Promigas S.A. E.S.P. Separate Financial Statements ......PERIOD RESULTS $ 320.039.214328.818.686 NET INCOME PER SHARE $ 289,75 282,01 The notes attached hereto are an integral part

Promigas S.A. E.S.P. Separate Financial Statements December 31 and June 30, 2017 With Statutory Auditor’s Report

(FREE TRANSLATION OF THE REPORT PREVIOUSLY ISSUED IN SPANISH) STATUTORY AUDITOR’S REPORT

To the Shareholders Promigas S.A. E.S.P.:

Report on the separate financial statements

I have audited the separate financial statements of Promigas S.A. E.S.P. (the Company), which comprise the separate statement of financial position at December 31, 2017 and the separate statements of income, other comprehensive income, changes in equity and cash flows for the half-year then ended and their respective notes that include the summary of significant accounting policies and other explanatory notes.

Management's responsibility regarding the separate financial statements

Management is responsible for the fair preparation and presentation of these separate financial statements in accordance with Accounting and Financial Reporting Standards accepted in Colombia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and presentation of separate financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Statutory Auditor’s responsibility

My responsibility is to express an opinion on the separate financial statements based on my audit. I obtained the necessary information and carried out my audit in accordance with International Standards on Auditing accepted in Colombia. Such standards require that I comply with ethical requirements and plan and perform the audit to obtain a reasonable assurance about whether the separate financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the separate financial statements. The procedures selected depend on the statutory auditor's judgment, including the assessment of the risk of material misstatement in the separate financial statements. In making this risk assessment, the statutory auditor considers internal control relevant to the preparation and presentation of the separate financial statements, in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the separate financial statements.

I believe that the audit evidence I have obtained provides a reasonable basis for my audit opinion expressed below.

2

Opinion

In my opinion, the above mentioned separate financial statements, taken accurately from books and attached to this report, present fairly, in all material respects, the separate financial position of the Company at December 31, 2017, the separate results of its operations, and its separate cash flows for the half-year then ended, in conformity with Accounting and Financial Reporting Standards accepted in Colombia, applied on a consistent basis with previous half-year.

Emphasis of Matter

Without qualifying my opinion, I draw attention to note 4 to the separate financial statements, which indicates that the comparative information presented as at and for the half-year ending June 30, 2017 has been restated in relation to the presentation, in the separate income statement, income from the equity method and income from the update of the fair value of the financial asset due to the Company's right in the concession contracts.

Other matters

The separate financial statements at and for the half-year ending June 30, 2017 are submitted only for comparison purposes and were audited by me and in my report, dated August 22, 2017, expressed an unqualified opinion thereon.

Report about other legal and regulatory requirements

Based on the results of my tests, I believe during the half-year ending December 31, 2017:

a) The Company’s bookkeeping has been performed in conformity with legal rules and accounting pronouncements.

b) The operations recorded in the books and management performance are in conformity with the bylaws and decisions of the General Stockholders’ Meeting.

c) The correspondence, the vouchers of accounts and the books of minutes and record of shares have been properly maintained.

d) The management report prepared by management agrees with the accompanying financial statements, which includes evidence about free circulation of sellers’ or suppliers’ invoices.

e) The information contained in the contribution returns submitted to the Social Security System, specifically the information on affiliates and their salary base for determining contributions, has been prepared from the accounting records and supporting documentation. The Company is up to date in payment of contributions to the Social Security System.

In compliance with the requirements of articles 1.2.1.2. and 1.2.1.5. of Single Regulatory Decree 2420 of 2015, modified by articles 4 and 5 of Decree 2496 of 2015, respectively, in development

3

of the Statutory Auditor’s responsibilities contained in numerals 1 and 3 of article 209 of the Commercial Code, related to the evaluation whether the Company's management performance is in accordance with the bylaws and the orders or instructions of the Board of Partners and if there are and are adequate the internal control measures, preservation and custody of the Company’s assets or third parties assets in its possession, I issued a separate report dated February 11, 2018.

(Original Signed) Carmen Rosa Campo Hernández Statutory Auditor of Promigas S.A. E.S.P. Registration 67994 - T Member of KPMG S.A.S.

February 11, 2018

PROMIGAS S.A. E.S.P.SEPARATED FINANCIAL STATEMENTS(Expressed in thousands of Colombian pesos)

Note December JuneASSETS 2017 2017CURRENT ASSETS:

Cash 7 $ 38.753.748 82.953.403 Financial Assets at Fair Value 8 36.157.707 69.675.007 Financial assets at amortized cost 9 235.304.777 222.454.228 Inventories - materials and supplies 1.026.241 531.414 Other current assets 5.667.488 11.061.844

TOTAL CURRENT ASSETS 316.909.961 386.675.896

LONG-TERM ASSET:Financial assets at fair value 8 1.803.299.542 1.721.903.508 Financial assets at amortized cost 9 485.380.788 485.637.750 Inventories - materials and supplies 9.420.851 10.270.503 Investment in subsidiaries 10 653.790.231 594.432.674 Investment in associates 11 1.465.636.675 1.343.930.093 Properties, plant and equipment 12 84.189.163 80.020.402 Intangible assets:

Concessions 13 1.095.198.541 1.090.386.419 Other intangibles 10.738.768 10.348.868

1.105.937.309 1.100.735.287

Other non-current assets 6.970.823 6.753.660 TOTAL LONG-TERM ASSETS 5.614.625.382 5.343.683.877

TOTAL ASSETS $ 5.931.535.343 5.730.359.773

LIABILITIESCURRENT LIABILITY:

Financial obligations 14 $ 131.474.407 52.156.121 Bonds 13.327.427 13.936.422 Accounts payable 15 113.175.112 115.944.907 Employee benefits 8.392.697 7.722.479 Income tax payable 16 26.294.505 11.052.139 Other liabilities 17 24.981.420 24.908.528

TOTAL CURRENT LIABILITIES 317.645.568 225.720.596

LONG-TERM LIABILITY:Financial obligations 14 535.338.318 508.877.875 Bonds 18 1.717.651.536 1.717.350.761 Employee benefits 1.289.409 966.586 Provisions 19 29.593.047 30.687.240 Deferred tax liabilities 16 367.562.474 360.297.389 Other liabilities 8.764 9.083

TOTAL LONG-TERM LIABILITIES 2.651.443.548 2.618.188.934 TOTAL LIABILITIES 2.969.089.116 2.843.909.530

EQUITY 20Paid-in and subscribed capital 113.491.861 113.491.861 Premium in share underwriting 322.822.817 322.822.817 Reserves 558.143.090 470.699.983 Cumulative results 1.861.419.434 1.866.306.987 Other equity transactions (2.033.389) (2.033.382) Other comprehensive income 108.602.414 115.161.977

TOTAL EQUITY 2.962.446.227 2.886.450.243 TOTAL LIABILITIES AND EQUITY $ 5.931.535.343 5.730.359.773

The notes attached hereto are an integral part of the separated financial statements.

- 3 -

PROMIGAS S.A. E.S.P.

SEPARATED STATEMENTS OF COMPREHENSIVE INCOME

(Expressed in thousands of Colombian pesos, except the net income per share which is expressed in Colombian pesos)

Semesters ended on: Note December June

2017 2017

Revenues of ordinary activities 21 $ 312.865.264 332.115.841

Cost of sales 22 (114.456.669) (132.462.062)

GROSS INCOME 198.408.595 199.653.779

Operating expenses 23 (48.605.488) (42.319.608)

Profit sharing associates 10 65.985.555 75.701.319

Profit sharing controlled 11 115.538.234 109.946.512

Dividends received - 522.647

Others, net 24 11.615.833 (1.841.079)

RESULTS FROM OPERATING ACTIVITY 342.942.729 341.663.570

Financial revenues 25 117.396.410 130.264.560

Financial expenses 26 (96.400.136) (108.198.032)

EARNINGS BEFORE INCOME TAX 363.939.003 363.730.098

Income tax 16 (35.120.317) (43.690.884)

PERIOD RESULTS $ 328.818.686 320.039.214

NET INCOME PER SHARE $ 289,75 282,01


- 4 -


SEPARATED STATEMENT OF OTHER COMPREHENSIVE INCOME

(Expressed in thousands of Colombian pesos)

Semesters ended on: December June

2017 2017

PERIOD RESULTS $ 328.818.686 320.039.214

OTHER COMPREHENSIVE INCOME FOR THE YEAR

For fair value of equity instruments 195.323 3.821.666

For hedging transactions 2.446.713 (8.384.115)

For employee benefits (460.042) 14.327

For deferred tax 233.348 (409.821)

2.415.342 (4.957.943)

OTHER COMPREHENSIVE INCOME OF THE YEAR IN SUBSIDIARIES

For fair value of equity instruments 364.816 3.161.797

For currency conversion adjustment (1.799.713) 1.953.261

For hedging transactions (1.177.902) 829.913

For employee benefits (30.665) (40.590)

For deferred tax 296.557 (1.349.860)

(2.346.907) 4.554.521

OTHER COMPREHENSIVE INCOME OF THE YEAR IN ASSOCIATES

For currency conversion adjustment (7.406.635) 4.442.284

For hedging transactions 778.637 (1.028.106)

(6.627.998) 3.414.178

(6.559.563) 3.010.756

TOTAL INCOME AND OTHER COMPREHENSIVE INCOME FOR THE PERIOD $ 322.259.123 323.049.970


- 5 -


SEPARATED STATEMENT OF CHANGES IN EQUITY(Expressed in thousands of Colombian pesos)

Balances as of june 2016 $ 113.491.861 322.822.817 289.457.558 117.925.897 291.833.225 1.505.587.115 1.915.346.237 (2.034.045) 112.151.221 2.751.235.649

Interest sale in non-controlling interest - - - - - - - 663 - 663

Creation of reserves - - 185.233.081 (185.233.081) - - (185.233.081) - - -

Declared cash dividends - - - (183.845.383) - - (183.845.383) - - (183.845.383)

Transfers - - - 291.833.225 (291.833.225) - - - - -

Wealth tax - - (3.990.656) - - - - - - (3.990.656)

Income and other comprehensive income for the year - - - - 320.039.214 - 320.039.214 - 3.010.756 323.049.970

Balances as of december 2016 113.491.861 322.822.817 470.699.983 40.680.658 320.039.214 1.505.587.115 1.866.306.987 (2.033.382) 115.161.977 2.886.450.243

Interest sale in non-controlling interest - - - - - - - (7) - (7)

Creation of reserves - - 87.444.214 (87.444.214) - - (87.444.214) - - -

Declared cash dividends - - - (246.262.025) - - (246.262.025) - - (246.262.025)

Transfers - - - 320.039.214 (320.039.214) - - - - -

Wealth tax - - (1.107) - - - - - - (1.107)

Income and other comprehensive income for the year - - - - 328.818.686 - 328.818.686 - (6.559.563) 322.259.123

Balances as of june 2017 $ 113.491.861 322.822.817 558.143.090 27.013.633 328.818.686 1.505.587.115 1.861.419.434 (2.033.389) 108.602.414 2.962.446.227


First-time

adoption effect Total Equity Total

Other equity

transactions

Other

comprehensive

income

Cunulative Results

Semesters ending on december 31, 2017 and June 30,

2017

Paid-in and

subscribed

capital

Premium in

share

underwriting Reserves

Results of

previous

periods Period results

- 6 -


SEPARATED STATEMENTS OF CASH FLOW(Expressed in thousands of Colombian pesos)Semesters ended on: December June

2017 2017

Cash flow from operating activities: Period results $ 328.818.686 320.039.214 Adjustments to reconcile net income to net cash provided by

operating activities: Depreciation 4.192.271 4.198.702 Amortization of intangibles 40.238.310 39.685.631 Accrued interests 79.416.969 85.475.888 Accrued yield (29.934.607) (29.771.949) Update in financial asset (81.647.725) (87.047.863) Income from equity method (181.523.789) (185.647.831) Impairment of:

Inventories 45.944 6.243 Accounts receivable 247.255 1.494.128

Accrued provisions 1.582.718 11.958.067 Exchange difference for transactions in foreign currency 748.949 (3.688.003) (Profit) Loss on the sale of:

Investments 100.000 - Tangible assets (28.944) -

Loss for derecognition of:Tangible assets 54.728 96.075 Consessions 38.156 1.247.176 Investment Properties - 336.321

Income and CREE tax 35.120.317 43.690.884 Changes in assets and liabilities:

Accounts receivable (36.300.948) (96.934.150) Inventories 308.881 (2.170.410) Equity instruments through profit or loss 31.603.508 (30.042.297) Other assets 5.992.200 978.933 Accounts payable (6.630.552) (26.950.931) Employee benefts 533.001 (251.121) Provisions (2.676.911) (553.864) Other liabilities 31.645.394 (27.423.808) Paid wealth tax (743.482) (743.483) Paid income and CREE tax (44.864.410) (48.142.053) Paid returns 44.336.733 16.910.176 Paid interests (84.226.511) (95.334.526)

Net cash provided by operating activities 136.446.141 (108.584.851)

Cash flow from investment activities:Acquisition of:

Tangible assets (8.645.183) (1.946.454) Investment in companies (14.034.029) (316.185) Concessions (37.452.376) (33.355.884) Other intangibles (9.350.004) (2.893.495)

Debt securities 4.759 4.510 Result from the sale of:

Property, plant and equipment 28.944 - Investment in associates - 14.551.270

Dividends received from investment in subsidiaries 27.898.206 83.466.782 Other dividends received - 522.647 Dividends received from investment in associates - 78.850.040

Net cash used in investment activities (41.549.683) 138.883.231

Cash flow from financing activities : Paid dividends (242.794.875) (262.079.451) Acquisition of financial obligations 118.043.816 400.911.437 Payment of financial obligations (7.225.999) (141.962.326)

Net cash provided (used) by financing activities (131.977.058) (3.130.340)

Net increase (net decrease) of cash and cash equivalents (37.080.600) 27.168.040 Effect of exchange differences on cash and cash equivalents (7.119.055) 1.619.942 Cash and cash equivalents at the beginning of the year 82.953.403 54.165.421 Cash and cash equivalents at the end of the year $ 38.753.748 82.953.403


- 7 -


NOTES TO THE SEPARATE FINANCIAL STATEMENTS AS OF DECEMBER 31 AND JUNE 30, 2017 (Expressed in thousands of Colombian Pesos, unless otherwise stated)

8 (Continues)

1. REPORTING ENTITY

Promigas S.A. E.S.P. (hereinafter Promigas S.A. E.S.P., Promigas or the Company) was incorporated in accordance with Colombian Law on December 27, 1974, and its corporate purpose is the purchase, sale, transportation, distribution, exploitation and exploration of natural gas, oil and hydrocarbons in general, and the gas and oil activities in all their forms. It can also sell or provide goods or services to third parties, either financial or non-financial, and finance the acquisition of goods or services from third parties with its own resources. As of December 31, 2017, it had 391 direct employees and 77 temporary employees. As of June 30, 2017, it had 388 direct employees and 82 temporary employees. According to the control assessment set out in IFRS 10 - Consolidated Financial Statements, Promigas S.A. E.S.P. consolidates Corporación Financiera Colombiana S.A., whose parent company is Grupo Aval Acciones y Valores S.A. However, under Act 222/1995, Promigas S.A. E.S.P. is not subordinated, since the established budgets are not met. The corporate seat of the Company is in Barranquilla, its address is Calle 66 No. 67 – 123 and its term of duration expires on December 27, 2074. The Company is supervised by the Superintendence of Residential Utilities and in order to keep the National Register of Securities and Brokers (RNVI, for its Spanish acronym) up to date is subject to the concurrent supervision of the Colombian Financial Superintendence, in accordance with the provisions of Articles 5.2.4.1.2 and 5.2.4.1.3 of single Decree 2555/2010 of the Colombian Financial Superintendence and Regulation Letter 007/2015, Title Three. The Company is also required to submit separate financial statements and consolidated financial statements, which shall include its shareholding interest in subsidiaries and investments in associates.

Promigas has the following subsidiaries as of December 31 and June 30, 2017:

Company December 2017 June 2017

Direct Indirect Total Director Indirect Total

Surtigas S.A. E.S.P. 99,99% 0,00% 99,99% 99,99% 0,00% 99,99% Transoccidente S.A. E.S.P. 68,99% 0,00% 68,99% 68,99% 0,00% 68,99% Promioriente S.A. E.S.P. 73,27% 0,00% 73,27% 73,27% 0,00% 73,27% Transmetano E.S.P. S.A. 99,66% 0,00% 99,66% 99,66% 0,00% 99,66% Gases de Occidente S.A. E.S.P. 90,12% 0,00% 90,12% 90,12% 0,00% 90,12% Compañía Energética de Occidente S.A. E.S.P. 49,00% 45,96% 94,96% 49,00% 45,96% 94,96% Orion Contac Center S.A.S. 0,00% 94,07% 94,07% 0,00% 94,07% 94,07% Promisol S.A.S. 100,00% 0,00% 100,00% 100,00% 0,00% 100,00% Gases del Pacífico S.A.C. 74,99% 25,01% 100,00% 74,99% 25,01% 100,00% Gases del Norte del Perú S.A.C. 75,00% 25,00% 100,00% 75,00% 25,00% 100,00% Promisol México S.A. de C.V. 5,00% 95,00% 100,00% 5,00% 95,00% 100,00% Zonagen S.A.S. 0,00% 99,95% 99,95% 0,00% 99,95% 99,95% Sociedad Portuaria El Cayao S.A. E.S.P. 50,98% 0,00% 50,98% 50,98% 0,00% 50,98% Enlace Servicios Compartidos S.A.S. 100,00% 0,00% 100,00% 100,00% 0,00% 100,00%



9 (Continues)

In addition, the Company has non-controlling interest in the following associates:

Company Interest Seat Gases del Caribe S.A. E.S.P. (Gascaribe) 30,99% Barranquilla Complejo Energético del Este S.A. 33,00% Panama Antillan Gas Ltd. 20,00% Dominican Republic Gas Natural de Lima y Callao S.A.C. 40,00% Peru

Regulatory Framework

Promigas is mainly governed by Act 142/1994, whereby the Public Utilities Regime is established, CREG Resolution 071/1999, whereby the Single Regulation for Natural Gas Transportation (RUT, for its Spanish acronym) in Colombia is established, Act 689/2001, whereby Act 142/1994 is partially amended, the industry’s regulations, the concession agreements in force, its bylaws and other provisions contained in the Code of Commerce.

The rates the Company charges its customers for natural gas transportation and distribution services are regulated by the National Government through the Energy and Gas Regulatory Commission (CREG, for its Spanish acronym) in the following Resolutions:

CREG Resolution Description

Transportation Service 126/2010 Establishes the general remuneration criteria for the natural gas transportation

service and the general pricing scheme of the National Transportation System for the rate period.

117/2011 The transportation rate is established. 122/2012 Adjusts the regulated rates of CREG Resolution 117/2011 068/2013 Adjusts the regulated rates of CREG Resolution 117/2011 018/2014 Amends Resolution 126/2010 for the gas pipelines that fulfilled the regulatory

life in 2013 or before. 082/2014 Adjusts the regulated rates of the transportation system. 040/2015 Adjusts the transportation rates. 084/2016

Adjusts the regulated rates for the transportation system, updating the value of the assets with expired regulatory service life in 2014.

Distribution Service 011/2003

Establishes the general remuneration criteria of the distribution service of natural gas. Sets out the distribution rate for the embedded system of Promigas S.A. E.S.P. and Gases del Caribe S.A. E.S.P.

202/2013 and 086/2004

Establishes general criteria to remunerate the fuel gas distribution activity through pipeline networks and other provisions are set out.

093/2016 Partially revokes CREG 202/2013 and files the rate records. 066/2017 Complements CREG 202/2013 and companies are allowed temporary distribution

rate.



10 (Continues)

2. BASES FOR PREPARING THE FINANCIAL STATEMENTS

2.1 Technical Normative Framework The separate financial statements have been prepared in accordance with the Accounting and Financial Reporting Standards accepted in Colombia (CFRS), set out in Act 1314/2009, regulated by Single Regulatory Decree 2420/2015, as amended by Decrees 2496/2015, 2131/2016 and 2170/2017. The CFRS are based on the International Financial Reporting Standards (IFRS), along with its interpretations, issued by the International Accounting Standards Board (IASB). The base standards correspond to the official Spanish translations by the IASB as of December 31, 2015.

The Company applies to these separate financial statements the exception contained in Article 10 of Act 1739 of December 23, 2014, which allows to recognize the wealth tax affecting equity reserves instead of recognizing the expense according to IAS 37. These separate financial statements were prepared to comply with the legal provisions to which the Company is subject as an independent legal entity, some accounting principles may differ from those applied in the consolidated financial statements and, in addition, do not include adjustments or eliminations necessary for the presentation of the consolidated financial position and the consolidated comprehensive income of the Company and its subsidiaries. Accordingly, the separate financial statements should be read in conjunction with the consolidated financial statements of Promigas and its subsidiaries. For legal purposes in Colombia, the separate financial statements are the main financial statements.

2.2 Functional and Presentation Currency

Items included in the Company’s financial statements are expressed in the currency of the primary economic environment where organization operates (Colombian pesos). Separate financial statements are presented “in Colombian pesos,” which is the functional currency of the Company and the presentation currency. All information presented in thousands of pesos has been rounded to the nearest unit.

In accordance with IAS 21 and for purposes of presenting the financial statements, below are the exchange rates used for the conversion of transactions in foreign currency:

December 2017 June 2017

Closing $ 2.984,00 3.050,43



11 (Continues)

Monthly averages:

First half-year 2017 Second half-year 2017

January $ 2.944,65

July $ 3.038,76 February 2.881,68

August

2.972,62

March

2.943,49

September

2.918,49 April

2.873,55

October

2.955,06

May

2.924,00

November

3.013,17 June $ 2.958,36

December $ 2.991,40

Assets and liabilities of foreign operations are converted into Colombian pesos at the exchange rate current on the closing date of the reported period, and the income statement is converted at the average monthly exchange rate current at the date of the transactions. Equity is converted at its respective historical rate. The resulting exchange difference is recorded in equity.

2.3 Bases for Measurements

The separate financial statements have been prepared based on the historical cost, except for the following important items included in the statement of financial position:

• Derivative financial instruments are measured at fair value. • Financial instruments are measured at fair value through profit or loss and OCI. • Financial assets under concession are measured at fair value. • Financial instruments at fair value through other comprehensive income. • Investment Properties

2.4 Use of Estimates and Judgments

The Company makes estimates and assumptions that affect the amounts recognized in the separate financial statements and the book value of assets and liabilities in the following reporting period. Judgments and estimates are continually evaluated and are based on the management’s experience and other factors, including the expectation of future events that may be reasonable given the circumstances. The management also makes certain judgments different from those involving estimates in the process of applying the accounting policies. Judgments that have the most significant effect on the amounts recognized in the financial statements and estimates that may cause a significant adjustment in the book value of assets and liabilities in the following year are the following: a. Going Concern

The Company prepares its separate financial statements based on going concern. In making this judgment, the Company’s current financial position is considered, as well as its current intentions, the results of operations and the access to financial resources in the financial



12 (Continues)

market, and the impact of such factors is analyzed for future operations of the Company. As of the date of this report, the Company’s management is not aware of any situation that would lead to think that the Company fails to have the ability of continuing the going concern over the following year.

b. Investments in Debt Securities Classified at Amortized Cost The Company applies judgments when evaluating whether in the separate financial statements the investments in debt securities may be categorized at amortized cost considering in particular its business model for managing financial assets and whether they meet the conditions for such financial assets to be measured at amortized cost. The Company may sell these assets only in limited circumstances, in rare and immaterial transactions in relation to the total portfolio, such situations as assets failing to meet the investment accounting policies of the Company, adjustments in the maturity structure of its assets and liabilities, the need to finance important capital disbursements and standing liquidity needs.

c. Impairment for Doubtful Debts

Portfolio impairment is reviewed and updated at the end of the reporting period based on aging analyses of balances and collectability evaluations of individual accounts conducted by the administration. Periodically, impairment losses that are considered uncollectible are revealed.

d. Portfolio Impairment Due to Non-bank Financing The method for calculating the provision made by the Company is based on the operation of the incurred loss model, which has the following premises:

A reference point taken to start provisioning the portfolio by age, considered in 150 days; and

A recovery rate, defined as a percentage of the value of a default age that does not pass to the following age, on the following month.

The calculation is made based on a one-(1)-year behavior analysis of the portfolio. After completing the exercise, the values are taken by age of the month to be provisioned, minus the average recovery rate of the latest year in each default age, and the result is the money with which the incurred loss is expected. It also considers the portfolio in default age greater than 360 days, which is provisioned in its entirety, as it is a portfolio that has failed to recover and shall be offset.

e. Fair value of Financial Instruments and Derivatives



13 (Continues)

Information on the fair values of financial instruments and derivatives that were measured using assumptions not based on observable market data is provided in Note 6.

f. Deferred Income Tax

Deferred income tax is recognized using the liability method on the temporary differences between the tax bases of assets and liabilities and their corresponding carrying values as of the end of the reporting period, calculated with the tax rates expected to be applicable for the period when the asset is realized or the liability is paid off, based on the rates approved or once the approval process by the Government is practically over.

Liabilities for deferred taxes are recognized for all taxable temporary differences, except taxable temporary differences regarding investments in subsidiaries, associates and interests in joint ventures, when the reversal opportunity of temporary differences can be controlled and such temporary differences are unlikely to be reversed in the near future.

Deferred tax assets are recognized for all deductible temporary differences and future compensation of tax credits and unused tax losses, to the extent there will likely be availability of future taxable income to offset against such tax credits or tax losses, except deductible temporary differences regarding investments in subsidiaries, associates and interests in joint ventures.

g. Estimate for Contingencies The Company estimates and records a provision for contingencies in order to cover any possible losses due to, inter alia, labor cases, civil and commercial proceedings, and tax assessments, according to circumstances that, based on the opinion of external legal counsel, are likely to produce losses and can be reasonably quantified.

h. Determining Functional Currency

The functional currency of Promigas was determined based on the correlative economic conditions of the country of operations. This determination requires judgment. Despite this judgment, the Company assessed, among other factors, the place of the activities, cash flows, sources of income, risks relative to these activities and the operating currency denomination of the different entities.

i. Employee Benefits The estimate of pension obligations, costs and liabilities depend on a variety of long-term premises determined by actuarial bases, including estimates of present value of projected future pension payments for those participating in the plan, considering the probability of future potential events, such as an increase in minimum wages and demographic experience.



14 (Continues)

These premises may have an effect in the amount and future contributions, should any variation occur. The discount rate allows for future cash flows to be established at present value of the measurement date. The Company determines a long-term rate that represents the market rate for high quality fixed income investments or government bonds denominated in the currency in which the benefit shall be paid, and considers the opportunity and of payment amounts of future benefits, for which Government bonds have been selected. Other key premises are used to measure actuarial liabilities, and are calculated based on the Company’s specific experience combined with published statistics and market indicators.

j. “Smart Pig or Smart Tool” Provision By regulation, the Company must perform inspections on the infrastructure to determine the maintenance plan to follow; therefore, the amount required for such inspection is annually estimated and debited from profit and loss account. The estimate is determined as follows:

The last value paid under this item is taken as base (part of this value is in dollars and another part in pesos).

The part of the value paid in dollars is indexed with projections of the CPI (consumer price index) in the United States and then converted into pesos with the exchange rate projected for the date of the next inspection. The part payable in pesos is indexed with projections of the CPI in Colombia.

Macroeconomic projections are reviewed at the beginning of each year, or at the Company’s discretion if it determines any volatility in the variables used, to adjust the provision.

3. MAIN ACCOUNTING POLICIES

The main accounting policies applied consistently to the preparation of the separate financial statements according to the Colombian Financial Reporting Standards (CFRS) are stated below:

a) Investment in Subsidiaries

Investments in subsidiaries are accounted for using the equity method as per IAS 28, according to which the investment is recorded initially at cost and then periodically adjusted for changes in the investor’s interest in the net assets of the investee. The income and other comprehensive income of the investee are included by the investor according to its interest.

b) Investments in Associates



15 (Continues)

Investments of the Company in entities over which there is no control or joint control, but where there is significant influence are called “Investments in Associates” and are carried using the equity method. Significant influence is presumed in another entity if the Company has, directly or indirectly, between 20% and 50% or more of the voting rights, unless it can be clearly demonstrated that such influence does not exist.

According to IAS 28, the existence of significant influence is usually evidenced in one or more of the following ways:

Representation on the board of directors or equivalent governing body of the investee.

Participation in the policy-making process, including decision-making on dividends and other distributions.

Material transactions between the investor and the investee.

Interchange of managerial personnel.

Provision of essential technical information.

The equity method is an accounting method based on which the investment is recorded initially at cost and then adjusted for changes in the investor’s interest in the net assets of the investee. The income and other comprehensive income of the investee are included by the investor according to its interest.

c) Dividends

Revenue is recognized when the right of the Company to receive the corresponding payment is established, which usually occurs when shareholders approve the dividend. Dividends from investments in associates and subsidiaries are recognized in the balance sheet as a reduction of investment because it is accounted for using the equity method of investment.

d) Transactions and Balances in Foreign Currency

Operations in foreign currency are translated into the Company’s functional currency on the date of the operation. Monetary assets and liabilities denominated in foreign currencies as of the date of the report are translated into functional currency at the exchange rate of that date. Gains or losses on translations of foreign currency in monetary items is the difference between the amortized cost of the functional currency at the beginning of the period, adjusted for interests and effective payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the period.

Foreign currency differences arising during the translation are recognized in income; however, foreign currency differences arising from the translation of qualified cash flow hedges are recognized in other comprehensive income, provided that the hedge is effective.



16 (Continues)

e) Financial Instruments

Financial Assets

Recognition, Initial Measurement and Classification

The initial recognition of financial assets is at fair value; in the event of a financial asset not carried at fair value through profit or loss, the transaction costs directly attributable to the acquisition of the financial asset are added.

Financial assets are classified as subsequently measured at amortized cost or fair value on the basis of:

a. The business model of the entity for managing portfolios of financial assets.

b. The characteristics of contractual cash flows of the financial asset

Purchases or sales of financial assets that require the delivery of assets within a period set out by a market standard or convention are recognized at the date of the purchase or sale, i.e., the date on which the Company commits to purchase or sell the asset.

Financial assets include cash and cash equivalents, debt securities, trade receivable and other receivables and derivative transactions.

Financial Assets at Fair Value

Financial Assets at Fair Value through profit or loss include financial assets not designated at the time of classification at amortized cost.

Financial Assets at Amortized Cost

A financial asset is measured at amortized cost using the effective interest method and net loss for impairment if:

The asset is kept within a business model in order to keep the assets to obtain contractual cash flows; and

The contract terms of the financial assets produce, on specific dates, cash flows that are only capital payments and interests.

Equity Instruments



17 (Continues)

Measured at fair value through profit or loss, except those designated through other comprehensive income considered strategic. However, in specific circumstances, cost may be an appropriate estimate of fair value. That may be the case if the recent information available is insufficient to measure fair value, or if there is a wide range of possible fair value measurements and cost represents the best estimate of fair value within that range.

Equity instruments designated at fair value through other comprehensive income are those that are neither classified as held for trading or as at fair value through profit or loss. This classification is irrevocable.

For investments in equity instruments that are not held for trading, the Company may elect the initial recognition to present gains and losses in the other comprehensive income. For such investments measured at fair value through changes in other comprehensive income, gains and losses are never reclassified to the profit and loss account and neither are impairments recognized in the profit and loss account. Dividends earned from such investments are recognized in profit and loss account unless the dividend clearly represents a repayment of part of the investment cost.

Free-standing trust funds are managed according to their purpose. When there is control, it is recognized in each line of the separate financial statements, otherwise it will be included based on interest.

Derecognition

A financial asset (or, where applicable, part of a financial asset or part of a group of similar financial assets) is derecognized when:

Contractual rights on the asset’s cash flow expire;

The contractual rights on the asset’s cash flow are transferred, or an obligation is undertaken to pay a third party all cash flow without significant delay, through a transfer agreement

Substantially all risks and benefits inherent to the property of the asset have been transferred;

All risks and benefits inherent to the property of the asset have been substantially withheld, but the control thereof has been transferred.

Financial Liabilities

A financial liability is any contractual obligation to deliver cash or other financial asset to another entity or person or to exchange financial assets or liabilities under potentially unfavorable conditions for the Company, or any agreement that will or may be liquidated using equity instruments of the entity. Financial liabilities are initially recorded by their transaction value, unless otherwise determined, being similar to its fair value, less transaction costs directly



18 (Continues)

attributable to their issue. Subsequently such financial liabilities are measured at amortized cost according to the effective interest rate method initially determined and debited from profit and loss account under financial expenses.

Financial liabilities are only derecognized from the balance sheet when generated obligations are extinguished or when they are acquired (either with the intention of repaying them or reinvesting in them). Offset of Financial Instruments in the Balance Sheet Financial assets and liabilities are offset and the net amount is reported in the statement of financial position when there is a legal right to offset such recognized amounts and the management intends to liquidate them on a net basis or realize the asset and liquidate the liability simultaneously.

f) Transactions with Derivate Instruments

A derivative is a financial instrument that changes value over time based on an underlying variable, it does not require an opening net investment or a small investment with respect to the underlying asset and is liquidated on a future date. Forward contracts entered into by the Company to cover the fluctuation of exchange rates in revenues are considered a cash flow hedge, given that they cover a particular risk associated with a recognized asset or liability or a highly likely expected transaction, in which case the effective portion of the changes in the fair value of derivatives is recognized in the account other comprehensive income in equity. Gains or losses in the derivative relative to the portion that is not effective to the hedge or that does not correspond to the hedged risk is recognized immediately in the income statement. Hedge accounting is implemented while the forwards remain within the range of effectiveness (80% and 125%). Derivative transactions are revealed at baseline. Subsequent changes in the fair value are adjusted by debiting or crediting profit and loss account, as applicable, unless the derivative is defined as hedge, if so, the nature of the hedged item. Hedge derivatives are defined as the cumulative values in the account other comprehensive income transferred to earnings for the period where the hedged item is also carried to income.

The Company documents, at the beginning of the transaction, the relationship between the hedging instrument and the hedged item, as well as the risk objective and the strategy to undertake the hedge relationship. The Company also documents its assessments both at the date of the transaction and on the recurring basis that the hedging relationship is highly effective in offsetting changes in fair value or cash flows of hedged items.



19 (Continues)

Financial assets and liabilities by transactions with derivatives are not offset in the statement of financial position; however, when there is a legal and exercisable right to offset the recognized values and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously, they are then presented net in the separate statement of financial position.

Profits and losses for settlement of contracts are recognized at the end of each month.

g) Net Investment Hedges in Foreign Operations

Promigas uses different financial instruments in order to manage its exposure to exchange rate risks. Financial liabilities are measured at amortized cost; those traded with a foreign currency generate an exchange difference. The gain or loss from the exchange difference is immediately recognized through profit or loss unless the financial liability is designated and in effect as a hedging instrument, in which case the time of recognition through profit or loss depends on the nature of the hedge ratio. The hedge is classified as a net investment in foreign operation when it hedges the exchange rate risk that arises from the translation effect of a net investment in foreign operation. At the beginning of the hedge ratio, Promigas documents the relationship between the hedging instrument and the hedged item, together with its risk management objectives and its strategy for carrying out various hedging transactions. Additionally, at the beginning of the hedge and on a continuous basis, Promigas documents whether the hedging instrument is highly efficient in counteracting changes in market values or the cash flows of the hedged item attributable to the hedged risk. The effective portion of the changes in the financial liabilities that are designated and that qualify as hedges of a net investment is recognized in other comprehensive income and accumulated under the net investment hedge. The loss or gain related to the ineffective portion is recognized immediately through profit or loss, and is included in the profit or loss item in the exchange rate of the income statement for foreign currency hedging instruments. The amounts previously recognized in other comprehensive income and accumulated in equity are reclassified in income for the periods in which the hedged item is recognized in income. These profits are included within the same heading of the income statement of the recognized hedged item. Hedge accounting is discontinued when the hedging instrument expires or is sold, completed or exercised, or when it no longer meets the hedge accounting criteria. Any loss or gain recognized in other comprehensive income and accumulated in equity at that time is held in equity and recognized when the expected transaction is finally recognized in profit or loss. When an expected



20 (Continues)

transaction will not occur, the accumulated loss or gain in equity is immediately recognized in profit or loss.

h) Cash

Cash comprises cash and bank balances that are subject to an insignificant risk of change in value, and are used by the Company in the management of its short-term commitments.

i) Property, Plant and Equipment

Recognition and Measurement Elements of property, plant and equipment elements are measured at cost less cumulative depreciations and cumulative amounts and any impairment losses suffered. Costs include expenditures that are directly attributable to the acquisition of the asset. The cost of assets built by the Company includes the cost of materials and direct labor and any other costs directly attributable to the process of bringing the asset to a working condition for its intended use, costs of dismantling, removing and restoring the site where they are located. Subsequent Costs The cost of replacing part of an item of property, plant and equipment is capitalized if future economic benefits are likely to be received and their cost can be measured reliably. The book value of the replaced part is derecognized. Daily maintenance costs of property, plant and equipment are recognized in profit or loss when incurred. Depreciation The cost of assets is estimated linearly over the depreciable amount, which corresponds to the cost of the asset, minus its residual value. The estimated services lives for current and comparative periods are as follows:

Years

Constructions and buildings 50 Machinery and equipment 10 Transportation fleet and equipment 5 Computer and communication equipment 5 Furniture and fittings 10

Depreciation methods and service lives are reviewed each year and adjusted if necessary.



21 (Continues)

Disposals

The difference between the proceeds of the sale and asset’s net book value is recognized in the income statement under the item other revenues.

j) Loan Costs

The Company capitalizes loan costs directly attributable to the purchase, construction or production of qualifying assets, as part of the cost of such assets. A qualifying asset is an asset that necessarily takes over six (6) months of construction and/or mounting to get ready for its intended use or sale.

k) Leases

Assets Received under Lease Leases in terms of which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. On initial recognition, the leased asset is measured at the lower of either fair value or the present value of the minimum lease payments. After initial recognition, the asset is accounted for in accordance with the applicable accounting policy.

Other leases are operating leases, and the leased assets are not recognized in the Company’s separate statement of financial position. Assets Delivered under Lease Assets delivered under lease are classified at the time of signing the lease as financial or operating leases. A lease is classified as financial when it substantially transfers all the risks and advantages inherent in the property. A lease is classified as operating if it does not substantially transfer all the risks and benefits inherent in the property. Leases classified as financial are included in the balance sheet under “financial assets at amortized cost - accounts receivable“ and are accounted for in the same way as the loans granted. Leases that are classified as operating are included within the property, plant and equipment account and are accounted for and depreciated considering the asset class.

l) Intangible Assets

The cost of intangible assets is recognized at fair value at the date of purchase. After the initial recognition, the intangible assets are accounted for at cost less any cumulative amortization and any cumulative impairment loss.

Intangible assets with finite service lives are amortized over such financial service lives and are assessed to determine whether impairment occurred, provided that there are signs that an



22 (Continues)

intangible asset may have suffered such impairment. The amortization period and method for an intangible asset with finite service life is reviewed at the closing of each reported period.

The service life of intangible assets that include software and licenses is 3 to 5 years.

Gains or losses arising from derecognizing an intangible asset are measured as the difference between net income from the sale and the book value of the asset, and are recognized in the income statement when the asset is derecognized.

The Company records as expenses for the period all research costs, as well as any development costs where the technological and commercial feasibility thereof cannot be established.

m) Concession Agreements

Promigas recognizes the intangible asset arising from a service concession agreement when there is the right to charge for the use of concession infrastructure. On initial recognition, an intangible asset received as consideration for providing construction or improvement services in a service concession agreement is recognized at fair value. After initial recognition the intangible asset is measured at cost, including capitalized loan costs, less accumulated depreciation and accumulated impairment losses.

An intangible asset is recognized when there is no unconditional right to receive cash and the revenues are contingent on the extent of use of the asset under concession for the service provision. In some cases there may be mixed agreements, where part of the agreement is a financial asset and the other part is an intangible asset. In the case of Promigas, the financial asset is not for the remuneration of the transportation service, but for the obligation to sell the gas infrastructure by the end of the term of the agreement. Based on the above, rights in concession agreements are recorded by the Company as follows: (a) Revenues from the construction and costs relative to the constriction of concessions are

recorded in the income statement after completing stages of the project in the reported period.

(b) If the concession agreement qualifies as a financial asset, the asset arising in the agreement

is included in the account “other accounts receivable at fair value” and recognized at the present value of future payments to which the Company is entitled, discounted using the effective interest rate, in the event they are financial assets with mandatory sale at fair price at the end of the agreement. These financial assets are designated at fair value through profit or loss.

(c) In addition, cumulative disbursements during the construction phase of the project are

recognized as intangible assets, and amortized over the term of the concession agreement,



23 (Continues)

save for compressors, which are amortized over the shortest between the concession agreement and its service life, in a straight line debited on profit or loss from the date when the construction is completed and the corresponding asset is put the service of the users. Compressor stations are amortized as follows:

Component Years Rate

Centrifugal compressors Turbine (30,000 hours) 11*

Compressor (60,000 hours) 22*

Reciprocating compressors Motor-compressor (20,000 hours) 7* Compressor (40,000 hours) 15*

Skid Valves 20 5% Ancillary Systems:

Cooling Units 20 5% Fire Protection Equipment 10 10%

Ancillary Equipment: Fuel Gas Skid 20 5%

Air Compressor Skid 10 10% Station Dashboard 5 20% Motor control center 20 5% Power Generator 10 10% Valves and Accessories 20 5% Separator filters 10 10%

(*) Equivalence is calculated with the percentage of each compressor stations’ statistical use.

n) Inventories

Inventories are materials for the provision of services, measured at the lower of either the cost or the net realizable value. The cost includes the purchase price of inventories and other direct costs required to make them available for use. The cost of consumed inventories is determined by using the weighted average price method and classified either as short- or long-term based on the item’s rotation. The net realizable value is the estimated selling price in the ordinary course of business less trading and distribution expenses.

o) Noncurrent Assets Held for Sale



24 (Continues)

Noncurrent assets are classified as held for sale if it is highly likely that their value will be recovered mainly by their sale and not by their continuous use. These assets are recorded by the lower of either its book value at the time of its transfer to this account or its fair value less estimated selling costs. When classified as held for sale, intangible assets and property, plant and equipment are not amortized or depreciated, and the investees accounted for under the equity method are no longer accounted for under this method.

p) Prepaid Expenses and Prepaid Assets

Prepaid expenses mainly comprise insurance, services and leases paid in advance, amortized monthly at the contractual term, through profit or loss. Insurance - Insurance is recognized at cost; depreciation is calculated using the straight-line method to allocate the cost to profit or loss at the end of the term of the policy, i.e., one (1) year.

q) Taxes

Income Tax The tax expense or income comprises the current and deferred income tax for the period. Current and deferred taxes are recognized as income or expense and are included in profit or loss, except when related to items recognized in other comprehensive income or directly in equity, in which case, the current or deferred tax is also recognized in other result comprehensive income or directly in equity, respectively. Current Taxes Current tax is the amount payable or to recover current income tax. It is calculated based on the tax laws enacted as of the date of statement of financial position. Management periodically evaluates positions taken in tax returns with respect to situations where tax laws are subject to interpretation and, if necessary, makes provisions on the amounts expected to be paid to the tax authorities.

To determine the provision of income tax, the Company makes its calculation based on the higher value between taxable income and presumptive income (minimum return on equity last year that the law presumes to establish the income tax). The Company only compensates tax assets and liabilities to current earnings if there is a legal right to the tax authorities and it intends either to settle the debts resulting on a net basis or to realize assets and settle debts simultaneously.

Deferred Taxes



25 (Continues)

Deferred tax is recognized using the liability method, determined on temporary differences between the tax bases and the book value of assets and liabilities included in the financial statements. Deferred tax liabilities are the amounts payable in the future as income tax related to taxable temporary differences, while deferred tax assets are the amounts to be recovered by way of income tax due to the existence of deductible temporary differences, tax loss carryforwards or deductions pending application. Temporary difference is understood as the difference between the book value of assets and liabilities and their tax base. i. Recognition of Taxable Temporary Differences Deferred tax liabilities arising from taxable temporary differences are recognized in all cases except if:

They arise from the initial recognition of capital gains or an asset or liability in a transaction that is not a combination of business and that on the date of such transaction neither the accounting result or the taxable income is affected.

They correspond to differences associated with investments in subsidiaries and associates, and interests in joint ventures, when the reversal opportunity of temporary differences can be controlled and such temporary differences are unlikely to be reversed in the near future.

In the case of the recognition of deferred tax liabilities for temporary differences related to investments in associates when the intention to sell the investment is not expected in the foreseeable future, only deferred tax liabilities will be recognized for the existence of undistributed earnings that may generate dividends taxed in the foreseeable future and for which there is no agreement that sets forth the non-distribution of taxed dividends.

ii. Recognition of Deductible Temporary Differences Deferred tax assets arising from deductible temporary differences are recognized provided that:

Future taxable incomes against which the temporary differences may be offset are likely to be available, except in those cases where the difference arise from the initial recognition of assets or liabilities in a transaction that is not a combination of business and that on the date of such transaction neither the accounting result or the taxable income is affected.

Correspond to temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, when the temporary differences are likely to be reversed in the near future and positive future tax gains are expected to offset such differences.

Deferred tax assets that fail to meet the above conditions are not recognized in the statement of financial position. The Company reconsiders at the end of the reporting period whether the conditions are met to recognize deferred tax assets that had not previously been recognized.



26 (Continues)

Tax planning opportunities are considered in the recovery assessments of deferred tax assets only if the Company intends to adopt them or will likely adopt them.

iii. Measurement Deferred tax assets and liabilities are estimated using the tax rates applicable for the period where asset realization is expected or liabilities are going to be paid, based on the regulations enacted or expected to be enacted, and after considering the tax consequences that arise from the way in which the Company expects to recover assets or settle liabilities.

The company reviews at the end of the reporting period the carrying value of the deferred tax assets, in order to reduce such value so that it becomes unlikely that there will be sufficient future taxable income to offset them.

iv. The Company’s non-monetary assets and liabilities are measured in terms of its functional currency. If tax losses or profits are calculated in a different currency, exchange rate differences give rise to temporary differences and the recognition of a liability or a deferred tax asset and the resulting effect is charged or credited to profit or loss for the period.

v. Offset and Classification The Company offsets deferred tax assets and liabilities over current income when there is a legal right with tax authorities and those assets and liabilities relate to the same tax authority. Offset deferred tax assets and liabilities are recognized in the statement of financial position as noncurrent assets and liabilities regardless of the expected date of realization or settlement.

Wealth Tax Article 1 of Act 1739 of December 23, 2014, creates as of January 1, 2015, an extraordinary tax called wealth tax, which will be temporary for taxable years 2015, 2016 and 2017. The tax will be accrued annually on January 1 each year. This Act provides that, for accounting purposes in Colombia, such tax may be recorded against equity reserves). The Company decided to benefit from this exemption and recorded the wealth tax in 2017, 2016 and 2015 against capital reserves.

r) Provisions

A provision is recognized if it is the result of a past event, the Company has a legal or implicit obligation that can be estimated reliably, and an outflow of economic benefits to settle the obligation is probably necessary. Provisions are determined by discounting the cash flow expected in the future from the pre-tax rate that reflects the current market assessment of the value of money over time and the specific risks of the obligation.



27 (Continues)

Dismantling and Removal Costs The best estimate of the provision for the cost of dismantling and removing an item or restoring the site where it is located is recognized when there is an obligation. The estimate is based on a current obligation (legal or implied) arising from the purchase, construction or development of a long-term asset. If it is unclear whether a current obligation exists, the entity may assess the evidence under the most likely threshold. Such threshold is assessed in relation to the settlement risk of the obligation.

“Environmental Obligations” Provision The Company must periodically review the existence of environmental obligations resulting from new and existing projects. The recorded estimate will be the best estimate of the disbursement necessary to settle the present obligation.

Insofar as environmental costs are costs necessary for an asset to function as expected by management, they are recorded as a higher value than the asset that originates them. The provision is updated periodically through profit or loss.

s) Impairment

Financial Assets By the end of each reported period, the Company assesses whether there is any objective evidence of an impaired financial asset or group thereof. A financial asset or group thereof is considered impaired only if there is objective evidence of impairment as a consequence of one or more events occurring after the initial recognition of such asset (an “event causing the loss”), and if such event causing the loss has an impact over future estimated cash flows of the financial asset, which can be reliably estimated.

Objective evidence of impairments may include signs of debtors or group thereof having significant financial difficulties, nonpayment of or default in principal or interest payments, the likelihood of entering bankruptcy or other form of financial reorganization, and when observable data indicate that there is a measurable decrease in future estimated cash flows, such as adverse changes in the status of overdue payments or in the financial conditions that correlate with defaults.

To determine the impairment of financial assets, the Company and its subsidiaries use the quantification of incurred losses, which considers three basic factors: exposure, probability of default and severity, as follows:

Exposure is the amount of risk at the time of the counterparty default.

Probability of default is the likelihood that the counterparty defaults on its obligations of principal and/or interest payments. Probability of default is associated with the rating/scoring of each counterparty/transaction.



28 (Continues)

Severity is the estimate of the loss if default occurs. It mainly depends on the counterparty’s characteristics and the appraisal of guarantees or collaterals associated with the transaction.

If in subsequent periods a recovery of the financial asset’s value at amortized cost were evident, the loss due to impairment would be reversed. Such reversal will be limited to the book value the financial asset would have had should the loss due to impairment had not been recorded. The record of the reversal is recognized in the income statement.

Non-Financial Assets Impairment tests will be conducted when there are signs that the book value of an asset may exceed its recoverable amount. The recoverable amount of an asset is the higher of either its fair value minus disposal costs or its use value. The Company will assess at the end of the period whether there are any signs of impairment on the asset. If any, the Company would estimate the asset impairment. Corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, the recoverable amount is determined for the cash-generating unit to which the corporate asset belongs. Impairment losses are recognized in profit and loss account. Impairment losses recognized in respect of cash-generating units are firstly distributed to reduce the carrying amount of any capital gains distributed to the units and then to reduce the carrying amount of other assets in the unit (unit groups) on a pro rata basis. An impairment loss with respect to capital gains is not reversed. With respect to other assets, impairment losses recognized in prior periods are evaluated at the end of each reporting period, seeking any indication that the loss has decreased or disappeared. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only if the carrying amount of the asset does not exceed the carrying amount that would have been determined net of depreciation or amortization and if no impairment loss has been recognized. Capital gains that are part of the book value of an investment in a subsidiary in accordance with Act 222/1995 are not recognized separately and, consequently, no impairment tests are applied separately. Instead, the total amount of the investment is tested for impairment as a single asset when there is objective evidence that the investment may be impaired.

t) Revenues

Service Provision Promigas provides gas transmission pipeline maintenance and other services related to the transport activity. The recognition of revenue from the provision of services is realized in the accounting period in which the services are rendered, by reference to the stage of completion of



29 (Continues)

the specific transaction and evaluated on the basis of the actual service provided as a proportion of total services to be provided. When services are provided through an indeterminate number of acts over a specified period of time, revenue is recognized linearly along the agreed time interval.

Non-bank Financing Revenues from non-bank financing are recognized in the income statement at amortized cost using the effective interest method.

Construction Contracts Revenues from ordinary activities in construction contracts on networks under concession are measured at fair value of the consideration received or expected. Promigas recognizes the revenues from ordinary activities and costs according to IAS 11 – Construction Contracts, considering the completion stage of some construction phases. Revenues are measured at fair value of the consideration received or expected.

Sale of Assets Revenues from sale of assets are recorded when the significant risks and benefits pertaining to the ownership of the assets have been transferred to the buyer, generally when delivering such assets.

u) Financial Revenues and Costs

It mainly includes revenues and/or expenses for the update of the financial asset associated with the concession, which is periodically updated through profit or loss. Additionally, the Company’s financial revenues and costs include interest revenues and expenses, which are recognized using the effective interest method and the exchange difference.

v) Recognition of Costs and Expenses

The Company recognizes its costs and expenses as economic events occur in such a way that they are systematically recorded in the corresponding accounting period (accrual), regardless of the flow of monetary and financial resources (cash).

An expense is immediately recognized when a disbursement does not generate future economic benefits or when it fails to meet the necessary requirements for recognition as asset.

w) Costs of Construction Contracts

Costs related to construction contracts include costs that relate directly to the specific contract, costs that relate to contract activity in general and that can be allocated to the contract, and any other costs that can be charged to the customer, under the terms agreed in the contract.



30 (Continues)

x) Earnings per Share

Promigas presents information of basic earnings per shares of its common shares. Basic earnings per shares are estimated by dividing the result attributable to the Company’s common shares by the weighted average of common shares outstanding during the period, adjusted by own shares held.

y) Operating Segments:

The information by segment is presented consistently with the internal reports provided to those responsible for relevant operating decision-making. The following segments are considered for the separate financial statements:

Gas Transportation

Gas and Energy Distribution

Other Services

Non-bank Financing

Senior Executives regularly review the results of the segments and evaluate the results of each operation and the resources that must be allocated.

4. RESTATEMENT OF PREVIOUS FINANCIAL STATEMENTS

4.1. Due to change in the technical positions with respect to the classification of income by

equity method. After the issue of the financial statements as of June 30, 2017, the Company analyzed technical positions with respect to the classification in the statement of comprehensive income of the income by the equity method in subsidiary and associate companies and concluded that they should be classified in a separate line that is not part of the gross margin.

4.2. Due to the change in the technical positions with respect to the classification of the change in the fair value of the financial asset due to the Company’s right under the concession contracts.

After the issue of the financial statements as of June 30, 2017, the Company analyzed technical

positions with respect to the classification in the statement of comprehensive income of the

income arising from the change in the fair value of the financial asset due to the Company’s

right under the concession contracts and concluded that they should be classified as part of

the financial revenues/costs.



31 (Continues)

Below is the effect on the presentation of the separate statement of comprehensive income for the half-year ended June 30, 2017:

Balance previously presented

Equity method

Fair value financial asset

Restated balance

Revenues from ordinary activities $ 604.811.535

(185.647.831) (87.047.863) 332.115.841 Sales cost

(132.462.062)

-

-

(132.462.062)

Gross profit

472.349.473

(185.647.831)

(87.047.863)

199.653.779 Operating expenses

(42.319.608)

-

-

(42.319.608)

Share in profits of subsidiaries

-

109.946.512

-

109.946.512 Share in profits of associates

-

75.701.319

-

75.701.319

Dividends received

522.647

-

-

522.647 Others, net

(1.841.079)

-

-

(1.841.079)

Result of operating activities

428.711.433

-

(87.047.863)

341.663.570 Financial revenues

43.216.697

-

87.047.863

130.264.560

Financial expenses

(108.198.032)

-

-

(108.198.032)

Earnings before income tax

363.730.098

-

-

363.730.098 Income tax

(43.690.884)

-

-

(43.690.884)

Net income $ 320.039.214

-

-

320.039.214

5. RISK MANAGEMENT

The Company is exposed to a variety of risks, including market risk (including foreign exchange risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk, liquidity risk, operational and legal risks, which are managed depending on their nature.

a. Risk Management Framework

The Company’s Board of Directors is responsible for establishing and supervising the risk management structure of Promigas. The Company’s risk management policies are provided in order to identify and analyze the risks faced by Promigas, set limits and appropriate risk controls, and monitor risks and adherence to limits. Policies and risk management systems are reviewed regularly to reflect changes in market conditions and activities of Promigas. The Company, through its management standards and procedures, aims to develop an environment of disciplined and constructive control where all employees understand their roles and obligations.

b. Market Risk:



32 (Continues)

1. Macroeconomic Factors

The main macroeconomic factors that impact the financial results of the Company are devaluation, inflation and interest rates. Operating revenues are generated through fees that are indexed in US dollars, transport service invoices are issued in Colombian pesos and settled with the exchange rate at the time of invoice, while 95% of costs are in Colombian Pesos. Therefore, the exchange rate variation may positively or negatively affect income. The exchange rate exposure is mitigated by the contracting of financial hedging instruments (Forwards), which are contracted provided that future dollar sale rates are greater than or equal to the macroeconomic bases budgeted by the Company. With respect to inflation, DTF and other interest rates, Promigas is exposed given that the total debt of the Company is indexed to these macroeconomic indexes. The risk for these variables is mitigated by maintaining a permanent monitoring, which allows timely decision making, maintaining or refinancing existing credits or contracting new obligations, always seeking, where possible, to minimize financial costs.

2. Vulnerability to Changes in Interest Rates and Exchange Rates

Fluctuations in interest rates may negatively or positively affect the Company; however, to mitigate any negative impact that may arise, each and every financial obligation is contracted without prepayment penalty in order to benefit in the event of falls in market rates. As for the vulnerability to exchange rates, each project is analyzed independently to determine its exposure and the strategy to be implemented, which could be through the contracting of derivatives or the implementation of hedge accounting. For example, asset accounts held in foreign currency can be hedged naturally with financing in the same currency. Financial liabilities or accounts payable in foreign currency that do not have natural hedging with an active account may be hedged by the contracting of derivatives or by accounting derivatives. The measures implemented seek to minimize exchange rate risk.

3. Risk of Variation in the Exchange Rate of Foreign Currency:

The Company is exposed to variations in the exchange rate produced by transactions in several currencies, mainly in US Dollars. Currency risk in foreign currency arises from assets, liabilities, income, costs and some recognized expenses. Assets, liabilities and transactions denominated in foreign currency are those made in currencies different from the Company’s functional currency. As of December 31 and June 30, 2017, assets and liabilities denominated in foreign currency, expressed in Colombian pesos are:

December 2017

June 2017



33 (Continues)

Dollars

Thousands of

Cop $ Dollars

Thousands of Cop $

Current assets $ 6,762,466 20.179.199

10,734,534 32.744.944 Noncurrent assets (1) 205,801,330 614.111.169 195,262,666 595.635.094

Total assets

212,563,796 634.290.368

205,997,200 628.380.038

Current liabilities

(1,325,294) (3.954.677)

(989,901) (3.019.624)

Long-term liabilities (2)

(123,917,159) (369.768.803)

(123,504,010) (376.740.336)

Total liabilities

(125,242,453) (373.723.480)

(124,493,911) (379.759.960)

Net asset (liability) position $ 87,321,343 260.566.888 81,503,289 248.620.078

(1) Corresponds to the contract signed between Promigas S.A. E.S.P. and Promisol S.A. for the lease of

equipment with purchase option located in the Jobo station, with a 5-year term from December 1, 2016, and equipment located at the Bonga & Mamey Plant, with a 12-year term from January 2017, see note 9.

(2) Corresponds to the syndicated loan negotiated in December 2016 and received during the first half of 2017, maturing in 2020 with a 2-year grace period and a Libor + 2.5 rate.

Revenues received by the Company for the gas transport service are determined by the dollar rate. The sensitivity due to the effect of the dollar in revenues is as follows:

Dollar fluctuation effects:

Variable Scenario Devaluation Impact Value (in

millions)

Exchange Rate

Low + 4,00% EBITDA $ 1.105 Net Profit 2.220

Medium 0,00% EBITDA - Net Profit -

High - 4,00% EBITDA (1.110) Net Profit $ (2.126)

For the above sensitivity, we start from the medium scenario, which is the real scenario. For the low and high scenarios, a fluctuation of the devaluation in more or less 400 points is considered.

Hedge Accounting

Promigas generates revenues from the transportation service of gas under a regulated rate in US Dollars and to mitigate the risks of exchange rate effect, hedge positions with Non-Deliverable Forwards are taken to cover expected cash flows based on the income projection. The company



34 (Continues)

policy consists on ensuring at least the budgeted income, neutralizing the exchange rate risk without speculating on the currency. Promigas contractually monetizes the monthly invoicing with the average Exchange Rate for the month, so hedge agreements must replicate the exchange Rate of the contract. Through Non-Deliverable Forwards the Company has the option to take as much forwards as there are business days in a month, given that these are negotiated (settled) daily, with an averaged base of the revenues wishing to cover, to which different strike rates apply. At the end of the month, the average rate with which the revenues are contractually settled is simulated with the sum of the settled forwards. The Company’s risk management strategy consists on adjusting the value of the hedge instrument periodically, so it reflects the changes in the hedged position. In order to measure the efficiency expected at the beginning of the hedge and the actual efficiency during the hedge period, the Market to Market-MtM valuation and the Dollar Offset method will be used under an efficiency range of 80-125 percent.

c. Price Risk:

Companies in the regulated business of gas transportation and distribution have a selling price directly established by the government through the Energy and Gas Regulatory Commission (CREG) and for fixed periods; therefore, such companies do not have fluctuation risks. Price changes are generated in times of rate recalculations when the CREG defines the methodology and variables to be included in the respective calculation.

d. Credit Risk:

Promigas, through its non-bank financing program - Brilla, is exposed to credit risk, which consists of the debtor causing a financial loss for not fulfilling its obligations. The exposure to credit risk arises as a result of the activities of the Brilla program and the transactions with counterparties that give rise to financial assets, executed by Surtigas S.A. E.S.P., where Promigas currently finances the operation, as well as the portfolio that has been financed by Promigas for Gases Del Caribe S.A. E.S.P. and Gases De La Guajira S.A. E.S.P.

The maximum exposure to credit risk is the amount of the commitments, reflected in the book value of financial assets and in the Company’s statement of financial position. The principles and rules for managing the Brilla credit are stated in the Non-Bank Financing Policy. The evaluation criteria to control credit risk follow the guidelines provided by the Non-Bank Financing Policy, the Portfolio Committee and the Brilla Board of Directors.



35 (Continues)

The maximum credit authority is the Board of Directors, which guides the general policy and has the power to establish the credit limits for each distributor that handles credit requests and is responsible for the analysis, monitoring and results

For credit approvals, the user's payment behavior during the last two years is taken into account and, additionally, for the gas distribution companies, that have finished paying the gas connection or their debt is less than three hundred thousand pesos. The Company calculates the portfolio provision considering the incurred loss. For monitoring and measuring the portfolio, the Company has the indicator of non-performing loans. Monthly monitoring of the portfolio is conducted based on the analysis of nonperforming loans by age. Four times a year, the Portfolio Committee meets, presenting the indicators and reviewing the cases that affect collection in order to set out strategies and action plans to improve recovery, and analyzes the collection process by the contractor firms and the reports by locations in order to identify related items of default that establish a trend and control them immediately.

Portfolio Concentration: Aware of the economic capacity of users to whom the Brilla program is targeted, average limits of $1.750 are assigned to economic strata 1 through 3 and an average of $2.450 for strata 4 through 6, taking into account the socioeconomic stratum and that the user must have a good record in their payment behavior, thus mitigating portfolio concentration per user. The nonperforming loan indicator is monitored by location in order to control portfolio impairment.

As of December 31, 2017, the Brilla portfolio of Promigas increased by 7% with respect to the same period in the previous year, due to placements made by Surtigas S.A. E.S.P. Since 2014, Promigas S.A. E.S.P. has not made portfolio placements through Gases del Caribe S.A. E.S.P. and Gases de la Guajira S.A. E.S.P. given that they are funding with their resources and these entities are collecting the uncollected portfolio of Promigas S.A. E.S.P.

e. Liquidity Risk:

Liquidity risk is related to the inability of meeting obligations to creditors, for which purpose the Company reviews its available resources on a daily basis. With the information obtained, the Company determines the liquidity needs and makes the relevant decisions to define the excess liquidity placement strategy, seeking to optimize profitability and minimize concentration risk.

f. Interest Rate Risk:

The Company and its subsidiaries are exposed to market fluctuations effects in interest rates that affect its financial position and future cash flows.

Meanwhile, financial obligations are exposed to the effects of fluctuations in market interest rates that affect their future cash flows. For this, the Company periodically reviews the conditions of



36 (Continues)

financial obligations to analyze whether hedges need to be replaced, prepaid or managed. 100% of the financial obligations are contracted without prepayment penalty clauses in order to have benefit in cases of drops of market rates.

Promigas contracts loans in pesos indexed to DTF, CPI, Libor and Fixed Rate; in addition, issues of ordinary bonds are indexed to the CPI. As of December 31, 2017, the rates of the financial debt of Promigas consisted of 15.66% Libor, 10.33% DTF, 1.81% Fixed Rate and 72.21% CPI.

The sensitivity of the net result of fluctuations of interest rates is detailed in the table below:

DTF fluctuation effects:

Variable Scenario Rate Impact Value

DTF

Low 7,24% Net Income $ (1.476.286)

Medium 9,24% Net Income

-

High 11,24% Net Income $ 1.476.286

For the above sensitivity, we start from the medium scenario, which is the real scenario. For the low and high scenarios, a fluctuation of the devaluation in more or less 100 basic points and a 40% tax rate is considered. The result will be reflected through profit or loss on the following periods.

CPI fluctuation effects:


CPI

Low 6,06% Net Income $ (10.320.000)


-

High 10,06% Net Income $ 10.320.000

For the above sensitivity, we start from the medium scenario, which is the real scenario. For the low and high scenarios, a fluctuation of the devaluation in more or less 100 basic points and a 40% tax rate with respect to the medium scenario. Libor fluctuation effects:


Libor

Low 2,03% Net Income $ (750.000)


-

High 6,03% Net Income $ 750.000



37 (Continues)

For the above sensitivity, we start from the medium scenario, which is the real scenario. For the low and high scenarios, a fluctuation of the devaluation in more or less 100 basic points and a 40% tax rate with respect to the medium scenario.

According to the analysis discussed above, the methodology and assumptions used are still valid and have not been modified.

Promigas receives dividends from its gas distributor subsidiaries, which have revenues adjusted for CPI, therefore, the business has a natural hedge against fluctuations that this variable may have.

Promigas uses the resource investment mechanism to optimize their treasury strategies through Mutual Funds, the returns of which are product of the daily valuation of their portfolios at market price These, can increase interest margins, but can also reduce them and generate losses if unexpected movements in the rate of such funds occur. The Company monitors on a daily basis the balance of the money invested in Mutual Funds, in order to make decisions whether to transfer the resources to bank accounts in adverse events or keep them, considering that these investments are demand deposits and can be made available at any moment.

In addition, resources remain invested in savings accounts or current accounts with special remuneration, which do not have interest rate risk because they are fixed rates agreed with the banks. In turn, financial obligations are contracted without prepayment clauses in order to have benefit in the event of market rate decreases.

6. DETERMINING FAIR VALUES

Some of the Company’s accounting policies and disclosures require fair value measurement of both financial and non-financial assets and liabilities.

The Company has established a control framework regarding the measurement of fair values. This includes the finance team, which has the overall responsibility for the supervision of all significant fair value measurements.

Fair value of assets and liabilities traded in active markets (such as financial assets in debt and equity securities and derivatives actively traded in securities exchange or interbank markets) is based on market prices quoted at the end of the trade on the reporting period closing.

An active market is a market where transactions for assets or liabilities are carried out with the required frequency and volume to provide pricing information on an ongoing basis.

The fair value of financial assets and liabilities not traded in an active market is determined using valuation techniques permitted by the CFRS that are in line with those established by the Financial



38 (Continues)

Superintendence. Promigas uses a variety of methods and assumes that they are based in market conditions existing on the closing date of each period. The valuation techniques used for forwards include the use of recent similar transactions in equal conditions, references to other substantially similar instruments, discounted cash flow analysis, option pricing models and other valuation techniques commonly implemented by market participants that make the most of market data and rely as little as possible on entity specific data.

Promigas develops internal financial models to measure instruments that lack active markets, which are based on generally accepted valuation methods and techniques standardized for the different objects. Under this practice, Promigas has estimated the fair value of the financial asset that arises in pipeline concession agreements according to IFRIC 12 - Service Concession Arrangements, and in its estimate by not having observable market transactions or market information. Such markets must estimate the price of an ordered transaction to sell the asset or transfer the liability between market participants on the date of the measurement under current market conditions. The output of a model is always an estimate or approximation of a value that cannot be determined with certainty, and the valuation techniques used may not fully reflect every factor relevant to the positions of the Company. Therefore, valuations are adjusted, if necessary, to allow additional factors, including model, liquidity and counterparty risks. The fair value hierarchy has the following levels:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.

Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs for the asset or liability.

The level of the fair value hierarchy within which the fair value measurement is categorized in its entirety is determined based on the lowest level input that is significant to the entire measurement of the fair value. For such purpose, the importance of an input is assessed with respect to the measurement of fair value in its entirety. If a measurement of fair value uses observable inputs that require significant adjustments based on unobservable inputs, such measurements is a Level 3 measurement. The evaluation of the importance of a particular input for the measurement of fair value in its entirety requires judgment, considering factors specific to the asset or liability.

Determining what constitutes observable requires significant judgment by Promigas, which considers observable data any market data that is already available, that is distributed or updated regularly, that is reliable and verifiable, that has no property rights, and that is provided by independent sources that actively participate in the reference market. Fair Value Measurement of Financial Assets under Concession



39 (Continues)

Promigas designates at fair value through profit or loss the group of financial assets related to concession contracts governed by the petroleum law due to the contractual nature of the asset, taking into account that the Government will exercise the purchase at the end of the contract at its fair price in accordance with Article 51 of the Petroleum Code. In order to determine fair value the income approach is applied. Discounted cash flows correspond to the residual value (perpetuity) of the cash flows generated by the assets under concession, i.e., the estimated flows that such assets would generate from the end of the concession onwards; subsequently, the value of the financial asset will be adjusted in each period; this adjustment will be made considering once again changes in the assumptions made in the company discount rate (WACC) and the new horizon of the end of the concession. Below is the sensitivity of the fair value of the financial assets under concession measured at fair value through the following variables for the low and high scenarios with a variation of plus or minus 10 basis points: Net Income Impact High Low

Figures in millions

Discount Interest Rates (57.681) 60.251 Gradual growth in perpetuity 34.544 (33.346)

%

Discount Interest Rates (8,9%) 9,3% Gradual growth in perpetuity 5.3% (5,1%) The valuations of financial assets are considered at level III of the hierarchy in the measurement of fair value Fair Value Measurements on a Recurring Basis Fair value measurements on a recurring basis are those that the CFRS require or allow in the statement of financial position at the end of each accounting period.

The following table analyzes, within the fair value hierarchy, the assets and liabilities (by class) of Promigas measured at fair value on a recurring basis:


Level 2 Level 3 Level 2 Level 3

Assets Hedging operations receivable $ 3.266.229 - 4.163.095 - Other equity securities 37.501.634 - 70.373.759 - Long-term financial assets debtors - 1.798.689.386 - 1.717.041.661 Investment properties - 2.875.000 - 2.875.000

$ 40.767.863 1.801.564.386 74.536.854 1.719.916.661

Liabilities



40 (Continues)

Creditors for hedging liability position $ - - 90.041 -

The Company has no assets or liabilities categorized in Level 1, considering that for an asset or liability to be categorized in Level 1, its values must be based on quoted prices in active markets.

Financial instruments not traded in active markets, but valued according to quoted market prices, broker quotes or alternative price sources supported by observable inputs, are categorized in Level 2. Derivatives from foreign currency hedging derivative contracts are included. As investments include positions that are not traded in active markets and/or are subject to transfer restrictions, the valuations may be adjusted to reflect illiquidity or non-transferability, which are generally based on available market information.

When a price for an identical asset or liability is unobservable, an entity shall measure the fair value suing another valuation technique that maximizes the use of relevant observable input data and minimizes the use of unobservable input data. Given that fair value is a market-based measurement, it is measured using assumptions that market participants would use to fix the price of the asset or liability, including risk assumptions. These financial instruments are categorized in Level 3. This is the case of financial assets recognized at fair value for the sale obligation of the residual interest of the pipeline infrastructure at the end of the concession agreements.

Assets reflected in the Company’s statement of financial position correspond to the financial asset of the unconditional contractual right to receive from the Colombian State or from an entity under its supervision cash or other financial asset for the construction services of pipelines and networks under concession by the end of the term of the concession agreements, the payment of which the State has little or no ability to avoid, as the agreement is enforceable by law. Promigas recognizes an intangible asset by the consideration for the construction services.

Management decided that the best option to measure the fair value of the financial asset is free discounted cash flow, as it reflects current market expectations on future amounts that constitute the fair value of the concession to be negotiated with the State, once completed or renewed. The assumptions for calculating the financial asset were:

The financial asset is calculated considering the date of termination of the respective concession agreement.

Promigas made proportional calculations for the completion of each current concession agreement.

Only operating cash flows of these assets under concession were considered. Below are the components of the calculation: - Free cash flow generated exclusively by assets under concession



41 (Continues)

- Concession expiry period - Perpetuity value of Free Cash Flow (FCF) for year n - Current value discounted of WACC residual value* - Financial Revenue: Annual adjustment of the value of the financial asset

* Nominal WACC (Weighted Average Cost of Capital) calculated under the CAPM, which is

updated periodically.

Significant unobservable input data used for measuring the fair value of the financial asset for the pipelines under concession are: operating revenues, costs and expenses and investments pertaining exclusively to the assets under concession, and the WACC formula intended to take into account the sources of capital used and their share in the total capital of the Company, to determine the average cost of procuring equity capital resources and financial debt. Increases (decreases) in any of these input data considered independently would result in a fair value measurement significantly lower (greater). Generally, a change in the assumption used to project revenues is reflected accordingly in the measurement of the financial asset and with an opposite change in the assumption of costs and expenses.

Promigas biannually reviews the Level 3 valuations and considers the appropriateness of the inputs of the valuation model and the result of the valuation using several industry standardized valuation methods and techniques. In selecting the most appropriate valuation model, the Company conducts the tests once again and considers which are the results of the model that historically are more in line with actual market transactions.

For the periods ended December 31 and June 30, 2017, there was no transfer of assets or liabilities initially classified in Level 3.

The following table indicates the movement of financial asset by pipeline under concession classified in Level 3, showing that there are no transfers between levels for the period ended December 31, 2017: Balance as of December 2016 $ 1.629.993.798 Earnings included in profit or loss 87.047.863

Balance as of June 2017

1.717.041.661 Earnings included in profit or loss 81.647.725

Balance as of December 2017 $ 1.798.689.386

7. CASH

Cash is integrated as follows:


Colombian Pesos



42 (Continues)

Cash $ 30.718 34.801 Related entities (1) 13.650.299 30.578.191 Demand deposits in banks and other

financial institutions (1) 24.690.615

47.510.086

Total Colombian Pesos

38.371.632 78.123.078

Foreign currency

Cash

53.729 32.127 Demand deposits in banks and other

financial institutions (1) 328.387

4.798.198

Total foreign currency

382.116 4.830.325

Total cash $ 38.753.748 82.953.403

(1) Below is a breakdown of the credit rating of the main financial institutions where the Company and its

subsidiaries keep cash funds, as determined by independent risk rating agencies:

Credit rating December 2017 June 2017

AAA $ 35.885.987 70.695.224 AA+ 2.454.927 7.393.053 A+ 328.387 4.798.198

TOTAL $ 38.669.301 82.886.475

The balance of cash is comprised of the resources available in cash and bank accounts, in order to meet the requirements of the Company. These accounts provided an average return of 5.11% and 7.03% E.A. as of December 31 and June 30, 2017, respectively.

There are no restriction or limitations in this item.



43 (Continues)

8. FINANCIAL ASSETS AT FAIR VALUE

Financial assets at fair value through profit or loss include the following: December 2017 June 2017

Short-term: Other equity securities (1) $ 32.891.478 65.511.912 Other accounts receivable at fair value (2) 3.266.229 4.163.095

$ 36.157.707 69.675.007

Long-term: Equity instruments through profit or loss $ - 347.013 Equity instruments through OCI 4.610.156 4.514.834 Other accounts receivable (3) 1.798.689.386 1.717.041.661

$ 1.803.299.542 1.721.903.508

(1) Temporary investments are represented mainly by Mutual Funds where resources are maintained in order to optimize liquidity surpluses, and are valued at market prices, which are updated monthly according to profitability reported by their administrators. (Stockbrokers and Trusts). These funds provided an average return of 6.03 and 8.08% E.A. as of December 31 and June 30, 2017, respectively.

There is a Mutual Fund in BBVA Fiduciaria, where the resources received from Pacific Stratus Energy in March 2016 as security transport agreement are held. As of December 31 and June 30, 2017, the balance was $3,671,327 and $3,567,315, respectively. Below is a breakdown of the credit rating of the main counterparties in debt securities and investments in equity instruments where the Company holds financial assets at fair value, as determined by independent and internal risk rating agencies:

December 2017 June 2017 Credit rating

AAA $ 27.558.458 52.545.680 AA+ 794.244 3.586.789 AA 4.538.776 9.379.443

TOTAL $ 32.891.478 65.511.912

All financial instruments currently held by the Company have a variable interest rate.

(2) Derivatives - Hedging Derivatives:

a) Description of the type of hedge: Sales FWD Non-delivery, hedging cash flow of a group of highly probable forecasted transaction.



44 (Continues)

b) Description of financial instruments assigned as hedging instruments: hedging cash flow of a group of highly probable forecasted transaction.

c) Description of the nature of the hedged risks: Risk of change in the magnitude of cash flows associated with the portion of gas transportation revenues denominated in USD and settled in COP, due to fluctuations in the COP-USD parity.

d) Description of the periods in which the expected cash flows occur: As of December 31, 2017, Promigas

has contracted 468 forwards with a weighted average of agreed strikes of $ 3,095.39. We can see that the Company was effective in contracting.

e) Description of the periods in which the expected cash flows affected profit or loss: During the second half of 2017, the profit and loss account was affected by the settlement of the contracts. As a result of good hedging, and an average exchange rate behavior, lower than the contracted rate, we see a higher income from FWD settlements.

f) Counterparty: Banks and financial entities.

Below is the detail of sale of forwards in foreign currency as of:

As of December 31, 2017

Notional value in Dollars US$ 41.614.181 Notional value in Pesos $ 128.812.011

Net asset fair value (see note 8)

3.266.229

As of June 30, 2017

Notional value in Dollars US$ 75.636.492 Notional value in Pesos $ 237.728.627 Fair value

Assets (see note 8) $ 4.163.095 Liabilities (see note 15) (90.041)

Net fair value $ 4.073.054

Below is the detail of sale of forwards in local currency – Dollar:


Number of operations 468 624 Nominal in dollars 41.614.181 75.636.492 Market value in thousands of pesos 3.266.229 4.073.054 Total average term in days 220 302 Average remaining term in days 139 105 Market value of open position liabilities $ 3.266.229 4.073.054

Hedged Item US$ 41.614.181 75.636.492



45 (Continues)

Prices specified in forward contracts to sell financial assets in cash, as follows:

Cumulative time bands


Up to 1 month $ 18.209.818 37.345.945 Between 2 and 3 months

35.555.059 75.312.232

Between 3 and 12 months

75.047.134 125.070.450

Total $ 128.812.011 237.728.627

As of December 31 and June 30, 2017, the Company has no obligation to deliver financial assets in debt securities or foreign currency, or receive financial assets or foreign currency, considering they are hedge derivatives under Sales/Purchase Non-Deliverable Forwards. Currently there are no restrictions related to derivative hedging instruments. The effect of the liquidation of the forwards for the half years ended December 31 and June 30, 2017 is $ 11.715.751 and $ 9.516.231

(3) Corresponds to the obligation of selling the networks and pipelines under concession to the Colombian

State at the termination date of the agreements. In accordance with IFRIC 12 - Service Concession Arrangements, the Operator shall recognize a financial asset by the residual interest over the infrastructure insofar as it has an unconditional contractual right to receive from the grantor or from an entity under the latter’s supervision, cash or other financial asset for the construction services, the payment of which the grantor has little or no ability to avoid, as the agreement is enforceable by law. This shall be measured according to the provisions of IFRS 9 - Financial Instruments. According to IFRS 9 - Financial Instruments, financial assets are measured at fair value for each reported period. This measurement is based on the application of IFRS 13 – Fair Value Measurement.

9. FINANCIAL ASSETS AT AMORTIZED COST

Below is a breakdown of financial assets at amortized cost:

December 2017

June 2017

Short-term

Debt securities $ 479.746

490.308

Accounts receivable (1) 171.922.498

187.587.533 Other accounts receivable (2)

62.902.533

34.376.387

$ 235.304.777

222.454.228

Long-term

Accounts receivable (1) $ 180.140.879

181.494.993

Other accounts receivable (2)

305.239.909

304.142.757

$ 485.380.788

485.637.750



46 (Continues)

(1) Commercial accounts receivable are detailed below:

June 2017 December 2016

Third Parties Related Entities Total

Third Parties

Related Entities Total

Short-term

Gas transportation (a) $ 37.040.506 24.518.722 61.559.228 40.489.728 28.518.564 69.008.292 Gas Distribution (a) - 1.054.791 1.054.791 - 2.135.941 2.135.941 Non-bank financing (b) 88.211.082 4.951.768 93.162.850 88.039.829 5.832.799 93.872.628 Finance lease (c) - 14.286.258 14.286.258 - 17.032.985 17.032.985

Other services 3.149.902 965.011 4.114.913 7.232.862 1.295.229 8.528.091

Doubtful debts 9.013 - 9.013 215.067 - 215.067

128.410.503 45.776.550 174.187.053 135.977.486 54.815.518 190.793.004 Debtor impairment (2.264.555) - (2.264.555) (3.205.471) - (3.205.471)

$ 126.145.948 45.776.550 171.922.498 132.772.015 54.815.518 187.587.533

Long-term

Non-bank financing (b) $ 79.832.761 - 79.832.761 71.844.590 - 71.844.590

Finance lease (c) - 100.308.118 100.308.118 - 109.650.403 109.650.403

79.832.761 100.308.118 180.140.879 71.844.590 109.650.403 181.494.993

a) Corresponds to the gas transportation and distribution portfolio represented with 29.36% in Surtigas, 21.46% in Termobarranquilla and 14.63% in Ecopetrol.

b) Includes accounts receivable from users of natural gas with the “Brilla” business, whose portfolio ranges from 1 to 5 years at the maximum legal interest rate authorized by the Colombian Financial Superintendence.

c) Includes the account receivable from Promisol for finance leases with the following characteristics:

Assets Located in the Jobo Station (Canacol) Located in the Bonga & Mamey Plant (Hocol)

Effective 5 years 12 years Start December 2016 January 2017 Transfer In the end at US $0 Transfer in the end US $5.000.000

December 2017 June 2017 December 2017 June 2017

Gross investment $ 47.327.715 53.803.521 96.783.400 104.700.557

Net investment $ 43.010.785 49.781.941 71.583.591 76.901.447

Balance US$ 14.353.137 15.823.815 23.875.883 25.210.035

Below is a summary of the years when the long-term accounts will be collected:

Year Value



47 (Continues)

2019 $ 10.838.898 2020 51.839.689 2021 32.825.528 2022 25.308.692 From January 2023 onward 59.328.072

$ 180.140.879

The composition by maturity of the commercial portfolio is as follows:


Maturity 0 - 30 days $ 330.680.468 331.351.199 Maturity 31 - 90 days 16.886.801 24.173.645 Maturity 91 - 180 days 4.201.075 5.355.731 Maturity 181 - 360 days 1.921.112 2.970.447 Maturity over 360 days 638.476 8.436.975

$ 354.327.932 372.287.997

Guarantees Provided by Debtors

To guarantee the debts of domestic customers there are bank guarantees, blank promissory with letters of instruction and contracts / purchase orders / commercial offers. Some transportation agreements have insurance policies in case of default. For loans of the Brilla portfolio, blank promissory notes with letters of instruction are constituted, and for debts with employees, payment orders are subscribe and social benefits are pledged in case of retirement. Currently there are no restrictions related to accounts receivable.

(2) Other accounts receivable are detailed below:


Third parties

Related Parties Total

Third parties

Related Parties Total

Short-term Granted loans $ 503.525 - 503.525 529.336 - 529.336 Dividends receivable (a) - 2.872.936 2.872.936 - 16.031.986 16.031.986 Other debtors (b) 47.351.791 12.174.281 59.526.072 141.564 17.673.501 17.815.065

$ 47.855.316 15.047.217 62.902.533 670.900 33.705.487 34.376.387

Long-term

Granted loans (c) $ 6.824.970 298.414.939 305.239.909 2.698.238 301.444.519 304.142.757



48 (Continues)

(a) Includes dividends receivable from subsidiaries as follows:

December 2017

June 2017

Compañía Energética de Occidente S.A. E.S.P. 2.872.936 4.400.590 Transportadora de Metano E.S.P. S.A. - 11.631.396

$ 2.872.936 16.031.986

(b) The variation corresponds mainly to the account receivable from the Solidarity Fund for $44.510.667,

which was purchased from Surtigas S.A. E.S.P. in the month of December of 2017.

(c) Includes loans granted under the following terms:

Company

Value Term Interest Rate

Promioriente S.A. E.S.P. $ 50.000.000 11/mar/2022 CPI + 3,34% E.A. Promioriente S.A. E.S.P. 18.299.531 11/mar/2030 CPI + 4,37% E.A. Gases de Occidente S.A. E.S.P. 19.200.000 09/sep/2020 CPI + 3,29% E.A. Gases de Occidente S.A. E.S.P. 30.300.000 09/sep/2026 CPI + 3,74% E.A. Gases de Occidente S.A. E.S.P. 54.200.000 09/sep/2036 CPI + 4,12% E.A. Promisol S.A.S. 10.000.000 09/sep/2020 CPI + 3,29% E.A. Promisol S.A.S. (US $35.662) 106.415.408 23/dec/2021 Libor + 2,5% E.A. Transmetano E.S.P. S.A. 10.000.000 09/sep/2026 CPI + 3,74% E.A.

$ 298.414.939

Below is a summary of the years when the long-term accounts will be collected:

Year Value

2019 $ 273.863 2020 21.880.195 2021 54.163.871 2022 44.197.002 From January 2023 onward 184.724.978

$ 305.239.909

10. INVESTMENTS IN ASSOCIATES

Description and Economic Activity of Associates



49 (Continues)

Gas Natural de Lima y Callao S.A.C. - Its corporate purpose is the distribution of natural gas,

including the sale of equipment, equipment installation and maintenance, and the implementation

of activities related to hydrocarbons and/or distribution. Its headquarters are in Lima Peru.

Gases del Caribe S.A. E.S.P. - It was incorporated according to Colombian law on November 25,

1966, and its corporate purpose is the purchase, storage, packaging and distribution of gas and

hydrocarbon derivatives; the construction and operation of natural gas pipelines for industrial,

commercial and home use, and the purchase of items, services and artifacts related to the sale

and distribution of fuel gases and related products. The Company is headquartered in the city of

Barranquilla, Colombia. Its legal existence expires on January 26, 2083.

Antillan Gas Ltd - Investment Company incorporated pursuant to the laws of the British Virgin

Islands in 2004, and registered in the National Register of Taxpayers of the Dominican Republic on

February 12, 2014. Investment company with full authority to carry out or engage in any business

or activity, perform acts or enter into any transaction, subject to the British Virgin Islands Business

Companies Act of 2004, except for the following businesses: banking or trust, such as insurance or

reinsurance companies; insurance broker or agent, company management, agent or registered

office of companies incorporated in the British Virgin Islands or mutual funds, mutual fund

manager or mutual fund administrator.

Complejo Energético del Este S.A. - Installation of an import and regasification terminal of

Liquefied Natural Gas (LNG) in Dominican Republic territory, within the framework of the policies

outlined by that country’s government, and the trade and distribution of natural gas through

networks or pipelines. The Company is headquartered in Panama City, Republic of Panama, it may

be transferred to any other place within the territory of Panama.

Below is the detail of investments in associates:

Company Economic Activity Seat Share

Book Value

Revenues Equity Method

Effect on Reserve and

OCI

December 31, 2017 Gas Natural de Lima y Callao S.A.C. Gas distribution Peru 40,00% $ 384.051.576 32.616.634 (6.365.339) Gases del Caribe S.A. E.S.P. Gas distribution Colombia 30,99% 269.738.655 33.368.921 (262.659) Complejo Energético del Este S.A. LNG regasification Panama 33,00% 3.059.206 -

-

Antillean Gas Ltd. LNG regasification Dominican 20,00% 968.035 -

-

657.817.472 65.985.555 (6.627.998)

Impairment of investments in associates (4.027.241)

Total associates

$ 653.790.231

June 30 2017



50 (Continues)

Company Economic Activity Seat Share

Book Value

Revenues Equity Method

Effect on Reserve and

OCI

Gas Natural de Lima y Callao S.A.C. Gas distribution Peru 40,00% $ 357.800.281 36.621.543 4.442.284 Gases del Caribe S.A. E.S.P. Gas distribution Colombia 30,99% 236.632.393 39.079.776 (1.028.106) Complejo Energético del Este S.A. LNG regasification Panama 33,00% 3.059.206 - - Antillean Gas Ltd. LNG regasification Dominican 20,00% 968.035 - -

598.459.915 75.701.319 3.414.178

Impairment of investments in associates (4.027.241)

Total associates $ 594.432.674

To estimate and record the equity method, the Company performs homologation of accounting principles to align accounting policies with those of Promigas S.A. E.S.P.

The operations of permanent investments in associates are as follows:

December 2017

June 2016

Initial balance $ 594.432.674 594.167.217 Declared dividends - (78.850.040) Revenues from equity method 65.985.555 75.701.319 Effect on reserves and OCI (6.627.998) 3.414.178

Final balance $ 653.790.231

594.432.674

In the second half of 2017, no dividends were declared or received by Associate Companies. The dividends declared and effectively received as of June 30, 2017, are as follows:

June 2017

Gases del Caribe S.A. E.S.P. $ 20.944.598 Gas Natural de Lima y Callao S.A.C. 57.905.442

$ 78.850.040

Below is the detail of the equity structure of investments in associates, recorded using the equity method:

Capital

Share placement premium Reserves

Period Results

Un-appropriated retained earnings

Results from IFRS

Adoption Unrealized gains

or losses (OCI) Total equity

As of December 31, 2017

Gas Natural de Lima y Callao S.A.C. $ 474.434.154 - 51.539.417 84.983.865 64.028.652 - 233.166.510 908.152.598 Gases del Caribe S.A. E.S.P.

1.755.369 1.260.919 132.760.095 107.063.769 284.607.537 336.459.944 (208,922) 863,698,711

Complejo Energético del Este S.A.

13.428.000 - - 465 (391.807)- - - 13,036.658 Antillan Gas Ltd.

8.868.169 - - - (11.691.876) - - (2.823.707)



51 (Continues)

Capital


Period Results

Un-appropriated retained earnings

Results from IFRS

Adoption Unrealized gains

or losses (OCI) Total equity As of June 30, 2017

Gas Natural de Lima y Callao S.A.C. $ 474.434.154 - 51.539.417 91.553.856 (24.276.614) - 248.967.378 842.218.191

Gases del Caribe S.A. E.S.P.

1.755.369 1.260.919 42.207.987 123.701.017 250.980.379 336.459.944 869.100 757.234.715 Complejo Energético del Este S.A.

8.222.580 - (325.341) (1.639) - - - 7.895.600

Antillan Gas Ltd.

8.868.169 - - - (11.691.876) - - (2.823.707)

11. INVESTMENT IN SUBSIDIARIES

Description and Economic Activity of Subsidiaries Surtidora de Gas del Caribe S.A. E.S.P. (Surtigas) - The corporate purpose of the company is the purchase, storage, packaging and distribution of gases derived from hydrocarbons; the construction and exploitation of pipelines for industrial, commercial and household natural gas; and the purchase and sale of items, services and artifacts related to the sale and distribution of fuel gases and the like. The Company conducts its activities in the Departments of Bolivar, Sucre and Cordoba and in some towns of the Departments of Antioquia and Magdalena. It is headquartered in the city of Cartagena. Promigas, through Surtigas S.A. E.S.P., owns 24.99% of Gases del Pacífico S.A.C. and 39.99% of Orión Contact Center S.A.S.

Transoccidente S.A. E.S.P. - Transportation of fuel gas by the construction, operation and maintenance of transport systems and subsystems. The assembly, construction, operation, maintenance and commercial exploitation of systems and subsystems anywhere in the country or abroad, on its own behalf or on behalf of others. Its activities are conducted in the city of Santiago de Cali. Transmetano E.S.P. S.A. - Transportation of fuel gas by the construction, operation and maintenance of transport systems. This activity is developed in Northeastern Antioquia (towns of Cimitarra, Berrio, Yolombo, Cisneros, Maceo, San Roque, Santodomingo, Barbosa, Girardota, Guarne and Rio Negro). It is headquartered in the city of Medellin. Sociedad Portuaria El Cayao S.A. E.S.P. - The corporate purpose of the company is the investment in construction, maintenance and management of ports, loading and unloading, storage in ports and other services directly related to the port activities performed in the Port of Cartagena. It is headquartered in the city of Cartagena. Gases del Pacífico S.A.C. - The corporate purpose of the company is the purchase, sale and trading of energy in any form, including, without limitation, natural gas, electric energy, hydrocarbons derived from oil, coal and other fuels. The company is headquartered in the city of Lima, Peru. Promioriente S.A. E.S.P. - The corporate purpose of the company is the transportation of gas fuel by the construction, operation and maintenance of main and branch pipelines. The assembly, construction, operation, maintenance and commercial exploitation of pipelines anywhere in the country or abroad, on its own behalf or on behalf of others. Its activities are conducted in the



52 (Continues)

towns of Lebrija, Giron, Bucaramanga and its Metropolitan Area. It is headquartered in the city of Bucaramanga. Compañía Energética de Occidente S.A.S. E.S.P. - The exclusive corporate purpose of the company is the execution and performance of the Management Agreement for the fulfillment of the administrative, operational, technical and commercial management of the provision of electric power trading and distribution in the Department of Cauca, as well as the investment, expansion of coverage, reconditioning and preventive and corrective maintenance of the infrastructure for providing such service, and other activities required therefor. It is headquartered in the city of Popayan.

Gases de Occidente S.A. E.S.P. - Provision of fuel gas distribution services. The purchase, storage, transportation, packaging, distribution and trade of natural gas or any other fuel, as well as hydrocarbons and derivatives in all their forms. Trade and/or finance of any kind of products directly or indirectly related to the activities or services provided. Such activities are conducted in the Departments of Valle del Cauca and Cauca. The Nation has awarded Gases de Occidente S.A. E.S.P. a 50-year term concession starting from the commencement date of the pipeline’s operation (September 23, 1997, for areas of non-exclusive service, and December 29, 1997, for areas of exclusive service) to provide transportation and distribution services of liquefied gas from oil and natural gas through gas and propane pipelines at least in the city of Santiago de Cali. Promigas, through Gases de Occidente S.A. E.S.P., owns 54.07% and 51.00% of Orión Contact Center S.A.S. and Compañía Energética de Occidente S.A. E.S.P., respectively. Gases del Norte del Peru S.A.C. - The corporate purpose of the company is the purchase, sale, production and trading of energy in any form, including, without limitation, natural gas, electric power, hydrocarbons derived from oil, coal and other fuels. The company is headquartered in the city of Piura, Peru.

Promisol S.A.S. - The corporate purpose of the company is to implement energy management systems, develop energy diagnostics and prepare and implement improvement projects offering energy solutions for companies, and also provides comprehensive advisory in energy management. In addition, it provides natural gas compression and dehydration services. In the course of fulfilling its corporate purpose, the Company has executed commercial offers to provide compression and dehydration services for natural gas from the Ballena and Chuchupa fields before being transported. It is headquartered in the city of Barranquilla. Promigas, through Promisol S.A.S., owns 51% of Enercolsa S.A.S., 99.97% of Zonagen S.A. and 95% of Promisol México S.A. de C.V. Promisol Mexico S.A. de C.V. - Its corporate purpose is the implementation of energy management systems, development of energy diagnostics, formulation and implementation of on-site or distributed generation projects, change or substitution of technology, predictive energy maintenance programs and comprehensive advice on energy management, purchase, sale,



53 (Continues)

distribution, exploitation, trade of products, professional and technical services. It is headquartered in Mexico City, Federal District. Enlace servicios compartidos S.A.S. - Its corporate purpose is to contract with individuals and the State, to acquire, sell or use real or personal property, to carry out financial operations, in general to conduct all kinds of operations with the aim to obtain funds or other assets necessary for the development of the company. Its seat is in the city of Barranquilla.

Below is the detail of balances, percentages and movements of investments in subsidiaries:

In subsidiaries Economic activity Number of

shares Interest

% Book value

Revenues (expenses) equity

method

Unrealized earnings (losses) OCI,

reserves and other equity operations

As of December 31, 2017 Surtigas S.A. E.S.P. Gas distribution 62.900.742 99,99% $ 479.756.245 19.151.984 (135.842) Transoccidente S.A. E.S.P. Gas transportation 127.925 68,99% 7.222.690 745.039 (2.731) Gases de Occidente S.A. E.S.P. Gas distribution 1.746.888 90,12% 289.300.161 35.417.937 (23.286) Transmetano E.S.P. S.A. Gas transportation 1.460.953.304 99,66% 159.582.714 18.497.498 (91.868) Promisol S.A.S. Services 2.274.944 100,00% 81.269.720 13.693.333 (212.681)

Compañía Energética de Occidente S.A.S. E.S.P. Electric power trade

3.184.997 49,00% 59.715.169 7.825.106 -

Promioriente S.A. E.S.P. Gas transportation 883.229.859 73,27% 272.225.367 24.011.680 (23.500) Sociedad Portuaria El Cayao S.A. E.S.P. LNG Regasification 11.204.477 50,98% 93.725.376 2.526.909 (2.094.495) Gases del Pacifico S.A.C. Gas distribution 31.077.442 74,99% 11.748.678 (5.900.815) 240.342 Promisol Mexico S.A. de C.V. Services 2.500 5,00% 455 - - Gases del Norte del Perú S.A.C. Gas distribution 2.070 75,00% 103.057 (94.974) (2.846) Enlace Servicios Compartidos S.A.S. Services 11.322.498 100,00% 10.987.043 (335.463) -

Total investments in subsidiaries $ 1.465.636.675 115.538.234 (2.346.907)

As of June 30, 2017 Surtigas S.A. E.S.P. Gas distribution 62.900.742 99.99% $ 460.740.106 28.458.194 2.553.194 Transoccidente S.A. E.S.P. Gas transportation 127.925 68.99% 7.351.701 922.657 (2.574) Gases de Occidente S.A. E.S.P. Gas distribution 1.746.888 90,12% 253.905.510 28.697.093 42.560 Transmetano E.S.P. S.A. Gas transportation 1.460.953.304 99,66% 152.173.091 10.994.832 (27.978) Promisol S.A.S. Services 2.274.944 100,00% 67.789.068 3.510.051 47.775

Compañía Energética de Occidente S.A.S. E.S.P. Electric power trade 3.184.997 49,00% 54.762.947 2.872.933 -

Promioriente S.A. E.S.P. Gas transportation 883.229.859 73,27% 248.237.187 23.495.353 (22.359) Sociedad Portuaria El Cayao S.A. E.S.P. LNG Regasification 11.204.477 50,98% 93.292.962 16.084.900 2.040.339 Gases del Pacifico S.A.C. Gas distribution 31.077.442 74,99% 5.475.189 (5.013.735) (36.450) Promisol México S.A. de C.V. Services 2.500 5,00% 455 - - Gases del Norte del Perú S.A.C. Gas distribution 2.070 75,00% 200.877 (75.766) (39.986) Enlace Servicios Compartidos S.A.S. Services 1.000 100,00% 1.000 - -

Total investments in subsidiaries $ 1.343.930.093 109.946.512 4.554.521

Below is a summary of investment operations:



54 (Continues)


Initial balance $ 1.343.930.093 1.315.272.417 Capitalization, acquisitions and decapitalization (1) 23.255.527 (14.235.085) Dividends ordered by companies (2) (14.739.156) (69.105.245) Equity method through profit or loss 115.538.234 109.946.512 Valuations recognized through OCI of the period (2.346.907) 4.554.521 Equity method wealth tax (1.107) (2.503.690) Effect on other equity operations (9) 663

Final balance $ 1.465.636.675 1.343.930.093

(1) During the second half of 2017 an advance for future capitalizations for $2.100.000 was granted and formalized to Enlace Servicios Compartidos S.A.S.; also in December 2017, $9.221.498 were capitalized in kind (property, plant and equipment for $1.325.648 and intangible assets for $7.895.850); and additionally, in the second half of 2017, $11,934,029 were capitalized for Gases del Pacífico S.A.C.; no changes in interest were generated in either company. In June 2017, an advance payment was made for future capitalizations for $14.551.270 in Sociedad Portuaria El Cayao S.A. E.S.P., which is considered a decapitalization, but does not generate changes in interest; in addition, capitalization was performed without change in the interest in Gases del Norte del Perú S.A.C. for $ 315.185 and contribution to Enlace Servicios Compartidos S.A.S. for $ 1.000.

(2) The detail of the dividends ordered and received is presented below:

December 2017 June 2017 Received Declared Received Declared

Transoccidente S.A. E.S.P. $ 871.318 871.318 804.724

804.724 Gases de Occidente S.A. E.S.P. - - 49.058.464

27.864.649

Transmetano E.S.P. S.A. 22.626.298 10.994.902 6.568.813

13.686.807 Compañía Energética de Occidente S.A.S. E.S.P. 4.400.590 2.872.936 4.686.306 4.400.590 Promioriente S.A. E.S.P. - -

22.348.475

22.348.475

$ 27.898.206 14.739.156 83.466.782

69.105.245

Below is the detail of equity components of investments in subsidiaries, recorded using the equity method:

Capital


Un-appropriated

retained earnings

Period Results

Results from IFRS

Adoption

Unrealized gains or

losses (OCI) and other

movements Total equity As of December 31, 2017 Surtigas S.A. E.S.P. $ 571.764 1.932.628 279.925.440 23.751.360 20.745.744 112.606.132 4.857.096 444.390.164 Transoccidente S.A. E.S.P. 1.854.000 - 1.493.106 - 1.079.775 5.691.565 9.582 10.128.028 Gases de Occidente S.A. E.S.P. 37.391.491 18.529.438 110.839.967 - 39.300.840 42.166.683 21.387 248.249.806 Transmetano E.S.P. S.A. 13.195.633 3.293.272 18.480.950 1.886.333 18.559.673 103.551.889 226.430 159.194.180

Promisol S.A.S. 19.274.944 24.075.992 31.491.805 (10.,464.,049

) 13.836.345 4.727.019 270.29 83.212.265



55 (Continues)

Capital


Un-appropriated

retained earnings

Period Results

Results from IFRS

Adoption

Unrealized gains or

losses (OCI) and other

movements Total equity Compañía Energética de Occidente S.A.S. 65.000.000 110.236.194 29.895.204 - 15.969.599 (99.631.117) - 121.469.880 Promioriente S.A. E.S.P. 120.538.477 - 184.459.393 - 32.746.476 29.166.011 725.025 367.635.382 Sociedad Portuaria El Cayao S.A. 138.799.925 - 23.709.328 1.464.941 12.784.578 7.666.125 (3.863.176) 180.561.721 Gases del Pacífico S.A.C 557.340.544 - - (26.936.901) (14.738.726) - - 515.664.917 Promisol Mexico S.A. de C.V. 9.139 - - (5.742) (3.733) - (1.268) (1.604) Gases del Norte del Perú S.A.C 422.430 - - (101.021) (126.635) - (57.365) 137.409 Enlace Servicios Compartidos S.A.S. 11.322.498 - - - (335.457) - - 10.987.041

As of June 30, 2017

Surtigas S.A. E.S.P. $ 571.764 1.932.628 254.084.094 22.723.038 25.841.345 112.606.132 5.406.439 423.165.440 Transoccidente S.A. E.S.P. 1.854.000 - 1.418.702 - 1.337.194 5.691.565 13.539 10.315.000 Gases de Occidente S.A. E.S.P. 37.391.491 18.529.438 78.996.785 - 31.843.182 42.166.683 47.227 208.974.806 Transmetano E.S.P. S.A. 13.195.633 3.293.272 18.482.058 1.886.333 11.031.788 103.551.889 318.607 151.759.580 Promisol S.A.S. 19.274.944 24.075.992 28.124.766 (14.474.308) 3.367.039 8.737.275 (1.551.154) 67.554.554 Compañía Energética de Occidente S.A.S. 65.000.000 110.236.194 29.895.204 - 5.863.139 (99.631.117) - 111.363.420 Promioriente S.A. E.S.P. 120.538.477 - 152.370.816 - 32.088.577 29.166.011 757.097 334.920.978 Sociedad Portuaria El Cayao S.A. 138.799.925 - 157 9.320.305 15.853.808 7.666.125 2.552.878 174.193.198 Gases del Pacífico S.A.C 27.811.547 - - (24.716.412) (6.684.986) - 10.879.198 7.289.347 Promisol Mexico S.A. de C.V. 9.139 - - (5.742) - - (1.234) 2.163 Gases del Norte del Perú SAC 422.430 - - (45.409) (55.612) - (53.315) 268.094 Enlace Servicios Compartidos S.A.S. 1.000 - - - - - - 1.000

12. PROPERTY, PLANT AND EQUIPMENT

Below is the detail of property, plant and equipment:


Cost Accumulated depreciation Total Cost

Accumulated depreciation Total

Lands $ 16.410.989 - 16.410.989 16.512.271 - 16.512.271 Construction in progress 4.124.677 - 4.124.677 5.359.450 - 5.359.450 Buildings 42.263.276 (3.394.728) 38.868.548 36.231.091 (2.826.217) 33.404.874 Machinery, equipment and tools 31.688.543 (15.640.302) 16.048.241 27.520.541 (12.447.690) 15.072.851 Furniture and fittings 2.879.531 (1.030.976) 1.848.555 2.686.459 (961.582) 1.724.877 Communication and computer equipment 7.770.068 (4.395.736) 3.374.332 7.102.490 (3.999.463) 3.103.027 Transportation equipment 12.156.005 (8.642.184) 3.513.821 13.858.435 (9.015.383) 4.843.052

$ 117.293.089 (33.103.926) 84.189.163 109.270.737 (29.250.335) 80.020.402

The movements of property, plant and equipment accounts are presented below:

Lands

Constructions in progress Buildings

Machinery, equipment and tools

Furniture and Fittings

Computer and communication equipment

Transportation

equipment Total Cost

Balance as of December $ 19.723.592 78.550.133 35.843.246 26.928.363 2.522.397 6.641.688 13.775.624 183.985.043



56 (Continues)

2016 Purchases - 856.049 - 300.910 164.062 542.622 82.811 1.946.454 Capitalized interest - 375.678 - - - - - 375.678 PPE Withdrawal - (91.534) - (3.771) - (38.037) - (133.342) Transfers (1) (3.211.321) (74.330.876) 387.845 295.039 - (43.783) - (76.903.096)

Balance as of June 2017 $ 16.512.271 5.359.450 36.231.091 27.520.541 2.686.459 7.102.490 13.858.435 109.270.737 Purchases - 4.218.708 - 1.644.504 708.136 1.300.559 773.276 8.645.183 Finance lease - - - - - - 540.643 540.643 Capitalized interest - 611.240 - - - - - 611.240 PPE Withdrawal - - - (113.280) (102.817) (139.697) - (355.794) PPE Sales - - - - - (2.094) (35.520) (37.614) Transfers (1) (101.282) (6.064.721) 6.032.185 2.636.778 (412.247) (491.190) (2.980.829) (1.381.306)

Balance as of December 2017 $ 16.410.989 4.124.677 42.263.276 31.688.543 2.879.531 7.770.068 12.156.005 117.293.089

Accumulated depreciation

Balance as of December 2016 $ - - (2.334.907) (10.697.464) (791.024) (3.510.471) (7.755.034) (25.088.900)

Depreciation (expenses) - - (491.310) (1.750.745) (170.558) (525.740) (1.260.349) (4.198.702) PPE Withdrawal - - - 519 - 36.748 - 37.267

Balance as of June 2017 $ - - (2.826.217) (12.447.690) (961.582) (3.999.463) (9.015.383) (29.250.335) Depreciation (expenses) - - (568.511) (1.779.863) (167.820) (538.063) (1.138.014) (4.192.271) PPE Withdrawal - - - 62.944 98.426 139.696 - 301.066 PPE Sales - - - - - 2.094 35.520 37.614 Transfers - - - (1.475.693) - - 1.475.693 -

Balance as of December 2017 $ - - (3.394.728) (15.640.302) (1.030.976) (4.395.736) (8.642.184) (33.103.926)

Net balance

Balance as of June 2017 $ 16.512.271 5.359.450 33.404.874 15.072.851 1.724.877 3.103.027 4.843.052 80.020.402

Balance as of December 2017 $ 16.410.989 4.124.677 38.868.548 16.048.241 1.848.555 3.374.332 3.513.821 84.189.163

(1) In December 2017, assets were transferred for the capitalization in kind of Enlace Servicios Compartidos

S.A.S., see note 11. In January 2017, the reclassification to accounts receivable for the commissioning of the assets located in the Jobo Station and the Bonga & Mamey Plant, granted in finance lease to Promisol S.A.S., for $73.240.414, see note 9.

The detail of the gross value of fully depreciated assets is as follows:

December 2017 June 2017 Buildings $ 3.155.287 2.593.101 Machinery, equipment, tools 11.593.628 12.671.154 Furniture, fittings and office equipment 1.038.204 2.452.173 Communication and computer equipment 13.238.160 13.364.064 Transportation equipment 1.895.828 1.614.786

$ 30.921.107 32.695.278

For the periods ended December 31 and June 30, 2017, there are no balances for property, plant and equipment ranted in finance lease.



57 (Continúa)

There are currently no restrictions or impairments for property, plant and equipment.

13. INTANGIBLE ASSETS - CONCESSIONS

Below is the detail of intangible assets by infrastructure under concession:


Cost

Accrued amortization Total Cost

Accrued amortization Total

Lands $ 3.376.683 (858.733) 2.517.950 3.275.401 (734.036) 2.541.365 Constructions in progress 187.368.350 - 187.368.350 159.730.433 - 159.730.433 Gas pipelines and networks 895.798.716 (174.613.936) 721.184.780 896.368.088 (147.177.109) 749.190.979 Machinery and equipment 247.195.171 (63.067.710) 184.127.461 230.383.609 (51.459.967) 178.923.642

$ 1.333.738.920 (238.540.379) 1.095.198.541 1.289.757.531 (199.371.112) 1.090.386.419

Below are the movements of concessions:

Lands

Constructions in progress

Pipelines and Networks

Machinery and Equipment

Total Concessions

Cost

Balance as of December 2016 $ 3.265.868 170.755.710 859.752.699 216.939.480 1.250.713.757 Purchases and/or acquisitions 9.533 22.490.953 811.132 10.044.266 33.355.884 Capitalized interest - 7.170.322 - - 7.170.322 Withdrawals - (23) (214.314) (1.675.674) (1.890.011) Transfers - (40.686.529) 36.018.571 5.075.537 407.579

Balance as of June 2017 $ 3.275.401 159.730.433 896.368.088 230.383.609 1.289.757.531 Purchases and/or acquisitions - 42.684.019 (5.231.643) - 37.452.376 Capitalized interest - 6.516.302 - - 6.516.302 Withdrawals - - (42.946) 17.978 (24.968) Transfers 101.282 (21.562.404) 4.705.217 16.793.584 37.679

Balance as of December 2017 $ 3.376.683 187.368.350 895.798.716 247.195.171 1.333.738.920

Accrued amortization Balance as of December 2016 $ - - (119.849.217) (41.517.507) (161.366.724)

Amortization (734.036) - (27.351.447) (10.561.740) (38.647.223) Withdrawals - - 23.555 619.280 642.835

Balance as of June 2017 $ (734.036) - (147.177.109) (51.459.967) (199.371.112) Amortization (124.697) - (27.441.617) (11.607.743) (39.174.057) Withdrawals

- - 4.790 (17.978) (13.188)

Transfers - - - 17.978 17.978



58 (Continúa)

Balance as of December 2017 $ (858.733) - (174.613.936) (63.067.710) (238.540.379)

Net balance

Balance as of June 2017 $ 2.541.365 159.730.433 749.190.979 178.923.642 1.090.386.419

Balance as of December 2017 $ 2.517.950 187.368.350 721.184.780 184.127.461 1.095.198.541

During the half-years ended December 31 and June 30, 2017, the Company reviewed the fair value of cash flow of the financial asset through profit or loss, which involves all flows of the concessions, including intangibles, without identifying any impairment.

Additional information required for concession agreements that are currently under construction

Below is the detail of the main revenues and costs incurred in the construction phase of concession agreements in the periods ended December 31 and June 30, 2017:

Period Accruals

Revenues

Costs December 2017

Revenues from concession agreements $ 21.516.779

- Construction costs incurred in the period -

21.516.779

June 2017 Revenues from concession agreements 40.965.648 - Construction costs incurred in the period - 40.965.648

The Company recognizes revenues and costs in accordance with IAS 11 - Construction Contracts, taking into account the stage of completion of the construction phases. Revenues are measured at the fair value of the consideration received or receivable, which is very close to the costs incurred, considering that the projects do not exceed one year of construction. As of December 31 and June 30, 2017, the Company had no contingent assets under revenues receivable caused by a contractual dispute in a pipeline construction, other than a recognition rate. Nor did the Company have any contingent liabilities under fines or penalties imposed by the Government in the performance of the concession agreement for possible contractual breaches.

Through concessions, Promigas is contractually engaged in construction and operation, meeting international standards, and that is why their constructions of natural gas infrastructure are performed by engineering works that comply with the required operating conditions, meeting the designs and specifications set out in order to ensure the quality expected by customers. Its designs and constructions focus on high levels of integrity, so operation and maintenance are safe and reliable.

All phases that involve Promigas providing the service of gas transportation and distribution throughout the years, from the construction and infrastructure improvements, through maintenance



59 (Continúa)

and operation, are remunerated through charges based on rates provided by the Government through the Energy and Gas Regulatory Commission (CREG). Concession agreements entered into by and between Promigas and the Government, whereby the latter grants Promigas the right to build, operate, maintain, exploit and manage a public utility pipeline to transport hydrocarbons, are governed by IFRIC 12 – Service Concession Agreements, therefore recognizing an intangible asset for its right to charge users a consideration rate for the construction services, and a financial asset regarding the obligation to sell at fair price at the end of the Concession and its extensions, if any.

In the course of its operations, the Company had the following existing concession agreements:

Pipelines Description Contract

Date Expiry Date Remaining Life

La Guajira - Barranquilla of 20” and 24” 25/05/1976 25/05/2026 8 years and 4 months La Guajira – Cartagena of 20” and 24” 16/09/1976 16/09/2026 8 years and 8 months Baranoa 20/10/1988 20/10/2038 20 years and 9 months Jobo – Tablón – Montelibano 20/10/1988 20/10/2038 20 years and 9 months Cartagena – Montería 20/10/1988 20/10/2038 20 years and 9 months Arjona 20/10/1988 20/10/2038 20 years and 9 months San Onofre 17/11/1988 17/11/2038 20 years and 10 months Sampués 13/04/1989 13/04/2039 21 years and 3 months Chinú 19/06/1989 19/06/2039 21 years and 5 months Sincelejo – Corozal 18/07/1990 18/07/2040 22 years and 6 months

El Difícil – Campo de la Cruz –Suan 04/10/1990 04/10/2040 22 years and 9 months Galapa 04/10/1990 04/10/2040 22 years and 9 months Ovejas – San Juan Nepo 04/10/1990 04/10/2040 22 years and 9 months Sabanalarga 18/10/1990 18/10/2040 22 years and 9 months Cerromatoso – Montelibano 27/10/1990 27/10/2040 22 years and 9 months Trunk Municipality Cerete 08/11/1990 08/11/2040 22 years and 10 months Tolúviejo 19/11/1990 19/11/2040 22 years and 10 months Barranquilla – Puerto Colombia 25/01/1991 25/01/2041 23 years and 0 months Tolú 24/04/1991 24/04/2041 23 years and 3 months Aracataca – Fundación 17/05/1991 17/05/2041 23 years and 4 months Palmar – Varela 18/07/1991 18/07/2041 23 years and 6 months Trunk to Cienaga de Oro 18/07/1991 18/07/2041 23 years and 6 months

Trunk Magangue 01/08/1991 01/08/2041 23 years and 7 months Sincé – Corozal 01/08/1991 01/08/2041 23 years and 7 months Santo Tomas 23/06/1992 23/06/2042 24 years and 5 months San Marcos 02/07/1992 02/07/2042 24 years and 6 months Luruaco 21/04/1993 21/04/2043 25 years and 3 months Manaure – Uribia 22/10/1993 22/10/2043 25 years and 9 months Polonuevo 15/10/1994 15/10/2044 26 years and 9 months Branches Department Córdoba 08/11/1994 08/11/2044 26 years and 10 months Branches Department La Guajira 08/11/1994 08/11/2044 26 years and 10 months

Branches Department Atlántico 09/11/1994 09/11/2044 26 years and 10 months

Branches Department Bolívar 09/11/1994 09/11/2044 26 years and 10 months

Branches Department Magdalena 09/11/1994 09/11/2044 26 years and 10 months



60 (Continúa)

The previous agreements are signed in accordance with Decree 1056/1953, the Petroleum Code (now in force), and other laws complementing it. Each concession with the Government was for 50 years, whereby the government gives Promigas the right to build, operate, maintain, exploit and manage a network of public utility pipelines for the transportation of hydrocarbons from La Guajira to major cities such as Barranquilla and Cartagena with trunk pipelines and regional pipelines to other populations in the Atlantic Coast. These agreements additionally have the following relevant elements:

The agreement required the provision of construction services to develop, operate, maintain, exploit and manage a network of pipelines by Promigas. The term of the agreements is 50 years, renewable for 20 more years, without representing an automatic renewal, and the estimated service life of the pipelines is 70 years, in current conditions and with minimal maintenance required. Additionally, since the concession agreements include construction, operation and maintenance activities, at the end of the contractual term, the pipeline shall be in optimum operating conditions to ensure the continued provision of public utilities beyond the contractual term of the concessions; therefore, it is concluded that the infrastructure is not used for its entire service life. The extensions should proceed with the approval of the Ministry of Mines and Energy.

Promigas has the right to recover the investment by charging the public service, which is regulated by the Government to set rates for transporting gas through the CREG. The remuneration of construction service is included in the fees fixed by the CREG, which are established considering the provisions of the Petroleum Code, as follows:

- Amortization of invested capital in construction; - Maintenance, management and exploitation expenses; and - Fair earnings for entrepreneurs.

Such remuneration with the building service does not cover payments receivable when the Government exercises its right acquired in signing the agreement to buy transportation infrastructure. In fact, in establishing the remuneration of new investments or reinforcement of infrastructure, the regulated asset base is calculated through the concession on a five-year basis, according to the regulatory framework and in which the fair contractual selling price at the end of the concession is not taken into account, enabling Promigas to recover its investment by charging customers for services before fulfilling the obligation to sell the system to the State. That is, the final payment is not part of the repayments related to the investments in construction and maintenance.

The agreement provides that Promigas is obligated to sell the pipeline only and exclusively to the Government as follows: i) 30 years after the agreement; ii) 50 years after terminating the agreement; and iii) at the end of each extension, if any. Therefore, the Government shall always have the right to purchase the infrastructure at the time that it sees fit, without implying that it has an option of absolute waiver of a payment obligation, but otherwise that it has the ability to choose when to make the payment. Neither party shall have the option of waiving the terms of the agreement with respect to the exercise of the right of purchase by the Government and the obligation to sell by Promigas.



61 (Continúa)

Regarding the above obligation, the Government and Promigas shall agree the price of the pipeline and only in case of dispute shall the fair price be fixed by a third party.

Contract law and the relevant contractual obligation exist because of a transaction or event that has happened in the past; in the case of Promigas, the execution of the concession agreement, which sets out the mandatory the sale of the infrastructure to the Government at a fair price at the end of the concession agreement, produces clear economic consequences that the Government, as party to the agreement, has little or no ability to prevent, as the agreement is enforceable by law.

From the above it follows that, for each concession, Promigas is facing a significant residual interest in the pipeline infrastructure and on which it has acknowledged having a right represented in a financial asset by the obligation to sell the infrastructure to the Government, the measurement of which being at fair value.

Promigas may not assign or transfer this Agreement, in whole or in part, to any natural or juridical person without prior approval by the Government, which, at its discretion, can approve or deny it without being obligated to provide the reasons for its determination.

14. FINANCIAL OBLIGATIONS

Below is the detail of financial obligations:


Short-term

Credits in local currency $ 114.049.116 36.005.300 Leases 11.895.861 12.066.209 Interest payable 5.529.430 4.084.612

$ 131.474.407 52.156.121

Long-term

Credits in foreign currency (1) $ 369.768.803 376.740.336 Credits in local currency 83.538.425 46.541.075 Leases 82.031.090 85.596.464

$ 535.338.318 508.877.875

Below is the detail of financial obligations:



62 (Continúa)

December 2017

June 2017

Interest Rate

Type of Portfolio

Year of Maturit

y Term

(months)

Capital amortization/

Interest

Short-term

Loans in local currency

Banco Davivienda $ 6.005.300 6.005.300 DTF - 2,00 Development 2026 144 Quarterly Bancolombia 30.000.000 30.000.000 DTF + 3,05 Ordinary 2018 12 Quarterly

Bancolombia 35.000.000 - DTF + 3,05 Ordinary 2018 12 Bullet/ Quarterly Banco Colpatria 43.043.816 - 6,40% E.A. Ordinary 2018 12 Bullet/ Quarterly

114.049.116 36.005.300 Lease Agreements

Leasing Bancolombia 10.018.667 10.018.667 DTF+3,10 Finance L. 2026 144 Quarterly Vehicle Lease 1.877.194 2.047.542

11.895.861 12.066.209

Interest payable 5.529.430 4.084.612

$ 131.474.407 52.156.121

Long-term Loans in foreign currency

JP Morgan Chase (1) $ 369.768.803 376.740.336 Libor+2,5 Ordinary 2022 60 2 years PL-Biannual

Loans in local currency Banco Davivienda 43.538.425 46.541.075 DTF – 2,00 Development 2026 144 Quarterly

Bancolombia 40.000.000 - DTF + 2,80 Ordinary 2022 61 Bullet/ Quarterly

83.538.425 46.541.075

Lease Agreements Leasing Bancolombia 81.485.225 84.997.577 DTF+3,10 Finance L. 2026 144 Quarterly Renting de vehículos 545.865 598.887

82.031.090 85.596.464

$ 535.338.318 508.877.875

(1) On December 23, 2016, Promigas and Gases del Pacífico entered into a syndicated loan for USD $ 200,000,000,

corresponding to USD $125,000,000 and USD $75,000,000, respectively. The managing agent is JP Morgan Chase Bank. The loan was closed with 14 banks from different countries: JP Morgan, Banco de Crédito del Peru, Bank of America, Bank of Tokio Mitsubishi, Citi, Mizuho, Scotiabank, Sumitomo, Banco BCI, Banco Sabadell, Banco Santander Colombia, Banco Santander España , EDC, ING, and Intesa San Paolo. Value of the loan in pesos $373.000.000, in addition, includes the attributed costs for $3.231.197. Conditions of loan agreement: The loan agreement mainly includes the following conditions, which have been met by the Company: - In each quarter, the debt may not exceed the Consolidated Ebitda, with the following multiples: 4,00 to

1,00, until December 31, 2017, 4,25 to 1,00, after December 31, 2017, and until December 31, 2020, and finally after December 31, 2020, and until December 31, 2021, 4,00 to 1,00.

- At the end of each quarter, the ratio between the Consolidated Ebitda and the Financial Expense cannot be lower by 2.75 to 1.00.

Below is the detail of the long-term maturities of financial obligations in force as of December 31, 2017:



63 (Continúa)

Year of maturity 2019 90.092.766 2020 164.146.901 2021 164.146.901 2022 onward 116.951.750

$ 535.338.318

During the half-years ended December 31 and June 30, 2017, interests were recognized as follows:

December 2017 June 2017 Accrued in financial expenses $ 17.063.414

12.784.507

Paid $ 14.437.193

11.481.296

Hedging Financial Liabilities Promigas, at the end of 2016, contracted a syndicated loan for US $200,000,000, of which US $75,000,000 were disbursed directly to Gases del Pacífico S.A.C. and US $125,000,000 to Promigas. The loan is amortizable until December 23, 2021, with a two-year grace period. As of December 31 and June 30, 2017, the value of the syndicated loan is $373.000.000 and $381,303,750, not including the costs of debt, and the effect on other comprehensive income is $4.379.981 and $7,633,518, respectively. Hedge Ratio: Promigas has identified the fluctuation risk in the exchange rate of the conversion effect on investments with dollar functional currency as a hedged item. Designated financial liabilities limit the risk resulting from fluctuations in the dollar exchange rate above or below the specified ranges. The Company designated a portion of the syndicated loan as a hedging instrument, as follows:

Amount Designated for 2017 Hedged Hedging

Instrument Hedged Item

(1) December 2017 $ 51.108.980 51.108.980 January 2018 51.484.391 51.484.391 February 2018 51.861.426 51.861.426 March 2018 52.240.092 52.240.092 April 2018 52.620.397 52.620.397 May 2018 53.002.347 53.002.347 June 2018 53.385.950 53.385.950



64 (Continúa)

(1) The hedged items designated in the net investment hedge ratio abroad are part of the cost of Gases del Pacífico S.A.C., Sociedad Portuaria El Cayao S.A.C. and Gas Natural de Lima y Callao S.A.C.

To determine the effectiveness of the hedge ratio, the Company evaluates qualitatively the critical contractual obligations between the hedged item and the hedging instrument. If inconsistencies are noticed in contractual obligations, a quantitative assessment is used to determine the impact of potential ineffectiveness. Impact of the Hedge Ratio: The part of the gain or loss on the hedging instrument determined as an effective hedge is recognized in other comprehensive income. The determination of the results by net investment hedge is as follows:

Hedged Item Measurement

Hedging Instrument

Measurement Ratio

Effectiveness of the hedge ratio $ 4.379.981 4.379.981 100%

15. ACCOUNTS PAYABLE

Below is the detail of accounts payable:


Third

Parties

Related Entities

Total Third

Parties

Related Entities

Total

Acquisition of national goods and services $ 26.944.197 20.532.069 47.476.266

23.440.515 30.877.885 54.318.400

Goods and services abroad 576.006 - 576.006 153.212 - 153.212 Creditors 6.447.980 - 6.447.980 6.175.544 - 6.175.544 Dividends payable (1) - 58.674.860 58.674.860 - 55.207.710 55.207.710 Hedges payable (2) - - - 90.041 - 90.041

$ 33.968.183 79.206.929 113.175.112 29.859.312 86.085.595 115.944.907

(1) As of December 31, 2017, includes three installments of the ordinary monthly dividends declared on the first half of 2017. As of June 30, 2017, it includes three installments of the monthly ordinary dividends, ordered on the income for the second half of 2016.

16. TAXES

Below is the detail of the current income tax liability:



65 (Continúa)


Current year income tax $ 61.580.267

33.958.383 Compensation income and tax and complementary (35.285.762)

(22.906.244)

$ 26.294.505

11.052.139

Below is the detail of the deferred income tax asset and liability:

December 2016

Credited (debited) to

profit and loss


OCI

June 2017


profit and loss


OCI December

2017

Deferred tax assets

Provision credit portfolio $ 805.934

449.115 -

1.255.049 (672.064) - 582.985

Deferred charges of intangible assets

6.390.923

(1.727.860) -

4.663.063 2.948.811 - 7.611.874

Non-deductible liability provisions

2.610.973

4.471.048 -

7.082.021 570.797 - 7.652.818 Difference between the accounting

and tax bases of property, plant and equipment - 23.422.043 - 23.422.043 (18.902) -

23.403.141

Employee benefits

67.750

(4.786) -

62.964 113.063 - 176.027 Others

7.157.316

337.373 29.715

7.524.404 (416.450) (29.715) 7.078.239

17.032.896

26.946.933 29.715

44.009.544 2.525.255 (29.715) 46.505.084

Deferred tax liabilities

Financial asset

(318.405.857)

(11.137.467) -

(329.543.324) (11.500.629) - (341.043.953)

Valuation of equity investments

(16.753.275)

1.818.366 (990.447)

(15.925.356) (862.021) (184.717) (16.972.094) Credit Portfolio (17.669.305) (22.906.249) - (40.575.554) 2.759.411 - (37.816.143) Property, plant, equipment

(3.912.865)

(854.020) -

(4.766.885) (16.858) - (4.783.743)

Others

(12.211.053)

(1.835.672) 550.911

(13.495.814) (403.591) 447.780 (13.451.625)

(368.952.355)

(34.915.042) (439.536)

(404.306.933) (10.023.688) 263.063 (414.067.558)

$ (351.919.459) (7.968.109) (409.821) (360.297.389) (7.498.433) 233.348 (367.562.474)

Income Tax: The Company is subject to income tax at a 25% rate as of December 31 and June 30, 2017, of 33%, applicable to the higher value of either net income or presumptive income. The presumptive rate is equal to 3% of the previous year’s net equity. As of December 31 and June 30, 2017, the Company calculated and recorded provisions for income taxes, based on taxable income, which takes into account certain adjustments to the commercial profit of the separate financial statements prepared in accordance with the Financial Reporting Standards accepted in Colombia (CFRS), provided in Act 1314/2009.

Taxable years 2015 and 2016 are subject to review by the tax authorities; additional taxes are not expected in the event of an audit visit.



66 (Continúa)

On February 4, 2009, the Company entered into a Legal Stability Agreement with the Nation – Ministry of Mines and Energy, whereby it agrees to build a pipeline and other transportation facilities amounting to $77,263,585, over a seven-(7)-year term. The contract term is twenty (20) years, during which the Nation, as consideration, guarantees Promigas the legal stability on certain provisions of the Tax Code. Some of the benefits are:

The benefit from the deduction of productive real fixed assets as of June 30, 2017, and December 31, 2016, for $3.430.864 and $4.879.702, respectively.

Application of the income tax rate as of June 30, 2017, of 33% and not the new rate applicable under Act 1819/2016 of 34%. Applying the rate of 34% would have meant a higher tax close to $1.323.966.

Non-imposition of the 6% income surtax as of June 30, 2017, applicable under Act 1819/2016 of 34%. Applying this surtax would have meant a higher tax close to $7.895.797.

Below is the detail of income tax expense for the half-years ended December 31 and June 30, 2017:


Current Income Tax $ 27.621.884 35.722.775 Net deferred taxes 7.498.433 7.968.109

$ 35.120.317 43.690.884

Below is the reconciliation of the effective rate for the half-years ended December 31 and June 30, 2017:

December 2017 % June 2017 % Earnings before income tax $ 363.939.003 363.730.098 Theoretical tax expense estimated based on current tax

rate 120.099.871 33,00

120.030.932 33,00 Nondeductible expenses 885.285 0,24 1.588.713 0,44 Dividends received (11.011.744) (3,03) (24.981.435) (6,87) Equity method income (48.891.106) (13,43) (36.282.349) (9,98) Interests and other nontaxable income (2.071.599) (0,57) (172.473) (0,05) Non-deductible expenses used as tax discount 1.175.837 0,32 1.204.342 0,33 Donations considered as tax discounts (890.785) (0,24) (878.444) (0,24) Deduction Investment in science and technology (492.258) (0,14) - - Effect of accounting vs fiscal amortization (651.134) (0,18) (651.132) (0,18) Tax benefit in acquisition of productive assets (7.697.834) (2,12) (1.132.185) (0,31) Effect on deferred taxes due to changes in tax rates in

concessions (15.443.119) (4,24)

(17.588.328) (4,84) Earnings of subsidiaries countries different rates - - 2.085.196 0.57 Deferred tax effect due to changes in tax rates 862.021 0.24 1.818.366 0,50 Effect on income tax due to adjustment of previous periods - - (320.803) (0,09) Other items (753.118) (0,21) (1.029.516) (0,28)

Total tax expenses for the period $ 35.120.317 9,65 43.690.884 12,01



67 (Continúa)

Wealth Tax Pursuant to the provisions of Act 1739/2014, for the years 2015 to 2017, the Company shall be obligated to settle a wealth tax equal to 1.15%, 1.0% and 0.40% of net equity as of January 1 of each year. Such law provides that for accounting purposes in Colombia such tax may be recorded against equity reserves. The Company recognized a wealth tax for $1.486.965 recorded against the reserves account for future extensions and made the payments of the corresponding installments in May and September 2017.

Transfer Pricing Pursuant to Acts 788/2002 and 863/2003, the Company prepared the last transfer pricing assessment over transactions with related entities abroad in 2016. The assessment did not give rise to adjustments affecting tax income, costs or expenses of the Company.

The Company must conduct a transfer pricing assessment for 2017 in 2018, no significant changes are expected with respect to the previous year.

Tax Reform On December 29, 2016, Act 1819/2016 was passed, whereby new tax rules are introduced, the most relevant aspects of which are the following:

As of 2017, the income tax for equality CREE is revoked and the income and complementary tax is unified. The applicable rates will be 34% in 2017 and 33% in 2018 and 2019 with a corresponding surcharge of 6% in 2017 and 4% in 2018 applicable when the taxable base is greater than or equal to $800 million pesos; such surcharge will not apply for 2019.

The percentage of presumptive income is increased to 3.5%, which will continue being settled on net worth.

The Colombian Financial Reporting Standards (CFRS) would be the basic rules used to determine the taxable base for the income tax, but the reconciliations will continue to be managed for those specific cases where accounting treatments have no incidence on the income tax.

The Peso was determined as functional currency for tax purposes.

The tax system is modified for profits generated as of 2017, to be drawn as dividends, for which both the company and the shareholder will be taxed. For profits that are “untaxed,” according to articles 48 and 49 of the Tax Code, the following rates shall be applied, considering the type of beneficiary:

Marginal rates between 0%, 5% and 10% in the payment or account credits to resident natural persons. 5% fee on payment or account credit to nonresidents, foreign companies and branch offices of foreign companies.

The payment or account credit made to national companies will continue to be considered revenues that do not qualify as taxable income or occasional earnings.



68 (Continúa)

“Taxable” profits will initially be subject to a 35% tax, and once this tax is reduced, the rates of 0%, 5% and 10% will be applied to resident natural persons, and 5% to non-resident natural persons, foreign companies and branch offices of foreign companies. National companies must incorporate in their income tax return statement the payment or account credit, being thereby taxed at the current rate.

Tax losses may only be offset against the net income obtained within the following 12 taxable periods and the possibility of adjusting the tax credits derived from excess of presumptive income and tax losses is eliminated. The value of tax losses and excess presumptive income generated before 2017 on the income and complementary tax and/or income tax for equality CREE will be proportionally offset and will not have a time limit.

The general term of the tax returns was fixed at three (3) years. For entities subject to transfer prices, the term will be six (6) years, which applies also in the case of tax returns where tax losses are offset. The term of the tax returns where tax losses are generated will be equal to the time provided to offset them, i.e., twelve (12) years; however, if the taxpayer offsets the loss within the final two years, the term shall be extended for three (3) more years from such offset with respect to the tax return where said loss was settled, so the period for inspection could be 15 years.

The rates of the withholding tax for payments abroad are modified, fixed at 15% for capital and labor income, consulting, technical services, technical assistance, payments to parent companies for management activities, financial returns, among others. The rate corresponding to 33% of 80% of the payment or account credit for the exploitation of computer programs is maintained.

In terms of sales tax, the general rate was modified from 16% to 19% and the taxable event was modified, including the sale or assignment of rights on intangible assets associated with industrial property and services provided from abroad. For this purpose, services provided and intangibles acquired or licensed from abroad shall be understood to be provided, acquired or licensed on national territory when the direct beneficiary or recipient has his fiscal residence, domicile, permanent establishment or seat of his economic activity on national territory.

17. OTHER LIABILITIES The detail of the other liabilities is as follows: December 2017 June 2017

Collection for third parties (1) $ 13.416.865 15.443.197 Withholding tax and self-withholding tax 4.369.632 3.100.279 Industry and trade withholding tax payable 91.568 53.885 Other taxes and contributions payable 552.811 1.967.422 Value added tax payable 463.297 277.397 Advances and prepayments received 2.454.205 798.647 Deposits received from third parties 3.633.042 3.267.701

$ 24.981.420 24.908.528



69 (Continúa)

(1) Corresponds mainly to the billing made to customers for transportation rate collection and

development fee. 18. OUTSTANDING BONDS The company issues long-term bonds with AAA risk rating and have a past due quarter interest payment. They are detailed below:

Series Term Interest

Rate Legal Representative of

holders Issue Date Maturity Date Subscription

Date December 2017

June 2017

C10 10 years CPI + 5.40% Helm Trust S.A. 27/08/2009 27/08/2019 27/08/2009 $ 150.000.000 150.000.000 C15 15 years CPI + 5.99% Helm Trust S.A. 27/08/2009 27/08/2024 27/08/2009 170.000.000 170.000.000 A7 7 years CPI + 3.05% Helm Trust S.A. 29/01/2013 29/01/2020 29/01/2013 99.821.000 99.821.000 A10 10 years CPI + 3.22% Helm Trust S.A. 29/01/2013 29/01/2023 29/01/2013 150.179.000 150.179.000 A20 20 years CPI + 3.64% Helm Trust S.A. 29/01/2013 29/01/2033 29/01/2013 250.000.000 250.000.000 A4 4 years CPI + 2.55% Helm Trust S.A. 11/03/2015 11/03/2019 11/03/2015 105.000.000 105.000.000 A7 7 years CPI + 3.34% Helm Trust S.A. 11/03/2015 11/03/2022 11/03/2015 120.000.000 120.000.000 A15 15 years CPI + 4.37% Helm Trust S.A. 11/03/2015 11/03/2030 11/03/2015 175.000.000 175.000.000 A4 4 years CPI + 3.29% Helm Fiduciaria S.A. 08/09/2016 08/09/2020 09/09/2016 100.000.000 100.000.000 A10 10 years CPI + 3.74% Helm Fiduciaria S.A. 08/09/2016 08/09/2026 09/09/2016 150.000.000 150.000.000 A20 20 years CPI + 4.12% Helm Fiduciaria S.A. 08/09/2016 08/09/2036 09/09/2016 250.000.000 250.000.000

Total bonds issued

1.720.000.000 1.720.000.000 Amortized cost (2.348.464) (2.649.239)

$ 1.717.651.536 1.717.350.761

During the half-years ended December 31 and June 30, 2017, interests were recognized as follows:


Accrued in financial expenses $ 57.603.504

67.558.068 Accrued in non-bank financing cost of sale 4.750.051 5.133.313 Capitalized in projects 7.127.542

7.546.000

Total accrued interests $ 69.481.097

80.237.381

Paid $ 69.789.318 83.853.230

Below is the detail of the long-term maturities of bond issues and current interests as of December 31, 2017:

Year of Maturity 2019 $ 255.000.000



70 (Continúa)

2020 199.821.000 2021 - 2022 120.000.000 2022 onward 1.145.179.000

$ 1.720.000.000

19. PROVISIONS

The table below shows the nature and value of the loss contingencies:

Administrative

Labor

Civil

Dismantling and restoration costs

Other provisions

Total provisions

Balance as of December 31, 2016 $ 1.155.087 2.208.405 5.353.957 1.413.035 9.152.553 19.283.037 New provisions 919.040 - - - - 919.040 Increase (decrease) of current provisions

(28.793)

-

(381.127)

10.098.367

1.350.580

11.039.027

Provisions used -

-

-

-

(553.864)

(553.864)

Balance as of June 30, 2017 $ 2.045.334

2.208.405

4.972.830

11.511.402

9.949.269

30.687.240 New provisions 49.303 - 1.370.088 - - 1.419.391 Increase (decrease) of current provisions

- (1.265.350) 153.735 57.041 1.217.901 163.327

Provisions used - (843.055) (1.296.772) - (537.084) (2.676.911) Balance as of December 31, 2017 $ 2.094.637 100.000 5.199.881 11.568.443 10.630.086 29.593.047

Below is the detail of the provisioned processes:

Type of Process

Process Start Date

Plaintiff Process Details

December

June

2017 2017 Administrative 02-feb-10 Municipality of Pueblo Nuevo Lawsuit against Public Lighting tax bills. $ 71.664

71.664

Administrative 24-may-10 Municipality of Sahagún Lawsuit against Public Lighting tax bills.

251.078

251.078 Administrative 13-mar-12 Municipality of Tolú Viejo Lawsuit against Public Lighting tax bills.

322.946

322.946

Administrative 01-jun-15 Municipality of Salamina Lawsuit against Public Lighting tax bills.

292.534

292.534 Administrative 10-apr-14 Municipality of Manaure Lawsuit against Public Lighting tax bills.

18.864

18.864

Administrative 30-jun-15 Municipality of San Marcos Lawsuit against Public Lighting tax bills.

98.791

98.791 Administrative 10-sep-15 Municipality of Sampués Lawsuit against Public Lighting tax bills.

106.856

106.856

Administrative 26-feb-15 Municipality of San Carlos Lawsuit against Public Lighting tax bills.

69.954

20.651 Administrative 26-feb-15 Municipality of Sincelejo Lawsuit against Public Lighting tax bills.

861.950

861.950

Labor 30-jun-08 Barrios Arrellana Hernando Labor process for unfair dismissal

-

180.000

Labor 01-feb-05 Muñoz Pérez Marcos Labor process for nonpayment of wage equalization and recalculation of benefits.

100.000

100.000

Labor 18-dec-16 Carlos Cardona Rodriguez Reinstatement of his position, payment of compensation for dismissal, default penalty, payment of wages and social benefits.

-

24.131

Labor 18-dec-16 Denilson Torres y Otros Declaration of existence of employment relationship, recognition of seniority premium, overtime and reimbursement of benefits, food aid and payment of default penalty.

-

1.904.274

Civil 24-jun-02 Martínez Celedón Luis Carlos and others

Compensation for damages caused as a result of the terrorist attack on the Pipeline between Manaure and Barranquilla in October 2001.

4.207.605

4.207.605

Civil 25-jun-03 Escudero Kerguelen Jackeline Compensation for damages.

140.198

765.225



71 (Continúa)

Civil Aureliano José Serpa Estrada Compensation for damages caused by the construction of a variant in 10” pipeline, located in the village of Oasis, Jurisdiction of the Municipality of Soledad.

852.078

-

Restoration costs Dismantling costs of Compressor Stations

11.568.443

11.511.402

Inspection ILI

Smart tool provision

6.773.961

5.734.419

Environmental provision Environmental provision costs

3.856.125

4.214.850

$ 29.593.047

30.687.240

20. EQUITY

Share Capital – As of December 31 and June 30, 2017, share capital was represented by 1,150,000,000 common shares, respectively, with a nominal value of one hundred pesos each. The detail of the assets is presented below:

December 2017 June 2016 Number of shares authorized, issued and outstanding

1.134.848.043 1.134.848.043

Number of shares paid-in and subscribed 1.134.918.610 1.134.918.610

Number of shares repurchased (1) 70.567 70.567

Paid-in and subscribed capital $ 113.491.861 113.491.861

(1) From 2005 to December 31, 2015, the Company has repurchased 70.567 shares for $1.527.933. In accordance

with the provisions of the Code of Commerce, any rights inherent to repurchased shares are suspended.

Reserves – The balance of reserves is detailed as follows:

December 2017 June 2016 Legal reserve $ 56.745.931

56.745.931

Reserve pursuant to bylaws

70.865.347 70.865.347 Other reserves

430.531.812 343.088.705

Total $ 558.143.090 470.699.983

Legal Reserve – According to Colombian Law, the Company must transfer at least 10% of profits for the period to a legal reserve until such reserve equals 50% of the subscribed capital. This reserve is not available for allocation, but may be used to offset losses. Tax Reserve – Pursuant to article 45 of Act 75/1986, the Company created a reserve equal to 70% of the higher value of the depreciation requested as tax deduction. Such reserve may be capitalized or allocated insofar as it is released.

Reserve for Share Repurchase – In 2005, the Company created a reserve for share repurchase amounting to $1,527,933.

Profit Allocation – Dividends are ordered and paid to shareholders based on non-consolidated net profits



72 (Continúa)

for the immediately previous half-year. The dividends ordered were the following:

December 2017 June 2017 Date of Meeting September 26, 2017 March 21, 2017 Unconsolidated earnings from the immediately preceding half-year

$ 320.039.214 291.833.225

Cash dividends

Ordinary cash dividends of $7 monthly per share on 1.134.848.043 outstanding common shares, which will be paid monthly each 21

st day from

October 2017 to March 2018. An extraordinary dividend of $115 per share on 1.134.848.043 outstanding shares payable on October 21, 2017.

Ordinary cash dividends of $16 per share on 1.134.848.043 outstanding common shares as of December 31, 2016, which will be paid monthly each 21

st day from April to September

2017. An extraordinary dividend of $66 per share on 1.134.848.043 outstanding shares payable on April 21, 2017.

Total outstanding shares 1.134.848.043 1.134.848.043 Total dividends declared $ 246.262.025 183.845.383

Detail of mandatory and voluntary reserves (1)

$ 87.444.214

107.376.018

Available for future allocation (2) $ 27.013.633 611.824

(1) Corresponds to the transfer to the Reserve by CFRS convergence effects approved by the General Shareholders‘

Meeting.

(2) From the balance available to shareholders as of June 30, 2017, $13.667.025 were taken to declare dividends.

21. REVENUES FROM ORDINARY ACTIVITIES

Below is the detail of revenues from ordinary activities:

December 2017 June 2017 Natural gas transportation and distribution $ 267.793.696 268.006.147 Facilities and technical services 753.987 255.612 Revenues from non-bank financing 14.215.724 15.226.896 Construction agreements (see note 13) 21.516.779 40.965.648 Revenues from Backoffice services 4.531.486 4.125.124 Other services 4.053.592 3.536.414

$ 312.865.264 332.115.841

22. COST OF GOODS SOLD

Below is the detail of costs of goods sold for the periods ended:



73 (Continúa)

December 2017 June 2017 Employee benefits $ 12.764.351 12.543.852 Maintenance and materials 15.265.635 14.901.948 Fees and consulting 1.263.302 778.558 General costs 21.031.649 20.504.134 Construction of concessions (see note 13) 21.516.779 40.965.648 Taxes 584.539 1.238.155 Depreciation and amortization 42.030.414 41.529.767

$ 114.456.669 132.462.062

23. OPERATING EXPENSES

Below is the detail of operating expenses for the periods ended:

December 2017 June 2017 Employee benefits $ 20.603.565 20.163.534 Fees 7.741.358 3.668.747 Maintenance and materials 1.920.866 1.434.313 General administrative expenses 7.467.221 6.051.467 Impairments 293.199 1.500.371 Provisions 1.612.356 890.249 Administrative taxes 6.566.756 6.256.361 Depreciation and amortization 2.400.167 2.354.566

$ 48.605.488 42.319.608

Below is the detail of number of employees by type of contract: Amount of employees by type of contract December 2017 June 2017

Direct 391 388 Indirect 18 14 Temporary 77 82

Total 486 484

24. OTHERS, NET

Below is the detail of others, net for the periods ended: December 2017

June 2017

Other Revenues Leases $ 978.039 471.257 Earnings on sale of assets 28.944 -



74 (Continúa)

Compensation 980.373 469.902 Exploitation 8.040.104 1.703.818 Other revenues with related entities 5.555.694 856.992

15.583.154 3.501.969

Other expenses Donations 3.563.142 3.649.520 Loss in asset derecognition 92.885 1.343.251 Other expenses 311.294 350.277

3.967.321 5.343.048

Others, net $ 11.615.833 (1.841.079)

25. FINANCIAL REVENUES

Below is the detail of financial revenues for the periods ended:

December 2017 June 2017 Interests and yield $ 13.069.893 13.354.641 Revenues from financial asset under concession 81.647.725 87.047.863 Exchange difference 20.480.588 29.634.312 Other financial revenues 2.198.204 227.744

$ 117.396.410 130.264.560

26. FINANCIAL EXPENSES

Below is the detail of financial expenses for the periods ended:


Issued bonds interests $ 57.603.504 67.558.068 Financial obligations interests 17.063.414 12.784.507 Exchange differences 21.229.537 25.946.309 Other financial expenses 503.681 1.909.148

$ 96.400.136 108.198.032

27. BALANCES AND TRANSACTIONS WITH RELATED COMPANIES AND ASSOCIATES

According to the “IAS 24 - Related Party Disclosures”, a related party is a person or entity that is related to the entity that is preparing its financial statements and has control or joint control over the reporting entity; has significant influence over the reporting entity; or is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. The definition of a related party includes: a) person or a close member of that person's family related to the reporting entity, entities that



75 (Continúa)

are members of the same group (parent and subsidiaries), associates or joint ventures of the entity or entities of the Group, post-employment benefit plans for the benefit of employees of either the reporting entity or an entity related to the reporting entity.

Related parties are:

An economic affiliate is a person or entity that is related to any group entity through transactions

such as transfers of resources, services and obligations, regardless of whether or not it is charged. For

the Company, transactions between economic associates are any economic operations held with

shareholders and entities of the parent company.

Shareholders who individually own more than 10% of the Company’s share capital.

Key management personnel: persons with authority and responsibility for planning, directing and

controlling the activities of the entity, either directly or indirectly, including any director or manager

(whether executives or otherwise) of the entity, including the CEO, Senior Executives and Board

Members.

Subordinated Entities: Companies where control is exercised according to the definition of control in

the code of commerce and “IFRS 10 - Consolidated Financial Statements”.

Associate Entities: companies where significant influence is exercised, which is generally considered

as a participating interest of between 20% and 50% of its share capital.

Operations with related parties:

As of December 31, 2017, through its business infrastructure, Promigas provides technical-administrative support in some activities of the companies, as in the case of Promioriente S.A. E.S.P., Transmetano E.S.P. S.A., Zonagen S.A., Transoccidente S.A. E.S.P., Gases del Pacifico S.A.C., Sociedad Portuaria El Cayao S.A. E.S.P. and Promisol S.A.S.

During the half-years ended December 31 and June 30, 2017, there were no significant operations of the following characteristics:

Free or compensated services debited to a related company. Loans implying an obligation to the borrower that does not correspond to the essence or nature of

the loan agreement.

Below is the summary of assets and liabilities as of December 31 and June 30, 2017, and for transactions made during the half-years ending on such dates with associates, subsidiaries, shareholders, legal representatives and managers:

Shareholders

Board of Directors

Key Manageme

nt Personnel

Subsidiaries

Associates

Other Related Parties

Total



76 (Continúa)

Shareholders

Board of Directors

Key Manageme

nt Personnel

Subsidiaries

Associates


Total

December 2017

Assets

Cash $ 241.918

- -

-

-

13.408.381

13.650.299 Investments

-

- -

1.465.636.675

653.790.231

479.746

2.119.906.652

Debtors

-

- 926.983

451.521.185

8.025.639

259.647

460.733.454

$

241.918

- 926.983

1.917.157.860

661.815.870

14.147.774

2.594.290.405

Liabilities

Accounts payable $ 58.674.860

- -

19.071.541

41.205

1.419.323

79.206.929

Revenues

Sale of services

-

- -

59.931.019

34.272.509

33.910

94.237.438 Financial

4.393

- 26.440

14.278.869

-

387.674

14.697.376

Net equity method -

- -

115.538.234

65.985.555

-

181.523.789 Other

-

- -

3.117.278

2.438.415

37.158

5.592.851

$ 4.393

- 26.440

192.865.400

102.696.479

458.742

296.051.454

Expenditures

Cost of sale $ -

- -

3.220.399

3.521

152.001

3.375.921 Salaries and wages

-

- 4.704.339

-

-

2.713.381

7.417.720

Fees - 190.331 - - - 230.809 421.140 General

-

- -

215.072

55.582

886.026

1.156.680

Financial - - - 13.107.894 - 10.055 13.117.949

$ -

190.331 4.704.339

16.543.365

59.103

3.992.272

25.489.408

June 2017

Assets

Cash $ 237.833 - -

-

-

30.340.358

30.578.191 Investments

- - -

1.343.930.093

594.432.674

490.308

1.938.853.075

Debtors

- - 655.981

484.880.402

14.074.972

4.572

499.615.927

$ 237.833 - 655.981

1.828.810.495

608.507.646

30.835.238

2.469.047.193

Liabilities

Accounts payable $ 55.207.710 - - 27.850.025

2.415.277

612.583

86.085.595

Revenues

Sale of services $ - - -

50.736.075

33.735.088

34.110

84.505.273 Financial

3.417 - 21.892

23.895.403

-

159.866

24.080.578

Net equity method

- - -

109.946.512

75.701.319

-

185.647.831 Other - - -

835.328

21.664

-

856.992

$ 3.417 - 21.892

185.413.318

109.458.071

193.976

295.090.674

Expenditures

Cost of sale $ -

- -

3.514.640

289

-

3.514.929 Salaries and wages

-

- 3.232.717

-

-

-

3.232.717

Fees - 111.026 - 38.636 46.498 196.160



77 (Continúa)

Shareholders

Board of Directors

Key Manageme

nt Personnel

Subsidiaries

Associates


Total

General

-

- -

148.632

5.611

4.548.652

4.702.895 Interests

151.860

- -

1.413.794

-

2.778.861

4.344.515

$ 151.860

111.026 3.232.717

5.077.066

44.536

7.374.011

15.991.216

From the half-years ended December 31 and June 30, 2017, the following balances with subsidiaries and associates stand out:

Debtors Accounts payable


Subsidiaries Transmetano E.S.P. S.A. $ 10.248.389 21.874.685 - - Promioriente S.A. E.S.P. 68.586.887 69.053.710 - - Transoccidente S.A. E.S.P. 47.644 46.311 - - Surtigas S.A. E.S.P. 28.984.936 28.477.253 3.388.277 666.084 Gases del Pacífico S.A.C 3.012.902 2.527.672 - - Sociedad Portuaria El Cayao S.A. E.S.P. 230.711 815.708 - - Gases de Occidente S.A. E.S.P. 104.221.841 104.212.976 6.357 - Compañía Energética de Occidente S.A. E.S.P. 2.872.936 4.400.590 - - Promisol S.A.S. 233.311.773 253.471.497 15.676.907 27.201.133 Enlace Servicios Compartidos S.A.S. 3.166 - - 1.000

$ 451.521.185 484.880.402 19.071.541 27.868.217

Associates Gases del Caribe S.A. E.S.P. $ 7.985.637 13.955.475 23.355 2.449.953 Energia eficiente S.A. $ - - 17.850 - Gases de la Guajira S.A. E.S.P. 40.002 119.497 - -

$ 8.025.639 14.074.972 41.205 2.449.953

Cost of sale Operating expenses


Subsidiaries Surtigas S.A. E.S.P. $ 2.977.204 3.336.377 (1.007) 1.431 Compañía Energética de Occidente S.A. E.S.P. 243.195 178.263 216.079 147.201

$ 3.220.399 3.514.640 215.072 148.632

Associates Energía eficiente S.A. $ - - 15.0000 - Gases del Caribe S.A. E.S.P. $ 3.521 12.048 40.582 32.488

3.251 12.048 55.582 32.488



78 (Continúa)

Revenues from ordinary activities Financial revenues


Subsidiaries Transmetano E.S.P. S.A. $ 986.158 990.480 390.977 446.385 Promioriente S.A. E.S.P. 1.258.081 852.827 2.629.488 3.015.784 Transoccidente S.A. E.S.P. 270.643 235.727 - - Surtigas S.A. E.S.P. 48.910.479 46.509.810 186.847 203.118 Gases del Pacífico S.A.C 1.163.250 - (51.125) 136.608 Sociedad Portuaria El Cayao S.A. E.S.P. 25.047 1.202.831 35.449 164.119 Gases de Occidente S.A. E.S.P. 2.191 43.779 4.113.443 4.687.241 Orion Contact Center S.A.S. 274 - - - Promisol S.A.S. 7.314.896 898.877 6.973.790 15.242.148 Zonagen S.A. - 1.744 - -

$ 59.931.019 50.736.075 14.278.869 23.895.403

Associates Gases del Caribe S.A. E.S.P. $ 34.266.938 33.735.088 - - Gases de la Guajira S.A. E.S.P. 5.571 - - -

$ 34.272.509 33.735.088 - -

Other revenues

Financial expenses


Subsidiaries Transmetano E.S.P. S.A. $ 247.853

-

-

-

Promioriente S.A. E.S.P. 438.106

1.293

-

- Surtigas S.A. E.S.P. 1.731.623

423.238

-

-

Gases del Pacífico S.A.C 536.355

-

-

- Sociedad Portuaria El Cayao S.A. E.S.P. -

390.818

-

75.175

Gases de Occidente S.A. E.S.P. 107.924

19.979

-

- Compañía Energética de Occidente S.A. E.S.P. 39.848

-

-

-

Orion Contac Center S.A.S. 3.138

-

-

- Promisol S.A.S. 12.430 - 13.107.894 1.318.416

$ 3.117.278 835.328 13.107.894 1.393.591

Associates Gases del Caribe S.A. E.S.P. $ 2.429.990

21.664

-

-

Efigas Gas Natural S.A. E.S.P. 8.425 - - -

$ 2.438.415 21.664 - -

Compensation of Key Management Personnel:

Key Management personnel include the CEO and Chief Officers. The compensation received by the key Management personnel is as follows:

December 2017

June 2017

Items Salaries $ 2.810.670 2.516.613 Short-term Employee Benefits 1.893.669 716.104

Total $ 4.704.339 3.232.717



79 (Continúa)

As of December 31 and June 30, 2017, there are unused credit card quotas with other related entities worth $28.275 and $65.972, respectively.

Below is the detail of the Company’s key personnel: December 2017 June 201/ Key personnel:

CEO 1 1 Vice Presidents 5 4

Other executives Managers 21 21 Directors 3 3

30 29

28. COMMITMENTS AND CONTINGENCIES Commitments - For the development of its corporate purpose, the Company has entered into the following agreements, among others:

a. By Public Deed No. 1629 of September 16, 1976, the Company obtained from the National government the concession to build, operate, maintain, exploit and manage a public utility pipeline for the transportation of hydrocarbons from Ballenas, Department of La Guajira, to the cities of Barranquilla and Cartagena, for an 50-year term, extendable to 20 more years. Under the terms of the concession, The National Government has a preemption right over the transportation of these products through the gas pipeline, paying a current rate. The Company shall be obligated to sell the pipeline to the Nation, if required by the Government, upon completion of the first 30 years of the Agreement (2006), at the expiry thereof (2026) or upon termination of the extension period, at the price agreed by the parties, or based on the appraisal of an independent expert. The Company may not assign or relinquish the agreement, neither totally nor partially, without prior approval by the National Government.

In notice served to the Company on May 11, 2005, the ministry of Mines confirmed that they would not take up the purchase option that was available for 2006 over the gas pipelines under concession.

The detail of the concession agreements for the pipeline sectors entered into with the National Government is included in note 13.

b. Agreements with gas distribution Companies, power generation companies and industrial users with consumption over 100,000 cubic feet per day, corresponding to natural gas transportation through the pipeline systems available to the Company. These agreements comply with the regulatory framework and their terms of duration range between five and ten years, and the guarantees necessary and sufficient for the performance and stability thereof have been constituted.



80 (Continúa)

The Company’s management considers that there are no risks of significant losses in the future arising from the performance of these agreements and commitments.

Contingencies - In the course of its operations, the Company is subject to several legal regulations pertaining to public utilities and environmental protection companies. The Management considers, based on legal opinions, that there have been no situations that may indicate possible breaches to those standards and leading to significant impacts on the financial statements.

In 2001, the Company entered into an Operating Balance Agreement (OBA) with Chevron Petroleum Company and during the reporting period there were contractual differences arising from Chevron's interpretation in the application of the Balance Agreement, based on the entry into force of CREG Resolutions 089/2013 and 088/2015, which explain, inter alia, the provisions for the management of gas imbalances at the Outlet Point and not at the Inlet Point, leading to a dispute over the amounts invoiced in favor or against. In December 2017 a settlement was reached, where Promigas must pay Chevron a total of $15.835.720, $8.114.638 of which were paid in December 2017 and the difference in February 2018. $4.466.791 that Promigas had recognized in accounts receivable were also compensated.

In May 2017, the Contentious-Administrative Court of La Guajira confirmed the sentence issued in September 2014 by the Second Court of Riohacha, where the Company was declared financially responsible for the explosion of the Ballena-Barranquilla gas pipeline on the Riohacha-Maicao road, that occurred in 2001. The claims are for $3.700.000, an amount that is currently provisioned. Given the foregoing, Promigas filed a writ for the protection of fundamental rights and the mechanism of exceptional revision with the State Council.

In November 2017, Generadora y Comercializadora de Energia del Caribe S.A. E.S.P. - Gecelca S.A. E.S.P. called for an Arbitration Court in the Barranquilla Chamber of Commerce against Promigas S.A. ESP, which amounted to $62 billion, for the alleged breach of a gas transportation agreement due to the late entry of operation of a new gas pipeline caused by delays in construction works, mainly because of prior consultations, strikes and extralegal recourses of the communities. The lawsuit filed with the Court was answered in a timely manner on December 1, 2017, and the next hearing to be held within the arbitration process will be a settlement hearing on February 21, 2018. The settlement is expected for the first months of 2018.

As of December 31 and June 30, 2017, the Company had the following litigations and individual lawsuits filed against it. Their quantities are determined by the claims and are not recognized in the provisions, given that the lawyers handling each process consider that the success chances of such claims are eventual:



81 (Continúa)

Range December 2017 June 2017 (millions of pesos)

Number of Claims

Value

Number of Claims

Value

Litigations and Individual Lawsuits Against (1)

Easement claims: Between $1 and $1,000 30 $ 4.350.799 30 $ 5.216.024 $1,001 onward 4 5.874.378 3 4.815.219

Easement 34 10.225.176 33 10.031.243

Ordinary processes: Between $1 and $1,000 47 5.969.602 46 5.920.299 Between $1,001 and $3,000 2 4.027.303 2 4.027.303 $3,001 onward 2 8.826.414 2 8.826.414

Ordinary 51 18.823.319 50 18.774.016

Labor 6 593.000 10 2.722.406

Total processes 91 $ 29.641.495 93 $ 31.527.665

Litigations and Individual Lawsuits in Favor Contingency rights (2) 96 61.086.136 95 61.949.726

(1) As of December 31 and June 30, 2017, there are 17 and 15 processes, respectively, without value.

(2) Includes mainly the process The Nation - Ministry of Mines - CREG for the nullity of CREG Resolution 018/2001,

CREG Resolution 014/2002, CREG Resolution 089/2004 and CREG Resolution 120/2005 for US $13.000.000; the variation is a result of the exchange difference.

29. OPERATIONS BY SEGMENT Information by segment is structured according to the different lines of business of the Company. The lines of business described below were established according to the organizational structure of the Company, considering the nature of services and products offered. The structure of this information is designed as if each line of business were an autonomous business and had its own separate resources, allocated based on the assets assigned to each line according to an internal system of percentage distribution of costs.

Below is the information by segment of these activities:



82

Gas Transportation

Distribution of Gas and Energy

Other Services

Financing

Total

December 2017

Operating revenues $ 282.682.684

7.492.812

7.596.088

15.093.680

312.865.264 Cost of goods sold (114.636.382)

(1.961.943)

320.032

1.821.624

(114.456.669)

Gross earnings 168.046.302

5.530.869

7.916.120

16.915.304

198.408.595 Operating expenses (44.576.897)

(1.765.907)

(1.011.711)

(1.250.973)

(48.605.488)

Interest in associates 6.342.470

59.643.085

-

-

65.985.555 Interest in subsidiaries 59.474.459 56.063.775 - - 115.538.234 Others, net 8.690.877

-

2.924.956

-

11.615.833

Operating earnings 197.977.211

119.471.822

9.829.365

15.664.331

342.942.729 Financial revenues 117.396.410

-

-

-

117.396.410

Financial expenses (96.400.136)

-

-

-

(96.400.136)

Earnings before income tax 218.973.485

119.471.822

9.829.365

15.664.331

363.939.003 Income tax (33.232.586)

(231.921)

(270.445)

(1.385.365)

(35.120.317)

Net income $ 185.740.899

119.239.901

9.558.920

14.278.966

328.818.686

Assets

Available cash equivalent $ 38.753.748

-

-

-

38.753.748

Financial assets at fair value 1.839.457.249

-

-

-

1.839.457.249 Financial assets at amortized cost 426.537.782

-

123.273.367

170.874.416

720.685.565

Inventories 10.447.092

-

-

-

10.447.092 Investments in associates -

653.790.231

-

-

653.790.231

Investments in subsidiaries 614.026.323

851.610.352

-

-

1.465.636.675 Property, plant and equipment 82.467.750

-

1.721.413

-

84.189.163

Intangible assets 1.105.937.309

-

-

-

1.105.937.309 Other assets 12.638.311

-

-

-

12.638.311

Total assets $ 4.130.265.564

1.505.400.583

124.994.780

170.874.416

5.931.535.343

Liabilities

Financial obligations and bond issues $ 2.397.791.688

-

-

-

2.397.791.688

Accounts payable 102.186.062

-

4.230.118

6.758.932

113.175.112 Employee benefits 8.958.768

-

668.322

55.016

9.682.106

Deferred liabilities 351.582.445

15.980.029

-

-

367.562.474 Provisions 29.593.047 - - - 29.593.047 Income tax payable 25.137.258 220.776 257.448 679.023 26.294.505 Other liabilities 24.990.184

-

-

-

24.990.184

Total liabilities $ 2.940.239.452

16.200.805

5.155.888

7.492.971 2.969.089.116



83

Gas Transportation

Distribution of Gas and Energy

Other Services

Financing

Total

June 2017

Operating revenues $ 302.444.142

6.512.319

7.932.484

15.226.896

332.115.841

Cost of goods sold (124.513.325)

1.883.193

(4.165.169)

(5.666.761)

(132.462.062)

Gross earnings 177.930.817

8.395.512

3.767.315

9.560.135

199.653.779 Operating expenses (40.074.664)

975.814

(1.730.010)

(1.490.748)

(42.319.608)

Interest in associates -

75.701.319

-

-

75.701.319 Interest in subsidiaries 55.007.793 54.938.719 - - 109.946.512 Dividends received 522.647

-

-

-

522.647

Others, net 358.541

-

(2.199.620)

-

(1.841.079)

Operating earnings 193.745.134

140.011.364

(162.315)

8.069.387

341.663.570 Financial revenues 130.264.560

-

-

-

130.264.560

Financial expenses (108.843.966)

-

-

645.934

(108.198.032)

Earnings before income tax 215.165.728

140.011.364

(162.315)

8.715.321

363.730.098 Income tax (40.514.020)

(2.403.417)

(298.366)

(475.081)

(43.690.884)

Net income $ 174.651.708

137.607.947

(460.681)

8.240.240

320.039.214

Assets Available cash equivalent $ 82.953.403

-

-

-

82.953.403

Financial assets at fair value 1.791.578.515

-

-

-

1.791.578.515 Financial assets at amortized cost 394.614.503

2.051.924

147.814.810

163.610.741

708.091.978

Inventories 10.463.197

338.720

-

-

10.801.917 Investments in associates -

594.432.674

-

-

594.432.674

Investments in subsidiaries 568.844.463

775.085.630

-

-

1.343.930.093 Property, plant and equipment 56.777.194

22.470.422

772.786

-

80.020.402

Intangible assets 1.090.386.419

-

-

-

1.090.386.419 Other assets 28.163.753

-

619

-

28.164.372

Total assets $ 4.023.781.447

1.394.379.370

148.588.215

163.610.741

5.730.359.773

Liabilities Financial obligations and bond issues $ 2.292.321.179

-

-

-

2.292.321.179

Accounts payable 96.416.798

918.754

12.412.958

6.196.397

115.944.907 Employee benefits 8.529.028

72.830

68.943

18.264

8.689.065

Deferred liabilities 345.302.338

14.995.051

-

-

360.297.389 Provisions 30.687.240 - - - 30.687.240 Income tax payable 10.545.891 104.556 98.034 303.658 11.052.139 Other liabilities 24.917.611

-

-

-

24.917.611

Total liabilities $ 2.808.720.085

16.091.191

12.579.935

6.518.319 2.843.909.530



84

30. NEW STANDARDS AND INTERPRETATIONS a) Standards and interpretations with subsequent application issued by the Ministry of Finance and

Public Credit and the Ministry of Trade, Industry and Tourism In accordance with Decrees 2496 of December 2015 and 2131 of December 2016, the following standards are applicable as of 2018. The impact of these standards is being evaluated by the Company.

Standard Issue Detail

IAS 7 Statement of Cash Flows

Disclosure initiative Require entities to provide disclosures that enable users of financial statements to assess changes in liabilities arising from financing activities.

IAS 12 Income Taxes

Recognition of Deferred Tax Assets for Unrealized Losses

Clarify the requirements for recognition of deferred tax assets for unrealized losses on debt instruments measured at fair value.

The impact of the application of IFRS 9, 15 and 16 is stated in subsection c).

b) New Accounting Statements Issued by the International Accounting Standards Board (IASB):

During 2017, the International Accounting Standards Board (IASB) issued the following new statements on amendments related to standards already issued or new issues of standards that may have an impact on the Company and its subsidiaries, which are:

IFRS 17 - Insurance Contracts The new standard sets out the principles for the recognition, measurement, presentation and disclosure of insurance contracts and replaces IFRS 4 - Insurance Contracts. The standard is effective for annual periods beginning on or after January 1, 2021, with early application allowed. It is applied retrospectively unless it is impracticable, in which case the modified retrospective approach or the fair value approach is applied.

IFRIC 23 - Uncertainty over Income Tax Treatments The Interpretation sets out how to determine the accounting tax position when there is uncertainty about the treatment of income taxes. The effective date is annual periods beginning on or after January 1, 2019.

Annual Improvements IFRS 12 - Disclosure of Interests in Other Entities Establishes whether the disclosure requirements of IFRS 12 apply to interests in other entities when they are classified as non-current assets held for sale or discontinued operations in accordance with IFRS 5 Non-Current Assets Held for Sale or Discontinued Operations. The Board published the amendment in December 2016.

Annual Improvements IAS 28 - Investments in Associates and Joint Ventures The amendment clarifies that an investment fund or trust may choose to apply the exemption from recognition of the equity method and record its investments in associates or joint ventures at fair value



85

under IFRS 9; however, such choice must be made separately for each associate or joint venture in the initial recognition of such investment. The Board published the amendment in December 2016.

Amendment to IAS 40 - Investment Property Clarifies the application of paragraph 57 of IAS 40 - Investment Property, providing guidance on transfers to, or from, investment property. The Board published the amendment in December 2016.

IFRIC 22 - Foreign Currency Transactions and Advance Consideration Provides requirements on what exchange rate to use when reporting foreign currency transactions (such as revenue transactions) when payment is made or received in advance. The Board published the amendment in December 2016.

c) New standards, modifications and interpretations incorporated into the accounting framework

accepted in Colombia whose application must be evaluated beyond January 1, 2018, or in some cases could be applied in advance

Decrees 2496 of December 2015, 2131 of December 2016 and 2170 of December 2017 introduced to the financial reporting regulatory framework new regulations, modifications or amendments issued or made by the International Accounting Standards Board (IASB) to the International Financial Reporting Standards between 2014 and 2016, to evaluate their application in financial periods beginning on or after January 1, 2018, although their application made in advance.

The assessment of the impact of these new standards and interpretations made by the Company is as follows:

IFRS 9 - Financial Instruments In July 2014, the International Accounting Standards Board (IASB) issued the final version of International Financial Reporting Standard No. 9 (IFRS 9) “Financial Instruments” for mandatory application in annual periods beginning on or after January 1, 2018. This standard replaces International Accounting Standard No. 39 (IAS 39) and in Colombia replaces the previous version of IFRS 9 “Financial Instruments” that had been issued in 2010 and that was included in Decree 2420/2015.

The new IFRS 9 addresses issues related mainly to the classification and measurement of financial assets, establishes a new impairment model for financial assets and introduces new rules for hedge accounting.

I. Classification and measurement - Financial assets The new IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model in which these assets are managed and their cash flow characteristics. The new IFRS 9 includes three main classification categories for financial assets: measured at amortized cost (AC), at fair value through other comprehensive income, and at fair value through profit or loss (FVPL).



86

The new standard complements the two existing categories of AC and FVPL in the previous IFRS 9 that are currently in force in Colombia for the consolidated financial statements by adding the category of Debt Instruments at Fair Value through Equity in the other comprehensive income account. (FVOCI). A financial asset is measured at amortized cost and not at fair value through profit or loss if it complies with both of the following conditions: 1. The asset is maintained within a business model whose objective is to maintain assets to obtain

contractual cash flows; and 2. The contractual terms of the financial asset set specific dates for the cash flows derived only from

payments of principal and interest on the current balance.

A debt instrument is measured at FVOCI only if it meets both of the following conditions and has not been designated as FVPL:

3. The asset is maintained within a business model whose objective is achieved by collecting contractual

cash flows and selling these financial assets; and 4. The contractual terms of the financial asset establish specific dates for cash flows derived only from

payments of principal and interest on the outstanding balance. During the initial recognition of investments in equity instruments not held for trading, you can irrevocably choose to record the subsequent changes in fair value as part of other comprehensive income in equity. This choice must be made on an instrument-by-instrument basis. All financial assets not classified as measured at amortized cost or at fair value through OCI as described above are measured at fair value through profit or loss. Preliminary impact assessment of the classification of financial assets Based on the preliminary high-level assessment of possible changes in classification and measurement of financial assets held as of December 31, 2017, no significant changes in the classification of the company's financial assets will be presented. II. Impairment of financial assets The new IFRS 9 replaces the “incurred loss” model of IAS 39 with an expected credit loss model (ECL). This new model will require that considerable judgment be applied regarding how changes in economic factors affect the ECL, which will be determined on a weighted average basis. The new impairment model will be applicable to the following financial assets that are not measured at FVPL:

Investments in debt securities;

Commercial accounts receivable;

Other accounts receivable.



87

No impairment loss will be recognized on investments in equity instruments. The new IFRS 9 requires recognition of a provision for impairment of financial assets at fair value through profit or loss and at fair value through OCI in an amount equal to an expected impairment loss in a period of twelve months after the cut-off date of the financial statements or during the remaining life of the financial asset. The expected loss in the remaining life of the financial asset is the expected loss that results from all possible impairment events over the expected life of the financial instrument, while the expected loss in the twelve-month period is the portion of expected losses that will result from impairment events that result from the impairment events that are possible within twelve months after the reporting date of the financial statements. IFRS 9 presumes that an asset is impaired when it is more than 30 days past due unless the company can demonstrate and rebut this presumption. The Company intends to adopt the standard using the modified retrospective approach, which means that the cumulative impact of the adoption will be recognized in the retained earnings as of January 1, 2018, and that the comparative figures will not be restated. The new model for determining the provision of financial assets is quite complex for entities fundamentally in the financial sector; however, for non-financial entities, IFRS 9 allows measuring the correction of the value for losses at an amount equal to the expected credit losses during the life of the asset for commercial accounts receivable that do not have a significant financial component. Under this scheme, the Company has developed a provision determination model based on the Company’s historical loss experiences taking into account the days of default, and a simplified model for projection of macroeconomic factors that affect the Company’s industry. Based on these analyzes, the following provision percentages have been preliminarily estimated for commercial accounts receivable in accordance with the days of default as of January 1, 2018: The Company has estimated that the adoption of the new provisions model for impairment of financial assets as of January 1, 2018, will decrease the retained earnings as detailed below:

Stage Ratio %

Brilla Portfolio Leases

1 0,828% 0,220% 2 8,271% 0,220%

2.2 8,143% 0,220% 3 65,940% 0,220%

III. Hedge accounting In the initial application of IFRS 9, the Company may choose as an accounting policy to continue applying the hedge accounting requirements of IAS 39 instead of those included in IFRS 9. The Company has chosen to continue applying the hedge accounting of IAS 39.



88

IFRS 15 - Revenue from contracts with customers. In July 2014, the IASB issued IFRS 15 “Revenue from contracts with customers", which replaces several previous standards, but especially IAS 11 “Construction Contracts” and IAS 18 “Revenue.” This new standard with mandatory application as of January 1, 2018, requires that revenues from ordinary activities of customers other than those originated in financial instruments and financial lease agreements be recognized with specific standards for their registration. Under IFRS 15, revenues are recognized so as to reflect the transfer of control of goods or services promised to the customers in exchange for an amount that expresses the consideration expected. Under this new premise, the Company recognizes revenue from ordinary activities, other than financial revenues such as: fees for banking services, sale of goods or services under different headings, and revenue from construction contracts, through the application of the following stages: 1. Identifying the contract with the customer. 2. Identifying performance obligations in the contract. 3. Determining the price of the transaction. 4. Assigning the transaction price within performance obligations. 5. Recognizing revenue to the extent that each customer is satisfied with each performance obligation. In accordance with the foregoing criteria, the main changes that apply to the Company in determining other revenue other than financial revenue and revenue from lease agreements correspond to the reassessment made of the allocation of the transaction price based on fair values of the different services or costs plus profit margin instead of using the residual value method, especially in the allocation of revenue from contracts for the construction and operation of goods of the Colombian state in concession contracts. The preliminary high-level assessment carried out by the Company indicates that the implementation of IFRS 15 will not have a material impact on the timing and amount of recognition of the other revenue corresponding to the aforementioned operations. The Company intends to adopt the standard using the modified retrospective approach, which means that the cumulative impact of the adoption will be recognized in the retained earnings as of January 1, 2018, and that the comparative figures will not be restated. Preliminary impact assessment on revenue from ordinary activities. Based on the preliminary high-level assessment of possible changes in the implementation of IFRS 15 as of January 1, 2018, there will be no significant changes. IFRS 16 - Leases IFRS 16 was issued by the IASB in 2016 with the date of effective application by the entities as of January 1, 2019, with early application allowed; however, in Colombia it has not yet been included in the regulatory decrees of accounting standards.



89

IFRS 16 replaces the existing guidelines for accounting for leases, including IAS 17 Leases, IFRIC 4 Determining whether an arrangement contains a lease, SIC 15 Operating leases - Incentives, and SIC 27 Evaluating the Substance of Transactions in the Legal Form of a Lease. IAS 16 introduces a single accounting record model of lease agreements in the statement of financial position for lessees. A lessee recognizes an asset by right of use representing the right to use the leased asset and a lease liability representing its obligation to make the lease payments. There are optional exemptions for short-term leases or leases of very low-value assets. The accounting treatment of lease agreements for lessors remains similar to current accounting standards in which the lessor classifies leases as financial or operating leases. The possible impacts of this standard are currently being analyzed.

31. EVENTS OCCURRED AFTER THE REPORTING PERIOD Capitalization of Gases del Pacífico S.A.C. On January 23, 2018, the Mandatory Annual Shareholders’ Meeting of Gases del Pacífico S.A.C. and a capital contribution of US $6,300,000 (Promigas S.A. E.S.P. for US $4,725,000 and Surtigas S.A. E.S.P. for US $1,575,000)it was agreed. These contributions were paid in full in the month of January 2018, giving rise to the issue of 20,279,700 shares, 15,209,775 shares of Promigas S.A. E.S.P. and 5,069,925 shares of Surtigas S.A. E.S.P.

32. APPROVAL OF FINANCIAL STATEMENTS

The financial statements and notes thereto were approved for issue according to Board Meeting Minutes No. 471 of February 7, 2018. These financial statements and notes thereto will be presented at the Shareholders’ Meeting of March 20, 2018. Shareholders have the power to approve or modify the Company’s financial statements.

(FREE TRANSLATION OF THE REPORT ISSUED IN SPANISH) STATUTORY AUDITOR’S REPORT ON THE COMPLIANCE WITH NUMERALS 1º) AND 3º)

OF ARTICLE 209 OF COMMERCIAL CODE

To the Shareholders Promigas S.A. E.S.P.:

As part of my duties as Statutory Auditor and in compliance with Articles 1.2.1.2 and 1.2.1.5 of Single Regulatory Decree 2420 of 2015, amended by Articles 4 and 5 of Decree 2496 of 2015, respectively, I submit the result of the audit procedures carried out in compliance with paragraphs 1) and 3) of Article 209 of the Commercial Code, detailed as follows, for the period the half-year ended December 31, 2017, by Promigas S.A. E.S.P., hereinafter the “Society”.

1º) If the Society’s management performance are in conformity with the bylaws and the instructions or decisions of the Board of Shareholders, and

3) If there are and are adequate the measures of internal control, maintenance and custody of the Society’s assets or third parties’ assets in its possession.

Criteria The criteria considered for the evaluation of the matters mentioned in the previous paragraph include: a) the bylaws and the minutes of the Board of Shareholders and, b) the internal control components implemented by the Society, such as the control environment, the risk assessment procedures, its information and communications systems, and the monitoring of controls by the administration and those in charge of corporate governance, which are based on the Integrated Internal Control Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, COSO.

Management's responsibility Management is responsible for the compliance with the bylaws and the Board of Shareholders decisions and for designing, implementing and maintaining internal control measures, of maintenance and custody of the Society’s assets and third parties’ assets in its possession, in accordance with the requirements of the internal control system which are based on the Integrated Internal Control Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, COSO.

Statutory Auditor’s responsibility My responsibility is to carry out a reasonable assurance work to express a conclusion based on the evidence obtained. I performed my procedures in accordance with the International Standard on Assurance Engagements 3000 accepted in Colombia (ISAE 3000 for its acronym in English, which was translated into Spanish and issued in April 2009 by the International Auditing and Assurance Standards Board (IAASB, for its acronym in English). Such a standard requires that I

2

comply with ethical requirements, plan and perform the procedures necessary to obtain reasonable assurance about compliance with the bylaws and the Board of Shareholders decisions and whether there are and are adequate the internal control measures, which include the Self-Control and Risk Management System for Money Laundering and Financing of Terrorism, maintenance and custody of the Society’s assets and third parties’ assets that are in its possession, in accordance with the requirements of the internal control system which are based on the Integrated Internal Control Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, COSO, in all important aspects of evaluation.

Procedures performed

This reasonable assurance engagement includes obtaining evidence for the period the half-year ended December 31, 2017. Procedures include:

Obtaining a written representation from Management on the compliance with the bylaws and the Board of Shareholders decisions and on the adequacy of internal control measures, which include the Self-Control and Risk Management System for Money Laundering and Financing of Terrorism, maintenance and custody of the Society’s assets and third parties’ assets in its possession, in accordance with the requirements of the internal control system which are based on the Integrated Internal Control Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, COSO.

Reading and verifying compliance with the Society’s bylaws.

Obtaining a management certification on the meetings of the Board of Shareholders, documented in the minutes.

Reading of the Board of Shareholders minutes and the bylaws and verification of whether the management performance conform to them.

Inquiries with Management about changes or modification projects to the Society’s bylaws during the period covered and validation of its implementation.

Evaluation of whether there are and are adequate the internal control measures, which include the Self-Control and Risk Management System for Money Laundering and Financing of Terrorism and maintenance and custody of the Society’s assets and third parties’ assets that are in its possession, in accordance with the requirements of the internal control system which are based on the Integrated Internal Control Framework issued by the, which includes:

– Design, implementation and operating effectiveness tests on the relevant controls of the internal control components on the financial report and the elements established by the Society, such as: control environment, process of risk assessment by the entity, the information systems, control activities and monitoring to controls.

3

– Evaluation of the design, implementation and operating effectiveness of relevant, manual and automatic controls of the key business processes related to the significant accounts of the financial statements.

– Verify compliance with the rules and instructions on the Self-Control and Risk Management System for Money Laundering and Terrorism Financing

Inherent limitations

Due to the inherent limitations to any internal control structure, there may be effective controls at the date of my examination that change that condition during the period reviewed, because my report is based on selective tests. Additionally, the evaluation of internal control has the risk of becoming inadequate due to changes in the conditions or because the degree of compliance with the policies and procedures may deteriorate. On the other hand, the inherent limitations of internal control include human error, failures due to the collusion of two or more people, or inappropriate overshoot of controls by the administration.

Conclusion

My conclusion is based on the evidence obtained on the matters described, and is subject to the inherent limitations set forth in this report. I believe that the audit evidence I have obtained provides a reasonable assurance basis for my conclusion expressed below:

Based on the results of my tests and the evidence obtained, in my opinion, the management performance conforms to the bylaws and the Board of Shareholders decisions and the internal control measures, which include the Self-Control and Risk Management System for Money Laundering and Financing of Terrorism, conservation and maintenance and custody of the Society’s assets or third parties’ assets in its possession are adequate, in accordance with the requirements of the internal control system which are based on the Integrated Internal Control Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, COSO.

(Original Signed) Carmen Rosa Campo Hernández Statutory Auditor of Promigas S.A. E.S.P. Registration 67994 - T Member of KPMG S.A.S.

February 11, 2018

4

Documents

Promigas S.A. E.S.P. Separate Financial Statements ......PERIOD RESULTS $ 320.039.214328.818.686 NET INCOME PER SHARE $ 289,75 282,01 The notes attached hereto are an integral part