The Colombian Government and Ecopetrol present a plan to cover the Fuel Price Stabilization Fund (“FEPC”) deficit

  • The defined actions will allow settling the Fuel Price Stabilization Fund’s (FEPC for its Spanish acronym) estimated balance of COP 14.1 trillion as of March 2022 in favor of the Business Group.
  • The government will contribute near to COP 7.3 trillion in cash and a portion of COP ~0.7 trillion of the dividends decreed on the 2021 results by Ecopetrol at its General Shareholders' Meeting in March 2022.
  • The remaining COP 6.1 trillion will be obtained from the dividends the Nation is entitled to following the release of part of Ecopetrol's occasional reserve. For this purpose, an Extraordinary Shareholders' Meeting will be held on June 17th, 2022.
  • The plan strengthens Ecopetrol's financial and liquidity position to execute its ambitious investment plan for 2022 and subsequent years.
  • The Fund has served as an effective mechanism to protect consumers’ purchasing power and avoid greater domestic inflationary pressures.

The National Government through the Ministry of Finance and Public Credit (MHCP for its Spanish acronym) and Ecopetrol, defined an agreement to settle the COP 14.1 trillion of the outstanding receivables from the FEPC as of March 2022.

The agreed plan entails two decisive actions directed to settling the aforementioned in the next few weeks:

  1. Contributions from the Nation for close to COP 8 trillion, distributed into COP 7.3 trillion from cash resources and COP 675.4 billion from the declared dividends from Ecopetrol's 2021 results to which the Government is entitled, as approved in the Ordinary Shareholders' Meeting of March 30, 2022.
     
  2. Proposal to release a portion of the occasional reserve presented in stated Shareholders' Meeting and that would be distributed as an extraordinary dividend to the shareholders. Accordingly, COP 168 per share would be distributed as an extraordinary dividend, totaling almost COP 6.9 trillion. Of this amount, the COP 6.1 trillion the Nation receives would be allocated to settling the remaining balance of the FEPC, following the provisions of Article 90 of Law 2159 of 2021, and COP 795 billion would be distributed among the more than 250 thousand minority shareholders. After this distribution, Ecopetrol's occasional reserve would amount to COP 2 trillion.

This proposal will be presented at Ecopetrol's Extraordinary Shareholders' Meeting requested by the majority shareholder (MHCP) and convened for June 17th, 2022.

FEPC has proven to be an effective mechanism to prevent the increase in international oil and fuel prices from affecting consumers’ purchasing power, thus avoiding greater inflationary pressures on the domestic economy.

Ecopetrol reports solid financial results with a net income of COP 6.6 trillion in the first quarter of 2022, the highest ever recorded in its quarterly history. The agreed plan strengthens the Ecopetrol Group's liquidity position and its ability to execute the ambitious investment plan announced for 2022 and the coming years, as well as its 2040 strategy. The mechanism not only allows it to provide a solution to settle the accrued receivable amounts of the FEPC as of March 2022, but also contemplates a strategy for adequately financing the Fund during the following years.

In this way, the Ministry of Finance and Public Credit confirms its commitment to meet the FEPC's obligations and ensures the Fund’s satisfactory operation in the medium term. In line with this commitment, the 2022 Medium-Term Fiscal Framework will provide a roadmap that will include a multi-year payment program (2022-2025) to meet the estimated obligations incurred with the FEPC that complies with the fiscal rule, as well as a variety of alternatives to modify this stabilization mechanism’s structure to ensure its medium-term sustainability.

Bogotá, May 31, 2022

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