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1ISA ECONOMIC GROUP – GENERAL OVERVIEW – OCTOBER 2006

© All rights reserved - Interconexión Eléctrica S.A. E.S.P.

ISA ECONOMIC GROUPISA ECONOMIC GROUPGENERAL OVERVIEWGENERAL OVERVIEW

Bear Stearns 2006 Colombia Conference Bear Stearns 2006 Colombia Conference

Hotel Charleston Santa TeresaHotel Charleston Santa Teresa

Cartagena, ColombiaCartagena, Colombia

October 22October 22--2424

2ISA ECONOMIC GROUP – GENERAL OVERVIEW –OCTOBER 2006


This presentation contains statements relating to future results (including certain projections and business trends) that are subject to risks and uncertainties that may cause our actual results or performance to differ, perhaps materially, from any future results or performance expressed or implied by the forward-looking statements.

All forward-looking statements contained in this presentation or otherwise attributable to us or persons acting on our behalf are expressly qualified in their entirety by reference to such factors. You should not place undue reliance on such statements, which speak only as of the date that they were made. Our independent public accountants have not examined or compiled the forward-looking statements and, accordingly, do not provide any assurance with respect to such statements. These cautionary statements should be considered in connection with any written or oral forward-looking statements that we may issue in the future. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

Forward- Looking Statements

© All rights reserved by Interconexión Eléctrica S.A. E.S.P.



AgendaISA ECONOMIC GROUP

ECONOMIC GROUPWho are we?

PRESENCE IN THE MARKET

RECENT TRANSACTIONS

ADVANCE OF RELEVANT PROJECTS

ISA GROUP FINANCIAL FIGURES Second Quarterly Results 2006

GROWTH STRATEGY




20021998 2002 2003 2001 2002

2001

2005

1967

INTERCONEXIÓN ELÉCTRICA

ISA PERÚ S.A.

Carrier andValue Added Services

2006

ENERGYTELECOMMUNICATIONS

ISA Group is currently a major participant in Latin American Power and Telecommunicationsectors.

Operation of NationalInterconnection

System and EnergyMarket Operator

Transport ofEnergy




•The 28.19% belongs to private capital shareholders and their shares are freely traded on the Stock Exchange (free float). •As of September 30, 2006 the Company had 960.341.683 shares and 66.514 shareholders. On March 22, 2004, ISA’s shares were registered in the United States as Level I ADR.


ISA MATRIX SHAREHOLDERS

SHAREHOLDERSNUMBER OF

SHARES %

TRADITIONAL INVESTORS 689,590,319 71.81%

COLOMBIAN GOVERNMENT 569,472,561 59.30%

EPM 102,582,317 10.68%

EEB 17,535,441 1.83%

PRIVATE INVESTORS 270,751,364 28.19%

INDIVIDUALS 129,473,003 13.48%

INSTITUTIONAL INVESTORS 110,249,651 11.48%

LEGAL PERSONS 16,898,965 1.76%

FOREIGN INVESTMENT FUNDS 9,377,395 0.98%

ISA ADR PROGRAM 4,752,350 0.49%

TOTAL 960,341,683 100.00%



PRESENCE IN THE MARKET



84%

91%


ISA PERÚ S.A.

52%

10%

12.5% 12.5%

EPR1830 km - 2008

UPME 01-021000 km - 2006 - 2007

Participation in transmission grid >=

220 kV (km of circuit)


ISA Group is one of the major players in the Latin American Power sector.

• ISA Group is involved in the Operation, Administrationand Transport of Energy in Colombia, Brazil, Peru, Bolivia, and Central America



36,30518,2666035883935,3801,5318,941Total km

11,51710,005--1311,24314124Km (circuit)<220 kV

15,8871,4121.2065882624,1371,5177,367Km (circuit)220-230 Kv

8,2986,849-----1,449Km345 -500 kV

6,7653,669505-8218802,285MVAR

53,87138,5153002552351,6412,82010,105MVA

219102356451246S/E


ISA PERÚ S.A.

ISA´sGroupLatin

Americannetwork


With 36.305 km, the ISA Group has presence in Latin American energy markets.



ISA Group The largest dedicated energy transmitter in Latin America.

0

10,000

20,000

30,000

40,000

50,000

CFEIS

A Gro

upCEM

IGFURNAS

CHESF

TRANSENERELE

TROSUL

TRANSELEC

ELETRONORTE

EDELCA

UTEANDE

TRANSELECTRIC

RED ELÉCTRIC

A

ICE

ENTRESAETE

SAETE

SALTRELEC

Km

s o

f cir

cu

its

Integrated (G+T+D+C)

Transmission



5.624 GWhUS$477 MM5.624 GWhUS$477 MM

Mar. 03 - Aug. 06Mar. 03 - Aug. 06

119 GWhUS$ 3.7 MM119 GWh

US$ 3.7 MM

Mar. 03 - Aug. 06Mar. 03 - Aug. 06TIE with Ecuador: Growing trendin electricity exports.

– Reduction in end-user’s rates from congestion rents to cover constraints

– Support to Social Energy Fund

– Demand satisfactionin emergencies

Co

lom

bia

Co

lom

bia

– Reduction in final user’s rates due to a lower marginal cost

– Savings in fuel consumption

Ecu

ado

rE

cuad

or

BENEFITS

Coordinated dispatch

TIESCHEME

TIETIE

SCHEMESCHEME

ANDEAN REGIONANDEAN REGION(Col (Col -- EcuEcu))

Since2003

ISA, operator and administrator of the Colombian electric market and TIE.

The dynamics of exchanges is an evidence of the benefits of the

Ecuador - Colombia integration




2005 2004

Nacional: 56.0% 47.9%

Internet: 42.6% 27.4%

2005 2004

1.82% 1.4%

Market Participation

4.267 km fiber-optic network, National Microwave network,Satellite Network and LMDS

Network

VALUE ADDED SERVICE

CARRIER SERVICE

International connections:Arcos and Maya Cables and interconnection with Ecuador.

ISA Group, Colombia’s most reliable telecommunications transport network, national and international carrier of carriers and the country’s first specialized wireless broadband operator.




RECENT TRANSACTIONS



Key Facts Map of TransMantaro S.A.

Recent transactionsPerú: Consorcio TransMantaro S. A.

Deal was closed with HQI and FSTQ for 85% of the company . On September 11th, a bid presented for the remaining 15% (ETECEN) was awarded to ISA. This deal will probably be concluded by November.Transition process shared with REP.

Technical Infraestructure

• 220kV Transmission Line

• 603 km (Northern Section, 292 km, connects Cotaruse and Mantaro and Southern Section, 311 km, connects Cotaruse and Socabaya

• Three Substations

–Mantaro: 2,060m above sea level.

–Cotaruse: 4,165m above sea level.

–Socabaya: 2,350m above sea level.

• Altitude:

–60% over de 3,800m above sea level

–Maximum altitude 4,985m above sea level

• Microwave network

The line is operated and maintained by HQI, Peru Branch.

In 1997, the

Peruvian State held an

international public

bidding process for

a concession to

build and, thereafter, operate

the Mantaro-

Socabaya electric

transmission line

with the objective to interconnect the

Central-Northern

Interconnected

System (or SICN) with the Southern

Interconnected

System (or SIS).


• HQI: Hydro-Québec Internacional

• FSTQ: Fonds de Solidarité des Travailleuers dú Québec• ETECEN: Empresa de Transmisión Eléctrica Centro

Norte S.A. ( Lima)



• Approximately 30% of all energy in Brazil and 60% of the energy in the Southeast region is transmitted through CTEEP’s transmission lines. This requires a complex infrastructure comprising:

• 11.8 thousand km of transmission lines

• 18.3 thousand km of transmission circuits

• 39,156 MVA of total transforming capacity

• 100 substations (102 operated by CTEEP)

• 464 transformers / 76 reactors / 177 telecommunication stations

• 1.8 thousand km of optical fiber

• 3 regional operating centers (CRO) and 1 system operating center (COS)

Key Facts Map of CTEEP Transmission Network

The operational area

of CTEEP is

concentrated in the

State of São Paulo,

the most important interconnection

center between

Brazil’s South,

Southeast and Mid-West regions. The

State has

approximately 22% of

the Brazilian

population and one-third of the national

GDP .

• Currently, CTEEP holds two concession contracts for its transmission system in the State of São Paulo, valid up to 2015 and 2031.

Largest transmission company in Brazil

Recent transactions:Brazil: Companhia Transmissão de Energía ElétricaPaulista -CTEEP-




RELEVANT PROJECTS ADVANCE



Ocaña

PrimaveraBacatá

CopeyBolívar

Underconstruction Projects Colombia: National Transmission System - STN

UPME 02

UPME 01

Dec 31, 2006

OperationStart

Mar 31, 2007

Advance

Lines Subs.

15.85

Revenues per Year (1 to 25)(USD MM)

2–9, 25

4.22

1, 11-24 10

13.09

28.377.56 23.43

UPME 01-2003 Primavera-Bacatá

UPME 01-2003 Primavera-Bacatá

UPME 02-2003 Primavera-Bolívar

UPME 02-2003 Primavera-Bolívar

44.211.78 36.52

87.5% 94.2%

83.3%85.8%

With theseprojects, ISA will

strengthen itsnational

transportation grid.




SVC OXY Connecttion(Caño Limón)November 2007Investment 11.00 MUSDAnnuity 3.8 MUSD (5 years)

Transformation Bank ConnecttionEPSA (San Marcos)July 2007Investment 0.82 MUSDAnnuity 0.19 MUSD (25 years) Transformation Bank Connection

(La Reforma) EMSAJuly 2007Investment 0.8 MUSDAnnuity 0.18 MUSD (25 years)


Underconstruction Projects Colombia: Connection Assets



Underconstruction Projects Central America: SIEPAC Project

Antigua (Guatemala), February 17, 2005 ISA formalized its incorporation as the 8th partner of EPR, which means:

. Equal share participation of 12,5%

. Capital infusion worth USD 5 MM

. Guarantee for USD 40 MM loan

. Appointment of one Board Director

To begin operation in the second quarter of 2008

EPR: Empresa Propietaria de la Red – Central America

Partners:

Central American

Countries

+ ENDESA + ISA

Country Length (km)

Costa Rica: 462.4El Salvador: 282.3Guatemala: 281.8Honduras: 369.4Nicaragua: 293.5Panama: 140.3

Total: 1, 829.7

GUATE ESTE

GUATE NORTE

PANALUYA

EL CAJON

RIO LINDO

SUYAPA

AHUACHAPANNEJAPA15 SEPTIEMBRE

PAVANA

PL.NI.

TICUANTEPE

CAÑAS

PARRITA

RIO CLAROVELADERO

CHANGUINOLA

PANAMÁ

COSTA RICA

NICARAGUA

HONDURAS

GUATEMALA

EL SALVADOR

CHORRERA




ISA GROUP FINANCIAL RESULTS



307

2001 2002 2003 2004 2005 Jun-2006 2001 2002 2003 2004 2005 Jun-2006

Margin67%

OperatingMargin 47%

Net Margin27%

ISA Group Consistent growth of revenues and income

289264

363

449471

219293246

182197

307

146

Revenue EBITDA

• ISA has revenues exceeding USD 450 million, and strong operating margins that show the Group’s operating strength

128118

154

208 214

104

59

88

42 3 3059

Operating Income

Net Income



OPERATING REVENUES ISA GROUP

ISA Colombia

REP

Transelca

XM

ISA Bolivia

ISA Perú

Internexa

Flycom

Energy 92% TeleCos 8%

50%

13%

14%

7%

2%

1%

9%

4%

EBITDA ISA GROUP

ISA Colombia

REP

Transelca

XM

ISA Bolivia

ISA Perú

Internexa

Flycom

63%

13%

12%2%

2%

3%

5%

0%

59%

13%

12%

4%

2%

2%

7%

1%

Energy 87% TeleCos 13%

OPERATING EXPENSES ISA GROUP

ISA Colombia

REP

Transelca

XM

ISA Bolivia

ISA Perú

Internexa

Flycom

ISA GroupSubsidiary contribution to ISA Group

50%

13%

14%

7%

2%

1%

9%

4%



ISA GroupEBITDA Margin

39%

0%

20%

52%

81%

73%68%

84%

67%71%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

ISA

Col

.

Tra

ns

elc

a

ISA

Per

ú

RE

P

ISA

Bo

livia

Tra

ns

Ma

nta

ro

CT

EE

P

XM

Inte

rne

xa

Fly

com



ISA Group Sound capital structure

1,7641,865

1,974

2,319

2,5712,361

1,1511,1871,079992950819

Assets Liabilities

2001 2002 2003 2004 2005 Jun-2006 2001 2002 2003 2004 2005 Jun-2006

• Post acquisition, ISA Group will have approximately USD 5.0 billion in assets

874800

858

1,1061,220

1,074

Equity



ISA consolidated

2,0

2,5

3,0

3,5

4,0

4,5

Total Net Debt / EBITDA 3,43 4,28 2,96 2,66 2,71 2,82

EBITDA / Interest 2,63 3,02 3,00 3,36 3,57 3,69

2001 2002 2003 2004 2005 2006-jun

ISA Group Coverage ratios

ISA stand-alone

2,0

2,5

3,0

3,5

4,0

4,5

Total Net Debt / EBITDA 3,76x 3,77x 2,81x 2,60x 2,46x 2,69x

EBITDA / Interest 2,54x 3,24x 3,16x 4,29x 3,84x 4,13x

2001 2002 2003 2004 2005 2006 Jun



GROWTH STRATEGY



Market promotion

Investment in assets

Service delivery

Central America

Andean Region

Mercosurand Chile

NorthAmerica

Gas Transport

PowerTelecommu-

nications

Sectors

Types of business

Target Market

� Reform of the electricalsector

� Diversification of risks(telecommunications andother services)

� International experience ofsimilar electricalcompanies

� Regional integration ofenergy markets

Our Strategy for Growth

Limitations in the marketcontributed to search for

new opportunities . . .




ISA stand-aloneUSD 466 mln

ISA GroupDebt profile as of June 2006

DEBT BY TERM

Short Term18%

Long Term82%

DEBT BY TERM

Short Term14%

Long Term86%

ISA consolidatedUSD 811 mln

57,4%

23,3%

1,8%5,8%5,5%

6,1%

Local Banks

Internal. Banks

Bonds

MLAs

ECAs

Others

1,3%5,2%

57,5%

10,2%3,2%

22,6%

Local Banks

Internal. Banks

Bonds

MLAs

ECAs

Others

USD mln24

6

268

106

15

47

466

USD mln50

45

466

189

15

47

811



GoodGovernance

Practices

Developments in new financial

structures (Capital Markets)

Service efficiency and quality

39-year experience in the sector translate into Know-How, Personnel and Technology

39-year experience in the sector translate into Know-How, Personnel and Technology

StrategyStrategy

GrowthGrowth

Media

Mediaalignment

Objectives

Implementation of strategy demands concrete actions

“First, develop an ideal …Second, find the resources …Third, alingn the media”

Aristóteles



99.8

66

99.9

46

99.9

53

99.9

35

99.9

34

99.9

42

99.9

31

99.00

99.10

99.20

99.30

99.40

99.5099.60

99.70

99.80

99.90

100.00

2000 2001 2002 2003 2004 2005 2006

Per

cen

tag

e

Efficiency and Quality in the service

• Competitiveness Study (Monitor 1995)

• Analysis on implementation of the New ISA (1996)

• Integrated Management Diagnosis (Corporación Calidad 1997)

• Environmental National Award (corporate category) (1998)

• Day-to-Day Management (1998 - 2000)

• Management Instruments (1999 - 2000)

• The Colombia Presidency and the Ministry of Economic Development grant ISA the Colombian Quality Award (2001)

• ISO 9001 Certification for:

• Energy Service Transport (2001)

• Market Operation and Administration (2002)

• ISO 9001 certification renewal, 2000 version

Some Awards Availability of ISA’s Energy Transport Grid

Results upper the regulatory target

Goal established by CREG: 99.651%



Development new financial structures Experience in the capital markets• ISA Group has a proven track record in the capital markets having successfully accessed the debt

and equity capital markets in the past

Domestic AAA RatingDuff & Phelps de Colombia S.A.

For domestic debt bonds issued by ISA and TRANSELCA

Domestic AAA rating

For bonds issued by REP in the Peruvian capital market

Foreign Currency :BB/ positive outlook

Standard & Poor’sISA’s credit-rating same as Republicof Colombia’s sovereign rating for LT Debt

Strong Ratings Based On

• Competitive position

• Revenue diversification

• High corporate governance standards

• Good financial performance

• Financial soundness

1996 1997 1998 1999 2000 2001 2002 2003 2004 20062005 Future

Bond Offerings(USD 500m)

Short-terms andlong-termHedging

transactions

Project Financeat International

level

SyndicatedLoan

PrimaryIssuance and

Underwriting ofShares

ColombiaAAA

AffiliatesAAA

Dutch Auctionmrchanism

144 A/ Reg S

Successful IPO ofISA, with 23.72% ofshares in hands of

over 90.000 Colombians

Filing oflevel Y ADR in the USA

(NY)

ADR Leve

lII

FX Forwards (USD 542 m)

Swaps(USD 121 m) Commodities

ISA Perú(USD 40.5 m)

ISA Bolivia (USD 54 m)

CTEEP ABN-JP

MORGAN (USD550 m)



The Nation, as ISA’s controlling shareholder, subscribed on December 15th, 2000, a statement to protect minority shareholders during a ten-year period.

ISA´s Good Governance PracticesStatement of the Nation

Establishment of a shareholder information center

• Shareholder service offices in Medellín and Bogotá

• Toll-free number

• Electronic mail

• Meetings with national and foreign investors

• “Shareholder Account Statement” and “Corporate Newsletter” delivered every six months

• Every year, at least 70% of distributable income

shall be distributed as dividends. Dividend’s

growing trend.

• Liquidity fund established in June of 2001.

Liquidated in June of 2006.

• In 2003, ISA’s shares were listed on the

Colombian Stock Exchange.

• On March 22, 2004, ISA’s shares were

deposited in the United States as Level I ADR.

Mechanism to guarantee the stock’s liquidity

Clear dividend policy

Majority decisions are presented in to Stockholders’ Meeting

Limits to operations with affiliates

Right to withdrawal and sale

• Since 2001, common citizens have a principal and

an alternate member representing them to the

Board of Directors. In 2004, the representative of

minority shareholders assumed the Presidency of

the Board of Directors.

Representation of minority shareholders to the Board of Directors




In 2001, and in compliance with Resolution 0275 of May 23, 2001, ISA prepared a Good Governance Code to compile the management practices used in the Company and incorporate new ones. Contents were previously discussed and agreed with Asofondos and Confecámaras.

The Board of Directors approved the Good Governance Code on November 15, 2001.

On March 18, 2002, the Stockholders’ Meeting raised to the status of bylaws the practicesadopted under the Code not already included in the bylaws.

The Company has implemented a mechanism for on-line verification of compliance with each commitment included in the Code that sends alert signals to those responsible one month before its due date.

Constant publication on the Web page[http://www.isa.com.co] of updated economic

and financial information related to the

Company, its management, and other issues

of interest.

Annual meetings with stockbrokers and institutional investors to report results

obtained and financial projections (3 meetings

with stockbrokers and more than 10 investor

meetings).

Monthly electronic newsletter with relevant corporate news and financial reports. In

2005, 15 reports with monthly financial results

and relevant news were published and sent to

shareholders and stockbrokers.

Information DisclosureGood Governance Code

ISA´s Good Governance PracticesGovernance Code & Information Disclosure




ISA´s Good Governance PracticesBoard of Directors: Committees and Reports

Board Committee: To follow up and accompany Management in financial and human talent issues, operation and evaluation of the Board of Directors, compliance with the Good Governance Code, and evaluation of the General Manager. Met on 11 occasions during 2005.

New Business Committee: To analyze new businesses and investments and monitor those under execution. Met on 13 occasions during 2005.

Auditing Committee: To guide and facilitate control inside the organization. Met on 5 occasions during 2005.

Board of Directors Committees

Reports presented to the Stockholders’Meeting since 2001:

•Evaluation of the General Manager: Integrated Management Chart indicators.

•Self-evaluation of the Board of Directors: Top Level Integrated Management Chart (approved by sections 618 and 620).

•Board of Directors’ Operation Report:Meetings held, attendance of principal and alternate members, preparation of agenda.

•Report on compliance with the Good Governance Code.

Board of Directors’ Reports




In the year 2006, ISA will be recognized asLatin America’s most efficient economic

group in the provision of power market administration,operation and transport services integrated

with telecomunicactions services.

ISA has been working to make reality it´s vision.

Our Growth Strategy enables us to achieve our Vision.



© All rights reserved - Interconexión Eléctrica S.A. E.S.P. © Interconexión Eléctrica S.A. E.S.P ISA. All rights reserved.

Attacks on the electric infrastructure

ISA’s towers affected2001 – September 2006

A notorious reduction of attacks against the electric infrastructure have been observed during 2004 and 2005 in comparison with the historical levels.

YEARTOTAL TOWERS DAMAGED/FAILE

D

TOTAL TOWERS REPAIRED

PENDING REPAIRED

ACCUMULATED

RECOVERY COST

(MILL USD)% REVENUES

% OF ISA TOWERS

1999 179 52 128 5 1.9% 1.50%2000 281 349 60 12 5.4% 2.34%2001 194 179 75 10 4.4% 1.46%2002 258 196 135 10 5.2% 1.96%2003 209 329 13 4 1.7% 1.61%2004 80 85 6 5 1.6% 0.59%2005 122 117 12 6 1.80% 0.95%2006 122 133 0 7 2.30% 0.92%Total 1445 1440 58




Attacks on the electric infrastructure19

4

258

209

80

122

122

225

120

47

104

76

329

127

226

198

88

282

483

0

100

200

300

400

500

600

2001 2002 2003 2004 2005 Sep-06

ISA OTHERS TOTAL




ISA GroupIncome Statement as of June 2006 (unaudited)

Amounts expressed in US dollars are intended for information purposes only. As of 6/30/2006 USD 1.00 = COP 2633.12

* Note: June 2006 figures exclude XM financial results due to spin-off of that business in October 2005

Jun-06* Jun-05 % Jun-06* Jun-05 %

Operating Revenues 132 137 -4% 219 203 7%

Operating Expenses 59 64 -8% 115 108 6%

Operating Income 73 73 0% 104 95 9%

Non Operating Loss -9 -21 -57% -26 -36 -28%

Income Before Taxes 65 52 25% 77 59 31%

Income Taxes 5 13 -62% 10 17 -41%

Net Income 59 39 51% 59 39 51%

EBITDA 94 97 -3% 146 136 7%

Ebitda Margin(%) 71% 70% 67% 67%

Operating Margin(%) 55% 53% 47% 47%

Net Margin(%) 45% 29% 27% 19%

INCOME STATEMENT

(USD mln)

ISA stand-alone ISA consolidated



ISA GroupBalance Sheet as of June 2006 (unaudited)

Amounts expressed in US dollars are intended for information purposes only. As of 6/30/2006 USD 1.00 = COP 2633.12

* Note: June 2006 figures exclude XM financial results due to spin-off of that business in October 2005

Jun-06* Dec 05 % Jun-06* Dec 05 %

Total Assets 1.789 1.720 4% 2.361 2.230 6%

Total Liabilities 716 662 8% 1.151 1.030 11%

Minority Interest 136 142 -4%

Equity 1.074 1.058 1% 1.074 1.058 1%

BALANCE SHEET

(USD mln)

ISA stand alone ISA consolidated

isa economic group general overview - global … · isa economic group – general overview...

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