center and a plant for the treatment of leachate, among others.

Waste water management business in Mexico EPM currently undertakes the following activities in Mexico pursuant to applicable Mexican regulations: abstraction, purification, distribution and supply of water (excluding irrigation), and development of urbanization works, including the construction of transport lines and distribution networks, drainages, water purification and treatment plants and drilling wells.

TICSA In 2013, EPM acquired 80% of TICSA’s capital stock by way of a capital contribution by EPM’s subsidiary, EPM Capital Mexico. TICSA, incorporated in Mexico in 1980 with the primary purpose of developing and promoting technology, is a holding company that through its subsidiaries, designs, constructs, commissions and operates water treatment plants in Mexico. TICSA currently has 14 subsidiaries in Mexico, most of which are treatment plants incorporated as special purpose vehicles (SPVs). As of December 31, 2013, TICSA had a total of 393 employees. TICSA has designed, built and commissioned over 200 waste water plants in Mexico and abroad, for clients such as Grupo Alfa, Kimberly Clark, Coca Cola, Hershey’s, PEMEX, Grupo Modelo, Tequila Herradura Group Durango, the City of Pachuca, the Municipality of Morelia, the City of Colima, and Arancia Corn Products, among others.

201 Infrastructure: Waste Water Treatment Plants The following table sets forth the TICSA’s waste water treatment plants:

Contract PTAR Company Name Design Data Municipality Termination Years Status Morelia (Atapaneo) Aquasol Morelia, S.A. de C.V. 1.200 Morelia, January 2025 12 Operational Michoacán Morelia II Aquasol Morelia, S.A. de C.V. 0,210 Morelia, January 2025 12 Operational (Itzicuaros) Michoacán Colima – Villa de Ecosistema de Colima, S.A. de C.V. 1,200 Colima September 28 Operational Alvarez 2041 Cd. Lerdo Ecosistema de Lerdo, S.A. de C.V. 0,200 Lerdo September 19 Operational 2032 Tierra Negra (Tam) DH TAM, S.A. de C.V. 1,500 Tampico December 18 Operational 2031 Morelos (Tam) DH TAM, S.A. de C.V. 0,300 Tampico December 18 Operational 2031 Tecomán Sistema de Agua Tecomán, S.A. de 0,250 Colima July 2030 17 Operational C.V. Uruapan Ecosistema de Uruapan, S.A. de C.V. 0,300 Uruapan, December 14 Operational Michoacán 2027 Torreón Ecosistema de Torrón, S.A. de C.V. 1,900 Torreón January 2022 9 Operational Acapantzingo Ecosistema de Morelos, S.A. de C.V. 0,750 Cuemavaca March 2030 17 Operational Celaya Ecosistema de Celaya, S.A. de C.V. 0,750 Celaya March 2031 18 Operational Paso Limón Ecosistema de Tuxtla, S.A. de C.V. 0,800 Tuxtla December 19 Under 2032 construction Tuchtlan Ecosistema de Tuxtla, S.A. de C.V. 0,320 Tuxtla December 19 Under 2032 construction Pachuca Ecosistema de Pachuca, S.A. de C.V. 0,500 Pachuca December 19 Project 2032

Customers TICSA primarily serves customers in the treatment plants building business, including breweries, textiles, dairy, bottling machines, municipal water treatment, cellulose and paper, chemical, petrochemical, pharmaceutical and distilleries. Schemes of operation with the municipalities To operate with the municipalities, the relevant special purpose entity and the decentralized municipal entity responsible for water management in the respective municipality enter into a ‘‘Service Contract’’ for the treatment of waste water, which includes operation, preservation and maintenance activities, generally for periods ranging from 20 to 30 years. The scheme includes several types of trusts that guarantee payment of the services rendered and the return on investment. If the decentralized municipal entity does not have funds to pay, an ‘‘Irrevocable Revolving Contingent Credit Line’’ guarantees payments to the special purpose entity and then collects from the respective agency. The tariff comprises three elements: (i) a fee that compensates the capital at risk and the credit necessary to ensure the construction of the PTAR, (ii) a fee that pays total fixed costs, previously agreed and based on the bid winning the public tender, and (iii) a fee that pays variable costs per treated cubic meter. EPM’s Participation in the Telecommunications Business Overview EPM participates in the telecommunications sector through its non-controlling interest in UNE, a telecommunications company that provides Local Telephone services, Long-Distance services, Value-Added Services, carrier and interconnection services and pay television services, directly or through its subsidiaries. As of December 31, 2013, as measured by the MTIC, UNE was the third largest player in the information and communications technology industry in Colombia in terms of revenues, the second largest dedicated access internet services provider in terms of subscribers, the largest International Long-Distance telephone services provider in terms of minutes used, the second largest Long-Distance telephone services provider in terms of minutes used, the second largest Long-Distance telephone services provider in terms of revenues, and the largest Local Telephone services provider in terms of lines in service and revenues. In addition, according to ANTV, UNE was the third largest subscription TV services provider in terms of revenues and the second largest in terms of subscribers as of December 31, 2013.

202 In 2002, EPM entered the mobile telecommunications market through a joint venture with Empresa de Telecomunicaciones de Bogotá S.A. E.S.P. (‘‘ETB’’), which resulted in the formation of Colombia Móvil S.A. E.S.P. (‘‘Colombia Móvil’’). Prior to the UNE-Millicom Merger, (i) EPM had a 100% equity interest in UNE and operated UNE and its subsidiaries as an independent BU, and (ii) UNE owned 24.99%, ETB owned 24.99% and Millicom indirectly owned 50% plus one share of the capital stock of Colombia Móvil, one of nine mobile telecommunications companies operating in Colombia. Following the UNE-Millicom Merger and the transfer of EPM’s control over the business affairs of UNE to Millicom (which is not part of the EPM group), the telecommunications business is now operated independently from EPM. Beginning on August 1, 2014, EPM ceased consolidating the assets, liabilities and results of operations of UNE with EPM’s assets, liabilities and results of operations. In future periods, EPM expects to record its investment in UNE under the equity method. See ‘‘Summary—Recent Developments—UNE-Millicom Merger.’’ For the years ended December 31, 2013, 2012 and 2011 and for the six months ended June 30, 2014 and 2013, UNE’s revenues (after intercompany eliminations) were Ps.2,474,120 million, Ps.2,303,346 million, Ps.2,172,140 million, Ps.1,354,654 million and Ps.1,182,260 million, respectively, representing 19.1%, 18.4%, 18.7%, 19.4% and 18.6%, respectively, of EPM’s consolidated revenues. For the years ended December 31, 2013, 2012 and 2011 and for the six months ended June 30, 2014 and 2013, UNE’s cost of sales (after intercompany eliminations) were Ps.2,105,311 million, Ps.2,139,099 million, Ps.1,820,010 million, Ps.1,146,339 million and Ps.1,009,599 million, respectively, representing 23.2%, 24.3%, 23.1%, 23.2% and 23.0%, respectively, of EPM’s consolidated cost of sales. For the years ended December 31, 2013, 2012 and 2011 and for the six months ended June 30, 2014 and 2013, UNE’s net income (after intercompany eliminations) was Ps.27,496 million, Ps.-196,870 million, Ps.-63,215 million, Ps.22,531 million and Ps.-118 million, respectively, representing 1.7%, -12.4%, -4.2%, 2.7% and 0.2%, respectively, of EPM’s consolidated net income. As of June 30, 2014, UNE’s total assets (after intercompany eliminations) were Ps.4,677,208 million, representing 12.3% of EPM’s consolidated total assets. UNE did not distribute dividends in 2012 and only distributed dividends in 2013 as a result of the UNE-Millicom Merger.

Operating Data The following table presents summary operating data for the former Telecommunications BU for the periods indicated: As of and for the Six Months Ended June 30, As of and for the Year Ended December 31, 2014 2013 2012 2011 Lines in service* ...... 1,941,030 1,955,194 1,909,191 2,024,753 Outgoing International Long-Distance minutes...... 15,830,221 36,106,397 42,806,917 52,858,288 Incoming International Long-Distance minutes...... 589,558,553 1,473,249,240 1,695,919,954 2,010,825,078 Domestic Long-Distance minutes ...... 157,300,718 309,884,748 312,089,829 313,870,272 Internet, broadband access and other Value- Added Services customers* ...... 1,340,575 1,310,803 1,164,150 1,014,837 Mobile broadband* ...... 347,067 272,594 161,597 118,749 Television subscribers* ...... 1,032,293 1,061,995 1,071,937 1,071,177 IPTV services customers*...... 171,224 173,845 174,326 164,143 Local Telephone services churn rates (monthly average) ...... 1.50 1.37 1.79 1.13 Television services churn rates (monthly average) ...... 2.01 2.13 2.11 1.98 Broadband services churn rates (monthly average) ...... 1.87 1.99 1.95 1.46 Revenues ...... Ps.1,376,637 Ps.2,524,463 Ps.2,346,916 Ps.2,109,702

* Includes customers of affiliates.

203 Operations UNE’s Services UNE’s services include Local Telephone and Long-Distance services, Value-Added Services (including internet services and broadband access), mobile services, interconnection, Carrier Services, television services, professional services, lease and sale of equipment and providing yellow and white pages directories to subscribers. Currently UNE has presence in 767 of 1,123 municipalities (i.e. 68.3%), which UNE believes gives it a competitive advantage in some of the most important markets of Colombia (Antioquia, Santander, Bolívar, Caldas, Quindío and Risaralda). UNE’s strategy is also focused on attending other important markets such as Bogotá, Barranquilla and Cali. UNE serves digital territories (territorios digitales), which is a governmental plan to promote social and economic development through the implementation of information technology, in Quindío, Atlántico, Boyacá, Bolívar, Magdalena, Huila, Meta, Tolima, Guajira, Cauca, Nariño, Antioquia, Amazonas, Caquetá, Guaviare, Putumayo, Vaupés, Vichada, Chocó, Guainía, Cundinamarca and Norte de Santander.

Local Telephone Services Local Telephone services consist of carrying calls that originate and terminate within the same locality. UNE provides additional services, including, public telephone services, calling card services and other supplemental services such as voice mail, call waiting, call forwarding, conferencing, speed dial, caller ID and call alerts, among others. UNE also provides public telephone services, which include the installation and operation of public phones. UNE offers its Local Telephone services to the residential and corporate sectors, including to SMEs. UNE offers its customers a wide array of customized service plans. In the corporate sector, UNE offers traditional telephone services, BRI, virtual PBX, DID, PRI, dedicated E1, Intelligent Network, ToIP, SIP connections, virtual IP, and unified communications (administered voice). UNE provides its Local Telephone services for either a consumption based fee or a flat fee for limited or an unlimited number of minutes. As of June 30, 2014, UNE’s average installation time for landlines was 2.6 days, which represents a significant improvement in comparison to previous years. For each 100 lines in service EPM recorded 1.6 malfunctioning lines per month and UNE’s average repair time was 33.9 hours. For the six months ended June 30, 2014, UNE’s consolidated revenues from these services totaled Ps.352,187 million and represented 25.93% of UNE’s consolidated revenues. Those revenues derive from the fees UNE collects from its subscribers, which fees include connection and consumption charges.

Long-Distance Telephone Services

Domestic Long-Distance Telephone Services UNE entered the Domestic Long-Distance market through its acquisition of OSI in August 2007. Domestic Long-Distance services include all calls that originate in UNE’s network in any location in Colombia and terminate in a different Department in Colombia, either within UNE’s own network or in a third-party network. These services also include calls that originate in domestic third-party networks and that are carried through UNE’s network to any termination point in Colombia. UNE provides these services at the national level under the General Operating License granted to UNE by MTIC on December 7, 2010. See ‘‘— Telecommunications BU — Licenses and Certain Contracts — Licenses’’ for more information. According to MTIC, UNE’s Domestic Long-Distance traffic was 296 million minutes in 2013, compared to 303 million minutes in 2012, representing a decrease of 0.7%. This decrease was primarily due to the increasing penetration of mobile services in Colombia and the implementation of new technologies that allow operators to offer voice services at reduced costs. In order to maintain UNE’s customer base, UNE offers a wide array of Long-Distance calling service plans that reduce the effective rates paid by its customers based on volume, time of use and consumption habits, among other factors. UNE provides Domestic Long-Distance services through its national carrier network, mainly using fiber optic and radio links.

International Long-Distance Services UNE entered the International Long-Distance market through its acquisition of OSI in August 2007. International Long-Distance services include all calls that originate in UNE’s network at any location in Colombia

204 and terminate in a third-party network abroad or vice versa. UNE provides these services under a General Operating License granted to UNE on December 7, 2010 by the MTIC. See ‘‘— Telecommunications BU — Licenses and Certain Contracts — Licenses.’’ UNE provides its International Long-Distance telephone services under the trade name ‘‘UNE.’’ UNE is one of the leading International Long-Distance service providers in Colombia. UNE’s incoming International Long-Distance traffic totaled 1,483 million minutes for the year ended December 31, 2013, which represented a decrease of 12.4% from the total minutes for the year ended December 31, 2012. This decrease was primarily driven by the migration to mobile telecommunication services and shifting usage patterns of customers and the presence of global telecommunication providers of IP or internet voice services. Notwithstanding this situation, UNE maintains itself as the Colombian market leader for 2013, accounting for 36.9% of all incoming International Long-Distance minutes, followed by Telefónica and ETB with 24.44% and 9.6%, respectively. In terms of revenues from incoming International Long-Distance traffic, UNE generated Ps.55,456 million for the year ended December 31, 2013 and accounted for approximately 27.43% of the total generated revenues from incoming International Long-Distance services in Colombia. According to the MTIC, UNE’s main competitors in this market during 2013 were Telefónica and Infracel with market shares of 25.21% and 28.92%, respectively. UNE also faced and continues to face competition from providers of VoIP technologies. According to UNE’s calculations, for the six months ended June 30, 2014, UNE had incoming International Long-Distance traffic totaling 590 million minutes. For the six months ended June 30, 2014, UNE’s unconsolidated revenues from incoming International Long-Distance services were Ps.20,763. For the year ended December 31, 2013, UNE had 35.8 million outgoing International Long-Distance minutes, accounting for 11% of the outgoing Long-Distance minutes in Colombia and represented a decrease of 16.42% from the minute totals for the year ended December 31, 2012. UNE’s main competitors were Telefónica and Infracel with 27.16% and 20% of the outgoing International Long-Distance minutes in Colombia, respectively. In relation to revenues from outgoing International Long-Distance traffic, UNE generated revenues of Ps.19,273 million in 2013. According to reports from the MTIC, UNE’s main competitors in this market in 2013 were Telefónica and Infracel which accounted for 30.47% and 24.81% of the revenues generated from outgoing International Long-Distance minutes in Colombia. For the same period, UNE accounted 10.32% of generated revenues from outgoing International Long-Distance services in Colombia. Providers of VoIP technologies also competed and continue to compete in this market. According to UNE’s calculations, for the six months ended June 30, 2014, UNE had outgoing International Long-Distance traffic totaling 15.8 million minutes. For the six months ended June 30, 2014, UNE unconsolidated revenues from outgoing International Long-Distance were Ps.10,810 million. Provision of International Services Through Subsidiaries In addition, UNE provides International Long-Distance services indirectly through (i) OSI in Colombia to customers located abroad, (ii) CTC in the United States and Canada and (iii) OCL in Spain. International Long-Distance services are also expected to be provided in the United Kingdom in the near future. International Long-Distance services provided abroad are targeted to the Latin American community living in those countries. The aggregate International Long-Distance traffic of these three subsidiaries totaled 3,884 million of minutes, 3,572 million of minutes and 1,846 million of minutes for the years ended December 31, 2012 and 2013 and for the six months ended June 30, 2014, respectively. Internet, Broadband Access and other Value-Added Services UNE provides internet, broadband access and other Value-Added Services directly and indirectly through Edatel and ETP. UNE provides Value-Added Services at the national level. UNE’s main sources of revenue in this market are xDSL-based broadband internet access services. As of March, 2014 UNE’s broadband access customers totaled 1,249,293 of which 595,775 or 56.3% were xDSL customers and 582,958 were cable customers, according to SIUST. Since late 2006, dial-up access has decreased and usage of broadband access has increased. This trend is due to an increased appetite for high speed connections, which have consolidated UNE as Colombian market leader for broadband access according to SIUST. UNE’s revenues from internet services derive from fees UNE collects from its governmental, corporate and household customers. UNE’s revenues from the provision of internet services have rapidly grown due to increasing market penetration as a consequence of decreases in service rates, the sophistication of the telecommunications customers’ needs and higher availability of computer equipment in Colombia.

205 4G Mobile Internet UNE was the first carrier to deploy a 4G LTE commercial network in Latin America. Cumulative revenues in 2013 for this service reached Ps.45,163 million. UNE continued to offer its customers the 3G mobile Internet service in cities with no coverage of the 4G LTE network, providing customers multiple connectivity options. Likewise, UNE consolidated a mobile Internet offer with plans controlled by discharge capacity from 2GB to 15GB and, in June 2013, launched its new Internet and wireless phone service plans in Colombia, an easy-to-install solution –the first of its kind in Colombia – that works on a 4G LTE network. In 2013, the deployment of the 4G network in 60 municipalities of the country and the commercial operation in 41 municipalities, with 960 base stations installed throughout the country was achieved.

Carrier Services Carrier and connectivity services include the transmission of traffic through UNE’s networks on behalf of third parties. UNE provides its Carrier Services under a General Operating License that UNE obtained from the MTIC on December 7, 2010. UNE also provides Carrier Services through its subsidiaries Edatel, ETP, CTC, OCL and OSI. UNE’s revenues from carrier and connectivity services are derived from access charges. For the six months ended June 30, 2014, carrier and connectivity services totaled Ps.18,226 million and represented 1.6% of UNE’s unconsolidated operating revenues.

Interconnection Services UNE provides interconnection services to other telecommunications operators on a mandatory-regulated basis and on a commercial-privately agreed basis. Interconnection charges applicable to mandatory interconnections are subject to limitations set forth by the CRC. However, operators, including UNE, are free to negotiate interconnection charges that do not exceed those limits. UNE also offers interconnection services under commercial terms to foreign operators. UNE is not subject to pricing restrictions with respect to these services. See ‘‘Industry — Regulation of the Telecommunications Industry in Colombia.’’ UNE also provides interconnection services through its subsidiaries Edatel in Antioquia, and ETP in Risaralda and the City of Bogotá. As of June 30, 2014, UNE has entered into 82 interconnection agreements with each of the established telecommunications operators in Colombia which provides local phone, mobile and Long-Distance phone services. Since UNE was not able to reach an agreement as to the terms of interconnection to the networks of these operators, the CRC imposed an easement on UNE’s networks forcing interconnection at rates and technical, operational, economic and commercial conditions established by the CRC.

Television UNE provides pay television services to customers throughout Colombia. As part of its pay television services UNE is developing its own set of television channels, including ‘‘Canal UNE’’, which is an added feature to UNE’s services. UNE also offers IPTV services using IP technology, which allow customers to choose content on demand and to tailor the service according to their wants and needs. This interactive TV service includes innovative services such as the video store, the program guide, parental control, scheduling reminders, and favorite channels. UNE currently broadcasts HDTV channels (high definition television) as a part of its interactive TV service. UNE also provides television services through ETP and Edatel. UNE provides its television services under a concession with granted by the Colombian Government on December 20, 1999. See ‘‘— Licenses and Certain Contracts — Licenses.’’ This gives UNE a significant advantage over competitors that do not have a television concession, such as Colombia Telecomunicaciones and ETB. Operators and regulators have long debated whether IP-based television services are considered Value-Added Services or traditional television services. This debate has generated legal uncertainty that affects the operators that do not have a traditional television concession, thereby delaying their capital investments and limiting the entrance of potential competitors into the market. In addition, the infrastructure required to provide IP-based television services is costly and technically challenging. These problems do not necessarily affect UNE to the same extent, since UNE can provide traditional services based on its existing coaxial infrastructure.

206 Television services constitute an important element of UNE’s growth and revenue substitution strategy. UNE expects that the revenues generated from television services will grow substantially in the next five years. To realize this growth, UNE will continue to deploy its interactive TV service in seven additional service segments, including, among others, video on demand, HDTV and free content sponsored by leading consumer brands as an extension of the content-based business model. The following table shows UNE’s IPTV active customers as of June 30, 2014:

Total Active Cities IPTV Customers Antioquia ...... 118,307 Atlántico ...... 2,689 Bogotá D.C ...... 30,254 Bolivar ...... 12 Cesar...... 3,066 Córdoba ...... 7,570 Cundinamarca ...... 560 Caldas ...... 1,311 Risaralda ...... 3,310 Santander ...... 1,997 Sucre...... 2,148 Total ...... 171,224

Professional Services UNE provides tailor-made services to its corporate customers, also known as professional services, which allow companies to concentrate on their core business, while UNE takes care of most of their technological issues. These professional services include help desk solutions, BCP, Contact Center, management services and technology management and technology leasing, which are supported on the UNE experience and the integration of its portfolio with the services of other providers.

Lease and Sale of Equipment UNE leases physical spaces to other providers in order to house their equipment on UNE’s premises, typically accompanied by maintenance and custody services such as temperature control, electricity, monitoring, etc. This service is commonly known as ‘‘collocation.’’ UNE also sells telecommunications equipment such as computation equipment, telephone and caller ID devices, DSLAMs and Integrated Service Digital Network (Red Digital de Servicios Integrados or ‘‘ISDN’’) terminals, among others.

Yellow and White Pages Directories UNE provides yellow and white pages directory services to its subscribers pursuant to a joint venture with Publicar S.A. The yellow pages directory includes advertising from businesses and companies whereas the white pages directory lists telephone numbers for all telephone subscribers. UNE offers both a printed version (together with Publicar S.A.) and #113 operator information services (through Emtelco S.A. E.S.P. (‘‘Emtelco’’)). The printed directory is distributed to UNE’s Local Telephone services subscribers at no charge.

Service Packages UNE offers tailor-made packages in order to satisfy all the telecommunications needs of its customers. According to industry standards, UNE offers packages that include voice services (Local Telephone and Long-Distance services), internet and television services, commonly known as ‘‘Triple-Play,’’ and a variety of combinations thereof. UNE also has the ability to add mobile services to these packages, which are provided under a joint venture with Colombia Móvil.

Contents and Entertainment UNE has developed tools and applications that complement and add differential value to its portfolio of products and basic services. This is the case of Smart Play, TV UNE, UNE Más, and the UNE Store, which are meant to allow

207 business to deliver products to their users more tailored to their particular needs. On the other hand, Canal UNE has entered into important alliances with own massive local media to generate quality news contents, fitting for the cities.

Billing and Customer Service UNE collects consumption information of its customers and handles the invoicing process through OPEN Smarflex platforms Version 6, Version 7 OPEN Smarflex Version 7, Geneva, Elite, RBM and SAP. UNE has not experienced delays in billing, data loss or serious flaws that affect the Company’s income or the level of service. In recent years, UNE has made significant improvements in their times of care services for their clients. UNE’s average installation time for the services of its portfolio standard decreased from 3.6 days from December 31, 2011, to 1.71 days for the closure of the year 2013. Similarly, UNE’s average repair time for the services of its portfolio standard decreased from 26.29 hours as of December 31, 2011, to 16.21 hours to the close of the year 2013. These indicators have had the same declining trend for the three segments served by UNE: households, companies and corporate.

Competition and Market Share As of December 31, 2013, as measured by the MTIC, UNE was the second largest dedicated access internet services provider, the largest provider of Local Telephone services, the second largest Long-Distance telephone services provider in Colombia, and the largest International Long-Distance telephone services provider, in terms of revenues reported by market participants to the MTIC.

Local Telephone Service According to the SIUST, as of December 31, 2013, UNE was the largest Local Telephone service provider in Colombia in terms of both lines in service and revenues, with 1,615,363 lines in service, representing 22.6% of the total market.

Domestic Long-Distance For the year ended December 31, 2013, UNE’s domestic long-distance traffic totaled 296 million minutes, which represented a 17.8% share of the nationwide domestic long-distance market according to the SIUST. UNE’s main competitors in the national long-distance market are Telefónica and ETB, with 55.18% and 16.8%, respectively, of the market in terms of minute volume for the year ended December 31, 2013. In terms of revenue, UNE had a 18.6% market share with Ps.49,006 million, Telefónica had a 55.2% market share with Ps.145,456 million and ETB had a 16.8% market share with Ps.44,279 million. UNE also competes in this market with mobile services operators; however, the market share estimates for domestic long-distance services do not include the traffic carried through mobile networks. Since 2003 Domestic Long-Distance customers have been migrating to mobile services. Such migration has been primarily driven by lower rates offered by mobile telecommunications operators for calls within Colombia. Competitors also exists for this service in VoIP.

International Long-Distance According to new data from telecom market research firm TeleGeography, Skype’s international traffic volume continues to soar while International telephone traffic from fixed and mobile phones growth rates are well below the average posted over the past 20 years, and the benefits of traffic growth have largely been offset by steady price declines. UNE has evolved and strengthened its wholesale business around a world class traffic table and continuous improvement of the management processes, reaching an aggregated 35.0% increase in gross profit from 2012 to 2013. UNE and its subsidiaries incoming International Long-Distance traffic decreased 13.1% from 2012 to 2013. On the other hand, UNE’s outgoing international long-distance traffic decreased 15.7% from 2012 to 2013. In this context and facing increasing pressure from the newest operators of the Long-Distance telephony market, OTT apps and illegal practices in Colombia known as ‘‘bypass’’ or ‘‘callback’’ in which incoming international calls are carried over leased lines and then connected to the public switched telephone network in Colombia, thus avoiding settlement payments. UNE and its subsidiaries continue their effort to protect market share and improve financial performance of the wholesale business unit.

208 Internet According to the MTIC, as of December 31, 2013, UNE had a 26.0% share of the national market of internet services measured by subscribers, which makes UNE the second largest operator in the market, next to Telmex with a 31.8% market share, Telefónica with a 19.1% market share and ETB with a 11.9% market share. Together with the market shares of Edatel and ETP, UNE has a 29.0% share of Colombia’s internet services market. UNE’s broadband monthly average churn rate for 2013 was 2.0%.

Television As of December 31, 2013, UNE had a 23.0% share of the market for television services in terms of subscribers according to the CNTV. UNE’s main competitors in this market are Telmex and DirecTV.

Main Projects In 2013, the company defined the following strategic focuses: service, retention, loyalty, profitability and supply, which were leveraged to develop four programs and their respective projects, which resulted in significant achievements in terms of operation, satisfaction and customer experience and mobility. Effective Operation Program: The program was designed to have a more effective operation and deliver real-time answers to customers. Loyal Customer Program. The program seeks to ensure profitability through retention strategies, and optimize costs associated with the sales process. With the actions implemented over Ps.3,187 million in savings have been achieved, and income above Ps.16,000 million has been protected. Experience Management Program: comprising assurance, channel efficiency and billing processes efficiency programs, the program is meant to assure collection and recovery. Mobility Program: Comprising the 4G LTE Voice and Fixed offer program, the 4G LTE Network Deployment program, the Remote SIM management platform (OTA) program, the supply chain logistics program, the Online Channel program, and fraud control and revenue assurance projects. It is designed to achieve sales goals and profitability for the company. ARCA: The conceptual design of UNE’s new Data Center was initiated, in order to increase shareholder value through a complete and competitive offer for customers. UNE-Edatel and UNE-ETP synergies: These projects allowed UNE to further develop its relationship with its subsidiaries and to generate synergies in common processes among the companies.

209 RELATIONSHIP WITH THE MUNICIPAL GOVERNMENT

Medellín — Its Role as Owner of EPM Overview EPM is owned by the City of Medellín, Colombia’s second largest city located in the northwestern region of the country, in the Aburrá Valley, at approximately 1,479 meters above sea level. The City of Medellín occupies an area of 387 km2. According to DANE, the City of Medellín had a population of 2.4 million as of December 31, 2013, which represented approximately 5.31% of the total population of Colombia as of such date. The City of Medellín, and the other cities in the ‘‘Metropolitan Area, represented an estimated 13.1% of Colombia’s GDP in 2012. The City of Medellín is also the capital of the Department of Antioquia, one of the most populous of Colombia’s 32 Departments. According to the last official census (carried out in 2005), the Department of Antioquia had a population of 3.4 million (and according to the DANE, the number of inhabitants in 2013 was 3.8 million), which represented approximately 8.1% of the total population of Colombia as of such date. The City of Medellín’s legal framework is set forth in the Colombian constitution and in certain laws, decrees and city ordinances, including, among others, the Public Administration Statute (Law 489 of 1998), the Contracting Statute (Law 80 of 1993 and Law 1150 of 2007), the Indebtedness Statute (Decree 2681 of 1993), the Corporate Governance Statute for Securities Issuers in Medellín (Decree 2654 of 2006), the Budget Statute for Medellín for 2009 (Decree 1998 of 2008), and the Tax Statute for Medellín (Agreements 57 of 2003 and 67 of 2008). Average revenues generated by the City of Medellín have increased in the last five years. The City of Medellín generated annual average revenues of Ps.3,530,442 million during the period from 2008 to 2012. For the year ended December 31, 2012, the City of Medellín’s revenues totaled Ps.3,809,929 million, which represents a 1.4% decrease as compared to the previous year. Annual average tax revenues during the period from 2008 to 2012 were Ps.959,185 million, while tax revenues for the year ended December 31, 2012, were Ps.1,039,960 million, which represents a 5.1% decrease as compared to the previous year. The City of Medellín has successfully implemented policies for managing and controlling financial risks, including monitoring low leverage ratios (as of July 31, 2011, the City of Medellín’s leverage ratio was 3.0%), low debt service cost to revenues ratios and other debt management mechanisms such as a program to exchange debt for bonds in 2006. These programs have been an important factor in stabilizing debt servicing costs. The City of Medellín has a AAA domestic rating for sovereign debt from Fitch Rating de Colombia S.A. The contribution of the City of Medellín to the consolidated economy of Antioquia has increased 6.5% in the last nine years, during such period, the City of Medellín’s contribution to the consolidated economy of Antioquia increased from 48.2% in 2005 to 54.7% in 2012. In addition, between 2005 and 2012, Medelin contribution to the aggregate Colombian economy increased from 6.8% to 7.1%. In 2012, the City of Medellín’s GDP was 38% above the national Colombian GDP and 42 % above the regional Colombian GDP. Recently, the City of Medellín has improved its position in several rankings related to the ease of starting and operating businesses in different cities. In 2013, the Ranking of Latin-American cities for the Attraction of Investments of the University of El Rosario and the Chilean agency Business Intelligence placed the City of Medellín in the 13th position among 48 Latin American cities. For the year 2014, the same ranking placed the City of Medellín in the 10th position among 51 Latin American cities. According to such ranking, the City of Medellín’s position improved because of ‘‘its strengths on the economic performance, the location of multinational companies and on key aspects such as its urban comfort as its cultural offer, its urban facilities and its reasonable life’s cost.’’ Since 2004, the City of Medellín has made significant social welfare and infrastructure expenditures resulting in granting access to public utilities to 100.0% of the city’s population, a significant increase in the number of positions available for students at public schools, among others. In the 2008-2011 period, the City of Medellín spent the 86 % of its total budget in social welfare programs, which means that for every Ps.1, Ps.0.86 went to satisfy social needs, such as: • Investments in the City of Medellín’s public transportation system; • Implementation of social programs to reduce inequality which have resulted in a reduction of 6.7% in the GINI index, in the period from 2008 to 2013;

210 • Investments in education, such as the creation of the EPM Fund funded with proceeds from extraordinary surpluses of EPM, to finance scholarships and loans to students. The EPM Fund was constituted with Ps.300.000 million, plus additional Ps.14.000 million from the AMA alliance (Antioquia - Medellín). From 2008 to 2012 the EPM Funds has benefited a total of 26,807 young students; and • Improvements of public infrastructure, including investments in health, education, waste collection and cleaning services and facilities. From 2012 to 2013, 16.7 new kilometers of highways were built in the City of Medellín. The city also has a metro system (the only one in the country) capable of moving over 50,000 passengers per hour during rush hours with more than 555,000 passengers daily, two airports, one for domestic and one for international flights, which handle over 16,500 passengers per day, 100.0% access to electricity services, and 100.0% access to water services for all the population. The City of Medellín is governed by a Mayor (Alcalde) and a City Council (Concejo Municipal), which are both elected by popular vote every four years. The current Mayor and City Council’s term in office expires in December 2015. The labor market in the City of Medellín also has improved in the recent years. The increased number in labor opportunities combined with the economic improvements of the city have made possible a reduction in the rate of unemployment in the City of Medellín, which decreased from 12,4 % to 11,2 % between 2012 and 2013 in accordance with the private institutional alliance ‘‘Medellín Cómo Vamos’’. The City of Medellín has a rating of ‘‘Baa3’’ by Moody’s.

Net Income Distribution Policy Under Colombian law, the maximum amount of net income that a government-owned company may, or may be required to distribute is 80.0% of the previous year’s net income. Pursuant to EPM’s by-laws and upon approval by the COMPES, EPM is required to distribute to the City of Medellín, EPM’s sole owner, no more than 30.0% of EPM’s net income for the previous year. Under certain circumstances, however, EPM may be required to distribute to the City of Medellín additional amounts in excess of 30.0%. All distributions in excess of 30.0% of EPM’s net income are subject to prior approval from the Medellín City Council, which involves a process that requires, among other things, EPM’s certification that the distribution of additional amounts has no effect on the financial condition and sustainability of EPM’s businesses, including its ability to service its debt. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Distributions’’ for a detailed description of EPM’s distributions for the years ended December 31, 2011, 2012 and 2013 and approved distributions for subsequent years. The following table sets forth the detailed information regarding the distributions made by EPM to the City of Medellín:

Distributions Extraordinary from UNE – Ordinary Paid Paid Sub-Total Paid Net Percentage of Millicom Total Paid Distributions Distributions Distributions Income (7) Net Income Merger(11) Distributions (Ps. in millions, except %) 2003(1) ...... 140,000 — 140,000 264,470 53% 140,000 2004(2) ...... 169,294 156,974 326,268 536,631 61% 326,268 2005(2)(3) ...... 222,182 130,000 352,182 740,617 48% 352,182 2006(2)(5) ...... 254,415 186,117 440,532 848,051 52% 440,532 2007(2)(6) ...... 295,848 133,464 429,312 986,161 44% 429,312 2008(2)(9) ...... 333,327 337,500 670,827 1,111,092 60% 670,827 2009(2) ...... 399,519 187,500 587,019 1,331,728 44% 587,019 2010(2)(8) ...... 509,343 337,500 846,843 1,697,813 50% 846,843 2011(2)(9) ...... 437,346 360,154 797,500 1,457,821 55% 797,500 2012(2)(9) ...... 458,095 381,746 839,842 1,526,984 55% 839,842 2013(2)(9)(10)...... 526,122 438,435 964,557 1,753,740 55% 218,936 1,183,493

(1) As of this year onwards distributions are made after income tax provision. (2) Exceeds the 30.0% threshold.

211 (3) Extraordinary distributions were expressly approved by the Medellín City Council. (4) Extraordinary distributions totaling Ps.86,117 million and contributions to the ‘‘Escuelas de Medellín’’ program of Ps.100,000 million. (5) EPM’s net income on an unconsolidated basis for the previous year. (6) Extraordinary distributions totaling Ps.93,464 million and contributions to the ‘‘Escuelas de Medellín’’ program of Ps.40,000 million (7) Extraordinary contribution of Ps.150,000 to the scholarship program (8) Extraordinary distributions totaling Ps.187,500 million and contributions of Ps.150,000 million for special program of social investment in Medellín. (9) Extraordinary distributions totaling Ps.187,500 million and contributions of Ps.150,000 million for special program of social investment in Medellín. (10) For 2011 and subsequent years, the Medellín City Council approved additional extraordinary distributions for an amount not exceeding 25.0% of EPM’s net income. (11) In December 2013, in connection with and prior to the consummation of the UNE-Millicom Merger, EPM declared an extraordinary dividend of Ps.320,000 million, of which Ps.218,936 million was paid to the City of Medellín in December 2013 and the remainder Ps.101,064 million is expected to be paid to the City of Medellín by the end of October 2014. This distribution will not be recurrent.

Related Party Transactions EPM has entered into certain transactions with the City of Medellín, and other government or government- controlled entities. Many of these transactions occur in EPM’s ordinary course of business. Such transactions may create potential conflicts of interest that could adversely affect EPM or your interests as holders of the Notes. Furthermore, EPM cannot assure that the transactions between EPM and these entities have been or will be conducted on an arm’s length basis so that such transactions would not adversely affect EPM or your interests as holders of the Notes. See ‘‘Risk Factors — Risk Factors Relating to EPM’s Relationship With Medellín — EPM regularly enters into transactions with Medellín and other Government-controlled entities.’’ For a list of EPM’s main transactions with related parties and related party balances as of June 30, 2014, see ‘‘Note 14. Related Party Balances and Transactions’’to EPM’s condensed consolidated financial statements as of and for the period ended June 30, 2014.

Subsidiary and Affiliate Transactions Colombian law sets forth certain restrictions and limitations on transactions with subsidiaries and affiliates, including the following: • Subsidiaries must carry out their activities independently and with administrative autonomy, so that they have enough decision-making capacity to carry out the transactions related to their business purpose. • Transactions between the parent company and its subsidiaries must be of a real nature and cannot diverge considerably from standard market conditions, nor may they be detrimental to shareholders or third parties. • Subsidiaries may not acquire any shares issued by their parent company. • No transaction may be carried out between parent companies and their subsidiaries that implies conflicts of interest as determined by the SFC. EPM believes that it is in material compliance with these rules.

212 CORPORATE STRUCTURE AND MANAGEMENT

Summary Corporate Structure of EPM EPM operates its business directly and indirectly through several subsidiaries. For a list of EPM’s subsidiaries and of certain affiliates, see ‘‘Annex B — Subsidiaries and Certain Affiliates.’’ For the year ended December 31, 2013, Ps.5,309,346 million, representing 40.9% of EPM’s consolidated revenues, were generated directly by EPM, while Ps.7,677,120 million, representing 59.1% of its consolidated revenues, were generated by its subsidiaries. For the six months ended June 30, 2014, Ps.$2,688,187 million, representing 38.5% of EPM’s consolidated revenues, were generated directly by EPM, while Ps.$4,300,839 million, representing 61.5% of its consolidated revenues, were generated by its subsidiaries.

Medellín’s Powers and Restrictions as EPM’s Owner EPM is not a stock corporation, therefore the City of Medellín does not own stock or any other type of equity securities issued by EPM. Instead the City of Medellín has statutory ownership over EPM. Its ownership power is exercised exclusively through EPM’s board of directors. In that capacity, the City of Medellín has the power to participate, along with the other directors, in the decision-making process regarding EPM. On April 23, 2007, the Mayor of Medellín and EPM entered into the ‘‘General Agreement for Corporate Governance,’’ a governance agreement setting forth the terms and conditions pursuant to which the City of Medellín would exercise its ownership power in EPM. The purpose of the agreement is to curtail the potential for excessive political interference from the City of Medellín in EPM’s business, to protect EPM’s autonomy and to align the City of Medellín’s incentives with EPM’s business goals. The governance agreement expressly recognizes it intends to set forth corporate governance mechanisms that meet international standards and, therefore, enhance EPM’s ability to attract capital and access financing in the international markets. Under the governance agreement, the City of Medellín assumed several obligations, such as agreeing (i) not to interact with EPM or officers of EPM other than through EPM’s board of directors, (ii) not to intervene in EPM’s contracting process, (iii) not to interfere with EPM’s financial planning and management, and (iv) to appoint no less than five independent directors. On the other hand, the governance agreement reiterates EPM’s obligation to make ordinary and extraordinary net income distributions, as explained elsewhere in this section.

The Board of Directors EPM’s board of directors consists of nine directors, comprised of the Mayor of Medellín, who presides over the board of directors, five directors freely appointed by the Mayor of Medellín and three directors appointed by the Mayor of Medellín from among representatives of groups of customers registered with the SSPD. The business address of the directors is Carrera 58 No 42-125, Medellín, Colombia. The members of the board of directors are appointed for the same term as that of Medellín’s Mayor. Directors may be appointed for additional terms without limitation. The compensation of the members of the board of directors is determined by the Mayor of Medellín by decree. Neither the Mayor nor any member of the board who is a public officer has a right to such compensation. As of the date of this offering memorandum, EPM’s board of directors is composed of the following members:

Director Age Position Held Since Aníbal Gaviria Correa...... 48 January 01, 2012 Andrés Bernal Correa ...... 43 February 06, 2012 Luis Fernando Arbeláez Sierra ...... 75 February 06, 2012 Rubén Hernando Fernández Andrade...... 54 February 06, 2012 Manuel Santiago Mejía Correa...... 68 April 30, 2012 Gabriel Ricardo Maya Maya ...... 48 February 22, 2008 Alberto Arroyave Lema ...... 65 February 22, 2008 Beatriz Restrepo Gallego ...... 73 February 06, 2012

213 Biographical Information Aníbal Gaviria Correa: Mr. Gaviria is the Mayor of Medellín for the period 2012-2015. Mr. Gaviria served as Governor of Antioquia between 2004 and 2007. He was recognized in 2007 with the award Colombia Líder as Colombia´s best governor. Mr. Gaviria has a degree in Business Administration from Universidad EAFIT. Andrés Bernal Correa: Mr. Bernal is the Vice President of Finance and Strategic Development of Holding de Pensiones Sura Latinoamérica. He has served as CEO of Inversiones Corporativas, CFO and Project Manager of Corfinsura S.A. Mr.Bernal is also member of the boards of directors of the following companies: Cementos Argos, Protección, Suramericana and Enka de Colombia. He has a degree in Business Administration from Universidad EAFIT and an M.B.A from Babson College, Massachusetts. Luis Fernando Arbeláez Sierra: Mr. Arbelaez is a professor at Universidad Nacional, Universidad Santo Tomas and Universidad Cooperativa de Colombia. Mr. Arbelaez has served as a member of the Planning Council, consultant and advisor for the City of Medellín and the Metropolitan Area Zoning Plan, as well as for the Master Plan of Universidad de Antioquia. He has also served as a member of EPM Foundation’s board of directors. Mr. Arbelaez has a degree in architecture from Universidad Pontificia Bolivariana and different studies from the International Institute of Recherche et de Formation en vue Développement-Harmonisé (IRFED), and from Institut Supérieur D’Architecture de la Cambre Bruxelles. Rubén Hernando Fernández Andrade: Mr. Fernandez is the President of the board of directors of Corporación Region and has been member of the boards of directors of Confederación Colombiana and Federación Antioqueña. He has served as professor at Universidad de Medellín, Universidad Pontificia Bolivariana, Luis Amigo and Universidad de Antioquia. Mr. Fernandez has also served as Head of Education in Instituto Popular de Capacitación. He has been a member of the Scientific Committee of the magazine Nomadas and member of the Civic Committee of Empresas Públicas de Medellín. Mr. Fernández has a degree in Education-Spanish and literature, as well a Master degree in Education and Development from Universidad de Antioquia. Manuel Santiago Mejía Correa: Mr. Mejia is the CEO of Colombiana de Comercio S. A., which is also known as Corbeta. He was one of the first members of EPM´s board of directors appointed by the Mayor of Medellín. Mr. Mejía is also an active member of other seven boards of directors belonging to public and private companies: Asociación Nacional de Empresarios de Colombia ANDI, Proantioquia, Consejo Superior de la Universidad de Antioquia, Politécnico Colombiano Jaime Isaza Cadavid, Acción Social, Colciencias y Colombia Humanitaria. Mr. Mejia was the Treasury Secretary of the Medellín between 1980 and 1982. Mr. Mejia has a degree in Economy from Universidad de Antioquia and an M.B.A. from S. Illinois University. Gabriel Ricardo Maya Maya: Mr. Maya is the general counsel and director of the Corporación Fendipetroleo and has served as: legal advisor at Morenos y Cia, lawyer at the Consumer Protection Division of the SIC, Police Department Judge at the Department Secretary, vice president of the Comité Intergremial de Antioquia, chief executive of Frente Empresarial de Seguridad de los Distribuidores Minoristas de Combustibles. He has also served as a member of the board of directors of Cooperativa de los Distribuidores Minoristas de Combustibles. Mr. Maya has a degree in law from Universidad de Medellín and a degree in economic law from Externado de Colombia University. Alberto Arroyave Lema: Mr. Arroyave is a member of the educational committee of Coimpresores Antioquia and a member of the Youth Department Committee of the Department of Antioquia. Among the positions he holds are: local councillor in Apartado (Antioquia), text editor at the Oveja Negra, labor advisor, and commercial manager at Americana de Impresiones. He is also founder of the Newspaper El Interuniversitario. Mr. Arroyave’s studies include eight semesters in sociology at Universidad de Antioquia. Beatriz Restrepo Gallego: Mrs. Restrepo has served as: consultant of the IADB, representative of the educational sector at Visión Antioquia Siglo 21, member of the technical committee and secretary of Planea, academic advisor of Federación Antioqueña de ONG, and Dean of the faculty of philosophy at the Universidad Pontificia Bolivariana. Mrs. Restrepo has a B.A. degree in Philosophy at Manhattanville College, New York University, a Master degree in Philosophy and Humanities at School of Philosophy and Humanities, Universidad Central de Madrid, with a specialization in Ethics at Higher Institute of Philosophy, Université Catholique de Louvain, Belgium.

214 Independent Directors Pursuant to Colombian law, at least 25% of the board of directors of EPM must be ‘‘Independent Directors,’’ as this term is defined pursuant to Colombian law. As of the date of this offering memorandum, EPM’s board of directors complies with such requirement.

Executive Officers EPM’s executive officers are appointed by the board of directors. The executive officers are responsible for all matters concerning EPM’s day-to-day management and operations. As of the date of this offering memorandum, none of EPM’s executive officers holds any interest in EPM’s capital. The table below lists EPM’s executive officers as of the date of this offering memorandum, their age, their offices and the dates on which they were appointed.

Officer Age Position Position Held Since Juan Esteban Calle Restrepo...... 48 CEO of EPM and Leader of the EPM Group April 11, 2013 Ana Mercedes Villegas Mejía . . . . . 52 Executive Vice President of Business April 11, 2013 Management Diana Rúa Jaramillo ...... 48 Vice President of Corporate Finance April 11, 2013 Wilson Chinchilla Herrera ...... 51 Executive Vice President of Projects and April 11, 2013 Engineering Gabriel Jaime Betancourt Mesa . . . . 54 Executive Vice President of Strategy and April 11, 2013 Growth Ana María Restrepo Botero ...... 45 Vice President of Human Development and April 11, 2013 Organizational Capacity Maria Fanery Sucerquia Jaramillo . . 41 Vice President of Shared Supplies and May 11, 2013 Services Ana María González Gómez...... 45 Deputy Vice President of Communications July 14, 2014 and Corporate Relations Maritza Alzate Buitrago ...... 42 General Secretary April 11, 2013 Hernán Darío Vergara Castro ...... 51 Vice President of Corporate Auditing April 11, 2013 Carlos Alberto Solano Bonnett . . . . . 45 Vice President of Energy Generation April 11, 2013 Inés Helena Vélez Pérez ...... 51 Vice President of Energy Transmission and April 11, 2013 Distribution Carlos Arturo Díaz Romero ...... 57 Vice President of Gas April 11, 2013 María Isabel Jaramillo Fernández . . 53 Vice President of Commerce May 11, 2013 Luis Alberto Sánchez Correa ...... 47 Vice President of Corporate Strategy May 11, 2013 Santiago Ochoa Posada ...... 46 Vice president of Water and Sanitation July 11, 2013 Alejandro José Jaramillo Arango . . . 49 Vice President of Growth April 11, 2013 Luis Javier Vélez Duque...... 56 Vice President of the Ituango Project April 11, 2013

Biographical information Juan Esteban Calle Restrepo: Mr. Calle is the CEO of EPM and Leader of the EPM Group. Mr. Calle is a CFA charter holder and member of the CFA society of Toronto. He has a distinguished career in both the public and private sectors in Colombia and abroad. He has worked in Investment Banking, Corporate Finance and asset management in leading companies of the financial sector in Toronto, New York, Bogotá and Medellín. From 2004 to 2006 he served as Antioquia’s Secretary of Finance and as interim Governor of Antioquia. After his position as Secretary, in 2007, he moved to Canada where he started as an independent consultant in Vancouver, then worked in the commercial office of Proexport (Colombian export promotion agency) as Director of Foreign Investment and later started working as an Investment Advisor for BMO Nesbitt Burns. He was appointed CEO of EPM in January 2012, where he currently leads the international expansion of the company and the consolidation of its social and environmental policies across all markets. Mr. Calle has a bachelor degree in Business Administration from EAFIT University and an MBA with concentration in Finance and Business Economics from the Booth School of Business of the University Of Chicago. Ana Mercedes Villegas Mejía is the Executive Vice President of Business Management. She was the Director of Corporate Responsibility at EPM since July 2012. Before joining EPM, she worked for 27 years at ISA where she

215 held top managerial positions as: Strategy and Growth Manager and Manager of Energy Transportation in Colombia. She was also Head of Organizational Management at Compañía de Transmisión de Energía Eléctrica Paulista (Cteep) in Brazil. She has a degree in Electrical Engineering from Universidad Pontificia Bolivariana and a Master degree in Use of Hydraulic Resources from Universidad Nacional de Colombia. Diana Rúa Jaramillo is the Vice President of Corporate Finance. Previously, she was the Director of Corporate Finance at EPM. She has more than 20 years of experience in the financial area within EPM. She has held managerial positions in the Capital Management and Financial Planning units of the company. She has a degree in economy from Universidad Autónoma Latinoamericana and a specialization in Corporate Finance and Capital Markets from Universidad Pontificia Bolivariana. Wilson Chinchilla Herrera is the Executive Vice President of Projects and Engineering. Previously, he was the Director (ad interim) of Energy at EPM. He began his professional life working with EADE and since then has forged a career at EPM, holding managerial positions related to strategy, markets and regulation. He has a degree in Electrical Engineering from Universidad Nacional de Colombia and obtained a specialization diploma in Gas Engineering from Universidad Industrial de Santander, as well as a specialization diploma in Industrial Organization and Economic Regulation from Universidad Eafit. Gabriel Jaime Betancourt Mesa is the Executive Vice President of Strategy and Growth. Previously, he was the Director of International Growth at EPM. Having been with the company, he has headed the International Growth and Business Department, the Energy Transmission and Distribution Department, and the Sub-department of Administration and Finance. He has a degree in Civil Engineering from Universidad de Medellín, and a specialization diploma in Information Systems from Universidad Eafit, as well as a specialization diploma in Management from Universidad Pontificia Bolivariana. Ana María Restrepo Botero is the Vice President of Human Development and Organizational Capacity. Previously she was the Director of Human and Organizational Management. Before joining EPM, she held senior positions in human resource management at companies such as what Nutresa Group, Bimbo and Haceb Industries. She has a degree in Social Work from Universidad Pontificia Bolivariana and has specialization diplomas in industrial relations from Universidad Eafit and in Management from Universidad Pontificia Bolivariana. Maria Fanery Sucerquia Jaramillo is the Vice President of Shared Supplies and Services. Previously, she served as Director of Negotiation at Haceb Industries, where she has spent a large part of her career in managerial positions in the areas of sales, marketing, negotiation and supply chains. She led at Haceb the opening of supply offices in Asia, the Middle East, Europe and America. She has a degree in Business Administration at Ceipa Business School, with a specialization diploma in International Marketing from Universidad Eafit. Ana Maria González is the current acting Vice president of Communications and Corporate Relations at EPM. She has been with the company since 2003, holding different managerial positions such as Deputy Marketing Manager, Water Commercial Deputy Manager and Deputy Director of Corporate Identity. Before joining EPM, she worked at SAM, Postobon, Avianca, AvGroup, and Redebn Mastercard. She has broad experience in the areas of marketing, branding and reputation. She has a degree in Business Management and Finance from Universidad Eafit and a graduate diploma in Management from Universidad Pontificia Bolivariana. Maritza Alzate Buitrago is the General Secretary at EPM. She was previously Legal Risks Advisor at the law firm Guzmán Escobar y Asociados. She also served as Local Claims Leader at Delima Marsh and Coordinator of Collective Labor Recruitment at Fundación Social. She has a degree in law from Universidad Externado de Colombia, a specialization diploma in International Transportation Law from the same university and a Master degree in Insurance Law from Université Catholique Louvain la Neuve. Hernán Darío Vergara Castro is the Vice President of Corporate Auditing. Previously, he was the Director of Internal Control at EPM. Between 1989 and 2004 he held positions relating to internal control and corporate auditing at Corona and was also the Internal Auditing Manager at Mavesa Colombia. He has a degree in Public Accounting from Universidad Eafit and has a Master degree in Administration, as well as a specialization diploma in Systems Auditing from the same university. Carlos Alberto Solano Bonnett is the Vice President of Energy Generation. He previously fulfilled the role of Manager (interim) of Energy Generation. He has held managerial posts in the Energy business since 2006, such as

216 Head of Energy Market Management and as Commercial Deputy Manager of Generation. Before joining EPM, he held managerial positions at Procter and Gamble. He has a degree in Mechanical Engineering from Universidad Eafit and obtained a specialization diploma in Marketing from the same institution and a Master degree in Finance from Instituto Tecnológico de Monterrey. Inés Helena Vélez Pérez is the Vice President of Energy Transmission and Distribution. She previously was the Director of the Integrated Commercial Project in the program EPM sin Fronteras. During her 25 years of work at EPM, she has held different positions in the commercial and marketing areas of the business, including: Deputy Manager for Major Clients, Deputy Manager for Corporate and Business Clients, Commercial Deputy Manager of Transmission and Distribution, and Manager of the Gas business. She has a degree in Business Administration from Universidad Eafit, and obtained a specialization diploma in Information Systems at the same university, as well as a specialization diploma in International Business from Universidad Pontificia Bolivariana. Carlos Arturo Díaz Romero is the Vice President of Gas. He previously fulfilled the role of Deputy Manager of Gas Networks Construction. He has been linked with EPM since 1989 and has had different positions, such as Head of Gas Networks Area Expansion and Deputy Manager of Gas Networks Construction, among others. He has a degree in Electrical Engineering from Universidad Nacional de Colombia, with a specialization dipoloma in Management from Universidad Pontificia Bolivariana. María Isabel Jaramillo Fernández is the Vice President of Commerce. She has developed her career in issues related to strategic marketing at companies such as ISAGEN, as well as holding significant commercial and marketing positions during more than 20 years with Bancolombia Group, including Head of Commercial Management Marketing, Head of Management for the Vice Presidency of Government Enterprises Banking, Director of the Marketing Services Unit and Director of Corporate Marketing. She has a degree in economy from Universidad de Medellín, and has completed programs in Marketing and Strategy at North Western University and in Advanced Management at the Universidad de La Sabana. Luis Alberto Sánchez Correa is the Vice President of Corporate Strategy. Previously, he was the Manager of Corporate Development at UNE-EPM Telecomunicaciones. He began his career with EPM in 1992, as Telecommunications Engineer and Planning Specialist. During his professional career he has held managerial positions related to planning and strategy at UNE-EPM Telecomunicaciones. He has taken part in various processes involving both mergers and divisions with the EPM group, and is currently the Director of the program EPM sin Fronteras. He has a degree in Electrical Engineering from Universidad Pontificia Bolivariana and a specialization diploma in Organizational Perspective from Universidad Esumer. Santiago Ochoa Posada is the Vice President of Water and Sanitation. He previously was the Deputy Manager of Water Operations and Maintenance. He also served as Head of Aqueduct Operation at EPM. He has been linked with the company since 1994. He has a degree in Civil Engineering from Universidad Nacional de Colombia and a specialization diploma in ISO 9000 Quality Administration Systems, with experience in operating aqueduct and sewage systems in normal and in contingency conditions, as well as in planning the repositioning, expansion and optimization of the infrastructure associated with these systems. Alejandro José Jaramillo Arango is the Vice President of Growth. Previously, he was Deputy Director of New Businesses. He began his career with EPM in 1991, and from 1994 onwards held managerial positions such as Head of the Gas Finance Department and Head of Financial Distribution. He has a degree in Civil Engineering from Universidad Eafit, going on to specialize in Business Law at Universidad Externado de Colombia and in Finance at the Universidad Eafit. Luis Javier Vélez Duque is the Vice President of the Ituango Project. Previously, he was the Head of the Projects Department. He began his career with EPM in 1985 as a Project Engineer. Since 1996, he has held managerial positions related to projects such as Nechí, Central Termoeléctrica La Sierra, La Herradura, Porce III and Ituango. He has a degree in Mechanical Engineering from Universidad de Antioquia, followed by a specialization in Financial Management from Universidad Pontificia Bolivariana and a Master degree in Thermal Power from Cranfield University.

D&O Insurance As part of EPM’s insurance policy, board members, as well as executive officers are covered by standard director & officer (D&O) liability insurance (based on Colombian standards of coverage), which includes defense costs, with total liability coverage capped at U.S.$30,400,000.

217 Statutory Auditor EPM is not required to have a statutory auditor under its bylaws or under the Colombian Commercial Code due to its status as a government-owned commercial and industrial business. However, EPM has an external auditor who is responsible for auditing EPM’s financial information. The external auditor’s term shall not exceed three years. Additionally, EPM’s status as a public domiciliary utilities services enterprise, and its 100% ownership by the City of Medellín, subjects EPM, among other things, to fiscal control under the General National Accounting Authority, and the Comptroller’s Office of Medellín.

Corporate Governance Corporate Governance Code In accordance with Colombian law, on December 18, 2001, the board of directors of EPM adopted a Corporate Governance Code which sets forth the governance, conduct and information disclosure practices that must be followed by all members of the organization. The provisions of the Corporate Governance Code were incorporated into the Estatuto Interno de Gobernabilidad Corporativa regulating EPM’s internal governance on September 24, 2002. The board of directors adopted a new Corporate Governance Code on October 1, 2007, in order to update and complement the Code adopted in 2001, as amended on January 25, 2005. The 2007 Corporate Governance Code follows international standards regarding relationships with controlling entities, board of directors’ roles, and the control and disclosure of information. According to this new Corporate Governance policy, at the end of each year an Annual Corporate Governance Report will be prepared, setting forth the extent of compliance or failure to comply with or implement its policies. This report is published together with EPM’s Social Responsibility Report. Additionally, on October 1, 2007, the board of directors approved the Internal Regime of the Board of Directors which sets forth the operations and functions of EPM’s board of directors. The General Agreement for Corporate Governance, together with the Annual Corporate Governance Report and the Governance Framework Agreement entered into with the City of Medellín, represent the three basic pillars of EPM’s corporate governance framework.

Internal Controls EPM’s internal control system was implemented to help EPM achieve its strategic and business objectives, effectively allocate resources, improve the flow and reliability of information necessary for corporate decision- making and the satisfaction of corporate policies and procedures, and identify risks that may affect EPM’s operations. EPM’s Vice-presidency of Corporate Auditing is responsible for developing, applying and evaluating EPM’s internal control system. The Vice-presidency also works closely with EPM’s Business Group and with strategic committees to help define and realize EPM’s corporate and institutional goals. EPM believes that the internal control system has been successful in achieving the goals for which it was created. EPM is not subject to the Sarbanes-Oxley Act or any rules or regulations thereunder. EPM’s internal control mechanisms may be different than those required under those regulations.

Board of Director’s Committees During the second half of 2013 EPM’s Board of Directors restructured its support committees to optimize their structure and composition. The evaluation of EPM’s board of directors by its members is key to devise and implement strenghtening plans.

Audit Committee EPM created the Audit Committee in July 2006. The committee is responsible for monitoring and maintaining adequate corporate practices in connection with the preparation, presentation and disclosure of financial information, establishing guidelines for and liaising directly with independent auditors contracted by EPM, and ensuring the implementation of, and continued adherence to the policies adopted under the Corporate Governance Code, among other responsibilities. The committee is composed of at least three independent members of the board of directors.

Strategy and Business Committee On August 6, 2013, by means of Decree 344, and on November 5, by means of Decree 349, the Board of Directors of EPM amended the Strategy Committee Charter. Pursuant to the former decree (Decree 344), such Committee assumed the responsibility of analysis and supervision of infrastructure projects. Pursuant to the latter

218 decree (Decree 349), the name of the Committee was changed to ‘‘Strategy and Business Committee,’’ and it was resolved that the executive vice-presidencies of Business Management, Projects and Engineering and Strategy and Growth, as well as the Vice President of Corporate Finance and the General Secretary, shall be permanent members of this Committee.

Business Management Committee By means of Decree 345 of August 6, 2013, the Board of Directors amended the Business Management Committee Charter and resolved that, in addition to its other responsibilities, the Committee shall analyze, supervise and propose specific actions with regards to the formulation, execution and evaluation of business-management projects of EPM. Additionally, by means of Decree 350 of November 5, 2013, the Board of Directors adapted the Business Management Committee Charter to EPM’s new Administrative Structure and resolved that the Executive Vice President of Strategy and Growth, the Vice President of Human Development and Organizational Capacity and the General Secretary shall be permanent members of this Committee.

219 DESCRIPTION OF THE NOTES We will issue Ps.965,745,000,000 of our 7.625% Senior Notes due 2024 (the ‘‘Notes’’) offered hereby under an indenture (the ‘‘Indenture’’) between us and The Bank of New York Mellon, as trustee (the ‘‘Trustee’’), dated as of September 10, 2014. The terms of the Notes include those set forth in the Indenture. The Indenture is not required to be nor will it be qualified under the Trust Indenture Act. The following description is a summary of the material terms of the Indenture and the Notes. It does not, however, restate the Indenture in its entirety, and where reference is made to particular provisions of the Indenture, such provisions, are qualified in their entirety by reference to the provisions of the Indenture and the Notes. You should read the Indenture because it contains additional information and because it and not this description of the Notes define your rights as Holder of the Notes. The Holders will be entitled to the benefits of, be bound by and be deemed to have notice of all the provisions of the Indenture. Copies of the Indenture (which we incorporate by reference) may be obtained by requesting them from the Issuer or, if and so as long the Notes are listed on the Official List of the Luxembourg Stock Exchange, from The Bank of New York Mellon (Luxembourg) S.A., the specified office of the listing agent in Luxembourg. We have made an application to list the Notes on the Official List of the Luxembourg Stock Exchange and to trade the Notes on the Euro MTF market of the Luxembourg Stock Exchange. We cannot assure you that this application will be accepted. If and so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange, we will maintain a transfer and listing agent in Luxembourg and a co-paying agent in the European Union. Certain terms used in this description are defined below under ‘‘— Certain Defined Terms.’’ For purposes of this Description of the Notes, we also refer to EPM as the ‘‘Issuer.’’

The Notes and the Indenture The Notes will be issued in an aggregate principal amount of Ps.965,745,000,000. Each of the Notes offered hereby and issued pursuant to the Indenture will represent the right of the applicable Holder to receive: (1) payments of interest on such Note. The Notes will bear interest at an annual rate of 7.625% on the outstanding principal amount, payable annually in arrears on September 10 of each year (each a ‘‘Payment Date’’) commencing September 10, 2015, (2) payment of 100% of the principal on the Notes in a single installment on the Maturity Date, and (3) any Additional Amounts on any of the foregoing. For purposes of all payments of interest, principal or Additional Amounts contemplated herein: Interest on the Notes will be payable to the persons who are registered Holders at the close of business on the fifteenth day immediately preceding the applicable interest payment date. Interest on the Notes will be computed on the basis of the actual number of days elapsed, not to exceed 365, divided by 365. The Issuer will pay all amounts in respect of the principal of and interest on the Notes and any Additional Amounts (as defined below) in U.S. Dollars, as calculated by the Calculation Agent by converting the Peso amounts due into U.S. Dollars at the Settlement Rate on the applicable Rate Calculation Date. As long as the Notes are outstanding, we will maintain a Calculation Agent for determining the Settlement Rate on each Rate Calculation Date. We have initially appointed The Bank of New York Mellon to serve as Calculation Agent. Each determination of the Calculation Agent will, in the absence of manifest error, be conclusive for all purposes and binding on us and the Holders. Payments due on a date other than a Business Day shall be made on the next succeeding Business Day and such extension of time shall not be included in computing interest and fees in connection with that payment. The principal amount of the Notes will be repaid in a single installment on the Maturity Date. The Calculation Agent will give notice to Holders, the Issuer and the Luxemburg Stock Exchange of the Settlement Rate and the U.S. dollar amounts to be paid per Ps.1,000 on the second Business Day immediately preceding the applicable payment date in the manner described under ‘‘— Notices.’’ The Notes constitute senior, unconditional, unsecured, and unsubordinated obligations of the Issuer and will rank equally without preference among themselves and will rank equally with all the Issuer’s existing and future senior and unsecured External Indebtedness in right of payment and senior to the Issuer’s existing and future debt

220 that by its terms is junior and subordinated in right of payment to the Notes. The final payment of principal, interest and Additional Amounts (if any) is expected to be made on the Notes on the Maturity Date. The Notes will not be redeemable prior to the Maturity Date except as otherwise provided herein.

Additional Notes The Issuer may, without your consent, incur additional Indebtedness. At the Issuer’s option, this additional Indebtedness may consist of additional Notes (‘‘Additional Notes’’) issued in one or more transactions, which have identical terms (other than issue price, issue date, date from which the interest will accrue and, to the extent necessary, certain temporary securities law transfer restrictions) as Notes issued on the Closing Date provided that, unless such Additional Notes are issued under a separate CUSIP, such Additional Notes will be fungible with the original notes for U.S. federal income tax purposes. Any Additional Notes will be consolidated and form a single class with the Notes issued on the Closing Date, so that, among other things, Holders of any Additional Notes will have the right to vote together with Holders of Notes issued on the Closing Date as one class.

Additional Amounts Pursuant to the Indenture, all payments to be made in respect of the Notes are to be made free and clear of, and without deduction or withholding for or on account of, any Taxes, except to the extent such Taxes are imposed by applicable law. In the event that any Taxes are required by applicable law to be deducted or withheld from any payment required to be made in respect of the Notes or otherwise under the Indenture, then the amount of such payment shall be increased by such additional amounts as may be necessary for such payment to be made, after withholding or deduction for or on account of such Taxes, in an amount equal to the amount that would have been received by the applicable recipient(s) in respect of such payment had no such Taxes (including any Taxes payable in respect of such Additional Amounts) been required to be so deducted or withheld (any such amounts, ‘‘Additional Amounts’’). Furthermore, the amount of any Taxes required to be withheld or deducted from any payment made in respect of the Notes or otherwise under the Indenture shall be withheld or deducted from such payment (as increased by any Additional Amounts) and paid to the taxing authority imposing such Taxes in accordance with applicable law. Notwithstanding the preceding sentences, no such Additional Amounts will be payable in respect of: (1) any Tax assessed or imposed by any taxing authority to the extent that such Tax would not have been assessed or imposed but for the applicable recipient or beneficial owner of such payment having a present or former connection with Colombia or any jurisdiction through which payments are made other than solely by reason of the applicable recipient’s or beneficial owner’s mere holding of the Notes (or such beneficial interest); (2) any estate, inheritance, gift, personal property, sales, use, excise, transfer or other similar Tax imposed with respect to such payment; (3) any such Taxes that would not have been imposed but for the failure of the applicable recipient or beneficial owner of such payment to comply with any certification, identification, information, documentation or other reporting requirement to the extent (a) such compliance is required by applicable law or an applicable treaty as a precondition to exemption from, or reduction in the rate of deduction or withholding of, such Taxes and (b) at least 30 days before the first Payment Date with respect to which the obligor with respect to a payment shall apply this clause (3), such obligor shall have notified such recipient in writing that such recipient will be required to comply with such requirement; (4) any Tax imposed on a payment on the Notes required to be made pursuant to Council Directive 2003/48/EC of the Council of the European Union on the taxation of savings income in the form of interest payments (or any European Union Directive otherwise implementing the conclusions of the ECOFIN Council Meeting of 26 and 27 November 2000) or any law implementing or complying with, or introduced in order to conform to, any such Directive; (5) any such Taxes required to be withheld by any paying agent from any payment, if such payment can be made in a commercially reasonable manner without such withholding by any other paying agent with respect to the Notes; (6) any Note presented for payment (where presentation is required) more than 30 days after the relevant payment is first made available for payment to the applicable recipient (except to the extent that such recipient would have been entitled to Additional Amounts had the Note been presented during such 30-day period);

221 (7) any Tax payable other than by withholding or deduction; or (8) any combination of the circumstances described in clauses (1) through (7), nor will any Additional Amounts be paid with respect to any payment to a recipient who is a fiduciary or partnership or any person other than the sole beneficial owner of such payment to the extent that a beneficiary or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner would not have been entitled to the Additional Amounts had such beneficiary, settlor, member or beneficial owner been in the place of such recipient. In addition, the Issuer shall pay any and all Other Taxes imposed by the relevant taxing authority imposing such Other Taxes in accordance with applicable law. The Issuer will provide the Trustee upon its request with documentation reasonably satisfactory to it evidencing the payment of Taxes in respect of which the Issuer has paid any Additional Amounts. Copies of such documentation will be made available to the applicable recipients upon written request therefor to the Trustee. The obligation to pay Additional Amounts will survive the repayment of the Notes and the sale or transfer of the Notes (or beneficial interests therein) by any investor.

Optional Redemption at Par At any time or from time to time on or after June 10, 2024 (three months prior to the maturity date of the Notes) (the ‘‘par call date’’), the Issuer will have the right to redeem the Notes in whole or in part, on at least 30 days’ but not more than 60 days’ notice, as provided herein under ‘‘— Notices,’’ at a redemption price equal to 100% of the outstanding principal amount of the Notes plus accrued and unpaid interest to, but excluding, the Redemption Date.

Optional Tax Redemption The Notes may be redeemed at the Issuer’s election in whole but not in part on any date prior to the Maturity Date, by the giving of notice as provided herein under ‘‘— Notices,’’ at a redemption price equal to 100% of the outstanding principal amount thereof, together with any Additional Amounts and accrued and unpaid interest to the Redemption Date, if, as a result of: (a) any change in, or amendment to, laws or treaties (or any regulation or rulings promulgated thereunder) of a Taxing Jurisdiction or any political subdivision or taxing authority thereof or therein; or (b) any change in the official application, administration or interpretation of such laws, treaties, regulations or rulings in such jurisdictions, which amendment, change, application, administration or interpretation is proposed and becomes effective on or after the Closing Date, as a result of which the Issuer has become or would become obligated to pay any Additional Amounts on the next date on which any amount would be payable with respect of such Notes and the Issuer determines in good faith that such obligation cannot be avoided by taking commercially reasonable measures available to the Issuer; provided, however, that no such notice of redemption shall be given earlier than 60 days prior to the earliest date on which the Issuer would be obligated to pay such Additional Amounts. For the avoidance of doubt, commercially reasonable measures shall include a change in the jurisdiction of the paying agent(s). Notice of any redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of the Notes to be redeemed. Prior to the giving of notice of redemption of such Notes pursuant to the Indenture, the Issuer will deliver to the Trustee an Officers’ Certificate and a written opinion of such Taxing Jurisdiction counsel independent of the Issuer and its Affiliates to the effect that all governmental approvals necessary for it to effect such redemption have been or at the time of redemption will be obtained and in full force and effect, and that the Issuer has or will become obligated to pay such Additional Amounts as a result of such change, amendment, application, administration or interpretation. On the Redemption Date, interest will cease to accrue on the Notes that have been redeemed.

Open Market Purchases The Issuer or any of its Subsidiaries may at any time purchase any Note in the open market or otherwise at any price. Any Note so purchased by the Issuer may be surrendered to the Trustee for cancellation.

222 Certain Covenants The Indenture contains the following covenants:

Limitation on Liens The Issuer will not and will not permit any of its Subsidiaries to incur any Indebtedness secured, directly or indirectly, by a Lien on any property, assets, income or profits of the Issuer or any Subsidiary of the Issuer without effectively providing that the Notes (together with, if the Issuer so determines, any other Indebtedness or obligation then existing or thereafter created which is not subordinated to the Notes) shall be secured equally and ratably with (or prior to) such Indebtedness so long as such Indebtedness shall be so secured, except that the foregoing provisions shall not apply to: (1) Liens in existence on the Closing Date; (2) Liens that secure Indebtedness owing by a Subsidiary of the Issuer to the Issuer and/or one or more other Subsidiaries of the Issuer or by the Issuer to one or more of its Subsidiaries; (3) Liens on any property or assets acquired from a Person that is merged with or into the Issuer or any Subsidiary of the Issuer, or any Liens on the property, capital stock, assets, income or profits of any Person, existing at the time such Person becomes a Subsidiary of the Issuer and, in either such case, is not created as a result of or in connection with or in anticipation of any such transaction (unless such Lien was created to secure or provide for the payment of any part of the purchase price of such Person or was created in contemplation of such Person being merged with or into, or such Person becoming a Subsidiary of, either the Issuer or any of its Subsidiaries); provided, however, that such Liens may not extend to any other property, assets, income or profits of the Issuer or any Subsidiary of the Issuer; (4) any Lien on any property or assets existing at the time of acquisition thereof, including any acquisition by means of a merger or consolidation, and that is not created as a result of or in connection with or in anticipation of such acquisition (unless such Lien was created to secure or provide for the payment of any part of the purchase price of such property or assets); provided, however, that such Liens may not extend to any other property, assets, income or profits of the Issuer or any Subsidiary of the Issuer; (5) any Lien on the Capital Stock of any Subsidiary of the Issuer; (6) Liens (including extensions and renewals) with respect to Indebtedness incurred to finance the acquisition of real or personal property including capital stock acquired after the Closing Date; provided, however, that (a) such Lien is created solely for the purpose of securing the payment of Indebtedness incurred to finance the cost (including the cost, other than internal costs of the Issuer or any of its Subsidiaries, of design, development, acquisition, construction, installation, improvement, transportation or integration) of acquiring the item of property subject thereto and such Lien is created prior to, at the time of or within 180 days after the later of the acquisition, the completion of construction or the commencement of the full operation of such property, (b) the principal amount of the Indebtedness secured by such Lien does not exceed 100% of the cost (including the cost, other than internal costs of the Issuer or any of its Subsidiaries, of design, development, acquisition, construction, installation, improvement, transportation or integration) of such property or assets; and (c) such Lien shall not extend to cover any property, assets, income or profits other than such items of property and any improvements on such items; (7) Liens imposed by law, including carriers’, warehousemen’s and mechanics’ Liens and other similar Liens, on the property or assets of the Issuer or any Subsidiary of the Issuer arising in the ordinary course of business and securing payment of obligations that are not more than 60 days past-due or are being contested in good faith by appropriate proceedings; (8) Liens on the property or assets of the Issuer or any Subsidiary of the Issuer incurred in the ordinary course of business to secure the performance of tenders, bids, statutory obligations, surety and appeal bonds and deposits, government contracts, workers’ compensation and social security claims, performance and return-of- money bonds, or other obligation of a like nature and incurred in a manner consistent with industry practice, in each case which are not incurred in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property or assets in the operation of the business of the Issuer and its Subsidiaries;

223 (9) easements, rights of way, restrictions, or defects or irregularities in title and other similar charges or encumbrances which do not interfere in any material respect with the business of the Issuer or any Subsidiary;’’ (10) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights or remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided, however, that (a) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Issuer or any Subsidiary of the Issuer in excess of those set forth by regulations promulgated by the Board of Governors of the Federal Reserve System of the United States and (b) such deposit account is not intended by the Issuer or any Subsidiary of the Issuer to provide collateral to such depository institution; (11) Liens arising out of judgments or awards against the Issuer or a Subsidiary which do not give rise to an Event of Default; (12) Liens securing Purchase Money Obligations; (13) Liens imposed by law for taxes not yet due or delinquent (or which may be paid without interest or penalties) or that are otherwise being contested in good faith by appropriate procedures and for which adequate reserves have been maintained in accordance with Colombian Public Utilities Companies GAAP; (14) Liens securing counter-guarantee obligations in respect of Government Guaranteed Indebtedness of the Issuer or any Subsidiary of the Issuer, provided that such Lien is no more extensive than that required by applicable laws, rules or regulations in Colombia; (15) Liens to secure the Notes; (16) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any Lien referred to in the foregoing clauses (1) through (15) or of any Indebtedness secured thereby; provided that the principal amount of Indebtedness so secured thereby shall not exceed the principal amount of Indebtedness so secured at the time of such extension, renewal or replacement (plus accrued and unpaid interest and reasonable fees and expenses incurred in connection therewith), and that such extension, renewal or replacement Lien shall be limited to all or part of the property that secured the Lien extended, renewed or replaced (plus improvements on or additions to such property); (17) Liens securing Hedging Obligations entered into in the ordinary course of business and not for speculative purposes; or (18) Liens not otherwise permitted by clauses (1) through (17) above securing Indebtedness in a principal amount not in excess of 10.0% of the Consolidated Net Tangible Assets. Liens or deposits required by any contract or statute or other regulatory requirements in order to permit the Issuer or any Subsidiary of the Issuer to perform any contract or subcontract made by it with or at the request of a governmental entity or any department, agency or instrumentality thereof, or to secure partial progress, advance or any other payments to the Issuer or any Subsidiary by a governmental entity or any department, agency or instrumentality thereof pursuant to the provisions of any contract or statute shall not be deemed to create Indebtedness secured by Liens.

Limitation on Sale and Lease-Back Transactions The Issuer shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into any sale and lease-back transaction unless the Issuer complies with this restrictive covenant. A ‘‘sale and lease-back transaction’’ generally is an arrangement between the Issuer or a Subsidiary and a bank, insurance company or other lender or investor where the Issuer or a Subsidiary lease real or personal property for an initial term of three years or more which was or will be sold by the Issuer or a Subsidiary to that lender or investor for a sale price of U.S.$5 million (or its equivalent) or more. The Issuer can comply with this restrictive covenant if (A) (i) within 12 months after the effective date of such sale and lease-back transaction (whether made by the Issuer or such Subsidiary of the Issuer), the Issuer or a Subsidiary apply an amount equal to 100% of the net cash proceeds received from such sale lease-back transaction to repay and permanently reduce any Indebtedness which is secured by a Lien; or (ii) the sale lease-back transaction is entered into prior to, concurrently with or within four months after the acquisition, the completion or construction (including any improvements on an existing property) or the commencement of commercial operations

224 of the property which is the subject of the sale lease-back transaction; and (B) the Issuer or its Subsidiaries could otherwise grant a lien on the property as described in ‘‘— Limitation on Liens.’’

Financial Reporting For so long as any of the Notes are outstanding, the Issuer shall, within 90 days after the end of each fiscal quarter of each fiscal year (other than the final fiscal quarter of any fiscal year) and 120 days after the end of each fiscal year of the Issuer, provide to the Trustee copies of an unaudited (with respect to a fiscal quarter) or audited (with respect to a fiscal year) consolidated balance sheet, statements of income and statements of cash flows of the Issuer, prepared in a form substantially similar to the financial statements included in the offering memorandum, prepared in accordance with Colombian Public Utilities Companies GAAP and presented in the English language. The audited information provided with respect to a fiscal year shall also include a report thereon by the Issuer’s certified independent public accountants. The Trustee’s receipt of such reports shall not constitute actual or constructive notice of any information contained therein or determinable from information contain therein, including the Issuer’s compliance with any of its covenants under the Indenture. For so long as any of the Notes are outstanding, the above information will be made available at the specified offices of each listing agent. For so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange and the rules of such exchange so require, the above information will also be made available in Luxembourg through the offices of the Listing Agent.

Maintenance of Ratings The Issuer shall, for so long as any Notes are outstanding, use commercially reasonable efforts to maintain ratings on the Notes from at least two of the Rating Agencies (it being acknowledged and agreed that the Issuer shall not be required to maintain any minimum credit rating).

Limitation on Line of Business The Issuer will not, and will not permit any Subsidiary, to engage in any business other than a Related Business.

Consolidation, Merger, Conveyance, Sale or Lease Nothing contained in the Indenture will prevent the Issuer from consolidating with or merging into another Person or conveying, transferring or leasing the Issuer’s properties and assets substantially as an entirety (determined on a consolidated basis, with its Subsidiaries) to any Person; provided that (1) the resulting, surviving or transferee Person (if not the Issuer or such Subsidiary) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary was organized or under the laws of Colombia; provided that the foregoing shall not apply in the case of a Subsidiary of the Issuer that (A) has been disposed of in its entirety to another Person (other than to the Issuer or a Subsidiary of the Issuer), whether through a merger, consolidation or sale of Capital Stock or assets or (B) as a result of the disposition of all or a portion of its Capital Stock ceases to be a Subsidiary of the Issuer; (2) the Issuer shall be obligated under the Indenture to cause the Person formed by such consolidation or into which the Issuer is merged or the Person which acquires by conveyance or transfer, or which leases, the Issuer’s properties and assets substantially as an entirety (determined on a consolidated basis, with its Subsidiaries) (the ‘‘Successor’’), to expressly assume the Issuer’s obligations under the Indenture; (3) immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction) no Default or Event of Default would occur; (4) all requisite governmental approvals therefor shall have been obtained; and (5) the Issuer has delivered to the Trustee an Officers’ Certificate and an opinion of counsel, each stating that all conditions precedent provided for in the Indenture relating to such transaction have been complied with.

Repurchases at the Option of the Holders of the Notes Upon Change of Control If a Change of Control occurs, each Holder of Notes will have the right to require the Issuer to repurchase all or any part (in integral multiples of Ps.1 million) of that Holder’s Notes pursuant to a Change of Control Offer (as defined below) on the terms set forth in the Indenture. No such purchase in part shall reduce the Outstanding principal

225 amount at maturity of the Notes held by any Holder to below Ps.5 million. In the Change of Control Offer, the Issuer will offer a ‘‘Change of Control Payment’’ in cash equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Additional Amounts, if any, on the Notes repurchased, to the date of purchase (subject to the right of the Holders of record on the relevant Record Date to receive interest and Additional Amounts, if any, on the relevant interest payment date). Within 30 days following any Change of Control, the Issuer will make a ‘‘Change of Control Offer’’ by giving notice to each Holder of Notes by mailing and publishing such notice in accordance with the provision set out under ‘‘— Notices’’ below, describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in the notice (the ‘‘Change of Control Payment Date’’), which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed, pursuant to the procedure required by the Indenture and described in such notice. The Issuer will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other applicable securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any applicable securities laws or regulations conflict with provisions of this covenant, the Issuer will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue of its compliance with such securities laws or regulations. On the Change of Control Payment Date, the Issuer will, to the extent lawful: (1) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer; (2) deposit with the paying agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and (3) deliver or cause to be delivered to the Trustee the Notes properly accepted, together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Issuer. The paying agent under the Indenture will promptly deliver each Holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee will authenticate and mail (or cause to be transferred by book entry) to each Holder a new note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each new note will be in a principal amount of Ps.5 million or an integral multiple of Ps.1 million in excess thereof. The Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The provisions described above that require the Issuer to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Issuer repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The Issuer will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements, set forth in the Indenture, that are applicable to a Change of Control Offer made by the Issuer and such third party purchases all Notes properly tendered and not withdrawn under the Change of Control Offer.

Rule 144A Information For so long as any of the Notes remain Outstanding and are ‘‘restricted securities’’ within the meaning of Rule 144(a)(3) under the Securities Act, the Issuer shall furnish, upon the request of any Holder, such information as is specified in Rule 144A(d)(4) under the Securities Act: (i) to such Holder, (ii) to a prospective purchaser of such Note (or beneficial interests therein) who is a QIB designated by such Holder and (iii) upon written request of the Issuer, to the Trustee for delivery to any applicable Holders or such prospective purchaser so designated, in each case in order to permit compliance by such Holder with Rule 144A in connection with the resale of such Note (or beneficial interest therein) in reliance upon Rule 144A. All such information shall be in the English language.

226 Events of Default Events of Default with respect to the Notes in the Indenture will include (each, an ‘‘Event of Default’’): (1) default in the payment of any interest (or Additional Amounts, if any) on any Note when it becomes due and payable and such default shall continue unremedied for a period of 30 days; or (2) default in the payment of the principal of (or premium, if any, on) any of the Notes when it becomes due and payable, whether at stated maturity or otherwise and the continuance of any such failure for seven (7) days; or (3) default in the performance, or breach, of any covenant, agreement or obligation of the Issuer or any of its Subsidiaries contained in the Indenture or the Notes and continuance of such default or breach for a period of 60 consecutive days after there has been given, by registered or certified mail, to the Issuer by the Trustee or to the Issuer and the Trustee by the Noteholders of at least 25% in aggregate principal amount of the Outstanding Notes a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a ‘‘Notice of Default’’ hereunder; or (4) with respect to either the Issuer or any of its Subsidiaries, any final and non-appealable judgment or order for the payment of money in excess of 6.0% of the Consolidated Net Tangible Assets or its equivalent in other currencies (to the extent not covered by insurance as acknowledged in writing by the insurer) is rendered against the Issuer or any of its Subsidiaries and such judgment or order remains undischarged or unstayed for a period of 180 days after such judgment becomes final and non-appealable; or (5) either: (i) the Issuer or any of its Subsidiaries shall default (as principal or guarantor or other surety) in the payment of principal of any External Indebtedness in the principal amount of at least U.S.$50 million in the aggregate (or its equivalent in any other currency) and such default shall have continued for more than any applicable period of grace and any time for payment of such amounts has not been expressly extended, or (ii) External Indebtedness of the Issuer or any of its Subsidiaries is accelerated by the holders thereof because of a default, and the total amount of such accelerated External Indebtedness exceeds U.S.$50 million (or its equivalent in any other currency); or (6) certain events of insolvency, administrative takeover or other similar laws relating to the Issuer or any Subsidiary. The Issuer will be required to provide to the Trustee written notice, within ten Business Days of obtaining knowledge thereof, of any Event of Default. The Indenture provides that the Trustee may withhold notice to the Holders of any Event of Default (except on payment of principal of (or premium, if any on), or interest, if any, on the Notes) if a Responsible Officer or Officers of the Trustee in good faith determines that it is in the interest of the Holders of the Notes to do so. The Indenture provides that (a) if any Event of Default (other than an Event of Default involving a bankruptcy, insolvency or other similar event in respect of the Issuer) with respect to the Notes specified therein shall have happened and be continuing, either the Trustee acting at the written direction of Holders holding at least 25% in aggregate principal amount of Outstanding Notes or the Holders of at least 25% in aggregate principal amount of the Outstanding Notes may declare the principal amount of all the Notes to be due and payable immediately; and (b) if an Event of Default involving a bankruptcy, insolvency or other similar event in respect of the Issuer shall have happened, the principal amount of all the Notes will be immediately due and payable without notice or any other act on the part of the Trustee or any Holder. However, if all Defaults are cured (except the nonpayment of principal of and accrued interest on Notes which shall become due by acceleration) and certain other conditions are met, such declaration may

227 be rescinded by the Holders of not less than a majority in aggregate principal amount of the Outstanding Notes. In addition, past Defaults with respect to the Notes may be waived by the Holders of not less than a majority in aggregate principal amount of the Outstanding Notes except a Default in the payment of principal of (or premium, if any) or interest, if any, on any Note. A Holder shall not have any right to institute any suit, action or proceeding for the enforcement of the Indenture, or for the exercise of any other remedy hereunder unless: (i) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Notes, (ii) Holders of more than 25% in aggregate principal amount of Outstanding Notes shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee thereunder, (iii) such Holder or Holders have offered to the Trustee indemnity reasonably satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such request, (iv) the Trustee during the 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding, and (v) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Notes; it being understood and intended that no one or more Holders shall have any right to affect, disturb or prejudice in any manner whatsoever the benefit of the Indenture afforded the Notes by its or their action, or to enforce, except in the manner provided herein, any remedy, right or power hereunder. Any suit, action or proceeding shall be instituted and maintained in the manner provided herein for the benefit of the Holders of all Outstanding Notes. Notwithstanding any other provision herein, the right of any Holder to receive payment of principal of and interest on the Notes held by such Holder, on or after the respective due dates expressed in the Notes, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. The Indenture contains provisions requiring the consent of the Holder of each Outstanding Note affected by any proposed amendment to the Indenture in order to, among other things, reduce in any manner the amount of, delay the timing of or alter the priority of, any payments that are required to be made herein on any Note or reduce any premium and Additional Amounts in respect thereof, or change any date of payment on any Note, or change the place of payment where, or the coin or currency in which, any Note is payable, or impair any Holder’s right to institute suit for the enforcement of any payment on or after the due dates therefor, as further described under ‘‘— Modification of the Indenture.’’

Defeasance The Issuer may at any time terminate all of its obligations with respect to the Notes (‘‘defeasance’’), except for certain obligations, including those regarding any trust established for a defeasance and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain agencies in respect of the Notes. The Issuer may at any time terminate its obligations under certain covenants set forth in the Indenture, and any omission to comply with such obligations will not constitute a default or an event of default with respect to the Notes issued under the Indenture (‘‘covenant defeasance’’). In order to exercise either defeasance or covenant defeasance, the Issuer must irrevocably deposit in trust, for the benefit of the holders of the Notes, with the trustee money or U.S. government obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent accountants, investment bank or consultants expressed in a written certificate delivered to the trustee, without consideration of any reinvestment, to pay the principal of, the premium, if any, and interest on the Notes to redemption or stated maturity and comply with certain other conditions, including the delivery of opinions of Colombian and U.S. counsel as to certain tax matters (including that holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance, as the case may be, had not occurred.) In the case of defeasance, such opinion from U.S. counsel must be based on a ruling by the Internal Revenue Service or a change in the applicable U.S. federal income tax law.

228 Form, Denomination and Registration Any Notes sold outside the United States to non-U.S. Persons in reliance on Regulation S will be in fully registered form without interest coupons attached and only in denominations of Ps.5 million and in integral multiples of Ps.1 million in excess thereof. Any Notes sold pursuant to Rule 144A will be issued in fully registered form without interest coupons attached and only in denominations of Ps.5 million and integral multiples of Ps.1 million in excess thereof. No service charge will be made for any registration of transfer or exchange of Notes, but the Trustee may require payment of a sum sufficient to cover any Tax or other government charge payable in connection therewith. The Notes (or beneficial interests therein) may not be transferred unless the principal amount so transferred is in an authorized denomination. The Global Notes will be deposited on or about the Closing Date with the Trustee as custodian for (and registered in the name of a nominee of) DTC. Except as described in the limited circumstances described under ‘‘— Book Entry, Delivery and Form,’’ Holders holding beneficial interests in Global Notes through DTC will not be entitled to receive physical delivery of certificated Notes. The Notes are not (and will not be) issuable in bearer form.

Listing Application has been made to list the Notes on the Official List of the Luxembourg Stock Exchange and to trade them on the Euro MTF Market of such exchange and the Issuer will use its reasonable best efforts to maintain listing of the Notes on the Official List of the Luxembourg Stock Exchange.’’ In the event that the Notes are admitted to listing on the Official List of the Luxembourg Stock Exchange, the Issuer will use its commercially reasonable best efforts to maintain such listing, provided that if, as a result of the European Union regulated market amended Directive 2001/34/EC (the ‘‘Transparency Directive’’) or any legislation implementing the Transparency Directive the Issuer could be required to publish financial information either more regularly than the Issuer otherwise would be required to or according to accounting principles which are materially different from the accounting principles which the Issuer would otherwise use to prepare our published financial information, or the Issuer determines in its sole discretion that it is unduly burdensome to maintain a listing on the Luxembourg Stock Exchange, the Issuer may delist the Notes from the Official List of the Luxembourg Stock Exchange and seek an alternative admission to listing, trading and/or quotation for the Notes on a different section of the Luxembourg Stock Exchange or by such other listing authority, stock exchange and/or quotation system inside or outside the European Union as the Issuer may decide. Although the Issuer cannot assure you as to the liquidity that may result from a listing on the Luxembourg Stock Exchange, delisting the Notes from the Luxembourg Stock Exchange may have a material effect on the ability of holders of the Notes to resell the Notes in the secondary market.

Luxembourg Listing Agent and Transfer Agent The Bank of New York Mellon (Luxembourg) S.A. is the Luxembourg Listing Agent and the Luxembourg Transfer Agent in respect of the Notes. The Issuer will maintain such agencies so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange. The address of the Luxembourg Listing Agent and the Luxembourg Transfer Agent are set forth on the inside back cover of this offering memorandum.

Paying Agent Until the Notes are repaid, the Issuer will maintain a paying agent in The City of New York. The Bank of New York Mellon will initially act as principal paying agent and registrar for the Notes. The Issuer may appoint other paying agents instead of, or in addition to The Bank of New York Mellon. For so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange, the Issuer will maintain a co-paying agent in a member state of the European Union that is not obliged to withhold or deduct tax pursuant to the European Council Directive 2003/48/EC or any other directive implementing the conclusions of the ECOFIN Council meeting of 26 and 27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such directive. The Bank of New York Mellon, acting through its London Branch will initially act as co-paying agent in the European Union. Upon any change in a paying agent, the Issuer will publish a notice on the website of the Luxembourg Stock Exchange at www.bourse.lu (or if the rules so require, in a leading daily newspaper of general circulation in Luxembourg which EPM expects to be the Luxemburger Wort).

Lost, Stolen and Mutilated Notes In case any Note shall become mutilated, defaced, destroyed, lost or stolen, the Issuer will execute and the Trustee will, upon direction by the Issuer, authenticate, register and deliver a new definitive Note of like tenor

229 (including the same date of issuance) and equal principal amount registered in the same manner, dated the date of its authentication and bearing interest from the date to which interest has been paid on such Note, in exchange and substitution for such Note (upon surrender and cancellation thereof in the case of mutilated or defaced Notes) or in lieu of and in substitution for such Note. In case a Note is destroyed, lost or stolen, the applicant for a substitute Note shall furnish the Issuer and the Trustee (a) such security or indemnity as may be required by them to save each of them harmless and (b) satisfactory evidence of the destruction, loss or theft of such Note and of the ownership thereof. Upon the issuance of any substituted Note, the Trustee may require the payment by the registered Holder thereof of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any fees and expenses (including those of the Trustee) connected therewith. With respect to mutilated, defaced, destroyed, lost or stolen definitive Notes, a Holder thereof may obtain new definitive registered Notes from the office of the Registrar. Notwithstanding any statement herein, the Issuer and the Trustee reserve the right to impose such transfer, certificate, exchange or other requirements, and to require such restrictive legends on Notes, as they may determine are necessary to ensure compliance with the securities laws of the United States and the states therein and any other applicable laws. Payments; Registration of Transfer The Trustee will be responsible for (among other things) (a) maintaining a record of the aggregate holdings of Notes represented by the Global Notes and accepting Notes for exchange and registration of transfer, (b) making payments in respect of the Notes to the Holders to the extent funds are available therefor (as contemplated by the Indenture) and (c) transmitting notices to Holders and from Holders to the Issuer (in each case as contemplated by the Indenture). The Trustee will keep at its office a register (the ‘‘Register’’) in which, subject to such reasonable regulations as it may prescribe, the Trustee will provide for the registration of the Notes and registration of transfers and exchanges of the Notes. In the event of a partial transfer of a Definitive Note, new Notes will be obtainable at the office of the Trustee in connection with such transfer. In accordance with the Indenture, the Issuer may terminate the appointment of the Trustee or appoint additional trustees or other such agents. The Issuer will cause notice of any resignation, termination or appointment of the Trustee, and of any change in the office through which any such agent will act, to be provided to Holders in accordance with ‘‘— Notices’’ below. Distributions Distributions on the Notes will be made by the Trustee directly to the Holders in accordance with the procedures set forth in the Indenture. Distributions of principal, interest and any other amounts that may be due on the Notes will be made on each Payment Date to the Holders in whose names the Notes were registered as of the close of business on the preceding Record Date. Distributions will be made by check mailed to the address of each such Holder as it appears on the Register maintained by the Trustee or by electronic funds transfer to an account maintained by such Holder with a bank having electronic funds transfer capability. Unless such designation for payment by electronic funds transfer is revoked, any such designation made by such Holder with respect to such Note will remain in effect with respect to any future payments in respect of such Note. The Issuer will pay any administrative costs that are imposed in connection with making payments by wire transfer. The final payment on any Note (including any Global Note registered in the name of the nominee of DTC), however, will be made only upon presentation and surrender of such Note at the office or agency of the Trustee. Any monies deposited with or paid to the Trustee for the payment of the principal, premium, interest or any other amount due with respect to the Notes and not applied but remaining unclaimed for three years after the date upon which such principal, premium, interest or other amount shall have become due and payable, will (to the extent not required to escheat to any governmental authority) shall upon receipt by the Trustee of a written request transfer from the Issuer be repaid by the Trustee to or for the account of the Issuer, and, to the extent permitted by applicable law, the Person claiming such money shall thereafter look only to the Issuer for any related payment that it may be entitled to receive, and all liability of the Trustee with respect to such monies shall thereupon cease. Notices Any notice or communication to a Holder shall be deemed to have been duly given (i) upon the mailing of such notice by first class mail to such Holder at its registered address as recorded in the Register not later than the latest date, and not earlier than the earliest date, prescribed in the Indenture for the giving of such notice and (ii) for so long

230 as the Notes are listed on the Official List of the Luxembourg Stock Exchange, upon publication in a daily newspaper of general circulation in Luxembourg, which the Issuer expects to be the Luxemburger Wort, or alternatively, via the website of the Luxembourg Stock Exchange at www.bourse.lu, such notices being deemed given on the date of such publication. Subject to publication on the website of the Luxembourg Stock Exchange, if publication in Luxembourg is impracticable, the Issuer will make the publication elsewhere in Western Europe. By ‘‘daily newspaper’’ the Issuer means a newspaper that is published on each day, other than Sunday or holiday, in Luxembourg or, when applicable, elsewhere in Western Europe. In the case of Global Notes, notices shall be sent to DTC or its nominees (or any successors), as the Holders thereof, and DTC will communicate such notices to the DTC Participants in accordance with its standard procedures. Any requirement of notice hereunder may be waived by the Person entitled to such notice before or after such notice is required to be given, and such waivers shall be filed with the Trustee.

Modification of the Indenture The Indenture contains provisions permitting the Issuer and the Trustee, with the consent of the Holders of a majority in aggregate in principal amount of the Outstanding Notes, to modify the Indenture, any supplemental indenture, or the rights of the Holders; provided that no such modification shall, without the consent of the Holder of each Outstanding Note affected thereby: • reduce in any manner the amount of, delay the timing of or alter the priority of, any payments that are required to be made herein on any Note or reduce any premium and Additional Amounts in respect thereof, or change any date of payment on any Note, or change the place of payment where, or the coin or currency in which, any Note is payable, or impair any Holder’s right to institute suit for the enforcement of any payment on or after the due dates therefor; • reduce the percentage of the Outstanding Notes the consent of which is required for any such amendment, or reduce such percentage required for any waiver or instruction provided for in the Indenture; • modify certain provisions of the Indenture; • reduce the premium payable upon the redemption or repurchase of any Note or change the time at which any Note may or shall be redeemed or repurchased in accordance with the Indenture; or • modify or amend in any manner adverse to the Holders the terms and conditions of the obligation of the Issuer for the due and punctual payment of the principal of or interest on the Notes. The Indenture provides that Notes (or beneficial interests therein) owned by the Issuer or any of its Affiliates shall be disregarded and deemed not to be outstanding for, among other purposes, consenting to any such modification. Notwithstanding the foregoing, without the consent of any Holder of the Notes, the Issuer and the Trustee may modify, amend or supplement the Indenture: (a) to evidence the succession by another Person to the Issuer and the assumption by any such successor of the covenants in the Indenture and in the Notes of such series in accordance with ‘‘— Certain Covenants — Consolidation, Merger, Conveyance, Sale or Lease’’; (b) to add to Issuer’s covenants and those of any other obligor of the Notes for the benefit of the Holders of the Notes or to surrender any right or power conferred upon us or any other obligor of the Notes, as applicable, in the Indenture or in the Notes for the benefit of the Holders of the Notes; (c) to cure any ambiguity, or to correct or supplement any provision in the Indenture or the Notes that may be defective or inconsistent with any other provision in the Indenture, the Notes or this description in this offering memorandum; (d) to make any other changes with respect to matters or questions arising under the Indenture or the Notes; provided that, such changes shall not materially adversely affect the interests of the Holders of the Notes; (e) to evidence and provide the acceptance of the appointment of a successor trustee under the relevant Indenture;

231 (f) to mortgage, pledge, hypothecate or grant a security interest in favor of the Trustee for the benefit of the Holders of the Notes as additional security for the payment and performance of the Issuer’s obligations under the Indenture, in any property, or assets, including any of which are required to be mortgaged, pledged or hypothecated, or in which a security interest is required to be granted to the Trustee pursuant to the Indenture or otherwise; and (g) to provide for the issuance of Additional Notes in accordance with and if permitted by the terms of and limitations set forth in the Indenture.

The Trustee The Bank of New York Mellon will be the Trustee under the Indenture. The Trustee’s corporate trust office is presently located at 101 Barclay Street, 7E, New York, New York, 10286. The Issuer and its Affiliates may from time to time enter into normal banking and trustee relationships with the Trustee and its Affiliates. In addition, the Trustee may appoint co- or separate trustees to the extent required to meet the legal requirements of a particular jurisdiction. Subject to the provisions of the Indenture relating to the duties of the Trustee, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Trustee security or indemnity acceptable to the Trustee. Subject to such provision for indemnification, the Holders of a majority in principal amount of the Outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to the Notes, provided that the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine that the action so directed conflicts with any law or the provisions of the Indenture or subjects the Trustee to personal liability. The rights and duties of the Trustee shall be more fully set forth in the Indenture.

Appointment to Fill Vacancy in Office of Trustee If the Trustee resigns or is removed or if a vacancy exists in the office of the Trustee for any reason, the Issuer will promptly appoint a successor Trustee meeting certain eligibility requirements by notifying the Trustee in writing. Within one year after the successor Trustee takes office, Holders representing at least 50% of the aggregate principal amount of the Notes then outstanding may appoint a successor Trustee reasonably acceptable to the Issuer to replace the successor Trustee appointed by the Issuer. Each successor Trustee shall execute, acknowledge and deliver to the Holders, the Issuer and to its predecessor Trustee an instrument accepting such appointment and, upon the resignation or removal of the predecessor Trustee, such appointment shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor, with like effect as if originally named as Trustee. Upon written request of any such successor Trustee, the Holders and the Issuer shall execute any and all instruments in writing for fully and certainly vesting in and confirming to such successor Trustee all such rights and powers. In the event of a change of Trustee, a notice regarding such a change will be published in Luxembourg as provided under ‘‘— Notices.’’

No Personal Liability of Incorporators, Stockholders, Directors, Officers or Employees The Indenture provides that there will be no recourse against any incorporator, stockholder, officer, director, employee or controlling person of the Issuer for the payment of the principal of, premium, if any, or interest on the Notes or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Issuer in the Indenture or the Notes or because of the creation of any Indebtedness represented thereby. Each Holder, by accepting the Notes, waives and releases all such liability.

Governing Law; Consent to Jurisdiction and Service of Process The Indenture and the Notes provide that they will be governed by, and construed in accordance with, the laws of the State of New York, except that all matters relating to authorization and execution by the Issuer of both the Notes and the Indenture will be governed by the laws of Colombia. The Issuer has consented to the non-exclusive jurisdiction of (i) the courts of the State of New York and the United States District Court for the Southern District of New York (in either case sitting in Manhattan, New York City), and (ii) the courts of its own corporate domicile,

232 and has irrevocably appointed CT Corporation System as agent for service of process, with respect to any action that may be brought in connection with the Indenture and the Notes and has irrevocably appointed CT Corporation System as agent for service of process in respect of any such actions in the State of New York.

Prescription Claims against the Issuer for the payment of principal or interest and Additional Amounts in respect of the Notes will be prescribed unless made within six years of the due date for payment of such principal or interest and Additional Amounts.

Certain Defined Terms The terms listed below have the following meanings when used herein: ‘‘Additional Notes’’ shall have the meaning given to it under ‘‘— Additional Notes.’’ ‘‘Affiliates’’ means, with respect to any specified Person, any other Person which, directly or indirectly, is in control of, is controlled by or is under common control with such specified Person. For purposes of this definition, control of a Person means the posession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms ‘‘controlling’’ and ‘‘controlled’’ have meanings correlative to the foregoing. For the avoidance of doubt, Persons controlling or under common control of the Issuer or any Subsidiary thereof as of the Closing Date shall be limited to the City of Medellín and any Persons, directly or indirectly, controlled by the City of Medellín. ‘‘Board of Directors’’ shall mean, with respect to any Person, the Board of Directors of such Person or any committee thereof duly authorized to act on behalf of the Board of Directors of such Person. ‘‘Business Day’’ shall mean a day, other than a Saturday, or Sunday, on which commercial banks and foreign exchange markets are open, or not authorized to close, in The City of New York; provided, however, that solely for the purposes of determining the Representative Market Rate, ‘‘business day’’ shall mean a day, other than a Saturday or Sunday, on which commercial banks and foreign exchange markets are open, or not authorized to close, in Medellín, Colombia. ‘‘Calculation Agent’’ shall mean The Bank of New York Mellon. ‘‘Capital Stock’’ of any Person shall mean any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. ‘‘Capitalized Lease Obligations’’ shall mean an obligation that is required to be classified and accounted for as a capitalized lease for financial reporting purposes in accordance with Colombian Public Utilities Companies GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with Colombian Public Utilities Companies GAAP; and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty. ‘‘Change of Control’’ shall mean the occurrence of any of the following events: (1) the sale, transfer, conveyance or other disposition (other than by way of a merger or consolidation transaction permitted by the covenant ‘‘— Consolidation, Merger, Conveyance, Sale or Lease’’) of all or substantially all of the properties or assets of the Issuer and the Subsidiaries, taken as a whole, to any Person (other than to (a) a Subsidiary of the Issuer, (b) the City of Medellín, (c) the Republic of Colombia or (d) any governmental entity or political subdivision of the Republic of Colombia or an entity controlled, directly or indirectly, by the City of Medellín or the Republic of Colombia, (d) any Affiliate of the Issuer or (e) any Person of which holders of securities that represented 100% of the Voting Stock of the Issuer immediately prior to such transaction own directly or indirectly at least a majority of the voting power of the Voting Stock of such Person immediately after such transaction); or (2) the City of Medellín (or the Republic of Colombia or any governmental entity or political subdivision thereof) ceases to have, directly or indirectly, the power to elect, or shall not have elected a majority of the Board of Directors of the Issuer; or

233 (3) the City of Medellín (or the Republic of Colombia or any governmental entity or political subdivision thereof) ceases to own beneficially and of record more than 50% of the Capital Stock and the Voting Stock of the Issuer. ‘‘Change of Control Offer’’ shall have the meaning given to it under ‘‘— Repurchases at the Option of the Holders of the Notes Upon Change of Control.’’ ‘‘Change of Control Payment’’ shall have the meaning given to it under ‘‘— Repurchases at the Option of the Holders of the Notes Upon Change of Control.’’ ‘‘Change of Control Payment Date’’ shall have the meaning given to it under ‘‘— Repurchases at the Option of the Holders of the Notes Upon Change of Control.’’ ‘‘Closing Date’’ shall mean September 10, 2014. ‘‘Colombian Public Utilities Companies GAAP’’ shall mean the accounting principles set forth in the Accounting Manual for Domiciliary Public Utility Providers (Plan de Contabilidad para Entes Prestadores de Servicios Públicos Domiciliarios) published by the SSPD and the accounting standards set forth by the Colombian General Accounting Office (Contaduría General de la Nación or ‘‘CAO’’), each as in effect from time to time; provided, however, that if the Issuer adopts a different accounting framework, including but not limited to International Financial Reporting Standards, ‘‘Colombian Public Utilities Companies GAAP’’ shall mean such new accounting framework as in effect from time to time, including, without limitation, in each case, those accounting principles set forth in the manuals, standards, statements, opinions and pronouncements of the SSPD and the CAO or in such other statements by such other entity as approved by a significant segment of the accounting profession. ‘‘Consolidated Net Tangible Assets’’ means the Total Assets of the Issuer and its Subsidiaries less goodwill and intangibles (other than intangibles arising from, or relating to, intellectual property, licenses or permits (including, but not limited to, emissions rights) of the Issuer and its Subsidiaries), in each case calculated in accordance with Colombian Public Utilities Companies GAAP less current liabilities (other than current maturities of long-term debt), provided that in the event that the Issuer or any of its Subsidiaries assumes any indebtedness or acquires any assets in connection with the acquisition by the Issuer or any of its Subsidiaries of another Person subsequent to the commencement of the period for which the Consolidated Net Tangible Assets is being calculated but prior to the event for which the calculation of the Consolidated Net Tangible Assets is made, then the Consolidated Net Tangible Assets shall be calculated giving pro forma effect to such assumption of indebtedness or acquisition of assets, as if the same had occurred at the beginning of the applicable period. ‘‘Corporate Trust Office’’ shall mean the office of the Trustee on the Closing Date located at 101 Barclay Street, 7E, New York, New York, 10286, or such other office as the Trustee may from time to time designate in writing to the Issuer. ‘‘Currency Agreement’’ shall mean, with respect to any Person, any foreign exchange contract, currency swap agreement or other similar agreement or arrangement to which such Person is a party or of which it is a beneficiary. ‘‘Default’’ shall mean any event that is, or after notice or passage of time or both would be, an Event of Default. ‘‘DTC’’ shall mean The Depository Trust Company, a New York corporation. ‘‘U.S. Dollars’’ or ‘‘U.S.$’’ shall mean the lawful currency for the time being in the United States of America. ‘‘EPM’’ shall mean Empresas Públicas de Medellín E.S.P., an industrial and commercial government-owned entity (empresa industrial y comercial del estado) organized under the laws of Colombia. ‘‘Exchange Act’’ shall mean the United States Securities and Exchange Act of 1934, as amended. ‘‘External Indebtedness’’ means Indebtedness other than Internal Indebtedness. ‘‘Government Guaranteed Indebtedness’’ means any Indebtedness incurred by a Person with a multilateral or development financial institution as creditor or guarantor, which Indebtedness is guaranteed by the Republic of Colombia. ‘‘Guarantee’’ shall mean any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of any Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to

234 purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term ‘‘Guarantee’’ shall not include endorsements for collection or deposit in the ordinary course of business. The term ‘‘Guarantee’’ used as a verb has a correlative meaning. ‘‘Hedging Agreement’’ means (a) any and all Interest Rate Agreement, Currency Agreement, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts or any other similar transactions or any combination or the foregoing (including any option to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, traded at the over-the-counter or standardized markets and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or are governed by any form of master agreement published by the International Swaps and Derivative Association, Inc., any International Foreign Exchange Master Agreement or any other master agreement (including such master agreement, together with any related schedules, a ‘‘Master Agreement’’) including any such obligations or liabilities under any Master Agreement. ‘‘Hedging Obligations’’ of any Person shall mean the obligations of such Person pursuant to any Interest Rate Agreement or Hedging Agreement. ‘‘Indebtedness’’ shall with respect to any Person on any date of determination (without duplication): (1) any obligation of such Person (a) for borrowed money, under any reimbursement obligation relating to a letter of credit (other than letters of credit payable to suppliers, customer deposits and advance customer payments, each in the ordinary course of business), under any reimbursement obligation relating to a financial bond or under any reimbursement obligation relating to a similar instrument or agreement, (b) for the payment of money relating to any obligations under any capital lease of real or personal property, or (c) to the extent not otherwise included in this definition, the aggregate net termination value of all Hedging Obligations of such Person; and (2) any amendment, supplement, modification, deferral, renewal, extension or refunding of any liability of the types referred to in clause (1) above. For the purpose of determining any particular amount of Indebtedness under this definition, Guarantees of (or obligations with respect to letters of credit) Indebtedness otherwise included in the determination of such amount shall not be included. ‘‘Interest Rate Agreement’’ shall mean, with respect to any Person, any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement to which such Person is a party or a beneficiary. ‘‘Internal Indebtedness’’ means any Indebtedness that is payable to Colombian residents in Pesos. ‘‘Issuer’’ shall mean Empresas Públicas de Medellín E.S.P. ‘‘Lien’’ shall mean any mortgage, pledge, lien, hypothecation, security interest or other charge or encumbrance on any property or asset including, without limitation, any equivalent created or arising under applicable law. ‘‘Maturity Date’’ shall mean September 10, 2024. ‘‘Noteholder’’ or ‘‘Holder’’ shall mean the Person in whose name a Note is registered on the Register. ‘‘Officers’ Certificate’’ shall mean a certificate signed by two officers (as defined in the Indenture) or by an officer and the Chief Financial Officer of the Issuer or any Subsidiary, as the case may be, and delivered to the Trustee. ‘‘Other Taxes’’ shall mean any and all stamp, documentary or similar taxes, or any other excise or similar levies that arise on account of the execution, delivery, registration, recording or enforcement of the Notes and the Indenture (other than any Taxes paid in accordance with the first paragraph of ‘‘— Additional Amounts’’).

235 ‘‘Outstanding’’ when used with respect to the Notes, shall mean, as of the date of determination, all Notes theretofore authenticated and delivered under the Indenture, except: (1) Notes theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (2) Notes, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any paying agent (other than the Issuer) in trust or set aside and segregated in trust by the Issuer (if the Issuer shall act as their own paying agent) for the Holders of such Notes; provided that, if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to the Indenture or provision therefor satisfactory to the Trustee has been made; and (3) Notes which have been paid pursuant to the provisions for ‘‘Mutilated Notes’’ under the Indenture or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to the Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands such Notes are valid obligations of the Issuer; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Issuer or its Subsidiaries shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the reasonable satisfaction of the Trustee the pledgee’s right so to act with respect to such Notes and that the pledgee is not any of the Issuer or its Subsidiaries. ‘‘Payment Date’’ shall have the meaning giving to it under ‘‘The Notes and the Indenture.’’ ‘‘Person’’ shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, other entity or governmental authority. ‘‘Pesos’’ or ‘‘Ps.’’ means the lawful currency of the Republic of Colombia. ‘‘Preferred Stock’’ shall mean, with respect to the Capital Stock of any Person, any class or classes (however designated) that is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. ‘‘Purchase Money Obligation’’ shall mean: (1) mortgage financings, purchase money obligations or other Indebtedness incurred or assumed for the purpose of financing or refinancing all or any part of the purchase price, lease, expense or cost of any property or asset, tangible or intangible used in any Related Business (including the documented cost of design, development, acquisition, construction (including capitalized interests), installation, improvement, transportation, integration and prepaid maintenance and all reasonable and documented related fees or expenses) or (2) Indebtedness incurred in connection with any lease financing transaction whether such lease will be treated as an operating lease or a Capitalized Lease Obligation in accordance with Colombian Public Utilities Companies GAAP. ‘‘QIB’’ shall mean a ‘‘qualified institutional buyer’’ as such term is defined from time to time for purposes of Rule 144A. ‘‘Rate Calculation Date’’ shall mean the third Business Day preceding (i) in the case of interest or principal, each scheduled interest or principal payment date or any other date on which principal or interest shall become payable as a result of an acceleration of the maturity of the Notes and (ii) in the case of the exercise of the optional redemption rights described herein, the applicable redemption date. ‘‘Rating Agencies’’ shall mean Fitch, Inc. (‘‘Fitch’’), Moody’s Investors Service, Inc. (‘‘Moody’s’’) and Standard & Poor’s (‘‘S&P’’) or, if any of Fitch, Moody’s or S&P shall not make a rating on the Notes publicly

236 available, such other ‘‘nationally recognized statistical rating organization’’ (within the meaning of Rule 15c3- 1(c)(2)(vi)(F) under the Exchange Act) as the Issuer may select (as certified by a resolution of the Board of Directors of the Issuer) as a replacement agency for Fitch, Moody’s or S&P or each of them, as the case may be. ‘‘Record Date’’ shall mean, with respect to any payment of principal or interest on any Note, the fifteenth day prior to the due date for such payment (whether or not a Business Day). ‘‘Redemption Date’’ means, when used with respect to any Note to be redeemed, the date fixed for such redemption by or pursuant to the Indenture. ‘‘Register’’ shall mean the register maintained pursuant to the Indenture for the registration and registration of transfer and exchange of the Notes. ‘‘Regulation S’’ shall mean Regulation S under the Securities Act. ‘‘Related Business’’ shall mean any business related, ancillary or complementary to the businesses of the Issuer and its Subsidiaries on the Closing Date as described in the offering memorandum related to the Notes including, but not limited to, infrastructure-related projects and investments. ‘‘Representative Market Rate’’ means the weighted average of the buy and sell foreign exchange rates for transactions completed on the previous Business Day by certain commercial banks and financial corporations in Bogotá, Cali, Barranquilla and Medellín, as calculated and published by the SFC and which is available at the SFC’s website at http://www.superfinanciera.gov.co, or at Bloomberg by typing ‘‘TRMHP‘‘, or at the Banco de la República’s website at http://www.banrep.gov.co. If such exchange rate is not calculated and published by the SFC for any Business Day, then the Representative Market Rate shall be determined by the Calculation Agent by polling Citibank — Colombia, Banco Bilbao Vizcaya Argentaria Colombia S.A., Banco Davivienda S.A., Banco de Bogota S.A. and Banco CorpBanca Colombia S.A. located in Bogotá D.C., Colombia (collectively, the ‘‘Reference Banks’’) at (or as close as possible to) 1:00 P.M., Bogotá time, for the exchange rate for the professional market, by taking the arithmetic mean of the polled exchange rates (such mean, the ‘‘Alternative Rate’’). In the event that any of the Reference Banks cease to operate in Colombia or if the Reference Banks fail to provide the Calculation Agent with such information necessary to complete polling, they shall be replaced by the Issuer, for the purpose of determining the Alternative Rate, with subsidiaries or branches of other foreign banks having similar characteristics and the Issuer shall notify the Calculation Agent in writing of such replacement. ‘‘Responsible Officer’’ shall mean, with respect to the Trustee, except as otherwise provided in the Indenture, any officer assigned to the Global Finance Americas unit (or any successor division or unit) of the Trustee located at the Corporate Trust Office of the Trustee who shall have direct responsibility for the administration of this Indenture and also means, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject. ‘‘Rule 144A’’ shall mean Rule 144A under the Securities Act. ‘‘Securities Act’’ shall mean the United States Securities Act of 1933, as amended. ‘‘Settlement Rate’’ means, for any Rate Calculation Date, the average (rounded to the nearest hundredth) of the Representative Market Rates for each Business Day in the five Business Day period ending on that Rate Calculation Date. ‘‘SFC’’ shall mean the Colombian Superintendence of Finance (Superintendencia Financiera de Colombia). ‘‘SSPD’’ shall mean the Colombian Superintendency of Domiciliary Public Utilities (Superintendencia de Servicios Públicos Domiciliarios). ‘‘Stated Maturity’’ shall mean, with respect to any Indebtedness, the date specified in such Indebtedness as the fixed date on which the final payment of principal of such Indebtedness is due and payable, including, with respect to any principal amount that is then due and payable pursuant to any mandatory redemption or prepayment provision, the date specified for the payment thereof (but excluding any provision providing for the repurchase or prepayment of such Indebtedness at the option of the Holder thereof upon the happening of any contingency beyond the control of the obligor thereunder unless such contingency has occurred). ‘‘Subsidiary’’ shall mean, with respect to any Person (the ‘‘parent’’) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the

237 parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with Colombian Public Utilities Companies GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (1) of which securities or other ownership interests representing more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held; or (2) that is, as of such date, otherwise controlled by the parent or one or more Subsidiaries of the parent. ‘‘Taxes’’ shall mean any and all income, stamp or other taxes, duties, levies, imposts, charges, fees, deductions or withholdings (including interest and penalties with respect to the foregoing), now or hereafter imposed, levied, collected, withheld or assessed by any governmental authority of Colombia or any political subdivision thereof, any authority of or in such jurisdiction having the power to impose taxes, or any jurisdiction through which payments are made (each, a ‘‘Taxing Jurisdiction’’). ‘‘Total Assets’’ means with respect to any Person, the total consolidated assets of such Person and its Subsidiaries, without giving effect to any amortization of the amount of intangible assets since the Closing Date, (x) as shown on the most recent balance sheet of such Person, or (y) in regards to the Issuer only, as shown on the most recent balance sheet required to be delivered pursuant to the covenant under ‘‘Financial Reporting.’’ ‘‘U.S. Government Obligations’’ shall mean direct obligations (or certificates representing an ownership interest in such obligations) of the United States (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States is pledged and that are not callable or redeemable at the issuer’s option. ‘‘Voting Stock’’ of a Person shall mean all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof.

Book-Entry, Delivery and Form The Notes will be represented by one or more definitive, fully registered securities in global form. A global security is a special type of indirectly held debt security. All Notes initially sold in the United States or to U.S. persons will be restricted Notes (‘‘Restricted Notes’’). The Restricted Notes will be issued in definitive, fully registered form without interest coupons to QIBs pursuant to Rule 144A, in the form of beneficial interests in one or more global notes in registered form (‘‘Restricted Global Notes’’) registered in the name of a nominee of DTC, and will be deposited with the Trustee as custodian for DTC. The Restricted Global Notes (and any Notes issued in exchange for them) will be subject to certain restrictions on transfer set forth therein and in the Indenture (the ‘‘Transfer Restrictions’’) and will bear the legend relating to such restrictions set forth under ‘‘Transfer Restrictions —Investors’ Representations and Restrictions on Resale’’ in this offering memorandum. Notes sold to persons other than U.S. persons in offshore transactions in reliance on Regulation S (‘‘Regulation S Notes’’) will initially be represented by one or more global Notes in definitive, fully registered form without interest coupons (collectively, the ‘‘Regulation S Global Notes’’ and, together with the Restricted Global Notes, the ‘‘Global Notes’’) registered in the name of a nominee of DTC, and will be deposited with the Trustee as custodian for DTC. The Notes will be subject to certain restrictions on transfer set forth therein and will bear the legend relating to such restrictions set forth under ‘‘Transfer Restrictions —Investors’ Representations and Restrictions on Resale’’ in this offering memorandum. Each Global Note will be deposited with the Trustee, as custodian for DTC, and will be registered in the name of Cede & Co., as nominee of DTC. Any person wishing to own a beneficial interest in the Notes must do so indirectly by virtue of an account with a broker, bank or other financial institution that in turn has an account with DTC. As an indirect holder, an investor’s rights relating to a Global Note will be governed by the account rules of the investor’s financial institution and of DTC, as well as general laws relating to securities transfers. EPM does not recognize this type of investor as a holder of the Notes under the Indenture and instead deals only with DTC, which holds the Global Notes.

238 An investor should be aware that because the Notes are issued only in global form: • the investor cannot get the Notes registered in his or her own name; • the investor cannot receive physical certificates for his or her interest in the Notes; • the investor will be a ‘‘street name’’ holder and must look to his or her own bank or broker for payments on the Notes and protection of his or her legal rights relating to the Notes; • the investor may not be able to sell interests in the Notes to some insurance companies and other institutions that are required by law to own their securities in the form of physical certificates; and • DTC’s policies will govern payments, transfers, exchange and other matters relating to the investor’s interest in the Global Note. None of EPM, the Trustee and their respective agents have any responsibility for any aspect of DTC’s actions or for its records of ownership interests in the Global Note. EPM, the Trustee and their respective agents also do not supervise DTC in any way. In a few special situations described below, the Global Notes will terminate and interests in them will be exchanged for physical certificates representing the Notes. After that exchange, the choice of whether to hold the Notes directly or in ‘‘street name’’ will be up to the investor. Investors must consult their own bank or brokers in the event of such special situation to find out how to have their interests in the Notes transferred to their own name so that they will be direct holders. The special situations for termination of the Global Notes are when: • DTC or its successor notifies EPM that it is unwilling, unable or no longer qualified to continue as depositary for the Notes and no successor depositary has been appointed within 90 days of this notification to them or of their becoming aware of this; or • an Event of Default on the Notes has occurred and not been cured. The laws of some jurisdictions may require that certain persons take physical delivery of securities in certificated form. Consequently, the ability to transfer beneficial interests in a Global Note to such persons may be limited. Because DTC can act only on behalf of DTC participants, which, in turn, act on behalf of indirect DTC participants and certain banks, the ability of an investor to pledge its beneficial interest in a Note to persons that do not participate in the DTC system, or otherwise take actions in respect of such beneficial interest, may be affected by the lack of a physical certificate evidencing such interest. DTC DTC has advised EPM as follows: • DTC is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a ‘‘clearing corporation’’ within the meaning of the New York Uniform Commercial Code and a ‘‘clearing agency’’ registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for DTC participants and to facilitate the clearance and settlement of transactions among its participants in those securities through electronic book-entry changes in accounts of DTC participants, thereby eliminating the need for physical movement of certificates. • DTC participants include certain securities brokers and dealers, banks, trust companies and clearing corporations and may in the future include certain other organizations (‘‘DTC participants’’). Indirect access to the DTC system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly (‘‘indirect DTC participant’’). • Transfers of ownership or other interests in Notes in DTC may be made only through DTC participants. Indirect DTC participants are required to effect transfers through a DTC participant. DTC has no knowledge of the actual beneficial owners of the Notes. DTC’s records reflect only the identity of the DTC participants to whose accounts the Notes are credited, which may not be the beneficial owners. DTC participants will remain responsible for keeping account of their holdings on behalf of their customers and for forwarding all notices concerning the Notes to their customers. • So long as DTC, or its nominee, is a registered owner of the Global Notes, payments of principal and interest on the Notes will be made in immediately available funds in accordance with the DTC participants’

239 holdings shown on DTC’s records. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in ‘‘street name,’’ and will be the responsibility of the DTC participants and not of DTC, the Trustee or EPM, or their respective agents subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of EPM. Disbursement of payments to DTC participants will be DTC’s responsibility, and disbursement of payments to the beneficial owners will be the responsibility of DTC participants and indirect DTC participants. • Because DTC can only act on behalf of DTC participants, who in turn act on behalf of indirect DTC participants, and because owners of beneficial interests in the Notes holding through DTC will hold interests in the Notes through DTC participants or indirect DTC participants, the ability of the owners of beneficial interests to pledge the Notes to persons or entities that do not participate in DTC, or otherwise take actions with respect to the Notes, may be limited. • Ownership of interests in the Notes held by DTC will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC, the DTC participants and the indirect DTC participants. The laws of some jurisdictions require that certain persons take physical delivery in definitive form of securities which they own. Consequently, the ability to transfer beneficial interests in the Notes held by DTC is limited to that extent. Euroclear and Clearstream, Luxembourg Positions and Procedures Euroclear and Clearstream, Luxembourg will hold omnibus positions on behalf of their participants through customers’ securities accounts in Euroclear’s and Clearstream, Luxembourg’s names on the books of their respective system depositaries which in turn will hold the positions in customers’ securities accounts in the system depositaries’ names on the books of DTC. Euroclear and Clearstream, Luxembourg are indirect DTC participants. Subject to compliance with the transfer restrictions applicable to the Notes described below under ‘‘— Registration of Transfer and Exchange,’’ cross-market transfers between DTC participants, on the one hand, and Euroclear participants or Clearstream, Luxembourg participants, on the other hand, will be effected in DTC in accordance with DTC’s rules on behalf of Euroclear or Clearstream, Luxembourg, as the case may be; provided, that such cross-market transfers will require delivery of instructions to Euroclear or Clearstream, Luxembourg, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels/Luxembourg time) of such system. Euroclear or Clearstream, Luxembourg, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depository to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant Global Notes in DTC, and by making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream, Luxembourg participants may not deliver instructions directly to the depositories for Euroclear or Clearstream, Luxembourg. Because of time zone differences, the securities account of a participant with Euroclear or Clearstream, Luxembourg purchasing a beneficial interest in a Global Note from a DTC participant will be credited during the securities settlement processing day (which must be a business day for Euroclear or Clearstream, Luxembourg, as applicable) immediately after the DTC settlement date, and such credit of any transaction or beneficial interest in a Global Note settled during such processing day will be reported to the relevant participant with Euroclear or Clearstream, Luxembourg on such day. Cash received in Euroclear or Clearstream, Luxembourg as a result of sales of beneficial interests in a Global Note by or through a participant with Euroclear or Clearstream, Luxembourg to a DTC participant will be received with value on the DTC settlement date, but will be available in the relevant Euroclear or Clearstream, Luxembourg cash account only as of the business day after settlement in DTC. EPM expects that DTC will take any action permitted to be taken by a Holder (including the presentation of Notes for exchange as described below) only at the direction of one or more DTC participants to whose account such DTC interests in the Global Notes are credited and only in respect of such portion of the aggregate principal amount of the Notes to which such DTC Participant(s) has/have given such direction. Although the foregoing procedures are those currently in place to facilitate transfers of interests in the Global Notes among DTC participants, Euroclear participants and Clearstream, Luxembourg participants, DTC, Euroclear

240 and Clearstream, Luxembourg are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither EPM nor the Trustee nor any of their respective agents will have any responsibility for the performance by DTC, Euroclear, Clearstream, Luxembourg or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their transactions.

Registration of Transfer and Exchange

General Subject to the restrictions on transfer contained in the Indenture, and described below and in ‘‘Transfer Restrictions — Investors’ Representations and Restrictions on Resale,’’ and the limitations applicable to Global Notes, Notes may be presented for exchange for other Notes of any authorized denominations and of a like tenor and aggregate principal amount or for registration of transfer by the holder thereof or his attorney duly authorized in writing and, if so required by EPM or the Trustee, with the form of transfer thereon duly endorsed or accompanied by a written instrument of transfer in form satisfactory to EPM or the Trustee duly executed, at the office of the Registrar or at the office of any transfer agent designated by EPM for such purpose. No service charge will be made for any exchange or registration of transfer of Notes, but EPM may require payment of a sum by the holder of a Note sufficient to cover any tax or other governmental charge payable in connection therewith. Such transfer or exchange will be effected upon the Registrar or such transfer agent, as the case may be, being satisfied with the documents of title and identity of the person making the request. The Registrar may decline to accept any request for an exchange or registration of transfer of any Note during the period of 15 days preceding the due date for any payment of principal of or any other payments on or in respect of the Notes. EPM has appointed the Trustee as Registrar. EPM may at any time designate additional transfer agents or rescind the designation of any transfer agent or approve a change in the office through which any transfer agent acts; provided, however, that there shall at all times be a Registrar in the Borough of Manhattan, The City of New York. Upon the transfer, exchange or replacement of Restricted Notes bearing the legend referred to under ‘‘Transfer Restrictions — Investors’ Representations and Restrictions on Resale,’’ or upon specific request for removal of such legend on a Note, the Trustee will deliver only Notes that bear such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to EPM or the Trustee such satisfactory evidence, which may include an opinion of counsel, as may reasonably be required by EPM or the Trustee that neither the legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act.

Transfers Within Global Notes Subject to the procedures and limitations described above, transfers of beneficial interests within a Global Note may be made without delivery to EPM or the Trustee of any written certifications or other documentation by the transferor or transferee.

Transfers Between Global Notes Prior to the 41st day after the later of the commencement of this offering and the closing date (the ‘‘Restriction Date’’), a beneficial interest in a Regulation S Global Note may be transferred only to another person who takes delivery in the form of an interest in a Regulation S Global Note or to a person who takes delivery in the form of an interest in a Restricted Global Note, upon receipt by the Trustee of a written certification from the transferee or the transferor, as the case may be (in the form provided in the Indenture) to the effect that either: • such transferee is purchasing the Notes for its own account or for accounts as to which it exercises sole investment discretion and that it, and, if applicable, each such account is a QIB within the meaning of Rule 144A, in each case, in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction; Beneficial interests in a Restricted Global Note may be transferred to a person who takes delivery in the form of an interest in a Regulation S Global Note, whether before, on or after the Restriction Date, only upon receipt by the Trustee of a written certification from the transferor (in the forms provided in the Indenture) to the effect that such transfer is being made in accordance with Rule 903 or Rule 904 of Regulation S (as applicable). Any beneficial interest in any Global Note that is transferred to a person who takes delivery in the form of an interest in the other type of Global Note will, upon transfer, cease to be an interest in such Global Note and become

241 an interest in the other type of Global Note and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in such other type of Global Note for as long as it remains such an interest. Except in the circumstances described herein, owners of beneficial interests in Global Notes will not be entitled to receive physical delivery of certificated Notes.

Transfers or Exchanges from Global Notes to Certificated Notes If DTC or any successor depositary is at any time unwilling or unable to continue as a depositary for the reasons set forth above, and a successor depositary is not appointed by EPM within 90 days, EPM will issue Notes in certificated form (‘‘Certificated Notes’’) in definitive registered form of like tenor in denominations of Ps.5 million and integral multiples of Ps.1 million in excess thereof in exchange for the Regulation S Global Notes and Restricted Global Notes, as the case may be. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests therein will be registered in the names, and issued in any approved denominations, requested by DTC. So long as the Notes are listed on the Luxembourg Stock Exchange and admitted to trading on the Euro MTF and the rules of such exchange so require, payments of principal on definitive registered Notes may be made by presenting and surrendering such Notes at the office of the co-paying agent in the European Union. In addition, so long as the Notes are listed on the Luxembourg Stock Exchange and admitted to trading on the Euro MTF and the rules of such exchange so require, transfers or exchange of definitive registered Notes may be made by presenting and surrendering such Notes at, and obtaining new definitive registered Notes from, the office of the Luxembourg Transfer Agent. With respect to a partial transfer of a definitive registered Note, a new definitive registered Note in respect of the balance of the principal amount of the definitive registered Note that was not transferred will be delivered at the office of the Luxembourg Transfer Agent. EPM will maintain a co-paying agent in the European Union as long as the Notes are listed on the Euro MTF Market of the Luxembourg Stock Exchange.

Same Day Settlement and Payment Settlement for the Notes must be made by the Initial Purchasers in immediately available funds. All payments of interest or premium on, principal of, or Additional Amounts on, Global Notes will be made in immediately available funds. So long as Notes are represented by a Global Note registered in the name of DTC or its nominee, the Notes will trade in DTC’s Same-Day Funds Settlement System and secondary market trading activity in the Notes will be required by DTC to settle in immediately available funds on trading activity in the Notes. Transfers between participants in Euroclear and Clearstream, Luxembourg will be effected in the ordinary manner in accordance with their respective rules and operating procedures.

242 CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS The following summary of certain U.S. federal income tax consequences to holders of the purchase, ownership and disposition of the Notes issued in this offering is based upon the Internal Revenue Code of 1986, as amended (the ‘‘Code’’), Treasury regulations and judicial decisions and administrative interpretations thereof, all as of the date hereof and all of which are subject to change (possibly with retroactive effect) or possible differing interpretations. This summary is limited to U.S. Holders who purchase the Notes in the initial offering at the price indicated on the cover hereof and who hold the Notes as capital assets (generally, property held for investment) and does not purport to address all aspects of U.S. federal income taxation that may be applicable to U.S. Holders in light of their particular circumstances nor does it purport to address persons in special tax situations, such as banks, financial institutions, insurance companies, regulated investment companies, real estate investment trusts, tax-exempt entities or persons holding the Notes in a tax-deferred or tax-advantaged account, dealers in securities or currencies, traders in securities that elect to mark to market, certain expatriates, persons subject to the alternative minimum tax or Medicare tax on net investment income, entities that are treated as partnerships or other pass-through entities for U.S. federal income tax purposes, persons holding Notes as a hedge against currency risks, as a position in a ‘‘straddle’’ or as part of a ‘‘hedging,’’ persons deemed to sell the Notes under the constructive sales provisions of the Code, ‘‘conversion’’ or ‘‘integrated’’ transaction for tax purposes, or persons whose functional currency is not the U.S. dollar. Further, any Notes which are Additional Notes may not be fungible for U.S. federal income tax purposes and thus holders of Additional Notes should contact their tax advisors regarding the U.S. federal income tax consequences to such holders of the purchase, ownership and disposition of Additional Notes. If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds the Notes, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Thus, persons who are partners in a partnership holding the Notes and such partnerships should consult their tax advisors. THIS SUMMARY DOES NOT ADDRESS ANY U.S. FEDERAL GIFT OR ESTATE TAX CONSEQUENCES OR ANY STATE, LOCAL OR FOREIGN TAX CONSEQUENCES. PERSONS CONSIDERING THE PURCHASE OF THE NOTES SHOULD CONSULT THEIR TAX ADVISORS CONCERNING THE APPLICATION OF U.S. FEDERAL INCOME, STATE AND LOCAL TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES ARISING UNDER THE LAWS OF ANY FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY. As used in this offering memorandum, the term ‘‘U.S. Holder’’ means a beneficial owner of a Note that is for U.S. federal income tax purposes: • an individual who is a citizen or resident of the United States, • a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) that is created or organized in or under the laws of the United States, any state thereof or the District of Columbia, • an estate the income of which is subject to U.S. federal income taxation regardless of its source, or • a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust or if the trust was in existence on August 20, 1996 and made a valid election to be treated as a United States person. ‘‘Non-U.S. Holder’’ means a person that is a beneficial owner of a Note other than a U.S. Holder.

U.S. Holders Characterization of the Notes. Because the Notes are denominated in a currency other than the U.S. dollar, the Notes are subject to special rules under Section 988 of the Code and the Treasury regulations thereunder (the ‘‘988 regulations’’). The proper application of the 988 regulations to the Notes is unclear. For purposes of applying the 988 regulations to the Notes, we believe that it is reasonable to treat the relevant Settlement Rate that we use to translate the issue price and payments on a Note into U.S. dollars (as set forth above under ‘‘Description of Notes—The Notes and the Indenture’’) as the relevant exchange rate for determining income, gain or loss with respect to payments on, or the proceeds from the disposition of, the Notes, and the remainder of this discussion assumes that such treatment is correct. It is possible, however, that the IRS could require a U.S. Holder to calculate

243 income, gain or loss on the Notes using spot rates in effect on the issue date or on a relevant payment date, as the case may be. If such rates were to apply, it is possible that the character, amount, source and timing of income, gain or loss on the Notes could differ from what is described below. U.S. Holders should consult their tax advisors regarding the proper application of the 988 regulations to the Notes. Payments of Interest. Payments of interest on a Note (including any withheld taxes or Additional Amounts in respect thereto) generally will be taxable to a U.S. Holder as ordinary interest income at the time such payments are accrued or are received (in accordance with the U.S. Holder’s regular method of accounting for U.S. federal income tax purposes). For U.S. Holders that use the cash method of tax accounting, the amount of interest income realized will be the U.S. dollar amount received in respect of such payments based on the ‘‘spot’’ rate in effect on the date of receipt. Under applicable Treasury regulations, the ‘‘spot rate’’ generally means a rate that reflects a fair market rate of exchange available to the public for currency under a ‘‘spot contract’’ in a free market and involving representative amounts. A ‘‘spot contract’’ is a contract to buy or sell a currency on the nearest conventional settlement date, generally two business days following the date of the execution of the contract. If such a spot rate cannot be demonstrated, the Internal Revenue Service (the ‘‘IRS’’) has the authority to determine the spot rate. For U.S. Holders that are accrual-basis taxpayers, the amount of interest income realized will be based on the average exchange rate in effect during the interest accrual period (or with respect to an interest accrual period that spans two taxable years, at the average exchange rate for the partial period within the taxable year). Alternatively, an accrual-basis U.S. Holder may elect to translate all interest income on the Notes at the spot rate on the last day of the accrual period (or the last day of the taxable year, in the case of an accrual period that spans more than one taxable year) or on the date that the interest payment is received if that date is within five business days of the end of such holder’s accrual period or taxable year. If this election is made, a U.S. Holder must apply it consistently to all debt instruments held by such U.S. Holder at the beginning of the first taxable year to which the election applies and to all debt instruments that such U.S. Holder subsequently acquires. This election cannot be changed without the consent of the IRS. Accrual-basis U.S. Holders will recognize foreign currency gain or loss on the receipt of an interest payment in U.S. dollars if the amount received differs from the amount previously accrued in respect of that interest payment. This foreign currency gain or loss will be treated as U.S. source ordinary income or loss, but generally will not be treated as an adjustment to interest income received on the Note. As a result of the inclusion of any amounts attributable to withheld taxes and Additional Amounts, the amount included in a U.S. Holder’s gross income for U.S. federal income tax purposes with respect to a payment of interest may be greater than the amount of cash actually received (or receivable) by such U.S. Holder. Subject to applicable limitations (including certain minimum holding period requirements), a U.S. Holder may be entitled to a credit against such U.S. Holder’s U.S. federal income tax liability (or a deduction in computing such U.S. Holder’s U.S. taxable income) for any foreign income taxes withheld. Interest paid on the Notes generally will be treated as income from sources outside the United States for purposes of computing the U.S. Holder’s foreign tax credit and generally will be treated as ‘‘passive category income,’’ or, in the case of certain U.S. Holders, ‘‘general category income’’ for U.S. foreign tax credit limitation purposes. The rules relating to U.S. foreign tax credits are extremely complex. U.S. Holders should consult their tax advisors regarding the availability of U.S. foreign tax credits in their particular circumstances. Sale, Exchange, Redemption or Other Taxable Disposition. A U.S. Holder generally will recognize gain or loss on the sale, exchange, redemption or other taxable disposition of a Note equal to the difference (if any) between the amount realized on the sale, exchange, redemption or other taxable disposition, (collectively, a ‘‘disposition) except to the extent such amount is attributable to accrued but unpaid interest (which will be treated as such), and such U.S. Holder’s adjusted tax basis in the Note. A U.S. Holder’s adjusted tax basis in a Note generally will equal the U.S. dollar value of such U.S. Holder’s purchase price of the Note on the date of purchase, calculated at the spot rate in effect on that date. The amount realized generally will be the U.S. dollar value of the Colombian pesos received, calculated at the spot rate in effect on the date of the disposition. If a cash-basis U.S. Holder (or an accrual-basis holder that makes a special election) disposes of a Note that is traded on an established securities market, such U.S. Holder will determine its tax basis or amount realized by using the spot rate in effect on the settlement date of the purchase or disposition, as the case may be. A U.S. Holder will recognize U.S. source foreign currency gain or loss (taxable as ordinary income or loss) on the disposition of a Note equal to the difference, if any, between the U.S. dollar value of the amount realized on such disposition based on the spot rate in effect on the date of such disposition and the U.S. dollar value of the U.S. Holder’s purchase price for the Note (or, if less, the principal amount

244 of the Note) based on the spot rate in effect on the date on which the U.S. Holder acquired the Note. Any such foreign currency gain or loss will be realized only to the extent of total gain or loss realized on the disposition. Any remaining gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if the Note was held by such U.S Holder for more than one year at the time of the disposition. Certain non-corporate U.S. Holders (including individuals) may qualify for preferential rates of U.S. federal income taxation in respect of long-term capital gains. The deductibility of capital losses is subject to certain limitations. Any gain or loss realized by a U.S. Holder on a disposition of a Note generally will be treated as U.S.-source gain or loss for U.S. foreign tax credit purposes (irrespective of whether such income is treated as Colombian source income for purposes of any applicable Colombian taxes). See ‘‘Certain Colombian Tax Considerations.’’ The rules relating to U.S. foreign tax credits are extremely complex. U.S. Holders should consult their tax advisors regarding the availability of U.S. foreign tax credits in their particular circumstances.

Foreign Asset Reporting Certain U.S. Holders who are individuals are required to report information relating to an interest in the Notes, subject to certain exceptions (including an exception for Notes held in accounts maintained by financial institutions). U.S. Holders are urged to consult their tax advisors regarding their information reporting obligations, if any, with respect to their ownership and disposition of the Notes.

Non-U.S. Holders Subject to the discussion of backup withholding below, a Non-U.S. Holder generally will not be subject to U.S. federal withholding tax on interest and Additional Amounts on or gain with respect to the Notes. A Non-U.S. Holder also generally will not be subject to U.S. federal income tax on a net income basis with respect to interest and Additional Amounts received in respect of the Notes or gain realized on the sale, exchange or other taxable disposition (including redemption) of the Notes, unless that interest or gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business within the United States or, in the case of gain realized by an individual Non-U.S. Holder, the Non-U.S. Holder is present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met.

Information Reporting and Backup Withholding Payments of interest, principal and proceeds from the disposition of a Note that are made within the United States or through certain U.S.-related financial intermediaries may be subject to information reporting and backup withholding of U.S. federal income tax unless the U.S. Holder is a corporation or other exempt recipient or, in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number, certifies that such U.S. Holder is not subject to backup withholding and otherwise complies with the backup withholding rules. Non-U.S. Holders generally will be required to comply with applicable certification procedures to establish that they are not U.S. Holders in order to avoid the application of information reporting and backup withholding. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against such U.S. Holder’s U.S. federal income tax liability and may entitle such U.S. Holder to a refund, in each case, provided that the required information is timely furnished to the IRS.

245 CERTAIN COLOMBIAN TAX CONSIDERATIONS The following summarizes certain Colombian tax considerations that may be relevant to you if you invest in the Notes. This summary is based on laws, regulations, rulings and decisions now in effect in Colombia and may change. Any change could apply retroactively and could affect the continued validity of this summary. Under current Colombian law payments of principal and interest on the Notes are not subject to Colombian income or withholding tax, provided that the holder of the Notes is not a Colombian resident and is not domiciled in Colombia. In addition, gains realized on the sale or other disposition of the Notes will not be subject to Colombian income withholding tax, provided that the holder of the Notes is not a Colombian resident and is not domiciled in Colombia. So long as the holders of the Notes are not Colombian residents, there are no Colombian transfer, inheritance, gift or succession taxes applicable to the Notes. Pursuant to Law 1607 of 2012 (the ‘‘Tax Law’’), a person (including a holder of notes) will be deemed to be a tax resident in Colombia if he or she meets any of the following criteria: • If such person physically stays in Colombia for more than 183 calendar days within any given 365 consecutive day term. • If such person has been in service with the Colombian State or Government in a foreign state in which that person is exempt from taxes during the time of service by virtue of any provisions of the Vienna Conventions on diplomatic relations. • If such person is a Colombian national residing abroad, provided that, additionally, any of the following conditions are met: • such person has a spouse or permanent companion, or dependent children, who is a resident of Colombia, or • 50% or more of such person’s total income is sourced in Colombia, or • 50% or more of such person’s assets are managed in Colombia, or • 50% or more of such person’s assets are deemed to be located in Colombia, or • If such person has been summoned by the Colombian Tax Office to provide proof of residency in another country (other than Colombia) and has failed to provide such evidence, or • if such person is a resident of a country deemed a tax haven under Colombian law. Other changes introduced by the Tax Law and additional changes in tax related laws and regulations, and interpretations thereof, can affect tax burdens by increasing tax rates and fees, creating new taxes, limiting tax deductions, and eliminating tax based incentives and non-taxed income. In addition, tax authorities or courts may interpret tax regulations differently than we do, which could result in tax litigation and associated costs and penalties; see ‘‘Risk Factors— We are subject to new and higher taxes resulting from changes in tax regulations or the interpretation thereof in Colombia.’’ This summary does not describe all of tax the considerations that may be relevant to you or your situation, you should consult your tax adviser about the applicable regulation and tax consequences of holding the Notes.

246 PLAN OF DISTRIBUTION EPM intends to offer the Notes through the Initial Purchasers. Subject to the terms and conditions contained in a purchase agreement between EPM and the Initial Purchasers, EPM has agreed to sell to the Initial Purchasers, and each of the Initial Purchasers has agreed, severally and not jointly, to purchase from EPM, the principal amount of the Notes set forth opposite such Initial Purchaser’s name.

Initial Purchaser Principal Amount HSBC Securities (USA) Inc...... Ps.321,915,000,000 Itau BBA USA Securities, Inc...... Ps.321,915,000,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated ...... Ps.321,915,000,000 Total ...... Ps.965,745,000,000

If an initial purchaser defaults, the purchase agreement provides that the purchase commitments of the nondefaulting initial purchasers may be increased or the purchase agreement may be terminated. The Initial Purchasers may offer and sell the Notes through one or more of their affiliates. The Initial Purchasers have advised EPM that they propose initially to offer the Notes at the price listed on the cover page of this offering memorandum. After the initial offering, the Initial Purchasers may change the offering price and other selling terms. EPM has agreed to indemnify the Initial Purchasers and their controlling persons against certain liabilities in connection with this offering, including liabilities under the Securities Act, or to contribute to payments the Initial Purchasers may be required to make in respect of those liabilities. The Initial Purchasers are offering the Notes, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the Notes, and other conditions contained in the purchase agreement, such as the receipt by the Initial Purchasers of officer’s certificates and legal opinions. The Initial Purchasers reserve the right to withdraw, cancel or modify offers to investors and to reject orders in whole or in part.

Notes are Not Being Registered The Notes have not been and will not be registered under the Securities Act or any other State securities laws and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in transactions not requiring registration under the Securities Act or other applicable State securities laws, including to QIBs in reliance on Rule 144A under the Securities Act and to persons in offshore transactions in reliance on Regulation S under the Securities Act. Each of the Initial Purchasers has agreed that, except as permitted by the purchase agreement and to persons they reasonably believe to be QIBs, it will not offer, sell or deliver the Notes (i) as part of its distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date, within the United States or to, or for the account or benefit of, U.S. persons, and it will have sent to each distributor, dealer or other person receiving a selling concession, fee or other remuneration to which it sells Notes in reliance on Regulation S during such 40-day period, a confirmation or other notice detailing the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act. Resales of the Notes are restricted as described under ‘‘Transfer Restrictions — Investors’ Representations and Restrictions on Resale.’’ In addition, until 40 days after the commencement of the offering, an offer or sale of Notes within the United States by a broker/dealer (whether or not it is participating in the offering), may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than pursuant to Rule 144A or another exemption from registration under the Securities Act. Each purchaser of the Notes will be deemed to have made acknowledgments, representations and agreements as described under ‘‘Transfer Restrictions — Investors’ Representations and Restrictions on Resale.’’

247 New Issue of Notes The Notes are a new issue of securities with no established trading market. EPM has applied to list the Notes on the Luxembourg Stock Exchange and to trade the Notes on the Euro MTF Market. We cannot assure you that a trading market for the Notes will develop, or if a trading market does develop, that it will be maintained. The Initial Purchasers have advised EPM that they presently intend to make a market in the Notes after completion of this offering. However, they are under no obligation to do so and may discontinue any market making activities at any time without notice. We cannot assure the liquidity of the trading market for the notes. If an active trading market for the notes does not develop, the market price and liquidity of the notes may be adversely affected. If the notes are traded, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for similar securities, our operating performance and financial condition, general economic conditions and other factors.

Price Stabilization and Short Positions In connection with the offering, the Initial Purchasers may engage in transactions that stabilize the market price of the Notes. Such transactions consist of bids or purchases to peg, fix or maintain the price of the Notes. If the Initial Purchasers create a short position in the Notes in connection with the offering, i.e., if they sell more Notes than are listed on the cover page of this offering memorandum, the Initial Purchasers may reduce that short position by purchasing Notes in the open market. The Initial Purchasers must close out any short position by purchasing notes in the open market. A short position is more likely to be created if the Initial Purchasers are concerned that there may be downward pressure on the price of the Notes in the open market after pricing that could adversely affect investors who purchase in the offering. Similar to other purchase transactions, the Initial Purchasers’ purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of the Notes or preventing or retarding a decline in the market price of the Notes. Purchases of a security to stabilize the price or to reduce a short position may cause the price of the security to be higher than it might be in the absence of such purchases. Neither EPM nor any of the Initial Purchasers make any representation or prediction as to the direction or magnitude of any effect the transactions described above may have on the price of the Notes. In addition, neither EPM nor any of the Initial Purchasers make any representation that the Initial Purchasers will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

No Sale of Similar Securities During the period from the date of this offering memorandum until 45 days from the date of this offering memorandum, EPM has agreed that it will not, without the prior written consent of the Initial Purchasers, directly or indirectly, issue, offer, sell, contract to sell or otherwise dispose of any debt securities or securities exchangeable for or convertible into debt securities, issued or guaranteed by EPM with a tenor of more than one year.

Other Relationships The Initial Purchasers and their affiliates have engaged in, and/or may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with EPM. They have received, and may receive in the future, customary fees and commissions for these transactions. In addition, in the ordinary course of their business activities, the Initial Purchasers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. Certain of the Initial Purchasers or their affiliates that have a lending relationship with us routinely hedge their credit exposure to us consistent with their customary risk management policies. Typically, such Initial Purchasers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities, including potentially the notes offered hereby. Any such short positions could adversely affect future trading prices of the notes offered hereby. The Initial Purchasers and/or their affiliates may make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and enter into derivative and/or structured transactions with clients, at their request, in connection with the Notes and the Initial Purchasers and/or their affiliates may purchase some of the Notes to hedge their risk exposure in connection with such transactions.

248 Notice to Prospective Investors in the European Economic Area In relation to each Member State of the European Economic Area (each, a ‘‘Relevant Member State’’), no offer of notes may be made to the public in that Relevant Member State other than: A. to any legal entity which is a qualified investor as defined in the Prospectus Directive; B. to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives; or C. in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of notes shall require the Company or the representatives to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive. This offering memorandum has been prepared on the basis that any offer of notes in any Relevant Member State will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of notes. Accordingly any person making or intending to make an offer in that Relevant Member State of notes which are the subject of the offering contemplated in this offering memorandum may only do so in circumstances in which no obligation arises for the Company or any of the initial purchasers to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neither the Company nor the initial purchasers have authorized, nor do they authorize, the making of any offer of notes in circumstances in which an obligation arises for the Company or the initial purchasers to publish a prospectus for such offer. For the purpose of the above provisions, the expression ‘‘an offer to the public’’ in relation to any notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe the notes, as the same may be varied in the Relevant Member State by any measure implementing the Prospectus Directive in the Relevant Member State and the expression ‘‘Prospectus Directive’’ means Directive 2003/71/EC (including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member States) and includes any relevant implementing measure in the Relevant Member State and the expression ‘‘2010 PD Amending Directive’’ means Directive 2010/73/EU.

Notice to Prospective Investors in the United Kingdom In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are ‘‘qualified investors’’ (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19 (5) of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’) Order 2005, as amended (the ‘‘Order’’) and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as ‘‘relevant persons’’). This document must not be acted on or relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any investment or investment activity to which this document relates is only available to, and will be engaged in with, relevant persons. The Initial Purchasers have (i) only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by them in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and (ii) complied and will comply with all applicable provisions of the FSMA with respect to anything done by them in relation to the Notes from or otherwise involving the United Kingdom.

Notice to Prospective Investors in Switzerland This offering memorandum does not constitute an issue prospectus pursuant to Article 652a or Article 1156 of the Swiss Code of Obligations and the notes will not be listed on the SIX Swiss Exchange. Therefore, this offering memorandum may not comply with the disclosure standards of the listing rules (including any additional listing rules or prospectus schemes) of the SIX Swiss Exchange. Accordingly, the notes may not be offered to the public in or from Switzerland, but only to a selected and limited circle of investors who do not subscribe to the notes with a view to distribution. Any such investors will be individually approached by the initial purchasers from time to time.

249 Notice to Prospective Investors in the Dubai International Financial Centre This offering memorandum relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (‘‘DFSA’’). This offering memorandum is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this offering memorandum nor taken steps to verify the information set forth herein and has no responsibility for the offering memorandum. The notes to which this offering memorandum relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the notes offered should conduct their own due diligence on the notes. If you do not understand the contents of this offering memorandum you should consult an authorized financial advisor.

Notice to Prospective Investors in Chile The offer of the notes will begin on September 10, 2014 and is subject to General Rule No. 336 of the Chilean Securities Commission (Superintendencia de Valores y Seguros de Chile, or the ‘‘SVS’’). The notes being offered are not registered in the Securities Registry (Registro de Valores) or in the Foreign Securities Registry (Registro de Valores Extranjeros) of the SVS and, therefore, the notes are not subject to the supervision of the SVS. As unregistered securities, we are not required to disclose public information about the notes in Chile. The notes may not be publicly offered in Chile unless they are registered in the corresponding securities registry. La oferta de los valores comienza el 10 de Septiembre del 2014 y está acogida a la Norma de Carácter General número 336 de fecha 27 de junio de 2012 de la Superintendencia de Valores y Seguros de Chile (la ‘‘SVS’’). La oferta versa sobre valores no inscritos en el Registro de Valores o en el Registro de Valores Extranjeros que lleva la SVS, por lo que los valores no están sujetos a la fiscalización de dicho organismo. Por tratarse de valores no inscritos, no existe obligación por parte del emisor de entregar en Chile información pública respecto de los valores. Estos valores no pueden ser objeto de oferta pública a menos que sean inscritos en el registro de valores correspondiente.

Notice to Prospective Investors in Peru The notes and the information contained in this offering memorandum are not being publicly marketed or offered in Peru and will not be distributed or caused to be distributed to the general public in Peru. Peruvian securities laws and regulations on public offerings will not be applicable to the offering of the notes and therefore, the disclosure obligations set forth therein will not be applicable to the issuer or the sellers of the notes before or after their acquisition by prospective investors. The notes and the information contained in this offering memorandum have not been and will not be reviewed, confirmed, approved or registered under the Peruvian Superintendency of Capital Markets (Superintendencia del Mercado de Valores) or any other Peruvian regulations. Accordingly, the notes cannot be offered or sold within Peruvian territory except to the extent any such offering or sale qualifies as a private offering under Peruvian regulations and complies with the provisions on private offerings set forth therein.

Notice to Prospective Investors in Hong Kong This offering memorandum has not been approved by or registered with the Securities and Futures Commission of Hong Kong or the Registrar of Companies of Hong Kong. The notes will not be offered or sold in Hong Kong other than (a) to ‘‘professional investors’’ as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a ‘‘prospectus’’ as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the notes which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) has been issued or will be issued in Hong Kong or elsewhere other than with respect to notes which are or are intended to be disposed of only to persons outside Hong Kong or only to ‘‘professional investors’’ as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

Notice to Prospective Investors in Singapore This offering memorandum has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this offering memorandum and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the notes may not be circulated or distributed, nor may the notes be offered

250 or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act (Chapter 289) (the ‘‘SFA’’), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. Where the notes are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, then securities, debentures and units of securities and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the securities under Section 275 except: (i) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (ii) where no consideration is given for the transfer; or (iii) by operation of law.

Notice to Prospective Investors in Colombia The offering of the notes will not be authorized by the SFC and the notes have not been and will not be registered in the Colombian National Registry of Securities and Issuers (Registro Nacional de Valores y Emisores) maintained by the SFC and may not be offered or sold publicly or otherwise be subject to brokerage activities in Colombia, except as permitted by Colombian law.

General Selling Restrictions EPM has taken no action and it will not take any action in the future in any jurisdiction that would, or is intended to, permit a public offering of the Notes, or possession or distribution of this offering memorandum or any other offering material, in any country or jurisdiction where action for that purpose is required. EPM requires persons into whose hands this offering memorandum comes to comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, offer, sell or deliver Notes or have in their possession, distribute or publish this offering memorandum or any other offering material relating to the Notes, in all cases at their own expense.

251 TRANSFER RESTRICTIONS Because of the following restrictions, purchasers are advised to consult legal counsel prior to making any offer, resale, pledge or other transfer of the Notes.

Offers and Sales by Initial Purchasers The Notes have not been, and will not be, registered under the Securities Act and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons except in accordance with an applicable exemption from the registration requirements thereof. Accordingly, the Notes are being offered and sold only to (a) QIBs purchasing for their own account or for the account of QIBs in reliance on the exemption from the registration requirements of the Securities Act provided by Rule 144A or (b) purchasers that are not U.S. persons in ‘‘offshore transactions’’ in reliance on Regulation S under the Securities Act.

Investors’ Representations and Restrictions on Resale Each purchaser of the Notes will be deemed, in making its purchase, to have represented and agreed as follows (terms used in this section not otherwise defined in this offering memorandum that are defined in Rule 144A or in Regulation S are used in this section as defined in those rules or regulations): (1) The purchaser either (a)(1) is a QIB, (2) is aware that the sale of the Notes to it is being made in reliance on Rule 144A, (3) is acquiring such Notes for its own account or the account of one or more other QIBs and (4) is not an Affiliate or (b)(1) is a foreign purchaser that is outside the United States (or a foreign purchaser that is a dealer or other fiduciary of the kind referred to above) and (2) is aware that the sale of the Notes to it is being made in reliance on Regulation S; (2) The purchaser understands that the Notes have not been registered under the Securities Act or the securities laws of any other jurisdiction and they may not be offered, sold or delivered in the United States or to, or for the account or benefit of, any U.S. person except as set forth below; (3) The purchaser understands and agrees that such Notes are being offered only in a transaction not involving any public offering within the meaning of the Securities Act, and that any future resale, pledge or transfer of such Notes on which the legend set forth below appears, may be made only by such Holder (i) to EPM, (ii) so long as the Notes remain eligible for resale pursuant to Rule 144A under the Securities Act, to a person who the seller reasonably believes is a QIB acquiring for its own account or for the account of one or more other QIBs in a transaction meeting the requirements of Rule 144A, (iii) in an offshore transaction meeting the requirements of Rule 903 or Rule 904 (as applicable) of Regulation S under the Securities Act, (iv) pursuant to an exemption from registration under the Securities Act (if available) or (v) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States or other jurisdictions (provided that as a condition to the registration of transfer of any Notes pursuant to (iv) above, EPM or the Trustee may, in circumstances that any of them deems appropriate, require evidence that it deems necessary or appropriate to evidence compliance with such exemption and with any state securities laws that may be applicable; (4) The purchaser will, and each subsequent holder is required to, notify any purchaser of Notes from it of the resale restrictions referred to in (3) above, if then applicable; (5) The purchaser understands and agrees that (A) the Notes initially offered to QIBs in reliance on Rule 144A will be represented by Restricted Global Notes, and (B) with respect to any transfer of any interest in Restricted Global Notes, (i) if to transferees that take delivery in the form of interests in Restricted Global Notes, the Trustee will not require any written certification from the transferor or the transferee, and (ii) if to transferees that take delivery in the form of interests in Regulation S Global Notes, the Trustee will require written certification from the transferor (in the form(s) provided in the Indenture), the form of which can be obtained from the Trustee, to the effect that the transfer complies with Rule 903 or 904 of Regulation S;

252 (6) The purchaser understands that the Notes will bear a legend to the following effect unless otherwise agreed by EPM: ‘‘NEITHER THIS GLOBAL SECURITY NOR ANY BENEFICIAL INTEREST HEREIN HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’). EACH OF THE HOLDER HEREOF AND EACH OWNER OF A BENEFICIAL INTEREST HEREIN, BY HOLDING THIS GLOBAL SECURITY AND ACQUIRING THEIR BENEFICIAL INTERESTS HEREIN, RESPECTIVELY, AGREES FOR THE BENEFIT OF EMPRESAS PÚBLICAS DE MEDELLÍN E.S.P. (THE ‘‘COMPANY’’) THAT THIS GLOBAL SECURITY AND BENEFICIAL INTERESTS HEREIN MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY BY A HOLDER (AS DEFINED IN THE INDENTURE PURSUANT TO WHICH THIS SECURITY WAS ISSUED) (1) TO THE COMPANY, (2) SO LONG AS THIS GLOBAL SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (‘‘RULE 144A’’) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A, ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ONE OR MORE OTHER QUALIFIED INSTITUTIONAL BUYERS IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION (IF AVAILABLE), OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND IN EACH OF SUCH CASES IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAW OF ANY STATE OF THE UNITED STATES. (PROVIDED THAT AS A CONDITION TO THE REGISTRATION OF ANY NOTES PURSUANT TO (4) ABOVE, EPM OR THE TRUSTEE MAY, IN CIRCUMSTANCES THAT ANY OF THEM DEEMS APPROPRIATE, REQUIRE EVIDENCE THAT IT DEEMS NECESSARY OR APPROPRIATE TO EVIDENCE COMPLIANCE WITH SUCH EXEMPTION AND WITH ANY STATE SECURITIES LAWS THAT MAY BE APPLICABLE). EACH OWNER OF A BENEFICIAL INTEREST IN THIS GLOBAL SECURITY, BY ACQUIRING SUCH BENEFICIAL INTEREST, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOTIFY ANY PURCHASER OF SUCH BENEFICIAL INTEREST FROM IT OF THE RESALE RESTRICTIONS REFERRED TO ABOVE. THIS LEGEND CAN ONLY BE REMOVED AT THE OPTION OF THE COMPANY AND IN COMPLIANCE WITH APPLICABLE LAW. THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED WITH THE COLOMBIAN NATIONAL REGISTRY OF SECURITIES AND ISSUERS (REGISTRO NACIONAL DE VALORES Y EMISORES) MAINTAINED BY THE SUPERINTENDENCE OF FINANCE OF COLOMBIA AND WILL NOT BE LISTED ON THE COLOMBIA STOCK EXCHANGE (BOLSA DE VALORES DE COLOMBIA). ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED OR SOLD IN COLOMBIA EXCEPT UNDER CIRCUMSTANCES WHICH DO NOT CONSTITUTE A PUBLIC OFFERING OF SECURITIES OR VIOLATE APPLICABLE SECURITIES LAWS AND REGULATIONS.’’ (7) If the purchaser is a non-U.S. purchaser, it understands that the Notes offered in reliance on Regulation S initially will be represented by the Regulation S Global Note; the non-U.S. purchaser further understands that the Regulation S Global Notes will bear a legend to the following effect, unless we determine otherwise in accordance with applicable law: ‘‘THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMENDED, (THE ‘‘SECURITIES ACT’’) AND MAY NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS SUCH SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT OR ANY EXEMPTION FROM THE REGISTRATION

253 REQUIREMENTS THEREOF IS AVAILABLE. THE FOREGOING SHALL NOT APPLY FOLLOWING THE EXPIRATION OF FORTY DAYS FROM THE LATER OF (I) THE DATE ON WHICH THESE SECURITIES WERE FIRST OFFERED AND (II) THE DATE OF ISSUANCE OF THESE SECURITIES.’’ (8) The purchaser acknowledges that EPM, the Initial Purchasers and others will rely upon the truth and accuracy of the foregoing acknowledgments, representations, warranties and agreements, and agrees that if any of the acknowledgments, representations or warranties deemed to have been made by it by its purchase of Notes are no longer accurate, it shall promptly notify EPM and the Initial Purchasers. If it is acquiring any Notes as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each such account and it has full power to make the foregoing representations, warranties and agreements on behalf of each such account. Each purchaser of Notes will be deemed to have represented and agreed that it understands that with respect to any transfer of interests in a Regulation S Global Note, on or prior to the 40th day after the later of the commencement of the offering and the closing date for the Notes, as described under ‘‘Book-Entry, Delivery and Form — Registration of Transfer and Exchange,’’if to a transferee who takes delivery in the form of an interest in a Restricted Global Note, the Trustee will require written certification from the transferee or transferor, as the case may be, (in the form(s) provided in the Indenture) to the effect that (i) such transferee is purchasing the Notes for its own account or for accounts as to which it exercises sole investment discretion and that it and, if applicable, each such account is a QIB within the meaning of Rule 144A, in each case, in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction or (ii) the transferor did not purchase such Notes as part of the initial distribution thereof and the transfer is being effected pursuant to and in accordance with an applicable exemption from the registration requirements of the Securities Act and the transferor has delivered to the Trustee such additional evidence that the Issuer or the Trustee may require as to compliance with such available exemption. EPM recognizes that none of DTC, Euroclear or Clearstream, Luxembourg in any way undertakes to, and none of DTC, Euroclear or Clearstream, Luxembourg shall have any responsibility to, monitor or ascertain the compliance of any transactions in the Notes with any exemptions from registration under the Securities Act or of any other state or federal securities law.

Right to Request Information EPM acknowledges that so long as any of the Notes are ‘‘restricted securities’’ within the meaning of Rule 144(a)(3) under the Securities Act, holders of such restricted securities, and prospective purchasers (as designated by such holders) of such restricted securities, will have the right to obtain upon request any information required to be provided by Rule 144A(d)(4) under the Securities Act during any period in which EPM is not subject to and in compliance with Section 13 or 15(d) of the Exchange Act, or EPM is not exempt from such reporting requirements pursuant to and in compliance with Rule 12g3-2(b) under the Exchange Act.

254 LEGAL MATTERS The validity of the Notes being offered hereby is being passed upon for EPM by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, EPM’s U.S. counsel. Certain legal matters relating to the issuance of the Notes will be passed upon for the Initial Purchasers by Milbank, Tweed, Hadley & McCloy LLP, the Initial Purchasers’s U.S. counsel. Matters of Colombian law will be passed upon for EPM by Mosquera Abogados Ltda., EPM’s Colombian counsel, and for the Initial Purchasers by Brigard & Urrutia Abogados S.A.S., Colombian counsel to the Initial Purchasers.

255 INDEPENDENT AUDITORS The consolidated financial statements as of December 31, 2012 and for each of the two years in the period ended December 31, 2012, included in this offering memorandum have been audited by PricewaterhouseCoopers Ltda, independent auditors, as stated in their report appearing herein. The consolidated financial statements as of and for the year ended December 31, 2013, included in this offering memorandum have been audited by Deloitte & Touche Ltda, independent auditors, as stated in their report appearing herein.

256 LISTING AND GENERAL INFORMATION

Listing Except as disclosed herein, there are no litigation or arbitration proceedings against or affecting us or any of our assets, nor are we aware of any pending or threatened proceedings, which are or might reasonably be expected to be material in the context of the issuance of the notes. Except as disclosed herein, there has been no adverse change, or any development reasonably likely to involve an adverse change, in our condition (financial or otherwise) or our general affairs since June 30, 2014. (the end of the most recent fiscal period for which financial statements have been prepared) that is material in the context of the issuance of the notes. EPM has applied to list the Notes on the Official List of the Luxembourg Stock Exchange in accordance with the rules of that exchange and to trade the Notes on the Euro MTF Market of such exchange. EPM will publish a notice of any redemption, change of control or any change in the rate of interest payable on the Notes on the website of the Luxembourg Stock Exchange at www.bourse.lu (or if the rules so require in a leading daily newspaper of general circulation in Luxembourg which EPM expects to be the Luxemburger Wort). For as long as the Notes are listed on the Official List of the Luxembourg Stock Exchange and the rules of that exchange require, you may inspect and obtain copies of the following documents at the specified office of the listing agent in Luxembourg during normal business hours on any business day: (1) EPM’s organizational documents (including their bylaws); (2) EPM’s current and future annual consolidated and unconsolidated financial statements, and any quarterly financial statements published by EPM; (3) any annual reports published by EPM in the future; and (4) the Indenture relating to the Notes (which includes the forms of the Notes). EPM, in the event the Notes are issued, will maintain a transfer agent in Luxembourg for as long as any of the Notes are listed on the Official List of the Luxembourg Stock Exchange and a co-paying agent in the European Union. EPM has appointed The Bank of New York Mellon, acting through its London Branch as its co-paying agent (the ‘‘Co-Paying Agent’’). The Co-Paying Agent will act as intermediary between the holders of the Notes and EPM. EPM reserves the right to vary such appointment and it will publish a notice on the website of the Luxembourg Stock Exchange at the office of our Listing Agent (or if the rules so require in a leading daily newspaper of general circulation in Luxembourg which EPM expects to be the Luxemburger Wort). EPM’s fiscal years each end on December 31. EPM’s financial statements for the fiscal years ending December 31, 2012 and 2013 will be available free of charge at the office of the Listing Agent. EPM may apply to remove the Notes from listing on the Official List of the Luxembourg Stock Exchange, particularly if necessary to avoid any new withholding tax.

Where You Can Find Other Information While any Notes remain outstanding, any requests for information and requests for agreements summarized in this offering memorandum should be directed to EPM. EPM will provide a copy of this offering memorandum and any related amendments or supplements to this offering memorandum to each purchaser of the Notes from the Initial Purchasers. Each person receiving this offering memorandum and any related amendments or supplements to this offering memorandum acknowledges that: (1) such person has been afforded an opportunity to request from EPM, and to review and has received, all additional information considered by it to be necessary to verify the accuracy and completeness of the information herein; (2) such person has not relied on the Initial Purchasers or any person affiliated with the Initial Purchasers in connection with its investigation of the accuracy of such information or its investment decision; and

257 (3) except as provided pursuant to (1) above, no person has been authorized to give any information or to make any representation concerning the Notes offered hereby other than those contained herein and, if given or made, such other information or representation should not be relied upon as having been authorized by EPM or the Initial Purchasers.

Clearing Information The Notes sold pursuant to Rule 144A under the Securities Act and the Notes sold pursuant to Regulation S have been accepted for clearance through the facilities of DTC, including for the account of Euroclear and Clearstream Luxembourg. The securities codes are: (i) CUSIP 29246BAC2 (144A) and P9379RAV9 (Reg S); (ii) ISIN US29246BAC28 (144A) and USP9379RAV98 (Reg S); and (iii) Common Code 110953496 (144A) and 110952937 (Reg S).

Consents and Authorizations The issuance of the Notes has been authorized by resolutions No. 1539 and 1570 of EPM’s board of directors dated September 6, 2011 and October 1, 2013, respectively, and by the General Directorate of Public Credit and National Treasury (Dirección General de Crédito Público y Tesoro Nacional) of the MHCP.

No Significant or Material Change Except as disclosed in this offering memorandum: (1) there has been no material adverse change in EPM’s financial position since June 30, 2014; and (2) EPM has not been involved in any litigation, administrative proceeding or arbitration relating to claims or amounts which are material in the context of the issuance of the Notes, and so far as EPM is aware, no such litigation, administrative proceeding or arbitration is pending or threatened.

258 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page Empresas Públicas de Medellín E.S.P. and its Subsidiaries Audited Consolidated Financial Statements as of December 31, 2013 and 2012 and for the years ended December 31, 2013, 2012 and 2011...... F-2

Empresas Públicas de Medellín E.S.P. and its Subsidiaries Unaudited Interim (Condensed) Consolidated Financial Statements as of June 30, 2014 and for the six-month periods ended June 30, 2014 and 2013 ...... F-95

F-1 Empresas Públicas de Medellín E.S.P. and its Subsidiaries Audited Consolidated Financial Statements

As of December 31, 2013, 2012 and for the years ended December 31, 2013, 2012, 2011

F-2 EXTERNAL AUDITOR’S REPORT To the shareholders of EMPRESAS PÚBLICAS DE MEDELLÍN E.S.P. (EPM): We have audited the consolidated balance sheet of EMPRESAS PÚBLICAS DE MEDELLÍN E.S.P. and its subordinates, as of December 31, 2013 and the related consolidated statements of financial, economic, social and environmental activity, changes in equity, changes in financial position and cash flows for the year then ended, as well as the summary of the main accounting policies and other explanatory notes. The consolidated financial statements as of December 31, 2012, were audited by another external auditor who in his report of March 5, 2013 issued an opinion on them without qualifications. Management is responsible for the preparation and fair presentation of these financial statements in accordance with generally accepted accounting principles in Colombia and instructions issued by the General Accounting Office of the Nation of Colombia. This responsibility includes: designing, implementing and keeping and internal control system that is adequate for the preparation and presentation of financial statements free from significant misstatements, whether due to fraud or error; selecting and applying the appropriate accounting policies, as well as making accounting estimates that are deemed to be reasonable under the circumstances. Our responsibility is to express an opinion on these financial statements based on our audit. We obtained the necessary information to fulfill our functions and carry out our work in accordance with generally accepted auditing standards in Colombia. These standards require planning and performing the audit in order to attain reasonable assurance of whether or not the financial statements are free of significant errors. An audit of the financial statements involves examining, on a selective test basis, the evidence that supports the figures and disclosures in the financial statements. The audit procedures selected depend on the auditor’s professional judgment, including the assessment of the risks of significant error in the financial statements. In the evaluation of the risk, the auditor considers the Company´s internal control that is relevant for the preparation and fair presentation of the financial statements, in order to design audit procedures that are appropriate in the circumstances. An audit also includes assessing the accounting principles used and the significant accounting estimates made by Management, as well as the evaluation of the overall presentation of the financial statements. We consider that our audit provides us a reasonable basis to issue our opinion. In our opinion, based on our audit, the consolidated financial statements referred to above, present fairly, in all material respects, the consolidated financial situation of EMPRESAS PÚBLICAS DE MEDELLÍN E.S.P. and its subordinates as of December 31, 2013, the results of its operations, the changes in its equity, the changes in its financial position and its cash flows for the year then ended, in accordance with generally accepted accounting principles in Colombia and instructions issued by the General Accounting Office of the Nation of Colombia, uniformly applied with those of the previous year. As explained in more detail in Note 8.1.8.to the financial statements, the Boards of Directors of EPM and UNE S.A. approved the master negotiation agreement to merge UNE and Millicom, process that is subject to approved by the regulatory and government authorities. In accordance with the contract, EPM would have the majority shareholding in the merged company with a participation of 50% plus one share in the capital stock. Millicom in turn, would be the owner of the remaining shares, and would assume the full consolidation of the financial statements and the administrative and operating control of the entity. The General Accounting Office of the Nation of Colombia issued a binding concept whereby it gives instructions to maintain the investment of the mentioned affiliated under the equity method, until the time of the final approval of the merger process. DELOITTE & TOUCHE LTDA February 25, 2014.

F-3 EXTERNAL AUDITOR’S REPORT To the Board of Directors of Empresas Públicas de Medellín E. S. P. March 5, 2013 We have audited the consolidated balance sheets of Empresas Públicas de Medellín E.S.P. at December 2012 and 2011 and the related consolidated statements of financial, economic, social and environmental activities, of changes in equity and of cash flows for the years then ended, as well as a summary of the main accounting policies set forth in Note 5 and other explanatory notes. The Company’s management is responsible for the preparation and fair presentation of these consolidated financial statements in conformity with the accounting principles generally accepted in Colombia for entities under the supervision of the Superintendency of Household Public Utility Services and with the provisions of the Colombian General Accountants’ Office. Such responsibility includes: designing, implementing and maintaining relevant internal control to the preparation and fair presentation of the financial statements that are free of material misstatements whether due to fraud or error; selecting and applying the appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Our responsibility is to express an opinion on such consolidated financial statements based on our audits. We performed our work in accordance with the auditing standards generally accepted in Colombia. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatements. An audit of financial statements involves, among others, performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements. In making those risk assessments, the independent accountant considers internal control relevant to the company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes assessing the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as assessing the overall presentation of the financial statements. We believe that the audit evidence we obtained provides a reasonable basis for the opinion on the consolidated financial statements we express in the following paragraph. In our opinion, the aforementioned consolidated financial statements audited by us, which were faithfully taken from the accounting books, fairly present, in all material respects, the consolidated financial position of Empresas Públicas de Medellín E.S.P. at December 31, 2012 and 2011 and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in Colombia for entities under the supervision of the Superintendency of Household Public Utility Services and with the provisions of the Colombian General Accountants’ Office, applied on a consistent basis. (Original in Spanish signed by:) Bibiana Moreno Vásquez Certified Public Accountant Professional Card No. 167200-T

F-4 EMPRESAS PÚBLICAS DE MEDELLÍN E.S.P. CONSOLIDATED BALANCE SHEETS (In millions of Colombian Pesos)

As of December 31, ASSETS Notes 2013 2012

CURRENT ...... 6,306,990 6,336,894 Cash and cash equivalents ...... 10 1,306,580 1,496,488 Investments in securities ...... 11 1,289,538 1,901,168 Accounts receivable, net ...... 12 3,303,599 2,570,296 Inventories, net ...... 13 258,083 242,503 Prepaid expenses ...... 14 64,590 67,473 Other assets ...... 18 84,600 58,966

NON – CURRENT ...... 31,991,689 28,941,015 Investments in securities ...... 11 8,185 9,672 Equity investments, net ...... 15 501,370 507,177 Accounts receivable, net ...... 12 959,692 738,605 Property, plant and equipment, net ...... 16 16,023,149 14,154,412 Pension plan asset ...... 17 736,183 741,441 Prepaid expenses ...... 14 200,678 133,625 Other assets ...... 18 2,377,768 2,118,257 Reappraisal of assets ...... 19 11,184,664 10,537,826

TOTAL ASSET ...... 38,298,679 35,277,909

LIABILITIES AND EQUITY CURRENT ...... 4,173,817 3,087,887 Financial obligations ...... 20 847,806 234,773 Hedging operations ...... 21 32,803 75,711 Accounts payable ...... 22 2,123,326 1,591,823 Taxes payable ...... 23 462,063 723,046 Labor liabilities ...... 24 157,774 132,592 Pension plan obligations ...... 25 241,793 129,374 Estimated liabilities ...... 26 66,264 18,648 Other liabilities ...... 27 241,988 181,920

NON – CURRENT 11,109,051 10,115,294 Financial obligations ...... 20 8,382,690 7,316,939 Hedging operations ...... 21 35,635 85,438 Accounts payable ...... 22 300,941 112,600 Taxes payable ...... 23 2,805 172,804 Labor liabilities ...... 24 67,194 71,162 Pension plan obligations ...... 25 1,157,999 1,171,465 Estimated liabilities ...... 26 219,558 295,921 Other liabilities ...... 27 942,229 888,965

TOTAL LIABILITIES ...... 15,282,868 13,203,181 MINORITY INTEREST ...... 37 968,297 1,014,999 EQUITY (See the accompanying statement) ...... 22,047,514 21,059,729 TOTAL LIABILITIES AND EQUITY ...... 38,298,679 35,277,909 MEMORANDUM ACCOUNTS, NET ...... 12,264,737 11,410,695

The accompanying notes are an integral part of these consolidated financial statements.

F-5 EMPRESAS PÚBLICAS DE MEDELLÍN E.S.P. CONSOLIDATED STATEMENTS OF FINANCIAL, ECONOMIC AND SOCIAL ACTIVITIES (In millions of Colombian Pesos)

For the year ended December 31, Notes 2013 2012 2011

Revenues ...... 31 12,986,466 12,498,850 11,508,020 Cost of sales ...... 32 (8,123,451) (7,703,343) (6,947,489) Depreciation and amortizations ...... 33 (946,320) (1,094,129) (854,526) Gross profit ...... 3,916,695 3,701,378 3,706,005 Administrative expenses ...... 34 (1,069,680) (1,025,631) (908,410) Provision, depreciation and amortizations ...... 33 (338,364) (287,183) (382,889) Operating income ...... 2,508,651 2,388,564 2,414,706 Non operating revenues ...... 35 827,025 856,093 607,977 Non operating expenses ...... 36 (1,009,906) (927,383) (824,209) Total non-operating expenses, net ...... (182,881) (71,290) (216,232) Net Income before taxes and minority interest ...... 2,325,770 2,317,274 2,198,474 Income tax ...... 23 (599,016) (629,013) (592,403) Net income before minority interest ...... 1,726,754 1,688,261 1,606,071 Minority interest ...... (101,941) (96,335) (87,392) Net income ...... 1,624,813 1,591,926 1,518,679

The accompanying notes are an integral part of these consolidated financial statements.

F-6 EMPRESAS PUBLICAS DE MEDELLIN E.S.P. CONSOLIDATED STATEMENTS OF EQUITY (In millions of Colombian Pesos)

Accumulated Surplus Unappropriated Inflation Surplus on from Retained Adjustments Translation revaluation Capital Donations Reserves Earnings of Equity adjustments of assets Total Balance at December 31, 2010 ... 67 113,392 3,193,028 3,824,179 2,963,843 (171,216) 8,452,066 18,375,359 Appropriation of reserves ...... 376,986 (376,986) — Increase of revaluation surplus . . . 347,381 347,381 Extraordinary distribution to the city of Medellín ...... (50,000) (50,000) Movements for the year ...... 927 (526,046) 227,124 (297,995) Net income ...... 1,518,679 1,518,679 Balance at December 31, 2011 ... 67 114,319 3,570,014 4,915,872 2,437,797 55,908 8,799,447 19,893,424 Appropriation of reserves ...... 9,625 (9,625) — Increase of revaluation surplus . . . 488,278 488,278 Distribution to the city of Medellín (789,841) (789,841) Movements for the year ...... (124,058) (124,058) Net income ...... 1,591,926 1,591,926 Balance at December 31, 2012 ... 67 114,319 3,579,639 5,708,332 2,437,797 (68,150) 9,287,725 21,059,729 Increase of revaluation surplus . . . 259,530 (259,530) 597,529 597,529 Distribution to the city of Medellín (1,234,557) (1,234,557) Net income ...... 1,624,813 1,624,813 Balance at December 31, 2013 ... 67 114,319 3,839,169 5,839,058 2,437,797 (68,150) 9,885,254 22,047,514

The accompanying notes are an integral part of these consolidated financial statements.

F-7 EMPRESAS PÚBLICAS DE MEDELLÍN E.S.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions of Colombian Pesos)

For the year ended December 31, 2013 2012 2011 Cash flows from operating activities:

Net income ...... 1,624,813 1,591,926 1,518,679 Adjustments to reconcile net income to cash provided by operating activities: Deferred income tax ...... 7,511 (35,173) 54,682 Provision, depreciation and amortizations ...... 1,150,065 1,272,460 1,160,498 Pension plan ...... 134,835 109,786 129,178 Translation adjustments ...... 288,469 (226,875) 227,124 Net income attributable to minority interest ...... 101,941 96,335 87,392 Other non-cash of income and expenditure ...... 74,183 132,022 (13,641) Net changes in operating assets and liabilities net of effect of business combinations: Increase of accounts receivable ...... (619,676) (211,174) (456,052) Increase of inventories ...... (14,268) (22,703) (37,197) Increase of other assets ...... (87,208) (52,385) (2,252) Increase (decrease) of accounts payable ...... 82,499 (394,996) 814,048 Increase (decrease) of third parties collections and other liabilities ...... (289,153) (98,918) 49,381 Decrease of labor liabilities ...... (80,713) (87,170) (71,404) Net cash provided by operating activities ...... 2,373,298 2,073,135 3,460,436

Cash flows from investing activities: ...... Acquisitions of property, plant and equipment ...... (2,919,439) (1,866,903) (1,795,251) Business combination ...... (62,980) — (344,880) Acquisition of other assets ...... (125,844) 84,805 (678,907) Net cash used in investing activities ...... (3,108,263) (1,782,098) (2,819,038)

Cash flows from financing activities:

Proceeds from financial obligations ...... 1,484,653 1,799,072 2,282,140 Payments of financial obligations ...... (367,733) (1,032,614) (1,555,470) Distribution to the city of Medellín ...... (1,183,493) (839,842) (797,500) Net cash used in financing activities ...... (66,573) (73,384) (70,830)

Net increase (decrease) in cash and cash equivalents and investments in securities ...... (801,538) 217,653 570,568 Cash and cash equivalents and investments in securities at beginning of the year ...... 3,397,656 3,180,003 2,609,435 Cash and cash equivalents and investments in securities at end of the year ...... 2,596,118 3,397,656 3,180,003

The accompanying notes are an integral part of these consolidated financial statements.

F-8 General Notes Note 1 Legal nature, corporate purpose and business activities Empresas Públicas de Medellín E.S.P. (hereinafter ‘‘EPM’’ or the ‘‘Company’’) is the Parent Company of a business group that, with the 55 related parties are part of it, is present in Bermuda, Chile, Colombia, El Salvador, Spain, United States, Guatemala, Cayman Islands, Mexico and Panama. EPM is a municipal decentralized entity created in Colombia by means of Agreement 58 of August 6, 1955 issued by the Administrative Council of Medellin as an autonomous public Establishment. It was transformed into a Municipal Government-owned industrial and commercial company through Agreement 069 of December 10, 1997, issued by the City Council of Medellin. As a result of its legal nature, EPM has administrative and financial autonomy and its own equity, in accordance with Article 85, Law 489 of 1998. All the capital of its incorporation and its current operation, as well as its equity, is public, its sole owner being the Municipality of Medellin. Its main domicile is located at Carrera 58 No. 42-125, Medellin, Colombia. No duration term has been established for the company. The corporate object of EPM is to provide domiciliary public utilities of water, sewage, power, fuel gas distribution, basic public switched fixed-line telephone system, and local mobile telephone in the rural sector, and other telecommunications services. The company may also provide public waste collection, treatment and use services, as well as all complementary activities proper of each of these public utilities. The EPM Group offers its services through the following segments: • Energy: made up by the business of Generation, Transmission, Distribution and Commercialization of Energy and Distribution of Natural Gas. • Water: consisting of the waterworks, wastewater and cleaning and sanitation businesses. • Telecommunications: in October 2013 the framework agreement was signed whereby the negotiation of the merger between UNE and Millicom was closed, whereby EPM will have the majority shareholding in the merged company with a participation of 50% and 1 share in the capital stock. Millicom, in turn will own the remaining shares, assume and administrative and operating control of the entity and the full consolidation of the financial statements. • Other segments: made up by the investment vehicles: EPM Inversiones, PDG, EPM Chile, EPM Capital Mexico. Additionally, there is Max Seguros Ltd, captive reinsurance company, incorporated to negotiate, contract and provide reinsurance services.

EPM Group structure Following is a detail of the companies related to the EPM Group, indicating the direct or indirect participation that EPM has within the companies: Direct participation percentage Creation Company Location Corporate purpose 2013 2012 date Empresa de Armenia Rendering of public utilities of electric power; purchase, 92.85% 92.85% December 22, Energía del sale and distribution of electric power; these activities 1988 Quindío S. A. shall be conducted through the execution of policies, E.S.P. – (EDEQ) plans, programs and projects concerning distribution and commercialization of electric power, as well as related management, handling and uses in conformity with the regulations, guidelines and standards issued by the MME, primarily fulfilling the social function framed by such activity. Central Manizales Rendering of essential public utilities of electric power, 80.10% 80.10% September 9, Hidroeléctrica de mainly exploitation of electric power generation plants, 1950 Caldas S. A. transmission and sub transmission lines, and distribution E.S.P. – (CHEC) network; purchase, sell and distribution of electric power; construction or acquisition of electric power generation plants, substations, transmission lines, distribution networks, and all sorts of installations related to production, purchase and sale of electric power, as well as commercialization, imports, distribution and sell of electric power.

F-9 Direct participation percentage Creation Company Location Corporate purpose 2013 2012 date Electrificadora de Bucaramanga Rendering of residential public utilities of electric power 74.05% 73.89% September 16, Santander E.S.P. and related complementary activities of generation, 1950 – (ESSA) transmission, distribution and commercialization, as well as rendering of services related to public utilities activities, in accordance with the legal and regulatory framework. Centrales Cúcuta Rendering of electric power utility, for which the 91.52% 91.52% October 16, Eléctricas del following operations are performed, among others: 1952 Norte de purchase, exports, imports, distribution and sell of Santander S. A. electric power and other energy sources; construction E.S.P. – (CENS) and exploitation of electric power stations, generating plants and substations, and the construction and exploitation of transmission and sub transmission lines and distribution networks. Electra Noreste Panamá City Rendering of electric power utility, for which the 51.00% 51.00% January 19 S.A (ENSA) following operations are performed, among others: 1998 purchase, transport throught the distribution network, tension transformation, to install, operate and maintain public lightning in the concession area. Also, the entity is authorized to generate energy power with a limit of 15% in respect of the maximum energy in the concession area. Hidroecológica (1) Panamá City Finance the construction of the Bonyic Hydroelectric 99.99% 97.09% November 11, del Teribe S. A. – project to meet the growing demand of electric power in 1994 (HET) the Isthmus of Panama. Empresa Eléctrica Guatemala To commercialize energy. 80.90% 80.90% Octubre 5, de Guatemala City 1939 S.A. (EEGSA) Gestión de Guatemala Provide advisory and consultancy services to companies 100.00% 100.00% December 17, Empresas City of electric power distribution, generation and 2004 Eléctricas S.A. transportation. (GESA) Almacenaje y Guatemala To provide outsourcing services to the materials 100.00% 100.00% March 23, Manejo de City administration area. 2000 Materiales Eléctricos S.A (AMESA) Comercializadora Guatemala To commercialize energy. 80.90% 80.90% November 5, Eléctrica de City 1998 Guatemala S.A (COMEGSA) Transportista Guatemala To commercialize energy. 80.90% 80.90% October 6, Eléctrica City 1999 Centroamericana S.A Enérgica S.A. Guatemala To build and maintain projects and goods for energy 80.90% 80.90% August 31, (ENÉRGICA) City sector. 1999 Crediegsa S.A Guatemala To provide personnel hiring and other administrative 80.90% 80.90% December 1, (CREDIEGSA) City services. 1992 Distribuidora de San Salvador To transform, distribute and commercialize electricity, 86.41% 86.41% November 16, Electricidad del supplying energy to the Center-South of El Salvador, in 1995 Sur (Delsur) Central America. Innova San Salvador To provide services specialized in electric engineering 100.00% 100.00% October 19, Tecnología y and electrical appliances sale to electricity users of 2010 Negocios S.A de Delsur. C.V Parque Eólico (2) Santiago Electricity generation through all types of fuels and 100.00% N.A. August 26, Los Cururos Ltda de Chile renewable energy in any form, such as wind, 2011 photovoltaic and biomass. Transmission, purchase and sale of electricity to customers either or any interconnected system. Elaborate, execute, implement, manage and maintain projects related to the use of renewable energy, cogeneration or regeneration.

F-10 Direct participation percentage Creation Company Location Corporate purpose 2013 2012 date Parque Eólico La (3) Santiago Electricity generation through all types of fuels and 100.00% N.A. February 17, Cebada S.A de Chile renewable energy in any form, such as wind, 2011 photovoltaic and biomass. Transmission, purchase and sale of electricity to customers either or any interconnected system. Elaborate, execute, implement, manage and maintain projects related to the use of renewable energy, cogeneration or regeneration. Aguas Nacionales Medellín Rendering of residential public utilities of water, sewage 99.99% 99.99% November 29, EPM S. A. E.S.P. draining, sanitation, and treatment and use of waste 2002 material and related complementary activities and engineering services pertaining to those public utilities. Aguas de Urabá Apartadó Ensure the rendering of residential public utilities of 63.42% 63.42% January 18, S. A. E.S.P. water, draining and sanitation and compensate for the 2006 underdevelopment of infrastructure for those services in associate municipalities. Empresas Rionegro Rendering of public utilities of water and draining 58.33% 58.33% November 12, Públicas de services for rural areas and sub urban areas of the 2009 Oriente S. A. Municipalities of Envigado, Rionegro and El Retiro, in E.S.P. the so called Valle de San Nicolás. Empresa de El Retiro Rendering of residential public utilities of water and 56.01% 56.01% November 22, Aguas del Oriente draining, as well as other complementary activities 1999 Antioqueño S. A. related to each of those public utilities. E.S.P. Regional de San Jerónimo Rendering of residential public utilities of water, 62.11% 62.11% December 26, Occidente S. A. draining and sanitation, as well as other complementary 2006 E.S.P. activities related to each of those public utilities and treatment and use of waste material. Aguas de (4) Malambo Ensure the rendering of residential public utilities of 87.99% 78.32% November 20, Malambo S. A. water, draining and sanitation within the jurisdiction of 2010 E.S.P. the Municipality of Malambo in the Department of Atlántico. Aquasol Pachuca (5) Pachuca Preparation of the final design, construct, equipment and 57.60% N.A. July 5, S.A. de C.V. de Soto operation of a wastewater treatment plant, in the city of 2004 Pachuca de Soto. Develop potable water projects and water treatment plants. Ecosistemas de (5) Colima Preparation of the final design, construct, equipment and 79.99% N.A. February 14, Colima S.A. de operation of a wastewater treatment plant, covers a 2006 C.V. period of one year for the construction, testing and commissioning, and 19 years for the operation, preservation and maintenance of the plant, and stabilization of sludge generated in the municipalities of Colima and Villa de Alvarez, in the Colima State. Ecosistemas de (5) Tuxtla Construction, equipping, testing, commissioning, 80.40% N.A. November 17, Tuxtla S.A. de operate and maintain a wastewater treatment system, as 2006 C.V. well as the execution of additional works, in the form of total private recoverable investment. Develop potable water projects and water treatment plants. Ecosistemas de (5) Uruapan Rendering of residential public utilities of water, 80.20% N.A. November 18, Uruapan S.A. de draining and sanitation within the jurisdiction of the 2009 C.V. Municipality of Uruapan, Michoacán. It also is subject to the preparation of the final design for a wastewater treatment plant. It comprises a period of one year to prepare the final design, construction, equipment, testing and commissioning and 15 years for the operation, preservation and maintenance of the plant. Ecosistema de (5) Lerdo Construction, equipping, commissioning, operation and 80.00% N.A. April 24, Ciudad Lerdo Durango maintenance for 20 years a sewage treatment system in 2007 S.A. de C.V. the City of Lerdo, Durango, and the execution of additional works in the mode of total private recoverable investment. Aquasol Morelia (5) Morelia Construction of a wastewater treatment plant, as well as 100.00% N.A. November 13, S.A. de C.V. the equipment and operation of the plant in Atapaneo in 2003 the Municipality of Morelia, Michoacan State.

F-11 Direct participation percentage Creation Company Location Corporate purpose 2013 2012 date Ecosistemas de (5) Celaya Preparation of the final design, construct, equipment and 80.00% N.A. December 5, Celaya S.A. de operation of a wastewater treatment plant, as well as the 2008 C.V. transport and disposal of solid waste and sludge generated by the plant, in the city of Celaya, Guanajuato State. Ecosistema de (5) Cuernavaca Preparation of the final design, construct, equipment, 80.00% N.A. November 17, Morelos S.A. de testing, commissioning, operate, conservate and 2009 C.V. mantain the wastewater treatment plant in Acapantzigo, Municipality of Cuernavaca, Morelos State. Desarrollos (5) Ciudad Desing projects, construction, equipment, expansion, 79.29% N.A. August 25, Hidráulicos de de México improvement, preservation, maintenance, establishment 1995 TAM S.A. de and operation of all types of water supply systems and C.V. sewerage and drainage works as well as the collection and sewage treatment and all types of solid waste. Ecoagua de (5) Torreón Provide services for wastewater treatment operation, 80.00% N.A. October 25, Torreón S.A. de whether municipal or domestic, as well as activities 1999 C.V. related to the treatment of wastewater. Sistema de Aguas (5) Tecomán Preparation of the final design, construct, equipment and 49.60% N.A. August 21, de Tecomán S.A. operation of a wastewater treatment plant, covers a 2009 de C.V. period of one year for the construction, testing and commissioning, and 19 years for the operation, preservation and maintenance of the plant, and stabilization of sludge generated. Empresas Varias (6) Medellín Rendering of cleaning public utilities as part of the 99.90% N.A. January, de Medellín S. A. integral management waste collection treatment. 1964 E.S.P. – EMVARIAS EPM Inversiones Medellín Capital investment in domestic or foreign societies 99.99% 99.99% August 25, S. A. organized as public utilities companies. 2003 UNE EPM Medellín Rendering of telecommunications services, information 99.99% 99.99% June 29, Telecomunicaciones and communication technology services, information 2006 S. A. services and complementary activities. Emtelco S.A. Medellín Rendering of telecommunications services, information 99.93% 99.93% July 21, and communication technology services, information 1994 services and complementary activities. Edatel S. A. Medellín Rendering of telecommunication, information and 56.00% 56.00% December 17, E.S.P. communications technologies services and information 1969 services as well as complementary activities. Empresa de Pereira Rendering of telecommunication, information and 99.980% 56.140% May 16, Telecomunicaciones communications technologies services and information 1997 de Pereira S.A. services as well as complementary activities. (ETP) Cinco Telecom Miami Rendering of telecommunication, information and 100.00% 100.00% December 24, Corporation communications technologies services and information 2001 (CTC) services as well as complementary activities. Orbitel Madrid Rendering of telecommunication, information and 100.00% 100.00% July 22, Comunicaciones communications technologies services and information 2003 Latinoamericanas services as well as complementary activities. S.A.U. (OCL) Orbitel Servicios Rionegro Rendering of telecommunication, information and 99.990% 99.990% June 27, Internacionales communications technologies services and information 2003 S.A. (OSI) services as well as complementary activities. Maxseguros EPM Bermudas Negotiation, contracting and handling of reinsurance for 100.00% 100.00% April 23, Ltd. policies covering equity. 2008 Panama Panamá City Capital investments in partnerships. 100.00% 100.00% October 30, Distribution 1998 Group S. A. – PDG Distribución Guatemala Capital investments in companies dedicated to 100.00% 100.00% March 12, Eléctrica City distribution and commercialization of electric power 1999 Centroamericana and to provide telecommunication services. DOS S. A. – DECA II

F-12 Direct participation percentage Creation Company Location Corporate purpose 2013 2012 date Inmobiliaria y Guatemala Investment in real estate. 80.90% 80.90% June 15, Desarrolladora City 2006 Empresarial de América S.A. (IDEAMSA) AEI El Salvador Panamá City Capital investments in partnerships. 100.00% 100.00% May 17, Holding S.A. 2007 Electricidad de Santa Tecla Investment in shares and other securities titles, and 100.00% 100.00% December 9, Centroamérica advisory to DELSUR company. 1997 Ltda. de C.V. (ELCA) PPLG El Caimán Capital investments in partnerships. 100.00% 100.00% April 9, Salvador II 1999 EPM Capital Ciudad Develop infrastructure projects of any kind, including 100.00% 100.00% May 4, México S. A. de de México but not limited to projects related to electric power, 2012 C.V. public lighting, gas, telecommunications, sanitation, treatment plants for potable water, draining, sewage treatment plants, wells, buildings, as well as the operation, studies and services in all fields and branches in connection with the above. EPM Chile S.A. (9) Santiago Develop infraestructure projects of any kind, including 100.00% N.A. February 22, de Chile but no limited to ptojects related to electric power, 2013 public lighting, gas, Telecommunications, sanitation, treatment plants for potable water, draining, sewage treatment plants, wells; render electric power services, water and cleanness; participate in all kind of compeitity, tenders, of kind private or public. Tecnología (5) México City Estudio, desarrollo, fomento y ejecución de proyectos y 80.00% N.A. July 28, Intercontinental procesos industriales, así como el diseño, fabricación, 1980 S.A. de C.V. ensamble y montaje de maquinaria, el desarrollo de (TICSA) tecnología incluyendo la comercialización, representación comercial y comercio en general Proyectos de (5) México City Providing the services of design, general, engineering or 98.00% — August 1, Ingeniería the construction, professional and technical services, 2008 Corporativa S.A. manage and carry out all the activities needed for the de C.V. (h) development of a company, commercial, industrial or services in the form of individuals or legal persons. Corporación de (5) México City Providing the professional services towards to operate, 100.00% — August 1, Personal manage and carry out all the activities needed for the 2008 Administrativo development of a company, commercial, industrial or S.A. de C.V. (h) services in the form of individuals or legal persons, as well as the management, recruitment, hiring and interchange of staff that perform functions at the petitioner companies. Liquidation of companies 2013 CENS Inversiones (7) Cúcuta Capital investment in companies organized as public N.A. 99.47% August 24, S. A. en utility service companies in the electric power sector, 2012 Liquidación regardless of the type or nature of those public utilities, and entities whose corporate purpose relates to the complementary activities included in Act 142 of 1994, or in any complementary regulation, rescinding, developing or amending the above. ESSA Capital (8) Bucaramanga Capital investment in companies organized as public N.A. N.A. February 20, S. A. en utility service companies in the electric power sector, 2013 Liquidación regardless of the type or nature of those public utilities, and entities whose corporate purpose relates to the complementary activities included in Act 142 of 1994, or in any complementary regulation, rescinding, developing or amending the above. EPM Ituango (10) Medellín Financing, construction, operation, maintenance and N.A. 99.41% March 31, S. A. E.S.P. en commercial exploitation of Ituango Hydroelectric power 2011 Liquidación station and the Hydroelectric Society Ituango S.A. E.S.P. upon termination of the contracts subscribed with the latter.

F-13 Direct participation percentage Creation Company Location Corporate purpose 2013 2012 date Espíritu Santo (11) Panama City Execute, organize, take in to and promote the purchase, N.A. N.A. March 27, Energy S. de R.L. sale and distribution of electric power, also, the 2009 company will render the public electric power generation. Espiritu Santo (11) Bogotá D.C Rendering of residential public utilities of electric power N.A. N.A. May 28, Colombia S. A. S. and related complementary activities of generation and 2009 E.S.P. transmission.

(1) Under the local accounting rule of Panama, IFRS, this Company recognized an impairment that implied an expense in its financial statements; however, in the homologation of the Colombian accounting practices the recognition of this expense is not applicable. (2) Company (formerly Sociedad Pacífico S.A.) acquired in March 2013 through the affiliates EPM Chile and EPM investments. On April 2013 it changed its corporate name and corporate form. (3) Company acquired in March 2013 through the affiliates EPM Chile and EPM investment. (4) Company to which a capitalization was made in June 2013 reaching a participation of 87.99%. (5) In September 2013 a capitalization was made equivalent to 80% of the shares of the company Tecnología Intercontinental S.A. de C.V. (TICSA), through the affiliate EPM Capital México S.A. de C.V. TICSA is holding company consisting of 13 companies. (6) On November 1, 2013 EPM acquired 99.90% of the shares. (7) Company founded in August 2012 by the cleavage of Centrales Eléctricas del Norte de Santander S.A. E.S.P. (CENS). On August 9, 2013 the liquidation of the company was recorded in the Chamber of Commerce of Cúcuta. (8) Company formed in February 2013 by the cleavage Electrificadora Santander SA E.S.P. (ESSA). On August 1, 2013 the liquidation of the company was recorded in the Chamber of Commerce of Bucaramanga. (9) Company formed in February 2013 in Chile. (10) On March 12, 2013, the dissolution of this company was registered in the Chamber of Commerce of Medellin. In an extraordinary meeting of November 29, 2013, the General Stockholders Meeting of EPM Ituango S.A. en Liquidación approved the final liquidation account and the distributions of the remnants. The commercial registration in the Chamber of Commerce of Medellin was cancelled on January 15, 2014. (11) Companies acquired in January 2013. On October 8, 2013 through deed of Notary Fifth of the Republic of Panama, the liquidation of the company Espiritu Santo Energy S. de R.L. was notarized. In meeting of November 29, 2013, the General Stockholders’ Meeting of Espiritu Santo Colombia S.A.S. E.S.P. en Liquidación, approved the liquidation accounts and the distribution of remnants.

Note 2 Legal and regulatory framework The activities performed by EPM, rendering of domiciliary public utilities, are regulated in Colombia, Guatemala, El Salvador, Panamá, Chile and México. The most significant applicable regulatory aspects are the following:

2.1 Regulations in Colombia 2.1.1 General aspects The Political Constitution of Colombia of 1991 provided that public utilities are inherent to the State’s social purpose and that its duty is to ensure the efficient rendering of those services to all inhabitants of the national territory. The Constitution also establishes that it corresponds to the President of the Republic to point out, in compliance with the law, the general administration and efficiency control policies of domiciliary public utilities, exercising, through the Superintendence of Domiciliary Public Utilities, the control, inspection and monitoring of the entities that provide them. Law 142 of 1994, the Public Utilities Law, defines the general criteria and the policies that must rule the rendering of domiciliary public utilities in the country and the procedures and mechanism for their regulation, control and monitoring. Law 143 of 1994, the Electric Law, made viable the constitutional approach and regulates the generation, transmission, distribution and commercialization of electric power, at the same time that it created market environment and competition, strengthened the sector and limited the State’s intervention. Because it is a company engaged in the rendering of domiciliary public utilities, EPM is governed by laws 142 and 143 of 1994. Therefore, according to those laws and to Law 689 of 2001, the contracting regime that rules it is private

F-14 law, without waiving the obligations to follow the general public function principles set forth in the Constitution and other principles that rule the provision of domiciliary public utilities. Likewise, because it is a decentralized municipal entity, EPM is subject to the political control of the Council of Medellin, to the fiscal control of the Medellin’s Controller Office and to the disciplinary control of the General Attorney’s Office.

2.1.2 Regulation commissions The President’s function of establishing general policies for administration and efficiency control of residential public utilities was delegated to the Regulatory Commissions by means of Decree 1524 of 1994. In Colombia, Regulatory Commissions have the function of regulating monopolies in the rendering of public utilities when competition is not possible. In all other cases, the function is to promote the competition among those who provide public utilities, in order that the operations of the competitors will be economically efficient, do not imply abuse in the dominant position and produce quality services. These entities are the following: • The Energy and Gas Regulatory Commission (CREG, for its initials in Spanish) technical entity attached to the Ministry of Mines and Energy (MME) that regulates the energy sale rates and aspects related to the operation of the Wholesale Energy Market and the rendering of the electric power and gas services. • The Potable Water and Basic Sanitation Regulatory Commission (CRA, for its initials in Spanish), regulates the water and sewage rates, technical entity attached to the Ministry of Housing, City and Territory. • The Communications Regulatory Commission (from the Spanish Comisión de Regulación de Comunicaciones – CRC), a special administrative technical unit under the Ministry of Information and Communications Technologies, is responsible for promoting competition, preventing the abuse of dominant position, and monitoring networks and telecommunications services.

2.1.3 Tariff system The tariff or rate system applicable to domiciliary public utilities is made up by rules related to procedures, methodologies, formulas, structures, socioeconomic groups, billings, options, values and, in general, all aspects that determine the charge of the rates. According to the Public Utilities Law said regime is oriented by the criteria of economic efficiency, neutrality, solidarity, redistribution, financial sufficiency, simplicity and transparence. Entities that provide residential public utilities must observe formulas periodically defined by the respective Regulatory Commission to set their tariffs. In this respect, the regulatory commission may establish maximum and minimum tariff limits that must be mandatorily complied by the companies; it may also define the methodologies to determinate the rates and the convenience of applying the regulated or supervised freedom system, in accordance with market conditions. Notwithstanding other alternatives that might be defined by the Regulatory Commissions, the factors in tariff formulas may include a charge per consumption unit, a fixed charge and a connection contribution charge, the collection of which, under no circumstance, may contradict the principle of efficiency, nor transfer the cost of an inefficient management to the user, nor derive benefits from dominant or monopolistic positions. Regulatory Commission may design and disclose to the public various tariff options that take into consideration optimal rate designs.. Based on legal provisions, the tariff formulas have a term of five years. After which the commissions must review them to adjust them to the particular dynamics of the sector and of the economy in general. Additionally, the tariff system includes the criteria of solidarity and income redistribution, whereby subscribers of lower socioeconomic levels are benefited with subsidies on basic consumption or subsistence consumption, which are funded by the contributions made by industrial and commercial users, and residential users in socioeconomic levels 5 and 6, as well as contributions from the National Government and territorial Entities.

2.1.4 Regulation by sector 2.1.4.1 Potable water and basic sanitation sector The tariffs for potable water and basic sanitation services take into consideration, on the one hand, the regulations pertaining to pricing, and on the other hand, regulations for designing the subsidies and contributions scheme.

F-15 For these utilities the CRA adopted the regulated freedom system, whereby the prices are set by the local rate-setting entity, in accordance with the methodology defined in resolution CRA 287 of 2004 and its complementary regulations. For service suppliers different from the municipality, the local rate-setting entity corresponds to the board of directors of the supplier company. The costs adopted by EPM were approved by means of Decree 211 of December 2005 modified by means of Decree 232 of June 2007. For each utility, pricing includes the following components:

2.1.4.1.1 Water supply service The Tariff of this service includes a fixed charge and a charge for consumption. The fixed charge represents the costs incurred by EPM to guarantee the permanent availability of the service. This charge includes costs related to the administrative and commercial activity for the rendering of this service, affected by the comparative efficiency score, calculated based on the Data Envelopment Analysis (DEA) technique. The charge for consumption reflects the costs to operate and maintain the system, as well as the investment, replacement and rehabilitation costs, and the infrastructure recognition at the time of the computation. This charge also considers the average costs of environmental rates, which reflect the obligation to which water supply companies are subject by environmental authorities. These rates reflect the obligation arising from the use of the resource and are regulated by the Ministry of the Environment and Sustainable Development.

2.1.4.1.2 Basic sanitation service As in the case of the water supply utility, in the sanitation service a fixed charge and a charge for use. The fixed charge represents the costs incurred by the companies to guarantee the permanent availability of the service, including the accounting costs associated to the administrative and commercial activity of providing the service, affected by the comparative efficiency score calculated based on the DEA technique. The charge for consumption reflects the costs to operate and maintain the system, as well as the investment, replacement, rehabilitation costs, and the infrastructure recognition at the time of the computation. This charge also includes the average cost of environmental rates, which reflect the obligation to which sewage companies are subject under environmental authorities for compensatory rates for the subscriber’s wastewater disposal into receiving sources.

2.1.4.1.3 Cleaning and sanitation service The rates of the ordinary public utility service of cleaning and sanitation consider, on one hand, the regulatory provisions on the subject of pricing, and on the other, the regulation for the design of the subsidy and contribution scheme. For these services, the CRA (Potable Water and Basic Sanitation Regulation Commission, for its initials in Spanish), adopted the regulated freedom regime; for the case of cleaning and sanitation the regulation is of price ceiling, thus the CRA estimates maximum prices at which the public utility companies may provide the service, and develops the rate methodologies in order to establish the maximum rate in each market. Prices are set by the local rate fixing entity (Board of Directors), in conformity with the methodology defined in Resolutions CRA 351 and 352 of 2005 and their complementary regulations. Rates include the services of solid waste collection, transportation and final disposal, as well as the sweeping and cleaning of roads and public areas. 2.1.4.1.4 Subsidies and contributions In the water supply and basic sanitation services, the balances between contributions and subsidies are calculated in accordance with Law 632 of 2000, Law 1450 of 2011, Decrees 1013 of 2005 and 4924 of 2011, which established minimum contribution factors applicable to subscribers of socioeconomic levels 5 and 6, industrial and commercial subscribers; the methodology to find balance between contributions from the various sources and subsidies for socioeconomic level 1, 2 and 3, as well as the creation of a common pool of minimum contributions for municipalities served by the same supplier. According to the latter, these contributions are distributed among the municipalities according to the percentage that each municipality assigns to cover subsidies, and to the total demand for resources required to cover said subsidies.

F-16 In the ordinary public cleaning and sanitation services, the balance between contributions and benefits are calculated in accordance with Act 632 of 2000, Act 1450 of 2011, Decree 1013 of 2005, which set the minimum applicable factors contributing to level 5, 6, industrial and commercial users; the methodology balance between the contributions of the different sources and subsidies in level 1, 2 and 3. According to legal regulations, subsidies cannot in any case exceed the value of basic subsistence consumption or be higher than seventy percent (70%) of the average cost of the supply for level 1, forty percent (40%) for level 2 and fifteen percent (15%) for level 3. While the factors of solidary contribution for the public utilities of water supply and sewage will be minimum the following: residential subscribers of level 5, fifty percent (50%); residential subscribers of level 6, sixty percent (60%); commercial subscribers fifty percent (50%); and industrial subscriber thirty percent (30%).

2.1.4.2 Electric power sector 2.1.4.2.1 General Law 143 of 1994 segmented the electric power service into four activities: generation, transmission, distribution and commercialization, which may be carried out by independent companies. The legal framework’s purpose is to supply the demand of electricity under economic and financial viability criteria and move towards an efficient, secure and reliable operation of the sector. Based on these laws 142 and 143 of 1994, the CREG designs, regulates and implements the institutional and regulatory framework of the Colombian electric sector by means of specific resolutions for each of the activities of the electric power service chain.

2.1.4.2.1.1 Activities of the electric power sector Through different resolutions, and based on Acts 142 and 143 of 1994, the CREG established the following general definition for each of those activities: Generation: Consists in the production of electric power based on different sources (conventional or non- conventional), whether this activity is performed exclusively or combined with another or other activities of the electricity sector, regardless of which of them is the main activity. Transmission: The national transmission activity is the transportation of electric power in the National Transmission System (STN, for its initials in Spanish). It is made up by the set of lines, together with their corresponding connection equipment, that operate at voltages equal to or higher than 220 kV. The National Transmitter is the legal person that operates and transport electric power in the STN or has incorporated a company which object is the performance of said activity. Distribution: Consists in transporting electric power through a set of lines and substations, with their associated equipment, that operate at voltages lower than 220 kv. Commercialization: Activity consisting in the purchase of electric power in the wholesale market and its sale to other market agents or end subscribers regulated or not regulated, whether this activity is performed exclusively or combined with other activities of the electric power sector, regardless of which of them is the main activity. Law 143 of 1994 prohibits the vertical integration between generators and distributors, but allows that both agents may perform the commercialization activity. For the transmission, it defined that the companies that perform it must have this activity as their exclusive object. However, companies that as of the date of passing of Law 143 of 1994 were vertically integrated could continue being so, provided that they keep separate accountings for the various activities. By means of Resolution 011 of 2006, and its amendments, and Resolution 060 of 2007, the CREG established the limits of participation of the companies in each one of the activities of the sector, defining also the methodologies for calculation of such participation. For the generation activity, it established a differential regulation, according to the participation of the agent in the electric power generation activity and the market concentration. In this manner, this allows that under certain market concentration conditions, an agent may have up to 30% participation in this activity.

F-17 For the distribution activity the participation limits were released, while for the case of commercialization it was established that no company may have, directly or indirectly, a market share in excess of 25.49%, determined according to the calculation methodology defined in Resolution CREG 001 of 2006, modified by Resolutions CREG 163 of 2008 and 024 of 2009.

2.1.4.2.1.2 Wholesale Electric Power Market (MEM, for its initials in Spanish) Law 143 of 1994 defined the Wholesale Electric Power Market (MEM) in the following terms: ‘‘The market of large blocks of electric power, in which generators and commercialization agents sell and buy energy and power in the National Interconnected System (NIS), subject to the operating regulations’’...Its operation is based on the existence of an electric exchange market, where commercial interchanges are made, and a central operator of the NIS called National Dispatch Center (NDC). Resolution CREG 024 of 1995 regulated the commercial aspects of the MEM and Resolution CREG 025 of 1995 the operating aspects of the NIS. Transactions performed between generators and commercialization agents are made through two mechanisms: Bilateral agreements: Power purchases intended to the regulated market must be made through mechanisms that encourage free competition and that request and give an opportunity under equal conditions to all interested agents to submit their offers, which must be evaluated based on the price. Vertically integrated companies with the generation activity can only self-purchase up to 60% of the power intended to their regulated market and must participate as any other generator in the public bid for power purchases. For the non-regulated market power purchases are made through direct negotiations between generators and commercialization agents or non-regulated subscribers. Energy Exchange Market: It is a system whereby energy is sold and purchased in the short term (hour by hour), based on a model of free competition between supply and demand. The generation resources offered to cover the demand are dispatched from lower to higher price, using for this purpose model of optimization by day, based on which the hourly exchange rate is set.

2.1.4.2.2 Power generation activity It is an activity open to competition and for this reason the prices are market defined. Generator agents subject to central dispatch, with an installed capacity equal to or in excess of 20 MW, carry out their electric power transactions in the MEM. In addition, the following types of generators are part of the system: • Small-size plants: Those with installed capacity of less than 20 MW. The regulations applicable to commercial transactions carried out by these agents are included in CREG Resolution 086 of 1996. • Self-generator: Natural or legal person who produces electric power exclusively to take care of its own needs. It uses the public network only to obtain support from the SIN (CREG Resolution 086 of 1996). • Cogenerator: Natural or legal person who produces energy using a cogeneration process (CREG Resolution 005 of 2010). This process consists in the combined production of electric power and thermal power that forms integral part of the productive activity of those who produce that power, both intended to their own consumption of that of third parties in industrial or commercial processes. Revenues from the generation activity proceeds basically from power sales through bilateral agreements in the regulated and non-regulated markets, of the power market exchange, the Automatic Generation Control (AGC) service and the reliability charge. By means of CREG Resolution 071 of 2006, and its subsequent amendments, the methodology was established for remunerating the reliability charge to MEM generators. This charge intends to promote the expansion of the electric power generation capability in the country and make sure that the generation resources are available to supply the demand in critical hydrology events. To this end, the Firm Power Obligations (OEF, for its initials in Spanish) that are required to cover the system’s objective demand defined by the regulator are auctioned. The generator to which OEFs are assigned receives a known remuneration that is stable during a determined term, and agrees to deliver this energy when the exchange price exceeds the threshold previously established by the CREG, known as ‘‘scarcity pricing’’. The Administrator of Commercial Interchanges (ASIC, for its initials in Spanish) calculates, collects and distributes this revenues and it is paid by regulated and non-regulated subscribers of the SIN through the rates charged by the commercialization agents.

F-18 The implementation of CREG Resolution 071 of 2006 had a transition period from December 1, 2006 up to November 30, 2012. During this period, both the mechanism of assignment of the reliability charge and the determination of the price were managed centrally. In this transition the price of the OEF was of 13,045 USD /MWh (USD of 2006). From November 30, 2012 to November 30, 2015, the OEF price is $13,008 USD /MWh (USD of 2008) and corresponds to those OEFs assigned through the first auction that took place on May 6, 2008; this value applies both for existing plants and for new plans with OEF assignment in the auction process. As of December 1, 2015 the reliability charge will have a value of USD 15.70 USD /MWh (USD of 2011), according to the results of the auction of December 27, 2011.

2.1.4.2.3 Energy transmission activity 2.1.4.2.3.1 General aspects of regulations in effect The most relevant aspects of the regulatory framework in effect of this activity are contained in CREG Resolution 011 of 2009, which are summarized below. The remuneration methodology of the National Transmission activity is known as ‘‘regulated income’’, whereby the maximum annual income that remunerates each national transmitter are established, in accordance with the assets effectively owned in the STN. For the above, typical constructive units were established valued at replacement cost as new, useful lives, administration, operation and maintenance expenses (AOM) and a discount rate applicable to the assets were defined. These revenues are collected through the application of some charges for the use of the STN, which are paid by the commercialization agents of the SIN (demand), determined in accordance with the methodology established in CREG Resolution 103 of 2000, which is based on a national stamp charge with time differentiation by loan period that permits to remunerate transporters of the STN. The resulting charge and collection of the application of charges for the use of the STN are managed centrally through the person in charge of the Account Assessment and Administration (LAC, for its initials in Spanish) of the STN, who bills and calculates the charges for use. On the subject of quality, the transmission agents must take into account some maximum value of non-availability of the assets owned by them. The failure to comply with these values will lead to the reduction of the agent’s regulated income, which results in a lower value of the charge for use of the STN that must be paid by the demand of the SIN. Likewise, they will make compensations of energy not supplied when the non-availability of these assets causes demand not met that exceeds the limits previously established in the regulation.

2.1.4.2.3.2 Expansion of the STN With regard to the expansion of the STN, the CREG adopted a set of provisions contained in CREG Resolution 022 of 2001, and its modifications, that seek to introduce elements of efficiency in the performance of the STN expansion plan. This plan is defined by the Mining Energy Planning Unit (UPME, for its initials in Spanish), and is awarded through public bidding processes. In this processes compete existing national, as well as potential transmitters, for the construction, management, operation and maintenance of the STN expansion projects. The bidder with the lowest present value of the expected income flow will be awarded the respective project.

2.1.4.2.4 Distribution activity The distribution activity is the transportation of electric power through the Local Distribution System (SDL, for its initials in Spanish) or the Regional Transmission System (STR, for its initials in Spanish). This activity is carried out by Network Operators (OR, for its initials in Spanish) who take charge of the planning of the expansion, investments, operation and maintenance of all or part of a STR or SDL. The assets may be owned by them or by third parties, although the OR has the priority in the system expansion. The SDL is the electric power transportation system that consists of the set of lines and substations, together with their associated equipment, that operate at voltage levels lower than 57.5 kV (levels 1, 2 and 3), engaged in the rendering of the service in one or several commercialization markets. The STR is the electric power transportation system made up by the connection assets to the STN and the set of lines and substations, together with their associated equipment, that operate at a level equal or higher than 57.5 kV (level 4). An STR may belong to one or more OR. Since the distribution activity is a monopoly, it is totally regulated. To this effect, the CREG defines the remuneration applicable, which is reviewed every five years as provided by the law. The methodology established for the

F-19 remuneration has a quality scheme associated. The basic elements of the remuneration are contained in CREG Resolution 097 of 2008, whereby the general methodology for determination of distribution charges was defined, emphasizing the following: • The methodology for remuneration for voltage level 4 is of regulated income and for levels 1, 2 and 3 of maximum price. In the first case an income is guaranteed to the OR, regardless of the demand’s behavior, and in the latter a maximum charge is guaranteed but with the demand risk associated. • Distribution charges of each of the voltage levels are calculated as the ratio between annuity of AOM assets and the power transported of the base year (for the current rate period it corresponds to 2007). In assets, the regulator defines constructive units (physical quantity) and values them at weighted costs between replacement price to new and the cost recognized in the preceding regulatory period; the AOM are determined by considering the actual AOMs of the company and the service quality evolution of the immediately preceding year. The regulator also defines the value of the Weighted Average Cost of Capital (WACC), which is the discount rate used to find the annuity of assets. The energy transported considers some efficient energy losses, which are also defined by the regulator. • Upon definition of the methodology, each OR is approved by an independent resolution its own distribution charges by voltage level. The distribution charges for EPM were approved by means of CREG Resolutions 105 of 2009 and 026 of 2010. Additionally, for the distribution activity remuneration, the MME defined the distribution areas (ADD, for its initials in Spanish), that correspond to a group of Network Operators by zones considering their geographic proximity, in order to define in this manner the charges for transportation use of all ORs by voltage level (1, 2, 3 and 4), that for the case of the Companies of the EPM Group corresponds the ADD-Center in accordance of the Resolution MME 18 0574 of 2012; and although the unified charges are defined to transfer to the rate in the commercialization markets of the ORs of the ADD, each OR will receive as income its charges approved by means of CREG Resolutions.

2.1.4.2.4.1 Expansion of Regional Transmission Systems (STR) and the Local Distribution Systems The regulation establishes the criteria to ensure the expansion and coverage levels of the STR and SDL, which are in the CREG Resolution 079 of 1998. The ORs are responsible for preparing and executing the expansion plan of the system operated by them, in accordance with their strategic, action and financial plans. The OR’s expansion plan must include all projects required by their system, considering requests from third parties and that are viable under the context of their financial plan. If the OR does not carry out a project contained in their expansion plan, it can be carried out by the interested subscriber or a third party, for which a remuneration scheme is defined. For the specific case of the STR expansion, the projects that are not of interest of the OR will be subject to public bid processes. According to the provisions of the Distribution Regulations, CREG Resolution 070 of 1998, the planning must be done based on certain criteria, among them, meeting the demand, adaptability, flexibility, environmental viability, economic efficiency, quality and continuity in the supply. Based on the methodology defined in CREG Resolution 097 of 2008, the expansion projects that have an average cost in excess of that approved in the distribution charges to the network operator will be incorporated in the rate, prior approval by the UPME. Thus, such projects start to be remunerated once they being to operate and it is no longer necessary to wait until the following regulatory period as it was the case before. In the year 2013, the CREG issued Resolution 024 of 2013, which establishes the procedures to be followed for the expansion of the STRs (selection processes).

2.1.4.2.4.2 Quality of the electric power service The regulation differentiates the quality of the power supplied from the quality of the service provided. The quality of the power relates to the deviations of the values specified for the voltage variables and for the form of the voltage and current waves, while the quality of the service provided refers to the reliability of the service. Regarding quality of the service rendered, the methodology defines in CREG Resolution 097 of 2008 introduced incentives with compensations to the worst served subscribers in the SDL and for the case of the STR compensations were defined by energy not supplied when the non-availability of these assets causes unattended demand that exceeds the limits previously established in the regulation.

F-20 For the incentive scheme, a quality target was defined, calculated based on the average quality for each distribution system, which varies within a range defined based on a two-year history (2006 and 2007) and its fulfillment is evaluated quarterly, as follows: • If the OR fails to reach the goal, that is, performs worse than expected, their distribution charge is reduced. • If the OR exceeds the goal, that is, achieve a better result than expected; they are giving an incentive increasing them the charge for distribution use in the quarter following that evaluated. • If the OR achieves results that places them within the range previously defined (indifference range) their rate is not affected. In both cases above, when the tariff is improved or when it remains the same, it is necessary to compensate the ‘‘worst served’’ subscribers, that is, those subscribers to whom the quality is individually deteriorated. CREG Resolution 117 of 2010 determined the Grouped Availability Benchmark Indexes (IRAD, for its initials in Spanish) for EPM, with which it started the application of the SDL service quality scheme.

2.1.4.2.5 Commercialization activity Generators and distributors of electric power may carry out this activity jointly or it may be carried out independently. The commercialization agent is the intermediary between the end subscriber and all other agents that are behind the chain (generators, transporters, distributors and market administrator). Therefore, he is in charge of purchasing energy from the wholesale market and selling it to those subscribers, for which it prepares the billing, measuring, collection and service to summers, among others. Law 143 of 1994 established a segmentation of the retail electricity market in two types: regulated market and non-regulated market. Regulated market: Electric power market in which the rates operate under the regulated freedom regime, are not negotiable and are determined through rate formulas established in resolutions issued by the CREG. Industrial, commercial and residential subscribers can participate in this market. Also, competition was introduced in such a way that subscribers are free to choose the service provider. The purchase of energy for the regulated market must be done through public bids in order to ensure agents free concurrence. Non-regulated market: Electric power market in which users with a demand for electricity equal or in excess of 0.1 MW, or a minimum monthly power consumption of 55 MWh, as established by CREG Resolution 131 of 1998. Commercialization and generation agents supply it; who negotiate the prices freely (generation component), the period and the electric power quantities.

2.1.4.2.5.1 Tariff structure According to the regulations in effect, electric power commercialization agents may charge their end subscribers a maximum cost per consumption unit. For the regulated market said cost is calculated in accordance with the rate formula defined by the CREG, in CREG Resolution 119 of 2007, which became effective by February 2008. The cost of rendering the service is the sum of the costs involved in each of the activities of the electric sector: generation (G), transmission (STN), distribution (SDL), commercialization (C) restrictions (R) and losses (P). For the non-regulated market a tariff formula is not approved because it operates under the (monitored) free system, but the costs of the six components above are transferred to it, although some of them are calculated differently: the G results from the negotiation between subscribers and commercialization agents and, also, between the latter and the generators. The provisions on the subject of subsidies and contributions are summarized below: • Tariffs for subscribers of levels 1 and 2: according to the provisions of Law 1117 of 2006, extended by means of Law 1428 of 2010, for subsistence consumptions, consumptions lower than 131 kWh/month, the tariffs can only increase monthly a maximum of the inflation. This means that when the cost of rendering the service grows above the inflation, the difference becomes a higher subsidy for subscribers. The subsidy percentage has a limit of 60% and 50% for levels 1 and 2 respectively. • Rates for level 3 subscribers: they receive a subsidy equivalent to 15% of the cost of rendering the service.

F-21 • Rates for level 5 and 6 and the commercial sector: they pay a contribution of 20% on the cost of rendering the service, intended to cover the subsidies granted to subscribers of levels 1, 2 and 3. Law 1430 of 2011, whereby tax regulations of control and for competitiveness are issued, established a contribution, setting forth as of 2012 that industrial subscribers will not be subject to the charge for solidarity contribution. In addition, the Government will establish who is the industrial subscriber beneficiary of the discount and subject to that surcharge. Such regulation became effective by means of decrees 2915 of 2011, 4955 of 2011 and 2860 of 2013. Law 142 of 1994 established the obligation to create in the Ministry of Mines and Energy a Solidarity Fund for Subsidies and Redistribution of Income (FSSRI, for its initials in Spanish), which is funded with resources from the surpluses that commercialization companies generate, after offsetting subsidies and contributions in their own markets. Additionally, if the resources from the companies’ surpluses are not sufficient to cover the total amount of the subsidies applied, the National Government covers the shortage, charging the budget. Otherwise, the public utility companies may take the necessary measures in order that subscribers cover the total service cost.

2.1.4.3 Natural gas sector 2.1.4.3.1 General Law 142 of 1994 defined the legal framework for the rendering of domiciliary public utilities, environment in which natural gas is defined as a public utility, and created the CREG as the entity in charge of developing the rules and regulations for the activities associated to this service: commercialization from production, transportation, distribution and commercialization to end subscriber. However, the regulations and competences expressed in the Oil Code and the Association Contract continue to rule for the exploration, exploitation and production of natural gas and, therefore, it is beyond the scope of CREG’s regulation. The regulation of the natural gas production is made by the MME and the administration of gas resources is carried out through contracts with the National Hydrocarbons Agency (ANH, for its initials in Spanish). After the Law 142 of 1994 significant changes took place on institutional and regulatory matters which have consolidated the development of the natural gas industry in the country, achieving the incorporation of new and considerable investments in the different activities of the sector, through different public and private agents. Natural gas distribution companies started to exercise their activity under the legal regime of this law, without need for a concession contact with the Nation, exception applicable only to the exclusive service areas for distribution of natural gas through a network based on Law 142 of 1994, the CREG defined the regulatory framework of the natural gas utility by means of Resolution 057 of 1996.

2.1.4.3.2 Activities of the sector The CREG defined the regulatory framework for the natural gas service an established the following activities for the provision of natural gas:

2.1.4.3.2.1 Commercialization since production (supply of natural gas) This activity consists in the sale of natural gas originating in the different production fields located in the national territory, to the commercialization agents or non-regulated users who wish to access gas supply directly. The CREG, by means of Resolution 08 of 2013, modified the commercialization mechanism in effect to improve the liquidity and efficiency of the primary and secondary gas markets. The above, through the definition of requirements and standards for the contracts, as well as of the market operator and some modifications to the secondary market, including matters related to long and short term ‘‘take or pay’’ mechanisms. For fields with a production higher than 30 MCFD, the bilateral negotiation is allowed in case that the annual balance of the added supply and demand made by UPME shows excess supply in at least three of the five years of the horizon. Otherwise, an annual and simultaneous auction is held in the points of entry to the system and with standardized products of 1 and 5 years. The types of supply contracts permitted, both in the primary and the secondary markets, are: firm, conditioned firmness, gas purchase option, gas purchase option against exports and of contingency for thermal and non-thermal demand (per provisions of CREG Resolution 062 of 2013). Contracts with interruptions will be allowed until November 2014 and subsequently they will be made by monthly auction.

F-22 2.1.4.3.2.2 Transportation of natural gas This activity consists in the conveyance of natural gas in high-pressure steel pipes that makes up the National Transportation System (SNT), from the natural gas production fields to the entrance to the large cities (city gate) and to large consumers, thermoelectric plants and large industries. The activity is considered a natural monopoly with price, quality and access. The remuneration of the service is based on a scheme of charges by passage or distance, determined as the sum of the charges corresponding to each gas pipeline section form the point of entry of gas to the SNT up to the point of exit of gas of each purchasing agent of the utility. The remuneration and charge structure are established in CREG Resolution 126 of 2010. The distance charge scheme reflects the average costs of each component of the system and preserves the location signs, for which efficient investment costs and the gas pipeline AOM as well as the volumes transported by it are taken into account. The natural gas transportation market is a bilateral market characterized by the direct negotiation between the parties, transporter and sender, closing the transactions autonomously. Contracts are ruled according to the standardization established by CREG Resolution 089 of 2013. Access conditions to the transportation network, as well as the quality and pressure specifications for delivery of natural gas must comply with the conditions that are set forth in the Single Transportation Regulations (RUT, for its initials in Spanish), CREG Resolution 071 of 1999. CREG Resolution 171 of 2011 prohibited the physical ‘‘by-pass’’ to the natural gas distribution network by an existing or future user, who although being able to connect to the distribution network, given his pressure and quality requirements, wishes to connect directly to the SNT to avoid the remuneration payment of the distribution network.

2.1.4.3.2.3 Retail distribution and commercialization of natural gas through pipelines networks The natural gas distribution activity through pipe networks consists in the conveyance of said fuel from the city gate regulating stations, or from a distribution system, to the connection of an end user, through medium and low pressure pipes, which are mostly made of polyethylene. Distribution of natural gas in Colombia is regulated according to the service modality: exclusive service areas (those given in concession according to the lower price obtained) and areas of non-exclusive service (tariff formulas–Regulated Freedom Regime). The latter applies to EPM. For the non-exclusive service areas, by means of Resolution 011 of 2003, the CREG established the general criteria to remunerate the fuel gas distribution and commercialization activities and the general rate formulas for the rendering of the domiciliary public utility of fuel gas distribution through pipe networks. The activity of natural gas distribution through pipe networks is considered a natural monopoly regulated in price, quality and access. The applicable regulatory regime corresponds to a Price Cap determined based on the calculation of the average medium term costs, which are transferred to the demand using a rate basket methodology applied based on the average charges approved by the regulator. The calculation of the medium term average costs considers the base investment, the five-year expansion projection, the demand and efficient AOM expenses projection for a 20-year horizon and a rate of return that remunerates the cost of the invested capital. The tariff basket is applied based on six consumption ranges, and has a cap price equal of 110% the average charge approved by the regulator and also a floor charge equal to the average cost of the medium pressure network. The cap charge is applied to the first consumption range, which includes the entire residential demand and the low consumption retail sector. Distribution and commercialization charges for each relevant distribution market are approved by the CREG through a specific regulation, at the request of distributors. The commercialization charge (Co) is a value in COP (Colombian Peso) for invoice (COP/invoice) that remunerates the costs of metering, billing, collection, customer service, commercialization margin and past due receivables risk, among others. Its definition takes into account annual efficient AOM expenses, depreciation of assets associated to the commercialization activity and a commercialization margin of 1.67%, applied on the gross annual income of the commercialization agent in the regulated market for the year corresponding to that in which the calculations of the efficient AOM expenses were made.

F-23 Annual efficient AOM expenses are determined using the DEA relative efficiency methodology, and the commercialization margin recognized is intended to remunerate an operating margin of the activity of 1.60% and a receivables risk premium of 0.07%. The rights and responsibilities to be complied with among distributors, commercialization agents and users, the free access conditions to the distribution network and the safety and minimum quality of the distribution service, are established in the code of fuel gas distribution by networks, issued by CREG Resolution 067 of 1995. In addition, CREG Resolution 123 of 2013 established the Commercialization Regulation of the Natural Gas Utility that contains the set of provisions that regulate the rights and obligations of commercialization agents, as well as the rights and obligations of non-regulated users when they participate directly in the natural gas wholesale market.

2.1.4.3.3 Tariff structure For the regulated market distribution-commercialization companies that serve the natural gas utility in non-exclusive service areas applied, for 2013 and previous years, the tariff formula established in CREG Resolution 011 of 2003. This tariff formula permits companies to transfer monthly the average maximum unit cost for natural gas purchases and transportation (G & T), in addition to its distribution and commercialization (D & C) costs. For the non-regulated market a tariff formula is not approved since a monitored freedom regime operates. However, as in the case of the regulated market, the costs of the regulated transportation and distribution components are transferred, as well as the gas purchase and commercialization variables, the latter in accordance with the prices resulting from the negotiation between users and commercialization agents.

2.1.4.3.4 Subsidies and contributions regime According to the current applicable legal framework in Colombia, a subsidies and contributions regimes is used, in conformity with the principle of solidarity and income redistribution, which mandates that users of level 1 and 2 be granted some subsidies to the cost of the utility and to level 5 and 6, industrial (according to the DIAN classification) and commercial sectors, be charged a contribution on the value of said cost to cover the subsidies granted to the former. Currently levels 3 and 4 do not receive subsidies and are not charged contributions. The provisions referring to subsidies and contributions are summarized as follows: • The levels for users of level 1 and 2 in the range of subsistence consumption (lower than 20 m3 /month), according to the provisions of Law 1117 of 2006, extended by Law 1428 of 2010, cannot have monthly increases in excess of the Consumer Price Index (CPI). This implies that when the unit cost for the service grows above inflation, the difference becomes higher subsidy for those users. The Law defined the maximum percentage of subsidy that can be granted to level 1 and 2 at 60% and 50%, respectively. • It is important to emphasize that users of fuel gas that belong to level 3 and 4 are not subject to subsidy and at the same time they are exempt by law from the payment of contribution. • Socioeconomic levels 5 and 6 contribute 20% of the service value. • Commerce and industry contribute 8.9% on the service value, with the exception of the gas-based generation of electricity, the petrochemical industry and vehicle compressed natural gas (VCNG), whose contribution is 0%. • Law 1450 of 2011, Law of the National Development Plan 2010-2014, established that as of 2012 industrial users of domiciliary natural gas will not be subject to the contribution charge referred to by Law 142 of 1994 and that the National Government will regulate the necessary conditions in order that the providers of domiciliary natural gas carry out an adequate control among the different types of users. Such regulation was implemented through decree 4956 of December 30, 2011. • Law 142 of 1994 established the obligation to create in the MME the Solidarity Fund for Subsidies and Redistribution of Income (FSSRI), which is funded with resources from the surplus of commercialization companies generate, after offsetting subsidies and contributions in their own markets. If the resources of the fund are not enough to cover the total amount of the subsidies applied by the companies, initially the National Government covers the shortage through budget transfers to the Ministry account used for this purpose. In case that this is not possible the public utilities companies may take the necessary measures in order that subscribers cover the total service cost.

F-24 2.1.4.3.5 Integration of the natural gas sector Resolution 057 de 1996 determined the rules for capital stock participation in the natural gas sector, which impose limits to the sector’s agents. In this respect, companies whose objective is to sell, commercialize or distribute natural gas, may not be transporters or have any economic interest in a transportation company of the same product. For the purposes described, there is an economic interest of a transportation company in another which object is the production, sale, commercialization or distribution of the same product, in the following cases: • When these companies, their parent companies, subordinates or related parties are party of an agreement to share profits or reduce costs or in any joint venture agreement with producing, commercialization or distributing companies of natural gas. • When the production company owns more than 25% of the corporate capital in the transportation company and 30% of the corporate capital in a distribution company. • When the transport company owns more than 25% of the capital in a commercialization or distribution company or in a major consumer of natural gas. • The transport may not participate in the natural gas commercialization activities, save when they hold a capital stock participation in a natural gas distribution-commercialization company. Additionally, Resolution 112 of 2007 released the participation limit of retail natural gas distribution and commercialization, which permits a distribution-commercialization agent participate up to 100% in these activities.

2.1.4.3.6 Quality of the natural gas service The quality in the natural gas sector is assessed in two perspectives. The first measures and assesses the quality of the service rendered; for this purpose the maximum time of equivalent duration of the service interruption to the users and the technical service response time are measured and evaluated in the case of events such as gas leaks, fire, quality of flame and interruption. And the second assesses the natural gas product quality, for which purpose the delivery pressure indexes in individual lines and the odorization of natural gas are specified. Through Resolution 100 of 2003, the GREC defined the criteria, indicators and goals to measure this quality and determined the responsibilities and compensations for the failure to achieve these goals.

2.1.4.4 Telecommunications sector The Ministry of Information Technology and Communications (MINTIC) is the entity in charge of defining the policies, plans and projects of the sector, as well as to rule the duties of monitoring and control on suppliers of Technology, Information and Communications (TIC) networks and services. As refers the financing policies, technical entity and regulation of the spectrum, said regulations establish as entities in charge the FONTIC (Technology, Information and Communications Fund), Agency for the Spectrum and Telecommunications Regulation Commission (CRT, for its initials in Spanish). Regarding to users protection, the Superintendence of industry and commerce is the competent entity in charge of deciding on the appeal recourses related to petitions, complains and claims and carrying out the investigations for practices that infringe the regime set by the CRT. The Constitution and Law 182 of 1995 leave in the hands of the National Television Commission (CNTV, for its initials in Spanish) the regulation, policies, monitoring and control of the television service, provision that is being subject to legislative review. There are no legal restrictions in Colombia to the participation of nationals or foreigners in the private capital of the companies to provide telecommunications services. Foreign entities must establish and affiliate to operate in Colombia. Basic local switched telephone operators classified as dominant in Resolution CRT 087 of 1997, that is, with a market share equal to or higher than 60%, must abide by the criteria and methodology established by the CRT, in order to determine their rates. The remaining operators of Basic Public Switched Telephone (BPST) services (local, national and international long distance), may determine their rates freely. By means of resolution 1250 of 2005, the CRT changed the system of rates for the BPST, applicable as of January 1, 2006. The most important changes for the local service of basic telephone are the following:

F-25 • Changes in the measurement of the unit of measure: up to December 2005, there were changes by pulse and as of January 2006 the charge is made by minutes. • Different plans with minutes were created and fixed charge was eliminated for all level; the amount of the plan will always be consumable and the customer has the option to select the most adaptable plan to his needs. • The basic local public switched telephone service has a system of subsidies and contributions; there is a consumption subsidized for levels 1 and 2 of 200 minutes per month; the contribution is of 20% and is charged to levels 5 and 6 to companies and the industrial sector. Levels 3 and 4 are charge the cost or reference, that is, no contribution or subsidy is received.

2.2 Regulations in Guatemala 2.2.1 General Considerations The political constitution of the republic of Guatemala of 1985 declared as national urgency the electrification of the country, based on plans formulated by the State and the municipalities, in a process that could have the participation by private initiative. With the constitution as legal support, in 1996 the General Electricity law was passed, whereby fundamental legal regulations were established to facilitate the actions of the different sectors of the electric system. The main objectives of the general electricity law are as follows: eliminating the government influence on decisions on prices, in order to allow the Guatemalan electricity industry to operate in an open and competitive environment to achieve electricity prices that reflect the lowest production cost; regulate the transmission tolls and the distribution rates in order to avoid monopoly practice; provide end users a quality electricity service and the benefits of the prices established in a competitive market and integrate the Guatemalan electricity industry within a regional Central American market. The principles of the general electricity law are: • The generation of electricity is free and the generation companies do not have to require special permits or comply with conditions imposed by the Government, except for hydroelectric, geothermal and nuclear plants. • The transmission of electricity is deregulated, except if the companies use public domain goods to provide the transmission and distribution of services. • Electricity exchange prices are freely determined, not so those of transmission and distribution services which are subject to regulation.

2.2.2 Regulatory authorities The General Law of Electricity provided the creation of two new entities: the National Electric Energy Commission (CNEE, for its initials in Spanish), as regulatory entity, and the Wholesale Market Administrator (AMM, for its initials in Spanish), as operator. On March 21, 1997 the Ministry of Energy and Mines adopted the regulations implemented by that law. In 1997 and 1998, respectively, were created the CNEE and the AMM, completing in this manner the legal framework for the privatization of the Guatemalan electric sector.

Ministry of Energy and Mines The Ministry of Energy and Mines is the Guatemalan governmen´s most important entity in the electric sector. It is responsible for enforcing the General Electricity Law and the related regulations, as well as for the coordination of policies between the CNEE and the AMM. This government division also has the authority to grant authorization permits for the operation of distribution, transmission and generation companies.

National Electrical Energy Commission (CNEE for its initials in spanish) The Guatemalan electric sector is regulated by the CNEE, a regulatory entity created pursuant to the General Electricity Law, as technical entity of the Ministry of Energy and Mines and subordinated to the latter. It is made up by three members appointed by the President of the Republic based on groups of three people proposed by the presidents of universities, the Ministry of Energy and Mines and the Wholesale Market agents. The term of each directory is of five years.

F-26 The General Electricity Law establishes the following responsibilities to the CNEE: • Set the transmission and distribution tariffs, as well as the methodology to calculate the tariffs in accordance with the provisions of the General Electricity Law. • Ensure compliance with the laws and regulations related to the electricity and impose penalties, if necessary. • Compliance of entities that support the various public permits, protect the rights of end users and prevent anti-competition, abusive and discriminatory activities. • Settle controversies that arise between subsector agents. • Defined technical rules and performance standards for the electricity sector and guarantee the compliance with international accepted practices. • Create regulations and rules to guarantee the access and use of transmission lines and distribution networks. • Issue sanctions.

Wholesale Market Administrator (AMM) The Guatemalan wholesale market is managed by the AMM, a private entity created by the General Electricity Law that coordinates the operation of the generation facilities, international interconnections and transmission lines that form the national electricity system. Also, it is responsible for the safety and operation of the system by carrying out an economically efficient dispatch and managing the electricity resources in such a way as to minimize the operating costs, including costs of failures, within the restrictions imposed by the transmission system and the quality requirements of the service. Likewise, the AMM is in charge of scheduling the supply and dispatch of electricity. The managing council of AMM is made up by five members, elected by each group of participants in the wholesale market of electricity: generators, distributors, transporters, commercialization agents and large users. Each participant in the whole market has a number of votes that is equal to the percentage of his participation in the market. EEGSA (Empresa Eléctrica de Guatemala S.A.) has the capacity to elect a representative from the distribution, COMEGSA (Comercializadora Eléctrica de Guatemala) has been able to elect a representative of the commercialization agent of electricity, but for the upcoming elections will require a small percentage allied in order to obtain it. Members hold their positions for two years. The AMM is responsible for: • Establishing policies and the rules for the conduction of wholesale and capacity markets. • Defining of the rights and obligations of participants in the wholesale electricity and capacity markets. • Supervise participants of the wholesale electricity and capacity markets. • Establishing spot prices for transfer of electricity and capacity between participants of wholesale electricity and capacity market. • Ensure that purchases of electricity and capacity in the spot market are efficiently established and settled. • Guaranteeing the supply and safety of electricity and capacity in general. The regulations of the AMM are subject to approval by the CNEE. If a generation, transmission or distribution company or an electricity agent or large user does not operate their facilities in conformity with the regulations established by the AMM, the CNEE has the capacity of penalizing it with fines and, in case of a serious infringement, it may require that the national electricity system will be disconnected.

2.2.3 Tariff system 2.2.3.1 Distribution tariffs According to the general electricity law and the regulations of the CNEE, a distribution company charges its regular customers a tariff that is made up by • An electricity charge, intended to reimburse the distribution company for the cost of electricity and the capacity purchased by the latter • The transmission tariffs

F-27 • A charge for Added Distribution Value (VAD, for its initials in Spanish), intended to allow the distribution company to cover its operating expenses, complete its capital expense plans and recover its capital costs. Although the electricity prices that are charged to the large users are not regulated by the CNEE, they must pay a regulated tariff, equal to the VAD charge applicable for the delivery of electricity through the facilities of a distribution company.

2.2.3.2 Regulated tariff The CNEE, every five years establishes the Added Distribution Value for regulated customers, which is revised quarterly. Biannually the power and energy price is revised. Currently the following tariffs are affected: • A social tariff available to customers whose demand less than 300 kWh per month. • A simple tariff available to all customers that purchase low voltage electricity. • Three additional tariffs available to customers who buy electricity to distribute at low voltages. • Three tariffs available for customers who buy electricity to distribute at 13 kV. • One tariff available to government entities that buy electricity for public lighting. The social, simple and public lighting tariffs only consist of an electricity charge, a VAD charge and a fixed monthly charge for connection to the distribution system. The following three additional low voltage rates and three rates of 13 kV are available to: • Customers who contract the purchase of capacity and electricity only during peak demand hours which are between 18:00 and 22:00 h; • Customers who contract the purchase of electricity only out of peak hours. • Customers who contract purchase of capacity and electricity during any time of the day. Customers who request these tariffs establish a contract with the distribution company to acquire a specific amount of capacity. These tariffs consist in a fixed capacity charge for every kw contracted, a charge for electricity used by the customer, a charge for use of capacity and a fixed monthly charge for connection to the distribution system. The charge of use of capacity has two components: one of generation and transmission and the other of distribution. Customers are charged the capacity use based on the maximum amount of capacity demanded during any billing cycle. The electricity charge and the generation and transmission component of the charge for capacity use is adjusted in the same manner as the electricity charge determined in the social tariff, the simple tariff and the public lighting tariff. The capacity charge and the distribution component of the maximum capacity charge are adjusted in the same manner as the VAD charges according to social, simple and public lighting tariffs.

2.2.3.3 Tariff adjustments VAD charges for every distribution company are established by the CNEE every 5 years, based on a study made by a consultant contracted by the company, prequalified by the CNEE, and they are calculated to equal an annual payment over 30 years of the net replacement value of the distribution system, which is determined by calculating the replacement value of a distribution network that would be necessary to offer the services provided by the distribution company for the following eight years in the same service area. The replacement value of the distribution system is determined based on a discount tariff selected by the CNEE from 7% to 13%, according to the studies made by independent consultants. The VAD calculation for a distribution company uses as reference the estimated costs of an efficient distribution company, which serves a similar distribution area and provides for the following costs: • Losses suffered in the distribution of the electricity. • Administrative costs for rendering of the service to customers. • Maintenance and operation costs of the distribution system, including the cost of capital The VAD collected by EEGSA until August 2003 was determinated when it was privatized. At the time new VAD charges were also established, scheduled to be in force in May 2008. For the processes of establishing the VAD

F-28 charges it is necessary that the distribution company will have a consultant approved by CNEE to calculate the VAD components (including the net replacement value) applied for the company’s distribution system. The CNEE may also hire a consultant to calculate the VAD with application to the company’s distribution system. After the presentation of the VAD, computed by CNEE consultants, this same instance decides if it approves the mentioned VAD. In case that it does not approve it, the controversy is remitted to an experts’ commitee made up by three members, one appointed by the distribution company, another appointed by the CNEE and another appointed by the first two members; of no agreement is reached in three days, the third one is appointed by the Ministry of Energy and Mines. The CNEE holds that the pronouncement by the experts’ commission is not binding; at least it was so applied in VAD 2008. The charges of VAD are adjusted biannually to reflect the effect of fluctuations in the exchange tariff of the Quetzal/US dollar on the components denominated in U.S. dollars of the calculation of the net replacement value and the effects of the Guatemalan inflation in the components denominated in Quetzals of the calculation of the net replacement value. The electricity charge is intended to reimburse the distribution company for the electricity costs of this purchase. The electricity charge components of the regulated tariffs consist in a base rate and an electricity adjustment surcharge. According to the General Electricity Law and the regulations of the CNEE, the base tariff is adjusted annually to reflect the changes anticipated in the cost of electricity to be acquired by the distribution company during the following year. The electricity adjustment charge is adjusted quarterly to reflect the variations in the actual cost of electricity acquired by the distribution company of the projected cost. 2.2.3.4 Social tariff In 2001, Guatemala enacted the social tariff law, which requires that a special tariff will be available for customers with an electricity consumption lower than 300 kWh per month. According to regulations adopted by CNEE, the distribution companies requested to participate in bidding processes for power purchase agreements, in order to supply electricity to customers that were eligible for the social tariff. The National Electrification Institute (INDE) has been in most of the times the supplier for this rate; however, recently there are other suppliers, but the INDE continues affecting the price by means of a subsidy that it pays to the distributors for those users with consumptions lower than 300 kWh-month, differentiating those than consume less than 50 kWh and less than 100 kWh-month, whereby the base tariff applicable to these customers is reduced. 2.2.3.5 Transmission tolls The General Electricity Law provides that all parties that connect to the national electricity system of Guatemala, including all the generation, transportation and distribution companies, as well as electricity agents and large users, must pay for the connection and the use of it. Transmission quotas for electricity may be negotiated by the generation or distribution companies, or by large consumers that use the national electricity system. In the absence of a negotiated price, the quotas for use of the transmission lines, substations and distribution facilities, are established according to the regulations issued by the CNEE. There are separate quotas applicable to the primary and secondary transmission systems. Both quotas are determined on the basis of the New Replacement Value (VNR) of the transmission system, that is, the estimated cost of the replication of a transmission system, model that includes an estimated return of the capital. The quotas for the primary transmission system are determined by the CNEE based on the information provided by the owners of the transmission facilities and the AMM. The transmission quotas for the primary transmission system are revised every two years, and the customary practice has been that the secondary transmission system is also updated. The transmission quotas for the use of the primary and secondary transmission system are calculated on the Wholesale Market itself. 2.2.3.6 Wholesale electricity and capacity market The Guatemalan Wholesale Market is a ‘‘frontier-free’’ market, allowing market participants to purchase electricity and capacity from generators and sell to customers within and outside Guatemala. Among the parties that may participate in the wholesale electricity and capacity market are included:

F-29 • Generation facilities with an installed capacity of over 10 MW. • Distribution companies with 20,000 customers or more. • Transmission companies with a system connected to plants with a capacity of over 10 MW. • Electricity agents who purchase or sell 10 MW more including importers, exporters and large users. The market spot price for electricity is established on an hourly basis that is supported on the compensation price, at which the demand may be satisfied through the available electricity offered. Wholesale market participants may also trade capacity transaction (Power is the term most used in Guatemala), allowing generators that are not in a position to provide the capacity committed to be able to purchase additional capacity. Capacity market prices are established by the AMM based on the theoretical cost of the setting up efficient generation capacity.

2.2.3.7 Operation of the national electricity system The AMM is responsible for the Security and operation of the national electricity system, carrying out an economically efficient delivery and undertaking the administration the electricity resources, in such a way as to minimize the operation cost, including the costs for failures within the restrictions imposed by the transmission system and the service quality requirements. The AMM must schedule the delivery of electricity to guarantee the coverage of the electricity requirements at a minimum cost within the priorities that define the quality and safety of the service, particularly the requirements of supplementary services, such as the regulation of the frequency and voltage and the reactive control and the reserve, among others. The AMM delivers electricity acquired in the spot market, in accordance with the efficient levels of the generators who offer the electricity.

2.3 Regulations in El Salvador 2.3.1 General considerations A procedure for restructuring the electricity sector was developed in El Salvador. Such procedure was embodied in a legal and institutional framework aimed at promoting competition and necessary conditions to secure the availability of an efficient energetic offer, capable of supplying the demand under technical, social, economic, environmental and financial viability criteria. In the nineties, El Salvador promoted a reform process in the energy sector that consisted in the restructuring of the hydrocarbon and electricity sectors, the privatization of most of the state companies that provided energetic goods or services and markets deregulation.

2.3.2 Regulatory framework The legal framework of the Salvadorian electric sector is made up by the Law for Creation of the General Superintendence of Electricity and Telecommunications (SIGET), enacted by means of Legislative Decree 808 of September 12, 1996, which gave legal life to the regulatory entity; the General Electricity Law (LGE), enacted by means of Legislative Decree 843 of October 10, 1996 and the Regulation of the Genera Electricity Law, established by means of Executive Decree 70 of July 25, 1997, including their amendments. As a result of the electricity sector restructuring, two entities were created, the Unidad de Transacciones S.A. (UT), which manages the Wholesale Electric Energy Market, and Empresa de Transmisión de El Salvador (ETESAL); at the same time, distribution as well as thermal generation companies were privatized. Furthermore, the activities of hydroelectric and geothermal generation were separated, with a private partner incorporating in the latter one. Among the last changes that have taken place in the energetic sector of El Salvador it is worth mentioning that the Legislative Assembly considered necessary to create a state autonomous nonprofit public service institution, that will be the ruling and regulatory entity of the national energetic policy. In this respect, the Assembly issued in October 2007 Legislative Decree 404 that creates the National Energy Council (CNE). According to the law that created it, the CNE is the highest, ruling and regulatory authority on the subject of energetic power, which purpose is the establishment of the policy and strategy that promote the efficient development of the energetic sector. The Wholesale Electricity Market (MME) of El Salvador, through the national transmission system (network of 115,000 volts or higher), permits the direct participation in energy transactions of all agents or participants of the

F-30 market (PM) that have a direct connection with the transmission system. This PM may be generators, distributors or end users. There is also availability for other agents that have no connection with the transmission network to be able to participate indirectly in the market, under the form of commercialization agents, according to the special regulation that in this respect the regulating entity, SIGET, has developed. With Executive Decree 57 of June 2006 modifications are introduced to the Regulations of the General Electricity Law. First of all, it is established that the dispatch of generating units will be in conformity with their respective variable operating costs. In this manner one of the reforms of the LGE issued by the mentioned Legislative Decree 1216 is implemented. This modification seeks to guarantee the healthy competition in the generation segment and the supply of the demand at a minimum cost expected of operation and rationing. To this end, the UT would be given the responsibility to plan and coordinate the dispatch of generating units and the operation of the facilities of the transmission system. Secondly, this same Decree regulates the contracting scheme of the long-term supply by distributing companies, through free participation procedures. As of August 1, 2011 the Regulations for operation of the transmission system and of the wholesale market based on production costs (ROBCP) started operations, which substituted the previous system based on opportunity offers. With these new Regulations the dispatch is determined by the transaction price of the energy in the MRS that will be equal to the marginal operating cost of the system in the respective market interval. The ROBCP provides that, in addition to the energy dispatched, valued by hour at the marginal cost of operation of the respective energy, the generating units that sell energy in the Opportunity Market will receive a payment for firm capacity equal to the marginal cost of installation of leading edge generation capacity, applied on the power that one generating unit or plant is capable of injecting to the system with a high probability in a control period corresponding to the hours in which the maximum demand of the generating system is produced. The price to value the transactions of firm capacity has been determined as the cost per kW of investment annualized plus the fixed cost of operation of an efficient unit to grant support and additional capacity in the system control period, extended in a reserve margin and in loss factor corresponding to the hours of highest demand.

2.3.3 Regulatory entities 2.3.3.1 National electric market Ministry of Economy (MINEC) Institution of the Central Government, which purpose consists in the promotion of the economic and social development through the increase of production, productivity and rational utilization of resources. Among its responsibilities is that of defining the country’s commercial policy and the follow up and encouragement of the economic Central American integration. It has under its command the Direction of Electric Energy and the Social Investment Fund for Local Development; in addition, it heads the National Energy Council. In addition, it contributes to the development of competition and competitiveness of productive activities both for the internal and for the external market.

General Superintendence of Electricity and Telecommunications (SIGET) It is a non-profit autonomous public service institution. Said autonomy consists of the administrative and financial aspects and is the competent entity to apply the rules contained in international treaties about electricity and telecommunications in effect in El Salvador and in the laws that rule the electricity and telecommunications sectors and their regulations, in addition to deciding on their non-fulfillment.

Transactions Unit (UT) Among the duties is that of managing with transparency and efficiency the wholesale electric energy market and operating the transmission system, maintaining the safety and quality and providing to the market operators satisfactory answers for the performance of their activities. Likewise, it coordinates with the Regional Operator Entity (EOR), the energy transactions performed by El Salvador with other countries at the Central American and international levels. Finally, it determines the responsibilities in case of failures in the systems.

F-31 Ministry of the Environment and Natural Resources (MARN) Among its functions is that of formulating, planning and executing the environmental and natural resource policies; it exercises the direction, control, inspection, promotion and development on the subject of environment and natural resources; it proposes the legislation on conservation and rational use of natural resources, to obtain their sustained development, and watches for their fulfillment, at the same time that it promotes the active participation by all sectors of the national life in the sustained use of the natural resources and of the environment, among others.

Contract Markets (MC) This market refers to the sale of energy where the agents involved established the characteristics of the agreement in a private manner without formulating financial conditions to the UT.

System Regulating Market (MRS) It is the spot market of electric power. It serves to make the short-term balance to obtain the coverage of the total demand of the wholesale market and permits to establish balance between the supply and demand.

National Energy Council (CNE) It is a government entity in charge of watching for the formulation of the energetic policy of the country. Prepares, proposes, coordinates and executes policies, programs, projects and actions that permit an efficient operation of the sector, taking into account the generation, transportation and distribution activities, that must be reflected in wellbeing for society. In addition, it analyzes the current energy problems and proposes short, medium and long-term measures, intended to the efficient use of energy, proposes to government entities and to the private sectors the actions necessary for the achievement of the measures that are decided to be implemented, among other functions. As of year 2010, it performs the functions of the electric energy direction of the MINEC.

2.3.3.2 Regional Electric Market (MER) Regional Electric Interconnection Commission (CRIE) It is the regulating entity of the MER created by the framework convention, executed by the countries of the Central American isthmus, with its own legal personality capacity of international public law. The CRIE guarantees conditions of competition and non-discrimination, proper of the development of the market, both in its initial operation and in its evolution and resolves situations on the authorizations to joint the market or for the purchase and sale of energy; in addition, it approves the tariff for use of the transmission system, among other functions that seek to establish the measures necessary for the good operation of the market.

Regional Operating Entity (EOR) The EOR proposes to the CRIE the operating procedures of the market and of the use of the Regional Transmission Network (RTR). Likewise, it makes sure that the operation and regional dispatch of energy will be made with economic criterion, trying to reach adequate levels of safety, quality and reliability; it carries out the commercial management of transactions between market agents, supports through the supply of information the market evolution processes and formulates the plan that indicates the expansion of the regional generation and transmission.

2.3.4 Tariff System The tariff to the end user is made up by the commercialization charge, distribution charge and energy charge. The commercialization charge and the distribution charge are approved for tariff periods of five years, during which they are annually indexed with the variation of the consumer price index (CPI). The distribution charge is indexed annually with 50% of the CPI while the commercialization charge is indexed with 100% of the CPI. The energy charge is adjusted automatically, pursuant to the regulations, every three months according to the cost of the supply of energy of the distributor during the previous three months. Said cost takes into account the costs of purchase of energy of the long-term contracts transferable to tariff entered into by distributors and their spot market purchases. The amendments to the regulations of the General Electricity Law establish the following aspects:

F-32 • Distributors shall have covered a minimum long term contracting percentage of 70% at the latest by February 1, 2013, with contracts for terms of less than or equal to five years. • Distributors shall have covered a minimum long term contracting percentage of 80% by July 1, 2017: – No more than 50% in contracts of less than five years. – At least 30% in contracts of more than five years. In situations of force majeure or Acts of God, or when some circumstance duly justified requires it, the SIGET, prior consultation with the CNE, may determine by means of an agreement the extension of the terms indicated above, only once and for a term not exceeding one calendar year.

2.3.5 Subsidies and contributions regime For residential subscribers with a consumption of up to 99 kWh per month, a subsidy is granted for 89.5% of the differential of the full tariff with respect to the maximum prices established in November 1999, which are the following: • Monthly consumption from 1 kWh to 50 kWh: USD 0.0635 per kWh • Monthly consumption from 50 kWh up to 99 kWh: USD 0.671 per kWh According to the information provided by distributing companies, as of December 2012 a total of 1,057,301 customers were subsidized, which represent 66.9% of the customers connected to the distribution network and that correspond to the subscribers that consume up to 99 kWh. In terms of energy consumption, these subsidized users demanded during 2012 a volume of 631,919.4 MWh, the equivalent to 12.9% of the energy demand at the distribution level.

2.3.6 Specific regulations • Law of creation of the Superintendence of Electricity and Telecommunications. • General Law of Electricity. • Regulation of the General Law of Electricity • Rules for determination of distribution and commercialization charges. • Service quality rules of the distribution systems: their purpose is to regulate the indexes and indicators of reference of quality applied by the electric power distributors in the provision of electric power services to the users of the distribution network. • Operating regulations of the transmission system and of the wholesale market: rules and procedures for the operation of the transmission system and for the administration of transactions of the wholesale market of electric power in El Salvador. • Operating regulations of the transmission system and of the wholesale market based on production costs: contains the rules and procedures for the operation of the transmission system and for the administration of transactions of the wholesale market of electric power of El Salvador. • Regulations applicable to the commercialization activities: its purpose is to develop the rules intended to promote competition on the subject of commercialization of electric power.

2.4 Regulations for Panama 2.4.1 General aspects The electric sector of Panama is divided into three areas of activities: generation, transmission and distribution. Panama has established a regulatory structure for the electric industry, which is based on the legislation approved between 1996 and 1998. This framework creates an independent regulator, the National Authority of Public Utilities – ASEP- and creates also a transparent pricing process for the sale of energy to regulated customers.

2.4.2 Regulatory framework According to the Electric Law, the electricity tariffs have a term of 4 years (Article 95) and during this period they may be updated based on the variations of the consumer price index and to reflect the actual cost of the energy

F-33 purchases. For this purpose, the regulator must define the tax regime (Article 91), which in turn must contain the calculation procedures, update and application of electric tariff. The tariff regime must follow the following criteria in order of importance: i) financial sufficiency, ii) economic efficiency, iii) equity, iv) simplicity and v) transparence. According to Article 98 of Law 6, the Added Distribution Value (VAD) is made up by the costs that an efficient distribution company would have to provide the distribution service in its concession zone, as follows: administration, operation and maintenance costs of the distribution system, excluding the costs of measurement, billing and customer services; the cost of the standard losses in the distribution networks, the cost of depreciation of its property and the cost corresponding to the opportunity that the concessionaire must have to obtain a reasonable profitability tariff on its investments. The regulator will establish a maximum of six distribution areas, representative of the markets serviced in each concession zone and then will calculate the added distribution value for each representative area, under the assumption of efficiency in the operation of the distribution company. The assumption of efficiency will have as a base the recent performance of similar real companies, national or foreign. To set the reasonable profitability tariff, the regulator will take into account the efficiency of the distributor, the quality of his service, and his investment program for the period of effectiveness of the tariff formulas and any other factor that may be considered relevant. However, the tariff that the regulatory entity defines shall not be more than two points different from the tariff resulting from adding the annual effective interest tariff, average of the twelve months prior to the date on which the tariff formula is set, of the thirty-year treasury notes of the United States of America, plus a premium of eight points for the electric distribution business risk in the country.

2.4.2.1 Regulatory regime It is made up mainly by the following regulations: • Law 6 of February 3, 1997. It sets forth the regulatory and institutional framework for the rendering of the public service of electricity. It establishes the regime to which the distribution, generation, transmission and commercialization of electric energy are subject to. • Decree Law 10 of February 26, 1998. Modifies Law 6 of 1997, as refers to the duties of the regulator, the modalities of the companies to participate in the electric sector, the restrictions in distribution and generation, the update of the tariffs and the cost recognized by purchases in block. • Executive Decree 22 of June 22, 1998. It regulated Law 6 of 1997. • Law 57 of October 13, 2009. Several modifications to Law 6, 1997 are made, among which are the following: obligation by generating companies to participate in the energy or power purchasing processes, the obligation by the Company Transmisión Eléctrica S.A. (ETESA) to purchase energy in representation of the distributors and the increase in the fines that may be imposed by the regulator up to $20 million Balboas, and at the same time establishes the right of customers to refrain from paying the portion being congested and grants them a term of 30 days to file a claim with the regulator in case of not being satisfied with the answer given by the distributor. • Law 51 of September 29, 2010, whereby the urban and domiciliary cleaning authority is created and certain articles of Law 6 of 1997 are modified, in order to make mandatory the charge of the cleaning and sanitation tariff through the electricity bills. • Law 65 of October 26, 2010. Through this new Law two article are added, 140-A and 140-B, to Law 6 of 1997, whereby it is established that if the State requires the removal or relocation of electric infrastructure, the companies must proceed with the request within the term that is established in the regulation of said article. In turn, article 140-B indicates that if the company does not comply with the relocation within the term stipulated, the infrastructure may be freely removed at the cost of the company. • Las 58 of May 30, 2011. The articles related to rural electrification are modified, among which we can mention the modification of the calculation of the subsidy that the Rural Electrification Office (OER) must pay to the distributors for a period of 4 years (previously it was paid at 20 years) and the creation of a rural electrification fund for 4 years that will be made up by the contributions by the market agents that sell electric energy, which shall not exceed 1% of their net profit before taxes. • Law 68 of September 1, 2011. Through this Law the obligation is established by the distributions to respond to the claims in 15 calendar days. Likewise, it is established, as a function of the ASEP, to prepare and approve

F-34 an indemnification table applicable to cases of damages caused to customers. It is also established to the ASEP a term of 30 calendar days to resolve the customer claims and of 15 days to resolve the reconsideration and appeal recourses. On the other hand, a paragraph is added to Article 95 of Law 95 6 on rural electrification, that defines ‘‘area not given under concession’’ as the distance that exceeds one kilometer, in straight line, from the last pole of the concession area. • Executive Decree 247 and 297 of 2012. It regulated Law 65 of October 26, 2010, establishing terms and mechanisms for the relocation of public utilities. • Law 15 of April 26 of 2012. It establishes a tariff to cover the costs of undergrounding of cables and infrastructure of the telecommunications and paid television services. The distribution companies of the zone to underground as part of the plan established, will be the units in charge of processing the offers and/or bills of charges and the conduction of the biddings of the acts related to the contracting of the people that will be carry out the undergrounding plan in the areas included. • Law 43 of August 9, 2012 modifies Law 6, including the form of special Bill of Charges, in order to make feasible the purchase of power and/or energy based on the generation technology. On the other hand, as a new function it is assigned to the ASEP to determine the criteria and procedures for the compliance with article 47 of Law 6, which deals with the process of renewal of the concession for distribution.

2.4.2.2 Regulation of the distribution sector The distribution is the activity which purpose is the transportation of electric power and the transformation of the related voltage, from the point of delivery of the energy by the transmission network up to the point of supply to the customer. According to Law 6, the distribution activity covers the commercialization of energy to customers, which is no more than the sale to the end customer, including measurement, reading, billing and collection of energy delivered. The distribution company is limited the participation in other companies or activities, except in its own generation with the limitations established in the Law. The general characteristics of the distribution activity are included in Law 6 of February 1997, Executive Decree 22 that regulates Law 6 and the distribution concession contracts. The most relevant characteristics are summarized below: • Distribution concessions are granted by the ASEP for a term of 15 years. Before the expiration of this term the ASEP will open a competitive bidding process of open participation for the sale of the package of 51% of the shares, in which current holder may participate, who will sent the price of the shares. If offers are presented that are lower or equal to the price set by the holder, the latter will continue to be the holder of the block of shares. To the contrary, if there is a higher price, the block of shares will be awarded to the highest bidder and the ASEP will deliver the amount for the sale to the holder up to that moment. In any of the two cases a new concession will be granted for another 15 years. • There is zone exclusiveness during the term of the concession with guarantee from the State. • The distributor has the obligation to provide the service (expand lines) to every user who requires it, located within 100 meters around the distributor facilities. • Beyond the mentioned 100 meters, the distributor will also have the obligation to connect to everyone who requests it but it may require, in addition to the payment for connection that the tariff schedule contains, a contribution for the investment necessary for the connection. • In the concession contract a concession zone is established from 500 to 3000 meters of the distribution network and a zone of influence between 5,000 and 10,000 meters. In the current concession period, ENSA has defined its concession zone up to 500 meters and its zone of influence up to 3,000 meters. In the zone of influence the operator will have the first option to provide the distribution service. • The parties awarded the distribution service have the obligation to allow the use of their distribution systems to third parties, through the payment of tolls. • A distributor may perform the generation activity within 15% of its demand and provided that it allows differentiating the operations by type of activity.

F-35 • At the end of each tariff period, ASEP reviews, for each distributing company, the approved IMP (maximum income allowed) in respect to the actual income received in order to determine if the variations are within a reasonable margin. For this review no variations in sales will be considered, in the quantity or type of customers, or in the costs of inputs or labor, in a manner different to that reflected by the CPI of the General Controller’s Office of the Republic. • The tariff period is of 4 years. The current one covers from July 1, 2010 to September 30, 2014.

2.4.3 Subsidies and contributions regime In Panama several types of subsidies are considered, the main ones are: • Subsidies to retirees, agricultural activities and political parties: the consumption of the first 600 kWh of retirees (men of 62 years of age or older and women of 57 years of age or older) is entitled to a discount of 25%. The difference between the consumption and that quantity pays the full tariff. Discounts of 5% and 50% are also applicable to the consumption in agricultural activities and the provincial offices of political parties, respectively. Discounts to retirees, agricultural activities and political parties are crossed subsidies that are included in the rest of the customers’ consumption in reviewing the tariff every four years. • Subsidies for basic consumption (Law 15): customers with consumption levels below 100 kWh per month have a discount of up to 20% in their accounts. The funds for this discount come from a charge to the customers with consumption in excess of 500 kWh per month of up to 0.6% of their invoice value. Approximately 70,000 customers receive this benefit. • Tariff Stabilization Fund: since 2004 the Government approved a direct subsidy for residential customers with a consumption of less than 500 kWh per month. In the invoice of each customer a discount appears that causes that these customers will not receive tariff increase. The funds for this subsidy come from the Government. At the end of each biannual period a balance is made to verify that the funds received coincide with the subsidies applied. The Government has announced a progressive reduction process of the subsidy range to arrive only at the customers with a consumption of less than 300 kWh. Currently it is only applied to customers with a consumption lower than 450 kWh per month. In case that the ASEP requests the application of a tariff lower than the corresponding one according to the tariff regime, this fund is used to cover the difference between the income with the tariff applied and the income with the tariff that should have been applied. • Energetic Compensation Fund (FACE): The FACE is created through Cabinet Resolution No. 174 of November 8, 2011, which approved the execution of a Trust Agreement for the creation of a fund which object is to compensate the electric power distribution companies for the amounts they failed to receive through the update of electric tariffs due to the commitment acquired by the State to mitigate the transfer of the inflation imported into the country through the increases in the fuel prices. The Trust Agreement provides that in the periods in which the tariffs of the electric power distribution companies and verified by the ASEP are higher than the tariff applied to the customers of the preceding six-month period, the FACE will be used to compensate these increases; otherwise, the difference will be returned to the FACE to compensate the disbursements made during the previous tariff periods.

2.4.4 Regulatory entities Secretary of Energy Its office is to formulate, propose and promote the national energy policy in order to guarantee the safety of the supply, the rational and efficient use of resources and the energy in a sustainable manner, according to the National Development Plan. Currently it is processing with the Empresa de Transmisión Eléctrica (ETESA), the creation of an energetic parent company with more and more varied renewable and clean renewable resources (eolic, gas, among others).

National Authority of Public Utilities (ASEP) Established in accordance with the law of the regulatory entity of public utilities of 1996. It is an autonomous entity of the Government with responsibility to regulate, control, monitor the rendering of the services of water and sanitary sewage, telecommunications, radio and television, electricity and natural gas.

F-36 On November 22, 2006, by Decree Law 10, the Regulatory Entity of Public Utilities (ERSP) was restructured and changed its name, and thus since April 2006 it is known as the ASEP, with the same responsibilities and functions that the regulatory entity had but with a general administrator and an executive director, each designated by the President of the Republic of Panama and ratified by the National Assembly. Likewise, it has three national directors under the authority of the general administrator, one for the electricity and water sector, one for the telecommunications sector and one for the customer service sector. The national directors are responsible for issuing resolutions related to their respective industries and their appeals are resolved by the general administrator as the final stage of the administrative process. The responsibilities of the ASEP include: • Securing the compliance with the sector laws and regulations and applying penalties for non-fulfillments. • Granting concessions and licenses. • Monitoring the service quality standards. • Verifying the fulfillment of goals of expansion, system improvement and the regulation, in accordance with the terms of the specific concessions or licenses. • Promote competition and investigate monopolistic and anti-competition practices. • Determine the efficiency criteria to assess the performance of regulated companies. • Establish the principles and methodologies to define the rates. • Determine the information to be provided by suppliers of the public service. • Arbitrate conflicts between operators, governmental agencies, municipalities and consumers. • Authorize the expropriation of land and easements for the expansion of the service. The operating costs of the ASEP are covered with several sources, including a control and monitoring rate that is charged to all participants of the electric sector. This rate shall not exceed 1% of the gross income generated in the sector during the previous year and it cannot be transferred to the consumers. The charge of this rate is made monthly and each company pays the percentage defined by the ASEP on the income of the regulated and non-regulated customers, less the amounts paid by the company to other suppliers of services to cover costs of energy and transmission. In the year 2012 this percentage was set at 0.73% (2011 – 0.59%) and for 2013 it is of 0.78%.

Planning Unit of the Empresa de Transmisión Electrica (ETESA) It prepares the reference expansion plans. It projects the global requirements of energy and the forms to satisfy those requirements, including the development of alternative sources and establishing programs to keep and optimize the use of energy. The public service companies are required to prepare and present their expansion plans to ETESA.

National Dispatch Center (CND) It is operated by the ETESA. It plans, supervises and controls the integrated operation of the National Interconnected system. It receives the offers of the generators that participate in the energy spot market, determines the spot prices of energy, manages the transmission network and provides the settlement values between suppliers and producers and consumers, among others.

Rural Electrification Office (OER) Is the entity responsible to promote electrification in rural areas not served, not profitable and not concessioned.

2.4.5 Restrictions According to the law, the companies in each activity have the following restrictions:

Distribution: • Participate, directly or indirectly in the control of generation plants, when the equivalent added capacity exceeds 15% of the demand served in its concession zone.

F-37 • Request new concessions, if by making it serves directly or indirectly, through the shareholding control of other distribution companies or other means, more than 50% of the number of total customers in the national market. The National Authority of Public Utilities (ASEP) may authorize exceeding this percentage when in its judgment it may be necessary to expand the concession zone or the expansion of the country’s electric system.

Generation: • Participate directly or indirectly in the control of distribution companies. • Request new concessions if, by doing so, serves directly or indirectly, through other generation companies or other media, more than 25% of the electricity consumption of the national market. The Executive Body, prior opinion from the ASEP, may increase the percentage indicated when it considers that the conditions of competition in the electric market justify it.

Transmission: • Controlled 100% by the State.

2.5 Regulations in Chile 2.5.1 General aspects In the Chilean electric market the activities of generation, transmission and distribution are identified, which are regulated by the General Electric Service Law (LGSE). In Chile there are four interconnected electric systems: The Interconnected System of the Large North (SING) that covers the territory between the cities of Arica and Antofagasta, with 28.06% of the country’s installed capacity; the Central Interconnected System (SIC) that covers from the towns of Taltal and Chiloé, with 71.03% of the country’s installed capacity; the Aysen System that serves the consumption of Region XI, with 0.29% of the capacity; and the Magallanes System that supplies the Region XII, with 0.62% of the country’s installed capacity. The reforms in the Chilean electric sector started in 1978 with the creation of the National Energy Commission and were formalized with the approval of the Electric Law in 1982. In Chile there is no participation by the State in the sector given that it was privatized as of 1980.

2.5.2 Regulatory framework According to the General Law of Electric Services (LGSE), the National Energy Commission is the competent authority to calculate the rates by means of the technical reports for setting the base price, which is later established by decree from the Ministry of Economy, Promotion and Reconstruction. The legislation in effect establishes as basic premise that rates must represent the actual electricity generation, transmission and distribution costs in order that an optimum development of the electric systems can be obtained. In those segments where there are competition conditions there is price freedom. This is the case of supply to end users which connected power is in excess of 2,000 kW (Free Customer), under the assumption that they have a higher negotiating capacity and, therefore, greater possibility to receive the supply of electricity by other forms. Contrarily, the law regulates the supply prices to end users whose connected power is lower than or equal to 2,000 kW (Regulated Customers) given that this market has characteristics of natural monopoly. Additionally, customers who have a connected power higher than 500 kW are entitled to choose between a regulated rate and a free price rate, after a minimum period of permanence of 4 years in the regime that they have chosen and communicating the change at least 12 months in advance. In the electric systems with a size in excess of 1,500 kW in installed capacity of generation, the Law makes a distinction between two price levels subject to establishment: The generation prices – transportation (Base Prices) and the distribution prices. The price that distributing companies may charge to users located in their distribution zone, for the electricity distribution service, is determined by the sum of the base price, the VAD (Added Distribution Value) and a single charge or toll for the use of the main transmission system, in such a way that the resulting supply price corresponds to the cost of the utilization by the user of the resources at the production-transportation and distribution levels.

F-38 The VAD represents the payment to the distribution company for its standard investment, operation and maintenance costs, its overhead, billing and customer service costs, and its average distribution losses in power and energy. Both the base price and the VAD are regulated. On the one hand, the base price is set biannually, in the months of April and October of each year, through a technical report from the CNE, by means of a decree from the Ministry of Economy. On the other hand, the VAD is established in accordance with the formulas for calculations set every four years, by the Ministry of Economy, prior Technical Report from the CNE. Decree No. 276 of 2004 contains the different rate options to which the final user has access, depending on his consumption characteristics, power and type of installed measurement. Users may freely elect the rate option most convenient for them, for a minimum term of one year, at the end of which they can modify it or maintain it. Companies that have concessions of electric distribution have the obligation to accept the rate option of each customer. In order to motivate investment and secure the access to the electric service to all persons who require it, the regulatory system is design to provide to the aggregated set of the distribution facilities of the concessionaires a reasonable economic profitability rate on the investment that cannot be over four points different from the update rate of 10%, real annual. In this manner, upon determination of the preliminary rates, the Commission verifies annually the with the income and real exploitation costs, the annual profitability of the distribution industry remains between 5% and 15%, during the period of effectiveness of the rate options.

2.5.2.1 Regulatory regime The legal framework of the Chilean electric sector consists mainly of: • Law 20402 of 2009. It creates the Ministry of Energy, establishing modifications to Decree Law 2224 and to other legal regulations. • Law 20257 of 2008. It introduces modifications to the General Law of Public Utilities – LGSE – in respect to the generation of electric power with renewable non-conventional energy sources. • Decree with Force of Law No. 4 DFL No. 4 of 2007. It approves modifications to the Decree with Force of Law No 1 of 1982, General Law of Public Utilities, on the subject of electric power. • Decree with Force of Law No. 1 DFL No. 1 of 1982. The General Law of Public Utilities establishes the fundamental provisions for the development of the economic activity in the electric industry. It can only be modified in Congress, its most relevant modifications being those applied by Law No. 19940 of 2004 (Short Law I) that reformed the regulatory framework of Transmission and Law Mo. 20018 of 2005 (Short Law II), which reformed the commercialization regime between generators and distributors for the supply of regulated customers. The regulations, in turn, are prepared by the sector entities of the Executive Branch and must be submitted to the provisions established by the Law.

2.5.2.2 Regulation of the distribution sector Distribution is defined as that activity that carries out the transportation of power and electric energy at voltage levels of 23 kV or less, and is in charge of the supply of energy to consumers whose connected power is lower than or equal to 2,000 kW or that choose to enter into a free contract. Companies that have the concession of the public service of distribution basically provide three services: Transportation and commercialization of electricity to consumers within its concession area, other services associated provided to the distributor’s own customers, and transportation to other companies that commercialize energy and power in the market that is within the concession area. Given that in Chile the distribution of electricity constitutes a natural monopoly, the State establishes regulated prices for supplies to end customers. All matters related to the operation and exploitation of the electric facilities intended to the distribution public service are regulated by the General Law of Electric Services, by its Regulations and by the laws that modify them (Law 19940 of March 2004 – Short Law I and Law 20018 of May 2005 – Short Law II). The most relevant characteristics that these provisions contemplate are summarized below: • The distribution of electricity in Chile within a determined zone may be carried out by Public Utility Concession.

F-39 • The concession may be provisional, in which case it is requested directly to the Superintendence, or final, in which case it must be requested to the President of the Republic through the Ministry of Economy, Promotion and Reconstruction. • No exclusiveness in granted in the distribution. A new distributor may request and obtain a new concession in part or in the entire territory already under concession. • Distributing companies beneficiaries of concessions must provide the service to anyone who requests it within their concession zone, or to anyone who connects to it through its own lines or those of third parties, in compliance with the technical regulations of service quality and safety. • Distribution concessions must assure the permanent supply of energy, in such a way that they are able to satisfy the total consumption projected of their regulated consumers for a period of at least three years, with the obligation to hold a bidding process previously for the supply that they are not able to provide through their own generation (Short Law II). • The future supply contracts of energy will be awarded to the generators that, in public bids, open, non-discriminatory, transparent and competitive in prices, offer the supply at the lowest cost (Short Law II). • The General Law of Electric Services contains the rules for setting prices or maximum rates for regulated customers, with an effective period of four years. • Distributors shall transfer directly to their regulated end customers the average price of the award of their contracts, instead of the base price set by the authority (Short Law II). • Customers not subject to pricing of the distributing companies enter into long-term contracts in which the service price is freely established by the parties.

2.5.3 Subsidies and contributions regime Law 20040 regulates the matters related to subsidies for consumption of electricity. According to this provision, if within a period equal to or lower than 6 months, the electric rates for residential users, urban and rural show a real accumulated increase equal to or higher than 5%, the President of the Republic, by means of supreme decreed issued through the Ministry of Economy, Promotion and Reconstruction, may establish a transitory subsidy to the payment of electric energy consumption that will favor low income residential users who are up to date in their payments. The subsidy will be discounted by the companies that have the concessions of the public distribution service to their respective customers beneficiaries of the subsidy. These companies must evidence to the Superintendence of Electricity and Food the amounts discounted in order to authorize the respective payment.

2.5.4 Regulatory entities Ministry of Economy, Encouragement and Reconstruction Designs and monitors the implementation of public policies that affect the country’s competitiveness. Its main lines of action are related to the design and promotion of Innovation and Enterprising Policies.

Ministry of Energy It is the highest body of cooperation of the President of the Republic in the duties of government and administration of the energy sector. This public entity is responsible for determining the plans, policies and rules for the development of the electric sector. In addition, it grants concessions for hydroelectric plants, transmission lines, substations and electric distribution zones. The National Energy Commission (CNE) is an instrumentality of the Ministry of Energy.

National Energy Commission (CNE) The National Energy Commission (CNE) is a public and decentralized organization with its own equity and full capacity to acquire and exercise rights and obligation that relates the President of the Republic through the Ministry of Energy. In particular, the National Energy Commission conducts the setting of prices to electricity and network gas companies. It is responsible for designing techniques and calculating the regulated prices established in the Law.

F-40 Likewise, it monitors and projects the current and expected operation of the energetic sector, through the generation of the works plan, which constitutes a guideline for the ten-year expansion of the system. Furthermore, it proposes to the Ministry of Energy the legal and regulatory rules that are required on the subjects of its competence. Finally, it advises the Government, through the Ministry of Energy, in all those matters related to the energetic sector for its better performance. The institutional framework of the CNE is Decree Law 2224 of May 25, 1978, modified by Law 20402.

Superintendence of Electricity and Fuels (SEC) It is the public entity which mission is to monitor the adequate operation of the electricity, gas and fuels services, in terms of their safety, quality and price. In addition to setting the technical standards, the objective of the SEC is to examine and oversee the compliance of legal and regulatory provisions on generation, production, storage, transportation and distribution of liquid fuels, gas and electricity to verify that the quality of the services rendered to users will be that indicated in those provisions and technical regulations and that the operation and the use of the energetic resources do not represent any danger for people or their things. The constitutional framework of the SEC is Law 18410 of 1985, modified by Law 20402.

Economic Load Dispatch Center (SIC) The CDEC –SIC is the entity in charge of coordinating and determining the operation of the SIC facilities, including generating plants, lines and substations of the transmission system and free customer consumption bus-bars of free customers. Among its duties is to watch for the safety of the service in the electric system, guarantee the most economic operation of the group of facilities of the electric system and guarantee the easement on the transmission systems established through electric concessions decree. The CDEC-SIC is made up by the generators, transmission companies and free customers that operate in the SIC and are its members which finance it. The institutional framework of the CDEC is Decree 291.

Economic Load Dispatch Center (SING) The CDEC-SING is the entity in charge of coordinating and determining the operation of the facilities of the SING. It is analogous to the CDEC-SIC.

Panel of Experts The Panel of Experts is an entity integrated by professionals of wide experience, whose function is to issue a pronouncement, through rulings with a binding effect, on discrepancies and conflicts that arise on occasion of the application of the electric legislation and that companies of the sector submit to their decision. Generators, transmission companies and distributors finance the panel. The matters on which the panel has competence as well as well as its institutional framework are included in Title VI of the General Law of Electric Services.

2.5.5 Restrictions and limits Some limits contemplated by the Chilean regulation are: • Restricted corporate object: The companies that have public concessions of public service of distribution shall only use their distribution facilities for the public service and public lighting. • Separation of companies: The companies that are operators or owners of the trunk transmission systems must be incorporated as open joint stock companies. These corporations cannot engage, either by themselves or through related natural or legal persons, to activities that involve the generation or distribution of electricity. The performance of other activities, that do not involve those indicated above, shall only be carried out through affiliate or associated stock companies • Limitation to participation: The individual participation of companies that operate in any other segment of the electric system, or of users not subject to price setting in the trunk transmission system, shall not exceed, directly or indirectly, eight percent of the total investment value of the trunk transmission system. Additionally, the joint participation of generating and distributing companies and of the group of users not subject to price setting, in the trunk transmission system, shall not exceed forty percent of the total investment value of the trunk system.

F-41 These limitations to the property extend to business groups or legal or natural persons that form part of transmission companies or that have joint action agreements with transmission, generating or distributing companies. The owners of the facilities constructed previously to their definition as belonging to the trunk system may maintain the ownerships of those facilities and will not be applied the limits of ownership, and will be able to exceed the percentages of eight and forty indicated above. 2.6 Regulations for Mexico (Sanitation) 2.6.1 Regulatory Framework The legal framework that regulates the rendering of the services of potable water, drainage, sewage, treatment and disposal of wastewater, has suffered transformations as a consequence of the reforms to constitutional article 115 and of the policies adopted recently on the subject of contracting public debt and granting of guarantees for their repayment. Within them the following are outstanding: • Strengthening the decentralization criteria by assigning to the municipalities the primary responsibility of the services of water supply and sanitation, with the subsidiary of support of state government, at the express request of the municipalities. • Resolving the legal gap by including the treatment and disposal of wastewater, generically called sanitation, whereby, among other things, a solid legal base is established for the charge of these services. • Establishing the principle of treasury autonomy for the municipalities, without excesses of discretion, which, among other things, promotes the possibility of aligning the specific costs of the services and recovering them through determined tariffs (Law of Quotas and Rate of each Municipality). • In an important manner, exception privileges are defined which a good number of instrumentalities and entities of the federal and state, and even municipal, public sector used to resort to and continue to do so. • Establish that the municipalities propose to the state legislators the applicable quotas and tariffs. According to the constitutional rule, legislators of the states will approve the laws of income of municipalities, will review and examine their public accounts. The municipalities will approve the budgets of expenses based on their available income. Within the constitutional regime are worth mentioning especially the provisions of constitutional article 117, which establishes that the states cannot in any case: ‘‘Incur directly or indirectly obligations or debts with governments of other nations, with foreign corporations or individuals, or when they are to be paid in foreign currency or outside the national territory’’. The same article indicates that: ‘‘States and Municipalities shall not incur obligations or debts except when they are intended to productive public investments, even those incurred by decentralized entities and public companies, pursuant to the basis established by the legislatures in a law or by the concepts and up to the amount that they establish annually in the respective budgets. The executives will inform of their exercise when rendering public account’’. 2.6.2 Regulatory regime In the state environment, each one of the 32 federative entities has its respective water laws, with notably equal purposes, notwithstanding the various denominations. The modifications to the state legislature associated to the rendering of water supply and sanitation services derived mainly from a series of initiatives promoted by the National Water Commission – CAN in the nineties. The evolution that since then and up to the beginning of this decade has experienced the state legal regime on the subject of water and sanitation, is summarized as follows: • Reforms of 1983 to constitutional article 115, whereby the municipal nature of the water supply and sanitation services was ratified and strengthened, which forced to redirect the role of the state authorities on this subject, in order to assign them a subsidiary role and to some extent, regulatory. • Government policies established to promote the creation of decentralized organizations (decrees of creation) of the Municipal Administration, with the technical capacity and administrative and financial autonomy necessary for the efficient provision of the services, together with the instruction of schemes of participation by the private sector. • Greater participation of the state authorities in the administration of the national water, through agreements that, pursuant to the provisions of constitutional article 116, may be executed by the federation with the state

F-42 governments, in order that the latter carry out or exercise different tasks or authorities, of the exclusive competence of the federal government. This possibility was reinforced even more with the reforms and additions to the National Water Law that entered into force in 2004. The first laws enacted under the conception of decentralized operator entities have been slowly adjusted; in essence, to strengthen the citizens’ participation in government entities and open ways to the participation by the private sector in the provision of the services, as well as to optimize the mechanisms and procedures to determine the quotas and tariffs associated to the charge of the potable water and sanitation services.

2.6.3 Regulation of the Potable Water and Sanitation distribution sector Provision of services: In all the states involved it is established that these services are to be rendered through decentralized public entities of the Public Municipal Administration. In the laws of water services, the basis are set out in order that the social and private sector may be able to participate in the rendering of the services. Especially, in the legislation is detailed the manner how the state government, through its respective State Water Commissions, may take part in the rendering of the services Autonomy: The greater autonomy is granted to the State Water Commissions this in turn to the Water Operator Entities. Legal provisions issued by CONAGUA refer to the incorporation and operation of the operator entities created as decentralized entities of the municipal public administration. In the relevant aspects are included: • Municipal operator entities (central or decentralized). • Inter-municipal operator entities. • The corresponding state water commission. • Different ways of organization of the social sector or of the private sector different form a decentralized public entity.

2.6.4 Subsidies and contributions regime Contributions: By establishing the charge of the services (Potable Water, Sanitation and Sewage) under the form of fiscal contribution (rights), the tariff proposals must be incorporated into the municipal income laws. All this notwithstanding that the same laws (that cannot be above the constitutional provisions) grant to the government bodies of the operator entities the power to establish the Quotas and tariffs to charge for the services. Subsidies: By means of the programs that are operated by various Federal Government agencies (CONAGUA), state governments and municipalities, subsidies are subject, first , to the availability of budget resources that result from the processes established for said purpose, by means of the timely action by corresponding state units, supported with duly integrated projects (Potable Water, Sewage and Sanitation in URBAN ZONES (APAZU), Program for the Construction and Rehabilitation of the Potable Water and Sanitation Systems in Rural Areas (PROSSAPYS) Program of Return of Rights (PRODDER) Program for Treatment of Wastewater (PROTAR). To the user: Directly through Municipal Water Operator Entities. • Eliminate 100% of fines and surcharges when paying the total of the year’s consumption. • 50% to retirees and the elderly. • From 8% to 12% for advance annual payment.

2.6.5 Regulatory entities SEMARNAT: Incorporates in the different environments of society and the public function, criteria that secure the optimum protection, conservation and use of the natural resources of the country, creating in this manner an integral and comprehensive environmental policy that permits to reach sustainable development, provided that they are not expressly entrusted to another agency; as well as on the subject of ecology, environmental sanitation, water environmental regulation of urban development and of the fishing activity, with the participation that corresponds to other agencies and entities.

F-43 CONAGUA: Administers and preserves national waters, with the participation of the society, in order to achieve the sustainable use of the resource with the joint responsibility of the three government levels and the society in general, it being an authority with technical quality and promoter of the government orders in the integrated management of the hydric resource and its inherent public goods and protects the bodies of water, guaranteeing a sustainable development and preserving the environment. SEDESOL: Defines the commitments of the administration to progress in the achievement of an effective social development. It formulates and coordinates the solidary and subsidiary social policy of the federal government, oriented towards the common good, and executes it in joint responsibility with the society.

2.6.6 Restrictions According to the Constitution of the United States of Mexico ‘‘Article 27. The ownership of the land and waters included within the limits of the national territory corresponds originally to the Nation, which has had and currently has the right to transfer their possession to private parties, constituting private property.’’ Expropriations can only be made for a public utility cause and by means of indemnification.

Note 3 Statutory audit Empresas Públicas de Medellín E.S.P. has no obligation to have a statutory auditor, since it is an industrial and commercial company of the State, and since all the capital for its incorporation and operation is of a government owned. For the same reason, the entity is subject to full fiscal control by the Contraloría General de Medellin.

Note 4 External audit According to provisions of the Corporate Governance Code, as a control mechanism is established the external audit, whose purpose is the examination of the accounting information in general and of the financial statements, as well as the issuing of an independent opinion in respect to the reasonableness of the financial statements to indicate the financial condition of the company at the closing of each fiscal period. The Audit Committee of the Board of Directors previously reviews the External Audit Plan and follows up the auditors performance.

Note 5 Accounting practices For the preparation and presentation of the financial statements, the company, as a public entity, complies with the Public Accounting Regime (RCP, for its initials in Spanish), established by the Nation’s General Accounting Office (CGN, for its initials in Spanish), a public entity of the Republic of Colombia. The RCP is harmonized with rules and practices accepted internationally for the public sector. Local regulations contain international elements applicable to the local context and strategic for the interaction of the public sector in a globalized environment. The regulations in effect of the CGN that rule accounting matters are: • Resolution 354 of 2007: adopted the RCP, established its structure and defined the scope of application. • Resolution 355 of 2007: adopted the General Public Accounting Plan (PGCP, for its initials in Spanish), which contains the general public accounting regulations and the grounds to recognize and disclose the transactions, events and operations carried out. • Resolution 356 of 2007: adopted the procedures manual of the public accounting regime consisting of the general catalogue of accounts, the accounting procedures and the accounting instructions manual. • Resolution 357 of 2008: establishes the internal accounting control procedure and the remittance of the annual internal control evaluation report that must be sent to the CGN. Also applicable are the regulations of the Superintendence of Domiciliary Public Utilities (SSPD, for its initials in Spanish), a technical entity created by the Constitution of Colombia to exercise the control, inspection and monitoring of the entities that provide domiciliary public utility services. The unified system of costs and expenses by activities of EPM is ruled by Resolution 20051300033635 of December 28, 2005, issued by the SSPD, updated with Resolution 20101300021335 of 2010, which was derogated with Resolution 20131300001025 of 2013. According with the regulations in effect, EPM adopts the accounting practices detailed below:

F-44 a) Functional currency: the functional currency of Colombia is the Colombian peso. Consequently, the operations carried out by EPM in other currencies are considered denominated in a ‘‘currency different from the peso’’ and are recording according to the exchange rates in effect on the dates of the operations. For international subsidiaries functional currency shall be governed according to the laws of the country of origin. For domestic and foreign companies the differences between the historic exchange rate accounted for and the rate in effect on the date of the charge or payment are recorded as exchange difference gain or loss and are presented in the ‘‘net non-operating result’’ of the consolidated statements of financial, economic and social activities. Excepted from this practice are investments abroad in controlled companies, which are recorded in the equity through the equity method. The exchange rates used at December 31 are certified by the Financial Superintendence of Colombia, as well:

Currency 2013 2012 US Dollar (USD) ...... 1,926.83 1,768.23 Euro (EUR) ...... 2,655.08 2,331.23 Japanese Yen (JPY) ...... 18.32 20.46 Sterling Pound (GBP) ...... 3,191.31 2,874.26 Swiss Franc (CHF) ...... 2,166.57 1,931.76 Quetzal (GQT) ...... 245.73 223.76 Mexican Peso (MXN) ...... 147.11 135.91 Chilean Peso (CLP) ...... 3.66 3.69 b) Accounting estimates and judgments: in the preparation of the financial statements estimates are used to quantify some of the assets, liabilities, income, expenses and commitments that are recorded in the accounting. Basically estimates refer to: • Valuation of assets to determine the existence of losses by their impairment. • Useful life of properties, plant and equipment and intangibles. • Net realizable value to determine the inventories provision. • Recoverability of accounts receivable to determine the provision. • Hypothesis used to calculate the fair value of properties, plant and equipment. • Public utilities supplied to customers, corresponding to billing cycles with consumptions of December, but the invoices for which are issued in January of the following year. The records are made globally and at the respective tariffs of the specific income in consideration that the right to said income already exists. • Some macroeconomic variables, particularly costs of the electric sector. • Hypothesis used in the actuarial calculation of the retirement pension and seniority bonus calculations. • Amount of liabilities associated to possible contingencies, which gives rise to recognition of provisions. • Determination of fair value of investments that are not quoted in the public exchange market. These estimates are made as a function of providing reasonable information that reflects the economic reality of the company as of the closing date. The end result of the operations referred to by those estimates may be different from the final values and originate future modifications according to their occurrence. c) Materiality notion: The recognition and disclosure of the economic events is made according to their relative importance. An economic event is material when because of its nature or amount, its knowledge or lack of knowledge, taking into account the circumstances, may significantly alter the economic decisions for users of information. When preparing the financial statements, the relative importance for disclosure purposes was determined on 5% basis applied to each group of accounts. d) Classification of assets and liabilities: Assets and liabilities are classified according to the use to which they are intended or according their degree of realization, enforceability or assessment in terms of times and values. The values realizable or payable within a term not exceeding one year are considered current assets and liabilities.

F-45 e) Cash and cash equivalents: Money in cash and in banks is considered cash. Funds that because of contractual o conventional reasons have a restricted availability are recorded separately. f) Investments for liquidity management: Correspond to the investments made to optimize the excess liquidity surpluses, that is, all funds that are not immediately intended to the performance of activities that constitute the company’s corporate object. Investment of excess liquidity is made under the criteria of transparence, security, liquidity, profitability, under the guidelines of an adequate control and at market conditions with no speculative purposes in accordance with Decree from the General Management 1651 of 2007. Considering the stipulations of Decree 1525 of 2008 from the Ministry of Finance and Public Credit, modified by Decrees 2805 and 4471 of 2009, 4686 of 2010, 1468 of 2012 and 600 and 1117 of 2013, transitory investments in EPM may be created in treasury securities (TES), Class B, fixed Rate or indexed to the UVR (Real Value Unit) and in term deposit certificates (CDT, for its initials in Spanish), in checking or savings account or in term deposits with banking institutions monitored by the Financial Superintendence of Colombia or in entities with special regimes, contemplated in section tenth of the financial system organizational structure and in collective investment portfolio of the monetary or open market, without pact of permanence, in entities with the second best rating in effect on strength or quality in the administration of portfolios and that comply with the investment regime provided for EPM. The bank establishment subject to investment of excesses must have a rating in effect corresponding to the maximum category for short term, in accordance with the scales currently used by the rating agencies BRC Investor Services S.A. (BRC1+), Value and Risk Ratings S. A. (VrR1+) and Fitch Ratings (F1+) and receive as minimum the third best rating in effect for the long term (AA) used by the respective corporations. Foreign currency excesses may be investment in international governments or financial institutions with a minimum tariff of A+ for the long term and A-1+ for the short term, the same that in branches abroad of banking establishments monitored by the Financial Superintendence of Colombia, that have the maximum rating in effect for the long and short term according to the scale used by rating agencies that tariff the Nation’s foreign debt. The portfolio of liquidity investments is valued daily at market prices, according to the provisions of the regulations in effect. Prices and benchmark tariff used for the different categories of securities are: for local currency those published by the Stock Exchange of Colombia in its information for valuation page (Infovalmer), and for foreign currency those published in Bloomberg. The purchase of investments, administration of fixed income liquidity, is recorded at purchase cost, which is the same reasonable value. The costs of these transactions are recognized as expenses when incurred. Subsequently to their initial recognition, they are valued at reasonable value taking into consideration the market value established in the stock exchange where said security is traded. Differences that arise between each valuation increase or decrease their cost, with debit or credit to the results accounts of financial income or expenses, according to the case. g) Equity investments: Consists of investment in controlled and uncontrolled entities. • Investments in controlled entities: Equity investments in controlled entities consist of investments made with the intention of exercising control or have the joint control. They are recognized at their historic cost and the equity investments in which EPM exercises major influence are included. The historic cost is made up by the acquisition price or original amount, plus all the disbursements necessary made by EPM for the acquisition of the investment. These investments are not subject to exchange difference adjustment, since the equity method incorporates it, but are subject to adjustment to intrinsic value in order to recognize at the time of the purchase the difference between the acquisition price and the intrinsic value of the shares, quotas or part of corporate interest. If as a result of the comparison the investment value is lower than the intrinsic value, the difference is recorded as appreciation. If, to the contrary, as a result of the comparison the value of the investment is higher than the intrinsic value, the difference is recorded as provision, affecting results. The adjustment to the intrinsic value is modified by new acquisitions. • Equity investments in uncontrolled entities: They consist of the participative securities classified as of low or minimum tradability or without any trading, which do not permit EPM to control, share the control or exercise any major influence on the issuing entity. These investments have the characteristic of not being

F-46 available for sale. They are updated by the cost method quarterly, based on the value in the stock exchange or their intrinsic value. If the intrinsic value or stock exchange trading value is higher than the adjusted cost, the difference is recognized as appreciation, affecting the equity as surplus. If the intrinsic value or stock exchange trading value is lower than the adjusted cost, the appreciation created is reduced until it is extinguished, and beyond that value provisions are recognized against results for the period as other non-operating expenses. h) Debtors: It constitutes the value of the rights in favor of EPM originated in the rendering of the public utilities services. Within this item are the utilities of electric power, water, basic sanitation, fuel gas and their respective subsidies. It also includes other items such as related parties, prepayment and advances for contractors and suppliers of goods and services, sale of goods, loans to employees, financing for the conversion to gas and for gas appliances, rendering of other information technology services, technical assistance and leases, among others. One of the following conditions must be met for their recognition: • That the service or good has been satisfactorily delivered. • That there is a right on which the transfer of money or its compensation in kind may be legally demanded. • The existence of a collection document, agreement, court ruling or other document legally issued that supports the right. Doubtful accounts: As doubtful accounts are considered those that are over six month past due or when they are sent to legal collection, event that originates the reclassification of the respective amount from current account receivables to doubtful accounts. From this reclassification are exempted the debtors that are classified as official entities. An administration provision is established for the protection of receivables, charged to the expense account of provision for debtors. When risks for the recovery of debtor balances are evidenced, the calculation of this provision corresponds to a technical evaluation that allow to determine the loss contingency or risks for eventual debtor’s insolvency. Each month the collectability status is assessed using the cascade model; which requires a historic base of minimum 12 months to determine the non-collectability percentages. When there are rights which recovery is not possible through legal process, coercive jurisdiction, or ordinary channels, the write-off will apply to recognize the extinction of the account receivable in favor of EPM. The account receivable write-off does not release EPM of the responsibility to continue with the collection efforts that will be relevant. The practice for the recognition of the receivable write-off, is, as it may correspond, a charge to the account of debtors provision and a credit to the account receivable from the customer or to doubtful accounts. The value of the account receivable to be cancelled against the provision is recorded in memorandum accounts. In an eventual recovery, the balance of the memorandum account is reduced and an income for recovery is recorded. The value of the provision to cover the risk of uncollectibility of accounts receivable from companies providers of telecommunications services, is determined in general according to the following ranges: • As doubtful accounts for voice services are considered those that are over 240 days past due and for the remaining services those that have a due day of over 120 days. The sums that are finally considered uncollectible are charged to the provision as write-offs, when they are duly authorized. • For value added services the provision is made of the balances past due as follows: 90% for expirations from 120 to 360 days and for longer expirations 100%. • For voice services the provision is made of the balances that are past due, as follows: 90% for expirations from 240 to 360 days and for longer expirations 100%. • For the long distance service 100% of debtors is provisioned after they exceed 120 days or it is returned by operators and third parties.

F-47 i) Inventories: As inventories are classified the goods acquired with the intention to sell them or consume them in the process of rendering public utility services. They include goods in stock that do not require transformation such as power, gas and water meters, supplies, materials such as parts and accessories for rendering services and goods in transit and held by third parties. The goods acquired will be incorporated to inventories at the time of their receipt for their acquisition cost, added with all costs and expenses necessary to put them in usable or sale conditions. The weighted average method is used for their valuation. The consumption of materials and spares is recorded with credit to the account of inventory of materials for rendering of services, for the average cost, with charge to the respective expense, cost or investment account. In order to reflect the value of the inventory in accordance with its economic reality, in EPM the inventories will be updated at their realization value, provided that this value is lower that the book value. In this case the provisions will be recognized for the difference; otherwise, provisions will be recovered when they exist, not exceeding the value created for this item. For the case of physical reductions, such as decreases, deterioration or obsolescence the inventory retirement will be made directly against expense. Physical inventory counts are taken on a rotating basis throughout the year, in order to cover all articles catalogued in the inventories. Inventories keep their inventory nature, regardless of the fact that because of exogenous factors proper of the economy or by natural situations inherent to the business conditions they have a slow turnover. Although they continue as inventories, this low turnover gives them a ‘‘immobilized good’’ characteristic in EPM. j) Properties, plant and equipment: Represents the tangible assets acquired, constructed or in process of construction, with the intention of using them permanently in operating activities for the production and rendering of services, to lease them or to use them as administrative support of the organization, that are not intended for sale in the normal course of business and which useful life exceeds one year. The historical value of these assets includes all disbursements and charges necessary to put them in usable conditions. All disbursements made by the company to increase the useful life of these assets, extend their productive capacity and operating efficiency, improve the quality of products and services, or allow a significant reduction of operating costs are capitalized as higher value of the asset. Pursuant to the provisions of Resolution 356 of September 2007, issued by the CGN, the company updates the value of properties, plant and equipment by means of technical appraisals with the application of methodologies of recognized technical value, which consider among other criteria, their useful life, economic life and remaining life, the location, condition, productive capacity, market situation, degree of tradability, obsolescence and deterioration suffered by goods. The update of properties, plant and equipment is made every three years from the latest update made and the recording is made in the respective accounting period. However, if prior to the completion of this term the value in books of properties, plant and equipment experiences significant changes in respect to the replacement cost, or the realization value, a new update is made, recording its effect in the respective accounting period. Useful lives of fixed assets in EPM are defined taking into account technical criteria, in accordance with the characteristics proper of the asset, considering future economic benefits, the potential of the asset service, the capacity or physical performance expected of it, as well as the physical and environmental conditions. They shall be defined taking into account technical criteria and in the terms that it is expected that they will bring economic benefits to the company, taking into account the following factors to determine them: • The use of the asset or its physical wear and tear, which is estimated by reference to the capacity or physical yield expected of it. • The expected natural deterioration caused by reasons other than its use that depends on operating aspects such as: number of work shifts in which the asset will be used, the repairs and maintenance program, among others. • The geographic location of the asset. • The legal limits or similar restrictions on the use of the asset.

F-48 In case there are no technical criteria, the useful lives established by the CGN may be taken as reference. The average of useful lives by type of asset used in 2013 and 2012 are:

Type of assets 2013 2012 Constructions Dams, repeating stations ...... 49 48 Buildings, houses, offices, stores, booths, camps, parking, garages, warehouses, sports facilities ...... 30 30 Storage tanks ...... 30 30 Plants, ducts and tunnels Generation plants ...... 43 44 Treatment plants...... 48 49 Conduction plants ...... 45 47 Substations and regulation stations ...... 24 24 Water works and channeling ...... 30 30 Pumping stations ...... 27 27 Networks, lines and cables Distribution and air networks ...... 22 22 Wastewater collection networks ...... 35 32 Transmission lines and cables ...... 33 33 Machinery and equipment Construction equipment, industrial machinery ...... 7 7 Tools and accessories...... 7 7 Equipment for pumping stations ...... 7 7 Control center equipment ...... 13 12 Dredging machinery and equipment, cleaning equipment, other machinery and equipment ...... 7 8 Medical and scientific equipment Research equipment ...... 6 6 Laboratory, medical and scientific equipment ...... 11 11 Furniture, fixtures and office equipment...... 7 7 Communications and computer equipment ...... 5 5 Transportation traction and lifting equipment ...... 5 5 Dining, kitchen, pantry and hotel equipment ...... 7 7 The following are among the classifications: Constructions in progress: This category contains all disbursements made by EPM to construct, expand, modernize, rehabilitate or replace, among other things, networks, plants and equipment. Disbursements are categorized as constructions in progress until such time the asset may be used to conduct operations to guarantee the expansion and sustainability of the infrastructure to provide the services offered through construction. The value for which constructions in progress are recognized is determined by the total amount disbursements that are necessary for, and directly associated to, the acquisition or construction of the asset, from the date of initiation of construction until the date when the asset is ready for operation. Commissions, financial costs, interest and exchange differences for interest originated in loans obtained to finance constructions in progress are capitalized until the relevant assets are in operating conditions. Disbursements made during the pre-feasibility and feasibility assesments, on the contrary, are not capitalized but recorded in the expense accounts; if, however, fixed assets or intangibles are acquired during these phases, they are recorded as property, plant and equipment or intangibles, as appropriate. In the power generation business investments are made, mainly for the construction, rehabilitation or modernization of power generation plants as well as for the repowering and replacement of their equipment.

F-49 Investments in infrastructure for the expansion and replacement of transmission and distribution networks in different voltage levels are intended to the construction of general use networks in order to cover the needs arising from the growth of power demand to take care of the works aimed at the system’s reliability. Additionally, to cover regulatory requirements, improvement of service quality level, shielding of networks to reduce fraudulent connections and the change of elements that show a high degree of deterioration. In the gas distribution business, in turn, investments are made to address the non-residential market and the expansion beyond the Valle de Aburra through Compressed Natural Gas system in the municipalities where access with conventional gas pipelines is not yet possible. In the Strategic Business Group of Water, investments are made intended to the modernization and replacement of waterworks and wastewater networks in the different circuits, expansion of conductions and acquisition of equipment for water treatment plants and pumping stations. In addition, replacement of equipment in waste water treatment plants, as well as the construction, replacement, optimization and expansion of secondary networks and collectors as part of the ‘‘Sanitation Program of the Medellin River and its affluent streams’’. Movable goods in storage: This category covers movable goods acquired in any manner, which are characterized as permanent because they will be used in future production or administration activities at EPM. While they maintain this condition they are not subject to depreciation, as provided in paragraph 171 of the General Public Accounting Plan. Properties, plant and equipment not in use: This category includes assets that, because of obsolescence, are not required for the operation of the business, as well as assets temporarily out of service, in rehabilitation process or waiting for a technical decision to be rehabilitated or retired. Movable assets retired due to obsolescence or because they are no longer required by the company are taken to the reuse warehouse where they are offered in public auctions (by internal regulations). These assets are retired at the time they are reintegrated, exceptfor vehicles, which are retired when sold. Buildings: This category represents the value of buildings and houses, offices, booths, parking lots, garages, warehouses, sports and recreational facilities, dams and storage tanks, among others, acquired by the Company to perform its functions and provide public utilities. Plants, ducts and tunnels: This category represents the value of plants, ducts and tunnels acquired by the company for the generation, transmission and distribution of energy, distribution of gas, provision of water and sanitation. In the operating infrastructure used by EPM in the power generation, transmission and distribution of power, natural gas, water supply and sanitation are, among others, the civil works and equipment of the generation, treatment, conduction plants, gas pipelines, power substations, channeling and pumping stations. Networks, lines and cables: This category represents the value of the distribution networks of energy, waterworks, collection of wastewater, gas supply networks, power transmission and distribution lines used in the business operation. Depreciation: It is calculated on the basis of the historic cost under the straight-line method. The base used is the useful life determined according to technical criteria, such as additions or improvements, technological advances, maintenance and repairs policies, obsolescence, physical exposure of the goods and other factors. Deferred depreciation reflects the value obtained by the excess of the fiscal over the accounting depreciation expense, because the tax regulation provides the use of depreciation methods and useful lives different from those used for accounting purposes, which permits that for tax purposes an asset will be depreciated in a more accelerated manner. k) Pension plan assets: It is the set of assets that have been intended by the public accounting entity according to legal provisions in effect or by its own initiative to take care of pension obligations. These assets are recorded in accounts associated to funds and the payments of retirement pension and pension bonds are paid against them. l) Expenses paid in advance: These are disbursements that are paid before receiving the good or service required. They are deferred during the period in which the services are received or the costs or expenses are accrued. Expenses paid in advance are measured for their original cost, as provided in the contractual agreements or the prices set and agreed with third parties.

F-50 m) Deferred charges: Are disbursements corresponding to the supply of goods or rendering of services received that, with reasonable certainty, will generate future benefits. The amortization is recognized during the periods in which it is expected to receive the benefits of the costs and expenses incurred, according to the feasibility studies for their recovery, the estimated periods of consumption of goods or services or the effective periods of the respective agreement. The balances of deferred assets must be appraised at their net recovery value. At the end of each year, it must be determined if the deferred charges will generate future benefits; otherwise, their value will be fully amortized. n) Intangibles: Are those disbursements made for the acquisition or development of the set of incorporeal goods, or without physical appearance, such as rights, licenses and software, from which future benefits may be obtained. As intangibles will be recognized in the balance sheet accounts, among others, those goods that are intended to the performance of primary activities of the value chain, on which it is expected to obtain future economic benefits. These goods are recognized if they are: • Identifiable: their value can be established. • Controllable: they can be transferred or their access can be restricted. • Generate future economic benefits or a service potential. • Their monetary measurement is reliable. Intangibles are: • Goodwill: Corresponds to the additional amount that is paid in the purchase of shares or quotas of corporate interest, above their equity value, as recognition of attributes such as good name, qualified personnel, good credit reputation or the control of the economic entity. In order to reflect the economic reality of the operation and its direct association with the economic benefits that are expected to be obtained from the investment, the goodwill must be amortized based on methodologies of recognized technical value, during the term in which, according to the technical study made for the acquisition, the investment is expected to be recovered. Nevertheless, the goodwill with indefinite useful life is not subject to amortization. At the closing of each accounting period, EPM assesses the goodwill in order to verify if the conditions of generation of future economic benefits are maintained, taking into account the financial projects of each company. • Licenses and software: Are those right acquired by a company to exploit a determined invention, knowledge, trademark or technology that has their corresponding intellectual property. The updates of licenses, that form a part of the support and maintenance agreement entered into, are accounted for as a maintenance cost. Software is understood as the set of computer programs, procedures, rules, documentation and associated data that form part of the operations of a computer system. • Intangibles generated internally: For their recognition it is necessary to identify and separate the research phase and the development phase, where the disbursements made in the research phase are recorded as cost or expense in the income statement in the period in which they are made, and disbursements made in the development phase may be, may be capitalized provided that each and all the characteristics for their recognition are evidenced. • Easements: they are amortized in accordance with the provisions of the act that originated them; that is, if the contract is in perpetuity, they will not be amortized; if, to the contrary, is for a definite term, it will be amortized upon expiration of the term agreed in the contract. • Reappraisal: Corresponds to the excess of the valuation value and the book value of the assets owned at the end of the period, in accordance with the regulations in effect. EPM calculates and records valuations for investments, properties, plant and equipment and other assets. o) Financial Obligations: Correspond to the acts or contracts that, in accordance with legal provisions on public credit, are intended to provide EPM the resources for the acquisition of goods or services with a term for their

F-51 payment such as loans, issue and placement of bonds and public debt securities. They are recognized for the value disbursed. Bonds and securities must be recognized for their face value. Guarantees granted to secure the payment of the debt are recognized for the value of the payments corresponding to capital that could be made, which are recorded in memorandum accounts. Public credit operations are classified as: • According to the place where they are agreed: Internal: operations in the national territory External: operations outside Colombia • According to the expiration: Short term: the obligation expires in a term of one year. Long term: its expiration is over one year. Public credit operations agreed in foreign currency must be recognized at the Market’s Representative Exchange Rate (TRM, for its initials in Spanish) on the date of the transaction. This value must be re-expressed monthly applying the TRM of the end of the month. In the case of operations made in different units of value or specific indexes, they must be recognized for the price of the unit on the date of the obligation and be re-expressed periodically, applying the price of the unit or the index of the date of the update. The higher or lower value obtained as a result of the re-expression is recognized in the period in profit and loss accounts. p) Hedging operations: They represent the value of instruments derivaties that are entered into in order to cover the risk of liabilities and may be carried out to purchase or sell assets, such as foreign currency, securities or financial futures on exchange rates, interest rates, stock exchange indexes or any other underlying asset agreed, which will be calculated on a future date agreed. They are recognized for the value agreed in the agreement. If made in currencies other than the Colombian peso, they are recognized at the rate of the date of the transaction. Monthly they are re-expressed with the rate certified by the Financial superintendence of Colombia at the end of the month. The higher or lower value obtained as result of the re-expression is recognized in the period of in the profit and loss accounts. q) Accounts payable: Includes the payment rights in favor of third parties originated in services received or purchase of goods, use of assets owned by third parties and other obligations incurred in favor of third parties. These obligations are recognized at the time that the service or good has been satisfactorily received and in accordance with the value agreed, complying with these conditions: • That the good or service has been satisfactorily received and that its risks and benefits have been received. • That it is probable that from the payment of that obligation a disbursement of funds will derive that incorporate future benefits. • That the value may be determined in a reliable manner. r) Taxes payable: The tax structure in Colombia, the regulatory framework and the plurality of operations performed by EPM make the company to be subject to taxes, levies, rates and contributions of the national and territorial levels. As taxes payable are recognized the rights in favor of the Nation, the department and the municipalities and other active subjects, upon compliance of the conditions provided in the corresponding regulations issued. The major taxes that correspond to EPM are the following: Ordinary income tax: EPM is a taxpayer of the ordinary income tax regime, at the general rate of 25%. The income tax is recognized as a current expense in accordance with calculation adjustment made between the income for tax purposes and the accounting profit or loss, affecting the item ‘income tax’ as an offsetting entry in the accounts payable called ‘taxes payable’. In intermediate periods a current income tax estimate is recognized based on the forecast of fiscal results for the year, and thus during the year the provision account is used. The deferred tax is recognized separately from the income tax as expense or recovery. Since 2013 EPM is also a taxpayer of the income tax for equality –CREE-. This tax was created by Law 1607 of 2012 and is defined as the contribution made by corporations, legal and similar persons who are taxpayers filers of the income and complementary tax, for the benefit of workers, generation of employment and social

F-52 investment in the terms provided by said law. Article 21 and 22 of the mentioned law indicate the generating event and taxable base of the same and, in turn, article 23 defines the applicable rate, which will be of 9% for the years 2013 to 2015 while as of 2016 will be of 8%. This tax has in turn an advance collection mechanism that is declared and paid monthly and that is calculated on the net income received by entities subject to this tax, for which these entities act as self-with holders, applying to that net income the rate associated to their main economic activity, in accordance with the provisions of the regulations in effect for this tax. The deferred tax arises from the application of the income tax rate to the temporary differences between tax incomes and the accounting profit or loss. This tax is recognized to the extent that there is a favorable expectation that such differences will be reversed in the future. The applicable income tax rate is that in effect at the time that the mentioned differences are reversed. If the temporary difference entails a higher income tax payment in the future, it is recognized as a deferred liability in the account of other liabilities, deferred taxes and its offsetting entry will be a lower value of the income tax expense of the current year; this entry is presented separately from the current tax. If the temporary difference entails a lower income tax payment in the future, it is recognized as an asset in the account other assets and its offsetting entry will be a higher value of the income tax expense of the current year and it will be presented separately from the current tax. Equity tax: Pursuant to the provisions of Law 1370 of 2009, the equity tax must be paid to the National Government in eight installments that cover the years 2011, 2012, 2013 and 2014 and the base of which is the net equity that the entity had as of January 1, 2011. According to Article 9 of Decree Law 4825 of 2010, it corresponds to EPM pay 25% additional to 4.8% as surtax of the equity tax. Since 2011 this tax has been accounted for with the methodology established by the CGN debiting equity appreciation against the total liability of the tax payable for years 2011 to 2014, according to the indications contained in Concept 20119-158027. Sales tax: EPM is a taxpayer of the common regime. This tax is generated by the sale of goods and services taxed, as well as by the exempt income derived from the exports of services. The utilities of energy, waterworks, sewage and domiciliary gas are excluded from the tax. The sale tax that is not discountable is a higher value of the asset, cost or expense and is recognized at the time that the payment is made or the respective invoice is accrued. s) Labor and social security obligations: these are the commitments that EPM has acquired with its workers for the services provided through an employment relationship established in accordance with the labor legislation, pact or collective bargaining agreement. t) Estimated liabilities These are recognized when the following conditions are met: • EPM has obtained a benefit from the good or service, but the supporting document has not been received from the supplier to be recognized as real. • EPM has the obligation, according to the provisions of the law, to make payments or to give up resources in the future to take care of credits, on a date established by the parties. • The value of the resources to be delivered or the payment may be reasonably estimated and very close to their actual value. Contingencies: for the recognition of the contingencies associated to legal processes EPM follows the procedure established by the CGN in chapter V for ‘‘the recognition and disclosure of legal processes, arbitration awards, out of court conciliations and attachments decreed and executed on bank accounts’’. It is established therein that the processes with a rating of probable must be recorded as provision, while the processes with lower probability of loss must be recorded in memorandum account as potential obligations. The situation or set of circumstances that generate uncertainty on possible losses and which final result will only become known when one or more events occur or cease to occur and that are not classified within the described procedure, are recognized taking into account the principle of prudence for the recording of expenses.

F-53 Pension obligations: pension obligations by EPM have two components, pension bonds and pensions, which in turn include the pension quota shares. Their calculation has its legal base on legal regulations in effect on pensions. For the purposes of the actuarial evaluation, the parameters established in Decree 2783 of 2001 of the National Government were followed. Since 2010 the evaluation has been made taking into account the new mortality table of annuitants approved by the Financial Superintendence of Colombia in its Resolution 1555 of 2010, according to which the life expectations of annuitants (retirees) increased in respect to previous tables, which means a longer period of pension payment and therefore an increase in pension liabilities. The pension adjustment rate as of December 31, 2013 was of 2.99% (as of December 31, 2012 was of 3.26%) according to paragraph 1, Article 1, of the mentioned Decree 2783. Pension bonds were updated and capitalized according to Decree 1748 of October 12, 1995 and Article 6 of Decree 4937 of 2009 from the Ministry of Finance and Public Credit, which ordered to value the type T bonds (bonds not issued), at an interest rate of 4%, from the closing date to the date of update, which in 2009 form part of type B bonds, corresponding to the average premium and that was valued at a rate of 3%. The values already known of the bonds on the closing date, after deducting those paid during the year were taken as base. In the calculation methodology were included the additional payments of June and December of each year, as well as the real value of the funeral allowance in the group of retirees of which EPM is in charge, in compliance with item b), Article 2 of Decree 1517 of August 4, 1998. The pension liability is 100% amortized, in compliance with Resolution 356 of 2007; since 2009 pension payments are recorded affecting the liability account. Pension Commutation: according to Minutes 1466 of December 4, 2006, EPM assumed in 2007 the pension liabilities of Empresa Antioqueña de Energia E.S.P. (EADE), liquidated. The methodology used for the actuarial calculation of pensions and pension bonds of EADE follows the parameters and technical bases established by the competent authority and are the same ones used for measuring pension liabilities in EPM. These pension liabilities are amortized 100%. Pursuant to the provisions of Decree 941 of 2002, which regulates Law 100, the respective trust funds were created to guarantee the payment of pension obligations derived from pension funds and pension quota shares that correspond to EPM, as well as the payment of pensions and from the pension commutation. The fund is forecasted in such a way that it will extinguish at the time of payment of the last pension payable by EPM (year 2065). With the creation of these funds the availability of resources to take care of the payment of the pension liabilities and pension bonds of the companies is guaranteed, at the same time that their financial management is independent. u) Equity: is made up by the accounts that represent the tax capital, reserves, profits from previous periods, results for the period, surplus and equity appreciation. Reserves: in compliance with Decree 2336 of 1995, Article 1, a reserve was created by the application of the equity participation method. The reserve corresponds to the profits that are generated at the closing of the accounting period as a consequence of the application of special valuation systems at market prices and that have not been realized in the name of the company, in accordance with the rules of Article 27 (income realization) and other concurring regulations of the Tax Code. Financial surpluses: in compliance with Municipal Agreement 12 of 1998, from the Council of Medellin, it was established in Article 5 that the base for assessment of the financial surpluses that are transferred to the Municipality of Medellin is the net profit. With this base, the Compes (Municipal Council for Economic and Social Policy) determines the amount or percentage of the financial surpluses that will form part of the resources of the budget of the municipal budget. Additionally, Municipal Agreement 69 of 1997, in its Article 13, mentions: ‘‘The percentage of EPM financial surpluses, in conformity with Article 97 of Decree 111 of 1996, cannot be transferred by a percentage over 30% to the Municipality of Medellin and will be intended by the latter exclusively to social investment and payment of city lighting’’.

F-54 Financial surpluses to be transferred to the Municipality of Medellin are recognized when the COMPES determines them, in compliance with legal formalisms, based on the financial statements of the previous year approved by the Board of Directors and sent by the General Manager of EPM to the Secretary of Finance of the Municipality, through a decrease in the profits of previous periods. In those exceptional cases in which the Municipal Council approves extraordinary or additional financial surpluses, the recognition will be made with the document that gives rise to the obligation for EPM to transfer the financial surpluses, that is, when the certain amount is determined as well as the condition of method, place and time to make their transfer. Equity appreciation: it records the value of inflation adjustments of the equity account balances made since 1992 to 2000, year in which the CGN eliminated them. According to regulations in effect, this balance cannot be distributed as profit until the company is liquidated or decapitalized. Surplus for appreciations: Represents the value of the net increase of the book value of assets, determined as result of the update, in accordance with technical rules. In EPM the excess of the intrinsic value of investments compared to their book value and the excess of the realization value or replacement cost of goods over the book value are recognized as appreciation. Investments: in investments recognized as controlled entities: they are the subject of adjustment to the intrinsic value, in order to recognize the difference between the acquisition price and the intrinsic value of shares, quotas or part of corporate interest, at the time of purchase. In equity investments in uncontrolled entities: they are updated by the cost method quarterly, based on the intrinsic or stock exchange value of the entity. Reappraisal: Corresponds to the excess of the valuation value and the book value of assets owned at the end of the period, in accordance with the regulations in effect. EPM calculates and records provisions and appreciations for investments, properties, plant and equipment and other assets v) Memorandum accounts: debtor and creditor memorandum accounts represent the estimate of events or circumstances that may affect the financial, economic, social and environmental situation of the public accounting entity, as well as the value of goods, rights and obligations that require to be controlled. They also include the value originated in the differences arising between the public accounting information and that used for tax purposes. w) Revenues: corresponds to the accrued income by EPM in the accounting period, originated in the performance of its main activity. The returns, discounts and rebates for these items are recorded in separate accounts as lower value of the income. For the recognition of revenues the following conditions must be fulfilled: • That the service has been effectively rendered or the good has been delivered. • That the value of the service of good may be reasonable quantified. • That it is expected to receive the product of the service provided or good sold. • That the income is susceptible of increasing the net equity of EPM. • The income will not be recognized if there are any doubts about its realization. x) Non-operating income: Represents the income obtained by EPM in operations other than the provision of the public utility, including also the income of an extraordinary nature. EPM will recognize as non-operating income those that are not framed within its main corporate object, on which the risks or benefits have been transferred or the service has been effectively provided, that their value may be reasonably quantified and that it is probable to obtain the proceeds of the good or service delivered. y) Costs of rendering the services: These are the disbursements necessary to provide the public utility service, without which it would not be possible to provide it or its quality would not be optimum. These costs are connected directly to the rendering of the service, at a difference of the expenses that are disbursements associated to administrative activities. For the recognition of costs it is necessary to fulfill the following: • That the good or service subject of the costs has been satisfactorily received or is being received (for the case of services provided in several periods). • That the risks and benefits of the good or service have been received.

F-55 • That the value of the cost may be reliably measured. • It is probable that from the payment of the good or service received the outflow of resources that involve future benefits may be derived. • That the good or service subject of the cost is related to the rendering of services or is an element necessary in those services. z) Expenses: expenses are necessary disbursements, derived from the normal operation of the organization, that serve as support for the rendering of the service. EPM recognizes its expenses to the extent that the financial, economic, social an environment events occur, in such a way that they will be systematically contemplated in the corresponding accounting period, regardless of the flow of monetary or financial resources. For this purpose it will be necessary to take into account that the recognition will be made when: • The good or service subject of the expense has been satisfactorily received or is being received. • That the risks and benefits of the good or service have been received. • That the value of the expense may be reliably measured. • It is probable that from the payment of the good or service received the outflow of resources that involve future benefits may be derived.

Note 6 Significant changes in accounting practices For 2013 the following changes in the practices were made: • Methodology to determine the receivables provision: up to 2012 the methodology used to establish the receivables provision was the individual provision, as of 2013 the method of recognized technical value, cascade model is used. • Methodology to value litigations and lawsuits: up to 2012 the value of litigations and lawsuits corresponded to the value of the claim or the amount expected to be paid, as of 2013 the value of litigations and lawsuits classified as long term is established as the present value of the estimated value to be paid using as discount rate the rate of the In the statement of financial, economic, social and environmental activity the government securities TES fixed rate.

Reclassifications In order to present the figures of both periods in a way that their comparability is propitiated, the following reclassifications were made in the presentation of the figures of the previous year: In the revenues of year 2012 and 2011 a total value was presented for $12,586,616 and $11,595,433, disclosing for that period a value of $12,498,850 and $11,508,020, respectively. The lower income was due to the change of the accounting practice in respect to the presentation of the return of the charge for reliability for $80,659, 2012 and $90,154, 2011, which was presented as operating cost in these periods; and the leasing of the electric infrastructure for $7,107, 2012 and $2,741, 2011 (higher operating income), which was presented as non-operating income in the previous year. In the cost of sales of the years 2012 and 2011 the total value was presented for $7,784,002 and $7,037,643, disclosing in these periods a value for $7,703,343 and $6,947,489, respectively. The difference for $80,659 and $90,154 (lower cost) was due to the change of accounting practice in respect to the presentation of the return of the change for reliability commented above. In the non-operating revenues of the years 2012 and 2011 a total value was presented for $848,986 and $610,718, disclosing in this period a value for $856,093 and $607,977, respectively. The difference of $7,107 and $2,741 was due to the change of accounting practice in respect to the presentation of the leasing of the electric infrastructure, commented above.

Note 7 Subsequent events As of this date no events have been identified

F-56 Note 8 Other relevant aspect 8.1 Business combination and corporate reorganization Under Colombian regulations, equity investments in controlled companies are subject to adjustments, recognizing as goodwill the excesses between their acquisition price and their book value. If the purchase value is lower than the book value of the acquired entity, the difference is recognized as an equity increase, affecting the combination of business in the respective equity accounts. In Colombia no negative goodwill is recorded in the income statement for the year. However, the net equity is affected by the surplus for appreciation.

8.1.1 Merger of UNE EPM Telecomunicaciones S. A. and UNE EPM Bogotá S. A. in June 2012 On June 30, 2012 UNE EPM Telecomunicaciones S. A. formalized the bylaws’ reform consisting of a merger by virtue of which it took over its subsidiary UNE EPM Bogotá S. A. At the time of the merger, balances on condensed financial information of UNE EPM Bogotá S. A. were as follows:

June 30, 2012 December 31, 2011 Assets ...... 346,321 349,158 Liabilities ...... 170,319 172,150 Equity ...... 176,002 176,008 Net balances in UNE EPM Telecomunicaciones S. A E.S.P. as a result of the merge were as follows:

At June 30, Assets 2012 Assets EPM Bogotá S. A E.S.P...... 346,321 – Accounts receivable (reciprocal)...... (105,374) – Investments UNE S. A. E.S.P...... (176,002) Net assets resulting from the merger included in UNE S. A E.S.P ...... 64,945

Liabilities Liabilities EPM Bogotá S. A E.S.P...... 170,319 – Accounts receivable (reciprocal)...... (105,374) Net assets resulting from the merger included in UNE S. A E.S.P ...... 64,945

8.1.2 Spin-off of Centrales Eléctricas del Norte de Santander S. A. E.S.P. (CENS) in August 2012 As a result of the spin-off of Centrales Eléctricas del Norte de Santander S. A. E.S.P. (CENS) on August 24, 2012 in Cúcuta, the company CENS Inversiones S. A. was incorporated, the corporate purpose of which is the investment of capital in companies organized as public utilities companies in the electric power sector, regardless of the type or nature of those public utilities, as well as those entities whose corporate purpose corresponds to the complementary activities described in Act 142 of 1994, or in any complementary regulations rescinding, developing or amending the above.

8.1.3 Subscription of shares in the Company for Electric Power Distribution of Central America II (DECA II) in October 2012 On October 10, 2012, EPM subscribed and paid 132.614.853 shares in the Company for Electric Power Distribution of Central America II (DECA II), all of which hold par value of one quetzal (Q1,00) each, by means of contributions of the shares owned in ones Generadores Hidroeléctricos S. A. (Genhidro) and Hidronorte S. A.

8.1.4 Sale of share participations in Generadores Hidroeléctricos S. A. (Genhidro) and Hidronorte S. A. in November 2012 On November 28, 2012, DECA II formalized the sale of share participations received from EPM on Genhidro S. A. and Hidronorte S. A.; the purchaser was AKIS International Ltd, subsidiary of Centro American Mezzanine Infrastructure Fund (CAMIF), an investment fund of Canadian origin located in Washington D.C.

F-57 The main consolidated financial information of Genhidro S. A. (including Hidronorte S. A.) at December 31, 2011 and at October 31, 2012 was as follows:

Net income Assets Liabilities Equity 31/12/2011 ...... 4,091 45,630 12,178 33,452 31/10/2012 ...... 3,743 41,948 9,086 32,862

8.1.5 Acquisition and liquidation of the Panamanian Company Espíritu Santo Energy S. de R.L. In January 2013, EPM and EPM Inversiones acquired the Panamanian company Espíritu Santo Energy S. de R.L. owner of 99.99% of the shares of the company Espíritu Santo Colombia S.A.S. E.S.P. which was owner of the rights to carry out the hydroelectric project Espiritu Santo in Colombia that will generate approximately 600 megawatts of energy, on the basin of the Cauca River, in the North of Antioquia. The transaction was closed for $134,878 million. On October 8, 2013, by means of deed of Notary Fifth of the Republic of Panama the liquidation of the company Espíritu Santo Energy S. de R.L. was notarized. Remnants for $4,335 million were received. In the meeting of November 29, 2013, the General Stockholders’ Meeting of Espíritu Santo Colombia S.A.S. E.S.P. in Liquidation approved the liquidation accounts and the distribution of the remnants for $2,928 million. With the liquidation of these companies the hydroelectric project will be carried out by EPM.

8.1.6 Creation of the Company EPM Chile S.A. and acquisition of the companies Parque Eólico Pacífico S.A. and Parque Eólico La Cebada S.A. In February 2013 the company EPM Chile S.A. was created with contributions from EPM and EPM Investments for $61,628 million as of December 2013. This affiliate acquired in March 2013, 100% of the Chilean companies Parque Eolico La Cebada S.A. and Parque Eólico Los Cururos Ltda. (formerly Parque Eolico Pacifico), which carry out the construction of an eolic park of 109.6 megawatts in the region of Coquimbo, North of Chile. The value of the transaction was of $31,803 million.

8.1.7 Capitalization of the Company Tecnología Intercontinental S.A. de C.V. On September 20, 2013 a capitalization was made equivalent to 80% of the shares of the Company Tecnología Intercontinental S.A. de C.V. (TICSA), through the affiliate EPM Capital Mexico S.A. de C.V. TICSA is a holding company consisting of 13 companies, 11 of them engaged in the design, construction, operation and startup of the wastewater treatment plants (PTAR). During its 25 years of experience it has developed more than 250 wastewater treatment plants, industrial and municipal. Currently, it is in charge of the operation of 9 PTAR with Mexican operator entities and is constructing other 4 projects, by which its treatment capacity will total more than 11 cubic meters per second (11,000 liters per second) of wastewater. The value of the transaction was for $217.732 million.

8.1.8 Acquisition of the Company Empresas Varias de Medellín S.A. E.S.P. On November 1, 2013, EPM acquired 99.90% of the shares of Empresas Varias de Medellin S.A. E.S.P. (Emvarias) for $34,490 million. Emvarias was created 49 years ago. It provides the service of municipal collection of waste, mainly solid waste and complementary activities of transportation, sweeping and cleaning of roads and public areas, treatment, use and final disposal of waste, cutting of grass and trimming of trees located in the roadways and public areas. It is a company leader in the rendering of the domiciliary public service of cleaning and sanitation in the Valle de Aburrá.

8.1.9 Liquidation of the Company EPM Ituango S.A. E.S.P. In the extraordinary General Stockholders Meeting of EPM Ituango S.A. E.S.P. of January 11, 2013, it was decided to assign to EMPRESAS PÚBLICAS DE MEDELLÍN E.S.P. the contractual position that it had with HIDROELÉCTRICA ITUANGO S.A. in the contract BOOMT (Build, Operate, Own, Maintenance and Transfer), for the construction, operation, maintenance and transfer of the Ituango project to EPM.

F-58 The decisions made by in this meeting were the following: • Assign in favor of EPM the contractual position that EPM Ituango has in the BOOMT contract for a value of $18,520 and the remaining contracts that it has executed for the performance of the BOOMT, as well as the rights and obligation inherent to it. • Sell to EPM the assets associated to the project at their accounting value based on the listing of assets as of December 31, 2012, plus the adjustment for the investments made from January 1st to 11, 2013. By means of private document executed on January 19, 2013 EPM ITUANGO S.A. E.S.P. (In liquidation) assigned its contractual position as contractor in the BOOMT contract to EMPRESAS PUBLICAS DE MEDELLIN E.S.P. as well as the remaining contracts that form part of the project and consequently the assignee accepted to assume in their proceedings, substance and equity all legal actions, pretrial conciliations, police and administrative coverage, claims third party liability claims, in which EPM ITUANGO S.A. E.S.P. would be acting as defendant, plaintiff, party summoned or summoning to conciliation, and addressee of claims, related to the performance of the Ituango hydroelectric project, which may be currently underway. In order to carry out the mentioned assignment, EPM ITUANGO S.A. E.S.P. (In liquidation), by means of private document of February 7, 2013, sold to EMPRESAS PÚBLICAS DE MEDELLÍN E.S.P. all assets with which EPM ITUANGO S.A. E.S.P. was carrying out the BOOMT contract. It was indicated that as of that date EMPRESAS PÚBLICAS DE MEDELLÍN E.S.P. was the owner and therefore subject to the obligations and duties inherent to the condition as owner of each of the assets. The liquidation of EPM Ituango S.A. E.S.P. was registered at the Chamber of Commerce of Medellin on January 13, 2014, said company being fully extinguished.

8.1.10 Liquidation of the Company CENS Inversiones S.A. On August 9, 2013, the company CENS Inversiones SA. was liquidated. The process of liquidation was started in April and was completed with the registration at the Chamber of Commerce of Cucuta. The companies of the EPM Group received $100,137 million as remnant of the liquidation.

8.1.11 Creation and liquidation of the company ESSA Capital S.A. The company ESSA Capital S.A. was incorporated on February 20, 2013 as a result of the spin-off of part of the equity of Electrificadora de Santander S.A. E.S.P., according to approval by the General Stockholders’ Meeting of January 24, 2012. The shareholders of ESSA Capital S.A. were EPM, EPM Inversiones, Department of Santander, Municipality of Bucaramanga and other minor shareholders. On August 1, 2013 the dissolution of the company ESSA Capital S.A. was registered at the Chamber of Commerce of Bucaramanga. The General Stockholders’ Meeting in an extraordinary session of August 29, 3013 approved the liquidation inventory and advance distribution of the remnants, of which the EPM Group companies received $176,658 million.

8.1.12 Framework Merger Agreement EPM – Millicom The boards of directors of UNE and EPM approved on October 1, 2013 the final documents of the negotiation that will permit the merger between UNE and Millicom. Upon signature of this framework agreement, it was presented for approval to the Colombian regulatory and governmental authorities, among them the Superintendence of Industry and Commerce, the Financial Superintendence, the Superintendence of Corporations, the National Authority of Television and the Meeting Bondholders of UNE. According to the schedule provided, the final approval of the merger should be ready during the first half of 2014. The process for the integration of UNE EPM Telecomunicaciones and Millicom was started on February 5, 2013, when both companies executed a non-binding memorandum of understanding. On May 9th a transcendental advance took place with the issuance of Agreement 17 of 2013 by the Council of Medellin, that authorized the transformation of UNE under a series of conditions that were complied with in full. On July 22nd both companies signed a new memorandum of understanding, this time of a binding nature, after completing the conversations related to the structure and terms for the integration of their operations.

F-59 Among the agreements reached the following are outstanding: • EPM will have the majority shareholding in the merged company with a participation of 50% and 1 share of corporate capital. Millicom, in turn, will be the owner of the remaining shares and will assume the full consolidation of the financial statements and the administrative and operating control of the entity. • The Company will continue to have its registered office in Medellin, will bill new headquarters for the integrated company and will continue being a source of employment for the region. Once the regulatory authorities authorize the merger, EPM will abandon the consolidation of UNE and its affiliates. On September 23, 2013, the Sindicato de Trabajadores de las Empresas de Servicios Públicos Domiciliarios, Complementarios y Conexos (Sinpro) filed a suit requesting the court to enjoin the UNE-Millicom Merger, claiming that, as a result of the merger, EPM is selling part of its equity interest in UNE, in violation of the provisions of Law 226 of 1995. If the UNE-Millicom Merger is enjoined, EPM will not be able to achieve the synergies expected from the merger, the implementation of EPM’s strategy relating to the telecommunications industry will be delayed, and its reputation may be adversely affected.

8.2 International Financial Reporting Standards (IFRS) Adoption The International Financial Reporting Standards (IFRS) are a set of standards and interpretations of a technical nature, approved, issued and published by the International Accounting Standards Board (IASB). In these standards are established the criteria for the recognition, valuation, presentation and disclosure of financial information. These standards are becoming the universal accounting language enforceable and accepted to make sure that in all countries the same financial language is spoken, with greater consistency in the accounting policies and comparability of the companies’ financial information. EPM undertook the adoption project of International Financial Standards (IFRS) since 2009, to respond to its growth strategy and facilitate the access to international capital markets. In Colombia, the approval of Law 1314 of 2009, whereby accounting and financial reporting and information assurance principles and standards are regulated, has gained great importance. In December 2013, the CGN issued Resolution 743 whereby the Public Accounting Regime, the regulatory framework provided in the annex to National Decree 2784 of 2012 from the Ministry of Trade, Industry and Tourism of Colombia whereby the International Financial Reporting Standards are officially adopted in the country. According to these regulations, EPM belongs to Group 1 of preparers of financial information and therefore, it presented to the authorities in charge of monitoring the company the IFRS implementation plan and progress reports of 2013, as per the information requirements established in the different resolutions.

8.3 Process of consolidation of accounting information In 2009, with the international bond issued for USD 500 million, EPM acquired the commitment, with the investors and international banks, to present periodically the consolidated financial statements of the EPM Group; this exercise was being carried out in EPM for administrative purposes, but with this issue the formal obligation was acquired. EPM consolidates its financial information with the companies in which it holds an equity interest equal to or in excess of 50%, either directly or indirectly or has the administrative control. The consolidated financial statements are issued quarterly and are present to the Board of Directors. After the Board of Directors approve them, they are published in the official EPM page together with their respective Notes.

F-60 Specific notes Notes related to valuation Note 9 Conversion of values in foreign currency The balances in cash, banks, accounts receivable, investments, suppliers and financial obligations in foreign currency were expressed in Colombian pesos based on the Market´s Representative Exchange Rate (TRM, for its initials in Spanish) certified by the Financial Superintendence of Colombia. As of December 31st the values are:

Currency 2013 2012 2011 US Dollar (USD) ...... 1,926.83 1,768.23 1,942.70 Euro (EUR) ...... 2,655.08 2,331.23 2,521.92 Japanese Yen (JPY) ...... 18.33 20.46 25.26 Sterling Pound (GBP) ...... 3,191.31 2,874.26 3,019.15 Swiss Franc (CHF) ...... 2,166.57 1,931.76 2,077.52 Quetzal (GQT) ...... 245.73 223.76 248.67 Mexican Peso (MXN) ...... 147.12 135.91 144.03 Chilean Peso (CLP) ...... 3.66 3.69 3.60 The effects in results for exchange difference as of December 31 were the following:

2013 2012 2011 Non-operating income from exchange differences Cash ...... 34,539 5,095 27,899 Acquisition of goods and services ...... 20,856 43,453 36,598 Investments ...... 8,006 0 1,829 Accounts receivable ...... 39,731 9,932 38,586 Public credit transactions ...... (12,772) 163,708 12,742 Other adjustments on exchange differences ...... 45,440 32,310 12,951 Total non-operating income from exchange differences ...... 135,800 254,498 130,605 Non-operating expenses from exchange differences Cash ...... 19,359 11,349 2,303 Acquisition of goods and services ...... 12,924 21,236 42,341 Accounts receivable ...... 9,891 37,138 32,858 Investments ...... 0 16,033 1,865 Short term external Public credit transactions ...... 215,494 0 29,830 Other adjustments on exchange differences ...... 48,031 30,253 8,545 Total non-operating expense from exchange differences ...... 305,699 116,009 117,742

Balance Sheet Assets Note 10 Cash and cash equivalents As of December 31, cash and cash equivalents are comprised as follows:

2013 2012 Cash ...... 6,738 2,474 Due from banks ...... 1,243,154 1,490,147 Other available resources ...... (1) 56,688 3,867 Total cash and cash equivalents...... 1,306,580 1,496,488 Restricted funds ...... (2) 144,945 62,239

(1) Includes funds in foreign currency payable on demand, realized through overnight operations that generate a financial return.

F-61 (2) Cash in banks includes the following accounts with special destination:

Fund Destination 2013 2012

Restricted Resources EPM

Agreements

IADB Credit 2120 Intended to the disbursement of the credit funds, which was granted 43,246 — for the construction of the wastewater treatment plant – PTAR in Bello. The resources that arrive at this account are requested via legalization, only duly legalized funds are released.

Municipality of Medellin–Water Integral management of water for human consumption of the 5,124 8,599 inhabitants of the Municipality of Medellin.

Department of Antioquia Covenant Join efforts for the institutional development, strengthening, 2,974 — transformation or creation of companies in order to ensure the rendering of public utilities in the municipalities of the Department.

Ministry of Mines and Energy– Co-financing agreements for the construction, distribution and 2,415 — Special Promotion Quota Fun connection infrastructure to lower income subscribers in the municipalities of Amagá, Santa Fé de Antioquia, Sopetrán, San Jerónimo and Ciudad Bolívar. Compressed natural gas and connect subscribers to Don Matías, Entrerríos, San Pedro, Santa Rosa and Yarumal. Agreement No. 106 construction infrastructure to lower income subscribers of Valle de Aburrá, La Ceja, La Unión, and El Retiro. Agreement 179: includes the municipality of Sonsón

Government of Antioquia–Gas Support the development of the expansion component through the 2,398 1,323 without borders construction of domiciliary gas connection within the framework of the program ‘‘Gas without borders’’ in the sub-regions of the Department of Antioquia.

Municipality de Medellin–Moravia Construction, repair and replacement of waterways and sewage 1,069 1,052 networks and paving in the Municipality of Medellín of the streets affected by these works in the neighborhood of Moravia.

Municipality de Barbosa Replacement and modernization of secondary waterways and 1,039 — sewage networks and their complementary works in the neighborhoods of Robles, Centro, La Bicentenaria, Los Ángeles and El Portón in the Municipality of Barbosa

Ministry of Mines and Energy– Manage the funds and make the payment of the agreement entered 673 — Trust management into with the Ministry of Mines and Energy FAER GGC 225 2012 (CT-2012-001774 in EPM), to extend and improve the electric power services in the zones of the National Interconnected System located in the Commercialization Market of the Network Operator.

Rural Electrification Agreements Construction and works supervision of domiciliary installations by 369 — EPM, to develop rural electrification programs in different municipalities of the Department of Antioquia.

Multilateral Fund of the Montreal Agreement with the Ministry of Environment and Sustainable 290 — Protocol Development for the performance of activities in the framework of the implementation of the Montreal Protocol in Colombia.

Aldeas program Take advantage of the wood that completes its maturity cycle in the 260 411 forests planted by EPM around its reservoirs, to construct low- income homes in the municipalities of Antioquia out of Valle de Aburrá and deliver them to low income people, preferably who have been forced or voluntary displaced.

Department of Antioquia and IDEA Carry the electric power service to rural homes in Municipalities of 135 3,521 – Antioquia lighted the Department of Antioquia.

Municipality de Medellín–Land Acquisition of pieces of land identified and characterized within the 47 456 zones of protection of the hydrographic basins that supply the water systems of the Municipality of Medellín.

Fondo Nacional de Regalías–Gas Construction of the compressed natural gas distribution 1 — infrastructure and subsidies for the connection of users of social economic level 1 and 2 of the municipalities of El Peñol and Guatapé.

F-62 Fund Destination 2013 2012

Conventional

Sinpro Housing Fund Contribute to the acquisition of homes and their improvement, of 15,501 7,570 workers beneficiary of the labor agreements entered into between Sintraemdes Housing Fund EPM and the labor unions. 14,897 18,730

Sintraemdes Disaster Fund Promote the wellbeing of its workers through the availability of 912 724 funds in order that they may take care of their urgent and Sinpro Disaster Fund unforeseen needs or those of their primary family group. 851 858

Sinpro Education Fund Promote the wellbeing of workers in order that they may take care 904 723 of their payment needs of school tuition, textbooks and supplies Sintraemdes Education Fund required to carry out their own studies or those of their family 796 743 group.

Motorcycle Repair Fund Promote the wellbeing of official workers who perform their work 152 149 in the regional market and use motorcycles owned by them for the Motorcycle Replacement Fund performance of their work. 61 47

Guarantees

Entidad Adaptada de Salud Fund Control and Monitoring mechanism to the collection of 641 601 and Fosyga Fund contributions of the Contributive Regime of the General Social Security System for Healthcare.

International Energy Transactions Corresponds to the ‘‘compensation’’ that should be performed 358 — between the invoice transaction and prepayments bag, looking that perform the actual payment XM.

Deposits Law 820 Corresponds to the guarantee required by the landlord to the tenant 40 603 for the payment of public utilities. According to Article 15 of Law 820 of 2003 and Regulatory Decree 3130 of 2003.

Total restricted resources Epm 95,153 46,110 Parent Company

Restricted resources ESSA S. A. E.S.P.

Covenant Faer 235 Extend coverage, improve quality and continuity of electric power 4,940 — service and satisfy its demand in the zones of the National Covenant Faer 090 Interconnected System – SIN located in the commercialization 4,867 — market of the NETWORK OPERATOR, through execution of resources of the Financial Support Fund for Energizing of Interconnected Rural Zones FAER.

Convenio Autoseguros Self-insurance Agreement 4,960 —

Faer 030 Technical assistance agreement between the Nation’s Ministry of 1,260 1,291 Mine and ESSA for the administration and execution of resources from the Financial support fund for electric power supply to Interconnected Rural Areas (FAER).

Prone Execution of resources from the Program for Normalization of 817 900 Electric Power Supply Networks - PRONE

Covenant Provincial Government– Construction of low and medium voltage networks, assemble of 498 5,271 ESSA Stage V transformers and internal installations for rural electric power supply in villages of the Department of Santander.

Covenant Faer GSA 160 2012 Technical assistance agreement between the Nation’s Ministry of 395 1,542 Mine and ESSA for the administration and execution of resources from the Financial support fund for electric power supply to Interconnected Rural Areas (FAER).

Public lighting San Gil Resources from surplus from Public lighting of the Municipality of 348 262 San Gil.

Faer 014 Administration and execution of resources from the Financial 342 330 support fund for electric power supply to Interconnected Rural Areas (FAER), allocated to rural electric power supply and normalization of electric power networks.

F-63 Fund Destination 2013 2012

Covenant Provincial Government– Construction of low and medium voltage networks, assemble of 296 173 ESSA Stage III transformers and internal installations for rural electric power supply in villages of the Department of Santander

Covenant Jesus María Construction of low and medium voltage networks, assemble of 138 — transformers and internal installations for rural electric power supply in villages of the Department of Jesús - María, Santander.

Covenant Provincial Government– Construction of low and medium voltage networks, assemble of 203 904 ESSA Stage IV transformers and internal installations for rural electric power supply in villages of the Department of Santander

Public hearings General administration and execution of resources from Public 93 90 hearings by ESSA allocated to projects for construction of low and medium voltage networks for Rural Electric Power Supply.

Covenant Provincial Government– Construction of low and medium voltage networks, assemble of — 804 ESSA–Stage I transformers and internal installations for rural electric power supply in villages of the Department of Santander

Covenant Faer 036 Technical assistance agreement between the Nation’s Ministry of — 529 Mine and ESSA for the administration and execution of resources from the Financial support fund for electric power supply to Interconnected Rural Areas (FAER).

Covenant ESSA–Municipality Construction of low and medium voltage networks, assemble of — 61 Charalá transformers and internal installations for rural electric power supply in villages of the Department of Charalá

Covenant Provincial Government Construction of low and medium voltage networks, assemble of — 23 transformers and internal installations for rural electric power supply in villages of the Department of Santander

Total restricted resources ESSA 19,157 12,180

Restricted resources EDEQ

Housing fund Resources destined to improve workers’ quality of life by granting 554 703 loans for the purchase or improvement of houses.

Fund for household damages Resources destined to cover damages caused by difficult and 11 13 unforeseen events affecting the workers or their families.

Total restricted resources EDEQ 565 716

Restricted resources CENS

Contract FAER GGC 105-2013 Execution of the works for the rural electrification of the 14,829 — entered into between the Nation municipalities of Convención, San Calixto, Cáchira, Hacarí, Ocaña, (MINISTRY OF MINES) AND La Playa, Villa Caro, Teorama and La Esperanza Department of CENS. Norte de Santander. (FAER CATATUMBO III)

FUNDESCAT Execution of the works for the rural electrification of the 5,275 — municipalities of Tibu and El Tarra, Department of Norte de Santander.

CONVENIO CENS– ECOPETROL Execution of the works for the rural electrification of the 4,007 — municipalities of Tibu and El Carmen, Department of Norte de Santander.

Rotating Housing Fund Financing the value of a home for those workers that do not own it. 178 —

Convenant FAER 021 General administration and execution of some resources of the 124 — financial support fund for energizing of interconnected rural zones – FAER.

Electrificadora Vereda Aguablanca– Construction of medium and low voltage interconnection networks 106 — FNR village Aguablanca Municipality of Bucarasica Norte de Santander.

AOM Contract Administration, operation, maintenance and replacement of the 62 — rural electrification assets constructed with the resources of the project ‘‘program of rural electrification zone of Catatumbo and province of Ocaña, phase 1, Norte de Santander’’.

F-64 Fund Destination 2013 2012

FAER 003 Agreement General administration and execution of some resources of the 3 — financial support fund for energizing of interconnected rural zones – FAER.

Total restricted resources CENS 24,584 —

Restricted resources Regional de Occidente

Covenant 10000083 Sopetrán Resources received during 2011 form inter-administrative covenant 22 54 08-CF-124850 agreed between the Department of Antioquia and Covenant-San Jerónimo Municipalities of Santafé de Antioquia and San Jerónimo, as well as 13 13 resources received during 2011 under the inter-administrative Covenant-Santafé covenant for financial support agreed between the Ministry of 2 2 Environment, Housing and Territorial Development, the Covenant 5847 Department of Antioquia and Regional de Occidente with the 1 8 purpose of providing financial support to the regional schemes for the rendering of water and draining services.

Total restricted resources 38 77 Regional de Occidente

Restricted resources Aguas de Urabá

Contributions 10005141- 143 EAU Inter-administrative agreement for the construction of the master 3,402 2,891 plans of waterworks – Phase II of the region of Urabá, Municipalities of Turbo, Carepa, Apartado y Chigorodo.

Financial performance 10004502 Balance of capitalization resources received from the Department 582 — of Antioquia and the interest yielded.

Contributions Department 10008940 Inter-administrative agreement for the performance of the 371 — optimization of the Wastewater collection system of the Municipality of Turbo

Financial performance 10005141 Inter-administrative agreement for the construction of the master 5 — plans of waterworks – Phase II of the region of Uraba, Municipalities of Turbo, Carepa, Apartado y Chigorodo.

Financial support 10005431-07- Balance of agreement signed with Department of Antioquia for the 2 31 CF12-4842 execution of works

Financial support 10003713-49 Support the execution of the works and investment plan of the — 176 Apartadó waterworks projects, defined in the crash plan for the municipalities of Apartadó y Chigorodó.

Financial support 10003713-49 Support the execution of the works and investment plan of the — 58 Chigorodó waterworks projects, defined in the crash plan for the municipalities of Apartadó y Chigorodó.

Total restricted resources Aguas 4,362 3,156 de Urabá

Restricted resources Aguas Nacionales

Trust – Fiduciaria Bogota 197517 Inter-administrative collaboration agreement No. 1 entered into 1,002 — between EPQ IN LIQUIDATION and EPM for the management of FL Bancolombia 536423 investments and supervision, maintenance and operation of the 53 — waterworks, sewage and cleaning and sanitation systems in the MN Main Cash urban zone of the municipality of Quibdo. 30 —

FL MN Petty Cash Restricted A 1 —

Total restricted resources Aguas 1,086 — Nacionales

Total restricted resources 144,945 62,239

F-65 Note 11 Investments in securities As of December 31 investments for liquidity management are comprised as follows:

2013 2012 Value Average profitability Value Average profitability Rights in funds and securities investment trust ...... (1) 72,832 3.26% E.A. 422,418 5,37% E.A. Treasury securities-TES ...... (2) 126,181 6.09% E.A. 262,010 7.53% E.A. 4.06% E.A, Time deposits ...... (3) 633,692 5.69% E.A. en GTQ, 748,366 6.16% E.A. 3.85% E.A. en USD Bonds and securities issued by financial institutions ...... (4) 309,467 0.38% E.A. en USD 395,422 1.16% E.A. en USD Bonds and securities issued by 8.50% E.A. en GTQ international institutions ...... 78,796 7.21% E.A. en USD 44,657 Bonds and securities issued by general government ...... (5) 51 44 Bonds and securities issued by private sector ...... 31,492 26,968 -39.44% E.A. Other investments for liquidity management ...... (6) 37,027 0.99% E.A en USD 1,283 Current investments in securities .. 1,289,538 1,901,168 Deposits of foreign debt transactions 0 2,555 Other investments for liquidity management ...... 8,185 7,117 Non-current investments in securities ...... 8,185 9,672 Total investments in securities .... 1,297,723 1,910,840

(1) Short-term investments made with own funds in investment funds. They are treated as a current account and are investments made to obtain a yield on cash surpluses. (2) Internal public debt securities issued by the National Government and administered by the Central Bank. These instruments are valued by price in case that they have been traded on the day of the valuation. (3) Financial instruments for borrowing of savings; their interest rate is determined by the amount, term and market conditions at the time of creation. (4) These correspond to term deposit investments, entered into with international financial institutions with a minimum rating of A+ for the long term, and A-1+ for the long term and branches abroad of banking institutions monitored by the Financial Superintendence of Colombia with the maximum rating in effect for long and short term. (5) Investments in international investment mutual funds or Exchange Trade Funds (ETF) and bonds issued by trusts and guaranteed with cash flows by bank loan. (6) Correspond to Tax Refund Securities (TIDIS, for its initials in Spanish).

Note 12 Accounts receivable, net As of December 31 accounts receivable are comprised as follows:

2013 2012 Receivables from utility services Electric power service ...... 1,268,526 1,198,124 Telecommunications service ...... 296,898 323,650 Subsidy on telecommunications service ...... 17,764 56,230 Subsidy on electric power service ...... 5,741 50,134 Fuel gas service ...... 98,402 93,449 Water service ...... 62,123 64,106 Sewage draining service ...... 69,140 51,027

F-66 2013 2012 Subsidy on fuel gas service ...... 6,638 6,081 Subsidy on water service ...... 5,511 5,528 Subsidy on sewage draining service ...... 2,413 1,715 Cleaning service ...... 6,929 151 Other accounts receivable Rendering of services other that public utilities ...... 217,802 227,232 Advances or credit balances for taxes and contributions ...... (1) 351,273 197,337 Deposits and advances delivered ...... 162,978 193,944 Loans to employees ...... 28,481 34,075 Interests ...... 328 31,480 Resources given for administration ...... (2) 664,976 20,433 Pension payment quotas ...... 25,532 19,809 Collection schemes ...... 10,732 18,374 Sales of goods ...... 30,061 17,780 Payments on behalf of third parties ...... 38,062 16,120 Leasing ...... 8,706 5,800 Administration of resources health system ...... 0 4,557 Sales of assets ...... 279 4,242 Fees and commissions ...... 3,109 1,608 Dividends and shares receivable ...... 0 4 Other minor accounts receivable ...... 89,281 70,165 Doubtful accounts Electric power service ...... 161,234 159,893 Telecommunications service ...... 137,313 126,951 Water service ...... 9,684 9,577 Fuel gas service ...... 10,335 8,421 Sewage draining service ...... 8,149 7,962 Other doubtful accounts receivable ...... 92,897 87,585 Current accounts receivable ...... 3,891,297 3,113,544 Current portion provision ...... (3) (587,698) (543,248) Current accounts receivable, net ...... 3,303,599 2,570,296 Rendering of public utilities Fuel gas service ...... 164,430 147,017 Electric power service ...... 161,493 146,301 Water service ...... 28,214 27,425 Sewage draining service ...... 16,797 17,773 Other accounts receivable Loans to employees ...... 112,089 93,630 Deposits and advances delivered ...... 91,539 65,755 Payments on behalf of third parties ...... 3,091 16,059 Interests ...... 319 5,173 Sales of assets ...... 4,830 4,584 Rendering of services ...... (4) 334,327 1,357 Resources given for administration ...... 1,506 126 Charging scheme ...... 84 0 Others ...... 40,973 213,405 Non-current accounts receivable, net ...... 959,692 738,605 Accounts receivable, net ...... 4,263,291 3,308,901

(1) Includes mainly advances of income tax and VAT of temporary investments. (2) Includes trusts by Aguas Nacionales S.A E.S.P., for $604,219 (2012 - $0). (3) The movement of the allowance for doubtful accounts was as follows:

F-67 2013 2012 Initial balance ...... 543,248 612,377 Increase for the year ...... 110,882 83,515 Expense from previous periods ...... (1,565) 885 Translation adjustment ...... 2,208 (802) Business combinations ...... 7,743 — Reclassification of provision ...... (1,107) (24,694) Recovery of provision ...... (33,888) 983 Use of provision ...... (39,823) (129,016) Total provision for accounts receivable ...... 587,698 543,248

During 2013 the methodology to determine the provision was changed see note 6 (4) Includes mainly concession agreement valued as accounts receivable corresponding to the T1 rate component, for the construction of wastewater treatment plans in the Ticsa Group of Mexico. The value was for $332,957 (2012 - $0).

Note 13 Inventories, net As of December 31, inventories are comprised as follows:

2013 2012 Materials ...... (1) 218,720 216,516 Goods for sale ...... (2) 30,787 18,100 Inventories held by third parties ...... 7,685 5,033 Goods in transit ...... 5,302 8,796 Work in process ...... 1,024 770 Subtotal inventories ...... 263,518 249,215 Provision ...... Materials for the rendering of services ...... (3,587) (6,527) Merchandise in stock ...... (1,848) (185) Total provision ...... (3) (5,435) (6,712) Total inventories, net ...... 258,083 242,503

(1) Includes minor spare parts used for the repair of company assets, also includes elements and accessories for the rendering of services. (2) Include elements of foods and provisions associated to products commercialized in the supply stores of EPM. (3) The movement of the inventories provision was as follows:

2013 2012 Initial balance ...... 6,712 6,284 Increase of the year ...... 2,319 4,620 Use of the provision ...... — (859) Adjustment from previous periods ...... (476) (1,242) Translation adjustment ...... (8) (228) Recovery of provisions ...... (1,392) (1,863) Business combinations ...... (1,720) — End balance ...... 5,435 6,712

F-68 Note 14 Prepaid expenses As of December 31, prepaid expenses are comprised as follows:

2013 2012 Insurance ...... 38,667 36,994 Leasing ...... 6,776 7,309 Other expenses paid in advance ...... 19,147 23,170 Current prepaid expenses ...... 64,590 67,473 Insurance ...... (1) 38,489 7,567 Leasing ...... 30,806 32,470 Other expenses paid in advance ...... (2) 131,383 93,588 Non-Current prepaid expenses (Note 18) ...... 200,678 133,625 Non-Current prepaid expenses ...... 265,268 201,098

(1) Includes mainly all risks policies for $32,665 (2012 - $0) and third party liability $295 (2012 - $0) of the Hidroituango project in EPM Parent. Both policies have an effective term up to March 2020. (2) Includes mainly the rights of use of cables called IRUS, Wimax and purchase of domains, among other items (Irrevocable Right of Use – IRU – on dark optic fiber thread, purchase of domains, beneficiary rights).

Note 15 Equity investments, net As of December 31, balances of investments are comprised as follows:

2013 2012 Investments in non - controlled entities ...... 604,872 606,089 In entities under liquidation ...... 102 603 Equity investments ...... (1) 604,974 606,692 Valuation allowance of investments ...... (2) (103,604) (99,515) Equity investments, net ...... 501,370 507,177

(1) The investments recorded under the cost method as not controlled were:

Percentage of participation

Company Location Corporate purpose 2013 2012 Creation date

Isagen S.A. E.S.P. Medellín Generation and commercialization of electric 13.11% 13.11% April 4, 1995 power, natural gas by grids, as well as commercialization of coal, steam and other energy sources of industrial use.

Interconexión Medellín Operation and maintenance of its own 10.17% 10.17% September 14, Eléctrica S.A E.S.P. transmission network, expansion of the 1967 national interconnection network, planning and coordination of the operation with resources from SIN.

Hidroeléctrica Medellín Operation and maintenance of its own 46.45% 46.45% December 29, Ituango S.A. E.S.P. transmission network, expansion of the 1997 national interconnection network, planning and coordination of the operation with resources from SIN.

Gestión Energética Manizales Rendering of one or more public utilities 0.19% 0.19% May 4, 1993 S.A. E.S.P. GENSA considered under ACT 142 of 1994 or the conduction of one or several activities considered as complementary or one and the other activity.

Reforestadora Medellín Produce, transform and commercialize 6.82% 6.84% February 28, Industrial de timber products and non-timber products 2003 Antioquia RIA from forestry plantations, seeking high profitability and sustainability.

F-69 Percentage of participation

Company Location Corporate purpose 2013 2012 Creation date

Electrificadora del Barranquilla Distribution and commercialization 0.07% 0.07% June 06, 1998 Caribe S.A. electricity in the Colombian Caribbean.

Transoriente S.A. Bucaramanga Transportation of fuel gas by means of 6.73% 6.73% March 24, 1994 E.S.P. construction, operation and maintenance of gas pipelines, ducts and branches.

Gas Natural del Bucaramanga Rendering of essential public utilities of 10.00% 10.00% August 30, 1997 Oriente S.A. E.S.P. residential fuel gas distribution in any part of the country. The value of investments recorded under the cost method, with detail of adjusted cost, revaluation and associated provisions, were:

Entity Cost Provision Net Revaluation Dividends Isagen S.A. E.S.P...... 194,312 — 194,312 955,907 24,460 Interconexión Eléctrica S.A. E.S.P...... 187,035 — 187,035 837,676 21,170 Colombia Móvil S. A. E.S.P...... 152,073 (85,493) 66,580 — — Hidroeléctrica Ituango S.A. E.S.P...... 28,111 — 28,111 6,314 1,977 Gestión Energética S.A. E.S.P...... 12,700 (12,059) 642 — — Transoriente S.A. E.S.P...... 8,633 — 8,633 4,089 — Gas Natural del Oriente S.A. E.S.P...... 7,651 — 7,651 11,137 2,416 Reforestadora Industrial de Antioquia (RIA) . . . . 5,076 (125) 4,951 — — Electrificadora del Caribe S.A. E.S.P...... 1,764 (336) 1,428 — — Hidroeléctrica del Río Aures ...... 446 — 446 12 — Others ...... 1,794 (213) 1,581 14,583 455 Total ...... 599,595 (98,226) 501,370 1,829,718 50,478

Entity Cost Provision Net Revaluation Dividends Isagen S. A. E.S.P...... 194,311 — 194,311 702,995 27,577 Interconexión Eléctrica S. A. E.S.P...... 187,035 — 187,035 893,978 20,156 Colombia Móvil S. A. E.S.P...... 152,073 (81,622) 70,451 — — Hidroeléctrica Ituango S. A. E.S.P...... 28,025 — 28,025 6,202 620 Gestión Energética S. A. E.S.P...... 12,700 (12,092) 608 — — Transoriente S. A. E.S.P...... 8,633 — 8,633 2,826 — Gas Natural del Oriente S. A. E.S.P...... 7,651 — 7,651 10,573 1,297 Reforestadora Industrial de Antioquia (RIA) . . . . 5,076 (129) 4,947 — — Electrificadora del Caribe S. A. E.S.P...... 1,398 (340) 1,058 — — Others ...... 9,790 (5,332) 4,458 12,014 37 Total ...... 606,692 (99,515) 507,177 1,628,588 49,687 The main financial information of equity investments as of December 31 was:

Company Net result Assets Liabilities Equity Interconexión Eléctrica S. A. E.S.P...... 433,048 10,233,090 2,818,975 7,414,115 Isagen S.A. E.S.P...... 314,422 7,309,208 3,553,393 3,755,815 Hidroeléctrica Ituango S.A. E.S.P...... 834 92,436 18,005 74,431 Reforestadora Industrial de Antioquia –RÍA- ...... 67 77,203 3,480 73,723

Company Net result Assets Liabilities Equity Interconexión Eléctrica S. A. E.S.P...... 272,938 8,912,304 2,792,599 6,119,705 Isagen S. A. E.S.P...... 407,957 6,200,731 2,714,065 3,486,666 Hidroeléctrica Ituango S. A. E.S.P...... 1,030 90,960 17,438 73,522 Reforestadora Industrial de Antioquia -RÍA- ...... 205 76,245 3,950 72,295

F-70 (2) The movement of the investments provision was as follows:

2013 2012 2011 Initial balance ...... 99,515 99,490 101,075 Increase for the year ...... 4,097 3,390 11,226 Provision expense from previous years ...... 855 — — Reclassification of provisions ...... 47 — (230) Recovery of provisions ...... (910) (3,365) (12,581) End balance ...... 103,604 99,515 99,490

Note 16 Property, plant and equipment, net As of December 31, the components of property, plant and equipment are comprised as follows:

2013 2012 Constructions in progress ...... (1) 3,204,013 1,634,074 Plants, ducts and tunnels ...... (2) 7,966,692 7,779,364 Networks, lines and cables ...... (2) 7,980,215 7,317,027 Buildings ...... (2) 3,058,647 2,970,508 Communication and computer equipment ...... 1,298,462 1,256,016 Machinery and equipment ...... 493,079 469,191 Land ...... 210,648 227,676 Transportation, traction and lifting equipment ...... 203,365 147,674 Movable goods in store ...... 179,552 140,831 Furniture, fixtures and office equipment ...... 113,978 112,862 Property, plant and equipment not used ...... 103,530 102,587 Machinery, plant and equipment in assembly ...... 131,409 90,516 Property, plant and equipment in transit ...... 13,126 32,481 Medical and scientific equipment ...... 29,787 28,659 Property, plant and equipment in maintenance ...... 10,640 6,622 Others ...... 11,215 10,942 Subtotal property, plant and equipment ...... 25,008,358 22,327,030 Depreciation accrued Plants, pipelines and tunnels ...... (5,719,737) (5,424,238) Networks, lines and cables ...... (3,517,871) (3,054,715) Communication and computer equipment ...... (855,934) (797,091) Buildings ...... (780,247) (652,597) Machinery and equipment ...... (286,407) (258,243) Transportation, traction and lifting equipment ...... (161,560) (105,754) Furniture, fixtures and office equipment ...... (84,501) (81,367) Medical and scientific equipment ...... (17,483) (16,680) Others ...... (1,812) (1,777) Accumulated depreciation ...... (3) (11,425,552) (10,392,462) Deferred depreciation ...... 2,561,246 2,323,135 Total depreciation ...... (8,864,306) (8,069,327) Valuation allowance of property, plant and equipment ...... (4) (120,903) (103,291) Total property, plant and equipment, net ...... 16,023,149 14,154,412

(1) An increase of $1,569,939 in respect to the previous year, explained especially by the incorporation of the Hydroelectric Project Ituango to the balance sheet of EPM, which initial value was $804,294, and the execution of charges for this same project intended to the construction of access roads and camps, the initiation of the excavation of the spillway and of the vault of the main cavern of the power house, the completion of the excavation of the tunnel of access to the power house, and of the deviation tunnels. (2) Corresponds to operating infrastructure components of the business of Generation, Transmission and Distribution, Natural Gas, Waterworks, Wastewater Sanitation.

F-71 (3) The movement of the depreciation during the year is detailed below:

2013 2012 Initial balance ...... 10,392,462 9,616,941 Increase for the year ...... 817,477 836,150 Business combination ...... 46,735 — Translation adjustments ...... 59,601 (38,486) Deferred depreciation, net ...... 238,110 350,701 Disposal of property, plant and equipment ...... (120,460) (196,567) Charges from previous years ...... 3,757 131 Adjustments and eliminations ...... — (206,454) Others ...... (12,130) 30,046 End balance ...... 11,425,552 10,392,462 (4) The movement of the provision during the year is detailed below:

2013 2012 Initial balance ...... 103,291 102,229 Increase for the period ...... 29,811 30,392 Provision expense from previous years ...... (706) (15,475) Reclassification of provision ...... — (10,440) Disposal of property, plant and equipment ...... (223) (408) Translation adjustments ...... 3 (3) Business combination ...... 26 — Recovery of provision ...... (2,365) — Others ...... (8,934) (3,004) End balance ...... 120,903 103,291

Note 17 Pension plan asset The pension plan asset as of December 31 is made up by:

2013 2012 Pension bonds (trust funds) ...... (*) 736,183 741,441 Total Pension plan asset ...... 736,183 741,441

(*) This is mainly comprised by trust funds of EPM, the most relevant being: (1) The autonomous equity trust was created with Fiduciaria Davivienda S. A. for the management of the resources intended to the payment of pension both of EPM and those derived from the pension commutation of EADE. The autonomous equity trust was created for the amount of $322,000; with this figure plus the returns that are expected to be obtained, it will be possible to cover up to 2056 the total pension payments according to the actuarial study. (2) An autonomous equity trust was created with the Consortium EPM 2008 (made up by BBVA Fiduciaria S.A. with the participation of 40%, BBVA Horizonte with a participation of 40% and Fiduciaria Corficolombiana with a participation of 20%) to guarantee the coverage of the obligations generated by the pension bonds, pension quota shares and the payment of substitution indemnification derived from the risks regulated by the general pension system. The value of the autonomous equity trust is projected in such a way that it will extinguish at the time of the last pension bond payment due by EPM in 2065; therefore with its creation is guaranteed the availability of funds to cover the pension liability of bonds and their financial management is made independent.

F-72 Note 18 Other assets The balance of other assets as of December 31 corresponds to:

2013 2012 Goods given to third parties ...... (1) 49,183 42,986 Deferred charges ...... (2) 35,667 15,980 Total other current assets ...... (1) (250) — Intangible assets ...... 84,600 58,966 Deferred charges ...... (3) 2,322,117 2,011,384 Assets held by third parties ...... (2) 499,169 464,907 Goods and services paid in advance ...... (1) 400,430 351,811 Trust fund rights ...... (4) 118,112 130,949 Leasehold improvements ...... (5) 133,158 130,585 Goods acquired by financial leasing ...... 3,077 3,480 Goods of arts and culture ...... 77 77 Goods received as payment in kind ...... — — Total other non-current assets ...... 3,476,140 3,093,193 Amortization of intangible assets ...... (3) (793,667) (716,945) Amortization of goods given to third parties ...... (1) (301,787) (254,811) Depreciation of goods acquired in leasing ...... (2,914) (3,176) Allowance for goods given to third parties ...... (1) (4) (4) Total depreciations, amortizations and provisions other assets ...... (1,098,372) (974,936) Total other non-current assets ...... 2,377,768 2,118,257 Total other assets ...... 2,462,368 2,177,223

(1) The goods delivered to third parties as of December 31 correspond to: 2013 2012 Goods given for administration ...... 368,353 313,418 Goods given as loan for use ...... 51,330 54,754 Other goods given to third parties ...... 29,930 26,625 Subtotal goods given to third parties ...... 449,613 394,797 Amortization ...... (1.1) (301,787) (254,811) Allowance ...... (254) (4) Total goods given to third parties ...... 147,572 139,982 (1.1) The movement the goods delivered to third parties amortization is: 2013 2011 Initial balance ...... 254,811 211,475 Increase for the period ...... 70,149 71,088 Withdrawals ...... (21,343) (54,559) Adjustments and eliminations ...... — (2,749) Other increases (decreases ) ...... (1,830) 29,556 End balance ...... 301,787 254,811 (1) Detail of the balance of deferred charges as of December 31st: 2013 2012 Deferred taxes ...... (2.1) 413,138 337,587 Studies and projects ...... 72,641 67,828 Equity tax ...... (2.2) 16,671 28,427 Discount in bonds and securities of long term foreign public debt ...... (2.3) 18,616 21,490 Premium for legal stability contracts ...... (2.4) 7,049 7,544 Organization and set up expenses ...... 1,176 1,281 Development expenses ...... 5,545 16,730 Other deferred charges ...... 534,836 480,887

F-73 (2.1) In 2013 deferred tax debit has been generated by receivables provision, actuarial calculation, provisions, exchange difference on investments abroad and goodwill, mainly. (2.2) Corresponds to the equity tax, pursuant to Law 1370 of 2009 in Colombia, for the Group companies that did not have in their equity appreciation of equity to be discounted. This tax will be amortized up to year 2014. (2.3) Corresponds to the discount granted by the issue of international bonds (coupon of 7.625%), by the credit of USD 500 million. The premium will be amortized up to its expiration date in July 2019. (2.4) Corresponds to the premium paid to the Nation for the legal stability agreement for the power generation activity of EPM. It was executed in a term of twenty years and its value was equivalent to 0.5% of the value of the investments made in the unproductive period and 1% in the operating phase. The initial value amounted to $9,894. (3) The detail of intangible as of December 31 is:

2013 2012 Goodwill and know how ...... (3.1) 1,420,440 1,197,866 Software, licenses, rights ...... 877,837 786,533 Brands, concessions and franchises ...... 24 2,088 Easements ...... 14,230 14,157 Other intangible assets ...... 9,586 10,740 Subtotal intangible assets ...... 2,322,117 2,011,384 Less amortization of goodwill and know how ...... (3.1) (353,635) (321,472) Less amortization of software, licenses, rights ...... (426,737) (378,131) Less amortization of brands, concessions and franchises ...... (4) (2,068) Less amortization of easements and others ...... (13,291) (15,274) Subtotal amortization ...... (3.2) (793,667) (716,945) Total intangible assets ...... 1,528,450 1,294,439 (3.1) The composition of the goodwill as of December 31 is the following:

Company Cost Amortization Net value Distribución Eléctrica Centroamericana II S. A. – DECA II ...... 336,140 (23,992) 312,148 EPM Ituango S.A. E.S.P. en Liquidación ...... 177,667 177,667 Panama Distribution Group S. A. – PDG ...... 109,883 (16,681) 93,202 Emtelsa S.A. E.S.P.* ...... 51,850 (12,746) 39,104 Promisión S.A. E.S.P.* ...... 85,513 (34,234) 51,279 Empresa de Telecomunicaciones de Pereira S.A. E.S.P...... 79,081 (79,081) — Edatel S.A. E.S.P.** ...... 68,786 (55,043) 13,743 Costavisión S.A. E.S.P.* ...... 65,453 (16,091) 49,362 Orbitel S.A. E.S.P...... 55,869 (25,877) 29,992 UNE EPM Telecomunicaciones S.A.** ...... 37,144 (21,323) 15,821 Del Sur S.A. de C.V...... 44,433 (10,639) 33,794 Empresa de Energía del Quindío S.A. E.S.P. (EDEQ) ...... 23,923 (23,573) 350 Emtelco S.A...... 20,929 (20,148) 781 Gestión de Empresas Eléctricas S.A...... 17,682 (1,189) 16,493 UNE EPM Bogotá S.A...... 6,409 (6,389) 20 Tecnología Intercontinental S.A. de C.V. (TICSA) ...... 170,472 — 170,472 Hidroecológica del Teribe S.A. (HET) ...... 6,032 (6,032) — Central Hidroeléctrica de Caldas S.A. E.S.P. (CHEC) ...... 593 (593) — Aguas de Malambo S.A. E.S.P...... 64 (4) 60 Espíritu Santo Energy S. de R.L...... 32,200 — 32,200 Aguas Nacionales EPM S.A. E.S.P...... 3 — 3 Parque Eólico Los Cururos Ltda...... 19,618 — 19,618 Parque Eólico La Cebada S.A...... 10,696 — 10,696 Total goodwill ...... 1,420,440 (353,635) 1,066,805 * According to a concept from the CGN, issued in December 2007, the goodwill generated by the higher price paid for a value representative of capital in respect to its intrinsic value, can only be recorded when the companies are effectively merged. For the case of Emtelsa, Promisión and Costavisión, the amortization generated started in January 2009. ** This corresponds to Know How

F-74 (3.2) The movement of the amortization is detailed below:

2013 2012 Initial balance ...... 716,946 826,844 Increase for the year ...... 51,945 259,291 Withdrawal of intangible assets ...... — (369,189) Other decreases ...... 24,776 — End balance ...... 793,667 716,946 (4) Trust rights are the resources delivered by the group companies to companies in charge of the administration of autonomous trusts. (5) The leasehold improvements and works include adaptations in some customer service offices in the different zones.

Note 19 Reappraisal of assets As of December 31, revaluation of assets is comprised as follows:

2013 2012 Equity investments ...... 1,840,799 1,628,588 Property, plant and equipment ...... * 9,290,911 8,855,757 Other assets ...... 52,954 53,481 Total Reappraisal of assets ...... 11,184,664 10,537,826

(*) As of December 31 comprise:

2013 2012 Plants, ducts and tunnels ...... 3,303,625 3,192,990 Networks, lines and cables ...... 3,154,869 2,819,167 Buildings ...... 1,263,924 1,306,880 Land ...... 1,410,552 1,373,104 Communication and computer equipment ...... 55,423 64,243 Transportation, traction and lifting equipment ...... 50,178 48,177 Machinery and equipment ...... 33,187 33,543 Furniture, fixtures and office equipment ...... 17,230 17,150 Medical and scientific equipment ...... 1,885 462 Dining room, kitchen, pantry and hotel equipment ...... 38 41 Total Reappraisal of property, plant and equipment ...... 9,290,911 8,855,757

Note 20 Financial obligations As of December 31, public credit transactions are as follows:

2013 2012 Domestic debt transactions ...... (1) 326,604 21,396 Foreign debt transactions ...... (2) 521,202 213,377 Current financial obligations ...... 847,806 234,773 Domestic debt transactions ...... (1) 3,473,724 2,749,766 Foreign debt transactions ...... (2) 4,908,966 4,567,173 Non-current financial obligations ...... 8,382,690 7,316,939 Total financial obligations ...... 9,230,496 7,551,712

(1) Domestic debt transactions:

2013 2012 Current domestic debt transactions ...... 326,604 21,396 Non-current domestic debt transactions ...... 3,473,724 2,749,766 Total public credit transactions ...... 3,800,328 2,771,162

F-75 2013 2012 Ow ni g c ompany E ytitn tnI ere ts tar e Pe os s ( m oilli n )s tnI ere ts tar e Pe os s ( m oilli n )s DTF + 1.49% a 2.59%, IPC + DTF + 1.49% a 2.59%, IPC + 3.25% a EPM Bonds * 1,662,990 3.25% a 7.12%, Fixed 10.80% a 1,295,710 7.12%, Fixed 10.80% a 13.80% 13.80% UNE Bon sd ** PI C + 6.3 7% a 1.5 0% 60 0,0 00 PI C + 6.3 7% a 1.5 0% 60 0,0 00 EPM D eiviva nda ulC( b D e )la DTF + 7.2 % 27 0,0 00 DTF + 4.3 % 27 0,0 00 EPM BBVA ulC( b D e )la DTF + 7.2 % 18 0,0 00 DTF + 4.3 % 18 0,0 00 SSE A Banco d e B og áto DTF + 8,2 % 15 5,5 00 EPM Banco S a atn nd re ulC( b D e )la DTF + 7.2 % 7 0,2 00 DTF + 4.3 % 7 0,2 00 CENS Banc olo m ,aib B anco d e B og áto D TF + 0.3 % 7 0,0 00 DTF + 3.3 % - D TF + 0.3 % 8 0,0 00 UNE Loc la ys n cid eta d erc tid DTF + 4.3 5% 40 0,0 00 DTF + 9,3 % 20 0,0 00 UNE Da eiviv nda DTF+ 3.1 6% 31 0,0 00 EPM H le m B ank ulC( b D e )la DTF + 7.2 % 3 0,5 00 DTF + 4.3 % 3 0,5 00 AGUAS D E U RABÁ H le m B ank y B anco P op ralu DTF - 1 % - D TF + 9.3 % 1 8,7 44 DTF - 1 % - D TF + 9.3 % 1 5,1 94 EDEQ Bancolombia y BBVA DTF + 2.45% - DTF + 2.9% 20,508 DTF + 2.45% - DTF + 2.9% 13,300

CHEC, AGUAS DE DTF - 1.0% a 5.10%, Fixed Icel y Bancolombia DTF + 3.5%, Fixed 6.5% - 6,87% 6,485 13,558 OCCIDENTE, EDATEl 6.5%

TOTAL 8,3 0 3,0 28 7,2 7 1,1 62

* The EPM bonds do not have guarantee and included: i) $1,000,000 million which auction took place between November 2008 and March 2009, with expiration between the years of 2011 and 2024, and ii) $500,000 million which auction took place on December 14, 2010, with expiration in years 2016, 2022 and 2030. ** This item corresponds to bonds without guarantee which auctions took place as follows: i) $300,000 million on March 12, 2010 with expiration in 2015 and 2020 and ii) $300,000 million on October 20, 2011 with expirations in 2016 and 2023. (2) Foreign debt transactions:

2013 2012 Current foreign debt transactions ...... 521,202 213,377 Non-current foreign debt transactions ...... 4,908,966 4,567,173 Total public credit transactions ...... 5,430,168 4,780,550

2013 2012 Owing company Source Balance source Equivalent in Source Balance source Equivalent in E ytitn etnI re ts etar Interest rate debtor currency currency pesos currency currency pesos EPM Bonds * 6.7 25% USD 500 96 4,3 15 6.7 25% USD 500 88 1,4 15 EPM Bonds ** 3.8 75% COP 2,1 5 0,0 00 2,1 5 0,0 00 3.8 75% COP 1,250,000 1,250,000 EPM FI C biL ro + 8.1 75% - 1.2 5% USD 349 67 4,2 64 biL ro + 8.1 75% - 1.2 5% USD 349 61 1,7 12 EPM AFD *** 3.4 2% USD 195 37 7,5 32 EPM DIB 1 664 biL ro + 0.1 5% USD 185 35 7,5 22 biL ro + 0.1 5% USD 200 35 6,3 46

EPM Bank fo T okyo y B BVA T okyo biL ro + 9,0 5% USD 167 32 1,1 33 biL ro + 9,0 5% USD 183 32 1,4 73 ENSA Bonds 6.7 % USD 100 19 6,2 83 6.7 % USD 100 17 8,6 23 EPM DIB 2 120 biL ro USD 99 19 0,0 53 biL ro USD 99 17 4,4 09 EPM DIB 8 00 biL ro + 4.1 3% USD 49 9 6,3 03 biL ro + 4.1 3% USD 57 10 2,0 15 EPM DIB 7 92 biL ro + 4.1 3% USD 29 5 7,5 83 biL ro + 4.1 3% USD 58 10 3,2 84 EEGSA bitiC ank 5.8 % USD 97 18 3,7 55 0 J-0 a 0-n 0 USD 97 17 9,1 34 EEGSA Banco Industrial Active rate - 6.56% GTQ 497 122,028 Active rate - 5.30% GTQ 497 111,120 EEGSA Banco G&T Continental Active rate - 6.56% GTQ 323 79,271 Active rate - 5.50% GTQ 323 72,185 UNE niS cid ado J PM gro an biL ro + 2 % USD 0 0 biL ro + 7.1 5% USD 47 8 5,2 17 Banco Agromercantil de EEGSA Active rate - 6.56% GTQ 175 43,002 Active rate - 6.56% USD 175 39,158 Guatemala DEL S UR Bonds M ni 5 % - Max 8 % USD 21 4 3,0 69 M ni 5 % - Max 8 % USD 21 3 1,7 33 EEGSA O ht sre A evitc etar - 5.6 6% - 2.5 9% GTQ 163 4 1,0 38 A evitc etar - 3.5 0% y 8.5 0% GTQ 163 3 5,6 50 EPM, HET O ht sre biL ro + 2 ,% ajiF d e 7 % a 9 % USD 9 1 4,7 46 biL ro + 4.0 ,% xiF ed 7 % a 1.9 5% USD 10 1 2,7 54 CIT S ****A Banco d le B oíja EIIT + 7.2 5% MXN 117 1 1,7 85 CIT S ****A Sa atn nd re EIIT + 5.4 % MXN 20 9,2 32 TICSA**** Banobras Fixed Rate 8.2% 8.3% 9.0% 11.5% MXN 217 31,994 TICSA**** Interacciones TIIE+3.00%- 3.90% - 4.0% - 4.07% MXN 672 98,805 CIT S ****A Ban etro EIIT + 0.4 0 ,% 5.4 % MXN 143 2 9,0 92 ENSA O ht sre biL ro + 3.2 75% y T F 7,4 3% E A USD 100 19 6,2 83 biL ro + 2.1 5% a 3.2 75% USD 100 17 8,6 23 Min 4.5% - Max 6.5%, Fija DEL S UR O ht sre M ni 5.4 % - Max 5.6 % USD 34 6 3,5 79 6.50% - Active rate - 6% USD 30 52,998 Total 5,430,168 4,780,550

(*) Bonds without guarantee issued in July 2009, quoted in the Luxembourg Euro MTF stock exchange, placed in the United States, Europe, Asia and Latin American markets, with expiration in July 2019. They are exempt from compliance with financial covenants because they have double investment degree rating granted by Fitch Ratings and Moody´s.

F-76 (**) EPM issued in January 2011, global bonds in pesos in the international capital market for an amount of $1,250,000 million, intended to the general investments plan. The issue, which received an investment grade rating of Baa3 by Moody’s and BBB- by Fitch Ratings, was placed at a yield of 8.5% with expiration on February 1, 2021 and coupon of 8.375%. (***) In September 2013, the EPM Group entered the Mexican water market, with capitalization of USD 113 million to the firm Tecnología Intercontinental SAPI de CV, TICSA, equivalent to 80% of the company shares, through the affiliate EPM Capital México SA de CV.

Covenants related to loans 1. Bank of Tokyo Mitsubishi and Banco Bilbao Vizcaya Argentaria Tokyo with Guarantee from the Japan for International Cooperation JBIC: • Debt to EBITDA ratio – EPM should not allow the total financial debt to EBITDA ratio to be higher than 3.5 to 1. • Debt to capital ratio – EPM should not allow the total long term financial debt to capital ratio to be higher than 1.5 to 1.

2. Inter-American Development Bank ‘‘IADB’’ • Total debt to EBITDA ratio of EPM Group must be lower than or equal to 3.5. • Relationship between total long term debt and assets of EPM Group should not exceed 1.5 times its assets.

3. International Finance Corporation ‘‘IFC’’ • Total debt to EBITDA ratio of EPMs must be lower than or equal to 3.5. • Interest coverage ratio must be higher than 3 times.

4. French Development Agency – AFD • Total debt to EBITDA ratio of the EPM Group must be lower than or equal to 3.5. • Interest coverage ratio must be higher than 3 times.

5. Credit of EGGSA with Citibank • Total debt to EBITDA ratio must be lower than or equal to 5. • EBITDA / financial expenses ratio should be 3 times higher. At December 31, 2013 and 2012, the EPM Group was in fulfillment of these covenants. The detail of the expirations of public credit operations as of December 31st, corresponds to:

US dollars Quetzales Colombian pesos Mexican pesos Equivalent in Year (millions) (millions) (millions) (millions) pesos (millions) 2014 ...... 261 5 326,604 114 847,806 2015 ...... 148 5 583,272 89 882,032 2016 ...... 159 167 397,239 100 758,771 2017 ...... 102 167 212,672 120 468,068 2018 ...... 120 167 475,996 125 766,285 2019 onwards. . 1,143 648 3,054,545 621 5,507,533 Total ...... 1,933 1,159 5,050,328 1,169 9,230,495

F-77 Note 21 Hedging operations The balance as of December 31st of hedging operations is as follows:

2013 2012 Obligations in derivative contracts ...... 133,940 254,893 Rights in derivative contracts (DB) ...... (101,137) (179,182) Current hedging operations ...... 32,803 75,711 Obligations in derivative contracts ...... 141,029 274,969 Rights in derivative contracts (DB) ...... (105,394) (189,531) Non-current hedging operations ...... 35,635 85,438 Total hedging operations (*) ...... 68,438 161,149

(*) The detail of the expirations of hedging operations for the year is as follows:

Year 2013 Contractual rights Contractual obligations Net 2014 ...... 101,137 133,940 (32,803) 2015 ...... 49,516 56,755 (7,239) 2016 ...... 55,878 84,274 (28,396) Total ...... 206,531 274,969 (68,438)

Year 2012 Contractual rights Contractual obligations Net 2013 ...... 179,182 (254,893) (75,711) 2014 ...... 92,812 (133,940) (41,128) 2015 ...... 45,440 (56,755) (11,315) 2016 ...... 51,278 (84,273) (32,995) Total ...... 368,712 (529,861) (161,149)

Note 22 Accounts payable As of December 31, the balance of accounts payable is comprised as follows:

2013 2012 Acquisition of domestic goods and services ...... (*) 960,536 680,303 Acquisition of foreign goods and services ...... 350,270 314,763 Creditors ...... 565,887 373,318 Interests payable ...... 186,703 187,048 Other accounts payable ...... 59,930 36,391 Current accounts payable ...... 2,123,326 1,591,823 Acquisition of domestic goods and services ...... 2,233 16,205 Other accounts payable ...... 298,708 96,395 Non-current accounts payable ...... 300,941 112,600 Total accounts payable ...... 2,424,267 1,704,423

(*) There was an increase in the accounts payable associated to the business combination of with Ticsa Group of Mexico and Emvarias.

F-78 Note 23 Taxes payable As of December 31, the balance of taxes payable is comprised as follows:

2013 2012 Income tax ...... (1) 52,124 398,352 Equity tax ...... (2) 147,078 145,952 Withholding tax and stamp tax ...... 80,359 57,993 Tax on sales ...... (4,049) 21,151 Industry and trade tax ...... 37,979 39,697 Other taxes, liens and encumbrances ...... 148,572 59,901 Current taxes payable ...... 462,063 723,046 Equity tax ...... (2) 2,085 152,141 Tax on sales for temporary imports ...... (3) 720 20,663 Other taxes, liens and encumbrances ...... 0 0 Non-current taxes payable ...... 2,805 172,804 Total taxes payable ...... 464,868 895,850

(1) Income tax: tax regulations applicable and in force provide the following: • For 2013 the nominal rate of the income tax is 25% (2012 – 33%) for the parent and national affiliates with the exception of Orbitel Servicios Internacionales, which because it is a company located in a Free Trade Zone has a nominal tax rate of 15%. The nominal rate of the income tax for equity CREE is of 9% as of 2013- For the Guatemala affiliates, the tax is determined by the Optional Regime (rate of 31% on the taxable income determined on the taxable income determined on the basis of the net income) or by the General Regime (6% rate on gross income and 10% for capital gains); for the affiliates of El Salvador 30% for the companies with taxable income higher than US$150,000 and 25% for those that do not exceed that limit; for the Panama and Mexico affiliates a taxation rate of 30%. • The domiciliary public utility companies in Colombia are excluded from determining the income tax by the system of presumptive income calculated based on the net tax equity of the immediately preceding year; for the calculation of the income tax for equity CREE they are not benefited by that exclusion. • Due to the operations that EPM carries out with its related parties located abroad, it is subject to the regulations that in respect to transfer pricing were introduced in Colombia with laws 788 of 2002 and 863 of 2003. • In the year 2012 Law 52 was enacted in Panama, which contemplates obligations regarding transfer pricing applicable to the operations with related parties. • The Parent Company of the EPM Group uses the tax deduction called ’’Special deduction for investments in productive fixed assets’’, equivalent to 40% of investments made during the fiscal year. This benefit continues in effect for the parent company on occasion of the legal stability agreement signed with the National Government in 2008. Said benefit contemplates the condition of applying the depreciation by the straight line system on the assets subject to this deduction; if the assets are sold or cease to be used in the income producing activity prior to the expiration of their economic life, it will be mandatory for the company to reimburse the value of the deduction claimed proportionately to the remaining useful life of the asset in the income tax return of the tax period in which this event occurs. This benefit is transferred to the shareholders through the increase of not taxed dividends. • With the entry into force of Decree 957 of December 2011 that modified ISR (Income Tax) Law of El Salvador, the dividends that are paid or credited to the partners or shareholders were taxed with a 5% withholding. The listing of the net taxable income for the Group as of December 31 is shown below: 2013 2012 2011 Profit before income tax provision 2,325,770 2,317,274 2,198,474 Less Less Profits before income tax provision in Guatemala ISR 6%(*) 39,761 5,627 — Plus Items increase income Non- deducible expense for tax on equity 17,680 16,820 15,728 Valuation of investments by straight line method 61,667 78,617 — Other non-deductible expenses 285,818 457,640 140,349 Increase of non-deductible provisions 151,605 174,015 224,438 Dividends received from companies where control is held 887,304 435,677 — Expenses and costs from previous periods 18,509 31,593 8,852 Total items increasing net taxable income 1,422,583 1,194,362 389,367

F-79 2013 2012 2011 Less Items Decrease income Special 40% deduction on investments in the year 268,247 61,484 71,939 Excess property, plant and equipment depreciation 458,938 484,230 408,033 Non-taxable income 519,829 485,756 245,998 Income not subject to income tax-dividends 798,213 231,226 133,404 Profits from liquidity investments appraisal 24,044 135,424 — Total items decreasing net income 2,069,271 1,398,120 859,374 Net ordinary income for the period 1,639,321 2,107,889 1,728,467 Less Exempt income 38,962 53,778 42,508 Clearings 2,181 — 2,065 Plus Plus Especial net income — 3,444 368 Net taxable income 1,598,178 2,057,555 1,684,262 Considering the different income tax rates, the detail of the calculation of the provision for this tax is as follows: Tariff 31% Tariff 30% Tariff 25% Tariff 15% Total

Taxable income ...... 111,324 107,240 1,365,059 14,555 1,598,178

Provision for current income tax before discounts . 34,511 36,608 343,678 2,183 416,980 Tax discounts-water and draining / withholdings overseas ...... — — 48,390 — 48,390

Provision for current income tax (1) ...... 34,511 36,608 295,288 2,183 368,590 Tax on occasional gain ...... — — 367 — 367 Net charge to income for deferred income tax . . . . — 8,885 61,812 — 70,697 Income tax provision charge to income ...... 34,511 45,493 357,467 2,183 439,654 (+) ISR 6% on income taxable (****) ...... — — — — 5,268 Total income tax ...... ———— 444,922

2013 Income tax for equity CREE , taxable income liquid 1,360,771 Plus Items increase income Special deduction in productive fixed assets 268,247 Other special deductions 4,451 Other increase items 23,632 Total items increase taxable income 296,330 Less Items decrease income Other items decrease 23,576 Total items decrease taxable income 23,576 Taxable income for ordinary depuration 1,633,525 Plus Minimum income tax base for equity CREE 78,626 Total taxable income liquid 1,712,151 Tax rate 9% Income tax for equity CREE, provision 154,094

Total income tax and tax for equity CREE 599,016

F-80 The detail of the calculation of the provision for income tax in 2012 was the following: Tariff 33% Tariff 31% Tariff 30% Tariff 15% Total Taxable income ...... 1,791,063 115,882 143,676 6,934 2,057,555 Provision for current income tax before discounts ...... 635,683 35,923 43,102 1,040 715,748 Tax discounts-water and draining / withholdings overseas ...... 85,392 — — — 85,392 Provision for current income tax (1) ...... 550,291 35,923 43,102 1,040 630,356 Tax on occasional gain ...... 610 610 Net charge to income for deferred income tax (4,625) (2,953) (7,579) Income tax provision charge to income .... 546,276 35,923 40,149 1,040 623,388 (+) ISR 5% on income taxable (*****) ...... — — — 5,625 Total income tax ...... 629,013

(*) It is excluded from the calculation of the net income because some Guatemalan affiliates are taxed on 6% of their income and not at the rate of 31% on taxable income. (**) The excess of tax over accounting depreciation corresponds to: (i) the utilization of different useful lives; (ii) the application of the depreciation method of declining balances and additional shifts, and (iii) the increase in the depreciation base by the addition in the cost of historic inflation adjustments (2001-2006), since as of that date they were suspended by legal provision (***) In Colombia, the discount for investment in regional water networks and sewage companies is set forth in Article 104 of Law 788 of 2002, equivalent to 40% of the capital effectively paid in order to extend the service coverage. (****) Tax calculated based on the income. Movements of deferred taxes during the year were as follows: 2013 2012 Initial balance of deferred tax asset ...... 337,587 228,467 Initial balance of deferred tax liability ...... (878,073) (804,126) Subtotal ...... (540,486) (575,659) Net adjustment on income for the period ...... (70,696) 7,579 Adjustment on deferred tax charged to previous years ...... 49,016 27,594 New investments / interests minority elimination ...... (3,126) — End balance of deferred tax asset ...... 413,138 337,587 End balance of deferred tax liability ...... (978,430) (878,073) Total deferred tax, net ...... (565,292) (540,486) Reconciliation between accounting equity and tax equity at December 31 is shown below:

2013 2012 Accounting equity 22,047,514 21,059,729 Less Revaluation of assets (11,184,664) (10,537,826) Adjustments for inflation, depreciation and tax amortization (2,825,555) (2,589,913) Excess of tax depreciation (3,207,375) (3,132,030) Income tax payable — (249,960) Credit deferred monetary correction, net (53,222) (70,963) Deferred tax, assets (413,138) (337,586) (17,683,954) (16,918,278) Plus Tax inflation adjustments 4,313,778 4,383,764 Deferred tax, liabilities 978,430 878,073 Actuarial computation 51,874 88,907 Provisions and contingencies 252,677 446,147 Provision for property, plant and equipment 120,903 103,291 Provision accounts receivables 399,186 247,649 Provisions of investments 103,604 99,515 6,220,452 6,247,346 Fiscal tax equity 10,584,012 10,388,797

(2) Corresponds to accrual of equity tax payable, for the years 2013 and 2014.

F-81 (3) Corresponds to the VAT payable for temporary imports of goods. On a general basis, income tax returns of the EPM Group for the years 2011 and 2012 are opened to review by the tax authorities. The Administration of EPM and subsidiaries, as well as their legal advisors consider that the amounts recorded are sufficient and it is not likely that liabilities arise in excess of those already recorded.

Legal stability contracts EPM Parent Company entered into a legal stability contract in Colombia based on Law 963 of 2005 (for the power generation business). The contract protects EPM against adverse tax changes and permits it to use the rules that are favorable to it; the main rules stabilized are: • Income tax rate of 33% • Tax on equity until 2010. • Special deduction of 40% on the investment of real productive fixed assets. • Special deduction for investment in science and technology and environmental. • Other basic rules in the determination of income. The agreement has a term of 20 years counted as of June 2008.

New regulations Tax reform and emergency measures Colombia The main changes incorporated by the Law 1607 of 2012 are summarized in: • Income tax: The previous income tax rate of 33% is modified, reducing it to 25% and a new tax called income tax for equality (CREE) is created with a rate of 9% for years 2013 to 2015 and of 8% as of 2016. For taxpayers of CREE the reform establishes the exoneration of contributions to SENA (2%), ICBF (3%) as of July 1, 2013 and healthcare (8.5%) as of January 1, 2014, in respect to employees (new and old) who earn up to 10 minimum monthly legal wages. • Capital gains tax: In respect to this ta, it has been reduced from 33% to 10% for legal and similar persons. This implies in the sale of fixed assets owned by EPM for over two (2) years. However, for lotteries, raffles, bets, and similar, the tax rate continues to be 20%. • Sales tax –VAT-: * The number of existing rates is reduced to only three: 0%, 5% and 16%. * The surveillance, temporary and integral cleaning and cafeteria services will be subject to 16% VAT, but applied to the AIU (Administration, Contingencies and Profit) margin, which in no case shall be less than 10% of the contract value. * Exchange operations of purchase and sale of foreign currency, as well as the exchange operations on derivative instruments have been excluded from VAT. These changes in the VAT will be applicable to contracts that are awarded as of January 1, 2013. The contracts that are currently being performed or that have already been awarded will continue with the VAT rate and taxable base that were in effect at the time of the award. When these contracts are modified or extended, the regulatory changes indicated above will be applied. • New national consumption tax: As of January 1, 2013 the national consumption tax is created, which will apply to the rendering of the mobile telephone service (4%), some vehicles (8% and 16%) and to the prepared food and beverage sale service in restaurants, cafeterias, self-service premises, ice cream, fruit shops and bakeries (8%).

F-82 Tax reform in Guatemala: The major changes brought by the income tax reform (Decree 10-2012), which effects take place as of January 1, 2013 are: • Modification of the rate for determination of the taxable income of profitable activities as follows: * Tax year 2013: 31% * Tax year 2014: 28% * Tax year 2015: 25% • Modification of the rate for determination of capital income, capital gains and losses: * Movable and immovable capital income: Rate 10% (formerly taxed in the general regime of 5% and the optional regime at a rate of 31%) * Capital gains: Rate 10% (formerly taxed in the general regime of 10% and the optional regime at a rate of 31%) * Distribution of dividends, gains and profits: Rate 5%. In the previous law they were not taxed.

Tax reform in Mexico: • Mexico had a tax reform in December 2013. By means of Decree published in the Official Diary, on December 11, this new regulation derogated the Business Tax at Single Rate (IETU) and the Tax on Cash Deposits. • A new Income Tax Law (ISR) was issued, maintaining for legal persons a taxation rate of 30%. A withholding of 10% is established on dividends paid to individuals and foreigners, which in the case of payment of dividends to Colombia do not apply because of the Double Taxation Treaty signed with Mexico and which entered into force on January 1, 2014. Based on said treaty, the withholding in the payment of interest to a Colombian credit shall not be higher than 10%. • The profit sharing received by the workers of the company (PTU) will be calculated on the same basis of the income tax, without being reduced by the profit sharing paid in the period or with the tax losses pending to be applied.

Note 24 Labor liabilities The balance of labor obligations as of December 31 was:

2013 2012 Severance ...... (1) 56,972 47,192 Vacation bonuses ...... (2) 34,738 31,654 Vacations ...... 24,435 24,270 Interest on severance payments ...... 10,488 9,682 Payroll payable ...... 11,234 7,637 Other premiums ...... 14,281 5,344 Other salaries and social benefits ...... 5,626 6,813 Current labor liabilities ...... 157,774 132,592 Severance ...... (1) 34,838 35,672 Other premiums ...... (3) 23,962 28,164 Compensations ...... 8,301 7,313 Other salaries and social benefits ...... 93 13 Non-current labor liabilities ...... 67,194 71,162 Total labor liabilities ...... 224,968 203,754

(1) The current portion corresponds to the severance payments for employees that shall be transferred to the severance funds before February 14, 2014. The non-current portion corresponds to the severance payments for employees of the previous scheme.

F-83 (2) This corresponds to the Premium granted to employees of EPM and UNE EPM Telecomunicaciones S. A. who enjoy vacations equivalent to 32 days of ordinary salary per each year of service and proportional to each fraction of a year. (3) It corresponds to the estimate, at present value, of the future payments corresponding to the seniority bonus. In EPM, Central Hidroeléctrica de Caldas SA. E.S.P. and the Empresa de Energia de Quindío S.A. E.S.P. the official workers are entitled to this bonus every time they complete five years of service in the company, continuous or discontinuous. The estimated value is determined by the actuary, taking into account the average salary increase, discount rate of 5.77% and the mortality rates approved by the Financial Superintendence in Resolution 155 of 2010. For the remaining affiliates the estimate is updated each year based on the consolidation of information of all employees who become entitled to those bonus.

Note 25 Pension plan obligations The balance of pension obligations and pensions commutation as of December 31 is comprised as follows:

2013 2012 Pension bonds ...... 79,744 81,293 Retirement pensions ...... 157,817 36,673 Pension commutation ...... 4,232 11,408 Current pension plan obligations ...... 241,793 129,374 Retirement pensions ...... 637,867 735,586 Pension bonds ...... 429,963 354,228 Pension commutation ...... 90,169 81,651 Non-current pension plan obligations...... 1,157,999 1,171,465 Total pension plan obligations (*) ...... 1,399,792 1,300,839

(*) The movement of the actuarial calculation was:

Actuarial Balance to be Net computation amortized liability Balance at December 31, 2011 ...... 1,372,429 (78,479) 1,293,950 Adjustment per actuarial valuation ...... 99,375 (99,375) — Benefits paid and bonuses issued ...... (92,901) — (92,901) Charge to results — amortization ...... — 109,786 109,786 Net movement pensions payable ...... (9,996) — (9,996) Balance at December, 2012 ...... 1,368,907 (68,068) 1,300,839 Adjustment per actuarial valuation ...... 194,127 (194,127) — Benefits paid and bonuses issued ...... (96,708) — (96,708) Charge to results — amortization ...... — 134,620 134,620 Business combination - Emvarias ...... 174,086 (107,279) 66,807 Net movement pensions payable ...... 86 — 86 Other charges to income ...... (5,852) — (5,852) Balance at December, 2013 ...... 1,634,646 (234,854) 1,399,792 The major factors in the actuarial calculations corresponding to retirement as of December 31 were:

2013 2012 Number of people covered ...... 7,035 6,811 Technical interest rate ...... 4.80% 4.80% Pension readjustment rate* ...... 2.99% 3.26%

(*) This rate corresponds to the weighted average of inflation of 2010, 2011 and 2012, as follows: 3 points for 2013, 2 points for 2011 and 1 point for 2010, according to the provisions in Paragraph 1 of Article 1 of Decree 2783 of December 20, 2001.

F-84 Note 26 Estimated liabilities As of December 31, the estimated liabilities balance is comprised as follows:

2013 2012 Provision for contingencies ...... (*) 49,735 3,572 Other provisions ...... 16,529 15,076 Current estimated liabilities ...... 66,264 18,648 Provision for contingencies ...... (*) 108,454 209,766 Provision for insurance and reinsurance ...... 45 154 Other provisions ...... 111,059 86,001 Non-current estimated liabilities ...... 219,558 295,921 Total estimated liabilities ...... 285,822 314,569

(*) This includes provisions for civil and administrative litigations, labor lawsuits, tax proceedings and other contingencies. The main proceedings rated as probable were the following:

Third Party Claim 2013 2012

Municipality of Tuta ...... Discussion of the industry and commerce tax by the 17,547 21,702 commercialization activity in the municipality for the generator. Manuel Márquez and others . Riogrande II Project, indemnification to the community for not 7,728 10,065 having acquired the mining reserves. Concretos y Asfaltos S.A . . . Indemification for damages for USD 3,298,054 6,325 5,832 José Alberto Ruiz Betancur. . Injuries for primary power lines that go by close to a residence 5,546 7,269 in Copacabana. Pacific Stratus Energy Terminate by mutual consent the agreement corresponding to — 6,189 Colombia ...... the commercial offer presented by EPM to Pacific Stratus Energy Columbia USD 3,500,000 Municipality of Yumbo . . . . . Discussion of the industry and commerce tax by the 3,940 8,726 commercialization activity in the municipality for the generator. Municipality of Caloto . . . . . Discussion of the industry and commerce tax by the 3,095 3,704 commercialization activity in the municipality for the generator. Amounts stated in millions of columbian pesos

Note 27 Other liabilities As of December 31, other liabilities balance is comprised as follows: 2013 2012 Collections in favor of third parties (1) Sale of public utilities and telecommunications ...... 17,901 24,210 Taxes ...... 14,011 13,130 Public lighting ...... 20,076 11,995 Sales on behalf of third parties ...... 8,188 11,087 Collections of third party accounts receivable ...... 13,072 9,259 Other collections in favor of third parties ...... 7,632 12,724

F-85 2013 2012 Income received in advance Sales ...... 56,028 39,327 Sale of public utilities and telecommunications ...... 27,065 30,457 Leasing ...... 13,674 16,203 Other income received in advance ...... 13,340 12,749 Deferred taxes ...... (2) 50,892 779 Advanced Taxes ...... 109 0 Other current liabilities ...... 241,988 181,920 Deferred taxes ...... (3) 927,539 877,295 Other liabilities ...... 14,690 11,670 Other non-current liabilities ...... 942,229 888,965 Total other liabilities ...... 1,184,217 1,070,885

(1) Agreements for collection of receivables executed with entities such as Municipality of Medellin, Empresas Varias de Medellin E.S.P., Publicar S.A., Telmex S.A., Comcel S.A. and Colombia Movil S.A. E.S.P., among others. (2) The deferred tax is credit if the difference that originated implied the payment of a lower tax in the year.

Note 28 Reserves As of December 31, the reserves balances are comprised as follows: 2013 2012 Legal reserves ...... 3,257,570 2,998,040 Occasional reserves ...... 574,008 574,008 Equity funds ...... (1) 7,591 7,591 Other reserves ...... — — Total reserves ...... (2) 3,839,169 3,579,639 (1) As of December 31, the equity funds showed the following balances:

2013 2012 Self-insurance fund ...... 3,491 3,491 Financing Plan ...... 3,108 3,108 Housing fund ...... 992 992 Total equity funds ...... 7,591 7,591 (2) The Board of Directors or General Shareholders’ meetings approve the following each year upon presentation of the financial statements at period end: • Create and release reserves to comply Article 130 of the Colombian Tax Code. • Create and release reserves to comply with Decree 2336 of 1995 for the profits in the application of the equity method. • Create reserves for future reinvestments.

Note 29 Distribution to the city of Medellín Based on the determination of the COMPES in the meeting of April 30, 2013, ordinary financial surpluses were transferred to the Municipality of Medellin for $526,122 (2012 - $458,095) and extraordinary financial surpluses for $708,435 (2012 - $331,746) as defined by Decree 1202 of June 26, 2013 issued by the Major of Medellin and Agreement 74 of 2013) and Minutes the COMPES meeting of December 23, 2013. The total financial surpluses paid in 2013 was of $1,183,493 (2012 - $839,841), which includes the third installment of the scholarship fund for $50,000.

F-86 Note 30 Memorandum accounts As of December 31, memorandum accounts are comprised as follows:

2013 2012 Contingent rights ...... (1) 899,588 850,579 Fiscal debit accounts ...... (2) 6,518,951 7,035,921 Control debit ...... (3) 583,297 682,199 Debit memorandum accounts ...... 8,001,836 8,568,699 Contingent liabilities ...... (4) 254,144 733,198 Fiscal credit accounts ...... (5) 19,021,106 18,527,797 Control credit ...... 991,323 718,399 Credit memorandum accounts...... 20,266,573 19,979,394 Memorandum accounts, net...... 12,264,737 11,410,695

(1) Contingent rights correspond to litigations in civil processes in which the companies of the EPM Group brings suit against third parties, generally contractors that is considered that failed to comply with their contractual obligations. These have probabilities of having a favorable result. (2) Tax debit memorandum accounts refer to the differences between accounting and tax regulations. They include mainly the difference in the depreciation, inflation adjustments to property, plant and equipment, shares and contributions and addition to tax goodwill. In general, differences in asset, cost and deduction accounts. (3) It records the operations that the companies of the EPM Group have with third parties or for internal control, without their nature affecting their financial situation. These accounts include fully amortized assets, obsolete inventories and other. It corresponds to the right in favor of the Company. (4) The contingent liabilities correspond to civil proceedings in which the companies of the EPM Group are sued by third parties, generally contractors that are considered to have failed to comply with their contractual obligations. Contingent liabilities include counter-guarantee to the National Government related to credits granted by the IADB. The value of the guarantee corresponds to the encumbrance of the operating income, equivalent to 120% of the debt service of the following six-month period of the IABD credits. The main proceedings rated as possible were the following: John Jairo Velásquez Agudelo. On April 25, 2013, John Jairo Velásquez Agudelo, as plaintiff, filed a suit before the municipal civil courts of the City of Medellín, claiming the nullity of the decisions adopted by the extraordinary shareholders meeting of EPM Ituango S.A. E.S.P. and seeking an order against EPM to restore the BOOMT Agreement entered into with HidroItuango to EPM Ituango S.A. E.S.P., together with any proceeds accrued from January 11, 2013, until the date of compliance with the judicial order. The amount of the claim for damages is approximately Ps.23,655 million. The matter is currently in the evidentiary stage. Aura der Jesús Salazar Mazo et al. On October 5, 2012, 114 individuals, claiming to be residents of the Alto de Chiri village in the Briceño municipality, filed a class action against HidroItuango, EPM Ituango S.A. E.S.P. and EPM, claiming payment of the environmental losses and the damages caused to the ancestral paths providing access to the community. The amount of the claim for damages is approximately Ps.23,151 million. This matter is currently in the stage of notices to the community. Sindicato de Trabajadores de las Empresas de Servicios Públicos Domiciliarios, Complementarios y Conexos – Sinpro. On September 23, 2013, Sinpro filed a suit claiming EPM is selling its shares of UNE, in violation of the provisions of Law 226 of 1995, and requesting the court to enjoin the alleged sale to Millicom. Millicom and EPM have appealed the court’s decision pursuant to which Millicom is deemed to have received service of process by way of conclusive conduct. Marisol Aristizabal Tuberquia. On November 30, 2011, Marisol Ariztizabal Tuberquia, as plaintiff, sued EPM claiming payment of damages allegedly caused by the operation of the El Peñol dam to the premises where the Los Recuerdos hostel operates. The amount of the claim is approximately Ps.7,070 million. The matter is currently in the evidentiary stage. Astrid Helena Álvarez Arroyave. On October 7, 2011, 45 families filed a class action against the Bello municipality and EPM, claiming payment of the damages allegedly caused to their homes by the alleged lack of preventive measures in connection with the geological conditions of the area. The amount of the claim is approximately Ps.10,440 million. The matter is currently in the evidentiary stage. Carmen María Alzate Rivera et al. On August 30, 2000, 41 families filed a class action against EPM, claiming payment of the damages allegedly caused by the water discharges from a hydroelectric power station owned by EPM. More families subsequently joined the class action, which currently involves 201 families. The amount of the claim is approximately Ps.7,633 million. The trial court dismissed the claims arguing the applicable statute of limitations had expired and the plaintiffs appealed the decision. The appeal is currently pending. Consorcio Dragados Porce II. On August 20, 2007, Consorcio Dragados Porce II, as plaintiff, sued EPM, claiming the breach of a contract in connection with the completion and the installation of water lock gates for the Porce II project. The plaintiff claims that EPM delivered defective lock gates that prevented the claimant from performing an adequate installation. The amount of the claim is approximately Ps.14,440 million. The matter is currently in the evidentiary stage. Carlos Arturo Galvis Hernández et al. On June 12, 2008, a group of miners filed a class action against EPM, claiming damages caused by the alleged eviction from the Porce III influence area, which allegedly prevented them from conducting mining activities in such area during the entire period of their environmental license. The amount of the claim is approximately Ps.2,225 million. The matter is currently in the evidentiary stage (5) Tax credit memorandum accounts are made up by the differences between accounting and tax regulations. They refer especially to the recording of appreciation of investments, the deferred monetary indexation and accumulated depreciation of properties, plant and equipment.

F-87 Note 31 Revenues As of December 31, revenues are comprised as follows: 2013 2012 2011 Energy Electricity generation ...... 2,700,029 2,787,388 2,199,470 Electricity transmission, distribution and commercialization ...... 7,899,020 7,385,579 6,708,682 Natural gas distribution and commercialization ...... 564,894 448,551 405,694 Eliminations ...... (1,350,340) (1,097,677) (570,654) Total energy gross revenues ...... 9,813,603 9,523,841 8,743,192 (-) Discounts ...... 85,192 103,432 20,990 Total energy revenues, net ...... 9,728,411 9,420,409 8,722,202 Telecommunications —— Local telephone, value-added, television, and other services ...... 2,921,349 2,722,721 2,110,506 Eliminations ...... (396,585) (375,604) — Total telecommunications gross revenues ...... 2,524,764 2,347,117 2,110,506 (-) Discounts ...... 301 201 804 Total telecommunications revenues, net ...... 2,524,463 2,346,916 2,109,702 Water, sewage, and waste management ...... Water ...... 368,365 373,596 351,008 Sewage ...... 410,143 357,313 352,136 Waste management ...... 26,765 — — Eliminations ...... (1,728) (5,024) — Total water, sewage, and waste management gross revenues ..... 803,545 725,885 703,144 (-) Discounts ...... 8 495 319 Total water, sewage, and waste management revenues, net ...... 803,537 725,390 702,825 Other revenues(1) ...... Others, net...... 80,737 100,453 12,730 Other revenues, net ...... 80,737 100,453 12,730 Eliminations ...... (150,682) (94,318) (39,439) Total revenues ...... 12,986,466 12,498,850 11,508,020

Note 32 Cost of sales As of December 31, cost of sales are comprised as follows: 2013 2012 2011 Cost of goods and public utilities – Sales ...... (1) 4,851,810 4,679,535 4,220,903 Access charge and interconnection for telecommunication services ...... 232,127 313,320 299,607 Cost of distribution and marketing gas natural ...... 198,072 148,947 143,185 Personnel cost ...... (2) 898,210 812,228 690,621 Orders and contracts on account of other services ...... 472,627 421,659 425,545 Maintenance and repair ...... (3) 413,715 353,564 334,376 General costs ...... 205,382 185,496 232,056 Licenses, contributions and royalties ...... 180,744 158,873 135,447 Materials and operating costs ...... 133,476 119,704 106,024 Leases ...... 123,235 113,212 76,827 Costs for the sale of goods ...... 118,720 92,544 82,464 Direct inputs compsuption ...... (4) 81,137 92,969 24,811 Fees ...... 65,998 51,929 54,005 Insurance ...... 62,279 58,542 51,741 Taxes ...... 46,092 46,435 33,720 Public utilities ...... 36,822 51,077 33,380 Cost for services rendering loses ...... 3,005 3,309 2,777 Total cost of sales...... 8,123,451 7,703,343 6,947,489

(1) Includes energy purchases, payment for the use of networks and pipelines and restrictions.

F-88 (2) The salary increase of 2013 was of 3.94% (2012 – 4.73%). (3) Includes maintenance and repairs of lines, networks and ducts and maintenance and repairs of buildings. (4) Includes purchases of fuel for generation of the thermal plant La Sierra.

Note 33 Provision, depreciation, and amortizations As of December 31, depreciation, provisions and amortization are comprised as follows: 2013 2012 2011 Depreciation Networks and lines depreciation ...... 352,374 341,275 255,851 Plants, pipelines and tunnels depreciation ...... 257,558 269,457 251,515 Communication and computer equipment depreciation ...... 89,819 107,799 43,853 Buildings depreciation ...... 41,913 44,286 69,629 Machinery and equipment depreciation ...... 23,719 26,323 48,545 Other depreciations ...... 15,202 13,777 12,653 Total depreciation cost ...... 780,585 802,917 682,046 Amortization cost Intangible assets amortization ...... 77,990 191,613 80,439 Goods delivered to third parties amortization ...... 64,913 70,718 75,464 Improvements in others’ property amortization ...... 12,409 17,859 13,945 Studies and projects ...... 9,934 11,022 2,632 Future pensions actuarial computation amortization ...... 215 — — Depletion ...... 274 — — Total amortization cost ...... 165,735 291,212 172,480 Total depreciation, and amortizations cost ...... 946,320 1,094,129 854,526 Depreciation Communications and computer equipment depreciation ...... 17,517 16,268 16,399 Buildings depreciation ...... 5,170 5,084 5,335 Furniture, mixtures, and office equipment depreciation ...... 6,270 4,867 5,338 Machinery and equipment depreciation ...... 4,972 4,033 2,337 Transport equipment depreciation ...... 1,886 1,981 2,089 Other depreciation ...... 1,077 1,000 649 Total depreciation expense ...... 36,892 33,233 32,147 Pension plan Retirement pension updating ...... 74,872 78,478 91,782 Bond quotas and bonds updating ...... 15,697 22,038 24,800 Pension commutation updating ...... 10,081 4,889 9,244 Pension quotas updating ...... 21,917 852 218 Future pension updating ...... 12,052 3,529 3,134 Total pension plan expense ...... 134,619 109,786 129,178 Amortization Intangible assets amortization ...... 10,789 15,741 19,829 Goods delivered to third parties ...... 86 370 661 Total amortization expense ...... 10,875 16,111 20,490 Provisions Allowance for doubtful accounts ...... 110,882 83,515 113,862 Property, plant and equipment provision ...... 29,811 30,392 26,162 Allowance for inventory obsolescence ...... 2,319 4,620 1,796 Industry and Commerce tax provision ...... — 15 35,851 Other provisions ...... 12,966 9,511 23,403 Total provisions expense ...... 155,978 128,053 201,074 Total provision, depreciation, and amortizations expense ...... 338,364 287,183 382,889 Total provision, depreciation, and amortizations ...... 1,284,684 1,381,312 1,237,415

F-89 Note 34 Administrative expenses As of December 31, administrative expenses are comprised as follows: 2013 2012 2011 Personnel expenses ...... Salaries and wages ...... 354,832 319,539 301,277 Effective contributions ...... 59,239 56,963 49,998 Attributable contributions ...... 48,193 43,694 41,527 Payroll contributions ...... 6,029 9,262 11,050 Total personnel expenses ...... 468,293 429,458 403,852 General expenses ...... Commissions, fees and services ...... 132,472 87,367 70,791 Studies and projects ...... 11,458 48,125 8,367 Leases ...... 48,766 47,856 46,758 Intangible expenses ...... (1) 41,494 46,043 48,492 Maintenance ...... 44,208 40,222 37,809 Advertisement ...... 23,313 22,729 25,335 Promotion and disclosure ...... 20,070 19,273 24,928 Monitoring and security ...... 11,035 10,925 10,576 Public utilities ...... 8,597 10,569 11,423 Materials and supplies ...... 10,882 8,275 5,412 General insurances ...... 7,868 7,771 8,345 Communications and transport ...... 6,148 5,290 5,950 Cleaning elements, laundry and cafeteria ...... 3,481 3,947 5,997 Other administrative expenses ...... 47,968 50,935 41,253 Total general expenses ...... 417,760 409,327 351,436 Industry and Commerce tax ...... 65,409 52,270 21,730 Financial movements lien ...... 48,182 44,659 44,412 Supervision and audit quota ...... 27,627 26,449 22,572 Contributions ...... 2,176 20,358 22,080 Equity tax ...... (2) 17,790 16,511 15,728 Other taxes ...... 22,443 26,599 26,600 Total taxes ...... 183,627 186,846 153,122 Total administrative expenses ...... 1,069,680 1,025,631 908,410

(1) Value of licenses and software of an administrative nature used in the support activities. (2) Corresponds to the tax on equity that was accounted for by the companies that did not have any balance in the account ‘‘revaluation of equity’’ as of December 31, 2010 (see note 23).

Note 35 Non-operating revenues As of December 31, non-operating revenues is comprised as follows: 2013 2012 2011 Financial revenue Accounts receivable interests ...... 48,577 63,074 55,138 Interests in arrears ...... 26,874 28,635 30,211 Interests on financial institutions deposits ...... 31,840 42,529 37,447 Dividends and participations ...... 50,483 49,687 54,307 Yields on administrative deposits ...... 1,390 18,539 53,217 Profit from the appraisal of liquidity administrative investments in debt securities ...... 40,622 131,876 58,105 Other financial revenue ...... 48,714 90,203 38,226

F-90 2013 2012 2011 Exchange difference adjustment ...... (1) 135,800 254,498 130,605 Other ordinary revenue ...... 178,864 39,291 36,475 Extraordinary revenue ...... Recoveries ...... (2) 199,900 77,027 61,068 Uses ...... 7,404 11,364 5,881 Compensations ...... 13,279 12,513 24,229 Other extraordinary revenue ...... 42,915 42,926 17,341 Adjustment from previous periods ...... 363 (6,069) 5,727 Total non-operating revenues ...... 827,025 856,093 607,977

(1) During 2013 there was a devaluation of the peso in respect to the U.S. dollar of 8.97% (2012 – revaluation 8.98%, 2011 – devaluation 1.50%). (2) Includes recovery of provisions for receivables, and litigations and lawsuits, generated by the change in methodology (see note 6). Note 36 Non-operating expenses As of December 31, non-operating expenses are comprised as follows:

2013 2012 2011 Interests Domestic public credit transactions ...... 200,679 212,880 216,120 Foreign public credit transactions ...... 226,880 208,091 164,775 Other interests ...... 95,614 102,922 114,135 Commissions ...... 8,852 19,604 27,029 Exchange difference adjustment ...... (1) 305,699 116,009 117,742 Financial expenses Securities administration and issuance ...... 1,211 935 6,669 Discount on financing bonds and securities ...... 2,868 2,868 2,783 Loss for the appraisal of liquidity administrative investments ...... 3,374 25,769 11,387 Other financial expenses ...... 9,648 10,929 8,693 Other ordinary expenses ...... 28,356 23,798 27,579 Extraordinary expenses ...... (2) 4,281 48,676 42,772 Equity investment provision ...... 4,097 3,390 11,226 Tax obligations provision ...... 3,648 3,317 158 Contingencies provision Litigations ...... (3) 57,134 111,010 58,841 Other provisions ...... 1,206 6,055 1,042 Intangible expenses amortization ...... 40,856 51,938 34,636 Adjustment from previous periods ...... 15,503 (20,808) (21,378) Total non-operating expenses ...... 1,009,906 927,383 824,209

(1) During 2013 there was a devaluation of the peso in respect to the US dollar of 8.97% (2012 – revaluation 8.98%, 2011 – devaluation 1.50%). (2) There was a decrease in respect to 2012, mainly by the expense of $24,877 of the effective guarantee for the non-construction of the generation plant Porce IV. (3) It corresponds to the provision of litigations rated as probable (see note 26). Note 37 Minority interest As of December 31, the minority interest for each of EPM Group subsidiaries was comprised as follows:

2013 2012 Percentage Amount Percentage Amount Electrificadora de Santander S.A. E.S.P. (ESSA) ...... 25.95% 227,591 26.10% 288,952

F-91 2013 2012 Percentage Amount Percentage Amount Central Hidroeléctrica de Caldas S.A. E.S.P. (CHEC) . . . . 19.90% 166,850 19.89% 163,574 Elektra Noreste S.A. (ENSA) ...... 48.84% 146,709 48.84% 135,177 Edatel S.A. E.S.P...... 44.00% 126,799 44.00% 123,636 Empresa Eléctrica de Guatemala S.A. (EEGSA) ...... 19.10% 100,970 19.09% 77,606 Transportista Eléctrica Centroamericana S.A. (TRELEC) . 19.10% 46,035 19.09% 38,833 Tecnologia Intercontinental S.A.P.I. De CV ...... 20.00% 44,020 — — Centrales Eléctricas del Norte de Santander S.A. E.S.P. (CENS) ...... 8.48% 41,721 8.48% 38,597 Aguas de Urabá S.A. E.S.P...... 36.58% 15,244 36.58% 15,455 Distribuidora de Electricidad del Sur (Delsur) ...... 13.59% 15,832 13.59% 10,868 Empresa de Energía del Quindío S.A. E.S.P. (EDEQ) . . . . 7.15% 10,774 7.15% 10,715 Comercializadora Eléctrica de Guatemala S.A. (COMEGSA) ...... 19.10% 6,280 19.09% 8,952 Regional de Occidente S.A. E.S.P...... 37.89% 5,123 37.88% 4,286 Inmobiliaria y Desarrolladora Empresarial de América S.A. (IDEAMSA) ...... 19.10% 5,081 19.09% 4,691 Aguas de Malambo S.A. E.S.P...... 12.01% 2,508 21.67% 3,069 Empresas Públicas de Oriente S.A. E.S.P...... 41.67% 2,296 41.67% 2,369 Enérgica S.A. (ENÉRGICA) ...... 19.10% 2,021 19.09% 1,449 Empresa de Aguas del Oriente Antioqueño S.A. E.S.P. . . . 43.99% 1,251 43.98% 1,228 Crediegsa S.A. (CREDIEGSA) ...... 19.10% 1,018 19.09% 1,309 Empresas Varias S.A. E.S.P...... 0.10% 67 — — Hidroecológica del Teribe S.A. (HET) ...... 0.01% 25 2.91% 2,648 Empresa de Telecomunicaciones de Pereira S.A. E.S.P. (ETP) ...... 0.01% 18 43.86% 75,022 EPM Ituango S.A. E.S.P...... — — 0.44% 5,549 CENS Inversiones S.A...... — — 0.53% 535 Otras (*) ...... — 65 — 479 Total minority interest ...... 968,297 1,014,999

F-92 Note 38 Transactions with related parties At December 31, transactions with related parties were comprised as follows: December 2013 December 2012 Accounts Accounts Other Accounts Accounts Other receivable payable obligations receivable payable obligations Area Metropolitana del Valle de Aburra ...... 1,566 — — 2,593 512 — Caja Nacional de Prevision Social-En Liquidacion ...... — — — 8,815 — — Comision de Regulacion de Energia y Gas - . . . . — 1,586 — — 1,092 — Corporacion Autonoma Regional de las Cuencas de Los Rios Rionegro y Nare ...... 34 2,240 — — 2,603 — Corporacion Autonoma Regional del Centro de Antioquia ...... — 5,451 — — 4,845 — Corporación Ruta N Medellin ...... 1,700 737 — — — — Departamento de Antioquia ...... 210 9,437 — 4,667 5 3 Direccion de Impuestos y Aduanas Nacionales . . — 92,102 813 — 143,829 813 E.S.P. Empresa de Energia del Casanare - Enerca S.A...... 112 156 — 4,063 186 — E.S.P. Generadora y Comercializadora de Energia del Caribe S.A...... 483 — — 10,172 — — E.S.P. Transportadora de Gas Internacional S.A. . — 8,926 — — 5,798 — E.S.P. Enviaseo ...... — 10 1,310 — — — E.S.P. Xm Compañía de Expertos En Mercados S.A ...... 30,731 37,704 — — — — Ecopetrol S.A...... 171 3,874 27 175 3,760 27 Electrificadora del Huila S. A. -E.S.P...... 661 394 3 978 451 — Electrificadora del Meta S. A. -E.S.P...... 7,420 326 26 12,012 606 — Electrificadora del Tolima S. A. -E.S.P. - En Liquidacion ...... 1,180 — 24 1,180 — 24 Empresa de Energia Electrica de Arauca ...... 111 99 — 1,646 100 — Empresa de Vivienda de Antioquia - ...... 1,820 — — — — — Empresa Urra S.A. E.S.P...... — 1,394 — — — — Empresas Municipales de Cali E.I.C.E E.S.P. . . . 7,827 2,790 94 7,733 742 — Fundación Empresas Públicas de Medellín . . . . . 5,675 4,506 — 4,351 43 — Isagen S.A...... 3,311 20,118 — 4,715 8,041 — Ministerio de Minas y Energia ...... 58,052 2,611 — 69,586 — — Municipio de Amalfi ...... 13 1,191 — 511 922 34 Municipio de Arboletes ...... 13 34 — 1,176 40 — Municipio de Barbosa - Antioquia ...... 68 1,598 — 1,051 494 — Municipio de Bello ...... 495 2,169 1 69 2,268 — Municipio de Envigado ...... 208 1,388 — 113 1,429 — Municipio de Itagüí ...... 937 1,269 7 898 1,028 6 Municipio de Medellín ...... 6,209 159,912 4,429 15,733 59,920 1,980 Municipio de Necoclí ...... 72 76 — 2,401 79 1 Municipio de San Rafael ...... 437 891 — 491 885 280 Municipio de Turbo ...... 116 213 — 1,440 219 — Municipio de Yolombó ...... 421 333 — 867 375 — Municipio de Yondó (Casabe) ...... 1,405 31 — 92 28 — Universidad de Antioquia ...... 5,290 1,462 2,356 6,479 1,070 1,431 Universidad Nacional de Colombia ...... 373 1,663 — 216 140 — Otros ...... 11,451 19,480 1,724 27,139 17,745 83 Total ...... 148,572 386,171 10,814 191,362 259,255 4,682

F-93 December 2013 December 2012 December 2011 Income Income Income from the from the from the sale of goods Other Costs and sale of goods Other Costs and sale of goods Other Costs and and services income expenses and services income expenses and services income expenses Area Metropolitana del Valle de Aburra ...... — — 7,777 1 48 5,903 — 151 5,648 Centrales Electricas de Nariño S. A. ESP ...... 2,217 — 5,452 2,351 — 5,940 3,562 — 6,450 Comision de Regulacion de Energia y Gas ...... — — — — — 3,223 4 — 4,603 Corporacion Autonoma Regional del Centro de Antioquia ...... — — 11,921 — — 20,835 319 — 10,339 Departamento de Antioquia . — — — 2,474 — 441 3,457 40 694 E.S.P. Empresa de Energia de Pereira S.A...... 2,007 — 1,401 1,988 — 1,346 11,190 78 2,856 E.S.P. Empresa de Energia del Casanare - Enerca S.A...... 1,299 — 2,060 19,311 — 2,055 2,125 — 2,115 E.S.P. Empresa Distribuidora del Pacífico S.A...... 25,800 — 2,572 632 — 2,879 710 — 3,413 E.S.P. Generadora y Comercializadora de Energia del Caribe S.A. . . 3,497 — — 58,093 — — 59,390 1 — E.S.P. Transportadora de Gas Internacional S.A...... — — 17,196 17 — 55,589 6 — 48,538 E.S.P. XM Compañia de Expertos en Mercados S.A...... 335,535 — 13,471 — — 12,039 19,433 — 11,667 Ecopetrol S.A...... 796 — 16,999 807 676 105,354 16,610 4 92,674 Electrificadora del Huila S. A. -E.S.P...... 13,592 — 4,862 5,793 — 4,982 7,299 — 5,158 Electrificadora del Meta S. A. -E.S.P...... 54,690 — 3,949 37,327 — 2,473 33,888 — 3,759 Empresa de Energia de Cundinamarca S. A. - E.S.P ...... 2,230 — 2,730 2,216 — 2,818 4,111 — 2,787 Empresa de Energia Electrica de Arauca . . . . 19,938 — 1,002 7,396 — 1,373 7,708 57 1,163 Empresas Municipales de Cali E.I.C.E E.S.P...... 183,314 4 7,704 51,536 10 5,189 87,858 30 9,863 Empresas Municipales de Cartago ...... 15,242 — 87 — — — — — — Empresas Varias de Medellín — — — 6,153 — 26 4,939 8 32 Instituto Colombiano de Bienestar Familiar . . . . . — — — 138 — 3,392 332 — 11,197 Isagen S.A...... 24,705 20 57,267 37,892 22 42,394 31,784 21,182 40,199 Municipio de Amalfi . . . . . 134 28 4,715 9 14 3,200 59 11 1,507 Municipio de Bello ...... 287 770 2,895 1,055 — 2,825 2,214 7 3,832 Municipio de Carolina del Principe ...... — — — 9 5 2,797 33 18 1,605 Municipio de Itagüí ...... 1,630 602 1,959 1,570 140 1,794 5,257 — 2,820 Municipio de Medellín . . . . 12,153 58 64,184 10,008 223 57,794 22,295 564 75,638 Municipio de Santa Rosa de Osos ...... — — — 52 — 2,809 306 — 1,877 Superintendencia de Servicios Publicos Domiciliarios ...... — — 5,649 — — 9,624 — 53 13,616 Universidad de Antioquia . . 5,479 218 5,307 3,404 17 3,464 6,299 288 5,703 Otros ...... 34,493 5,578 67,082 18,104 1,151 51,937 265,175 76,940 390,254 Total ...... 739,038 7,278 308,241 268,336 2,306 414,495 596,363 99,432 760,007

F-94 Empresas Públicas de Medellín E.S.P. and its Subsidiaries Unaudited Consolidated Financial Statements As of June 30, 2014 and for the six-month periods ended June 30, 2014 and 2013

F-95 EMPRESAS PÚBLICAS DE MEDELLÍN E.S.P. CONSOLIDATED BALANCE SHEETS (In millions of Colombian Pesos)

As of June 30, As of December 31, ASSETS Notes 2014 2013

CURRENT ...... 5,516,805 6,306,990 Cash and cash equivalents ...... 3 953,757 1,306,580 Investments in securities ...... 4 706,125 1,289,538 Accounts receivable, net ...... 5 3,473,734 3,303,599 Inventories, net ...... 6 261,450 258,083 Prepaid expenses ...... 7 37,017 64,590 Other assets ...... 11 84,722 84,600

NON – CURRENT ...... 32,375,479 31,991,689 Investments in securities ...... 4 7,396 8,185 Equity investments, net ...... 8 501,331 501,370 Accounts receivable, net ...... 5 920,987 959,692 Property, plant and equipment, net ...... 9 16,568,521 16,023,149 Pension plan asset ...... 10 731,959 736,183 Prepaid expenses ...... 7 144,455 200,678 Other assets ...... 11 2,368,173 2,377,768 Reappraisal of assets ...... 12 11,132,657 11,184,664

TOTAL ASSET ...... 37,892,284 38,298,679

LIABILITIES AND EQUITY CURRENT ...... 4,284,578 4,173,817 Financial obligations ...... 13 895,210 847,806 Hedging operations ...... 14 31,028 32,803 Accounts payable ...... 15 2,260,953 2,123,326 Taxes payable ...... 16 344,474 462,063 Labor liabilities ...... 17 207,842 157,774 Pension plan obligations ...... 18 204,378 241,793 Estimated liabilities ...... 19 75,617 66,264 Other liabilities ...... 20 265,076 241,988

NON – CURRENT ...... 10,846,074 11,109,051 Financial obligations ...... 13 7,976,931 8,382,690 Hedging operations ...... 14 51,123 35,635 Accounts payable ...... 15 347,510 300,941 Taxes payable ...... 16 2,109 2,805 Labor liabilities ...... 17 40,323 67,194 Pension plan obligations ...... 18 1,209,300 1,157,999 Estimated liabilities ...... 19 233,201 219,558 Other liabilities ...... 20 985,577 942,229

TOTAL LIABILITIES ...... 15,130,652 15,282,868 MINORITY INTEREST ...... 37 836,367 968,297 EQUITY (See the accompanying statement) ...... 21,925,265 22,047,514 TOTAL LIABILITIES AND EQUITY ...... 37,892,284 38,298,679 MEMORANDUM ACCOUNTS, NET ...... 13,888,427 12,264,737

The accompanying notes are an integral part of these consolidated financial statements.

F-96 EMPRESAS PÚBLICAS DE MEDELLÍN E.S.P. CONSOLIDATED STATEMENTS OF FINANCIAL, ECONOMIC AND SOCIAL ACTIVITIES (In millions of Colombian Pesos)

As of June 30, Notes 2014 2013 Revenues ...... 24 6,989,026 6,357,546 Cost of sales ...... 25 (4,441,908) (3,932,120) Depreciation and amortizations ...... 26 (494,096) (463,741) Gross profit ...... 2,053,022 1,961,685 Administrative expenses ...... 27 (497,054) (468,740) Provision, depreciation and amortizations ...... 26 (149,769) (177,407) Operating income ...... 1,406,199 1,315,538 Non operating revenues ...... 28 419,520 463,622 Non operating expenses ...... 29 (539,970) (626,347) Total non-operating expenses, net ...... (120,450) (162,725) Net Income before taxes and minority interest ...... 1,285,749 1,152,813 Income tax ...... 16 (378,350) (341,582) Net income before minority interest ...... 907,399 811,231 Minority interest ...... (59,771) (61,665) Net income ...... 847,628 749,566

The accompanying notes are an integral part of these consolidated financial statements.

F-97 EMPRESAS PUBLICAS DE MEDELLIN E.S.P. CONSOLIDATED STATEMENTS OF EQUITY (In millions of Colombian Pesos)

Accumulated Surplus Unappropriated Inflation Surplus on from Retained Adjustments Translation Revaluation Capital Donations Reserves Earnings of Equity adjustments of assets Total Balance at December 31, 2012 ... 67 114,319 3,579,639 5,708,332 2,437,797 (68,150) 9,287,725 21,059,729 Appropriation of reserves ...... — — 50,929 (50,929) — — — — Increase of revaluation surplus . . . — — — — — — (152,933) (152,933) Distribution to the city of Medellín — — — (526,122) — — — (526,122) Extraordinary distribution to the city of Medellín ...... — — — (388,435) — — — (388,435) Net income ...... — — — 749,566 — — — 749,566 Balance at June 30, 2013 ...... 67 114,319 3,630,568 5,492,412 2,437,797 (68,150) 9,134,792 20,741,805

Balance at December 31, 2013 ... 67 114,319 3,839,169 5,839,058 2,437,797 (68,150) 9,885,254 22,047,514 Appropriation of reserves ...... — — (52,833) 52,833 — — — — Increase of revaluation surplus . . . — — — — — — (60,109) (60,109) Distribution to the city of Medellín — — — (909,768) — — — (909,768) Net income ...... — — — 847,628 — — — 847,628 Balance at June 30, 2014 ...... 67 114,319 3,786,336 5,829,751 2,437,797 (68,150) 9,825,145 21,925,265

The accompanying notes are an integral part of these consolidated financial statements.

F-98 EMPRESAS PÚBLICAS DE MEDELLÍN E.S.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions of Colombian Pesos)

For the six months ended June 30, 2014 2013 Cash flows from operating activities:

Net income ...... 847,628 749,566 Adjustments to reconcile net income to cash provided by operating activities: Deferred income tax ...... 95,649 51,954 Provision, depreciation and amortizations ...... 574,299 563,027 Pension plan ...... 62,119 69,239 Translation adjustments ...... (45,284) 274,876 Net income attributable to minority interest ...... 59,771 61,665 Other non-cash of income and expenditure ...... 47,923 (4,461) Net changes in operating assets and liabilities net of effect of business combinations: Increase of accounts receivable ...... (186,811) (1,183,738) Increase of inventories ...... (11,765) (13,173) Increase (decrease) of other assets ...... 83,674 (17,453) Increase (decrease) of accounts payable ...... (268,289) 472,971 Decrease of third parties collections and other liabilities ...... (208,085) (13,775) Decrease of labor liabilities ...... (25,037) (24,936) Net cash provided by operating activities ...... 1,025,792 985,762

Cash flows from investing activities: Acquisitions of property, plant and equipment ...... (986,711) (1,692,645) Acquisition of other assets ...... (97,019) (123,069) Net cash used in investing activities ...... (1,083,730) (1,815,714)

Cash flows from financing activities:

Proceeds from financial obligations ...... 441,193 550,377 Payments of financial obligations ...... (737,118) (224,997) Distribution to the city of Medellín ...... (582,373) (696,122) Net cash used in financing activities ...... (878,298) (370,742)

Net increase (decrease) in cash and cash equivalents and investments in securities ...... (936,236) (1,200,694) Cash and cash equivalents and investments in securities at beginning of the year ...... 2,596,118 3,397,656 Cash and cash equivalents and investments in securities at end of the year ...... 1,659,882 2,196,962

The accompanying notes are an integral part of these consolidated financial statements.

F-99 EMPRESAS PÚBLICAS DE MEDELLÍN E.S.P. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PERIOD ENDED JUNE 30, 2014 AND DECEMBER 31, 2013 (Amounts expressed in million of Colombian pesos, except for the market representative exchange rate which are expressed in Colombian pesos and thousands of dollars, Euros, sterling pounds and yens) NOTE 1. BASIS OF PRESENTATION Our consolidated financial statements are prepared in accordance with the Accounting Manual for Domiciliary Public Utilities Providers (Plan de Contabilidad para Entes Prestadores de Servicios Públicos Domiciliarios) published by the Superintendence of Public Services (Superintendencia de Servicios Públicos Domiciliarios, ‘‘SSPD’’) and the accounting standards set forth by the Colombian General Accounting Office (Contaduría General de la Nación or ‘‘CAO’’) (such standards, collectively, ‘‘Public Services Companies GAAP’’). The preparation of financial statements in accordance with Public Services Companies GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements. Actual results could differ from these estimates and assumptions. Some information and footnote disclosures normally included in financial statements that meet Public Services Companies GAAP have been condensed. The Company’s management considers that they include all necessary adjustments for a fair presentation of the financial position and results of operations for each period. These financial statements should be read together with EPM’s audited financial statements as of December 31, 2013 and 2012 and for the years ended December 31, 2013, 2012 and 2011. The accompanying unaudited condensed consolidated financial statements include the accounts of EPM and its subsidiaries. The table below presents the entities included in the consolidated financial statements as well EPM’s percentage ownership in each entity.

Empresa de Armenia Rendering of public utilities of electric power; purchase, 92.85% 92.85% December 22, Energía del sale and distribution of electric power; these activities 1988 Quindío S. A. shall be conducted through the execution of policies, E.S.P. – (EDEQ) plans, programs and projects concerning distribution and commercialization of electric power, as well as related management, handling and uses in conformity with the regulations, guidelines and standards issued by the MME, primarily fulfilling the social function framed by such activity.

Central Manizales Rendering of essential public utilities of electric power, 80.10% 80.10% September 9, Hidroeléctrica de mainly exploitation of electric power generation plants, 1950 Caldas S. A. transmission and sub transmission lines, and distribution E.S.P. - (CHEC) network; purchase, sell and distribution of electric power; construction or acquisition of electric power generation plants, substations, transmission lines, distribution networks, and all sorts of installations related to production, purchase and sale of electric power, as well as commercialization, imports, distribution and sell of electric power.

Electrificadora de Bucaramanga Rendering of residential public utilities of electric power 74.05% 74.05% September 16, Santander E.S.P. - and related complementary activities of generation, 1950 (ESSA) transmission, distribution and commercialization, as well as rendering of services related to public utilities activities, in accordance with the legal and regulatory framework.

F-100 Direct participation percentage Creation Company Location Corporate purpose 2014 2013 date

Centrales Cúcuta Rendering of electric power utility, for which the 91.52% 91.52% October 16, Eléctricas del following operations are performed, among others: 1952 Norte de purchase, exports, imports, distribution and sell of Santander S. A. electric power and other energy sources; construction E.S.P. - (CENS) and exploitation of electric power stations, generating plants and substations, and the construction and exploitation of transmission and sub transmission lines and distribution networks.

Electra Noreste Panamá City Rendering of electric power utility, for which the 51.00% 51.00% January 19 S.A (ENSA) following operations are performed, among others: 1998 purchase, transport throught the distribution network, tension transformation, to install, operate and mantain public lightning in the concession area. Also, the entity is authorized to generate energy power with a limit of 15% in respect of the maximum energy in the concession area.

Hidroecológica (1) Panamá City Finance the construction of the Bonyic Hydroelectric 99.04% 99.04% November 11, del Teribe S. A. - project to meet the growing demand of electric power in 1994 (HET) the Isthmus of Panama.

Empresa Eléctrica Guatemala To commercialize energy. 80.90% 80.90% Octubre 5, de Guatemala City 1939 S.A. (EEGSA)

Gestión de Guatemala Provide advisory and consultancy services to companies 100.00% 100.00% December 17, Empresas City of electric power distribution, generation and 2004 Eléctricas S.A. transportation. (GESA)

Almacenaje y Guatemala To provide outsourcing services to the materials 99.94% 99.94% March 23, Manejo de City administration area. 2000 Materiales Eléctricos S.A (AMESA)

Comercializadora Guatemala To commercialize energy. 80.52% 80.52% November 5, Eléctrica de City 1998 Guatemala S.A (COMEGSA)

Transportista Guatemala To commercialize energy. 80.90% 80.90% October 6, Eléctrica City 1999 Centroamericana S.A

Enérgica S.A. Guatemala To build and maintain projects and goods for 78.19% 78.19% August 31, (ENÉRGICA) City energy sector. 1999

Crediegsa S.A Guatemala To provide personnel hiring and other 80.90% 80.90% December 1, (CREDIEGSA) City administrative services. 1992

Distribuidora de San Salvador To transform, distribute and commercialize electricity, 86.41% 86.41% November 16, Electricidad del supplying energy to the Center-South of El Salvador, in 1995 Sur (Delsur) Central America.

Innova San Salvador To provide services specialized in electric engineering 86.41% 86.41% October 19, Tecnología y and electrical appliances sale to electricity users of 2010 Negocios S.A de Delsur. C.V

Parque Eólico (2) Santiago Electricity generation through all types of fuels and 100.00% 100.00% August 26, Los Cururos Ltda de Chile renewable energy in any form, such as wind, 2011 photovoltaic and biomass. Transmission, purchase and sale of electricity to customers either or any interconnected system. Elaborate, execute, implement, manage and mantain projects related to the use of renewable energy, cogeneration or regeneration.

F-101 Direct participation percentage Creation Company Location Corporate purpose 2014 2013 date

Parque Eólico La (3) Santiago Electricity generation through all types of fuels and 100.00% 100.00% February 17, Cebada S.A de Chile renewable energy in any form, such as wind, 2011 photovoltaic and biomass. Transmission, purchase and sale of electricity to customers either or any interconnected system. Elaborate, execute, implement, manage and mantain projects related to the use of renewable energy, cogeneration or regeneration.

Aguas Nacionales Medellín Rendering of residential public utilities of water, sewage 99.99% 99.99% November 29, EPM S. A. E.S.P. draining, sanitation, and treatment and use of waste 2002 material and related complementary activities and engineering services pertaining to those public utilities.

Aguas de Urabá Apartadó Ensure the rendering of residential public utilities of 63.42% 63.42% January 18, S. A. E.S.P. water, draining and sanitation and compensate for the 2006 underdevelopment of infrastructure for those services in associate municipalities.

Empresas Rionegro Rendering of public utilities of water and draining 57.31% 57.31% November 12, Públicas de services for rural areas and sub urban areas of 2009 Oriente S. A. theMunicipalities of Envigado, Rionegro and El Retiro, E.S.P. in the so called Valle de San Nicolás.

Empresa de El Retiro Rendering of residential public utilities of water and 56.01% 56.01% November 22, Aguas del Oriente draining, as well as other complementary activities 1999 Antioqueño S. A. related to each of those public utilities. E.S.P.

Regional de San Jerónimo Rendering of residential public utilities of water, 62.11% 62.11% December 26, Occidente S. A. draining and sanitation, as well as other complementary 2006 E.S.P. activities related to each of those public utilities and treatment and use of waste material.

Aguas de (4) Malambo Ensure the rendering of residential public utilities of 88.73% 87,99% November 20, Malambo S. A. water, draining and sanitation within the jurisdiction of 2010 E.S.P. the Municipality of Malambo in the Department of Atlántico.

Aquasol Pachuca (4) Pachuca Preparation of the final design, construct, equipment and 57.60% 57.60% July 5, S.A. de C.V. de Soto operation of a wastewater treatment plant, in the city of 2004 Pachuca de Soto. Develop potable water projects and water treatment plants.

Ecosistemas de (4) Colima Preparation of the final design, construct, equipment and 79.99% 79.99% February 14, Colima S.A. de operation of a wastewater treatment plant, covers a 2006 C.V. period of one year for the construction, testing and commissioning, and 19 years for the operation, preservation and maintenance of the plant, and stabilization of sludge generated in the municipalities of Colima and Villa de Alvarez, in the Colima State.

Ecosistemas de (4) Tuxtla Construction, equipping, testing, commissioning, 80.40% 80.40% November 17, Tuxtla S.A. de operate and maintain a wastewater treatment system, as 2006 C.V. well as the execution of additional works, in the form of total private recoverable investment. Develop potable water projects and water treatment plants.

Ecosistemas de (4) Uruapan Rendering of residential public utilities of water, 80.20% 80.20% November 18, Uruapan S.A. de draining and sanitation within the jurisdiction of the 2009 C.V. Municipality of Uruapan, Michoacán. It also is subject to the preparation of the final design for a wastewater treatment plant. It comprises a period of one year to prepare the final design, construction, equipment, testing and commissioning and 15 years for the operation, preservation and maintenance of the plant.

Ecosistema de (4) Lerdo Construction, equipping, commissioning, operation and 80.00% 80.00% April 24, Ciudad Lerdo Durango maintenance for 20 years a sewage treatment system in 2007 S.A. de C.V. the City of Lerdo, Durango, and the execution of additional works in the mode of total private recoverable investment.

Aquasol Morelia (4) Morelia Construction of a wastewater treatment plant, as well as 80.00% 80.00% November 13, S.A. de C.V. the equipment and operation of the plant in Atapaneo in 2003 the Municipality of Morelia, Michoacan State.

F-102 Direct participation percentage Creation Company Location Corporate purpose 2014 2013 date

Ecosistemas de (4) Celaya Preparation of the final design, construct, equipment and 80.00% 80.00% December 5, Celaya S.A. de operation of a wastewater treatment plant, as well as the 2008 C.V. transport and disposal of solid waste and sludge generated by the plant, in the city of Celaya, Guanajuato State.

Ecosistema de (4) Cuernavaca Preparation of the final design, construct, equipment, 80.00% 80.00% November 17, Morelos S.A. de testing, commissioning, operate, conservate and 2009 C.V. mantain the wastewater treatment plant in Acapantzigo, Municipality of Cuernavaca, Morelos State.

Desarrollos (4) Ciudad Desing projects, construction, equipment, expansion, 79.29% 79.29% August 25, Hidráulicos de de México improvement, preservation, maintenance, establishment 1995 TAM S.A. de and operation of all types of water supply systems and C.V. sewerage and drainage works as well as the collection and sewage treatment and all types of solid waste.

Ecoagua de (4) Torreón Provide services for wastewater treatment operation, 80.00% 80.00% October 25, Torreón S.A. de whether municipal or domestic, as well as activities 1999 C.V. related to the treatment of wastewater.

Sistema de Aguas (4) Tecomán Preparation of the final design, construct, equipment and 49.60% 49.60% August 21, de Tecomán S.A. operation of a wastewater treatment plant, covers a 2009 de C.V. period of one year for the construction, testing and commissioning, and 19 years for the operation, preservation and maintenance of the plant, and stabilization of sludge generated.

Empresas Varias (5) Medellín Rendering of cleaning public utilities as part of the 99.90% 99.90% January, de Medellín S. A. integral management waste collection treatment. 1964 E.S.P. - EMVARIAS

EPM Inversiones Medellín Capital investment in domestic or foreign societies 99.99% 99.99% August 25, S. A. organized as public utilities companies. 2003

UNE EPM Medellín Rendering of telecommunications services, information 99.99% 99.99% June 29, Telecomunicaciones and communication technology services, information 2006 S. A. services and complementary activities.

Emtelco S.A. Medellín Rendering of telecommunications services, information 99.93% 99.93% July 21, and communication technology services, information 1994 services and complementary activities.

Edatel S. A. Medellín Rendering of telecommunication, information and 80.00% 56.00% December 17, E.S.P. communications technologies services and information 1969 services as well as complementary activities.

Empresa de Pereira Rendering of telecommunication, information and 99.99% 99.99% May 16, Telecomunicaciones communications technologies services and information 1997 de Pereira S.A. services as well as complementary activities. (ETP)

Cinco Telecom Miami Rendering of telecommunication, information and 100.00% 100.00% December 24, Corporation communications technologies services and information 2001 (CTC) services as well as complementary activities.

Orbitel Madrid Rendering of telecommunication, information and 100.00% 100.00% July 22, Comunicaciones communications technologies services and information 2003 Latinoamericanas services as well as complementary activities. S.A.U. (OCL)

Orbitel Servicios Rionegro Rendering of telecommunication, information and 99.99% 99.99% June 27, Internacionales communications technologies services and information 2003 S.A. (OSI) services as well as complementary activities.

Maxseguros EPM Bermudas Negotiation, contracting and handling of reinsurance for 100.00% 100.00% April 23, Ltd. policies covering equity. 2008

Panama Panamá City Capital investments in partnerships. 100.00% 100.00% October 30, Distribution 1998 Group S. A. - PDG

F-103 Direct participation percentage Creation Company Location Corporate purpose 2014 2013 date

Distribución Guatemala Capital investments in companies dedicated to 100.00% 100.00% March 12, Eléctrica City distribution and commercialization of electric power 1999 Centroamericana and to provide telecommunication services. DOS S. A. - DECA II

Inmobiliaria y Guatemala Investment in real estate. 80.90% 80.90% June 15, Desarrolladora City 2006 Empresarial de América S.A. (IDEAMSA)

AEI El Salvador Panamá City Capital investments in partnerships. 100.00% 100.00% May 17, Holding S.A. 2007

Electricidad de Santa Tecla Investment in shares and other securities titles, and 100.00% 100.00% December 9, Centroamérica advisory to DELSUR company. 1997 Ltda. de C.V. (ELCA)

PPLG El Caimán Capital investments in partnerships. 100.00% 100.00% April 9, Salvador II 1999

EPM Capital Ciudad Develop infrastructure projects of any kind, including 100.00% 100.00% May 4, México S. A. de de México but not limited to projects related to electric power, 2012 C.V. public lighting, gas, telecommunications, sanitation, treatment plants for potable water, draining, sewage treatment plants, wells, buildings, as well as the operation, studies and services in all fields and branches in connection with the above.

EPM Chile S. A. Santiago Develop infraestructure projects of any kind, including 100.00% 100.00% February 22, de Chile but no limited to ptojects related to electric power, 2013 public lighting, gas, Telecommunications, sanitation, treatment plants for potable water, draining, sewage treatment plants, wells; render electric power services, water and cleanness; participate in all kind of compeitity ,tenders, of kind private or public.

Tecnología (4) México City Estudio, desarrollo, fomento y ejecución de proyectos y 80.00% 80.00% July 28, Intercontinental procesos industriales, así como el diseño, fabricación, 1980 S.A. de ensamble y montaje de maquinaria, el desarrollo de C.V. (TICSA) tecnología incluyendo la comercialización, representación comercial y comercio en general

Proyectos de (4) México City Providing the services of design, general, engineering or 80.40% 80.40% August 1, Ingeniería the construction, professional and technical services, 2008 Corporativa S.A. manage and carry out all the activities needed for the de C.V. development of a company, commercial, industrial or services in the form of individuals or legal persons.

Corporación de (4) México City Providing the professional services towards to operate, 79.40% 79.40% August 1, Personal manage and carry out all the activities needed for the 2008 Administrativo development of a company, commercial, industrial or S.A. de C.V. services in the form of individuals or legal persons, as well as the management, recruitment, hiring and interchange of staff that perform functions at the petitioner companies.

(1) Under Panamanian domestic accounting regulations, IFRS (International Financial Reporting Standards), in 2013 this company experienced losses that were reflected as an expense on its financial statements. However, there is no acknowledgment of this expense in the confirmation of Colombian accounting practices. (2) Company acquired in March 2013 through EPM Chile and EPM Inversiones Subsidiaries. (3) Company’s name was changed in April 16, 2013. Its former name was Parque Eólico El Pacífico S.A. (4) In September 2013 EPM, through its subsidiary EPM Capital Mexico SA, acquired an 80% interest in Tecnología Intercontinental S. A. de C.V. (TICSA). TICSA is a holding company that encompasses 13 companies. (5) On November 1, 2013 EPM acquired 99,90% of the shares.

F-104 Specific notes Notes related to valuation Note 2 Conversion of values in foreign currency The balances in cash, banks, accounts receivable, investments, suppliers and financial obligations in foreign currency were expressed in Colombian pesos based on the Market’s Representative Exchange Rate (TRM, for its initials in Spanish) certified by the Financial Superintendence of Colombia. As of June 30, 2014 and December 31, 2013 the values are:

Currency 2014 2013 US Dollar (USD) ...... 1,881.19 1,926.83 Euro (EUR) ...... 2,575.63 2,655.08 Japanese Yen (JPY) ...... 18.57 18.33 Sterling Pound (GBP) ...... 3,216.55 3,191.31 Swiss Franc (CHF) ...... 2,121.32 2,166.57 Quetzal (GQT) ...... 241.84 245.73 Mexican Peso (MXN) ...... 144.53 147.12 Chilean Peso (CLP) ...... 3.40 3.66 The effects in results for exchange difference as of June 30, 2014 and 2013, were the following:

2014 2013 Non-operating revenue from exchange differences Cash ...... 22,989 31,607 Acquisition of goods and services ...... 9,419 12,131 Investments ...... 15,896 4,853 Accounts receivable ...... 15,127 30,916 Public credit transactions ...... 58,652 20,301 Other adjustments on exchange differences ...... 18,435 17,830 Total non-operating revenue from exchange differences 140,518 117,638 Non-operating expenses from exchange differences Cash ...... 23,192 11,423 Acquisition of goods and services ...... 8,124 9,752 Accounts receivable ...... 39,924 (212) Investments ...... 75 (55) Short term external Public credit transactions ...... 50,255 236,989 Other adjustments on exchange differences ...... 17,089 19,806 Total non-operating expense from exchange differences 138,659 277,703

F-105 Balance Sheet Assets Note 3 Cash and cash equivalents As of June 30, 2014 and December 31, 2013, cash and cash equivalents are comprised as follows:

2014 2013 Cash ...... 3,283 6,738 Due from banks ...... 918,466 1,243,154 Other available resources ...... (1) 32,008 56,688 Total cash and cash equivalents...... 953,757 1,306,580 Restricted funds ...... (2) 114,836 144,945

(1) Includes funds in foreign currency payable on demand, realized through overnight operations that generate a financial return. (2) Cash in banks includes the following accounts with special destination:

Fund Destination 2014 2013

Restricted resources EPM Parent Company

Agreements

City of Medellín – Water Integrated management of water for human consumption by 6,941 5,124 the inhabitants of the city of Medellin.

Agreement Department of Antioquia Joining forces for the institutional development, 3,024 2,974 strengthening, transformation or creation of companies, with the aim of ensuring the provision of public services in the department’s municipalities.

Ministry of Mines and Energy - Special Promotion Agreement for co-financing construction, distribution 2,696 2,415 Installment Fund (Fondo Especial Cuota Fomento, FECF) infrastructure and connection for low-income users in the municipalities of Amagá, Santa Fe de Antioquia, Sopetrán, San Jerónimo and Ciudad Bolívar. Compressed Natural Gas and connection of users in Don Matías, Entrerríos, San Pedro, Santa Rosa and Yarumal. Agreement No. 106: construction of connection infrastructure for users in Valle de Aburrá, La Ceja, La Unión and El Retiro. Agreement 179: includes the city of Sonsón.

‘‘Aldeas’’ Program Taking advantage of wood which is completing its maturity 1,420 260 cycle in the forests planted by EPM around its dams, to construct homes of community interest in the municipalities of Antioquia outward from Valle de Aburrá, and to give them to needy families, preferably those that are in a displaced situation whether forced or voluntarily.

Antioquia Government - Gas Without Borders Supporting the development of the expansion component 1,362 2,398 through the building of domestic gas connections, within the framework of the ‘‘Gas Without Borders’’ program, in the subregions of the department of Antioquia.

City of Medellín – Moravia Construction, repair and replacement of water lines and 1,076 1,069 sewer networks and paving of the streets in the city of Medellín affected by the works in the Moravia neighborhood.

City of Barbosa Replacement and modernization of secondary water lines 597 1,039 and sewer networks and their associated works in the neighborhoods of Robles, Centro, La Bicentenaria, Los Ángeles and El Portón of the city of Barbosa.

Multilateral fund of the Montreal protocol Cooperation agreement with the Ministry of Environment 586 290 and Sustainable Development for the development of activities within the framework of implementing the Montreal protocol in Colombia.

Rural electrification agreements Construction and supervision of domestic installations by 373 369 EPM, in order to develop rural electrification programs in different municipalities of the department of Antioquia.

F-106 Fund Destination 2014 2013

National Royalties Fund – Gas Construction of compressed natural gas distribution 273 1 infrastructure and subsidies for connection to stratum 1 and 2 users in the cities of El Peñol and Guatapé.

Agreements for street-lighting and sanitation charges with Agreement to manage the resources of territorial bodies in 273 — Cities order to pay cities that have agreements for collecting street-lighting and sanitation taxes; these resources are exempt from the 4x1000.

Department of Antioquia and IDEA (Instituto para el Bringing electrical energy services to rural homes in the 267 135 Desarrollo de Antioquia (Antioquia Development cities of the department of Antioquia. Institute)) – Illuminated Antioquia Program

IDB (Inter-American Development Bank) Credit 2120 Destined for the disbursement of credit resources granted 100 43,246 for the construction of the Bello residual water treatment plant (RWTP). The resources which reach this account are requested via legalization; only duly legalized resources are released.

Connections Connections agreement with cities of the Antioquia 64 — Department FECF (Fondo Especial de Cuota de Fomento (Special Development Fund)). Resolution 90543 of 2013 of the Ministry of Mines and Energy.

Ministry of Mines and Energy - Financial Charge Administering the resources and making the payments from 59 673 the contract signed with the Ministry of Mines and Energy FAER GGC 225 2012 (CT-2012-001774 in EPM), to broaden and improve the supply of electricity in the areas of the Interconnected National System located in the Trading Market of the Network Operator.

City of Barbosa - Subsidies Agreement to partially subsidize the connection of users in 51 — stratums 1 and 2

City of Medellín – Lands Acquisition of sites identified and inspected within the 47 47 protection zones of hydrographic basins that supply the aqueduct system in the city of Medellín.

City of Caldas Management of resources assigned by the city to develop 2 — the project for the re-siting and modernization of secondary aqueduct and sewage networks together with their associated works.

Agreements

Sintraemdes Dwelling Fund Contributing to obtaining and improving housing for public 28,050 14,897 servants who benefit from the agreement signed by EPM Sinpro Dwelling Fund with the unions. 17,347 15,501

Sintraemdes Disaster Fund Promoting the welfare of its public servants to meet urgent 923 912 and unforeseen needs or those of their primary family Sinpro Disaster Fund group. 861 851

Sintraemdes Education Fund Promoting the welfare of its public servants to meet their 860 796 needs to pay for registration fees, textbooks and Sinpro Education Fund contributions required to pursue their own studies and those 921 904 of their family group.

Motorbike Repair Fund Promoting the welfare of official workers who operate in 153 152 the regional market and use their own motorbikes to carry Motorbike Repair Fund out their work. 62 61

Guarantees

Adapted Organization Fund and Fosyga Fund Mechanism for controlling and monitoring the collection of 1,430 641 contributions for the Contributory Regime of the General Social Security in Health System

International energy transactions Represents the ‘‘compensation’’ that has to be carried out 70 358 between the billing of stock exchange transactions and advance payments, with the aim of carrying out the real payment to XM.

Law 820 Deposits Represents the guarantee demanded by the landlord from a 44 40 tenant for the payment of public services. According to Article 15 of Law 820 of 2003 and Regulatory Decree 3130 of 2003.

F-107 Fund Destination 2014 2013

EPM Parent Company total restricted resources 69,932 95,153

ESSA (Electrificadora de Santander S.A.) restricted resources

Puerto Wilches Barranca line Construction of the Termobarranca Puerto Wilches 115/34.5 23 — kW double-circuit line, a 115/34.5 kW substation at Puerto Wilches, and expansion of the Termobarranca substation.

Financial Support Fund for Electrifying Interconnected Broadening coverage, improving quality and continuity of 4,735 4,867 Rural Zones - FAER - Agreement 090 the electricity service and satisfying the demand for the latter in the areas of the Interconnected National System FAER Agreement 235 (INS) located in the Network Operator’s trading market, 2,273 4,940 through the use of resources from the Financial Support Fund for the Electrification of Rural Interconnected Zones (FAER).

FAER Agreement 030 Technical service agreement between the Nation (Ministry 1,276 1,260 of Mines) and ESSA for the management and implementation of the resources from the Financial Support Fund for the Electrification of Rural Interconnected Zones (FAER).

Program for Normalizing Electricity Networks (Programa Implementation of resources from the Program for — 817 de Normalización de Redes Eléctrica, PRONE). Normalizing Electricity Networks (PRONE).

ESSA - Santander Governorship agreement, Phase V Construction of medium and low-voltage grids, assembly of 505 498 transformers, and internal installations for rural electrification of streets in the Department of Santander.

Public Lighting San Gil Resources from remaining funds from Public Lighting in 474 348 the City of San Gil

FAER Agreement 014 Management and implementation of the resources of the 348 342 Financial Support Fund for the Electrification of Rural Interconnected Zones (FAER) assigned to rural electrification projects and to the normalization of electricity networks.

ESSA - Santander Governorship Agreement, Phase III Construction of medium and low-voltage grids, assembly of 296 296 transformers, and internal installations for rural electrification of streets in the Department of Santander.

FAER GSA Agreement 160 2012 Technical service agreement between the Nation (Ministry 97 395 of Mines) and ESSA for the management and implementation of the resources from the Financial Support Fund for the Electrification of Rural Interconnected Zones (FAER).

ESSA - Santander Governorship Agreement - Phase IV Construction of medium and low-voltage grids, assembly of 206 203 transformers, and internal installations for rural electrification of streets in the Department of Santander.

Jesús María Agreement Construction of medium and low-voltage grids, assembly of 138 138 transformers, and internal installations for rural electrification of the streets in the city of Jesús María, in Santander.

FAER Agreements FAER administration of resources 542

Public hearings General administration and implementation of resources 95 93 from public hearings by ESSA, allocated to projects for constructing medium and low-voltage networks for rural electrification.

Macaravita Agreement Construction of medium and low-voltage grids, assembly of 26 — transformers, and internal installations for rural electrification of the streets in the city of Macaravita - Santander.

Motor insurance Agreement Motor insurance Agreement 4,985 4,960

ESSA total restricted resources 16,019 19,157

EDEQ (Empresa de Energía del Quindío) restricted resources

Dwelling Fund Resources destined for improving the quality of life of its 818 554 workers by granting credits aimed at buying and improving the home.

F-108 Fund Destination 2014 2013

Domestic Disaster Fund Resources destined for events caused by serious and 11 11 unforeseen situations that affect the worker or their family.

EDEQ total restricted resources 829 565

CENS [Centrales Eléctricas del Norte de Santander (Power Plants in Northern Santander)] restricted resources

FAER GGC Contract 105 - 2013 signed by the Nation Carrying out rural electrification works in the cities of 6,483 14,829 (Ministry of Mines) and CENS. (FAER CATATUMBO Convención, San Calixto, Cáchira, Hacarí, Ocaña, La Playa, III) Villa Caro, Teorama and La Esperanza in the department of Norte de Santander.

CENS - Governorship of Santander Agreement Carrying out rural electrification works in the cities of 5,887 — Ábrego, El Carmen and El Tarra, in the department of Norte de Santander.

FUNDESCAT (Fundación Ecopetrol para el Desarrollo Carrying out rural electrification works in the cities of Tibú 4,321 5,275 del Catatumbo) and El Tarra, Norte de Santander department

CENS - ECOPETROL Agreement Carrying out rural electrification works in the cities of Tibú 4,061 4,007 and El Carmen, Norte de Santander department.

Rotational dwelling fund Financing the cost of a home for those workers who do not 180 178 have one.

FAER Agreement 021 General management and implementation of resources of 124 124 the Financial Support Fund for the Electrification of Rural Interconnected Zones (FAER).

AOM Contract Management, operation, maintenance and replacement of 62 62 rural electrification assets built with the resources from the ‘‘Rural electrification program rural zone of Catatumbo and province of Ocaña, phase 1, Norte de Santander’’.

Electrificadora Vereda Aguablanca – FNR (Fondo Building of medium and low-voltage connection networks — 106 Nacional de Regalías (Royalties National Fund)) in Vereda Aguablanca, City of Bucarasica, Norte de Santander.

FAER Agreement 003 General management and implementation of resources of 3 3 the Financial Support Fund for the Electrification of Rural Interconnected Zones (FAER).

Total restricted resources CENS 21,121 24,584

Recursos restringidos CHEC

INNPULSA fund Fund shared between CHEC and Ministry of ICT (Innpulsa) 723 — for the project that ensures Internet access and improves productivity and competitiveness of SMEs beneficiaries through the implementation of existing software or new applications.

Total restricted resources CHEC 723 —

Restricted resources Western Regional

Agreement 10000083 Sopetrán Resources received in 2011 from the inter-administrative 22 22 agreement 08-CF-124850 signed between the Department Agreement – San Jerónimo of Antioquia and the cities of Santafé de Antioquia and San 13 13 Jerónimo as well as the resources received in 2011 under the Agreement – Santafé inter-administrative agreement for financial support signed 2 2 between the Ministry of Environment, Housing, and Agreement 5847 Territorial Development; the Department of Antioquia, and 1 1 Western Regional, whose object is the financial support of the regional frameworks for the supply of water and sewer services.

Total restricted resources Western Regional 38 38

Restricted resources Aguas de Urabá

Contributions 10005141- 143 EAU Inter-administrative contract for the construction of the 3,421 3,402 aqueduct master plans - II phase of the region of Urabá, cities of Turbo, Carepa, Apartadó and Chigorodó.

Financial yields 10004502 Balance of resources from capitalization received from the 597 582 Department of Antioquia and the interest earned.

F-109 Fund Destination 2014 2013

Departament Contributions 10008940, 8941 Inter-administrative contract for the development of the 37 371 optimization of the system for collecting residual waters in the city of Turbo

Dwelling Fund Resources destined for improving the quality of life of its 34 — workers by granting credits aimed at buying and improving the home.

Financial yields 10005141 Inter-administrative contract for the construction of — 5 aqueduct master plans - phase II in the region of Urabá, cities of Turbo, Carepa, Apartadó and Chigorodó.

Financial support 10005431- 07-CF12-4842 Balance of agreement signed with the Department of — 2 Antioquia for the performance of works.

Total restricted resources Aguas de Urabá 4,089 4,362

Restricted resources Aguas Nacionales

Financial charge FiduBogota 197517 Inter-administrative cooperation agreement No. 1 signed by 491 1,002 EPQ in Liquidation and EPM, for the management of Bancolombia FL 536423 investments and their supervision, maintenance and 99 53 operation of the aqueduct, sewer and sanitation systems in MN Main fund the urban zone of the city of Quibdó. — 30

Restricted subsidiary fund A FL MN 3 1

Financial charges on administration 973 —

Financial charges on administration Financial charge, restricted resources exclusively for the 519 — construction of the Treatment Plant for Residual Water

Total restricted resources Aguas Nacionales 2,085 1,086

Total restricted resources 114,836 144,945 Note 4 Investments in securities As of June 30, 2014 and December 31, 2013, investments securities are comprised as follows:

2014 2013 Value Average profitability Value Average profitability Rights in funds and securities investment trust . . . . . (1) 79,902 2.63% E.A. 72,832 3.26% E.A. Treasury securities-TES ...... (2) 11,345 7.92% E.A. 126,181 6.09% E.A. 6.37% E.A, 4.06% E.A, 4.04% E.A. en GTQ, 5.69% E.A. en GTQ, Time deposits ...... (3) 331,225 1.37% E.A. en USD 633,692 3.85% E.A. en USD Bonds and securities issued by financial institutions . . (4) 170,246 0.25% E.A. en USD 309,467 0.38% E.A. en USD Bonds and securities issued by international 8.50% E.A. en GTQ 8.50% E.A. en GTQ institutions ...... (5) 74,159 1.69% E.A. en USD 78,796 7.21% E.A. en USD Bonds and securities issued by general government . . (6) 41 51 Bonds and securities issued by private sector ...... 32,721 8.81% E.A. 31,492 Other investments for liquidity management ...... 6,486 3.04% E.A en USD 37,027 0.99% E.A en USD Current investments in securities ...... 706,125 1,289,538 Deposits of foreign debt transactions ...... 0 0 Other investments for liquidity management ...... 7,396 8,185 Non-current investments in securities ...... 7,396 8,185 Total investments in securities ...... 713,521 1,297,723

F-110 (5) Investments in international investment mutual funds or Exchange Trade Funds (ETF) and bonds issued by trusts and guaranteed with cash flows by bank loan. (6) Correspond to Tax Refund Securities (TIDIS, for its initials in Spanish).

Note 5 Accounts receivable, net As of June 30, 2014 and December 31, 2013, accounts receivable are comprised as follows: 2014 2013 Receivables from utility services Electric power service ...... 1,247,426 1,268,526 Telecommunications service ...... 300,673 296,898 Subsidy on telecommunications service ...... 16,016 17,764 Subsidy on electric power service ...... 68,758 5,741 Fuel gas service ...... 94,831 98,402 Water service ...... 66,827 62,123 Sewage draining service ...... 55,356 69,140 Subsidy on fuel gas service ...... 11,158 6,638 Subsidy on water service ...... 6,932 5,511 Subsidy on sewage draining service ...... 3,560 2,413 Cleaning service ...... 17,617 6,929 Other accounts receivable ...... 0 0 Rendering of services other that public utilities ...... 297,551 217,802 Advances or credit balances for taxes and contributions . . (1) 340,254 351,273 Deposits and advances delivered ...... 199,347 162,978 Loans to employees ...... 22,507 28,481 Interests ...... 330 328 Resources given for administration ...... (2) 534,549 664,976 Pension payment quotas ...... 24,222 25,532 Collection schemes ...... 761 10,732 Sales of goods ...... 25,778 30,061 Payments on behalf of third parties ...... 27,241 38,062 Leasing ...... 8,971 8,706 Administration of resources health system ...... 0 0 Sales of assets ...... 15,098 279 Fees and commissions ...... 3,705 3,109 Dividends and shares receivable ...... 24,098 0 Other minor accounts receivable ...... 236,489 89,281 Doubtful accounts ...... 0 0 Electric power service ...... 163,037 161,234 Telecommunications service ...... 147,002 137,313 Water service ...... 9,889 9,684 Fuel gas service ...... 10,931 10,335 Sewage draining service ...... 8,408 8,149 Other doubtful accounts receivable ...... 105,380 92,897 Current accounts receivable ...... 4,094,702 3,891,297 Current portion provision ...... (3) (620,968) (587,698) Current accounts receivable, net ...... 3,473,734 3,303,599 Rendering of public utilities Fuel gas service ...... 167,892 164,430 Electric power service ...... 161,626 161,493 Water service ...... 28,128 28,214 Sewage draining service ...... 16,891 16,797

F-111 2014 2013 Other accounts receivable Loans to employees ...... 114,404 112,089 Deposits and advances delivered ...... 90,433 91,539 Payments on behalf of third parties ...... 3,078 3,091 Interests ...... 249 319 Sales of assets ...... 3,837 4,830 Rendering of services ...... 1,195 334,327 Resources given for administration ...... 1,506 1,506 Charging scheme ...... 0 84 Others ...... 331,748 40,973 Non-current accounts receivable, net ...... 920,987 959,692 Accounts receivable, net ...... 4,394,721 4,263,291

(1) Includes mainly advances of income tax and VAT of temporary investments. (2) Includes trusts by Aguas Nacionales S.A E.S.P. (3) The movement of the allowance for doubtful accounts was as follows:

2014 2013 Initial balance ...... 587,698 543,248 Increase for the year ...... 51,236 110,882 Expense from previous periods ...... — (1,565) Translation adjustment ...... (625) 2,208 Business combinations ...... — 7,743 Reclassification of provision ...... 3,901 (1,107) Recovery of provision ...... (20,026) (33,888) Use of provision ...... (1,216) (39,823) Total provision for accounts receivable ...... 620,968 587,698

Note 6 Inventories, net As of June 30, 2014 and December 31, 2013, inventories are comprised as follows: 2014 2013 Materials ...... (1) 230,851 218,720 Goods for sale ...... (2) 36,250 30,787 Inventories held by third parties ...... 6,553 7,685 Goods in transit ...... 653 5,302 Work in process ...... 976 1,024 Subtotal inventories ...... 275,283 263,518 Provision Materials for the rendering of services ...... (11,486) (3,587) Merchandise in stock ...... (2,347) (1,848) Total provision ...... (3) (13,833) (5,435) Total inventories, net ...... 261,450 258,083

F-112 (3) The movement of the inventories provision was as follows:

2014 2013 Initial balance ...... 5,435 6,712 Increase of the year ...... 1,264 2,319 Adjustment from previous periods ...... — (476) Translation adjustment ...... — (8) Recovery of provisions ...... 7,134 (1,392) Business combinations ...... — (1,720) End balance ...... 13,833 5,435

Note 7 Prepaid expenses As of June 30, 2014 and December 31, 2013, prepaid expenses are comprised as follows:

2014 2013 Insurance ...... 11,466 38,667 Leasing ...... 6,746 6,776 Other expenses paid in advance ...... 18,805 19,147 Current prepaid expenses ...... 37,017 64,590 Insurance ...... (1) 34,930 38,489 Leasing ...... 28,322 30,806 Other expenses paid in advance ...... (2) 81,203 131,383 Non-Current prepaid expenses (Note 18) ...... 144,455 200,678 Non-Current prepaid expenses ...... 181,472 265,268

(1) Includes mainly all risks policies and third party liability of the Hidroituango project in EPM Parent. Both policies have an effective term up to March 2020. (2) Includes mainly the rights of use of cables called IRUS, Wimax and purchase of domains, among other items (Irrevocable Right of Use – IRU – on dark optic fiber thread, purchase of domains, beneficiary rights).

Note 8 Equity investments, net As of June 30, 2014 and December 31, 2013, balances of non-current investments, net are comprised as follows:

2014 2013 Investments in non - controlled entities ...... 604,945 604,872 In entities under liquidation ...... 102 102 Equity investments ...... (1) 605,047 604,974 Valuation allowance of investments ...... (2) (103,716) (103,604) Equity investments, net ...... 501,331 501,370

(1) The non-current investments recorded under the cost method as not controlled were: Percentage of participation

Company Location Corporate purpose 2014 2013 Creation date

Isagen S.A. E.S.P. Medellín Generation and commercialization of electric power, 13.14% 13.11% April 4, 1995 natural gas by grids, as well as commercialization of coal, steam and other energy sources of industrial use.

Interconexión Medellín Operation and maintenance of its own transmission 10.17% 10.17% September 14, Eléctrica S.A network, expansion of the national interconnection 1967 E.S.P. network, planning and coordination of the operation with resources from SIN.

Hidroeléctrica Medellín Operation and maintenance of its own transmission 46.45% 46.45% December 29, Ituango S.A. network, expansion of the national interconnection 1997 E.S.P. network, planning and coordination of the operation with resources from SIN.

F-113 Percentage of participation

Company Location Corporate purpose 2014 2013 Creation date

Gestión Manizales Rendering of one or more public utilities considered 0.19% 0.19% May 4, 1993 Energética S.A. under ACT 142 of 1994 or the conduction of one or E.S.P. GENSA several activities considered as complementary or one and the other activity.

Reforestadora Medellín Produce, transform and commercialize timber products 6.84% 6.82% February 28, Industrial de and non-timber products from forestry plantations, 2003 Antioquia RIA seeking high profitability and sustainability.

Electrificadora del Barranquilla Distribution and commercialization electricity in the 0.07% 0.07% June 06, 1998 Caribe S.A. Colombian Caribbean.

Transoriente S.A. Bucaramanga Transportation of fuel gas by means of construction, 6.73% 6.73% March 24, E.S.P. operation and maintenance of gas pipelines, ducts and 1994 branches.

Gas Natural del Bucaramanga Rendering of essential public utilities of residential fuel 10.00% 10.00% August 30, Oriente S.A. gas distribution in any part of the country. 1997 E.S.P. The value of investments recorded under the cost method, with detail of adjusted cost, revaluation and associated provisions, were:

2014

Entity Cost Provision Net Revaluation Dividends Isagen S.A. E.S.P...... 194,312 — 194,312 916,617 28,131 Interconexión Eléctrica S.A. E.S.P...... 187,035 — 187,035 845,558 24,098 Colombia Móvil S. A. E.S.P...... 152,063 (86,742) 65,321 — — Hidroeléctrica Ituango S.A. E.S.P...... 28,025 — 28,025 6,406 — Gestión Energética S.A. E.S.P...... 12,700 (12,050) 650 — — Transoriente S.A. E.S.P...... 8,633 — 8,633 4,414 — Gas Natural del Oriente S.A. E.S.P...... 7,651 — 7,651 9,089 2,135 Reforestadora Industrial de Antioquia (RIA) ...... 5,076 (125) 4,951 — — Electrificadora del Caribe S.A. E.S.P...... 1,763 (314) 1,449 3 — Hidroeléctrica del Río Aures ...... 446 — 446 11 — Others ...... 7,343 (4,485) 2,858 26,454 459 Total ...... 605,047 (103,716) 501,331 1,808,552 54,823

2013

Entity Cost Provision Net Revaluation Dividends Isagen S. A. E.S.P...... 194,312 — 194,312 955,907 24,460 Interconexión Eléctrica S. A. E.S.P...... 187,035 — 187,035 837,676 21,170 Colombia Móvil S. A. E.S.P...... 152,073 (85,493) 66,580 — — Hidroeléctrica Ituango S. A. E.S.P...... 28,111 — 28,111 6,314 1,977 Gestión Energética S. A. E.S.P...... 12,700 (12,059) 642 — — Transoriente S. A. E.S.P...... 8,633 — 8,633 4,089 — Gas Natural del Oriente S. A. E.S.P...... 7,651 — 7,651 11,137 2,416 Reforestadora Industrial de Antioquia (RIA) ...... 5,076 (125) 4,951 — — Electrificadora del Caribe S. A. E.S.P...... 1,764 (336) 1,428 — — Hidroeléctrica del Río Aures ...... 446 — 446 12 — Others ...... 1,794 (213) 1,581 14,583 455 Total ...... 599,595 (98,226) 501,370 1,829,718 50,483

F-114 The main financial information of equity investments as of December 31 was:

2014 2013 Initial balance ...... 103,604 99,515 Increase for the year ...... 398 4,097 Provision expense from previous years ...... — 855 Reclassification of provisions ...... — 47 Recovery of provisions ...... (286) (910) End balance ...... 103,716 103,604 Note 9 Property, plant and equipment, net As of June 30, 2014 and December 31, 2013, the components of property, plant and equipment are comprised as follows: 2014 2013 Constructions in progress ...... (1) 3,777,941 3,204,013 Plants, ducts and tunnels ...... (2) 8,019,708 7,966,692 Networks, lines and cables ...... (2) 8,217,126 7,980,215 Buildings ...... (2) 3,067,627 3,058,647 Communication and computer equipment ...... 1,347,982 1,298,462 Machinery and equipment ...... 502,890 493,079 Land ...... 210,225 210,648 Transportation, traction and lifting equipment ...... 207,152 203,365 Movable goods in store ...... 175,037 179,552 Furniture, fixtures and office equipment ...... 114,167 113,978 Property, plant and equipment not used ...... 92,066 103,530 Machinery, plant and equipment in assembly ...... 113,709 131,409 Property, plant and equipment in transit ...... 16,059 13,126 Medical and scientific equipment ...... 32,133 29,787 Property, plant and equipment in maintenance ...... 4,831 10,640 Others ...... 11,208 11,215 Subtotal property, plant and equipment ...... 25,909,861 25,008,358 Depreciation accrued Plants, pipelines and tunnels ...... (5,836,832) (5,719,737) Networks, lines and cables ...... (3,730,621) (3,517,871) Communication and computer equipment ...... (899,156) (855,934) Buildings ...... (842,033) (780,247) Machinery and equipment ...... (302,200) (286,407) Transportation, traction and lifting equipment ...... (169,629) (161,560) Furniture, fixtures and office equipment ...... (86,294) (84,501) Medical and scientific equipment ...... (18,742) (17,483) Others ...... (1,604) (1,812) Accumulated depreciation ...... (3) (11,887,111) (11,425,552) Deferred depreciation ...... 2,667,875 2,561,246 Total depreciation ...... (9,219,236) (8,864,306) Valuation allowance of property, plant and equipment . . . (4) (122,104) (120,903) Total property, plant and equipment, net ...... 16,568,521 16,023,149

F-115 (1) On June 30, 2014 an increase of $573,928, 18%, was presented with respect to December 2013. This can be explained by the acquisition of goods and services, mainly in the energy generation business for the construction of the Ituango Power Plant, which is under construction in relation with the tracks on the edge of the Cauca River, the construction of tunnels and of 13 vehicular bridges. Execution of this construction work for the deviation of the Cauca River through two tunnels which are approximately 1 km long. Advance in generator room, transformer cavern, bottom discharge tunnel portal, dumping site and entrance and injection gallery excavations. (2) Corresponds to operating infrastructure components of the business of Generation, Transmission and Distribution, Natural Gas, Waterworks, Wastewater Sanitation and Telecommunication. (3) The movement of the depreciation during the year is detailed below:

2014 2013 Initial balance ...... 11,425,552 10,392,462 Increase for the year ...... 420,822 817,477 Business combination ...... — 46,735 Translation adjustments ...... (19,422) 59,601 Deferred depreciation, net ...... 106,629 238,110 Disposal of property, plant and equipment ...... (45,888) (120,460) Charges from previous years ...... — 3,757 Others ...... (582) (12,130) End balance ...... 11,887,111 11,425,552 (4) The movement of the provision during the year is detailed below:

2014 2013 Initial balance ...... 120,903 103,291 Increase for the period ...... 3,408 29,811 Provision expense from previous years ...... — (706) Disposal of property, plant and equipment ...... (2,206) (223) Translation adjustments ...... — 3 Business combination ...... — 26 Recovery of provision ...... — (2,365) Others ...... (1) (8,934) End balance ...... 122,104 120,903

Note 10 Pension plan asset The pension plan asset as of June 30, 2014 and December 31, 2013, is made up by:

2014 2013 Pension bonds (trust funds) ...... (*) 731,959 736,183 Total Pension plan asset ...... 731,959 736,183

(*) This is mainly comprised by trust funds of EPM, the most relevant being: • The autonomous equity trust was created with Fiduciaria Davivienda S. A. for the management of the resources intended to the payment of pension both of EPM and those derived from the pension commutation of EADE. The autonomous equity trust was created for the amount of $322,000; with this figure plus the returns that are expected to be obtained, it will be possible to cover up to 2056 the total pension payments according to the actuarial study. • An autonomous equity trust was created with the Consortium EPM 2008 (made up by BBVA Fiduciaria S.A. with the participation of 40%, BBVA Horizonte with a participation of 40% and Fiduciaria Corficolombiana with a participation of 20%) to guarantee the coverage of the obligations generated by the pension bonds, pension quota shares and the payment of substitution indemnification derived from the risks regulated by the general pension system. The value of the autonomous equity trust is projected in such a way that it will extinguish at the time of the last pension bond payment due by EPM in 2065; therefore with its creation is guaranteed the availability of funds to cover the pension liability of bonds and their financial management is made independent.

F-116 Note 11 Other assets The balance of other assets as of June 30, 2014 and December 31, 2013 corresponds to:

2014 2013 Goods given to third parties ...... (1) 54,121 49,183 Deferred charges ...... (2) 31,175 35,667 Total other current assets ...... (1) (574) (250) Intangible assets ...... 84,722 84,600 Deferred charges ...... (3) 2,410,750 2,322,117 Assets held by third parties ...... (2) 472,459 499,169 Goods and services paid in advance ...... (1) 429,470 400,430 Trust fund rights ...... (4) 122,270 118,112 Leasehold improvements ...... (5) 138,138 133,158 Goods acquired by financial leasing ...... 3,075 3,077 Goods of arts and culture ...... 77 77 Nonrenewable natural resources ...... 55 — Goods received as payment in kind ...... 553 — Total other non-current assets ...... 3,576,847 3,476,140 Amortization of intangible assets ...... (3) (872,933) (793,667) Amortization of goods given to third parties ...... (1) (332,764) (301,787) Depreciation of goods acquired in leasing ...... (2,973) (2,914) Allowance for goods given to third parties ...... (1) (4) (4) Total depreciations, amortizations and provisions other assets ...... (1,208,674) (1,098,372) Total other non-current assets ...... 2,368,173 2,377,768 Total other assets ...... 2,452,895 2,462,368

(1) The goods delivered to third parties as of June 30, 2014 and December 31, 2013, correspond to:

2014 2013 Goods given for administration ...... 397,992 368,353 Goods given as loan for use ...... 53,971 51,330 Other goods given to third parties ...... 31,628 29,930 Subtotal goods given to third parties ...... 483,591 449,613 Amortization ...... (1.1) (332,764) (301,787) Allowance ...... (578) (254) Total goods given to third parties ...... 150,249 147,572 (1.2) The movement the goods delivered to third parties amortization is:

2014 2013 Initial balance ...... 301,787 254,811 Increase for the year ...... 34,395 70,149 Withdrawals ...... (6,085) (21,343) Adjustments and eliminations ...... — — Other increases (decreases) ...... 2,667 (1,830) End balance ...... 332,764 301,787

F-117 (2) Detail of the balance of deferred charges as of June 30, 2014 and December 31, 2013: 2014 2013 Deferred taxes ...... (2.1) 388,252 413,138 Studies and projects ...... 75,535 72,641 Equity tax ...... (2.2) 8,335 16,671 Discount in bonds and securities of long term foreign public debt ...... (2.3) 17,104 18,616 Premium for legal stability contracts ...... (2.4) 6,802 7,049 Organization and set up expenses ...... 1,125 1,176 Development expenses ...... 6,481 5,545 Other deferred charges ...... 503,634 534,836 (2.1) In 2013 deferred tax debit has been generated by receivables provision, actuarial calculation, provisions, exchange difference on investments abroad and goodwill, mainly. (2.2) Corresponds to the equity tax, pursuant to Law 1370 of 2009 in Colombia, for the Group companies that did not have in their equity appreciation of equity to be discounted. This tax will be amortized up to year 2014. (2.3) Corresponds to the discount granted by the issue of international bonds (coupon of 7.625%), by the credit of USD 500 million. The premium will be amortized up to its expiration date in July 2019. (2.4) Corresponds to the premium paid to the Nation for the legal stability agreement for the power generation activity of EPM. It was executed in a term of twenty years and its value was equivalent to 0.5% of the value of the investments made in the unproductive period and 1% in the operating phase. The initial value amounted to $9,894. (3) The detail of intangible as of June 30, 2014 and December 31, 2013 is: 2014 2013 Goodwill and know how ...... (3.1) 1,399,948 1,420,440 Software, licenses, rights ...... 929,998 877,837 Brands, concessions and franchises ...... 1,651 24 Easements ...... 18,584 14,230 Other intangible assets ...... 60,569 9,586 Subtotal intangible assets ...... 2,410,750 2,322,117 Less amortization of goodwill and know how ...... (3.1) (372,190) (353,635) Less amortization of software, licenses, rights ...... (470,944) (426,737) Less amortization of brands, concessions and franchises ...... (6) (4) Less amortization of easements and others ...... (29,793) (13,291) Subtotal amortization ...... (3.2) (872,933) (793,667) Total intangible assets ...... 1,537,817 1,528,450 (3.1) The composition of the goodwill as of June 30 is the following: Company Cost Amortization Net value Distribución Eléctrica Centroamericana II S. A. - DECA II . . 336,140 (28,405) 307,735 EPM Ituango S.A. E.S.P. en Liquidación ...... 177,667 — 177,667 Panama Distribution Group S. A. - PDG ...... 109,883 (19,821) 90,062 Emtelsa S.A. E.S.P.* ...... 51,850 (14,044) 37,806 Promisión S.A. E.S.P.* ...... 85,513 (35,932) 49,581 Empresa de Telecomunicaciones de Pereira S.A. E.S.P. . . . . 79,081 (79,081) — Edatel S.A. E.S.P.** ...... 68,786 (57,340) 11,446 Costavisión S.A. E.S.P.* ...... 65,453 (17,725) 47,728 Orbitel S.A. E.S.P...... 55,869 (27,029) 28,840 UNE EPM Telecomunicaciones S.A.** ...... 37,144 (21,945) 15,199 Del Sur S.A. de C.V...... 43,730 (12,318) 31,412 Empresa de Energía del Quindío S.A. E.S.P. (EDEQ) . . . . . 23,923 (23,923) — Emtelco S.A...... 20,929 (20,178) 751 Gestión de Empresas Eléctricas S.A...... 17,681 (1,416) 16,265 UNE EPM Bogotá S.A...... 6,409 (6,403) 6 Tecnología Intercontinental S.A. de C.V. (TICSA) ...... 154,444 — 154,444 Hidroecológica del Teribe S.A. (HET) ...... 6,032 (6,032) — Central Hidroeléctrica de Caldas S.A. E.S.P. (CHEC) . . . . . 593 (593) — Aguas de Malambo S.A. E.S.P...... 64 (5) 59 Espíritu Santo Energy S. de R.L...... 32,200 — 32,200 Aguas Nacionales EPM S.A. E.S.P...... 3 — 3 Parque Eólico Los Cururos Ltda...... 16,620 — 16,620 Parque Eólico La Cebada S.A...... 9,934 — 9,934 Total goodwill ...... 1,399,948 (372,190) 1,027,758

* According to a concept from the CGN, issued in December 2007, the goodwill generated by the higher price paid for a value representative of capital in respect to its intrinsic value, can only be recorded when the companies are effectively merged. For the case of Emtelsa, Promisión and Costavisión, the amortization generated started in January 2009. ** This corresponds to Know How

F-118 (3.2) The movement of the amortization is detailed below: 2014 2013 Initial balance ...... 793,667 716,946 Increase for the year ...... 70,637 51,945 Withdrawal of intangible assets ...... — — Other decreases ...... 8,629 24,776 End balance ...... 872,933 793,667 (4) Trust rights are the resources delivered by the group companies to companies in charge of the administration of autonomous trusts. (5) The leasehold improvements and works include adaptations in some customer service offices in the different zones.

Note 12 Reappraisal of assets As of June 30, 2014 and December 31, 2013, reappraisal of assets is comprised as follows: 2014 2013 Equity investments ...... 1,808,553 1,840,799 Property, plant and equipment ...... (*) 9,271,150 9,290,911 Other assets ...... 52,954 52,954 Total Reappraisal of assets ...... 11,132,657 11,184,664

(*) As of June 30, 2014 and December 31, 2013 comprise: 2014 2013 Plants, ducts and tunnels ...... 3,302,908 3,303,625 Networks, lines and cables ...... 3,142,731 3,154,869 Buildings ...... 1,261,824 1,263,924 Land...... 1,408,037 1,410,552 Communication and computer equipment ...... 54,180 55,423 Transportation, traction and lifting equipment ...... 49,638 50,178 Machinery and equipment ...... 32,823 33,187 Furniture, fixtures and office equipment ...... 17,093 17,230 Medical and scientific equipment ...... 1,878 1,885 Dining room, kitchen, pantry and hotel equipment ...... 38 38 Total Reappraisal of property, plant and equipment ...... 9,271,150 9,290,911 Note 13 Financial obligations As of June 30, 2014 and December 31, 2013, financial obligation transactions are as follows: 2014 2013 Domestic debt transactions ...... (1) 348,951 326,604 Foreign debt transactions ...... (2) 546,259 521,202 Current financial obligations ...... 895,210 847,806 Domestic debt transactions ...... (1) 3,114,666 3,473,724 Foreign debt transactions ...... (2) 4,862,265 4,908,966 Non-current financial obligations ...... 7,976,931 8,382,690 Total financial obligations ...... 8,872,141 9,230,496

(1) Domestic debt transactions:

2014 2013 Current domestic debt transactions ...... 348,951 326,604 Non-current domestic debt transactions ...... 3,114,666 3,473,724 Total public credit transactions ...... 3,463,617 3,800,328

F-119 As of June 30, 2014 As of December 31, 2013

Com ap ny Ty ep tseretnI etar COP ( M oilli )sn tseretnI etar COP ( M oilli )sn

DTF + 1.49% a 2.59%, IPC + 3.25% a 7.12%, Fixed DTF + 1.49% a 2.59%, IPC + 3.25% a 7.12%, Fixed EPM Bon so * 1,511,390 1,662,990 10.80% a 13.80% 10.80% a 13.80% EPM ulC b D lae ( D neiviva ,ad B og to DTF + 7.2 % 412,715 DTF + 7.2 % 000,755 UNE Bon so * * PI C + 76.3 % a 01.5 % 000,006 PI C + 76.3 % a 01.5 % 000,006 UNE niS dacid o L laco DTF + 54.3 % 000,063 DTF + 9,3 % 000,004 UNE D neiviva ad DTF+ 63.1 % 0 DTF+ 63.1 % 000,013 ESSA B ocna ed B og áto DTF + 48,2 % 005,381 DTF + 48,2 005,551 ESSA Fond so O soiranidr TV 0 0 EPM B ocna A oirarg PI C + 7.4 % 000,611 0 CENS B olocna m aib Y B ocna ed B ogo D TF + 0.3 % 000,57 DTF + 3.3 % - D TF + 0.3 % 000,07 EDEQ B olocna m aib y B BVA DTF + 54.2 % - D TF + 9.2 % 008,81 DTF + 54.2 % - D TF + 9.2 % 805,02 AGUAS DE URABÁ Helm Bank, Banco Popular y BDTF 7.0- %- 1 % - D TF + 9.3 % 836,81 DTF - 1 % - D TF + 9.3 % 448,71 AGUAS D E O C IC DENTE B olocna m aib y P op ralu DTF + 57.2 % 5.3- % 007,7 DTF + 57.2 % 5.3- % 000,6 CHEC ,lecI B olocna m aib dexiF 5.6 % 573,55 dexiF 5.6 % 584 TOTAL 3,463,617 3,800,328 * The EPM bonds do not have guarantee and included: i) $1,000,000 which auction took place between November 2008 and March 2009, with expiration between the years of 2011 and 2024, ii) $500,000 which auction took place on December 14, 2010, with expiration in years 2016, 2022 and 2030, and iii) $367,280 which auction took place on December 4, 2013, with expiration in years 2018, 2023, and 2033. ** This item corresponds to bonds without guarantee which auctions took place as follows: i) $300,000 on March 12, 2010 with expiration in 2015 and 2020 and ii) $300,000 on October 20, 2011 with expirations in 2016 and 2023. (2) Foreign debt transactions:

2014 2013 Current foreign debt transactions ...... 546,259 521,202 Non-current foreign debt transactions ...... 4,862,265 4,908,966 Total public credit transactions ...... 5,408,524 5,430,168

As of June 30, 2014 As of December 31, 2013

Source Balance source Equivalent en Source Balance source Equivalent en E ytitn Ty ep tseretnI etar Interest rate currency currency pesos currency currency pesos EPM B sono * 526.7 % USD 005 595,049 526.7 % USD 005 514,369 EPM B sono ** 573.8 % COP 000,052,1 000,052,1 573.8 % COP 000,052,1 000,052,1 EPM BID 1664, 2120, 800, 792 y 2217 Libor + 1.05%, 1.43% ,2% USD 244 458,460 Libor + 1.05%, 1.43% ,2% USD 370 712,289 EPM BID 1-0212 6172.6 % COP 592,091 592,091 EPM FI C robiL + 578.1 % - 51.2 % USD 303 577,965 robiL + 578.1 % - 51.2 % USD 943 464,276 EPM AFD *** 23.4 % USD 962 040,605 23.4 % USD 591 237,573 EPM B kna fo T oyko y B BVA T oyko robiL + 59,0 % USD 851 948,792 robiL + 59,0 % USD 761 331,123 EEGSA knabitiC 5.8 % USD 42.79 819,281 52.8 % USD 79 553,781 EEGSA Banco Industrial Active rate - 6.56% GTQ 496.60 120,098 Active rate - 5.30% GTQ 497 122,028 EEGSA Banco G&T Continental Active rate - 6.56% GTQ 322.60 78,018 Active rate - 5.50% GTQ 323 79,271 EEGSA Banco Agromercantil de Guatemala Active rate - 6.56% GTQ 175.10 42,347 Active rate - 6.56% USD 175 43,002 EEGSA Banco Reformador Active rate - 6.56% Tasa Piso 6% GTQ 130.34 31,522 Active rate - 6.56% Tasa Piso 6% GTQ 130 32,029 EEGSA Banco Internacional Active rate - 6.55% 13.48% GTQ 33.00 7,981 Active rate - 6.55% 13.48% GTQ 33 8,109 IT CSA *** senoiccaretnI EIIT + 00.3 % 09.3, %, 0.4 % y 70.4 % MXN 146 019,29 EIIT + 00.3 % 09.3, %, 0.4 % y 70.4 % MXN 276 508,89 IT CSA *** B sarbona 61.8 % , 82.8 % , 9 % y 5.11 % MXN 602 929,92 61.8 % , 82.8 % , 9 % y 5.11 % MXN 712 499,13 IT CSA *** B ocna led B oíja EIIT + 57.2 % MXN 102 621,92 EIIT + 57.2 % MXN 711 581,71 IT CSA *** B etrona EIIT + 00.4 % MXN 621 403,81 EIIT + 00.4 % MXN 341 299,02 IT CSA *** rednatnaS EIIT + 5.4 % MXN 0 0 EIIT + 5.4 % MXN 02 239,2 ENSA B sono 6.7 % - robiL + 573.2 % - 37,4 % E A USD 002 832,673 6.7 % - robiL + 573.2 % - 37,4 % E A USD 002 663,583 ENSA O sreht TF USD 44 758,28 0 DEL S UR B sono M ni 5.4 % - M xa 8 % USD 03 733,65 M ni 5.4 % - M xa 8 % USD 03 296,75 DEL S UR B ocna D adneiviva 79.3 % USD 52 729,64 79.3 % USD 52 650,84 HET O sreht 00.9 % USD 0 0 00.9 % USD 0 913 TOTAL 5,408,524 5,430,168 (*) Bonds without guarantee issued in July 2009, quoted in the Luxembourg Euro MTF stock exchange, placed in the United States, Europe, Asia and Latin American markets, with expiration in July 2019. They are exempt from compliance with financial covenants because they have double investment degree rating granted by Fitch Ratings and Moody´s. (**) EPM issued in January 2011, global bonds in pesos in the international capital market for an amount of $1,250,000 million, intended to the general investments plan. The issue, which received an investment grade rating of Baa3 by Moody’s and BBB- by Fitch Ratings, was placed at a yield of 8.5% with expiration on February 1, 2021 and coupon of 8.375%. (***) In September 2013, the EPM Group entered the Mexican water market, with capitalization of USD 113 million to the firm Tecnología Intercontinental SAPI de CV, TICSA, equivalent to 80% of the company shares, through the affiliate EPM Capital México SA de CV.

Covenants related to loans 6. Bank of Tokyo Mitsubishi and Banco Bilbao Vizcaya Argentaria Tokyo with Guarantee from the Japan for International Cooperation JBIC: • Debt to EBITDA ratio – EPM should not allow the total financial debt to EBITDA ratio to be higher than 3.5 to 1. • Debt to capital ratio – EPM should not allow the total long term financial debt to capital ratio to be higher than 1.5 to 1.

F-120 7. Inter-American Development Bank ‘‘IADB’’ • Total debt to EBITDA ratio of EPM Group must be lower than or equal to 3.5. • Relationship between total long term debt and assets of EPM Group should not exceed 1.5 times its assets. 8. International Finance Corporation ‘‘IFC’’ • Total debt to EBITDA ratio of EPMs must be lower than or equal to 3.5. • Interest coverage ratio must be higher than 3 times. 9. French Development Agency – AFD • Total debt to EBITDA ratio of the EPM Group must be lower than or equal to 3.5. • Interest coverage ratio must be higher than 3 times. 10. Credit of EGGSA with Citibank • Total debt to EBITDA ratio must be lower than or equal to 5. • EBITDA / financial expenses ratio should be 3 times higher. At June 30, 2014, the EPM Group was in fulfillment of these covenants. The detail of the expirations of financial obligations as of June 30, 2014, corresponds to:

US dollars Quetzales Colombian pesos Mexican pesos Equivalent in Year (millions) (millions) (millions) (millions) pesos (millions) 2014...... 223 5 142,544 37 568,671 2015...... 145 5 273,922 91 560,537 2016...... 160 167 401,208 102 757,623 2017...... 103 167 220,610 125 472,924 2018...... 121 167 483,933 132 770,742 2019 onwards . 1,118 648 3,381,697 688 5,741,644 Total ...... 1,870 1,159 4,903,914 1,175 8,872,141

Note 14 Hedging operations The balance of hedging operations as of June 30, 2014 and December 31, 2013, is as follows:

2014 2013 Obligations in derivative contracts ...... 277,723 133,940 Rights in derivative contracts (DB) ...... (246,695) (101,137) Current hedging operations ...... 31,028 32,803 Obligations in derivative contracts ...... 525,988 141,029 Rights in derivative contracts (DB) ...... (474,865) (105,394) Non-current hedging operations ...... 51,123 35,635 Total hedging operations (*) ...... 82,151 68,438

(*) The detail of the expirations of hedging operations for the year is as follows:

Year Contractual rights Contractual obligations Net 2014 ...... 135,649 157,700 (22,052) 2015 ...... 221,864 239,694 (17,830) 2016 ...... 229,355 268,587 (39,233) 2017 ...... 67,347 68,865 (1,518) 2018 ...... 67,347 68,865 (1,518) Total ...... 721,560 803,711 (82,151)

F-121 Note 15 Accounts payable As of June 30, 2014 and December 31, 2013, the balance of accounts payable is comprised as follows:

2014 2013 Acquisition of domestic goods and services ...... 798,682 960,536 Acquisition of foreign goods and services ...... 385,999 350,270 Creditors ...... 861,468 565,887 Interests payable ...... 144,851 186,703 Other accounts payable ...... 69,938 59,930 Current accounts payable ...... 2,260,953 2,123,326 Acquisition of domestic goods and services ...... 3,139 2,233 Acquisition of foreign goods and services ...... 0 0 Other accounts payable ...... 343,551 298,708 Non-current accounts payable ...... 347,510 300,941 Total accounts payable ...... 2,608,463 2,424,267

Note 16 Taxes payable As of June 30, 2014 and December 31, 2013, the balance of taxes payable is comprised as follows:

2014 2013 Income tax ...... (1) 76,571 52,124 Equity tax ...... (2) 73,481 147,078 Withholding tax and stamp tax ...... 61,994 80,359 Tax on sales ...... 53,665 (4,049) Industry and trade tax ...... 22,090 37,979 Other taxes, liens and encumbrances ...... 56,673 148,572 Total current taxes payable ...... 344,474 462,063 Equity tax ...... (2) 1,042 2,085 Tax on sales for temporary imports ...... (3) 744 720 Other taxes, liens and encumbrances ...... 323 0 Total non-current taxes payable...... 2,109 2,805 Total taxes payable ...... 346,583 464,868

(1) Income tax: tax regulations applicable and in force provide the following: • For 2014 the nominal rate of the income tax is 33% (2013 – 33%) for the parent and national affiliates with the exception of Orbitel Servicios Internacionales, which because it is a company located in a Free Trade Zone has a nominal tax rate of 15%. The nominal rate of the income tax for equity CREE is of 9% as of 2013- For the Guatemala affiliates, the tax is determined by the Optional Regime (rate of 31% on the taxable income determined on the taxable income determined on the basis of the net income) or by the General Regime (6% rate on gross income and 10% for capital gains); for the affiliates of El Salvador 30% for the companies with taxable income higher than US$150,000 and 25% for those that do not exceed that limit; for the Panama and Mexico affiliates a taxation rate of 30%. • The domiciliary public utility companies in Colombia are excluded from determining the income tax by the system of presumptive income calculated based on the net tax equity of the immediately preceding year; for the calculation of the income tax for equity CREE they are not benefited by that exclusion. • Due to the operations that EPM carries out with its related parties located abroad, it is subject to the regulations that in respect to transfer pricing were introduced in Colombia with laws 788 of 2002 and 863 of 2003. • The Parent Company of the EPM Group uses the tax deduction called ’’Special deduction for investments in productive fixed assets’’, equivalent to 40% of investments made during the fiscal year. This benefit continues in effect for the parent company on occasion of the legal stability agreement signed with the National Government in 2008. Said benefit contemplates the condition of applying the depreciation by the straight line system on the assets subject to this deduction; if the assets are sold or cease to be used in the income producing activity prior to the expiration of their economic life, it will be mandatory for the company to reimburse the value of the deduction claimed proportionately to the remaining useful life of the asset in the income tax return of the tax period in which this event occurs. This benefit is transferred to the shareholders through the increase of not taxed dividends. • With the entry into force of Decree 957 of December 2011 that modified ISR (Income Tax) Law of El Salvador, the dividends that are paid or credited to the partners or shareholders were taxed with a 5% withholding.

F-122 The listing of the net taxable income for the Group as of June 30, 2014, and June 30, 2013 is shown below:

2014 2013 Profit before income tax provision 1,285,749 1,152,813 Less Less Profits before income tax provision in Guatemala ISR 6%(*) 24,439 19,032 Plus Items increase income Non- deducible expense for tax on equity 8,863 9,153 Valuation of investments by straight line method 13,711 10,464 Other non-deductible expenses 131,203 388,249 Increase of non-deductible provisions 39,060 25,777 Dividends received from companies where control is held 353,117 820,015 Expenses and costs from previous periods 16,999 5,582 Total items increasing net taxable income 562,952 1,259,240 Less Items Decrease income Special 40% deduction on investments in the year 153,971 120,106 Excess property, plant and equipment depreciation 220,304 235,196 Non-taxable income 229,253 249,490 Income not subject to income tax- dividends 332,878 760,263 Deduction by investment in technology and others 1,854 — Profits from liquidity investments appraisal 18,232 10,216 Total items decreasing net income 956,491 1,375,271 Net ordinary income for the period 867,772 1,017,750 Less Exempt income 26,828 8,822 Clearings 17,346 5,849 Plus Plus Especial net income —— Net taxable income 823,598 1,003,079 Considering the different income tax rates, the detail of the calculation of the provision for this tax is as follows:

Tariff 30% - 25% Tariff 28% Tariff 25% Tariff 20% Tariff 15% Total Taxable income ...... 46,818 57,696 741,820 -28,078 5,340 823,596 Provision for current income tax before discounts ...... 14,330 16,155 193,382 0 801 224,668 Tax discounts-water and draining / withholdings overseas ...... — — 24511 — 24,511 Provision for current income tax (1) ... 14,330 16,155 168,871 0 801 200,157 Tax on occasional gain ...... — — 362 — 362 Net charge to income for deferred income tax ...... 8649 — 88,365 -6,452 — 90,562 Income tax provision charge to income . 22,979 16,155 257,598 -6,452 801 291,081 (+) ISR 6% on income taxable (****) . . . — — — — 3,076 Total income tax ...... 294,157 2014 Income tax for equity CREE , taxable income liquid 753,284 Plus Items increase income Special deduction in productive fixed assets 153,971 Other special Deductions 485 Other increase Items 1,173 Total items increase taxable income 155,629 Less Items decrease income Other items decrease 9,755 Total items decrease taxable income 9,755 Taxable income for ordinary depuration 899,159 Plus Minimum income tax base for equity CREE 36,319 Total taxable income liquid 935,477 Tax rate 9% Income tax for equity CREE , provision 84,193

Total income tax and tax for equity CREE 378,350

F-123 The detail of the calculation of the provision for income tax in 2013 was the following:

Tariff Tariff Tariff Tariff 34% 31% 30% 15% Total Taxable income ...... 871,286 55,570 68,622 7,601 1,003,079 Provision for current income tax before discounts . . . 269,511 17,227 20,843 1,140 308,721 Tax discounts-water and draining / withholdings overseas ...... 37,055 — — — 37,055 Provision for current income tax (1) ...... 232,456 17,227 20,843 1,140 271,666 Tax on occasional gain ...... — — — — — Net charge to income for deferred income tax . . . . . 65,208 2,353 67,561 Income tax provision charge to income ...... 297,664 17,227 23,196 1,140 339,227 (+) ISR 5% on income taxable (*****) ...... — — — 2,354 Total income tax ...... 341,581

2014 2013 Initial balance of deferred tax asset ...... 413,138 337,587 Initial balance of deferred tax liability ...... (978,430) (878,073) Subtotal ...... (565,292) (540,486) Net adjustment on income for the period ...... (90,564) (70,696) Adjustment on deferred tax charged to previous years ...... 7,670 49,016 New investments / interests minority elimination ...... (12,755) (3,126) End balance of deferred tax asset ...... 388,252 413,138 End balance of deferred tax liability ...... (1,049,193) (978,430) Total deferred tax, net ...... (660,941) (565,292) Reconciliation between accounting equity and tax equity at June30, 2013 and December 31, 2013, is shown below:

2014 2013 Accounting equity 21,925,264 22,047,514 Less Revaluation of assets (11,132,657) (11,184,664) Adjustments for inflation, depreciation and tax amortization (2,825,555) (2,825,555) Excess of tax depreciation (3,922,834) (3,207,375) Credit deferred monetary correction, net (45,830) (53,222) Deferred tax, assets (388,252) (413,138) (18,315,128) (17,683,954) Plus Tax inflation adjustments 4,206,291 4,313,778 Deferred tax, liabilities 1,049,193 978,430 Actuarial computation 63,194 51,874 Provisions and contingencies 275,835 252,677 Provision for property, plant and equipment 122,104 120,903 Provision accounts receivables 418,885 399,186 Provisions of investments 103,716 103,604 6,239,218 6,220,452 Fiscal tax equity 9,849,354 10,584,012

(2) Corresponds to accrual of tax on equity payable, for the years 2013 and 2014. (3) Corresponds to the VAT payable for temporary imports of goods.

F-124 On a general basis, income tax returns of the EPM Group for the years 2011 and 2012 are opened to review by the tax authorities. The Administration of EPM and subsidiaries, as well as their legal advisors consider that the amounts recorded are sufficient and it is not likely that liabilities arise in excess of those already recorded.

New regulations Tax reform and emergency measures Colombia The main changes incorporated by the Law 1607 of 2012 are summarized in: • Income tax: The previous income tax rate of 33% is modified, reducing it to 25% and a new tax called income tax for equality (CREE) is created with a rate of 9% for years 2013 to 2015 and of 8% as of 2016. For taxpayers of CREE the reform establishes the exoneration of contributions to SENA (2%), ICBF (3%) as of July 1, 2013 and healthcare (8.5%) as of January 1, 2014, in respect to employees (new and old) who earn up to 10 minimum monthly legal wages. • Capital gains tax: In respect to this ta, it has been reduced from 33% to 10% for legal and similar persons. This implies in the sale of fixed assets owned by EPM for over two (2) years. However, for lotteries, raffles, bets, and similar, the tax rate continues to be 20%. • Sales tax–VAT-: * The number of existing rates is reduced to only three: 0%, 5% and 16%. * The surveillance, temporary and integral cleaning and cafeteria services will be subject to 16% VAT, but applied to the AIU (Administration, Contingencies and Profit) margin, which in no case shall be less than 10% of the contract value. * Exchange operations of purchase and sale of foreign currency, as well as the exchange operations on derivative instruments have been excluded from VAT. These changes in the VAT will be applicable to contracts that are awarded as of January 1, 2013. The contracts that are currently being performed or that have already been awarded will continue with the VAT rate and taxable base that were in effect at the time of the award. When these contracts are modified or extended, the regulatory changes indicated above will be applied. • New national consumption tax: As of January 1, 2013 the national consumption tax is created, which will apply to the rendering of the mobile telephone service (4%), some vehicles (8% and 16%) and to the prepared food and beverage sale service in restaurants, cafeterias, self-service premises, ice cream, fruit shops and bakeries (8%).

F-125 Tax reform in Guatemala: The major changes brought by the income tax reform (Decree 10-2012), which effects take place as of January 1, 2013 are: • Modification of the rate for determination of the taxable income of profitable activities as follows: * Tax year 2013: 31% * Tax year 2014: 28% * Tax year 2015: 25% • Modification of the rate for determination of capital income, capital gains and losses: * Movable and immovable capital income: Rate 10% (formerly taxed in the general regime of 5% and the optional regime at a rate of 31%) * Capital gains: Rate 10% (formerly taxed in the general regime of 10% and the optional regime at a rate of 31%) * Distribution of dividends, gains and profits: Rate 5%. In the previous law they were not taxed.

Note 17 Labor liabilities The balance of labor liabilities as of June 30, 2014 and December 31, 2013, was:

2014 2013 Severance ...... (1) 41,990 56,972 Vacation bonuses ...... (2) 42,193 34,738 Vacations ...... 29,817 24,435 Interest on severance payments ...... 4,203 10,488 Payroll payable ...... 15,115 11,234 Other premiums ...... 37,488 14,281 Other salaries and social benefits ...... 37,036 5,626 Current labor liabilities ...... 207,842 157,774 Severance ...... (1) 30,579 34,838 Other premiums ...... (3) 644 23,962 Compensations ...... 8,533 8,301 Other salaries and social benefits ...... 567 93 Non-current labor liabilities ...... 40,323 67,194 Total labor liabilities ...... 248,165 224,968

F-126 (2) This corresponds to the Premium granted to employees of EPM and UNE EPM Telecomunicaciones S. A. who enjoy vacations equivalent to 32 days of ordinary salary per each year of service and proportional to each fraction of a year. (3) It corresponds to the estimate, at present value, of the future payments corresponding to the seniority bonus. In EPM, Central Hidroeléctrica de Caldas SA. E.S.P. and the Empresa de Energia de Quindío S.A. E.S.P. the official workers are entitled to this bonus every time they complete five years of service in the company, continuous or discontinuous. The estimated value is determined by the actuary, taking into account the average salary increase, discount rate of 5.77% and the mortality rates approved by the Financial Superintendence in Resolution 155 of 2010. For the remaining affiliates the estimate is updated each year based on the consolidation of information of all employees who become entitled to those bonus.

Note 18 Pension plan obligations The balance of pension obligations as of June 30, 2014 and December 31, 2013, is comprised as follows:

2014 2013 Pension bonds ...... 84,571 79,744 Retirement pensions ...... 113,363 157,817 Pension commutation ...... 6,444 4,232 Current pension plan obligations...... 204,378 241,793 Retirement pensions ...... 680,930 637,867 Pension bonds ...... 440,326 429,963 Pension commutation ...... 88,044 90,169 Non-current pension plan obligations ...... 1,209,300 1,157,999 Total pension plan obligations (*) ...... 1,413,678 1,399,792

(*) The movement of the actuarial calculation was:

Actuarial Balance to be computation amortized Net liability Balance at December 31, 2012 ...... 1,368,907 (68,068) 1,300,839 Adjustment per actuarial valuation ...... 194,127 (194,127) — Benefits paid and bonuses issued ...... (96,708) — (96,708) Charge to results — amortization ...... — 134,620 134,620 Business combination - Emvarias ...... 174,086 (107,279) 66,807 Net movement pensions payable ...... 86 — 86 Other charges to income ...... (5,852) — (5,852) Balance at December, 2013 ...... 1,634,646 (234,854) 1,399,792 Adjustment per actuarial valuation ...... 60,014 (60,014) — Benefits paid and bonuses issued ...... (48,577) — (48,577) Charge to results — amortization ...... — 62,119 62,119 Business combination - Emvarias ...... — — — Net movement pensions payable ...... 344 — 344 Balance at June, 2014 ...... 1,646,427 (232,749) 1,413,678 The major factors in the actuarial calculations corresponding to retirement as of December 31, 2013, were:

2013 2012 Number of people covered...... 7,035 6,811 Technical interest rate...... 4.80% 4.80% Pension readjustment rate*...... 2.99% 3.26%

F-127 Note 19 Estimated liabilities As of June 30, 2014 and December 31, 2013, the estimated liabilities balance is comprised as follows:

2014 2013 Provision for contingencies ...... (*) 53,625 49,735 Other provisions ...... 21,992 16,529 Current estimated liabilities ...... 75,617 66,264 Provision for contingencies ...... (*) 116,529 108,454 Provision for insurance and reinsurance ...... 45 45 Other provisions ...... 116,627 111,059 Non-current estimated liabilities ...... 233,201 219,558 Total estimated liabilities ...... 308,818 285,822

(*) This includes provisions for civil and administrative litigations, labor lawsuits, tax proceedings and other contingencies. The main proceedings rated as probable were the following: Third party Claim 2014 2013 Municipality of Tuta Discussion on the industry and commerce tax for the commercialization 15,205 17,547 activity in the municipality for the generator. Manuel Márquez y otros Riogrande II Project – Compensation to the community for not having 7,789 7,728 acquired mining fields. Ruiz Betancur José Alberto Damages for primary electric power lines crossing close to a house in 5,807 5,546 Copacabana. Municipality of Yumbo Discussion on the industry and commerce tax for the commercialization 4,094 3,940 activity in the municipality for the generator. Municipality of Caloto Discussion on the industry and commerce tax for the commercialization 3,188 3,095 activity in the municipality for the generator. Trainco S.A. Compensation from damages related to the agreement for the construction 2,662 2,662 and pavement of the road from Cancana to La Draga Concretos y Asfaltos S.A Compensation from damages in the sub-management of Projects in water — 6,325 of EPM. USD3,298,054

Note 20 Other liabilities As of June 30, 2014 and December 31, 2013, other liabilities balance is comprised as follows:

2014 2013 Collections in favor of third parties ...... (1) Sale of public utilities and telecommunications ...... 13,617 17,901 Taxes ...... 9,726 14,011 Public lighting ...... 20,238 20,076 Sales on behalf of third parties ...... 10,036 8,188 Collections of third party accounts receivable ...... 14,043 13,072 Other collections in favor of third parties ...... 5,743 7,632 Income received in advance ...... Sales ...... 53,362 56,028 Sale of public utilities and telecommunications ...... 26,801 27,065 Leasing ...... 12,592 13,674 Other income received in advance ...... 15,999 13,340 Deferred taxes ...... (2) 82,653 50,892 Advanced Taxes ...... 266 109 Other current liabilities ...... 265,076 241,988 Deferred taxes ...... (2) 966,541 927,539 Other liabilities ...... 19,036 14,690 Other non-current liabilities ...... 985,577 942,229 Total other liabilities ...... 1,250,653 1,184,217

F-128 Note 21 Reserves As of June 30, 2014 and December 31, 2013, the reserves balances are comprised as follows:

2014 2013 Legal reserves ...... 2,511,760 3,257,570 Occasional reserves ...... 574,008 574,008 Equity funds ...... (1) 7,591 7,591 Total reserves ...... (2) 3,093,359 3,839,169

(1) As of June 30, 2014 and December 31, 2013, the equity funds showed the following balances:

2014 2013 Self-insurance fund ...... 3,491 3,491 Financing Plan ...... 3,108 3,108 Housing fund ...... 992 992 Total equity funds ...... 7,591 7,591

(2) The Board of Directors or General Shareholders’ meetings approve the following each year upon presentation of the financial statements at period end: • Create and release reserves to comply Article 130 of the Colombian Tax Code. • Create and release reserves to comply with Decree 2336 of 1995 for the profits in the application of the equity method. • Create reserves for future reinvestments.

Note 22 Distribution to the city of Medellín Based on the determination of the COMPES in the meeting of April 17, 2014, ordinary financial surpluses were transferred to the Municipality of Medellin for $496,237 (2013 - $526,122) and extraordinary financial surpluses for $413,531 (2013 - $708,435). The total financial surpluses paid as of June 30, 2014, were $582,373 (2013 - $1,183,493).

Note 23 Memorandum accounts As of June 30, 2014 and December 31, 2013, memorandum accounts are comprised as follows:

2014 2013 Contingent rights ...... (1) 819,914 899,588 Fiscal debit accounts ...... (2) 5,764,160 6,518,951 Control debit ...... (3) 587,990 583,297 Debit memorandum accounts...... 7,172,064 8,001,836 Contingent liabilities ...... (4) 1,146,537 254,144 Fiscal credit accounts ...... (5) 18,788,098 19,021,106 Control credit ...... 1,125,856 991,323 Credit memorandum accounts ...... 21,060,491 20,266,573 Memorandum accounts, net ...... 13,888,427 12,264,737

F-129 (3) It records the operations that the companies of the EPM Group have with third parties or for internal control, without their nature affecting their financial situation. These accounts include fully amortized assets, obsolete inventories and other. It corresponds to the right in favor of the Company. (4) The contingent liabilities correspond to civil proceedings in which the companies of the EPM Group are sued by third parties, generally contractors that are considered to have failed to comply with their contractual obligations. Contingent liabilities include counter-guarantee to the National Government related to credits granted by the IADB. The value of the guarantee corresponds to the encumbrance of the operating income, equivalent to 120% of the debt service of the following six-month period of the IABD credits. The main proceedings rated as possible were the following: John Jairo Velásquez Agudelo. On April 25, 2013, John Jairo Velásquez Agudelo, as plaintiff, filed a suit before the municipal civil courts of the City of Medellín, claiming the nullity of the decisions adopted by the extraordinary shareholders meeting of EPM Ituango S.A. E.S.P. and seeking an order against EPM to restore the BOOMT Agreement entered into with HidroItuango to EPM Ituango S.A. E.S.P., together with any proceeds accrued from January 11, 2013, until the date of compliance with the judicial order. The amount of the claim for damages is approximately Ps.23,655 million. The matter is currently in the evidentiary stage. Aura der Jesús Salazar Mazo. On October 5, 2012, 114 individuals, claiming to be residents of the Alto de Chiri village in the Briceño municipality, filed a class action against HidroItuango, EPM Ituango S.A. E.S.P. and EPM, claiming payment of the environmental losses and the damages caused to the ancestral paths providing access to the community. The amount of the claim for damages is approximately Ps.23,151 million. This matter is currently in the stage of notices to the community. Sindicato de Trabajadores de las Empresas de Servicios Públicos Domiciliarios, Complementarios y Conexos – Sinpro. On September 23, 2013, Sinpro filed a suit claiming EPM is selling its shares of UNE, in violation of the provisions of Law 226 of 1995, and requesting the court to enjoin the alleged sale to Millicom. Millicom and EPM have appealed the court’s decision pursuant to which Millicom is deemed to have received service of process by way of conclusive conduct. Consorcio CCC Porce III. On February 4, 2014, Consorcio CCC Porce III, as plaintiff, sued EPM, claiming the breach of two contracts in connection with the construction of the underground central and the dam for the Porce III project. The amount of Consorcio CCC Porce III’s claim is approximately Ps.40,373 million. EPM, in turn, filed a claim against Consorcio CCC Porce III in connection with the liquidation minutes relating to the two contracts. The amount of EPM’s claim is approximately Ps.7,230 million. The parties are discussing a potential settlement that would result in EPM paying approximately Ps.11,774 million to Consorcio CCC Porce III. Marisol Aristizabal Tuberquia. On November 30, 2011, Marisol Ariztizabal Tuberquia, as plaintiff, sued EPM claiming payment of damages allegedly caused by the operation of the El Peñol dam to the premises where the Los Recuerdos hostel operates. The amount of the claim is approximately Ps.7,070 million. The matter is currently in the evidentiary stage. Astrid Helena Álvarez Arroyave et al. On October 7, 2011, 45 families filed a class action against the Bello municipality and EPM, claiming payment of the damages allegedly caused to their homes by the alleged lack of preventive measures in connection with the geological conditions of the area. The amount of the claim is approximately Ps.10,440 million. The matter is currently in the evidentiary stage. Carmen María Alzate Rivera et al. On August 30, 2000, 41 families filed a class action against EPM, claiming payment of the damages allegedly caused by the water discharges from a hydroelectric power station owned by EPM. More families subsequently joined the class action, which currently involves 201 families. The amount of the claim is approximately Ps.7,633 million. The trial court dismissed the claims arguing the applicable statute of limitations had expired and the plaintiffs appealed the decision. The appeal is currently pending. Consorcio Dragados Porce II. On August 20, 2007, Consorcio Dragados Porce II, as plaintiff, sued EPM, claiming the breach of a contract in connection with the completion and the installation of water lock gates for the Porce II project. The plaintiff claims that EPM delivered defective lock gates that prevented the claimant from performing an adequate installation. The amount of the claim is approximately Ps.14,440 million. The matter is currently in the evidentiary stage. Carlos Arturo Galvis Hernández et al. On June 12, 2008, a group of miners filed a class action against EPM, claiming damages caused by the alleged eviction from the Porce III influence area, which allegedly prevented them from conducting mining activities in such area during the entire period of their environmental license. The amount of the claim is approximately Ps.2,225 million. The matter is currently in the evidentiary stage (5) Tax credit memorandum accounts are made up by the differences between accounting and tax regulations. They refer especially to the recording of appreciation of investments, the deferred monetary indexation and accumulated depreciation of properties, plant and equipment.

F-130 Note 24 Revenues As of June 30, revenues are comprised as follows: 2014 2013 Energy Electricity generation ...... 1,373,859 1,328,161 Electricity transmission, distribution and commercialization ...... 4,269,700 3,839,262 Natural gas distribution and commercialization ...... 272,350 262,162 Eliminations ...... (751,288) (575,405) Total energy gross revenues ...... 5,164,621 4,854,180 (-) Discounts ...... 16,984 42,205 Total energy revenues, net ...... 5,147,637 4,811,975 Telecommunications...... — — Local telephone, value-added, television, and other services ...... 1,601,354 1,389,852 Eliminations ...... (224,643) (185,565) Total telecommunications gross revenues ...... 1,376,711 1,204,287 (-) Discounts ...... 74 47 Total telecommunications revenues, net ...... 1,376,637 1,204,240 Water, sewage, and waste management ...... 0 0 Water ...... 191,111 183,755 Sewage ...... 238,592 182,980 Waste management ...... 77,619 1,172 Eliminations ...... (10,776) (780) Total water, sewage, and waste management gross revenues ... 496,546 367,127 (-) Discounts ...... 14 1 Total water, sewage, and waste management revenues, net .... 496,532 367,126 Other revenues(1) ...... Others, net ...... 36,391 33,324 Other revenues, net ...... 36,391 33,324 Eliminations ...... (68,171) (59,119) Total revenues ...... 6,989,026 6,357,546 Note 25 Cost of sales As of June 30, cost of sales are comprised as follows: 2014 2013 Cost of goods and public utilities – Sales ...... (1) 2,720,769 2,415,663 Access charge and interconnection for telecommunication services 110,343 114,810 Cost of distribution and marketing gas natural ...... 88,187 93,467 Personnel cost ...... 489,781 457,420 Orders and contracts on account of other services ...... 308,676 211,025 Maintenance and repair ...... (2) 174,049 172,450 General costs ...... 97,369 81,160 Licenses, contributions and royalties ...... 92,054 87,433 Materials and operating costs ...... 70,717 55,853 Leases ...... 65,875 59,584 Costs for the sale of goods ...... 52,945 43,270 Direct inputs compsuption ...... (3) 44,656 34,494 Fees ...... 35,322 23,839 Insurance ...... 32,179 29,719 Taxes ...... 31,043 23,757 Public utilities ...... 26,887 26,844 Cost for services rendering loses ...... 1,056 1,332 Total cost of sales ...... 4,441,908 3,932,120

(1) Includes energy purchases, payment for the use of networks and pipelines and restrictions. (2) Includes maintenance and repairs of lines, networks and ducts and maintenance and repairs of buildings. (3) Includes purchases of fuel for generation of the thermal plant La Sierra and chemical products for the treatment of potable water.

F-131 Note 26 Provision, depreciation, and amortizations As of June 30, provision, depreciation, and amortization are comprised as follows:

2014 2013 Depreciation Networks and lines depreciation ...... 185,413 171,187 Plants, pipelines and tunnels depreciation ...... 125,022 127,602 Communication and computer equipment depreciation ...... 44,290 44,657 Buildings depreciation ...... 21,958 20,990 Machinery and equipment depreciation ...... 14,957 11,968 Other depreciations ...... 9,742 7,967 Total depreciation cost ...... 401,382 384,371 Amortization cost Intangible assets amortization ...... 45,970 38,165 Goods delivered to third parties amortization ...... 34,355 31,450 Improvements in others’ property amortization ...... 7,398 4,788 Studies and projects ...... 4,183 4,865 Future pensions actuarial computation amortization ...... 481 102 Depletion ...... 327 — Total amortizations cost ...... 92,714 79,370 Total depreciation and amortizations cost ...... 494,096 463,741 Depreciation Communications and computer equipment depreciation ...... 9,341 9,043 Buildings depreciation ...... 2,724 2,606 Furniture, mixtures, and office equipment depreciation ...... 2,619 3,508 Machinery and equipment depreciation ...... 2,831 2,449 Transport equipment depreciation ...... 1,266 1,018 Other depreciation ...... 659 527 Total depreciation expense ...... 19,440 19,151 Actuarial computation Retirement pension updating ...... 37,660 44,431 Bond quotas and bonds updating ...... 14,910 14,932 Pension commutation updating ...... 2,116 5,704 Pension quotas updating ...... 3,841 1,246 Future pension updating ...... 3,112 2,824 Total actuarial computation expense ...... 61,639 69,137 Amortization Intangible assets amortization ...... 4,972 31,479 Goods delivered to third parties ...... 40 275 Total amortization expense ...... 5,012 31,754 Provisions Allowance for doubtful accounts ...... 51,236 45,200 Property, plant and equipment provision ...... 3,408 243 Allowance for inventory obsolescence ...... 1,264 389 Industry and Commerce tax provision ...... — 30 Other provisions ...... 7,770 11,503 Total provisions expense ...... 63,678 57,365 Total provision, depreciation, and amortizations expense ...... 149,769 177,407 Total provision, depreciation, and amortizations ...... 643,865 641,148

F-132 Note 27 Administrative expenses As of June 30, administrative expenses are comprised as follows:

2014 2013 Personnel expenses Salaries and wages ...... 183,004 171,256 Effective contributions ...... 25,603 30,045 Attributable contributions ...... 19,245 16,555 Payroll contributions ...... 2,480 4,456 Total personnel expenses ...... 230,332 222,312 General expenses Commissions, fees and services ...... 46,095 48,029 Studies and projects ...... 4,206 5,562 Leases ...... 24,643 24,118 Intangible expenses ...... (1) 11,327 15,014 Maintenance ...... 19,167 16,112 Advertisement ...... 6,961 7,162 Promotion and disclosure ...... 6,187 6,726 Monitoring and security ...... 7,118 5,218 Public utilities ...... 4,447 4,331 Materials and supplies ...... 1,568 1,495 General insurances ...... 5,837 3,581 Communications and transport ...... 3,287 2,702 Cleaning elements, laundry and cafeteria ...... 970 570 Other administrative expenses ...... 23,840 18,898 Total general expenses ...... 165,653 159,518 Industry and Commerce tax ...... 36,803 30,730 Financial movements lien ...... 26,330 23,264 Supervision and audit quota ...... 14,472 13,384 Contributions ...... 1,116 1,324 Equity tax ...... (2) 8,985 9,153 Other taxes ...... 13,363 9,055 Total taxes ...... 101,069 86,910 Total administrative expenses ...... 497,054 468,740

(1) Value of licenses and software of an administrative nature used in the support activities. (2) Corresponds to the equity tax that was accounted for by the companies that did not have any balance in the account ‘‘revaluation of equity’’ as of December 31, 2010 (see note 23).

F-133 Note 28 Non-operating revenues As of June 30, non-operating revenues is comprised as follows:

2014 2013 Financial revenue Accounts receivable interests ...... 27,597 27,666 Interests in arrears ...... 15,347 12,628 Interests on financial institutions deposits ...... 11,941 17,526 Dividends and participations ...... 54,822 48,069 Yields on administrative deposits ...... 1,623 2,553 Profit from the appraisal of liquidity administrative investments in debt securities ...... 25,881 5,034 Other financial revenue ...... 50,714 34,994 Exchange difference adjustment ...... 140,518 117,638 Other ordinary revenue ...... 18,616 98,895 Extraordinary revenue Recoveries ...... 32,349 82,086 Uses ...... 2,302 3,460 Compensations ...... 2,782 8,410 Other extraordinary revenue ...... 35,909 6,599 Adjustment from previous periods ...... (881) (1,936) Total non-operating revenues ...... 419,520 463,622 .

Note 29 Non-operating expenses As of June 30, non-operating expenses are comprised as follows:

2014 2013 Interests Domestic public credit transactions ...... 110,208 94,205 Foreign public credit transactions ...... 128,235 107,472 Other interests ...... 62,410 55,639 Commissions ...... 7,148 5,320 Exchange difference adjustment ...... 138,659 277,703 Financial expenses Securities administration and issuance ...... 516 504 Discount on financing bonds and securities ...... 1,434 1,434 Loss for the appraisal of liquidity administrative investments . . . 1,089 3,710 Other financial expenses ...... 3,010 4,760 Other ordinary expenses ...... 15,561 30,169 Extraordinary expenses ...... 2,035 1,345 Equity investment provision ...... 398 8,575 Tax obligations provision ...... 2,415 1,615 Contingencies provision Litigations ...... 23,389 9,203 Other provisions ...... 4,240 456 Intangible expenses amortization ...... 19,695 17,021 Adjustment from previous periods ...... 19,528 7,216 Total non-operating expenses ...... 539,970 626,347

F-134 Note 30 Minority interest As of June 30, the minority interest for each of EPM Group subsidiaries was comprised as follows:

2014 2013 Percentage Amount Percentage Amount Electrificadora de Santander S.A. E.S.P. (ESSA) ...... 25.95% 220,955 25.95% 227,591 Central Hidroeléctrica de Caldas S.A. E.S.P. (CHEC) . . . . 19.90% 114,350 19.90% 166,850 Elektra Noreste S.A. (ENSA) ...... 49.00% 159,707 49.00% 146,709 Edatel S.A. E.S.P...... 20.00% 61,069 44.00% 126,799 Empresa Eléctrica de Guatemala S.A. (EEGSA) ...... 19.10% 97,632 19.10% 100,970 Transportista Eléctrica Centroamericana S.A. (TRELEC) . 19.10% 47,240 19.10% 46,035 Tecnología Intercontinental S.A. de C.V. (TICSA) ...... 20.00% 25,431 20.00% 44,020 Centrales Eléctricas del Norte de Santander S.A. E.S.P. (CENS) ...... 8.48% 42,056 8.48% 41,721 Aguas de Urabá S.A. E.S.P...... 36.58% 15,480 36.58% 15,244 Distribuidora de Electricidad del Sur (Delsur) ...... 13.59% 13,809 13.59% 15,832 Empresa de Energía del Quindío S.A. E.S.P. (EDEQ) . . . . 7.15% 10,585 7.15% 10,774 Comercializadora Eléctrica de Guatemala S.A. (COMEGSA) ...... 19.10% 5,928 19.10% 6,280 Regional de Occidente S.A. E.S.P...... 37.89% 5,371 37.89% 5,123 Inmobiliaria y Desarrolladora Empresarial de América S.A. (IDEAMSA) ...... 19.10% 4,642 19.10% 5,081 Aguas de Malambo S.A. E.S.P...... 11.27% 2,531 12.01% 2,508 Empresas Públicas de Oriente S.A. E.S.P...... 41.67% 2,173 41.67% 2,296 Enérgica S.A. (ENÉRGICA) ...... 19.10% 1,555 19.10% 2,021 Empresa de Aguas del Oriente Antioqueño S.A. E.S.P. . . . 43.99% 1,269 43.99% 1,251 Crediegsa S.A. (CREDIEGSA) ...... 19.10% 820 19.10% 1,018 Empresas Varias de Medellín S.A. E.S.P...... 0.10% 81 0.10% 67 Hidroecológica del Teribe S.A. (HET) ...... 0.96% 2,680 0.96% 25 Empresa de Telecomunicaciones de Pereira S.A. E.S.P. (ETP) ...... 0.01% 17 0.01% 18 Sistema de Aguas de Tecomán S.A. de C.V...... 50.40% 669 50.40% — Desarrollos Hidráulicos de TAM S.A. de C.V...... 20.71% 298 20.71% — Aguas Nacionales EPM S.A. E.S.P...... 0.01% 8 0.01% 16 Otras (*) ...... — 11 — 49 Total minority interest ...... 836,367 968,297

F-135 Note 31 Transactions with related parties At June 30, transactions with related parties were comprised as follows:

June 2014 Diciembre 2013 Accounts Accounts Other Accounts Accounts Other receivable payable obligations receivable payable obligations Área Metropolitana del Valle de Aburrá ...... 1,566 — — 1,566 — — Caja Nacional de Prevision Social en Liquidación . . . — — — — — — Comisión de Regulación de Energía y Gas ...... — — — — 1,586 — Corporación Autónoma Regional de las Cuencas de los ríos Negro y Nare ...... 3 950 — 34 2,240 — Corporación Autónoma Regional del Centro de Antioquia ...... — 3,302 — — 5,451 — Corporación Ruta N Medellín ...... 584 263 — 1,700 737 — Departamento de Antioquia ...... 1,504 3 2 210 9,437 — Dirección de Impuestos y Aduanas Nacionales ...... 34,454 75,501 789 — 92,102 813 E.S.P. Empresa de Energía del Casanare - Enerca S.A. — — — 112 156 — E.S.P. Generadora y Comercializadora de Energía del Caribe S.A...... — 1,053 — 483 — — E.S.P. Transportadora de Gas Internacional S.A...... — 14 — — 8,926 — E.S.P. Enviaseo ...... — — 498 — 10 1,310 E.S.P. XM Compañía de Expertos en Mercados S.A . . — — — 30,731 37,704 — Ecopetrol S.A...... 72 3,058 27 171 3,874 27 Electrificadora del Huila S. A. E.S.P...... — 43 — 661 394 3 Electrificadora del Meta S. A. E.S.P...... — 68 — 7,420 326 26 Electrificadora del Tolima S. A. E.S.P. en Liquidación 1,180 — — 1,180 — 24 Empresa de Energía Eléctrica de Arauca ...... 1,034 19 — 111 99 — Empresa de Vivienda de Antioquia ...... — 956 — 1,820 — — Empresa Urrá S.A. E.S.P...... — — — — 1,394 — Empresas Municipales de Cali E.I.C.E E.S.P...... 11,453 2,080 — 7,827 2,790 94 Fundación Empresas Públicas de Medellín ...... 5,392 — — 5,675 4,506 — Isagen S.A...... 5 5,694 — 3,311 20,118 — Interconexion Electrica S.A. - Isa ...... 24,108 — — 105 156 — Ministerio de Minas y Energía ...... 87,245 3,275 — 58,052 2,611 — Municipio de Amalfi ...... 512 893 — 13 1,191 — Municipio de Arboletes ...... 1,175 22 — 13 34 — Municipio de Barbosa ...... 93 618 — 68 1,598 — Municipio de Bello ...... 565 990 1 495 2,169 1 Municipio de Caldas ...... 1,388 1,212 — 292 583 — Municipio de Envigado ...... 119 980 — 208 1,388 — Municipio de Itagüí ...... 896 138 6 937 1,269 7 Municipio de Medellín ...... 20,787 477,958 2,480 6,209 159,912 4,429 Municipio de Necoclí ...... 2,345 49 — 72 76 — Municipio de San Rafael ...... 470 397 — 437 891 — Municipio de Turbo ...... 1,551 180 — 116 213 — Municipio de Yolombó ...... 828 216 — 421 333 — Municipio de Yondó (Casabe) ...... 1,652 36 — 1,405 31 — Universidad de Antioquia ...... 4,742 920 872 5,290 1,462 2,356 Universidad Nacional de Colombia ...... — 234 — 373 1,663 — Otros ...... 23,492 10,621 2,180 11,054 18,741 1,724 Total ...... 229,215 591,743 6,855 148,572 386,171 10,814

F-136 June 2014 June 2013 Income from Income from the sale of the sale of goods and Other Costs and goods and Other Costs and services income expenses services income expenses Área Metropolitana del Valle de Aburrá ...... 125 — 3,824 — — 6,400 Centrales Eléctricas de Nariño S. A. E.S.P...... 971 — 2,311 970 — 2,305 Comisión de Regulación de Energía y Gas ...... — — 2,124 — — 1,954 Corporación Autónoma Regional de las Cuencas de los ríos Negro y Nare ...... 94 — 3,671 — — 4,869 Corporación Autónoma Regional del Centro de Antioquia ...... — — 9,573 — — 6,384 Departamento de Antioquia ...... 1,170 — 450 1,225 — 513 E.S.P. Empresa de Energía de Pereira S.A...... 831 — 586 821 — 574 E.S.P. Empresa de Energía del Casanare - Enerca S.A. 600 — 808 558 — 871 E.S.P. Empresa Distribuidora del Pacífico S.A...... 283 — 1,059 8,620 — 1,099 E.S.P. Generadora y Comercializadora de Energía del Caribe S.A...... 2,222 — 5,073 132 — — E.S.P. Transportadora de Gas Internacional S.A...... — — 48,126 — — 42,208 E.S.P. XM Compañía de Expertos en Mercados S.A. . 239,291 — 5,694 — — 6,280 Electrificadora Del Caquetá S. A. E.S.P...... 7,021 — 308 276 — 221 Ecopetrol S.A...... 340 — 32,734 332 — 3,677 Electrificadora del Huila S. A. E.S.P...... 1,118 — 2,158 7,147 — 2,022 Electrificadora del Meta S. A. E.S.P...... 1,347 — 1,788 23,182 — 2,216 Empresa de Energía de Cundinamarca S. A. E.S.P . . . 4,577 — 1,186 940 — 1,180 Empresa de Energía Eléctrica de Arauca ...... 4,412 — 410 7,445 — 790 Empresas Municipales de Cali E.I.C.E E.S.P...... 51,047 — 2,167 79,996 3 4,007 Empresas Municipales de Cartago ...... 219 — 50 5,729 — 23 Empresas Varias de Medellín ...... — — — 106 2,823 10 Instituto Colombiano de Bienestar Familiar ...... — — 1,052 118 — 1,771 Isagen S.A...... 6,763 10 22,355 12,866 10 28,108 Municipio de Amalfi ...... 68 18 2,192 1 11 1,161 Municipio de Bello ...... 138 362 1,234 136 417 1,553 Municipio de Carolina del Príncipe ...... — 3 1,300 — 5 1,161 Municipio de Envigado ...... 681 — 835 559 — 1,103 Municipio de Guatapé ...... 21 8 2,121 22 — 1,065 Municipio de Itagüí ...... 855 280 1,334 871 324 1,051 Municipio de Medellín ...... 5,838 — 33,232 7,469 — 32,018 Municipio de Santa Rosa de Osos ...... 43 29 1,167 — 25 1,042 Municipio de Yondó (Casabe) ...... 1,078 8 93 — 4 14 Superintendencia de Servicios Públicos Domiciliarios . — — 6,416 — — 5,910 Universidad de Antioquia ...... 2,404 87 1,696 2,489 132 1,911 Otros ...... 14,689 3,098 24,246 7,757 2,826 23,146 Total ...... 348,246 3,903 223,373 169,767 6,580 188,617 Note 32 Subsequent events In November 2013, after the shareholders’ meetings of UNE and Millicom Spain Cable S.L. approved the terms of the UNE-Millicom Merger, the merger was submitted for the approval of several Colombian regulatory and governmental authorities, including the Superintendence of Industry and Commerce (Superintendencia de Industria y Comercio or ‘‘SIC’’), the SFC, and the ANTV. In September 2014, EPM closed the UNE-Millicom Merger after obtaining all regulatory and governmental approvals and executing and registering the corresponding public deed with the Medellín Chamber of Commerce. As a result of the UNE-Millicom Merger, EPM now owns 50% plus one share of UNE’s capital stock while Millicom Spain S.L. owns the remaining shares and has administrative and operating control of UNE. In addition, as a result of (i) the UNE-Millicom Merger and (ii) UNE’s purchase from ETB and Colvatel S.A. E.S.P. (‘‘Colvatel’’) of their shares in the capital stock of Colombia Móvil, which became effective upon completion of the UNE-Millicom Merger, UNE now owns 100% of the shares of capital stock of Colombia Móvil. EPM no longer consolidates the results of UNE’s operations with EPM’s results of operations.

F-137 ANNEX A

SUMMARY OF CERTAIN DIFFERENCES BETWEEN COLOMBIAN PUBLIC UTILITIES COMPANIES GAAP AND IFRS Overview On July 13, 2009, the Colombian congress enacted Law No. 1314, which was subsequently signed by the Colombian President. Law No. 1314, which is intended to further promote the internationalization of the Colombian economy, regulates the accounting, reporting and information assurance principles and standards that are generally accepted in Colombia (Colombian GAAP) and requires the gradual convergence of Colombian GAAP into IFRS, as issued by the International Accounting Standards Board (‘‘IASB’’). In 2012, the mandate contained in Law No. 1314 was further developed through Decree No. 2784 and a deadline was set for the adoption of IFRS by Group 1 government-owned companies (such as EPM). In 2013, the technical regulatory financial reporting framework applicable to Group 1 government-owned companies contained in the Annex to Decree No. 2784 was partially amended and the Colombian General Accounting Office (Contaduría General de la Nación or ‘‘CAO’’), through Resolution 743 of 2013, incorporated the rules and regulations set forth in the Annex to Decree No. 2784 of 2012 as an integral part of the Public Accounting Regime, applicable to Group 1 government-owned companies, and set December 31, 2015 as the IFRS reporting date deadline. Recently, EPM’s management approved a project to early adopt IFRS as issued by the IASB and set December 31, 2014 as its reporting date under IFRS. The early adoption of IFRS is permitted by current regulations. EPM continues to monitor and assess the impact of evolving differences between Colombian Public Utilities Companies GAAP and IFRS. The adoption will result in changes to EPM’s reported financial position and results of operations, and these changes may be material. In addition, IFRS could have an effect on the computation of the Company’s debt covenants and of certain other contractual obligations. In particular, although the adoption of IFRS will not change EPM’s actual cash flows, covenants linked to financial ratios may be affected by the adoption of IFRS in ways that are difficult to predict at this time. The matters described below summarize certain relevant differences between the Colombian Public Utilities Companies GAAP and IFRS. EPM cannot assure you that the following summary of differences between Colombian Public Utilities Companies GAAP and IFRS is complete. In making an investment decision, investors should rely on their own examination of the Company, the terms of the offering, and the financial information available. Potential investors should consult their own professional advisors for an understanding of the differences between Colombian Public Utilities Companies GAAP and IFRS, and how these differences may affect the available financial information.

Equity investments Colombian Public Utilities Companies GAAP In accordance with Colombian Public Utilities Companies GAAP, investments in which no control is exercised (ownership lower than 50%) are recorded at cost and adjusted by intrinsic value or fair value if the securities are listed. Updates in the valuation of equity securities in non-controlled entities are performed periodically by comparing the original cost with its intrinsic or fair value. When the intrinsic or fair value is above the cost, a valuation adjustment (markup) is performed. Otherwise, any previous valuation adjustments are reversed until they are reduced to zero. If the market price is below the acquisition cost, an allowance is recorded in the income statement.

IFRS (IAS 27 and IAS 28) Pursuant to IFRS the equity method is applied for investments in associates. Associates are defined as entities in which an investor holds a significant influence, but does not include subsidiaries or joint businesses. Significant influence is the power to intervene in the Company’s financial and operating policy decisions, without holding absolute control or a joint control of the Company. There is a presumption of significant influence when the investor holds, directly or indirectly, 20% or more of the voting rights. Investments for which voting rights are less than 20% are recorded based on IFRS 9 depending of the investment classification. IFRS 9 divides all financial assets into two classifications: those measured at amortised cost and those measured at fair value. Where assets are measured at fair value, gains and losses are either recognised entirely in profit or loss, or recognised in other comprehensive income.

A-1 Employee Benefit plans Colombian Public Utilities Companies GAAP Defined Benefit Obligations Before Law 100 of 1993 came into effect, employers were required to pay the pensions of those employees who met certain requirements, such as age or years of service. Since 1993, the Social Security Institute and other private funds have assumed the pension obligations and payments of most workers. Defined benefit plans are determined based on actuarial studies prepared in accordance with legal regulations. The actuarial computation method was established by Decree No. 2783 of December 20, 2001.

Other Benefit plans The recording of liabilities related to seniority bonuses is not required. However, since 2009, EPM decided, with previous approval of the CAO, recognizes the seniority bonus liability in its financial statements. The calculation is made taking into account the present value of future payments related to this obligation.

IFRS (IAS 19 as revised in 2011 and IAS 26) Defined Benefit Obligation The ultimate cost of a defined benefit plan may be influenced by many variables, including final salaries, employee turnover and mortality, medical costs and, for a funded plan, the investment earnings on the plan assets. The ultimate cost of the plan is uncertain and this uncertainty is likely to persist over an extended period of time. In order to measure the present value of the pensions and related obligations, it is necessary to: a) apply an actuarial valuation method, b) attribute benefit to periods of service, and c) make actuarial assumptions. An entity shall use the Projected Unit Credit Method to determine the present value of its defined benefit obligations and the related current service cost and, where applicable, past service cost. The Projected Unit Credit Method (sometimes known as the accrued benefit method pro-rated on service or as the benefit/years of service method) sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation.

Other Benefit plans An entity shall account not only for its legal obligations under the formal terms of a defined benefit plan, but also for additional obligation that may be construed from the entity’s practices. Informal practices give rise to a constructive obligations where the entity has no other alternative but to pay employee benefits. Bonuses based on seniority are one example of these constructive obligations.

Deferred Tax Colombian Public Utilities Companies GAAP In accordance with Colombian Public Utilities Companies GAAP, deferred income taxes are generally recognized only for the temporary differences arising from the income statement. Deferred taxes generally arise where (i) tax relief is provided in advance of an accounting expense, (ii) income is accrued but not taxed until received, or (iii) tax relief is provided after an expense is deducted for accounting purposes. According to the opinion No. 20061-57086 issued by the CAO on January 31, 2006, every company has the autonomy to define its own accounting policies with respect to deferred taxes. Accordingly, EPM has considered inflation adjustments of depreciable fixed assets as temporary differences that result in the accrual of deferred taxes.

IFRS (IAS 12) Temporary differences are differences between the carrying amount of an asset or liability in the statement of financial position and its tax base. By adopting IFRS, the change in the book value of assets and liabilities directly impacts on the amount of the deferred tax, given the increased differences with their fiscal base.

A-2 Under certain circumstances, international standards allow to record deferred tax against a net equity component of the entity, a situation which is not currently regulated by the Colombian accounting standards.

Property, Plant and Equipment Colombian Public Utilities Companies GAAP The useful life of fixed assets is determined by tax regulations, residual value of assets is not a requirement, and depreciation is calculated following the straight-line method over the estimated useful life of the asset based on its historical book value. The reappraisal of property, plants and equipment is preformed no less than once every three years based on technical appraisals. Provisions or reappraisal should be registered when the book value of the assets differs from their reposition cost. Reappraisal is not subject to depreciation.

IFRS (IAS 16) The useful life of assets is estimated based on the time they are expected to generate future economic benefits for the company. Depreciation is calculated following a reasonable depreciation method over the estimated useful life of the asset, based on its historical book value or revaluated cost. Companies may chose the cost method or the revaluation method for periods after the adoption of IFRS, and apply these methods to property, plant and equipment. Revaluations must be conducted regularly to ensure that the book value does not significantly differ from the fair value at the end of the period reported.

Impairment of Assets Colombian Public Utilities Companies GAAP Under Colombia Public Utilities Companies GAAP, impairment of assets per se is not required. However, management may record allowances on assets when the evidence shows that their book value exceeds their fair value. Once every three years the reappraisal of fixed asset must be updated and compared to their book value, and an allowance shall be recorded for those assets with a book value that exceeds their reposition or realization cost.

IFRS (IAS 36) IFRS (IAS 36) establishes that an impairment test should be made when there are indications that the book value of an asset may exceed their recoverable value. In addition, an annual test of Goodwill and other indefinite useful intangibles must be performed. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill are reviewed for possible reversal of the impairment at each reporting date.

Leases Colombian Public Utilities Companies GAAP Under the Colombian Public Utilities Companies GAAP, a lease agreement is recorded if (i) the agreement grants an irrevocable option to purchase the goods at the end of the lease, and (ii) the terms of the agreement are do not exceed the following time established by law: 60 months for real estate, 36 months for equipment, furniture and other goods, and 24 months for productive vehicles and computers. (Article 127-1 of the Colombian Tax Statute).

IFRS (IAS 17) Under the IFRS (IAS 17), a lease is classified as a financial lease if the agreement transfers substantially all the risks and rewards incidental to ownership. Otherwise the lease is classified as an operating lease. A financial lease is presumed upon fulfillment of any of the following conditions: a) Ownership is transferred to the lessee at the end of the lease term; b) A bargain option to purchase the goods is agreed upon the parties; c) Lease term covers most of the economic life of the asset; d) The net present value of the minimum lease payments is equivalent to at least all of the fair value of the leased asset and; e) Leased assets are so specialized that only the lessee can use them without making significant changes on them.

A-3 The assets and obligations rising from a financial lease are recorded in the Company’s financial statement. For subsequent periods, the same practices that rule property, plants and equipment shall be applied.

Financial Instruments Colombian Public Utilities Companies GAAP Under the Colombian Public Utilities Companies GAAP, financial instruments are classified as marketable investments, non-current investments, and loans and receivables. When a financial instrument is recognized an entity shall measure it using the cost method. After initial recognition, financial instruments are measured as follows: a) Marketable investments are measured at cost plus periodically accrual of interest. b) Non-current investments in non-controlled entities are updated periodically by comparing the original cost with its intrinsic value when the investments are classified as having minimal or low tradability or are unlisted, or according to the stock market price if the investment is classified as having high or medium-level tradability. c) Loans and receivables shall be measured using the cost method. The Colombian Public Utilities Companies GAAP does not require any particular documents to designate derivate instruments for coverage purposes, nor specifies the accounting method of the derivates not used for coverage (cash management). Colombian Public Utilities Companies GAAP only requires that derivative instruments used for cash management shall be recorded and updated at fair value.

IFRS (IFRS 9 and IAS 7) IFRS 9 (as revised in 2010) requires all recognised financial assets that are within the scope of IAS 39 (Financial Instruments: Recognition and Measurement) to be subsequently measured at amortized cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding, are generally measured at amortized cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods. The most significant effect of IFRS 9 (as revised in 2010) regarding the classification and measurement of financial liabilities relates to the accounting for changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss. On November 19, 2013, the IASB issued amendments to IFRS 9 as part of the hedge accounting phase of its project on accounting for financial instruments. The changes include (1) the introduction of a new hedge accounting model, along with disclosure requirements related to risk management activity; (2) an option for entities to recognize fair value changes of financial liabilities for which they have elected the fair value option in Other Comprehensive Income rather than in profit and loss. In July, 2014, The International Accounting Standards Board (IASB) has published the final version of IFRS 9 ‘Financial Instrument’. The Standard includes the requirements previously issued and the additional amendments to introduce a new expected loss impairment model and limited changes to the classification and measurement requirements for financial assets. IAS 7 requires detailed information for disclosures regarding risk and conditions that affect the business that must match with risk associated to hedge accounting.

A-4 Provisions and Contingencies Colombian Public Utilities Companies GAAP Under the Colombian Public Utilities Companies GAAP, lawsuits, arbitrations and settlements of disputes brought by or against a company, must be recorded as Memorandum Accounts in contingent creditor memorandum accounts. Contingencies may be probable, eventual or remote. If the contingency is determined probable based on a risk assessment according to methods of known technical value or the status of the proceeding, an estimated liability shall be recorded. Economic facts are initially recorded based on their historical value applying the basic rule of prudence.

IFRS (IAS 37) Under the IFRS a provision must be reported when the entity has a present obligation as a result of past events; it is probable that resources will be used to pay the obligation and a reliable estimate of the obligation can be made. The amount recorded as provision must be the best estimate as of the date of the balance sheet, of the disbursement necessary to pay the corresponding obligation. The amount of the provision must be equal to the present value of future cash flows to be paid. The entity should not record probable, possible or remote contingent assets, possible or remote contingent liabilities, or future operating losses. Memorandum accounts are not allowed under IFRS, contingencies classified as eventual or remote are disclosed in note to the financial statements.

Presentation of Consolidated Financial Statements Colombian Public Utilities Companies GAAP Under the Colombian Public Utilities Companies GAAP, statement of changes in financial position is required in addition to the cash flow statement. Other comprehensive income statements are not required to be part of the financial statements.

IFRS (IAS 1) IFRS (IAS 1) requires the presentation of the statement of cash flow and not the statement of change in financial position. Also other comprehensive income statement is required to be presented as separated financial statement or as part of the comprehensive income statement. Generally, disclosures tend to be more in quantity and have more detailed explanations. IFRS 7 requires specific disclosures related to financial instruments and IFRS 12 sets out what entities need to disclose in their annual consolidated financial statements when they have interest in subsidiaries, joint arrangements, associates or unconsolidated structures entities.

Business Combinations Colombian Public Utilities Companies GAAP Under the Colombian Public Utilities Companies GAAP, if the purchase value is higher than the intrinsic value of the acquired investment, the excess is recorded as Goodwill and amortized based on methodologies using the technical value during the life of the investment. When the purchase price is lower, negative goodwill is not allowed to be recognized in the statement of income. Instead, a reappraisal surplus is recorded as assets and equity for the difference between the purchase price and the proportional intrinsic value of the acquired investment.

IFRS (IFRS 3) Under IFRS 3, as of the acquisition date, the acquirer shall recognize, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest acquired through the business combination. Identifiable assets acquired and liabilities assumed are measured based on their fair value at the acquisition date. When applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities contained in the Framework for the Preparation and Presentation of Financial Statements at the acquisition date. The acquirer shall recognize goodwill as of the acquisition date if the purchase price of an investment exceeds the fair value of the identifiable assets and liabilities acquired. Goodwill shall not be amortized.

A-5 An acquirer may make a bargain purchase, which is a business combination in which the fair value of assets and liabilities acquired exceeds the purchase price. The acquirer shall recognize that difference as a profit on the acquisition date.

Intangible Assets Colombian Public Utilities Companies GAAP The Colombian Public Utilities Companies GAAP allows the reporting of intangible assets at cost minus accumulated amortization, reviewing at the end of each fiscal year whether market value is lower than book value, in which case the difference shall be recorded in the statement of income. Recognition of internally generated intangible assets is prohibited.

IFRS (IAS 38) An intangible asset is recognized if, and only if, (i) it is probable that the expected future economic benefits attributable to the asset would flow to the entity, and (ii) its cost can be reliably measured. The probability recognition criterion is always considered to be satisfied for intangible assets that are acquired separately or in a business combination. The fair value of an intangible asset acquired in a business combination can be measured with sufficient reliability to be recognized separately from goodwill. Under IAS 38, the company may choose the cost method or the revaluation model for subsequent measurements. revaluations must be conducted regularly to ensure that the asset’s book value at the end of the period reported, does not differ significantly from the fair value at the balance sheet date. IAS 38 also requires an annual test of impairment of goodwill and of other intangible assets with an indefinite life. The amortization method and useful lives must be reviewed at least once a year. Changes should be accounted for as changes in estimates.

Operating Segments Colombian Public Utilities Companies GAAP Under the Colombian Public Utilities Companies GAAP, no guidelines are established for operating segments.

IFRS (IFRS 8) Operating segments information should be provided in the financial statements. IFRS 8 also requires disclosure of information related to products and services, geographic areas, and main clients. Operating segments are defines as components of a company of which separate financial information is available. This information is regularly evaluated by the top management to make decisions on operations and decide how to assign resources and evaluate its performance. Every operating segment must measure the result of the assets and liabilities, particular revenues and expenditures, when this information is regularly given to the top authority to make decisions on operations.

Non Controlling Interest Colombian Public Utilities Companies GAAP Under the Colombian Public Utilities Companies GAAP, non controlling interests represents the equity and profits or losses attributed to equity interests that are not owned directly or indirectly by a company and its related parties. Non controlling interest is reported separately in the shareholder’s equity and the consolidated balance sheet, apart from the parent company’s equity.

IFRS (IAS 27) Non controlling interest is presented as a specific item under net equity. In the income statement it is presented as follows: results from the period attributable to non-controlling interest and results from the period attributable to holders of the controlling company.

A-6 Accounting Policies, Changes in Accounting Estimates, and Errors Colombian Public Utilities Companies GAAP Under the Colombian Public Utilities Companies GAAP, the effects of a change to accounting estimates according to the Colombian Public Utilities Companies GAAP are recognized prospectively. Any items that represent correction of the accounting errors from previous periods, arising from errors in mathematical calculations, deviations in the application of accounting standards, or because of unnoticed quantifiable facts that existed on the date on which the financial information was published, must be included in the results for the period during which they are discovered.

IFRS (IAS 8) Under IFRS the effect of a change to one accounting estimate (other than those changes that produce changes in assets or liabilities, or in an equity item), shall be recognized prospectively by including it in the results for: a) The period of the change, if the change only affects that period; or b) in the period of the change and future periods, if the change affects both. Unless determining the specific effect of the period or the accumulated effect is impractical, any material errors from previous periods are corrected retroactively in the first financial statements after they have been identified, by means of: a) By restating the comparative amounts for the previous period presented in which the error occurred; or b) If the error occur before the oldest previous period presented, by restating the initial balances of assets, liabilities and shareholders’ equity for the oldest period presented.

Capitalization of Interest Colombian Public Utilities Companies GAAP Under the Colombian Public Utilities Companies GAAP, the company capitalizes the interest cost of on-going projects until the asset is ready for use.

IFRS (IAS 23) According to IFRS (IAS 23), borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset shall be capitalized as part of the cost of that asset. IAS 23 establishes a limit for capitalization of borrowing cost by providing a restrictive definition of qualifying assets; requiring to offset the charges to the fixed asset with income from temporary funds investment no yet used in the construction or production of the qualifying asset. In addition, the standard allows credit costs related to inventory to be capitalized in the event that it takes substantial time to prepare the inventory for sale.

Functional Currency Colombia Public Utilities companies GAAP Colombian Public Utilities Companies GAAP presumes the use of the Colombian peso for companies operating in Colombia as the functional currency. Transactions denominated in foreign currencies are translated into Colombian pesos using the exchange rate applicable on the date they occur realizing charges (credits) to the income statement for foreign exchange gains (losses), except for assets which were in the process of installation or under construction up to December 2007. The foreign exchange gains/losses associated with these assets are recognized in income when the asset is ready for use.

IFRS (IAS 21) Pursuant IFRS 21, the primary economic environment in which an entity operates is normally the one in which it primarily generates and expends cash. An entity considers the following factors in determining its functional currency: a) The currency that mainly influences sales prices for goods and services; and the currency of the country whose competitive forces and regulations mainly determine the sales prices of its goods and services b) The currency that mainly influences labor, material and other costs of providing goods or services (this will often be the currency in which such costs are denominated and settled).

A-7 Cumulative translation adjustment gain or loss must be presented as part of the Other Comprehensive income.

Capitalization of Foreign Exchange (Losses) Gains Colombia Public Utilities companies GAAP Transactions denominated in foreign currencies are translated into Colombian pesos using the exchange rate applicable on the date they occur realizing charges (credits) to the income statement for foreign exchange gains (losses), except for assets which were in the process of installation or under construction up to December 2007. The foreign exchange gains/losses associated with these assets are recognized in income when the asset is ready for use.

IFRS (IAS 21 and IAS 23) Under IAS 21, exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements shall be recognized in profit or loss in the period in which they arise. When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss shall be recognized in other comprehensive income. Conversely, when a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss shall be recognized in profit or loss. IAS 23 uses the term ‘‘borrowing costs’’. ‘‘Borrowing costs’’ reflects the broader definition in IAS 23, which encompasses interest and other costs, such as exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

Other Capitalized and Deferred Costs Colombia Public Utilities companies GAAP Colombian Public Utilities Companies GAAP permits the capitalization and subsequent amortization of certain pre-operating and operating charges as the followings between others studies, investigations, changes of software modernization, advertising and government security taxes for which there are potential future benefit or savings.

IFRS (IAS 38) Under IFRS, there are strict guidelines regarding the deferral of costs and amortization over future periods. IAS 38 establishes an intangible asset shall be recognized if, and only if, it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and the cost of the asset can be measured reliably. An entity shall assess the probability of expected future economic benefits using reasonable and supportable assumptions that represent management’s best estimate of the set of economic conditions that will exist over the useful life of the asset.

Accounting for Uncertainties in Income Taxes Colombia Public Utilities companies GAAP Under Colombian Public Utilities Companies GAAP, there are no specific standards with respect to accounting for uncertainties in income taxes.

IFRS Under IFRS, there is no specific guideline. While income taxes are outside the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets, the guidance in IAS 37.10 is considered relevant to uncertain tax positions because they may give rise to ‘‘a liability of uncertain timing or amount’’. Consequently, preparers may use the recognition and measurement criteria of IAS 37 by analogy when determining the appropriate recognition and measurement of uncertain tax positions. It would be inappropriate, however, to present the resulting liabilities with other provisions recognised under IAS 37, because IAS 37.5(b) specifically excludes from the scope of that Standard provisions that are addressed in IAS 12. It should be presumed that any uncertain tax positions taken by an entity in determining its current tax liabilities (assets) will be examined by the appropriate tax authority having full knowledge of all relevant information.

A-8 Inflation Adjustments Colombia Public Utilities companies GAAP Under Colombian Public Utilities Companies GAAP, even though it was not a hyperinflationary economy, in a prospective basis since January 1, 1992 and up to December 31, 2000, our financial statements were adjusted in a prospective basis for the effects of inflation on the basis of changes in the PAAG Index of the related year, which is the middle-income consumer price index as established, with a one-month lag, by the National Administrative Statistic Department of Colombia. This index was applied to all non-monetary assets and liabilities and shareholders’ equity accounts, except for the revaluation of fixed assets and the current year net income accounts. The net gain (loss) from exposure to inflation was reflected as ‘‘Monetary Correction’’ in the results.

IFRS (IAS 29) IFRS does not permit inflation adjustments unless the Company is in a hyperinflationary economy, as defined by IFRS. This Standard does not establish an absolute rate at which hyperinflation is deemed to arise. It is a matter of judgment when restatement of financial statements in accordance with this Standard becomes necessary. Hyperinflation is indicated by characteristics of the economic environment of a country which include, but are not limited to, the fact that the cumulative inflation rate over three years is approaching, or exceeds, 100%. The financial statements of an entity whose functional currency is the currency of a hyperinflationary economy, whether they are based on a historical cost approach or a current cost approach, shall be stated in terms of the measuring unit current at the end of the reporting period. The corresponding figures for the previous period required by IAS 1 Presentation of Financial Statements (as revised in 2007) and any information in respect of earlier periods shall also be stated in terms of the measuring unit current at the end of the reporting period. The gain or loss on the net monetary position shall be included in profit or loss and separately disclosed.

Consolidation of Variable Interest Entities Under Colombian Public Utilities Companies GAAP, subsidiaries are consolidated when control exists which is usually presumed to occur when ownership exceeds 50% of the voting rights. Consolidated financial statements under Colombian GAAP are only used for information purposes. Current Colombian accounting rules do not require special treatment or identification for variable interest entities.

IFRS (IAS 10) In May 2011, a package of five Standards on consolidation, joint arrangements, associates and disclosures was issued, including IFRS 10, IFRS 11 IFRS 12, IAS 27 (as revised in 2011) and IAS 28 (as revised in 2011). Under IFRS 10, there is only one basis for consolidation, that is, control. In addition, IFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvements with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor´s return.

Revenue Recognition Under Colombian Public Utilities Companies GAAP, revenues for connection fees for utilities are recognized on payment in cash or the execution of a promissory note by the customer. Connection fees are refundable only if the customer cancels its service within six months of installation.

IFRS (IAS 18) Under IAS, revenues from connection fees are recorded on a deferred basis. Under this policy, connection fee income less direct installation costs and direct selling costs are deferred and amortized into income over the expected earnings period using the straight-line method.

Derivatives Under Colombian Public Utilities Companies GAAP, the difference between the amounts paid and received under these arrangements is recognized as financial income or expense. If the net payment will result in a payment to be received from the counterparty this is recorded as interest receivable. Both the interest payable and interest receivable resulting from net swap payments are recorded using current rates for the period.

A-9 IFRS (IAS 39) IAS requires that all derivative instruments are recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated to be part of an effective cash-flow hedging transaction or an effective fair value hedging transaction. Derivative instruments that do not meet the requirements of either a cash-flow or fair value hedge would be recorded at fair value on the balance sheet with the fair value gains and losses of the instrument recorded in the income statement. IFRS precludes reassessment of embedded derivatives after inception of the contract unless there is a change in the terms of the contract that significantly modifies the expected future cash flows that would otherwise be required under the contract. If an entity reclassifies a financial asset out of the held for trading category, embedded derivatives must be assessed and, if necessary, bifurcated.

Asset Retirement Obligation Under Colombian Public Utilities Companies GAAP does not require an accrual and disclosure for asset retirement obligation.

IFRS (IAS 16, IAS 37, IFRIC 1 and IFRIC 5) IFRS requires that management’s best estimate of the cost of dismantling and removing the item or restoring the site on which it is located, be recorded when an obligation exist. The estimate is to be based on a present obligation (legal or constructive) that arise as a result of the acquisition, construction, or development of a long-live asset. If it is not clear whether a present obligation exists, the entity may evaluate the evidence under a more-likely than not threshold. This threshold is evaluated in relation to the likelihood of settling the obligation.

A-10 ANNEX B

SUBSIDIARIES AND CERTAIN AFFILIATES (as of June 30, 2014)

Consolidated Subsidiaries EPM’s corporate structure includes the following subsidiaries:

Consolidated Subsidiaries Jurisdiction of Incorporation or Direct Indirect Main Activity, Business Organization Company Holdings Holdings or Purpose Medellín EPM Inversiones S.A. 99.99% _ Holding company (Colombia) Medellín UNE EPM 99.99% _ Telecommunications services (Colombia) Telecomunicaciones S.A. Medellín Emtelco S.A. _ 99.93%(1)(2) Telecommunications services (Colombia) Medellín Edatel S.A. E.S.P. _ 80.00%(2) Telecommunications services (Colombia) Pereira Empresa de _ 99.99%(2) Telecommunications services (Colombia) Telecomunicaciones de Pereira S.A. –-ETP-

Rionegro Orbitel Servicios _ 99.99%(1)(2) Telecommunications services (Colombia) Internacionales S.A.

Miami (United Cinco Telecom Corp. _ 100.00%(2) Telecommunications services States) Madrid (Spain) Orbitel Comunicaciones _ 100.00%(2) Telecommunications services Latinoamericanas S.A.U.

Cúcuta Centrales Eléctricas del 12.54% 78.98%(1) Energy services (Colombia) Norte de Santander S.A. E.S.P. (CENS)

Bucaramanga Electrificadora de 0.28% 73.77%(1) Energy services (Colombia) Santander S.A. E.S.P. (ESSA)

Manizales Central Hidroeléctrica de 24.44% 55.65%(1) Energy services (Colombia) Caldas S.A. E.S.P. (CHEC)

Armenia Empresa de Energía del 19.26% 73.60%(1) Energy services (Colombia) Quindío S.A. E.S.P. (EdeQ)

Ciudad de Hidroecológica del Teribe 99% _ Energy services Panama S.A. (Panama)

Panama AEI El Salvador Holdings _ 100% (3) Capital investment S.A. (AEIESH)

Panama Panamá Distribution Group 100% _ Capital investment S.A. (PDG) Panama Elektra Noreste S.A. _ 51% (4) Energy services (ENSA)

B-1 Consolidated Subsidiaries Jurisdiction of Incorporation or Direct Indirect Main Activity, Business Organization Company Holdings Holdings or Purpose Cayman Islands PPLG El Salvador II _ 100% (5) Capital investment (PPLG)

El Salvador Electricidad de _ 100% (6) Energy services Centroamérica Ltda. (ELCA)

El Salvador Distribuidora de _ 86.41% (5) Energy services Electricidad del Sur S.A. de C.V. (Del Sur)

El Salvador Innova Tecnología y _ 100% (7) Importation, commercialization, Negocios S.A. de C.V. purchase, sale and distribution of goods and the provision of services to electricity users of Del Sur related to electric engineering and electrical appliances. Guatemala Distribución Eléctrica 99.99% 0.00001%(1) Energy services Centroamericana Dos II (Deca II) (5)

Guatemala Empresa Eléctrica de _ 80.88% (3) Energy services Guatemala S.A. (EEGSA)

Guatemala Comercializadora Eléctrica _ 78.90% (3) Energy services de Guatemala S.A. (commercialization) (COMEGSA)

Guatemala Transportista Eléctrica _ 80.88% (3) Energy services (transport) Centromaericana S.A. (TRELEC)

Guatemala Credieegsa S.A. _ 80.87% (3) Administrative services

Guatemala Almacenaje y Manejo de _ 99.67% (3) Outsourcing services related with Materiales Eléctricos S.A. electrical materials (Amesa)

Guatemala Enérgica S.A. _ 66.69% (3) Maintenance, operation and other services to the energy sector Guatemala Inmobiliaria y _ 80.88% (3) Real estate investment Desarrolladora Empresarial de América S.A. Guatemala Gesa 99.98% 0.02%(1) Commercial services to companies of the energy sector Chile EPM Chile S.A. 99.9968% 0.0031%(1) Infrastructure project development and provision of energy, water, sewage and sanitation services. Chile Parque Eólico La Cebada _ 99.95% (8) Energy services S.A.

B-2 Consolidated Subsidiaries Jurisdiction of Incorporation or Direct Indirect Main Activity, Business Organization Company Holdings Holdings or Purpose

Chile Parque Eólico Los Cururos _ 99.9% (8) Energy services Ltda. Bermuda Maxseguros EPM Ltd. 100% _ Reinsurance

El Retiro Empresa de Aguas del 56.00% 0.0143%(1) Water and sewage services (Colombia) Oriente Antioqueño S.A. E.S.P.

Medellín Aguas Nacionales EPM 99.96% 0.04%(1) Water and sewage services (Colombia) S.A. E.S.P.

Apartadó Aguas de Urabá S.A. 59.27% 4.15%(1) Water and sewage services (Colombia) E.S.P. San Jerónimo Regional de Occidente 59.98% 2.14%(1) Water and sewage services (Colombia) S.A. E.S.P.

Envigado, Empresas Públicas de 56.00% 2.33%(9) Water and sewage services Rionegro and Oriente Antioqueño S.A. El Retiro E.S.P. (Colombia)

Malambo Aguas de Malambo S.A. 84.01% 3.98% (1) Water and sewage services (Atlantico, E.S.P. Colombia) Mexico EPM Capital México S.A. 90% 10% (1) Development of infrastructure de C.V. (6) projects related to energy, electricity, gas, telecommunications, sanitation, water treatment plants, sewage, waste water treatment plants, wells, and buildings. Mexico Tecnología Intercontinental _ 80% (10) Construction, development, S.A. de C.V. (TICSA) procurement, operation and maintenance of water treatment plants, sewage, waste water treatment plants and wells. Mexico Proyectos de Ingeniería _ 98% (11) Participate in all kinds of Corporativa S.A. de C.V. tendering processes and purchase (PROINGE) of shares in companies related to infrastructure projects. Mexico Ecosistema de Morelos _ 100% (12) Construction, procurement, S.A. de C.V. operations and maintenance of a waste water treatment plant and provision of related services. Mexico Corporación de Personal _ 100% (12) Provision of professional Administrativo, S.A. services to operate and manage all types of commercial, industrial or services companies. Mexico Ecoagua de Torreón, _ 100% (12) Construction, procurement and S.A.de C.V. operations of a waste water treatment plant and provision of related services.

B-3 Consolidated Subsidiaries Jurisdiction of Incorporation or Direct Indirect Main Activity, Business Organization Company Holdings Holdings or Purpose Mexico Aquasol Pachuca, S.A.de _ 72% (11) Construction, procurement and C.V. operations of a waste water treatment plant and provision of related services. Mexico Desarrollos Hidráulicos de _ 99.11% (11) Construction, procurement, TAM, S.A. de C.V. operations and maintenance of a waste water treatment plant and provision of related services. Mexico Ecosistema de Colima, _ 99.99% (11) Construction, procurement, S.A.de C.V. operations and maintenance of a waste water treatment plant and provision of related services. Mexico Aquasol Morelia, S.A. de _ 100% (12) Construction, procurement and C.V. operations of a waste water treatment plant and provision of related services. Mexico Sistema de Aguas de _ 62% (11) Construction and operations of a Tecomán, S.A. de C.V. waste water treatment plant and provision of related services. Mexico Ecosistema de Celaya S.A. _ 100% (12) Construction, procurement and de C.V. operations of a waste water treatment plant and provision of related services. Mexico Ecosistema de Tuxtla, S.A _ 100% (12) Construction of a waste water de C.V. treatment plant and provision of related services. Mexico Ecosistema de Ciudad _ 100% (12) Construction, procurement, Lerdo, S.A.de C.V. operations and maintenance of a waste water treatment plant and provision of related services. Mexico Ecosistemas de Uruapán, _ 100% (12) Construction, procurement, S.A.de C.V. operations and maintenance of a waste water treatment plant and provision of related services. Medellín Empresas Varias de 99.90% _ Waste Management services (Colombia) Medellín S.A. E.S.P. (EMVARIAS)

(1) Indirect ownership through EPM Inversiones S.A. (2) Indirect ownership through UNE EPM Telecomunicaciones S.A. (3) Indirect ownership through DECA II. (4) Indirect ownership through PDG. (5) Indirect ownership through AEIESH. (6) Indirect ownership through AEIESH and PPLG (7) Indirect ownership through Del Sur and ELCA. (8) Indirect ownership through EPM Chile S.A. (9) Indirect ownership through Empresa de Aguas del Oriente Antioqueño S.A. E.S.P. (10) Indirect ownership through EPM Capital México S.A. de C.V. (11) Indirect ownership through TICSA. (12) Indirect ownership through TICSA and PROINGE

B-4 Non-Controlling Interests EPM has non-controlling interests in, among others, the following companies. None of the companies listed below are consolidated into EPM’s financial statements.

Unconsolidated Companies Jurisdiction of Incorporation or Direct Indirect Main Activity, Business Organization Company Holdings Holdings or Purpose Medellín Hidroeléctica del Río Aures 42.04% _ Energy services (Colombia) S.A. E.S.P.

Medellín Reforestadora Industrial de 6.72% _ Industrial reforestation (Colombia) Antioquia S.A. –RIA- services Medellín Isagen S.A. E.S.P. 13.14% _ Energy services (Colombia)

Medellín Interconexión Eléctrica S.A. 10.17% _ Energy services (Colombia) E.S.P. -ISA-

Bugaramanga (Col) Hidrosogamoso S.A. E.S.P. en 4.93% 37.32%(1) Energy Services liquidación Manizales Gestión Energética S.A. E.S.P. 0.188% _ Energy services (Colombia) Gensa Barranquilla Electrificadora del Caribe S.A. 0.05% _ Energy services (Colombia) E.S.P. Bogotá (Colombia) Emgesa S.A. E.S.P. 0.00075% _ Energy services

Medellín Hidroeléctrica Ituango S.A. 46.33% 0.14%(2) Energy services (Colombia) E.S.P.

Bogotá (Colombia) Colombia Móvil S.A. _ 24.99% (3) Telecommunications services

Bogotá (Colombia) Banco Davivienda S.A. 0.00052% _ Financial services

Bogotá (Colombia) Concentra Inteligencia de 4.76% _ Gas Energía S.A.S

Bogotá (Colombia) Inversiones de los Aseguradores 0.035% _ Real estate Colombianos S.A. (Inverseguros)

Bogotá (Colombia) Inversiones Telco S.A.S. 50% (4) _ Capital Investment

Manizales Sociedad Hotelera de Caldas 0.08% _ Tourism (Colombia) S.A. en Liquidación Bogotá (Colombia) Terpel del Centro S.A. 0.013% _ Fuel

(1) Indirect ownership through Electrificadora de Santander S.A. E.S.P. (ESSA) (2) Indirect ownership through Central Hidroeléctrica de Caldas S.A. (CHEC) (3) Indirect ownership through UNE EPM Telecomunicaciones S.A. (4) 49.99% voting rights.

B-5 ANNEX C

CERTAIN DEFINED TERMS

General Terms

4G...... Fourth Generation Integrated Telecommunications Services

AES ...... AES Chivor & Cia S.C.A. E.S.P.

Aguas Nacionales ...... Aguas Nacionales EPM S.A. E.S.P.

ASOCODIS ...... Colombian Association of Electricity Distributors (Asociación Colombiana de Distribuidores de Energía Eléctrica)

Axesat ...... Axesat S.A.

BONYIC ...... Hydroelectric project under development by HET.

BU ...... Business Unit (Unidad de Negocios).

CCIT ...... Colombian Chamber of Information and Communication (Cámara Colombiana de Información y Comunicaciones).

CENS ...... Centrales Eléctricas del Norte de Santander S.A. E.S.P.

CHEC ...... Central Hidroeléctrica de Caldas S.A. E.S.P.

Colombia ...... Republic of Colombia.

Colombia Móvil ...... Colombia Móvil S.A. E.S.P.

Colombian GAAP ...... Generally accepted accounting principles adopted in Colombia.

CTC ...... Cinco Telecom Corporation doing business as Orbitel USA.

DTC ...... Depository Trust Company.

DTF ...... Floating interest rate announced on a weekly basis by the Central Bank, based on the weighted average of 90 day rates on certificates of deposit offered by banks and other financial institutions in the Colombian market.

EADE ...... Empresa Antioqueña de Energía S.A. E.S.P.

Edatel ...... Edatel S.A. E.S.P.

EdeQ ...... Empresa de Energía del Quindío S.A. E.S.P.

EEA ...... European Economic Area.

EMPOPASTO ...... Empresa de Obras Sanitarias de Pasto S.A. E.S.P.

Emtelco ...... Emtelco S.A. E.S.P.

Emtelsa...... Emtelsa S.A. E.S.P.

C-1 EPM Bogotá ...... EPM Bogotá S.A. E.S.P.

EPM Bogotá Aguas ...... EPM Bogotá Aguas S.A. E.S.P.

ESSA ...... Electrificadora de Santander S.A. E.S.P.

E.S.P...... Empresa de Servicios Públicos.

ETB ...... Empresa de Telecomunicaciones de Bogotá S.A. E.S.P.

ETP ...... Empresa de Telecomunicaciones de Pereira S.A.

GDP ...... Gross Domestic Product.

HET ...... Hidroecológica del Teribe S.A.

IADB ...... Inter-American Development Bank.

Infracel ...... Infraestructura Celular Colombiana S.A. E.S.P.

Initial Purchasers ...... Collectively, Banc of America Securities LLC and J.P. Morgan Securities Inc.

IPC ...... Colombian Consumer Price Index (Índice de Precios al Consumidor). A statistical measure of inflation, based on the national consumer price index of Colombia, as calculated and certified by DANE.

IPP ...... Colombian Producer Price Index (Índice de Precios al Productor) certified by DANE. km ...... Kilometers.

Law 142 or LSPD ...... Legal framework applicable to the rendering of domiciliary public utilities.

Law 143 ...... Legal framework applicable to the rendering of electricity services.

LTE...... Long Term Evolution

Medellín ...... City of Medellín.

Metropolitan Area ...... Geographical area comprising certain cities in Antioquia, including, Barbosa, Bello, Caldas, Copacabana, Envigado, La Estrella, Girardota, Itagüí, Medellín and Sabaneta. mi ...... Miles. OCL ...... Orbitel Comunicaciones Latinoamericanas S.A.U.

OSI ...... Orbitel Servicios Internacionales S.A. E.S.P.

Paying Agent ...... The Bank of New York Mellon.

C-2 Promisión ...... TV Cable Promisión S.A.

Regional Water Subsidiaries ...... Aguas de Urabá S.A. E.S.P., Regional de Occidente S.A. E.S.P., Empresa de Aguas del Oriente Antioqueño S.A. E.S.P., and Aguas Nacionales EPM S.A. E.S.P. (f/k/a EPM Bogotá Aguas).

SMEs ...... Small and medium sized enterprises.

TRM...... Representative Market Exchange Rate (Tasa Representativa del Mercado) as determined and certified by the SFC.

UEN ...... Strategic Business Unit (Unidad Estratégica de Negocio).

UNE ...... EPM Telecomunicaciones S.A. E.S.P.

UVR ...... Real Value Units (Unidades de Valor Real). A unit that reflects the purchasing power of Colombian pesos based exclusively on the IPC variation certified by the DANE.

Colombian Relevant Authorities

ANE ...... National Spectrum Agency (Agencia Nacional del Espectro).

ANH ...... National Hydrocarbon Agency (Agencia Nacional de Hidrocarburos).

ASIC ...... Colombian Administrator of the Commercial Exchange System (Administrador del Sistema de Intercambios Comerciales).

CAO ...... Colombian General Accounting Office (Contaduría General de la Nación).

Central Bank ...... Colombian Central Bank (Banco de la República).

COMFIS ...... Council of Fiscal Policies of Medellín (Consejo de Política Fiscal del Municipio de Medellín).

CONPES ...... Colombian National Council of Economic and Social Policy (Consejo Nacional de Política Económica y Social).

COMPES ...... Municipal Council of Economic and Social Policy (Consejo Municipal de Política Económica y Social).

CND ...... National Dispatch Center (Centro Nacional de Despacho). The CND is responsible for the planning, supervision and control of electricity generation, interconnection and transmission in connection with the National Interconnected System. The CND is subject to the National Operation Council Accords (Acuerdos del Consejo Nacional de Operación).

CNTV ...... Colombian National Television Commission (Comisión Nacional de Televisión).

C-3 CRA ...... Water and Sanitation Regulation Commission (Comisión de Regulación de Agua Potable y Saneamiento Básico).

CREG ...... Colombian Energy and Gas Regulatory Commission (Comisión de Regulación de Energía y Gas).

CRC ...... Colombian Communications Commission (Comisión de Regulación de Comunicaciones).

DANE ...... Colombian National Department of Statistics (Departamento Administrativo Nacional de Estadística).

DIAN ...... Colombian National Tax and Customs Office (Dirección de Impuestos y Aduanas Nacionales).

ICONTEC ...... Colombian Institute of Technical Norms (Instituto Colombiano de Normas Tecnicas y Certificación).

IDEA ...... Institute for the Development of Antioquía (Instituto para el Desarrollo de Antioquia).

MAVDT ...... Colombian Ministry of the Environment, Housing and Development (Ministerio de Ambiente, Vivienda y Desarrollo Territorial).

MHCP ...... Colombian Ministry of Finance and Public Credit (Ministerio de Hacienda y Crédito Público).

MTIC ...... Colombian Ministry of Technologies of Information and Communications (Ministerio de las Tecnologías de la Información y las Comunicaciones).

MME ...... Colombian Ministry of Mines and Energy (Ministerio de Minas y Energía).

SFC ...... Superintendence of Finance of Colombia (Superintendencia Financiera de Colombia).

SIUST ...... Unified Telecommunications Information System (Sistema de Información Unificado del Sector de las Telecomunicaciones).

SSPD ...... Colombian Superintendence of Domiciliary Public Utilities (Superintendencia de Servicios Públicos Domiciliarios).

UPME ...... Colombian Mining and Energy Planning Unit (Unidad de Planeación Minero Energética).

XM ...... Compañía de Expertos en Mercados S.A. E.S.P., in its capacity as ASIC and settler of charges for the use of the STN.

C-4 Technical and Regulatory Terms

Specific to the Energy Industry

AGC ...... Automatic Generation Control (Control Automático de Generación) means the secondary regulation of frequency (regulación secundaria de frecuencia).

Capacity Charge ...... Capacity Charge refers to the former compensation mechanism for electricity generators which guaranteed companies fixed annual income per each MW of installed capacity at a fixed price established by the regulatory authorities.

DES ...... The Electricity Interruption Duration Index (Indicador de Duración Equivalente de las Interrupciones del Servicio) measures the total amount of service interruption per circuit during the previous twelve-month period pursuant to a formula established by the CREG

Distribution Usage Charges ...... Distribution Usage Charges are the changes set forth by the CREG and applicable to the access and use of the STR and SDL.

Energy Spot Market ...... The Energy Spot Market is an hourly exchange market where generation companies and traders can sell their excess electricity resulting from the difference between its electricity offer and real demand. Each day electricity generation companies offer the price required to generate electricity with each hydroelectric unit or thermal machine, each hour and inform each plant’s availability for the next day.

ENS ...... Non Transmitted Electricity (Energía No Suministrada) by an OR.

FES ...... Electricity interruptions’ index (Indicador de Frecuencia Equivalente de las Interrupciones del Servicio) that evaluates the STR’s and SDL’s reliability according to the number of service interruptions per circuit during the previous twelve months pursuant to a formula established by the CREG.

Firm Energy ...... According to CREG Resolution No. 060 of 2007, Firm Energy (energía firme) represents the maximum volume of electricity that may be continuously produced in one-year period by a generation plant under low hydrologic conditions.

GW ...... Gigawatt, which equals 1,000 MW.

GWh ...... Gigawatt-hours, which represents one hour of electricity consumption at a constant rate of 1 GW.

Index of Discontinuity ...... The Index of Discontinuity (Índice de Discontinuidad) measures the average amount of ENS per each unit of Electricity Transmitted or Energía Suministrada by an OR. kV ...... Kilovolt; one of which equals one thousand volts; a unit of electric tension. kW ...... Kilowatt; which is a unit of power representing the rate at which electricity is produced.

C-5 kWh ...... Kilowatt-hour; one kilowatt hour represents one hour of electricity consumption at a constant rate of 1 kW.

MEM ...... Wholesale Energy Market (Mercado de Energía Mayorista).

MW ...... Megawatt which equals 1,000 kW.

MWh ...... Megawatt-hour; one megawatt hour represents one hour of electricity consumption at a constant rate of 1 MW.

Optimal Dispatch ...... The Optimal Dispatch is a system used by the XM to rank production by electricity generators which assumes unlimited transmission capacity through the SIN and disregards network restrictions.

OR ...... Network Operator (Operador de Red).

PCSA ...... Weekly Asset Compensation Percentage (Porcentaje de Compensación Semanal del Activo). PCSA is one of the variables used by the CND to calculate weekly compensation for assets used in the STN.

PEN ...... National Energy Plan (Plan Energético Nacional). The UPME is responsible for developing the PEN, which sets policy guidelines for the long-term development of the energy sector.

Regulated Market ...... Market that includes Colombian consumers of electricity that have a peak demand lower than 0.10 MW or a minimum monthly consumption lower than 55.0 MWh.

Regulated Users ...... Colombian consumers of electricity within the Regulated Market.

Reliability Charge ...... The Reliability Charge (Cargos por Confiabilidad) compensates electricity generators for making investments in order to guarantee the supply of electricity during scarce conditions.

Restricted Generators ...... Electricity generators whose actual generation is higher than Optimal Dispatch.

SDL ...... Local Distribution System (Sistema de Distribución Local).

SIN ...... National Interconnected System (Sistema Interconectado Nacional).

STN ...... National Transmission System (Sistema de Transmisión Nacional).

STR ...... Regional Transmission System (Sistema de Transmisión Regional). The STR is a network that operates at levels between 200 kV and 57.5 kV.

Unregulated Market ...... Market that includes Colombian consumers of electricity that have a peak demand greater than 0.10 MW or a minimum monthly consumption greater than 55.0 MWh.

Unregulated Users ...... Colombian consumers of electricity within the Unregulated Market.

C-6 Specific to the Telecommunications Industry

ADSL ...... Asymmetric Digital Subscriber Line, a data transmission technology that allows data transmission at high speeds through copper lines. The information flow provided by ADSL is greater in one direction than the other, i.e., it is asymmetric. This means that download stream is faster than upload stream.

ARPU ...... Average Revenue Per User. EPM calculates ARPU by dividing the total voice revenues for a given period by the average number of voice lines in service during such period. Revenues from data and wholesale services are reported separately and are not a factor in calculating ARPU.

ATM ...... Asynchronous Transfer Mode, communications protocol based on switching fixed size information packages called cells, used for the purpose of data transmission.

Carrier Services ...... Services that provide the necessary capacity for the transmission of signals between two or more defined points of a telecommunications network. Carrier Services can be provided on frame or circuit switched networks or on non switched networks. Carrier Services include the lease of isolated pairs and dedicated circuits.

CPE ...... Customer Premises Equipment.

Domestic Long-Distance ...... As defined in Law 142, the public switched telephone service rendered between different localities of Colombia.

DSL ...... Digital Subscriber Line is a family of technologies that provides digital data transmission over the wires of a Local Telephone network.

DSLAM ...... Digital Subscriber Line Access Multiplexer, a network device, located near the customer’s location that connects multiple customers to UNE’s high speed IP backbone line using multiplexing techniques. DSLAMs are used to procure higher transmission speeds and increase bandwidth of traditional copper networks.

E1 ...... European standard set by the European Conference of Postal and Telecommunications Administrations for digital transmission at 2mb/s speeds.

Frame Relay ...... A communications protocol based on switching variable size information packages, used as an encapsulation technique to transmit data over a frequently changing path transparent to all end users.

Gbps ...... Gigabit per second.

ISDN ...... Integrated Service Digital Network (Red Digital de Servicios Integrados, RDSI).

International Long-Distance ...... As defined in Law 142, the public switched telephone service rendered between Colombia and another country.

C-7 IP ...... Internet Protocol.

IPTV ...... Internet Protocol Television.

Local Telephone ...... Local PSTN and extended PSTN.

Long-Distance ...... As defined in Decree 1900 of 1990, Domestic Long-Distance and International Long-Distance services.

Local PSTN ...... Basic Public Switched Local Telephone Service (Telefonía Pública Básica Conmutada Local), means the basic telecommunication service, consisting of switched transmission of voice through the public switched telephone network within a single city.

MHz ...... A million cycles per second (Hertz).

MPLS ...... Multiprotocol Label Switching, a data carrying IP-based protocol used to carry big volumes of traffic between networks, including backbone networks.

MSAN ...... Multiservice Access Networks. MSAN are devices typically installed in telephone exchanges (and sometimes in roadside serving area interface cabinets) which connect customers’ telephone lines to the core network to provide telephony, ISDN and broadband Internet (including DSL) from a single platform.

NGN ...... Next Generation Network. Broad term to describe some key architectural evolutions in telecommunications core and access networks that will be deployed over the next five to ten years. NGN refers to a network that transports all information and services (voice, data and all sorts of media such as video) through packet bundling. NGNs are commonly IP based networks.

PABX ...... Public Automatic Branch Exchange. PABX is a type of PBX that accommodates up to 10 exchange lines and 49 automatic extensions and provides for automatic connection to the public telephone network and full internal dialing between extensions. Incoming exchange calls are received on a small, compact, key operated switchboard on a table or desk, and are dealt with by the PABX operator. A small number of manual extensions and lines to other PBXs can be connected to the system.

PBX ...... Public Branch Exchange. PBX is a telephone exchange that serves one single company or office by connecting the terminals, i.e., telephones, faxes, modems, etc., that comprise its internal voice transmission network.

PCS ...... Personal Communication Services.

C-8 PMP ...... Point multipoint (Punto multipunto). PMP links different remote points among them and to a central exchange for the implementation of voice and data transmission networks along large areas. PMP is most typically used in wireless Internet and VoIP via gigahertz radio frequencies.

Router ...... Device that extracts the logical code that contains the destination of received packages, selects the best path to that destination, and forwards the packet to the next device according to this selection.

SDH ...... Synchronous Digital Hierarchy, an international standard developed by the International Telecommunications Union for synchronic transmission of digital data through fiber optics. It is the standard used in most of the world. North America uses another standard called SONET, which is functionally compatible. An SDH frame is a virtual container that moves voice and data. The basic SDH frame unit is STM 1.

STM 1 ...... Synchronous Transport Module, rate of transmission defined by SDH standard. It is the basic SDH frame unit that serves as a virtual container to move voice and data through fiber optics with a 155.52 Mbit/s speed. Its SONET counterpart is OC3 (Optical Container).

SUI ...... Sistema Único de Información.

TDM ...... Time Division Multiplex, a data encapsulating and transmission method.

Triple Play ...... The offering of telephone, Internet and television services as part of a bundled service plan.

Value-Added Services ...... As defined in Decree 1900 of 1990, Decree 600 of 2003 and Decree 2870 of 2007, services supported over basic, data transmission, broadcast services, or any combination thereof, that provide complete capacity for the transmission of information, adding certain facilities to the support service or satisfying new telecommunication needs, regardless of the technology. Value-Added Services include video, audio, voice, text and other signals that use the government- owned telecommunications network, and Internet through dial up access, broadband access, data transmission through Frame Relay and Clear Channel and other Internet related services.

VoIP ...... Voice Over Internet Protocol.

VPN ...... Virtual Private Networks.

C-9 Specific to the Water and Sewage Industry

AWWA ...... American Water Works Association.

DEA ...... Data Envelopment Analysis. DEA is used to evaluate company productivity based on relative efficiency.

EPA ...... United States Environmental Protection Agency.

IDEAM ...... Colombian Institute of Hydrology, Meteorology and Environmental Studies m3 ...... Cubic meters.

PTAR ...... Waste water Treatment Plant (Planta de Tratamiento de Aguas Residuales).

C-10 Empresas Públicas de Medellín E.S.P. Carrera 58 No. 42-125 Medellín, Colombia

TRUSTEE, REGISTRAR, TRANSFER AGENT AND PAYING AGENT

The Bank of New York Mellon Global Trust Services 101 Barclay Street — 7th Floor East New York, NY 10286

LUXEMBOURG TRANSFER AGENT

The Bank of New York Mellon (Luxembourg) S.A. Vertigo Building – Polaris 2-4 rue Eugène Ruppert L-2453 Luxembourg

CO-PAYING AGENT IN THE EUROPEAN UNION

The Bank of New York Mellon, London Office 40th Floor, One Canada Square London, E14 5AL

LEGAL ADVISERS

To EPM, as to United States Law To EPM, as to Colombian law Skadden, Arps, Slate, Meagher & Flom LLP Mosquera Abogados Ltda. 4 Times Square Carrera 7 No. 71-21, Torre A, Piso 6 New York, New York 10036 Bogotá, D.C. Unites States of America Republic of Colombia

To the Initial Purchasers, as to United States Law To the Initial Purchasers, as to Colombian Law Milbank, Tweed, Hadley & McCloy LLP Brigard & Urrutia Abogados S.A. 1 Chase Manhattan Plaza Calle 70A # 4-41 New York, New York 10005 Bogotá, D.C. United States of America Republic of Colombia

INDEPENDENT AUDITORS TO EPM

Deloitte & Touche Ltda Calle 16 Sur # 43A-49 Piso 10 Medellín Republic of Colombia Ps.965,745,000,000

Empresas Públicas de Medellín E.S.P. (an Empresa Industrial y Comercial del Estado organized under the laws of the Republic of Colombia)

7.625% Senior Notes due 2024

OFFERING MEMORANDUM

September 3, 2014