NATURAL GAS DISTRIBUTION FOR LOW INCOME FAMILIES

 40 years of experience in the transport and distribution of natural gas  Transports 51% of natural gas consumed in Colombia  Ownership interest in 5 transmission and 5 distribution companies PROFILE OF PROMIGAS 2,200,000+ connected users 1,300,000 connected users

Target Sector:  Strata 1 & 2  80,000 households yet to be connected  Caribbean Coast  Highest poverty levels in Colombia  5 to 7 member households  Monthly income <US$168 min. wage The Problem:  Gas mains exist near 48% of 80,000 homes  Gas is affordable, but high switching costs THE TARGET SECTOR Households cannot afford US$370 connection fee, 220% of monthly income

US $5 million to provide grants to connect 35,000 households Provides Colombian government with a platform for replication Builds upon a €1 million PPP project with Dutch Government THE GPOBA PROJECT Output Definition Strata 1 or 2 household (at least 50% in Strata 1) New connection Service used at the connection for at least 3 months Sufficient for operation of kitchen gas stove Stove provided to household at no cost Focus on access vs. consumption subsidies (new in Colombia) Expands scope of “output” beyond connections to use of gas for cooking

Figures in dollars are based on a tax exchange of $2,300 pesos per dollar. US$, monthly Number of households to receive subsidies for the connection35,000 Average household income160 Connection cost370 Subsidy per household141 Unsubsidized cost per household228 Percentage subsidy38% Monthly firewood expense15.00 Natural gas consumption (service only)3.50 Natural gas and connection invoice - 6 year financing12.00 Natural gas and connection invoice with subsidy - 6 year financing8.00 Savings per family (natural gas with subsidy vs. wood)45% PROJECT PROPOSAL

 Financial  Annual savings of 50% of one monthly income (incl. connection payments)  Once connection is paid, annual savings of 80% of one monthly income  LPG and Electricity prices are 1.4x and 4x the price of gas, respectively  Environmental  34 hectares of forest or mangrove swamp preserved  Natural gas reduces polluting emissions  Health: Reduction of fire hazards and smoke-induced respiratory diseases KEY BENEFITS

 Level of defined “output” achieved, e.g. number of connections made  Breakdown of beneficiary households by strata  Breakdown of total households in service area by strata  Annual reports on service quality  Average monthly consumption per household  Average household expenditures on alternative fuels prior to gas connection  Average residential tariff for households  Total project costs and average cost per household SUPERVISION: KEY INDICATORS Measuring impact will facilitate scaling up and replication