UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549  FORM 20-F/A (Amendment No. 1)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015  Commission File Number: 001- 34429 PAMPA ENERGíA S.A. (Exact name of registrant as specified in its charter) Pampa Energy Inc. (Translation of registrant’s name into English) Argentina (Jurisdiction of incorporation or organization) Ortiz de Ocampo 3302, Building #4 C1425DSR, City of Buenos Aires Argentina (Address of principal executive offices)
 Gerardo Carlos Paz Ortiz de Ocampo 3302, Building #4 C1425DSR, City of Buenos Aires Argentina Tel.: + 54 11 4809 9500 / Fax: + 54 11 4809 9541 (Name, telephone, e-mail and/or facsimile number andaddress of company contact person)
  Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of each class
 Name of each exchangeon which registeredCommon Stock
American Depositary Shares, each representing
25 shares of common stock, par value Ps. 1.00 per share
 New York Stock Exchange*
New York Stock Exchange*Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.
 Securities registered or to be registered pursuant to Section 12(g) of the Act: None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 1,695,859,459 shares of common stock, par value Ps. 1.00 per share
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. xYes
  ̈No
 If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  ̈Yes
 xNo
 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. xYes
  ̈No
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated filer ̈
 Accelerated filerx
 Non-accelerated filer ̈
 Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP ̈
 International Financial Reporting Standards as issued by the International Accounting Standards Boardx
 Other ̈
 If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.  ̈Item 17
  ̈Item 18
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ̈Yes
 xNo


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EXPLANATORY NOTE  On May 2, 2016, the Company filed its annual report on Form 20-F for the year ended December 31, 2015 (the “Original Annual Report”) with the Securities and Exchange Commission (the “Commission”)  This amendment on Form 20-F/A (this “Amendment No. 1”) amends and restates the Original Annual Report, solely to (i) replace (a) Item 3 (Key Information), (b) Item 4A (Unresolved Staff Comments), (c) Item 5  (Operating and Financial Review and Prospects), (d) Item 15 (Controls and Procedures) and (e) Item 18 (Financial Statements) and (ii)to reflect the restatement in our financial statements for the years ended December 31, 2015 and 2014 as a consequence of changes within the statement of cash fows and to disclose subsequent events through such date.  These additions and changes were made in response to comments that we received from the Commission.  This Amendment No. 1 and the Restated Consolidated Financial Statements included herein have been approved by resolution of the Board of Directors’ meeting of the Company held on July 26, 2016.  In light of the restatement, readers should not rely on the Company’s previously filed financial statements as of each of December 31, 2015 and December 31, 2014, and for each of the years ended December 31, 2015 and December 31, 2014.  Except as provided in this explanatory note, or as indicated in the applicable disclosure, this Amendment No. 1 has not been updated to reflect other events occurring after the filing of the Original Annual Report and does not modify or update information and disclosures in the Original Annual Report affected by subsequent events.  Accordingly, this Amendment No. 1 should be read in conjunction with our filings with the Commission subsequent to the date on which we filed the Original Annual Report, together with any amendments to those filings.  This Amendment No. 1 also includes certifications from our chief executive officer and chief financial officer, dated as of the date of this filing.


2

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Item 3.            Key Information In this annual report, we use the terms “we,” “us,” “our,” the “registrant” and the “Company” to refer to Pampa Energía S.A. This annual report contains our audited consolidated financial statements as of December 31, 2015 and 2014, and for each of the three years in the period ended December 31, 2015, and the notes thereto (the “Restated Consolidated Financial Statements”).  The Restated Consolidated Financial Statements have been audited by Price Waterhouse & Co. S.R.L., an independent registered public accounting firm in Buenos Aires, Argentina, member firm of PricewaterhouseCoopers International Limited network, whose report is included in this annual report. Specially, with respect to Compañía de Transporte de Energía Eléctrica en Alta Tensión S.A. (“ Transener”) and Transportadora de Gas del Sur S.A. (“TGS”), given that the stake in such companies constitutes an interest in a joint venture and associate, respectively, they are not consolidated and they are measured under the equity method of accounting in the Restated Consolidated Financial Statements.


3

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SELECTED FINANCIAL DATA The following table presents our selected financial data for each of the years in the five-year period ended December 31, 2015. The selected consolidated statement of comprehensive income (loss) and restated statement of cash flow data for the years ended December 31, 2015, 2014, 2013, 2012 and 2011 and the selected consolidated statement of financial position as of December 31, 2015 and 2014, have been prepared in accordance with IFRS as issued by the IASB and, with the exception of the financial data as of December 31, 2011, 2012 and 2013, have been derived from our Consolidated Financial Statements included elsewhere in this annual report.  The financial data as of December 31, 2011, 2012 and 2013, is derived from our audited consolidated financial statements that are not included in this annual report, which were audited by Price Waterhouse & Co. S.R.L., member firm of PricewaterhouseCoopers network, an independent registered public accounting firm. OurRestatedConsolidated Financial Statements are set forth in Item 18 beginning on page F-1 of this annual report. Our Restated Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). This annual report along with theRestatedConsolidated Financial Statement included herein have been approved by resolution of the Board of Directors’ meeting of the Company held on July 26, 2016. You should read the information below in conjunction with our Restated Consolidated Financial Statements, including the notes thereto, as well as the sections “Presentation of Financial Information” and “Item 5. Operating and Financial Review and Prospects.”


4

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At December 31,2015
 
 2015
 
 2014
 
 2013
 
 2012
 
 2011(US$) (1)
 
 (Pesos)
 
 (Pesos)
 
 (Pesos)
 
 (Pesos)
 
 (Pesos)STATEMENT OF FINANCIAL POSITIONNon-current assets:Investments in joint ventures
 
 17,237,795
 
 223,918,951
 
 226,894,893
 
 188,644,285
 
 192,315,761
 
 222,219,616Investments in associates
 
 9,487,092
 
 123,237,325
 
 133,169,584
 
 134,774,654
 
 132,546,155
 
 130,251,204Property, plant and equipment
 
 1,116,890,152
 
 14,508,403,073
 
 9,218,099,975
 
 6,902,661,359
 
 6,019,372,559
 
 5,847,071,944Intangible assets
 
 56,517,928
 
 734,167,886
 
 872,384,099
 
 901,846,313
 
 1,798,492,198
 
 1,791,802,004Biological assets
 
 142,700
 
 1,853,667
 
 1,894,481
 
 1,935,296
 
 1,976,109
 
 1,935,511Financial assets at fair value through profit and loss
 
 198,474,419
 
 2,578,182,705
 
 963,012,962
 
 432,729,855
 
 303,792,067
 
 553,768,412Deferred tax asset
 
 4,024,631
 
 52,279,953
 
 93,681,916
 
 63,214,262
 
 87,532,301
 
 116,574,172Trade and other receivables
 
 90,022,886
 
 1,169,397,290
 
 954,842,893
 
 366,685,679
 
 421,117,506
 
 342,191,671Total non-current assets
 
 1,492,797,602
 
 19,391,440,850
 
 12,463,980,803
 
 8,992,491,703
 
 8,957,144,656
 
 9,005,814,534Current assets:Infrastructure under construction
 
 -
 
 -
 
 -
 
 -
 
 84,465,694
 
 45,504,000Biological assets
 
 18,888
 
 245,361
 
 198,470
 
 564,431
 
 497,255
 
 99,003Inventories
 
 17,356,643
 
 225,462,790
 
 135,570,860
 
 114,615,289
 
 107,342,562
 
 60,421,699Financial assets at fair value through profit and loss
 
 314,166,244
 
 4,081,019,508
 
 1,028,577,127
 
 844,259,368
 
 236,646,460
 
 172,193,934Trade and other receivables
 
 379,880,333
 
 4,934,645,531
 
 2,903,411,995
 
 2,256,967,076
 
 1,541,543,369
 
 1,373,557,822Derivatives financial instruments
 
 15,177
 
 197,150
 
 -
 
 -
 
 -
 
 1,315,707Cash and cash equivalents
 
 39,768,893
 
 516,597,918
 
 335,234,106
 
 341,668,865
 
 156,647,001
 
 245,623,669Total current assets
 
 751,206,178
 
 9,758,168,258
 
 4,402,992,558
 
 3,558,075,029
 
 2,127,142,341
 
 1,898,715,834Assets classified as held for sale
 
 -
 
 -
 
 
 
 11,987,500
 
 235,196,934
 
 1,183,952,808Total assets
 
 2,244,003,780
 
 29,149,609,108
 
 16,866,973,361
 
 12,562,554,232
 
 11,319,483,931
 
 12,088,483,176Shareholders ́ equityShare capital
 
 130,551,152
 
 1,695,859,459
 
 1,314,310,895
 
 1,314,310,895
 
 1,314,310,895
 
 1,314,310,895Additional paid-in capital
 
 94,802,407
 
 1,231,483,268
 
 342,984,871
 
 263,489,911
 
 1,018,352,216
 
 1,536,759,469Legal reserve
 
 3,961,675
 
 51,462,158
 
 14,304,190
 
 -
 
 -
 
 27,396,793Voluntary rerserve
 
 75,271,824
 
 977,780,998
 
 271,779,611
 
 -
 
 -
 
 -Reserve for directors’ options
 
 -
 
 -
 
 266,060,067
 
 259,351,053
 
 250,405,701
 
 241,460,349Retained earnings (Accumulated losses)
 
 235,957,615
 
 3,065,089,423
 
 743,159,355
 
 286,083,801
 
 (771,796,574)
 
 (667,906,366)Other comprehensive loss
 
 (2,393,087)
 
 (31,086,202)
 
 (32,191,096)
 
 (24,385,321)
 
 (10,753,372)
 
 (12,650,920)Equity attributable to owners of the company
 
 538,151,586
 
 6,990,589,104
 
 2,920,407,893
 
 2,098,850,339
 
 1,800,518,866
 
 2,439,370,220Non-controlling interest
 
 107,052,282
 
 1,390,609,148
 
 633,431,122
 
 775,971,764
 
 529,796,278
 
 1,327,964,340Total equity
 
 645,203,869
 
 8,381,198,252
 
 3,553,839,015
 
 2,874,822,103
 
 2,330,315,144
 
 3,767,334,560Non-current liabilities:Trade and other payables
 
 207,757,502
 
 2,698,769,957
 
 1,909,433,852
 
 1,295,851,077
 
 2,230,282,210
 
 1,568,886,646Borrowings
 
 514,607,101
 
 6,684,746,241
 
 3,786,988,603
 
 2,924,530,436
 
 2,218,483,028
 
 2,487,650,894Deferred revenue
 
 11,841,095
 
 153,815,820
 
 109,089,120
 
 33,665,717
 
 264,427,265
 
 174,796,000Salaries and social security payable
 
 6,161,612
 
 80,039,338
 
 62,858,307
 
 25,959,305
 
 17,460,281
 
 23,584,607Defined benefit plans
 
 20,358,342
 
 264,454,859
 
 196,587,957
 
 136,521,808
 
 120,902,649
 
 103,634,036Deferred tax liabilities
 
 45,541,805
 
 591,588,053
 
 470,584,488
 
 416,561,631
 
 625,429,965
 
 821,124,172Taxes payable
 
 29,904,773
 
 388,463,004
 
 281,231,713
 
 150,095,508
 
 61,545,202
 
 45,675,917Provisions
 
 24,155,425
 
 313,778,975
 
 119,527,656
 
 91,464,804
 
 86,409,533
 
 69,975,102Total non-current liabilities
 
 860,327,656
 
 11,175,656,247
 
 6,936,301,696
 
 5,074,650,286
 
 5,624,940,133
 
 5,295,327,374Current liabilities:Trade and other payables
 
 512,123,588
 
 6,652,485,409
 
 4,536,471,292
 
 3,098,555,391
 
 1,687,978,624
 
 1,082,963,093Borrowings
 
 100,666,888
 
 1,307,662,872
 
 783,583,090
 
 753,571,799
 
 790,916,969
 
 893,801,060Deferred revenue
 
 58,790
 
 763,684
 
 763,684
 
 -
 
 -
 
 -Salaries and social security payable
 
 68,280,817
 
 886,967,815
 
 725,274,898
 
 501,445,076
 
 447,870,658
 
 324,900,133Defined benefit plans
 
 3,548,066
 
 46,089,380
 
 26,759,690
 
 8,552,119
 
 21,846,945
 
 14,888,746Taxes payable
 
 46,967,858
 
 610,112,473
 
 231,928,622
 
 239,718,270
 
 248,119,227
 
 196,282,111Derivatives financial instruments
 
 1,391,948
 
 18,081,410
 
 47,880,462
 
 -
 
 -
 
 -Provisions
 
 5,434,301
 
 70,591,566
 
 24,170,912
 
 11,239,188
 
 11,659,708
 
 11,399,017Total current liabilities
 
 738,472,256
 
 9,592,754,609
 
 6,376,832,650
 
 4,613,081,843
 
 3,208,392,131
 
 2,524,234,160Liabilities associated to assets classified as held for sale
 
 -
 
 -
 
 -
 
 -
 
 155,836,523
 
 501,587,082Total liabilities
 
 1,598,799,912
 
 20,768,410,856
 
 13,313,134,346
 
 9,687,732,129
 
 8,989,168,787
 
 8,321,148,616Total liabilities and equity
 
 2,244,003,780
 
 29,149,609,108
 
 16,866,973,361
 
 12,562,554,232
 
 11,319,483,931
 
 12,088,483,176
  (1)Solely for the convenience of the reader, Peso amounts as of December 31, 2015 have been translated into U.S.$ at the average between the purchase and seller exchange rate for U.S. $ quoted by Banco Nación on December 31, 2015 of Ps. 12.990 to U.S.$1.00.See “Item 3. - Key Information—Exchange Rates.”     5


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For the year ended December 31,2015
 
 2015
 
 2014
 
 2013
 
 2012
 
 2011(US$) (1)
 
 (Pesos)
 
 (Pesos)
 
 (Pesos)
 
 (Pesos)
 
 (Pesos)STATEMENT OF COMPREHENSIVE INCOME (LOSS)Revenue
 
 551,253,382
 
 7,160,781,433
 
 6,204,645,511
 
 5,334,993,550
 
 6,695,364,819
 
 5,229,666,000Cost of sales
 
 (546,019,287)
 
 (7,092,790,535)
 
 (6,029,079,708)
 
 (5,603,274,246)
 
 (6,355,771,263)
 
 (4,726,852,788)Gross profit
 
 5,234,095
 
 67,990,898
 
 175,565,803
 
 (268,280,696)
 
 339,593,556
 
 502,813,212Selling expenses
 
 (74,879,294)
 
 (972,682,033)
 
 (713,360,347)
 
 (634,221,473)
 
 (414,002,396)
 
 (282,577,570)Administrative expenses
 
 (95,410,783)
 
 (1,239,386,075)
 
 (837,458,716)
 
 (563,852,810)
 
 (463,317,509)
 
 (379,815,207)Other operating income
 
 72,415,553
 
 940,678,036
 
 311,975,857
 
 466,220,030
 
 196,418,100
 
 132,580,010Other operating expenses
 
 (58,075,554)
 
 (754,401,446)
 
 (447,074,876)
 
 (204,039,316)
 
 (203,949,959)
 
 (134,804,547)Reversal of impairment of property, plant and equipment
 
 1,944,569
 
 25,259,957
 
 88,406,704
 
 -
 
 -
 
 -Impairment of property, plant and equipment
 
 -
 
 -
 
 -
 
 -
 
 (108,283,569)
 
 (557,668,671)Share of profit (loss) of joint ventures
 
 714,224
 
 9,277,768
 
 34,208,368
 
 (4,799,349)
 
 (31,020,306)
 
 (14,605,490)Share of (loss) profit of associates
 
 (764,608)
 
 (9,932,259)
 
 (1,605,070)
 
 2,228,499
 
 2,294,951
 
 19,779,284Impairment of intangible assets
 
 -
 
 -
 
 -
 
 -
 
 -
 
 (90,056,095)Profit of acquisition of subsidiaries
 
 -
 
 -
 
 -
 
 -
 
 -
 
 505,936,374Operating loss before higher costs recognition and SE Resolution No. 32/15
 
 (148,821,798)
 
 (1,933,195,154)
 
 (1,389,342,277)
 
 (1,206,745,115)
 
 (682,267,132)
 
 (298,418,700)Income recognition on account of the RTI - SE Resolution No. 32/15
 
 386,844,783
 
 5,025,113,729
 
 -
 
 -
 
 -
 
 -Higher Costs Recognition - SE Resolution No. 250/13 and subsequent Notes
 
 42,455,615
 
 551,498,435
 
 2,271,926,952
 
 2,933,051,544
 
 -
 
 -Operating profit (loss)
 
 280,478,600
 
 3,643,417,010
 
 882,584,675
 
 1,726,306,429
 
 (682,267,132)
 
 (298,418,700)Financial income
 
 26,830,464
 
 348,527,733
 
 440,541,774
 
 336,295,165
 
 143,263,842
 
 92,803,259Financial cost
 
 (96,790,977)
 
 (1,257,314,794)
 
 (1,113,228,906)
 
 (813,875,720)
 
 (501,942,312)
 
 (417,859,940)Other financial results
 
 130,944,651
 
 1,700,971,014
 
 420,055,021
 
 (519,261,217)
 
 (203,001,724)
 
 (142,516,846)Financial results, net
 
 60,984,138
 
 792,183,953
 
 (252,632,111)
 
 (996,841,772)
 
 (561,680,194)
 
 (467,573,527)Profit (Loss) before income tax
 
 341,462,738
 
 4,435,600,963
 
 629,952,564
 
 729,464,657
 
 (1,243,947,326)
 
 (765,992,227)Income tax
 
 (45,171,436)
 
 (586,776,949)
 
 (100,412,278)
 
 12,178,991
 
 133,311,022
 
 36,912,458Profit (Loss) for the year from continuing operations
 
 296,291,302
 
 3,848,824,014
 
 529,540,286
 
 741,643,648
 
 (1,110,636,304)
 
 (729,079,769)Discontinued operations
 
 -
 
 -
 
 -
 
 (126,858,328)
 
 31,066,521
 
 (90,851,233)Total Profit (Loss) of the year
 
 296,291,302
 
 3,848,824,014
 
 529,540,286
 
 614,785,320
 
 (1,079,569,783)
 
 (819,931,002)Total Profit (Loss) of the year attributable to:Owners of the company
 
 235,957,615
 
 3,065,089,423
 
 743,159,355
 
 286,083,801
 
 (649,694,254)
 
 (741,395,337)Non - controlling interest
 
 60,333,687
 
 783,734,591
 
 (213,619,069)
 
 328,701,519
 
 (429,875,529)
 
 (78,535,665)Basic earnings (loss) per share from continuing operations
 
 0.1752
 
 2.2760
 
 0.5654
 
 0.2829
 
 (0.5133)
 
 (0.5297)Diluted earnings (loss) per share from continuing operations
 
 0.1752
 
 2.2760
 
 0.5082
 
 0.2829
 
 (0.5133)
 
 (0.5297)Basic (loss) earnings per share from discontinued operations
 
 -
 
 -
 
 -
 
 (0.0652)
 
 0.0190
 
 (0.0344)Diluted (loss) earnings per share from discontinued operations
 
 -
 
 -
 
 -
 
 (0.0652)
 
 0.0186
 
 (0.0344)Dividends per share (2)
 
 -
 
 -
 
 -
 
 -
 
 -
 
 0.0138Basic earning (loss) per ADS (2)from continuing operations
 
 0.0070
 
 0.0910
 
 0.0226
 
 0.0113
 
 (0.0205)
 
 (0.0212)Diluted earning (loss) per ADS (2)from continuing operations
 
 0.0070
 
 0.0910
 
 0.0203
 
 0.0113
 
 (0.0205)
 
 (0.0212)Basic (loss) earning per ADS (2)from discontinuing operations
 
 -
 
 -
 
 -
 
 (0.0026)
 
 0.0008
 
 (0.0014)Diluted (loss) earning per ADS (2)from discontinuing operations
 
 -
 
 -
 
 -
 
 (0.0026)
 
 0.0007
 
 (0.0014)Dividends per ADS (3)
 
 -
 
 -
 
 -
 
 -
 
 -
 
 0.0006Weighted average amount of outstanding shares
 
 103,673,317
 
 1,346,716,389
 
 1,314,310,895
 
 1,314,310,895
 
 1,314,310,895
 
 1,314,310,895
   For the year ended December 31,2015
 
 2015
 
 2014
 
 2013
 
 2012
 
 2011(Restated)
 
 (Restated)
 
 (Restated)(US$) (1)
 
 (Pesos)
 
 (Pesos)
 
 (Pesos)
 
 (Pesos)
 
 (Pesos)RESTATED STATEMENT OF CASH FLOWSNet cash generated by operating activities
 
 336,086,857
 
 4,365,768,267
 
 2,193,534,713
 
 1,656,196,597
 
 1,198,056,614
 
 1,063,758,464Net cash used in investing activities
 
 (547,692,154)
 
 (7,114,521,077)
 
 (2,472,053,463)
 
 (1,456,587,868)
 
 (903,135,054)
 
 (1,657,527,373)Net cash generated by (used in) financing activities
 
 219,572,453
 
 2,852,246,162
 
 232,933,975
 
 (76,931,201)
 
 (542,226,508)
 
 383,135,512
  (1)Solely for the convenience of the reader, Peso amounts as of December 31, 2015 have been translated into U.S.$ at the average between the purchaser and seller exchange rate for U.S.$ quoted by Banco Nación on December 31, 2015 of Ps. 12.990 to U.S.$ $1.00.See “Item 3. - Key Information—Exchange Rates.” (2)Each ADS represents 25 common shares. (3)In 2010, we declared advance dividends of Ps. 18.1 million, an amount sufficient to cover the Argentine personal asset tax obligations of certain of our shareholders. In March 2011, we paid those dividends and withheld the corresponding amount of personal asset tax from those shareholders who were subject to the personal asset tax    6


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EXCHANGE RATES Exchange Rates The following table sets forth the high, low, average and period-end exchange rates for the periods indicated, expressed in Pesos per U.S. Dollar and not adjusted for inflation.  There can be no assurance that the Peso will not depreciate or appreciate again in the future.  The Federal Reserve Bank of New York does not report a noon buying rate for Pesos.  Source: Banco Nación (1)   Represents the average of the exchange rates on the last day of each month during the period. (2)   Average of the lowest and highest daily rates in the month. (3)   Represents the average of the lowest and highest daily rates from April1 through April 19, 2016. In the future, any cash dividends we pay will be in Pesos, and exchange rate fluctuations affect the U.S. Dollar amounts received by holders of American Depositary Shares (“ADSs”), on conversion by us or by the depositary of cash dividends on the shares represented by such ADSs.  Fluctuations in the exchange rate between the Peso and the U.S. Dollar will affect the U.S. Dollar equivalent of the Peso price of our shares on the Buenos Aires Stock Exchange and, as a result, can also affect the market price of the ADSs.  7


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RISK FACTORS  Risks Related to Argentina *Overview* We are a stock corporation (sociedad anónima) incorporated under the laws of the Republic of Argentina and substantially all of our revenues are earned in Argentina and substantially all of our operations, facilities, and customers are located in Argentina.  Accordingly, our financial condition and results of operations depend to a significant extent on macroeconomic, regulatory, political and financial conditions prevailing in Argentina, including growth, inflation rates, currency exchange rates, interest rates, and other local, regional and international events and conditions that may affect Argentina in any manner.  For example, slower economic growth or economic recession could lead to a decreased demand for electricity in the service areas in which our subsidiaries operate or a decline in the purchasing power of our customers, which, in turn, could lead to a decrease in collection rates from our customers or increased energy losses due to illegal use of our services.  Actions of the Argentine Government concerning the economy, including decisions with respect to inflation, interest rates, price controls (including tariffs and other compensation of public services), foreign exchange controls and taxes, have had and may in the future have a material adverse effect on private sector entities, including us.  For example, during the Argentine economic crisis of 2001, the Argentine Government froze electricity distribution margins and caused the pesification of our tariffs, which had a materially adverse effect on our business and financial condition and led us to suspend payments on our financial debt at the time. We cannot assure you that the Argentine Government will not adopt other policies that could adversely affect the Argentine economy or our business, financial condition or results of operations. In addition, we cannot assure you that future economic, regulatory, social and political developments in Argentina will not impair our business, financial condition or results of operations, or cause the market value of our ADSs to decline. A global or regional financial crisis and unfavorable credit and market conditions may negatively affect our liquidity, customers, business, and results of operations The effects of a global or regional credit crisis and related turmoil in the global financial system may have a negative impact on our business, financial condition and results of operations, an impact that is likely to be more severe on an emerging market economy, such as Argentina.  Such was the case in 2008, when the global economic crisis led to a sudden economic decline in Argentina in 2009, accompanied by inflationary pressures, depreciation of the Peso and a drop in consumer and investor confidence. The effect of the economic crisis on our customers and on us cannot be predicted.  Weak global and local economic conditions could lead to reduced demand or lower prices for energy, which could have a negative effect on our revenues.  Economic factors such as unemployment, inflation and the availability of credit could also have a material adverse effect on demand for energy and, therefore, on our financial condition and operating results.  Weak global and local economic conditions could lead to reduce demand or lower prices for energy, which could have a negative effect on our revenues. The financial and economic situation in Argentina or other countries in Latin America, such as Brazil, may also have a negative impact on us and third parties with whom we do, or may do, business. In addition, the global economic crisis that began in the fourth quarter of 2008, triggering an international stock market crash and the insolvency of major financial institutions, limited the ability of Argentine companies to access international financial markets as they had in the past or made such access significantly more costly for Argentine issuers.  A similar global or regional financial crisis in the future could limit our ability to access credit or capital markets at a time when we require financing, thereby impairing our flexibility to react to changing economic and business conditions (see “Argentina’s ability to obtain financing from international markets is limited, in part due to the unresolved litigation with holdout bondholders, which may impair its ability to foster economic growth and, consequently, affect our business, results of operations and prospects for growth” above). For these reasons, any of the foregoing factors could together or independently have an adverse effect on our results of operations and financial condition and cause the market value of our ADSs to decline. 8


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The Argentine economy remains vulnerable and any significant decline could adversely affect our financial condition The Argentine economy has experienced significant volatility in recent decades, characterized by periods of low or negative growth, high levels of inflation and currency devaluation.  Sustainable economic growth in Argentina is dependent on a variety of factors, including the international demand for Argentine exports, the stability and competitiveness of the Argentine Peso against foreign currencies, the confidence among consumers and foreign and domestic investors and a stable rate of inflation. The Argentine economy remains vulnerable, as reflected by the following economic conditions: ·The gross domestic product (“GDP”) growth has declined, and previous GDP performance has depended to some extent on high commodity prices which, despite having a favorable long-term trend, are volatile in the short-term and beyond the control of the Argentine Government; ·Argentina’s public debt as a percentage of GDP remains high, the availability of long-term credit is scarce and international financing remains limited; ·continued increases in public expenditure could result in fiscal deficits and affect economic growth; ·inflation remains high and threatens to continue at those levels; ·investment as a percentage of GDP remains too low to sustain the growth rate of recent years; ·a significant number of protests or strikes could take place, as they have in the past, which could adversely affect various sectors of the Argentina economy; ·energy or natural gas supply may not be sufficient to supply increased industrial activity (thereby limiting industrial development) and consumption; ·unemployment and informal employment remains high; and ·in the climate created by the above-mentioned conditions, demand for foreign currency has grown, generating a capital flight effect to which the Fernández de Kirchner administration reacted in the past with regulations and currency exchange transfer restrictions. As in the recent past, Argentina’s economy may be adversely affected if political and social pressures inhibit the implementation by the Argentine Government of policies designed to control inflation, generate growth and enhance consumer and investor confidence, or if policies implemented by the Argentine Government that are designed to achieve these goals are not successful. These events could materially adversely affect our financial condition and results of operations, or cause the market value of our ADSs to decline. We cannot assure you that a decline in economic growth, increased economic instability or the expansion of economic policies and measures taken by the Argentine Government to control inflation or address other macroeconomic developments that affect private sector entities such as us, all developments over which we have no control, would not have an adverse effect on our business, financial condition or results of operations or would not have a negative impact on the market value of our ADSs. The impact of the recent congressional and presidential elections on the future economic and political environment of Argentina is uncertain, but likely to be material Presidential and congressional elections in Argentina took place on October 25, 2015, and a runoff election (ballotage) between the two leading Presidential candidates was held on November 22, 2015, which resulted in Mr. Mauricio Macri being elected President of Argentina.  The Macri administration assumed office on


December 10, 2015, and is expected to adjust longstanding fiscal and monetary policies that have resulted in recurrent public sector deficits, inflation and pervasive foreign exchange controls and limited foreign investment. 9


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Since assuming office, the Macri administration has announced and already implemented several significant economic and policy reforms, including:  ·Electricity system state of emergency and reforms.The Macri administration declared the state of emergency of the national electricity system that will remain in effect until December 31, 2017. The state of emergency allows the Argentine Government to take actions designed to guarantee the supply of electricity.  In addition, following the Macri administration’s announcement that it would reexamine energy subsidy policies, the ME&M increased electricity rates for the wholesale market for purchases made between February 1 and April 30, 2016.   This increase is expected to be used to reduce subsidies to the sector. Also, through various Resolutions the Argentine Government has increased the tariff for generators and distributors, as described in this annual report (i.e., ENRE Resolution No. 1/2016 and SEE Resolution No. 22/2016).  INDEC reforms.  In light of questions raised by the International Monetary Fund (“IMF”) regarding the reliability of the information produced by the INDEC, the Macri administration appointed Mr. Jorge Todesca, previously a director of a private consulting firm, as head of the INDEC.  It is expected that the INDEC will implement certain methodological reforms and adjust certain macroeconomic statistics on the basis of these reforms.  On January 8, 2016, Decree No. 55/2016 was issued by the Argentine government declaring a state of administrative emergency on the national statistical system and on the official agency in charge of the system, the INDEC, until December 31, 2016. Following the declared emergency, the INDEC has ceased publishing statistical data until a rearrangement of its technical and administrative structure is finalized. During the implementation of these reforms, however, the INDEC will use official CPI figures and other statistics published by the Province of San Luis and the City of Buenos Aires.  Despite these expected reforms, there is uncertainty as to whether official data will be sufficiently corrected and within what time period such data will be corrected, and what effect these reforms will have on the Argentine economy and public accounts.  Foreign exchange reforms.In addition, the Macri administration implemented certain reforms to the foreign exchange market regulatory framework that provide greater flexibility and easier access to the foreign exchange market.  The principal measures adopted as of the date of this annual report include: (i) the elimination of the requirement to register foreign exchange transactions in the Argentine Tax Authority’s (“AFIP”) database; (ii) the elimination of the requirement to transfer the proceeds of new financial indebtedness transactions into Argentina and settle such proceeds through the single and free‐floating foreign exchange market (the “MULC”); (iii) the reestablishment of the U.S.$2.0 million monthly limit per resident on the creation of offshore assets; (iv) a decrease from 30% to 0% of the registered, non-transferable and non-interest-bearing deposit required in connection with certain transactions involving foreign currency inflows; (v) the reduction of the required period that the proceeds of any new financial indebtedness incurred by residents, held by foreign creditors and transferred through the MULC must be maintained in Argentina from 365 calendar days to 120 calendar days from the date of the transfer of the relevant amount; and (vi) the elimination of the requirement of a minimum holding period (72 business hours) for purchases and subsequent sales of the securities. In addition, on December 17, 2015, following the announcement of the lifting of a significant portion of exchange restrictions, the Peso depreciated approximately 36% against the U.S. Dollar.  The exchange rate published by Banco Nación as of April 19, 2016, was Ps. 14.19 to U.S.$1.00.  Foreign trade reforms.  The Macri administration eliminated export duties on wheat, corn, beef and regional products, and reduced the export duty on soybeans by 5% to 30%.  Further, the 5% export duty on most industrial exports and export duties on mining exports were eliminated.  With respect to payments of existing debts for imports of goods and services, the Macri administration announced the gradual elimination of amount limitations for access to the MULC and eliminated the amount for any new transactions.  As of December 17, 2015, the amount limitations for such existing debt transactions are expected to gradually decrease and be eliminated in June 2016.  Financial Policy.Soon after taking office, the Macri administration sought to settle the outstanding claims with holdout creditors.  See “—Argentina’s ability to obtain financing from international markets is limited, in part due to the unresolved litigation with holdout bondholders, which may impair its ability to foster economic growth and, consequently, affect our business, results of operations and prospects for growth.” 10


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As of the date of this annual report, the impact that these measures and any future measures taken by the Macri administration will have on the Argentine economy as a whole, and the electricity sector in particular, cannot be predicted.  While we believe that the effect of the planned liberalization of the economy will be positive for our business by stimulating economic activity, it is not possible to predict such effect with certainty and such liberalization could also be disruptive to the economy and fail to benefit or harm our business.  In addition, there is uncertainty as to which measures announced during the Presidential campaign by the Macri administration will be taken and when.  Since assuming office, the Macri administration has begun reviewing certain public employee contracts in several sectors and reformed energy and gas sector tariffs. However, we cannot predict how the Macri administration will address certain other political and economic issues that were central during the presidential election campaign, such as the financing of public expenditures, public service subsidies and tax reforms, or the impact that any measures related to these matters that are implemented by the Macri administration will have on the Argentine economy as a whole.  In addition, political parties opposed to the Macri administration retained a majority of the seats in the Argentine Congress in the recent elections, which will require the Macri administration to seek political support from the opposition for its economic proposals and creates further uncertainty as to the ability of the Macri administration to pass any measure which it may expect to implement.  Political uncertainty in Argentina relating to the measures to be taken by the Macri administration in respect of the Argentine economy could lead to volatility in the market prices of securities of Argentine companies, such as ours. We cannot assure you the impact that these measures or any future measures taken by the Macri administration will have on the Argentine economy, would not have an adverse effect on our business, financial condition or results of operations or would not have a negative impact on the market value of our ADSs. If the high levels of inflation continue, the Argentine economy and our results of operations could be adversely affected Inflation has, in the past, materially undermined the Argentine economy and the Argentine Government’s ability to create conditions that permit growth. In recent years, Argentina has confronted inflationary pressures, evidenced by significantly higher fuel, energy and food prices, among other factors.  According to data published by theInstituto Nacional de Estadística y Censos(National Statistics and Census Institute or “INDEC”), the rate of inflation reached 10.6% in 2013, 21.4% in 2014 and 11.9% in the ten-month period ended October 31, 2015.  The wholesale price index (“WPI”) increased 12.7%, 13.1%, 14.8% and 28.3% in each of those years, respectively, and 10.6% in the ten-month period ended October 31, 2015.  In November 2015, the INDEC suspended the publication of the consumer price index (the “CPI”) and the WPI.  See “—The credibility of several Argentine economic indices has been called into question, which may lead to a lack of confidence in the Argentine economy and, in turn, limit our ability to access credit and the capital markets” below.  The previous administration has in the past implemented programs to control inflation and monitor prices for essential goods and services, including freezing the prices of supermarket products, and price support arrangements agreed between the Argentine Government and private sector companies in several industries and markets. A high inflation rate affects Argentina’s foreign competitiveness by diluting the effects of the Argentine Peso devaluation, negatively impacting employment and the level of economic activity and employment and undermining confidence in Argentina’s banking system, which may further limit the availability of domestic and international credit to businesses. In turn, a portion of the Argentine debt is adjusted by theCoeficiente de Estabilización de Referencia(Stabilization Coefficient, or “CER”), a currency index, that is strongly related to inflation. Therefore, any significant increase in inflation would cause an increase in the Argentine external debt and consequently in Argentina’s financial obligations, which could exacerbate the stress on the Argentine economy.  A continuing inflationary environment could undermine our results of operations, adversely affect our ability to finance the working capital needs of our businesses on favorable terms; and it could adversely affect our results of operations and cause the market value of our ADSs to decline. 11


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*The credibility of several Argentine economic indices has been called into question, which may lead to a lack of confidence in the Argentine economy and, in turn, may limit our ability to access credit and the capital markets* In January 2007, INDEC modified its methodology used to calculate the CPI, which is calculated as the monthly average of a weighted basket of consumer goods and services that reflects the pattern of consumption of Argentine households. Since then, through 2015, the credibility of the CPI, as well as other indexes published by the INDEC have been called into question. On November 23, 2010, the Fernández de Kirchner administration began consulting with the IMF for technical assistance in order to prepare a new national consumer price index with the aim of modernizing the current statistical system.  However, Argentina was subsequently censured by the IMF in 2014 for failing to make sufficient progress in adopting remedial measures to address the quality of official data, including inflation and GDP. In order to address the quality of official data, a new price index was put in place on February 13, 2014. The new price index represented the first national indicator to measure changes in prices of final consumption by households. Unlike the previous price index, which only measured inflation in the urban sprawl of the City of Buenos Aires, the new price index is calculated by measuring prices of goods across the entire urban population of the 24 provinces of Argentina. Using this new methodology, the consumer price index rose to 11.9% in the ten-month period ended October 31, 2015. Although this new methodology brought inflation statistics closer to those estimated by private sources, material differences between official inflation data and private estimates remained during 2015. In November 2015, the INDEC suspended the publication of the CPI and the WPI. On January 8, 2016, Decree No. 55/2016 was issued by the Argentine government declaring a state of administrative emergency on the national statistical system and on the official agency in charge of the system, the INDEC, until December 31, 2016. Following the declared emergency, the INDEC ceased publishing statistical data until a rearrangement of its technical and administrative structure is finalized. During the implementation of these reforms, however, INDEC will use official CPI figures and other statistics published by the Province of San Luis and the City of Buenos Aires.  Despite these expected reforms, there is uncertainty as to whether official data will be sufficiently corrected and within what time period such data will be corrected, and what effect these reforms will have on the Argentine economy. The Macri administration has released an alternative CPI index based on data from the City of Buenos Aires and the Province of San Luis and is currently working on a new inflation index.  According to the most recent publicly available information based on data from the Province of San Luis, the CPI grew by 31.6% in 2015 and the inflation rate was 6.5%, 4.2% and 2.7%, in December 2015, January 2016 and February 2016, respectively. According to the most recent publicly available information based on data from the City of Buenos Aires, the CPI grew by 26.9% in 2015 and the inflation rate was 3.9%, 4.1% and 4.0%, in December 2015, January 2016 and February 2016, respectively. No official inflation data has been released since the new INDEC authorities have taken charge, and there is uncertainty regarding current rates of inflation. The discontinuation of the publication of indices by the INDEC has generated uncertainty in Argentina’s economy, and any future required correction or restatement of the INDEC indices could result in a decrease in confidence in Argentina’s economy, which, in turn, could have an adverse effect on our ability to access international capital markets to finance our operations and growth, and which could, in turn, adversely affect our results of operations and financial condition and cause the market value of our ADSs to decline. *Argentina’s ability to obtain financing from international markets is limited, in part due to the unresolved litigation with holdout bondholders, which may impair its ability to foster economic growth and, consequently, affect our business, results of operations and prospects for growth* The prospects for Argentine companies of accessing financial markets might be limited in terms of the amount of financing available, and the conditions and cost of such financing. Economic policy measures adopted by the Argentine Government, may continue to prevent Argentine companies such as us from accessing the international capital markets or make the terms of any such transactions


less favorable than those provided to companies in other countries in the region, and may therefore negatively impact our financial condition or cash flows. 12


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In 2005 and 2010, Argentina conducted exchange offers to restructure part of its sovereign debt that had been in default since the end of 2001.  As a result of these exchange offers, Argentina restructured over 92% of its eligible defaulted debt. Commencing in 2002, holdout creditors filed numerous lawsuits against Argentina in several jurisdictions, including the United States, Italy, Germany, and Japan.  These lawsuits generally assert that Argentina failed to make timely payments of interest or principal on their bonds, and seek judgments for the face value of or accrued interest on those bonds.  Judgments have been issued in numerous proceedings in the United States and Germany, but to date creditors have not succeeded, with a few minor exceptions, in executing on those judgments. In February 2012, plaintiffs in 13 actions in New York, involving claims for U.S.$ 428 million in principal, plus interest, obtained a U.S. district court order enjoining Argentina from making interest payments in full on the bonds issued pursuant to the 2005 and 2010 exchange offers (“Exchange Bonds”) unless Argentina paid the plaintiffs in full, under the theory that the former payments violated the pari passu clause in the 1994 Fiscal Agency Agreement (the “FAA”) governing those non‐performing bonds.  The U.S. district court order was stayed pending appeals.  The Second Circuit Court of Appeals confirmed the so-called pari passu injunctions, and on June 16, 2014 the U.S. Supreme Court denied Argentina’s petition for a writ of certiorari and the stay of the pari passu injunctions was vacated on June 18, 2014.  Additionally, in 2015, plaintiffs that had obtained pari passu injunctions amended their complaints to include claims that Argentina’s servicing of more recently issued BONAR 2024 bonds, as well as all external indebtedness in general, would violate the pari passu clause.  The U.S. district court has not ruled on these new claims and discovery among the parties remains ongoing.  On October 30, 2015, the U.S. district court issued new pari passu injunctions, substantially identical to the ones already in effect, in 49 additional proceedings, involving claims for over U.S.$ 2.1 billion under the 1994 FAA, plus billions more in pre- and post-judgment interest.  On November 10, 2015, Argentina appealed the decision. In 2014, the Argentine Government took a number of steps intended to continue servicing the bonds issued in the 2005 and 2010 exchange offers, which had limited success. Holdout creditors continued to litigate expanding the scope of issues to include payment by the Argentine government on debt other than the Exchange Bonds and the independence of the Central Bank. The Macri administration engaged in negotiations with holders of defaulted bonds in December 2015 with a view to bringing closure to fifteen years of litigation. In February 2016, the Argentine government entered into an agreement in principle to settle with certain holders of defaulted debt and put forward a proposal to other holders of defaulted debt, including those with pending claims in U.S. courts, subject to two conditions: obtaining approval by the Argentine Congress and the lifting of the pari passu injunctions. On March 2, 2016, the U.S. district court agreed to vacate the pari passu injunctions, subject to two conditions:  first, the repealing of all legislative obstacles to settlement with holders of defaulted debt securities issued under the FAA, and second, the full payment to holders of pari passu injunctions with whom the Argentine Government had entered into an agreement in principle on or before February 29, 2016, in accordance with the specific terms of such agreements. The U.S. district court’s order has been appealed and on April 13, 2016 was affirmed by the Second Circuit Court of Appeals. On March 31, 2016, the Argentine Congress repealed the legislative obstacles to the settlement and approved the settlement proposal. As of the date of this annual report, litigation initiated by bondholders that have not accepted Argentina’s settlement offer continues in several jurisdictions, although the size of the claims involved has decreased significantly.  The lifting of the injunctions issued by the United States courts preventing bondholders from receiving their interest payments on the bonds issued pursuant to the 2005 and 2010 exchange offers and the related subsequent events paved the way for the Argentine Government to regain access to the international capital markets, with an issue of U.S.$.16.5 billion aggregate principal amount of 3-year, 5-year, 10-year and 30-year bonds on April 22, 2016 and the pari passu injunctions were vacated.   13


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*Fluctuations in the value of the Argentine Peso could adversely affect the Argentine economy, which could, in turn adversely affect our results of operations* Fluctuations in the value of the Peso may also adversely affect the Argentine economy, our financial condition and results of operations.  The devaluation of the Argentine Peso could have a negative impact on the ability of certain Argentine businesses to service their foreign currency-denominated debt, lead to very high inflation, significantly reduce real wages, jeopardize the stability of businesses whose success depends on domestic market demand, including public utilities and the financial industry, and adversely affect the Argentine Government’s ability to honor its foreign debt obligations. After several years of moderate variations in the nominal exchange rate, the peso lost more than 30% of its value with respect to the US Dollar in each of 2013 and 2014, and in 2015, the Peso lost approximately 52% of its value with respect to the U.S. Dollar including a depreciation of approximately 34% mainly experienced after December 17, 2015 following the announcement of the lifting of a significant portion of foreign exchange restrictions.  Since the devaluation in December 2015, the Central Bank has allowed the Peso to float and limited interventions to those needed to ensure the orderly functioning of the foreign exchange market. As of April 19, 2016, the exchange rate was Ps 14.19 to U.S.$1.00.  We are unable to predict the future value of the Peso against the U.S. Dollar.  If the Argentine Peso devalues further, the negative effects on the Argentine economy could have adverse consequences to our businesses, our results of operations and the market value of our ADSs, including as measured in U.S. Dollars. On the other hand, a significant appreciation of the Argentine Peso against the U.S. Dollar also presents risks for the Argentine economy, including the possibility of a reduction in exports (as a consequence of the loss of external competitiveness). Any such increase could also have a negative effect on economic growth and employment, reduce the Argentine public sector’s revenues from tax collection in real terms, and have a material adverse effect on our business, our results of operations and the market value of our ADSs as a result of the weakening of the Argentine economy in general. Government intervention may adversely affect the Argentine economy and, as a result, our business and results of operations In the recent past, the Fernández de Kirchner administration increased its direct intervention in the economy, including through the implementation of expropriation and nationalization measures, price controls and exchangecontrols. In response to the global economic crisis, in December 2008, Law No. 26,425 was passed, the Argentine Congress unifying the Argentine pension and retirement system into a system publicly administered by theAdministración Nacional de la Seguridad Social(the National Social Security Agency, or the “ANSES”), and eliminating the pension and retirement system previously administered by private managers.  In accordance with the new law, private pension managers transferred all of the assets administered by them under the pension and retirement system to the ANSES.  Prior to 2009, a significant portion of the local demand for securities of Argentine companies came from Argentine private pension funds.  With the nationalization of Argentina’s private pension funds, the Argentine Government, through the ANSES, became a significant shareholder in many of the country’s public companies.  In April 2011, the Argentine Government lifted certain restrictions pursuant to which ANSES had been prevented from exercising more than 5% of its voting rights in any stock exchange listed company (regardless of the equity interest held by ANSES in such companies).  ANSES has since exercised its voting rights in excess of such 5% limit in order to appoint directors in different stock exchange listed companies.  ANSES’s interests may differ from, or conflict with, those of the other investors in such companies.  In addition, in September 2015, Law No. 27,181 was enacted, which prohibits the sale of shares in Argentine public companies held by the Argentine Government or any other action that limits, alters or modifies the use, ownership or nature of such shares, without the prior authorization of Congress.  Additionally, Law No. 27,181 created the National Government Equity Holdings Agency (Agencia Nacional de Participaciones Estatales en Empresas), a decentralized agency operating under the scope of the Argentine Executive Branch, which is in charge of implementing any policies and actions related to the exercise by the Argentine Government of any rights arising out of the shares it holds.  As of the date of this annual report, ANSES owns shares representing 18% of our capital stock, and also owns shares of capital stock of Edenor, CTG and Transener.  14


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Beginning in April 2012, the Fernández de Kirchner administration provided for the nationalization of YPF and imposed major changes to the legal framework in which oil companies operate, principally through the enactment of Law No. 26,741 and Decree No. 1,277/2012.  In February 2014, the Fernández de Kirchner administration and Repsol announced that they had reached agreement on the terms of the compensation payable to Repsol for the expropriation of the YPF shares.  Such compensation amounted to U.S.$5.0 billion, payable by delivery of Argentine sovereign bonds with various maturities.  Additionally, on December 19, 2012, the Fernández de Kirchner administration issued Decree No. 2,552/2012, pursuant to which it ordered the expropriation of thePredio Rural de Palermo.  However, on January 4, 2013, the Federal Civil and Commercial Chamber granted an injunction that has temporarily blocked the enforcement of Decree No. 2,552/2012. Although the decision was appealed by the Argentine government, the Supreme Court of Justice rejected such appeal and confirmed the Federal Civil and Commercial Chamber’s injunction subject to a decision on the merits. Notwithstanding the measures recently adopted by the Macri administration, we cannot assure you that these or other measures that may be adopted by the current or any future Argentine Government, such as expropriation, nationalization, forced renegotiation or modification of existing contracts, new taxation policies, changes in laws, regulations and policies affecting foreign trade and investments will not have a material adverse effect on the Argentine economy and, as a consequence, adversely affect our financial condition, our results of operations or cause the market value of our ADSs to decline. The implementation in the future of new exchange controls and restrictions on capital inflows and outflows could limit the availability of international credit and could threaten the financial system, adversely affecting the Argentine economy and, as a result, our business During 2001 and the first half of 2002, Argentina experienced a mass withdrawal of deposits from the financial system as a result of a lack of confidence in the Argentine Government’s ability to repay its debt and sustain the parity between the Peso and the U.S. Dollar. This caused a liquidity crisis in the Argentine financial system, which led the Argentine Government to impose exchange controls and transfer restrictions, substantially limiting the ability of companies to retain foreign currency or make payments abroad.  After 2002, these restrictions, including those requiring the Central Bank’s prior authorization for the transfer of funds abroad to pay principal and interest on debt obligations, were substantially eased through 2007.  In addition to the foreign exchange restrictions applicable to outflows, in June 2005 the Argentine Government adopted various rules and regulations that established new restrictive controls on capital inflows into Argentina, including a requirement that, for certain funds remitted into Argentina, an amount equal to 30% of the funds must be deposited into an account with a local financial institution as a U.S. Dollar deposit for a one-year period without any accrual of interest, benefit or other use as collateral for any transaction. Through a combination of foreign exchange and tax regulations from 2011 until President Macri assumed office in 2015, the Fernández de Kirchner administration significantly curtailed access to the foreign exchange market by individuals and private-sector entities.  In addition, during the last few years under the Fernández de Kirchner administration, the Central Bank exercised ade factoprior approval power for certain foreign exchange transactions otherwise authorized to be carried out under applicable regulations, such as dividend payments or repayment of principal of inter-company loans as well as the import of goods, by means of regulating the amount of foreign currency available to financial institutions to conduct such transactions.  The number of exchange controls introduced in the past and in particular after 2011, during the Fernández de Kirchner administration, gave rise to an unofficial U.S. Dollar trading market. The Peso/U.S. Dollar exchange rate in such market substantially differed from the official Peso/U.S. Dollar exchange rate.  See “Item 3—Key Information—Exchange Rates” and “Item 10—Exchange Controls.” Additionally, the level of international reserves deposited with the Central Bank significantly decreased from US$47.4 billion as of November 1, 2011 to US$25.6 billion as of December 31, 2015, resulting in a reduced capacity of the Argentine government to intervene in the foreign exchange market and to provide access to such markets to private sector entities like us. The Macri administration recently announced a program intended to increase the level of international reserves deposited with the Central Bank through the execution of certain agreements with several foreign entities. As a result of the measures taken under such program, the international reserves increased to US$30.0 billion as of January 30, 2016. 15


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Notwithstanding the measures recently adopted by the Macri administration, in the future the Argentine Government could impose exchange controls, transfer restrictions or restrictions on the movement of capital or take other measures in response to capital flight or a significant depreciation of the Peso, which could limit our ability to access the international capital markets and impair our ability to make interest, principal or dividend payments abroad.  Such measures could lead to renewed political and social tensions and undermine the Argentine Government’s public finances, which could adversely affect Argentina’s economy and prospects for economic growth and, consequently, adversely affect our business and results of operations and cause the market value of our ADSs to decline.  As of the date of this annual report, however, the transfer of funds abroad to pay dividends is permitted to the extent such dividend payments are made in connection with audited financial statements approved by a shareholders’ meeting of the Company. The Argentine economy could be adversely affected by economic developments in other markets and by more general “contagion” effects Argentine financial and securities markets are influenced, to varying degrees, by economic and financial conditions in other markets and Argentina’s economy is vulnerable to external shocks, including those related or similar to the global economic crisis that began in 2008 and economic and financial conditions in Argentina’s major trading partners, in particular, Brazil. For example, the current devaluation of the Brazilian currency and the slowdown of its economy may negatively affect the Argentine economy, and in turn, our business and results of operations. Although economic conditions can vary from country to country, investors’ perception of the events occurring in other countries have substantially affected in the past, and may continue to substantially affect capital flows to other countries and the value of securities in other countries, including Argentina.  The Argentine economy was adversely impacted by the political and economic events that occurred in several emerging economies in the 1990s, including those in Mexico in 1994, the collapse of several Asian economies between 1997 and 1998, the economic crisis in Russia in 1998 and the Brazilian devaluation of its currency in January 1999. In addition, international investors’ reactions to events occurring in one market sometimes demonstrate a “contagion” effect in which an entire region or class of investment is disfavored by international investors, Argentina could be adversely affected by negative economic or financial developments in other countries, which in turn may have material adverse effect on the Argentine economy and, indirectly, on our business, financial condition and results of operations, and the market value of our ADSs. The actions taken by the Fernández de Kirchner administration to reduce imports may adversely affect our ability to access capital goods that are necessary for our operations In 2012, the Argentine Government adopted an import procedure pursuant to which local authorities must pre-approve any import of products and services to Argentina as a precondition to allowing importers access to the foreign exchange market for the payment of such imported products and services. In 2012, the European Union, the United States of America and Japan filed claims with the World Trade Organization (“WTO”) against certain import-related requirements maintained by Argentina. Recently, the WTO found that those measures are not consistent with Argentina’s obligations under the WTO and requested removal. On December 22, 2015, through Resolution No. 3,823, AFIP removed the import authorization system in place since 2012 denominated Affidavit Advance Import (“DJAI”) and replaced it with the new Comprehensive Import Monitoring System (“SIMI”). Among other changes, local authorities must now reply to any request for approval within a ten-day period from the date in which the request is filed. We cannot assure that the Argentine Government will not modify current export tax rates and import regulations. We cannot predict the impact that any changes may have on our results of operations and financial condition.  Application of certain laws and regulations is uncertain and could adversely affect our results of operations and financial condition. Law No. 26,854, which regulates injunctions in cases in which the Argentine Government is a party or has intervened, was promulgated on April 30, 2013 as part of a judicial reform bill approved by the Argentine Congress.  Among the principal changes implemented pursuant to the judicial reform bill is a time limitation on injunctions imposed in proceedings brought against the Argentine government and the creation of three new chambers of


Casación, each of which must hear an appeal before the matter is considered bythe Supreme Court of Justice of Argentina.  In addition, Law No. 26,855, which became effective on May 27, 2013, modified the structure and functions of the ArgentineConsejo de la Magistratura(judicial council), which has the authority to appoint judges, present charges against them and suspend or remove them.  As of the date of this annual report, several aspects of this legislation have been struck down as unconstitutional by the Argentine Supreme Court. 16


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On August 7, 2014, Law No. 26,944 on State Responsibility was enacted to regulate government actions. Said law governs the responsibility of the Argentine Government regarding the damages that its activity or inactivity may cause to individuals’ properties or rights. Such law establishes that the Argentine Government’s responsibility is objective and direct, that the provisions of the civil and commercial codes are not applicable to the actions of the Argentine Government in a direct or subsidiary manner and that no dissuasive financial penalties may be imposed on the Argentine Government, its agents or officers. On September 18, 2014, the Argentine Congress enacted Law No. 26,991 amending Law No. 20,680 (the “Supply Law”), which became effective on September 28, 2014, to increase control over the supply of goods and provision of services. Such initiative includes the ability of the Argentine Government to regulate consumer rights under Article 42 of the Constitution and permits the creation of an authority to maintain the prices of goods and services (the “Observer of Prices of Goods and Services”). The Supply Law, as amended: (i) requires the continued production of goods to meet basic requirements; (ii) creates an obligation to publish prices of goods and services produced and borrowed; (iii) allows financial information to be requested and seized; and (iv) increases fines for judicial and fiscal persons. The reforms and creation of the Observer of Prices of Goods and Services could adversely affect our operations.  An initiative to regulate questions of consumer rights was also approved, creating theConciliación Previa en las Relaciones de Consumo(Prior Conciliatory Procedures For Consumer Relations, or the “COPREC”), where users and consumers may present claims free of charge and have them resolved within 30 days. The Supply Law applies to all economic processes linked to goods, facilities and services which, either directly or indirectly, satisfy basic consumer needs (“Basic Needs Goods”) and grants a broad range of powers to its enforcing agency. It also grants the enforcing agency the power to order the sale, production, distribution or delivery of Basic Needs Goods throughout the country in case of a shortage of supply. On October 1, 2014, the Argentine Congress approved the reform, update and unification of the National Civil and Commercial codes. A single new National Civil and Commercial Code became effective on August 1, 2015. The consequences of the reform and its subsequent judicial application cannot be predicted. The long-term impact of recently adopted legislation on Argentina’s legal system and future administrative or judicial proceedings, including potential future claims by us against the Argentine Government, cannot be predicted. Risks Relating to the Argentine Electricity and Oil and Gas Sectors *The Argentine Government has intervened in the electricity sector in the past, and is likely to continue intervening* To address the Argentine economic crisis in 2001 and 2002, the Argentine Government adopted the Public Emergency Law and other regulations, which made a number of material changes to the regulatory framework applicable to the electricity sector.  These changes severely affected electricity generation, distribution and transmission companies and included the freezing of distribution nominal margins, the revocation of adjustment and inflation indexation mechanisms of tariffs, a limitation on the ability of electricity distribution companies to pass on to the consumer increases in costs due to regulatory charges and the introduction of a new price-setting mechanism in the wholesale electricity market (the “WEM”) which had a significant impact on electricity generators and generated substantial price differences within the market.  The Argentine Government has continued to intervene in this sector, by, for example, granting temporary nominal margin increases, proposing a new social tariff regime for residents of poverty-stricken areas, removing discretionary subsidies, creating specific charges to raise funds that are transferred to government-managed trust funds that finance investments in generation and distribution infrastructure


and mandating investments for the construction of new generation plants and the expansion of existing transmission and distribution networks. 17


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On December 17, 2015, the Argentine Government issued Decree No. 134/15 declaring the emergency of the National Electricity Sector until December 31, 2017, and instructing the Ministry of Energy and Mining (“ME&M”) to adopt any measure the ME&M deems necessary regarding the generation, transmission and distribution segments, to adjust the quality, and guarantee the provision of, electricity. On January 25, 2016, the ME&M issued Resolution No. 6/2016, approving the seasonal WEM prices for each category of users for the period from February 2016 through April 2016. Such resolution readjusted the seasonal prices set forth in the regulatory framework. Energy prices in the spot market had been set by CAMMESA which determined the price charged by generators for energy sold in the spot market of the wholesale electricity market on an hourly basis. The WEM prices resulted in the elimination of certain energy subsidies and a substantial increase in electricity rates for individuals. Resolution No. 6/2016 introduced different prices depending on customers’ categories. The ME&M, issued Resolution No. 7/2016 pursuant to which it instructed the ENRE to, among others, (i) adjust the value-added for the distribution (the “VAD”) using the transitional tariff regime included in the agreement that Edenor entered into with the Argentine Government in February 2006 relating to the adjustment and renegotiation of the terms of the concession (the “Adjustment Agreement”), (ii) implement a social tariff regime and a reduction of such WEM prices for certain consumers, and (iii) effect a revision of the Integral Tariff Revision (Revisión Tarifaria Integralor “RTI”) that has to be implemented before December 31, 2016. Also the Resolution No. 7/2016 derogated the PUREE and the Secretariat of Energy’s (“SE”) Resolution No. 32/2015. As of the date of this annual report, the Argentine Government maintains the remuneration scheme implemented for the generation segment in 2013. The last changes were implemented by the Secretariat of Energy through its Resolution No. 22/2016, dated March 31, 2016, as described in “Item 4.—The Argentine Electricity Sector—SE Resolution No. 95/2013, as amended—New price scheme and other modifications to the WEM”). We cannot assure you that these or other measures that may be adopted by the Argentine Government will not have a material adverse effect on our business and results of operations or on the market value of our shares and ADSs or that the measures adopted by the Argentine Government through the ME&M under the emergency declared by Decree No. 134/15, or other similar regulation that may be adopted in the future, may further increase our regulatory obligations, including increased taxes, unfavorable alterations to our tariff structures and other regulatory obligations, compliance with which would increase our costs and have a direct negative impact on our results of operations and cause the market value of our ADSs to decline. *Electricity distributors, generators and transmitters were severely affected by the emergency measures adopted during the economic crisis, many of which remain in effect* Distribution and transmission tariffs include a regulated margin that is intended to cover the costs of distribution or transmission, as applicable, and provide an adequate return.  Generators, which mostly depend on the sales made to the spot market (the market set by supply and demand of energy available for immediate delivery), used to have stable prices and were able to reinvest their profits to become more efficient and achieve better margins.  Under Law No. 23,928 and Decree No. 529/91 (together, the “Convertibility Law”), which established a fixed exchange rate of one Peso per U.S. Dollar, distribution and transmission tariffs and electricity spot prices were calculated in U.S. Dollars and distribution and transmission margins were adjusted periodically to reflect variations in U.S. inflation indexes.  In January 2002, pursuant to the Public Emergency Law, which authorized the Argentine Government to renegotiate its public utility contracts, provisions requiring price adjustments based on foreign inflation indexes and all other indexation mechanisms in public utility services agreements between the Argentine Government or any provincial government and the providers of those services (including us) were revoked, and the tariffs for the provision of such services were frozen and converted from their original U.S. Dollar values to Argentine Pesos at a rate of Ps.1.00 per U.S.$1.00.  These measures, coupled with the effect of high inflation and the devaluation of the Peso, led to a decline in revenues in real terms and an increase of costs in real terms, which could no longer be recovered through margin adjustments or market price-setting mechanisms.  This situation, in turn, led many public utility companies to suspend payments on their financial debt (which continued to be denominated in


U.S. Dollars despite the pesification of revenues), effectively preventing these companies from obtaining further financing in the domestic or international credit markets and making additional investments.  Although the Argentine Government has granted temporary and partial relief to certain companies in the electricity sector, we cannot assure you that these measures will be sufficient to address the structural problems created for our company by the economic crisis and in its aftermath or that similar measures extending the relief granted will be enacted in the future. 18


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*Electricity demand may be affected by tariff increases, which could lead electricity companies, such as us, to record lower revenues* During the 2001 and 2002 economic crisis, electricity demand in Argentina decreased due to the decline in the overall level of economic activity and the deterioration in the ability of many consumers to pay their electricity bills. In the years following the 2001 and 2002 economic crisis, electricity demand experienced significant growth (an increase of 8.9% from 2012 to 2015). This increase in electricity demand since 2003 reflects the relative low cost, in real terms, of electricity to consumers due to the freezing of margins, subsidies in the energy purchase price and the elimination of the inflation adjustment provisions in distribution concessions coupled with the devaluation of the Peso, the inflation and the pesification of the tariffs.  The executive branch of the Argentine Government granted temporary increases in transmission and distribution margins, and transmission and distribution companies are currently negotiating further increases and adjustments to their tariff schemes with the Argentine Government.  Although the increases in electricity transmission and distribution margins, which increased the cost of electricity to residential customers, have not had a significant negative effect on demand, we cannot make any assurances that these increases or any future increases in the relative cost of electricity will not have a material adverse effect on electricity demand or a decline in collections from customers.  Further, in November 2011, the Argentine Government announced a cut in subsidies (which has not impacted our value-added for distribution,or “VAD”) for electricity granted to certain customers that are presumed to be in a position to afford the cost without such subsidies. Such cut in subsidies affected only a small portion of our customers (namely, certain industries, such as oil and gas and certain distribution areas with high purchasing power). In January 2016, the ENRE, approved a new tariff scheme for Edenor and Empresa Distribuidora Sur S.A. (“Edesur”) which included the WEM prices approved by ME&M Resolution No. 7/2016 and an increase in the VAD. In this respect, we cannot assure you that these measures or any future measures (including new increases on tariffs for residential users) will not lead electricity companies, like us, to record lower revenues and results of operations than currently anticipated, which may, in turn, have a material adverse effect on the market value of our ADSs. If the demand for energy is increased suddenly, current levels of power generation and the difficulty in increasing the capacity of transmission and distribution companies in a short or medium term, could adversely affect the Company, which in turn could result in customer complaints and substantial fines imposed on such companies In recent years, the increase in electricity demand was greater than the structural increase in electricity generation, transmission and distribution capacities, which led, sometimes, to power shortages and disruptions.  While current demand for electricity has decreased because of, among other things, a lower level of activity linked to the global economic crisis, a sustained increase in electricity demand could generate future shortages. Additionally, according to Argentine law, distribution companies are responsible before their customers for any interruption in the supply of electricity.  Consequently, customer can make their claims to the distribution companies.  Also, distribution companies can suffer fines and penalties for interruptions caused by power outages, unless the respective Argentine authorities determine that power outages are caused by force majeure events.  As of the date of this annual report, Argentine authorities have not ruled on the conditions under which outages may constitute a case of force majeure.  In the past, however, Argentine authorities have adopted a restrictive view of the concept of force majeure and have acknowledged its existence in limited circumstances, such as internal defects in the customer’s location or extraordinary weather events (such as severe storms, tornadoes or floods). We cannot assure that we will not experience a lack in the supply of energy that could adversely affect our business, financial condition and results of operations and cause the market value of our ADSs and shares to decline.  19


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Oil and gas companies have recently been affected by certain measures taken by the Argentine Government and may be further affected by additional changes in their regulatory framework Since December 2011, the Argentine Government has adopted a number of measures concerning repatriation of funds obtained as a result of exports of oil and gas and charges applicable to the production of liquid gas which have affected the business of oil and gas producers and manufacturers (see “Certain measures that may be taken by the Argentine Government may adversely affect the Argentine economy and, as a result, our business and results of operations”). More recently, beginning in April 2012, the Argentine Government provided for the nationalization of YPF and imposed major changes to the system under which oil companies operate, principally through the enactment of Law No. 26,741, Decree No. 1277/2012 and Law No. 27,007. Further changes in such regulations may increase the adverse effect of such measures on the business, revenues and operations of companies operating in the oil and gas sector, including companies in which we hold, or may hold in the future, equity interests, and may lead in turn to a material adverse effect on the market value of our ADSs. Argentine oil and gas production concessions and exploration permits are subject to certain conditions and may not be renewed or could be revoked Law No. 17,319 the “Hydrocarbons Law” (as amended by Law No. 27,007) provides for oil and gas concessions to remain in effect for 25, 30 or 35 years, depending on the concession, as from the date of their award, and further provides for the concession term to be extended for periods of 10 additional years, subject to terms and conditions approved by the grantor at the time of the extension. The authority to extend the terms of current and new permits, concessions and contracts has been vested with the government of the province in which the relevant area is located (and the Argentine Government in respect of offshore areas beyond 12 nautical miles).  In order to be eligible for the extension, any concessionaire and permit holder must have complied with its obligations under the Hydrocarbons Law and the terms of the particular concession or permit, including evidence of payment of taxes and royalties, the supply of the necessary technology, equipment and labor force and compliance with various environmental, investment and development obligations. Under the Hydrocarbons Law, non-compliance with these obligations and standards may also result in the imposition of fines and in the case of material breaches, following the expiration of applicable cure periods, the revocation of the concession or permit. The Argentine Government and a number of provincial governments revoked certain of YPF’s (prior to its nationalization) and Petrobras Argentina S.A.’s (“Petrobras”) concessions in 2012.  Petrolera Pampa has formed partnerships in projects with proved gas reserves to be developed by major oil and gas companies, such as Ysur Energía Argentina S.R.L. (“Ysur”) (formerly Apache Energía Argentina S.R.L. or “Apache”), Petrobras and YPF and is currently negotiating agreements that involve potential oil and gas production with Petrolera Pampa as operator. See “Item 4.—Our Business—Oil and Gas—Petrolera Pampa—Petrolera Pampa’s Projects”. The termination or revocation of, or failure to obtain the extension of, a concession or permit under these projects could have a material adverse effect on Petrolera Pampa’s business and results of operations. In April 2012, the Argentine Congress passed Law No. 26,741, expropriating 51% of the shares of YPF owned by the Spanish energy company, Repsol YPF. Under the terms of the law, out of the 51% of total shares to be expropriated, 51% of such shares will be held by the Argentine Government and the remaining 49% will be held by oil-producing Argentine Provinces.  Also, the law states that hydrocarbon activities (including, exploitation, industrialization, transportation and commercialization) in the territory of Argentina qualify as a “national public interest”.  The law, entitled “Hydrocarbon Sovereignty of Argentina”, provides that the primary objective is to achieve Argentina’s self-sufficiency in oil and gas supply.  We cannot assure you that these or other measures that may be adopted by the Argentine Government will not have a material adverse effect on the Argentine economy and, as a consequence, adversely affect our financial condition, our results of operations and the market value of our shares and ADSs. Oil and gas reserves in Argentina are likely to decline Many oil and gas fields in Argentina are mature and without significant investment into development and exploration activities, reserves are likely to be depleted.  Such investments do not, however, guarantee the success of oil and gas activities.  Access to crude oil and natural gas reserves is essential to an oil and gas company’s sustained production and generation of income.  Given our strategy of investing almost exclusively in areas with proved oil


and gas reserves, a decline in proved oil and gas reserves in Argentina could have an adverse effect on our business and results of operations. 20


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Risks Relating to our Company *We operate a material portion of our business pursuant to public concessions granted by the Argentine Government, the revocation or termination of which would have a material adverse effect on our business* We conduct a significant part of our businesses pursuant to public concessions granted by the Argentine Government.  These concessions contain several requirements regarding the operation of those businesses and compliance with laws and regulations.  Compliance with our obligations under our concessions is typically secured by a pledge of our shares in the concessionaires in favor of the Argentine Government.  Accordingly, upon the occurrence of specified events of default under these concessions, the Argentine Government would be entitled to foreclose on its pledge of the concessionaire and sell our shares in that concessionaire to a third party.  Such sale would have a severe negative impact on our ability to operate a material portion of our business, and as a result, our results of operations would be materially adversely affected.  Finally, our concessions also generally provide for termination in the case of insolvency or bankruptcy of the concessionaire.  If any of our concessions are terminated or if the Argentine Government forecloses its pledge over the shares we own in any of our concessionaire companies, such companies could not continue to operate as a going concern, and in turn our consolidated results of operations would be materially adversely affected and the market value of our shares and ADSs could decline. *We employ a largely unionized labor force and could be subject to an organized labor action, including work stoppages that could have a material adverse effect on our business* The majority of the employees in the electricity sector are affiliated with labor unions.As of December 31, 2015, approximately 81.0% of our employees were union members.  Although our relations with unions are currently stable, we cannot assure you that our operating subsidiaries will not experience work disruptions or stoppages in the future, which could have a material adverse effect on our business and revenues.  In addition, our collective bargaining agreements generally expire after a one-year term.We have completed salary negotiations for 2014.We cannot assure you that we will be able to negotiate new collective bargaining agreements on the same terms as those currently in effect, or that we will not be subject to strikes or work stoppages before or during the negotiation process. If we are unable to negotiate salary agreements or if we are subject to strikes or work stoppages, our results of operations, financial condition and the market value of our ADSs could be materially adversely affected. *In the event of an accident or event not covered by our insurance policies, we could face significant losses that could materially adversely affect our business and results of operations* We carry insurance policies that are consistent with industry standards in each of our different business segments.  See “Item 4.  —Our Business—Insurance.”  Although we believe our insurance coverage is commensurate with standards for the international electricity generation, transmission and distribution industry, no assurance can be given of the existence or sufficiency of risk coverage for any particular risk or loss.  For example, two of the towers used by Transener’s transmission lines located in the Province of Buenos Aires, were damaged in 2008 due to unknown causes, despite us having carried all related actions which were legally required.  These damages resulted in the interruption of electricity transmission service to customers in the greater Buenos Aires region and certain areas in other provinces for several hours, which could have caused losses that may not be covered by our insurance policies.  We cannot make any assurances that this kind of damage will not occur again in the future, which could eventually result in further losses or the imposition of sanctions on Transener by the regulatory authorities.  If an accident or other event occurs that is not covered by our current insurance policies in any of our business segments, we may experience material losses or have to disburse significant amounts from our own funds, which may have a material adverse effect on our net profits and our overall financial condition and on the market value of our shares and ADSs. 21


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*We conduct a portion of our operations through joint ventures, and our failure to continue such joint ventures or resolve any material disagreements with our partners could have a material adverse effect on the success of these operations* We conduct a portion of our operations through joint ventures and as a result, the continuation of such joint ventures is vital to our continued success.  In the event that any of our partners were to decide to terminate its relationship with us in any of such joint ventures or sell its interest in such joint ventures, we may not be able to replace our partner or obtain the necessary financing to purchase our partner’s interest.  For example, we own a  joint controlling interest in Citelec, the holding company of Transener, our transmission company, where we were previously a party to significant agreements with our former partner, Petrobras Energía S.A. (“Petrobras Energía”), with respect to the management of Transener.  Electroingeniería S.A. (“Electroingeniería”), now Grupo Eling S.A. and Energía Argentina S.A. (“Enarsa”) subsequently acquired Petrobras Energía’s interest in Citelec’s capital stock.  While we were able to enter into similar agreements that we enjoyed with Petrobras Energía, any significant disagreement with our new partners could have a material adverse effect on the success of such joint venture, and thereby our business and results of operations.  In this particular case of Transener, we are not able to acquire our partners’ interests under applicable Argentine regulations.  See “Item 4.  —The Argentine Electricity Sector.”  As a result, the failure to continue some of our joint ventures or to resolve disagreements with our partners could adversely affect our ability to transact the business that is the subject of such joint venture, which would in turn negatively affect our financial condition and results of operations and the market value of our shares and ADSs. Our performance is largely dependent on recruiting and retaining key personnel Our current and future performance and the operation of our business are dependent upon the contributions of our senior management and our skilled team of engineers and other employees. We depend on our ability to attract, train, motivate and retain key management and specialized personnel with the necessary skills and experience. There is no guarantee that we will be successful in retaining and attracting key personnel and the replacement of any key personnel who were to leave could be difficult and time consuming. The loss of the experience and services of key personnel or the inability to recruit suitable replacements and additional staff could have a material adverse effect on our business, financial condition and results of operations. If we are not able to effectively hedge our currency risk in full and, as a result, a devaluation of the Peso occurs, there may be a material adverse effect on our results of operations and financial condition Our revenues are collected primarily in Pesos pursuant to tariffs that are not indexed to the U.S. Dollar, while a significant portion of our existing financial indebtedness is denominated in U.S. Dollars, which exposes us to the risk of loss from devaluation of the Peso.  If we are not able to effectively hedge all or a significant portion of our currency risk exposure, a devaluation of the Peso (as happened in January 2014, see “Fluctuations in the value of the Argentine Peso could adversely affect the Argentine economy, which could, in turn adversely affect our results of operations”) may significantly increase our debt service burden, which, in turn, may have a material adverse effect on our financial condition and results of operations. The Argentine Antitrust Commission could decide not to approve the implementation of the Restructuring Agreement On July13, 2012, the parties to the Restructuring Agreement, including the Company, entered into a Fifth Amendment to the Restructuring Agreement pursuant to which they agreed on the terms and conditions upon which the restructuring will be consummated. If the restructuring is achieved through the Restructuring Agreement’s implementation, the Company and/or its subsidiaries (as financial creditor of Compañía de Inversiones de Energía S.A. or “CIESA”) would obtain, direct and indirect ownership over 50% of CIESA’s equity, which in turn would control 51% of TGS. The implementation of the restructuring has already been approved by theEnte Nacional Regulador del Gas(the National Gas Regulating Agency, or the “ENARGAS”), and has not expressly been approved by the Argentine Antitrust Commission (see “Item 4. Our Business – Other Projects - TGS - CIESA Transaction”).  We cannot assure that the Argentine Antitrust Commission will expressly approve the Restructuring Agreement, and although the Company believes that from a legal stand point the Restructuring Agreement has been tacitly approved by the Argentine Antitrust Commission, the board of directors of the Company is evaluating the legal and factual implications and other courses of action without having made a decision as of the date of this


annual report.The outcome of this matter may adversely affect the financial position and results of operations of the Company. If the potential sale of our indirect stake in TGS occurs we cannot assure that the Argentine Antitrust Commission will expressly approve such sale. 22


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We are involved in various legal proceedings which could result in unfavorable decisions and financial penalties for us We are party to a number of legal proceedings, some of which have been pending for several years. We cannot be certain that these claims will be resolved in our favor, and responding to the demands of litigation may divert management’s time and attention and our financial resources. See “Item 8—Legal Proceedings.” Downgrades in our credit ratings could have negative effects on our funding costs and business operations Credit ratings are assigned to the Company and its subsidiaries. The credit ratings are based on information furnished by us or obtained by the credit rating agencies from independent sources and are also influenced by the credit ratings of Argentine Government bonds and general views regarding the Argentine financial system as a whole. The credit ratings are subject to revision, suspension or withdrawal by the credit rating agencies at any time. A downgrade, suspension or withdrawal in our credit ratings could result in, among other things, the following: (i) increased funding costs and other difficulties in raising funds; (ii) the need to provide additional collateral in connection with financial market transactions; and (iii) the termination or cancellation of existing agreements.  As a result, our business, financial condition and results of operations could be materially and adversely affected. *The designation of veedores (supervisors), by the CNV or otherwise, could adversely affect the economic and financial situation of the Company* The new Capital Markets Law No. 26,831 (the “CML”) provides in Article 20 that the CNV may conduct an inspection on persons subject to its control (such as the Company or any of its subsidiaries subject to CNV’s control).  If after any inspection the CNV considers that a resolution of the board of directors of such person violated the interests of minority shareholders or any holder of securities that are subject to the Argentine public offering regime, it may appoint aveedor(supervisor), who will have veto powers.  Additionally, the CNV may suspend the board of directors for a period of up to 180 days, until the CNV rectifies the situation.  This measure is subject to limited appeals.  If the CNV makes an inspection on the Company (or any of its subsidiaries subject to CNV’s control) and considers that any right of a minority shareholder or holder of any security has been violated, it may proceed to suspend the board of directors for up to 180-day period, in which case the economic and financial situation of the Company (or the subsidiary in question) could be negatively affected.  In addition, aveedormay be appointed through a judicial request.  In this respect, on April 21, 2014, Molinos Rio de la Plata S.A., an Argentine company whose shares are publicly-traded in Argentina, reported the judicial appointment of aveedorat the request of ANSES, one of its shareholders, which is also a shareholder of the Company, for a period of six months.  We cannot assure you that ANSES, or any other party, will not attempt to pursue a similar course of action with respect to the Company (or any of its subsidiaries subject to CNV’s control), which may have a negative effect on the Company. A cyber-attack could adversely affect our business, financial condition, results of operations and cash flows Information security risks have generally increased in recent years as a result of the proliferation of new technologies and the increased sophistication and activities of cyber-attacks. Through part of our grid and other initiatives, we have increasingly connected equipment and systems to the Internet.  Because of the critical nature of our infrastructure and the increased accessibility enabled through connection to the Internet, we may face a heightened risk of cyber-attack. In the event of such an attack, we could have our business operations disrupted, property damaged and customer information stolen; experience substantial loss of revenues, response costs and other financial loss; and be subject to increased regulation, litigation and damage to our reputation. A cyber-attack could adversely affect our business, results of operations and financial condition. 23


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Risks Relating to our Generation Business *There are electricity transmission constraints in Argentina that may prevent us from recovering the full marginal cost of our electricity, which could materially adversely affect the financial results of our generation business* During certain times of the year, more electricity can be generated than can be transmitted.  While under the new remuneration scheme established by SE Resolution No. 95/2013, as amended, such constraints should not affect the price that is paid to the generator, our dispatch may nonetheless be affected by such transmissions constraints.  We cannot make any assurance that required investments will be made to increase the capacity of the system.  As a result of lower dispatch, our generation business may record lower operating profits than we anticipate, which could adversely affect our consolidated results of operations and financial condition and causethe market value of our ADSs to decline. Changes in regulations governing the dispatch of generators may affect our generators Pursuant to Note No. 5129/13, the Secretariat of Energy instructed CAMMESA to optimize the dispatch of WEM’s generators according to the available fuels and their actual costs. Such modifications or any other modifications under the emergency established by Decree No. 134/15 or any other measures thereof, may result in a lower dispatch of our generators and, in turn, could adversely affect our results of operations and financial conditions. *We may be unable to collect amounts, or to collect them in a timely manner, from CAMMESA and other customers in the electricity sector, which could have a material adverse effect on our financial condition and results of operations* Electricity generators, including our subsidiaries, are paid by CAMMESA, which collects revenue from other wholesale electricity market agents.  Since 2012, a significant number of wholesale electricity market agents –mostly distributors, including Edenor - defaulted in the payment of amounts they owed to the wholesale electricity market or failed to pay in a timely manner, which adversely affected the ability of CAMMESA to meet its own payment obligations to generators or to pay them in a timely manner. This situation led to the creation of theFondo Transitorio de Recomposición de Cobranzas”– SE Notes No. 7588/12, 8147/12 and 8476/12 (the “Transitory Recovery Fund”), by means of which the Secretariat of Energy instructed CAMMESA to collect the charges and interest accrued from distributors’ defaults and renegotiate the terms of the payment of the defaulted amounts. Additionally, the stabilization fund created by the Secretariat of Energy to cover the difference between the spot price and the seasonal price of electricity recorded a permanent deficit.  This difference is due to the intervention of the Argentine Government and the measures adopted pursuant to the Public Emergency Law. Even though the ME&M No. 7/2016 approved new WEM seasonal prices and adopted several measures, as described in “Item 3. – Key Factors – Risk Factors – Risks Relating to our Generation Business”. The Argentine Government has intervened in the electricity sector in the past, and is likely to continue intervening, in order to reduce the distributor’s debt with CAMMESA, we cannot make any assurances that the difference between the spot price and the seasonal price will not increase in the future, that the Argentine Government will use funds from the National Treasury to meet the differences or that CAMMESA will be able to make payments to generators, both in respect of energy and capacity sold in the spot market. Furthermore, as a consequence of the suspension of the incorporation or renewal of contracts in the term market (see “Item 4. The Argentine Electricity Sector - SE Resolution No. 95/2013, as amended – New price scheme and other modifications to the WEM”), the revenues of electricity generators will depend on the payments received from CAMMESA. Additionally, due to the scheme implemented by SE Resolution No. 95/2013, the margin collected from Large Users derived from contracts in WEM’s term market will be calculated based on the remuneration received from CAMMESA, which will impact the revenues of the generators. The inability of generators, including certain of our subsidiaries, to collect their credits from CAMMESA or to collect them in a timely manner, may have a material adverse effect on the revenues of our generation


subsidiaries and accordingly, on our results of operations and financial condition and the market value of our shares and ADSs. 24


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New measures encouraging renewable energy generation projects may affect our generation assets sales On October 15, 2015, Law No. 27.191 was enacted. Pursuant to such law, among other measures, is established that, by December 31, 2025, 20% of the total domestic energy demand must be provided through renewable energy sources. In order to meet such goal, the law obliges Wholesale Users and CAMMESA to cover their respective portion of domestic energy demand with sources of renewable energy by 8%, by December 31, 2017. The percentage to be covered with renewable energy increases every two year up to the abovementioned 20% on 2025. The law also includes tax and other benefits for new renewable energy projects. Law No. 27,191 was partially regulated by Decree No. 531/2016, and further regulation is required for its implementation, However, we cannot make any assurances that the implementation of the law and its regulation will not affect our generators sales, particularly in our sales under the Energy Plus regime, which, in turn, could adversely affect our results of operations and financial conditions. *Our ability to generate electricity in our thermal generation plants depends on the availability of natural gas, and fluctuations in the supply or price of gas could materially adversely affect our results of operations* The supply or price of gas used in our generation businesses has been and may from time to time continue to be affected by, among other things, the availability of gas in Argentina, our ability to enter into contracts with local gas producers and gas transportation companies, the need to import a larger amount of gas at a higher price than the price applicable to domestic supply as a result of low domestic production, and gas redistribution mandated by the Secretariat of Energy, given the present shortage of supply and declining reserves.  Since 2009, the Secretariat of Energy has applied a procedure – (see “Item 4. – The Argentine Electricity Sector - Procedure for the Dispatch of Natural Gas for Power Generation”)–by means of which generators assign in favor of CAMMESA the natural gas acquired from the producers. CAMMESA may assign those volumes to other generation plants. Several of our generation facilities are equipped to run solely on gas and, in the event that gas becomes unavailable, these facilities will not be able to switch to other types of fuel in order to continue generating electricity.  If we are unable to purchase gas at prices that are favorable to us, if the supply of gas is reduced, if the procedure cited above is canceled or if CAMMESA does not provide gas to our facilities, our costs could increase or our ability to profitably operate our generation facilities could be impaired.  Moreover, some of our generation units are included in the “Energía Plus” program under SE Resolution 1281/2006 and/or have executed WEM Supply Agreements under SE Resolution No. 220/2007, and both regulations require the generator to assure the committed capacity with its own fuels through the execution of firm natural gas and transport contracts.  See “Item 4. The Argentine Electricity Sector - Electricity Prices – Energía Plus” and “WEM Supply Agreements under SE Resolution No. 220/2007”. Notwithstanding, as of the issuance of SE Resolution No. 95/2013, as amended, generators will depend on the fuels that CAMMESA supplies them for their operations, since through such resolution the Secretariat of Energy appointed CAMMESA as the sole supplier of fuels for the generation sector. Such a disruption or an inability to acquire the necessary fuels for our generation business could, in turn, materially adversely affect our results of operations and financial condition and the market value of our ADSs. Our ability to generate electricity using gas plus under the Gas Plus Program at Loma de la Lata depends on the recognition by CAMMESA of Gas Plus costs Loma de la Lata has executed several natural gas provision agreements with producers whose production is included under the terms of the “Gas Plus” program (SE Resolution No. 24/2008).  Under such program, the producers are able to sell their production at a price higher than the reference price (gas market value for generators).  By virtue of the agreements executed with the Secretariat of Energy, and the mechanism established in Note No. 7585/10 of the Secretariat of Energy (see“Item 4. The Argentine Electricity Sector -Procedure for the Dispatch of Natural Gas for Power Generation”), CAMMESA recognizes such costs to Loma de la Lata.


CAMMESA has to recognize the Gas Plus cost to Loma de la Lata in order for Loma de la Lata to be able to make the corresponding payments to their natural gas suppliers.  If CAMMESA does not recognize the Gas Plus cost or if such recognition is delayed, the ability of Loma de la Lata to pay the natural gas suppliers may be affected.  Consequently, in such a situation, Loma de la Lata would have to renegotiate the terms and conditions previously agreed with their natural gas suppliers and, in case an agreement is not reached, any of the parties may terminate the contracts under which they committed to supply natural gas.In this respect, during 2012, due to delay in collecting payments from CAMMESA, some renegotiation needed to be made with natural gas producers in order to fulfill Loma de la Lata’s obligations and to keep the agreements in force. As a consequence of this situation, Loma de la Lata might need to search for alternative suppliers of natural gas, and if they are unsuccessful in reaching new agreements with natural gas suppliers, their ability to generate electricity using gas plus recognized under the Gas Plus Program could be affected. 25


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Additionally by means of the Notes No. 3456/12 and 4377/12, the Secretariat of Energy introduced several modifications to the terms and conditions for the provision of natural gas recognized under the Gas Plus Program for energy generation. See “Item 4. – The Argentine Electricity Sector - Natural Gas Supply under the Gas Plus Program”. However, as of the issuance of SE Resolution No. 95/2013, as amended, generators will depend on the fuels that CAMMESA supplies them for their operations, since through such resolution the Secretariat of Energy appointed CAMMESA as the sole supplier of fuels for the generation sector. Consequently, as of the termination of the current gas supply agreements, Loma de la Lata and EGSSA (now merged into CTG) will no longer need to have firm gas supply agreements with suppliers and request the recognition of costs thereunder to CAMMESA as it will depend on CAMMESA’s gas supply (See “Item 3.- Key Information – Risk Factors – Risk Relating to our Generation Business – Our ability to generate electricity in our thermal generation plants depends on the availability of natural gas, and fluctuations in the supply or price of gas could material adversely affect our results of operations”). In September 2015, CAMMESA informed Loma de la Lata that, in accordance with SE Resolution No. 529/14, that after the first automatic renewal of the term of the natural gas supply agreements, CAMMESA will no longer acknowledge (i) any further automatic renewals of such agreements, and (ii) the costs associated to such supply, including the additional 10% of such costs established in the “Convenio Marco para el Cierre del Ciclo Combinado de Loma de la Lata” Entered into among Loma de la Lata and the SE in December 2008.  Loma de la Lata has taken the necessary measures to protect its interest. (Please see “Item 8 – Legal Proceedings Involving Loma de la Lata”). We cannot assure you that the changes on the terms and conditions for the provision of natural gas under the Gas Plus Program and, particularly, the lack of recognition of costs associated with Loma de la Lata’s supply pursuant to SE Resolution No. 529/14 described above, would not have an adverse effect on the operation of our generation facilities and the revenues derived from such activity. Penalties may be applied under Loma de la Lata’s and EGSSA’s WEM Supply Agreements under SE Resolution No. 220/2007, which may adversely affect the revenues derived from such contracts A breach of the availability commitments set forth in Loma de la Lata’s and EGSSA’s (now merged into CTG) WEM Supply Agreements under SE Resolution No. 220/2007 (see “Item 4.- The Argentine Electricity Sector - WEM Supply Agreements under SE Resolution No. 220/2007”) allows CAMMESA to apply penalties to the generator that may adversely impact in the revenues derived by the generator from such agreements, which in turn may adversely affect the generator’s results. A breach of the availability commitment set forth in Piedra Buena’s Loan Agreement with CAMMESA may adversely impact Piedra Buena’s results of operations On April 8, 2014, Piedra Buena executed a loan agreement with CAMMESA for an amount equal to the peso-equivalent of U.S.$ 82.6 million plus the associated taxes and nationalization costs. This loan is to be repaid in 48 equal installments. As long as Piedra Buena’s availability is higher than 80% (summer) or 83% (winter), Piedra Buena’s payment obligations shall be limited to the revenue established to cover extraordinary maintenance works (SE Resolution No. 529/2014, as amended) and 50% of the Debt Payment Cash Flow (as defined in such agreement) (See “Item 5 – Debt – Generation – Piedra Buena”). If Piedra Buena’s availability is below the abovementioned


percentages, Piedra Buena shall pay the applicable installment.  A breach of the availability commitments set forth in the loan agreement and the consequent acceleration of the loan may adversely impact in Piedra Buena’s results of operations. 26


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*Our ability to generate electricity at our hydroelectric generation plants may be negatively affected by poor hydrological conditions, which could, in turn affect our results of operations* Prevailing hydrological conditions could adversely affect the operations of our six hydroelectric generation plants owned by HINISA and HIDISA, in a number of ways, not all of which we can predict.  For example, hydrological conditions that result in a low supply of electricity in Argentina could cause, among other things, the implementation of broad electricity conservation programs, including mandatory reductions in electricity generation or consumption.  Hydrological conditions since 2006, the year in which our units recorded the greatest intake to date, have been poor.  In particular, in 2014, the water intake at Los Nihuiles and Diamante available for electricity generation was 62% and 64% lower, respectively, as compared to 2006.  A prolonged continuation of poor conditions could force the Argentine Government to focus its generation efforts on the use of other sources of electricity generation.  In the event of electricity shortages, the Argentine Government could mandate the implementation of broad electricity conservation programs, including mandatory reductions in electricity generation or consumption; the government could also mandate increased production from thermal plants that use fossil fuels as their generation sources and preserve the available water resources for future electricity generation.  Although such a shift in production could benefit our thermal generation plants, it would negatively affect our hydroelectric plants and any mandated reduction in electricity generation or consumption could reduce revenues in our generation business and lead to a decline in our consolidated results of operations, which may have a material adverse effect on our financial condition and the market value of our shares and ADSs. Moreover, in a case where the water level of the dams of our hydroelectric facilities decreases to the minimums established in the applicable concessions contract, the local water authority (The Province of Mendoza Irrigation General Department) would gain the control of the amount of water that may be dispatched in order to assure the continuity of other water uses such as human consumption and irrigation. *Operational difficulties could limit our ability to generate electricity, which could adversely affect our results of operations* We may experience operational difficulties that could require us to temporarily suspend operations or otherwise affect our ability to generate electricity and, as a result, adversely impact our operating results.  These difficulties may affect our generation equipment, electromechanical components or, in general, any of our assets required for the supply of electricity.  We cannot make any assurances that events of such nature will not occur in the future.  While we maintain comprehensive insurance for each of our facilities, we cannot make any assurances that the amounts for which we are insured or the amounts that we may receive under such insurance policies would cover all of our losses.  If operational difficulties impede our generation of electricity, the disruption may lead to reduced revenues from our generation segment, which would have an adverse effect on our consolidated results of operations and may negatively affect the market value of our shares or ADSs. Please see “Item 4.- Our Business – Piedra Buena – Operations”. *We may no longer own a controlling interest in HINISA, one of our principal generation assets, if the Province of Mendoza sells its participation in HINISA* Our subsidiary, Nihuiles, currently owns a 52.04% controlling stake in HINISA, a hydroelectric generation company in the Province of Mendoza, Argentina, and the Province of Mendoza, through EMESA, currently owns 47.96% of the capital stock of HINISA.  In 2006, the Province of Mendoza publicly announced its intention to sell shares representing 37.75% of the capital stock of HINISA.  See “Item 4.—Our Business—Our Generation Business—Nihuiles and Diamante—Nihuiles.”  Pursuant to HINISA’s concession, if the Province of Mendoza sells these shares, Nihuiles will be required to sell 20% of HINISA’s capital stock and would no longer own a controlling 52.04% interest in HINISA.  In addition, according to HINISA’s by-laws, Nihuiles would not be permitted to purchase any additional shares of HINISA. 27


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We currently consolidate the results of operations of Nihuiles.  If Nihuiles loses its controlling interest in HINISA, it may have a significant adverse effect on the value of our investment in Nihuiles and on our consolidated results of operations and the market value of our ADSs.  In addition, neither we nor Nihuiles has any control over the timing of the Province of Mendoza’s proposed sale or the price at which Nihuiles would be required to sell its 20% of HINISA’s shares.  As a result, these shares may be sold at a time and price per share that are adverse to our interests and the return on our investment in Nihuiles. *Piedra Buena could be exposed to third-party claims on real property utilized for its operations that could result in the imposition of significant damages, for which we have not established a provision in our Consolidated Financial Statements for potential losses* At the time of Piedra Buena’s privatization in 1997, the Province of Buenos Aires agreed to expropriate and transfer to Piedra Buena the real property on which the plant was built and to create administrative easements in favor of Piedra Buena over the third-party lands through which a gas pipeline and an electricity transmission line run.  Although the Province of Buenos Aires is in the process of expropriating the property on which the plant is built, as of the date of this annual report, it has not transferred all of the real property with clear and marketable title to Piedra Buena.  In addition, the Province of Buenos Aires has not created the administrative easements for Piedra Buena’s gas pipeline or the electricity transmission line.  In July 2008, Piedra Buena sued the Province of Buenos Aires seeking the creation of the administrative easements in favor of Piedra Buena.  Piedra Buena has received several complaint letters from third parties seeking compensation for the use of this land.  See “Item 8. - Legal Proceedings—Generation—Legal proceedings involving Piedra Buena’s real estate.”If the Province does not complete the expropriation process or the administrative easement process, Piedra Buena may be exposed to judicial claims by third parties seeking compensation or damages for which we have not established a provision in our Consolidated Financial Statements.  If Piedra Buena were required to pay material damages or compensation for the right to use this real property as a result of adverse outcomes from legal proceedings, we could be required to use cash from operations to cover such costs, which could have a materially adverse effect on our financial condition and consolidated results of operations and causethe market value of our ADSs to decline. Piedra Buena could be subject to fines and penalties for not having a concession for the use of sea water for the refrigeration of its generation units Piedra Buena uses sea water to refrigerate its generation units.  According to applicable provincial law, such activity requires a concession to be granted by the provincial government. In the documentation that we received with the privatization of Central Piedra Buena, no concession was included.  Piedra Buena consulted the regulatory authorities who informed that, according to their files, no such concession has been granted to Piedra Buena.  The penalties for such infringement may vary from the application of up to a Ps. 50,000 fine to the closing of the plant. While Piedra Buena considers that the likelihood of any such penalties being imposed is low, we cannot assure you that the operation of Piedra Buena would not be affected if such penalties were to be imposed. The unfulfillment of the requirements of the Energy Plus Program or its modification or cancellation may affect CTG’s profits If CTG  does not comply with the requirements of the Energy Plus Program (SE Resolution No. 1281/2006) or if such program is modified or canceled, CTG would have to sell its production on the spot market, and also, eventually, under the remuneration scheme applicable under SE Resolution No. 95/2013, as amended, which could affect CTG’s revenues. Moreover we cannot assure you that, due to measures adopted by the Secretariat of Energy or its failure to promote the Energy Plus market, the demand of such market will not decrease, which could cause CTG to have to sell its production in the spot market under the remuneration scheme applicable under SE Resolution No. 95/2013, as amended, affecting CTG’s revenues. In September 2015, CAMMESA issued Note No. B-102407-4, pursuant to which it obliged CTG to sell its uncommitted production under the Energy Plus Program to the spot market under the price scheme established by SE Resolution No. 482/2015. In Note No. 567/07, as amended, the Secretariat of Energy established the“Cargo Medio Incremental de la Demanda Excedente”(“CMIEE”) as a maximum fee for WEM users with a capacity higher than 300 KW(“WEM


Large Users”) for their surplus demand in the event that they do not have their demand backed with a contract under the Energy Plus Program. As of the date of this annual report, the CMIEE applicable toGrandes Usuarios Mayores(Major Large Users, or “GUMAs”) andGrandes Usuarios Menores(Minor Large Users, or “GUMEs”) is equal to 650 Ps./MWh and forGrandes Usuarios del Distribuidor(Major Distribution Users or “GUDIs”) 0 $/MWh. The CMIEE implies an indirect maximum limit to the price that generators under the Energy Plus Program may charge. The detrimental effect that such limits could have on our generators would worsen if the Peso continues its devaluation. As a consequence, if the CMIEE is not adjusted or a higher devaluation of the Peso occurs, this could result in a fall in prices charged by our generators under their Energy Plus Program contracts or in a discontinuance of the Energy Plus contracts, forcing such generators to sell the capacity and energy unsold in the spot market at lower prices. 28


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Risks Relating to our Transmission Business *If we are not able to renegotiate our transmission tariffs regime directly or gain access to another mechanism to generate additional income with the Argentine Government in a timely fashion, it could have a material adverse impact on our financial condition and results of operations* In January 2002, pursuant to the Public Emergency Law, tariffs for the provision of public services, including the transmission of electricity, were converted from their original U.S. Dollar values to Pesos (at a rate of Ps. 1.00 per U.S. $1.00) and frozen at those levels.  Additionally, contract clauses in Transener’s and Transba S.A. (“Transba”)’s concession agreements requiring adjustments to their tariffs based on foreign inflation indexes and certain other indexation mechanisms were revoked.  The Public Emergency Law also required the renegotiation of public service concession agreements.  In connection with such renegotiation process, Transener and Transba entered into agreements with the Argentine Government in 2005 that provided for an average tariff increase on fixed charges of 31% for Transener and 25% for Transba.  Although these companies’ operating costs have significantly increased since 2005, the Ente Nacional Regulador de la Electricidad (the Argentine National Electricity Regulator, or the “ENRE”) has not totally adjusted tariffs accordingly.  On December 21, 2010, the ENRE and the Secretariat of Energy acknowledged Transener’s and Transba’s (see “Item 4. - Our Business – Our Transmission Business”) right to collect amounts resulting from the variations of costs during the period of June 2005 – to November 2010 in an instrumental agreement (the “Instrumental Agreement”), which payment would be based on CAMMESA’s availability of funds, with such payments to be used for investments by us in the transmission system as instructed by the Secretariat of Energy.  A mechanism for the calculation and payment of cost variations from December 1, 2010 to December 31, 2011 was also established.  In May 2013, Transener and Transba executed with the ENRE and the SE, a Renewal Agreement of the Instrumental Agreement (the “Renewal Agreement”), setting forth: (i) the recognition of Transener and Transba’s rights to collect the amounts resulting from the variations of costs during the period from December 2010 to December 2012, (ii) the payment of outstanding balances from Addenda II (as defined herein), and (iii) a procedure for the updating and payment of cost variations incurred from January 1, 2013 to December 31, 2015, calculated biannually.  On October 25, 2013 and February 14, 2014, Transba and Transener, respectively, negotiated a third Addendum (together, the “Addenda III”) to their Financing Agreements (as defined herein) with CAMMESA, to increase their related amounts by the sum of Ps. 324.8 million and Ps. 785.8 million.  On September 2, 2014, Transener and Transba executed with CAMMESA the New Financing Agreements. The New Financing Agreements provided:  i) that the Financing Agreements, together with their Addendums I, II and III, are concluded; ii) the granting to Transener and Transba of  new loans in the amount of Ps. 622.2 million and Ps. 240.7 million, respectively, corresponding to receivables acknowledged by the SE and the ENRE on account of cost variations for the January 2013-May 2014 period; and iii) the assignment as collateral of the receivables recognized on account of higher costs as at May 31, 2014 pursuant to the Renewal Agreement.  For the year ended December 31, 2015, Transener and Transba recorded revenues from sales as well as accrued interests amounting to Ps. 1,502.6 million in accordance with the Instrumental Agreements and the Renewal Agreement. 29


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On March 17, 2015, Transener and Transba executed with CAMMESA new amendments to their New Financing Agreements (the “Addenda IV”), setting forth:i) the granting to Transener and Transba of  new loans in the amount of Ps. 563.6 million and Ps. 178.3 million, respectively, corresponding to (a) the outstanding amount due pursuant to the Financing Agreement as of January 2015, and (b) receivables acknowledged by the Secretariat of Energy and the ENRE on account of cost variations for the June 2014-November 2014 period; and ii) the assignment as collateral of the receivables recognized on account of higher costs as at November 30, 2014 pursuant to the Renewal Agreement.
 In September 2015, Transener and Transba executed with the ENRE and the SE, an Amendment to the Renewal Agreement (the “Amendment to the Renewal Agreement”), setting forth the 2015 year financial - economic projection and investment plan in the amount of $ 431.9 million and $ 186.6 million for Transener and Transba, respectively, and granting additional non-reimbursable resources for the execution of such investment plan. On November 25, 2015, Transener and Transba executed with CAMMESA the financing agreements for the implementation of the Amendment to the Renewal Agreement, setting forth: i) the granting to Transener and Transba of  new loans in the amount of Ps. 508,9 million and Ps. 317,6 million, respectively, corresponding to (a) receivables acknowledged by the SE and the ENRE on account of cost variations for the December 2014-May 2015 period; and ii) the additional investments required pursuant to the Amendment to the Renewal Agreement. Pursuant to the Renewal Agreement and the Amendment to the Renewal Agreement, Transener and Transba are currently in communication with the relevant authorities to implement a scheme that would better allow them to fund their business plan.  This information consists of monthly cash flows, investments execution and implementation of funds requirements.  We cannot make any assurances that Transener and/or Transba will receive the full amount recognized on the Instrumental Agreements, the Renewal Agreements and the Amendment to the Renewal Agreement or that similar adjustments will be made in the future, according to the*Unidad de Renegociación y Análisis de Contratos de Servicios Públicos*(Renegotiation and Analysis of Public Services Contracts Unit, or the “UNIREN ACT”) and/or the Instrumental Agreements. If operating costs continue to increase and we do not receive any increase in revenues as a result of a tariff adjustment because of the RTI and/or the full compliance of the Instrumental Agreements or Renewal Agreements, our financial position and results of operations may be adversely affected, which could negatively impact the value of our shares or the ADSs. *Our transmission capacity may be disrupted, which could result in material penalties being imposed on us* Our electricity transmission business depends on Transener’s and Transba’s ability to transmit electricity over long distances through their transmission networks.  Our financial condition and results of operations would be adversely affected if a natural disaster, accident or other disruption were to cause a material curtailment of our transmission capacity.  Argentina’s transmission system has evolved from a radial pattern to a fully integrated transmission grid system.  However, there are areas where generation and demand are connected by a single transmission line or, in some cases, two or more transmission lines in parallel.  Accordingly, the outage of any single line could totally disconnect entire sections of theSistema de Interconexión Nacional(the National Interconnection System, or NIS).  The concession agreements establish a system of penalties, which Transener and Transba may incur if defined parts of their networks are not available to transmit electricity, including in cases of force majeure.  Consistent with industry standards, Transener and Transba do not maintain business interruption insurance and we cannot make assurances that any future disruption in Transener’s or Transba’s transmission capacity would not result in the imposition of material penalties, the payment of which would require us to use funds from operations and could have a material adverse effect on our financial condition and consolidated results of operations and cause the market value of our ADSs to decline. *The ENRE may reject our request to redetermine the revenues derived from expansion of the NIS as a result of the pesification of these revenues, which would result in a significant shortfall that could adversely affect our financial condition* The Public Emergency Law also affected the revenues we receive in connection with Transener’s expansion of the NIS.  In particular, the income from the construction, operation and maintenance of an


approximately 1,300 km high-voltage electricity transmission line (500 kilovolts (“kV”)) from the Comahue region to the Abasto substation was converted into Pesos at a rate of Ps. 1.00 per U.S. $1.00 and then adjusted for inflation.  Transener has asked the ENRE, in its capacity as the main party to the construction, operation and maintenance agreement relating to Transener’s construction of the transmission line (which includes approximately 2,550 high voltage towers and the expansion of the Piedra del Águila, Choele Choel, Bahía Blanca, Olavarría and Abasto substations, which we refer to collectively as the “Fourth Line”), to redetermine such revenue.On April 25, 2012, the ENRE issued Resolution No. 90/2012, which established a new annual rate of Ps. 113.4 million as from August 2011 and instructed CAMMESA to make the adjustments, including interest. During the year ended December 31, 2012, revenues were recognized in the amount of Ps. 7.3 million, corresponding to the retroactive adjustment for year 2011. 30


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On August 28, 2013, the ENRE issued Resolution No. 244/2013, which established a new annual rate of Ps. 131.2 million as from August 2012 and instructed CAMMESA to make the adjustments, including interest.On September 13, 2013, Transener presented a Motion for Reconsideration of ENREResolution No. 244/2013, which was accepted by the ENRE. As a consequence, on December 4, 2013, the ENRE issued Resolution No. 346/2013 which established a new annual rate of Ps. 132.2 million from August 2012 and instructed CAMMESA to make the adjustments, including interest.  On September 23, 2013, Transener requested the ENRE for a new determination of the Fourth Line’s revenue related to the cost variation from August 2013 according to the above mentioned ENRE Resolution No.244/2013.On March 12, 2014, the ENRE issued Resolution No. 79/2014, which established a new annual rate of Ps. 156.2 million as from August 2013 and instructed CAMMESA to make the adjustments necessary for the retroactive payment, including the corresponding interest.On April 3, 2014, Transener presented a Motion for Reconsideration of ENRE’sResolution No. 79/2014, which was partially accepted by the ENRE. As a consequence, on November 12, 2014, the ENRE issued Resolution No. 332/2014 which established a new annual rate of Ps. 158.6 million beginning in August 2013 and instructed CAMMESA to make the adjustments necessary for the retroactive payment, including the corresponding interest.  On September 12, 2014, Transener asked the ENRE for a new determination of the Fourth Line’s revenue related to the cost variation from August 2014 to December 19, 2014.  In this respect, Transener requested the ENRE to determine the remuneration corresponding to the Operation and Maintenance of the Fourth Line since December 21, 2014.  On August 5, 2015, the ENRE issued Resolution No. 272/2015, which established the remuneration corresponding to the Operation and Maintenance of the Fourth Line from December 21, 2014 and instructed CAMMESA to make the adjustments necessary to implement the retroactive payment of the remuneration set forth in ENRE Resolution No. 272/2015, including the interest applicable to such remuneration.  Even though the ENRE issued Resolution No. 272/2015, if CAMMESA does not make the necessary adjustments to implement the retroactive payment described above, we could face significant losses in the operation and maintenance of, such transmission line, which could have a material adverse effect on our overall financial condition and results of operations and cause the market value of our ADSs to decline. *Increasing competition in our non-regulated transmission activities could lead to lower revenues* We generate a material portion of our transmission revenues from non-regulated transmission activities, including (a) the construction and installation of electrical assets and equipment, (b) non-network line operation and maintenance,(c) the Fourth line’s operation and maintenance, (d) any adjustment by the Cost Variation Index (“IVC”) (according to the Definitive Agreement, the Instrumental Agreement and the Renewal Agreement) and (e) other services.  On a consolidated basis, Transener’s other net revenues for the year ended December 31, 2015, were Ps. 187.7 million (Ps. 93.9 million on a proportional interest basis), representing 9.6% of Transener’s consolidated net revenues for such period.  We believe that these non-regulated revenues will continue to be an important part of our transmission business.  Historically, Transener has not experienced significant competition in these areas of service (with the exception of its construction and international activities).  However, we cannot make any assurance that competition will not substantially increase in the future or that such competition will not contribute directly to


decreased revenues, which would adversely affect our financial condition and results of operations and cause the market value of our ADSs to decline. 31


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*Transener is highly leveraged, which could limit its financing options or even its ability to service its debt and consequently have an adverse effect on our results of operations* As of December 31, 2015, Transener’s total consolidated indebtedness, denominated in U.S. Dollars and Pesos, amounted to the equivalent of approximately U.S. $120.5 million (Ps. 1,565.4 million), including accrued but unpaid interest and the effect of the adjustments applied to its debt under IFRS.  Transener’s leverage may impair its ability to service its indebtedness and obtain additional financing in the future, withstand competitive pressure and adverse economic conditions or take advantage of significant business opportunities that may arise, each of which could adversely affect our results of operations or growth prospects and cause the market value of our ADSs to decline. *Transener has not completed the legal transfer and registration of title of all of the properties transferred to it and Transba pursuant to the transmission concessions, which could result in potentially significant losses if any defect in title is later discovered* Under their concessions, Transener and Transba became the owners of a large number of properties, including land and buildings associated with the substations, transformers, and other installations previously owned by the predecessor owners of Transener and Transba.  Transener is in the process of finalizing certain formalities to legally perfect the transfer of title to these properties to Transener and Transba.  Transener and Transba have completed the legal transfer of, and Transener and Transba have registered title to, approximately 87% and 67%, respectively, of these properties as of December 31, 2015.  Transener is taking steps to establish and/or record legal title to the remaining properties.  Although the concessions contain representations by the predecessor owners of Transener and Transba that they possessed good and valid title to all such properties, if Transener discovers any defects in title during such process, Transener will be liable for any payments required to cure such defects because the predecessor owners no longer exist.  We cannot make assurances that any such defect in title, or the costs associated with curing such defect, will not adversely affect our financial condition or results of operations or could cause the market value of our ADSs to decline. Risks Relating to our Distribution Business Failure or delay to negotiate further improvements to Edenor’s tariff structure, including increases in Edenor’s distribution margin, and/or to have the tariff adjusted to reflect increases in Edenor’s distribution costs in a timely manner, or at all, has affected Edenor’s capacity to perform its commercial obligations and could also have a material adverse effect on Edenor’s capacity to perform its financial obligations. Since the execution of the Adjustment Agreement and as required by them, Edenor has been engaged in the RTI with the ENRE.  However, the timeline for completing this process and the favorability to us of the final resolution are both uncertain. ME&M Resolution No. 7/2016 issued in January 2016 established that the new deadline for the completion of the RTI process at the end of 2016. The Adjustment Agreement currently contemplates a cost adjustment mechanism for the transition period during which the RTI is being conducted.  This mechanism, known as the Cost Monitoring Mechanism (the “CMM”), requires the ENRE to review Edenor’s actual distribution costs every six months (in May and November of each year) and adjust Edenor’s distribution margins to reflect variations of 5% or more in Edenor’s distribution cost base.  Edenor may also request that the ENRE apply the CMM at any time that the variation in Edenor’s distribution cost base is at least 10% or more.  Any adjustments, however, are subject to the ENRE’s assessment of variations in Edenor’s costs, and the ENRE’s approval of adjustments have not been sufficient to cover Edenor’s actual incremental costs in a timely manner.  In the past, even when the ENRE has approved adjustments to Edenor’s tariffs, there has been a lag between the time when Edenor actually experienced increases in the distribution costs and the time when Edenor received increased income following the corresponding adjustments to its distribution margins pursuant to the CMM. 32


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During the years ended December 31, 2012 and 2011, Edenor recorded a significant decrease in net income and operating income(recording and operating loss in 2012), and Edenor’s working capital and liquidity levels were negatively affected, primarily as a result of the delay in obtaining a tariff increase and in having the tariff adjusted to reflect increases in the distribution costs, coupled with a constant increase in operating costs to maintain adequate service levels, all of which has affected Edenor’s capacity to perform its commercial obligations. In this context and in light of the situation that affected the electricity sector, the ENRE issued Resolution No. 347/2012 in November 2012, which established the application of fixed and variable charges that have allowed Edenor to obtain additional revenue as from November 2012 through 2016. However, changes made by SE Resolution No. 250/2013 and Notes No. 6852/2013, No. 4012/2014, No. 486/2014 and No. 1136/2014 and the additional revenue obtained through SE Resolution No. 347/2012 were insufficient to make up Edenor’s operating deficit in 2014, due to the constant increase in operating costs.  In March 2015, the Secretariat of Energy issued SE Resolution No. 32/2015 pursuant to which it granted Edenor a temporary income increase through funds provided by CAMMESA, applicable retroactively as from February 1, 2015, to cover costs and investments associated with the regular provision of the public service of distribution of energy on account of the future RTI.
 In January 2016, the ME&M issued Resolution No. 7/2016, pursuant to which the ENRE implemented a VAD adjustment to the tariff schedule on account of the future RTI in effect as of February 1, 2016, and is expected to take all necessary action to conclude the RTI process by December 31, 2016. In addition, such resolution: (i) abrogated the PUREE; (ii) repealed SE Resolution No. 32/2015 as from the date the ENRE resolution implementing the new tariff schedule becomes effective; (iii) discontinued the application of mechanisms that imply the transfer of funds from CAMMESA in the form of loan agreements with CAMMESA; and (iv) ordered the implementation of the actions required to terminate the trusts created pursuant to Resolution No. 347/2012 of the ENRE. Pursuant to Resolution No. 7/2016, the ENRE issued Resolution No. 1/2016 establishing a new tariff structure. However,  if Edenor is not able to recover all future cost increases, and/or if there is a significant lag time between when Edenor incurs the incremental costs and when it receives income increase, and/or if Edenor is not successful in achieving a satisfactory renegotiation of the tariff structure, Edenor may be unable to comply with its financial obligations, may suffer liquidity shortfalls and may need to restructure its debt to ease its financial condition, any of which, individually or in the aggregate, would have a material adverse effect on our business and consolidated results of operations, and may cause the value of our ADSs and shares may decline. The goal of the RTI is to achieve a comprehensive revision of Edenor’s tariff structure, including further increases in its distribution margins and periodic adjustments based on changes in Edenor’s cost base, to provide Edenor with an adequate return on Edenor’s asset base.  Although we believe the RTI will result in a new tariff structure, we cannot assure you that the RTI will conclude in a timely manner or at all, or that the new tariff structure will effectively cover all of Edenor’s costs or provide Edenor with an adequate return on its asset base.  Moreover, the RTI could result in the adoption of an entirely new regulatory framework for Edenor’s business, with additional terms and restrictions on Edenor’s operations and the imposition of mandatory investments.  We also cannot predict whether a new regulatory framework will be implemented and what terms or restrictions could be imposed on Edenor’s operations. Edenor’s inability to obtain tariff adjustments in line with the actual changes in costs could result in Edenor’s inability to meet its trade obligations and could also have a material adverse effect on Edenor’s ability to meet its financial obligationsAlthough Resolution No. 7/2016 issued by the ME&M and Resolution No. 1/2016 of the ENRE established a new tariff scheme pursuant to the terms of the Adjustment Agreement and on account of the future RTI, it did not include any adjustment method to reflect future variations in costs. If inflation levels in 2016 continue the trend of 2015, the increase in tariffs provided by Resolution No. 1/2016 of the ENRE may prove insufficient to support the real variation in costs. Edenor’s inability to obtain tariff adjustments in line with future changes in costs could result in Edenor’s inability to meet obligations vis-a-vis CAMMESA, Edenor’s major supplier, and could have a material adverse


effect on Edenor’s ability to meet its financial obligations as a result of a shortage in liquidity, which may result in the need to restructure Edenor’s debt and may have a material adverse effect on Edenor’s business, financial condition and results of operations.  Furthermore, in case Edenor was unable to obtain such tariff adjustments, we cannot assure that CAMMESA or any other governmental entity will provide Edenor the financing or that any future financing would be available in favorable terms, which may seriously impair our ability to continue providing the service. 33


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Edenor’s distribution tariffs may be subject to challenges by Argentine consumer and other groups In recent years, Edenor’s tariff has been challenged by Argentine consumer associations, such as the action brought against Edenor in December 2009, by an Argentine consumer association, (Unión de Usuarios y Consumidores), seeking to annul certain retroactive tariff increases.  In November 2010, the relevant administrative court upheld the claim.  Edenor appealed the court’s order and requested that it be stayed pending a decision on the appeal.  In December 2010, the court stayed its order pending a decision on the appeal.On June 1, 2011, the Administrative Court of Appeals (Cámara Nacional de Apelaciones en lo Contencioso Administrativo Federal – Sala V) overturned the judgment of the lower administrative court.  TheUnión de Usuarios y Consumidoresfileda Federal Extraordinary Appeal (“Recurso Extraordinario Federal”)against such decision,which was granted on March 11, 2011.  On October 1, 2013, the Supreme Court of Justice decided to dismiss the Federal Extraordinary Appeal that had been filed.  A final judgment in favor of Edenor has been rendered. In February 2016, Edenor adjusted its tariff again, and as of the date of this annual report, there had not been any challenges thereto. However, we cannot make assurances that other actions or requests for injunctive relief will not be brought by these or other groups seeking to reverse the adjustments Edenor has obtained or to block any further adjustments to our distribution tariffs.  If these legal challenges were successful and prevented us from implementing tariff adjustments granted by the Argentine Government, we could face a decline in collections from distribution customers, and a decline in our results of operations, which may have a material adverse effect in our financial condition and the market value of our shares and ADSs. Our distribution business has been, and may continue to be, subject to fines and penalties that could have a material adverse effect on our financial condition and results of operations, in particular as a result of a recent measure adopted by the ENRE We operate in a highly regulated environment and our distribution business has been and in the future may continue to be subject to significant fines and penalties by regulatory authorities, including for reasons outside our control, such as service disruptions attributable to problems at generation facilities or in the transmission network that result in a lack of electricity supply.  Since 2001, the amount of fines and penalties imposed on our distribution business has increased significantly. As of December 31, 2015, 2014 and 2013, Edenor’s accrued fines and penalties totaled Ps.1,253.1 million (including Ps.186.3 million under the ENRE settlement agreement), Ps. 1,102.8 million and Ps. 923.8 million, respectively (taking into account adjustments made to fines and penalties following the ratification of the Adjustment Agreement). Although the Argentine Government has agreed to waive a portion of these accrued fines and penalties pursuant to the Adjustment Agreement and to allow Edenor to repay the remaining balance over time, this waiver and repayment plan is subject to a number of conditions, including compliance with quality of service standards, reporting obligations and required capital investments.    If our distribution business fails to comply with any of these conditions, the Argentine Government may seek to obtain payment of these fines and penalties. On April 15, 2016, the ENRE issued Note No. 120,151(the “Note”) establishing that all fines and penalties imposed by the ENRE after April 15, 2016 (whether with respect to events occurring on or after such date or events occurring prior to the date thereof but for which fines or penalties had not been imposed on Edenor by such date that include a reference to “Note No. 120,151” must be valued according to the KWh values in effect as of the last date of the semester or period during which the event giving rise to the penalty occurred, including any increases or adjustments applicable to Edenor’s “remuneration” at such date.  In addition, fines and penalties that fall within the purview of the Note will accrue interest from the date on which the event giving rise to the penalty occurred until the date they are paid by Edenor.  As of the date of this annual report, it is unclear how the ENRE will consider that the fines and penalties not yet imposed on Edenor relating to events that occurred prior to April 15, 2016, should be


valued as per Edenor’s “remuneration” and Edenor has therefore calculated such amounts according to its interpretation of the Note. Regarding this, Edenor believes that the term “remuneration” should be interpreted to mean those amounts effectively paid by the users through the tariff. 34


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As of the date of this annual report, fines and penalties in an aggregate amount equal to Ps. 364.1 million (at historical values) are subject to the Note. Edenor believes that such amount as adjusted to reflect accrued interest according to the Note would increase by Ps. 129.0 million. As of the date of this annual report, it is unclear what will be the ENRE’s interpretation of “remuneration” with respect to fines and penalties not yet imposed on Edenor relating to events that occurred prior to April 15, 2016. If the ENRE interpreted that the term “remuneration” includes all amounts received by Edenor in the form, or in lieu, of subsidies, such amount could be significantly higher (in a range of three to five times higher). In addition, based on recent oral exchanges with certain officials of the Macri administration, the Macri administration is of the view that interest over fines and penalties already imposed on Edenor (but not yet paid) should also be payable at the time of payment or waiver thereof. If interest over such penalties was to be payable by Edenor (which Edenor believes should not be the case), its results of operations could be materially and adversely affected. In Edenor’s opinion, any adjustments to fines and penalties (whether by virtue of the Note or otherwise, and including the accrual of interest as provided in the Note) should not be applicable to Edenor because the delay in imposing such fines and penalties is not attributable to it but to the Argentine Government. Additionally, Edenor understands the Argentine Government would be strictly binding Edenor to the terms of the Adjustment Agreement without taking into account certain omissions in recognizing its rights thereunder, mainly in connection with Edenor’s right to have tariffs adjusted to reflect increases in operation costs to be able to provide its services adequately. In addition, we cannot assure you that our distribution business will not incur significant fines in the future, which could have a material adverse effect on our financial condition and results of operations and the market value of our shares and ADSs. If we are unable to control energy losses in our distribution business, our results of operations could be adversely affected Our distribution concession does not allow our distribution business to pass through to our customers the cost of additional energy purchased to cover any energy losses that exceed the loss factor contemplated by the concession, which is, on average, 10%.  As a result, if our distribution business experiences energy losses in excess of those contemplated by the concession, we may record lower operating profits than we anticipate.  Prior to the 2001 and 2002 economic crisis in Argentina, Edenor had been able to reduce the high level of energy losses experienced at the time of the privatization to the levels contemplated (and reimbursed) under the concession.  However, during the last years, Edenor’s level of energy losses, particularly Edenor’s non-technical losses, started to grow again, in part as a result of the increase in poverty levels and, with it, the number of delinquent accounts and fraud.  Although Edenor continues making investments to reduce energy losses, these losses continue to exceed the 10% average loss factor contemplated in the concession, and based on the current tariff schedule and the economic turmoil, we do not expect these losses to decrease in the near term.  Energy losses in our distribution business amounted to 14.9 % in 2015, 14.3% in 2014 and 13.0% in 2013.  We cannot assure you that energy losses will not increase again in future periods, which may lead to lower margins in our distribution segment and could adversely affect our financial condition and consolidated results of operations and the market value of our shares and ADSs. *The Argentine Government could foreclose on its pledge over Edenor’s Class A shares under certain circumstances, which could have a material adverse effect on our business and financial condition* Pursuant to our distribution concession and the provisions of the Adjustment Agreement, the Argentine Government has the right to foreclose on its pledge over Edenor’s Class A common shares and sell these shares to a third-party buyer if: 35


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·the fines and penalties incurred in any given year exceed 20% of Edenor’s gross energy sales, net of taxes (which corresponds to Edenor’s energy sales); ·Edenor repeatedly and materially breaches the terms of our distribution concession and does not remedy these breaches upon the request of the ENRE; ·EASA, Edenor’s controlling shareholder, creates any lien or encumbrance over Edenor’s Class A common shares (other than the existing pledge in favor of the Argentine Government); ·Edenor or EASA obstructs the sale of Class A common shares at the end of any management period under our distribution concession; ·EASA fails to obtain the ENRE’s approval in connection with the disposition of Edenor’s Class A common shares; ·Edenor’s shareholders amend its articles of incorporation or voting rights in a way that modifies the voting rights of the Class A common shares without the ENRE’s approval; or ·Edenor, or any existing shareholders or former shareholders of EASA who have brought a claim against the Argentine Government in the ICSID do not desist from such ICSID claims following completion of the RTI and the approval of a new tariff regime. In 2015, the fines and penalties imposed on Edenor by the ENRE amounted to an estimated Ps. 281.7 million, which represented 7.6% of Edenor’s energy sales. If the Argentine Government were to foreclose on its pledge over Edenor’s Class A common shares, pending the sale of those shares, the Argentine Government would also have the right to exercise the voting rights associated with such shares.  In addition, the potential foreclosure by the Argentine Government of the pledge on Edenor’s Class A common shares may be deemed to constitute a change of control under the terms of Edenor’s Senior Notes due 2017 and 2022.  See “—Edenor may not have the ability to raise the funds necessary to finance a change of control offer as required by Edenor’s Senior Notes due 2017 and 2022.”  If the Argentine Government forecloses its pledge over Edenor’s Class A common shares, our results of operations and financial condition could be significantly affected and the market value of our ADSs could also be affected. Default by the Argentine Government could lead to termination of our distribution concession, and have a material adverse effect on our business and financial condition If the Argentine Government breaches its obligations in such a way that we cannot comply with our obligation under our distribution concession or in such a way that Edenor’s service is materially affected, we may request the termination of our distribution concession, after giving the Argentine Government 90 days’ prior notice. Upon termination of our distribution concession, all our assets used to provide electricity distribution service would be transferred to a new state-owned company to be created by the Argentine Government, whose shares would be sold in an international public bidding procedure. The amount obtained in such bidding would be paid to Edenor, net of the payment of any debt owed by Edenor to the Argentine Government, plus an additional compensation established as a percentage of the bidding price, ranging from 10% to 30% depending on the management period in which the sale occurs. Any such default could have a material adverse effect on our business and financial condition. Edenor may be unable to import certain equipment to meet the growing demand for electricity, which could lead to a breach of Edenor’s concession and could have a material adverse effect on its operations and financial positionCertain restrictions on imports that may be adopted in the future by the Argentine Government could limit or delay Edenor’s ability to purchase capital goods that are necessary for our operations (including carrying out specific projects) (see “The actions taken by the Fernández de Kirchner administration to reduce imports may adversely affect our ability to access capital goods that are necessary for our operations”). Under Edenor’s concession, it is obligated to satisfy all of the demand for


electricity originated in its concession area, maintaining at all times certain service quality standards that have been established for its concession. If Edenor is not able to purchase significant capital goods to satisfy all of the demand or suffer unexpected delays in the import process, it could face fines and penalties which may, in turn, adversely affect its activity, financial position and results of operations. 36


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We could incur material labor liabilities in connection with outsourcing in our distribution business that could have an adverse effect on our business and results of operations We outsource a number of activities related to our distribution business to third-party contractors in order to maintain a flexible cost base.  As of December 31, 2015, we had approximately 2,927 third-party employees under contract in our distribution business.  Although we have very strict policies regarding compliance with labor and social security obligations by contractors, we are not in a position to ensure that contractors will not initiate legal actions to seek indemnification from us based upon a number of judicial rulings issued by labor courts in Argentina which have recognized joint and several liability between the contractor and the entity to which it is supplying services under certain circumstances.  We cannot make any assurances that such proceedings will not be brought against us or that the outcome of such proceedings would be favorable to us.  If we were to incur material labor liabilities in connection with the outsourcing of our distribution business, such liabilities could have an adverse effect on our financial condition and consolidated results of operations and the market value of our shares and ADSs. A substantial number of Edenor’s assets are not subject to attachment or foreclosure and the enforcement of judgments obtained against us by Edenor’s shareholders may be substantially limited A substantial number of Edenor’s assets are essential to the public service Edenor provides.  Under Argentine law, as interpreted by the Argentine courts, assets which are essential to the provision of a public service are not subject to attachment or foreclosure, whether as a guarantee for an ongoing legal action or to allow for the enforcement of a court judgment.  Accordingly, the enforcement of judgments obtained against Edenor by Edenor’s shareholders may be substantially limited to the extent Edenor’s shareholders seek to attach those assets to obtain payment on their judgment. If Edenor’s controlling shareholder fails to meet its debt service obligations, its creditors may take measures that could have a material adverse effect on our results of operations In July 2006, EASA completed a comprehensive restructuring of all of its outstanding financial indebtedness, which had been in default since 2002.  In connection with this restructuring, EASA issued approximately U.S. $85.3 million in U.S. Dollar‐denominated notes in exchange for the cancellation of approximately 99.94% of its outstanding financial debt.  Since EASA’s ability to meet its debt service obligations under these notes depends largely on Edenor’s ability to pay dividends or make distributions or payments to EASA, Edenor’s failure to do so could result in EASA becoming subject to actions by its creditors, including the attachment of EASA’s assets and petitions for involuntary bankruptcy proceedings.  If EASA’s creditors were to attach Edenor’s Class A shares held by EASA, the Argentine Government would have the right under our distribution concession to foreclose its pledge over Edenor’s Class A shares held by the Argentine Government, which could trigger a repurchase obligation under the terms of Edenor’s restructured debt and Edenor’s Senior Notes due 2017 and 2022, and have a material adverse effect on our results of operations and financial condition. Loss of exclusivity to distribute electricity in our service area may be adversely affected by technological or other changes in the energy distribution industry, the loss of which would have a material adverse effect on our business Although our distribution concession grants us the exclusive right to distribute electric energy within our service area, this exclusivity may be revoked in whole or in part if technological developments would make it possible for the energy distribution industry to evolve from its present condition as a natural monopoly into a competitive business.  In no case does the complete or partial revocation of our exclusive distribution rights entitle us to claim or to obtain reimbursement or indemnity.  Although, to our knowledge, there are no current projects to introduce new technologies in the medium or long term which might reasonably modify the composition of the electricity distribution business, we cannot assure you that future developments will not enable competition in our


industry that would adversely affect the exclusivity right granted by our concession.  Any total or partial loss of our exclusive right to distribute electricity within our service area would likely lead to increased competition, and result in lower revenues in our distribution segment, which could have a material adverse effect on our financial condition and consolidated results of operations and the market value of our shares and ADSs. 37


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A potential nationalization or expropriation of 51% of Edenor’s capital stock, represented by its Class A shares, may limit the capacity of the Class B common shares to participate in the Board of Directors As of the date of this annual report, the ANSES owns shares representing 26.8% of the capital stock of Edenor and appointed five Class B directors in the last Shareholders’ meeting. The remaining directors were appointed by the Class A shares. If the Argentine Government were to expropriate 51% of Edenor’s capital stock, represented by Edenor’s Class A shares, the Argentine Government would be the sole holder of the Class A shares and the ANSES would hold the majority of the Class B shares. Certain strategic transactions require the approval of the holders of the Class A shares. Consequently, the Argentine Government and the ANSES would be able to determine substantially all matters requiring approval by a majority of Edenor’s shareholders, including the election of a majority of Edenor’s directors, and would be able to direct Edenor’s operations. If the Argentine Government nationalizes or expropriates 51% of Edenor’s capital stock, represented by its Class A shares, our results of operations and financial condition could be adversely affected and this could cause the market value of our ADSs and Edenor’s ADSs and Class B common shares to decline. Edenor may not have the ability to raise the funds necessary to repay its commercial debt with CAMMESA, Edenor’s major supplier As of December 31, 2015, Edenor owed approximately Ps.3,360.6 million (including interest) to CAMMESA.  Although Edenor submitted to CAMMESA a repayment plan in November 2015, as of the date of this annual report negotiations with CAMMESA continue with respect to a final repayment schedule. This debt therefore remains due and unpaid and Edenor has not secured any waivers from CAMMESA. If CAMMESA request that Edenor repay such debt in a single payment, it may be unable to raise the funds to repay it and, consequently, Edenor could be exposed to a cash attachment, which could in turn result in Edenor’s filing for a voluntary reorganization proceeding (concurso preventivo), which could cause the market value of our ADSs and Class B common shares to decline. Edenor may not have the ability to raise the funds necessary to finance a change of control offer as required by Edenor’s Senior Notes due 2017 and 2022 As of the date of this annual report, approximately U.S.$191.1 million of Edenor’s financial debt is represented by its Senior Notes due 2017 and 2022.  Under the indentures for the Senior Notes due 2017 and 2022, if a change of control occurs, Edenor must offer to buy back any and all such notes that are outstanding at a purchase price equal to 100% of the aggregate principal amount of such notes, plus any accrued and unpaid interest thereon and additional amounts, if any, through the purchase date.  Edenor may not have sufficient funds available to it to make the required repurchases of the Senior Notes due 2017 and 2022 upon a change of control.  If Edenor fails to repurchase such notes in these circumstances, that may constitute an event of default under the indentures, which may in turn trigger cross-default provisions in other of Edenor’s debt instruments then outstanding. All of Edenor’s outstanding financial indebtedness contains bankruptcy, reorganization proceedings and expropriation events of default, and Edenor may be required to repay all of its outstanding debt upon the occurrence of any such events As of the date of this annual report, approximately U.S.$191.1 million of Edenor’s financial debt is represented by its Senior Notes due 2017 and 2022.  Under the indentures for the Senior Notes due 2017 and 2022, certain expropriation and condemnation events with respect to Edenor may constitute an event of default, which if declared could trigger acceleration of our obligations under the notes and require Edenor to immediately repay all such accelerated debt.  In addition, all of Edenor’s outstanding financial indebtedness contains certain events of default related to bankruptcy and voluntary reorganization proceedings (concurso preventivo).  If Edenor is not able to fulfill certain payment obligations as a result of its current financial situation, and the requirements set forth in the


Argentine Bankruptcy Law No. 24,522 are met, any creditor, or even Edenor, could file for its bankruptcy, or Edenor could file for a voluntary reorganization proceeding (concurso preventivo).In addition, all of Edenor’s outstanding financial indebtedness also contains cross-default provisions and/or cross-acceleration provisions that could cause all of Edenor’s debt to be accelerated if the debt containing expropriation and/or bankruptcy and/or reorganization proceeding events of default goes into default or is accelerated. In such a case, Edenor would expect to actively pursue formal waivers from the corresponding financial creditors to avoid this potential situation, but in case those waivers are not obtained and immediate repayment will be required, Edenor could face short-term liquidity problems, which could adversely affect our results of operations and cause the market value of our ADSs to decline. 38


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Edenor is currently required by law to undertake a mandatory capital stock reduction and may in the future be required to be dissolved and liquidated Edenor’s losses for 2014 exceeded its reserves plus more than 50% of its capital stock at the end of that year, and Edenor was therefore required to mandatorily reduce its capital stock pursuant to Article 206 of the Argentine Corporations Law unless it received a capital contribution or expected future revenues or results of operations which would result in its liabilities not exceeding 50% of its assets. In the shareholders’ meeting held on April 28, 2015 it was decided not to proceed with the mandatory stock reduction considering the better results in the first quarter of 2015. If Edenor’s losses for any fiscal year exceed its reserves plus 50% or more of its capital stock at the end of any such year, it will fall under the purview of Section 206 of the Argentine Corporations Law and will be required to mandatorily reduce its capital stock. Moreover, if Edenor’s shareholders equity becomes negative (that is, if Edenor’s total liabilities exceed its total assets) at the end of any fiscal year, Edenor will be required to dissolve and liquidate pursuant to Article 94 of the Argentine Corporations Law unless Edenor receives a capital contribution or expect future revenues or results of operations which would result in its assets exceeding its liabilities. A mandatory capital stock reduction can adversely affect Edenor’s results of operations and financial conditions.  The New York Stock Exchange and/or the Buenos Aires Stock Exchange may suspend trading and/or delist Edenor’s ADSs and Class B common shares, respectively, upon occurrence of certain events relating to Edenor’s financial situation The New York Stock Exchange (“NYSE”) and/or the Buenos Aires Stock Exchange may suspend and/or cancel the listing of Edenor’s ADSs and Class B common shares, respectively, in certain circumstances, including upon the occurrence of certain events relating to Edenor’s financial situation. For example, the NYSE may decide such suspension or cancellation if its shareholders’ equity becomes negative. The NYSE may in its sole discretion determine on an individual basis the suitability for continued listing of an issue in the light of all pertinent facts.  Some of the factors mentioned in the NYSE Listed Company Manual, which may subject a company to suspension and delisting procedures, include: “unsatisfactory financial conditions and/or operating results,” “inability to meet current debt obligations or to adequately finance operations,” and “any other event or condition which may exist or occur that makes further dealings or listing of the securities on the NYSE inadvisable or unwarranted in the opinion of NYSE.” The Buenos Aires Stock Exchange may cancel the listing of Edenor’s Class B common shares if it determines that Edenor’s shareholders’ equity and Edenor’s financial and economic situation do not justify Edenor’s access to the stock market or if the NYSE cancels the listing of Edenor’s ADSs. We cannot assure you that the NYSE and/or Buenos Aires Stock Exchange will not commence any suspension or delisting procedures in light of Edenor’s current financial situation, including if Edenor’s shareholders’ equity becomes negative.  A delisting or suspension of trading of Edenor’s ADSs or Class B common shares by the NYSE and/or the Buenos Aires Stock Exchange, respectively, could adversely affect Edenor’s results of operations and financial conditions and cause the market value of Edenor’s ADSs and Class B common shares to decline. Changes in weather conditions or the occurrence of severe weather (whether or not caused by climate change or natural disasters), could adversely affect Edenor’s operations and financial performance 39


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Weather conditions may influence the demand for electricity, Edenor’s ability to provide it and the costs of providing it.  In particular, severe weather may adversely affect Edenor’s results of operations by causing significant demand increases, which Edenor may be unable to meet without a significant increase in operating costs. This could strongly impact the continuity of Edenor services and its quality indicators. For example, the exceptional thunderstorms that occurred in April and December of 2013 and a heat wave that occurred in December of 2013 affected the continuity of our services, both in the low voltage and medium voltage networks.  Furthermore, any such disruptions in the provision of Edenor’ services could expose Edenor to fines and orders to compensate those customers affected by any such power cuts, as has occurred in the past.  Edenor’s financial condition, results of operations and cash flows could therefore be negatively affected by changes in weather conditions and severe weather. Risks Relating to our Oil and Gas business Petrolera Pampa is not the operating partner in all of the joint ventures (joint operations for accounting purposes) in which it participates, and actions undertaken by the operators in such joint ventures could have a material adverse effect on the success of these operations Our subsidiary Petrolera Pampa generally undertakes its activities in exploration and exploitation of hydrocarbons in a particular area by entering into an agreement with third parties to participate in joint ventures (joint operations for accounting purposes). Under the terms and conditions of these agreements, one of the parties takes the role of operator of the joint venture, and thus assumes responsibility for executing all activities undertaken pursuant to the joint venture agreement. However, Petrolera Pampa does not always assume the role of operator and therefore, in such cases, is exposed to risks relating to the performance of and the measures taken by the operator to carry out the activities. Such actions could have a material adverse effect on the success of these joint ventures, and thus adversely affect Petrolera Pampa’s financial condition and results of operations. Petrolera Pampa conducts all of its operations through joint ventures, and its failure to resolve any material disagreements with its partners or to continue such joint ventures could have a material adverse effect on the success of such operations Petrolera Pampa conducts all of its oil and gas operations through joint ventures and as a result, the continuation of such joint ventures is vital to its success.  Any material disagreements with Petrolera Pampa’s partners could have an adverse effect on the success of such joint ventures.  In the event that any of Petrolera Pampa’s partners were to decide to terminate its relationship with Petrolera Pampa in respect of a joint venture or sell its interest in a joint venture, Petrolera Pampa may not be able to replace that partner or obtain the necessary financing to purchase that partner’s interest.  Accordingly, Petrolera Pampa’s failure to resolve disagreements with its partners or to maintain its joint ventures could adversely affect its ability to conduct the underlying operations of such joint venture, which, in turn, could negatively affect Petrolera Pampa’s financial condition and results of operations. Any failure of Petrolera Pampa to comply with its commitments to make certain investments under its investment agreements could negatively affect its results of operations Petrolera Pampa has commitments to make certain investments under its investment agreements.  Failure to comply with such commitments in a timely manner could result in a breach of the relevant partnership agreement, foreclosure of any guarantees and/or the loss of all rights over the underlying area, which could have an adverse effect on Petrolera Pampa’s results of operations. Petrolera Pampa’s ability to generate revenues and meet its financial obligations is dependent on the success of its oil and gas exploration and production projects, which are concentrated in a single block Petrolera Pampa’s sole corporate purpose is the study, exploration, exploitation, commercialization, industrialization and storage of solid, liquid and/or gaseous hydrocarbons and their derivatives.  Petrolera Pampa’s ability to generate revenues, cover its fixed and variable costs and meet its financial obligations depends on the success of Petrolera Pampa’s oil and gas exploration and production projects.  As of December 31, 2015, more than 95% of Petrolera Pampa’s total revenues were derived from the sale of natural gas.  A significant portion of


Petrolera Pampa’s natural gas production, 72%, was concentrated in theRincóndel Mangrullo block.  Accordingly, any unexpected interruption in production at this block for an extended period of time could negatively impact Petrolera Pampa’s results of operations and ability to generate sufficient cash flows. 40


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Petrolera Pampa’s results of operations are also dependent, to a significant extent, on its continued participation in two key government programs and its ability to collect payments under such programs Petrolera Pampa’s results of operations and financial condition also depend, to a significant extent, on its continued participation in two key programs established by the Argentine Government with the aim of generating higher levels of activity, investment and employment in the domestic natural gas sector. Upon formation, one of Petrolera Pampa’s primary objectives was to capitalize on the opportunity to sell natural gas under the Gas Plus Program, which was created by the Ministry of Energy in 2008 to encourage natural gas production in Argentina.  In 2015, through the Gas Plus Program, Petrolera Pampa was able to sell 31% of its natural gas production at a price higher than the average price in the domestic market.  However, various factors, including certain regulatory requirements, may affect its ability to sell natural gas under this program. In 2013, Petrolera Pampa also began participating in thePrograma de Estímulo a la Inyección Excedente de Gas Natural(Natural Gas Surplus Injection Stimulus Program, or the “Natural Gas Stimulus Program”).  Companies that participate in the Natural Gas Stimulus Program agree to a minimum injection volume (the “Base Volume”) to be sold at a fixed price (the “Base Price”) and receive U.S.$7.50 per mmBtu for any amount of natural gas produced in excess of the Base Volume (the “Surplus Injection”).  The Argentine Government agrees to compensate participating companies, on a monthly basis, for: (i) any difference between U.S.$7.50 per mmBtu and the price actually received for the sale of the Surplus Injection and (ii) any difference between the Base Price and the price actually received for the sale of the Base Volume. As of the date of this annual report, we receive U.S.$7.50 per mmBtu from the Argentine Government for any volume of natural gas that we produce in excess of an agreed threshold with respect to 91% of Petrolera Pampa’s total natural gas production.  However, as of the date of this annual report, Petrolera Pampa has only collected payments from the Argentine Government through April 2015.Although Petrolera Pampa’s compensation is denominated in U.S. Dollars, it is billed in Pesos and converted at the prevailing exchange rate during the month in which the payment is made, thereby leaving Petrolera Pampa exposed to an exchange rate risk between the billing date and the collection date.  As of December 31, 2015, overdue payables due to us under the Natural Gas Stimulus Program amounted to Ps. 451.8 million.If Petrolera Pampa does not collect the Natural Gas Stimulus Program compensation in a timely manner or if its total compensation decreases as a result of exchange rate fluctuations, Petrolera Pampa may face liquidity restraints that could negatively affect its financial conditions and ability to pay its debts and as a consequence could affect its results of operations and conditions. In addition, if Petrolera Pampa is unable to fulfill its commitments under the Natural Gas Stimulus Program, it may not receive any compensation for Surplus Injection and it may be removed from the program or pay fines, among other potential consequences.  The Argentine Government may also not be obligated to pay such compensation if certain conditions are met, such as LNG import prices remaining below U.S.$7.50 per mmBtu for a continued period of six months.  Petrolera Pampa is not currently obligated to pay royalties on the compensation it receives from the Argentine Government in connection with the Natural Gas Stimulus Program.  We cannot, however, guarantee that Petrolera Pampa will not be required to pay royalties or other charges for the amounts it receives in the future or the amounts it has received in the past, which, in turn, could affect its results of operations. Petrolera Pampa additionally faces the risk of the Argentine Government suspending the Gas Plus Program and/or the Natural Gas Stimulus Program, as was the case when theMinisterio de Planificación Federal, Inversión Pública y Servicios(Ministry of Federal Planning, Public Investment and Services) suspended the implementation of the “Oil Plus” program in February 2012 in response to market conditions.  If the same were to occur to either of these key programs, Petrolera Pampa’s ability to generate revenues would be substantially impaired, which, in turn, would negatively affect its results of operations. 41


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Unless Petrolera Pampa replaces its oil and gas reserves, its reserves and production will decline over time  Production from oil and gas fields declines as reserves are depleted, with the rate of decline depending on reservoir characteristics.  Accordingly, the amount of proved reserves declines as these reserves are produced.  The level of Petrolera Pampa’s future oil and natural gas reserves and production, and therefore its cash flows and income, are highly dependent on its success in efficiently developing its current reserves, entering into new investment agreements and economically finding or acquiring additional recoverable reserves.  While Petrolera Pampa has had success in identifying and developing commercially exploitable deposits and drilling locations in the past, it may be unable to replicate that success in the future.  Petrolera Pampa may not identify any more commercially exploitable deposits or successfully drill, complete or produce more oil or gas reserves, and the wells that it has drilled and currently plan to drill may not result in the discovery or production of any further oil or natural gas.  If Petrolera Pampa is unable to replace its current and future production, the value of its reserves will decrease, and its results of operations could be negatively affected. Petrolera Pampa’s estimated oil and gas reserves are based on assumptions that may prove inaccurate Petrolera Pampa’s oil and gas reserves estimates as of December 31, 2015 are based on the Netherland, Sewell & Associates, Inc. (“Independent Reserves Engineers Firm”) year-end reserves report (the “Reserves Report”).  Although classified as “proved reserves”, the reserves estimates set forth in the Reserves Report are based on certain assumptions that may prove inaccurate. The Independent Reserves Engineers Firm’s primary economic assumptions in estimates included oil and gas sales prices determined according to the guidelines described in the Reserves Report, future expenditures and other economic assumptions (including interests, royalties and taxes) provided by Petrolera Pampa. Oil and gas reserves engineering is a subjective process of estimating accumulations of oil and gas that cannot be measured in an exact way, and estimates of other engineers may differ materially from those set out in this offering memorandum.  Numerous assumptions and uncertainties are inherent in estimating quantities of proved oil and gas reserves, including projecting future rates of production, timing and amounts of development expenditures and prices of oil and gas, many of which are beyond Petrolera Pampa’s control.  Results of drilling, testing and production after the date of the estimate may require revisions to be made.  The estimate of Petrolera Pampa’s oil and gas reserves would be impacted if, for example, Petrolera Pampa was unable to sell the oil and natural gas it produces.  Accordingly, reserves estimates are often materially different from the quantities of oil and gas that are ultimately recovered, and if such recovered quantities are substantially lower than the initial reserves estimates, this could have a material adverse impact on Petrolera Pampa’s results of operations. We face significant competition in the acquisition of exploratory acreage and oil and natural gas reserves The Argentine oil and gas industry is extremely competitive.  When Petrolera Pampa bids for exploration or exploitation rights with respect to a block, it faces significant competition not only from private companies, but also public companies.  In fact, the provinces of La Pampa, Neuquén and Chubut have formed companies to carry out oil and gas activities on behalf of their respective provincial governments.  The state-owned energy companies ENARSA S.A. and YPF are also major players in the Argentine oil and gas market.  As a result, Petrolera Pampa cannot assure that we will be able to acquire new exploratory acreage or oil and gas reserves in the future, which could negatively affect its financial condition and results of operations. There can be no assurance that the participation of ENARSA or YPF S.A. (or any provincial owned company) in the bidding processes for new oil and gas concessions will not influence market forces in such a manner that could have an adverse effect on Petrolera Pampa’s financial condition and results of operations. Petrolera Pampa may incur significant costs and liabilities related to environmental, health and safety matters Petrolera Pampa’s operations, like those of other companies in the Argentine oil and gas industry, are subject to a wide range of environmental, health and safety laws and regulations.  These laws and regulations have a substantial impact on Petrolera Pampa’s operations and could result in material adverse effects on its financial position and results of operations. Environmental, health and safety regulation and case law in Argentina is developing at a rapid pace and no assurance can be provided that such developments will not increase Petrolera Pampa’s cost of doing business and


liabilities.  In addition, due to concern over the risk of climate change, a number of countries have adopted, or are considering the adoption of, new regulatory requirements to reduce greenhouse gas emissions, such as carbon taxes, increased efficiency standards, or the adoption of cap and trade regimes.  If adopted in Argentina, these requirements could make Petrolera Pampa’s products more expensive as well as shift hydrocarbon demand toward relatively lower-carbon sources such as renewable energies. 42


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Risks Relating to our Shares and ADSs *Restrictions on the movement of capital out of Argentina may impair the ability of holders of ADSs to receive dividends and distributions on, and the proceeds of any sale of, the shares underlying the ADSs, which could affect the market value of the ADSs* The Argentine Government may impose restrictions on the conversion of Argentine currency into foreign currencies and on the remittance to foreign investors of proceeds from their investments in Argentina.  Argentine law currently permits the government to impose this kind of restrictions temporarily in circumstances where a serious imbalance develops in Argentina’s balance of payments or where there are reasons to foresee such an imbalance.  Beginning in December 2001, the Argentine Government implemented an unexpected number of monetary and foreign exchange control measures that included restrictions on the free disposition of funds deposited with banks and on the transfer of funds abroad, including dividends, without prior approval by the Central Bank, some of which are still in effect.  Among the restrictions that are still in effect are those relating to the payment prior to maturity of the principal amount of loans, bonds or other securities owed to non-Argentine residents and the requirement for Central Bank approval prior to acquiring foreign currency for certain types of investments.  Although the transfer of funds abroad in order to pay dividends no longer requires Central Bank approval to the extent such dividend payments are made in connection with audited financial statements approved by a shareholders’ meeting, restrictions on the movement of capital to and from Argentina such as those that previously existed could, if reinstated, impair or prevent the conversion of dividends, distributions, or the proceeds from any sale of shares, as the case may be, from Pesos into U.S. Dollars and the remittance of such U.S. Dollars abroad.  We cannot assure you that the Argentine Government will not take similar measures in the future.  In such a case, the depositary for the ADSs may hold the Pesos it cannot otherwise convert for the account of the ADS holders who have not been paid.  Nonetheless, the adoption by the Argentine Government of restrictions on the movement of capital out of Argentina may affect the ability of our foreign shareholders and holders of ADSs to obtain the full value of their shares and ADSs and may adversely affect the market value of our shares and ADSs. ADS holders’ ability to receive cash dividends may be limited Our shareholders’ ability to receive cash dividends may be limited by the ability of the depositary to convert cash dividends paid in Pesos into U.S. Dollars.  Under the terms of our deposit agreement with the depositary for the ADSs, the depositary will convert any cash dividend or other cash distribution we pay on the common shares underlying the ADSs into U.S. Dollars, if it can do so on a reasonable basis and can transfer the U.S. Dollars to the United States.  If this conversion is not possible or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so.  If the exchange rate fluctuates significantly during a time when the depositary cannot convert the foreign currency, shareholders may lose some or all of the value of the dividend distribution. Under Argentine law, shareholder rights may be fewer or less well-defined than in other jurisdictions Our corporate affairs are governed by our by-laws and by Argentine corporate law, which differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States, such as the States of Delaware or New York, or in other jurisdictions outside Argentina.  In addition, the rights of holders of the ADSs or the rights of holders of our common shares under Argentine corporate law to protect their interests relative to actions by our board of directors may be fewer and less well defined than under the laws of those other jurisdictions.  Although insider trading and price manipulation are illegal under Argentine law, the Argentine securities markets are not as highly regulated or supervised as the U.S. securities markets or markets in some other jurisdictions.  In addition, rules and policies against self-dealing and regarding the preservation of shareholder interests may be less


well-defined and enforced in Argentina that in the United States, putting holders of our common shares and ADSs at a potential disadvantage. 43


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Holders of ADSs may be unable to exercise voting rights with respect to the common shares underlying the ADSs at our shareholders’ meetings Shares underlying the ADSs are held by the depositary in the name of the holder of the ADS.  As such, we will not treat holders of ADSs as one of our shareholders and, therefore, holders of ADSs will not have shareholder rights.  The depositary will be the holder of the shares underlying the ADSs and holders may exercise voting rights with respect to the shares represented by the ADSs only in accordance with the deposit agreement relating to the ADSs.  There are no provisions under Argentine law or under our by-laws that limit the exercise by ADS holders of their voting rights through the depositary with respect to the underlying shares.  However, there are practical limitations on the ability of ADS holders to exercise their voting rights due to the additional procedural steps involved in communicating with these holders.  For example, holders of our shares will receive notice of shareholders’ meetings through publication of a notice in an official gazette in Argentina, an Argentine newspaper of general circulation and the daily bulletin of the Buenos Aires Stock Exchange, and will be able to exercise their voting rights by either attending the meeting in person or voting by proxy.  ADS holders, by comparison, do not receive notice directly from us.  Instead, in accordance with the deposit agreement, we provide the notice to the depositary.  If we ask it to do so, the depositary will mail to holders of ADSs the notice of the meeting and a statement as to the manner in which instructions may be given by holders.  To exercise their voting rights, ADS holders must then instruct the depositary as to voting the shares represented by their ADSs.  Due to these procedural steps involving the depositary, the process for exercising voting rights may take longer for ADS holders than for holders of shares and shares represented by ADSs may not be voted as the holders of ADSs desire.  Shares represented by ADSs for which the depositary fails to receive timely voting instructions may, if requested by us, be voted at the corresponding meeting either in favor of the proposal of the board of directors or, in the absence of such a proposal, in accordance with the majority. Our shareholders may be subject to liability for certain votes of their securities Because we are a limited liability corporation, our shareholders are not liable for our obligations.  Shareholders are generally liable only for the payment of the shares they subscribe.  However, shareholders who have a conflict of interest with us and who do not abstain from voting at the respective shareholders’ meeting may be liable for damages to us, but only if the transaction would not have been approved without such shareholders’ votes.  Furthermore, shareholders who willfully or negligently vote in favor of a resolution that is subsequently declared void by a court as contrary to the law or our by-laws may be held jointly and severally liable for damages to us or to other third parties, including other shareholders. Provisions of our bylaws and of Argentine securities laws could deter takeover attempts and have an adverse impact on the price of our shares and the ADSs Our bylaws and Argentine securities laws contain provisions that may discourage, delay or make more difficult a change in control of our Company, such as the requirement, upon the acquisition of a certain percentage of our capital stock, to launch a tender offer to acquire a certain percentage of our capital stock, which percentage ranges from 10% to 100% depending on several factors.  These provisions may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interest of our shareholders and may adversely affect the market value of our shares and ADSs.  In addition, the provisions of our bylaws and of Argentine securities laws with respect to the obligation to launch a mandatory tender offer differ in certain respects; as of the date of filing of this annual report, it is unclear whether the provisions of our bylaws, which might be more beneficial to minority shareholders under certain circumstances than the provisions of Argentine securities laws in effect as of the date hereof, would prevail over the provisions of Argentine securities laws.  44


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Item 4A.  Unresolved Staff Comments During 2016, the Company engaged in discussions with the  Commission regarding the comments by the staff of the Commission (the “Staff” to the annual report on Form 20-F for the year ended December 31, 2014 of the Company’s subsidiary Edenor, relating to the presentation in the statement of cash flows of the financial assistance granted by the Argentine Government to Edenor during 2014 and 2015. Such financial assistance was made, through various loan agreements for the consumption and assignment of secured receivables, in order to pay higher salary costs and also to cover the insufficiency of the funds deriving from the FOCEDE (the “loans for investments and salaries”).  As a result of such discussions, the Company concluded that the cash inflows from these loans should be presented within financing activities in the Statement of Cash Flows, as relevance must be placed more on the fact that these agreements were instrumented as loans than in the underlying reasons for these agreements, which was to provide an alternative source of cash inflows due to the lack of increases in tariffs and review of the concession contract for the last 15 years. Accordingly, the Company’s statements of cash flows for the years ended December 31, 2015 and 2014 have been restated to present the cash inflows related to such agreements within financing activities in the statement of cash flows, instead of operating activities as previously presented. Also, the increase in the balances of Edenor’s loans with CAMMESA for funds received by the FOCEDE for the years ended December 31, 2015 and 2014 have been restated and are now presented as non-cash financing transactions in the supplementary disclosures to the statement of cash flows instead of operating activities as previously disclosed. For a further information, see Note 1 to our restated consolidated financial statements included elsewhere in this annual report. Although the Company has not received formal confirmation that the Staff has no further comments, the Company believes that the restatement described above and in our restated audited consolidated financial statements is appropriately responsive to the Staff’s comments. Item 5.   Operating and Financial Review and Prospects This section contains forward-looking statements that involve risks and uncertainties.  Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in “Forward-Looking Statements,” and “Item 3.  Key Information—Risk Factors” and the matters set forth in this annual report generally. The following discussion is based on, and should be read in conjunction with our Restated Consolidated Financial Statements and related notes contained in this annual report, as well as “Item 3.  Key Information—Selected Financial Data.” Overview We acquired all of our principal generation, transmission and distribution assets commencing in the second half of 2006 and, in each case, after Messrs. Damián Mindlin, Gustavo Mariani, and Ricardo Torres acquired a majority stake in us in November 2005.  At the time of our acquisition by these individuals, we did not have any operations or engage in any activities, as our former business activities, which were limited to the ownership and operation of a cold storage warehouse building, were suspended in 2003.  Since November 2005, our business activities consist principally in identifying and executing investments in the Argentine electricity sector.  As a result of the acquisitions we have consummated since the second half of 2006, we have become the largest fully integrated electricity company in Argentina. 45


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Below is a summary of our principal generation, transmission and distribution assets, as of the date of this annual report, including the respective acquisition date and price for each asset: ·Generation: -90.3% of the capital stock of Nihuiles and 91.6% of the capital stock of Diamante (each a holding company that owns a majority interest in HINISA and HIDISA, respectively, each a hydroelectric power generation company), acquired for a combined purchase price of approximately U.S. $55.7 million, of which U.S. $50.8 million were paid at closing on October 18, 2006 and U.S. $4.9 million (plus interest) were paid on March 7, 2012.On January 8 and 9, 2008, we acquired for Ps.3.4million the shares previously held by HIDISA’s Employee Participation Program, representing 2% of the capital stock of HIDISA.  Following such acquisition, all Class C shares of HIDISA were converted to Class B shares, which are freely transferable to third parties.  Therefore, we currently control indirectly, 61% of the capital stock and voting rights of HIDISA.On December 18, 2009, the shareholders of HINISA agreed to cancel its Class “E” shares corresponding to HINISA’s Employee Stock Option Plan, representing 2% of its capital stock, as a result we now indirectly own 52.04% of the shares and votes of HINISA; -100% of the capital stock of IPB which, in turn, holds 100% of the capital stock of Piedra Buena, a thermal generation plant located at Ingeniero White, Bahia Blanca in the Province of Buenos Aires, acquired on August 3, 2007, for a total purchase price of U.S. $85.0 million; -100% of the capital stock of Loma de la Lata was merged with Powerco (See “Item 4. Our Business – Our Generation Business – Loma de la Lata - History”) formerly owner of 15.48% of the voting capital stock of Güemes; we acquired an indirect stake in Powerco through the acquisition of 100% of Pampa Inversiones’ capital stock (which was at that time known as Dilurey and held 90% of Powerco’s capital stock) and a direct 8% stake in Powerco on January 4, 2007 for a total purchase price of U.S. $16.7 million and the remaining 2% of Powerco’s capital stock on August 24, 2007 for U.S. $460,000 pursuant to an option agreement between us and Güemes’ former chief executive officer. Also, Loma de la Lata, which owns the thermal generation plant located at Loma de la Lata in the Province of Neuquén, which was acquired from Central Puerto on May 17, 2007 for a purchase price of U.S. $60 million (Loma de la Lata also holds 62,157,407 ordinary shares of Güemes, representing 64.25% of Güemes’ voting capital stock); and -90.43% of the capital stock of CTG, which owns (i) a thermal generation plant (Central Térmica Güemes) with an installed capacity of 361 MW located in General Güemes, in the Province of Salta, which we acquired in January 2007; and (ii) a thermal generation plant (Central Térmica Piquirenda) with an installed capacity of 30 MW located in Piquirenda, General San Martín, in the Province of Salta, which we acquired in March 2011. ·Transmission:100% of the capital stock of Transelec, which holds 50% of the capital stock of Citelec, the owner of 52.65% of the capital stock of Transener (the largest electricity transmission company in Argentina).  We acquired from Dolphin Opportunity LLC on September 15, 2006, 89.76% of Transelec’s capital stock for a purchase price of U.S. $48.5 million; the remaining 10.24% of Transelec’s capital stock was collectively held by Messrs. Marcelo Mindlin, Damián Mindlin and Gustavo Mariani, who had a right to sell those shares to us after January 1, 2008.  This right was exercised on January 2, 2008 for a total purchase price of Ps. 38.8 million (U.S. $12.3 million). ·Distribution:100% of the capital stock of IEASA, which holds 100% of the capital stock of EASA, the owner of 51% of the capital stock of Edenor (the largest electricity distribution company in Argentina), acquired on September 28, 2007 from the former indirect shareholders of EASA in exchange for 480,194,242 shares of our common stock (of which 436,745,975 were issued in the form of Global Depositary Receipts (“GDSs”). ·Oil and Gas:49.6% of the capital stock of Petrolera Pampa. 46


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In addition to our principal businesses, below is a summary of certain non-electricity assets and investments we hold in our holding and others segments, directly or indirectly, including the respective acquisition date and price for each asset: ·Beneficiary and trustee under the Trust Agreement dated August 29, 2005, pursuant to which The Royal Bank of Scotland, Argentina branch, holds in trust 40% of CIESA shares See “Item 4. – Our Business – Oil and Gas – CIESA Transaction”. ·On April 8, 2011, we acquired 100% of the shares issued by PEPCA, a company which owns 10% of the share capital of CIESA, for a total purchase price of U.S. $29 million. ·100% of the capital stock of Bodega Loma la Lata S.A. ·100% of the capital stock of Greenwind S.A. Sources of Revenues Generation Our generation operations derive revenues from the sale of electricity in the spot market and under term contracts,includingEnergía Pluscontracts and contracts under SE Resolution No. 220/2007.  See “Item 4.—The Argentine Electricity Sector—Energía Plus.” Distribution Our distribution operations generate revenues mainly from energy sales to users in our distribution service area.  Energy sales reflect the distribution tariffs Edenor charges its customers (valued on the basis of applicable tariffs and the charges resulting from the application of SE Resolution No. 347/2012).  In addition, our distribution revenues include connection and reconnection charges and leases of poles and other network equipment. Revenue from electricity provided by Edenor to low-income area and shantytowns is recognized to the extent that the framework agreement has been renewed for the period in which the service was rendered. Oil & Gas Our oil and gas operations derive revenues from the sale of natural gas, through term contracts under the Gas Plus Regime or to industrial clients at similar prices. Additionally, our oil production is sold to our partners with which we are associated in areas of production. Factors Affecting Our Results of Operations Our results of operations are principally affected by economic conditions and inflation in Argentina, changes in prices for our electricity sold and in our regulated transmission and distribution tariffs, fluctuations in demand for electricity in Argentina and our costs of sales and operating expenses. Argentine Economic Conditions and Inflation Because substantially all of our operations, facilities and customers are located in Argentina, we are affected by general economic conditions in the country.  In particular, the general performance of the Argentine economy affects demand for electricity, and inflation and fluctuations in currency exchange rates affect our costs and our margins. Inflation primarily affects our business by increasing operating costs, while at the same time reducing our revenues in real terms. In December 2001, Argentina experienced an unprecedented crisis that virtually paralyzed the country’s economy through most of 2002 and led to radical changes in government policies. The crisis and the Argentine Government’s policies during this period severely affected the electricity sector, as described below. Although over


the following years the Argentine economy has recovered significantly from the crisis, and the business and political environment has been largely stabilized, the Argentine Government has only recently begun to address the difficulties experienced by the Argentine electricity sector as a result of the crisis and its aftermath. However, we believe that the current recovery and the recent measures adopted by the Macri administration in favor of the electricity sector, such as establishing incentives for the construction of additional generation facilities and the creation of trust funds to further enhance generation, transmission and distribution of electricity throughout the country, have set the stage for growth opportunities in our industry. 47


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The following table sets forth key economic indicators in Argentina during the years indicated:  Sources:INDEC; Central Bank; Ministry of Economy and Production. 
* Includes hold-outs** The CPI for 2015 was calculated for the ten-month period ended October 31, 2015. In November 2015, the INDEC suspended the publication of the CPI and the WPI. Following years of hyperinflation and economic recession, in 1991 the Argentine Government adopted an economic program that sought to liberalize the economy and impose monetary discipline. The economic program, which came to be known as the ConvertibilityRegime, was centered on the Convertibility Law of 1991 and a number of measures intended to liberalize the economy, including the privatization of a significant number of public sector companies (including certain of our subsidiaries and jointly controlled companies). The Convertibility Law established a fixed exchange rate based on what is generally known as a currency board. The goal of this system was to stabilize the inflation rate by requiring that Argentina’s monetary base be fully backed by the Central Bank’s gross international reserves. This restrained the Central Bank’s ability to effect changes in the monetary supply by issuing additional Pesos and fixed the exchange rate of the Peso and the U.S. Dollar at Ps. 1.00 to U.S.$1.00. The ConvertibilityRegimetemporarily achieved price stability, increased the efficiency and productivity of the Argentine economy and attracted significant foreign investment to Argentina. At the same time, Argentina’s monetary policy was tied to the flow of foreign capital into the Argentine economy, which increased the vulnerability of the economy to external shocks and led to increased reliance on the services sector of the economy, with the manufacturing, agricultural and industrial sectors lagging behind due to the relative high cost of Peso-denominated products in international markets as a result of the Peso’s peg to the U.S. Dollar. In addition, related measures restricted the Central Bank’s ability to provide credit, particularly to the public sector. Following the enactment of the Convertibility Law, inflation declined steadily and the economy experienced growth through most of the period from 1991 through 1997. This growth slowed from 1998 on, however, as a result of the Asian financial crisis in 1997, the Russian financial crisis in 1998 and the devaluation of Brazil’s currency in 1999, which led to the widespread withdrawal of investors’ funds from emerging markets, increased interest rates and a decline in exports to Brazil, Argentina’s principal export market at the time.  According to INDEC, in the fourth quarter of 1998, the Argentine economy entered into a recession that caused the gross domestic product to decrease by 3.4% in 1999, 0.8% in 2000 and 4.4% in 2001. In the second half of 2001, Argentina’s recession worsened significantly, precipitating a political and economic crisis at the end of 2001. 48


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2001 Economic Crisis Beginning in December 2001, the Argentine Government implemented an unexpected number of monetary and foreign exchange control measures that included restrictions on the free disposition of funds deposited with banks and on the transfer of funds abroad without prior approval by the Central Bank, some of which are still in effect. On December 21, 2001, the Central Bank decided to close the foreign exchange market, which amounted to ade factodevaluation of the Peso. On December 24, 2001, the Argentine Government suspended payment on most of Argentina’s foreign debt. The economic crisis led to an unprecedented social and political crisis, including the resignation of President Fernando De la Rúa and his entire administration in December 2001. After a series of interim governments, in January 2002 the Argentine congress appointed Senator Eduardo Duhalde, a former vicepresident and former governor of the Province of Buenos Aires, to complete De la Rúa’s term through December 2003. On January 6, 2002, the Argentine congress enacted the Public Emergency Law, which introduced dramatic changes to Argentina’s economic model, empowered the Argentine Government to implement, among other things, additional monetary, financial and foreign exchange measures to overcome the economic crisis in the short term and brought to an end the ConvertibilityRegime, including the fixed parity of the U.S. Dollar and the Peso. Following the adoption of the Public Emergency Law, the Peso devalued dramatically, reaching its lowest level on June 25, 2002, at which time it had devalued from Ps. 1.00 to Ps. 3.90 per U.S. Dollar according to Banco Nación. The devaluation of the Peso had a substantial negative effect on the Argentine economy and on the financial condition of individuals and businesses. The devaluation caused many Argentine businesses (including us) to default on their foreign currency debt obligations, significantly reduced real wages and crippled businesses that depended on domestic demand, such as public utilities and the financial services industry. The devaluation of the Peso created pressure on the domestic pricing system and triggered very high rates of inflation. According to INDEC, during 2002 the Argentine WPI increased by approximately 118% and the Argentine CPI rose approximately 41%. Following the adoption of the Public Emergency Law, the Argentine Government implemented measures, whether by executive decree, Central Bank regulation or federal legislation, attempting to address the effects of the collapse of the ConvertibilityRegime, recover access to financial markets, reduce government spending, restore liquidity to the financial system, reduce unemployment and generally stimulate the economy. Pursuant to the Public Emergency Law, the Argentine Government, among other measures: ·converted public utility tariffs from their original U.S. Dollar values to Pesos at a rate of Ps. 1.00 per U.S. $1.00; ·froze all regulated distribution margins relating to the provision of public utility services (including electricity distribution services); ·revoked all price adjustment provisions and inflation indexation mechanisms in public utility concessions (including our concession); and ·empowered the Argentine Executive Branch to conduct a renegotiation of public utility contracts (including our concession) and the tariffs set therein (including our tariffs).  These measures, combined with the devaluation of the Peso and high rates of inflation, had a severe effect on public utility companies in Argentina (including us). Because public utility companies were no longer able to increase tariffs at a rate consistent with the increased costs they were incurring, increases in the rate of inflation led to decreases in their revenues in real terms and a deterioration of their operating performance and financial condition.  Most public utility companies had also incurred large amounts of foreign currency indebtedness to finance the capital improvement and expenditure programs. At the time of these privatizations, the capital structures of each privatized company were determined taking into account the ConvertibilityRegimeand included material levels of U.S. Dollar‐denominated debt. Following the elimination of the Convertibility regime and the resulting devaluation of the Peso, the debt service burden of these utility companies significantly increased, which when combined with the margin freeze and conversion of tariffs from U.S. Dollars to Pesos, led many of these utility companies (including us) to suspend payments on their foreign currency debt in 2002. 49


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Economic Recovery and Outlook Beginning in the second half of 2002, Argentina experienced economic growth driven primarily by exports and import‐substitution, both facilitated by the lasting effect of the devaluation of the Peso in January 2002. While this devaluation had significant adverse consequences, it also fostered a reactivation of domestic production in Argentina as the sharp decline in the Peso’s value against foreign currencies made Argentine products relatively inexpensive in the export markets. At the same time, the cost of imported goods increased significantly due to the lower value of the Peso, forcing Argentine consumers to substitute their purchase of foreign goods with domestic products, substantially boosting domestic demand for domestic products. In April 2003, Dr. Néstor Kirchner, the former governor of the province of Santa Cruz, was elected as president for a four-year term, and he took office in May 2003. During 2003, Argentina moved towards normalizing its relationship with the IMF, withdrew all the national and provincial governments’ quasi‐money securities from circulation and eliminated all deposit restrictions. The trade balance experienced a sustained surplus, aided by the rise in commodity prices and export volumes.  At the same time, social indicators improved, with the unemployment rate decreasing to 17.3%, and real wages began to recover according to INDEC. In June 2005, the Argentine Government completed a restructuring of Argentina’s public external debt, which had been in default since December 2001.  Argentina reduced its outstanding principal amount of public debt from U.S. $191.3 billion to U.S. $129.2 billion and extended payment terms. In April 2010, the Argentine Government launched a new exchange offer for the outstanding sovereign bonds that did not participate in the 2005 restructuring. On January 3, 2006, Argentina completed an early repayment of all of its outstanding indebtedness with the IMF, for an amount totaling approximately U.S. $10.0 billion owing under credit lines. From 2003 to 2007, the economy continued recovering from the 2001 economic crisis.  The economy grew by 8.8% in 2003, 9.0% in 2004, 9.2% in 2005, 8.5% in 2006 and 8.7% in 2007, led by domestic demand and exports.  From a demand perspective, private sector spending was accompanied by a combination of liberal monetary and conservative fiscal policies. Growth in spending, however, consistently exceeded the rate of increase in revenue and nominal GDP growth. From a supply perspective, the trade sector benefited from a depressed real exchange rate, which was supported by the intervention of the Central Bank in the foreign exchange market.  Real exports improved, in part due to growth in Brazil, and the current account improved significantly, registering surpluses in 2004, 2005, 2006 and 2007. On December 10, 2007, Cristina Fernández de Kirchner, wife of the ex-President Dr. Néstor Kirchner, was inaugurated as President of Argentina for a four-year term. Argentina’s economy grew by 7% in 2008, 19.5% less than in 2007. According to the INDEC, growth was negative in both the first and the fourth quarter of 2008 (-0.3% for both periods) as compared to the same periods in 2007, without adjusting for seasonality. This negative growth is primarily attributable to the conflict between the Argentine Government and farmers in early 2008 and the global financial crisis, which deepened in the second half of 2008. The agricultural sector was particularly hard hit in 2008 as a result of the decrease in commodities prices as well as a significant drought.  A decline in the agricultural sectorhadadverse ramifications for the entire economy due to the significant role that sector plays in the Argentine economy. At the end of 2008, the Argentine Government enacted a series of measures aimed at counteracting the decline in the level of economic activity, including special tax rates and less stringent foreign exchange restrictions in connection with the repatriation and national investment of capital previously deposited abroad by Argentine nationals, extensions in the payment terms for overdue taxes and social security taxes, reductions in payroll tax rates for companies that increase their headcounts, creation of theMinisterio de Producción(Ministry of Production), announcements regarding the construction of new public works, consumer loans for the acquisition of durable goods and loans to finance exports and working capital for industrial companies, as well as various agricultural and livestock programs, all aimed at minimizing lay-offs during the current global financial crisis. The effectiveness of these measures will depend on the Argentine Government’s ability to fund them without reducing the amount of funding for other budgeted activities as well as the degree of confidence they create in the overall stability of the Argentine economy. 50


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In 2009, after six years of robust and continuous growth, the Argentine economy, according to official indicators, grew by only 0.1%, and according to private indicators, contracted by 3.5%. The Central Bank, reacting to local uncertainty and a bleak global economic environment, adopted policies aimed at avoiding a financial collapse.  Specifically, the Central Bank sought to stabilize the exchange market. Although interest rates increased periodically during the course of the year, the exchange market remained relatively stable throughout. According to official indicators, in 2011, real GDP in Argentina grew by approximately 8.4%, furthering the growth trend showed in 2010. The four most important factors behind the economic recovery are the following: ·the agricultural boom, with a record harvest (especially soybeans); ·a favorable international context (with Brazil growing at a 2.7% rate in 2011, which had a positive effect on the local industrial sector, and China pushing the demand for commodities in an environment of high prices); ·a climate of financial stability prevented major shocks in the short term, primarily due to an oversupply of private dollars and a reduced probability of sovereign default in the short term; and ·an expansionary economic policy program (fiscal, monetary and income). In 2012, according to the official information created and disseminated by the INDEC, the economy expanded 0.8%.  Although the real GDP continued growing during that year, there was a marked deceleration with respect to the growth rate registered in 2011. According to official indicators, Argentina’s real GDP grew around 2.9% in 2013, compared to 0.8% in 2012.  The increase in the agricultural harvest (the agricultural production during the season 2012/13 was approximately 11% higher than the one registered for the previous season), in a context where international prices of commodities remained high, with greater financial stability in global markets (resulting from a more stable situation in Europe and a strengthened, though slow, growth in the United States). These were the main factors behind the accelerated rate of the economic growth during 2013.  According to official indicators (data published by INDEC), in 2014, the economic activity grew by approximately 0.2%, compared to 2.9% in 2013.  Private consumption contracted by 0.8% in 2014.  The weakening of the internal demand was the main factor in the contraction of the economy and can be explained in part by an increase in internal prices due to the financing of the fiscal imbalance by Central Bank to Treasury. In 2014, the public accounts contracted 1.2% of GDP compared to a contraction of 0.6% in 2013.The weaker performance of the private sector was mainly due to an increase in prices, the depreciation of the Peso a slowdown in credit extended to the private sector and a greater propensity in customers for saving in times of uncertainty.  Regarding the internal market, in January 2014, the Peso lost approximately 19% of its value with respect to the US Dollar. During the following month of 2014, the US Dollar remained relatively stable.  During 2015, the economy registered a positive growth, of approximately 2.5%. The level of activity was driven by the effect that the summer crop had on GDP growth in the second and third quarter, while during the last months of the year the economy showed a more moderate expansion.  In terms of supply, industrial production continued showing a poor performance, the exchange rate lag, restrictions to import intermediate goods, the deceleration of the main Argentine commercial partners’ growth and a weak domestic and external demand impacted on the performance of the manufacturing activity. In terms of expenses, consumption showed a good performance even though consumers continued acting with caution.  With reference to inflationary issues, a significant deceleration in the increase of prices was observed during the first half of 2015, related with the high 2014 baseline. Throughout the last months of the year, retail prices relatively picked up although the average growth rate was lower than that of the previous year. 51


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In January 2016, the new INDEC authorities appointed by the Macri administration announced the discontinuation of the methodology used by the Fernandez de Kirchner administration to measure inflation and declared a state of administrative emergency in the national statistics system, suspending the publication of all indices until the INDEC is able to calculate such indices based on accurate official data. See “Item 3. Key Information—Risk factors—Risks Relating to Our Business—The impact of the recent congressional and presidential elections on the future economic and political environment of Argentina is uncertain, but likely to be material.” On December 17, 2015, the Peso depreciated approximately 36% against the U.S. Dollar following the announcement of the lifting of a significant portion of exchange restrictions (See “—Risk Factors—Factors Relating to Argentina—Fluctuations in the value of the Peso could adversely affect the Argentine economy, and consequently, our results of operations or financial condition”), which caused the Peso to U.S. Dollar exchange rate to reach Ps.13.40 to U.S.$1.00.                  .  Outlook for 2016 Forecasts for 2016 are characterized by caution. The macroeconomic context and the imbalances (including high inflation, fiscal deficit, monetary and trade restrictions) deriving from certain policies adopted during recent years represent substantial obstacles for the Macri administration to introduce economic policy shifts. As of the date of this annual report, a drop in real GDP is expected for 2016, along with an inflation rate which would remain high, surpassing that of 2015.  Electricity prices and tariffs Our revenues and margins are substantially dependent on the prices we are able to charge for the electricity sold by our generation plants, as well as the composition of our transmission and distribution tariffs (including the tariff setting and adjustment process contemplated by our transmission and distribution concessions).  Our management is currently focused on improving the prices we are able to charge for electricity generated, including by expanding our generation capacity to increase our sales to the unregulated market under theEnergía Plusregulatory framework and under supply agreements within the framework of the SE Resolution No. 220/2007, and renegotiating our transmission and distribution tariff structures, which, if successful, would have a significant impact on our results of operations. Electricity prices Our generation operations derive revenues from the sale of electricity in the spot market and under term contracts, includingEnergía Pluscontracts and supply agreements. During 2013, the authorities responsible for the energy sector have continued with the policy adopted in 2003, which consists of having the spot price in the WEM determined on the basis of the maximum variable production costs recognized to power stations that are either gas-fed or available with natural gas, even if these cannot avail themselves of gas (SE Resolution No. 240/2003). Therefore, this price, as established, does not stem from the application of the marginal cost of the least efficient power plant dispatched. Rather, the assumption used is that gas is freely available and therefore, the spot price determined is equal to the marginal cost of the last gas-fed power station dispatched, even if it does not have gas availability. Therefore, when the least efficient power plant that has been dispatched is, for example, fuel-oil-fed, its cut-off price is not determined as the spot price, but rather, the WEM spot price is recognized as the cost that would have resulted if natural gas had been used instead and the additional cost incurred when using liquid fuels is recognized outside the determined WEM spot price, as a temporary dispatch surcharge. The relevant authorities have resorted to a number of procurement mechanisms for the supply of fuels for electricity generation, including an agreement with the principal electricity generators, which provides that natural gas volumes will be managed by CAMMESA with a view to optimizing the following (see “Item 4. The Argentine Electricity Sector – Procedure for the Dispatch of Natural Gas for Power Generation”): 52


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·natural gas consumption in the most efficient generation units, ·contracts for liquefied natural gas and its re-gasification, and ·natural gas imported from Bolivia, among others. All of this notwithstanding, the supply of natural gas continues to be insufficient to meet the needs of electricity generation, which explains why electricity generation has had to continue relying on the consumption of liquid fuels. The consumption of natural gas for electricity generation in 2015 increased 1.0% compared to 2014 (14,438,163 Dam3 in 2015 compared to 14,295,128 Dam3 in 2014). There was a 13.4% increase in fuel-oil consumption in 2015 compared to 2014 and a 24.7% increase in gasoil consumption compared to 2014. Mineral coal consumption was 5.5% lower in 2015 compared to 2014 (948,855 tn in 2015 compared to 1,004,376 tn in 2014).  The electricity demand for 2015 increased 4.4% compared to 2014. In February 2013, the SE Resolution No. 95/2013 established a remuneration scheme, for “comprised generators”, whereby the remuneration of generation capacity of Ps.12 per MW was replaced with a remuneration of fixed costs from a minimum of Ps. 12 per MW and up to Ps. 52.8 per MW depending on the type of technology of each generation and its availability. Such remuneration was later modified by SE Resolution No. 529/2014, SE Resolution No. 482/2015 and SEE Resolution No. 22/2016 (see “Item 4. - The Argentine Electric Sector - SE Resolution No. 95/2013, as amended – New price scheme and other modifications to the WEM). The chart below shows the monthly average cost during 2015 (compared with 2014) that electricity consumers should pay for the system not to be deficient.  This cost includes, in addition to the price of energy, the capacity charge, the increased generation cost resulting from using fuel oil or diesel oil, and other minor items.  Monthly Average Monomic Cost (Ps. Per MWh)  Source: CAMMESA. It includes charges for excess demand, imports from Brazil and WEM supply agreements. 53


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Tariffs Transmission.  Our transmission tariffs have four components: (1)          electricity transmission revenue; (2)          capacity charges; (3)          connection charges; and (4)          reactive equipment charges. The tariffs are paid on a monthly basis by CAMMESA out of the amounts it collects from local electricity distribution companies, generators and large users of electricity.  The tariffs that Transener and Transba receive under their concession agreements are reviewed periodically by the ENRE and are subject to deductions for penalties for non-availability of the network that are calculated pursuant to a formula set forth in the concession agreements and applicable regulations.  Originally, pursuant to the concession agreements, Transener’s and Transba’s tariffs were calculated in U.S. Dollars and converted into Pesos based on the exchange rate applicable at the time of invoicing.  The concession agreements provided for a semiannual adjustment based on a formula related to the U.S. CPI (Consumer Price Index) and U.S. PPI (Producer Price Index).  The concession agreements also provided for electricity transmission revenue to be revised every five years by the ENRE.  However, the Public Emergency Law converted Transener’s and Transba’s revenues into Pesos at a rate of Ps. 1.00 per U.S. $1.00 and adjustments to the U.S. CPI/PPI provided for under the terms of the concession agreements were disallowed.  Transener completed its first tariff review process in 1998, but as a consequence of the Public Emergency Law, Transener’s second tariff review process (and Transba’s first tariff review process) was replaced by the renegotiation process contemplated by the Public Emergency Law.  In connection with this renegotiation process, Transener and Transba entered into new agreements with the Argentine Government.  These agreements, among other things, provide for rules for a transition period with retroactive effect from June 1, 2005 until the effectiveness of theTransener RTI.  Under the transition period rules, Transener’s tariffs were increased by an average of 31% and Transba’s tariffs were increased by an average of 25%. According to the terms of Transener’s agreement with the Argentine Government, the Transener RTI will be based on the Electricity Law and tariffs will be determined based on costs, necessary investments, non-automatic tariff adjustment mechanisms, the impact of unregulated activities and rate of return and capital base.  The ENRE will schedule a public hearing to analyze Transener’s and Transba’s tariff proposal before applying the new charges for the next tariff period.  If the variation of Transener’s remuneration resulting from the Transener RTI is higher than the tariff increase during the transition period, then the tariff increase would be implemented in three semiannual stages. On August 5, 2008, the Secretariat of Energy adopted SE Resolutions No. 869/2008 and No. 870/2008, which establish that the new tariffs to be adopted pursuant to the Transener RTI will become effective in February 2009.However, as of the date of this annual report, the ENRE has not yet called the public hearing mandated by the Secretariat of Energy in SE Resolutions No. 869/2008 andNo.870/2008. Due to the increase in labor costs resulting from the application of National Executive Branch Decree No. 392/2004 and subsequent regulation, and the major operating costs incurred since 2004, Transener and Transba have certified the cost variations that had effectively occurred on each quarter, filing the respective claims before the ENRE, in order to readjust their regulated remuneration according to the clauses established in the Definitive Agreements for such purpose.  In that way, Transener and Transba, unsuccessfully required the ENRE to recognize the cost increases in the tariff that occurred after the Definitive Agreements had been entered into, that led to the initiation of judicial claims.  The UNIREN ACT has stated that the mechanism for monitoring of costs and regime of service quality had been set to last up to the enforcement of Transener and Transba’s RTI, respectively, and that the delay in the definition of said process is not attributable to the Concessionaires and it could not lead to undermine their rights. 54


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Finally, on December 21, 2010, an Instrumental Agreement (the “Instrumental Agreement”) related to the Definitive Agreements was entered into with the Secretariat of Energy and the ENRE, setting forth as follows: (i)the recognition of Transener and Transba’s rights to collect the amounts resulting from the variations of costs during the period from June 2005 to November 2010; (ii)the mandatory cancellation of the financing received from CAMMESA, through the assignment of credits resulting from the recognition of the above mentioned variations of costs; (iii)a mechanism of cancellation of the pending balances, (iv)an additional financing amount to be directed to investments in the transmission system for the amount of Ps. 34.0 million for Transener and Ps. 18.4 million for Transba, to be cancelled through the mechanism described in (ii); and (v)a procedure for the updating and payment of cost variations incurred from December 1, 2010 to December 31, 2011, calculated biannually.  In February 2011, CAMMESA made an estimation of the amounts owed to Transener and Transba due to the variations of costs generated during the period from June 2005 to November 2010. As of January 17, 2011 such amounts were as follows:   Pursuant to the Instrumental Agreement and subject to its fulfillment, Transener and Transba withdrew their judicial claims for delay against the ENRE requesting the recognition of the increased costs and the public hearing in order to complete the full RTI. On May 12, 2009 Transener and Transba entered into Financing Agreements with CAMMESA for an amount of Ps. 59.7 million and Ps. 30.7 million, respectively. On January 5, 2010, the Addenda I were subscribed for an amount of Ps. 107.7 million and Pesos 42.7 million, for Transener and Transba, respectively. On May 2, 2011, the Addenda II were entered into with CAMMESA, which provide the following: (i) the amounts received as of January 17, 2011 by Transener and Transba by virtue of the loans granted by the Financing Agreements with CAMMESA would be cancelled, (ii) a new loan for Transener and Transba for the amount of Ps. 289.7 million and Ps. 134.1 million respectively, corresponding to the credits recognized by the Secretariat of Energy and the ENRE resulting from the variations of costs incurred during the period of June 2005 – November 2010 would be granted, and (iii) all amounts owed to Transener and Transba for major costs as of November 2010 under the Instrumental Agreements would serve as a guarantee for the Addenda II.  In May 2013, Transener and Transba executed with the ENRE and the Secretariat of Energy, the Renewal Agreement, setting forth the following:  (i)the recognition of Transener and Transba ́s rights to collect the amounts resulting from the variations of costs during the period from December 2010 to December 2012, (ii)the payment of outstanding balances from Addenda II, and (iii)a procedure for the updating and payment of cost variations incurred from January 1, 2013 to December 31, 2015, calculated biannually.  On October 25, 2013and February 14, 2014, Transba and Transener, respectively, negotiated the Addenda III.  55


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On September 2, 2014, Transener and Transba executed with CAMMESA the New Financing Agreements. The New Financing Agreements provided:  i) that the Financing Agreements, together with their Addendums I, II and III, are concluded; ii) the granting to Transener and Transba of  new loans in the amount of Ps. 622.2 million and Ps. 240.7 million, respectively, corresponding to receivables acknowledged by the Secretariat of Energy and the ENRE on account of cost variations for the January 2013-May 2014 period; and iii) the assignment as collateral of the receivables recognized on account of higher costs as at May 31, 2014 pursuant to the Renewal Agreement. Also, on March 17, 2015, Transener and Transba executed with CAMMESA the Addenda IV, setting forth:i) the granting to Transener and Transba of  new loans in the amount of Ps. 563.6 million and Ps. 178.3 million, respectively, corresponding to (a) the outstanding amount due pursuant to the Financing Agreement as of January 2015, and (b) receivables acknowledged by the Secretariat of Energy and the ENRE on account of cost variations for the June 2014-November 2014 period; and ii) the assignment as collateral of the receivables recognized on account of higher costs as at November 30, 2014 pursuant to the Renewal Agreement. In September 2015, Transener and Transba executed with the ENRE and the SE the Amendment to the Renewal Agreement, setting forth the 2015 year financial - economic projection and investment plan in the amount of Ps. 431.9 million and Ps. 186.6 million for Transener and Transba, respectively, and granting additional non-reimbursable resources for the execution of such investment plan. On November 25, 2015, Transener and Transba executed with CAMMESA the financing agreements for the implementation of the Amendment to the Renewal Agreement, setting forth: i) the granting to Transener and Transba of  new loans in the amount of Ps. 508,9 million and Ps. 317,6 million, respectively, corresponding to (a) receivables acknowledged by the SE and the ENRE on account of cost variations for the December 2014-May 2015 period; and ii) the additional investments required pursuant to the Amendment to the Renewal Agreement. The results arising from the recognition of the variations of costs on behalf of the Secretariat of Energy and the ENRE have been registered in the Restated Consolidated Financial Statements, up to the amounts received as of December 31, 2015, through the financing of CAMMESA. Consequently, net revenues amounting to Ps. 1,326.1 million and Ps. 850 million, and interest income amounting to Ps. 176.5 million and Ps. 281.4 million, have been registered by Transener and Transba during the fiscal years ended December 31, 2015 and 2014, respectively. Pursuant to the New Financing Agreement, Renewal Agreement and the Amendment to the Renewal Agreement, Transener and Transba are currently in communication with the relevant authorities to implement a scheme that would better allow them to fund their business plan.  This information consists in monthly cash flows, investments execution and implementation of funds requirements.The outcome of the Transener RTI, however, is highly uncertain as to both its timing and final result.  We cannot assure you that the renegotiation process will conclude in a timely manner or that the revised tariff structure will cover our costs and compensate us for inflation and currency devaluations in the future and provide us with an adequate return on our transmission assets. For the fiscal year ended December 31, 2015, Transener and Transba have recorded revenues from sales as well as accrued interests amounting to Ps. 1,502.6 million in accordance with the Instrumental Agreements and the Renewal Agreement.  Distribution.Under the terms of Edenor’s concession, the tariffs charged by Edenor (other than those applied to customers in the wheeling system, described below) are composed of: ·the cost of electric power purchases, which Edenor passes on to its customers, and a fixed charge (which varies depending on the category and level of consumption of each customer and their energy purchase prices) to cover a portion of Edenor’s energy losses in its distribution activities (determined by reference to a fixed percentage of energy and power capacity for each respective voltage level set forth in our concession); ·Edenor’s regulated distribution margin, which is known as the value‐added for distribution, plus the fixed and variable charges contemplated under SE Resolution No. 347/2012; and 56


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·any taxes imposed by the Province of Buenos Aires or the City of Buenos Aires, which may differ in each jurisdiction. Certain large users are eligible to purchase their energy needs directly from generators in the WEM and acquire from Edenor only the service of delivering that electricity to them.  Edenor’s tariffs for these large users (known as wheeling charges), therefore, do not include charges for energy purchases.  Accordingly, wheeling charges consist of the fixed charge for recognized energy losses (determined by reference to a fixed percentage of energy and power capacity for each respective voltage level set forth in Edenor’s concession) and Edenor’s distribution margin. Edenor’s concession originally contemplated a fixed distribution margin for each tariff parameter with semiannual adjustments based on variations in the U.S. wholesale price and U.S. consumer price indices.  However, the Public Emergency Law, enacted in January 2002, among other measures, revoked all adjustment clauses in U.S. Dollars or other foreign currencies and indexation clauses.  As a result, the adjustment provisions contained in Edenor’s concession were no longer in force and, from January 2002 through February 2007, Edenor was required to charge the same fixed distribution margin in Pesos established in 2002, without any type of currency or inflation adjustment. Pursuant to the Adjustment Agreement, which came into effect in February 2007, the Argentine Government granted Edenor an increase in Edenor’s distribution margin.  Although this increase applied to all of Edenor’s tariff categories, the amount of the increase was only allocated to Edenor’s non-residential customers (including wheeling customers), while Edenor’s residential customers did not experience any increase in VAD.  The increase is effective retroactively from November 1, 2005 and will remain in effect until the approval of a new tariff scheme under the integral tariff revision process described below.  The Adjustment Agreement also contemplates a cost adjustment mechanism, known as the CMM, which requires the ENRE to review Edenor’s actual distribution costs every six months (in May and November of each year). Pursuant to the Adjustment Agreement, Edenor is currently engaged in an integral tariff revision process with the ENRE.  As of the date of this annual report, the Edenor RTI has not yet been completed. On November 12, 2009, Edenor submitted an integral tariff proposal to the ENRE’s Board of Directors as requested by ENRE Resolution No. 467/2008.  The proposal included, among other factors, a recalculation of the compensation Edenor receives for its distribution services, including taxes that are not currently passed through to their customers (such as taxes on financial transactions), a revised analysis of its distribution costs, modification to its quality of service standards and penalty scheme and, finally, a revision of its asset base and rate of return. Additionally, in June 2013, Edenor filed a complaint against the Argentine Government requesting full enforcement of the Adjustment Agreement and compensation for damages as a result of non‐compliance with the commitments established therein.  The damages claimed in the complaint were extended in November 2013.  In February 2014, Edenor filed for injunctive relief with the Federal Court requesting that the Argentine Government be compelled to provide Edenor with economic assistance during the course of the litigation.  This request was denied in both first and second instance in June 2014 and December 2014, respectively.  In Edenor’s opinion, the RTI process will have to factor in a revised analysis of its distribution costs, modifications to its quality of service standards and penalty scheme and, finally, a revision of Edenor’s asset base and rate of return, and the balances and other issues resulting from the measures recently adopted by the Argentine Government to provide it with temporary and partial relief.  Such issues include, among other: (i) the treatment to be given to the outstanding amounts granted under the loans for consumption to cover the insufficiency of the funds deriving from the FOCEDE; (ii) the conditions for the settlement of the outstanding debt with CAMMESA as of the date of issuance of SE Resolution No. 32/2015, for which purpose Edenor has submitted and are currently negotiating a repayment plan; (iii) the treatment to be given to the penalties and discounts determined prior and subsequent to the Adjustment Agreement (In Edenor’s opinion the generation and accumulation of unpaid balances for this concept are not attributable to the Distribution Company inasmuch as the inaction and discretionary decisions of the Grantor of the Concession in the past have led to the deterioration of Edenor’s economic and financial equation, thus preventing it from complying with its basic and elemental obligations for the provision of the public service); (iv) an agreement on quality levels and a new system


of penalties and discounts that provides for an adequate transitional period until the tariff schedule resulting from the RTI is fully implemented; and (v) the termination and liquidation of the FOCEDE and its effects. 57


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The outcome of the renegotiation of Edenor’s tariff structure is highly uncertain.  We cannot assure you that the renegotiation process will conclude in a timely manner or that the revised tariff structure will provide Edenor with an adequate return on its asset base, or that if an adjustment agreement is reached that it will not be challenged by Argentine consumer and other groups, something that, if successful, could materially adversely affect Edenor’s ability to implement any tariff adjustments granted by the Argentine Government.  For a more detailed review of our distribution tariff adjustment process and history please see“Item 4.–Our Business–Our Distribution Business”. Electricity demand and supply Electricity demand depends to a significant extent on economic and political conditions prevailing from time to time in Argentina, as well as seasonal factors.  In general, the demand for electricity varies depending on the performance of the Argentine economy, as businesses and individuals generally consume more energy and are better able to pay their bills during periods of economic stability or growth.  As a result, energy demand is affected by Argentine Governmental actions concerning the economy, including with respect to inflation, interest rates, price controls, foreign exchange controls, taxes and energy tariffs. Following the economic crisis in 2001, the demand for electricity in Argentina grew consistently each year driven by the economic recovery.  During 2014, the electricity demand grew 1% compared to 2013, from 125,167 GWh to 126,397 GWh and during 2015, the electricity demand grew 4.4% compared to 2014, from 126,397 GWh to 131,995 GWh. The following chart provides a breakdown of the demand for energy in 2015 by type of customer:      Electric Power Demand According to Type of Customer 100% = 131,995 GWh   Source: ADEERA.   A new 25,380 MW record of capacity load was registered on February 12, 2016, which was 1% above the peak for 2013. 58


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Peak Demand Records  2011
 2012
 2013
 2014
 2015
 2016Power Capacity (MW)
 21,564
 21,949
 23,794
 24,034
 23,949
 25,380Date
 01/08/2011
 02/16/2012
 12/23/2013
 01/20/2014
 01/27/2015
 02/12/2016Temperature (°C)
 3,5
 34,2
 35,4
 29,6
 35,6
 31,0Time
 8:18 PM
 3:10 PM
 2:20 PM
 3:05 PM
 2:13 PM
 2:35 PM
  Source: CAMMESA.  Generation of electricity increased by 4.0% in 2015, from 129,266 GWh in 2014 to 134,496 GWh in 2015.  For the year 2014, generation of electricity increased by 0.3%, from 128,826 GWh in 2013 to 129,266 GWh in 2014. Thermal generation continued to be the main resource to supply demand in 2015, as it contributed 86,482 GWh (64%), followed by hydroelectric generation net of pumping, which contributed 40,888 GWh (30%) and nuclear generation, which contributed 6,519 GWh (5%), photovoltaic and wind generation, which contributed 608 GWh (0.5%) and certain engines from ENARSA and the update of the capacity of certain plants (0.5%). There were also imports, for 1,655 GWh (19% higher than in 2014), exports for 53 GWh  and losses for 4,100 GWh (4% lower than in 2014).  During 2014, thermal generation was also the main resource to supply demand in 2014, as it contributed 83,194 GWh (64%), followed by hydroelectric generation net of pumping, which contributed 40,185 GWh (31%) and nuclear generation, which contributed 5,258 GWh (4%), and photovoltaic and wind generation, which contributed 629 GWh (0.5%). There were also imports, for 1,390 GWh (306% higher than in 2013), exports for 0.1 GWh (95% lower than in 2013) and losses for 4,258 GWh (6% higher than in 2013). Hydroelectric generation in 2015 did not experience material variations when compared to 2014, while thermal and nuclear generation registered a 4% and 24% increase, respectively, when compared to 2014.  In this sense, thermal generation continued to be the main source for the supply of electricity, fueled both by natural gas and by liquid fuels (diesel oil and fuel oil), and mineral coal mainly during the winter months. The following chart shows the development of electricity generation by type of generation (thermal, hydro, nuclear and renewable) since 2008: 59


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Source: CAMMESA. Note: Including WEM and PSWEM.Hydroelectric power generation is considered net of pumping. During 2015, generation facilities considerably increased their installed capacity from 30,405MW in 2014 to 33,493MW in 2015. This increase was caused by the commercial operations of the Atucha II nuclear plant (720MW), Vuelta de Obligado thermal plant (525 MW, Guillermo Brown thermal plant (434MW), certain engines from ENARSA and the update of the capacity of certain plants. The chart below shows the composition of installed capacity in Argentina(33.5 GW)as of December 31, 2015:   60


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Seasonality  Seasonality also has a significant impact on the demand for electricity, with electricity consumption peaks in summer and winter.  The impact of seasonal changes in demand is registered primarily among the residential and small commercial customers of Edenor.  The seasonal changes in demand are attributable to the impact of various climatological factors, including weather and the amount of daylight time, on the usage of lights, heating systems and air conditioners. The impact of seasonality on industrial demand for electricity is less pronounced than on the residential and commercial sectors for several reasons.  First, different types of industrial activity by their nature have different seasonal peaks, such that the effect on them of climate factors is more varied.  Second, industrial activity levels tend to be more significantly affected by the economy, and with different intensity levels depending on the industrial sector. *Cost of sales* Our most significant costs of sales in our generation business are gas purchases, maintenance and penalties by our thermal generation facilities, royalty payments by our hydroelectric generation facilities and energy purchases and personnel costs by our hydroelectric and thermal generation facilities. We also record depreciation and amortization charges related to electricity generation as part of our costs of sales. The cost of energy purchases varies according to the regulated seasonal price of energy. Our cost of sales in our distribution activities are mainly comprised of purchases of energy for distribution, personnel costs, penalties, depreciation charges and fees for third-party services. Our most significant costs of sales in our oil and gas business are property, plant and equipment depreciations, gas production, royalties and fees for third-party services. *Operating expenses* Our most significant operating expenses are our administrative and selling expenses in our distribution activities, which include related salaries, social security charges, fees for third-party services and penalties. In our generation, oil and gas and holding and other business, our selling and administrative expenses relate mainly to salaries, social security charges, compensation agreements, fees for third-party services, and taxes. 61


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Critical Accounting Policies and Judgments In the preparation of the Restated Consolidated Financial Statements, we have relied on variables and assumptions derived from historical experience and various other factors that we deemed reasonable and relevant.  Although we review these estimates and assumptions in the ordinary course of business, the presentation of our financial condition and results of operation often requires our management to make judgments regarding the effects of matters that are inherently uncertain on the carrying value of our assets and liabilities and, consequently, our results of operation. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the Restated Consolidated Financial Statements. In order to provide an understanding about how management forms its judgments about future events, including the variables and assumptions underlying the estimates, and the sensitivity of those judgments to different variables and conditions, we have included comments related to each critical accounting policy described as follows: Revenue recognition Revenue is measured at the fair value of the consideration received or receivable, taking into account the estimated amount of any discount, thus determining the net amounts. Ordinary revenue has been recognized when each and every condition described below has been met: i. the entity transferred to buyer significant risks and rewards; ii. the amount of revenue was reliably measured; iii. it is probable that the entity receives the economic benefits associated with the transaction; and iv. costs incurred or to be incurred in relation to the transaction have been reliably measured. The revenue recognition criteria of the main activities of the Company include:  i.From the power generation activity: they are recognized from the energy and power effectively consumed by customers or delivered to spot market.  During the fiscal year ended December 31, 2014, the 2014 Expansion Agreement was executed. Consequently condition (iii) above was met, and, therefore, our generation subsidiaries have recognized as income the fair value of the remuneration corresponding to the section c) of SE Resolution No. 406/2003 and the portion of the Additional Remuneration to be allotted to the Trust accrued during fiscal year 2013 and that corresponding to 2014.  During the fiscal year ended December 31, 2015, HIDISA and HINISA  did not recognize the Maintenance Remuneration —that will be allocated exclusively to finance the works under the major maintenance— as income since the condition (iii) above was not met as the works under the major maintenance to be financed with the LVFVDs to be issued by CAMMESA are subject to approval by the SE and, therefore, there is no reasonable certainty that our generation subsidiaries will collect the receivables.  Additionally during the fiscal year ended December 31, 2015, our generation subsidiaries did not recognize revenues of Remuneration FONINVEMEM 2015-2018.  ii.From the electricity distribution activity: revenue is recognized on an accrual basis upon delivery to customers, which includes the estimated amount of unbilled distribution of electricity at the end of each year. We consider our accounting policy for the recognition of estimated revenue critical because it depends on the amount of


electricity effectively delivered to customers which is valued on the basis of applicable tariffs. Unbilled revenue is classified as current trade receivables. 62


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Revenue from the electricity provided by Edenor to low-income areas and shantytowns is recognized to the extent that the Framework Agreement has been renewed for the period in which the service was rendered. Revenue from operations is recognized on an accrual basis and derives mainly from electricity distribution. Such revenue includes both the electricity supplied, whether billed or unbilled at the end of each year, which has been valued on the basis of applicable tariffs, and the charges resulting from the application of Resolution No. 347/2012. Edenor also recognizes revenue from other concepts included in distribution services, such as new connections, reconnections, rights of use on poles, transportation of electricity to other distribution companies, etc. iii.From exploration and exploitation of oil and gas activity: Revenues from sales of crude oil, natural gas and liquefied petroleum gas are recognized upon the transfer of title in accordance with the terms of the applicable contracts, which is when the customer has taken ownership and assumed the risks and benefits, prices have been determined and collectability is reasonably assured. Higher Costs Recognition under SEE Resolution No. 250/2013 and subsequent Notes and Recognition of income on account of the RTI – SEE Resolution No. 32/2015  The recognition of higher costs and the recognition of income not transferred to the tariff established by SEE Resolution No. 32/2015, fall within the scope of IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance” as they imply a compensation to cover the expenses and investments incurred by Edenor in the past to maintain the normal provision of its services.  Their recognition is made at fair value when there is reasonable assurance that they will be collected and the conditions attached thereto have been complied with (i.e. provision of the service in the case of the recognition established in SEE Resolution No. 32/2015, and (the ENRE’s approval and the SE’s recognition of the higher costs set forth in SEE Resolution No. 250/2015 or the provision of Edenor’s service as repayment for the recognition under SEE Resolution No. 32/2015), by means of a Note or Resolution.  As for the income deriving from the funds to which SEE Resolution No. 745/2005 refers, it is recognized according to the amounts billed.  Recognition of compensation for injection of surplus gas – Resolution No. 1/2013 of the Hydrocarbon Investment Plan’s Strategic Planning and Coordination Committee  The recognition of income for the injection of surplus gas is covered by IAS 20 since it involves a compensation as a result of the production increase committed by Petrolera Pampa.  Its recognition is made at its fair value when there is reasonable assurance that it will be collected and that the conditions required have been complied.  This item has been disclosed under Compensation for Surplus Gas Injection - Resolution No. 1/2013, under Operating Income, in the Comprehensive Income (loss) Statement. Impairment of assets Property, plant and equipment and identifiable intangible assets, are reviewed for impairment at the lowest level for which there are separately identifiable cash flows (“CGUs”). Most of the main subsidiaries or joint ventures of the Company are a CGU, as they have only one power generation plant (generation segment), a power transmission network (transmission segment) or one concession area for the distribution of electricity (distribution segment), and areas of exploration and exploitation of oil and gas (oil


and gas segment). Consequently, each subsidiary and joint venture in these segments represents the lowest level of composition of assets generating independent cash flows. 63


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i.Assets subject to depreciation / amortization are reviewed for impairment when facts or circumstances show that the carrying amount may not be recoverable. ii.Goodwill: In accordance with the applicable accounting policies, goodwill is tested for impairment annually. The amounts recoverable from CGUs are determined based on the calculations of its value in use. iii.Intangible assets: Intangible assets having an indefinite useful life are not amortized. Intangible assets having an indefinite useful life are tested for impairment by comparing their recoverable amount with their book value: (i) annually; and (ii) at any time, if there is any indication that they may have been impaired. In order to evaluate if there is evidence that a CGU could be affected, both external and internal sources of information are analyzed.  Specific facts and circumstances are considered, which generally include the discount rate used in the estimates of the future cash flows of each CGU and the business condition as regards economic and market factors, such as the cost of raw materials, oil and gas, the regulatory framework for the energy industry (mainly the RTI / CMM and recognition of expected prices), the projected capital investments and the evolution of the energy demand. An impairment loss is recognized when the book value of the asset exceeds its recoverable value. The recoverable amount is the higher of the value in use and the fair value less costs of disposal. Any impairment loss will be allocated (to reduce the book value of the CGU's assets) in the following order: (a) first, to reduce the book value of goodwill assigned to the CGU, and (b) then, to the other assets in the cash generating unit (or group of units), prorated for the carrying amount of each asset in the unit (or group of units), taking into account not to reduce the carrying amount of the asset below the higher of its fair value less costs of disposal, its value in use or zero value. (c) any impairment loss which may not be allocated to the specific asset will be proportionately distributed among the remaining assets making up the CGU. The value in use of each CGU is estimated on the basis of the present value of the future net cash flows that these units will generate. The Company’s management uses approved budgets up to one-year for its cash flow projections extrapolated into a term consistent with the assets’ remaining useful life, taking into consideration a scrap value and the appropriate discount rates. In order to calculate the fair value less the costs to sale, the Company’s management uses the estimated value of the future cash flows that a market participant could generate from the appropriate CGU, and deducts the necessary costs to carry out the sale of the corresponding CGU. The Company’s management is required to make judgments at the moment of the future cash flow estimation. The actual cash flows and the values may differ significantly from the expected future cash flows and the related values obtained through discount techniques. Non-financial assets other than goodwill which have suffered impairment in the past are reviewed for a possible reversal of the impairment as at the closing date of the fiscal year. *Reversal of Property, Plant and Equipment Impairment in CPB* As at September 30, 2012, CPB recorded an impairment loss amounting to Ps. 108.3 million for its property, plant and equipment; which net of the effect of the income tax, amounted to Ps. 70.4 million; as a result of the assessment of their recoverable value. 64


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Impairment loss charges have been distributed on a pro rata basis in order to reduce the book value of the assets comprising the cash generating unit taking into consideration the book value of each of the unit’s assets. After recognizing the impairment loss, the asset’s depreciation charges have been adjusted during the following fiscal years to systematically distribute its reviewed book value less any possible residual value through its remaining useful life. Previously impaired non-financial assets are reviewed for a possible reversal of the impairment at each reporting date. With the implementation of SE Resolution No. 95/2013 and its amendment through SE Resolution No. 529/2014—which established a new remuneration scheme for the industry as from February 2013 and the later update of remunerative values effective as from February 2014, respectively—and the granting of financing by CAMMESA under advantageous conditions to CPB, which will allow to afford the cost of the capital investments necessary to recover the company’s plant operating capacity, CPB’s projections regarding the recoverability of its Property, Plant and Equipment and its deferred tax assets have been modified. As of September 30, 2014, CPB’s management reevaluated its discounted cash flows taking into consideration the new regulatory measures adopted by the National Government. As a result of the new estimates, CPB CGU’s value in use determined based on the present value of future net cash flows was Ps.274.4 million higher than its book value. Therefore, CPB as of December 31, 2014, recovered the above-mentioned impairment losses which, net of accumulated depreciation, amounted to Ps. 88.4 million (recognized under“Reversal of Impairment of Property, Plant and Equipment”in the Statement of Comprehensive Income) and, net of the effect of the income tax, amounted to Ps. 57.5 million. The affected Property, Plant and Equipment items were lands, buildings, machines and generation equipment.As of the date of this annual report, CPB has not identified any events or circumstances indicate that the book value as of December 31, 2015 may not be recoverable. *Test of impairment of property, plant and equipment and intangible assets associated with the subsidiary Edenor* As at December 31, 2011, the Company has recorded impairment losses associated with Edenor’s consolidated assets resulting from the assessment of their recoverable value. Depreciation losses totaled up Ps. 647.7 million which, net of the effect of the income tax, amounted to Ps. 421 million. Cash flows are prepared on the basis of estimates concerning the future performance of certain variables that are sensitive to the determination of the recoverable amount, among which the following can be noted: (i) nature, opportunity and  method of electricity rate increases and/or cost adjustment recognition; (ii) demand for electricity projections; (iii) evolution of the costs to be incurred, (iv) investment needs in accordance with the service quality levels required by the regulatory authority, and; (v) macroeconomic variables, such as growth rates, inflation rates and foreign currency exchange rates. The future increase in electricity tariffs used by Edenor to assess the recoverability of its long-lived assets as of December 31, 2015, is based on the rights to which Edenor is entitled, as stipulated in the concession agreement and the agreements described in Note 2 to the Financial Statements. Furthermore, the actions taken to maintain and guarantee the provision of the public service, the presentations made before regulatory authorities, the status quo of the discussions that are being held with government representatives, the announcements made by government officials concerning possible changes in the sector’s revenues to restore the economic and financial equation, and certain measures adopted. Edenor’s Management estimates that it is reasonable to expect that new increases in revenues will be obtained as from 2017 as a result of the carrying out during 2016 of the RTI. Edenor has made its projections under the assumption that it will obtain better electricity rates, in addition to the adjustments on account of the VAD provided for by Resolution No. 7/2016. However, due to the complexity of the RTI process Edenor’s Management may not ensure that the future performance of the variables used to make its projections will be in line with what it has estimated at the date of preparation of the Financial Statements. In order to contemplate the estimation risk contained in the projections of the aforementioned variables, Edenor has considered three different probability-weighted scenarios. Although in all of them it is estimated that


Edenor will succeed in reaching an acceptable agreement with the Government resulting in a gradual tariff increase, Edenor has considered different timing and magnitude of an increase in the VAD. 65


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The scenarios that have been considered are the following: i.Pessimistic scenario: in this scenario, Edenor assumes modest electricity tariff increases as from 2017 as a result of the gradual implementation of the RTI. A five-year term payment plan is established for the penalties owed to customers, whereas those owed to the ENRE are waived. The debt with CAMMESA (for energy and loans), including interest, is paid in 4 years. Probability of occurrence assigned 20%. ii.Intermediate scenario: in this case, Edenor assumes reasonable electricity tariff increases as from 2017 as a result of the gradual implementation of the RTI. A five-year term payment plan is established for the penalties owed to customers, whereas those owed to the ENRE are waived. The debt with CAMMESA (for energy and loans), including interest, is paid in 10 years with funds deriving from a specific charge included in the electricity bills. Probability of occurrence assigned 65%. iii.Optimistic scenario: in this case, Edenor assumes increases in its remuneration, in addition to the ones recognized in the Intermediate scenario, as from 2017 as a result of the gradual implementation of the RTI. A five-year term payment plan is established for the penalties owed to customers, whereas those owed to the ENRE are waived. The debt with CAMMESA (for energy and loans for consumption) is waived as part of the Concession Agreement renegotiation process. Probability of occurrence assigned 15%.  Edenor has assigned to these three scenarios the previously described percentages of probability of occurrence based mainly on experience  and considering the present economic and financial situation, the status quo of the conversations that are being held with the Argentine Government and the need to maintain the public service, object of the concession, in operation. In all the scenarios a different after tax discount rate (WACC) in pesos has been used for each year of the projection. For the first 5 years, the average of these rates is 31%. Sensitivity analysis: The main factors that could result in impairment charges in future periods are: i) a distortion in the nature, opportunity and method of the electricity tariff increases and recognition of cost adjustments, ii) the development of the costs to be incurred and iii) the investment needs in accordance with the service quality levels required by the regulatory authority in the RTI, among other factors. These factors have been taken into account in the aforementioned weight of scenarios. Due to the inherent uncertainty involved in these assumptions, Edenor estimates that any sensitivity analysis that considers changes in any of them considered individually could lead to distorting conclusions. Based on the conclusions previously mentioned, the valuation of property, plant and equipment, taken as a whole, does not exceed its recoverable value, which is measured as the value in use as of December 31, 2015. Furthermore, the management understands that although these estimates may show an increase in the CGU’s value, actual measurements obtained so far are insufficient to consider a sustainable recovery which can be confirmed with the conclusion of the RTI expected to be completed during 2016, and consequently evaluate the possible reversal of the impairment loss recognized by the Company during fiscal year 2011. Allowance for doubtful accounts The Group is exposed to losses for uncollectible receivables. The Company’s management estimates the final collectability of the accounts receivable. 66


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The allowance for the impairment of accounts receivable is assessed based on the historical level of both the balances written off as an expense and the default balances. Additionally, Edenor’s Management records an allowance applying an uncollectibility rate for customer category, tariff, customers included in the Framework Agreement, and customers not included in the Framework Agreement. In order to estimate collections related to the energy generation segment we mainly consider the ability of CAMMESA to meet its payment obligations to generators, and the resolutions issued by SE, which allow the Company to collect its credits with CAMMESA through different mechanisms. Additionally, management analyzes the allowance for uncollectible receivables of the remaining accounts receivables of the segment based on an individual analysis of recoverability of receivables of the WEM debtors. Future adjustments to the allowance may be necessary if future economic conditions differ substantially from the assumptions used in the assessment for each year. We believe that the accounting policy relating to the allowance for doubtful accounts is a “critical accounting policy” because it requires management to make estimates and assumptions with respect to our receivables collection due to uncollectible accounts, which is susceptible to change from period to period, and as such the impact on our financial position and results of operations could be material. *Provisions for legal claims* The Company is subject to several lawsuits, complaints and other legal proceedings, including customers’ claims, where a third party seeks the payment of damages, reimbursement for losses or compensation. The Company’s potential liability as regards these claims, lawsuits and other legal proceedings cannot be estimated for sure. The Company’s management, with the assistance of its legal counselors (lawyers) regularly reviews the status of each important proceeding and assesses its potential financial exposure. If the loss derived from a lawsuit or legal proceeding is deemed probable and the amount can be reasonably estimated, the Company establishes allowance provision. The provision for contingent losses reflect a reasonable estimation that losses will be incurred, based on information available to the management at the Restated Consolidated Financial Statements date, and taking into account our litigation and resolution/settlement strategies. These estimates are prepared mainly with the help of legal counsel. However, if the Company’s management estimates are incorrect, current provisions might be inadequate and derive in a charge to profits that could have an adverse effect on the balance sheet, comprehensive income (loss) statement, statements of changes in equity and cash flows. With respect to the loss contingencies described in our Restated Consolidated Financial Statements, we do not expect to incur any losses exceeding the amounts accrued as of December 31, 2015, that would be material relative to our consolidated financial position, results of operations or liquidity as of such date. However, if reserves prove to be inadequate and we incur a charge to earnings, such charge could have a material adverse effect on our results of operations, financial condition and net worth. For more information regarding the balances for provision for contingencies see Note 37 to our audited Financial Statements. *Current and deferred Income tax / Minimum notional income tax* A great level of judgment is required to determine the income tax provision since the Company Management has to regularly assess the positions stated in the tax returns as regards those situations where the applicable tax regulations are subject to interpretation and, if necessary, establish provisions according to the estimated amount that the Company will have to pay to the tax authorities. When the final tax result of these items differs from the amounts initially acknowledged, those differences will have an effect on the income tax and on the deferred tax provisions in the fiscal year when such determination is made. A significant degree of judgment is required to determine the income tax provision. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company recognizes liabilities for eventual tax claims based on estimates of whether additional taxes will be due in the future. 67


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Deferred tax assets are reviewed at each reporting date and reduced in accordance with the probability that the sufficient taxable base will be available to allow for the total or partial recovery of these assets. Deferred tax assets and liabilities are not discounted. In assessing the realization of deferred tax assets, Management considers that it is likely that a portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income in the periods in which these temporary differences become deductible. To make this assessment, Management takes into consideration the scheduled reversal of deferred tax liabilities, the projections of future taxable income and tax planning strategies. Defined benefit plans The liability recognized by the Company is the best estimate of the present value of the cash flows representing the benefit plan obligation at the closing date of the year. Cash flows are discounted using actuarial assumptions about demographic and financial variables that affect the determination of the amount of such benefits. Such estimate is based on actuarial calculations made by independent professionals in accordance with the projected unit credit method. ENRE penalties and discounts Edenor consider its accounting policy for the recognition of ENRE Penalties and Discounts critical because it depends on the penalizable events which are valued on the basis of management’s best estimate of the expenditure required to settle the present obligation at the date of this annual report. The balances corresponding to ENRE Penalties and Discounts are adjusted in accordance with the regulatory framework applicable thereto and have been estimated based on Edenor’s estimate of the outcome of the RTI process described in Note 2 to the Financial Statements. Oil and Gas Reserves  Reserves are oil and gas volumes (expressed in oil-equivalent m3) originated from or associated with any economic income in the areas where Petrolera Pampa operates and over which it holds exploration and exploitation rights.  Crude oil and gas reserves estimates are an essential part of Petrolera Pampa’s decision-making process. Crude oil and gas reserves volumes are taken into consideration in the calculation of depreciation -by using the production unit ratio- and to evaluate exploration and exploitation asset investments’recoverable amounts.  Reserves estimates have been prepared by Petrolera Pampa’s technical staff, and are based on the technological and economic conditions prevailing as of December 31, 2015, taking into consideration their economic evaluation and the expiration of the relevant concession to determine their recoverability period.  The estimates are adjusted every time changes in the evaluated aspects so justify, or at least once a year. These reserves estimates have been certified by independent hydrocarbon counseling firms for the last time as of December 31, 2015.  There are numerous factors giving rise to uncertainty regarding the estimate of proven reserves and of future production profiles, prices and development costs, several of which are beyond the producer’s control. The reserves calculation procedure is a subjective process for estimating the crude oil and natural gas recoverable from the subsoil which involves a high degree of uncertainty. The reserves estimate is prepared based on the quality of the geological and engineering information available at the date in which the report is issued, as well as on its interpretation.  Asset retirement obligation  The obligations relating to the decommissioning of wells after completion of the operations Petrolera Pampa’s management to make estimates about the costs of abandonment in the long-term and the time remaining until the abandonment. Notably, technology, costs and policy, security and environmental considerations are, continually changing, which may result in differences between the actual future costs and estimates. 68


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Estimated future costs of wells plugging and abandonment in the hydrocarbon areas, discounted at a rate estimated at the time of their initial measuring, are capitalized together with the assets originating them, and are depreciated using the unit-of-production method. Additionally, a liability is acknowledged for this item at the estimated value of discounted payables.  Going concern status  The  jointly controlled company Citelec have prepared their Financial Statements in accordance with the accounting principles applicable to a going concern, assuming that the companies will continue to operate normally. Therefore, they do not include the effects of the adjustments or reclassifications, if any, that might be necessary to make as a consequence of the situation described as follows, as well as its impact on the Financial Statements.  Transmission Even though it is still difficult to forecast the evolution of the topics stated in Note 2 to the Financial Statements and their possible impact on Citelec’s business and cash flows, the execution of the Renewal Agreement constitutes a remarkable milestone towards the consolidation of Citelec’s economic and financial equation. Citelec has prepared its financial statements using the accounting principles applicable to an on-going business. Consequently, these statements do not include the effects of any applicable adjustment or reclassification in case these situations are not resolved favorably to the continuity of Citelec’s operations and, thus, this company would be forced to realize its assets and cancel its liabilities, including contingent ones, under conditions that are not in its ordinary course of business.  The interest in the joint venture represents about 1% of the Group’s assets and approximately 0.2% of the Group’s income. Additionally, the Company’s management considers that the uncertainty regarding Citelec’s joint venture does not affect its capacity to continue operating on an ordinary basis, mainly due to the following reasons: (i) there is no financial dependence on Citelec, as this joint venture has not paid it any dividends since its acquisition date in 2006; (ii) even though there is an enforceable and binding technical assistance agreement with Transener, the Company does not depend on this flow of funds to normally develop its activities; and (iii) the Company is not contractually obliged to provide financial assistance to Citelec.  Results of Operations The table below provides a summary of our results of operations for the years ended December 31, 2015, 2014 and 2013. 69


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70


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71


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The Company is engaged in the electricity sector, with a participation in the electricity generation, transmission and distribution segments through different legal entities.As of December 31, 2015, in view of the growth of the operations of Petrolera Pampa, the Company has identified Oil and Gas as a new segment. Therefore, the comparative information by segment in the Holding and others segment has been restated in its entirely.Accordingly, the following business segments have been identified by means of its subsidiaries and based on the nature, customers and risks involved: Generation, comprised by a direct and indirect equity interest in Piedra Buena, Güemes, Loma la Lata, HINISA, HIDISA, Pampa Comercializadora S.A and investments in shares in other companies related to the electricity generation sector. Transmission, comprised by an indirect equity interest through Citelec in Transener and its subsidiaries. For the purposes of presenting segment information the indirect equity interest has been consolidated proportionally. Distribution, comprised by an indirect equity interest in EASA and Edenor. Oil and gas, comprised by a direct interest in Petrolera Pampa dedicated to exploration and exploitation of oil and gas. Holding and others, comprised by a financial investment operations, holding activities, and other businesses. The Company manages its segments to the net income level of reporting. The segment called “Electricity transmission”, which corresponds to the Company’s indirect interest in Citelec and its subsidiaries, has been included as a reportable segment since it is considered as such in the reports received by the Executive Director of the Company. Since the stake in such companies constitutes an interest in a joint venture, it is not consolidated and it is valued according to the equity method of accounting in the Restated Consolidated Financial Statement.  72


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*Year**ended December 31, 2015 compared to year ended December 31, 2014* *Generation Segment* Generation net sales increased by 8.7% to Ps.2,473.2 million for the fiscal year ended December 31, 2015, from Ps.2,275.5 million for the same period in 2014. The rise of Ps.197.8 million in electricity generation net sales was mainly due to an increase in the average electricity selling prices calculated for the segment (Ps.279.3 per MWh for the fiscal year ended December 31, 2015, compared to Ps.225.3 per MWh for the same period in 2014, which represents a sales increase of Ps.529.1 million), which increase was partially offset by a decrease in the amount of electricity sold by the segment (8,660.7 GWh for the fiscal year ended December 31, 2015, compared to 9,802.0 GWh for the same period in 2014, which represents a Ps.318.7 million decrease in sales). Average electricity generation selling prices in this segment reflects the impact of the pricing scheme update set out in SE Resolution No. 95/2013, which was implemented in July 2015 and became effective as of February 2015,as well as the effect of changes in the exchange rate which impacted Energía Plus and SE Resolution No. 220/2007 agreements. Moreover, the decrease in electricity sales (in GWh) was mainly due to scheduled overhauls in Loma de la Lata and CPB, which were partly offset by a higher dispatch at CTG and CTP. In our hydroelectric power units, despite the lower water flow and input levels in the area, the joint sales in 2015 were 5 GWh lower than that in 2014.The following table shows net electricity sales (in GWh) for power generation plants:    Generation cost of sales increased by 13.7%, to Ps.1,337.5 million for the fiscal year ended December 31, 2015, from Ps.1,176.7 million for the same period in 2014, mainly due to higher labor costs of 33.8% in our hydroelectric power units and of 33.4% in our thermal power units, and higher materials and maintenance costs in our thermal power units of 89.1% and 50.9%, respectively, resulting from scheduled overhauls in Loma de la Lata and CPB. These higher costs were partially offset with lower energy purchases in our hydroelectric and thermal power units which decrease by 91.1% and 3.8%, respectively, since MAT contracts are managed by CAMMESA as from the implementation of SE Resolution No. 95/2013. In addition, there was a drop of 72.3% in penalties and of 30.4% in gas consumption costs as a result of scheduled overhauls at Loma de la Lata. The following table shows the main components of our generation segment cost of sales for the specified periods:  73


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Therefore, our generation segment gross profit increased by 3.4% to Ps.1,135.8 million for the fiscal year ended December 31, 2015, compared to Ps.1,098.8 million for the same period in 2014.  Selling expenses from our generation segment increased to Ps.23.5 million for the fiscal year ended December 31, 2015, compared to Ps.17.9 million for the same period in 2014, mainly due to a Ps.3.0 million increase in labor costs, a Ps.1.4 million increase in taxes, rates and contributions and doubtful accounts and selling expenses for Ps.1.2 million. Selling expenses relating to our hydroelectric power units amounted to Ps.9.7 million and Ps.8.4 million, and those corresponding to our thermal power units reached Ps.13.8 million and Ps.9.5 million for the fiscal years ended December 31, 2015 and 2014, respectively. The following table shows the main components of our generation segment selling expenses for the specified periods: 74


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Generation administrative expenses increased to Ps.262.7 million for the fiscal year ended December 31, 2015 from Ps.200.0 million for the same period in 2014, mainly due to a 61.4% increase in labor costs borne by our generation subsidiaries, which were partly offset by a 13.0% decrease in the fees for third-party services, a 57.7% decrease in taxes, rates and contributions and a 28.1% decrease in depreciation and amortization. Administrative expenses corresponding to our hydroelectric power units amounted to Ps.26.5 million and Ps.21.5 million, and those corresponding to our thermal power units reached Ps.236.2 million and Ps.178.5 million for the fiscal years ended December 31, 2015 and 2014, respectively. The following table shows the main components of our generation segment administrative expenses for the specified periods:     Other generation operating income and expenses decreased by 70.0%, to a profit of Ps.12.0 million for the fiscal year ended December 31, 2015, compared to Ps.39.9 million for the same period in 2014. This decrease was mainly as a result of non-recurrent income during 2015 that amounted to Ps.74.8 million in connection with compensation received by Loma de la Lata pursuant to the Arbitral Award ruled in its favor against the Project Counterparties (see “Item 8 – Legal Proceedings involving Loma de la Lata”), while during fiscal year 2014 recovery of insurance, receivables and taxes were disclosed for a total amount of Ps.93.1 million. The following table shows the main components of our generation segment other operating income and expenses for the specified periods:  75


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Generation operating income decreased by 12.1% to Ps.886.8 million for the fiscal year ended December 31, 2015, compared to Ps.1,009.1 million for the same period in 2014.Operating profit further reflectsthe reversal of an impairment in property, plant and equipment by Ps.25.3 million and Ps.88.4 million on December 31, 2015 and 2014, respectively.  Generation financial results accounted for a loss of Ps.144.6 million for the fiscal year ended December 31, 2015, compared to a loss of Ps.152.1 million for the same period in 2014, mainly due to lower revenues from adjustments to current value of CAMMESA’s consolidated credits (Ps.196.4 million), lower net income for changes in the fair value of financial instruments (Ps.70.9 million) and arbitral proceedings interest (Ps.30.4 million) which were partly offset by net foreign exchange losses (Ps.264.2 million), lower net income for commercial interest (Ps.12.6 million), an increase in fiscal interest (P.17.1 million) and an increase in net financial interest (Ps.45.4 million). The following table shows the main components of our generation segment financial results for the specified periods: 76


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Our generation segment recorded an income tax charge of Ps.192.4 million for the fiscal year ended December 31, 2015, compared to a charge of Ps.224.1 million for the same period in 2014. Finally, our generation segment recorded a net profit of Ps.549.8 million for the fiscal year ended December 31, 2015, of which Ps.496.9 million are attributable to the owners of the Company, compared to a net profit of Ps.529.3 million recorded in the same period in 2014, attributable to the owners of the Company. Transmission Segment Transmission net sales increased by 31.8% to Ps.973.4 million for the fiscal year ended December 31, 2015, compared to Ps.738.4 million for the same period in 2014. Net regulated sales increased by 52.4% to Ps.879.6 million for the fiscal year ended December 31, 2015, from Ps.577.2 million recorded for the same period in 2014, mainly as a result of greater recognition of cost variations (Ps.663.1 million in 2015 compared to Ps.425.0 million in 2014) pursuant to the Instrumental Agreement and the Renewal Agreement entered into by Transener, Transba, the SE, and the ENRE. During 2015, no net revenues from Fourth Line royalties were recognized, whereas Ps.9.1 million were recorded for the same period in 2014. Effective as from January 1, 2015, Transener no longer accrues recurring financial income from Fourth Line’s retroactive royalties and therefore it has requested the ENRE an update of operation and maintenance costs. Other sales decreased by 38.3% to Ps.93.9 million for the fiscal year ended December 31, 2015, compared to Ps.152.1 million for the same period in 2014, mainly as a result of lower unregulated revenues from Transener (supervision and construction works) and Transba. Transmission cost of sales increased by 23.4% to Ps.666.0 million for the fiscal year ended December 31, 2015 compared to Ps.539.7 million for the same period in 2014, mainly due to a 31.1% increase in labor costs  in


2015, which were partly offset by a 76.3% decrease in the consumption of materials. The following table shows the main components of our transmission segment cost of sales for the specified periods: 77


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Therefore, transmission gross profits increased to Ps.307.4 million for the fiscal year ended December 31, 2015, from a Ps.198.7 million profit for the same period in 2014, mainly as a result of greater sales arising from the Instrumental Agreement and the Renewal Agreement.  We do not record selling expenses related to our transmission activities.  Transmission administrative expenses increased by 36.8% to Ps.125.6 million for the fiscal year ended December 31, 2015, compared to Ps.91.8 million for the same period in 2014, mainly due to a 38.8% labor cost increase associated with higher salaries. The following table shows the main components of our transmission segment administrative expenses for the specified periods:       Other transmission operating income and expenses recorded a loss of Ps.12.4 million for the fiscal year ended December 31, 2015, compared to Ps.7.6 million loss for the same period in 2014. The following table shows the main components of our transmission segment other operating income and expenses for the specified periods:  78


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Transmission operating income accounted for a profit of Ps.169.4 million for the fiscal year ended December 31, 2015, 70.6% higher than the profit of Ps.99.3 million for the same period in 2014, mainly as a result of increases in regulated sales, which were partly offset by increases in the above-described costs and expenses.  Transmission financial results accounted for a loss of Ps.122.9 million for the fiscal year ended December 31, 2015, compared to a profit of Ps.24.7 million for the same period in 2014, mainly as a result of an increase in foreign exchange losses and financial interest on liabilities (Ps.2.5 million), and a decrease in the profits from interest income from the Fourth Line and the IVC under the Memorandum of Understanding (Ps.32.4 million). The following table shows the main components of our transmission segment financial results for the specified periods:    Our transmission segment recorded an income tax charge of Ps.18.8 million for the fiscal year ended December 31, 2015, compared to a charge of Ps.51.4 million for the same period in 2014.  Finally, our transmission segment recorded a net profit of Ps.9.1 million for the fiscal year ended December 31, 2015, compared to a net profit of Ps.34.1 million for the same period in 2014, both attributable to the Company’s owners.  Distribution Segment  Net sales from our distribution activities increased by 5.7% to Ps.3,802.2 million in the fiscal year ended December 31, 2015, compared to Ps.3,598.4 million for the same period in 2014, mainly due to charges collected


from Edenor’s customers to be allocated to the FOCEDE fund, implemented under Resolution No. 347/2012. Edenor’s electricity sales volume between 2014 and 2015increased by 1,089 GWh to 22,381 GWh in 2015, compared to 21,292 GWh in 2014. 79


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The cost of sales increased by 10.0% to Ps.5,189.0 million in the fiscal year ended December 31, 2015, compared to Ps.4,716.5 million for the same period in 2014, mainly due to an increase in labor costs of 35.4% and in power purchases of 7.7%mainly attributableto higher labor costs as a result of an increase in the number of employees and employee compensation andhigher energy purchases due to the increase in the volume of electricity sales, which were partly offset with a decrease in fees and compensations for third-party services in 35.2%. The following table shows the main components of our distribution segment cost of sales for the specified periods:    Therefore, the gross loss from our distribution activities increased to Ps.1,386.9 million in the fiscal year ended December 31, 2015, compared to a loss of Ps.1,118.1 million for the same period in 2014, mainly due to the increase in the cost of sales, increase that was not offset by a revenue increase.  Selling expenses increased by 26.5% to Ps.833.4 million in the fiscal year ended December 31, 2015, compared to Ps.658.9 million for the same period in 2014, mainly due to increases in third-party compensation of 25.4%, labor costs increases resulting from granted wage increases of 20.4% and communication expenses increases of 50.3%. The following table shows the main components of our distribution segment selling expenses for the specified periods:   80


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Administrative expenses from our distribution segment increased by 39.5% to Ps.711.9 million for the fiscal year ended December 31, 2015, compared to Ps.510.3 million for the same period in 2014, mainly due to labor cost increases resulting from wage increases of 35.5%, and increases in third-party compensation and fees between both periods of 36.1%. The following table shows the main components of our distribution segment administrative expenses for the specified periods:     Other operating income and expenses for the fiscal year ended December 31, 2015 amounted to a net loss of Ps.504.3 million, compared to a loss of Ps.266.1 million for the same period in 2014, which was mainly due to higher losses from provisions for liabilities (Ps.151.0) and uncollectible tax credits (Ps.80.6), voluntary retirements (Ps.18.2 million) and debit and credit tax (Ps.21.1 million). These effects were partly offset with an increase in the income from services to third parties (Ps.20.3 million) and a decrease in expenses under the FOCEDE fund implemented under Resolution no. 347/2012 (Ps.38.1 million). The following table shows the main components of our distribution segment other operating income and expenses for the specified periods:    Operating income from our distribution activities increased by Ps.2,421.7 million to a profit of Ps.2,140.2 million for the fiscal year ended December 31, 2015, compared to a loss of Ps.281.5 million for the same period in 2014, mainly due to the fact that the implementation of SE Resolution No. 32/15 exceeded operating costs. Under this resolution there was a recognition of income for Ps.5,576.6 million compared to Ps.2271.9 million for the same period in 2014, which were recognized under SE Resolution No. 250/13 and subsequent Notes. Excluding such effect, operating income from our distribution segment would account for a loss of Ps.3,436.4 million and Ps.2,553.4 million for fiscal years 2015 and 2014, respectively.  Financial results related to our distribution activities represented a loss of Ps.1,351.1 million for the fiscal year ended December 31, 2015, a 37.6% higher the loss compared to Ps.981.6 million loss for the same period of 2014, primarily due to the appreciation of the U.S. Dollar on the outstanding debt incurred in said currency


(Ps.577.3 million), losses  in financial liability interest (Ps.166.6 million), and a decrease in the income from financial interest due to the implementation of SE Resolution No. 250/2013 and subsequent Notes (Ps.145.6 million). These were partially offset by higher income from changes in the fair value of financial assets (Ps.283.7 million) and lower losses from commercial interest due to the incurred debt with CAMMESA (Ps.267.2 million). The following table illustrates the main components of financial results from our distribution segment: 81


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In turn, our distribution operations recorded an income tax charge of Ps.176.3 million in the fiscal year ended December 31, 2015, compared to Ps.161.8 million credits in the same period of 2014.  Finally, our distribution activities registered a net profit of Ps.612.8 million for the fiscal year ended December 31, 2015, of which Ps.59.1 million are attributable to the Company’s owners, compared to a loss of Ps.742.1 million for the same period in 2014 attributable to the Company’s owners .  82


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Oil and gas Segment Net sales related to our oil and gas segment  increased to Ps.943.5 million for the fiscal year ended December 31, 2015, 164.4% higher compared to Ps.356.8 million in  the same period of 2014 mainly due to an increase in sales primarily as a result ofhigher productionin the Rincón del Mangrullo Block and the entry into effect of the Addendum to the investment Agreement with YPF. The following table shows Petrolera Pampa’s oil and gas production under the investment agreements entered into by Petrolera Pampa for the specified periods:    Cost of sales related to our oil and gas segment increased by 228.1% to Ps.660.0 million for the fiscal year ended December 31, 2015, compared to Ps.201.2 million for the same period of 2014, mainly due to higher costs from well depreciation (Ps.194.4 million), costs of internal consumption of oil and gas production (Ps.125.2 million)as a result of increased production in the Rincón del Mangrullo Block and the entry into effect of the Addendum to the investment Agreement with YPF,and fees for third-party services (Ps.54.1 million). The following table shows the main components of cost of sales from our oil and gas segment for the specified periods:     Therefore, gross profit related to our oil and gas segment increased by 82.2% to Ps.283.5 million for the fiscal year ended December 31, 2015, compared to Ps.155.6 million for the same period in 2014.  Selling expenses related to our oil and gas segment increased to Ps.115.7 million for the fiscal year ended December 31, 2015, compared to Ps.36.5 million for the same period of  2014, mainly due to the accrual of higher costs under compensation agreements for the benefit of certain officers of Petrolera Pampa (Ps.55.0 million) and


higher tax losses (Ps.22.7 million). The following table shows the main components of our oil and gas segment selling expenses for the specified periods: 83


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Administrative expenses increased Ps.149.7 million for the fiscal year ended December 31, 2015, compared to Ps.71.1 million for the same period of 2014, principally due to the accrual of higher costs under compensation agreements for the benefit of certain officers of Petrolera Pampa (Ps.75.4 million) and higher labor costs (Ps.7.3 million), which were partly offset by lower fees for third-party services (Ps.6.2 million). The following table illustrates the main components of administrative expenses from our oil and gas segment for the specified periods:    Other operating income from our oil and gas activities registered a profit of Ps.466.8 million for the fiscal year ended December 31, 2015, 437.3% higher compared to the profit of Ps.86.9 million for the same period in 2014, mainly due to an increase in the additional compensation under the Surplus Injection Promotion Program implemented by Resolution No. 1/2013 (Ps.546.8 million for the same period in 2015, compared to Ps.127.1 million in 2014). The following table shows the main components of other operating income and expenses of our oil and gas segment for the specified periods:    The operating gain related to our oil and gas segment amounted to Ps.484.8 million for the fiscal year ended December 31, 2015, compared to Ps.134.9 million for the same period in 2014.  84


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Financial results related to our oil and gas activities represented a profit of Ps.30.5 million for the fiscal year ended December 31, 2015, compared to a loss of Ps.40.7 million for the same period of 2014, mainly due to higher profits from net foreign exchange differences on account of the devaluation of the Peso, the currency in which most of Petrolera Pampa’s debt is denominated (Ps.201.9 million), and changes in the fair value of financial assets (Ps.101.9 million), which were partly offset by higher losses from financial interests (Ps.208.9 million). The following table shows the main components of the financial results from our oil and gas segment for the specified periods:    Also, our oil and gas segment recorded an income tax charge of Ps.163.6 million for the fiscal year ended December 31, 2015, compared to a charge of Ps.10.2 million for the same period in 2014.  Finally, our oil and gas segment registered a net profit of Ps.351.8 million for the fiscal year ended December 31, 2015, of which Ps.174.6 million are attributable to the owners of the Company, compared to a profit of Ps.41.9 million for the same period in 2014, attributable to the owners of the Company.  85


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Holding and Others Segment Net sales related to our holding and others segment were Ps.53.6 million for the fiscal year ended December 31, 2015, 20.4% lower compared to Ps.67.2 million in the same period of 2014. These sales mostly correspond to fees collected from companies of our other segments.  Cost of sales related to our holding and others segment increased by 14.1% to Ps.2.3 million in the fiscal year ended December 31, 2015, compared to Ps.2.0 million for the same period of 2014, mainly due to higher labor costs (Ps.0.7 million). The following table illustrates the main components of costs of sales from our holding and others segment for the specified periods:    Therefore, gross profit related to our holding and others segment was Ps.51.3 million for the fiscal year ended December 31, 2015, 21.4% lower compared to Ps.65.3 million for the same period of 2014.  We did not record significant selling expenses related to our holding and others segment.  Administrative expenses increased 60.5% to Ps.130.7 million for the fiscal year ended December 31, 2015, compared to Ps.81.5 million for the same period in 2014, principally due to higher fees of directors and statutory auditors (Ps.19.3 million), fees for third-party services (Ps.19.0 million) and taxes, rates and contributions (Ps.18.7 million). These effects were partly offset by lower labor costs (Ps.4.2 million). The following table illustrates the main components of administrative expenses from our holding and others segment for the specified periods:    Other operating income and expenses from our holding and others segment registered a profit of Ps.211.8 million during fiscal year ended December 31, 2015, 4,955.4% higher compared to a gain of Ps.4.2 million for the same period in 2014. Mainly due to the profits registered of Ps.215.4 million from the cancellation of TGS loan granted by TGS through the assignment of the ICSID Claim to TGS (See Item 4 – Our Business – TGS – Ciesa Transaction”). The following table shows the main components of our holding and other segment other operating income and expenses for the specified periods:  86


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The operating gain related to our holding and others segment amounted to Ps.122.4 million for the fiscal year ended December 31, 2015, compared to an operating loss of Ps.13.6 million for the same period in 2014, primarily due to the profits arising from the cancellation of the debt under the loan granted by TGS described above.  Financial results related to holding and others segment represented a profit of Ps.2,257.4 million for the fiscal year ended December 31, 2015, compared to Ps.921.4 million for the same period in 2014, mainly due to higher profits for changes in the fair value of financial assets (Ps.1,074.8 million), net foreign exchange differences (Ps.262.1 million) and the repurchase of corporate bonds (Ps.7.2 million), partially offset by higher losses from net financial interest (Ps.1.1 million) and fiscal interest (Ps.8.3 million). The following table illustrates the main components of financial results from our holding and others segment for the specified periods:     Also, our holding and others segment recorded an income tax charge of Ps.54.5 million for the fiscal year ended December 31, 2015, compared to a charge of Ps.27.8 million for the same period of 2014.  87


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Finally, our holding and others segment registered a net profit of Ps.2,325.3 million for the fiscal year ended December 31, 2015 compared to a net profit of Ps.879.9 million recorded in the same period of 2014, attributable to the Company’s owners.  88


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*Yearended December 31, 2014 compared to year ended December 31, 2013* *Generation Segment* Generation net sales increased by 31.4% to Ps. 2,275.5 million for the fiscal year ended December 31, 2014 from Ps.1,731.3 million for the same period in 2013. The increase of Ps.544.1 million in electricity generation net sales was mainly due to the combined effect of the growth in average electricity selling prices calculated for the segment (Ps.225.3 per MWh for the fiscal year ended December 31, 2014, compared to Ps.193.0 per MWh for the same period in 2013, which represents a sales increase of Ps.287.8 million), and also due to the amount of electricity sold for the segment (9,802.0 GWh for the fiscal year ended December 31, 2014, compared to 8,908.8 GWh for the same period in 2013, which represents a sales increase of Ps.201.2 million). Average electricity generation selling prices in this segment reflects the impact of the pricing scheme provided in SE Resolution No. 529/2014, which was passed in May 2014 and changed the remuneration scheme provided under SE Resolution No. 95/2013 with retroactive effect to February 2013 and the changes in the exchange rate, which impacted our Energía Plus and SE Resolution No. 220/2007 agreements. Moreover, the increase in electricity sales (in GWh) was mainly due to greater generation in CTLL’s steam turbine and a higher dispatch at CPB. Both effects were partly offset by a lower dispatch at CTG, as well as to a lower dispatch in our hydraulic units, on account of lower water input levels in the area. The following table shows net electricity sales (in GWh) from the power generation plants:   Generation cost of sales decreased by 17.5% to Ps.1,176.7 million for the fiscal year ended December 31, 2014 from Ps.1,426.8 million for the same period in 2013, mainly due to the decline in energy purchases of 80.8% in our hydroelectric power units and of 47.3% in our thermal power units, due to the fact that as from the implementation of SE Resolution No. 95/2013 the WEM agreement administration has been managed by CAMMESA. The reduction in cost of sales was also due to a drop of 84.0% in penalties and 20.3% in maintenance costs of our thermal power units as CTLL’s steam turbine was fixed. These effects were partly offset by greater labor costs of 32.8% in our hydraulic power units and of 41.1% in our thermal power units, as well as a 42.9% increase in our hydroelectric facilities maintenance costs. The following table shows the main components of our generation segment cost of sales for the specified periods:     89


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Therefore, our generation segment gross profit increased by 260.8% to Ps.1,098.8 million for the fiscal year ended December 31, 2014 compared to Ps.304.5 million for the same period in 2013. Selling expenses from our generation segment decreased to Ps.17.9 million for the fiscal year ended December 31, 2014, compared to Ps.78.5 million for the same period in 2013, mainly due to a Ps.44.7 million decrease in the amount paid for tax sales and a Ps.16.1 million decrease in doubtful accounts. Selling expenses relating to our hydroelectric power units amounted to Ps.8.4 million and Ps.22.0 million, and those corresponding to our thermal power units reached Ps.9.5 million and Ps.56.5 million for the fiscal years ended December 31, 2014 and 2013, respectively. The following table shows the main components of our generation segment selling expenses for the specified periods: 90


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Generation administrative expenses increased to Ps.200.0 million for the fiscal year ended December 31, 2014, compared to Ps.139.0 million for the same period in 2013, mainly due to higher labor costs in our generation subsidiaries. Administrative expenses corresponding to our hydroelectric units amounted to Ps.21.5 million and Ps.20.2 million, while our thermal power units amounted to Ps.178.5 million and Ps.118.8 million for the fiscal years ended December 31, 2014 and 2013, respectively. The following table shows the main components of our generation segment administrative expenses segment for the specified periods:   Other generation operating income and expenses resulted in a total profit of Ps. 39.9 million and Ps.315.9 million for the fiscal years ended December 31, 2014 and 2013, respectively, mainly due to the recovery of insurance claims registered by CTLL and the registration of the discount granted as compensation for breaches (reversal of the provision) of the Isolux agreement for CTLL expansion works in 2013. The following table shows the main components of our generation segment other operating income and expenses for the specified periods:  91


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Generation operating income increased by 150.5% to Ps.1,009.1 million for the fiscal year ended December 31, 2014, compared to Ps.402.8 million for the same period in 2013.Operating profit further reflectsthe reversal of an impairment in property, plant and equipment by Ps.88.4 million in December 31, 2014. Generation financial results accounted for a loss of Ps.152.1 million for the fiscal year ended December 31, 2014, compared to a loss of Ps.590.0 million for the same period in 2013, mainly due to an increase in adjustments to current value of CAMMESA’s consolidated credits (Ps.375.6 million) and income for commercial interest (141.0 million), which were partly offset by an increase in net foreign exchange losses (Ps.104.8 million).The following table shows the main components of our generation segment financial income for the specified periods:  92


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Our generation segment recorded an income tax charge of Ps.224.1 million for the fiscal year ended December 31, 2014, compared to a charge of Ps.20.7 million for the same period in 2013. Finally, our generation segment recorded a net profit of Ps.633.0 million for the fiscal year ended December 31, 2014, of which Ps.529.3 million are attributable to the owners of the Company, compared to a loss of Ps.191.9 million for the same period in 2013 attributable to the owners of the Company. Transmission Segment Transmission net sales increased by 69.0% to Ps.738.4 million for the fiscal year ended December 31, 2014, compared to Ps.436.9 million for the same period in 2013. Net regulated sales increased by 72.1% to Ps.577.2 million for the fiscal year ended December 31, 2014, from Ps.335.4 million recorded for the same period in 2013, mainly as a result of greater recognition of cost variations (Ps.425.0 million in 2014 compared to Ps.183.6 million in 2013), pursuant to the Instrumental Agreement and the Renewal Agreement. Net revenues from royalties increased by 19.3% to Ps.9.1 million for the fiscal year ended December 31, 2014 from Ps.7.6 million for the same period in 2013. Other sales increased by 62.0% to Ps.152.1 million for the fiscal year ended December 31, 2014 from Ps.93.9 million for the same period in 2013, mainly as a result of increased unregulated revenues from Transener (supervision and construction works) and Transba. Transmission cost of sales increased by 37.1% to Ps.539.7 million for the period ended December 31, 2014, compared to Ps.393.7 million for the same period in 2013, mainly as a result of prevailing increases in labor costs in 2014. The following table shows the main components of our transmission segment cost of sales for the specified periods: 93


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Therefore, transmission gross profit increased to Ps.198.7 million for the fiscal year ended December 31, 2014, from a Ps.43.2 million profit for the same period in 2013, mainly as a result of greater sales recognition arising from the Instrumental Agreement and the Renewal Agreement.  We do not record selling expenses related to our transmission activities.  Transmission administrative expenses increased by 35.7% to Ps.91.8 million for the fiscal year ended December 31, 2014, compared to Ps.67.7 million for the same period in 2013, mainly due to a labor cost increase associated with higher salaries. The following table shows the main components of our transmission segment administrative expenses for the specified periods:    Other transmission operating income and expenses recorded a loss of Ps.7.6 million for the fiscal year ended December 31, 2014, compared to a Ps.2.6 million profit for the same period in 2013. The following table shows the main components of our transmission segment other operating income and expenses for the specified periods:   94


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Transmission operating income accounted for a profit of Ps.99.3 million for the fiscal year ended December 31, 2014, compared to a loss of Ps.21.9 million for the same period in 2013, mainly as a result of increases in regulated sales, which were partly offset by increases in the above-described costs and expenses.  Transmission financial results accounted for a profit of Ps.24.7 million for the fiscal year ended December 31, 2014, compared to a profit of Ps.16.2 million for the same period in 2013, mainly as a result of an increase in interest income from the Fourth Line and the IVC under the Memorandum of Understanding (Ps.53.1 million), partly offset by an increase in foreign exchange losses (Ps.16.4 million), and financial interest on liabilities (Ps.17.4 million). The following table shows the main components of our transmission segment financial results income for the specified periods:     Our transmission segment recorded an income tax charge of Ps.51.4 million for the fiscal year ended December 31, 2014, compared to a profit of Ps.0.8 million for the same period in 2013.  Finally, our transmission segment recorded a net profit of Ps.34.1 million for the fiscal year ended December 31, 2014, compared to a net loss of Ps.4.9 million for the same period in 2013, both attributable to the Company’s owners.  95


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Distribution Segment Net sales from our distribution activities increased by 4.6% to Ps.3,598.4 million in the fiscal year ended December 31, 2014, compared to Ps.3,440.7 million for the same period in 2013, mainly due to charges collected from Edenor’s customers to be allocated to the FOCEDE fund, implemented under Resolution No. 347/2012. Edenor’s electricity sales volume between 2013 and 2014 decreased in 382 GWh, compared to sales volume being 21,292 GWh in 2014 to 21,674 GWh in 2013.  The cost of sales increased by 14.4% to Ps.4,716.5 million in the fiscal year ended December 2014, compared to Ps.4,122.5 million for the same period in 2013, mainly due to higher labor costs. The following table shows the main components of our distribution segment cost of sales for the specified periods:    Therefore, the gross loss from our distribution activities increased to Ps.1,118.1 million in the fiscal year ended December 31, 2014, compared to a loss of Ps.681.8 million for the same period in 2013, mainly due to the cost of sales increase that was not offset by a revenue increase.  Selling expenses increased by 20.0% to Ps.658.9 million in the fiscal year ended December 31, 2014, compared to Ps.549.1 million for the same period in 2013, mainly due to increases in third-party compensation and fees between both periods, and labor cost increases resulting from granted wage increases, partly offset by lower penalties and doubtful accounts. The following table shows the main components of our distribution segment selling expenses for the specified periods:    Administrative expenses from our distribution segment increased by 53.4% to Ps.510.3 million for the fiscal year ended December 31, 2014, compared to Ps.322.6 million for the same period in 2013, mainly due to labor cost increases resulting from wage increases, and increases in third-party compensation and fees between both


periods. The following table shows the main components of our distribution segment administrative expenses for the specified periods: 96


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Other operating income and expenses for the fiscal year ended December 31, 2014, amounted to a net loss of Ps.266.1 million, compared to a loss of Ps.81.2 million for the same period in 2013. The following table shows the main components of our distribution segment other operating income and expenses for the specified periods:    Operating income from our distribution activities decreased by Ps.1,569.9 million to a loss of Ps.281.5 million for the fiscal year ended December 31, 2014, compared to a profit of Ps.1,288.4 million for the same period in 2013, mainly due to the fact that the implementation of SE Resolution No. 250/2013 and the subsequent Notes were not enough to offset higher operating costs. Under this resolution there was a recognition of higher costs for Ps.2,271.9 million in the fiscal year 2014, compared to Ps.2,993.1 million for the same period in 2013. Excluding such effect, operating income from our distribution segment would account for a loss of Ps.2,553.4 million for the fiscal year 2014.  Financial results related to our distribution activities represented a loss of Ps.981.6 million for the fiscal year ended December 31, 2014, a 39.4% higher loss compared to a loss of Ps.704.2 million for the same period of 2013, primarily due to the appreciation of the U.S. Dollar on the outstanding debt incurred in said currency (Ps.115.4 million), and losses from commercial interest under the debt with CAMMESA (Ps.133.9 million). The following table illustrates the main components of financial results from our distribution segment for the specified periods: 97


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In turn, our distribution operations recorded an income tax charge of Ps.161.8 million in the fiscal year ended December 31, 2014, compared to Ps.52.7 million credits in the same period of 2013. Finally, our distribution activities registered a net loss of Ps.1,101.4 million for the fiscal year ended December 31, 2014, of which Ps.742.1 million are attributable to the Company’s owners, compared to a gain of Ps.163.5 million for the same period in 2013 attributable to the Company’s owners.  98


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Oil and gas Segment Net sales related to our oil and gas segment were Ps.356.8 million for the fiscal year ended December 31, 2014, 109.6% higher compared to Ps.170.1 million in the same period of 2013. These sales mostly corresponded to sales of gas and oil. The following table shows Petrolera Pampa’s oil and gas production under the investment agreements entered into by Petrolera Pampa for the specified periods :  Cost of sales related to our oil and gas segment increased by 128.1% to Ps.201.2 million in the fiscal year ended December 31, 2014 compared to Ps.88.2 million for the same period of 2013.The following table illustrates the main components of cost of sales from our oil and gas segment for the specified periods:  Therefore, gross profit related to our oil and gas segment was Ps.155.6 million for the fiscal year ended December 31, 2014 compared to Ps.81.9 million for the same period of 2013. Selling expenses related to our oil and gas segment increased to Ps.36.5 million for the fiscal year ended December 31, 2014 compared to Ps.8.5 million for the same period of 2013. The following table illustrates the main components of selling expenses from our oil and gas segment for the specified periods:  99


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Administrative expenses increased 172.4% to Ps.71.1 million for the fiscal year ended December 31, 2014 compared to Ps.26.1 million for the same period of 2013, principally due to higher fees for third-party services, compensation agreements with some of Petrolera Pampa’s executives and labor costs. The following table illustrates the main components of administrative expenses from our oil and gas segment for the specified periods:   Other operating income from our oil and gas activities registered a profit of Ps.86.9 million for the fiscal year ended December 31, 2014, 233.3% higher compared to a gain of Ps.26.1 million for the same period in 2013, mainly due to Ps.104.5 million from the implementation of Natural Gas Excess Injection Encouragement Program of Petrolera Pampa, which was partly offset by losses in property, plant and equipment (Ps.18.1 million) and compensation agreements (Ps.16.7 million). The following table shows the main components of our oil and gas segment other operating income and expenses for the specified periods:    The operating gain related to our oil and gas segment amounted to Ps.134.9 million for the fiscal year ended December 31, 2014 compared to an operating gain of Ps.73.5 million for the same period of 2013, primarily explained by an increase in net sales from Petrolera Pampa in 2014 and Resolution No. 1/2013 Natural Gas Excess Injection Income. 100


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Financial results related to our oil and gas activities represented a loss of Ps.40.7 million for the fiscal year ended December 31, 2014 compared to a loss of Ps.32.1 million for the same period of 2013, primarily due to higher losses from net financial interest (Ps.104.4 million), partially offset by higher profits from changes on the fair value of financial assets (Ps.106.2 million). The following table shows the main components of financial results from our oil and gas segment for the specified periods:  Also, our oil and gas segment recorded an income tax charge of Ps.10.2 million for the fiscal year ended December 31, 2014, compared to a charge of Ps.4.2 million for the same period of 2013. Finally, our oil and gas segment registered a net profit of Ps.83.9 million for the fiscal year ended December 31, 2014, of which Ps.41.9 are attributable to the owners of the Company, compared to a net profit of Ps.37.2 million recorded in the same period of 2013, attributable to the owners of the Company.  101


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Holding and Others Segment Net sales related to our holding and others segment were Ps.67.2 million for the fiscal year ended December 31, 2014, 53.2% higher compared to Ps.43.9 million in the same period of 2013. These sales mostly corresponded to fees collected from companies of our other segments. Cost of sales related to our holding and others segment increased by 136.2% to Ps.2.0 million in the fiscal year ended December 31, 2014 compared to Ps.0.8 million for the same period of 2013.The following table shows the main components of cost of sales from our holding and others segment for the specified periods:   Therefore, gross profit related to our holding and others segment was Ps.65.3 million for the fiscal year ended December 31, 2014 compared to Ps.43.0 million for the same period of 2013. We do not record selling expenses related to our holding and others segment. Administrative expenses increased 3.0% to Ps.81.5 million for the fiscal year ended December 31, 2014 compared to Ps.78.8 million for the same period of 2013, principally due to higher labor costs. The following table illustrates the main components of administrative expenses from our holding and others segment for the specified periods:  Other operating income and expenses from our holding and other segment registered a profit of Ps.4.2 million for the fiscal year ended December 31, 2014, 218.3% higher compared to a gain of Ps.1.3 million for the same period in 2013. The following table shows the main components of our holding and others segment other operating income and expenses for the specified periods: 102


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The operating loss related to our holding and others segment amounted to Ps.13.6 million for the fiscal year ended December 31, 2014 compared to an operating loss of Ps.31.5 million for the same period of 2013.  Financial results related to our holding and others represented a profit of Ps.921.4 million for the fiscal year ended December 31, 2014 compared to a profit of Ps.329.4 million for the same period of 2013, primarily due to higher profits for changes on the fair value of financial assets (Ps.354.3 million) and net foreign exchange differences (Ps.229.4 million). The following table illustrates the main components of financial results from our holding and others segment for the specified periods:  Also, our holding and others segment recorded an income tax charge of Ps.27.8 million for the fiscal year ended December 31, 2014, compared to a charge of Ps.15.7 million for the same period of 2013. 103


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Finally, our holding and others segment registered a net profit of Ps.879.9 million for the fiscal year ended December 31, 2014, which are attributable to the owners of the Company, compared to a net profit of Ps.282.2 million recorded in the same period of 2013, attributable to the owners of the Company.   104


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Liquidity and Capital Resources *Sources and uses of funds* We acquired our principal generation, transmission and distribution assets relatively recently, beginning in the second half of 2006.  Our principal source of liquidity for these acquisitions was capital contributions from our shareholders, particularly our September 2006 and February 2007 equity offerings.  We have also used a combination of funds from operations and short-term borrowings to makeour last acquisitions.  In September 2006, we consummated a capital increase of 300 million shares of our common stock, including shares issued in the form of GDSs, which was subscribed by Argentine and international investors and generated aggregate cash proceeds to us of approximately Ps. 345 million.  In February 2007 we consummated an additional capital increase of 600 million shares of our common stock, including shares issued in the form of GDSs in an underwritten offering to Argentine and international investors, which generated aggregate cash proceeds to us of approximately Ps. 1.3 billion.  In addition, we acquired our indirect controlling interest in EASA in September 2007 through an exchange of newly-issued shares of our company for the shares of DESA and IEASA held by EASA’s former indirect shareholders.  In connection with this acquisition, in September 2007 we issued 480,194,242 additional shares of our common stock to the former indirect shareholders of EASA, including shares issued in the form of GDSs.  In 2011, we acquired: a controlling interest in EMDERSA and AESEBA, the CIESA Bonds and other liabilities of CIESA, and PEPCA through a combination of funds from operations, and short-term borrowings, a significant part of which has already been cancelled. In 2012, we spun off EMDERSA and sold its subsidiaries other than EDELAR and EGSSA, as well as started the exchange process from CIESA notes to CIESA shares.  In March 2013, we sold our controlling interest in AESEBA and in October 2013, we sold our controlling interest in EDELAR. On November 2015, the holders of all warrants formally communicated their decision to exercise them against the payment of the exercise price. On December 2015, against the payment of US$ 103 million, the Company issued 381,548,564 new common shares in the form of ADS. After such issuance, the Company’s current capital stock is comprised of 1,695,859,459 common shares. Our business activities are now focused on the development and value-enhancement of our energy assets, while continuing to identify, evaluate and invest in other opportunities in the Argentine energy industry that offer significant growth potential and/or synergies with our electricity businesses such as our investments in the oil and gas sector.  Historically, our operating subsidiaries have relied on their respective cash flows from operations and on short-term and long-term borrowings to finance their operations, including capital expenditures.  As of April 30, 2015, due to tariff freeze and increased operating costs, our subsidiaries began to received financing from the Argentine Government (mainly from CAMMESA) in order to fulfill the operating deficit or to make capital expenditures. We expect that our principal sources of liquidity for any future acquisitions by us will include capital contributions from our shareholders, cash flow from the operations of our subsidiaries and short-term and long-term borrowings. Under current conditions, we expect our operating subsidiaries will continue to rely on cash flow from operations and short-term and long-term borrowings and government financing to finance their capital requirements in the near term.We currently expect to generate sufficient working capital through cash flow generated from operations, short- and long-term borrowings and other additional financing activities.  In the Distribution segment, our cash flows from operations have been significantly affected in recent periods due to our failure to obtain adjustments to our tariffs to cover increases in our distribution costs, resulting in a working capital deficit as of December 31, 2015, 2014 and 2013. In order to preserve and guarantee the provision of the public service and improve the existing cash deficit, beginning in October 2012 Edenor decided to partially cancel the obligations with CAMMESA with surplus cash balances. This decision arose as a consequence of the volume of commitments necessary to ensure the provision of the public service, including investment plans and ongoing operation and maintenance tasks. In 2015, following the issuance of SE Resolution No. 32/2015, Edenor resumed full payment of its commercial obligations with CAMMESA, but did not cancel past commercial debt. As of the date of this annual report, Edenor’s commercial debt with CAMMESA amounts to approximately Ps. 2,714.3 million including interest. In November 2015, Edenor submitted to CAMMESA a repayment plan. As of the date of this annual report, negotiations with CAMMESA continue with respect to a final repayment schedule. See “Item 3. Risk Factors—Risk relating to our Distribution Business—Edenor may not have the ability to raise the funds necessary to repay its commercial debt with CAMMESA, Edenor’s major supplier.” 105


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Since entering into the Adjustment Agreement in February 2006, Edenor has been engaged in an RTI with the ENRE, relating to the adjustment and renegotiation of the terms of the concession. If Edenor is not able to recover all of the incremental costs contemplated in the Adjustment Agreement and all such future cost increases or there is a significant lag of time between when Edenor incurs the incremental costs and when it receives increased revenues, or if it is not successful in achieving a satisfactory re-negotiation of its tariff structure, Edenor may be unable to comply with its financial and commercial obligations, it may suffer liquidity shortfalls and it may need to restructure its debt to ease its financial condition, all of which, individually or in the aggregate, would have a material adverse effect on its business and results of operations and may cause the value of its ADSs to decline. The Argentine Government adopted a series of measures such as the issuance of ENRE Resolution No. 347/2012, SE Resolution No. 32/2015 and the granting of certain economic assistance program (through the extension of loans for consumption (mutuums))  to help Edenor cope with its cash needs for specific purposes. The obligations deriving from such financial assistance programs are classified in our financial statements as “other payables” and the related costs as “financial expenses”, since they result from a lack of adjustment of the electricity rate schedule, which depends exclusively on the Argentine Government and financial assistance has been granted under these special circumstances. Therefore, such obligations do not constitute financing decisions made by Edenor in the ordinary course of business. On June 24, 2014, by Note No. 4012/2014, the SE instructed CAMMESA to enter into a loan for the consumption and assignment of secured receivables agreement with Edenor in order to pay the higher salary costs. The aforementioned agreement was entered into on July 10, 2014. The agreement was guaranteed by Edenor through the assignment of future surplus sale settlements with maturity dates to be determined (*Liquidaciones de Venta con Fecha de Vencimiento a Definir*, or the “LVFVDs”), as a result of the application of SE Resolution No. 250/2013.  As of December 31, 2014, Edenor’s debt related to this financing amounted to Ps. 298 million (comprised of Ps.280.6 million in principal and Ps. 17.4 million in accrued interest).  In September 2014, the SE, through Resolution No. 65/2014, instructed CAMMESA to enter into a loan and guarantee assignment agreement with Edenor in order to provide the necessary financing to cover the Extraordinary Investment Plan approved by the SE as a consequence of a temporary insufficiency of funds received through SE Resolution No. 347/2012. During 2015, after several amendments, such loan agreement reached Ps. 2,913 million for the entire plan. SE Resolution No. 32/2015 resolved that LVFVDs be issued in our favor for the amounts generated by the salary increases deriving from the application of Resolution No. 836/14 of the Ministry of Labor, Employment and Social Security for which payment Edenor received this loan (mutuum); allowing any amounts discussed thereunder to be offset with outstanding balances of LVFVDs. The LVFVDs were issued on July 16, 2015 to compensate the debt generated for the higher cost salaries under the loan for consumption (mutuum) and assignment of secured receivables agreement.  As of December 31, 2015, the total debt under these loans (mutuum agreements) amounted to Ps. 1,099.8 million, comprised of Ps. 923.6 million in principal for the actual disbursements, and Ps. 176.2 million in accrued interest. These loans were discontinued as from February 1, 2016 under the terms of ME&M Resolution No. 7/2016. Edenor’s principal uses of cash are expected to be operating costs, the servicing of our financial debt and our investment plan. Edenor is subject to limitations on its ability to incur new debt under the terms of our debt instruments so the company cannot assure that it will be able to obtain additional financing on acceptable terms. Although the ENRE is expected to take all necessary action to conclude the RTI process by December 31, 2016, the outcome of such process is uncertain. Thus, if in the future: (i) the new electricity rate schedules are not issued pursuant to the RTI by the ENRE; (ii) Edenor is not granted any other recognition of additional revenue or any other mechanism to compensate for cost increases, and/or; (iii) Edenor does not obtain from the Argentine government any other financing to cover cost increases, it is likely that Edenor will have insufficient liquidity and


will therefore be obliged to pursue measures similar to those applied in the past in order to preserve cash and enhance its liquidity. 106


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See“Item 5. Operating and Financial Review and Prospects—Factors Affecting our Results of Operations—Tariffs” and “Item 3. Key Information—Risk factors—Risks Relating to Our Distribution Business—Failure or delay to negotiate further improvements to our tariff structure, including increases in our distribution margin, and/or to have our tariffs adjusted to reflect increases in our distribution costs in a timely manner or at all, has affected our capacity to perform our commercial obligations and could also have a material adverse effect on our capacity to perform our financial obligations.” In the oil and gas segment, our financial condition and liquidity is and will continue to be influenced by a variety of factors, including: (i) our ability to generate cash flows from our operations; (ii) our capital expenditure requirements; (iii) the level of our outstanding indebtedness and the interest we are obligated to pay on this indebtedness; and (iv) changes in exchange rates that impact our generation of cash flows when measured in U.S. Dollars. Petrolera Pampa’s principal sources of liquidity have historically been contributed by shareholder equity, debt financings and cash generated by its operations. As of the date of this annual report, Petrolera Pampa is focused on the development of proved gas reserves, while continuing to identify, evaluate and invest in other opportunities in the Argentine oil and gas sector. Petrolera Pampa believes that its current operations and 2016 capital expenditures program can be funded from cash flows from existing operations, cash on hand and by refinancing its debt securities that mature in 2016.  Should Petrolera Pampa’s operating cash flow decline due to unforeseen events, including delivery restrictions or a protracted downturn in oil and gas prices, it would examine measures such as further capital expenditure program reductions, pre-sale agreements, disposition of assets or a debt or equity issuance, among others. We record a portion of our trade receivables in our generation segment as non-current assets, as we do not expect to collect payment on these receivables within the following year in accordance with the terms of such receivables.  In our generation segment, our non-current trade receivables relate to (i) amounts owed us by FONINVEMEN, which are payable in 120 monthly installments, and (ii) credits arising from the 2008-2015 LVFVDs accrued as of SE Resolution No. 406/2003 which are not committed to other projects and as “Additional Remuneration” which are allocated to the trust included in the new scheme established for the remuneration of the generation sector provided in SE Resolution No. 95/2013, as amended, that are expected to finance the Loma de la Lata 2014 Expansion Project. Our total non-current trade receivables amounted to Ps. 888.7 million as of December 31, 2015.   “See Item 4. – The Argentine Electricity Sector - Regulatory and Legal Framework—FONINVEMEM  - WEM Supply Agreements under SE Resolution No. 724/2008 - Price Scheme–2008-2011 Agreement.” Each of our segments operates as a separate entity and all funding and treasury policies are controlled at the segment level.  While we do not have a centralized funding and treasury policy among segments, we maintain our cash and cash equivalents in Pesos, and in U.S. Dollars depending on medium term requirements and availability, at all levels of operations.  We and our subsidiaries conduct financing at both variable and fixed rates. The table below reflects our cash position at the dates indicated and the net cash provided by (used in) operating, investing and financing activities during the years indicated: 107


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At December 31,Restated
 
 Restated2015
 
 2014
 
 2013(in millions of pesos)Cash at the beginning of the year
 
 335.2
 
 341.7
 
 167.8Net cash generated by operating activities
 
 4,365.8
 
 2,193.5
 
 1,656.2Net cash used in investing activities
 
 (7,114.5)
 
 (2,472.1)
 
 (1,456.6)Net cash generated by (used in) financing activities
 
 2,852.2
 
 232.9
 
 (76.9)Foreing currency exchange difference generated by cash and cash equivalent
 
 77.9
 
 39.2
 
 51.2Cash and cash equivalent at the end of the year
 
 516.6
 
 335.2
 
 341.7
  *Net cash generated by operating activities* Net cash generated by operating activities amounted to Ps. 4,365.8 million for the year ended December 31, 2015, attributable principally to net income adjustments of Ps. 2,226 million for changes in the fair value of financial instruments, Ps. 551.5 million for Higher Costs Recognition  associated with SE Resolution No. 250/2013 and subsequent Notesissued bythe SE, Ps. 495.5 million for income recognition on account of the RTI associated with SE Resolution No. 32/2015 in our distribution segment and Ps. 215.4 million from the cancellation of debts with arbitration rights, which were partially offset by the positive adjustments to net income for non-cash charges in this period, including losses related to a Ps. 720.7 million for depreciation and amortization of assets, Ps. 566.2 million for foreign currency exchange difference and Ps. 859.6 million for interest accruals Changes in operating assets and liabilities amounted to Ps. 582 million for the year ended December 31, 2015. These changes in operating assets and liabilities were primarily due to a Ps. 251 million increase in proceeds from account payables with CAMMESA, Ps. 1,061.4 million increase in trade and other payables and Ps. 185.2 for proceeds from derivative financial instruments, which were partially offset by Ps. 988.7 million increase in trade and other receivables. Net cash generated by operating activities amounted to Ps. 2,193.5 million for the year ended December 31, 2014, attributable principally to net income adjustments of Ps. 907.9 million for changes in the fair value of financial instruments, Ps. 2,271.9 million for Higher Costs Recognition associated with SE Resolution No. 250/2013 and subsequent Notesissued bythe SE in our distribution segment, Ps. 223.3 million for results from measurement at present value and Ps. 47.1 million resulting from purchase of corporate bonds, which were partially offset by the positive adjustments to net income for non-cash charges in this period, including losses related to a Ps. 467.2 million for depreciation and amortization of assets, Ps. 761.3 million for foreign currency exchange difference and Ps. 596.7 million for interest accruals Changes in operating assets and liabilities amounted to Ps. 3,027 million for the year ended December 31, 2014. These changes in operating assets and liabilities were primarily due to a Ps. 2,974.9 million increase in proceeds from accounts payables with CAMMESA and Ps. 482.9 million increase from funds obtained for PUREE at our distribution segment, which were partially offset by Ps. 753.8 million increase in trade and other receivables. Net cash generated by operating activities amounted to Ps. 1,656.2 million for the year ended December 31, 2013, attributable principally to net income adjustments of Ps. 295.9 million for changes in the fair value of financial instruments, Ps. 2,933.1 million for Higher Costs Recognition associated with SE Resolution No. 250/2013 and subsequent Notesissued bythe SE in our distribution segment, and Ps. 88.9 million resulting from purchase of corporate bonds, which were partially offset by the positive adjustments to net income for non-cash charges in this period, including losses related to a Ps. 374.8 million for depreciation and amortization of assets, Ps. 744.2 million for foreign currency exchange difference, Ps. 447.6 million for interest accruals, Ps. 199.1 for discontinued operations at our distribution segment, and Ps. 155.9 million for results from measurement at present value. Changes in operating assets and liabilities amounted to Ps. 2,416.3 million for the year ended December 31, 2013. These changes in operating assets and liabilities were primarily due to a Ps. 183.4 million increase in trade and other payables, Ps. 2,231.5 million increase in proceeds from account payables with CAMMESA, and Ps. 491.9


million increase from funds obtained for PUREE at our distribution segment, which were partially offset by Ps. 508.7 million increase in trade and other receivables. 108


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*Net cash used in investing activities* Net cash used in investing activities amounted to Ps. 7,114.5 million for the year ended December 31, 2015, principally due to Ps. 4,797.9 million in capital expenditures, Ps. 3,506.2 million paid for the purchases of financial assets at fair value and Ps. 1,390.9 million in the purchase and redemption of securities issued by investments funds. These uses of cash and cash equivalents were partially offset by net cash and cash equivalent generated by our investing activities, including Ps. 2,263.9 million of proceeds from the sale of financial assets at fair value and Ps. 293.4 million in proceeds from deposits in guarantee. Net cash used in investing activities amounted to Ps. 2,472.1 million for the year ended December 31, 2014, principally due to Ps. 2,331.1 million in capital expenditures, Ps. 1,055.5 million paid for the purchases of financial assets at fair value and Ps. 276.6 million in constitution of deposits in guarantee. These uses of cash and cash equivalents were partially offset by net cash and cash equivalent generated by our investing activities, including Ps. 1,258.2 million of proceeds from the sale of financial assets at fair value. Net cash used in investing activities amounted to Ps. 1,456.6 million for the year ended December 31, 2013, principally due to Ps. 1,050.3 million in capital expenditures, Ps. 353.5 million paid for the purchases of financial assets at fair value, Ps. 282.2 million in subscription and rescue of investments funds, net, and Ps. 124.2 million in connection with discontinued operations at our distribution segment. These uses of cash and cash equivalents were partially offset by net cash and cash equivalents generated by our investing activities, including Ps. 279.1 million of proceeds from the sale of financial assets at fair value. *Net cash generated by (used in) financing activities* Net cash generated by our financing activities amounted to Ps. 2,852.2 million fortheyear ended December 31, 2015, principally due to Ps. 4,793.3 million generated by borrowings at our different segments, Ps. 998.8 million of capital contributions that we received and Ps. 214.9 million proceeds obtained from the mutuums with CAMMESA. These funds generated of cash and cash equivalents were partially offset by payments of Ps. 3,013 made in connection with bank and financial borrowings (including principal and interest) by all of our segments. Net cash generated by our financing activities amounted to Ps. 232.9 million fortheyear ended December 31, 2014, principally due to Ps. 2,519.4 million of net cash and cash equivalent generated by borrowings at our different segments and Ps. 380.6 million proceeds obtained from the mutuums with CAMMESA. These funds generated of cash and cash equivalents were partially offset by payments of Ps. 2,821.4 made in connection with bank and financial borrowings (including principal and interest) by all of our segments. Net cash used in our financing activities amounted to Ps. 76.9 million fortheyear ended December 31, 2013, principally due to payments of Ps. 779.6 made in connection with bank and financial borrowings (including principal, interest and repurchase costs for the repurchase of debt) by all of our segments. These uses of cash and cash equivalent were partially offset by Ps. 656.5 million of net cash and cash equivalents generated by borrowings at our different segments and Ps. 25.4 million generated in connection with discontinued operations at our distribution segment. 109


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Capital Expenditures The following table sets forth our capital expenditures for the years ended December 31, 2015 and 2014:   In 2015, our capital expenditures in our generation segment mainly related to work in progress and advances to suppliers (Ps. 1,433.6 million) and materials and spare parts (Ps. 73.6 million). In our distribution segment, we invested Ps. 2,518.2 million, a substantial portion of which was used to expand and improve our grid in order to keep pace with the growth in our customer base.  In addition, we made investments in order to meet our quality standards levels. Our capital expenditures in our oil and gas segment increased in line with the execution of Petrolera Pampa’s investment commitments under the YPF Agreement. In 2014, our capital expenditures in our generation segment mainly related to work in progress and advances to suppliers (Ps. 330.1 million), materials and spare parts (Ps. 30.1 million) and generation equipment and machinery (Ps. 9.0 million). In our distribution segment, we invested Ps. 1,701.8 million to expand and improve our grid in order to keep pace with the growth in our customer base.  In addition, we made investments in order to meet our quality standards levels and to maintain the level of past due receivables. In October 2015, Edenor decided to acquire a real property with the aim of concentrating centralized functions and reducing rental costs and the risk of future increases, for a total amount of Ps.439.2 million, which, as of December 31, 2015, was fully paid. As security for the amount paid, Edenor received a surety bond from the seller. Our capital expenditures in our oil and gas segment increased in line with the execution of Petrolera Pampa’s investment commitments under the YPF Agreement. In our generation segment we currently expect our capital expenditures to remain high in 2016, principally in connection with the completion of Loma de la Lata’s 2014 Expansion Project and the major maintenance works in one CPB’s units (unit 30). In our oil and gas segment, for the year 2016 Petrolera Pampa expects to continue with the development plan with YPF in the Rincón del Mangrullo Area, and to complete the installation of a new treatment plant and compression infrastructure in order to increase production. We expect to cover such capital expenditures mainly with cash flows from operations, cash on hand, short- and long-term borrowings and financing extended by CAMMESA. Debt The economic crisis in Argentina, and the measures adopted by the Argentine Government to address it, had a material adverse effect on the generation, transmission and distribution companies and operations that are now part of our group.  See “Item 4. - The Argentine Electricity Sector—History.”  As a result of these developments, several of these companies were forced to suspend principal and interest payments on their debt and have gone through one or more financial debt restructurings, including Güemes, Transener and Edenor.  Given the ongoing changes in the Argentine electricity regulatory framework, including the current uncertainties regarding transmission and distribution tariffs, we cannot assure you that one or more of our subsidiaries or operations will not have to undergo another debt restructuring in the future, or whether any such debt restructuring will be successful. Our total consolidated financial debt as of December 31, 2015 was Ps. 7,992.4 million, of which 83.6% was long-term debt.  Approximately 39.1% of our consolidated debt outstanding at December 31, 2015 was denominated in U.S. Dollars.The amount of our total consolidates financial debt does not include Transener given that our stake in Transener constitutes an interest in a joint venture, and it is not consolidated and it is valued according to the equity method of accounting in the Restated Consolidated Financial Statements. 110


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The below is a description of the main characteristics of the indebtedness of our group companies. Under the terms of their respective outstanding debt, our group companies are subject to a number of restrictive covenants, including limitations on incurrence of new indebtedness, capital expenditures and dividend payments, among others. As of December 31, 2015, all of these companies were in compliance with the covenants under their respective outstanding indebtedness. Generation Piedra Buena On March 21, 2011, Piedra Buena entered into a loan agreement with CAMMESA to finance a construction project that will increase the power output of steam turbine units of Piedra Buena, for a total amount of Ps. 56.8 million, in accordance to SE Resolution No. 146/2002 and Notes No.6157/10 and 7375/10. The collected amounts will be returned in 48 monthly, equal and consecutive installments, which will include interest resulting from the application of a rate equivalent to the average yield obtained by CAMMESA from its WEM’s financial placements, the first installment maturing on the month immediately following the works’ conclusion, estimated for the month of June 2011. Installments have been paid by WEM pursuant to the provisions of such notes, and distribution among demanding agents will be made based on the applicable criteria to be timely informed by the SE. As from the works’ conclusion of each unit, Piedra Buena guaranteed a minimum 80% availability for each unit during a three-year period, which, as of the date of this annual report, has concluded. In order to guarantee the due performance of the obligations undertaken by Piedra Buena under this contract, Piedra Buena assigned and transferred to CAMMESA 100% of its current and future receivables, both accrued and to be accrued, excluding those receivables already assigned to CTLL as of December 31, 2010. As of May 2011, Piedra Buena finished the works undertaken and, as from July 2011, units were made subject to the minimum availability control set forth by the loan agreement executed with CAMMESA. In case of breach of its availability obligation by Piedra Buena, the agreement provides for the application of a penalty, the maximum amount of which is set at 25% of the value of the received financing’s principal installment. During fiscal year ended December 31, 2013, Piedra Buena has started to bear penalties for failing to reach the minimum 80% availability undertaken under the loan agreement. The penalties imposed on Piedra Buena during the fiscal year ended December 31, 2014 and 2015 amounted to Ps. 4.7 and Ps. 4.7 million, respectively. On January 27, 2012, Piedra Buena executed an addendum to the loan agreement entered into with CAMMESA which modified the financing amount, which current amounts to Ps. 69.6 million. As of December 31, 2015, the loan was totally cancelled. On January 8, 2013, Piedra Buena signed a loan agreement with CAMMESA stipulating the terms for the financing of certain repair work delayed in units BBLATV29 and BBVLATV30 for an amount of Ps. 19.9 million plus VAT pursuant to SE Resolution No. 146/2002 so as to cover 70% of those maintenance costs. On February 25, 2013, through Note No. B-78922-1, CAMMESA informed Piedra Buena of the modification to that financing pursuant to the provisions approved by SE Resolution No. 356/2013 increasing the financing to Ps. 32.7 million plus VAT in order to cover 100% of maintenance costs. On April 24, 2014, Piedra Buena off set the loan against the LVFVDs for the amount of Ps. 39,545,740 plus interest. Finally, in August 2013, through Piedra Buena LegR Note No. 64/13, CPB submitted to CAMMESA the “2014-2015 Maintenance Plan” for the conduct of major maintenance works in units BBLATV29 and BBLATV30, requesting its approval based on a remuneration scheme that would allow for their financing as the remuneration set by SE Resolution No. 95/2013 was insufficient to bear the costs of major maintenance works. 111


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The 2014-2015 Maintenance Plan was amended and adjusted after the meetings held with representatives of CAMMESA and the Technical Group (CPB LegR Notes No. 65/13, 67/13 and 72/13). The total estimated amount of the works to be executed is U.S.$ 82 million plus VAT and associated import duties. On April 8, 2014, Piedra Buena executed a new loan agreement with CAMMESA for an amount equal to the peso-equivalent of U.S.$82.6 million plus the associated taxes. This loan is to be paid in 48 equal installments with a grace period of, the first to occur between, 12 months as from the first disbursement of the loan or 24 months as from the subscription of the loan. As long as Piedra Buena’s availability is higher than 80% (summer) or 83% (winter), Piedra Buena’s payment obligations shall be limited to the revenue established to cover extraordinary maintenance works (SE Resolution No. 529/2014) and 50% of the Debt Payment Cash Flow (as defined in such agreement). If Piedra Buena’s availability is below the abovementioned percentages, Piedra Buena shall pay the applicable installment on the applicable payment date. On May 18, 2015, under the above mentioned loan, CPB requested an additional U.S.$7.2 million plus VAT, which was granted by CAMMESA to continue the maintenance works. In order to guarantee the due performance of the obligations taken by Piedra Buena under this agreement, Piedra Buena assigned and transferred to CAMMESA 100% of its current and future receivables, except for the ones already assigned to other projects or agreements, both accrued and to be accrued, excluding those receivables already assigned. As of the date of this annual report, Piedra Buena received from CAMMESA Ps. 803.0 million of which Ps. 191.5 million were paid with Additional Maintenance Remuneration. Güemes On July 25, 2007, CTG finished the restructuring process for its outstanding Series “A” and “B” 2% Corporate Bonds maturing in 2013 (the “2013 Bonds”), having obtained an 88.7% acceptance rate on the total debt subject to restructuring. Said restructuring consisted of exchanging the previous debt securities for a combination of cash payments and the issuance of new simple Corporate Bonds for a nominal value of U.S.$ 22 million at a 10.5% rate, which are payable on March 11 and September 11 of each year and mature in September 2017 (the “2017 Bonds”). In June and July 2009, CTG repurchased under successive transactions at market prices its 2017 Bonds for a total of U.S.$ 18.2 million (nominal value). During June and July 2009 and January, Mach and May 2011, CTG repurchased under successive transactions and at market prices its 2017 Bonds for a nominal value of, approximately, U.S.$ 18 million and U.S.$ 0.8 million respectively. During March 2013, CTG cancelled all of its 2013 Bonds.  As of December 31, 2015, CTG held all the repurchased 2017 Bonds in its portfolio and the outstanding 2017 Bonds total a nominal value of U.S.$ 3.1million. On July 21, 2008, the Ordinary and Extraordinary Shareholders’ Meeting of Güemes approved the creation of a Global Program of Securities Representing Short-Term Debt (the “VCP”) up to a maximum amount outstanding at any time that may not exceed Ps. 200 million or the equivalent amount in other currencies, under which Güemes may issue VCPs in various classes and/or series, each one of them with an amortization term of up to 365 days or a shorter or longer term that in the future applicable regulations may contemplate (the “Güemes VCP Program”). Such meeting delegated to Güemes’ board of directors the power to provide for certain conditions of the Güemes VCP Program  and the opportunity of issuance and other terms and conditions of each class and/or series of VCPs to be issued under the Güemes VCP Program.  On January 17, 2012, Güemes’ Board of Directors approved the terms and conditions of the Güemes VCP Program as detailed in its Prospectus draft.  As of the date of this annual report, Güemes has not issued any notes under the Güemes VCP Program. In addition, on October 11, 2011, Güemes’ Extraordinary General Meeting of Shareholders, approved the creation of a program for the issuance of nonconvertible, simple corporate bonds for a nominal value of up to U.S.$ 50 million or its equivalent in other currencies (the “Güemes Corporate Bonds Program”).  The shareholders of Güemes also vested Güemes’ board of directors with the power to establish the terms of any debt under the Güemes Corporate Bonds Program and the time of the issuance of such debt.  On January 17, 2012 the board of directors approved the terms and conditions of the Güemes Corporate Bonds Program. 112


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On January 3, 2014the board of directors approved the terms and conditions of the Class 5 Notes to be issued under the Güemes Corporate Bonds Program, and on March 6, 2014, Güemes issued class 5 notes for an amount of Ps. 60.127.495 millionat an interest rate equal to the private Badlar rate plus of 5%. The terms and conditions of Class 5 Notes permitted settlement of the same with Notes of Class 3 and/or 4. As a result of this issuance, Ps. 19,092,025 were settled in Class 4 and Ps. 1,835,470 were settled in Class 3, and those Notes are held in CTG’s portfolio.Also, on January 27, 2014, the board of directors approved the terms and conditions of the Class 6 Notes to be issued under the Güemes Corporate Bonds Program, and on March 6, 2015, Güemes issued Class 6 Notes for an amount of Ps 91.0 millionat an interest rate equal to(i) for the first nine months 28% and (ii) from month tenth to eighteenth private Badlar rate plus 5%.  The final maturity date of the Class 5 and Class 6 Notes is September 6, 2016, respectively. In all cases interest under the Notes is payable on a quarterly basis. On May 18, 2015, CTG entered into a loan agreement with CAMMESA to finance TV11 unit's maintenance in a Peso-denominated amount equivalent to U.S.$ 10.3 million plus VAT and nationalization costs. This financing is schedule to be repaid in 36 monthly and consecutive installments, with the application of the average yield obtained by CAMMESA from its financial placements with the WEM, maturing as from the date of the economic transaction corresponding to the month following the completion of the works with the possibility of extending this period to 12 months in the case that the remuneration payable for the maintenance of such unit (the “Maintenance Remuneration”) accrued in that period is not sufficient to repay the funding. The Maintenance Remuneration will be allocated to the payment of the granted financing. In the case that it is necessary to use the additional period of twelve months mentioned above, in addition to applying the Maintenance Remuneration for cancellation of the installment should be applied Additional Remuneration Direct accrued by CTG in the relevant month. As of the date of this annual report, CTG had received partial advances in the amount of Ps. 8 million, which are disclosed under trade and other receivables, net of the Maintenance Remuneration. Loma de la Lata On December 28, 2009, the shareholders of Loma de la Lata approved the creation of a medium-term note program not to exceed the amount of U.S. $ 50 million.  The terms of any debt under this program were determined by Loma de la Lata’s board of directors at the time that such debt were to be issued.  In addition, the shareholders approved, under a shareholders meeting held on November 17, 2011, the increase of the amount of the program from U.S.$ 50 million to U.S.$ 350 million. The program was approved by the CNV on March 21, 2012.  On September 8 and 18, 2014, the board of directors approved the terms and conditions of the Class 1, 2, 3 and 4 notes to be issued under the Loma de la Lata medium-term note program, and on October 30, 2014, Loma de la Lata declared Class 1 deserte, issued Class 2 notes for an amount of Ps 96.4 millionat an interest rate equal to the private Badlar rate plus 4% maturing on April 30, 2016,the Class 3 notes for an amount of Ps. 50.8at an interest rate equal to the private Badlar rate plus 5% to be paid in three installments, maturing on April 30, 2017 and Class 4 notes for an amount of U.S.$ 29.9 at a fix rate of 6.25% maturing on October 31, 2016. On November 11, 2014, Banco de Crédito y Securitización S.A., Banco Hipotecario S.A., Industrial and Commercial Bank of China S.A. and Citibank N.A. granted a financing to Loma de la Lata for up to an amount of Ps. 450 million to be paid in eight quarterly, equal and consecutive installments of 11% of the outstanding principal amount of the loan and a ninth installment of 12%.  Interest will accrue at an interest rate equal to the fixed private Badlar rate plus 5.75% and will be paid quarterly.  The Company granted a guarantee to secure the obligations of Loma de la Lata under the loan and Loma de la Lata issued several promissory notes. As of the date of this annual report, the loan was totally cancelled. On December 1, 2014, Loma de la Lata entered into a Loan and Receivables Assignment Agreement with CAMMESA for the financing of the 2014 Expansion Project with an investment estimated at Ps. 930 million. The main characteristics of this financing are described below: i)Amount: up to the amount of the receivables accrued until December 31, 2015; ii)Interest rate: a rate equivalent to the monthly yield obtained by CAMMESA from its WEM’s financial placements; 113


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iii)Repayment: in a single payment on the maturity of the economic transaction corresponding to the 36th month as from the month following the commercial commissioning of the last generating unit making up the Project or, at Loma de la Lata’s option, through a cash payment or the offset with receivables; iv)Payment guarantee: assignment 100% of its receivables to the Stabilization Fund, up to the total amount of the financing, as collateral. On March 5, 2015, CAMMESA granted Loma de la Lata a loan up to the amount of U.S.$11,799,879 plus VAT and Ps. 7,217,000 plus VAT, to conduct major maintenance works at Loma de la Lata’s plant. The financing will (i) be disbursed in different installments according to a work plan, (ii) paid in 36 equal and consecutive installments (with the possibility to extend the maturity up to 12 months) the first of them maturing one month after the end of the works and the availability of the unit LDLTAG02, (iii) bear interest at a variable rate, and (iv) be secured with the assignment and transfer to CAMMESA of 100% of its current and future receivables derived from theRemuneración Adicional Directa a Generadoresand from theRemuneración de los Mantenimientos no Recurrentes, (except for the ones already assigned to other projects or agreements), both accrued and to be accrued, excluding those receivables already assigned. After the end of the works, Loma de la Lata is required to have an availability of 90%. If Loma de la Lata fails to accomplish the required availability, it shall pay the whole applicable installment on the stipulated maturity date. After unit LDLATG02's maintenance was completed, the unit became operative on December 21, 2014. Loma de la Lata later requested the execution of an Addendum to the Loan Agreement to conduct the maintenance of unit LDLATG03. On August 20, 2015, Addendum I to this Agreement was executed, which extended the financing to an amount equivalent in Pesos to U.S.$ 4.8 million and Ps. 18.2 million, in both cases plus VAT, nationalization and logistics costs. Maintenance of unit LDLATG03 finished on June 1, 2015, as from which date the unit became operative again. Based on the modifications introduced to Addendum I, Loma de la Lata guarantees a minimum of 80% availability from both units until the total repayment of the Financing. If the availability commitment is not met in a certain month, the repayment of the installment will not be limited to the Maintenance Remuneration amount and, if applicable, the difference between it and the Direct Additional Remuneration, and the whole installment will be payable. Later, an extension of the loan was requested in order to include the execution of unit LDLATG01's overhaul, upgrade and refurbishment in the amount of U.S.$ 13 million and Ps. 17.8 million , in both cases plus VAT, nationalization and logistics costs,  and withholdings to be imposed on foreign contractors. The extension was approved pursuant to SSETT y DEE Note No. 52/16. However, as of the date of this annual report, the applicable Addendum has not yet been entered into. As of the date of this annual report, Loma de la Lata had received partial advances in the amount of Ps. 191.7 million, which are disclosed under “Loans”, net of the Maintenance Remuneration collected by Loma de la Lata. On March 18, 2015, the shareholders of Loma de la Lata approved the creation of a new medium-term note program not to exceed the amount of U.S. $ 350 million.  The terms of any debt under this program will be determined by Loma de la Lata’s board of directors at the time that such debt is issued.  The program was approved by the CNV on July 2, 2015.  On April 13, 2015, May 22, 2015, August 20, 2015 and October 6, 2015, the board of directors approved the terms and conditions of the Class A, B, C, D and E notes, respectively, to be issued under the Loma de la Lata medium-term note program. On, August 6, 2015, the Class C Notes were issued for an amount of Ps. 257,954,545 at a fixed interest rateequal 27.75% maturing on May 6, 2017. On October 5, 2015, the Class A Notes were issued for an amount of Ps. 282,441,000 at an interest rate equal to Badlar maturing on October 5, 2018. On November 13, 2015, the Class E Notes were issued for an amount of Ps. 575,160,000 at an interest rate equal to Badlar maturing on November 13, 2020. As of the date of this annual report, no Classes B or D Notes have been issued.  114


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Transmission Transener Additionally, due to the delay in the implementation of the cost adjustments as set forth in the Definitive Agreements, on May 12, 2009, pursuant to Resolution No. 146/2002 of the Secretariat of Energy, Transener and Transba entered into a financing agreement with CAMMESA (as lender) for an amount of up to Ps. 59.7 million and Ps. 30.7 million, respectively (the “Initial CAMMESA Agreement”). On December 30, 2009, both companies and CAMMESA executed an amendment to the Initial CAMMESA Agreement (the “Mutual Fund Amendment”, and together with the Initial Agreement, the “CAMMESA Financing”), pursuant to which the available financing amount to be provided by CAMMESA was increased to up to Ps.107.7 million and Ps.42.7 million for Transener and Transba, respectively. Transener and Transba will apply the receivables acknowledged by the Secretariat of Energy and the ENRE on account of cost variations (pursuant to the Instrumental Agreement) to the cancellation, up to such amounts, of the financing granted by CAMMESA.  On May 2, 2011, Transener and Transba executed amendments to the financing agreements with CAMMESA, which provided for:  i) the cancellation of the amounts received as of January 17, 2011 by both companies pursuant to the financing granted by the agreements executed on May 12, 2009; ii) the granting to Transener and Transba of new loans for the amounts of Ps. 289.7 million and Ps. 134.1 million, respectively, corresponding to the favorable balances resulting from receivables acknowledged by the Secretariat of Energy and the ENRE on account of cost variations from June 2005 to November 2010; and iii) all amounts owed to Transener under the Instrumental Agreements would serve as a guarantee for the new CAMMESA Financing.  The funds arising from the new loans were used for operation and maintenance purposes and additionally applied to the investment plan for the year 2011.  Disbursements are made through partial advances based on the availability of cash and cash equivalents by CAMMESA and as instructed by the Secretariat of Energy. As of December 31, 2011, collected disbursements under this financing amounted to Ps. 235.4 million, Ps. 224.6 million of which correspond to principal and Ps. 10.8 million to accrued interest. All disbursements have been assigned as collateral for the payment of the balance of receivables acknowledged on account of higher costs pursuant to the Complementary Agreement. After December 31, 2011, disbursements amounting to Ps. 9.0 million were collected. On October 25, 2013 and February 14, 2014, Transba and Transener, respectively negotiated the Addenda III. On September 2, 2014, Transener and Transba executed with CAMMESA the New Financing Agreements. The New Financing Agreements provided i) that the Financing Agreements, together with their Addendums I, II and III, are concluded; ii) the granting to Transener and Transba of  new loans in the amount of Ps. 622.2 million and Ps. 240.7 million, respectively, corresponding to receivables acknowledged by the Secretariat of Energy and the ENRE on account of cost variations for the January 2013-May 2014 period; and iii) the assignment as collateral of the receivables recognized on account of higher costs as at May 31, 2014 pursuant to the Renewal Agreement. Also, on March 17, 2015, Transener and Transba executed with CAMMESA the Addenda IV, setting forth:i) the granting to Transener and Transba of  new loans in the amount of Ps. 563.6 million and Ps. 178.3 million, respectively, corresponding to (a) the outstanding amount due pursuant to the Financing Agreement as of January 2015, and (b) receivables acknowledged by the Secretariat of Energy and the ENRE on account of cost variations for the June 2014-November 2014 period; and ii) the assignment as collateral of the receivables recognized on account of higher costs as at November 30, 2014 pursuant to the Renewal Agreement. In September 2015, Transener and Transba executed with the ENRE and the SE the Amendment to the Renewal Agreement, setting forth the 2015 year financial - economic projection and investment plan in the amount of Ps. 431.9 million and Ps. 186.6 million for Transener and Transba, respectively, and granting additional non-reimbursable resources for the execution of such investment plan. On November 25, 2015, Transener and Transba executed with CAMMESA the financing agreements for the implementation of the Amendment to the Renewal Agreement, setting forth: i) the granting to Transener and Transba of  new loans in the amount of Ps. 508,9 million and Ps. 317,6 million, respectively, corresponding to (a) receivables acknowledged by the SE and the ENRE on account of cost variations for the December 2014-May 2015 period; and (b) the additional investments required pursuant to the Amendment to the Renewal Agreement. 115


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Distribution Edenor On January 20, 2006, Edenor launched a voluntary exchange offer and consent solicitation to the holders of Edenor’s outstanding financial debt. All of these holders elected to participate in the restructuring and, as a result, on April 24, 2006, Edenor exchanged all of its then-outstanding financial debt for the following three series of newly issued notes, which Edenor refer to as the restructuring notes:  ·U.S. $123,773,586 Fixed Rate Par Notes due December 14, 2016, with approximately 50% of the principal due and payable at maturity and the remainder due in semiannual installments commencing June 14, 2011, and bearing interest starting at 3% and stepping up to 10% over time; ·U.S. $12,656,086 Floating Rate Par Notes due December 14, 2019, with the same payment terms as the Fixed Rate Par Notes and bearing interest at LIBOR plus a spread, which starts at 1% in 2008 and steps up to 2% over time; and ·U.S. $239,999,985 Discount Notes due December 14, 2014, with 60% of the principal due and payable at maturity and the remainder due in semiannual installments commencing on June 14, 2008, and bearing interest at a fixed rate that starts at 3% and steps up to 12% over time. As of the date of this annual report, all of the restructuring notes have been repaid and cancelled.  In October 2007, Edenor completed an offering of U.S. $220 million aggregate principal amount of its 10.5% Senior Notes due 2017, which Edenor refers to as the Senior Notes due 2017. Edenor used a substantial portion of the proceeds from that offering to redeem in full its Discount Notes due 2014 in several transactions throughout the period from October through December 2007.  During 2008, Edenor repurchased U.S. $17.5 million of its Senior Notes due 2017, of which U.S. $6 million Senior Notes due 2017 were cancelled.  In May 2009, Edenor issued Ps. 75.7 million principal amount of Par Notes due 2013 under its Medium Term Note Program. The Par Notes due 2013 are denominated and payable in Pesos and accrue interest on a quarterly basis at a rate equal to the private BADLAR, as published by the Central Bank, for each such quarter plus 6.75%.  Principal on the notes is payable in 13 quarterly installments, starting on May 7, 2010. As of December 31, 2013, these Notes had been fully paid.  During 2009, Edenor repurchased U.S. $53.8 million Senior Notes due 2017, U.S. $24.5 million of which was transferred to Edenor as a consequence of the dissolution of the discretionary trust described below.  On October 25, 2010, Edenor issued Senior Notes due 2022 with a face value of U.S. $ 230.3 million, of which U.S. $ 140 million were subscribed under a cash offer and U.S. $ 90.3 million were exchanged, as a result of an exchange offer, for Senior Notes due 2017, paying in cash U.S. $ 9.5 million plus accrued unpaid interest on those Senior Notes due 2017. Edenor lunched an offer to purchase under which Edenor purchased Senior Notes due 2017 with a face value of U.S. $33.6 million for U.S. $35.8 million, including payment of accrued and unpaid interest on the Senior Notes due 2017.  The Senior Notes due 2022 have a 12-year maturity and were issued at par, with interest accruing from the date of issuance at a fixed rate of 9.75% and payable semi-annually on October 25 and April 25 of each year, with the first interest payment on April 25, 2011. As of December 31, 2015, the outstanding amount of Senior Notes due 2022 was U.S.$ 176.4 million. Edenor repurchased and cancelled U.S.$ 123.6 million during 2014, of which, U.S.$ 68 million were repurchased by the Aeseba Sale Trust during 2014.  On October 18, 2010, Edenor cancelled Senior Notes due 2017 with a nominal value of U.S. $65.3 million. 116


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In addition, on October 25, 2010, November 4, 2010, and December 9, 2010, Edenor cancelled Senior Notes due 2017 for a face value of U.S. $122.6 million, U.S. $1.3 million, and U.S. $0.04 million, respectively, representing approximately 83.3% of the Senior Notes due 2017 then outstanding.  On February 2, 2016, Edenor repurchased the Senior Notes due 2022 at market prices for a nominal value of US$ 0.3 million.  Oil and Gas Petrolera Pampa Short-term Corporate Bonds (VCPs) On July 27, 2011, the creation of a global short-term debt securities program for a maximum amount of Ps. 200 million, or its equivalent in other currencies, was approved at Petrolera Pampa’s extraordinary general meeting of shareholders.  Under this program, Petrolera Pampa may issue short-term corporate bonds (in the form of simple, non-convertible bonds), promissory notes or VCPs with common, special and/or floating security and/or any other guarantee (including, but not limited to, third-party guarantees), whether subordinated or not. On July 2, 2015, the maximum amount of this debt securities program was increased to U.S.$70.0 million. During the period from 2011 through 2015, Petrolera Pampa issued series 1, 2, 3, 4, 5, 6, 7, 8, 9, 11, 12 and 14 under the VCPs program.  Below we summarize the main terms and conditions of the series that remain outstanding. VCP 14 On April 20, 2016, Petrolera Pampa issued Ps. 295.7 million of its senior unsecured notes due 360 days after the issuance date, at a rateequal to the private BADLAR plus 5.90% (paid quarterly). VCP 14 may be redeemed at Petrolera Pampa’s option at any moment beginning 90 days prior to final maturity. At Petrolera Pampa shareholders’ meeting held on January 14, 2016, a new global short-term debt securities program for a maximum amount of U.S.$100.0 million, or its equivalent in other currencies, was approved.  Under this program Petrolera Pampa may issue short-term corporate bonds (in the form of simple, non-convertible bonds), promissory notes or VCPs with common, special and/or floating security and/or any other guarantee (including, but not limited to, third-party guarantees), whether subordinated or not.  As of the date of this annual report, CNV authorization of this program is pending. Corporate Bonds (ONs) On March 19 and May, 10, 2013, a program for the issuance of nonconvertible, simple corporate bonds for a nominal value of up to U.S.$100.0 million, or its equivalent in other currencies (the “Petrolera Pampa Corporate Bonds Program”), was approved at Petrolera Pampa’s extraordinary general meeting of shareholders.  Petrolera Pampa’s shareholders also vested Petrolera Pampa’s board of directors with the power to establish the terms of any debt issuance under the Petrolera Pampa Corporate Bonds Program and determine the time of any such issuance.  Accordingly, on March 21, 2013, Petrolera Pampa’s board of directors approved the terms and conditions of the Petrolera Pampa Corporate Bonds Program.  In 2015, the maximum issuance amount of such Corporate Bonds Program was increased twice, from U.S.$. 100.0 million to U.S.$125.0 million, as approved by the CNV on January 29, 2015, and from U.S.$125.0 million to U.S.$250.0 million, as approved by the CNV on July 2, 2015.  In 2016, the maximum amount of the Petrolera Pampa Corporate Bonds Program was increased again from U.S.$250.0 million to U.S.$500.0 million. As of the date of this annual report, CNV authorization of this program is pending. From 2013 through 2016 series 1, 2, 4, 5, 6 and 7 have been issued under the Petrolera Pampa Corporate Bonds Program. We summarize below the main terms and conditions of the series that remain outstanding. Outstanding Series under the Petrolera Pampa Corporate Bonds Program 117


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On May 6, 2013, Petrolera Pampa’s board of directors approved the terms and conditions of series 1 under the Petrolera Pampa Corporate Bonds Program.  On June 26, 2013, Petrolera Pampa issued Ps 254.8 million of series 1 bonds at a variable interest rate equal to the Badlar rate plus 3% and a maturity of 36 months.  Series 1 bonds may be redeemed by Petrolera Pampa at any time beginning 18 months prior to the maturity date. On December 18, 2013 and March 31, 2014, Petrolera Pampa’s board of directors approved the terms and conditions of series 2 and 3, respectively, under the Petrolera Pampa Corporate Bonds Program.  On June 6, 2014, Petrolera Pampa issued Ps. 525.4 million of series 2 bonds at a variable interest rate equal to the Badlar rate and a maturity of 36 months.  The series 3 bonds were not issued. Series 2 bonds may be redeemed by Petrolera Pampa at any time beginning 18 months prior to final maturity. On January 28, 2015, Petrolera Pampa’s board of directors approved the terms and conditions of series 4 and 5 bonds under the Petrolera Pampa Corporate Bonds Program.  On February 26, 2015, Petrolera Pampa issued (i) Ps. 51.0 million of series 4 bonds at an interest rate equal to (i) 27.48% for the first nine months, and (ii) thereafter, the Badlar rate plus 5%, and a maturity of 18 months, and (ii) U.S.$18.5 million of series 5 bonds at an interest rate equal to 5% and a maturity of 21 months.  Series 4 and 5 bonds may be redeemed by Petrolera Pampa at any time beginning three months prior to the maturity date. On March 18, 2015, Petrolera Pampa’s board of directors approved the terms and conditions of series 6 bonds under the Petrolera Pampa Corporate Bonds Program. On April 30, 2015, Petrolera Pampa issued Ps. 49.9 million of series 6 bonds at an interest rate equal to (i) 27.25% for the first nine months and (ii) thereafter, the Badlar rate plus 4.5%, and a maturity of 18 months.  Series 6 bonds may be redeemed by Petrolera Pampa at any time beginning three months prior to the maturity date. On November 6, 2015, Petrolera Pampa’s board of directors approved the terms and conditions of the series 7 bonds under the Petrolera Pampa Corporate Bonds Program.  On February 3, 2016, Petrolera Pampa issued Ps. 309.8 million of series 7 bonds at a variable interest rate equal to the Badlar rate plus 5%, and a maturity of 18 months.  Series 7 bonds may be redeemed by Petrolera Pampa at any time beginning 45 days after the date of issuance. All outstanding series under the Petrolera Pampa Corporate Bonds Program have common guarantees and an indebtedness covenant which restricts Petrolera Pampa from incurring new indebtedness unless Petrolera Pampa’s net debt to Ebitda ratio is below 4.25. Syndicated Loans On July 27, 2015, Petrolera Pampa entered into a syndicated loan agreement for Ps. 765 million with a syndicate composed of Banco Hipotecario, BACS Banco de Crédito y Securitización, ICBC Argentina and Citibank Argentina. The main terms and conditions of such syndicated loan are as follows: •Amortization: ten quarterly and consecutive installments, with a 15-month grace period from the date of disbursement.  The first two installments will each be 5.25% of the principal, the third will be 7.5%, the fourth will be 11.5% plus the balance, of 11.75% of the principal; and •Interest rate: Badcor plus 5.75% on an amount of Ps. 615 million, and a 30% fixed rate on an amount of Ps. 150 million, in both cases, payable quarterly. Promissory notes were issued to each of the lenders in the proportion of their share in the borrowing to guarantee the outstanding principal and interest amounts under the loan. The syndicated loan agreement contains customary covenants, which include, among others, limitations on the incurrence of debt, the incurrence of liens, asset sales, transactions with affiliates, engaging in certain businesses, and merger or consolidation and payment restrictions (including restrictions on our ability to pay dividends). As of the date of this annual report, Petrolera Pampa was in compliance with such covenants. 118


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On March 28, 2016, the Company and the banks of the syndicated loan described above, entered into a waiver and prepayment agreement, pursuant to which Petrolera Pampa, prepaid Ps.465 million of said loan. As of the date of this annual report the outstanding principal amount due thereunder is Ps. 300million. On March 3, 2016, the Company executed a loan agreement with Banco de Galicia y Buenos Aires S.A. The principal amount of the loan is Ps. 100 million. The loan accrues interest at a fixed rate of 32% and is payable on a monthly basis. On March 30, 2016, the Company executed a loan agreement with Industrial and Commercial Bank of China (Argentina) S.A.,pursuant to Communications “A” 5380, as amended by Communication “A” 5896 issued by the Central Bank. The principal amount of the loan is Ps. 300 million. The loan accrues interest for the first twelve months at a fixed rate of 33%, and for the last twenty-four months, at Badlar plus 5.75%. In both cases, interest will be payable on a quarterly basis. Holding and Others The Company On October 6, 2011, TGS granted a loan for the amount of U.S.$ 26 million (Ps. 109.4 million) to the Company for an initial one-year period (automatically renewable for one year upon expiration) that accrues interest at a 6.8% annual rate plus VAT. On October 6, 2012, such loan was renewed for an amount of U.S.$ 26 million plus the interest accrued during the first one-year term under the originally agreed conditions, which do not differ from current market conditions for this type of transaction. Also, on April 26, 2013, the maturity of the loan was extended until October 6, 2014 with an automatic renewal of one year and included the possibility of payment at maturity or in advance through the full and unconditional assignment to TGS of all the Company’s rights and obligations under the ICSID Claim in case, on or before the maturity date: (a) TGS has received a 20% increase on its tariff chart and that increase remains effective pursuant to the Transitory Agreement approved by Order No. 1918/2009 of the National Executive Branch, or (b) the following has been granted to TGS and remains effective: (x) the tariff adjustment set forth in an agreement initialized by TGS and approved by its Board of Directors on October 5, 2011, or (y) any other compensatory system implemented through any tariff review system or mechanism hereinafter replacing those currently in force under Economic Emergency Law No. 25,561 of the Republic of Argentina and having an equivalent economic effect on TGS. On January 12, 2015, the parties agreed to suspend the arbitration proceeding for six months as from that date. On, October 6, 2015, pursuant to the occurrence of certain events relating to an increase in TGS’s tariff described above, that was a condition under a loan granted from TGS to the Company for U.S.$. 26 million, the Company assigned to TGS, all its rights and obligations under the ICSID Claim to cancel the amounts owed under the loan. Contractual Obligations In the tables below, we set forth certain contractual obligations as of December 31, 2015 and the period in which the contractual obligations come due.  Peso amounts have been translated from Dollar amounts at the seller rate for Dollars quoted by Banco Nación on December 31, 2015 of Ps. 13.04 to U. S$. 1.00. 119


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(1)Includes amortization of principal and accrued and future interest payments.  See“Item 5. - Debt”for a broader description of our financial debt. (2)     Includes executed contractual obligations relating to our generation business.  Edenor’s concessions do not require them to make any specified amount of capital expenditures, but Edenor’s concession requires Edenor to meet certain quality and other service standards. (3)     Based on estimated payments included in our annual budget; royalty payments beyond 2017 are calculated based on average hydraulicity. (4)     Represents our minimum required lease payments. (5)     Based on the estimated average price of Ps. 1739.72 per Dam3. (6)     Based on the estimated average price of Ps. 16.65 per Dam3. (7)    See “Our Distribution Business - Empresa Distribuidora y Comercializadora Norte (Edenor) - Fines and penalties.”   
 (1)Prices are generally determined by formulas based on future market prices. Estimated prices used to calculate the monetary equivalent of these sales obligations for purposes of the table are based on current market prices as of December 31, 2015 and may not reflect actual future prices of these commodities. Accordingly, the Peso amounts provided in this table with respect to these obligations are provided for illustrative purpose only. (2)Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements of the type that we are required to disclose under Item 5.E. of Form 20-F.  120


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Item 15.         Controls and Procedures (a) Background  The Company issued its audited annual consolidated financial statements under IFRS as of December 31, 2015 and 2014 and for the three years in the period ended December 31, 2015 on March 9, 2016 and filed those consolidated financial statements with the Commission on May 2, 2016.  Following of discussions with the Staff regarding their comments related to the presentation in the statement of cash flows of the financial assistance received from the Argentine Government through the loans for investments and salaries, management restated its financial statements for the years ended on December 31, 2015 and 2014.  (b) Disclosure Controls and Procedures  We have evaluated, with the participation of our chief executive officer and chief financial officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of December 31, 2015.  There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.  Based upon our evaluation, we, with the participation of our chief executive officer and chief financial officer, concluded on April 29, 2016 that as of December 31, 2015, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.  However, due to the abovementioned restatement of the Financial Statement our chief executive officer and chief financial officer have subsequently revised that assessment and concluded that, as a result of the material weakness referred to below, our disclosure controls and procedures were not effective as of December 31, 2015.  (c) Management’s Annual Report on Internal Control over Financial Reporting (As Restated) Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of our management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.  121


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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).  Our management did not maintain effective controls over the Company’s presentation for non-routine, ad-hoc and complex agreements between the Company and the Argentine Government.  Specifically, controls over the interpretation of the accounting standards related to presentation of transactions in the statement of cash flows did not operate effectively as of December 31, 2015 which, as a result, impacted the classification between operating and financing cash flows and the disclosure of non-cash items related to the transaction. This control deficiency resulted in the restatement of the Company’s consolidated financial statements for the years ended on December 31, 2015 and 2014. Accordingly, our management has determined that this control deficiency constitutes a material weakness. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Accordingly, if not remediated, this deficiency could result in misstatements in the classification in the statement of cash flows that could, in turn, result in material misstatements of the Company’s consolidated financial statements that would not be timely prevented or detected. Because of this material weakness, management concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2015, based on criteria in Internal Control—Integrated Framework issued by the COSO. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2015 has been audited by Price Waterhouse & Co. S.R.L., an independent registered public accounting firm, as stated in their report which appears herein. (d) Remediation Plan The Company will streamline and reinforce its current procedures for the compilation, analysis and interpretation of the accounting standards to appropriately present non-routine, ad-hoc and/or complex agreements in the statement of cash flows. In addition, the Company will provide additional training to personnel to better perform this analysis. Management believes that the foregoing efforts will effectively remediate the material weakness. (e) Attestation Report of the Registered Public Accounting Firm Reference is made to the report of the Price Waterhouse & Co. S.R.L. on page F-3 of this annual report. (f) Changes in Internal Control over Financial Reporting There has been no change in our internal control over financial reporting during 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 122


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Item 18.         Financial Statements Our Restated Consolidated Financial Statements are included in this annual report beginning on page F-1. Item 19.         Exhibits Documents filed as exhibits to this Amendment No. 1 to our annual report: 12.1 Certification of Ricardo Alejandro Torres Co-Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 12.2 Certification of Gustavo Mariani, Co-Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 13.1 Certification of Co-Chief Executive Officers and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  123


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SIGNATURE  The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F/A and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
 Pampa Energía S.A.By:/s/ Ricardo Alejandro TorresName: Ricardo Alejandro Torres
Title: Co-Chief Executive Officer
  By:/s/ Gustavo MarianiName: Gustavo Mariani
Title: Co-Chief Executive Officer
   Date: July 26, 2016    124


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INDEX TO FINANCIAL STATEMENTS Pampa Energía S.A.
 Restated Consolidated Financial Statements as of December 31, 2015 and 2014, and for the Years Ended December 31, 2015, 2014, and 2013 Report of Independent Registered Public Accounting Firm
 F-3Consolidated Statement of Financial Position
 F-9Consolidated Statement of Comprehensive Income (Loss)
 F-11Consolidated Statement of Changes in Equity
 F-13Restated Consolidated Statement of Cash Flows
 F-16Notes to the Restated Consolidated Financial Statements
 F-19


F - 1

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RESTATED CONSOLIDATED FINANCIAL STATEMENTS  AS OF DECEMBER 31, 2015 AND 2014, AND FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013


F - 2

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Report of Independent Registered Public Accounting Firm   To the Board of Directors and Shareholders of Pampa Energía Sociedad Anónima (Pampa S.A.)  In our opinion, the accompanying consolidated statements of financial position and the related consolidated statements of comprehensive income (loss), changes in equity and of cash flows present fairly, in all material respects, the financial position of Pampa Energía Sociedad Anónima (Pampa S.A.) (hereinafter, “Pampa S.A.” or the “Company”) and its subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.  Management and we previously concluded that the Company maintained effective internal control over financial reporting as of December 31, 2015. However, management has subsequently determined that a material weakness in internal control over financial reporting related to the presentation in the consolidated statement of cash flows of the financial assistance received from the Argentine Government through the loans for investments and salaries existed as of that date. Accordingly, management's report has been restated and our present opinion on internal control over financial reporting, as presented herein, is different from that expressed in our previous report. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)because a material weakness in internal control over financial reporting related to the presentation in the consolidated statement of cash flows of the financial assistance received from the Argentine Government through the loans for investments and salaries existed as of that date. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness referred to above is described in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 15(c). We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2015 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included inmanagement’s report referred to above.Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.  As discussed in Note 1 to the consolidated financial statements, the Company has restated its 2015 and 2014 consolidated statement of cash flows to correct a misstatement.


F - 3

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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.   Autonomous City of Buenos Aires, July 26, 2016.    /s/PRICE WATERHOUSE & CO. S.R.L.Andrés Suarez (Partner)


F - 4

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GLOSSARY OF TERMS The following are not technical definitions, but they are helpful for the reader’s understanding of some terms used in the notes to the consolidated financial statements of the Company.  Terms
 
 DefinitionsAFIP
 
 Federal Administration of Public RevenueBLL
 
 Bodega Loma La Lata S.A.CAMMESA
 
 Compañía Administradora del Mercado Eléctrico Mayorista S.A.CC
 
 Combined CycleCGU
 
 Cash-Generating UnitsCIESA
 
 Compañía de inversiones de energía S.A.CINIIF
 
 International Financial Reporting Interpretations CommitteeCitelec
 
 Compañía Inversora en Transmisión Eléctrica Citelec S.A.CPB
 
 Central Piedra Buena S.A.CTG
 
 Central Térmica Güemes S.A.CTLL
 
 Central Térmica Loma La Lata S.A.CTP
 
 Central Térmica PiquirendaCSJN
 
 Supreme Court of Justice of the NationCYCSA
 
 Comunicación y Consumos S.A.DESA
 
 Desarrollos Energéticos S.A.EASA
 
 Electricidad Argentina S.A.Edenor
 
 Empresa Distribuidora y Comercializadora Norte S.A.Edesur
 
 Empresa Distribuidora Sur S.A.EGSSA
 
 EMDERSA Generación Salta S.A.ENDISA
 
 Energía Distribuida S.A.


F - 5

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GLOSSARY OF TERMS:(Continuation)  Terms
 
 DefinitionsENRE
 
 National Regulatory Authority of ElectricityFOCEDE
 
 Fund works of consolidation and expansion of electrical distributionFONINVEMEM
 
 Fund for Investments required to increase the electric power supply in the WEMFOTAE
 
 Works Administration Trust Transport for Electricity SupplyFRD
 
 Flow for debt repaymentFoundation
 
 Pampa Energía Foundation committed to education (Foundation)GE
 
 General ElectricGyP
 
 Gas y Petróleo de Neuquén S.A.P.E.M.HA
 
 Historical AvailabilityHI
 
 HydroelectricHIDISA
 
 Hidroeléctrica Diamante S.A.HINISA
 
 Hidroeléctrica Los Nihuiles S.A.HRP
 
 Hours Power CompensationIEASA
 
 IEASA S.A.IGMP
 
 Minimum Notional Income TaxINDISA
 
 Inversora Diamante S.A.INNISA
 
 Inversora Nihuiles S.A.IPB
 
 Inversora Piedra Buena S.A.LNG
 
 Liquefied Natural GasLVFVD
 
 Sales Liquidations with Maturity Date to be DefinedMAT
 
 WEM’s Forward MarketMAN Engines
 
 MAN B & W Diesel model 18V32/40PGIMECON
 
 Ministry of EconomyMEyM
 
 Ministry of Energy and MiningMMC
 
 Cost Monitoring Mechanism


F - 6

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GLOSSARY OF TERMS:(Continuation)  Terms
 
 DefinitionsMPFIPYS
 
 Ministry of Federal Planning, Public Investment and ServicesNIC
 
 International Accounting StandardsNIIF
 
 International Financial Reporting StandardsNYSE
 
 New York Stock ExchangeOrígenes Retiro
 
 Orígenes Seguros de Retiro S.A.PACOSA
 
 Pampa Comercializadora S.A.PEN
 
 Federal Executive PowerPEPASA
 
 Petrolera Pampa S.A.PEPCA
 
 PEPCA S.A.PISA
 
 Pampa Inversiones S.A.PP
 
 Pampa Participaciones S.A.PP II
 
 Pampa Participaciones II S.A.PUREE
 
 Rational Use of Electricity ProgrammePYSSA
 
 Préstamos y Servicios S.A.RA
 
 Recorded AvailabilityRTI
 
 Tariff Structure ReviewRTT
 
 Temporary Tariff RegimeSACME
 
 Centro de Movimiento de Energía S.A.Salaverri, Dellatorre,Burgio & Wetzler
 
 Salaverri, Dellatorre, Burgio y Wetzler Malbran Abogados Sociedad CivilSADI
 
 Argentine Interconnection SystemSE
 
 Secretary of EnergySEC
 
 Security and Exchange CommissionSIGEN
 
 National Comptroller OfficeSSN
 
 Superintendencia de Seguros de la NaciónST
 
 Secretary of LaborTG
 
 Gas Turbine


F - 7

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GLOSSARY OF TERMS:(Continuation)  Terms
 
 DefinitionsTGS
 
 Transportadora de Gas del Sur S. A.The Company / Group
 
 Pampa Energía S. A. and its subsidiariesTJSM
 
 Termoeléctrica San Martín S. A.TMB
 
 Termoeléctrica Manuel Belgrano S. A.Transba
 
 Empresa de Transporte de Energía Eléctrica por Distribución Troncal de la Provincia de Buenos Aires Transba S. A.Transelec
 
 Transelec Argentina S. A.Transener
 
 Compañía de Transporte de Energía Eléctrica en Alta Tensión Transener S. A.TV
 
 Vapor TurbineUMA
 
 Undertaken Minimum AvailabilityUTE Senillosa
 
 Petrolera Pampa S. A. Rovella Carranza Gas y Petróleo de Neuquén, Unión Transitoria de Empresas SenillosaVAT
 
 Value Added taxVCP
 
 Short-term securitiesVRD
 
 Debt SecuritiesWEM
 
 Wholesale Electricity Market


F - 8

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CONSOLIDATEDSTATEMENT OF FINANCIAL POSITION As of December 31, 2015 and 2014 (In Argentine Pesos (“$”) – unless otherwise stated)   Note
 
 12.31.2015
 
 12.31.2014ASSETSNON CURRENT ASSETSInvestments in joint ventures
 8
 
 223,918,951
 
 226,894,893Investments in associates
 9
 
 123,237,325
 
 133,169,584Property, plant and equipment
 10
 
 14,508,403,073
 
 9,218,099,975Intangible assets
 11
 
 734,167,886
 
 872,384,099Biological assets
 12
 
 1,853,667
 
 1,894,481Financial assets at fair value through profit and loss
 13
 
 2,578,182,705
 
 963,012,962Deferred tax assets
 14
 
 52,279,953
 
 93,681,916Trade and other receivables
 15
 
 1,169,397,290
 
 954,842,893Total non current assets
 
 
 19,391,440,850
 
 12,463,980,803CURRENT ASSETSBiological assets
 12
 
 245,361
 
 198,470Inventories
 16
 
 225,462,790
 
 135,570,860Financial assets at fair value through profit and loss
 13
 
 4,081,019,508
 
 1,028,577,127Derivative financial instruments
 4.13
 
 197,150
 
 -Trade and other receivables
 15
 
 4,934,645,531
 
 2,903,411,995Cash and cash equivalents
 17
 
 516,597,918
 
 335,234,106Total current assets
 
 
 9,758,168,258
 
 4,402,992,558Total assets
 
 
 29,149,609,108
 
 16,866,973,361


F - 9

---



CONSOLIDATEDSTATEMENT OF FINANCIAL POSITION (Continuation)   Note
 
 12.31.2015
 
 12.31.2014SHAREHOLDERS ́ EQUITYShare capital
 18
 
 1,695,859,459
 
 1,314,310,895Additional paid-in capital and other reserve
 
 
 1,231,483,268
 
 342,984,871Legal reserve
 
 
 51,462,158
 
 14,304,190Voluntary reserve
 
 
 977,780,998
 
 271,779,611Reserve for directors’ options
 
 
 -
 
 266,060,067Retained earnings
 
 
 3,065,089,423
 
 743,159,355Other comprehensive loss
 
 
 (31,086,202)
 
 (32,191,096)Equity attributable to owners of the company
 
 
 6,990,589,104
 
 2,920,407,893Non-controlling interest
 
 
 1,390,609,148
 
 633,431,122Total equity
 
 
 8,381,198,252
 
 3,553,839,015LIABILITIESNON CURRENT LIABILITIESTrade and other payables
 19
 
 2,698,769,957
 
 1,909,433,852Borrowings
 20
 
 6,684,746,241
 
 3,786,988,603Deferred revenue
 21
 
 153,815,820
 
 109,089,120Salaries and social security payable
 22
 
 80,039,338
 
 62,858,307Defined benefit plans
 23
 
 264,454,859
 
 196,587,957Deferred tax liabilities
 14
 
 591,588,053
 
 470,584,488Taxes payable
 24
 
 388,463,004
 
 281,231,713Provisions
 25
 
 313,778,975
 
 119,527,656Total non current liabilities
 
 
 11,175,656,247
 
 6,936,301,696CURRENT LIABILITIESTrade and other payables
 19
 
 6,652,485,409
 
 4,536,471,292Borrowings
 20
 
 1,307,662,872
 
 783,583,090Deferred revenue
 21
 
 763,684
 
 763,684Salaries and social security payable
 22
 
 886,967,815
 
 725,274,898Defined benefit plans
 23
 
 46,089,380
 
 26,759,690Taxes payable
 24
 
 610,112,473
 
 231,928,622Derivative financial instruments
 4.13
 
 18,081,410
 
 47,880,462Provisions
 25
 
 70,591,566
 
 24,170,912Total current liabilities
 
 
 9,592,754,609
 
 6,376,832,650Total liabilities
 
 
 20,768,410,856
 
 13,313,134,346Total liabilities and equity
 
 
 29,149,609,108
 
 16,866,973,361
  The accompanying notes are an integral part of these restated consolidated financial statements.


F - 10

---



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) For the years ended December 31, 2015, 2014 and 2013 (In Argentine Pesos (“$”) – unless otherwise stated)   Note
 
 12.31.2015
 
 12.31.2014
 
 12.31.2013Revenue
 26
 
 7,160,781,433
 
 6,204,645,511
 
 5,334,993,550Cost of sales
 27
 
 (7,092,790,535)
 
 (6,029,079,708)
 
 (5,603,274,246)Gross profit
 
 
 67,990,898
 
 175,565,803
 
 (268,280,696)Selling expenses
 28
 
 (972,682,033)
 
 (713,360,347)
 
 (636,129,432)Administrative expenses
 29
 
 (1,239,386,075)
 
 (837,458,716)
 
 (561,873,093)Other operating income
 30
 
 940,678,036
 
 311,975,857
 
 466,220,030Other operating expenses
 30
 
 (754,401,446)
 
 (447,074,876)
 
 (204,111,074)Reversal of impairment of property, plant and equipment
 10
 
 25,259,957
 
 88,406,704
 
 -Profit of cancellation debts with arbitration rights
 20
 
 -
 
 -
 
 -Share of profit of joint ventures
 8
 
 9,277,768
 
 34,208,368
 
 (4,799,349)Share of loss of associates
 9
 
 (9,932,259)
 
 (1,605,070)
 
 2,228,499Operating loss before higher costs recognition and SE Resolution No. 32/15
 
 
 (1,933,195,154)
 
 (1,389,342,277)
 
 (1,206,745,115)Income recognition on account of the RTI - SE Resolution No. 32/15
 2
 
 5,025,113,729
 
 -
 
 -Higher Costs Recognition - SE Resolution No. 250/13 and subsequent Notes
 2
 
 551,498,435
 
 2,271,926,952
 
 2,933,051,544Operating income
 
 
 3,643,417,010
 
 882,584,675
 
 1,726,306,429Financial income
 31
 
 348,527,733
 
 440,541,774
 
 336,295,165Financial expenses
 31
 
 (1,257,314,794)
 
 (1,113,228,906)
 
 (813,875,720)Other financial results
 31
 
 1,700,971,014
 
 420,055,021
 
 (519,261,217)Financial results, net
 
 
 792,183,953
 
 (252,632,111)
 
 (996,841,772)Profit before income tax
 
 
 4,435,600,963
 
 629,952,564
 
 729,464,657Income tax and minimun national income tax
 32
 
 (586,776,949)
 
 (100,412,278)
 
 12,178,991Profit for the year from continuing operations
 
 
 3,848,824,014
 
 529,540,286
 
 741,643,648Discontinued operations
 
 
 -
 
 -
 
 (126,858,328)Total profit of the year
 
 
 3,848,824,014
 
 529,540,286
 
 614,785,320Other comprehensive income (loss)Items that will not be reclassified to profit or lossRemeasurements related to defined benefit plans
 23
 
 (1,095,782)
 
 (23,297,267)
 
 (27,034,200)Minimum notional income tax
 14
 
 383,524
 
 10,763,517
 
 6,852,496Profit from share in joint ventures
 8
 
 839,661
 
 (2,129,126)
 
 (70,562)Other comprehensive income (loss) of the year
 
 
 127,403
 
 (14,662,876)
 
 (20,252,266)Comprehensive income of the year
 
 
 3,848,951,417
 
 514,877,410
 
 594,533,054


F - 11

---



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (Continuation)   Note
 
 12.31.2015
 
 12.31.2014
 
 12.31.2013Total Profit (loss) of the year attributable to:Owners of the company
 
 
 3,065,089,423
 
 743,159,355
 
 286,083,801Non - controlling interest
 
 
 783,734,591
 
 (213,619,069)
 
 328,701,5193,848,824,014
 
 529,540,286
 
 614,785,320Total profit (loss) of the year attributable to owners of the company:Continuing operations
 
 
 3,065,089,423
 
 743,159,355
 
 371,782,245Discontinued operations
 
 
 -
 
 -
 
 (85,698,444)3,065,089,423
 
 743,159,355
 
 286,083,801Total comprehensive income (loss) of the year attributable to:Owners of the company
 
 
 3,066,194,317
 
 735,353,580
 
 272,451,852Non - controlling interest
 
 
 782,757,100
 
 (220,476,170)
 
 322,081,2023,848,951,417
 
 514,877,410
 
 594,533,054Earnings per share attributable to the equity holders of the company during the yearBasic earnings per share
 33
 
 2.2760
 
 0.5654
 
 0.2829Diluted earnings per share
 33
 
 2.2760
 
 0.5082
 
 0.2829Basic and diluted loss per share from discontinued operations
 33
 
 -
 
 -
 
 (0.0652)
  The accompanying notes are an integral part of these restated consolidated financial statements.


F - 12

---



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the years ended December 31, 2015, 2014 and 2013 (In Argentine Pesos (“$”) – unless otherwise stated)   Attributable to ownersEquity holders of the company
 
 Retained earnings
 
 
 
 Non-controlling interest
 
 Total equityShare capital
 
 Additional paid-in capital and other reserves
 
 Legal reserve
 
 Voluntary reserve
 
 Reserve for directors’ options
 
 Other comprehensive (loss) income
 
 Retained earnings (Accumulated losses)
 
 SubtotalBalance as of December 31, 2012
 1,314,310,895
 
 1,018,352,216
 
 -
 
 -
 
 250,405,701
 
 (10,753,372)
 
 (771,796,574)
 
 1,800,518,866
 
 529,796,278
 
 2,330,315,144Reserve for directors’ options
 -
 
 -
 
 -
 
 -
 
 8,945,352
 
 -
 
 -
 
 8,945,352
 
 -
 
 8,945,352Accumulated losses absorptions - Shareholders’ meeting 04.26.2013
 -
 
 (771,796,574)
 
 -
 
 -
 
 -
 
 -
 
 771,796,574
 
 -
 
 -
 
 -Dividends attributables to non-controlling interest
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 (15,467,679)
 
 (15,467,679)Sale of subsidiaries
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 (72,127,674)
 
 (72,127,674)Sale of interest in subsidiaries
 -
 
 7,698,689
 
 -
 
 -
 
 -
 
 -
 
 -
 
 7,698,689
 
 20,941,588
 
 28,640,277Merging of subsidiaries
 -
 
 9,235,580
 
 -
 
 -
 
 -
 
 -
 
 -
 
 9,235,580
 
 (9,251,951)
 
 (16,371)Profit of the year
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 286,083,801
 
 286,083,801
 
 328,701,519
 
 614,785,320Other comprehensive profit of the year
 -
 
 -
 
 -
 
 -
 
 -
 
 (13,631,949)
 
 -
 
 (13,631,949)
 
 (6,620,317)
 
 (20,252,266)Comprehensive (loss) profit of the year
 -
 
 -
 
 -
 
 -
 
 -
 
 (13,631,949)
 
 286,083,801
 
 272,451,852
 
 322,081,202
 
 594,533,054Balance as of December 31, 2013
 1,314,310,895
 
 263,489,911
 
 -
 
 -
 
 259,351,053
 
 (24,385,321)
 
 286,083,801
 
 2,098,850,339
 
 775,971,764
 
 2,874,822,103


F - 13

---



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continuation)   Attributable to ownersEquity holders of the company
 
 Retained earnings
 
 
 
 Non-controlling interest
 
 Total equityShare capital
 
 Additional paid-in capital and other reserves
 
 Legal reserve
 
 Voluntary reserve
 
 Reserve for directors’ options
 
 Other comprehensive (loss) income
 
 Retained earnings (Accumulated losses)
 
 SubtotalBalance as of December 31, 2013
 1,314,310,895
 
 263,489,911
 
 -
 
 -
 
 259,351,053
 
 (24,385,321)
 
 286,083,801
 
 2,098,850,339
 
 775,971,764
 
 2,874,822,103-Reserve for directors’ options
 -
 
 -
 
 -
 
 -
 
 6,709,014
 
 -
 
 -
 
 6,709,014
 
 -
 
 6,709,014Sale of interest in subsidiaries
 -
 
 66,900,103
 
 -
 
 -
 
 -
 
 -
 
 -
 
 66,900,103
 
 7,814,930
 
 74,715,033Change of interest in subsidiaries
 -
 
 12,594,857
 
 -
 
 -
 
 -
 
 -
 
 -
 
 12,594,857
 
 86,752,644
 
 99,347,501Dividends attributables to non-controlling interest
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 (16,632,046)
 
 (16,632,046)Constitution of legal reserve - Shareholders’ meeting 04.30.2014
 -
 
 -
 
 14,304,190
 
 -
 
 -
 
 -
 
 (14,304,190)
 
 -
 
 -
 
 -Constitution of voluntary reserve - Shareholders’ meeting 04.30.2014
 -
 
 -
 
 -
 
 271,779,611
 
 -
 
 -
 
 (271,779,611)
 
 -
 
 -
 
 -Profit of the year
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 743,159,355
 
 743,159,355
 
 (213,619,069)
 
 529,540,286Other comprehensive profit of the year
 -
 
 -
 
 -
 
 -
 
 -
 
 (7,805,775)
 
 -
 
 (7,805,775)
 
 (6,857,101)
 
 (14,662,876)Comprehensive (loss) profit
 -
 
 -
 
 -
 
 -
 
 -
 
 (7,805,775)
 
 743,159,355
 
 735,353,580
 
 (220,476,170)
 
 514,877,410Balance as of December 31, 2014
 1,314,310,895
 
 342,984,871
 
 14,304,190
 
 271,779,611
 
 266,060,067
 
 (32,191,096)
 
 743,159,355
 
 2,920,407,893
 
 633,431,122
 
 3,553,839,015


F - 14

---



CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continuation)  Attributable to ownersEquity holders of the company
 
 Retained earnings
 
 
 
 Non-controlling interest
 
 Total equityShare capital
 
 Additional paid-in capital and other reserves
 
 Legal reserve
 
 Voluntary reserve
 
 Reserve for directors’ options
 
 Other comprehensive (loss) income
 
 Retained earnings (Accumulated losses)
 
 SubtotalBalance as of December 31, 2014
 1,314,310,895
 
 342,984,871
 
 14,304,190
 
 271,779,611
 
 266,060,067
 
 (32,191,096)
 
 743,159,355
 
 2,920,407,893
 
 633,431,122
 
 3,553,839,015Constitution of legal reserve - Shareholders’ meeting 04.30.2015
 -
 
 -
 
 37,157,968
 
 -
 
 -
 
 -
 
 (37,157,968)
 
 -
 
 -
 
 -Constitution of voluntary reserve - Shareholders’ meeting 04.30.2015
 -
 
 -
 
 -
 
 706,001,387
 
 -
 
 -
 
 (706,001,387)
 
 -
 
 -
 
 -Issuance of shares on exercise of stock options (Note 41)
 381,548,564
 
 883,272,106
 
 -
 
 -
 
 (266,060,067)
 
 -
 
 -
 
 998,760,603
 
 -
 
 998,760,603Dividends attributables to non-controlling interest
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 (26,092,252)
 
 (26,092,252)Sale of interest in subsidiaries
 -
 
 5,226,291
 
 -
 
 -
 
 -
 
 -
 
 -
 
 5,226,291
 
 513,178
 
 5,739,469Profit of the year
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 3,065,089,423
 
 3,065,089,423
 
 783,734,591
 
 3,848,824,014Other comprehensive profit (loss) of the year
 -
 
 -
 
 -
 
 -
 
 -
 
 1,104,894
 
 -
 
 1,104,894
 
 (977,491)
 
 127,403Comprehensive profit of the year
 -
 
 -
 
 -
 
 -
 
 -
 
 1,104,894
 
 3,065,089,423
 
 3,066,194,317
 
 782,757,100
 
 3,848,951,417Balance as of December 31, 2015
 1,695,859,459
 
 1,231,483,268
 
 51,462,158
 
 977,780,998
 
 -
 
 (31,086,202)
 
 3,065,089,423
 
 6,990,589,104
 
 1,390,609,148
 
 8,381,198,252
   The accompanying notes are an integral part of these restated consolidated financial statements.


F - 15

---



RESTATED CONSOLIDATEDSTATEMENT OF CASH FLOWS For the years ended December 31, 2015, 2014 and 2013 (In Argentine Pesos (“$”) – unless otherwise stated)  12.31.2015
 
 12.31.2014
 
 12.31.2013Note
 
 (restated)
 
 (restated)Cash flows from operating activities:Total profit for the year
 
 
 3,848,824,014
 
 529,540,286
 
 614,785,320Adjustments to reconcile net (loss) profit to cash flows generated by operating activities:Income tax and minimum notional income tax
 32
 
 586,776,949
 
 100,412,278
 
 (12,178,991)Accrued interest
 
 
 859,592,603
 
 596,724,545
 
 447,574,296Depreciations and amortizations
 27, 28 and 29
 
 720,684,258
 
 467,160,148
 
 374,791,231Reserve for directors’ options
 29
 
 -
 
 6,709,014
 
 8,945,352Reversal of impairment of property, plant and equipment
 10
 
 (25,259,957)
 
 (88,406,704)
 
 -Gain from discharge/cancellation of TGS Loan
 20
 
 (215,413,769)
 
 -
 
 -Constitution (Recovery) of accruals, net
 28 and 30
 
 120,672,006
 
 (23,697,702)
 
 48,343,247Constitution of provisions, net
 30
 
 228,150,344
 
 95,822,786
 
 36,571,446Share of (loss) profit of joint ventures and associates
 8 and 9
 
 654,491
 
 (32,603,298)
 
 2,570,850Accrual of defined benefit plans
 27, 28 and 29
 
 121,778,161
 
 73,163,395
 
 33,754,716Net foreign currency exchange difference
 31
 
 566,172,708
 
 761,254,771
 
 744,150,070Result from measurement at present value
 31
 
 (23,228,386)
 
 (223,304,132)
 
 155,869,735Changes in the fair value of financial instruments
 
 
 (2,226,008,275)
 
 (907,867,357)
 
 (295,854,837)Result from repurchase of corporate bonds
 31
 
 (9,904,686)
 
 (47,122,571)
 
 (88,879,485)Results from property, plant and equipment sale and decreases
 30
 
 8,756,789
 
 18,639,620
 
 13,404,236Consumption of materials
 
 
 40,996,168
 
 11,869,855
 
 6,783,353Recovery of other operative expenses
 
 
 -
 
 -
 
 (13,002,003)Revenue recognition from CAMMESA finance (*)
 
 
 (7,019,838)
 
 (18,852,659)
 
 (17,402,480)Higher Costs Recognition - SE Resolution No. 250/13 and subsequent Notes
 2
 
 (551,498,435)
 
 (2,271,926,952)
 
 (2,933,051,544)Income recognition on account of the RTI - Res.SE No. 32/15
 2
 
 (495,516,409)
 
 -
 
 -Dividends earned
 30
 
 (4,486,563)
 
 (6,226,319)
 
 (6,876,038)Recognition of March Agreement
 
 
 -
 
 -
 
 (85,177,042)Recovery of tax on gross income
 37
 
 -
 
 (41,110,709)
 
 -Provision for decommissioning of wells
 31
 
 18,899,410
 
 47,953
 
 -Compensation agreements
 27, 28 and 29
 
 223,600,947
 
 61,546,421
 
 -Other operating costs for contract termination
 30
 
 -
 
 11,366,548
 
 -Other expenses FOCEDE
 30
 
 59,563,107
 
 97,701,000
 
 -Other finance results
 
 
 10,260,586
 
 (4,301,834)
 
 3,811,823Income recognition for arbitral proceedings
 30
 
 (74,770,949)
 
 -
 
 -Other
 
 
 1,533,908
 
 38,242
 
 1,871,525Discontinued operations
 
 
 -
 
 -
 
 199,135,735Changes in operating assets and liabilities:Increase in trade receivables and other receivables
 
 
 (988,662,904)
 
 (753,779,506)
 
 (508,715,144)Increase in inventories
 
 
 (89,662,239)
 
 (21,085,864)
 
 (50,402,379)(Increase) Decrease in biological assets
 
 
 (46,892)
 
 365,961
 
 (916,879)Increase in trade and other payables
 
 
 1,061,352,687
 
 70,553,896
 
 183,440,125Increase in deferred income
 
 
 45,490,384
 
 76,187,087
 
 (700,044)Increase in salaries and social security payable
 
 
 178,868,247
 
 260,712,693
 
 112,375,704Decrease in defined benefit plans
 
 
 (35,677,351)
 
 (18,186,942)
 
 (13,164,865)Increase in taxes payable
 
 
 103,396,097
 
 51,441,807
 
 (31,963)Decrease in provisions
 
 
 (34,021,661)
 
 (54,049,454)
 
 (25,358,712)Income tax and minimum notional income tax paid
 
 
 (120,948,438)
 
 (880,339)
 
 (3,692,829)Funds obtained from PUREE (SE Resolution No. 1037/07)
 
 
 25,612,143
 
 482,928,401
 
 491,946,068Proceeds from (Payments of) derivative financial instruments
 
 
 185,214,525
 
 (42,125,000)
 
 -Subtotal before variations of accounts payable with CAMMESA
 
 
 4,114,723,780
 
 (781,340,635)
 
 (575,280,403)Increase in account payable with CAMMESA in distribution
 
 
 251,044,487
 
 2,974,875,348
 
 2,231,477,000Net cash generated by operating activities
 
 
 4,365,768,267
 
 2,193,534,713
 
 1,656,196,597
 (*) Corresponds to the financing of CAMMESA under the Note SE No. 6157/10, payment of which is in charge of the MEM


F - 16

---



RESTATED CONSOLIDATED STATEMENT OF CASH FLOWS(Continuation)   12.31.2015
 
 12.31.2014
 
 12.31.2013Note
 
 (restated)
 
 (restated)Cash flows from investing activities:Purchases of property, plant and equipment acquisition
 
 
 (4,797,918,069)
 
 (2,331,115,327)
 
 (1,050,265,080)Purchases of financial assets at fair value
 
 
 (3,506,210,675)
 
 (1,055,481,705)
 
 (353,525,353)Proceeds from property, plant and equipment sale
 
 
 40,660
 
 2,281,299
 
 399,407Proceeds from financial assets at fair value sale
 
 
 2,263,908,118
 
 1,258,242,711
 
 279,128,770Proceeds from financial assets' amortization
 
 
 1,579,202
 
 3,239,076
 
 54,793,585Proceeds from financial assets' interest
 
 
 16,161,243
 
 18,169
 
 1,878,384Dividends received
 
 
 4,486,563
 
 2,777,280
 
 13,028,406Proceeds from loans
 
 
 1,430,518
 
 2,182,025
 
 4,617,341Proceeds from interest on loans
 
 
 13,411
 
 -
 
 -Proceeds (Constitution) of guarantee deposits, net
 
 
 293,392,019
 
 (276,616,965)
 
 -Recovery (Subscription) of investment funds, net
 
 
 (1,390,929,067)
 
 (77,330,026)
 
 (282,191,942)Capital contribution in joint ventures
 
 
 (475,000)
 
 (250,000)
 
 (205,386)Discontinued operations
 
 
 -
 
 -
 
 (124,246,000)Net cash used in investing activities
 
 
 (7,114,521,077)
 
 (2,472,053,463)
 
 (1,456,587,868)Cash flows from financing activities:Proceeds from borrowings
 
 
 4,793,347,633
 
 2,519,386,589
 
 656,489,875Payment of borrowings
 
 
 (2,281,317,918)
 
 (2,253,561,870)
 
 (513,035,781)Payment of borrowings' interests
 
 
 (731,714,230)
 
 (567,793,296)
 
 (200,559,674)Capital contributions received
 
 
 998,760,603
 
 -
 
 -Capital contributions received from third parties in subsidiries
 
 
 -
 
 98,997,500
 
 -Proceeds from sale of interest in subsidiaries to Non Controlling Interest
 
 
 5,739,469
 
 74,714,844
 
 28,640,301Dividends paid to third parties in subsidiaries
 
 
 (26,092,252)
 
 (19,432,044)
 
 (7,871,681)Payment for repurchase of own debt
 
 
 (121,371,300)
 
 -
 
 (65,982,241)Discontinued operations
 
 
 -
 
 -
 
 25,388,000Proceeds from PP&E mutuum
 
 
 -
 
 100,000,000
 
 -Proceeds from Salaries mutuum
 
 
 214,894,157
 
 280,622,252
 
 -Net cash geterated by (used in) financing activities
 
 
 2,852,246,162
 
 232,933,975
 
 (76,931,201)Increase (Decrease) in cash and cash equivalent
 
 
 103,493,352
 
 (45,584,775)
 
 122,677,528Cash and cash equivalents at the beginning of the year
 17
 
 335,234,106
 
 341,668,865
 
 156,647,001Cash and cash equivalents at the beginning of the year included in assets classified as held for sale
 
 
 -
 
 -
 
 11,154,000Foreign currency exchange difference generated by cash and cash equivalents
 
 
 77,870,460
 
 39,150,016
 
 51,190,336Increase (Decrease) in cash and cash equivalent
 
 
 103,493,352
 
 (45,584,775)
 
 122,677,528Cash and cash equivalents at the end of the year
 17
 
 516,597,918
 
 335,234,106
 
 341,668,865


F - 17

---



RESTATED CONSOLIDATED STATEMENT OF CASH FLOWS(Continuation)   12.31.2015
 
 12.31.2014
 
 12.31.2013Note
 
 (restated)
 
 (restated)Significant Non-cash transactions:Acquisition of property, plant and equipment through an increase in trade payables
 
 
 (988,827,033)
 
 (208,339,247)
 
 (158,325,018)Borrowing costs capitalized in property, plant and equipment
 
 
 (433,823,766)
 
 (123,861,184)
 
 (24,532,005)Increase (Decrease) from offsetting of PUREE-related liability against receivables (SE Res. No. 250/13, subsequent Notes and SE Res. 32/15)
 
 
 10,618,797
 
 (574,009,553)
 
 1,661,103,990Increase (Decrease) from offsetting of liability with CAMMESA for electricity purchases against receivables (SE Res. No. 250/13, subsequent Notes and SE Res. 32/15)
 
 
 158,081,277
 
 (2,218,423,960)
 
 (1,152,267,285)Decrease from offsetting liability with CAMMESA from loans for consumption (mutuums) granted for higher salary costs (SE Res. No. 32/15)
 
 
 (495,516,409)
 
 -
 
 -Decrease in borrowings through offsetting trade receivables
 
 
 (92,129,978)
 
 (131,875,580)
 
 -Decrease in financial assets at fair value repurchased Corporate Bonds
 
 
 -
 
 (91,637,990)Increase of asset retirement obligation
 
 
 (26,900,873)
 
 (53,594,289)
 
 -(Constitution) Recovery of guarantee of derivative financial instruments, net through the delivery of financial assets at fair value through profit or loss
 
 
 (138,310,986)
 
 (24,767,682)
 
 -Reclassification of assets classified as held for sale to property, plant and equipment
 
 
 -
 
 (11,987,500)
 
 -Acquisition of property, plant and equipment through an increase in liability with FOTAE
 
 
 -
 
 (32,939,174)
 
 (48,960,000)Decrease in property, plant and equipment for arbitral proceedings
 37.2
 
 235,866,673
 
 -
 
 -Offsetting of rights over arbitration proceedings against loans
 20
 
 308,071,413
 
 -
 
 -Increase in financial assets at fair value from subsidiary sale
 
 
 -
 
 -
 
 334,339,766Increase in other receivables from subsidiary sale
 
 
 -
 
 -
 
 44,626,592Amounts received from CAMMESA through FOCEDE
 
 
 723,616,059
 
 100,000,000
 
 -
   The accompanying notes are an integral part of these restated consolidated financial statements.




F - 18

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2015. 2014 and 2013 (in Argentine Pesos (“$”) – unless otherwise stated)  NOTE 1: GENERAL INFORMATION  The Company is an integrated electricity company which, through its subsidiaries and joint ventures, is engaged in of the electricity generation, transmission and distribution in Argentina.  In the generation business, the Company has an installed capacity of approximately 2,217 MW, which accounts for approximately 7% of the installed capacity in Argentina.  In the transmission business, the Company jointly controls Citelec, which is the controlling company of Transener, that performs the operation and maintenance of the high-tension transmission network in Argentina which covers 12,365 km of lines of its own and 6,158 km of Transba high voltage lines in the Province of Buenos Aires. Both companies together carry 90% of the electricity in Argentina.  In the distribution business, the Company, through Edenor, distributes electricity to over 2.8 million customers throughout the northern region of Buenos Aires City, the north and northwest of Greater Buenos Aires.  In the oil and gas segment, the Company, through PEPASA, operates exploration and exploitation of oil and gas.  In other businesses, the Company operates financial investment and keep investments in other companies with complementary businesses.  On February 11, 2010 the Company was authorized to act as agent and clearing member of ROFEX.  Restatement of Financial Statements  The Company has restated these consolidated financial statements to correct an error in the presentation of the cash inflows related to a financial assistance program granted by the Argentine Government to its subsidiary Edenor, through various loan agreements for the consumption and assignment of secured receivables, in order to pay the higher salary costs and also to cover the insufficiency of the funds deriving from the FOCEDE (the “loans for investments and salaries”).  This restatement follows the conclusion of discussions of Edenor with the Staff of the U.S. Securities and Exchange Commission regarding the Staff’s comments relating to the presentation in the statement of cash flows of the financial assistance received from the Argentine Government through the loans for investments and salaries, as explained in Note 2.3.1.8.  As a result of these discussions, the Company has restated the presentation of the cash inflows related to these agreements, placing more relevance on the fact that these agreements were instrumented as loans and not on the underlying reasons for these agreements, which was to provide an alternative source of cash inflows in the lack of increases in tariffs and review of the concession contract for the last 15 years.


F - 19

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)   NOTE 1:(Continuation)  Accordingly, the Company’s statements of cash flows for the years ended December 31, 2015 and 2014 have been restated to present the cash inflows related to such agreements within financing activities in the statement of cash flows, instead of operating activities as previously presented. Also, the increase in the balances of Edenor’s loans with CAMMESA for funds received by the FOCEDE for the years ended December 31, 2015 and 2014 have been restated and are now presented as non-cash financing transactions in the supplementary disclosures to the statement of cash flows instead of operating activities as previously disclosed.  The restatement, which is treated as the correction of an error under accounting rules, impacts only the statement of cash flows for the year ended December 31, 2015 and 2014.  As a result of the restatement, cash flows from operating activities have decreased by $ 214.9 million and $ 380.6 million in 2015 and 2014, respectively, with a corresponding increase for such amounts in the cash flows from financing activities. Of such amounts, $ 214.9 million and $ 280.6 million in 2015 and 2014, respectively, did not result in future cash outflows, as they were offset with the grant received under SE Resolution N° 32/15, and disclosed as non-cash transactions under the “Decrease from offsetting liability with CAMMESA from loans for consumption (mutuums) granted for higher salary cost (SE Res. N° 32/15)” heading in the supplementary disclosures to the Statement of Cash Flows for the year ended December 31, 2015. Also, the amounts of $ 723.6 million and $ 100 million in 2015 and 2014, respectively, are now disclosed as non-cash transaction under the “Amounts received from CAMMESA through FOCEDE” heading in the supplementary disclosures to the statement of cash flows.  There are no impacts in the consolidated statements of financial position, comprehensive income, or equity, nor in the basic and diluted earnings per share for profit attributable to the owners of the parent.  Following the restatement, these Restated Financial Statements for the years ended December 31, 2015 and 2014 of the Company have been approved and authorized for issue by the Board of Directors on July 26, 2016.  The effect of the restatement on the previously issued consolidated statement of cash flows for the years ended December 31, 2015 and 2014 is as follows:  (All amounts in Pesos)
 
 2015
 
 2015
 
 2015(as reported)
 
 (adjustment)
 
 (restated)Cash flow from operating activities
 
 4,580,662,424
 
 
 (214,894,157)
 (1)
 
 4,365,768,267Cash flow from financing activities
 
 2,637,352,005
 
 
 214,894,157
 (1)
 
 2,852,246,162Non cash transactionsAmounts received from CAMMESA through FOCEDE
 
 -
 
 
 723,616,059
 (2)
 
 723,616,059Decrease from offsetting liability with CAMMESA from loans for consumption (mutuums) granted for higher salary costs (SE Res. No. 32/15)
 
 (495,516,409)
 (3)
 
 -
 
 
 (495,516,409)2014
 
 2014
 
 2014(as reported)
 
 (adjustment)
 
 (restated)Cash flow from operating activities
 
 2,574,156,965
 
 
 (380,622,252)
 (4)
 
 2,193,534,713Cash flow from financing activities
 
 (147,688,277)
 
 
 380,622,252
 (4)
 
 232,933,975Non cash transactionsAmounts received from CAMMESA through FOCEDE
 
 -
 
 
 100,000,000
 (2)
 
 100,000,000


F - 20

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)  NOTE 1:(Continuation)  (1)Corresponds to loans for salaries and were disclosed in the statement of cash flows under the heading “Increase in account payable and loans (MUTUUM) with CAMMESA in distribution”. See Note 2.3.1.8. (2)Corresponds to loans for investments. See Note 2.3.1.8. (3)Corresponds to the grant received under SE Resolution N° 32/15, issued on March 11, 2015 establishing the offsetting of the CAMMESA loans for salaries (2014 and 2015) with this grant. See Note 2.3.1.9. (4)$ 280.6 million and $ 100 million corresponds to loans for salaries and investments, respectively.  NOTE 2: REGULATORY FRAMEWORK  2.1 Generation  The future development of the power generation activity could force the Government to modify adopted measures or to introduce additional regulations. The impacts generated by the whole set of measures adopted as at the date hereof by the National Government on the Company and its subsidiaries’ financial, economic and cash position as at December 31, 2015 have been calculated based on the assessments and estimates made by the Company management as at the date of preparation of these consolidated financial statements and should be interpreted considering these circumstances.  Regarding changes the Government may introduce in this sector, Executive Order No. 134/15, which declared a state of emergency in the electrical sector until December 31, 2017, empowers the Ministry of Energy and Mining to adopt the necessary measures regarding the generation, transportation and distribution of electric power within the national jurisdiction in order to accommodate the quality and safety of the supply and guarantee the operation of the public utility under proper technical and economic conditions.


F - 21

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)

a.Resolution No. 95/13 – New Remuneration Scheme and other Modifications to the WEM

On March 22, 2013, the SE issued Res. 95/13 which provided for a new general-scope system replacing the applicable remuneration scheme previously in force for all the power generation sector, with the exception of power plants the energy and/or power of which are sold as an Energy Plus Service (SE Res. No. 1281/06) and under the WEM Supply Agreement pursuant to SE Res. No. 220/07.

The new remuneration scheme became applicable to CTG, CPB and CTLL as from the economic transactions for the month of February, 2013, and to HINISA and HIDISA as from the commercial transaction for the month of November, 2013, after such subsidiaries waived all their administrative and/or judicial claims against the National Government, the SE and/or CAMMESA regarding the 2008-2011 Agreement and/or SE Resolution No. 406/03, as well as their right to file new claims relating to said items and periods.

Pursuant to SE Resolution No. 529/14 passed on May 20, 2014 and SE Resolution No. 482/15 dated July 10, 2015, the SE provided for a retroactive updating —as from the economic transactions for the months of February, 2014 and 2015— of the remuneration scheme implemented by SE Resolution 95/13.



It should be pointed out that the system set forth by SE Resolution No. 482/15 applies directly to generators adhering under SE Resolution No. 95/13 or SE Resolution No. 529/14.

The applicable remuneration scheme comprises the following items:



i.Fixed Costs Remuneration:It considers and remunerates Power Capacity Made Available in HRP. The method for calculating the remuneration will be variable based on the RA and each unit's HA.

The parameters defined in the Resolution according to the type of technology are the following:



Classification or technology and scale
 $/MW-HRPTG units with power capacity (P) > 50 Mw
 64TV units with power capacity (P) < 100 Mw
 106.4TV units with power capacity (P) > 100 Mw
 76HI units with power capacity (P) between 30 Mw and 120 Mw
 103.4HI units with power capacity (P) between 120 Mw and 300 Mw
 49


A base percentage is defined, which is applied to the Fixed Costs Remuneration in accordance with the following values:






F - 22

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



TV/TG
 June-August and
December-February periods
 March-May and
September-November periodsRA > 90%
 110%
 100%80% < RA ≤ 90%
 105%
 100%70% < RA ≤ 80%
 85%
 85%RA ≤ 70%
 70%
 70%






50% of the percentage difference between the generator's RA and HA will be added to or subtracted from the base percentage; that is, for each percentage point variation in the generator’s RA as compared with its HA, half a percentage point will be applied to the Fixed Costs remuneration. The maximum and minimum values are those set forth for each period (maximum 110% and minimum 70%, as applicable). Pursuant to SE Resolution No. 482/15, the reference availability value will be defined regarding the available power capacity based on the typical temperature conditions at the site.



HA values for each thermal group will be determined based on its RA during the last 5 rolling years.



ii.Variable Costs Remuneration: It replaced the remuneration of Maintenance Variable Costs and Other Non-Fuel Variable Costs, It is calculated on a monthly basis based on the power generated by each type of fuel:



Classification or technology and scale
 Operating with:Natural
Gas
 FO/GO Hydrocarbons$/MWhTG units with power capacity (P) > 50 Mw
 33.1
 57.9TV units with power capacity (P) < 100 Mw
 33.1
 57.9TV units with power capacity (P) > 100 Mw
 33.1
 57.9




Hydroelectric Units
 $/MWhHI units with power capacity (P) between 30 Mw and 120 Mw
 26.2HI units with power capacity (P) between 120 Mw and 300 Mw
 26.2












F - 23

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



iii.Additional Remuneration:Part of this remuneration is settled directly to the generator and another will be destined to “new infrastructural projects in the electric sectors”, which will be defined by the SE through a trust. The SE will establish the trust funding mechanisms.





Classification or technology and scale
 AllocationGenerator $/MWh
 Trust $/MWhTG units with power capacity (P) > 50 Mw
 11.7
 7.8TV units with power capacity (P) < 100 Mw
 13.7
 5.9TV units with power capacity (P) > 100 Mw
 11.7
 7.8HI units with power capacity (P) between 30 Mw and 120 Mw
 84.2
 14.9HI units with power capacity (P) between 120 Mw and 300 Mw
 59.4
 39.6


Additionally, the SE will define the mechanism under which the LVFVDs issued by CAMMESA pursuant to SE Resolution No. 406/03 and not comprised within the general and/or specific agreements entered into with the SE and/or provisions aimed at the execution of investment works and/or existing equipment maintenance tasks should be destined to the payment of such trust.



iv.Maintenance Remuneration:Besides the previously stated remuneration items, SE Resolution No. 529/14 incorporated a new concept of “Remuneration for Non-Recurring Maintenance Works” (“Maintenance Remuneration”) applicable as from the economic transaction corresponding to February 2014 and calculated monthly based on the total generated energy. Such remuneration is implemented through LVFVDs and is destined exclusively to the financing of major maintenance works, subject to the SE approval. As from the passing of SE Resolution No. 482/15, this Maintenance Remuneration is also recognized to hydroelectric generators as from the economic transaction corresponding to February 2015.



Classification or technology and scale
 $/MWhTG units with power capacity (P) > 50 Mw
 28.2TV units with power capacity (P) < 100 Mw
 28.2TV units with power capacity (P) > 100 Mw
 28.2HI units with power capacity (P) between 30 Mw and 120 Mw
 8HI units with power capacity (P) between 120 Mw and 300 Mw
 8




The Maintenance Remuneration for thermal generators will result from the application of a formula contemplating adjustments based on the Power Utilization Factor during the last rolling year and a Start Factor contemplating starts pursuant to the dispatch administered by CAMMESA during the last rolling year. In both cases, the rolling year is calculated until the month prior to the transaction.





F - 24

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



v.“Production” and “Operating Efficiency” Promotion:



The promotion system implemented through SE Resolution No. 482/15 consists of an increase in the remuneration of variable costs upon the meeting of certain conditions.



The “Production” promotion consists of a 15% or 10% percent increase in the remuneration of variable costs of thermal units operating with liquid fuels and gas/coal, respectively, as from the moment its accumulated production during the calendar year exceeds by 25% or 50% its production capacity with the applicable fuel and for its actual power capacity.



The “Efficiency” consists of the acknowledgment of an additional remuneration equivalent to the variable cost remuneration for the percentage difference between the actual consumption and the reference consumption determined for each unit and fuel type. Comparisons will be made on a quarterly basis. In the case of higher consumptions, the base remuneration is not affected by variable costs.



Specific consumption reference values are as follows:



Generating Unit
 Natural Gas
 Alternative Fuels (FO/GO/CM)Kcal/kWh
 Kcal/kWhTG
 2,400
 2,600TV
 2,600
 2,600






vi.2015-2018 FONINVEMEM Resources:



Pursuant to the provisions of the 2015-2018 Agreement, SE Resolution No. 482/15 included a specific contribution, the 2015-2018 FONINVEMEM Resources, destined to the execution of works under such system. 2015-2018 FONINVEMEM Resources will be allocated to generators participating in projects approved or to be approved by the SE.



Specific contributions will be automatically allocated by CAMMESA retroactively as from the economic transactions for the month of February 2015 and until December 2018 to each applicable generating agent as from the execution of the relevant construction and supply agreements. Pursuant to SE Resolution No. 482/15, timely assigned 2015-2018 FONINVEMEM Resources do not create acquired rights for the generator and, in case of breach of the construction and/or supply agreements, such resources may be reassigned by the SE.






F - 25

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)

The 2015-2018 FONINVEMEM Resources values are as follows:



Technology and scale
 2015-2018 Investment Resources ($/MWh)TG units with power capacity (P) > 50 Mw
 15.8TV units with power capacity (P) < 100 Mw
 15.8TV units with power capacity (P) > 100 Mw
 15.8HI units with power capacity (P) between 30 Mw and 120 Mw
 6.3HI units with power capacity (P) between 120 Mw and 300 Mw
 6.3




vii.2015-2018 FONINVEMEM Direct Remuneration:

It consists of the recognition of an additional remuneration to units installed under the 2015-2018 FONINVEMEM scheme equivalent to 50% of the Direct Additional Remuneration. The term for the recognition of such remuneration will begin with the unit's commercial commissioning and extend for a term not exceeding 10 years.

This remuneration makes up the whole remuneration collectable by generators under the WEM, after discounting the electric energy and/or power committed to the MAT or pursuant to other similar agreements, valued at the applicable market price, with the exception of the previously mentioned specific contracts, and after deducting any other charge and/or service to be borne by said agents.

Payment Priority

Two new payment priorities have been established, excluding to such effect the application of SE Res. No. 406/03: (i) the Fixed Costs Remuneration, the recognition of fuel costs and the Variable Costs Remuneration will be canceled in the first place; and (ii) the Additional Remuneration will be canceled in the second place.

However, it is established that CAMMESA —based on what is provided for by the SE— should accommodate this priority to the applicable criteria, that is, to SE Res. No. 406/03 itself.

As regards the priority in the settlement of the above-mentioned remuneration, it was provided that the Fixed Costs Remuneration, the Variable Costs Remuneration and the Additional Remuneration settled directly to the generator, as well as the recognition of fuel costs, will have the same priority as that set forth in Section 4 of SE Res. No. 406/03.

The remuneration of frequency regulation and short-term reserve services will have the same priority as that set forth in Section 4.d of SE Res. No. 406/03, and the additional remuneration allocated to the trust, the same as that contemplated in subsection c) of said resolution.






F - 26

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)

Through SE Note No. 4858/13, the SE instructed CAMMESA to implement a payment priority mechanism in favor of generators adhering to SE Resolution No. 95/13 in order to keep a liquidity level similar to that prior to the passing of such Res. To such effect, CAMMESA will:



i.Account for the amounts directly received from Large Users;

ii.Allocate such amounts to cover the remuneration due to generators by distributing such funds to cover: first, fixed costs; secondly, variable costs; and lastly, direct additional remuneration. The distribution will be made proportionally to each Generator’s relative share in each of said items.

Fuel Supply

It was provided that the commercial management and dispatch of fuels for generation purposes will be centralized in CAMMESA. Generators may not renew or extend their contracts with suppliers, with the exception of those trading electric energy under supply agreements having a differential remuneration scheme, in which case they may continue entering into fuel agreements to provide firm support to their supply commitments. Notwithstanding that, until the termination of the contracts currently in force between generators and their suppliers, costs associated with the reference price, acknowledged freight costs, costs associated with the transportation and distribution of natural gas, as well as their related taxes and rates, will be recognized. For the recognition of said costs, two conditions should be met: (i) on the Resolution’s effective date, costs should be recognized by CAMMESA; and (ii) said costs should result from contractual relationships taken on before the Resolution’s effective date.

Later on, and regarding the supply of fuel for generation purposes, SE Note No. 8152/13 instructed CAMMESA to call oil companies registered under the “Natural Gas Surplus Injection Promotion Program” and/or the “Program for the Promotion of Natural Gas Injection for Companies with Reduced Injection” for the supply of natural gas from the Northeast and Neuquén Basins.

Under SE Note No. 5129/13, CAMMESA was instructed to optimize fuel and generation dispatch considering actual purchase costs consistently with the conditions described by CAMMESA in the analysis previously sent to the Secretariat of Energy. This modification will result in a change in the current dispatch conditions and the mixture of fuels used for power generation.

Moreover, and in furtherance of the objective sought by SE Resolution No. 95/13 of optimizing and minimizing costs in the supply of fuel to the WEM plants, it was provided that generation agents the energy and power of which have been committed under SE Resolution No. 1193/05 (FONINVEMEM), the WEM Supply Commitment under SE Resolution No. 220/07 and SE Resolution No. 1836/07, as well as under any other kind of energy supply agreement subject to a differential remuneration system —with the exception of agreements under the Energy Plus Service passed by SE Resolution No. 1,281/06— may not renew or extend their contracts with suppliers upon termination, the supply of such fuel thus becoming centralized in CAMMESA.







F - 27

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



It should be pointed out that for transaction purposes and to provide for the coverage of the agreements now subject to this provision, the availability of the generating unit shall be considered independently of fuel.



Within this framework, during September 2015 CAMMESA has interpreted that the provisions of SE Resolution No. 529/14 were applicable to the supply of CTLL's natural gas and, therefore, informed that, as from January 2016, it would stop recognizing the costs of such supply. This position entails that CAMMESA has ceased recognizing the 10% remuneration over such costs provided for in the “Master Agreement for the Closing of Loma de la Lata's Combined Cycle” entered into between the SE and CTLL. In view of this situation and in order to safeguard its rights, during November 2015 CTLL presented a claim prior to the filing of a complaint before the MPFIPyS.

Suspension of contracts in the MAT

A temporary suspension on the inclusion of new contracts into the MAT was provided (excluding those derived from resolutions fixing a differential remuneration scheme), as well as their extension or renewal. Notwithstanding the foregoing, contracts in force as at the new remuneration scheme's effective date will continue being managed by CAMMESA until their termination. As from such termination, Large Users should acquire their supplies directly from CAMMESA pursuant to the conditions established to such effect by the SE.

Resolution’s Implementation Criteria

The categorization by CAMMESA of generation units pursuant to the scales set forth by SE Resolution No. 95/13 is detailed below:






F - 28

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



Company
 Generating unit
 Technology
 PowerCTG
 GUEMTG01
 TG
 > 50 MWCTG
 GUEMTV11
 TV
 <100 MWCTG
 GUEMTV12
 TV
 <100 MWCTG
 GUEMTV13
 TV
 >100 MWCPB
 BBLATV29
 TV
 >100 MWCPB
 BBLATV30
 TV
 >100 MWCTLL
 LDLATG01
 TG
 >50 MWCTLL
 LDLATG02
 TG
 >50 MWCTLL
 LDLATG03
 TG
 >50 MWHIDISA
 AGUA DEL TORO
 HI
 HI – Medium  120<P≤300HIDISA
 EL TIGRE
 HI
 HI – Low    0<P≤120HIDISA
 LOS REYUNOS
 HI
 HI – Medium  120<P≤300HINISA
 NIHUIL I
 HI
 HI – Medium  120<P≤300HINISA
 NIHUIL II
 HI
 HI – Medium  120<P≤300HINISA
 NIHUIL III
 HI
 HI – Medium  120<P≤300






b.Energy Plus - SE Resolution No. 1281/06

The SE approved Res. No. 1281/06, in which it is established that the existing energy commercialized in the Spot market will have the following priorities: (i) Demands below 300 KW; (ii) Demands over 300 KW with contracts; and (iii) Demands over 300 KW without contracts.

It also establishes certain restrictions to the commercialization of electricity, and implements the Energy Plus service, which consist in the offering of additional generation availability by the generating agents.These measures imply the following:



-Hydroelectric and thermal generators without fuel contracts are not allowed to execute any new contract.

-Large Users with a demand over 300 KW will be only allowed to contract their energy demand in the forward market for the electrical consumption made during the year 2005 (“Base Demand”) with the thermoelectric plants existing in the WEM.

-The new energy consumed by Large Users with a demand over 300 KW over the Base Demand must be contracted with new generation at a price freely negotiated between the parties (“Energy Plus”).

-The New Agents joining the system must contract their whole demand under the Energy Plus service.

-For the new generation plants to be included within the Energy Plus service, they must have fuel supply and transportation contracts.






F - 29

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)

Under such standard, CTG extended its generation capacity on 98.8 MWISO with the implementation of the generation unit LMS 100. CTG was the first WEM generator that provided the service of Energy Plus, for which executed several service agreements with Energy Plus that cover for the entire Net Effective Power of the extension with various agents from the MAT.

Together with the approval by the MPFIPYS of the profit margin presented by CTG through MPFIPyS Note No. 2495/08, the Energy Secretariat, by virtue of Notes No. 625/08, 2429/08 and 2495/08, authorized the CTG contracts for a total power of 98.0 MW.

If an Energy Plus client cannot meet the demand for energy assigned to it, the generator may purchase that energy in the Spot Market at the operating marginal cost.

CTG has current Power Availability Agreements in force with other generators, including TermoAndes S.A., Petrobras Arg. S.A. (for its Genelba and Ecoenergia plants), Generación Mediterránea S.A., Solalban Energía S.A., Generación Independencia S.A. and Centrales Térmicas Mendoza S.A., whereby it can purchase energy from those generators to support its contracts in case of unavailability of its LMS 100 unit. Thus, CTG substantially limits the contracts’ support risk in case of unavailability of the LMS 100 unit.

These contracts include an automatic call clause applicable by CAMMESA under certain market conditions, which takes into consideration the total or partial unavailability of the equipment to support 100% of the energy demanded by customers, the Operating Marginal Cost hourly price and the contract price. The purchase prices for the power subject-matter of the stated contracts range from US$ 64.60/MWh to US$ 65.50/MWh.

Furthermore, CTG has entered into power availability agreements with the above mentioned generating agents whereby CTG acts as the selling party, supporting generators in case of unavailability of their equipment. These agreements are ranked with a lower priority than Energy Plus contracts and relate to surplus energy (energy committed to the Energy Plus contracts which has not been demanded by customers).



The SE, through Note No. 567/07 and its amendments, has implemented the Surplus Demand Incremental Average Charge as the maximum price payable by Large Users (with a power consumption above 300 KW) for their Surplus Demand in case they do not have an Energy Plus Service Agreement in force. These values imply a cap in pesos on the sales price authorized Generators may offer to provide the Energy Plus service.

Currently these values are $ 450/MWh for GUMA and GUME and $ 550/MWh for GUDI. Considering these values and the U.S. dollar exchange rate, the surplus demand purchase cost for a Large User (GUMA, GUME and GUDI) is currently similar to the Energy Plus generation cost in U.S. dollars; therefore, as they are unable to lower their prices and reach these values, generators are losing contracts, as clients prefer not to renew them, thus obliging generators to sell their energy and power capacity in the spot market, with the resulting decline in income.





F - 30

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



Finally, under that established in Art. 6 of Res. SE 482/15, and with the agreement of the generators of Energy Plus, the energy delivered to the spot market and the uncommitted power available in Energy Plus contracts in force in each period will be paid under the criteria established by Res. SE 482/15, being the cost of fuel provided by CAMMESA out of the transaction.

c.Supply contracts WEM- Resolution SE No. 220/07

Aiming to modify the market conditions allowing for new investments to increase the generation offer, the SE passed Res. No. 220/07, which empowers CAMMESA to enter into “WEM Supply Commitment Agreements” with WEM generating agents for the energy produced with new generation equipment. They will be long-term agreements, and the price payable by CAMMESA should compensate the investment made by the agent at a rate of return accepted by the ES.

On November 1, 2011, CAMMESA granted to CTLLL the provisional commercial commissioning of the TV unit, and the combined cycle started to operate on a commercial basis. Electricity generated by TV may be sold pursuant to the Energy Plus Plan and through the WEM Supply Agreements executed by CAMMESA pursuant to SE Res. No. 220/07. Pursuant to the Addendum to the December 2010 Supply Agreement, during the first 3 years of the Supply Agreement all the power produced by the TV may be marketed thereunder.



On October 27, 2014, the Addendum to CTLL’s Supply Agreement was extended until the termination, in the year 2021, of the WEM Supply Agreement pursuant to SE Resolution No. 220/07 entered into with CAMMESA.

Pursuant to the agreement mentioned in subsection k), Central Térmica Piquirenda, owned by EGSSA (which makes up CTG ́s assets after its merger with EGSSA and EGSSAH) was commissioned for commercial operation on May 3, 2011. On July 15, 2011, such company executed the WEM Supply Agreement pursuant to SE Res. No. 220/07. As from such date, the power produced is marketed in whole pursuant to the provisions of such agreement.

d.Receivables from WEM generators



As of December 31, 2015 and December 31, 2014, the Company, through its generation subsidiaries, holds receivables with CAMMESA which, at nominal value, together with accrued interest, amount to a total $ 1.016 and $ 797.4 million, with an estimated recoverable value of $ 978 and $ 745.6 million, respectively. Below its integration are detailed.





F - 31

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



a.LVFVDs pursuant to SE Resolution No. 406/03 2004-2006. They have been assigned to FONINVEMEM in the amount of $ 53.6 million and $ 66 million including interest, and their estimated recoverable value amounts to $ 46.9 million and $ 54.8 million, respectively.



b.LVFVDs pursuant to SE Resolution No. 406/03 2008-2011. They have been allocated to the “2014 Agreement” in the amount of $ 480.1 million and $ 408.5 million including interest, and their estimated recoverable value amounts to $ 480.1 million and $ 397.8 million, respectively.



c.LVFVDs pursuant to SE Resolution No. 406/03 2012-2013 and SE Resolution No. 95/13. These have been allocated to the “2014 Agreement” in the amount of $ 403.3 million and $ 228.6 million including interest, and their estimated recoverable value amounts to $ 371.9 million and $ 198.8 million, respectively



d.LVFVDs for Maintenance Remuneration in the amount of $ 79.1 million and $ 94.3 million, respectively, bound to cancel the funding approved by the SE previously authorized for maintenance work.They have been valued at their nominal value plus interest, net of advances received partial funding under CAMMESA detailed in note 20, except in the case of HIDISA and HINISA, which are subject to approval by the SE and, therefore, these Companies have decided to recognize this remuneration as income for the period in which the approval for the maintenance is verified, until reaching the amounts approved by the SE.



Regarding the 2015-2018 FONINVEMEM Resources, as at the date hereof generating subsidiaries have advanced in the study of projects seeking to obtain, with the prior SE approval, the automatic allocation of specific contributions which as of December 31, 2015 amount to $ 92,8 million. However, the change in administration in December 2015 prevented the execution of such agreements. Proceeds from the 2015-2018 FONINVEMEM Remuneration will be acknowledged as from the approval of the investment projects and the allocation of the specific contributions.



WEM Supply Commitment Agreements – SE Resolution No. 724/08



Pursuant to such resolution, on December 9, 2008 CTLL entered into a Master Agreement with the SE whereby it undertook to conduct an extension project for the closing of the combined cycle of its generation plant, which would be partially financed through the collection from CAMMESA of its LVFVDs accumulated between January 1, 2008 and December 31, 2010 corresponding to subsection c) of SE Res. No. 406/03, as well as the LVFVDs from other WEM generators wishing to assist in the project.



Furthermore, on April 14, 2009, CTLL entered into an Electric Power Supply Agreement with CAMMESA pursuant to such resolution and the Master Agreement.



During the months of May 2009 and June 2010, CTLL entered into several receivables assignment agreements with other WEM generators (including its subsidiaries HINISA, HIDISA, CTG and CPB) regarding their LVFVDs accumulated between January 1, 2008 and December 31, 2010.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



Pursuant to such agreement, CTLL has collected from CAMMESA all receivables accrued during fiscal year 2008 and has entered into several assignments with other generators for a total amount of $ 51.2 million during 2010 and 2011.



Upon the breach by CAMMESA of the commitments undertaken under the Supply Agreement and the Master Agreement resulting from the lack of payment of the LVFVDs issued by CAMMESA to CTLL and the other generation agents expressing their decision to allocate their LVFVDs to the execution of CTLL's CC closing project, and after all administrative remedies had been exhausted, on June 28, 2013, CTLL brought a legal action to safeguard its rights.



During the month of April 2014, CPB applied all of the LVFVD accumulated between January 2008 and December 2010, including accrued interest, to cancel the loan with CAMMESA as detailed in Note 20 - CAMMESA Financing II.



Afterwards, CTLL filed a petition before the intervening Court requesting the suspension of judicial proceedings pursuant to the commitments undertaken under the 2014 Agreement to allow for the collection of the pending LVFVDs. On November 9, 2015, the Court granted a new suspension of the proceeding for a term of six months.



2008 – 2011 Agreement



On November 25, 2010, the power generation subsidiaries together with other generating agents executed the 2008 – 2011 Agreement, the main purposes of which were as follows: i) to permit the entry of new generation to meet the increase in the power and energy demand; (iii) to define a mechanism for the cancellation of the pending LVFVDs for the 2008 - 2011 period.



Pursuant to that and in order to perfect the 2008 - 2011 Agreement, on April 1, 2011, the Company and its generating subsidiaries entered into a new agreement with the SE whereby they undertook to conduct a project for the installation and expansion of a new power generation plant (Instrumentation Agreement). The project, which involved CTP, owned by EGSSA (which makes up CTG’s assets after the merger of both companies), would be developed in two stages, upon the completion of which the total installed power would amount to 45 MW.



The Instrumentation Agreement provided for the payment of the LVFVDs accrued in favor of the signatory generators during the 2008 – 2011 period and not included under SE Res. No. 724/08 up to a total amount which not exceed 30% of the project’s amount.



On October 17, 2011, CAMMESA submitted to the consideration of the SE the report drawn up by the Technical Group regarding the execution of the first stage of the project, concluding that the maximum value to be recognized for that stage pursuant to the Instrumentation Agreement amounts to US$ 8.1.






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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



Upon the breach by CAMMESA of the commitments undertaken under the Instrumentation Agreement resulting from the failure to cancel the undersigned generators' LVFVDs for the 2008-2011 period not committed under SE Res. No. 724/08, which represented 30% of the amount of the investment made to execute the first stage of the project, and after all administrative remedies had been exhausted, on June 28, 2013, CTLL CPB, CTG and HIDISA brought a legal action in order to safeguard their rights.



The plaintiffs filed a petition before the intervening Court requesting the suspension of judicial proceedings pursuant to the commitments undertaken under the 2014 Agreement in order to allow for the collection of the pending LVFVDs. On September 23, 2015, the Court granted a new suspension of the proceeding for a term of six months.



Modification of the Final Agreement for the Readjustment of the WEM (the “Final Agreement”) – FONINVEMEM



SE Res. No. 1261/12 approved a 25 MW and 19.01 MW power increase in the amount of US$ 11.9 million and US$ 10.1 million plus VAT respectively for TMB and TJSM's plants, and authorized the amendment of the Final Agreement, in furtherance whereof two companies (TMB and TJSM) were organized, as well as the modification of the equity interests in said companies (funding for the works would be provided by generators and not by the National Government), among other modifications.



SE Note No. 5568/13 instructed CAMMESA to call for agents making up TMB and TJSM to turn the commitments taken on pursuant to SE Res. No. 1261/12 into irrevocable commitments pursuant to the terms of the Addendum to the Final Agreement included in said note.



The Addendum to the Final Agreement stipulates that generating agents should contribute their LVFVDs generated during the 2008-2011 period up to the amounts necessary to cover the amounts corresponding to the above-mentioned power expansion.



TMB and TJSM’s power-generating shareholders adhering to the call will receive an equity interest in said companies pro rata their respective LVFVDs’ participation in the whole capital allocated to the construction of the plants, including the investment necessary for power expansion.



As from the Addendums to the WEM Supply Agreements' effective dates, the 2008-2011 LVFVDs committed to the payment of additional power will be returned to participating generators, converted into U.S. dollars, upon actual payment of the additional power through the application of the 2004-2006 LVFVDs and in the same number of installments pending as from such Addendums' effective dates.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



CTG, HIDISA, HINISA and CPB adhered to the call, and CAMMESA informed of such decision to the SE through Note B-84261-1. This note states that not all TMB and TJSM’s power-generating shareholders have adhered to the call, and, consequently, these companies would be entitled to a proportional increase over the non-adhering generators’ portion. However, as at the issuance hereof, no progress has been made in the implementation of the operations contemplated in SE Res. No. 1261/12.



Since the LVFVDs accrued in favor of the subsidiaries during the year 2011 were committed under the 2008-2011 Agreement, on September 30, 2013, subsidiaries CTG, HIDISA and HINISA offered CTLL to partially terminate the assignments of LVFVDs perfected pursuant to the applicable executed receivables assignment agreements, for up to the amounts committed pursuant to SE Resolution No. 1261/12 and SE Note No. 5568/13 which, as at the termination date, amounted to $ 8.1 million plus VAT, and the amounts resulting from the right to a proportional increase pursuant to the provisions of the generating companies’ Bylaws, and CTLL accepted the proposal.



New Generation Project. 2014 Thermal Generation Availability Increase Agreement.



On September 5, 2014, the Company, together with its generation subsidiaries (the “Generators”) executed  a new thermal generation availability increase agreement with the National Government through the application of LVFVDs and the generators’ own resources (the “2014 Agreement”).



Conditional upon the meeting of certain precedent conditions precedent, the 2014 Agreement provided for an enhanced generation capacity in CTLL’s Plant by incorporating two 8 MW each engine generators and one 105 MW high-efficiency gas turbine, with an estimated investment of $ 930 million (jointly, the “Project”).



The Project is funded by CAMMESA up to an amount equivalent to: i) the LVFVDs issued pursuant to SE Resolution No. 406/03 and not committed under other agreements; ii) the receivables from the Additional Remuneration to the Trust issued until December 31, 2015 pursuant to SE Resolution No. 95/13 and amendments (jointly, the “Receivables”); and well as with the contribution of CTLL’s own funds.



In order to guarantee that funds equivalent to the Receivables will be allocated to the Project’s execution, such funds will be transferred to a fund to be created by CAMMESA at the SE’ direction.



The SE will instruct CAMMESA to include the remuneration acknowledgeable for this new generation within the WEM’s economic transactions. In this sense, the remuneration for power equivalent to the percentage representing the amount of the Receivables to be allocated to the Project by Generators over the total funds destined to the Project will be remunerated pursuant to SE Resolution No. 95/13 and amendments. In turn, the remuneration for power equivalent to the percentage representing CTLL’s own contributions additional to the Receivables over the whole funds allotted to the Project will be remunerated through a WEM Supply Commitment Agreement pursuant to SE Resolution No. 220/07.







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



On October 27, 2014, Generators and the SE entered into a Supplementary Agreement setting forth the specific conditions applicable to the Project’s execution. The most important aspects of the agreement are indicated below:



·The subscription of a Financing and Assignment of Secured Receivables Agreement with CAMMESA that would allow the financing of the Project’s works (the “Financing”). The financing will be cancelled, at CTLL’s option, through a cash payment or through the offsetting with receivables.

·The LVFVDs committed by generators to CTLL’s CC Closing Project and to CTP’s project outstanding as at the date hereof (hereinafter, the “Outstanding LVFVDs”) will be considered CTLL’s own capital in order to determine the power to be remunerated under the WEM Supply Agreement pursuant to SE Resolution No. 220/07.

·The execution of an Addendum to CTP’s WEM Supply Agreement aiming to exclude the second stage of the project, which involved that plant in the framework the 2008-2011 Agreement.

·The suspension of all brought legal actions seeking the collection of the outstanding LVFVDs for a term of six months, which will be automatically renewable. Once they have been wholly cancelled, these legal actions will be waived.



Based on the commitments undertaken pursuant to the 2014 Agreement, and as the Financing will be secured with receivables from subsidiaries and a final cancellation is foreseen, at CTLL's option, either in cash or by its offset with Receivables, on November 26, 2014, CTLL entered into new Receivables Assignment Agreements with CPB, CTG, HINISA and HIDISA involving their LVFVDs for their allocation to the Project. SE No. 406/03 for the 2008-2013 period and LVFVDs issued as Additional Remuneration to be allocated to the Trust pursuant to SE Resolution No. 95/13 and amendments for the 2013-2015 period, plus interest.



In all cases, the assignment of receivables will be conditional upon the actual cancellation of the Financing between CTLL and CAMMESA, after which CTLL will cancel all balances with counterparties under the terms and conditions of each specific agreement.



On December 1, 2014, CTLL entered into the Financing and Assignment of Secured Receivables Agreement with CAMMESA in order to obtain the financing for the Project pursuant to the 2014 Agreement and the Supplementary Agreement.



On December 3, 2014, CTLL entered into an Equipment Supply Agreement and an agreement for the building of a new electric generation plant on a turnkey basis to install a 105 MW high-efficiency gas turbine.



Furthermore, on September 18, 2015, CTLL entered into the necessary agreements for the installation of the MAN engines with ManDiesel & Turbo and with Empresa Walter Rittner S.A.







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



As at the issuance hereof, CTLL has received financial advances in the amount of $ 735.7 million pursuant to the Financing and Receivables Security Assignment Agreement.



2015 - 2018 Agreement for the Management and Operation of Projects, Thermal Generation Availability Increase and Adjustment of the Generation Remuneration



On July 2, 2015, the Company and its power generation subsidiaries entered into the "2015 - 2018 Agreement for the Management and Operation of Projects, Thermal Generation Availability Increase and Adjustment of the Generation Remuneration" (the "2015-2018 Agreement"). The 2015-2018 Agreement aims to expand SADI's installed capacity through the execution of new generation projects to be financed with: (i) the LVFVDs resulting from the application of SE Resolution No. 406/03 and not committed under other agreements; (ii) the charges for the Additional Remuneration committed to the Trust; (iii) a new  charge to be accrued in favor of generating agents executing the 2015-2018 Agreement, which will be regulated by the SE (the “2015 -2018 FONINVEMEM Resources”) (in this respect, items (i), (ii) and (iii) will make up the “Committed Receivables”), and (iv) possibly, the generating agents and/or the National Government's Additional Contributions.



In the case of the Additional Remuneration committed to the Trust and the 2015 -2018 FONINVEMEM Resources, all amounts accrued and to be accrued between February 2015 - December 2018 period (and not committed under other agreements) will be bound.



Any possible Additional Contributions to the Committed Receivables will be repaid through the execution of a supply agreement with the new power plants' MEM as from the commercial commissioning of each new Project. The remuneration for the power capacity equivalent to the percentage of the Committed Receivables allocated by the generator to the Project over the whole funds destined to the Project will be determined pursuant to the scheme provided by SE Resolution No. 95/13 as amended by SE Resolution No. 529/14 and SE Resolution No. 482/15 or any other provision superseding it.



The National Government's shareholding in the Project will be equivalent to the whole allotted funds less the percentage corresponding to the Committed Receivables and each generator's Additional Contributions over the whole allotted funds. Power generation companies will have an equity interest equivalent to the whole funds allotted to the Project less the National Government's shareholding.



Even though the Company and its generation subsidiaries have entered into the 2015-2018 Agreement and made progress in the study of the projects executable under such scheme —consisting of the expansion of CTLL's generation installed capacity through the installation of a new high-efficiency TG (105 MW) and investments in renewable energies— the change in administration in December 2015 prevented the company from entering into the specific project execution agreements.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



2.2 Transmission



In order to regularize the remuneration adjustment effective a from December 1, 2010, on May 13, 2013 and on May 20, 2013, Transener and Transba, respectively, entered into a Renewal Agreement of the Instrumental Agreement (“Renewal Agreement”) with the SE and the ENRE, which will be effective until December 31, 2015 and which set forth as follows:



i)the recognition of receivables by Transener and Transba resulting from cost variations during the December 2010 – December 2012 period, calculated through the Cost variation index of Memorandum of Agreement (IVC),

ii)a mechanism for the payment of outstanding positive balances of Addendum II and those determined in the previous subsection, during the year 2013;

iii)a procedure for the automatic update, and payment, of resulting cost variations following the sequence of the semesters already elapsed from January 1, 2013 to December 31, 2015.

iv)the execution of a new Addendum with CAMMESA including the amount of the generated receivables and the applicable interest until their actual cancellation.



Under the Renewal Agreement it was established a Cash Flow and an Investment Plan which Transener and Transba will execute during 2013 and 2014, taking into consideration the reception of the disbursements pursuant to the Addenda to be signed.In all cases, the Cash Flow and the Investment Plan will be aligned with Transener and Transba’s earning in each period.

The Investment Plan set forth in the Renewal Agreement estimates investments under the stated conditions for the years 2013 and 2014 amounting to approximately $ 286 million and $ 207 million, respectively, for Transener; and to $ 113 million and $ 100 million for Transba, respectively.

Lastly, the Renewal Agreement established that in case they are not renewed, as from January 1, 2016 CAMMESA will consider the values set forth by ENRE Resolutions No. 327/08 and 328/08 as remuneration for the services rendered by Transener and Transba, with the application of Section 4.2 of the Agreements, determined by the ENRE in the Instrumental Agreements and the Renewal Agreements.

In order to execute the Third CAMMESA Loan Extension, Transener and Transba have dismissed their filed legal actions regarding performance of the commitments undertaken in the Agreements and the Instrumental Agreements as at the date hereof. In case of breach of the commitments undertaken in the Agreements, the Instrumental Agreements and the Renewal Agreements, Transener and Transba will be entitled to resume and/or restart any actions deemed appropriate in furtherance thereof.

On October 25, 2013, Transba entered into an extension of the financing agreement (Addendum III) with CAMMESA, which stipulated as follows: i) the granting to Transba of a new loan in the amount of $ 324.8 million corresponding to receivables acknowledged by the SE and the ENRE on account of cost variations for the December, 2010- December, 2012 period; and iii) the assignment as collateral of the receivables on account of higher costs as at December 31, 2012 pursuant to the Renewal Agreement and the Agreement in order to pay off the amounts collectable for the application of the new agreed extensions.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)

Furthermore, on February 14, 2014 Transener entered into Addendum III with CAMMESA, which stipulated as follows: i) the granting to Transener of a new loan in the amount of $ 785.8 million corresponding to receivables acknowledged by the SE and the ENRE on account of cost variations for the December, 2010-December, 2012 period; and iii) the assignment as collateral of receivables on account of higher costs as at December 31, 2012 pursuant to the Renewal Agreement in order to pay off the amounts collectable for the application of the new agreed extensions.

Furthermore, on September 2, 2014, Transener and Transba executed with CAMMESA the Mutuum (Loan) Contracts for the implementation of the 2013 and 2014 Renewal Agreements (the “New Mutuum Contracts”), which stipulated as follows: i) that the Mutuum Contracts, together with their Addendums I, II and III timely executed with CAMMESA, would be deemed duly performed; ii) the granting to Transener and Transba of a new loan in the amount of $ 622.2 million and $ 240.7 million corresponding to receivables acknowledged by the SE and the ENRE on account of cost variations for the January 2013-May 2014 period; and iii) the assignment as collateral of the receivables recognized on account of higher costs as at May 31, 2014 pursuant to the Renewal Agreement in order to pay off the amounts collectable for the application of the executed New Mutuum Contracts.

On March 17, 2015 Transener and Transba executed with CAMMESA Addenda to the Mutuum (Loan) Contracts (New Addenda), by which it was agreed to grant new loans in the amounts of $ 563.6 million and $ 178.3 million to Transener and Transba, respectively, corresponding to: i) the outstanding of the Mutuum (Loan) Contracts as of January 30, 2015; and ii) receivables acknowledged by the SE and the ENRE on account of cost variations for the June 2014-November 2014 period. In addition, the assignment as collateral of the receivables recognized on account of higher costs as at November 30, 2014 pursuant to the Instrumental Renewal Agreement in order to cancel the amounts to be received by application of New Addenda signed.

On September 17, 2015, Transener and Transba entered into Addenda to the Renewal Agreements with the SE and ENRE approving the 2015 Economic and Financial Projection; providing for an investment plan for the year 2015 in the amount of $ 431.9 million and $ 186.6 million for Transener and Transba, respectively, and granting additional non-reimbursable resources for the execution of such investment plan.



On November 25, 2015, Transener and Transba executed the new Loan Agreements (the New Agreements) with CAMMESA stipulating the granting of financing in the amount of $ 508,9 million and $ 317.6 million to Transener and Transba, respectively, corresponding to: i) credit claims acknowledged by the SE and the ENRE for cost variations during the December 2014-May 2015 period; and ii) amounts corresponding to Additional Investments provided for in the Addendums to the Renewal Agreements. Additionally, the assignment as security of credit claims for increased costs as of May 31, 2015 was agreed pursuant to the Instrumental Agreement's Renewal Agreement with the purpose of paying off the amounts receivable within the scope of all the new executed Loan Agreements.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 2:(Continuation)

As of December 31, 2015, the results generated by the recognition of costs by the SE and the ENRE up to the amounts collected through mutual contracts have been accounted for in Transener and Transba’s financial statements. Consequently, Transener has recorded revenues from sales amounting to $ 908.1 million and $ 601.5 million, as well as accrued interest for $ 139.5 million and $ 200.9 million for the year ended December 31, 2015 and 2014, respectively. Likewise, Transba has disclosed revenues from sales amounting to $ 418.1 million and $ 248.5 million, and interest income amounting to $ 36.9 million and $ 80.5 million for the same periods, respectively. Liabilities for all disbursements received have been cancelled through the cession of receivables recognized for higher costs, pursuant to the Agreement and the Renewal Agreement.



2.3 Distribution



Edenor is subject to the regulatory framework provided under Law No. 24,065 and the regulations issued by the ENRE.



The ENRE is empowered to approve and control tariffs, and control the quality levels of the technical product and service, the commercial service and the compliance with public safety regulations, as provided for in the Concession Agreement. If the Distribution Company fails to comply with the obligations assumed, the ENRE will be entitled to apply the penalties stipulated in the Concession Agreement.



The Distribution Company’s obligations are, among others, to make the necessary investments and carry out the necessary maintenance works in order to ensure that the quality levels established for the provision of the service in the concession area will be complied with and that electricity supply and availability will be sufficient to meet the demand in due time, securing the sources of supply.



If Edenor repeatedly fails to comply with the obligations assumed in the Concession Agreement, the grantor of the concession will be entitled to foreclose on the collateral granted by the majority shareholders by means of the pledge of the Class A shares and sell them in a public bid. This, however, will not affect the continuity of the Holder of the concession. This situation may also occur if after the publication of the electricity rate schedule resulting from the RTI, EDENOR shareholders representing at least two thirds of the share capital, and/or the former Company shareholders do not submit their waivers to the rights to claim or abandon the actions filed as a consequence of Law 25,561, which in part depends on the decisions of third parties. At the date of issuance of these financial statements, there have been no events of non-compliance by the Company that could be regarded as included within the scope of this situation.



Furthermore, the Concession Agreement may be rescinded in the event of the Distribution Company undergoing bankruptcy proceedings. Additionally, if the Grantor of the Concession fails to discharge his obligations in such a manner that the Distribution Company is prevented from providing the service or the service is severely affected on a permanent basis, the Distribution Company may request, after demanding the regularization of such situation in a term of 90 days, that the agreement be rescinded.







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



2.3.1 Electricity rate situation



2.3.1.1 Adjustment Agreement entered into between Edenor and the Federal Government



On September 21, 2005, Edenor entered into an Adjustment Agreement within the framework of the process of renegotiation of the Concession Agreement set forth in Law No. 25,561 and supplementary regulations, which was ratified on February 13, 2006.



The Adjustment Agreement provides for the following:



i)The implementation of a RTT effective as from November 1, 2005, including a 23% average increase in the distribution margin, which may not result in an increase in the average rate of more than 15%, and an additional 5% average increase in the distribution added value, allocated to certain specified capital expenditures;

ii)The requirement that during the term of said temporary tariff structure, dividend payment be subject to the approval of the regulatory authority;

iii)The establishment of a “social tariff” for the needy and the levels of quality of the service to be rendered;

iv)The suspension of the claims and legal actions filed by the Company and its shareholders in national or foreign courts due to the effects caused by the Economic Emergency Law;

v)The carrying out of a RTI which will result in a new tariff structure that will go into effect on a gradual basis and remain in effect for the following 5 years. In accordance with the provisions of Law No. 24,065, the ENRE will be in charge of such review;

vi)The implementation of a minimum investment plan in the electric network for an amount of $ 178.8 million to be fulfilled by the Company during 2006, plus an additional investment of $ 25.5 million should it be required;

vii)The adjustment of the penalties imposed by the ENRE that are payable to customers by way of discounts, which were notified by such regulatory agency prior to January 6, 2002 as well as of those that have been notified, or whose cause or origin has arisen in the period between January 6, 2002 and the date on which the Adjustment Agreement goes into effect through the date on which they are effectively paid, using, for such purpose, the average increase recorded in the Company’s distribution costs as a result of the increases and adjustments granted at each date;

viii)The waiver of the penalties imposed by the ENRE that are payable to the National State, which have been notified, or their cause or origin has arisen in the period between January 6, 2002 and the date on which the Adjustment Agreement goes into effect.



The payment term of the penalties imposed by the ENRE, which are described in paragraph vii above, is 180 days after the approval of the RTI in fourteen semiannual installments, which represent approximately two-thirds of the penalties imposed by the ENRE before January 6, 2002 as well as of those that have been notified, or whose cause or origin has arisen in the period between January 6, 2002 and the date on which the Adjustment Agreement goes into effect, subject to compliance with certain requirements.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



Said agreement was ratified by the Federal Executive Power by means of executive order No. 1,957/06, signed by the President of Argentina on December 28, 2006 and published in the Official Gazette on January 8, 2007.  The aforementioned agreement stipulates the terms and conditions that, upon compliance with the other procedures required by the regulations, will be the fundamental basis of the Comprehensive Renegotiation of the Concession Agreement of the public service of electric power distribution and sale within the federal jurisdiction, between the Federal Executive Power and the holder of the concession.



Additionally, on February 5, 2007 the Official Gazette published ENRE Resolution No. 51/07 which approves the electricity rate schedule resulting from the RTT, applicable to consumption recorded as from February 1, 2007.This document provided for the following:



i.A 23% average increase in distribution costs, service connection costs and service reconnection costs in effect, except for the residential tariffs;

ii.An additional 5% average increase in distribution costs, to be applied to the execution of the works and infrastructure plan detailed in the Adjustment Agreement;

iii.Implementation of the MMC set forth in the Adjustment Agreement, which for the six-month period commenced November 1, 2005 and ended April 30, 2006, shows a percentage of 8.032%. This percentage would be applied to non-residential consumption recorded from May 1, 2006 through January 31, 2007;

iv.Invoicing in 55 equal and consecutive monthly installments of the differences arising from the application of the new electricity rate schedule for non-residential consumption recorded from November 1, 2005 through January 31, 2007 (paragraphs i) and ii) above) and from May 1, 2006 through January 31, 2007 (paragraph iii) above);

v.Invoicing of the differences corresponding to deviations between foreseen physical transactions and those effectively carried out and of other concepts associated with the MEM, such as the Specific fee payable for the Expansion of the Network, Transportation and Others;

vi.Presentation, within a period of 45 calendar days from the issuance of this resolution, of an adjusted annual investment plan, in physical and monetary values, in compliance with the requirements of the Adjustment Agreement.



Res. SE No. 434/2007 provided, among other things, that the obligations and commitments set forth in section 22 of the Adjustment Agreement be extended until the date on which the electricity rate schedule resulting from the RTI goes into effect, allowing the Company and its shareholders to resume the legal actions suspended as a consequence of the Adjustment Agreement if the new electricity rate schedule does not go into effect.



2.3.1.2 RTI



On July 30, 2008, the SE issued Resolution No. 865/08 which modified Resolution No. 434/07 and provided that the electricity rate schedule resulting from the RTI would go into effect in February 2009, which, due to the non-compliance therewith, has been resumed as from the issuance of Resolution No. 7 of the MEyM.









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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)





The ENRE began the Tariff Structure Review Process with the issuance of Resolution No. 467/08. On November 12, 2009, Edenor made its revenue request presentation for the new period, which included the grounds and criteria based on which the request was made. As from that moment, Edenor made successive and reiterated presentations aimed at ending the aforementioned process as well as obtaining the new electricity rate schedule, filing a Preliminary Administrative Action before the Ministry of Federal Planning, Public Investment and Services in March 2012 and a petition for the immediate resolution thereof in October 2012. In Edenor’s opinion, this claim has come to an end due to the issuance of SE Resolution No. 250/13 dated May 2013.



Additionally, in June 2013, Edenor filed a complaint against the Federal Government claiming full compliance with the Adjustment Agreement and compensation for damages due to the non-compliance with the commitments stipulated therein. The complaint was amended so as to extend it in November 2013.



On December 4, 2015, Edenor requested the suspension of the procedural time-limits under the terms of section 157 of the Federal Code of Civil and Commercial Procedure, in accordance with the provisions of SE Resolution No. 32/15, and reiterated the request on February 16, 2016 due to the revocation of SE Resolution No. 32/15, as indicated below.



By means of MEyM Resolution No. 7/16, SE Resolution No. 32/15 was repealed and the ENRE was instructed to adopt measures, within its field of competence, to finish the RTI so that the rates resulting therefrom will come into effect before December 31, 2016.



Although in the last years, the Grantor of the Concession adopted palliative measures to allow for the operations to continue, such measures were partial and considered neither all the variables nor the essential elements of the rights and obligations deriving from the Concession Agreement.



In Edenor’s opinion, the RTI must include, in addition to the definitive Electricity Rate Schedules, a review of costs, the required quality levels and other rights and obligations that would lead to an updated Concession Agreement, which, in turn, must provide for the definitive treatment to be given to all those issues, about which a decision is still pending, resulting from the non-compliance with the Adjustment Agreement, including the remaining balances and other effects caused by the partial measures adopted.



These issues include, among other, the following:



i.The treatment to be given to the remaining balances received for the fulfillment of the Investment plan through the Loans for consumption (Mutuums) granted to cover the insufficiency of the funds deriving from the FOCEDE,



ii.The conditions for the settlement of the balance outstanding with CAMMESA at the date of issuance of Resolution 32/15, for which purpose Edenor has submitted a payment plan,



iii.The treatment to be given to the Penalties and Discounts determined prior and subsequent to the Adjustment Agreement.









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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 2:(Continuation)



The Penalties and Discounts are determined by the ENRE when Edenor fails to comply with certain quality parameters stipulated in the Concession Agreement. The non-compliance with those parameters is indirectly caused by the insufficiency of the necessary funds to be allocated to the investments that would allow for the maintenance of the initially agreed-upon quality levels, due to the lack of a timely and proper adjustment of the Electricity Rate Schedule. In Edenor’s opinion the generation and accumulation of unpaid balances for this concept are not attributable to the Distribution Company inasmuch as the inaction and discretionary decisions of the Grantor of the Concession in the past have led to the deterioration of Edenor’s economic and financial equation, thus preventing it from complying with its basic and elemental obligations for the provision of the public service.



iv.The establishment, on a mutually agreed basis, of new quality levels and a system of Penalties and Discounts that provides for an adequate transition period for the effective application of the new conditions,



v.The termination and liquidation of the FOCEDE in order to reach an agreement on the treatment to be given to the obligations assumed by the Fund and the transfer thereof to the trustee and beneficiary.



2.3.1.3 Electricity rate schedules



The SE issued Resolution No. 1.169/08 which approved the new seasonal reference prices of power and energy in the WEM. Consequently, the ENRE issued Resolution No. 628/08 which approved the values of the electricity rate schedule to be applied as from October 1, 2008. The aforementioned electricity rate schedule included the transfer of the increase in the seasonal energy price to tariffs, with the aim of reducing Federal Government grants to the electricity sector, without increasing Edenor’s distribution added value.



The purpose of the PUREE created by SE Resolution No. 415/04, is to work on the demand for electricity, promoting energy savings so as to generate surpluses that may be used by those users, like industries, whose energy needs increase as a consequence of the growth in the level of the economic activity.



As in previous years, SE Resolution No. 1,037/07, ratified by SE Note No. 1,383/08, continued to produce effects. The aforementioned resolution modified the earmarking of the funds resulting from the application of the PUREE, being it possible to deduct therefrom the amounts paid by Edenor as Company as Quarterly Adjustment Coefficient (“CAT”) implemented by Section 1 of Law No. 25,957, to calculate the total value of the FNEE.



By means of MEyM Resolutions Nos. 6/16 and 7/16, as from February 1, 2016 the current electricity rate schedule of Distribution companies is readjusted within the framework of the RTT, which is not an electricity rate schedule resulting from the RTI process but rather the adaptation of the existing one to the semiannual readjustment that was pending.







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



2.3.1.4 Resolution MEyM No. 6/16 – Seasonal reference prices



By means of MEyM Resolution No. 6/16 the WEM summer quarterly rescheduling relating to the February 1-April 30, 2016 period is carried out.



The seasonal reference prices fixed by the aforementioned resolution are as follow:



-Power: $ 1,427.60/MW month

-Energy: $ 773.02/Mwh, $ 768.72/Mwh, $ 763.89/Mwh, in peak hours, other hours and off-peak hours, respectively.



With regard to residential utility customers, who are beneficiaries of the social tariff, the prices are as follow:



-Monthly consumption of up to 150 Kwh/month. $ 0,00 / Mwh.

-Monthly consumption exceeding 150 kwh/month:



i.If it is equal to or lower than the consumption recorded in the same month of 2015, the reference prices will be $ 31.39/Mwh, $ 27.09/Mwh, $ 22.26/Mwh, in peak hours, other hours and off-peak hours, respectively.

ii.If it is higher the consumption recorded in the same month of 2015, the reference prices will be $ 312.39 /Mwh, $ 317.09/Mwh, $ 312.26/Mwh, in peak hours, other hours and off-peak hours, respectively.



These are the prices which, together with those for power, are to be applied to the respective electricity rate schedules.



2.3.1.5 Resolution MEyM No. 7/16 and its effects



By MEyM Resolution No. 7/16 the Regulatory Authority for the ENRE is instructed to adjust, the distribution added value in electricity rate schedules, on account of the RTI, and to take all the necessary steps to carry out the RTI before December 31, 2016.



Furthermore, the aforementioned resolution provided for: (i) the cancellation of the PUREE (Note 2.3.16); (ii) the revocation of Energy Secretariat Resolution 32/15 as from the date on which ENRE Resolution that implements the electricity rate schedule comes into effect (Note 2.1.3.4 and 2.3.1.9); (iii) the suspension until further instruction of all the effects of the loans for consumption (mutuums) agreements entered into by and between the distribution companies and CAMMESA (Note 2.3.1.8); (iv) the implementation of the necessary actions to end the trusts created by ENRE Resolution No. 347/2012 (Note 2.3.1.7); (v) the restriction on the distribution of dividends in accordance with the provisions of clause 7.4 of the Adjustment Agreement.



2.3.1.6PUREE - MMC



On May 7, 2013, the SE issued Resolution No. 250/13 and subsequent notes, whereby it:



1. Authorized the values of the adjustments resulting from the MMC for the period May 2007 through January 2015, determined in accordance with Section 4.2 of the Adjustment Agreement, but without initiating the review process contemplated in the event of variations exceeding 5%.



1. Assessed the Company’s debt as of December 31, 2015 deriving from the application of the PUREE for the period May 2007 through January 2015.









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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



1. Authorized Edenor offset until December 2014 the debt indicated in paragraph ii) against and up to the amount of the receivables established in paragraph i), including interest, if any, on both amounts.



1. Instructed CAMMESA to issue LVFVD for the MMC surplus amounts after the offsetting process indicated in paragraph iii) has been carried out.



1. Authorized CAMMESA to receive LVFVD as part payment for the past due debts deriving from the economic transactions of the WEM.



1. Instructed the Company to assign the credits from the surplus LVFVD, if there were any, after having complied with that established in the preceding paragraph, to the trust created under the terms of ENRE Resolution No. 347/12 (FOCEDE).



The SE, if deemed timely and suitable, may extend, either totally or partially, the application of the aforementioned resolution and amplifying note pursuant to the information provided by the ENRE and CAMMESA. In this regard, on November 6, 2013, October 9, 2014 and December 18, 2014 it issued SE Notes No. 6,852/13, 4,012/14, 486/14 and 1,136/14 respectively.



Additionally, and in accordance with sections 8 and 9 of SE Resolution No. 250/2013 –which recognize the Company’s right to apply to the payment of its debts with the MEM the amount receivable deriving from the MMC for economic transactions, with charge to the Unified Fund– Edenor transferred in lieu of payment the trade liability it has with CAMMESA for energy purchases by applying the balance of the MMC receivable recognized by the ENRE, but not offset, in the periods covered by SE Resolution No. 250 and the extensions thereof.



The impacts of SE Resolution 250/13 and subsequent Notes on the statement of financial position are summarized below (in thousands of pesos):



2013
 
 2014
 
 2015
 
 TotalOther receivables - MMC
 
 2,978,582
 
 2,271,927
 
 186,596
 
 5,437,105Other receivables - net interest MMC - PUREE
 
 197,510
 
 157,786
 
 (309)
 
 354,987Other payables - PUREE
 
 (1,661,105)
 
 (574,010)
 
 10,619
 
 (2,224,496)Trade payables - CAMMESA
 
 (1,152,266)
 
 (2,218,424)
 
 (196,906)
 
 (3,567,596)362,721
 
 (362,721)
 
 -
 
 -






Furthermore, in November 2015, the SE issued Notes No. 2.097 and 2.157, which ordered the application of the MMC percentages of 6.20% and 9.05% as from May 1 and November 1, 2015, respectively.



As of December 31, 2015, Edenor recognized a total of $ 364.9 million for the aforementioned concept.



Pursuant to MEyM Resolution No. 7/16, as from February 1, 2016 the PUREE is cancelled and the Stimulus Plan (a system that rewards energy-saving efforts and results in a reduction of the previously mentioned wholesale electricity seasonal price), comes into effect.







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



2.3.1.7 ENRE Resolution No. 347/12



On November 23, 2012, the ENRE issued Resolution 347 pursuant to which distribution companies were authorized, as from the issuance thereof, to include in the bills a fixed amount for small-demand (T1) customers and a variable amount for medium and large-demand (T2 and T3) customers, to be calculated on a percentage of power charges. Such amounts, which are clearly indicated in the bills sent to customers, constitute a special account, which is managed by a Trust, to be exclusively used for the execution of distribution infrastructure works and corrective maintenance of each distribution company’s facilities. This Trust will be administered by an Implementation Committee comprised of 5 members: 1 from the MEyFP, 2 from the MPFIPyS, 1 from CAMMESA and 1 from the ENRE.



As established in such Resolution, on November 29, 2012, Edenor, in its capacity as trustor, and Nación Fideicomisos S.A., as trustee, entered into a private Financial and Management Trust Agreement, whereby the Company, as settlor of the trust, agreed to assign and transfer to the Trustee the fixed amounts set forth by Resolution ENRE No. 347 that are effectively collected, which will constitute the trust assets. Such agreement was ratified and approved by Edenor Board of Directors on December 11, 2012.



On December 18, 2012, the Company and Nación Fideicomisos S.A., signed the respective Operating Manual, whose purpose is to implement, standardize, and enable the collection and management of the trust assets. On that date, the Company Board of Directors approved the Operating Manual and appointed its attorneys-in-fact to represent the Company before Nación Fideicomisos S.A. in issues related to the Trust and its Operating Manual.



On July 4, 2013, Edenor and Nación Fideicomisos S.A. signed an Addendum to the private Financial and Management Trust Agreement entered into by the parties on November 29, 2012.



In the aforementioned Addendum it is agreed that Nación Fideicomisos S.A., in its capacity as trustee, will issue VRD to be offered to the market, in accordance with the public offering system authorized by the CNV, for a nominal value of up to $ 312.5 million. The proceeds will be used to pay Edenor’s investment plan.



On July 4, 2013, VRDs for $ 250 million were issued through a private placement. A subsequent public offering of these debt securities, with the possibility of being paid-in in kind is estimated. The VRD will accrue interest at the Private Badlar rate plus a spread of 4% and will be amortized in 5 years with increasing installments.









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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



In this regard, said agreement stipulates that payment obligations under the VRD will be solely and exclusively the obligations of Nación Fideicomisos S.A. (to the extent that the trust assets are sufficient) and will not imply in any way whatsoever any guarantee or recourse against the Company, which in no case will be liable for the non-payment, whether total or partial, of any amount owed under the VRD or any other concept contemplated by the trust agreement duly signed. Moreover, and in view of the fact that up to now the only income of the trust derives from Edenor’s contributions and, also, that the VRD have accrued interest that will have to be paid by the trust assets, Edenor has decided to record a provision for an amount equivalent to the trust’s net financial charges, which has been recorded as other payables and charged to other operating expense.



Additionally, on January 3, 2014, by Resolution No. 3/2014 of the MPFIPyS, it was established that the investments to be made with the funds of the FOCEDE will be decided by the Management Control and Coordination Undersecretariat, which will provide the necessary instructions for the carrying out of the works and investments under the FOCEDE to the Implementation Committee of the trust created by ENRE Resolution No. 347/12 as well as to electricity distribution companies Edenor and Edesur.



By Resolution No. 266/14 dated January 24, 2014, a technical commission to participate and give advice to the Management Control and Coordination Undersecretariat on technical and economic matters as well as on other issues relating to the investments to be made with the FOCEDE funds was created. This commission will be comprised of one representative of the ENRE, one representative of the SE, one representative of the Public Works Secretariat, both under the authority of the MPFIPyS. The Economy and MEyFP and the National Comptroller’s Office will also be invited to participate.



In this regard, by Resolution No. 2 dated January 29, 2016, the ENRE resolved to discontinue as of January 31, 2016 the current trust mechanism for the management of the funds resulting from the application of ENRE Resolution No. 347/12, and instructed Edenor to open a checking account for the deposit of the funds that will be received as from February 1, 2016 from the application of the fixed amount to afford the investments approved by the ENRE. Additionally, the Company is required to submit to the ENRE a works plan, identifying which works of such plan will be financed with the funds received.



By MEyM Resolution No. 7/2016, the SE is instructed to direct the Execution Committee of the Trusts to discontinue the transfers of resources to Edenor, in the name and to the order of the Unified Fund of Law No. 24,065, as well as to adopt the necessary measures to terminate the Trusts.



At the date of issuance of these financial statements, Edenor is taking steps aimed at the termination of the trust and the transfer of the remaining trust assets. .



2.3.1.8 Loans for consumption (mutuums) and assignments of secured receivables



Due to the delay in obtaining the RTI, which will make it possible to restore the economic and financial equation of the concession, Edenor lacks the necessary conditions to come to the financial market to make up the deficit of both its operations and the investment plans necessary to maintain the quality of the service, object of the concession. In order to deal with this situation, Edenor has obtained from the Federal Government a series of measures such as the issuance of ENRE Resolution No. 347/12 (Note 2.3.1.7) and SE Resolution 250 (Note 2.3.1.6), and the granting of loans for consumption (mutuums) to help it cope with its cash needs for specific purposes.









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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



The obligations deriving from this assistance are classified as other payables and the related costs as financial expenses, due to both the fact that they result from the lack of adjustment of the Electricity Rate Schedule, which depends exclusively on the Federal Government’s resolution, and the fact that such assistance has been granted under these special circumstances. Therefore, such obligations do not constitute financing decisions made by Edenor in the ordinary course of business.



As instructed by MEyM Resolution No. 7/16, as from February 1, 2016 CAMMESA shall suspend -until further notice- all the effects of the loans for consumption (mutuums) agreements entered into, as well as the transfers of resources to Distribution companies on behalf and to the order of the FOCEDE. As previously mentioned, the new works plan will be exclusively financed with the funds collected from customers.

The loans for consumption (mutuums) granted up to December 31, 2015 are detailed below:



1) Extraordinary Investment Plan - Temporary insufficiency of the revenue deriving from the FOCEDE



Due to the measures adopted by the MPFIPYS and the fact that the funds of the FOCEDE were insufficient to cover the estimated disbursements under the investment plan, Edenor has requested of the respective authorities that it be provided with funding assistance, which has been called Extraordinary Investment Plan.



Consequently, on September 26, 2014, the SE, by Resolution No. 65/14, instructed CAMMESA to enter into a Loan for consumption (Mutuum) and assignment of secured receivables agreement with the Company for a total of $ 500 million to cover the Extraordinary Investment Plan as a consequence of the temporary insufficiency of the revenue deriving from Resolution ENRE No. 347/12, mentioned in caption 2.3.1.5 of this note. The aforementioned agreement was entered into on September 30, 2014. On December 18, 2014, said agreement was extended, as instructed by the SE to CAMMESA, for an additional amount of $ 159.4 million.



In the current fiscal year, the loan for consumption (mutuum) agreement was extended, as instructed by the SE to CAMMESA, for an additional amount of $ 2.2 billion.



As of December 31, 2015, the debt related to this concept amounts to $ 1.1 billion (comprised of $ 923.6 million principal and $ 176.2 million in accrued interest) which is disclosed in the other non-current payables account.



Furthermore, as security for the performance of the obligations assumed and the repayment of the funds granted, the Company agreed to assign and transfer in favor of CAMMESA, as from the end of the grace period that the SE will estipulate along with the methodology and terms for the reimbursement of the funds, the amounts receivable which the Company may have with the WEM up to the actual amount of the funds granted. At the date of issuance of these financial statements, Edenor does not have any amount receivable with the WEM.





2) Higher salary costs



On June 24, 2014, by Note No. 4012/14, the SE instructed CAMMESA to enter into a Loan for consumption (Mutuum) and assignment of secured receivables agreement with Edenor in order to pay the higher salary costs indicated in Note 6.2.2. The aforementioned agreement was entered into on July 10, 2014.







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



The agreement will would be guaranteed by Edenor with the assignment of the future surplus LVFVD to be issued, as a result of the application of SE Resolution No. 250/13, as described in Note 2.3.1.3. At the date of issuance of these financial statements, Edenor does not have any surplus LVFVD.



The aforementioned SE Resolution No. 32/15 (Note 2.3.1.9) resolves that LVFVD be issued in favor of the Company for the amounts generated by the salary increases deriving from the application of Resolution No. 836/14 of the Ministry of Labor, Employment and Social Security for whose payment the Company received this Loan for consumption (mutuum); allowing for the offsetting thereof against the outstanding balances for this concept. The LVFVD were issued on July 16, 2015.



In this regard, Edenor made the pertinent recordings, fully canceling the $524.7 million liability for this concept, thus generating a positive result of $ 495.4 million related to the principal received, which is disclosed in the “Recognition of income on account of the RTI – SE Resolution No. 32/15” line item of the statement of comprehensive income , and a positive result of $ 29.3 million, related to interest accrued, which is disclosed in the “Financial expenses” line item of the statement of comprehensive income .



2.3.1.9 Resolution 32/15



The SE issued SE Res. No. 32/15, whereby it:



i.Grants a temporary increase in income to Edenor S.A. effective as from February 1, 2015, and on account of the RTI, in order for the Company to cover the expenses and afford the investments associated with the normal provision of the public service, object of the concession.

The additional income will arise from the difference between the “Theoretical electricity rate schedule” included in the resolution and the electricity rate schedule currently applied to each customer category, according to the ENRE’s calculations, which are to be informed to the SE and CAMMESA on a monthly basis. The above-mentioned funds will be contributed by the Federal Government and transferred to the Company by CAMMESA.



ii.Provides that, as from February 1, 2015, the funds related to the PUREE to which SE Resolution No. 745/05 refers will be regarded as part of Edenor’s income on account of the RTI and earmarked to cover the higher costs of the provision of the public service, object of the concession.



iii.Authorizes Edenor to offset, until January 31, 2015, the PUREE-related debts against and up to the amount of the MMC established receivables, including interest, if any, on both concepts.



iv.Instructs CAMMESA to issue LVFVD in favor of Edenor for the surplus amounts in favor of Edenor, resulting from the offsetting process indicated in the preceding paragraph, and for the amounts owed by Edenor under the Loans for consumption (mutuums) granted for higher salary costs.



v.Instructs CAMMESA to implement a payment plan to be defined with Edenor, with the prior approval of the SE, for the settlement of the remaining balances in favor of the MEM.



vi.Establishes that Edenor will neither distribute dividends nor use the income deriving from that which has been detailed in caption i) to repay loans to financial entities, restructure financial debts, acquire other companies, grant loans, or carry out other transactions that are not strictly related to the payment of its obligations with the WEM, the payment of salaries of Edenor’s own or hired personnel or the making of payments to suppliers of goods and/or services related to the provision of the public service of electricity distribution.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



vii.Provides that Edenor shall observe the provisions of clause 22.1 of the Adjustment Agreement and suspend any administrative claim and/or judicial action it may have brought against the Federal Government, the SE and/or the ENRE in relation to the compliance with clause 4.2 of the Adjustment Agreement and the provisions of the resolution’s clauses.



The impacts of SE Resolution No. 32/2015 on the statement of comprehensive income are summarized below (in thousands of pesos):



2015Other incomeAdditional increase from the difference between the electricity rate schedules (February-June/15) (1)
 a)
 3,961,378Funds obtained from the PUREE
 b)
 568,220Decrease in loans for consumption (Mutuums) granted for higher salary costs
 d)
 495,516Higher cost recognition
 c)
 551,498Total other income
 
 5,576,612


(1)As of December 31, 2015, the balance pending collection amounts to $ 650.9 million. At the date of issuance of this financial statement, there is neither balance collection.



As of December 31, 2014 CAMMESA had claims against Edenor for net late payment charges and compensatory interest for a total of $ 214 million, which were not recorded by Edenor in the framework of IAS 37 provisions, because in its opinion they were not attributable to Edenor.



Additionally, and as established by the SE through SE Note No. 1208 dated June 29, 2015, the amounts owed to CAMMESA have been recalculated based on the new adopted criteria.  In that regard, on July 22, 2015, the new owed amounts were agreed upon, and CAMMESA issued the LVFVD established in captions iii) and iv) and the documents supporting that which had been agreed. The net result of this agreement generated a profit of $ 254.4 million that has been recorded in the “Financial expenses” line item within the statement of comprehensive income.



As from February 1, 2016, by MEyM Resolution No. 7/16, the aforementioned SE Resolution No. 32/15 was repealed and the application of the new electricity rate schedules came into effect. Additionally, and in relation to that which has been detailed in the preceding caption g) and as indicated in section 14 of SE Resolution No. 32/15, Edenor has requested the suspension of the procedural time-limits, about which no decision has yet been made by the Court.



2.3.2 Framework agreement



On January 10, 1994, Edenor, together with Edesur, the Federal Government and the Government of the Province of Buenos Aires entered into a Framework Agreement, whose purpose was to establish the guidelines under which Edenor is to supply electricity to low-income areas and shantytowns.









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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



On July 22, 2011, Edenor, the Federal Government, and the Government of the Province of Buenos Aires entered into an Addendum for the renewal for a term of four years (from January 1, 2011 through December 31, 2014) of the new Framework Agreement that had been signed on October 6, 2003. Such extension was approved on September 21, 2012 by Resolution No. 248/12 issued by the ENRE and ratified by Resolution No. 247 of the MPFIPyS.



With regard to the amount receivable Edenor has with the Province of Buenos Aires, on October 18, 2012 Edenor entered into an agreement for the settlement of non-financial obligations and subscription of Buenos Aires province Government Bonds, pursuant to which the Company agreed to receive an amount of $ 0.3 million in cash and subscribe Series B Bonds for a residual nominal value of $ 6.14 million, as settlement of the debt that as of December 31, 2010 such Province had with Edenor for the electric power supplied to low-income areas.



Due to the fact that at the date of these financial statements the approval of the new Framework Agreement for the period of January 1, 2015 through December 31, 2018 by the Federal Government and the Government of the Province of Buenos Aires is still in process, no revenue for this concept has been recognized in fiscal year 2015.



2.3.3 Penalties



2.3.3.1 General



The ENRE is empowered to control the quality levels of the technical product and service, the commercial service and the compliance with public safety regulations, as stipulated in the Concession Agreement. If the Distribution Company fails to comply with the obligations assumed, the ENRE will be entitled to apply the penalties stipulated in the aforementioned Agreement.



As of December 31, 2015 and 2014, Edenor has recognized in its financial statements the penalties accrued, whether imposed or not yet issued by the ENRE, related to the control periods elapsed as of those dates. Additionally, Edenor has applied the adjustment set forth in the temporary tariff structure as well as the adjustments established by the electricity rate schedules applied during fiscal year 2008 by Resolutions No. 324/08 and No. 628/08.



The ENRE Penalties and Discounts included in the Adjustment Agreement are adjusted as stipulated in such agreement.



With regard to the Penalties and Discounts subsequent to the Adjustment Agreement, adjusted in accordance with the temporary tariff structure and the adjustments established by the electricity rate schedules subsequently applied (Resolutions No. 324/08 and No. 628/08), as of December 31, 2015 they have been estimated based on Edenor’s estimate of the outcome of the previously described RTI process.



Furthermore, as of December 31, 2015, Edenor Management has considered that the ENRE has mostly complied with the obligation to suspend lawsuits aimed at collecting the penalties included in the Adjustment Agreement.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



2.3.3.2 Compensation payable to Customers



Based on the provisions of ENRE Resolution No. 1/14, the definitive amount of the compensation payable to customers by way of discounts, as a consequence of the power cuts occurred during the period began on December 16, 2013 and ended on the date on which the service was fully restored, totaled $ 85.7 million.  As of December 31, 2015, an amount of $ 75.9 million of such total has been reimbursed to customers, based on consumption recorded.



2.3.3.3 Discounts to customers



Edenor began to credit Customer bills issued as from December 22, 2015 for the penalties included in clauses 9.2.1 and 9.2.2 of the Adjustment Agreement, as well as the adjustments thereof (Note 2.3.1.1.vii), for $ 152.2 million. Edenor finished crediting customer bills for these amounts in the first two months of 2016. Additionally, an amount of $ 33.7 million in compensation and adjustments was made available to the customers who as of December 22, 2015 had no active service.



As of December 31, 2015, the liability for this concept amounts to $ 125.8 million, which is disclosed in the Current trade payables account.



2.3.3.4Payment agreements



From May, 2014 through December 31, 2015, Edenor entered into three payment plan agreements with the regulatory agency pursuant to which it agreed to pay the penalties that had been ratified by the judicial authority for a total of $ 85.7 million, plus interest for $ 84.2 million. As of the December 31, 2015, payment plan agreements Nos. 1 and 2 have been complied with in due time and proper manner. With regard to payment plan agreement No. 3, the outstanding balance amounts to $ 167.3 million, which is disclosed in the ENRE Penalties and Discounts line item of the Other payables account within current and non-current liabilities.



Furthermore, and owing to the setting of fees in favor of ENRE professionals who acted in execution proceedings, Edenor entered into two payment agreements for a total of $ 18.7 million, plus interest. As of December 31, 2015, the outstanding balances of principal and interest accrued under payment agreement No. 2 amounted to $ 19.1 million and $ 0.4 million, respectively, which will be paid in 60 installments. The first payment agreement has been complied with in due time and proper manner. They are disclosed in the other payables account within current and non-current liabilities.



2.3.4 Stabilization factor



By Note No. 2883 dated May 8, 2012 (reference Resolutions MEyFP No. 693/11 and MPFIPyS No. 1,900/11), the SE has implemented a mechanism whose objective is to keep the amounts billed to residential customers throughout the year stable, thereby minimizing the effects of the seasonal consumption of electricity.



This methodology applies to all residential customers, regardless of whether or not they receive Government grants on electricity rates, who may opt to adhere to this stabilization system.









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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



Average consumption is determined based on the consumption recorded in the last six two-month periods. The stabilization factor arises from the difference between the aforementioned average consumption and the consumption recorded in the current two-month period. This value will be added to or subtracted from the two-month period charges, and the result obtained will be the amount to be paid before the corresponding taxes. The adjustments that are to be made in accordance with the differences between average consumption and recorded consumption will be reflected in the bill for the last two-month period of each calendar year.



The differences that arise as a consequence of comparing the annual average consumption to the consumption of the current two-month period will be recorded at the end of each period in the trade receivables balance sheet account, crediting or debiting the account, as the case may be, if the annual average consumption is higher or lower than the consumption of the current two-month period.



In this regard, by Note No. 119,098 dated January 18, 2016, the ENRE ordered the withdrawal from the stabilization system of all the users who were included therein, starting with the first bill preparation and issuance to be made in 2016.



2.3.5 Concession of the use of real property



Pursuant to the Bid Package, SEGBA granted Edenor the free use of real property for periods of 3, 5 and 95 years, with or without a purchase option, based on the characteristics of each asset, and the Company would be responsible for the payment of any taxes, charges and contributions levied on such properties and for the taking out of insurance against fire, property damage and third-party liability, to SEGBA’s satisfaction.



Edenor may make all kind of improvements to the properties, including new constructions, upon SEGBA’s prior authorization, which will become the grantor’s property when the concession period is over, and the Company will not be entitled to any compensation whatsoever. SEGBA may terminate the loan for use contract after demanding the performance by the Company of any pending obligation, in certain specified cases set forth in the Bid Package. At present, as SEGBA’s residual entity has been liquidated, these presentations and controls are made to the National Agency of Public Properties (ONABE).



2.4 Oil and gas



Amendment of the Argentine Hydrocarbons Law

On October 29, 2014, the National Congress enacted Law No. 27,007 amending Hydrocarbons Law No. 17,319. This Law incorporates new drilling techniques available in the oil industry, as well as changes mainly related to terms and extensions of exploration permits and exploitation concessions, canons and royalty rates, new legal concepts for the exploration and exploitation of unconventional hydrocarbons in the Continental Shelf and the Territorial Sea, and a promotion regime pursuant to Executive Order No. 929/13, among other key factors for the industry.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 2:(Continuation)



The main changes introduced by Law No. 27,007 are detailed below:

a)Unconventional Hydrocarbons Exploitation

Conferred a legal status to the legal concept of “Hydrocarbons Unconventional Exploitation Concession”. The term “hydrocarbons unconventional exploitation” is defined as the extraction of liquid and/or gaseous hydrocarbons by unconventional stimulation techniques applied in reservoirs situated in geological formations of schist rock or slate (shale gas or shale oil), tight sands, tight gas, tight oil, coal bed methane and/or deposits characterized, in general, by the presence of low permeability rocks.

Holders of exploration permits and/or hydrocarbon exploitation concessions will be entitled to request a hydrocarbon unconventional exploitation concession to the enforcement authority pursuant to the following terms:

-The exploitation concessionaire may, within its area, request the subdivision of the existing area into new hydrocarbon unconventional exploitation areas and the granting of a hydrocarbon unconventional exploitation concession. Such request will be based on the development of a pilot plan seeking the commercial exploitation of the discovered reservoir pursuant to acceptable technical and economic criteria.

-Holders of a hydrocarbon unconventional exploitation concession also being holders of a preexisting and adjacent exploitation concession may request the unification of both areas as a single hydrocarbon unconventional exploitation concession provided they furnish convincing evidence of the geological continuity of both areas. Such request should be based on the development of a pilot plan.

b)Terms of the exploitation concessions and permits

Terms for exploration permits will be established in each call for bids issued by the enforcement authority according to the exploration’s purpose (conventional or unconventional) and based on the following:

i)Conventional Exploration: the basic term is divided into two three-year periods plus an optional extension of up to five years. In this way, the maximum extension for exploration permits is reduced from 14 to 11 years;

ii) Unconventional Exploration: the basic term is divided into two four-year periods plus an optional extension of up to five years, that is, reaching a maximum of 13 years; and

iii) Exploration in the Continental Shelf and the Territorial Sea: the basic term is divided into two three-year periods plus an optional extension of one year each.





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NOTE 2:(Continuation)

Upon the expiration of the basic term, the exploration permit holder will decide whether to continue exploring the area or to revert it totally to the Government. The whole originally-granted area may be kept provided the obligations arising from the permit have been properly met. Upon the expiration of the basic term, the holder of the exploration permit will revert the whole area unless it exercises its right to use the extension period, in which case the reversion will be limited to 50% of the remaining area.

Exploitation concessions will have the following terms, which will be computed as from the granting resolution’s date:

i) Conventional Exploitation Concession: 25 years;

ii) Unconventional Exploitation Concession: 35 years; and

iii) Continental Shelf and Territorial Sea Exploitation Concession: 30 years.

Furthermore, the holder of an exploitation concession may, with a minimum one-year notice before the expiration of the concession, request the granting of indefinite extensions, for a 10-year term each, provided it has properly met its obligations as exploitation concessionaire, is actually producing hydrocarbons in the areas in question and files an investment plan consistent with the development of the concession.

The ban on simultaneously holding more than five exploration permits and/or exploitation concessions (whether directly or indirectly) has been lifted.

c)Concession Extension

Law No. 27,007 grants the Provinces having already started the concession extension process a 90-day term to finish it based on the conditions established for each of them. All subsequent extensions will be governed by the Argentine Hydrocarbons Law.

d)Awarding of areas

Law No. 27.007 calls for the drafting of a model invitation to bid to be jointly made by the SE and the provincial authorities, to which all calls for bids made by law enforcement authorities should adhere, and introduces a specific criterion for the award of permits and concessions on incorporating the specific parameter of “greater investment or exploration activity” as defining in the case of tie bids according, as applicable, to the National or Provincial Executive Branch’s duly supported criterion.

e)Canons and Royalties

The amended Argentine Hydrocarbons Law has updated the exploration and exploitation canons established by Executive Order No. 1454/2007. These canons may, in turn, be generally updated by the Executive Branch based on variations in the domestic market’s crude oil price.





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NOTE 2:(Continuation)

The updated values for each canon and royalty are detailed below:

i)Exploration Canon:

The holder of the exploration permit will pay the canon in advance on an annual basis for each square kilometer or its fraction based on the following scale:

-First period: $ 250 per km2 or fraction;

-Second period: $ 1,000 per km2 or fraction; and

-Extension: during the first year of the extension; $ 17,500/km2 or fraction, with a 25% annual cumulative increase.

In this case, offsetting mechanisms will remain effective: the amount that the exploration permit holder should pay for the second period of the basic term and for the extension period may be readjusted by offsetting it with exploration investments actually made within the area, until reaching a minimum canon equivalent to 10% of the applicable canon per km2 during the period, which will be payable in all cases.

ii)Exploitation Canon:

The holder of the exploitation permit will pay a canon which will consist of an annual advance payment of $ 4,500 per km2 or its fraction based on the following scale:

iii)Royalties

Royalties are defined as the only revenue the jurisdictions holding title to the hydrocarbons will collect, in their capacity as grantors, from the production of hydrocarbons.

The 12% percentage the exploitation concessionaire should pay as royalties to the grantor on the proceeds derived from liquid hydrocarbons produced at wellhead will remain effective. The production of natural gas will bear a like percentage of the value of extracted and actually used volumes, and will be payable on a monthly basis.

Cash payment of royalties will be made based on the value of crude oil at wellhead less freight costs up to the base location for the definition of its commercial value. Payment in kind of royalties will only proceed when the concessionaire is assured a reasonable permanent reception.

The possibility to reduce royalties up to 5% taking into consideration productivity, conditions and wells location also remains effective.

In case of extension, additional royalties for up to 3% regarding the applicable royalties at the time of the first extension, up to a total maximum of 18%, will be paid for the following extensions.





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NOTE 2:(Continuation)

For the conduction of hydrocarbon conventional exploitation complementary activities as from the expiration of the granted concession and within the hydrocarbons unconventional exploitation concession, the enforcement authority may fix additional royalties of to 3% above the current royalties, up to a maximum 18%, as applicable.

The National or Provincial Executive Branch, as applicable, acting in its capacity as granting authority, may reduce up to 25% the amount corresponding to royalties applicable to the production of hydrocarbons during a term of 10 years after the conclusion of the pilot project in favor of companies requesting a hydrocarbon unconventional exploitation concession within a term of 36 months as from Law No. 27,007’s effective date.

Finally, with the National Hydrocarbon Investment Plan’s Strategic Planning and Coordination Committee’s prior approval, royalties may be reduced up to 50% for tertiary oil recovery, extra-heavy oil and offshore products in view of their productivity, location and other unfavorable economic and technical characteristics.

f)Extension Bond

Law No. 27,007 empowers the enforcement authority to provide for the payment of an exploitation concession extension bond, the maximum amount of which will result from multiplying proven reserves at the expiration of the concession by 2% of the average price applicable to the specific hydrocarbon during a term of 2 years before the granting of the extension.

g)Exploitation Bond:

The enforcement authority may provide for the payment of an unconventional exploitation concession extension bond, the maximum amount of which will result from multiplying proven reserves associated with the exploitation of conventional hydrocarbons at the expiration of the granted concession by 2% of the average basin price applicable to the specific hydrocarbons during a term of 2 years before the granting of the concession.

h)Transportation Concessions

Transportation concessions (which had so far been granted for 35 years) will be granted for the same term than that granted for the exploitation concession where it originates, with the possibility of receiving subsequent extensions for up to 10 years each. Thus, transportation concessions originating in a conventional exploitation concession will have a basic 25-year term, whereas those originating in an unconventional exploitation concession will have a basic 35-year term, each plus any extension terms which may be granted. After the expiration of these terms, title to the facilities will be transferred to the National or Provincial Government, as applicable, by operation of law and without any charges or encumbrances whatsoever.










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NOTE 2:(Continuation)

i)Uniform Legislation

Law No. 27,007 provides for two types of non-binding commitments between the National Government and the Provinces regarding tax and environmental issues:

i)Environmental Legislation: It provides that the National Government and the Provinces will seek to establish a uniform environmental legislation primarily aiming to apply the best environmental management practices to hydrocarbon exploration, exploitation and/or transportation with the purpose of furthering the development of the activity while properly protecting the environment.

ii)Tax System: It provides that the National Government and the Provinces will seek to adopt a uniform fiscal treatment encouraging the development of hydrocarbon activities in their corresponding territories in adherence with the following guidelines:

-The gross receipts tax rate applicable to the extraction of hydrocarbons will not exceed 3%;

-The freezing of the current stamp tax rate and the commitment not to charge with this tax any financial contracts entered into in order to structure investment projects and to guarantee and/or warrant investments; and

-The commitment by the provinces and its municipalities not to impose new taxes —or increase the existing ones— on permit and concession holders, with the exception of service compensation rates, improvement contributions and general tax increases.

j)Restrictions on the reservation of areas to National or Provincial Government-Controlled Companies

The amendment of the Argentine Hydrocarbons Law restricts the National Government and the Provinces from reserving new areas in the future in favor or public or mixed companies or entities, irrespective of their legal form. Thus, contracts entered into by provincial companies for the exploration and development of reserved areas before this amendment are safeguarded.

Regarding areas that have not been reserved in favor of public companies and that have not yet been awarded under partnership agreements with third parties, associative schemes may be used, in which case the participation of such companies during the development stage will be proportional to their investments. In this way, the “carry” system during the areas’ development or exploitation stage has been done away with. Such system has not been prohibited for the exploration stage.

k)Conventional and Unconventional Hydrocarbon Investment Promotion Regime

On July 11, 2013, the National Executive Branch passed Executive Order No. 929/2013, which established the Investment Promotion Regime for the Exploitation of Hydrocarbons –both conventional and unconventional (the “Promotion Regime”) with the purpose of encouraging investments destined to the exploitation of hydrocarbons and the legal concept of hydrocarbons unconventional exploitation concession.









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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



Law No. 27.007 extends the benefits of the Promotion Regime to hydrocarbon projects involving a minimum US$ 250 million direct investment, assessed at the time the hydrocarbon exploitation investment project is presented, to be invested during its first 3 years. Before the amendment, the Promotion Regime benefits reached investment projects denominated in foreign currency for a minimum US$ 1,000 million amount during a term of 5 years.

Holders of exploration permits and/or hydrocarbons exploitation concessions, and/or third parties associated with such holders and registered with the National Registry of Hydrocarbon Investments submitting this kind of projects will enjoy the following rights as from the third year of their respective projects’ execution: (i) the right to freely market abroad 20% and 60% of the liquid and gaseous hydrocarbon production in the case of conventional and unconventional exploitation projects and in offshore projects, respectively, with a 0% export duty, if applicable, and (ii) the free availability of 100% of the foreign currency resulting from the exportation of these hydrocarbons, provided the applicable projects have involved a minimum US$ 250 million entry of foreign currency into the Argentine financial market.

During periods in which the national production of hydrocarbons is insufficient to meet domestic supply needs pursuant to Section 6 of the Argentine Hydrocarbons Law, the subjects covered by the Promotion Regime will have, as from the third year as from the execution of their respective investment projects, the right to obtain a price not lower than the reference export price (without computing the incidence of any applicable export duties) from the exportable liquid and gaseous hydrocarbon percentage produced under such projects.

Pursuant to these investment projects, Law No. 27,007 provides for two contributions payable to the producing provinces where the investment project is conducted: (i) the first one, payable by the project holder, for an amount equivalent to 2.5% of investment amount undertaken to be committed to corporate social responsibility projects, and (ii) the second contribution, payable by the National Government, which will be determined by the Committee based on the size and scope of the investment project and which will be destined to infrastructure projects.

As at the issuance hereof, PEPASA has not submitted any investment projects under the Promotion Regime.



Gas Market



Gas Plus Program – SE Resolution No. 24/08

Under this program, the main attraction for gas producers is the free availability and commercialization of the extracted gas. In order to qualify, the producer should submit an investment project in new gas areas, in areas which have not been in production since 2004, or in areas with complex geological characteristics of compact sands or low permeability. With the exception of new entities, companies should be up-to-date with the payment of the production installments fixed pursuant to the Producers’ Agreement to join this program.







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



Natural Gas Surplus Injection Promotion Program (the “Program”)

On February 14, 2013 Resolution No. 1/13 was published in the Official Bulletin. This Resolution creates the Program, which aims to evaluate and approve projects furthering the national self-supply of hydrocarbons through a gas production increase and its infusion into the domestic market, as well as to generate higher levels of activity, investment and employment in this sector.

Before June 30, 2013, any person registered with the National Registry of Hydrocarbon Investments created by Executive Order No. 1277/12 may submit its project before the National Hydrocarbon Investment Plan’s Strategic Planning and Coordination Committee. The National Government undertakes to pay a monthly compensation resulting from: (i) the difference between the Surplus Injection price (US$ 7.5/MMBTU) and the price actually collected from the sale of the Surplus Injection, plus; (ii) the difference between the Base Price and the price received from the Adjusted Base Injection. These projects will be in force for a maximum term of 5 years, with the possibility for renewal.

On April 26, 2013, Committee’s Resolution No. 3/13 was published in the Official Bulletin, which regulates the Program and sets forth that any companies interested in participating in the Program should submit monthly affidavits to the Committee containing specifically-detailed documentation on injection, price, contracts, etc., so that they may, after meeting the methodology and terms specified therein, obtain the applicable compensation. Furthermore, the Resolution expressly prohibits natural gas purchase and sale operations between producers and provides special considerations regarding new high-risk projects, investments control, the evolution of reserves and the Program’s auditing mechanism.

On July 11, 2013, pursuant to Provision No. 15/13 of the Committee, the Company was registered with the National Registry of Hydrocarbon Investments.

PEPASA has submitted several projects to the Committee’s consideration. On August 7, 2013, pursuant to Resolution No. 27/13, the Committee approved a project for an increase in the total natural gas injection submitted by the Company, with retroactive effects to March 1, 2013.

On July 15, 2015, the Committee approved Resolution No. 123/15 defining the Rules applicable to Acquisitions, Sales and Assignments of Areas, Rights and Interests under the Program, which provides that companies acquiring, selling or assigning areas, rights or interests should submit the applicable presentation within a term of 10 business days after the transaction is made.

PEPASA has filed the applicable documentation required by such Resolution and in accordance with the Addendum to the Investment Agreement entered into with YPF in the Rincón del Mangrullo area.

Finally, on January 4, 2016, Executive Order No. 272/15 was passed, which dissolves the Committee created pursuant to Executive Order No. 1277/12 and provides that the powers assigned to this Committee will be exercised by the MEyM.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)

As a result the above-mentioned regulatory changes, a delay in the collection of compensations has been verified. As of December 31, 2015, accumulated income recognized under this item amounts to $ 696.5 million, out of which $ 546.8 million have accrued during this fiscal year. As of the issuance of these financial statements, PEPASA has collected 100% of the Program’s compensations for the March – April, 2015 period for a total amount of $ 244.7 million.



Oil Market

As with the gas market, the oil market has also been affected by several resolutions.

Resolution No. 394/2007 of the Ministry of Economy has provided for an increase in export retentions on liquid hydrocarbons, with a reference value of US$ 60.9 per barrel and a cut-off value of US$ 42 per oil barrel. The exporting producer’s income was thus limited to US$ 42 per crude oil barrel, despite the fact that its WTI value is higher than US$ 60.9 per barrel.

On January 3, 2013, the Ministry of Economy issued Resolution No. 1/2013 increasing cut-off and reference values established by Resolution No. 394/07 from US$ 42 to US$ 70 and from US$ 60.9 to US$ 80 respectively, thus increasing oil-exporting companies’ revenue.

These regulations have entailed a decrease in the crude oil price in Argentina as compared with its international price.

Recently, on December 29, 2014, pursuant to Resolution No. 1077/2014, the Ministry of Economy abrogated Resolution No. 394/07 and its amending provisions in order to establish new export rates based on the crude oil’s international price, which is determined based on the reference Brent’s value on the month corresponding to the export less eight U.S. dollars per barrel (US$ 8/Bbl). Under this new system, the cut-off value is set at US$ 71/Bbl. That is, where the international price does not exceed US$ 71, the producer will pay export duties for 1% of that value. When the price is above US$ 80 (that is, an international price of $72/Bbl), variable deductions will be settled.

Finally, and with reference to the Petróleo Plus Program, on July 13, 2015 Executive Order No. 1330/15 canceling the Petróleo Plus Program and establishing the mechanism for the cancellation of incentives pending settlement was published in the official bulletin.



Crude Oil Production Promotion Program



On February 14, 2015, Res. No. 14/15 issued by the Committee was published in the official bulletin. This Resolution provided for the creation of the Crude Oil Production Promotion Program (the “Crude Oil Program”), which will be effective for a term of one year (extendable to another year).



Registration with this new Crude Oil Program is limited to subjects registered with the Oil Companies Registry, and requests may be submitted until April 30, 2015. The Crude Oil Program will be financed by the National Treasury.









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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 2:(Continuation)



The methodology for calculating this new Program’s stimulus is similar to that used by the Natural Gas Surplus Injection Promotion Program (created by Committee’s Resolution No. 1/13), as it grants a stimulus of US$ 2 or US$ 3 per crude oil barrel (depending on whether it will be destined to internal consumption or exportation) produced over its Base Production until reaching a maximum price depending on the type of crude oil (US$ 70 USD/BBL for Escalante and US$ 84/BBL for Medanito).



NOTE 3: BASIS OF PRESENTATION

These restated consolidated financial statements have been prepared in accordance with IFRS issued by the International Accounting Standards Board (IASB) and IFRIC. All the IFRSs in force as at the date of preparation of these restated consolidated financial statements have been applied. Additionally, the Company has applied the first phase of IFRS 9 “Financial Instruments” at the transition date.

The presentation in the restated consolidated statement of financial position makes a distinction between current and non-current assets and liabilities. Current assets and liabilities are assets expected to be realized or liabilities expected to be extinguished within a period of twelve months from the closing date of the period subject of the report, as well as those held for sale respectively. Additionally, the Group informs the cash flow from its operating activities using the indirect method. The fiscal year starts on January 1 and finishes on December 31 of each year. The economic and financial results are disclosed based on the fiscal year.

These restated consolidated financial statements are stated in Argentine pesos. They have been prepared under the historical cost convention, as modified by the measurement of certain financial assets and liabilities at fair value through profit and loss.

The preparation of these restated consolidated financial statements under IFRS requires estimates and assessments be performed affecting the amounts of assets and liabilities recorded and the contingent assets and liabilities disclosed as at the date of issuance of these restated consolidated financial statements, as well as the disclosure of income and expenses during such period. The areas involving a greater level of judgment and complexity or the areas in which assumptions and estimates are significant for the restated consolidated financial statements are described in Note 5.

These restated consolidated financial statements have been approved for issue by the Board of Directors dated July 26, 2016.

Comparative information

Balances as of December 31, 2014, included in these restated consolidated financial statements for comparative purposes, arise from the financial statements at that date. Certain reclassifications have been made to those financial statements to keep the consistency in the presentation with the amounts of the current year.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 4:ACCOUNTING POLICIES



The main accounting policies used in the preparation of these financial statements are explained below. Unless otherwise stated, these accounting policies have been consistently applied in all the years presented.



4.1Changes in accounting policies



4.1.1New provisions, modifications and interpretations which are not yet effective and have not been early adopted by the Company

- IFRS 15, “Revenue from Contracts with Customers", was issued in May 2014 and amended in July 2015 and applies to any annual reporting period beginning on or after January 1, 2018. This standard specifies how and when revenues should be recognized, and identifies the additional information the Company should disclose in its financial statements. The standard provides a single, principles based five-step model which will be applied to all contracts with customers. The Company is currently analyzing its effects; however, it estimates that its application will not have a significant impact on the Company’s operating results or financial position.

- IFRS 9 – “Financial Instruments”: This modification, which was issued in July 2014, covers all the phases of the IASB project to replace IAS 39 - “Financial Instruments: Recognition and Measurement”. These phases are the classification and measurement of instruments, impairment and hedging. This version adds a new impairment model based on expected losses and some minor modifications to the classification and measurement of financial assets. This new provision supersedes all previous versions of IFRS 9 and is effective for periods starting as from January 1, 2018. As at the transition date, the Company has adopted the first phase of IFRS 9 and is currently analyzing the impact of the second and third phases.

- IFRS 16 - Leases On 13 January 2016, the IASB published IFRS 16, ‘Leases’, which replaces the current guidance in IAS 17. IFRS 16 defines a lease as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.



Under IFRS 16 lessees have to recognize a lease liability reflecting future lease payments and a ‘right-of-use asset’ for almost all lease contracts. This is a significant change compared to IAS 17 under which lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 contains an optional exemption for certain short-term leases and leases of low-value assets; however, this exemption can only be applied by lessees.  The IFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019.







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 4:(Continuation)



4.2Consolidation

a.Subsidiaries

These financial statements include those of the Company and the entities controlled by it. Subsidiaries are all entities over which the Company exercises control, which is generally accompanied by a percentage above 50% of the available voting rights. The Company controls an entity when it is exposed or entitled to variable returns in view of its involvement in the entity and has the capacity to affect these returns through its power over it. When determining whether the Company controls an entity, the existence and effect of potential voting rights which are currently exercisable or convertible are considered. The Company also evaluates the existence of control when it does not hold more than 50% of the voting rights but can direct financial and operating policies through a “de facto control”. The “de facto control” may arise under circumstances in which the number of the Group's voting rights compared with the number and dispersion of the stakes held by other shareholders grants the Group the power to direct financial and operating policies, etc. For PEPASA, decisions on financial and operating policies are taken by the Board Directors of PEPASA, which is formed in its majority by the same directors of the Company. Subsidiaries are consolidated as from the date on which control is transferred to the Group and are de-consolidated as from the date such control ceases.



Main consolidation adjustments are the next:



i.elimination of balances between the Group companies, so that the financial statements disclose balances held with third parties and uncontrolled related parties.

ii.elimination of inter-company transactions between the Group companies, so that the financial statements disclose results with third parties and uncontrolled related parties.

iii.elimination of interest in equity and profit/loss and in the results of each year of the group companies

iv.recognition of assets and liabilities identified in process of business combination.



Accounting policies of subsidiaries have been modified, where necessary, to ensure consistency with the policies adopted by the Group.

b.Business combinations

Business combinations are accounted through the application of the acquisition method of accounting. The consideration for the acquisitions is measured at its fair value by calculating the sum, as at the acquisition date, of the fair value of the transferred assets, the incurred or taken on liabilities and the warrants issued by the Company and delivered in consideration of the control of the acquired business.

Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities assumed in a business combination are measured at their fair values at the acquisition date.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 4:(Continuation)

Goodwill represents the excess of the aggregate of the acquisition cost, plus the amount of any non-controlling interest in the acquired entity and the fair value of the equity interest in the acquired entity held by the company (if any) over the net identifiable assets acquired and liabilities assumed, at the date of acquisition.

If as a result of the assessment, the net amount of identifiable assets acquired and liabilities assumed exceeds the sum of the acquisition cost, plus the amount of any non-controlling interest in the acquired entity and the fair value of the equity interest in the acquired entity held by the company (if any), this excess is accounted for immediately in profit and loss as a gain for the purchase of the business.

The Group has up to 12 months to finalize the accounting for a business combination. Where the accounting for a business combination is not complete by the end of the year in which the business combination occurred, the Group reports provisional amounts.

c.Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between the fair value of any consideration paid/collected and the corresponding part of shares acquired/disposed on the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

d.Disposal of subsidiaries

When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in the carrying amount recognized in a profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset.

e.Joint Arrangements

The Company applies IFRS 11 “Joint arrangements”to all its joint arrangements. Under IFRS 11, joint arrangements are classified as either joint ventures or joint operations depending on each investor’s contractual rights and obligations. A joint venture is a contractual arrangement whereby the parties that have joint control on the arrangement have rights to the net assets of the arrangement. A joint operation is a contractual arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 4:(Continuation)

f.Interest in joint ventures

The Company accounts for its joint ventures using the equity method of accounting. Under this method, the interest is recognized at cost at the beginning and is subsequently adjusted by recognizing the portion that corresponds to the Company in the result obtained by the joint arrangements, after the acquisition date.

The Company recognizes in profit and loss its portion in the joint ventures results and in other comprehensive income its portion in other comprehensive results of the joint arrangements.



Accounting policies of the joint venture have been changed when necessary to ensure consistency with the policies adopted by the Group.

g.Participations in joint operations

The Company recognizes its direct right to the assets, liabilities, revenue and expenses in the different consortiums and joint venture for the prospecting, exploitation and production of hydrocarbons and its share of any jointly held or incurred assets, liabilities, revenue and expenses. This method requires disclosing its interests and obligations in each type of asset and liability respectively, under the terms of the agreement, as well as in the income, costs and expenses in each of the items of the consolidated financial statements.

Accounting policies applicable to joint operations have been modified and adapted, if applicable, to ensure consistency with the policies adopted by the Company.

h.Interest in associates

All associates are entities over which the Company does not exercise control but has significant influence, which is generally accompanied by a direct and indirect interest between 20% to 50% of voting rights, unless it can be clearly evidenced that this influence is non-existent. On the contrary, it is presumed that the investor does not exercise a significant influence if it directly or indirectly holds less than 20% of the voting rights in the associate, unless it can be clearly evidenced that this influence does exist.

The subsidiary PEPCA holds a 10% interest in CIESA. However, it exercises a significant influence on the operating and financial decisions affecting that company since it has the power to appoint a Titular Director.

Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of profit or loss of the Investee after the date of acquisition. The Group’s share of post-acquisition profit or loss is recognized in the income statement, and its share of post- acquisition movements in Other comprehensive income is recognized in Other comprehensive income with a corresponding adjustment to the carrying amount of the investment.



Accounting policies of the associates have been changed or adapted where necessary to ensure consistency with the policies adopted by the Group.









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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 4:(Continuation)

i.Predecessor accounting



For business combinations under common control, the predecessor accounting method is used, whereby the acquirer recognizes assets and liabilities at the predecessor’s book value. No new goodwill is recognized for these transactions.



4.3Segment information

Operating segments are reported consistently with internal reports reviewed by the Executive Director.

The Executive Director, is the highest decision-making authority, is the person responsible for allocating resources and setting the performance of the entity’s operating segments, and has been identified as the person/ body executing the Company’s strategic decisions.



4.4Property, plant and equipment

All Property, Plant and Equipment for use in production or for administrative purposes are stated at historical cost less depreciation a less any accumulated impairment. Historical cost includes expenditure that are directly attributable to the acquisition of the items.

In accordance with the provisions of IAS 23 “Borrowing costs”, borrowing costs in relation to any given asset could be capitalized when such asset is in the process of production, construction, assembly or completion, and such processes, due to their nature, take long periods of time; those processes are not interrupted; the period of production, construction, assembly or completion does not exceed the technically required period;  the necessary activities to put the asset in condition to be used or sold are not substantially complete; and the asset is not in condition so as to be used in the production of other assets or startup, depending on the purpose pursued with its production, construction, assembly or completion.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably and the investment will improve the condition of the asset beyond its original state. The carrying amount of those parts that are replaced is derecognized. It is a condition of an item of property, plant and equipment to continue to operate, to conduct periodic inspections for faults regardless of whether parts of the elements are replaced or not (major maintenance).  All other repairs and maintenance are charged to the income statement during the financial period in which they have been incurred.

Land is not depreciated. Machinery and generation equipment are depreciated under the unit of production method. Mining property is depreciated under the unit of production method in relation to proven and developed reserves and to prove and non-developed reserves.

Depreciation of other assets is calculated using the straight-line method.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)






NOTE 4:(Continuation)

The main depreciation methods are described below:



Buildings: 50 years

Substations: 35 years

High voltage lines: 40 - 45 years

Medium voltage lines: 35 - 45 years

Low voltage lines: 30 - 40 years

Transformer centrals: 25 - 35 years

Meters: 25 years

Vehicles: 5 years

Furniture, fittings and communication equipment: 5- 20 years

Computer equipment and software: 3 years

Tools: 10 years

Gas Plant and Pipeline: 20 years

Works in progress are valued according to their degree of progress. Works in progress are recorded at cost, less any loss due to impairment, if applicable.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at least at each financial year-end.

An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount.



4.5Intangible assets

a.Goodwill

Goodwill is the result of the acquisition of subsidiaries. Goodwill represents the excess of the acquisition cost over the fair value of the equity interest in the acquired entity held by the company in the net identifiable assets acquired at the date of acquisition.





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NOTE 4:(Continuation)

For the purpose of impairment testing, goodwill acquired in a business combination is allocated from the acquisition date to each of the acquirer’s cash-generating units or group of CGUs that are expected to benefit from the synergies of the combination. Each unit or group of units that goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.

b.Concession arrangements

Concession arrangements corresponding to Edenor and hydroelectric generation plants Diamante and Nihuiles are not covered by the guidelines of IFRIC 12 “Service Concession Arrangements”.



These concession agreements meet the criteria set forth by the IFRSs and are amortized following the straight-line method based on each asset’s useful life, which corresponds to the life of each concession agreement.

The concession of Edenor, has a useful life of 83 years, while the HIDISA and HINISA has a useful life of 30 years.

c.Identified intangible assets in acquired investments

Corresponds to intangible assets identified at the moment of the acquisition of companies from the distribution segment. Identified assets meet the criteria established in IFRS and are amortized by the straight-line method according to the useful life of each asset, considering the estimated way in which the benefits produced by the asset will be consumed.

d.Rights over arbitration proceedings

It corresponds to rights acquired by the Company to control, suspend and waive judicial claims.

As of December 31, 2014 proceedings’ conclusion dates cannot be accurately foreseen, it has been determined that they have an indefinite useful life (See Note 20)



4.6Biological assets

Biological assets comprise grape plantations and seed plots. These biological assets are measured on initial recognition and at the end of each reporting period, at its cost, which does not differ from its fair value less costs to sell.







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NOTE 4:(Continuation)



4.7Assets for oil and gas exploration

Expenses related to oil and natural gas exploration and evaluation are accounted for by the successful effort method. Costs are accumulated at the level of each field. Geological and geophysical costs are recorded as expenses as they are incurred. Costs directly associated to the exploration of wells and costs of exploration and acquisition of rights on real property are capitalized until the reserve determination is assessed. If the conclusion reached is that the discovery has no commercial viability, then those expenses are charged to results.

Capitalization is recognized in property, plant and equipment or in intangible assets according to the nature of the expense.

4.7.1 Development tangible and intangible assets

Disbursements for the building, installation and completion of infrastructures such as platforms, pipes and the drilling of wells with demonstrated commercial viability are capitalized as Property, Plant and Equipment and as intangible assets, depending on their nature. PEPASA recognized as mining property 50% of the investments in wells relating to the commitments undertaken in the first two phases and 35% of the investments in Lajas Formation under the agreement with YPF for Rincón del Mangrullo, and the remaining 50% and 65% as wells. Additionally, part of the investments made in wells relating to the commitment undertaken with Petrobras for El Mangrullo was recorded as mining property. When commercially viable reserves are found, exploration and evaluation assets are tested for impairment and transferred to development tangible or intangible assets. During the exploration and evaluation phase, no depreciation expenses are recognized for Property, Plant and Equipment or intangible assets.

4.7.2 Assets for oil and gas production

Assets for oil and gas production are tangible assets for exploration and evaluation and development expenses associated to production of proven reserves.

4.7.3 Assets retirement obligation

Estimated future costs of wells plugging and abandonment in the hydrocarbon areas, discounted at a rate estimated at the time of their initial measuring, are capitalized together with the assets originating them, and are depreciated using the unit-of-production method. Additionally, a liability is recorded for this item at the estimated value of discounted payables.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 4:(Continuation)

4.7.4 Depreciation

Assets related to oil and gas production are depreciated following the production unit method. Production unit rates are based on developed reserves with proven viability, such as reserves of oil, gas and other mineral reserves that are expected to be recovered through existing facilities using the current operating methods. Oil and gas volumes are considered as produced once they are measured with the oil meters at the custody transfer points or at the sale transactions points at the output valve of the storage tank.

The depreciation is adjusted by changes in the estimates of proved developed reserves when such changes arise. PEPASA performs reserves estimates reviews, which are certified by independent engineers at least once a year.

4.7.5 Impairment – Assets for exploration and evaluation

Assets for exploration and evaluation are subject to impairment tests whenever facts and circumstances suggest that an impairment in value may have occurred. An impairment loss is recognized for the amount in which the book value of the exploration and evaluation asset exceeds its recoverable amount. The recoverable amount is the higher of the value in use and the fair value less costs to sale of the exploration and evaluation assets. With the purpose of assessing the impairment, the exploration and evaluation assets subject to impairment tests are grouped together with the CGUs of the existing producing fields that are located in the same geographical region.

4.7.6 Impairment – Proven property for oil and gas production and intangible assets

Properties for oil and gas production and intangible assets whose commercial and technical viability has been proven are evaluated for impairment losses at the moment when facts or changes in circumstances suggest that the carrying amount could not be recoverable. An impairment loss is recognized for the amount in which the carrying value of the asset exceeds its recoverable amount. The recoverable amount is the higher of the value in use and the fair value less the cost to sale of the assets. With the purpose of assessing the impairment, the assets are grouped at the lowest level at which separate cash flows can be identified (CGUs).

4.8 Impairment of non-financial assets

Assets that have an indefinite useful life - for example, goodwill or intangible assets not ready to use – are not subject to amortization and are tested annually for impairment.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 4:(Continuation)

Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized as the amount by which the asset ́s carrying amount exceeds its recoverable amount. Recoverable amount is the higher amount of fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (CGUs).

Non-financial assets other than goodwill that have been impaired are reviewed at each reporting date for possible reversal of the impairment.



4.9 Foreign currency translation



4.9.1 Functional and presentation currency

Information included in the financial statements entities are measured in the functional and presentation currency of the Company, which is the currency of the primary economic environment in which the entity operates. The functional currency is Argentine peso, which is the Group’s presentation currency.



These financial statements have been prepared under the historical cost convention in nominal currency established in IFRS criteria applicable for non-hyperinflationary economies.



4.9.2 Transaction and balances

Foreign currency transactions are translated into the functional currency using the exchange rates as of at the date of the transaction. Foreign exchange gain and loss resulting from the settlement of any transaction and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, unless they have been capitalized.

The exchange rates used are as follows: buying rate for monetary assets, selling rate for monetary liabilities, average rate at the end of the year for balances with related parties, and date-specific exchange rate for foreign currency transactions.

4.9.3 Subsidiaries

All subsidiaries functional currency is the peso, so there are no effects of foreign currency translation.









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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 4:(Continuation)



4.10 Financial assets



4.10.1 Classification

The Company classifies its financial assets under the following categories: those to be measured subsequently at fair value and those to be measured at amortized cost. This classification depends on whether the financial asset is a debt instrument or an equity investment. For the asset to be measured at amortized cost, two conditions described below must be verified. The remaining financial assets are measured at fair value. IFRS 9 requires that all the investments in equity instruments are measured at fair value.

a.Financial assets at amortized cost

Financial assets are measured at amortized cost only if the following criteria have been met:



i.the objective of the Group’s business model is to hold the asset to collect the contractual cash flows;

ii.the contractual terms, on specified dates, have cash flows that are solely payments of principal and interest on the outstanding principal.



b.Financial assets at fair value

If any of the above mentioned criteria has not been met, the financial asset is measured at fair value through profit or loss.

All equity investments are measured at fair value. For equity investments that are not held for trading, the Group can irrevocably choose at the moment of the initial recognition to present changes in fair value through other comprehensive income. The decision of the Group was recognizing changes in fair value through profit or loss.



4.10.2 Recognition and measurement

Regular purchases and sales of financial assets are recognized on the trade-date, which is the date on which the Group commits to the purchase or sale of the asset. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset.







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 4:(Continuation)



A gain or loss on a debt investment that is subsequently measured at fair value and is not part of a hedging relationship is recognized in profit or loss. A gain or loss on a debt investment that is subsequently measured at amortized cost and is not part of a hedging relationship is recognized in profit or loss when the financial asset is derecognized or impaired and through the amortization process using the effective interest rate method.

The Group subsequently measures all equity investments at fair value. When the Group elects to present the changes in fair value in other comprehensive income, such changes cannot be reclassified to profit or loss. Dividends from such investments continue to be recognized in profit or loss as long as they represent a return on investment.

The Company reclassifies financial assets if and only if its business model to manage financial assets is changed.



4.10.3 Impairment of financial assets

Assets carried at amortized cost

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets measured at amortized cost are impaired. A financial asset or a group of financial assets are impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization.

The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the income statement. If the financial asset has a variable interest rate, the discount rate for the calculation of the impairment loss is the currently effective interest rate under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 4:(Continuation)

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the reversal of the previously recognized impairment loss is recognized in the statement of comprehensive income.



4.10.4 Offsetting of financial instruments

Financial assets and liabilities are offset, and the net amount reported in the consolidated statements of financial position, when there is a legally enforceable right to offset the recognized amounts, and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.



4.11 Trade and other receivables



4.11.1 Trade receivables

Trade receivables are amounts owed by customers for the sale of generated and distributed power, the sale of gas and liquid fuels and the provision of counseling services in the ordinary course of business.

Generation, Oil and Gas and Holding

Trade receivables and other receivables are recognized at fair value and subsequently measured at amortized cost, using the effective interest method.

Receivables from CAMMESA allocated to FONINVEMEM and Agreement 2014, documented as LVFVDs, have been valued at their amortized cost, the maximum value of which is their recoverable amount at the period’s closing date. The amortized cost has been determined based on the estimated future cash flows, discounted based on a rate reflecting the time value of money and the risks inherent to the transaction.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 4:(Continuation)

In the generation and Oil and gas segments, the Company accounts a provision for doubtful accounts when there is objective evidence that the Company will not be able to collect all the amounts that are owed to it according to the original terms of those receivables, based on an individual analysis of the recoverability of loan portfolio.

Distribution



The receivables arising from services billed to customers but not collected as well as those arising from services rendered but unbilled at the closing date of each financial year are recognized at fair value and subsequently measured at amortized cost using the effective interest rate method.



The receivables from electricity supplied to low-income areas and shantytowns are recognized, also in line with revenue, when the Framework Agreement has been renewed for the period in which the service was provided.



The amounts thus determined are net of an allowance for the impairment of receivables. Any debt arising from the bills for electricity consumption that remain unpaid 13 working days after their due dates for small-demand (tariff 1) customers and 7 working days after due date for medium and large-demand (tariff 2 and 3) customers is considered a delinquent balance. The uncollectibility rate is determined per customer category based on the historical comparison of collections made and delinquent balances of each customer group.



Additionally, and faced with temporary and/or exceptional situations, Edenor Management may redefine the amount of the allowance, specifying and supporting the criteria used in all the cases.

4.11.2 Other receivables

Other receivables are initially recognized at fair value and subsequently measured at amortized cost, using the effective interest method, and when significant, adjusted by the time value of the currency. The Company records impairment allowances when there is objective evidence that the Company will not be able to collect all the amounts owed to it in accordance with the original terms of the receivables.



The CMM amounts receivables, as well as the related income, are recognized to the extent that they have been approved by the ENRE and recognized by the SE by means of a Note or Resolution.

Where applicable, allowances for doubtful tax credits have been recognized based on estimates on their uncollectibility within their statutory limitation period, taking into consideration the Company’s current business plans.

4.12 Inventories

Inventories are measured at the lower of cost and net realizable value.







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 4:(Continuation)

Given that the Company's inventories are not goods held for sale, their valuation is considered as based on the purchase price, import duties (if applicable) and other taxes (not subsequently recoverable by tax authorities), transportation, storage and other costs directly attributable to the acquisition of those assets.

Cost is determined using the weighted average cost method.

The Company has classified materials and spare parts into current and non-current, depending on their ultimate purpose, the latter being those that can be used for maintenance or improvement on existing assets. The non-current part of materials and spare parts is shown under the heading “Property, plant and equipment”.

The carrying value of inventories, taken as a whole, does not exceed the recoverable amount at the end of each year.



4.13 Derivative financial instruments

Derivative instruments are initially recognized at their fair value on the derivative contract’s effective date. After their initial recognition, they are revalued at their fair value.

The Company partially hedges its exchange rate risk through the execution of forward contracts denominated in U.S. dollars.

The accounting method used to recognize the resulting profit or loss depends on whether the derivative has been specifically designated as a hedging instrument, and, if so, on the nature of the item being hedged. The Company has not formally designated privately negotiated derivatives as hedging instruments. Therefore, changes in their value are disclosed in “Foreign currency exchange difference”, under “Other financial results”.

The fair value of derivative financial instruments traded in active markets is disclosed based on their quoted market prices. The fair value of financial instruments that are not traded in active markets is determined using different valuation techniques. The Company uses its critical judgment to select the most appropriate methods and to determine assumptions which are based mainly on the market conditions prevailing at the closing of each year.

During this fiscal year, the Company and its subsidiaries have traded: i) U.S. dollar purchase contracts with ROFEX for an amount of US$ 397.9 million at an average exchange rate of $ 12.137 to a U.S. dollar, with maturities between January and June 2016; ii) U.S. dollar sales contracts with ROFEX for an amount of US$ 21 million at an average exchange rate of $ 9.971 to a U.S. dollar and maturing in November 2015. In turn, the Company has entered into U.S. dollars future sales agreements with affiliates for US$ 70 million and US$ 21 million at an average exchange rate of $ 10.728 to a U.S. dollar and with maturities between January 2016 and June 2016.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 4:(Continuation)

On December 14, 2015, in order to regularize U.S. dollar futures trading operations and eliminate the risk of breach of or challenge to agreed operations and pursuant to the powers granted by Section 4 of the “Rules applicable to U.S. Dollar Futures and Option Contracts”, Mercado a Término de Rosario S.A. and Argentina Clearing S.A., through their Communications No. 518 and 657, resolved as follows:

·To declare the “Operating Emergency of ROFEX Dollar Futures” regarding positions open as at December 14, 2015 on U.S. dollar futures contracts maturing up to and including June 2016 and agreed after September 29, 2015.

·To provide, regarding U.S. dollar purchasing future positions as at December 14, 2015 maturing up to and including June 30, 2016:

a) the correction of the operation's original price by adding $ 1.25 per U.S. dollar for operations open as from September 30, 2015 and up to and including October 27, 2015;

b) the correction of the operation's original price by adding $ 1.75 per U.S. dollar for operations open as from October 28, 2015.

In furtherance of these measures, the Company renewed contracts for operations covered by the new price regulations. These modifications have had a negative economic impact of $ 18.8 million.

Additionally, through General Resolution No. 3,818, as amended by General Resolution No. 3.824 passed on December 23, 2015, the AFIP established a one-time withholding system applicable on the difference between the originally agreed price or that resulting from the novation resulting from the application of the “Declaration of Operating Emergency of ROFEX Dollar Futures” of each open contract and the “mark to market” adjustment price for the closing of trading operations on December 23, 2015. The fair value of contracts open as at December 31, 2015 amounts to a $   17.9 million liability position, which is disclosed under "Derivative Financial Instruments". These contracts are guaranteed with financial instruments with a fair value of $ 269.4 million and are disclosed under “Other current receivables”.

The economic impact of these operations resulted in a $ 471.8 million income, which is disclosed in “Foreign currency exchange difference”, under “Other financial results” of the Statement of Comprehensive Income.

4.14 Cash and cash equivalents

Cash and cash equivalents includes cash in hand, demand deposits with banking institutions and other short-term, highly liquid investments with original maturities not exceeding three months and subject to an insignificant risk of changes in value. If any, current account overdrafts are not disclosed under Cash and cash equivalents in the statement of cash flows since they are not part of the Company’s cash management.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 4:(Continuation)

4.15 Shareholder ́s equity

Equity’s movements have been accounted for in accordance with the pertinent decisions of shareholders' meetings and legal or regulatory standards.

a.Share capital

Share capital represents the capital issued, composed of the contributions that were committed and/or made by the shareholders and represented by shares that comprise outstanding shares at nominal value. Ordinary shares are classified as equity.

b.Additional paid in capital and other reserves

It includes:

(i)The portion of the collected price exceeding the face value of the shares issued by the Company, net of absorbed accumulated losses.

(ii)The difference between the fair value of the consideration paid/collected and the accounting value of the equity interest in the subsidiary acquired/sold/diluted which does not represent a loss of control or significant influence.

(iii)The difference between the proportional equity value registered before the merger of subsidiary CTG with subsidiaries EGSSA and EGSSAH and the value resulting from applying to the subsidiary’s merged equity interest, the new ownership share resulting from the exchange relationship.

c.Legal reserve

In accordance with the Argentine Commercial Companies Law No. 19550, 5% of the profit arising from the statement of comprehensive income for the year, prior years' adjustments, the amounts transferred from other comprehensive income and prior years' accumulated losses, must be appropriated to a legal reserve until such reserve equals 20% of the Company’s outstanding capital. When for any reason, the amount of this reserve will be shorter, dividends may not be distributed, until such amount is made.

d.Voluntary reserve

This reserve results from an allocation made by the Shareholders’ Meeting, whereby a specific amount is set aside to cover for the funding needs of projects and situations associated with Company policies.

e.Directors ́option reserves

Corresponded to the reserve related to the share-based payments explained in 4.16 and Note 41







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 4:(Continuation)

f.Retained earnings(Accumulated losses)

Retained earnings comprise accumulated profits or losses without a specific appropriation; positive earnings can be distributable by the decision of the Shareholders' meeting, as long as they are not subject to legal restrictions. These earnings comprise prior years' earnings that were not distributed, the amounts transferred from other comprehensive income and prior years' adjustments, according to accounting standards.

In case of existence of negative retained earnings to be absorbed at the end of the year for consideration of the Shareholders' Meeting, the following order for appropriation of balances must be followed:



i)Reserved earnings

-Voluntary reserve

-Statutory reserve

-Legal reserve

ii)Capital contributions

iii)Additional paid in capital

iv)Other equity instruments (if feasible from the legal and corporate point of view)

v)Capital adjustment

vi)Share capital

g.Other comprehensive income (loss)

Includes actuarial gains and losses from the calculation of liabilities for defined benefit plans and their tax effects on subsidiaries.

h.Dividends distribution

Dividend distribution to Company shareholders is recognized as a liability in the consolidated financial statements in the year in which the dividends are approved by the Shareholders' Meeting.

4.16 Share-based payments

Agreement assignment opportunities



The Company entered into an Opportunities Assignment Agreement by which the Directors undertook to offer, on a priority basis, any investment opportunity above US$ 5 million they detect within the Company’s investment guidelines. In consideration of this commitment, the Company granted these executives warrants for up to 20% of the Company’s capital stock pursuant to the Warrants Issuance Agreements (as amended) that the Company entered into with each of these executives.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 4:(Continuation)



The fair value of the services rendered in consideration of these warrants was recorded as an expense, and has been determined using the Black-Scholes-Merton model, which takes into consideration assumptions such as annual volatility, dividend yield and a risk-free interest rate denominated in U.S. dollars. Pursuant to the conditions prevailing at the time the agreements were entered into, no value has been attributed to the stipulated contractual adjustment clauses.



The total expense amount was determined by reference to the fair value of the granted warrants, against a reserve included in the Statement of Changes in Equity and accrued following the straight-line method in the term during which the Company received this service. In view of the difficulties to determine the value attributable to the contract since there are no comparable parameters in the market (first option provided for in IFRS 2 – “Share-based payments”), the Company has used the valuation of the options issued to determine the compensation amount to be recognized during the life of the contract.



In Note 41 to the financial statements the conditions of compensation, terms of enforceability and the main variables considered in the valuation model is detailed.



Compensation agreement Value Company

PEPASA has granted to certain officers a compensation for services (payable in cash) based on the share value appreciation.

This compensation is recorded pursuant to the guidelines set forth in IFRS 2. The fair value of the services received is measured through the appreciation of the share as from its initial public offering and includes both its intrinsic value (the share quotation value as at the closing date) and its value over time (the right to participate in future quotation increases until the date this right would be actually exercised). The Black-Scholes-Merton financial valuation model was used to make this estimate, and the enforceability of the remuneration was taken into consideration.

The fair value of the amount payable for the compensation plan is accrued and acknowledged as an expense, with the resulting increase in liabilities, during the period in which employees have an unconditional right to payment. Liabilities are revalued on each balance date and at the settlement date. Any change in the fair value of liabilities is disclosed in profit or loss.

In Note 46 to the financial statements the conditions of compensation, terms of enforceability and the main variables considered in the valuation model is detailed.

4.17 Trade payables and other payables

4.17.1 Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payments fall due within one year or in a shorter period of time. Otherwise, they are classified as non-current liabilities.

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 4:(Continuation)

4.17.2 Customer guarantees

Customer guarantees are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method.

In accordance with the Concession Agreement, Edenor is allowed to receive customer guarantees in the following cases:



i.When the power supply is requested and the user is unable to provide evidence of his legal ownership of the premises;

ii.When service has been suspended more than once in one-year period;

iii.When the power supply is reconnected and the Company is able to verify the illegal use of the service (fraud).

iv.When the customer is undergoing liquidated bankruptcy or reorganization proceedings.

Edenor has decided not to request customer guarantees from residential tariff customers.

Customer guarantees may be either paid in cash or through the customer’s bill and accrue monthly interest at a specific rate of Banco de la Nación Argentina for each customer category.

When the conditions for which EDENOR  is allowed to receive customer guarantees no longer exist, the customer’s account is credited for the principal amount plus any interest accrued thereon, after deducting, if appropriate, any amounts receivable which EDENOR has with the customer.

4.17.3 Customer refundable contributions

Edenor receives assets or facilities (or the cash necessary to acquire or built them) from certain customers for services to be provided, based on individual agreements and the provisions of ENRE Resolution No. 215/12. These contributions are initially recognized as trade payables at fair value against Property, plant and equipment, and are subsequently measured at amortized cost using the effective interest rate method.

4.17.4 Other payables

The recorded liabilities for the debts with the FOCEDE (Note 2.3.1.6), the debts with the FOTAE, the penalties accrued, whether imposed or not yet issued by the ENRE (Note 2.3.3), the PUREE-related debts, and other provisions are the best estimate of the settlement value of the present obligation in the framework of IAS 37 provisions at the date of these financial statements.

The balances of ENRE Penalties and Discounts are adjusted in accordance with the regulatory framework applicable thereto and are based on Edenor’s estimate of the outcome of the RTI process described in Note 2, whereas the balances of the loans for consumption (mutuums) are adjusted by a rate equivalent to the monthly average yield obtained by CAMMESA from its short-term investments.

The compensation arrangements are recognized on the basis as described in Notes 4.16 and 4.27.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 4:(Continuation)

The other liabilities recorded in other payables, including the Loans for consumption (Mutuums) with CAMMESA (Note 2.3.1.7), the Payment agreement with the ENRE (Note 2.3.3.4) and the advances for the execution of works, are initially recognized at fair value and subsequently measured at amortized cost.

4.18 Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized as finance cost over the period of the borrowings, using the effective interest method.

4.19 Borrowing costs

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until the time the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognized in profit and loss in the period in which they have been incurred.

4.20 Deferred revenues

Non-refundable customer contributions

Edenor receives assets or facilities (or the cash necessary to acquire or built them) from certain customers for services to be provided, based on individual agreements. In accordance with IFRIC 18 “Transfers of Assets from Customers”, the assets received are recognized by Edenor as Property, plant and equipment with a contra-account in deferred revenue, the accrual of which depends on the nature of the identifiable services, in accordance with the following:



i.Customer connection to the network: revenue is accrued until such connection is completed;



ii.Continuous provision of the electric power supply service: throughout the shorter of the useful life of the asset and the term for the provision of the service.



4.21 Employee benefits

Defined benefit plans

The Company operate various defined benefit plans. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors, such as age, years of service and compensation.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 4:(Continuation)

The liability recognized in the balance sheet in respect to defined benefit plans is the present value of the defined benefit obligation at the end of the reporting period. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using future actuarial assumptions about demographic and financial variables that affect the determination of the amount of such benefits.

The Group's accounting policy for benefit plans is recognizing actuarial gains and losses from experience adjustments and changes in actuarial assumptions, in other comprehensive income (loss) in the period in which they arise. Past service costs are recognized immediately in the Statement of Comprehensive Income (loss).

4.22 Provisions and contingencies

Provisions were recognized in the cases in which, considering a present obligation in charge of the group, legal or constructive, arising from a past event, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate could be made of its amount.

The amount recorded as provisions is the best estimate of the resource outflow necessary to settle the present obligation, at the end of the reporting year, considering the pertinent risks and uncertainties. When a provision is measured using the estimated cash outflow for settling the present obligation, the amount recorded represents the present value of that cash flow. This present value is obtained applying a discount rate before taxes to reflect the market conditions, the time value of money and the risks specific to the obligation.

These provisions have been set up to cover potential contingent situations that could give rise to future obligations of payment. In estimating the amounts and probability of occurrence, the opinion of each Company’s legal advisors has been taken into account.



4.23 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, taking into account the estimate amount of any discount, thus determining the net amounts.



Ordinary revenue has been recognized when each and every of the following condition has been met:



i)the entity has transferred to the buyer all significant risks and rewards;

ii)the amount of revenue was reliably measured;

iii)it is probable that the entity will receive the economic benefits associated with the transaction;

iv)costs incurred or to be incurred in relation to the transaction have been reliably measured.











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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 4:(Continuation)



4.23.1 Revenue



The revenue recognition criteria of the main activities of the Company include:

i.From the power generation activity: they are recognized as accrued comprising energy made available and generated energy.

During this fiscal year ended December 31, 2014, upon the meeting of condition (iii) above, generating subsidiaries have recognized as income the fair value of the remuneration corresponding to the section c) Res. SE N ° 406/03 and the portion of the Additional Remuneration to be allotted to the Trust accrued during fiscal year 2013 and 2014. This change results from the execution of the 2014 Agreement on October 27, 2014, whereby CTLL have undertaken to conduct a new generation Project which will be partially funded by CAMMESA.

During this fiscal year ended December 31, 2015, HIDISA and HINISA  have not recognized the Maintenance Remuneration —which is to be allocated exclusively to the financing of major maintenance tasks— as income since the condition that the entities may probably receive the economic benefits associated with the transaction has not been met, as the major maintenance works to be financed with the LVFVDs to be issued by CAMMESA are subject to approval by the SE and, therefore, there is no reasonable certainty that these companies will collect the generated receivables.

Additionally during this fiscal year, generating subsidiaries have not recognized revenues of Remuneration FONINVEMEM 2015-2018 until the approval of investment projects.



ii.From the electricity distribution activity:Revenue from the electricity provided by Edenor to low-income areas and shantytowns is recognized to the extent that the Framework Agreement has been renewed for the period in which the service was rendered.

Revenue from operations is recognized on an accrual basis and derives mainly from electricity distribution. Such revenue includes both the electricity supplied, whether billed or unbilled at the end of each year, which has been valued on the basis of applicable tariffs, and the charges resulting from the application of SE Resolution No. 347/12 (Note 2.3.1.7).

Edenor also recognizes revenue from other concepts included in distribution services, such as new connections, reconnections, rights of use on poles, transportation of electricity to other distribution companies, etc.



iii.From exploration and exploitation of oil and gas activity: Revenues from sales of crude oil, natural gas and liquefied petroleum gas are recognized on the transfer of title in accordance with the terms of the related contracts, which is when the customer has taken title and assumed the risks and benefits, prices have been determined and collectability is reasonably assured.










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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 4:(Continuation)



4.23.2 Other Income



i.Recognition of higher cost.

The recognition of higher costs (Note 2.3.1.6) not transferred to the tariff, as well as the recognition established by SE Resolution No. 32/15 fall within the scope of IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance” as they imply a compensation to cover the expenses and afford the investments associated with the normal provision of the public service, object of the concession.

Their recognition is made at fair value when there is reasonable assurance that they will be collected and the conditions attached thereto have been complied with, i.e. provision of the service in the case of the recognition established in SE Resolution No. 32/15, and the ENRE’s approval and the SE’s recognition, by means of a Note or Resolution, in the case of the recognition of higher costs (Note 2.3.1.6).



As for the income deriving from the funds to which SE Res. No. 745/05 refers (Note 2.3.1.6), it is recognized on the basis of amounts billed.



Such concepts have been disclosed in the “Recognition of income on account of the RTI – Resolution 32/15” and “Higher Costs Recognition - SE Resolution 250/13 and subsequent Notes” line items of the statement of comprehensive income as of December 31, 2015 and 2014, recognizing the related tax effects. There have been no unfulfilled conditions or any other related contingencies.



ii.Recognition of compensation for injection of surplus gas – Resolution No. 1/13



The recognition of income for the injection of surplus gas is covered by IAS 20 since it involves a compensation as a result of the production increase committed by PEPASA.



Its recognition is made at its fair value when there is reasonable assurance that it will be collected and that the conditions required have been complied.



This item has been disclosed under Compensation for Surplus Gas Injection - Resolution No. 1/13, Under other operating income, in the comprehensive income (loss) statement.



4.23.3 Interest and dividend income



Dividend income is recognized when the right to receive payment has been established. Interest income is recognized using the effective interest method. They are recorded on a temporary basis, with reference to the outstanding principal and the applicable effective rate.



This income is recognized as long as it is probable that the entity receives the economic benefits associated with the transaction and the amount of the transaction has been reliably measured.









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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 4:(Continuation)



4.24 Income tax and tax on asset



4.24.1 Current and deferred income tax

The tax expenses for the period include current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized, using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they come from the initial recognition of goodwill; or if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at time of the transaction affects neither accounting nor taxable profit or loss.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available and can be used against temporary differences.

Deferred income tax is provided on temporary differences from investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset the recognized amounts and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Current and deferred tax assets and liabilities have not been discounted.



4.24.2 Minimum notional income tax

The Company calculates the minimum notional income tax by applying the current 1% rate on computable assets at the end of the year. This tax complements income tax. The Company’s tax obligation for each year will be the higher of the two taxes. If in a fiscal year, however, minimum notional income tax obligation exceeds income tax liability, the surplus will be computable as a payment in advance of income tax through the next ten years.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 4:(Continuation)

As of the closing date hereof, the Company’s Management analyzed this receivable’s recoverability, and allowances are created in as long as it is estimated that the amounts paid for this tax will not be recoverable within the statutory limitation period taking into consideration the Company’s current business plans. The Company’s Management will evaluate the evolution of this recoverability in future fiscal years.



4.25 Balances with related parties

Receivables and liabilities with related parties are initially recognized at fair value and subsequently measured at amortized cost.



4.26 Assignments of use

The assignments of use in which a significant portion of the risks and rewards deriving from ownership are kept by the lessor are classified as operating. At present, Edenor only has lease agreements that are classified as operating.



As assignor: The payments with respect to operating assignments of use are recognized as operating expenses in the statement of comprehensive income (loss) on a straight-line basis throughout the term of the assignment.



As assignee:The assignments of use in which the Company does not transfer substantially all the risks and rewards of the ownership of the asset are classified as operating assignments of use.



The collections with respect to operating assignments of use are recognized as income in the statement of comprehensive income (loss) on a straight-line basis throughout the term of the assignment.

4.27Variable Compensation to Certain Officers



PEPASA has granted its Corporate Directors an Annual Variable Compensation (the ‘EBDA Compensation’) for the performance of technical and administrative duties amounting to 7% of the EBDA (EBITDA less paid income tax, less total net financial costs, less interest on its own capital, considering an annual 10% dollar-denominated rate) accrued for each fiscal year, as disclosed in the corresponding financial statements approved by the applicable General Ordinary Shareholders Meeting.

The Company recognizes a provision (liability) and an expense for this EBDA Compensation based on the previously mentioned formula

4.28 Assets classified as held for sale and associated liabilities

The subsidiaries’ assets and liabilities that have been made available for sale are classified as Assets available for sale and associated liabilities when the carrying amount will be mainly recovered through a sale transaction, and this transaction is regarded as highly probable. These assets are valued at the lower of the carrying amount and fair value less costs of disposal. The amounts recognized in profit or loss corresponding to discontinued operations have been included in a single line item of the Company’s consolidated statement of comprehensive income (loss) called "Discontinued operations".



NOTE 5: CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of financial statements requires the Company’s Management to make future estimates and assessments, to apply critical judgment and to establish assumptions affecting the application of accounting policies and the amounts of disclosed assets and liabilities, and income and expenses.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 5:(Continuation)

The applied estimates and accounting judgments are evaluated on a continuous basis and are based on past experiences and other reasonable factors under the existing circumstances. Actual future results might differ from the estimates and evaluations made at the date of preparation of these consolidated financial statements. The estimates which have a significant risk of producing adjustments on the amounts of the assets and liabilities during the following year are detailed below:

5.1 Impairment of long-lived assets

Long-lived assets, including identifiable intangible assets, are reviewed for impairment at the lowest level for which there are separately identifiable cash flows (CGU).

Most of the main subsidiaries or joint ventures of the Company are a CGU, as they have only one power generation plant (generation segment), a power transmission network (transmission segment) or one concession area for the distribution of electricity (distribution segment) and areas of exploration and exploitation of oil and gas (oil and gas segment). Consequently, each subsidiary and joint venture in these segments represents the lowest level of composition of assets generating independent cash flows.

i)Assets subject to depreciation / amortization are reviewed for impairment when facts or circumstances show that the carrying amount may not be recoverable.

ii)Goodwill: In accordance with the applicable accounting policies, goodwill is tested for impairment annually. The amounts recoverable from CGUs are determined based on the calculations of its value in use.

iii)Intangible assets: Intangible assets having an indefinite useful life are not amortized. Intangible assets having an indefinite useful life are tested for impairment by comparing their recoverable amount with their book value: (i) annually; and (ii) at any time, if there is anyindicationthat they may have been impaired.

In order to evaluate if there is evidence that a CGU could be affected, both external and internal sources of information are analyzed.  Specific facts and circumstances are considered, which generally include the discount rate used in the estimates of the future cash flows of each CGU and the business condition as regards economic and market factors, such as the cost of raw materials, oil and gas, the regulatory framework for the energy industry (mainly the RTI / CMM and recognition of expected prices), the projected capital investments and the evolution of the energy demand.

An impairment loss is recognized when thebook value of the asset exceeds its recoverable value.The recoverable amount is the higher of the value in use and the fair value less costs of disposal. Any impairment loss will be distributed (to reduce the book value of the CGU's assets) in the following order:





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 5:(Continuation)

(a) first, to reduce the book value of goodwill assigned to the CGU, and

(b) then, to the other assets in the cash generating unit (or group of units), prorated for the carrying amount of each asset in the unit (or group of units), taking into account not to reduce the carrying amount of the asset below the higher of its fair value less costs of disposal, its value in use or zero value.

(c) any impairment loss which may not be allocated to the specific asset will be proportionately distributed among the remaining assets making up the CGU.

The value in use of each CGU is estimated on the basis of the present value of  future net cash flows that these units will generate. The Company Management uses approved budgets up to one year for its cash flow projections extrapolated into a term consistent with the assets’ remaining useful life, taking into consideration the appropriate discount rates. In order to calculate the fair value less the costs to sale, the Company Management uses the estimated value of the future cash flows that a market participant could generate from the appropriate CGU, and deducts the necessary costs to carry out the sale of the corresponding CGU.

The Company Management is required to make judgments at the moment of the future cash flow estimation. The actual cash flows and the values may differ significantly from the expected future cash flows and the related values obtained through discount techniques.

Non-financial assets other than goodwill which have suffered impairment in the past are reviewed for a possible reversal of the impairment as at the closing date of the fiscal year.

(a)Reversal of Property, Plant and Equipment Impairment in CPB

As from January 2012, CAMMESA, at the direction of the ES, remuneration adjustments established by the “2008 – 2011 Agreement” in November, 2010 were cancelled. Furthermore, in the case of CPB, another change in the regulatory framework prevented the Company from continuing operating in the fuel oil purchase business, an activity which allowed it to obtain a margin on the fuel it acquired for generation purposes. Both measures have had a negative effect on the company’s generation of funds, which were insufficient to meet growing operating costs. The deterioration of CPB’s economic and financial situation, evidenced by operating losses, negative cash flows and a working capital deficit, resulted in a decrease in the plant’s reliability since it lacked the sufficient resources to continue bringing about the improvements necessary to keep the operating levels met during fiscal year 2011.

Therefore, as at September 30, 2012, CPB recorded an impairment loss amounting to $ 108.3 million for its Property, Plant and Equipment —which, net of the effect of the income tax, amounted to $ 70.4 million— as a result of the assessment of their recoverable value.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 5:(Continuation)

Impairment loss charges have been distributed on a pro rata basis in order to reduce the book value of the assets composing the CGU, taking into consideration the book value of each of the unit’s assets. After recognizing the impairment loss, the asset’s depreciation charges have been adjusted during the following fiscal years to systematically distribute its reviewed book value less any possible residual value through its remaining useful life.

Previously impaired non-financial assets are reviewed for a possible reversal of the impairment at each reporting date.

With the implementation of SE Resolution No. 95/13 and its amendment SE Resolution No. 529/14 —which defined a new remuneration scheme for the industry as from February 2013 and the later update of remunerative values effective as from February 2014, respectively— and the granting of financing by CAMMESA under advantageous conditions to CPB, which will allow to afford the cost of the capital investments necessary to recover the company’s plant operating capacity (Note 21.1.3), CPB ́s projections regarding the recoverability of its Property, Plant and Equipment and its deferred tax assets have been modified.

As of September 30, 2014, CPB’s management reevaluated its discounted cash flows considering a revenue increase exceeding by 10% cost increases as from the year 2017 (on account of the recognition of cost mismatches in respect to past income) and that tariff increases will be granted to offset future cost increases.

The remaining assumptions are detailed below:

i.Actual discount rate:9.9%.

ii.Growth rate:0%.

iii.Plant’s availability factor: 86% on average, considering the execution of major maintenance works in the generating units.

iv.The collection of the maximum remuneration provided for fixed costs based on the provisions of item iii.

v.The fulfillment of the capital investments necessary to recover the plant’s operating capacity under normal availability conditions will take place during the next two years and will receive CAMMESA’s permanent financing, which will be repaid under the conditions detailed in Note 20.1.3.

In the light of the above conclusions, CPB CGU’s value in use determined based on the present value of future net cash flows was $ 274.4 million higher than its book value. Therefore, CPB as of December 31, 2014 recovered the above-mentioned impairment losses which, net of accumulated depreciation, amounted to $ 88.4 million (recognized under “Reversal of Impairment of Property, Plant and Equipment” in the Statement of Comprehensive Income) and, net of the effect of the income tax, amounted to $ 57.5 million. The affected Property, Plant and Equipment items were: lands, buildings, machines and generation equipment.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 5:(Continuation)

At the date of these financial statements CPB has not identified any events or circumstances indicate that the book value as of December 31, 2015 may not be recoverable.

(b)Test of impairment of property, plant and equipment and intangible assets associated with the subsidiary Edenor

As at December 31, 2011, the Company has recorded impairment losses associated with Edenor’s consolidated assets resulting from the assessment of their recoverable value. Depreciation losses totaled up $ 647.7 million which, net of the effect of the income tax, amounted to $ 421 million.

Due to the implementation of ENRE Resolution No. 1/16, which established an increase in income as from February 1, the projections concerning the recoverability of property, plant and equipment made by EDENOR, have been updated.

The value in use is determined based on projected and discounted cash flows, using discount rates that reflect the time value of money and the specific risks of the assets considered.

Cash flows are prepared on the basis of estimates concerning the future performance of certain variables that are sensitive to the determination of the recoverable amount, among which the following can be noted: (i) nature, opportunity and modality of electricity rate increases and/or cost adjustment recognition; (ii) demand for electricity projections; (iii) evolution of the costs to be incurred; (iv) investment needs in accordance with the service quality levels required by the regulatory authority, and (v) macroeconomic variables, such as growth rates, inflation rates and foreign currency exchange rates.

The future increase in electricity rates used by Edenor to assess the recoverability of its long-lived assets as of December 31, 2015  is based on the rights to which the Company is entitled, as stipulated in the Concession Agreement and the agreements described in Note 2 to these financial statements. Furthermore, the actions taken to maintain and guarantee the provision of the public service, the presentations made before regulatory authorities, the status quo of the discussions that are being held with government representatives, the announcements made by government officials concerning possible changes in the sector’s revenues to restore the economic and financial equation, and certain adopted measures, such as those described in Notes 2.3.3, 2.3.5 and 2.3.6 to these financial statements, have also been considered. Edenor Management estimates that it is reasonable to expect that new increases in revenues will be obtained as from 2017 as a result of the carrying out during 2016 of the RTI.

Edenor has made its projections under the assumption that it will obtain better electricity rates, in addition to the adjustments on account of the VAD provided for by Resolution No. 7/2016. However, due to the complexity of the RTI process Edenor Management may not ensure that the future performance of the variables used to make its projections will be in line with what it has estimated at the date of preparation of these financial statements.

In order to contemplate the estimation risk contained in the projections of the aforementioned variables, Edenor has considered three different probability-weighted scenarios. Although in all of them it is estimated that Edenor will succeed in reaching an acceptable agreement with the Government resulting in a gradual tariff increase, Edenor has considered different timing and magnitude of an increase in the VAD.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 5:(Continuation)

The scenarios that have been considered are the following:

a) Scenario called Pessimistic scenario: in this scenario, Edenor assumes modest electricity rate increases as from 2017 as a result of the gradual implementation of the RTI. A five-year term payment plan is established for the penalties owed to customers, whereas those owed to the ENRE are waived. The debt with CAMMESA (for energy and loans for consumption), including interest, is paid in 4 years. Probability of occurrence assigned 20%.

b) Scenario called Intermediate scenario: in this case, Edenor assumes reasonable electricity rate increases as from 2017 as a result of the gradual implementation of the RTI. A five-year term payment plan is established for the penalties owed to customers, whereas those owed to the ENRE are waived. The debt with CAMMESA (for energy and loans for consumption), including interest, is paid in 10 years with funds deriving from a specific charge included in electricity bills. Probability of occurrence assigned 65%.

c) Scenario called Optimistic scenario: in this case, Edenor assumes increases in its remuneration, in addition to the ones recognized in the Intermediate scenario, as from 2017 as a result of the gradual implementation of the RTI. A five-year term payment plan is established for the penalties owed to customers, whereas those owed to the ENRE are waived. The debt with CAMMESA (for energy and loans for consumption) is waived as part of the Concession Agreement renegotiation process. Probability of occurrence assigned 15%.

Edenor has assigned to these three scenarios the previously described percentages of probability of occurrence based mainly on experience and considering the present economic and financial situation, the status quo of the conversations that are being held with the Federal Government and the need to maintain the public service, object of the concession, in operation.

In all the scenarios a different after tax discount rate (WACC) in pesos has been used for each year of the projection. For the first 5 years, the average of these rates is 31%.

Sensitivity analysis:

The main factors that could result in impairment charges in future periods are: i) a distortion in the nature, opportunity and modality of the electricity rate increases and recognition of cost adjustments, ii) the development of the costs to be incurred, and iii) the investment needs in accordance with the service quality levels required by the regulatory authority in the RTI, among other factors. These factors have been taken into account in the aforementioned weight of scenarios. Due to the inherent uncertainty involved in these assumptions, the Company estimates that any sensitivity analysis that considers changes in any of them considered individually could lead to distorting conclusions.

Based on the conclusions previously mentioned, the valuation of property, plant and equipment, taken as a whole, does not exceed its recoverable value, which is measured as the value in use as of December 31, 2015.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 5:(Continuation)

Furthermore, the management understands that although these estimates may show an increase in the CGU’s value, actual measurements obtained so far are not sufficient to consider a sustainable recovery which can be confirmed with the conclusion of the RTI expected to be completed during 2016, and consequently evaluate the possible reversal of the impairment loss recognized by the Company during fiscal year 2011.

5.2 Current and deferred Income tax / Minimum notional income tax

A great level of judgment is required to determine the income tax provisionsince the Company Management has to regularly assess the positions stated in the tax returns as regards those situations where the applicable tax regulations are subject to interpretation and, if necessary, establish provisions according to the estimated amount that the Company will have to pay to the tax authorities. When the final tax result of these items differs from the amounts initially acknowledged, those differences will have an effect on the income tax and on the deferred tax provisions in the fiscal year when such determination is made.

A significant degree of judgment is required to determine the income tax provision. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company recognizes liabilities for eventual tax claims based on estimates of whether additional taxes will be due in the future.

Deferred tax assets are reviewed at each reporting date and reduced in accordance with the probability that the sufficient taxable base will be available to allow for the total or partial recovery of these assets. Deferred tax assets and liabilities are not discounted. In assessing the realization of deferred tax assets, Management considers that it is likely that a portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income in the periods in which these temporary differences become deductible. To make this assessment, Management takes into consideration the scheduled reversal of deferred tax liabilities, the projections of future taxable income and tax planning strategies.

5.3 Provisions

The Company is subject to several lawsuits, complaints and other legal proceedings, including customers’ claims, where a third party seeks the payment of damages, reimbursement for losses or compensation. The Company’s potential liability as regards these claims, lawsuits and other legal proceedings cannot be estimated for sure. The Company Management, with the assistance of its legal counselors (lawyers) regularly reviews the status of each important proceeding and assesses its potential financial exposure.

If the loss derived from a lawsuit or legal proceeding is deemed probable and the amount can be reasonably estimated, the Company establishes allowance provision.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 5:(Continuation)

The provision for contingent losses reflect a reasonable estimation that losses will be incurred, based on information available to the Management at the consolidated financial statements date, and taking into account our litigation and resolution/settlement strategies. These estimates are prepared mainly with the help of legal counsel. However, if the Company Management estimates are incorrect, current provisions might be inadequate and derive in a charge to profits that could have an adverse effect on the balance sheet, comprehensive income (loss) statement, statements of changes in equity and cash flows.

5.4 Asset retirement obligation

The obligations relating to the decommissioning of wells after completion of the operations PEPASA ́s management to make estimates about the costs of abandonment in the long-term and the time remaining until the abandonment. Notably, technology, costs and policy, security and environmental considerations are, continually changing, which may result in differences between the actual future costs and estimates.

Estimated future costs of wells plugging and abandonment in the hydrocarbon areas, discounted at a rate estimated at the time of their initial measuring, are capitalized together with the assets originating them, and are depreciated using the unit-of-production method. Additionally, a liability is acknowledged for this item at the estimated value of discounted payables.

5.5 Allowance for doubtful accounts

The Group is exposed to losses for uncollectible receivables. The Company Management estimates the final collectability of the accounts receivable.

The allowance for the impairment of accounts receivable is assessed based on the historical level of both the balances written off as an expense and the default balances. Additionally, Edenor Management records an allowance applying an uncollectibility rate for each customer category, tariff, customers included in the Framework Agreement, and customers not included in the Framework Agreement.

In order to estimate collections related to the energy generation segment we mainly consider the ability of CAMMESA to meet its payment obligations to generators, and the resolutions issued by ES, which allow the Company to collect its credits with CAMMESA through different mechanisms.

Additionally, Management analyzes the allowance for uncollectible receivables of the remaining accounts receivables of the segment based on an individual analysis of recoverability of receivables of the WEM debtors.

Future adjustments to the allowance may be necessary if future economic conditions differ substantially from the assumptions used in the assessment for each year.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 5:(Continuation)

5.6 Defined benefit plans

The liability recognized by the Company is the best estimate of the present value of the cash flows representing the benefit plan obligation at the closing date of the year. Cash flows are discounted using actuarial assumptions about demographic and financial variables that affect the determination of the amount of such benefits. Such estimate is based on actuarial calculations made by independent professionals in accordance with the projected unit credit method.

5.7 ENRE Penalties and Discounts

Edenor considers its applicable accounting policy for the recognition of ENRE penalties and discounts critical because it depends on penalizable events, which are valued on the basis of management best estimate of the expenditure required to settle the present obligation at the date of these financial statements. The balances of ENRE penalties and discounts are adjusted in accordance with the regulatory framework applicable thereto and have been estimated based on Edenor’s estimate of the outcome of the RTI process described in Note 2.

5.8 Going concern status

The co-controlled company Citelec has prepared their consolidated financial statements in accordance with the accounting principles applicable to a going concern, assuming that the companies will continue to operate normally. Therefore, they do not include the effects of the adjustments or reclassifications, if any, that might be necessary to make as a consequence of the situation described in Note 42, as well as its impact on the financial statements of the Group.

The management considers that this uncertainty regarding its the company under common control Citelec does not affect its capacity to continue operating on an ordinary basis, as described in Note 42.

5.9 Revenue recognition

In the distribution business, revenue is recognized on an accrual basis upon delivery to customers, which includes the estimated amount of unbilled distribution of electricity at the end of each year. We consider our accounting policy for the recognition of estimated revenue critical because it depends on the amount of electricity effectively delivered to customers which is valued on the basis of applicable tariffs. Unbilled revenue is classified as current trade receivables.

5.10 Oil and Gas Reserves

Reserves are oil and gas volumes (expressed in oil-equivalent m3) originated from or associated with any economic income in the areas where PEPASA operates and over which it holds exploration and exploitation rights.





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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 5:(Continuation)

Crude oil and gas reserves estimates are an essential part of PEPASA’s decision-making process. Crude oil and gas reserves volumes are taken into consideration in the calculation of depreciation -by using the production unit ratio- and to evaluate exploration and exploitation asset investments’ recoverable amounts.

Reserves estimates have been prepared by PEPASA technical staff, and are based on the technological and economic conditions prevailing as of December 31, 2015 taking into consideration their economic evaluation and the expiration of the concession to determine their recoverability period.

These estimates are adjusted every time changes in the evaluated aspects so justify, or at least once a year.

There are numerous factors giving rise to uncertainty regarding the estimate of proven and not proven reserves and of future production profiles, prices and development costs, several of which are beyond the producer’s control. The reserves calculation procedure is a subjective process for estimating the crude oil and natural gas recoverable from the subsoil which involves a high degree of uncertainty. This reserves estimate is prepared based on the quality of the geological and engineering information available as at that date, as well as its interpretation.



NOTE 6: FINANCIAL RISK MANAGEMENT



6.1 Financial Risk Factors

The Company’s activities are subject to several financial risks: market risk (including the exchange rate risk, the interest rate risk and the price risk), credit risk and liquidity risk.

Financial risk management is encompassed within the Company’s global policies focused on the uncertainty of certain financial markets, and aims to minimize potential adverse effects on its financial return. Financial risks are those derived from financial instruments the Company is exposed to during or at the closing of each fiscal year. The Company uses derivative instruments to hedge certain risks when it deems it necessary according to its risk management internal policies.

Financial risk Management is controlled by the Financial Department, which identifies, evaluates and covers financial risks. Risk Management systems and policies are reviewed on a regular basis to reflect changes in market conditions and the Company activities.

This section includes a description of the main risks and uncertainties which may adversely affect the Company’s strategy, performance, operational results and financial position.





F - 98

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 6:(Continuation)

6.1.1 Market risks

Exchange rate risk

The Company, through its subsidiaries in the Generation segment, collects a meaningful part of its income in Argentine pesos pursuant to tariffs which are indexed to U.S. dollars, as is the case of income resulting from the Supply Agreement entered into between CTLL and the SE or EGSSA and the SE (actually merged with CTG), pursuant to Resolution No.  220/07, or CTG’s Energy Plus agreements. The other part of its operating flows expressed in Argentine pesos are not indexed to the U.S. dollar, and comprise income from hydroelectric and thermal generators that do not have Energy Plus or Supply Agreements with the SE pursuant to Resolution No. 220/07. On the other hand, most of the financial debt of the subsidiaries of the Generation segment is denominated in pesos keeping a lower portion of debt denominated in US dollars (a 13.5% as of December 31, 2015 approximately), which exposes them to the risk of loss on a devaluation of the peso.

Therefore, as there is not a strong currency mismatch between the operating generation of funds and financial debt, the risk of foreign-currency exchange rate fluctuations is reasonably hedged. However, in case such risk is not adequately hedged by business operations, as of December 31, 2015, CTLL has conducted forward transactions to purchase U.S. Dollars with pesos for US$ 72 million at an average exchange rate of $ 14.18 to a U.S. dollar, with maturities between January and June, 2016.

However, as the subsidiaries receive most of its income from CAMMESA, which during the past year has incurred in significant delays in its payment terms. A significant part of the transactions are denominated in U.S. dollars, they are billed in Argentine pesos and converted at the exchange rate effective during the month in which they are perfected. For the income from the Supply Contracts under Res. SE No. 220/07, this amount in pesos is collected from CAMMESA, on average, 100 days afterward, but the difference in the exchange rate is recognized by CAMMESA only until the expiration date, about 45 days. In case there is a strong devaluation between the billing and the collection date, as was the case during the months of January 2014 to December 2015, the U.S. dollars collectable by the Company may be severely reduced, thus limiting the effectiveness of its exchange rate hedge.

Additionally, as part of the Work Technological Update 2015-2016, CPB assumed different commitments with foreign suppliers, which are mostly denominated in foreign currencies (mainly euros and dollars) and will be funded through mutual and Assignment in Guarantee Contract subscribed with CAMMESA during the month of April 2014. In addition, a substantial portion of its financial debt with related companies is denominated in US dollars.





F - 99

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 6:(Continuation)

In the distribution segment, Edenor ́s exposure to currency risk relates to the collection of its revenue in pesos, in conformity with regulated electricity rates that are not indexed in relation to the US dollar, whereas a significant portion of its existing financial liabilities is denominated in US dollars. Therefore, Edenor is exposed to the risk of a loss resulting from a devaluation of the peso. Edenor may hedge its currency risk trying to enter into currency forwards. Nevertheless, at the date of issuance of these financial statements, it has not been able to hedge its exposure to the US dollar under terms it may consider viable.

If Edenor continued to be unable to effectively hedge all or a significant part of its exposure to currency risk, any devaluation of the peso could significantly increase its debt service burden, which, in turn, could have a substantial adverse effect on its financial and cash position (including its ability to repay its Corporate Bonds) and the results of its operations.

In the Oil and Gas segment, part of the PEPASA's income is denominated in U.S. dollars but collectable in pesos. Most of the financial debt of PEPASA is denominated in pesos and a portion of its debt is denominated in U.S. dollars but is payable in pesos indexed relative to the U.S. dollar (12%). PEPASA contracted investment commitments and operating expenses are denominated in dollars. As there isn’t a strong currency mismatch between the generation of own funds and the undertaken expenses, the risk of foreign-currency exchange rate fluctuations is reasonably hedged. However, as of December 31, 2015, PEPASA has conducted forward transactions to purchase U.S. Dollars with pesos for US$ 83 million at an average exchange rate of $ 14.08 to a U.S. dollar, with maturities between January and June, 2016.

On December 17, 2015, the Argentine peso underwent a devaluation of approximately 40% that affected not only the economic context in which the Company operates but also its results in these financial statements.

At the date of issuance of these financial statements, the devaluation of the Argentine peso increased, as compared to its value at year-end, by approximately 17%. This variation would generate a negative impact of $ 369 million. Those impacts have been determined without considering the effects of the hedging contracts.

The following table shows the Company’s exposure to the exchange rate risk for financial assets and liabilities denominated in a currency different from the Company’s functional currency.







F - 100

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 6:(Continuation)



Type
 
 Amount of foreign currency
 
 Exchange rate(1)
 
 Total 
12.31.2015
 
 Total 
12.31.2014ASSETSNON CURRENT ASSETSOther receivablesThird parties
 U$S
 
 85,703
 
 12.940
 
 1,108,998
 
 3,530,984Total non current assets
 
 
 
 
 
 
 1,108,998
 
 3,530,984CURRENT ASSETSFinancial assets at fair value through profit and loss
 U$S
 
 95,331,357
 
 12.940
 
 1,233,587,761
 
 118,252,993Trade and other receivablesRelated parties
 U$S
 
 549,573
 
 12.990
 
 7,138,953
 
 10,089,975Third parties
 U$S
 
 24,754,018
 
 12.940
 
 320,316,983
 
 18,439,637EUR
 
 10,016
 
 14.068
 
 140,909
 
 521,398CHF
 
 39,930
 
 12.895
 
 514,916
 
 -£
 
 -
 
 19.052
 
 -
 
 96,987U$
 
 17,423
 
 0.432
 
 7,528
 
 -Cash and cash equivalents
 U$S
 
 28,946,258
 
 12.940
 
 374,564,573
 
 133,809,244EUR
 
 12,890
 
 14.068
 
 181,342
 
 147,584U$
 
 151,985
 
 0.432
 
 65,670
 
 14,508Total current assets
 
 
 
 
 
 
 1,936,518,635
 
 281,372,326Total assets
 
 
 
 
 
 
 1,937,627,633
 
 284,903,310LIABILITIESNON CURRENT LIABILITIESBorrowingsRelated parties
 U$S
 
 (1,009,362)
 
 12.990
 
 (13,111,615)
 
 (169,766,242)Third parties
 U$S
 
 (214,688,564)
 
 13.040
 
 (2,799,538,870)
 
 (1,802,303,741)Total non current liabilities
 
 
 
 
 
 
 (2,812,650,485)
 
 (1,972,069,983)








F - 101

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 6:(Continuation)



Type

   

   Amount of foreign currency

   

   Exchange rate(1)

   

   Total 12.31.2015

   

   Total 12.31.2014CURRENT LIABILITIESTrade and other payablesThird parties

   U$S

   

   (73,519,019)

   

   13.040

   

   (958,687,995)

   

   (405,629,479)EUR

   

   (1,693,714)

   

   14.210

   

   (24,067,178)

   

   (23,059,419)£

   

   -

   

   19.061

   

   -

   

   (1,161,726)CHF

   

   (30,321)

   

   12.906

   

   (396,733)

   

   (262,367)NOK

   

   (68,200)

   

   1.488

   

   (101,464)

   

   (78,830)U$

   

   (25,310)

   

   0.432

   

   (10,936)

   

   (11,942)BorrowingsRelated parties

   U$S

   

   (10,067)

   

   12.990

   

   (130,776)

   

   (269,697,740)Third parties

   U$S

   

   (23,890,393)

   

   13.040

   

   (311,531,217)

   

   (83,237,348)Salaries and social security payableThird parties

   U$

   

   (905,624)

   

   0.432

   

   (391,304)

   

   (209,039)Total current liabilities

   

   

   

   

   

   

   (1,295,317,603)

   

   (783,347,890)Total liabilities

   

   

   

   

   

   

   (4,107,968,088)

   

   (2,755,417,873)Total liabilities and equity

   

   

   

   

   

   

   (2,170,340,455)

   

   (2,470,514,563)(1) The exchange rates used correspond to December 31, 2015 released by the National Bank for U.S. dollars (U$S), euro (EUR), sterling pounds (£) swiss francs (CHF), norwegian kroner (NOK) and uruguayan pesos (U$). For balances with related parties, the exchange rate used is the average.




The Company estimates that provided all other variables remain constant, a 10% revaluation/(devaluation) of each foreign currency as compared to the Argentine peso would generate the following increase/(decrease) in the fiscal year’s in absolute values:



Argentine pesosCurrency

   

   12.31.2015

   

   12.31.2014U.S dollar

   

   214,628,321

   

   244,651,172Euros

   

   2,374,493

   

   2,239,044Sterling Pound

   

   -

   

   106,474Norwegian kroner

   

   10,146

   

   7,883Swiss francs

   

   11,818

   

   26,237Uruguayan peso

   

   32,904

   

   20,647Variation of the result for the year

   

   217,057,682

   

   247,051,456




Price risk

The Company’s investments in quoted and unquoted equity securities are subject to the risk of change in the market prices resulting from the uncertainties as to the future value of those securities.





F - 102

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 6:(Continuation)

The Company is exposed to the price risk on its fiduciary ownership of 40% of CIESA’s shares which is calculated based on the market values of ADRs TGS. However, the Company considers that the price fluctuation risk in the securities market is low, since once the pending regulatory approval is obtained, the Shares held in Trust will be transferred to the Company, which will allow to exercise an indirect joint control of TGS. On the other hand, the Company is not exposed to commodities price risks. Additionally, the Company has investments in Government securities which are exposed to the risk of a significant change in market prices.

The following table shows the Company’s exposure to the price risk for the previously mentioned financial assets:



Financial assets
 
 12.31.2015
 
 12.31.2014Shares
 
 175
 
 61,629,484Government securities
 
 1,566,785,757
 
 237,068,910Trust
 
 2,554,544,826
 
 962,942,332Total
 
 4,121,330,758
 
 1,261,640,726




The Company estimates that provided all other variables remain constant, a 10% revaluation/(devaluation) of each quotation would generate the following increase/(decrease) in the fiscal year’s income:



Increase (decrease) of the result for the yearFinancial assets
 
 12.31.2015
 
 12.31.2014Shares
 
 18
 
 6,162,940Government securities
 
 156,678,576
 
 23,706,891Trust
 
 255,448,323
 
 95,879,913Variation of the result of the year
 
 412,126,917
 
 125,749,744




Hydrocarbon Price Risk

PEPASA operations are impacted by several factors beyond its control, including, but not limited to, variations in product market prices, Governmental regulations on prices, taxes and other levies, and royalties.

PEPASA is not significantly exposed to the hydrocarbon price risk mainly because, on account of regulatory, economic, governmental and other policies, domestic prices are not directly affected by short-term price variations in the international market.

During the fiscal years ended December 31, 2015, gas sales represented 96.3% of PEPASA's revenues from sales. Although it is regulated, fluctuations in the oil price do not substantially affect PEPASA's results.





F - 103

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 6:(Continuation)

Since the domestic production of gas is insufficient to meet the demand, there is a need to import gas and liquid fuels. The decline in the price of oil and LNG resulted in lower prices for the LNG and the gas from Bolivia. During the first months of 2016, LNG prices are below the value of 7.5 US$/MM Btu for the Gas Plan, but above the prices paid to producers for volumes not covered by such plan. Additionally, the prices for imported liquid fuels (gas substitutes) are higher than the Gas Plan prices. In view of this situation, a downward revision of Gas Plan prices as a result of the decline in LNG import prices is not expected.

During the fiscal year 2015, 50% of gas were imported for LNG. Imported gas accounted for 25% of the annual consumption. The average price of these imports was US$ 8.6/MM Btu. No significant reduction in import volumes is expected in the short term.

In the fiscal years ended December 31, 2015, 2014 and 2013, PEPASA has not used derivative financial instruments to hedge risks associated with fluctuations in hydrocarbon prices.

Interest rate risk

Borrowings at variable rates exposes the Company to the interest rate risk on its cash flows due to the possible volatility they may experience, as it has happened throughout 2014 and 2015. Borrowings at fixed rates exposes the Company to the interest rate risk on the fair value of its liabilities, since they may be considerably higher than variable rates. As at December, 31, 2015, approximately 86.5 % of the loans were granted at a variable interest rate, based on thePrivate Badlar and Private Badlar corrected rate plus an applicable margin corrected.The remaining liabilities were agreed at fixed interest rates, denominated in U.S. dollars (82.9% of the total fixed rate debt). Borrowings at variable rates are denominated in pesos.

The Company seeks to mitigate its interest-rate risk exposure through the analysis and evaluation of (i) the different liquidity sources available in the financial and capital market, both domestic and (if available) international; (ii) interest rates alternatives (fixed or variable), currencies and terms available for companies in a similar sector, industry and risk than the Company; (iii) availability, access and cost of interest-rates hedge agreements. On doing this, the Company evaluates the impact on profit or losses resulting from each strategy over the obligations representing the main interest-bearing positions.

During the fiscal year ended December 31, 2015, the Private Badlar rate, the reference rate used by the Company for an important part of its financial liabilities, has remained constant during most of the year and then, towards its end, has increased significantly from an average 21% during the first nine months until reaching 30% during the last term, and was later stabilized at around 26%.

In case the fluctuations in variable interest rates become more significant, the Company may mitigate such risk, for example, through interest rate hedge agreements. In the case of fixed rates and in view of the market’s current conditions, the Company considers that the risk of a significant decrease in interest rates is low and, therefore, does not foresee a substantial risk in its indebtedness at fixed rates.







F - 104

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 6:(Continuation)

Any significant increase in the variable interest rates at which the Company holds a significant portion of its existing financial debt may result in a significant increase in its financial burden which, in turn, may have a material adverse effect on its operating results and assets and financial position.

The following chart shows the breakdown of the Company’s borrowings classified by interest rate and the currency in which they are denominated:



12.31.2015
 
 12.31.2014Fixed interest rate:Argentine pesos
 
 635,081,460
 
 129,933,527U.S dollar
 
 3,084,003,580
 
 2,223,975,162Subtotal loans granted at a fixed interest rate
 
 3,719,085,040
 
 2,353,908,689Floating interest rates:Argentine pesos
 
 4,082,587,531
 
 2,090,074,426Subtotal loans granted at a floating interest rate
 
 4,082,587,531
 
 2,090,074,426Non interest accruesU.S dollar
 
 40,308,898
 
 101,029,909Argentine pesos
 
 150,427,644
 
 25,558,669Subtotal no interest accrues
 
 190,736,542
 
 126,588,578Total borrowings
 
 7,992,409,113
 
 4,570,571,693






Based on the conducted simulations, and provided all other variables remain constant, a 10% increase/decrease in variable interest rates would generate the following (decrease)/increase in the fiscal year's income:



12.31.2015
 
 12.31.2014Floating interest rates:Argentine pesos
 
 110,254,660
 
 50,398,813Variation of the result for the year
 
 110,254,660
 
 50,398,813




6.1.2 Credit risk

Credit risk results from cash and cash equivalents, deposits in banks and financial institutions, and derivative financial instruments, as well as the customers and CAMMESA’ credit exposure, which includes outstanding balances of accounts receivable and the committed transactions. Regarding banks and financial institutions, only high credit quality institutions are accepted. If there are no independent risk ratings, the risk control area evaluates the customer’s creditworthiness, past experiences and other factors.

Individual credit limits are set according to the limits defined by the Board of Directors based on internal or external ratings approved by the Finance Division.







F - 105

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 6:(Continuation)

Electric power generators collect through CAMMESA payments corresponding to the new remuneration scheme implemented through SE Resolution No. 95/13 at the beginning of 2013 and updated by Res. SE No. 529/14 and Res. SE No. 482/15. On the other hand, there is an deficit between payments collected by CAMMESA and receivables from the generating companies in respect to this entity. This is due to the fact that the price collected by CAMMESA regarding the electric power marketed in the Spot Market is regulated by the National Government, and is lower than the generation cost that CAMMESA has to reimburse to generators. The National Government has been filling this gap through contributions by the Treasury. However, in January 2016, certain resolutions issued by MEyM transferred more of the price of electricity to end users, which could help to alleviate the deficit mentioned. Anyway, it cannot be guaranteed that CAMMESA will continue making payments to generators, both regarding the energy and the power sold.

Besides, the default in the payment of WEM’s electricity power purchases by electric power distribution service providers has considerably increased in the last years. This has increased the WEM’s deficit and affected (both regarding payment terms and payable volume) -and may possibly affect even more- CAMMESA’s payment capacity to WEM’s creditors (basically generation and transportation companies) and their income. Furthermore, in January 2016, the MEyM passed several resolutions adjusting income received by electricity distribution companies which may help relieve such deficit.

The impossibility by CAMMESA to pay the generators’ receivables may have a substantially adverse effect on their cash income and, consequently, on the result of their operations and financial situation which, in turn, may adversely affect the Company’s repayment capacity.

Furthermore, with the implementation of the new regulatory framework, the SE has suspended the renewal and execution of new agreements in the WEM’s MAT (with the exception of Energy Plus contracts), also providing that the demand unmet by generators would be supplied directly by CAMMESA.Generators will provide their power and energy to the Spot Market at the prices set by the SE Resolution No. 482/15.

With regard to the consolidated financial claims with CAMMESA,it should be pointed out that the Company,through CTLL,has entered into an agreement with the SE undertaking to develop a new generation investment project, with partial financing from CAMMESA which can be repaid, at CTLL option, by applying the following receivables:i) LVFVDs pursuant to SE Resolution No. 406/03, Section 4.c, not committed under other agreements; ii) receivables from the Additional Remuneration to the Trust issued until December 31, 2015.



In the case of Edenor, as of December 31, 2015 and 2014, default trade receivables amounted to approximately $ 209.3 million and $ 229.3 million, respectively. As of December 31, 2015 and 2014, financial statements included provisions for $ 79.3 million and $ 84.6 million, respectively. Failure to collect receivables in the future may have an adverse effect on Edenor's financial situation and operating results which, in turn, may negatively impact itscapacity to repay borrowings, including the cancellation of its Corporate Bonds.





F - 106

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 6:(Continuation)

Also, part of the gas produced by PEPASA is purchased by CAMMESA. With respect to CAMMESA there is no assurance that it will make the payments established in the times and ways agreed. The inability of PEPASA to charge their claims could have a material adverse effect on our revenues and, consequently, on the results of operations and financial condition.

Additionally, our Natural Gas Promotion Program compensation depends on the Argentine Government's ability and willingness to pay. As at the issuance of these financial statements, the Company has collected compensations for the March 2013- April 2015 period, and has outstanding receivables in the amount of $ 451.8 million corresponding to the May-December 2015 period. We may not guarantee that the Company receives properly payments ofthe offered compensations in the future which could cause a potential claim to the argentine government.

The Company’s maximum exposure to the credit risk results from the accounting value of each financial asset in the financial statements after deducting all applicable allowances and provisions.

6.1.3 Liquidity risk

Liquidity risk is the risk that the Company does not have enough funds to meet all its obligations, whether of an economic, industrial or commercial mature. The cash flow projection is made by the Financial Department.

The Company Management supervises updated projections on liquidity requirements to guarantee there is enough cash to meet operating needs while keeping at all times a sufficient margin for unused credit facilities. In this way, the aim is that the Company does not breach indebtedness levels or the Covenants, if applicable, of any credit facility. Such projections take into consideration the Company’s debt financing plans, the meeting of the covenants and, if applicable, the external regulatory or legal requirements such as, for example, restrictions on the use of foreign currency.

Excess cash kept by operating entities and balances above working capital Management requirements corresponding to the segments of generation, oil and gas and holding and others, are managed by the Company’s Treasury Department, which invests excess cash in term deposits, mutual funds and marketable securities, selecting instruments having proper currencies and maturities, and an adequate credit quality and liquidity so as to provide a sufficient margin as determined in the previously mentioned projections.

The Company keeps its sources of financing diversified between banks and the capital market, and it is exposed to the refinancing risk at maturity.

During 2015, the Company continued mitigating its liquidity risk from the Generation segment through:







F - 107

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 6:(Continuation)

i)An improvement in CTLL financial debt maturities profile and the reduction of its financing cost, mainly based on the issuance in October 2015 of Class C Corporate Bonds maturing in 2017 and the early cancellation of the syndicated borrowing received in November 2014;

ii)The refinancing of maturities of CTG’s financial debt of the year 2015 through the issuance of Class 6 Corporate Bonds, the proceeds of which were allotted to the cancellation of Class 4 Corporate Bonds maturing in March, 2015 and the early cancellation of the syndicated borrowing originally granted by CTG in February 2013. With this issuance, all outstanding peso-denominated Class 5 and 6 Corporate Bonds will finally mature in September 2016;

iii)Disbursements obtained by CPB through the execution of aLoan and Receivables Assignment Agreement between CPB and CAMMESA aiming to finance the 2015-2016 Technological Upgrade Work for a peso-denominated amount to be determined based on the disbursements made byCAMMESA and their respective exchange rates, for a maximum amount of US$ 82.6 million plus VAT and nationalization costs.

On the other hand, it should be pointed out that refinancing capabilities and terms are always dependent on the prevailing conditions at the time of renewal; therefore, there is limited leeway for reducing such risk.








F - 108

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 6:(Continuation)

In the Oil and Gas segment, during the fiscal year 2015, PEPASA, has managed to mitigate its liquidity risk through an improvement in its financing structure, mainly based on the extension of the Corporate Bonds Programs and entering into a syndicatedborrowingagreement with 18 months grace and final maturity in January 2019.

In addition and in order to continue to expand its sources of financing, PEPASA updates the amounts to VCP and Corporate Bonds Programs, as well as the possibility of a capital increase of up to $ 400 million through the issue of new ordinary shares.

The following table includes an analysis of the Company financial liabilities, grouped according to their maturity dates and considering the period remaining until their contractual maturity date from the date of the financial statements. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for the understanding of the cash flow calendar. The amounts shown in the table are the contractual undiscounted cash flows.



As of December 31, 2015
 
 Trade and other payables
 
 Borrowings
 
 TotalLess than three months
 
 6,339,768,736
 
 293,947,236
 
 6,633,715,972Three months to one year
 
 312,716,673
 
 1,909,665,250
 
 2,222,381,923One to two years
 
 216,869,471
 
 2,220,088,942
 
 2,436,958,413Two to five years
 
 90,022,948
 
 3,794,612,056
 
 3,884,635,004More than five years
 
 -
 
 2,535,360,818
 
 2,535,360,818Without established term
 
 2,391,877,538
 
 -
 
 2,391,877,538Total
 
 9,351,255,366
 
 10,753,674,302
 
 20,104,929,668As of December 31, 2014
 
 Trade and other payables
 
 Borrowings
 
 TotalLess than three months
 
 4,129,650,839
 
 317,105,956
 
 4,446,756,795Three months to one year
 
 317,765,237
 
 1,209,975,119
 
 1,527,740,356One to two years
 
 162,974,205
 
 1,203,307,509
 
 1,366,281,714Two to five years
 
 207,515,000
 
 2,543,661,242
 
 2,751,176,242More than five years
 
 -
 
 3,174,703,163
 
 3,174,703,163Total
 
 4,817,905,281
 
 8,448,752,988
 
 13,266,658,269




6.2.Concentration risk factors



6.2.1 Related to customers

Distribution segment’s receivables derive primarily from the sale of electric power.








F - 109

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)  NOTE 6:(Continuation) No single customer accounted for more than 10% of sales for the years ended December 31, 2015 and 2014. The collectability of trade receivables balances related to the Framework Agreement, which amount to $ 73.1 million and $ 75.8 million at December 31, 2015 and 2014, respectively, as disclosed in Note 2 (Framework Agreement) is subject to compliance with the terms of such agreement. 6.2.2 Related to employees who are union members  On June 8, 2015 an agreement was entered into between the Ministry of Labor, Employment and Social Security; Edesur; the Luz y Fuerza Union of the City of Buenos Aires, the Association of Senior Personnel of Power Companies; and Edenor pursuant to which the following was established:  a) A gradual salary increase until April 30, 2016, amounting to a 16% from May 1, 2015; a non-cumulative 11.8% from September 1, 2015;  b) and an 11.9% increase for the May 2016 - October 2016 period, to be calculated based on compensations effective in April 2016.




6.3 Capital risk Management

On managing capital, the Company aims to safeguard its capacity to continue operating as an on-going business with the purpose of generating return for its shareholders and benefits to other stakeholders, and keeping an optimal capital structure to reduce the cost of capital.

To keep or adjust its capital structure, the Company may adjust the amount of the dividends paid to its shareholders, reimburse capital to its shareholders, issue new shares, conduct stock repurchase programs or sell assets to reduce its debt.

In line with industry practices, the Company monitors its capital based on the leverage ratio. This ratio is calculated by dividing the net debt by the total capital. The net debt equals the total borrowings (including current and non-current borrowing) less cash and cash equivalents and current financial assets at fair value through profit and loss. The total capital corresponds to the equity attributable to owners of the company as shown in the statements of financial position, plus the net debt.








F - 110

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)  NOTE 6:(Continuation)  Financial leverage ratios as at December 31, 2015 and 2014 were as follows:  12.31.2015
 
 12.31.2014Total borrowings
 
 7,992,409,113
 
 4,570,571,693Less: cash and cash equivalents, and financial assets at fair value through profit and loss
 
 (4,597,617,426)
 
 (1,363,811,233)Net debt
 
 3,394,791,687
 
 3,206,760,460Total capital attributable to owners
 
 10,385,380,791
 
 6,127,168,353Leverage ratio
 
 32.69%
 
 52.34%
  6.4 Fair value estimation The Company classifies the fair value measurements of financial instruments using a fair value hierarchy, which reflects the relevance of the variables used to perform those measurements. The fair value hierarchy has the following levels:


-Level 1: quoted prices (not adjusted) for identical assets or liabilities in active markets.

-Level 2: data different from the quoted prices included in Level 1 observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices).

-Level 3: Asset or liability data not based on information that can be observed in the market (i.e., unobservable data).



The following table shows the Company’s financial assets and liabilities measured at fair value as of December 31, 2015 and 2014:







F - 111

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)  NOTE 6:(Continuation)  As of December 31, 2015
 
 Level 1
 
 Level 2
 
 Level 3
 
 TotalAssetsFinancial assets at fair value through profit and losssCorporate securities
 
 13,428,727
 
 -
 
 -
 
 13,428,727Government securities
 
 1,590,353,006
 
 -
 
 -
 
 1,590,353,006Shares
 
 175
 
 -
 
 70,630
 
 70,805Trust
 
 -
 
 2,554,544,826
 
 -
 
 2,554,544,826Investment funds
 
 2,500,804,849
 
 -
 
 -
 
 2,500,804,849Cash and cash equivalentsInvestment funds
 
 93,487,871
 
 -
 
 -
 
 93,487,871Derivative financial instruments
 
 -
 
 197,150
 
 -
 
 197,150Other receivablesInvestment funds as collateral
 
 268,738,961
 
 -
 
 -
 
 268,738,961Total assets
 
 4,466,813,589
 
 2,554,741,976
 
 70,630
 
 7,021,626,195LiabilitiesDerivative financial instruments
 
 -
 
 18,081,410
 
 -
 
 18,081,410Total liabilities
 
 -
 
 18,081,410
 
 -
 
 18,081,410As of December 31, 2014
 
 Level 1
 
 Level 2
 
 Level 3
 
 TotalAssetsFinancial assets at fair value through profit and losssCorporate securities
 
 505,553
 
 -
 
 -
 
 505,553Government securities
 
 235,522,555
 
 1,546,355
 
 -
 
 237,068,910Shares
 
 61,629,484
 
 -
 
 70,630
 
 61,700,114Trust
 
 -
 
 962,942,332
 
 -
 
 962,942,332Investment funds
 
 729,373,180
 
 -
 
 -
 
 729,373,180Cash and cash equivalentsInvestment funds
 
 135,536,579
 
 -
 
 -
 
 135,536,579Other receivablesInvestment funds as collateral
 
 53,238,417
 
 -
 
 -
 
 53,238,417Total assets
 
 1,215,805,768
 
 964,488,687
 
 70,630
 
 2,180,365,085LiabilitiesDerivative financial instruments
 
 -
 
 47,880,462
 
 -
 
 47,880,462Total liabilities
 
 -
 
 47,880,462
 
 -
 
 47,880,462









F - 112

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 6:(Continuation)

The value of the financial instruments negotiated in active markets is based on the market quoted prices as of the date of these consolidated financial statements. A market is considered active when the quoted prices are regularly available through a stock exchange, broker, sector-specific institution or regulatory body, and those prices reflect regular and current market transactions between parties that act in conditions of mutual independence. The market quotation price used for the financial assets held by the Company is the current offer price. These instruments are included in level 1.

The fair value of financial instruments that are not negotiated in active markets is determined using valuation techniques. These valuation techniques maximize the use of market observable information, when available, and rely as little as possible on specific estimates of the Company. If all significant variables to establish the fair value of a financial instrument can be observed, the instrument is included in level 2.

If one or more variables used to determine the fair value cannot be observed in the market, the financial instrument is included in level 3.

The techniques used for the measurement of assets at fair value with changes in income, classified as Level 2, are detailed below:

- Government securities: based on the present value of contractual cash flows, applying a discount rate derived from other similar debt securities’ observable market prices.

- Trusts: They were determined based on the measurement of the underlying assets and liabilities’ fair value, corresponding to 40% of CIESA’s shares. To determine this value, a measurement of the fair value of CIESA’s assets and liabilities was performed. CIESA’s main asset is its stake in TGS, which has been measured at the value of this company’s American Depositary Receipt.

- Derivative Financial Instruments: calculated from variations between market prices at the closing date of the year, and the amount at the time of the contract.



NOTE 7: INVESTMENTS IN SUBSIDIARIES

(a) Subsidiaries information



Unless otherwise indicated, the capital stock of the subsidiaries consists of common shares, each granting the right to one vote. The country of the registered office is also the principal place where the subsidiary develops its activities.





F - 113

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 7:(Continuation)



12.31.2015
 
 12.31.2014Country
 
 Main activity
 
 % Participation
 
 % ParticipationBLL
 
 Argentina
 
 Winemaking
 
 100.00%
 
 100.00%CTG
 
 Argentina
 
 Generation
 
 90.42%
 
 90.42%CTLL
 
 Argentina
 
 Generation
 
 100.00%
 
 100.00%IEASA
 
 Argentina
 
 Investment
 
 100.00%
 
 100.00%INDISA
 
 Argentina
 
 Investment
 
 91.60%
 
 91.60%INNISA
 
 Argentina
 
 Investment
 
 90.27%
 
 90.27%IPB
 
 Argentina
 
 Investment
 
 100.00%
 
 100.00%PACOSA
 
 Argentina
 
 Distributor
 
 100.00%
 
 100.00%PEPASA
 
 Argentina
 
 Oil
 
 49.60%
 
 49.74%PEPCA
 
 Argentina
 
 Investment
 
 100.00%
 
 100.00%PISA
 
 Uruguay
 
 Investment
 
 100.00%
 
 100.00%PP
 
 Argentina
 
 Investment
 
 100.00%
 
 100.00%PP II
 
 Argentina
 
 Investment
 
 100.00%
 
 100.00%Transelec
 
 Argentina
 
 Investment
 
 100.00%
 
 100.00%




(1)On January 8, 2014, PEPASA shareholders subscribed 17.8 million of new shares in the exercise of their preemptive rights and 41.9 million of new shares in the exercise of their accretion rights. The Company holdings were thus reduced to 50%. During the years 2014 and 2015, the Company sold PEPASA shares, reducing its interest to 49.74% and 49.60% respectively. However, the necessary conditions to keep PEPASA’s control are met.

(b) Summarized financial information for each subsidiary that has significant non-controlling interest



Non-controlling interests in subsidiaries are not significant for the Company, except for Edenor, a company which is indirectly controlled through IEASA, with a 51.54% equity interest.

Edenor

The subsidiary is registered in Argentina, which is also the principal place where it develops its activities.





F - 114

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 7:(Continuation)



i.Summary statement of financial position



12.31.2015
 
 12.31.2014Non CurrentTotal non current assets
 
 9,113,613,499
 
 6,989,315,674Borrowings
 
 2,460,975,397
 
 1,598,442,363Other non current liabilities
 
 3,316,579,611
 
 2,313,254,275Total non current liabities
 
 5,777,555,008
 
 3,911,696,638CurrentCash and cash equivalents
 
 128,951,624
 
 179,079,613Other current assets
 
 3,738,364,002
 
 1,461,672,975Total current assets
 
 3,867,315,626
 
 1,640,752,588Borrowings
 
 48,797,824
 
 33,960,526Other current liabilities
 
 5,629,526,622
 
 4,299,413,388Total current liabilities
 
 5,678,324,446
 
 4,333,373,914Equity
 
 1,525,049,671
 
 384,997,710








ii.Summary statement of comprehensive income (loss)



12.31.2015
 
 12.31.2014
 
 12.31.2013Revenue
 
 3,802,161,917
 
 3,598,376,178
 
 3,440,690,501Depreciation
 
 (281,407,098)
 
 237,639,289
 
 212,148,353Interest income
 
 96,225,288
 
 238,973,376
 
 287,067,095Interest expense
 
 (429,898,500)
 
 (576,503,676)
 
 (494,541,438)Profit (Loss) for the year before tax
 
 1,326,174,138
 
 (934,072,460)
 
 823,750,628Income tax
 
 (183,731,408)
 
 154,356,112
 
 44,116,566Profit (Loss) for the year
 
 1,142,442,730
 
 (779,716,348)
 
 867,867,194Discontinued operations
 
 -
 
 -
 
 (95,108,875)Other comprehensive loss
 
 (2,390,769)
 
 (11,584,911)
 
 (13,618,222)Total comprehensive income (loss) of the year
 
 1,140,051,961
 
 (791,301,259)
 
 759,140,097






F - 115

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 8: INVESTMENTS IN JOINT VENTURES



Note
 
 12.31.2015
 
 12.31.2014
 
 12.31.2013At the beginning of the year
 
 
 226,894,893
 
 188,644,285
 
 192,315,761Capital increase
 35.g
 
 475,000
 
 -
 
 1,198,435Other increases
 
 
 -
 
 6,171,366
 
 -Other decreases
 
 
 (13,568,371)
 
 -
 
 -Share of profit
 
 
 9,277,768
 
 34,208,368
 
 (4,799,349)Participation in other comprehensive income
 
 
 839,661
 
 (2,129,126)
 
 (70,562)At the end of the year
 
 
 223,918,951
 
 226,894,893
 
 188,644,285




The Company has a co-controlling interest in Citelec, Transener’s controlling company.



The Company’s equity in Citelec is 50%, and the latter holds 52.65% of the interests in Transener. This means that Pampa Energía indirectly holds 26.33% of the interests in Transener. The stock capital is composed of common shares, each granting the right to one vote. It is registered in Argentina, which is also the principal place where it develops its activities.



For the valuation of interest in joint venture, its consolidated financial statements as of December 31, 2015 have been used, which disclose the following items: Capital Stock in the amount of $ 554.3 million, profit for the year in the amount of $ 26.7 million and Shareholders’ Equity in the amount of $ 722.6 million.



The following chart includes a reconciliation of the equity method value and the book value of the Company’s interest in it:



12.31.2015
 
 12.31.2014
 
 12.31.2013Equity method
 
 
 177,963,736
 
 163,314,574
 
 127335695Adjustments (1)
 
 
 45,955,215
 
 63,580,319
 
 61308590Total investments in joint ventures
 
 
 223,918,951
 
 226,894,893
 
 188,644,285


(1)Includes adjustments for repurchase of corporate bonds and depreciation of property, plant and equipment.








F - 116

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 8:(Continuation)



i.Summary consolidated statement of financial position



12.31.2015
 
 12.31.2014Non currentTotal non current assets
 
 1,760,421,668
 
 1,605,270,566-
 
 -Borrowings
 
 1,234,822,563
 
 955,667,363Other non current liabilities
 
 231,393,857
 
 219,436,744Total non current liabities
 
 1,466,216,420
 
 1,175,104,107CurrentCash and cash equivalents
 
 591,952,625
 
 330,114,038Other current assets
 
 602,936,441
 
 519,478,559Total current assets
 
 1,194,889,066
 
 849,592,597Loans
 
 278,946,317
 
 147,212,304Other current liabilities
 
 487,579,823
 
 477,540,661Total current liabities
 
 766,526,140
 
 624,752,965Non-controlling interest
 
 367,505,789
 
 328,865,404Total Equity (Owners)
 
 355,062,385
 
 326,140,687




ii.Summary consolidated statement of comprehensive income (loss)



12.31.2015
 
 12.31.2014
 
 12.31.2013Sales
 
 1,946,843,329
 
 1,476,888,470
 
 873,761,354Depreciation
 
 (90,857,640)
 
 (86,374,111)
 
 83,889,462Interest income
 
 387,523,443
 
 452,249,248
 
 345,957,761Interest expense
 
 (122,813,236)
 
 (117,842,289)
 
 (83,121,779)Profit for the year before income tax
 
 101,375,540
 
 256,076,336
 
 (5,054,064)Income tax
 
 (37,686,499)
 
 (102,843,457)
 
 1,665,245Profit for the year
 
 63,689,041
 
 153,232,879
 
 (3,388,819)Owners of the company
 
 26,667,376
 
 76,206,155
 
 (3,333,089)Non-controlling interest
 
 37,021,665
 
 77,026,724
 
 (55,730)Other comprehensive profit (loss)
 
 3,298,040
 
 (8,439,021)
 
 (267,039)Total comprehensive profit of the year
 
 66,987,081
 
 144,793,858
 
 (3,655,858)




NOTE 9: INVESTMENTS IN ASSOCIATES



12.31.2015
 
 12.31.2014
 
 12.31.2013At the beginning of the year
 
 133,169,584
 
 134,774,654
 
 132,546,155Share of loss
 
 (9,932,259)
 
 (1,605,070)
 
 2,228,499At the end of the year
 
 123,237,325
 
 133,169,584
 
 134,774,654










F - 117

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)
  NOTE 9:(Continuation)  The Company holds an interest in only one associated company. Through PEPCA, the Company has a 10% interest in CIESA, a company holding 51% ofTGS’s capital stock.TGS is the most important gas transportation company in the country, and it operates the biggest pipeline system in Latin America. In turn, it is the leading company in the production and marketing of natural gas liquids both for the domestic and the export market. It also provides comprehensive solutions in the natural gas area and, since 1998, TGS has also landed in the telecommunications area through its subsidiary Telcosur S.A.  The capital stock of the associated company is composed of common shares, each granting the right to one vote. The associated company is registered in Argentina, which is also the principal place where it develops its activities.  For the valuation of its interest in the associate, financial statements as of December 31, 2015 have been used, which disclose the following items: Capital Stock in the amount of $ 638.8 million, loss for the year in the amount of $ 115.4 million and Shareholders’ Equity in the amount of $ 1,119 million.  The following chart includes a reconciliation of the equity method value and the book value of the Company’s interest in them:  12.31.2015
 
 12.31.2014
 
 12.31.2013Equity method
 
 88,417,829
 
 98,350,088
 
 99,955,158Adjustments (1)
 
 34,819,496
 
 34,819,496
 
 34,819,496Total investments in associates
 
 123,237,325
 
 133,169,584
 
 134,774,654
 (1)Includes the increased value of investments in associated companies.


F - 118

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 9:(Continuation)





i.Summary statement of financial position



12.31.2015
 
 12.31.2014Non currentTotal non current assets
 
 4,512,968,600
 
 4,315,905,067-
 
 -Borrowings
 
 2,895,699,292
 
 2,168,053,320Other non current liabilities
 
 559,514,632
 
 424,589,373Total non current liabities
 
 3,455,213,924
 
 2,592,642,693CurrentCash and cash equivalents
 
 888,372,789
 
 1,026,978,373Other current assets
 
 1,343,872,211
 
 1,115,478,627Total current assets
 
 2,232,245,000
 
 2,142,457,000Borrowings
 
 456,885,000
 
 553,159,000Other current liabilities
 
 897,312,000
 
 1,178,538,650Total current liabities
 
 1,354,197,000
 
 1,731,697,650Non-controlling interest
 
 1,051,624,600
 
 1,150,520,693Total Equity (owners of the company)
 
 884,178,076
 
 983,501,031




ii.Summary statement of comprehensive income (loss)

**

12.31.2015
 
 12.31.2014
 
 13.31.2013Sales
 
 4,226,569,000
 
 4,303,971,000
 
 2,864,986,000Depreciation
 
 (262,068,000)
 
 (255,662,000)
 
 (242,917,000)Interest income
 
 162,356,000
 
 262,297,000
 
 163,293,000Interest expense
 
 (355,022,000)
 
 (321,738,000)
 
 (230,864,000)(Loss) Profit for the year before income taxe
 
 (201,387,982)
 
 76,609,670
 
 138,484,000Income tax
 
 102,065,853
 
 (92,660,373)
 
 (93,248,000)Loss for the year
 
 (99,322,130)
 
 (16,050,703)
 
 22,284,986








F - 119

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 10: PROPERTY, PLANT AND EQUIPMENT







Original ValuesType of good
 
 At the beginning
 
 Increases
 
 Decreases
 
 Reversal of impairment
 
 Transfers
 
 At the endLand
 
 24,568,246
 
 -
 
 -
 
 -
 
 -
 
 24,568,246Buildings
 
 369,648,826
 
 -
 
 (17,495,775)
 
 -
 
 40,453,704
 
 392,606,755Generation equipment and machinery
 
 2,310,992,875
 
 2,747,339
 
 (273,882,461)
 
 -
 
 107,230,830
 
 2,147,088,583Work and compulsory work performed
 
 7,533,912
 
 -
 
 -
 
 -
 
 -
 
 7,533,912High, medium and low voltage lines
 
 2,477,342,509
 
 9,598,783
 
 (19,367,608)
 
 -
 
 733,052,521
 
 3,200,626,205Substations
 
 1,068,956,758
 
 -
 
 -
 
 -
 
 230,026,186
 
 1,298,982,944Transforming chamber and platforms
 
 608,521,395
 
 -
 
 (200,002)
 
 -
 
 184,320,346
 
 792,641,739Meters
 
 711,410,784
 
 -
 
 -
 
 -
 
 94,816,968
 
 806,227,752Wells
 
 462,012,725
 
 101,922,693
 
 (1,189,649)
 
 -
 
 561,161,642
 
 1,123,907,411Casks
 
 89,571
 
 -
 
 -
 
 -
 
 -
 
 89,571Mining property
 
 334,147,113
 
 470,365,247
 
 -
 
 -
 
 -
 
 804,512,360Gas plant
 
 4,156,943
 
 7,407,108
 
 -
 
 -
 
 182,214,358
 
 193,778,409Vehicles
 
 131,665,346
 
 124,628,055
 
 (779)
 
 -
 
 583,116
 
 256,875,738Furniture and fixtures and software equipment
 
 161,524,463
 
 30,486,646
 
 (104,946)
 
 -
 
 1,357,023
 
 193,263,186Communication equipments
 
 57,932,395
 
 139,474
 
 (6,900)
 
 -
 
 446,443
 
 58,511,412Materials and spare parts
 
 236,683,467
 
 126,050,640
 
 (40,996,168)
 
 -
 
 3,615,869
 
 325,353,808Tools
 
 30,157,577
 
 2,528,985
 
 (6,780)
 
 -
 
 704,992
 
 33,384,774Civil works
 
 2,696,068
 
 -
 
 -
 
 -
 
 -
 
 2,696,068Work in progress
 
 2,201,233,541
 
 4,579,481,279
 
 (5,459,587)
 
 25,259,957
 
 (1,934,998,204)
 
 4,865,516,986Advances to suppliers
 
 218,768,681
 
 792,535,246
 
 (1,720,546)
 
 -
 
 (204,985,794)
 
 804,597,587-Total at 12.31.2015
 
 11,420,043,195
 
 6,247,891,495
 
 (360,431,201)
 
 25,259,957
 
 -
 
 17,332,763,446Total at 12.31.2014
 
 8,616,516,627
 
 2,709,178,057
 
 (53,247,115)
 
 147,595,626
 
 -
 
 11,420,043,195








F - 120

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 10:(Continuation)



Depreciation
 
 Net book valuesType of good
 
 At the beginning
 
 Decreases
 
 Reversal of impairment
 
 For the year
 
 At the end
 
 At the end
 
 At 12.31.2014Land
 
 -
 
 -
 
 -
 
 -
 
 -
 
 24,568,246
 
 24,568,246Buildings
 
 (79,986,503)
 
 1,763,679
 
 -
 
 (18,906,868)
 
 (97,129,692)
 
 295,477,063
 
 289,662,323Generation equipment and machinery
 
 (497,494,132)
 
 50,842,826
 
 -
 
 (117,874,462)
 
 (564,525,768)
 
 1,582,562,815
 
 1,813,498,743Work and compulsory work performed
 
 (3,610,765)
 
 -
 
 -
 
 (415,147)
 
 (4,025,912)
 
 3,508,000
 
 3,923,147High, medium and low voltage lines
 
 (659,482,619)
 
 15,969,428
 
 -
 
 (109,412,224)
 
 (752,925,415)
 
 2,447,700,790
 
 1,817,859,890Substations
 
 (249,330,673)
 
 -
 
 -
 
 (41,098,577)
 
 (290,429,250)
 
 1,008,553,694
 
 819,626,085Transforming chamber and platforms
 
 (149,731,976)
 
 85,479
 
 -
 
 (25,618,323)
 
 (175,264,820)
 
 617,376,919
 
 458,789,419Meters
 
 (228,200,710)
 
 -
 
 -
 
 (41,935,046)
 
 (270,135,756)
 
 536,091,996
 
 483,210,074Wells
 
 (123,718,574)
 
 -
 
 -
 
 (178,860,182)
 
 (302,578,756)
 
 821,328,655
 
 338,294,151Casks
 
 (37,126)
 
 -
 
 -
 
 (17,913)
 
 (55,039)
 
 34,532
 
 52,445Mining property
 
 (40,579,609)
 
 -
 
 -
 
 (77,113,865)
 
 (117,693,474)
 
 686,818,886
 
 293,567,504Gas plant
 
 (593,369)
 
 -
 
 -
 
 (19,011,569)
 
 (19,604,938)
 
 174,173,471
 
 3,563,574Vehicles
 
 (38,768,503)
 
 779
 
 -
 
 (33,583,541)
 
 (72,351,265)
 
 184,524,473
 
 92,896,843Furniture and fixtures and software equipment
 
 (85,856,034)
 
 95,106
 
 -
 
 (21,148,601)
 
 (106,909,529)
 
 86,353,657
 
 75,668,429Communication equipments
 
 (31,987,738)
 
 -
 
 -
 
 (3,199,472)
 
 (35,187,210)
 
 23,324,202
 
 25,944,657Materials and spare parts
 
 -
 
 -
 
 -
 
 -
 
 -
 
 325,353,808
 
 236,683,467Tools
 
 (11,186,178)
 
 6,780
 
 -
 
 (2,848,196)
 
 (14,027,594)
 
 19,357,180
 
 18,971,399Civil works
 
 (1,378,711)
 
 -
 
 -
 
 (137,244)
 
 (1,515,955)
 
 1,180,113
 
 2,696,068Work in progress
 
 -
 
 -
 
 -
 
 -
 
 -
 
 4,865,516,986
 
 2,199,854,830Advances to suppliers
 
 -
 
 -
 
 -
 
 -
 
 -
 
 804,597,587
 
 218,768,681Total at 12.31.2015
 
 (2,201,943,220)
 
 68,764,077
 
 -
 
 (691,181,230)
 
 (2,824,360,373)
 
 14,508,403,073Total at 12.31.2014
 
 (1,713,855,268)
 
 8,758,089
 
 (59,188,922)
 
 (437,657,119)
 
 (2,201,943,220)
 
 
 
 9,218,099,975








F - 121

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 10:(Continuation)



Borrowing costs capitalized in the book value of property, plant and equipment during the year ended December 31, 2015 and 2014 amounted to $ 271.6 and $ 156 million respectively.



Labor costs capitalized in the book value of property, plant and equipment during the year ended December 31, 2015 and 2014 amounted to $ 433.8 and $ 123.9 million respectively.



Edenor acquisition of real property:



On October 7, 2015, Edenor Board of Directors approved the acquisition of a real property with the aim of concentrating centralized functions and reducing rental costs and the risk of future increases, for a total amount of $ 439.2 million, which, as of December 31, 2015, is fully paid.



As security for the amount paid, Edenor has received a surety bond from the seller.



Disclosed in the line “Advance to suppliers”.

NOTE 11: INTANGIBLE ASSETS



Original valuesType of good
 At the beginning
 
 Decreases
 
 At the endConcession agreements
 
 950,767,632
 
 -
 
 950,767,632Goodwill
 
 5,627,370
 
 -
 
 5,627,370Rights over arbitration proceedings
 
 108,754,000
 
 (108,754,000)
 
 -Intangibles identified in acquisitions of companies from the distribution segment
 
 8,834,040
 
 -
 
 8,834,040Total at 12.31.2015
 
 1,073,983,042
 
 (108,754,000)
 
 965,229,042Total at 12.31.2014
 
 1,073,983,042
 
 -
 
 1,073,983,042






AmortizationType of good
 At the beginning
 
 For the year
 
 At the endConcession agreements
 
 (194,973,412)
 
 (27,253,704)
 
 (222,227,116)Goodwill
 
 -
 
 -
 
 -Rights over arbitration proceedings
 
 -
 
 -
 
 -Intangibles identified in acquisitions of companies from the distribution segment
 
 (6,625,531)
 
 (2,208,509)
 
 (8,834,040)Total at 12.31.2015
 
 (201,598,943)
 
 (29,462,213)
 
 (231,061,156)Total at 12.31.2014
 
 (172,136,729)
 
 (29,462,214)
 
 (201,598,943)












F - 122

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 11:(Continuation)



Net book valuesType of good
 
 At the end
 
 At 31.12.2014Concession agreements
 
 728,540,516
 
 755,794,220Goodwill
 
 5,627,370
 
 5,627,370Rights over arbitration proceedings
 
 -
 
 108,754,000Intangibles identified in acquisitions of companies from the distribution segment
 
 -
 
 2,208,509Total at 12.31.2015
 
 734,167,886Total at 12.31.2014
 
 
 
 872,384,099






NOTE 12: BIOLOGICAL ASSETS





Non current
 
 
 12.31.2015
 
 12.31.2014Grape-producing plantations
 
 
 1,853,667
 
 1,894,4811,853,667
 
 1,894,481CurrentGrape growing crop
 
 
 245,361
 
 198,470245,361
 
 198,470






NOTE 13: FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS





Non current
 
 
 12.31.2015
 
 12.31.2014Shares
 
 
 70,630
 
 70,630Government securities
 
 
 23,567,249
 
 -Trusts
 
 
 2,554,544,826
 
 962,942,332Total non current
 
 
 2,578,182,705
 
 963,012,962CurrentGovernment securities
 
 
 1,566,785,757
 
 237,068,910Corporate securities
 
 
 13,428,727
 
 505,553Shares
 
 
 175
 
 61,629,484Investment funds
 
 
 2,500,804,849
 
 729,373,180Total current
 
 
 4,081,019,508
 
 1,028,577,127








F - 123

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 14: DEFERRED TAX ASSETS AND LIABILITIES



The composition of the deferred tax assets and liabilities is as follows:



12.31.2014
 
 Profit (loss)
 
 Other
comprehensive
income (loss)
 
 12.31.2015Tax los-carryforwards
 115,375,625
 
 (83,771,412)
 
 -
 
 31,604,213Trade and other receivables
 34,497,413
 
 18,576,230
 
 -
 
 53,073,643Derivative financial instruments
 2,063,417
 
 (2,063,417)
 
 -
 
 -Financial assets at fair value through profit and loss
 2,463,777
 
 5,469,550
 
 -
 
 7,933,327Trade and other payables
 347,324,494
 
 (13,981,811)
 
 -
 
 333,342,683Salaries and social security payable
 23,978,717
 
 (1,191,944)
 
 -
 
 22,786,773Defined benefit plans
 78,171,676
 
 30,135,284
 
 383,524
 
 108,690,484Provisions
 50,152,653
 
 83,866,210
 
 -
 
 134,018,863Taxes payable
 31,430,789
 
 17,834,853
 
 -
 
 49,265,642Other
 196,644
 
 122,189
 
 -
 
 318,833Deferred tax asset
 685,655,205
 
 54,995,732
 
 383,524
 
 741,034,461Property, plant and equipment
 (623,497,888)
 
 (86,371,293)
 
 -
 
 (709,869,181)Intangible assets
 (236,676,501)
 
 7,314,500
 
 -
 
 (229,362,001)Trade and other receivables
 (176,859,967)
 
 (89,425,764)
 
 -
 
 (266,285,731)Financial assets at fair value through profit and loss
 (15,121)
 
 (48,522,963)
 
 -
 
 (48,538,084)Borrowings
 (25,508,300)
 
 1,250,837
 
 -
 
 (24,257,463)Other
 -
 
 (2,030,101)
 
 -
 
 (2,030,101)Deferred tax liabilities
 (1,062,557,777)
 
 (217,784,784)
 
 -
 
 (1,280,342,561)








F - 124

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 14:(Continuation)



12.31.2013
 
 Profit (loss)
 
 Other
comprehensive
income (loss)
 
 12.31.2014Tax los-carryforwards
 136,235,830
 
 (20,860,205)
 
 -
 
 115,375,625Trade and other receivables
 43,379,702
 
 (8,882,289)
 
 -
 
 34,497,413Derivative financial instruments
 -
 
 2,063,417
 
 -
 
 2,063,417Financial assets at fair value through profit and loss
 1,314,135
 
 1,149,642
 
 -
 
 2,463,777Trade and other payables
 224,077,730
 
 123,246,764
 
 -
 
 347,324,494Salaries and social security payable
 4,320,300
 
 19,658,417
 
 -
 
 23,978,717Defined benefit plans
 50,775,875
 
 16,632,284
 
 10,763,517
 
 78,171,676Provisions
 35,350,925
 
 14,801,728
 
 -
 
 50,152,653Taxes payable
 37,289,313
 
 (5,858,524)
 
 -
 
 31,430,789Other
 253,084
 
 (56,440)
 
 -
 
 196,644Deferred tax asset
 532,996,894
 
 141,894,794
 
 10,763,517
 
 685,655,205Property, plant and equipment
 (577,908,963)
 
 (45,588,925)
 
 -
 
 (623,497,888)Intangible assets
 (243,991,000)
 
 7,314,499
 
 -
 
 (236,676,501)Trade and other receivables
 (33,379,506)
 
 (143,480,461)
 
 -
 
 (176,859,967)Borrowings
 (28,448,004)
 
 2,939,704
 
 -
 
 (25,508,300)Financial assets at fair value through profit and loss
 (2,465,940)
 
 2,450,819
 
 -
 
 (15,121)Other
 (150,850)
 
 150,850
 
 -
 
 -Deferred tax liabilities
 (886,344,263)
 
 (176,213,514)
 
 -
 
 (1,062,557,777)




Deferred tax assets and liabilities are offset in the following cases: a) when there is a legally enforceable right to offset tax assets and liabilities; and b) when deferred income tax charges are associated with the same fiscal authority. The following amounts, determined after their adequate offset, are disclosed in the statement of financial position:





12.31.2015
 
 12.31.2014Deferred tax asset
 52,279,953
 
 93,681,916Deferred tax liabilities
 (591,588,053)
 
 (470,584,488)Net deferred tax liabilities
 (539,308,100)
 
 (376,902,572)








The analysis for deferred tax assets and liabilities is as follows:



12.31.2015
 
 12.31.2014Deferred tax assetTo be recovered in more than 12 months
 418,100,378
 
 679,533,469To be recovered in less than 12 months
 322,934,083
 
 7,303,616Deferred tax asset
 741,034,461
 
 686,837,085Deferred tax liabilitiesPayable in more than 12 months
 (1,125,315,932)
 
 (1,048,920,689)Payable in less than 12 months
 (155,026,629)
 
 (14,818,968)Deferred tax liabilities
 (1,280,342,561)
 
 (1,063,739,657)Net deferred tax liabilities
 (539,308,100)
 
 (376,902,572)








F - 125

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 15:Trade and Other receivables





Non Current
 Note
 
 12.31.2015
 
 12.31.2014Res. No. 406/03 Inc c) CAMMESA consolidated receivables
 2
 
 650,774,473
 
 553,279,918Present value discount
 2
 
 (22,213,693)
 
 (34,635,539)Additional Remuneration Trusts Res. No. 95/13
 2
 
 275,943,978
 
 138,977,852Present Value discount Res. No. 406/03 inc. c)
 2
 
 (15,773,172)
 
 (17,156,517)Trade receivables, net
 
 
 888,731,586
 
 640,465,714Tax credits:- Value added tax
 
 
 31,029,398
 
 14,610,909- Sales tax
 
 
 21,799,934
 
 16,183,868- Income tax and minimum notional income tax
 
 
 382,687,758
 
 295,302,026- Tax on banking transactions
 
 
 21,715,623
 
 16,093,219- Allowance for tax credits
 
 
 (259,762,595)
 
 (107,111,954)Related parties
 35.l
 
 7,064,978
 
 7,366,313Expenses paid in advance
 
 
 2,286,129
 
 -Financial credit
 
 
 72,656,306
 
 71,191,721Other
 
 
 1,188,173
 
 741,077Other receivables, net
 
 
 280,665,704
 
 314,377,179Total non current
 
 
 1,169,397,290
 
 954,842,893CurrentReceivables from energy distribution(1)
 
 
 1,019,519,648
 
 945,666,193Receivables from MAT
 
 
 83,439,503
 
 48,626,021CAMMESA
 
 
 1,278,859,093
 
 1,004,349,392Res. No. 406/03 Inc. c) CAMMESA consolidated receivables
 2
 
 10,250,804
 
 10,905,524Maintenance remuneration
 2
 
 79,059,069
 
 94,253,852Receivables from gas sales
 
 
 167,462,419
 
 38,783,748Debtors in litigation
 
 
 22,924,028
 
 21,965,685Receivables from administrative services
 
 
 6,254,173
 
 15,174Related parties
 35.l
 
 6,730,859
 
 9,627,015Other
 
 
 710,057
 
 2,814,648Allowance for doubtful accounts
 
 
 (87,516,886)
 
 (91,117,582)Trade receivables, net
 
 
 2,587,692,767
 
 2,085,889,670


(1)Net of stabilization factor.





F - 126

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 15:(Continuation)



Note
 
 12.31.2015
 
 12.31.2014Tax credits:- Value added tax
 
 
 492,859,652
 
 215,042,937- Sales tax
 
 
 8,231,845
 
 5,405,113- Income tax and minimum notional income tax
 
 
 260,349
 
 369,418- Withholding of social security contributions
 
 
 869,674
 
 3,138,459- Other tax credits
 
 
 263,055
 
 159,957- Allowance for tax credits
 
 
 (443,955)
 
 (443,955)Advances to suppliers
 
 
 50,628,100
 
 14,183,290Advances to employees
 
 
 2,321,469
 
 2,547,431Related parties
 35.l
 
 14,726,068
 
 9,821,990Prepaid expenses
 
 
 40,980,120
 
 34,785,413Receivables from electric activities
 
 
 65,693,920
 
 48,581,474Financial credit
 
 
 19,332,315
 
 6,657,699Guarantee deposits
 
 
 277,692,711
 
 389,927,105Judicial deposits
 
 
 10,482,353
 
 11,900,401Credit with FOCEDE(1)
 
 
 49,536,128
 
 -Credits for Compensation of Excess Gas Injection Resolution No. 1/13
 
 
 451,798,679
 
 80,677,392Credit from income recognition on account of the RTI - SE Res. 32/15
 2
 
 650,937,684
 
 -Receivables from the sale of financial instruments
 
 
 56,191,064
 
 28,701,997Contributions to receive non-operating partners
 
 
 6,670,703
 
 1,646,774Receivables from arbitral proceedings
 37
 
 189,656,038
 
 -Other
 
 
 12,314,385
 
 4,186,073Allowance for other receivables
 
 
 (54,049,593)
 
 (39,766,643)Other receivables, net
 
 
 2,346,952,764
 
 817,522,325Total current
 
 
 4,934,645,531
 
 2,903,411,995




(1)As of December 31, 2015, the net position held by Edenor with the FOCEDE is comprised of the following (in thousands of pesos):





12.31.2015Fixed charge Res. No. 347/12 collected from customers and not transferred
 
 
 (7,204)Funds received in excess that transferred to FOCEDE fixed charge Res. No. 347/12
 
 
 191,722Outstanding receivables from extraordinary investment plan
 
 
 18,281Provision for FOCEDE expenses
 
 
 (153,263)49,536








F - 127

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 15:(Continuation)



Book value of current trade and other financial receivables is similar to their fair value due to their short-term maturity.

Trade receivables and other long-term financial other receivables are measured at amortized cost, which does not differ materially from its fair value.

At December 31, 2015 and 2014, trade receivables that were past due amounted to $ 541.3 million and $ 534.5 million, respectively, which were due and net foran allowance for doubtful accounts of $ 87.5 million, and $ 91.1 million respectively.The ageing analysis of these trade receivables is as follows:



12.31.2015
 
 12.31.2014Less than three months
 
 
 222,870,134
 
 188,809,908Three to six months
 
 
 43,697,533
 
 46,444,144Six to nine months
 
 
 54,061,674
 
 25,181,215Nine to twelve months
 
 
 218,727,774
 
 20,894,231More than twelve months
 
 
 1,958,531
 
 253,144,269Total past due trade receivables
 
 
 541,315,646
 
 534,473,767




The movements in the allowance for the impairment of trade receivables are as follows:



12.31.2015
 
 12.31.2014At the beginning
 
 
 91,117,582
 
 77,200,000Allowance for impairment
 
 
 26,175,512
 
 21,895,011Decreases
 
 
 (28,948,185)
 
 (7,323,802)Reversal of unused amounts
 
 
 (828,023)
 
 (653,627)At the end of the year
 
 
 87,516,886
 
 91,117,582




The movements in the allowance for the impairment of other receivables are as follows:



12.31.2015
 
 12.31.2014At the beginning
 
 
 147,322,552
 
 114,078,973Allowance for impairment
 
 
 170,283,109
 
 41,229,175Decreases
 
 
 (3,320,265)
 
 (6,146,779)Reversal of unused amounts
 
 
 (29,253)
 
 (1,838,817)At the end of the year
 
 
 314,256,143
 
 147,322,552








F - 128

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 16: INVENTORIES



Current
 
 
 12.31.2015
 
 12.31.2014Materials and spare parts
 
 
 209,653,574
 
 118,269,392Advances to suppliers
 
 15,742,632
 
 17,193,358Other
 
 
 66,584
 
 108,110225,462,790
 
 135,570,860




NOTE 17: CASH AND CASH EQUIVALENTS



12.31.2015
 
 12.31.2014Cash
 
 
 6,691,803
 
 2,813,079Banks
 
 
 416,099,909
 
 190,036,431Checks to be deposit
 
 
 318,335
 
 1,995,932Time deposits
 
 
 -
 
 4,852,085Investment funds
 
 
 93,487,871
 
 135,536,579516,597,918
 
 335,234,106




NOTE 18: SHARE CAPITAL

As of December 31, 2014, the Company ́s share capital consisted of 1,314,310,895 common shares in book-entry form with a face value of  $ 1 each and each granting the right to one vote.

On December 1, 2015, due to the exercise of all stock options granted to executives in consideration for the Opportunities Assignment Agreement, the Company issued 381,548,564 new ordinary shares (see Note 41).

Consequently, as of December 31, 2015, the Company’s share capital consists of 1,695,859,459 common shares in book-entry form with a face value of $ 1 each and each granting the right to one vote.



Publicly traded shares



The Company’s shares are listed for trading on Buenos Aires Stock Exchange, forming part of the Merval Index.



Also, on August 5, 2009, the SEC authorized the Company for the registration of ADSs representing 25 common shares each. On October 9, 2009, the Company started to market its ADSs on the NYSE.



The listing of the ADSs with the NYSE is part of the Company’s strategic plan to increase its liquidity and the volume of its shares.









F - 129

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 19:TRADE AND OTHER PAYABLES



Non Current
 Note
 
 12.31.2015
 
 12.31.2014Suppliers
 
 
 -
 
 364,852Customer contributions
 
 
 105,757,067
 
 118,297,671Funding contributions for substations
 
 
 51,700,000
 
 51,700,000Customer guarantees
 
 
 67,509,328
 
 60,742,930Trade payables
 
 
 224,966,395
 
 231,105,453ENRE Penalties and discount
 
 
 1,004,043,366
 
 1,032,193,134Loan (mutuum) with CAMMESA
 
 
 1,099,759,655
 
 506,753,360Compensation agreements
 
 
 81,926,024
 
 33,741,205Liability with FOTAE
 
 
 155,752,325
 
 105,640,700Payment agreement ENRE (2.3.1.4)
 
 
 132,322,192
 
 -Other payables
 
 
 2,473,803,562
 
 1,678,328,399Total non current
 
 
 2,698,769,957
 
 1,909,433,852CurrentSuppliers
 
 
 2,485,463,744
 
 1,408,516,910CAMMESA
 
 
 3,360,446,454
 
 2,562,949,421Customer contributions
 
 
 147,775,331
 
 148,075,761Discount to customers (Note 2.3.1.3)
 
 
 125,808,507
 
 -Funding contributions substations
 
 
 23,506,274
 
 18,431,955Canons and royalties
 
 
 5,539,336
 
 5,648,300Customer advances
 
 
 32,552,896
 
 1,199,336Customer guarantees
 
 
 1,048,184
 
 1,540,082Related parties
 35.l
 
 1,856,925
 
 384,534Trade payables
 
 
 6,183,997,651
 
 4,146,746,299PUREE
 
 
 -
 
 17,521,570ENRE Penalties and discount
 
 
 62,719,588
 
 70,588,565Related parties
 35.l
 
 124,680,713
 
 2,705,669Advances for works to be executed
 
 
 31,467,068
 
 10,650,017Guarantees enforcerd
 
 
 -
 
 170,912,175Liability with FOCEDE (1)
 
 
 -
 
 85,386,048Compensation agreements
 
 
 192,108,317
 
 27,805,216Payment agreements with ENRE (Note 2.3.1.4)
 
 
 54,044,821
 
 -Other
 
 
 3,467,251
 
 4,155,733Other payables
 
 
 468,487,758
 
 389,724,993Total current
 
 
 6,652,485,409
 
 4,536,471,292








F - 130

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 19:(Continuation)



(1)As of December 31, 2014, the net position of Edenor with the FOCEDE is comprised of the following (in thousands of pesos):



12.31.2014Fixed charge Res. No. 347/12 collected from customers and not transferred
 
 
 6,105Funds received in excess that transferred to FOCEDE fixed charge Res. No. 347/12
 
 
 74,713Outstanding receivables from extraordinary investment plan
 
 
 (93,133)Provision for FOCEDE expenses
 
 
 97,701Total liability with FOCEDE
 
 
 85,386






The fair values of non-current customer contributions as of December 31, 2015 and 2014 amount to $ 127.1 million and $ 109.9 million, respectively. The fair values are determined based on estimated discounted cash flows in accordance with a market rate for this type of transactions. This fair value is classified as level 2.



The book value of other non-current financial liabilities approximates its fair value due to valuation characteristics detailed in note 46.

The book value of other financial liabilities included in trade and other payables approximates their fair value.





NOTE 20: BORROWINGS



Non Current
 Note
 
 12.31.2015
 
 12.31.2014Financial borrowings
 
 
 717,019,046
 
 431,008,461Corporate bonds
 
 
 4,479,682,941
 
 2,743,759,769CAMMESA financing
 
 
 1,466,951,996
 
 418,817,373Related parties
 35.l
 
 21,092,258
 
 193,403,0006,684,746,241
 
 3,786,988,603CurrentBank overdrafts
 
 
 436,214
 
 52,941,170VCP
 
 
 235,987,129
 
 207,923,095Financial borrowings
 
 
 82,144,024
 
 153,635,113Corporate bonds
 
 
 799,017,535
 
 99,385,972CAMMESA financing
 
 
 10,477,887
 
 -Related parties
 35.l
 
 179,600,083
 
 269,697,7401,307,662,872
 
 783,583,090




The maturities of the Company’s borrowings (excluding finance lease liabilities) and its exposure to interest rates are as follow:







F - 131

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 20:(Continuation)



Fixed rate
 
 
 12.31.2015
 
 12.31.2014Less than one year
 
 
 497,660,316
 
 324,219,366One to two years
 
 
 533,383,482
 
 78,577,535Two to five years
 
 
 507,805,402
 
 237,716,203Up to five years
 
 
 2,180,235,840
 
 1,702,907,2093,719,085,040
 
 2,343,420,313Floating ratesLess than one year
 
 
 646,027,773
 
 333,052,096One to two years
 
 
 818,470,962
 
 632,846,695Two to five years
 
 
 2,618,088,796
 
 771,567,518Up to five years
 
 
 -
 
 363,096,4934,082,587,531
 
 2,100,562,802Non interest accruesLess than one year
 
 
 163,974,783
 
 126,311,628One to two years
 
 
 (13,962,221)
 
 (2,440,221)Two to five years
 
 
 40,723,980
 
 2,717,171190,736,542
 
 126,588,578




As of December 31, 2015 and 2014, the fair values of the Company’s non-current borrowings (Corporate Bonds) amount approximately to $ 5,159.33 million and $ 3,023.5 million, respectively. Such values were calculated on the basis of the determined market price of the Company’s corporate notes at the end of each year.



The carrying amounts of current borrowings approximates their fair value due to their short-term maturity.



Financial borrowings and CAMMESA financing approximate their fair value as they are subjected to a variable rate.



The other fair values are based on the present value of contractual cash flows using a discount rate derived from observable market prices of other similar debt instruments plus the corresponding credit risk. Fair values determinated in that way are within hierarchical level 2.



During the years ended December 31, 2015 and 2014, the Company and its subsidiaries acquired its own corporate bonds or corporate bonds of various subsidiaries at their respective market value for a total face value of US$ 13.8 million and US$ 203.2 million, respectively. Due to these debt-repurchase transactions, the Company and its subsidiaries recorded a gain of $ 9.9 million and $ 47.1 million in the year ended December 31, 2015 and 2014, respectively, disclosed under the line “Result from repurchase of corporate bonds” within Other financial results.












F - 132

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 20:(Continuation)

On February 2, 2016, Edenor has repurchased at market prices the “class 9, fixed rate par Corporate Notes” due 2022 for a nominal value of U$S 0.3 million.

Below are described the main characteristics of the indebtedness of the Group:



20.1 Generation



20.1.1 CTLL



CAMMESA Financing



Major maintenance



On March 5, 2015, CTLL executed a loan agreement with CAMMESA to finance a major maintenance of the unit LDLATG02 for a total amount in pesos equivalent to US$ 11.8 million and $ 7.2 million, in both cases plus VAT and costs of nationalization.



The financing will be repaid in 36 monthly, equal and consecutive installments, with the application of the mean yield obtained by CAMMESA from its financial placements with the WEM and maturing as from the economic transaction for the month following the conclusion of the works, with the possibility to extend such period for an additional 12-month term in case the Maintenance Remuneration accrued during such period is insufficient to cancel the financing. The Additional Remuneration will be allocated to the repayment of the granted financing. Should it be necessary to request the 12-month extension, besides applying the Additional Remuneration to the cancellation of the installment, the Direct Additional Remuneration accrued by CTLL in the corresponding month will also be applied.



After unit LDLATG02's maintenance was completed, the unit became operative on December 21, 2014.



CTLL later requested the execution of an Addendum to the Loan Agreement to conduct the maintenance of unit LDLATG03. On August 20, 2015, Addendum I to this Agreement was executed, which extended the financing to an amount equivalent in pesos to U$ 4.8 million and $ 18.2 million, in both cases plus VAT, nationalization and logistics costs. Maintenance of unit LDLATG03 finished on June 1, 2015, as from which date the unit became operative again.



Based on the modifications introduced to Addendum I, CTLL guarantees a minimum 80% availability from both units up to the total cancellation of the Financing. If the availability commitment is not met in a certain month, the repayment of the installment will not be limited to the Maintenance Remuneration amount and, if applicable, the difference between it and the Direct Additional Remuneration, but the whole installment will be payable.









F - 133

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 20:(Continuation)



Later, an extension of the loan was requested in order to include the execution of unit LDLATG01's overhaul, upgrade and refurbishment in the amount of US$ 13 million and $ 17.8 million , in both cases plus VAT, nationalization and logistics costs,  and withholdings to be imposed on foreign contractors. The extension was approved pursuant to SSETT y DEE Note No. 52/16; however, as of the issuance of hereof the applicable Addendum has not yet been entered into.



As of the issuance of these financial statements, CTLL has received partial advances in the amount of $ 191.7 million, which are disclosed under “Loans”, net of the Maintenance Remuneration collected by CTLL.



2014 Agreement



As at the date hereof, the power plant expansion projects, which consist of the installation of a new 105 MW high-efficiency gas turbine, are in their final construction stages. Early in February 2016, the proper operation of the systems finished verified, final checkups (in an operating condition) and contractual and commercial test performed, and the unit's commissioning is expected to take place halfway through March.



Regarding the two engine generators (8 MW each), on September 15, 2015, CTG accepted an offer by CTLL for the purchase of the MAN Diesel B&W engines (model 18V32/40PGI) and supplementary equipment, and the transfer of ownership was thus perfected. The price for the engines amounted to US$ 5 million.



Additionally, on September 11, 2015 and September 18, 2015, agreements were entered into with suppliers Man Turbo & Diesel SE and Empresa Walter Rittner S.A., respectively, main contractors of the project. Man Turbo & Diesel SE will provide the goods and services necessary for the conversion of the engines, and Empresa Walter Rittner S.A. will be responsible for installing them and providing auxiliary services.



On November 23, 2015, CTLL received a partial advance from CAMMESA in the amount of $75.2 million to cancel the amounts corresponding to the purchase of the engine generators which will make up the Project and the advances required by contractors for their installation and start-up.



As of the date hereof, the soil study has been completed and the engineering stage is still in course, the commissioning being expected for the first quarter of 2017. Additionally, the Company is conducting all necessary procedures to obtain the applicable environmental certificates, and to request access to the WEM and purchases of main equipment.



As at the issuance hereof, CTLL has received partial advances in the amount of $ 735.7 million pursuant to the Financing Agreement. Furthermore, CTLL has made payments in the amount of $ 758.19 million under the Supply and Construction Agreement.







F - 134

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 20:(Continuation)



Corporate Bonds



Early Redemption of 2018 Corporate Bonds

CTLL has canceled all of its 2018 Corporate Bonds through several partial redemptions —the first one on September 26, 2014 and the last one on December 2, 2014.



For the whole redemptions, CTLL has paid: (i) $ 1,595.1 million (equivalent to US$ 188 million converted at the reference exchange rates applicable corresponding to each partial redemption), as principal; (ii) $ 25.4 million, (equivalent to US$ 3 million converted at the reference exchange rates applicable corresponding to each partial redemption), as interest, and (iii) $ 40.4 million (equivalent to US$ 4.8 million converted at the reference exchange rates applicable corresponding to each partial redemption), as additional payment, all conversions being made at the reference exchange rates applicable to each partial redemption.



CTLL has financed these redemptions with the issuance of Class 2, 3 and 4 Corporate Bonds in the domestic market for approximately $ 401 million, the execution of a syndicated borrowing in the amount of $ 450 million, the taking of borrowing from affiliates for approximately $ 284 million, the sale of 2018 Corporate Bonds held in CTLL’s portfolio in the amount of $ 198 million, and the balance with short-term financial borrowings and current bank overdrafts, as well as with cash and cash equivalents and financial assets at fair value.



Issuance of Class 1, 2, 3 and 4 Corporate Bonds

Under the Simple Corporate Bonds Program (that is, corporate bonds non-convertible into shares) for up to US$ 350 million (or its equivalent value in other currencies), on October 30, 2014 CTLL issued the following Corporate Bonds:





F - 135

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 20:(Continuation)



-Class 1: CTLL resolved to cancel the tender.



-Class 2: for a face value of $ 96.4 million accruing interest at the Private Badlar rate plus a 400 basis points spread. The principal will be fully repaid at maturity on April 30, 2016, and interest will be repaid on a quarterly basis.



-Class 3: for a face value of $ 50.8 million accruing interest at the Private Badlar rate plus a 500 basis points spread. The principal will be amortized in three installments maturing on April 30, 2017 (33.34%), July 30, 2017 (33.33%) and October 30, 2017 (33.33%), and interest will be repaid on a quarterly basis.



-Class 4: for a face value of US$ 29.9 million at a $ 8.4917 exchange rate and a 6.25% annual nominal fixed rate. Principal will be amortized in whole on October 30, 2020. Interest accruing on the principal outstanding as at October 31, 2016 will be compounded quarterly. Interest accruing on the principal outstanding between November 1, 2016 and the maturity date will be paid on a quarterly basis.

The proceeds from the placement of new corporate bonds were used entirely to early 2018 rescue corporate bonds.

Creation of a new Corporate Bonds Program and issuance of Classes B and C Corporate Bonds



On July 7, 2015, CTLL created a new Simple Corporate Bonds Program (that is, corporate bonds not convertible into shares) for up to US$ 350 million (or its equivalent in other currencies) (the “Program”).



Under such Program, on August 6, 2015, CTLL issued Class C Corporate Bonds in the amount of $ 258 million maturing 21 months as from their issuance date and will accrue interest at a 27.75% fixed rate during the first 6 months as from their issuance date and at the Private Badlar rate plus a 450 basis points spread during the remaining 15 months. CTLL resolved to cancel the tender for Class B Corporate Bonds.



Net funds resulting from this placement will be allocated to the partial early cancellation of the Syndicated Loan.



Issuance of Class A and E Corporate Bonds – Subsection k)



On October 5, 2015, CTLL issued Class A Corporate Bonds in the amount of $ 282.4 million and maturing 36 months as from their issuance date and accrue interest at the Private Badlar rate. On November 13, 2015, CTLL issued an aggregate principal amount of $ 575.2 million of its Class E Corporate Bonds, maturing 60 months after their issuance date and paying a variable monthly coupon at the Private Badlar rate. On September 18, 2015 and November 6, 2015, the National Superintendence of Insurance ("SSN") classified Class A and E Corporate Bonds, respectively, as productive investments computable under Section 35.8.1 subsection k) of the Insurance Activity General Rules and Regulations (SSN Resolution No. 21.523/1992).







F - 136

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 20:(Continuation)



Funds derived from the issuance of Corporate Bonds will be destined to: (i) medium- and long-term infrastructure or productive projects in the Republic of Argentina, and (ii) the payment of working capital within the country regarding projects and investments mentioned in item “(i)” preceding. CTLL plans to use such net funds to finance part of the 121 MW expansion works it is currently conducting under the described “Availability Increase Project”.

Syndicated Borrowing

On November 11, 2014, in line with CTLL’s financial strategy of improving its financing cost and structure, CTLL’s Board of Directors approved a new indebtedness consisting of a syndicated borrowing in the amount of up to $ 450 million (the “Syndicated Loan”) with the Banco de Crédito y Securitización S.A., Banco Hipotecario S.A., Industrial and Commercial Bank of China S.A and Citibank S.A. (the “Banks”) seeking to refinance existing financial liabilities. The borrowing’s main terms and conditions are described below:

-Amortization: eight installments representing 11% of the indebtedness each, and a last installment for the remaining 12%, all of them payable on a quarterly and consecutive basis, the first one maturing twelve months as from the borrowing’s disbursement date.

-Compensatory Interest: at the adjusted Private Badlar rate plus a 575 basis points spread, payable on a quarterly basis.

-Guarantees:

i)CTLL will issue sight bills to each of the Banks to guarantee the outstanding principal and interest in accordance in the proportion of their share in the borrowing;

ii)The Company will act as joint and several obligor and main debtor of each and all payment obligations taken on by CTLL with the Banks, and will provide guarantee for all bills;.

-Subordination: the agreement contemplates the subordination of certain debts CTLL holds with PISA to the indebtedness to be taken with the Banks.



The net proceeds from the syndicated loan were used in its entirety for corporate bonds bail early 2018.



On August 13, 2015, CTLL partially canceled the Syndicated Loan in the amount of $ 260 million plus all interest accrued as of that date. The repayment was made out of Class C Corporate Bonds funds. On October 15, 2015, CTLL canceled the remaining principal balance in the amount of $ 190 million plus all interest accrued as of that date. The repayment was made out of CTLL's own funds.







F - 137

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 20:(Continuation)



20.1.2 CTG



Corporate bonds

On July 25, 2007, CTG finished the restructuring process for its outstanding Series “A” and “B” Corporate Bonds at 2% with maturity in 2013; having obtained an 88.7% acceptance rate on the total debt under restructuring (“2013 Bonds”).

The mentioned restructuring consisted on the swap of the previous debt securities for a combination of cash payments and the issuance of new simple Corporate Bonds for a nominal value of US$ 22 million at a 10.5% rate, which will be payable on March 11 and September 11 of each year and maturing in September 2017 (“2017 Bonds”).

In June and July 2009, and in January, March and May 2011, CTG purchased under successive transactions at market prices, its 2017 Bonds for a total of US$ 18.2 million and US$ 0.8 million of nominal value, respectively. As of December 31, 2015 CTG maintains all the 2017 Bonds repurchased.

The remaining 2017 Bonds outstanding as of December 31, 2015 total a nominal value of US$ 3.1 million.

The main limitations taken on by CTG regarding 2017 Bonds are as follows: (i) limitation on indebtedness, and (ii) limitation on levies. As of December 31, 2014, CTG was in full compliance of all its commitments undertaken under the 2017 Bonds.

Corporate Bonds Programme



Under the Simple Corporate Bonds Program (not convertible into shares) for up to US$ 50 million (or the equivalent amount in other currencies) dated February 13, 2013, on March 6, 2013 CTG issued Class 3 and 4 corporate bonds for a nominal value of $ 36.7 million and U$S 9.5 million (converted to an initial exchange rate of $ 5.0448 / U$S) at the Private Badlar rate plus 400 basis points and at the fixed rate of 3%, finally maturing on March 6, 2014 and March 6, 2015, respectively. Interest were payable on a quarterly basis. Funds resulting from the issuance of these corporate bonds were allocated entirely to debt refinancing.

On March 6, 2014, CTG issued Class 5 Corporate Bonds for a face value of $ 60.1 million accruing interest at the Private Badlar rate plus a 500 basis points spread. Principal will be amortized in two equal consecutive installments due on June 6, 2016 and September 6, 2016, and interest will be payable on a quarterly basis.

Class 5 Corporate Bonds have been subscribed in kind through the delivery of Class 3 and Class 4 Corporate Bonds for $ 1.8 million and $ 19.1 million, respectively (an amount equivalent to US$ 2.5 million). The outstanding balance of Class 3 Corporate Bonds was wholly cancelled on March 6. After the issuance of Class 5 Corporate Bonds, outstanding Class 4 Corporate Bonds, net of CTG’s portfolio holdings, amount to US$ 7 million.





F - 138

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 20:(Continuation)

After cancelling the principal and interest of Class 3 Corporate Bonds and discounting Class 4 Corporate Bonds presented for the swap, the net inflow amounted approximately $ 1.4 million that were allocated to the prepayment of bank loans.



Lastly, on March 6, 2015 CTG issued Class 6 Corporate Bonds for a face value of $ 91 million maturing within a term of 18 months and accruing interest at a 28% annual nominal fixed rate during the first nine months and at the Private Badlar rate plus a 500 basis points spread during the remaining nine months. Interest will be payable on a quarterly basis.



With the net proceeds of such issue, CTG proceeded to cancel the principal and interest of the Class 4 Corporate Bonds and partially prepay the bank loan mentioned below.



Bank borrowings

On February 28, 2013, CTG renewed, under a syndicated borrowing, the open credit facilities for a total amount of $ 78.7 million with Banco Hipotecario S.A., ICBC, Santander Rio S.A. and Citibank N.A, which was amended by the first amendment to the syndicated loan agreement dated December 20, 2013 (the "Amendment"). This borrowing was payable in two tranches, one in the amount of $ 61.3 million at the Private BADCOR rate plus 500 basis points, and another in the amount of $ 17.4 million accruing interest at a 29% annual nominal fixed rate. The borrowing will be paid off in ten quarterly consecutive installments, the first one becoming due six months from the amendment date. The first seven amortization payments will be for an amount equivalent to 60.96% of the principal; the eighth and ninth payments for an amount equivalent to 25.4% of the principal, and the last one will be made thirty-six months as from the amendment date



On the other hand, if a CTG bond is issued before April 15, 2014, net funds from the placement for up to $ 24 million will be allocated to the early cancellation of the syndicated borrowings based on its maturity in chronological order. With the net proceeds from the placement of corporate bonds Class 5 on March 2014, CTG proceeded to prepay $ 1.4 million of syndicated loan capital.

Subsequently, on July 23, 2014, CTG has:

(i)partially prepaid the borrowings for an amount equivalent to $ 18 million —out of which $ 14 million were applied to the cancellation of principal installments of the variable tranche and $ 4 million to the cancellation of principal installments of the fix tranche in chronological order based on their maturity dates.

(ii)paid accrued interest in the amount of $ 7.1 million and the outstanding from the first amortization installment for $ 4.6 million in accordance with the defined payment schedules; and



Last, on March 20, 2015, CTG prepaid in full the syndicated loan for an amount equivalent to $ 58.8 million of net proceeds from the issuance of Class 6 Corporate Bonds and equity.








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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 20:(Continuation)

CAMMESA Financing

On May 18, 2015, CTG entered into a loan agreement with CAMMESA for the purpose to finance TV11 unit's maintenance in a peso-denominated amount equivalent to US$ 10.3 million plus VAT and nationalization costs.

This financing will be repaid in 36 monthly and consecutive installments, with the application of the average yield obtained by CAMMESA from its financial placements with the WEM, maturing as from the economic transaction corresponding to the month following the completion of the works with the possibility of extending this period to twelve months in case the Maintenance Remuneration accrued in that period is not sufficient to cancel funding. The Maintenance Remuneration will be allocated to the payment of the granted financing. In case it is necessary to use additional period of twelve months mentioned above, in addition to applying the Maintenance Remuneration for cancellation of the installment should be applied Additional Remuneration Direct accrued by CTG in the relevant month.

CTG guarantees an 80% net capacity minimum availability as from the month following the unit's entry into service and until the termination of the repayment period.

As of the issuance of these financial statements, CTG has received partial advances in the amount of $ 8 million, which are disclosed under trade and other receivables, netting the credit for Maintenance Remuneration.



20.1.3 CPB



CAMMESA Financing

On March 21, 2011, CPB entered into a borrowing agreement with CAMMESA to finance a construction project that will increase the power output of steam turbine units of CPB, for a total amount of $ 56.8 million, in accordance to ES Resolution No. 146/02 and Notes 6157/10 and 7375/10. On January 27, 2012, CPB executed an addendum to the loan agreement entered into with CAMMESA which modified the financing amount, which current amounts to $ 69.6 million.

The collected amounts will be returned in 48 monthly, equal and consecutive installments, which will include interest resulting from the application of a rate equivalent to the average yield obtained by CAMMESA from its WEM’s financial placements, the first installment maturing on the month immediately following the works’ conclusion, estimated for the month of June, 2011. Installments will be paid by WEM pursuant to the provisions of ES Notes No. 6157/10 and 7375/10, which distribution among demanding agents will be made based on the applicable criteria determined by the ES.







F - 140

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 20:(Continuation)



During May 2011, CPB conclude the committed works, and from July, the units were subject to minimum availability control established by the loan agreement signed with CAMMESA.



During June 2015, in accordance with amortization as defined in the loan agreement with CAMMESA, the loan is fully canceled.



CAMMESA Financing II



On January 8, 2013, CPB signed a borrowing agreement with CAMMESA stipulating the terms for the financing of certain repair work delayed in units BBLATV29 and BBVLATV30 for an amount of $ 19.9 million plus the added-value tax pursuant to ES Resolution No. 146/02 so as to cover 70% of those maintenance costs.  Then, increased financing to $ 32.7 million plus the added-value tax in order to expand to cover 100% of maintenance costs.



The requested amount will be paid back in 18 monthly, which will bear a rate equivalent to the average yield derived by CAMMESA from its financial placements, the first installment being due the month after the last partial advance is made or 12 months after the first advance, whichever occurs earlier.



On April 9, 2014, CAMMESA notified CPB of the authorization granted by the ES to apply the LVFVDs corresponding to January 2008-June 2011 period, including accrued interest, to the cancellation of the loan. On April 15, 2014, CPB implements the cession of the LVFVD mentioned.



On April 24, 2014, the compensation of the mentioned financing was performed in the amount of $ 39.5 million of principal and $ 11.3 million of accrued interest (VAT included) with the issuance of the commercial documents by CAMMESA.



As a result of this compensation, as of December 31, 2014 CPB recognized income before taxes in the amount $ 35.3 million resulting from the revaluation of the affected LVFVDs, which were disclosed under "Other Financial Results" of the statement of comprehensive income (Loss).



Financing of Major Maintenance Works

During the month of April, 2014, the Borrowing and Receivables Assignment Agreement was entered into between CPB and CAMMESA to finance the 2015-2016 Technological Upgrade Work for an estimated total amount of US$ 82.6 million plus VAT and nationalization costs. The final amount of the financing will be determined based on the actual disbursements made by CAMMESA.

On May 18, 2015 and in answer to the requests filed by CPB, ES Note No. 1129/15 authorized the extension of the financing in the amount of US$ 7.2 million plus VAT and nationalization costs to fund the replacement of boiler burners which were not estimated in the original schedule. As at the date hereof, the Addendum to the Loan Agreement dated April 8, 2014 has not been perfected.







F - 141

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 20:(Continuation)



The investment plan aims to improve the units' reliability and availability, and so far the following progress has been made:



i)  Seasonal maintenance tasks have been performed in both units: on TV30 in 2014, and on TV29 early in 2015.

ii) As from August 31, 2015, CPB started the overhaul of generating unit TV29. The work scope included the following:



a) Review (“Overhaul”) of the main and ancillary equipment.

b) Repair, adjustment and replacement of spare parts (“Refurbishment”)

c) Replacement due to obsolescence (“Upgrade”) of equipment and systems

Regarding items a) and b), maintenance tasks were executed on equipment which had not been previously replaced, such as the turbine, generator, boiler, pumps, heat exchangers, valves, filters, tasks, pressure vessels and other equipment.

As regards item c), some of the equipment which was wholly replaced was the following:

-  Boiler burners. The original three-fuel burners were replaced by newly-designed and reduced NOx dual-fuel burners.

-  Burners Monitoring System (“BMS-BPS”). The original solid-state electronic system was replaced by a programmable system with a SILIII safety level.

-  Generator's excitation system. The original system was replaced by a solid-state static system.

-   Turbine Control System (“TCS”). The original system was replaced by a programmable digital system. The hydraulic system was replaced by a newly-designed system.

-   Turbine generator unit's electrical protection system. The original relay system was replaced by a digital latest-generation system.

-   Boiler superheater tubes. All the tubes of superheater No. 2 were replaced.

The provisional reception of the main project contracts took place on December 10, 2015; on that date, the commissioning period started, and the synchronization took place on January 14, 2016. Tests and adjustments have been carried out since that date. During this process, a breakdown occurred in the excitation transformer, and tasks are being conducted to solve the problem; in this sense, it is estimated that its commissioning will take place early in March.








F - 142

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 20:(Continuation)

Even though the project was originally scheduled for a term of 27 months ending in July 2016, CAMMESA did not authorize TV30's overhaul, upgrade and refurbishment for this period, so the task was postponed for the September-December 2016 period.

As of the issuance of these financial statements, the amounts committed under the main  executed agreements amount to US$ 102.2 million, out of which US$ 64.7 million have been canceled. These amounts do not include taxes, duties or nationalization costs.



The financing will have a twelve-month grace period as from the month following the last partial advance by CAMMESA, or 24 months after the execution of the loan, whichever occurs earlier, and this term may be extended for up to six months in case a delay in the execution of maintenance works of BBLATV 30 Unit is verified according to the dates specified in the schedule. Likewise, the financing will be repaid in 48 monthly, equal and consecutive installments, with the application of the mean yield obtained by CAMMESA from its financial placements.



The UMA will range from 80% to 83% depending on the month, and will be calculated as an average of the last three rolling months, including the month concerned as the last month of the quarter. To such effect, only the net power of units having performed the major maintenance will be assessed, excluding maintenance works authorized and programmed by CAMMESA.



The Maintenance Remuneration will be destined to the early cancellation of the granted financing. Should the Maintenance Remuneration be insufficient to cancel the amount of each installment and provided CPB meets the UMA, the balance payment obligation will be limited to 50% of the FRD. In case is not met, CPB will have to pay the whole applicable installment on the stipulated maturity date.



The FRD will be calculated based on the operating results plus Property, Plant and Equipment depreciations, net of:



(i)Additional Remuneration trust Res. No. 95/13;

(ii)Investments in Property, Plant and Equipment;

(iii)Taxes not included in operating results;

(iv)Variation in uncollected Delta receivables with CAMMESA;

(v)The Maintenance Remuneration.





F - 143

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 20:(Continuation)

In accordance with what has been previously stated, if at each installment’s maturity date the funds assigned to its cancellation are insufficient to fully cancel it, the uncancelled balance will be distributed pro rata among the remaining installments, provided the UMA has been met. If this situation occurs in the last installment, it will be successively deferred until its full cancellation.

In order to guarantee the granted financing, CPB has assigned to CAMMESA 100% of its current and future receivables, whether accrued or to be accrued, in connection with the operations conducted and to be conducted with the WEM, excluding those which had already been assigned to third parties before the conclusion of this agreement or included in contracts entered into pursuant to the 2008-2011 Agreement, as well as those included in the assignment as collateral provided for in the borrowing agreement under ES Note No. 6157/10 and in the assignment as collateral set forth in the borrowing agreement entered into by the parties on January 8, 2013, until the financing limit.



As of the issuance of these financial statements, CPB has received partial advances from CAMMESA in the amount of $ 757.9 million, out of which $ 175.1 million have been early canceled with receivables generated by the Maintenance Remuneration. Also, CPB has not generated a positive FRD for the early cancellation of the financing.



20.2 Oil and gas



20.2.1 PEPASA



VCPs Global Programme



On July 27, 2011, at PEPASA’s Extraordinary General Meeting of Shareholders, the creation of a VCP global program was approved for a maximum amount of $ 200 million or its equivalent in other currencies, pursuant to which PEPASA may issue short-term Corporate Bonds (simple, non-convertible into shares), promissory notes or short-term securities with common, special and/ or floating security and/ or any other guarantee (including, although not limited to, third-party guarantees), whether subordinated or not.



On April 24, 2014 and July 2, 2015, PEPASA modified VCP Program increasing it up to the amount of U$S 40 million and U$S 70 million, and or its equivalent in other currencies, respectively.





F - 144

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 20:(Continuation)



As of December 31, 2015, PEPASA had issued the following series of VCP:



Series
 Issuance date
 Nominal Amount
 Interest Rate
 Payment:Capital
 Interest1
 October 6, 2011
 46,654,990
 Badlar + 3.5%
 360 days
 Quarterly2
 May 11, 2012
 32,564,000
 Badlar + 2.75%
 360 days
 Quarterly3
 October 3, 2012
 34,396,246
 Badlar + 4.25%
 360 days
 Quarterly4
 USD 6,520,523
 4.25%
 360 days
 Quarterly5
 March 27, 2013
 77,821,661
 Badlar + 2.99%
 365 days
 Quarterly6
 USD 4,342,138
 0.01%
 365 days
 Quarterly7
 October 3, 2013
 65,400,000
 Badlar + 4%
 365 days
 Quarterly8
 April 28, 2014
 122,950,000
 Badlar + 3.95%
 365 days
 Quarterly9
 October 3, 2014
 76,450,000
 Badlar + 3.95%
 365 days
 Quarterly11
 February 26, 2015
 89.940.000
 28%
 365 days
 Quarterly12
 April 30, 2015
 137.000.000
 28,5%
 365 days
 Quarterly






As of December 31, 2015, outstanding Series 11 and 12 VCPs amounted to $ 235.5 million, including principal and interest.



Resources gathered through the issuance of these VCPs have been destined to investments in fixed assets, the payment of working capital and/ or the refinancing of liabilities.



Corporate Bonds Programme



On May 10, 2013, PEPASA’s Shareholders’ Meeting approved the terms and conditions of the Simple Corporate Bonds Program (non-convertible into shares) for up to US$ 100 million (or its equivalent in other currencies). On April 24, 2014, and July 2, 2015, PEPASA modified the Program increasing the amount up to US$ 125 million and US$ 250 or its equivalent in other currencies, respectively.







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 20:(Continuation)



At the date of issuance of these financial statements, PEPASA has issued the following series of Corporate Bonds:



Series
 Issuance date
 Nominal Amount
 Interest rate
 Payment:Capital
 Interest1
 June 28, 2013
 254,810,000
 Badlar + 3%
 3 years
 Quarterly2
 June 6, 2014
 525,362,500
 Badlar
 3 years
 Quarterly3
 February 26, 2015
 51,027,777
 Badlar + 5%
 1 year and 9 months
 Quarterly4
 February 26, 2015
 U$S 18,549,000
 5%
 1 year and 9 months
 Quarterly5
 April 30, 2015
 49,870,000
 Badlar + 4,5%
 1 year and 6 months
 Quarterly6
 February 3, 2016
 309,874,000
 Badlar + 5%
 1 year and 3 months
 Quarterly






Series 1 and 2 are aimed at making productive investments computable under Section 35.k) of the Insurance Activity General Rules and Regulations.



The remaining funds will be destined to investments in physical assets and/or the payment of working capital.



Syndicated Loan



On July 27, 2015, PEPASA entered into a syndicated loan agreement for the amount of $ 765 million with Banco Hipotecario S.A., BACS Banco de Crédito y Securitización S.A., Industrial and Commercial Bank of China (Argentina) S.A. and Citibank N.A, Argentine branch.



Its main terms and conditions are described below:



-Interest: Private Badlar corrected rate plus a 5.75% spread for an amount of $ 615 million, and a 30% fixed rate for an amount of up to $ 150 million;

-Amortization: it will be amortized in 10 quarterly and consecutive installments, the first one being payable upon the expiration of the term of 15 months as from the disbursement date. The first two installments will represent 5.25% of the principal; the third one, 7.5% of the principal; the fourth one, 11.5% of the principal; and, as from the fifth to the tenth installment, 11.75% of the principal. These amortization conditions will apply to the variable-rate and fixed-rate loan;

-Guarantees: PEPASA will issue promissory notes to each of the banks to guarantee the outstanding principal and interest in the proportion of their share in the loan.







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 20:(Continuation)



Net funds resulting from the syndicated loan will be applied by PEPASA to the expenses foreseen under the Investment Agreement with YPF.



As of December 31, 2015, PEPASA has complied with all covenants stipulated in the agreement.



20.3 Distribution



20.3.1 Edenor



Corporate bonds programs



The Company is included in a Corporate Bonds program, the relevant information of which is detailed below:



Debt issued in United States dollars



Millons of U$S
 
 Millons of $Corporate Bonds
 
 Class
 
 Rate
 
 Year of Maturity
 
 Debt structure at 01.01.2015
 
 Debt Purchase 2015 (2)
 
 Debt structure at 12.31.2015
 
 Debt structure at 12.31.2015Fixed Rate Par Note
 
 7
 
 10.50
 
 2017
 
 14.8
 
 -
 
 14.8
 
 192.5Fixed Rate Par Note (1)
 
 9
 
 9.75
 
 2022
 
 172.2
 
 (9.2)
 
 163.0
 
 2,148.6Total
 
 
 
 
 
 
 
 186.9
 
 (9.2)
 
 177.7
 
 2,341.1Millons of U$S
 
 Millons of $Corporate Bonds
 
 Class
 
 Rate
 
 Year of Maturity
 
 Debt structure at 01.01.2014
 
 Debt Purchase 2014 (2)
 
 Debt structure at 12.31.2014
 
 Debt structure at 12.31.2014Fixed Rate Par Note
 
 7
 
 10.50
 
 2017
 
 14.8
 
 -
 
 14.8
 
 126.2Fixed Rate Par Note (1)
 
 9
 
 9.75
 
 2022
 
 186.1
 
 (13.9)
 
 172.2
 
 1,472.2Total
 
 
 
 
 
 
 
 200.9
 
 (13.9)
 
 186.9
 
 1,598.4






(1)Net of issuance expenses.



(2)Includes collection, through the trust, of proceeds from subsidiary sales and collection of financial receivables with related companies. On March 27, 2014, Corporate bonds that EDENOR held in its portfolio were written off.



The main covenants are the following:



i)Negative Covenants



The terms and conditions of the Corporate Notes include a number of negative covenants that limit EDENOR’s actions with regard to, among others, the following:









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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 20:(Continuation)



- encumbrance or authorization to encumber its property or assets;

- incurrence of indebtedness, in certain specified cases;

- sale of Edenor’s assets related to its main business;

- carrying out of transactions with shareholders or related companies;

- making certain payments (including, among others, dividends, purchases of Edenor’s common shares or payments on subordinated debt).



ii)Suspension of Covenants:



Certain negative covenants stipulated in the terms and conditions of the Corporate Notes will be suspended or adapted if:



- Edenor’s long-term debt rating is raised to Investment Grade, or

- Edenor’s Level of Indebtedness calculated on the shareholders' equity is equal to or lower than 2.5.



If Edenor subsequently losses its Investment Grade rating or its Level of Indebtedness is higher than 2.5, as applicable, the suspended negative covenants will be once again in effect.



At the date of issuance of these financial statements, the previously mentioned ratios have been complied with.



20.4 Holding and others



20.4.1 PESA



TGS Financing



On October 6, 2011, TGS granted the Company a borrowing/financing amounting to US$ 26 million to make the payment necessary to acquire the rights to control, suspend and waive Enron Creditors Recovery Corp. and Ponderosa Assets LLP against the Republic of Argentina before the International Centre for Settlement of Investment Disputes of the World Bank (”CIADI”) (the “Arbitration Proceeding”) pursuant to the Call Option Agreement entered into between the Company, Inversiones Argentina II and GEB Corp. (the “ICSID Contract”).







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 20:(Continuation)



After several postponements, on April 26, 2013, the parties agreed on the following amendments to the financing agreement:



i)The maturity date will be October 6, 2014, automatically extendable for a single additional period of one year,

ii)The financing will be paid at maturity or in advance through the full and unconditional assignment to TGS of all PESA’s rights and obligations under the ICSID Agreement in case, on or before the maturity date: (a) TGS has received a 20% increase on its tariff chart and that increase remains effective pursuant to the Transitory Agreement approved by Order No. 1918/09 of the National Executive Branch, or (b) the following has been granted to TGS and remains effective: (x) the tariff adjustment set forth in the Agreement initialized by TGS and approved by its Board of Directors on October 5, 2011, or (y) any other compensatory system implemented through any tariff review system or mechanism hereinafter replacing those currently in force under Economic Emergency Law No. 25,561 of the Republic of Argentina and having an equivalent economic effect on TGS.

iii)Principal will bear compensatory interest at a 6.8 % annual nominal rate plus VAT



On January 12, 2015, the parties agreed to extend the suspension of mentioned exhibition proceeding for six months as from that date.



During September 2015, the condition stipulated in the loan agreement granted by TGS has been met, which required its compulsory cancellation through the full and unconditional assignment of all the ownership rights and liabilities held by the Company under the Arbitration Proceeding.



On October 7, 2015, all rights under the Arbitration Proceeding were assigned to a trust formed abroad to TGS and consequently, on that date the effects of the transaction were recognized according to the following breakdown:



Loan principal balance
 
 242,372,000Interest and taxes
 
 81,795,769Total TGS loan
 
 324,167,769Rights over arbitration proceedings
 
 108,754,000Gain from discharge/cancellation of TGS loan
 
 215,413,769








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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 21: DEFERRED REVENUE



Non current
 
 
 12.31.2015
 
 12.31.2014Customer contributions not subject to repayment
 
 
 153,815,820
 
 109,089,120153,815,820
 
 109,089,120CurrentCustomer contributions not subject to repayment
 
 
 763,684
 
 763,684763,684
 
 763,684




NOTE 22: SALARIES AND SOCIAL SECURITY PAYABLE



Non current
 
 
 12.31.2015
 
 12.31.2014Seniority - based bonus
 
 
 73,715,803
 
 59,742,127Early retirements payable
 
 
 6,323,535
 
 3,116,18080,039,338
 
 62,858,307CurrentSalaries and social security contributions
 
 
 231,789,446
 
 195,696,094Provision for vacations
 
 
 354,198,787
 
 295,534,685Provision for gratifications
 
 
 55,298,077
 
 39,765,102Provision for annual bonus for efficiency
 
 
 241,174,433
 
 192,092,861Early retirements payable
 
 
 4,507,072
 
 2,186,156886,967,815
 
 725,274,898










F - 150

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 23:DEFINED BENEFITS PLANS

The following are the benefits that the Company granted to certain employees under the existing collective union agreements:

a)seniority bonus to be granted to personnel with certain number of years of service;

b)a bonus for all workers having accumulated years of services with contributions to obtain the regular retirement payment.

The amounts and conditions vary depending on the collective bargaining agreement and for employees who are not union members.

The movement in the defined benefit obligation over the year is as follows:



12.31.2015
 
 12.31.2014
 
 12.31.2013Liabilities at the beginning
 223,347,647
 
 145,073,927
 
 142,749,594Current services cost
 36,010,995
 
 15,674,883
 
 5,147,032Cost for interest
 83,562,352
 
 55,955,929
 
 27,877,079Discontinued operations
 -
 
 -
 
 (45,299,718)Actuarial losses (gains)
 3,300,596
 
 24,829,850
 
 27,764,805Benefit payments
 (35,677,351)
 
 (18,186,942)
 
 (13,164,865)Liabilities at the end
 310,544,239
 
 223,347,647
 
 145,073,927




The detail of the obligation for defined benefit plans by segment is as follows:



12.31.2015
 
 12.31.2014
 
 12.31.2013Generation
 77,867,255
 
 62,425,518
 
 42,382,871Distribution
 232,676,984
 
 160,922,129
 
 102,691,056Total
 310,544,239
 
 223,347,647
 
 145,073,927




As of December 31, 2015 and 2014, the Company carried no assets related to defined benefits plans.



The details of the charge acknowledged in the Comprehensive Income (Loss) Statement is the following:



12.31.2015
 
 12.31.2014
 
 12.31.2013Current services cost
 36,010,995
 
 15,674,883
 
 5,147,032Cost for interest
 83,562,352
 
 55,955,929
 
 27,877,079Actuarial losses
 2,204,814
 
 1,532,583
 
 730,605Actuarial loss through other comprehensive income
 1,095,782
 
 23,297,267
 
 27,034,200Total cost
 122,873,943
 
 96,460,662
 
 60,788,916






The obligations for defined benefit plans expected are:







F - 151

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 23:(Continuation)



12.31.2015Less than one year
 46,089,380One to two years
 20,510,159Two to three years
 24,850,965Three to four years
 24,189,261Four to five years
 30,226,625Up to five years
 141,084,965




The actuarial assumptions used were as follows:



12.31.2015
 
 12.31.2014
 
 12.31.2013Discount rate
 6%
 
 6%
 
 6%Salaries increase
 2%
 
 2%
 
 2%Average inflation
 32%
 
 32%
 
 25%




The annual 6% real discount rate is reasonable considering the market rates for Argentine government bonds as of December 31, 2010. The IRR of Argentine government bonds has been significantly influenced, since mid-2011, by the global macroeconomic context, and the probability of default thereon is expected to be higher than the credit risk of large corporations. Subsequently, the rates increased due to a significant increase of the risk of default, unrelated to the risk of well-established firms whose risk of default on their obligations has not changed in such proportion.



The following information shows the effect of a variation in the discount rate and salaries increase on the obligation amount:



12.31.2015Discount rate: 5%Obligation
 333,224,324Variation
 22,680,0857.30%Discount rate: 7%Obligation
 290,930,189Variation
 (19,614,050)(6.32%)Salaries increase: 1%Obligation
 292,255,295Variation
 (18,288,944)(5.89%)Salaries increase: 3%Obligation
 331,342,940Variation
 20,798,7016.70%






F - 152

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 23:(Continuation)

Estimates based on actuarial techniques imply the use of statistical tools, such as the so-called demographic tables used in the actuarial valuation of the Company active personnel.

In order to determine the mortality of the Company active personnel, the “1971 Group Annuity Mortality” table has been used. In general, a mortality table shows for each age group the probability that a person in any such age group will die before reaching a predetermined age. Male and female mortality tables are elaborated separately inasmuch as men and women’s mortality rates are substantially different.

In order to estimate total and permanent disability due to any cause, 80% of the “1985 Pension Disability Study” table has been used.

In order to estimate the probability that the Company active personnel will leave the Company or stay therein, the “ESA 77” table has been used.

Liabilities related to the above-mentioned benefit plans have been determined contemplating all the rights accrued by the beneficiaries of the plans up to the closing date of the year ended December 31, 2015.



These benefits do not apply to key management personnel.







F - 153

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 24: TAX LIABILITIES



Non current
 
 
 12.31.2015
 
 12.31.2014Value added tax
 
 
 95,700,492
 
 77,286,956Income tax provision, net of witholdings and advances
 
 
 102,871,269
 
 63,685,209Minimum notional income tax provision, net of witholdings and advances
 
 
 168,896,460
 
 118,700,596Sales tax
 
 
 4,250,033
 
 1,766,628Payment plans
 
 
 15,380,012
 
 17,769,495Other
 
 
 1,364,738
 
 2,022,829388,463,004
 
 281,231,713CurrentIncome tax provision, net of witholdings and advances
 
 
 92,386,069
 
 15,192,552Minimum notional income tax provision, net of witholdings and advances
 
 
 46,563,652
 
 16,393,289Value added tax
 
 
 29,170,820
 
 24,805,453Municipal, provincial and national contributions
 
 
 73,804,583
 
 67,999,068Personal assets tax provision
 
 
 26,219,494
 
 8,686,056Payment plans
 
 
 3,052,584
 
 2,802,592Municipal taxes
 
 
 44,293,674
 
 40,327,928Tax withholdings to be deposited
 
 
 280,992,443
 
 43,827,166Stamp tax payable
 
 
 9,590,568
 
 9,590,568Other
 
 
 4,038,586
 
 2,303,950610,112,473
 
 231,928,622









F - 154

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 25: PROVISIONS



12.31.2015For contingencies
 
 Asset retirement obligation
 
 TotalNon CurrentAt the beginning of the year
 
 116,904,454
 
 2,623,202
 
 119,527,656Increases
 
 149,179,441
 
 46,543,290
 
 195,722,731Decreases
 
 (1,471,412)
 
 -
 
 (1,471,412)At the end of the year
 
 264,612,483
 
 49,166,492
 
 313,778,97512.31.2015For contingenciesCurrentAt the beginning of the year
 
 24,170,912Increases
 
 78,970,903Decreases
 
 (32,550,249)At the end of the year
 
 70,591,56612.31.2014For contingencies
 
 Asset retirement obligation
 
 TotalNon CurrentAt the beginning of the year
 
 89,775,416
 
 1,761,146
 
 91,536,562Increases
 
 38,129,133
 
 862,056
 
 38,991,189Reclassifications
 
 (4,510,478)
 
 -
 
 (4,510,478)Reversal of unused amounts
 
 (603,634)
 
 -
 
 (603,634)Decreases
 
 (5,885,983)
 
 -
 
 (5,885,983)At the end of the year
 
 116,904,454
 
 2,623,202
 
 119,527,65612.31.2014For contingenciesCurrentAt the beginning of the year
 
 11,167,430Increases
 
 56,636,476Reclassifications
 
 4,510,478Decreases
 
 (48,143,472)At the end of the year
 
 24,170,912








F - 155

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 25:(Continuation)



12.31.2013For contingencies
 
 Asset retirement obligation
 
 TotalNon CurrentAt the beginning of the year
 
 86,733,374
 
 881,711
 
 87,615,085Increases
 
 14,637,856
 
 879,435
 
 15,517,291Decreases
 
 (8,299,769)
 
 -
 
 (8,299,769)Discontinued operations
 
 (3,296,045)
 
 -
 
 (3,296,045)At the end of the year
 
 89,775,416
 
 1,761,146
 
 91,536,56212.31.2013For contingenciesCurrentAt the beginning of the year
 
 10,454,156Increases
 
 21,933,590Decreases
 
 (17,058,944)Discontinued operations
 
 (4,161,372)At the end of the year
 
 11,167,430




F - 156

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 26:REVENUE



12.31.2015
 
 12.31.2014
 
 12.31.2013Sales of energy to the SPOT Market
 1,072,149,819
 
 1,013,970,810
 
 597,361,773Sales of energy for the Resolution No. 220/07
 918,105,862
 
 777,074,476
 
 375,122,985Sales of energy to MAT
 1,540,301
 
 88,016,383
 
 468,072,318Energy plus sales
 470,115,211
 
 376,721,231
 
 267,833,254Other sales
 11,311,521
 
 19,672,330
 
 20,942,816Generation subtotal
 2,473,222,714
 
 2,275,455,230
 
 1,729,333,146Energy sales (1)
 3,720,442,988
 
 3,536,146,761
 
 3,393,759,304Right of use of poles
 76,416,604
 
 57,462,917
 
 41,537,592Connection and reconnection charges
 5,302,325
 
 4,766,500
 
 5,393,605Distribution subtotal
 3,802,161,917
 
 3,598,376,178
 
 3,440,690,501Gas sales
 812,647,779
 
 267,607,266
 
 116,396,140Oil and liquid sales
 34,866,520
 
 21,913,631
 
 18,676,492Oil and gas subtotal
 847,514,299
 
 289,520,897
 
 135,072,632Administrative services sales
 21,872,401
 
 29,000,109
 
 20,985,911Other sales
 854,832
 
 753,001
 
 1,214,398Holding and others subtotal
 22,727,233
 
 29,753,110
 
 22,200,309Intersegment sales
 15,155,270
 
 11,540,096
 
 7,696,962Total revenue
 7,160,781,433
 
 6,204,645,511
 
 5,334,993,550


(1)Includes revenue from the application of SE Resolution No. 347/12 for $ 535.5 million and $ 508.1 million for the year ended December 31, 2015 and 2014, respectively.









F - 157

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 27: COST OF SALES



12.31.2015
 
 12.31.2014
 
 12.31.2013Inventories at the beginning for the year
 135,570,860
 
 114,615,289
 
 107,342,562Plus: Charges for the yearPurchases of inventories and of energy
 2,112,676,027
 
 1,900,340,148
 
 2,056,829,052Salaries and social security charges
 2,196,486,036
 
 1,628,222,919
 
 975,865,640Fringe benefits
 36,380,012
 
 23,290,505
 
 13,566,377Accrual of defined benefit plans
 96,511,517
 
 58,973,854
 
 25,808,193Fees and compensation for services
 585,998,669
 
 754,831,570
 
 696,973,646Property, plant and equipment depreciations
 640,500,673
 
 401,421,064
 
 309,105,669Intangible assets amortization
 29,462,213
 
 29,462,214
 
 39,481,210Depreciation of biological assets
 40,815
 
 40,815
 
 40,815Gas consumption
 88,382,701
 
 151,533,463
 
 147,490,706Purchase of energy
 212,401,703
 
 243,636,169
 
 546,124,382Fuel consumption
 -
 
 -
 
 29,316,309Transport of energy
 16,277,810
 
 28,166,193
 
 24,815,156Material consumption
 297,102,048
 
 251,200,852
 
 162,592,701Penalties
 260,433,537
 
 245,211,708
 
 305,777,489Fitting oil
 3,471,687
 
 3,399,074
 
 -Maintenance
 127,624,724
 
 84,712,678
 
 100,545,265Canons and Royalties
 138,679,735
 
 67,558,760
 
 45,569,871Gas production
 138,296,404
 
 36,577,860
 
 11,568,867Rental and insurance
 79,417,582
 
 57,523,491
 
 51,611,895Surveillance and security
 52,735,805
 
 35,142,150
 
 22,520,858Taxes, rates and contributions
 24,904,989
 
 14,547,451
 
 16,459,783Communications
 14,551,171
 
 13,770,143
 
 8,189,542Water consumption
 9,327,728
 
 7,073,624
 
 -Other
 21,018,879
 
 13,398,574
 
 20,293,547Subtotal
 5,070,006,438
 
 4,149,695,131
 
 3,553,717,921Less: Inventories at the end of the year
 (225,462,790)
 
 (135,570,860)
 
 (114,615,289)Total cost of sales
 7,092,790,535
 
 6,029,079,708
 
 5,603,274,246






F - 158

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 28: SELLING EXPENSES



12.31.2015
 
 12.31.2014
 
 12.31.2013Salaries and social security charges
 
 
 310,826,478
 
 255,959,037
 
 185,161,944Fringe benefits
 
 
 286,672
 
 182,540
 
 153,771Accrual of defined benefit plans
 
 
 12,331,517
 
 6,869,206
 
 3,727,606Fees and compensation for services
 
 
 332,955,352
 
 264,899,163
 
 200,276,881Compensation agreements
 
 
 74,285,216
 
 19,291,337
 
 1,907,959Property, plant and equipment depreciations
 
 
 34,956,294
 
 18,562,317
 
 9,301,600Taxes, rates and contributions
 
 
 94,902,351
 
 64,474,833
 
 93,399,242Communications
 
 
 58,735,883
 
 39,088,308
 
 32,628,934Penalties
 
 
 24,371,291
 
 18,360,000
 
 52,700,000Doubtful accounts
 
 
 27,316,872
 
 24,717,807
 
 55,653,050Surveillance and security
 
 
 839,450
 
 201,120
 
 552,808Other
 
 
 874,657
 
 754,679
 
 665,637Total selling expenses
 
 
 972,682,033
 
 713,360,347
 
 636,129,432




NOTE 29:ADMINISTRATIVE EXPENSES



12.31.2015
 
 12.31.2014
 
 12.31.2013Salaries and social security charges
 
 
 526,612,767
 
 376,464,741
 
 245,648,385Fringe benefits
 
 
 16,207,755
 
 11,575,551
 
 8,545,262Accrual of defined benefit plans
 
 
 12,935,127
 
 7,320,335
 
 4,218,917Fees and compensation for services
 
 
 293,942,819
 
 220,815,364
 
 140,208,466Compensation agreements
 
 
 100,991,563
 
 25,576,205
 
 6,995,852Director's and Syndicate fees
 
 
 43,748,959
 
 21,605,223
 
 18,819,985Reserve for directors’ options
 
 
 -
 
 6,709,014
 
 8,945,352Property, plant and equipment depreciations
 
 
 15,724,263
 
 17,673,738
 
 15,823,013Intangible assets amortization
 
 
 -
 
 -
 
 1,038,924Material consumption
 
 
 23,047,185
 
 13,122,325
 
 7,737,331Maintenance
 
 
 3,209,269
 
 2,803,699
 
 1,723,604Transport and per diem
 
 
 6,009,626
 
 6,238,351
 
 3,486,066Rental and insurance
 
 
 76,590,708
 
 52,489,107
 
 33,777,439Surveillance and security
 
 
 26,027,785
 
 16,681,972
 
 11,746,010Taxes, rates and contributions
 
 
 45,415,846
 
 26,483,704
 
 32,974,034Communications
 
 
 9,055,126
 
 7,585,001
 
 5,416,538Advertising and promotion
 
 
 19,041,458
 
 10,369,097
 
 7,664,017Other
 
 
 20,825,819
 
 13,945,289
 
 7,103,898Total administrative expenses
 
 
 1,239,386,075
 
 837,458,716
 
 561,873,093










F - 159

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 30: OTHER OPERATING INCOME AND EXPENSES



Other operating income
 Note
 
 12.31.2015
 
 12.31.2014
 
 12.31.2013Insurance recovery
 
 
 43,560
 
 6,358,656
 
 245,975,559Recovery of expenses
 
 
 6,943,308
 
 13,765,053
 
 10,922,850Recovery of receivables
 
 
 1,480,059
 
 51,317,039
 
 4,835,714Recovery of allowance for tax credits
 
 
 494,045
 
 1,375,717
 
 13,751,536Recovery of other operating costs
 
 
 -
 
 -
 
 13,002,003Gain from discharge/cancellation of TGS Loan
 20
 
 215,413,769
 
 -
 
 -Recognition of Agreement March
 
 
 -
 
 -
 
 85,177,042Surplus Gas Injection Compensation Res. No. 1/13
 
 
 546,774,869
 
 127,147,619
 
 22,572,407Income recognition for arbitral proceedings
 37.2
 
 74,770,949
 
 -
 
 -Recovery of tax on gross income
 
 
 -
 
 37,943,970
 
 -Commissions on municipal tax collection
 
 
 14,775,428
 
 12,040,378
 
 8,638,401Dividends earned
 
 
 4,486,563
 
 6,226,319
 
 6,876,038Services to third parties
 
 
 53,621,223
 
 33,304,599
 
 21,699,983Profit of property, plant and equipment sale
 
 
 33,760
 
 5,596,699
 
 403,000Client severance
 
 
 -
 
 5,070,000
 
 -Recovery of penalties
 
 
 7,170,518
 
 -
 
 -Advance payments received for subsidiaries sales agreement
 
 
 -
 
 -
 
 8,868,000Other
 
 
 14,669,985
 
 11,829,808
 
 23,497,497Total other operating income
 
 
 940,678,036
 
 311,975,857
 
 466,220,030Other operating expensesProvision for contingencies
 
 
 (228,150,344)
 
 (96,426,420)
 
 (36,571,446)Voluntary retirements - bonus
 
 
 (43,192,457)
 
 (24,985,431)
 
 (15,875,775)Decrease in property, plant and equipment
 
 
 (8,790,549)
 
 (24,236,319)
 
 (13,807,236)Indemnities
 
 
 (11,801,084)
 
 (8,202,312)
 
 (4,924,296)Decreaeses in intangible assets
 
 
 -
 
 -
 
 (1,188,984)Allowance for uncollectible tax credits
 
 
 (95,329,238)
 
 (4,277,247)
 
 (10,088,463)Net expense for technical functions
 
 
 (12,899,848)
 
 (16,235,590)
 
 (15,540,678)Tax on bank transactions
 
 
 (176,436,692)
 
 (109,751,805)
 
 (84,186,431)Other expenses FOCEDE
 
 
 (59,563,107)
 
 (97,701,000)
 
 -Cost for services provided to third parties
 
 
 (52,420,500)
 
 (25,265,225)
 
 (9,035,156)Other operating costs from contract termination
 
 
 -
 
 (11,366,548)
 
 -Compensation agreements
 
 
 (48,324,168)
 
 (16,678,879)
 
 -Donations and contributions
 
 
 (6,902,455)
 
 (4,674,148)
 
 (3,078,609)Other
 
 
 (10,591,004)
 
 (7,273,952)
 
 (9,814,000)Total other operating expenses
 
 
 (754,401,446)
 
 (447,074,876)
 
 (204,111,074)









F - 160

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 31: FINANCIAL RESULTS



Finance income
 
 12.31.2015
 
 12.31.2014
 
 12.31.2013Commercial interest
 
 238,894,211
 
 222,687,554
 
 93,797,636Financial interest
 
 79,205,929
 
 217,854,220
 
 242,497,529Arbitral proceedings interest
 
 30,408,033
 
 -
 
 -Other interest
 
 19,560
 
 -
 
 -Total finance income
 
 348,527,733
 
 440,541,774
 
 336,295,165Finance expensesCommercial interest (1)
 
 (194,538,860)
 
 (460,787,579)
 
 (337,086,792)Fiscal interest
 
 (74,605,776)
 
 (51,036,110)
 
 (40,861,761)Financial interest
 
 (937,001,529)
 
 (508,127,128)
 
 (415,828,810)Other interest
 
 (1,923,174)
 
 (17,622,416)
 
 (266,289)Taxes and bank commissions
 
 (33,124,914)
 
 (30,042,093)
 
 (15,846,973)Penalties for early repayment of loans
 
 -
 
 (40,391,657)
 
 -Other financial expenses
 
 (16,120,541)
 
 (5,221,923)
 
 (3,985,095)Total financial expenses
 
 (1,257,314,794)
 
 (1,113,228,906)
 
 (813,875,720)Other financial resultsForeign currency exchange difference
 
 (566,172,708)
 
 (761,254,771)
 
 (744,150,070)Result from repurchase of Corporate Bonds
 
 9,904,686
 
 47,122,571
 
 88,879,485Changes in the fair value of financial instruments
 
 2,252,941,696
 
 907,867,357
 
 295,854,837Discounted value measurement
 
 23,228,386
 
 223,304,132
 
 (155,869,735)Asset retirement obligation
 
 (18,899,410)
 
 (47,953)
 
 -Other financial results
 
 (31,636)
 
 3,063,685
 
 (3,975,734)Total other financial results
 
 1,700,971,014
 
 420,055,021
 
 (519,261,217)Total financial results, net
 
 792,183,953
 
 (252,632,111)
 
 (996,841,772)




(1)Net of the profit recorded due to the agreement between CAMMESA and Edenor described in Note 2.3.1.9).



NOTE 32: INCOME TAX

The breakdown of income tax charge is:



Note
 
 12.31.2015
 
 12.31.2014
 
 12.31.2013Current tax
 
 
 370,067,119
 
 40,319,531
 
 29,485,263Deferred tax
 14
 
 162,789,052
 
 34,668,716
 
 (177,697,799)Tax returns amendment adjustment
 
 
 -
 
 -
 
 12,415,095Difference in the estimate of previous fiscal year income tax and the income return
 
 
 (17,177)
 
 (1,731,266)
 
 2,846,486Minimum notional tax
 
 
 53,937,955
 
 27,155,297
 
 15,238,198Discontinued operations
 
 
 -
 
 -
 
 105,533,766Total income tax
 
 
 586,776,949
 
 100,412,278
 
 (12,178,991)









F - 161

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 32:(Continuation)

Below is a reconciliation between income tax expense and the amount resulting from application of the tax rate on the income before taxes:



12.31.2015
 
 12.31.2014
 
 12.31.2013Profit before tax
 
 
 4,435,600,963
 
 629,952,564
 
 729464657Current tax rate
 
 
 35%
 
 35%
 
 35%Result at the tax rate
 
 
 1,552,460,337
 
 220,483,397
 
 255,312,630Share of profit of Joint Ventures and associates
 
 
 229,072
 
 (11,411,154)
 
 899,798Reserve for directors’ options
 
 
 -
 
 2,348,155
 
 3,130,873Non-taxable results
 
 
 (1,045,231,477)
 
 (419,313,741)
 
 (246,305,179)Non-deductible cost
 
 
 12,512,541
 
 4,706,151
 
 23,993,259Non-deductible provisions
 
 
 423,216
 
 3,071,264
 
 -Other
 
 
 (2,463,555)
 
 (205,979)
 
 1,995,728Subtotal
 
 
 517,930,134
 
 (200,321,907)
 
 39,027,109Expiration of tax loss-carryforwards
 
 
 -
 
 145,346
 
 23,260,952Minimun notional income tax credit
 
 
 53,937,955
 
 27,155,297
 
 15,238,198Difference in the estimate of previous fiscal year income tax and the income tax statement
 
 
 45,081,553
 
 (12,252,732)
 
 1,952,401Discontinued operations
 
 
 -
 
 -
 
 105,533,766Tax loss-carryforwards not previously recognized
 
 
 (282,398,102)
 
 (51,584,956)
 
 (385,844,096)Deferred tax assets not recognized
 
 
 252,225,409
 
 337,271,230
 
 188,652,679Total income tax expense
 
 
 586,776,949
 
 100,412,278
 
 (12,178,991)




As of December 31, 2015 and 2014 consolidated accumulated tax losses amount to $ 1,749.9 million and $ 2,023.8 million, respectively, which may be offset, pursuant to the applicable tax laws, with tax profits corresponding to future fiscal years based on the following breakdown:





F - 162

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 32:(Continuation)



Amount to 35%Fiscal year generation
 
 
 Fiscal year prescription
 
 12.31.2015
 
 12.31.20142009
 
 
 2014
 
 -
 
 4,230,6392010
 
 
 2015
 
 -
 
 85,431,3842011
 
 
 2016
 
 23,653,642
 
 77,855,0982012
 
 
 2017
 
 37,298,554
 
 96,415,8822013
 
 
 2018
 
 120,710,479
 
 121,111,9252014
 
 
 2019
 
 153,247,281
 
 323,291,8472015
 
 
 2020
 
 277,560,297
 
 -612,470,253
 
 708,336,775Unrecognized deferred assets
 
 
 
 
 (580,866,040)
 
 (592,961,150)Recognized Tax loss-carryforwards
 
 
 
 
 31,604,213
 
 115,375,625




Due to the uncertainty on whether future tax income may or may not absorb all deferred tax assets, as of December 31, 2015 and 2014 the Company and some subsidiaries have not recorded deferred assets resulting from tax-loss carry-forwards accrued for a total amount of $ 580.9 million and $ 593 million, respectively.



NOTE 33: EARNING (LOSS) PER SHARE



a)Basic



Basic earnings (loss) per share are calculated by dividing the result attributable to the Company’s equity interest holders by the weighted average of outstanding common shares during the year.



b)Diluted

Diluted earnings (loss) per share are calculated by adjusting the weighted average of outstanding common shares to reflect the conversion of all dilutive potential common shares. According as mentioned in Note 41 as of December 31, 2014, the Company had a kind of dilutive potential common shares, which corresponding to share purchase options. As of December 31, 2015 were converted into shares, for which there are no potential dilutive ordinary shares.

Potential common shares will be deemed dilutive only when their conversion into common shares may reduce the earnings per share or increase losses per share of the continuing business. Potential common shares will be deemed anti-dilutive when their conversion into common shares may result in an increase in the earnings per share or a decrease in the losses per share of the continuing operations.





F - 163

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 33:(Continuation)

The calculation of diluted earnings (loss) per share does not entail a conversion, the exercise or another issuance of shares which may have an anti-dilutive effect on the losses per share, or where the option exercise price is higher than the average price of ordinary shares during the period, no dilutive effect is recorded, being the diluted earning (loss) per share equal to the basic. As of December 31, 2015, the diluted earnings per share is equal to basic. Therefore, the basic and diluted results per share are the same for continuing operations during 2013, and for discontinued operations during 2013.



12.31.2015
 
 12.31.2014
 
 12.31.2013Earnings attributable to the equity holders of the Company
 3,065,089,423
 
 743,159,355
 
 371,782,245Weighted average amount of outstanding shares
 1,346,716,389
 
 1,314,310,895
 
 1,314,310,895Basic earnings per share
 2.2760
 
 0.5654
 
 0.2829Earnings attributable to the equity holders of the Company
 3,065,089,423
 
 743,159,355Charge for reserve for directors’ options
 -
 
 6,709,014Earnings attributable to the equity holders of the Company
 3,065,089,423
 
 749,868,369Weighted average amount of outstanding shares
 1,346,716,389
 
 1,314,310,895Adjustments for stock options
 -
 
 161,151,512Weighted average amount of outstanding shares for diluted profit per share
 1,346,716,389
 
 1,475,462,407Diluted earnings per share
 2.2760
 
 0.508212.31.2013(Loss) Earings attributable to the equity holders of the Company for discontinued operations
 
 
 
 
 (85,698,444)Weighted average amount of outstanding shares
 
 
 
 
 1,314,310,895Basic and diluted loss per share from discontinued operations
 
 
 
 
 (0.0652)






NOTE 34: SEGMENT INFORMATION

The Company is engaged in the electricity sector, with a participation in the electricity generation, transmission and distribution segments through different legal entities. As of December 31, 2015, in view of the growth of PEPASA operations, the Company has identified Oil and Gas as a new segment. Therefore, the comparative information by segment has been restated. Accordingly, the following business segments have been identified by means of its subsidiaries and based on the nature, customers and risks involved:

Generation,consisting in direct and indirect equity interest in CPB, CTG, CTLL, HINISA, HIDISA, PACOSA and investments in shares in other companies related to the electricity generation sector.

Transmission, consisting in indirect equity interest through Citelec in Transener and its subsidiaries. For the purposes of presenting segment information the indirect equity interest has been consolidated proportionally.

Distribution, consisting in indirect equity interest in EASA and Edenor. As of December 31, 2013 the Company has deconsolidated AESEBA, classifying their results as discontinued operations.

Oil and gas,consisting in direct participation in PEPASA dedicated to exploration and exploitation of oil and gas.

Holding and others, consisting in financial investment operations, holding, and other businesses.

The Company manages its segments based on the net income level of reporting.





F - 164

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 34:(Continuation)



Consolidated profit and loss information at December 31, 2015
 
 Generation
 
 Transmission
 
 Distribution(1)
 
 Oil and gas
 
 Holding and others
 
 Eliminations
 
 ConsolidatedRevenue
 
 2,473,222,714
 
 968,597,265
 
 3,802,161,917
 
 847,514,299
 
 22,727,233
 
 -
 
 8,114,223,428Intersegment sales
 
 -
 
 4,824,400
 
 -
 
 95,976,534
 
 30,833,245
 
 (111,654,509)
 
 19,979,670Cost of sales
 
 (1,337,465,646)
 
 (666,014,234)
 
 (5,189,018,337)
 
 (660,007,210)
 
 (2,275,876)
 
 95,976,534
 
 (7,758,804,769)Gross profit (loss)
 
 1,135,757,068
 
 307,407,431
 
 (1,386,856,420)
 
 283,483,623
 
 51,284,602
 
 (15,677,975)
 
 375,398,329Selling expenses
 
 (23,489,931)
 
 -
 
 (833,445,076)
 
 (115,743,829)
 
 (3,197)
 
 -
 
 (972,682,033)Administrative expenses
 
 (262,677,837)
 
 (125,593,749)
 
 (711,866,475)
 
 (149,667,556)
 
 (130,743,384)
 
 15,677,975
 
 (1,364,871,026)Other operating income
 
 91,149,862
 
 1,134,357
 
 80,068,901
 
 551,436,292
 
 218,022,982
 
 -
 
 941,812,394Other operating expenses
 
 (79,179,456)
 
 (13,520,651)
 
 (584,329,027)
 
 (84,663,177)
 
 (6,206,344)
 
 -
 
 (767,898,655)Reversal of impairment of property, plant and equipment
 
 25,259,957
 
 -
 
 -
 
 -
 
 -
 
 -
 
 25,259,957Profit from share in joint ventures
 
 -
 
 -
 
 813
 
 -
 
 -
 
 -
 
 813Loss from share in associates
 
 -
 
 -
 
 -
 
 -
 
 (9,932,259)
 
 -
 
 (9,932,259)Operating profit (loss) before higher costs recognition and SE Resolution No. 32/15
 886,819,663
 
 169,427,388
 
 (3,436,427,284)
 
 484,845,353
 
 122,422,400
 
 -
 
 (1,772,912,480)Income recognition on account of the RTI - SE Resolution 32/15
 
 -
 
 -
 
 5,025,113,729
 
 -
 
 -
 
 -
 
 5,025,113,729Higher Costs Recognition - SE Resolution No. 250/13 and subsequent Notes
 -
 
 -
 
 551,498,435
 
 -
 
 -
 
 -
 
 551,498,435Operating profit
 
 886,819,663
 
 169,427,388
 
 2,140,184,880
 
 484,845,353
 
 122,422,400
 
 -
 
 3,803,699,684Financial income
 
 301,521,342
 
 193,761,722
 
 96,225,288
 
 11,871,259
 
 25,524,990
 
 (86,615,146)
 
 542,289,455Financial expenses
 
 (357,519,192)
 
 (62,019,100)
 
 (576,974,728)
 
 (389,374,954)
 
 (20,052,832)
 
 86,615,146
 
 (1,319,325,660)Other financial results
 
 (88,601,258)
 
 (254,679,447)
 
 (870,332,509)
 
 407,959,095
 
 2,251,945,686
 
 -
 
 1,446,291,567Financial results, net
 
 (144,599,108)
 
 (122,936,825)
 
 (1,351,081,949)
 
 30,455,400
 
 2,257,417,844
 
 -
 
 669,255,362Profit before income tax
 
 742,220,555
 
 46,490,563
 
 789,102,931
 
 515,300,753
 
 2,379,840,244
 
 -
 
 4,472,955,046Income tax and minimun notional income tax
 
 (192,388,769)
 
 (18,843,250)
 
 (176,287,828)
 
 (163,563,328)
 
 (54,537,024)
 
 -
 
 (605,620,199)Profit for the year
 
 549,831,786
 
 27,647,313
 
 612,815,103
 
 351,737,425
 
 2,325,303,220
 
 -
 
 3,867,334,847Adjustment non-controlling interest in joint ventures
 
 -
 
 (18,510,833)
 
 -
 
 -
 
 -
 
 -
 
 (18,510,833)Total profit of the year
 
 549,831,786
 
 9,136,480
 
 612,815,103
 
 351,737,425
 
 2,325,303,220
 
 -
 
 3,848,824,014Depreciation and amortization(2)
 
 149,007,354
 
 45,428,820
 
 294,780,551
 
 275,623,108
 
 1,273,245
 
 -
 
 766,113,078










F - 165

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 34:(Continuation)



Consolidated profit and loss information at December 31, 2015
 
 Generation
 
 Transmission
 
 Distribution(1)
 
 Oil and gas
 
 Holding and
others
 
 Eliminations
 
 ConsolidatedTotal profit attributable to:Owners of the Company
 
 496,882,307
 
 9,136,480
 
 59,131,776
 
 174,635,640
 
 2,325,303,220
 
 -
 
 3,065,089,423Non - controlling interest
 
 52,949,479
 
 -
 
 553,683,327
 
 177,101,785
 
 -
 
 -
 
 783,734,591Consolidated statement of financial position as of December 31,2015Assets
 
 8,050,979,733
 
 1,490,947,675
 
 11,736,631,427
 
 3,969,844,749
 
 6,372,205,648
 
 (1,170,875,949)
 
 30,449,733,283Liabilities
 
 5,955,974,665
 
 1,116,402,542
 
 11,672,823,823
 
 3,360,682,807
 
 949,774,248
 
 (1,170,875,949)
 
 21,884,782,136Additional consolidated information as of December 31, 2015Increases in property, plant and equipment
 
 1,515,591,572
 
 142,608,646
 
 2,518,227,142
 
 2,213,604,140
 
 468,641
 
 -
 
 6,390,500,141(1)Includes financial results generated by Corporated Bonds issued by EASA for $ 672.2 million and other consolidation adjustments.(2)Includes amortization and depreciation of property, plant and equipment, intangible assets and biological assets (recognized in cost of sales, administrative expenses and selling expenses).






F - 166

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 34:(Continuation)





Consolidated profit and loss information at December 31, 2014 (restated)
 
 Generation
 
 Transmission
 
 Distribution(1)
 
 Oil and gas
 
 Holding
and others
 
 Eliminations
 
 ConsolidatedRevenue
 
 2,275,455,230
 
 736,960,163
 
 3,598,376,178
 
 289,520,897
 
 29,753,110
 
 -
 
 6,930,065,578Intersegment sales
 
 -
 
 1,484,071
 
 -
 
 67,274,788
 
 37,494,429
 
 (93,229,121)
 
 13,024,167Cost of sales
 
 (1,176,661,033)
 
 (539,700,648)
 
 (4,716,523,920)
 
 (201,174,719)
 
 (1,994,824)
 
 67,274,788
 
 (6,568,780,356)Gross profit (loss)
 
 1,098,794,197
 
 198,743,586
 
 (1,118,147,742)
 
 155,620,966
 
 65,252,715
 
 (25,954,333)
 
 374,309,389Selling expenses
 
 (17,933,800)
 
 -
 
 (658,946,487)
 
 (36,474,776)
 
 (5,284)
 
 -
 
 (713,360,347)Administrative expenses
 
 (200,037,863)
 
 (91,840,829)
 
 (510,281,735)
 
 (71,109,801)
 
 (81,467,335)
 
 25,510,965
 
 (929,226,598)Other operating income
 
 113,410,323
 
 3,866,382
 
 53,172,550
 
 138,863,463
 
 6,529,523
 
 -
 
 315,842,241Other operating expenses
 
 (73,504,738)
 
 (11,449,555)
 
 (319,224,611)
 
 (51,989,531)
 
 (2,339,617)
 
 -
 
 (458,508,052)Reversal of impairment of property, plant and equipment
 
 88,406,704
 
 -
 
 -
 
 -
 
 -
 
 -
 
 88,406,704Profit from share in joint ventures
 
 -
 
 -
 
 4,928
 
 -
 
 -
 
 -
 
 4,928Loss from share in associates
 
 -
 
 -
 
 -
 
 -
 
 (1,605,070)
 
 -
 
 (1,605,070)Operating profit (loss)
 
 1,009,134,823
 
 99,319,584
 
 (2,553,423,097)
 
 134,910,321
 
 (13,635,068)
 
 (443,368)
 
 (1,324,136,805)Higher Costs Recognition - SE Resolution No. 250/13 and subsequent Notes
 
 -
 
 -
 
 2,271,926,952
 
 -
 
 -
 
 -
 
 2,271,926,952Operating profit (loss)
 
 1,009,134,823
 
 99,319,584
 
 (281,496,145)
 
 134,910,321
 
 (13,635,068)
 
 (443,368)
 
 947,790,147Financial income
 
 240,948,678
 
 226,124,624
 
 238,973,376
 
 12,933,722
 
 13,102,465
 
 (65,416,467)
 
 666,666,398Financial expenses
 
 (310,774,890)
 
 (59,393,142)
 
 (692,484,612)
 
 (176,669,084)
 
 849,632
 
 65,859,835
 
 (1,172,612,261)Other financial results
 
 (82,259,803)
 
 (142,011,652)
 
 (528,135,412)
 
 122,981,107
 
 907,469,129
 
 -
 
 278,043,369Financial results, net
 
 (152,086,015)
 
 24,719,830
 
 (981,646,648)
 
 (40,754,255)
 
 921,421,226
 
 443,368
 
 (227,902,494)Profit (Loss) before income tax
 
 857,048,808
 
 124,039,414
 
 (1,263,142,793)
 
 94,156,066
 
 907,786,158
 
 -
 
 719,887,653Income tax and minimun notional income tax
 
 (224,090,358)
 
 (51,421,728)
 
 161,758,063
 
 (10,236,836)
 
 (27,843,149)
 
 -
 
 (151,834,008)Profit (Loss) for the year
 
 632,958,450
 
 72,617,686
 
 (1,101,384,730)
 
 83,919,230
 
 879,943,009
 
 -
 
 568,053,645Adjustment non-controlling interest in joint ventures
 
 -
 
 (38,513,359)
 
 -
 
 -
 
 -
 
 -
 
 (38,513,359)Total profit (loss) of the year
 
 632,958,450
 
 34,104,327
 
 (1,101,384,730)
 
 83,919,230
 
 879,943,009
 
 -
 
 529,540,286Depreciation and amortization(2)
 
 134,205,042
 
 43,187,056
 
 251,012,741
 
 80,908,481
 
 1,033,884
 
 -
 
 510,347,204








F - 167

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 34:(Continuation)



Consolidated profit and loss information at December 31, 2014 (restated)
 
 Generation
 
 Transmission
 
 Distribution(1)
 
 Oil and gas
 
 Holding
and others
 
 Eliminations
 
 ConsolidatedTotal profit (loss) attributable to:Owners of the Company
 
 529,325,836
 
 34,104,327
 
 (742,146,551)
 
 41,932,734
 
 879,943,009
 
 -
 
 743,159,355Non - controlling interest
 
 103,632,614
 
 -
 
 (359,238,179)
 
 41,986,496
 
 -
 
 -
 
 (213,619,069)Consolidated statement of financial position as of December 31, 2014 (restated)Assets
 
 5,152,601,934
 
 1,244,965,218
 
 8,066,880,278
 
 1,489,301,207
 
 2,887,803,792
 
 (910,030,330)
 
 17,931,522,099Liabilities
 
 3,547,364,693
 
 900,141,394
 
 8,616,187,612
 
 1,231,876,690
 
 827,710,323
 
 (910,030,330)
 
 14,213,250,382Additional consolidated information as of December 31, 2014 (restated)Increases of property, plant and equipment
 
 387,045,008
 
 196,277,070
 
 1,701,773,299
 
 618,844,913
 
 1,514,837
 
 -
 
 2,905,455,127(1)Includes financial results generated by Corporated Bonds issued by EASA for $ 312,2 million and other consolidation adjustments.(2)Includes amortization and depreciation of property, plant and equipment, intangible assets and biological assets (recognized in cost of sales, administrative expenses and selling expenses).










F - 168

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 34:(Continuation)



Consolidated profit and loss information at December 31, 2013 (restated)
 
 Generation
 
 Transmission
 
 Distribution(1)
 
 Oil and gas
 
 Holding 
and others
 
 Eliminations
 
 ConsolidatedRevenue
 
 1,729,333,146
 
 435,300,074
 
 3,440,690,501
 
 135,072,632
 
 22,200,309
 
 -
 
 5,762,596,662Intersegment sales
 
 2,002,563
 
 1,580,605
 
 -
 
 35,052,611
 
 21,686,380
 
 (51,044,592)
 
 9,277,567Cost of sales
 
 (1,426,829,452)
 
 (393,694,193)
 
 (4,122,453,202)
 
 (88,199,812)
 
 (844,391)
 
 35,052,611
 
 (5,996,968,439)Gross profit (loss)
 
 304,506,257
 
 43,186,486
 
 (681,762,701)
 
 81,925,431
 
 43,042,298
 
 (15,991,981)
 
 (225,094,210)Selling expenses
 
 (78,522,087)
 
 -
 
 (549,142,696)
 
 (8,464,649)
 
 -
 
 -
 
 (636,129,432)Administrative expenses
 
 (139,046,394)
 
 (67,703,269)
 
 (332,572,593)
 
 (26,065,746)
 
 (78,118,032)
 
 13,989,418
 
 (629,516,616)Other operating income
 
 363,356,067
 
 9,677,530
 
 62,289,569
 
 32,822,400
 
 7,750,190
 
 -
 
 475,895,756Other operating expenses
 
 (47,465,615)
 
 (7,057,780)
 
 (143,441,679)
 
 (6,755,323)
 
 (6,433,872)
 
 -
 
 (211,154,269)Profit from share in joint ventures
 
 -
 
 -
 
 4,682
 
 -
 
 -
 
 -
 
 4,682Loss from share in associates
 
 -
 
 -
 
 -
 
 -
 
 2,228,499
 
 -
 
 2,228,499Operating profit (loss)
 
 402,828,228
 
 (21,897,033)
 
 (1,644,625,418)
 
 73,462,113
 
 (31,530,917)
 
 (2,002,563)
 
 (1,223,765,590)Higher Costs Recognition - SE Resolution No. 250/13 and subsequent Notes
 
 -
 
 -
 
 2,933,051,544
 
 -
 
 -
 
 -
 
 2,933,051,544Operating profit (loss)
 
 402,828,228
 
 (21,897,033)
 
 1,288,426,126
 
 73,462,113
 
 (31,530,917)
 
 (2,002,563)
 
 1,709,285,954Financial income
 
 63,949,836
 
 172,978,880
 
 287,067,095
 
 2,095,270
 
 4,503,972
 
 (21,321,008)
 
 509,274,045Financial expenses
 
 (216,444,762)
 
 (41,928,248)
 
 (565,770,281)
 
 (60,073,397)
 
 7,130,820
 
 21,293,461
 
 (855,792,407)Other financial results
 
 (437,463,117)
 
 (114,902,206)
 
 (425,491,481)
 
 25,943,514
 
 317,749,867
 
 -
 
 (634,163,423)Financial results, net
 
 (589,958,043)
 
 16,148,426
 
 (704,194,667)
 
 (32,034,613)
 
 329,384,659
 
 (27,547)
 
 (980,681,785)(Loss) Profit before income tax
 
 (187,129,815)
 
 (5,748,607)
 
 584,231,459
 
 41,427,500
 
 297,853,742
 
 (2,030,110)
 
 728,604,169Income tax and minimun notional income tax
 
 (20,682,593)
 
 832,623
 
 52,724,268
 
 (4,178,328)
 
 (15,684,356)
 
 -
 
 13,011,614(Loss) Profit for the year
 
 (207,812,408)
 
 (4,915,984)
 
 636,955,727
 
 37,249,172
 
 282,169,386
 
 (2,030,110)
 
 741,615,783Discontinued operations
 
 -
 
 -
 
 (128,888,438)
 
 -
 
 -
 
 2,030,110
 
 (126,858,328)Adjustment non-controlling interest in joint ventures
 
 -
 
 27,865
 
 -
 
 -
 
 -
 
 -
 
 27,865Total (loss) profit of the year
 
 (207,812,408)
 
 (4,888,119)
 
 508,067,289
 
 37,249,172
 
 282,169,386
 
 -
 
 614,785,320Depreciation and amortization(2)
 
 107,730,568
 
 41,944,731
 
 230,060,227
 
 35,886,233
 
 1,114,203
 
 -
 
 416,735,962




F - 169

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 34:(Continuation)



Consolidated profit and loss information at December 31, 2013 (restated)
 
 Generation
 
 Transmission
 
 Distribution(1)
 
 Oil and gas
 
 Holding 
and others
 
 Eliminations
 
 ConsolidatedTotal (loss) profit attributable to:Owners of the Company
 
 (191,916,592)
 
 (4,888,119)
 
 163,469,954
 
 37,249,172
 
 282,169,386
 
 -
 
 286,083,801Non - controlling interest
 
 (15,895,816)
 
 -
 
 344,597,335
 
 -
 
 -
 
 -
 
 328,701,519Consolidated statement of financial position as of December 31, 2013 (restated)Assets
 
 3,714,900,214
 
 963,993,871
 
 6,971,553,493
 
 560,698,328
 
 1,623,089,057
 
 (455,870,761)
 
 13,378,364,202Liabilities
 
 2,713,844,869
 
 687,818,246
 
 6,434,706,032
 
 486,540,541
 
 508,493,445
 
 (455,870,761)
 
 10,375,532,372Additional consolidated information as of December 31, 2013 (restated)Increases of property, plant and equipment
 
 50,790,025
 
 108,370,673
 
 1,092,342,662
 
 129,759,923
 
 10,631,860
 
 -
 
 1,391,895,143(1)Includes financial results generated by financial debt issued by EASA for Ps. 130.3 million and other consolidation adjustments.(2)Includes amortizations and depreciation of fixed assets and intangible assets (recognized in cost of sales, administrative expenses and selling expenses).










F - 170

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)
 NOTE 34:(Continuation)  Accounting criteria used by the subsidiaries to measure of results, assets and liabilities of the segments is consistent with that used in the financial statements. Transactions between different segments are conducted under market conditions. Assets and liabilities are allocated based on the segment’s activity.  The segment called “Electricity transmission”, which corresponds to the Company’s indirect interest in Citelec and its subsidiaries, has been included as a reportable segment since it is considered as such in the reports received by the Executive Director. Since the stake in such companies constitutes an interest in a joint venture, it is not consolidated and it is valued according to the equity method of accounting in the consolidated Statement of Income and Financial position.  The reconciliation between the segment information and the statement of comprehensive income (loss) is presented below:   Consolidated profit and loss information at December 31, 2015
 
 Segment
information
 
 Results from
interest in joint
ventures
 
 Consolidated
comprehensive
total incomeRevenue
 
 8,114,223,428
 
 (968,597,265)
 
 7,145,626,163Intersegment sales
 
 19,979,670
 
 (4,824,400)
 
 15,155,270Cost of sales
 
 (7,758,804,769)
 
 666,014,234
 
 (7,092,790,535)Gross profit (loss)
 
 375,398,329
 
 (307,407,431)
 
 67,990,898Selling expenses
 
 (972,682,033)
 
 -
 
 (972,682,033)Administrative expenses
 
 (1,364,871,026)
 
 125,484,951
 
 (1,239,386,075)Other operating income
 
 941,812,394
 
 (1,134,358)
 
 940,678,036Other operating expenses
 
 (767,898,655)
 
 13,497,209
 
 (754,401,446)Reversal of impairment of property, plant and equipment
 
 25,259,957
 
 -
 
 25,259,957Profit from share in joint ventures
 
 813
 
 9,276,955
 
 9,277,768Loss from share in associates
 
 (9,932,259)
 
 -
 
 (9,932,259)Operating loss before higher costs recognition and SE Resolution No. 32/15
 
 (1,772,912,480)
 
 (160,282,674)
 
 (1,933,195,154)Income recognition on account of the RTI - SE Resolution 32/15
 
 5,025,113,729
 
 -
 
 5,025,113,729Higher Costs Recognition - SE Resolution No. 250/13 and subsequent Notes
 
 551,498,435
 
 -
 
 551,498,435Operating profit (loss)
 
 3,803,699,684
 
 (160,282,674)
 
 3,643,417,010Financial income
 
 542,289,455
 
 (193,761,722)
 
 348,527,733Financial expenses
 
 (1,319,325,660)
 
 62,010,866
 
 (1,257,314,794)Other financial results
 
 1,446,291,567
 
 254,679,447
 
 1,700,971,014Financial results, net
 
 669,255,362
 
 122,928,591
 
 792,183,953Profit (Loss) before income tax
 
 4,472,955,046
 
 (37,354,083)
 
 4,435,600,963Income tax and minimun notional income tax
 
 (605,620,199)
 
 18,843,250
 
 (586,776,949)Profit (Loss) for the year
 
 3,867,334,847
 
 (18,510,833)
 
 3,848,824,014Adjustment non-controlling interest in Joint Ventures
 
 (18,510,833)
 
 18,510,833
 
 -Profit for the year
 
 3,848,824,014
 
 -
 
 3,848,824,014Depreciation and amortization
 
 766,113,078
 
 (45,428,820)
 
 720,684,258


F - 171

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 34:(Continuation)





Consolidated statement of financial position as of December 31,2015
 
 Segment information
 
 Assets and liabilities from interest in joint ventures
 
 Consolidated Statements of financial positionAssets
 
 30,449,733,283
 
 (1,300,124,175)
 
 29,149,609,108Liabilities
 
 21,884,782,136
 
 (1,116,371,280)
 
 20,768,410,856Additional consolidated information as of December 31, 2015
 
 Segment information
 
 Increases in property, plant and equipment from interest in joint ventures
 
 Note 10Increases in property, plant and equipment
 
 6,390,500,141
 
 (142,608,646)
 
 6,247,891,495






Consolidated statement of financial position as of December 31, 2014 (restated)
 
 Segment
information
 
 Results from
interest in joint
ventures
 
 Consolidated
comprehensive
total incomeRevenue
 
 6,930,065,578
 
 (736,960,163)
 
 6,193,105,415Intersegment sales
 
 13,024,167
 
 (1,484,071)
 
 11,540,096Cost of sales
 
 (6,568,780,356)
 
 539,700,648
 
 (6,029,079,708)Gross profit (loss)
 
 374,309,389
 
 (198,743,586)
 
 175,565,803Selling expenses
 
 (713,360,347)
 
 -
 
 (713,360,347)Administrative expenses
 
 (929,226,598)
 
 91,767,882
 
 (837,458,716)Other operating income
 
 315,842,241
 
 (3,866,384)
 
 311,975,857Other operating expenses
 
 (458,508,052)
 
 11,433,176
 
 (447,074,876)Reversal of impairment of property, plant and equipment
 
 88,406,704
 
 -
 
 88,406,704Profit from share in joint ventures
 
 4,928
 
 34,203,440
 
 34,208,368Loss from share in associates
 
 (1,605,070)
 
 -
 
 (1,605,070)Operating profit (loss) before higher costs recognition and SE Resolution No. 32/15
 
 (1,324,136,805)
 
 (65,205,472)
 
 (1,389,342,277)Higher Costs Recognition - SE Resolution No. 250/13 and subsequent Notes SE No. 6852/13 and 4012/14
 2,271,926,952
 
 -
 
 2,271,926,952Operating profit (loss)
 
 947,790,147
 
 (65,205,472)
 
 882,584,675Financial income
 
 666,666,398
 
 (226,124,624)
 
 440,541,774Financial expenses
 
 (1,172,612,261)
 
 59,383,355
 
 (1,113,228,906)Other financial results
 
 278,043,369
 
 142,011,652
 
 420,055,021Financial results, net
 
 (227,902,494)
 
 (24,729,617)
 
 (252,632,111)Profit before income tax
 
 719,887,653
 
 (89,935,089)
 
 629,952,564Income tax and minimun notional income tax
 
 (151,834,008)
 
 51,421,730
 
 (100,412,278)Profit for the year
 
 568,053,645
 
 (38,513,359)
 
 529,540,286Adjustment non-controlling interest in joint ventures
 
 (38,513,359)
 
 38,513,359
 
 -Total profit of the year
 
 529,540,286
 
 -
 
 529,540,286Depreciation and amortization(2)
 
 510,347,204
 
 (43,187,056)
 
 467,160,148






Consolidated profit and loss information at December 31, 2014 (restated)
 
 Segment
information
 
 Assets and liabilities from interest in joint ventures
 
 Consolidated Statements of financial positionAssets
 
 17,931,522,099
 
 (1,064,548,738)
 
 16,866,973,361Liabilities
 
 14,213,250,382
 
 (900,116,036)
 
 13,313,134,346Additional consolidated information as of December 31, 2014 (restated)
 
 Segment
information
 
 Increases in property, plant and equipment from interest in joint ventures
 
 Note 10Increases in property, plant and equipment
 
 2,905,455,127
 
 (196,277,070)
 
 2,709,178,057










F - 172

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 34:(Continuation)









Consolidated statement of financial position as of December 31, 2013 (restated)
 
 Segment information
 
 Results from interest in joint ventures
 
 Consolidated comprehensive total incomeRevenue
 
 5.762.596.662
 
 (435.300.074)
 
 5.327.296.588Intersegment sales
 
 9.277.567
 
 (1.580.605)
 
 7.696.962Cost of sales
 
 (5.996.968.439)
 
 393.694.193
 
 (5.603.274.246)Gross profit (loss)
 
 (225.094.210)
 
 (43.186.486)
 
 (268.280.696)Selling expenses
 
 (636.129.432)
 
 -
 
 (636.129.432)Administrative expenses
 
 (629.516.616)
 
 67.643.523
 
 (561.873.093)Other operating income
 
 475.895.756
 
 (9.675.726)
 
 466.220.030Other operating expenses
 
 (211.154.269)
 
 7.043.195
 
 (204.111.074)Profit from share in joint ventures
 
 4.682
 
 (4.804.031)
 
 (4.799.349)Loss from share in associates
 
 2.228.499
 
 -
 
 2.228.499Operating (loss) profit before higher costs recognition and SE Resolution No. 32/15
 
 (1.223.765.590)
 
 17.020.475
 
 (1.206.745.115)Higher Costs Recognition - SE Resolution No. 250/13 and subsequent Notes SE No. 6852/13 and 4012/14
 
 2.933.051.544
 
 -
 
 2.933.051.544Operating profit
 
 1.709.285.954
 
 17.020.475
 
 1.726.306.429Financial income
 
 509.274.045
 
 (172.978.880)
 
 336.295.165Financial expenses
 
 (855.792.407)
 
 41.916.687
 
 (813.875.720)Other financial results
 
 (634.163.423)
 
 114.902.206
 
 (519.261.217)Financial results, net
 
 (980.681.785)
 
 (16.159.987)
 
 (996.841.772)Profit before income tax
 
 728.604.169
 
 860.488
 
 729.464.657Income tax and minimun notional income tax
 
 13.011.614
 
 (832.623)
 
 12.178.991Profit for the year
 
 741.615.783
 
 27.865
 
 741.643.648Discontinued operations
 
 (126.858.328)
 
 -
 
 (126.858.328)Adjustment non-controlling interest in joint ventures
 
 27.865
 
 (27.865)
 
 -Total profit of the year
 
 614.785.320
 
 -
 
 614.785.320Depreciation and amortization(2)
 
 416.735.962
 
 (41.944.731)
 
 374.791.231Consolidated profit and loss information at December 31, 2013 (restated)
 
 Segment information
 
 Assets and liabilities from interest in joint ventures
 
 Consolidated Statements of financial positionAssets
 
 13.378.364.202
 
 (815.809.970)
 
 12.562.554.232Liabilities
 
 10.375.532.372
 
 (687.800.243)
 
 9.687.732.129Additional consolidates information as of December 31, 2013 (restated)
 
 Segment information
 
 Increases in property, plant and equipment from interest in joint ventures
 
 Note 10Increases in property, plant and equipment
 
 1.391.895.143
 
 (108.370.673)
 
 1.283.524.470






















F - 173

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 35:RELATED PARTIES ́ TRANSACTIONS



a)Sales of goods and services



12.31.2015
 
 12.31.2014
 
 
 12.31.2013Joint venturesTransener
 
 15,155,270
 
 11,540,096
 
 
 7,696,962-
 
 -Other related partiesTGS
 
 40,479,980
 
 30,259,816
 
 
 -CYCSA
 
 1,560,000
 
 1,195,488
 
 
 1,095,864Grupo Dolphin
 
 -
 
 41,382
 
 
 -57,195,250
 
 43,036,782
 
 
 8,792,826




Corresponds to gas sale, advisory services in technical assistance for the operation, maintenance and management of the transport system of high-voltage electricity.



b)Purchases of goods and services



12.31.2015
 
 12.31.2014
 
 
 12.31.2013Joint venturesTransener
 
 (4,824,400)
 
 (1,484,071)
 
 
 (1,580,605)Other related partiesSACME
 
 (27,331,368)
 
 (19,605,316)
 
 
 (14,744,698)TGS
 
 (3,147,821)
 
 (3,754,792)
 
 
 -(35,303,589)
 
 (24,844,179)
 
 
 (16,325,303)






Corresponds to maintenance, operation and monitoring of the system for transmitting electricity.





c)Fees for services



12.31.2015
 
 12.31.2014
 
 
 12.31.2013Other related partiesSalaverri, Dellatorre, Burgio & Wetzler
 
 (802,748)
 
 (1,262,984)
 
 
 (1,596,860)(802,748)
 
 (1,262,984)
 
 
 (1,596,860)




Corresponds to fees for legal advice.









F - 174

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 35:(Continuation)



d)Other operating income



12.31.2015
 
 12.31.2014
 
 
 12.31.2013Other related partiesTGS
 
 215,413,769
 
 -
 
 
 -CYCSA
 
 6,187,905
 
 5,018,436
 
 
 3,857,297PYSSA
 
 -
 
 2,100
 
 
 -221,601,674
 
 5,020,536
 
 
 3,857,297




Corresponds to offsetting of rights over arbitration proceedings against loans and royalties for the use of the distribution network.



e)Other operating expenses



12.31.2015
 
 12.31.2014
 
 
 12.31.2013Other related partiesFundación
 
 (3,490,000)
 
 (3,370,000)
 
 
 (2,600,000)(3,490,000)
 
 (3,370,000)
 
 
 (2,600,000)




Corresponds to donations.



f)Financial expenses



12.31.2015
 
 12.31.2014
 
 
 12.31.2013Other related partiesPYSSA
 
 (89,071)
 
 (89,819)
 
 
 (94,822)TGS
 
 (11,789,035)
 
 (14,309,650)
 
 
 (9,654,462)Orígenes Retiro
 
 (44,971,678)
 
 (45,032,366)
 
 
 -(56,849,784)
 
 (59,431,835)
 
 
 (9,749,284)




Corresponds mainly to interest on loans received.

g)Capital Subscription



12.31.2015
 
 12.31.2014
 
 
 12.31.2013Joint venturesCitelec
 
 475,000
 
 -
 
 
 1,198,435475,000
 
 -
 
 
 1,198,435




h)Reserve for directors’ options

**



12.31.2015
 
 12.31.2014
 
 
 12.31.2013Other related partiesDirectores
 
 -
 
 6,709,014
 
 
 8,945,352-
 
 6,709,014
 
 
 8,945,352










F - 175

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 35:(Continuation)



i)Corporate Bonds transactions



12.31.2015
 
 12.31.2014
 
 
 12.31.2013Other related partiesOrígenes Retiro
 
 3,121,084
 
 6,460,000
 
 
 -3,121,084
 
 6,460,000
 
 
 -






j)Other financial results





12.31.2015
 
 12.31.2014
 
 
 12.31.2013Other related partiesCYCSA
 
 12,025,000
 
 -
 
 
 -12,025,000
 
 -
 
 
 -




Corresponds to the valuation of derivative financial instruments.



k)Key management personnel remuneration



The total remuneration to executive directors accrued during the year ended December 31, 2015,2014 and 2013 amounts to $ 267.3 million ($ 43.7 million in Directors' and Sindycs' fees and $ 223.6 in the accrual of the Company-Value Compensation and EBDA), $ 88.8 million ($ 20.6 million in Directors' and Sindycs' fees $ 6.7 in the accrual of reserves of share based payments and $ 61.5 in the accrual of the Company-Value Compensation and EBDA) and $ 36.6 million ($ 18.8 million in Directors' and Sindycs' fees $ 8.9 in the accrual of reserves of share based payments and $ 8.9 in the accrual of the Company-Value Compensation and EBDA) respectively.









F - 176

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 35:(Continuation)



l)Balances with related parties:

**



As of December 31, 2015
 
 Trade receivables
 
 Other receivablesCurrent
 
 Non Current
 
 CurrentJoint ventures:Transener
 
 5,832,549
 
 -
 
 -Other related parties:CYCSA
 
 471,900
 
 -
 
 6,406,202PYSSA
 
 -
 
 -
 
 7,510Fundación
 
 -
 
 -
 
 300,000SACME
 
 -
 
 7,064,978
 
 661,802Grupo Dolphin
 
 -
 
 -
 
 8,757Ultracore
 
 -
 
 -
 
 2,071,475TGS
 
 426,410
 
 -
 
 5,270,3226,730,859
 
 7,064,978
 
 14,726,068






As of December 31, 2015
 
 Trade
payables
 
 Others
payables
 
 BorrowingsCurrent
 
 Current
 
 Current
 
 Non CurrentJoint ventures:Transener
 
 1,513,486
 
 -
 
 -
 
 -Other related parties:CYCSA
 
 -
 
 116,595,124
 
 -
 
 -PYSSA
 
 -
 
 -
 
 -
 
 -SACME
 
 -
 
 3,446,742
 
 -
 
 -Grupo Dolphin
 
 -
 
 16,767
 
 -
 
 -Orígenes Retiro
 
 -
 
 -
 
 179,600,083
 
 21,092,258TGS
 
 343,439
 
 -
 
 -
 
 -UTE Apache
 
 -
 
 4,622,080
 
 -
 
 -1,856,925
 
 124,680,713
 
 179,600,083
 
 21,092,258






As of December 31, 2014
 
 Trade
receivables
 
 Other receivablesCurrent
 
 Non Current
 
 CurrentJoint ventures:Citelec
 
 -
 
 -
 
 250,000Transener
 
 3,539,690
 
 -
 
 -Other related parties:CYCSA
 
 241,090
 
 -
 
 170,051Ultracore
 
 -
 
 -
 
 942,506SACME
 
 -
 
 7,366,313
 
 666,344Directors
 
 -
 
 -
 
 4,344,050TGS
 
 5,846,235
 
 -
 
 3,449,0399,627,015
 
 7,366,313
 
 9,821,990










F - 177

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 35:(Continuation)





As of December 31, 2014
 
 Trade
payables
 
 Others
payables
 
 BorrowingsCurrent
 
 Current
 
 Current
 
 Non CurrentJoint ventures:Transener
 
 163,093
 
 -
 
 -
 
 -Other related parties:SACME
 
 -
 
 2,705,669
 
 -
 
 -Orígenes Retiro
 
 -
 
 -
 
 -
 
 193,403,000TGS
 
 221,441
 
 -
 
 269,697,740
 
 -384,534
 
 2,705,669
 
 269,697,740
 
 193,403,000






NOTE 36: FINANCIAL INSTRUMENTS



The following chart presents financial instruments by category:



As of December 31, 2015
 
 Financial
assets/liabilities
at amortized cost
 
 Financial
assets/liabilities
at fair value through profit and losss
 
 Subtotal
financial
assets/liabilities
 
 Non financial
assets/liabilities
 
 TotalAssetsTrade receivables and other receivables
 5,017,249,072
 
 290,662,529
 
 5,307,911,601
 
 796,131,220
 
 6,104,042,821Financial assets at fair value through profit and lossGovernment securities
 
 -
 
 1,590,353,006
 
 1,590,353,006
 
 -
 
 1,590,353,006Corporate securities
 
 -
 
 13,428,727
 
 13,428,727
 
 -
 
 13,428,727Trusts
 
 -
 
 2,554,544,826
 
 2,554,544,826
 
 -
 
 2,554,544,826Shares
 
 -
 
 70,805
 
 70,805
 
 -
 
 70,805Investment funds
 
 -
 
 2,500,804,849
 
 2,500,804,849
 
 -
 
 2,500,804,849Derivative financial instruments
 
 -
 
 197,150
 
 197,150
 
 -
 
 197,150Cash and cash equivalents
 
 423,110,047
 
 93,487,871
 
 516,597,918
 
 -
 
 516,597,918Total
 
 5,440,359,119
 
 7,043,549,763
 
 12,483,908,882
 
 796,131,220
 
 13,280,040,102LiabilitiesTrade and other liabilities
 
 7,120,712,793
 
 -
 
 7,120,712,793
 
 2,230,542,573
 
 9,351,255,366Borrowings
 
 7,992,409,113
 
 -
 
 7,992,409,113
 
 -
 
 7,992,409,113Derivative financial instruments
 
 -
 
 18,081,410
 
 18,081,410
 
 -
 
 18,081,410Total
 
 15,113,121,906
 
 18,081,410
 
 15,131,203,316
 
 2,230,542,573
 
 17,361,745,889










F - 178

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 36:(Continuation)





As of December 31, 2014
 
 Financial
assets/liabilities
at amortized cost
 
 Financial
assets/liabilities
at fair value through profit and losss
 
 Subtotal
financial
assets/liabilities
 
 Non financial
assets/liabilities
 
 TotalAssetsTrade receivables and other receivables
 3,294,835,322
 
 53,238,417
 
 3,348,073,739
 
 510,181,149
 
 3,858,254,888Financial assets at fair value through profit and lossGovernment securities
 
 -
 
 237,068,910
 
 237,068,910
 
 -
 
 237,068,910Corporate securities
 
 -
 
 505,553
 
 505,553
 
 -
 
 505,553Trusts
 
 -
 
 962,942,332
 
 962,942,332
 
 -
 
 962,942,332Shares
 
 -
 
 61,700,114
 
 61,700,114
 
 -
 
 61,700,114Investment funds
 
 -
 
 729,373,180
 
 729,373,180
 
 -
 
 729,373,180Cash and cash equivalents
 
 199,697,527
 
 135,536,579
 
 335,234,106
 
 -
 
 335,234,106Total
 
 3,494,532,849
 
 2,180,365,085
 
 5,674,897,934
 
 510,181,149
 
 6,185,079,083LiabilitiesTrade and other liabilities
 
 4,805,459,080
 
 -
 
 4,805,459,080
 
 1,640,446,064
 
 6,445,905,144Borrowings
 
 4,570,571,693
 
 -
 
 4,570,571,693
 
 -
 
 4,570,571,693Derivative financial instruments
 
 -
 
 47,880,462
 
 47,880,462
 
 
 
 47,880,462Total
 
 9,376,030,773
 
 47,880,462
 
 9,423,911,235
 
 1,640,446,064
 
 11,064,357,299




The categories of financial instruments have been determined according to IFRS 9.

The income, expenses, gains and losses derived from each of the financial instrument categories are indicated below:



As of December 31, 2015
 
 Financial
assets/liabilities
at amortized cost
 
 Financial
assets/liabilities
at fair value through profit and losss
 
 Subtotal
financial
assets/liabilities
 
 Non Financial
assets/ liabilities
 
 TotalInterest income
 
 326,131,437
 
 22,396,296
 
 348,527,733
 
 -
 
 348,527,733Interest expense
 
 (1,137,115,526)
 
 -
 
 (1,137,115,526)
 
 (70,953,813)
 
 (1,208,069,339)Foreign exchange, net
 
 (1,026,680,876)
 
 460,508,168
 
 (566,172,708)
 
 -
 
 (566,172,708)Results from financial instruments at fair value
 -
 
 2,252,941,696
 
 2,252,941,696
 
 -
 
 2,252,941,696Other financial results
 
 (17,547,111)
 
 1,403,092
 
 (16,144,019)
 
 (18,899,410)
 
 (35,043,429)Total
 
 (1,855,212,076)
 
 2,737,249,252
 
 882,037,176
 
 (89,853,223)
 
 792,183,953As of December 31, 2014
 
 Financial
assets/liabilities
at amortized cost
 
 Financial
assets/liabilities
at fair value with changes in profit and losss
 
 Subtotal
financial
assets/liabilities at amortized cost
 
 Non Financial
assets/ liabilities
at amortized cost
 
 TotalInterest income
 
 421,578,000
 
 18,963,774
 
 440,541,774
 
 -
 
 440,541,774Interest expense
 
 (969,307,212)
 
 -
 
 (969,307,212)
 
 (68,266,021)
 
 (1,037,573,233)Foreign exchange, net
 
 (955,452,688)
 
 194,197,917
 
 (761,254,771)
 
 -
 
 (761,254,771)Results from financial instruments at fair value,
 -
 
 907,867,357
 
 907,867,357
 
 -
 
 907,867,357Other financial results
 
 195,910,702
 
 -
 
 195,910,702
 
 1,876,060
 
 197,786,762Total
 
 (1,307,271,198)
 
 1,121,029,048
 
 (186,242,150)
 
 (66,389,961)
 
 (252,632,111)As of December 31, 2013
 
 Financial assets/liabilities at amortized cost
 
 Financial assets/liabilities at fair value through profit and losss
 
 Subtotal financial assets/liabilities at amortized cost
 
 Non Financial assets/ liabilities at amortized cost
 
 TotalInterest income
 
 297.026.738
 
 39.268.427
 
 336.295.165
 
 -
 
 336.295.165Interest expense
 
 (753.181.891)
 
 -
 
 (753.181.891)
 
 (40.861.761)
 
 (794.043.652)Foreign exchange, net
 
 (856.896.878)
 
 116.878.477
 
 (740.018.401)
 
 (4.131.669)
 
 (744.150.070)Results from financial instruments at fair value
 
 2.277.047
 
 293.577.790
 
 295.854.837
 
 -
 
 295.854.837Other financial results
 
 (88.986.917)
 
 58.220
 
 (88.928.697)
 
 (1.869.355)
 
 (90.798.052)Total
 
 (1.399.761.901)
 
 449.782.914
 
 (949.978.987)
 
 (46.862.785)
 
 (996.841.772)










F - 179

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 37: CONTINGENCIES



37.1 CTG

Legal proceeding with DESA

DESA filed a complaint against CTG seeking to enforce performance of a contract entered into between the parties and to collect differences in the settlement of fees paid to the plaintiff pursuant to this contract.

After a long judicial proceeding with wholly contradictory Court judgments, on April 15, 2014 and in view of the course of the litigation during the year 2014, CTG’s management decided to put an end to the dispute with DESA by executing a settlement agreement whereby it paid the amount of $ 15 million plus VAT to DESA and the amount of $ 3.8 million plus VAT to the intervening Law Office.

Termination of the reorganization proceeding

On September 24, 2014, CTG was served notice of a judicial order passed on June 30, 2014 and its explanatory order passed in September declaring the termination of the reorganization proceeding pursuant to Section 59 of Bankruptcy Act No. 24,522 and its amending provisions. Within this context, the judge ordered the lifting of the general restraint overgoods, the termination of the statutory auditors’ duties and the fixing of their professional fees in the amount of $ 1.6 million plus VAT. Statutory auditors have expressed their consent to this order, which is thus deemed final and conclusive. CTG has appealed the high statutory auditors’ fees having, the last one, answered the transfer of the corresponding grievances. It is pending of resolution.









F - 180

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 37:(Continuation)



37.2 CTLL



Legal action for breach of the joint venture formed by Isolux Corsan Argentina SA and Tecna Estudios y Proyectos de Ingeniería S.A.  and Engineering Projects (collectively "the Contractor")



As a result of the serious delays in the delivery of the expansion work, the lower power produced by the installed steam turbine (165 MW as compared with the originally expected 176 MW) and other breaches by the Contractor, CTLL is currently under an arbitration proceeding brought before an Arbitration Court constituted pursuant to the arbitration rules of the International Chamber of Commerce.



The arbitration complaint was brought by the Contractor in 2011, which claims as follows:



(i)The granting of the provisional reception certificate under the Construction Agreement;

(ii)The return of the amounts collected by CTLL through the execution of bank guarantees issued by BBVA and Commerzbank AG for a total amount of US$ 20 million;

(iii)The payment of the last contractual milestone, which had received a discount (compensation for breaches) by the Contractor, valued in US$ 18 million;

(iv)The payment of the damages which would result from CTLL’s actions regarding items (i) and (ii) above.



CTLL filed a counterclaim against the Contractor seeking a compensation for the serious injuries sustained as a result of the above mentioned breaches.



The Contractor assessed its claims in the amount of US$ 97.5 million, including US$ 71.5 million for reputational damages. Likewise, the Company assessed its claims in the total amount of US$ 148.3 million, and later restated this amount to US$ 228.2 million.



On June 19, 2015, CTLL was served notice of the award issued by the Arbitration Court constituted to such effect, which would put an end to all existing controversies (the “Award”).



The Award: (i) disallows practically all claims filed by the Contractor in the Arbitration Proceeding; (ii) declares that the Contractor has incurred several breaches of contract; (iii) provides for a penalty payable by the Contractor to CTLL in the amount of US$ 49.3 million as compensation for damages, cost reimbursements and penalties stipulated under the Contract in case of delays by the Contractor; (iv) declares the legitimacy of the execution of sureties by CTLL; and finally, (v) sentences the Contractor to pay the amount of US$ 1.6 million corresponding to 60% of the costs and expenses incurred by CTLL in the Arbitration Proceeding.









F - 181

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 37:(Continuation)



On November 17, 2015 the Addendum to the Award was notified, whereby the Arbitration Court dismissed all petitions filed by the parties, with the exception of the correction of certain misspellings and minor adjustments in the principal and interest amounts pursuant to the execution of the sureties.



Thus, after offsetting certain reciprocal receivables and payables between the parties, the balance owed by the Contractor in favor of CTLL by virtue of the Award and its addendum, amounted to US$ 14.5 million, which is made up as follows: (i) U$S 10.3 million as principal (which will accrue interest at an 8% annual rate until the full repayment of the debt); (ii) US$ 2.6 million as interest calculated until March 2015; and (iii) US$ 1.6 million as legal and arbitration costs.



On December 3, 2015, the parties executed a “Debt Acknowledgment, Payment Undertaking and Settlement Agreement” (the “Agreement”) establishing the form, terms and conditions for the cancellation of the balance owed by the Contractor to CTLL.



Consequently, as of November 27, 2015, the Contractor acknowledges that it owes US$ 15.3 million to CTLL, which is broken down as follows:



(i)Award's main penalty: US$ 10.3 million.

(ii)Interest on the Award's main penalty: US$ 3.2 million.

(iii)Legal and arbitration costs: US$ 1.8 million.



Furthermore, the parties have agreed a repayment installment plan, the first three installments in the amount of US$ 4 million and the fourth and last in the amount of US$ 3.3, maturing on December 30, 2015, January 30, January 27 and March 30, 2016, respectively. Provided the Contractor has duly paid the first three installments as and when required, the Company will grant a US$ 547,000 discount on the fourth installment.



The execution of the Agreement has entailed a waiver and dismissal by the Contractor of all its rights to bring or continue with any judicial proceeding aiming to annul or challenge the Award in any way whatsoever. Likewise, both the Contractor and CTLL have waived their rights to continue with the legal proceedings instituted in Spain and in Argentina.



As at the date hereof, the Contractor has only paid the amount of US$ 7.9 million and, therefore, it has breached its main obligation to pay  in whole the first two installments stipulated in the Agreement as and when required.









F - 182

---



NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 37:(Continuation)



Therefore, CTLL has demanded the forced execution of the Agreement, which is a lawfully enforceable title conferring the right of execution in Spain.



With the execution of the Agreement on December 3, 2015, which entailed the waiver by the Contractor of all its rights to bring or continue any action aimed to annul or challenge the Award in any way whatsoever, CTLL recognized the accounting impact of the award on that date, to such effect using the provisions of IAS 37 – “Provisions, Contingent Liabilities and Contingent Assets”, since CTLL considers that now there is reasonable degree of certainty deems virtually certain for the collection of the amounts owed by the Contractor.



Items of the judgment directly related to activities the Contractor should conduct so that the acquired asset may properly operate according to the stipulated contractual conditions have been recognized as a decrease in net asset cost for an amount of US$ 24.3 million (of the US$ 18 million compensation received pursuant to the March 2011 Agreement), to such end using the exchange rate effective upon the execution of the settlement agreement with the Contractor.



The remaining compensatory items not directly related to the cost of the asset for an amount of U$S 10.9 million, which constitute a reimbursement of certain sums paid by CTLL to third parties or which are accessories to the asset recognized as from the Award (compensatory interest), have been disclosed as income under Other operating income and Financial Results in the statement of Comprehensive Income, respectively.



Sales Tax



CTLL submitted a note to the Province of Neuquén’s Revenue Department in order to inform it that CTLL considers that the electric power generation activity conducted in that province should be covered by Section 12 of Law No. 15,336, which provides that electricity generation, transformation and transmission works and works and facilities within the national jurisdiction and the energy generated or transported by them should not be levied with taxes or contributions, nor be subject to domestic provisions restricting or hindering energy’s free production and circulation. Pursuant to this article, income derived from the generation of electric power is exempt from the provincial sales tax.



CTLL’s position was finally upheld by a final and conclusive decision by the State Attorney’s Office of the Province of Neuquén on April 9, 2014, where the State Attorney, in answer to Docket No. 5823-007042/14, “S/Central Térmica Loma de la Lata S/ISIB s/Generación de Energía Eléctrica y solicitud de certificado de exención”, held as follows: “[...] that pursuant to the provisions enacted by the National Government in this area as a proper means to attain the sought federal objectives, the Company should not pay the Provincial sales tax.”



In line with the decision of the State Attorney’s Office of the Province of Neuquén, in the month of May 2014 the Revenue Department of that province issued a Non-Tax Withholding and/or Collection Certificate to CTLL effective until December 31 of that year, which has been renewed twice so far, effective until December 31, 2015.









F - 183

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 37:(Continuation)



As at December 31, 2014, and based on the decisions adopted by such entities, CTLL has decided to reverse the provision recorded as of December 31, 2013 in the amount of $ 41.1 million, with an offsetting entry under “Other operating income” in the statement of comprehensive income for $ 37.9 million as sales tax and under “Other financial results” in the amount of $ 3.2 million as compensatory interest.



37.3 HIDISA e HINISA



Income tax



HIDISA and HINISA have assessed their income taxes for fiscal years 2012, 2013 and 2014, which resulted in a $ 1.5, $ 0.9 and $ 45.3 million for HIDISA and $ 1.2, $ 9.3 and $ 58.2 million tax-loss carry forward, respectively, for HINISA, taking into consideration the application of the inflation adjustment mechanisms set forth in Title VI of the Income Tax Act, the update of Property, plant and equipment amortizations (Sections 83, 84 and 89), a cost restatement on account of the disposal of shares and mutual funds quotas (Sections 58, 61 and 89), and the update of intangible assets amortizations (Sections 81.c, 84 and 89, and Section 128 of its regulatory decree), to such effect using the domestic wholesale price index (IPIM) published by the National Institute of Statistics and Censuses based on the similarity with the parameters put forward in the matter of “Candy S.A.” heard by the National Supreme Court of Justice, which on July 3, 2009 ruled for the application of the inflation adjustment mechanism. If the inflation adjustment mechanisms had not been applied, the taxes assessed for fiscal years 2012, 2013 and 2014 would have amounted to $ 9.6 $ 12.3 and $ 4.4 million and $ 14.1 million, respectively, for HIDISA and  $13.3 million, 14.1 million and $ 14.1 million, respectively, for HINISA



As of December 31, 2015 and until this issue is finally and conclusively resolved, HIDISA and HINISA will hold a provision for the additional income tax liabilities assessable for fiscal years 2012, 2013 and 2014 in case the inflation adjustment had not been deducted. This provision amounts to $ 39.5 million and $ 63.4 million respectively, including compensatory interest.



Sales tax



HIDISA and HINISA have filed a note to the Province of Neuquén’s Revenue Department informing that they consider that the electric power generation activity conducted in that province should be covered by the provisions of Section 12 of Act No. 15,336. Pursuant to this Section, revenues resulting from the generation of electric power are exempted from the provincial gross income tax.



As at December 31, 2015, a provision is held for gross receipts tax liabilities which would have been assessed for the January 2014 – December 2015 period if the electric power-derived income had been taxed.







F - 184

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 37:(Continuation)



37. 4 CPB



Income tax



Tax refund claim



On December 30, 2008, CPB filed a tax refund claim before the AFIP regarding the income tax payable for fiscal year 2002. This claim seeks the refund of $ 4.3 million. The refund was based on the substantial and unreasonable differences resulting from the failure to apply the inflation adjustment to tax returns submitted before such fiscal period.



As AFIP didn’t answer the claim, on March 18, 2011 CPB brought the tax refund claim before a National First Instance Administrative Litigation Court.



On March 10, 2015 CPB was notified of a judgment sustaining the tax refund claim filed by CPB. In turn, on August 3, 2015 a second-instance decision was passed disallowing the appeal filed by the National Treasury, which lodged an Extraordinary Appeal on August 18, 2015. The extraordinary appeal was dismissed, and such decision was not challenged by the Treasury; therefore, the decision is deemed a final and conclusive judgment.



37. 5 PESA and subsidiaries

Minimum notional income tax



Tax refund claim



The Company and CTLL have filed different petitions for refund against AFIP – DGI for the application of the IGMP corresponding to the fiscal years 2008 and 2009.  This claim seeks the refund of $ 24.9 million, including the recovery of payments recorded and the reversal of the payment made on account of the offsetting of several fiscal credits.



As AFIP didn’t answer the claim, the Company and CTLL brought the tax refund claim before a National First Instance Administrative Litigation Court Federal and at the same time requested the granting of interim injunctive relief so that AFIP may refrain from demanding payment and/or instituting tax execution proceedings and/or lock action against the companies.



Regarding the interim relief filed, on May 10, 2011 and March 3, 2011, were notified of the judgment of First Instance which the precautionary measures requested by PESA and CTLL respectively were rejected.









F - 185

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 37:(Continuation)



Declaratory relief



The Company and its subsidiaries filed a petition for declaratory relief pursuant to Section 322 of the Federal Code of Civil and Commercial Procedure against AFIP in order to obtain assurance as to the application of the minimum notional income tax for the fiscal years 2010, 2011, 2012, 2013 and 2014, based on the decision by the CSJN in “Hermitage” dated on September 15, 2010.



In this established precedent, the Court had declared this tax unconstitutional since it may be considered unreasonable under certain circumstances and since it breaches the tax capacity principle.



Furthermore, the Company and certain subsidiaries have requested the granting of interim injunctive relief so that AFIP may refrain from demanding payment or instituting tax execution proceedings on the tax and for the fiscal year mentioned. The Court seized of in the proceedings decided to reject the precautionary measures.



As regards the Company's fiscal year 2010 claim, on November 25, 2015 a first-instance judicial decision was rendered sustaining the filed declaratory relief.



As regards EGSSA's fiscal year 2010 and 2012 claims, on August 11 and March 31, respectively, first-instance judicial decisions were rendered sustaining the filed declaratory relief. In turn, on April 8 and September 14, 2015, the appeals filed by the National Treasury were sustained and the proceedings were elevated to the Court of Appeals.



As at the issuance hereof, the intervening Courts have not rendered a decision on the substance of the other pending actions.



As of December 31, 2015 and 2014, the Company held a provision for the IGMP for the fiscal years mentioned and for the proportional tax estimated for this year for a total amount of $ 256.6 million and $ 207.2 million, respectively, including compensatory interest.











F - 186

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 37:(Continuation)



37.6  Edenor



Edenor has contingent liabilities and is a party to lawsuits that arise from the ordinary course of business. Based on the opinion of its legal advisors, Edenor Management estimates that the outcome of the current contingencies and lawsuits will not exceed the amounts of the recorded provisions nor will be significant with respect to the Company’s financial position or the results of its operations.



Furthermore, it is worth mentioning that there exist contingent obligations and labor, civil and commercial complaints filed against Edenor related to legal actions for individual non-significant amounts for which a provision, which as of December 31, 2015  amounts to $ 330.1 million, has been recorded.



The most significant legal actions in which Edenor is a party involved are detailed below:



37.6.1    Legal action brought by Consumidores Libres Coop.Ltda. de provisión de servicios de acción comunitaria



Purpose:



a) That all the last resolutions concerning electricity rates issued by the ENRE and the SE be declared null and unconstitutional, and, in consequence whereof, that the amounts billed by virtue of these resolutions be refunded.

b) That all the defendants be under the obligation to carry out the RTI.

c) That the resolutions issued by the SE that extend the transition period of the Adjustment Agreement be declared null and unconstitutional.

d) That the defendants be ordered to carry out the sale process, through an international public bidding, of the class "A" shares, due to the fact that the Management Period of the Concession Agreement is considered over.

e) That the resolutions as well as any act performed by a governmental authority that modify contractual renegotiations be declared null and unconstitutional.

f) That the resolutions that extend the management periods stipulated in the Concession Agreement be declared null and unconstitutional.

g) Subsidiarity, should the main claim be rejected, that the defendants be ordered to bill all customers on a bimonthly basis.



Amount:undetermined















F - 187

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 37:(Continuation)



Procedural stage of the proceedings: Edenor answered the complaint rejecting all its terms and requesting that a summons be served upon CAMMESA as a third-party defendant. The Court hearing the case sustained the request and CAMMESA answered the service of notice in due time and proper manner. The Federal Government has answered the complaint filed against it within the term granted for such purpose, filing a motion to dismiss for lack of standing to be sued. At present no resolution has been issued modifying the procedural stage of the proceedings; however, the records have been made available to the Prosecutor, and after they were returned the defendant submitted the report required by section 4, sub-section 1 of Law No. 26,854



Conclusion: no provision has been recorded for these claims in these financial statements as Edenor believes, based on both that which has been previously mentioned and the opinion of its legal advisors, that there exist solid arguments for them to be considered unfounded. It is estimated that this legal action will not be terminated in 2016.



37.6.2Legal action brought by Consumidores Financieros Asociación civil para su defensa



Purpose:



1) Reimbursement of the VAT percentage paid on the illegally “widened” taxable basis due to the incorporation of a concept (National Fund of Electricity - FNEE) on which no VAT had been paid by the defendants when CAMMESA (the company in charge of the regulation and operation of the wholesale electricity market) invoiced them the electricity purchased for distribution purposes.

2) Reimbursement of part of the administrative surcharge on “second due date”, in those cases in which payment was made within the time period authorized for such second deadline (14 days) but without distinguishing the effective day of payment.

3) Application of the “borrowing rate” in case of customer delay in complying with payment obligation, in accordance with the provisions of Law No. 26,361.



Amount:undetermined



Procedural stage of the proceedings: On April 22, 2010, Edenor answered the complaint and filed a motion to dismiss for lack of standing, requesting, at such opportunity, that a summons be served upon the Federal Government, the AFIP and the ENRE as third-party defendants. Notice of this was served upon the plaintiff. Although the plaintiff’s opposition to the requested summons had not yet been resolved, the proceedings were brought to trial, in response to which Edenor filed a motion for reversal with a supplementary appeal. The Court hearing the case granted the motion filed by Edenor and ordered that the Federal Government, the AFIP and the ENRE be summoned as third-party defendants, which is currently taking place.



Conclusion:no provision has been recorded for these claims in these financial statements as Edenor, based on both that which has been previously mentioned and the opinion of its legal advisors, that there exist solid arguments for them to be considered unfounded. It is estimated that the proceedings will not be terminated in 2016






F - 188

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 37:(Continuation)



37.6.3 Legal action brought by the Company (“EDENOR S.A. VS ENRE RESOLUTION No. 32/11”)



Purpose:The judicial annulment of ENRE Resolution that established the following:



- That Edenor be fined in the amount of $ 750,000 due to its failure to comply with the obligations arising from Section 25, sub-sections a, f and g, of the Concession Agreement and Section 27 of Law No. 24,065.



- That Edenor be fined in the amount of $ 375,000 due to its failure to comply with the obligations arising from Section 25 of the Concession Agreement and ENRE Resolution No. 905/1999.



- That Edenor customers be paid as compensation for the power cuts suffered the following amounts: $ 180 to each small-demand residential customer (T1R) who suffered power cuts that lasted more than 12 continuous hours, $ 350 to those who suffered power cuts that lasted more than 24 continuous hours, and $ 450 to those who suffered power cuts that lasted more than 48 continuous hours. The resolution stated that such compensation did not include damages to customer facilities and/or appliances, which were to be dealt with in accordance with a specific procedure.



Amount:  $ 22.4 million.



Procedural stage of the proceedings: On July 8, 2011, Edenor requested that notice of the substance of the case be served upon the ENRE, which has effectively taken place. The proceedings are “awaiting resolution” since the date on which the ENRE answered the notice served. Furthermore, on October 28, 2011, Edenor filed an appeal to the Supreme Court concerning the provisional relief sought and not granted. On April 24, 2013, the Company was notified of Division I’s decision dated March 21, 2013, pursuant to which the appeal filed by Edenor was declared formally inadmissible. On May 3, 2013, Edenor filed an ordinary appeal to the Supreme Court. Additionally, on May 13, 2013, an extraordinary appeal was also filed to the same Court. On November 7, 2014, it was notified to Edenor that Division I had rejected the ordinary appeal but partially granted the extraordinary appeal, considering for the granting thereof the federal nature of the regulations being challenged and rejecting it in relation to the arbitrariness raised by Edenor. Therefore, and within the procedural term granted for such purpose, Edenor filed an appeal requesting that the extraordinary appeal dismissed be sustained. As of the date of this report, no decision has yet been issued on this regard.



Conclusion: As of the closing date of the year ended December 31, 2015, the provision recorded by the Company for principal and interest accrued amounts to $ 34.9 million. It is estimated that this legal action may be terminated in 2016.



37.6.4 Legal action brought by ASOCIACIÓN DE DEFENSA DE DERECHOS DE USUARIOS Y CONSUMIDORES – ADDUC



Purpose: that Edenor be ordered to reduce or mitigate the default or late payment interest rates charged to customers who pay their bills after the first due date, inasmuch as they violate section 31 of Law No. 24,240, ordering both the non application of pacts or accords that stipulate the interest rates that are being applied to the users of electricity –their unconstitutional nature– as well as the reimbursement of interest amounts illegally collected from users of the service from August 15, 2008 through the date on which the defendant complies with the order to reduce interest. It is also requested that the value added tax (VAT) and any other taxes charged on the portion of the surcharge illegally collected be reimbursed.









F - 189

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 37:(Continuation)



Amount: undetermined



Procedural stage of the proceedings: On November 11, 2011, Edenor answered the complaint and filed a motion to dismiss for both lack of standing to sue and the fact that the claims at issue were being litigated in another lawsuit, currently in process, requesting as well that a summons be served upon the ENRE as a third-party defendant. Notice of these pleadings was served upon the plaintiff. Prior to rendering a decision on the motion to dismiss, the Court ordered that the Court in Contentious and Administrative Federal Matters No. 2 – Clerk’s Office No. 3 provide it with the proceedings “Consumidores Financieros Asociación Civil vs EDESUR and Other defendants, for breach of contract”. At the date of issuance of these financial statements, the Court has received the requested file. On April 8, 2014, the Court in Civil and Commercial Federal Matters No. 9 – Clerk’s Office No. 17 admitted the motion to dismiss due to the fact that the claims at issue were being litigated in another lawsuit, and ordered that the proceedings be sent to Federal Court No. 2 – Clerk’s Office No. 3 to be dealt with thereat, thus joining them to the case entitled “consumidores financieros vs Edesur and other defendants, for breach of contract”. Apart from the fact that the proceedings have been received in the court that currently hears the case, which continues in process, no significant events have occurred.



Conclusion: It is estimated that this action will not be terminated in 2016.



37.6.5 Legal action brought by the Company (“EDENOR S.A. VS FEDERAL GOVERNMENT – MINISTRY OF FEDERAL PLANNING / PROCEEDING FOR THE DETERMINATION OF A CLAIM AND MOTION TO LITIGATE WITHOUT LIABILITY FOR COURT FEES OR COSTS ”)



On June 28, 2013, Edenor instituted these proceedings for the recognizance of a claim and the related leave to proceed without liability for court fees or costs, both pending in the Federal Court of Original Jurisdiction in Contentious and Administrative Federal Matters No. 11 – Clerk’s Office No. 22.



Purpose of the main proceedings: To sue for breach of contract due to the Federal Government’s failure to perform in accordance with the terms of the “Memorandum of Understanding concerning the Renegotiation of the Concession Agreement” entered into with Edenor in 2006, and for damages caused as a result of such breach.



Procedural stage of the proceedings: On November 22, 2013, Edenor amended the complaint so as to extend it and claim more damages as a consequence of the Federal Government’s omission to perform the obligations under the aforementioned “Adjustment Agreement”. On February 3, 2015, the court hearing the case ordered that notice of the complaint be served to be answered within the time limit prescribed by law, which was answered by the Federal Government in due time and in proper manner.  Subsequently, Edenor reported as new event, under the terms of Section 365 of the Federal Code of Civil and Commercial Procedure (CPCCN), the issuance by the Energy Secretariat of Resolution 32/15. After notice was served, the court rejected the treatment thereof as an “event”, holding the Company liable for costs. Edenor filed an appeal, which was admitted “with a postponed effect” (i.e. the Appellate Court will grant or reject the appeal when deciding on the granting or rejection of the appeal against final judgment). On October 16, 2015, the Attorney General’s Office requested to borrow the records for a term of 20 days, which were returned on December 1, 2015, in order to control the work done by the state’s attorneys. On December 4, 2015, Edenor requested the suspension of the procedural time-limits under the terms of section 157 of the CPCCN, in accordance with the provisions of SE Resolution 32/15, notice of which has been served upon the defendant. On February 16, 2016, Edenor reiterated the request due to the revocation of SE Resolution 32/15.











F - 190

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 37:(Continuation)



The motion to litigate without liability for court fees or costs, which was filed on July 2, 2013, is at present at the discovery period.



Additionally, and in the same action, in February 2014, Edenor applied for the immediate granting of a provisional remedy in order to maintain an efficient and safe service, requesting that until judgment is passed on the merits of the case, the Federal Government be compelled to provide Edenor with economic assistance, whether by means of a temporary rate adjustment or through government grants. After notice was served upon and answered by the Federal Government – Ministry of Federal Planning, on May 27, 2014, the court hearing the case rejected the provisional remedy sought by the Company, decision which was confirmed by Division V of the Appellate Court and notified to Edenor on December 19, 2014.



Conclusion: It is estimated that this action will not be terminated in 2016.



37.6.6    Administrative proceedings DJ/36/14 initiated by the AFIP.



Purpose: To accuse the Company of and have it fined for the filing of an inaccurate Minimum Presumed Income Tax return for fiscal period 2011.



Amount: $5.5 million.



Status:In May, 2012, Edenor filed the original minimum presumed income tax return for fiscal period 2011 with no assessed tax amount in the understanding that the payment of the tax for fiscal period 2011 when Edenor’s cumulative income tax losses carry forward amounted to $ 258 million, violated recognized constitutional guarantees and reflected its lack of payment capacity in relation to the taxes levied on income, such as the Minimum Presumed Income Tax (IGMP). This situation was duly informed to the AFIP.



At the same time, in accordance with the terms of Section 322 of the Federal Code of Civil and Commercial Procedure, Edenor filed a declaratory judgment action with the Federal Court against the Federal Government – Federal Administration of Public Revenue (AFIP) - General Tax Bureau, with the aim of obtaining a declaratory judgment as to whether or not the minimum presumed income tax related to fiscal period 2011 applied in the sense resolved by the Supreme Court in the “Hermitage” case on June 15, 2010. In this case, the Supreme Court had declared that this tax was unconstitutional as it was deemed confiscatory.



Subsequently, the Court of Original Jurisdiction in Contentious and Administrative Federal Matters No. 7 rejected the action requested by the Company, decision which was ratified by the Court of Appeals.



Faced with this situation, and in order to avoid possible attachments or prohibitions to dispose of property that could affect the normal development of its activities for the provision of the public service, the Company decided to rectify the Minimum Presumed Income Tax Return for fiscal period 2011 and adhere to the easy payment plan implemented by AFIP General Resolution 3451.



On November 19, 2015, by means of administrative proceedings DJ/36/14 initiated by the AFIP, Edenor is accused of and fined for the filing of an inaccurate Minimum Presumed Income Tax Return for fiscal period 2011.



On December 30, 2015, Edenor filed a post-judgment motion for reversal with the tax authority, requesting that the administrative proceedings be revoked, the fine imposed be annulled and the respective records be filed.






F - 191

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 37:(Continuation)



As is evident from the preceding paragraphs, it was not Edenor’s intention to cause any harm whatsoever to the national treasury, particularly considering that a rectifying tax return has been filed.



Conclusion: no provision has been recorded for this claim in these financial statements as Edenor believes, based on that which has been previously mentioned, that there exist solid arguments for it to be considered unfounded.



37.6.7 Legal action brought by the Company (Study, Review and Inspection of Works in Public Spaces Fees “TERI”)



In December 2015, Edenor filed with the City of Buenos Aires Court in Contentious and Tax-Related Matters, a petition for declaratory judgment, together with a petition for the granting of a precautionary measure, in order to obtain a favorable judgment that would put an end to the controversy, declaring the unlawfulness of the Government of the City of Buenos Aires’s claim concerning compliance by Edenor with the payment of the TERI. The precautionary measure requested, if granted, would stop the executory proceedings in process and eliminate the possibility that an attachment be levied on Edenor’s assets. It must be pointed out that as of the date of the filing of the petition, Edenor has received assessment and demand for payment notices from the Government of the City of Buenos Aires for a total amount of $ 28.8 million for such concept.



In Edenor’s opinion, these fees are not applicable in accordance with federal regulations, the case law and the procedural status of judicial decisions. Therefore, the Management of Edenor as well as its external legal advisors believe that there exist good reasons to support Edenor’s position and have this tax claim rejected by a court of law. Therefore, the probability of an outflow of resources on account of such contingency has been regarded as low.



NOTE 38: PAYMENT PLAN



As regards the AFIP’s income tax inspection for fiscal years 2008 through 2011, the  moment of the deduction of certain income by CPB has been challenged. On July 31, 2013, CPB resolved to allow the tax claim and adhered to the Payment Plan regulated by General Resolution No. 3451/13 to regularize periods not barred by the statute of limitations for a total amount of $ 15.2 million, which will be paid up in 120 monthly installments.



NOTE 39: EDENOR’S ASSIGMENT OF USE



a.As assignee



The features that these assignments of use have in common are that payments (installments) are established as fixed amounts; there are neither purchase option clauses nor renewal term clauses (except for the assignment of use contract of the Energy Handling and Transformer Center that has an automatic renewal clause for the term thereof); and there are prohibitions such as: transferring or sub-leasing the building, changing its use and/or making any kind of modifications thereto. All operating assignment of use contracts have cancelable terms and assignment periods of 2 to 13 years.



Among them the following can be mentioned: commercial offices, two warehouses, the headquarters building (comprised of administration, commercial and technical offices), the Energy Handling and Transformer Center (two buildings and a plot of land located within the perimeter of Central Nuevo Puerto and Puerto Nuevo) and Las Heras Substation.








F - 192

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 39:(Continuation)



As of December 31, 2015 and 2014, future minimum payments with respect to operating assignments of use are as follow:



12.31.2015
 
 12.31.2014
 
 12.31.20132014
 -
 
 -
 
 21,046,0002015
 -
 
 26,123,000
 
 10,998,0002016
 47,897,037
 
 19,864,000
 
 4,943,0002017
 19,464,103
 
 15,740,000
 
 4,752,0002018
 6,320,594
 
 5,698,282
 
 147,0002019
 4,310,446
 
 4,310,446
 
 147,0002020
 146,938
 
 146,938
 
 -2021
 147,000
 
 -
 
 -Total future minimum payments
 78,286,119
 
 71,882,667
 
 42,033,000




Total expenses for operating assignments of use for the years ended December 31, 2015 and 2014 are $ 38.6 million and $31 million, respectively:



b.As assignor



Edenor has entered into operating assignment of use contracts with certain cable television companies granting them the right to use the poles of Edenor’s network. Most of these contracts include automatic renewal clauses.



As of December 31, 2015 and 2014, future minimum collections with respect to operating assignments of use are as follow:



12.31.2015
 
 12.31.2014
 
 12.31.20132014
 -
 
 -
 
 51,620,2972015
 90,521,780
 
 72,921,528
 
 48,022,8242016
 84,949,198
 
 5,481,316
 
 27,8462017
 251,308
 
 200,222
 
 -2018
 -
 
 157,344
 
 -Total future minimum collections
 175,722,287
 
 78,760,411
 
 99,670,967




Total income from operating assignments of use for the years ended December 31, 2015 and 2014 is $74.6 million and $ 57.5 million, respectively.









F - 193

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 40:profit distributions



Dividends

In accordance with Law No. 25,063, passed in December 1998, dividends distributed in cash or in kind, in excess of accumulated tax profits at the end of the year immediately before the date of payment or distribution, will be subject to a 35% income tax withholding in a single and final payment. To such effect, income to be considered in each fiscal year will be that resulting from adding to the specific income determined pursuant to the general provisions of the Income Tax Act the dividends or earnings from other companies not computed within the determination of such income during the same fiscal periods.

NOTE 41: SHARE BASED PAYMENTS



On September 27, 2006, the Company entered into an Opportunities Assignment Agreement whereby certain officers undertook to offer the Company, on a priority basis, all investment opportunities above US$ 5 million they detect within the Company’s investment guidelines. In consideration of this commitment, the Company has granted these officers Warrants for up to 20% of its capital stock (the “Warrants Issuance Agreements”).

On April 16, 2009, the parties agreed on the following modifications to the Opportunities Assignment Agreement and the Warrants Issuance Agreements:

i) the term of the agreement was extended for five years, until September 27, 2014;

ii) one-fifth of the Warrants will accrue annually, as from September 28, 2010 and until September 28, 2014, and Warrants will remain in effect for fifteen years as from the date of issuance.

iii) their exercise price was set at US$ 0.27 per warrant.



On September 28, 2014, the Opportunities Allocation Agreement terminated, having been complied of all stipulated obligations. Furthermore, as from the stated date all Company shares’ purchase options granted to the Officers may be actually exercised, according to the following expiration dates and exercise prices:



Expiration
 
 Price of the year (U$S)
 
 Stock Options26.04.2024
 
 0.27
 
 111,500,00026.04.2024
 
 0.27
 
 150,000,00026.04.2024
 
 0.27
 
 120,048,564




The fair value of these Warrants has been measured according to the Black-Scholes valuation model. The main variables considered in such model are the following: (i) a 27% volatility, based on the historical volatility of the Company; (ii) 3% dividends; and (iii) a 4.63% risk-free U.S. dollars interest rate.







F - 194

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 41:(Continuation)



Regarding these Warrants, the Company has recognized a total $ 266.1 million in profit and loss, with an offsetting entry in an equity reserve during the life of the Opportunities Assignment Agreement.

On November 23, 2015, the Company received a notification from Merrill Lynch, Pierce, Fenner & Smith Incorporated, which, acting as attorneys in fact for the holders of all warrants, formally communicated the decision to exercise, conditional upon the meeting of certain conditions, all warrants against the payment of the set exercise price.

In furtherance of the obligations under the Warrants Issuance Agreements, on December 1, 2015, against the payment of US$ 103,018,112, that is US$ 0.27 per common share or its equivalent in pesos, the Company issued 381,548,564 new common shares in the form of American Depositary Shares (“ADS”).

After the issuance, these new common shares represent 22.5% of the company's capital stock and voting rights. Thus, the Company's capital stock now consists of 1,695,859,459 common shares in book-entry form with a face value of $ 1 each and each granting the right to one vote. Both the capital increase and the public offering and quotation of the issued shares are duly authorized by the CNV and Mercado de Valores.

Therefore, the Company recognized in its Statement of Changes in Shareholders’ Equity additional paid-in capital in the amount of $ 883.3 million and a $ 266.1 million decrease in reserves.

The movements in the number of Warrants and their respective average exercise prices are detailed below:



12.31.2015
 
 12.31.2014
 
 12.31.2013Stock Options
 
 Average price of the year in USD
 
 Stock Options
 
 Average price of the year in USD
 
 Stock Options
 
 Average price of the year in USDAt the beginning
 
 381,548,564
 
 0.27
 
 381,548,564
 
 0.27
 
 381,548,564
 
 0.27Granted
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -Excercised
 
 (381,548,564)
 
 0.27
 
 -
 
 -
 
 -
 
 -At the end
 
 -
 
 -
 
 381,548,564
 
 0.27
 
 381,548,564
 
 0.27






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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 42: ECONOMIC AND FINANCIAL SITUATION OF GENERATION, TRANSMISSION AND DISTRIBUTION SEGMENTS



42.1 Generation



HIDISA and HINISA

During the fiscal year ended December 31, 2014, HIDISA and HINISA have disclosed negative gross and operating results. During the year ended December 31, 2015, their economic and financial situation has continued deteriorate, as evidenced by gross and operating losses and the shortfall in operating funds. This situation is mainly attributable to the negative impact that ES Resolution No. 95/13 (as amended by ES Resolutions No. 529/14 and No. 482/15) has had on these subsidiaries' remuneration as from the commercial transaction corresponding to the month of November 2013.

Despite the increases granted by ES Resolution No. 482/15 in fixed (64%), variable (23%) and additional (10%) remunerations and the incorporation of a new remunerative item (the Maintenance Remuneration), repeated claims filed by HIDISA and HINISA through different presentations to CAMMESA and the ES requesting a tariff adjustment more aligned with their technical and operating structures have been neglected.



The new remuneration scheme implemented through ES Res. No. 95/13, later modified by ES Resolutions No. 529/14 and No. 482/15, would not allow HIDISA and HINISA to generate the minimum operating cash flows necessary to cover for their operating costs. Furthermore, the scope of the new Maintenance Remuneration is insufficient to finance the cost of the maintenance works necessary to guarantee normal and efficient operating conditions.



Besides this, according to hydrological forecasts by the National Undersecretariat of Hydric Resources, the expected water input to the reservoir for the hydrological period October-September 2016 will be between 49%-82% in HIDISA and 69%-91% in HINISA of an average year, this year being classified as dry. This situation, which has persisted for six consecutive years, further impairs HIDISA and HINISA's revenues, since the established remuneration scheme has a strong variable component, and expected values cannot be reached under the current conditions.



Despite the economic and financial situation described, HIDISA and HINISA have prepared their projections on the understanding that they will get tariff improvements in line with the new guidelines on energy policy that could involve a review of the current regulatory framework of generation.



CPB



As of December 31, 2015, CPB recorded negative working capital for a total amount of $ 191.2 million. Under the Borrowings, CPB registered related funding by $ 203.1 million to be refinanced through financing disbursements of Major Maintenance to receive from CAMMESA. Furthermore, it is expected that the economic and financial situation of CPB significantly improved as of the plant again reach its full production capacity and start generating revenue again TV29 unit, after the work of technological update that is mentioned in Note 20 .



Also, while the cancellation is subject to the ability to generate excess cash, the financial burden could exceed operating results, and consequently affect the financial balance of CPB.









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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 42:(Continuation)



42.2 Distribution



In fiscal year 2015, Edenor recorded positive operating and net results, thus reversing its negative economic and financial situation of the last years. This improvement has been achieved as a consequence of the issuance by the ES on March 13, 2015 of Res. No. 32/15, which addresses the need for the adjustment of the economic and financial situation of distribution companies and considers it necessary that urgent and temporary measures should be adopted in order to maintain the normal provision of the public service, object of the concession.



In spite of the deterioration of the economic and financial equation over the last years as a consequence of the delay in the compliance with certain obligations under the Adjustment Agreement, especially with regard to the  recognition of the semiannual rate adjustments resulting from the MMC, and the carrying out of the RTI, thanks to the adoption of certain measures aimed at mitigating the impact thereof, Edenor has been able to not only maintain the quality of the electricity distribution service but also satisfy the constant year-on-year increase in the demand for electricity that has accompanied the economic growth and the standard of living of the last years. In this regard, Edenor absorbed the higher costs associated with the provision of the service and complied with the execution of the investment plan and the carrying out of the essential operation and maintenance works that are necessary to maintain the provision of the public service in a satisfactory manner in terms of quality and safety.



In spite of that which has been mentioned in the first paragraph of this Note, as of December 31, 2015 Edenor’s negative working capital amounts to $ 1.8 billion, which includes the amount owed to CAMMESA for $ 1.8 billion plus interest accrued as of December 31, 2015, as described in Note 2.3.1.7.e, in respect of which Edenor submitted a payment proposal based on its available and projected cash flows. Until the date of issuance of these financial statements, no answer from CAMMESA has been received.



Furthermore, on December 16, 2015, the Federal Government issued Executive Order No. 134, which declared the state of emergency in the country’s electricity sector and authorized the MEyM to implement a plan of action for the generation, transmission and distribution of electricity at national level and guarantee the provision of the electricity public service under adequate economic and technical conditions.















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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 42:(Continuation)



After the closing date of the fiscal year being reported, in January 2016, the Energy and Mining Ministry issued, as part of the measures aimed at the restructuring of the electricity sector, Resolutions Nos. 6 and 7 which implemented a new electricity rate system aimed at improving the distribution companies’ revenue in order for them to be able to make investments and carry out network maintenance and expansion works. Additionally, the ENRE was instructed to adjust, on account of the RTI, VAD in electricity rate schedules and to take all the necessary steps to carry out the RTI before December 31, 2016. This new electricity rate system will protect those sectors that cannot afford the full cost of the service through the creation of a “Social Tariff”, will be accompanied by a program aimed at reducing the consumption of electricity and will provide for the billing of electricity consumption on a monthly basis in order to soften the impact of the increases on customers.



In view of this scenario, Edenor Board of Directors is currently assessing the sufficiency of the financial resources granted to cover the costs of the operation, the investment plans and debt service payments, as well as the impact of the different variables that affect Edenor’s business, such as behavior of demand, losses, delinquency, service quality and penalties, etc.



Additionally, Edenor Board of Directors will continue to take steps to resolve with the Grantor of the Concession and the regulatory agency the issue related to the RTI, which is expected will be concluded in accordance with the provisions of MEyM Resolution 7/16 (Note2.3.1.2) in a satisfactory manner with regard to its timing and final form.



42.3 Transmission



Even though it is still difficult to forecast the evolution of issues described in Note 2 and their possible impact on Transener’s business and cash flows, the execution of the Renewal Agreement constitutes a remarkable milestone towards the consolidation of Transener’s economic and financial equation.Transener has prepared its consolidated financial statements using the accounting principles applicable to an on-going business. Consequently, these statements do not include the effects of any applicable adjustment or reclassification in case these situations are not resolved favorably to the continuity of Transener’s operations and, thus, this company would be forced to realize its assets and cancel its liabilities, including contingent ones, under conditions that are not in its ordinary course of business.



The interest in the joint venture represents about 1% of the Group’s assets and approximately 0.2% of the Group’s income. Additionally, the Company’s management considers that the uncertainty regarding Citelec’s joint venture does not affect its capacity to continue operating on an ordinary basis, mainly due to the following reasons: (i) There is no financial dependence on Citelec, as this joint venture has not paid it any dividends since its acquisition date in 2006; (ii) Even though there is an enforceable and binding technical assistance agreement with Transener, the Company does not depend on this flow of funds to normally develop its activities; (iii) The Company is not contractually obliged to provide financial assistance to Citelec.







F - 198

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 43: TRANSACTIONS WITH NON-CONTROLLING INTERESTS



Sale of a non-controlling interest in EDENOR



During the year 2014, PISA has sold, through different market transactions, all its Edenor’s ADRs share (973.190 ADRs equivalent to 19.5 million of shares), which represented about 2% of the Company’s equity interest. For these operations, the Company has recorded $ 61.7 million as additional paid-in capital.



NOTE 44: DOCUMENTATION KEEPING



On August 14, 2014, the National Securities Commission issued General Resolution No. 629, which introduced modifications to the provisions applicable to the keeping and conservation of corporate and accounting books and commercial documentation. To such effect, the Company and its subsidiaries Edenor, CTG, CTLL, EASA and PEPASA have sent non-sensitive work papers and information corresponding to the periods not covered by the statute of limitations for their keeping in the Iron Mountain Argentina S.A.’s data warehouses located at the following addresses:



-Azara 1245 –C.A.B.A.

-Don Pedro de Mendoza 2163 –C.A.B.A.

-Amancio Alcorta 2482 C.A.B.A.

-San Miguel de Tucumán 601, Carlos Spegazzini, Municipality of Ezeiza, Province of Buenos Aires.



On February 5, 2014, Iron Mountain S.A.’s warehouse located at Azara 1245 suffered a publicly known accident.



However, according to an internal study conducted by the Company and timely reported to the National Securities Commission on February 12, 2014, approximately 15% of the documentation which the Company, CTG, CTLL, EASA and PEPASA had deposited with Iron Mountain S.A. may be located at the warehouse where the incident took place.



On February 18, 2014, Edenor informed the National Securities Commission that the accident may have affected between 20% and 30% of all the documentation sent to Iron Mountain S.A. for its custody.



At the date of issuance of these financial statements, the Company has been informed that according to Iron Mountain’s records, the boxes are probably located in the areas where the incident took place, although they cannot provide more detailed information until they are granted access to the facilities.



A list of the documentation delivered for storage, as well as the documentation provided for in Article 5.a.3) Section I, Chapter V, Title II of the PROVISIONS (2013 regulatory provisions and amending rules), is available at the Company headquarters.







F - 199

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 45: HYDROCARBON DEVELOPMENT AND EXPLOITATION PROJECTS



As of December 31, 2015, PEPASA is part of the following investment projects:

Investment agreement with YSUR by Anticlinal Campamento and Estación Fernández Oro

On December 1, 2010, PEPASA executed an investment agreement with YSUR for the joint development and exploitation of unconventional gas reservoirs in the Anticlinal Campamento and Estación Fernández Oro areas, located in the Provinces of Neuquén and Río Negro respectively.

This venture with YSUR has a 700,000 m3/day production target for unconventional natural gas during a term of three years between January 2011 and December 2013. The participation of PEPASA is 15% of that production.

To maintain the target volume production, it was estimated that the total drilling plan shall be thirty wells, which involved a total investment for PEPASA U$S 20 million.

As of December 31, 2015, the deadline for investment under this agreement has concluded, so PEPASA will receive the proceeds of the 22 drilled wells till the end of the useful life of them and will contribute to the costs associated with the exploitation. The cumulative investment amounts to US$ 17.5 million.

PEPASA's current production reaches 70,000 m3/day, which is being sold by YSUR under the Gas Plus Program.



Investment Agreements with Petrobras for “El Mangrullo” Area



Petrobras I

On December 7, 2010, PEPASA executed an investment agreement with Petrobras for the joint development and exploitation of unconventional gas reservoirs in El Mangrullo Area.

This partnership with Petrobras has an unconventional natural gas 400,000 m3/day production target during a term of four years since August 2011. PEPASA has a 43% interest in this production.

During the year ended December 31, 2015, the investment term stipulated in this agreement has terminated and, therefore, PEPASA will receive the proceeds from the 5 drilled wells until the end of their life cycles. The accumulated investments amounted to U$S 20.6 million.

The produced hydrocarbons are separately commercialized by each of the partners. PEPASA has entered into a Gas Supply Agreement with CAMMESA which is under the Gas Plus Program, and all its production is commercialized for a price of US$ 5.20/MMBTU.



Petrobras II

On February 7, 2013, PEPASA entered into a new investment agreement with Petrobras for El Mangrullo Area pursuant to conditions similar to that of the previous agreement.







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 45:(Continuation)

This new partnership with Petrobras seeks to reach an unconventional natural gas production of 400,000 m3/day during a term of four years. PEPASA has an interest in 43% of the production.

In order to maintain a target production it has been estimated that the total drilling plan will consist of nine wells, which would entail a total investment of approximately US$ 33 million for PEPASA. Taking into consideration the higher costs of the wells drilled under this agreement, the final investment by PEPASA will exceed its initial estimates.

During the year ended December 31, 2015, two new wells have been drilled, one of which is already in production, whereas the remaining is under analysis. In this way, six wells were drilled under this agreement, which allowed achieve target volume production since July 2013. The cumulative investments totaling U$S 29.3 million.

The produced hydrocarbons are commercialized by each of the partners. PEPASA has entered a Gas Supply Agreement with CAMMESA under the Gas Plus Program, and all its production is commercialized for a price of US$ 5.20/MMBTU.

Lastly, during 2016, with the purpose of keeping the target production committed under the Agreement, low-pressure capture activities are expected to become operative, which will allow for an increase in the hydrocarbon recovery factor and in the production of wells; besides, three new wells are expected to be drilled with an estimated investment of US$ 9.4 million for PEPASA.

Investment Agreement Senillosa Area

On September 14, 2010, PEPASA accepted an offering to assign from Rovella Carranza SA for the provision of the service jointly for the exploration, development and production of hydrocarbons in the exploration area "Senillosa". The agreement will allow PEPASA get 50% share of hydrocarbon production. PEPASA committed investments amounting to U$S 3.3 million.

PEPASA performed investments accumulated for U$S 12.5 million, including:



(i)Analysis of the area through the study of 3D seismic and geochemistry.

(ii)Nine drilling exploratory wells, of which two were discoverers of gas, four had manifestations of hydrocarbons and three were found to be sterile.

After meeting all investment commitments and pursuant to Executive Order No. 2541/15, the Senillosa joint venture obtained a 25-year exploitation concession called “Rio Limay Este”, as well as a prospecting lot called “Aguada Pavón” for a term of two years. Furthermore, G&P, in its capacity as concessionaire, is currently conducting proceedings to return rights over 368 km to the National Government.



During 2014, according to changes in the concession, PEPASA recognized a decrease in property, plant and equipment of $ 12.6, in Other operating expenses of the statement of comprehensive income.











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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 45:(Continuation)



Furthermore, in June 2015, PEPASA finished the work on the construction and assembly of a gas conditioning plant and a pipeline to its link with the transport system with the aim of putting into production of productive wells, allowing the start of production area. As at December 31, 2015, PEPASA's production under this agreement amounted to 10,000 m3 a day marketed to industrial clients at an average price of US$ 4.2/MMBTU.



Investment Agreement El Caracol North Area

On May 19, 2011, PEPASA entered into another agreement with GyP and Rovella Energía S.A. for the joint performance of the hydrocarbon exploitation, development and production service of the “El Caracol Norte” exploitation area. This agreement will allow PEPASA to obtain a 60% interest in the area’s hydrocarbon production. Investments committed by PEPASA amount to US$ 3.7 million.



As for December 31, 2014, PEPASA analyzed 3D seismic and two hydraulic fractures were made in the PA x – 3 well. As a result of these works, the well showed hydrocarbon manifestations, but, according to estimates made by the Management of PEPASA, such Company recognized a decrease in property, plant and equipment of $ 9.2 million in Other operating expenses of the statement of comprehensive Income.



On June 4, 2015, PEPASA assigned its rights and obligations under this Agreement to Petróleos Sudamericanos S.A., HOMAQ S.A. and JCR S.A. in consideration of US$ 200,000, out of which US$ 133,000 correspond to the Company.

This assignment agreement is subject to approval by the Environmental Authority and the Provincial Executive Branch within a term of twelve months as from the first business day following the execution of the Agreement.

As at the issuance of these financial statements, PEPASA is waiting for the fulfillment of these conditions for its recognition.



Investment Agreement with YPF for the “Rincón del Mangrullo” Area

On November 6, 2013, PEPASA entered into an investment agreement with YPF S.A. in the amount of US$ 151.5 million in consideration of a 50% interest in the production of hydrocarbons in the Rincón del Mangrullo area.

The Assigned Interest represents the total undivided rights and obligations associated with the production of hydrocarbons in the Area, with the exception of certain pre-existing wells that had been drilled by YPF and certain new YPF’s wells which will be drilled and funded exclusively by YPF.

The Investment Agreement consists of two investment phases:







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 45:(Continuation)

a) First Phase

PEPASA undertook to invest:

·US$ 80 million in the drilling, completion and entry into production of 17 wells to be made in the Area’s Western zone, with the exception of 2 wells which will be drilled in the Area’s South West,

·U$S 1.5 million for the performance of approximately 40 km2 of 3D seismic.

Furthermore, YPF undertook to invest:

·in the drilling, conclusion and entry into production of 17 additional wells exclusive of YPF; and

·in the construction of a gas treatment and conditioning plant, as well as in a gas pipeline with an approximate length of 55 km, which will allow connecting the Area to the gas trunkline system.

b) Second Phase

After the conclusion of the first phase, PEPASA may opt to continue investing up to US$ 70 million in the drilling of 15 wells in any zone within the Area.

After the conclusion of both investment phases, all subsequent investments will be made according their respective interests.

Addendum



On May 26, 2015, PEPASA and YPF executed an agreement to modify certain terms and conditions of the Investment Agreement dated November 6, 2013.



On July 14, 2015, the Parties deemed that certain conditions precedent regarding to the validity of the Addendum have been duly met; therefore, all the terms and conditions stipulated therein will become retroactively in force as from January 1, 2015.



The main modifications to the Agreement stipulated in the Addendum are the following:



(i)other formations previously excluded are incorporated, only excluding the Vaca Muerta and Quintuco formations;

(ii)PEPASA will be entitled to the production of all the existing wells in the Area, with the obligation to make all investments in surface facilities -estimated at US$ 65 million for PEPASA during the years 2015 and 2016- and to take on all costs and expenses incurred in the operation of the Area according to its percentage share (50%);

(iii)PEPASA will invest US$ 22.5 million in wells in the Mulichinco formation and/or make additional surface investments for the 2016-2017 period;

(iv)PEPASA will make investments in exploratory wells in the Lajas formation, which will amount to US$ 34 million during the first stage for the 2016-2017 period;

(v)in turn, PEPASA has jointly decided with YPF to expand the drilling plan for the year 2015 by approximately US$ 70 million in the Mulichinco formation.







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 45:(Continuation)

In this way, after detailed addendum, the total investment committed by PEPASA for the period 2014-2017 in the area, would exceed U$S 350 million. As of December 31, 2015, the disbursed investment amounted to U$S 218 million.

As of December 31, 2015, production under this agreement reaches approximately 3.1 million m3/day (50% of which correspond to PEPASA, plus a 300,000 m3/day compensation pursuant to the provisions of the Agreement), which is marketed through gas supply agreements with different clients at an average price of US$ 4.7/MMBTU. It should be pointed out that the evacuation facilities have reached their maximum capacity, and they are expected to be increased to 5 million m3/day approximately during March 2016.

Furthermore, the liquids and natural gas volumes retroactively recognized to PEPASA for the period comprised between January 1 and the Addendum's effective date amount to 63.7 million m3 and 1,820 m3, respectively, which will be wholly compensated to the Company by April 30, 2016. As of December 31, 2015, 41 million m3 gas volumes have been compensated, which represented an approximate income of $ 64,5 million for PEPASA.



NOTE 46: COMPENSATION AGREEMENTS



Annual Variable Compensation (the “EBDA Compensation”):

PEPASA has granted its Corporate Directors an Annual Variable Compensation (the "EBDA Compensation") for the performance of technical and administrative duties amounting to 7% of the EBDA (EBITDA less paid income tax, less total net financial costs, less interest on its own capital, considering an annual 10% dollar-denominated rate) accrued for each fiscal year as disclosed in the corresponding financial statements approved by the applicable PEPASA’s General Ordinary Shareholders Meeting.



As of December 31, 2015, PEPASA disclosed $ 46.6 million results for the EBDA Compensation cost against other liabilities



Company Value Sharing (the “Company-Value Compensation”)



On November 6, 2013, PEPASA’s Extraordinary General Meeting of Shareholders resolved to approve a variable and contingent compensation to certain officers equivalent to 7% of the capital stock after the Company’s capital stock increase, valued based on the difference between the share’s market value at the time of exercising the right and a given value of US$ 0.1735 per share determined at the exact moment of the capital stock increase.











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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 46:(Continuation)



On January 13, 2014, the capital stock increase was carried out and the rights granted to Officers to receive the Company-Value Compensation became effective.



The variable remuneration may be required by officers as follows:



1)25% as from June 2015

2)7.14% as from December 2015

3)32.15% as from June 2016

4)35.71% as from June 2017

The given right may be monetized at any time from the date of effective enforcement until November 15, 2020 (by 5%) and 11 January 2021 (for the remaining 2%) over 7% of the share capital calculated according to what was detailed in the first paragraph of the note.



The fair value of the Option has been measured according to the Black-Scholes valuation model. The main variables considered in such model are the following:



1)54.3% volatility based on the volatility of the shares of other comparable companies;

2)1,6886% risk-free U.S. dollars interest rate;

As of September 30, 2014, PEPASA has recognized this compensation’s in profit or loss (with a credit under “Other Liabilities”) on amount of $ 50.5 million, considering a share market value of $ 15.25.



Since its organization, the Company's growth and performance has far exceeded all initially defined metrics, parameters, and development and business plans.  Therefore, and in view of its officers' significant contribution to meeting such goals, on December 28, 2015, PEPASA entered into an amendment to the compensation agreement providing for the full and irrevocable accrual of the variable remuneration to be collected by officers regarding the percentages which are not yet due effective as from that date, without this affecting the previously described enforceability.



As of December 31, 2015, PEPASA recognized $ 227.4 million in results as the above mentioned compensation cost (with an offsetting entry in Other Debts), out of which $ 176.9 million were accrued in results during this fiscal year. The market value of the share amounted to $ 28.86.







F - 205

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTA 47: WORKS OF DISTRIBUTION



a.FOTAE



Due to the constant increase recorded in the demand for electricity as a result of the economic recovery, the SE, through Resolution 1875 dated December 5, 2005, established that the interconnection works through an underground power cable at two hundred and twenty kilovolts (220 kV) between Costanera and Puerto Nuevo Transformer Stations with Malaver Transformer Station were necessary. These works require not only the execution of expansion works but also new layout-designs of the high-voltage subsystems of Edenor and Edesur’s networks.  In addition, it established that a fraction of the electricity rate increase granted to distribution companies by ENRE Resolution 51/07 (as mentioned in Note 2.c.I), would be used to finance up to 30% of the total execution cost of these works, with the remaining 70% of the total cost of the works being absorbed by the MEM’s demand. Fund inflows and outflows related to the aforementioned expansion works are managed by the Works Trust Fund SE Resolution 1/03, which will act as the link among CAMMESA, the Contracting Distribution Companies and the companies that would have been awarded the contracts for the provision of engineering services, supplies and main pieces of equipment as well as those for the execution of the works and provision of minor supplies.



The amount transferred to CAMMESA by Edenor as from the commencement date of the project, through contributions in cash, supplies and services totaled $ 45.8 million.



In accordance with the agreements entered into on August 16, 2007 by and between Edenor and the National Energy Secretariat and on December 18, 2008 by and between the Company and Banco de Inversión y Comercio Exterior, in its capacity as Trustee of the FOTAE, Edenor is responsible for the development of all the stages of the project, regardless of the oversight tasks to be performed by the Works Commission SE Resolution 1/03. The agreement stipulates that Edenor will be in charge of the operation and the planned and reactive maintenance of the facilities comprising the expansion works, being entitled to receive as remuneration for the tasks and obligations undertaken 2% of the cost of major equipment and 3% of all the costs necessary for the carrying out of civil engineering and electromechanical assembly works related to the Malaver-Colegiales and Malaver-Costanera electrical transmission lines, the expansion of Malaver Substation and the remaining expansion works of Puerto Nuevo Substation.



The works were developed in different stages, and Edenor complied with its responsibility with regard to the development of each of them, as well as with the operation and the planned and reactive maintenance of the facilities comprising the expansion works. The final conclusion of the works occurred in fiscal year 2014.



Furthermore, on January 15, 2015, CAMMESA not only informed Edenor of the amounts disbursed by the BICE and CAMMESA for the execution of the aforementioned works, but also requested that Edenor carry out the pertinent actions to comply with the provisions of Resolution 1875/05. Consequently, Edenor has begun to carry out actions aimed at coordinating and reaching agreement, with the different parties involved, on the steps to be followed to have this process finalized. This will make it possible to subsequently define Edenor’s real situation in relation to the obligations that have been imposed to it by said resolution.



As of December 31, 2015, Edenor recognized as facilities in service in the Property, plant and equipment account its participation in the works for an estimated value of $ 141.8 million, including financial charges, $ 155.8 million of which have not yet been contributed, a debt which is disclosed in the Other payables account of non-current liabilities.









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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)


NOTE 47: (Continuation)



b.Construction works - San Miguel and San Martín Transformer Centers



The Company carried out construction works of a 7.3 km-long electrical transmission line consisting of four 13.2 kV lines in trefoil formation to link Rotonda Substation with San Miguel Transformer Center, owned by ENARSA, necessary for the provision of electric power generation services; and a 6.2 km-long electrical transmission line consisting of a 13.2 kV line in trefoil formation to link Rotonda Substation with San Martín Transformer Center, owned by ENARSA.



The works, whose ownership was assigned to Edenor, were carried out by Edenor with the contributions made by ENARSA. As of December 31, 2015, Edenor continues to recognize liabilities for this concept in the Deferred revenue account. The recognized amount is $ 32.1 million.



c.Electric works arrangement - Agreement for the supply of electric power to Mitre and Sarmiento railway lines



In September 2013, Edenor and the Interior and Transport Ministry entered into a supply and financial contribution arrangement pursuant to which the Federal Government will finance the necessary electric works aimed at adequately meeting the greater power requirements of the Mitre and Sarmiento railway lines.



The total cost of the works amounts to $ 114.3 million. The Federal Government will bear the costs of the so called “exclusive facilities”, which amount to $ 59.9 million, whereas the costs of the remaining works will be financed by the Federal Government and reimbursed by Edenor.



The financed amount of $ 54.4 million will be reimbursed by Edenor in seventy-two monthly and consecutive installments, as from the first month immediately following the date on which the Works are authorized and brought into service.



During the fiscal year being reported, Edenor received disbursements for $ 9.9 million, related to installment 5. As of December 31, 2015, the Company recorded $ 57.2 million as Non-current deferred revenue and $ 51.9 million as Non-current trade payables – Customer contributions.



d.Agreement for the execution of works in la Matanza District



In April 2015, the Company and La Matanza District entered into an agreement for the execution of works aimed at improving the electricity service. The amount of the agreement totals $ 103.75 million, including applicable taxes and charges.



It was agreed that after the completion of each work and upon the presentation of the respective invoices, the new facilities will be assigned free of charge in order for Edenor to proceed with the start-up of the facilities and the subsequent operation and maintenance thereof







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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)




NOTE 47: (Continuation)



The Public Works Secretariat of the Ministry of Federal Planning, Public Investments and Services agrees to provide financial assistance to La Matanza District, on the basis of an arrangement signed between the parties, for the total amount of the agreement.



As of December 31, 2015, Edenor recorded $ 16.9 million as non-current deferred revenue.



NOTE 48: NEW CONTRACT FOR THE MAINTENANCE OF LMS TG-100



During the month of August 2014, CTG entered into a new maintenance agreement with GE for its LMS 100 unit.

As distinguished from the previous contract, which was based on pre-established maintenance and exchange of  components (for example, at 25,000 and 50,000 hours of operation for certain components), this new agreement consists of periodical inspections and pieces repairs or exchanges, which will be programmed and executed based on their condition in order to guarantee the proper functioning and availability of the unit and to decrease the risk associated with long outages. The new agreement will be effective until the unit reaches 100,000 accumulated hours of operation.

Therefore, CTG, during 2014, recorded a loss in the amount of $ 11.4 million resulting from the write-off of the receivables associated with these contracts, which were disclosed under “Other operating expenses” in the statement of comprehensive income.



NOTE 49:  SALE OF MAN ENGINES



On April 30, 2015, CTG'S Board of Directors approved CTLL's proposal for the purchase of the MAN engines for a price of US$ 5 million (as approved by CAMMESA) so that the latter may expand its capacity under the “Agreement for the Increase of Thermal Generation Availability between the ES and Generators” and the “Specific Conditions to the Generation Availability Increase Agreement entered into between the ES and Generator’s subsidiaries”.



On September 15, 2015, CTG accepted the offer for the purchase of the MAN engines and supplementary equipment by CTLL, and the transfer of ownership was thus perfected. This operation entailed the recognition of profits in the amount of $ 25.3 million under Reversal of impairment of property, plant and equipment to let it to its original cost.













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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)    NOTE 50: DISCONTINUED OPERATIONS Sale of AESEBA/EDEN’s assets In February 2013 Edenor received offers from two investment groups for the acquisition of the total number of shares of AESEBA, the parent company of EDEN. On February 27, 2013, Edenor Board of Directors unanimously approved the acceptance of the Offer Letter sent by Servicios Eléctricos Norte BA S.L. (the “Buyer”) for the acquisition of the shares representing 100% of AESEBA’s capital stock and voting rights. The price offered by the buyer is payable through the delivery of Edenor debt securities for an amount equivalent, considering their quoted price at the date of the acceptance, to approximately U$S 85 million of nominal value. Such price was fixed in Bonar 2013 sovereign debt bonds or similar bonds (“the Debt Securities”) for a value equivalent to $ 334.3 million at the closing of the transaction, considering the market value of such government bonds at that time. In this regard, a Trust was set up in March 2013 by the Settlor (the Buyer), the Trustee (Equity Trust Company from Uruguay) and Edenor. At the closing date of the transaction, which took place on April 5, 2013, the buyer deposited in the Trust cash and Debt Securities for the equivalent of $ 262 million, considering the market value of those government bonds at the closing date, and, prior to December 31, 2013, the buyer will be required to deposit in the Trust Debt Securities for the equivalent of 8.5 million of nominal value divided by the average price of purchase thereof.  At the closing of the transaction, Edenor received the rights as beneficiary under the Trust. With the proceeds of the liquidation of the bonds received the Trust will purchase Edenor Class 9 and Class 7 Corporate Bons due in 2022 and 2017, respectively. In this manner, as of December 31, 2013, Edenor divested the AESEBA segment, which resulted in a loss of $ 96.5 million, included within the loss from discontinued operations, after tax-related effects and without considering the results of the repurchase of Corporate Bonds, which were recognized by Edenor when such transaction took place. At December 31, 2013, and due to the repurchases of Edenor’s own debt made by the Trust, Edenor recorded a gain of $ 71.7 million included in the “Other financial expense” line item of the Statement of Comprehensive Income (Loss).




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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)   NOTE 50:(Continuation)  The Trust has purchased the totality of Edenor Corporate Notes due in 2017 and 2022 indicated in the respective trust agreement for U$S 10 million and USD 68 million of nominal value, respectively. On March 27, 2014, these Corporate Notes were written off. Due to the repurchases of Edenor’s own debt made by the Trust, as of December 31, 2014, Edenor recorded a gain of $ 44.4 million, which has been included in the “Other financial expense” line item of the Statement of Comprehensive Income (Loss). Additionally, on April 5, 2014, the Trust was terminated and liquidated. Sale of EMDERSA/EDELAR On September 17, 2013, Edenor Board of Directors approved the sending to Energía Riojana S.A. (ERSA) and the Government of the Province of La Rioja of an irrevocable offer for (i) the sale of the indirect stake held by Edenor in EMDERSA, the parent company of EDELAR, and (ii) the assignment for valuable consideration of certain receivables which Edenor has with EMDERSA and EDELAR. On October 4, 2013, Edenor received the acceptance of the Offer by ERSA and the Government of the Province of La Rioja in its capacity as controlling shareholder of the buyer. The transaction was closed and effectively carried out on October 30, 2013. The price agreed upon in the aforementioned agreement amounts to $ 75.2 million and is payable in 120 monthly and consecutive installments, with a grace period of 24 months, to commence from the closing date of the transaction, for the payment of the first installment. Furthermore, on August 5, 2013 Edenor was notified of ENRE Resolution No. 216/2013, whereby the Regulatory agency declared that the procedure required by Section 32 of Law No. No. 24,065 with respect to the purchase of EMDERSA, AESEBA and their respective subsidiaries made by Edenor in March 2011 had been complied with, formally authorizing the acquisition thereof. The transaction was closed on October 30, 2013 together with the holding of the Ordinary Shareholders’ Meeting that appointed new authorities and approved the actions taken by the outgoing Directors and Supervisory Committee members.




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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)    NOTE 50:(Continuation)  The financial statements related to discontinued operations included in this financial statement are disclosed below:  12.31.2015
 
 12.31.2014
 
 12.31.2013Sales
 -
 
 -
 
 408,647,206Cost of sales
 -
 
 -
 
 (275,630,741)Gross profit
 -
 
 -
 
 133,016,465Selling expenses
 -
 
 -
 
 (56,439,207)Administrative expenses
 -
 
 -
 
 (36,856,088)Other operating income
 -
 
 -
 
 1,864,823Other operating expenses
 -
 
 -
 
 (36,379,564)Operating profit
 -
 
 -
 
 5,206,429Financial income
 -
 
 -
 
 14,802,397Financial cost
 -
 
 -
 
 (28,576,161)Other finance results
 -
 
 -
 
 (7,472,520)Financial results, net
 -
 
 -
 
 (21,246,284)(Loss) Income before income tax
 -
 
 -
 
 (16,039,855)Income tax
 -
 
 -
 
 171,707,861Income after income tax
 -
 
 -
 
 155,668,006Impairment of assets classified as held for sale
 -
 
 -
 
 (7,144,579)Loss on sale of assets classified as held for sale
 -
 
 -
 
 (185,960,015)Income tax
 -
 
 -
 
 (89,421,740)Total (loss) income of the year
 -
 
 -
 
 (126,858,328)Total (loss) income of the year attributable to:Owners of the company
 -
 
 -
 
 (85,698,444)Non - controlling interest
 -
 
 -
 
 (41,159,884)-
 
 -
 
 (126,858,328)




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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)   NOTE 51: SUBSEQUENT EVENTS  PEPASA  Corporate Bonds Program  On January 14, 2016, PEPASA modified the Simple Corporate Bonds Program (non-convertible into shares) for up to US$ 500 million or its equivalent in other currencies.  On February 3, 2016, PEPASA issued Series 7 Corporate Bonds for a face value of $ 309 million, accruing interest at the Badlar rate plus a 3.95% spread and maturing on August 3, 2017. Interest will be payable on a quarterly basis.  VCPs Global Program  On January 14, 2016, PEPASA modified the VCP Global Program by increasing its amount for up to US$ 100 million or its equivalent in other currencies.  Shareholders' Meeting  On January 14, 2016, PEPASA Extraordinary General Shareholders’ Meeting resolved as follows: i) to increase the capital stock for up to 400 million new common shares in book-entry form with a face value of $ 1 each, to be publicly offered in Argentina, and ii) to approve a first issuance for up to 20 million. As of the date hereof, the Company is taking the necessary steps to seek authorization of the first issuance by the CNV, which has not yet been granted.  Edenor  Extraordinary bonus to employees  Salaries and social security charges: on January 18, 2016, Edenor entered into two agreements, one with the Sindicato de Luz y Fuerza de Capital Federal (Electric Light and Power Labor Union Federal Capital) and another one with the Asociación del Personal Superior de Empresas de Energía, (Association of Supervisory Personnel of Energy Companies),pursuant to which Edenor agreed to grant, on a voluntary and one-time basis, an extraordinary bonus of $ 5,000 to all the employees subject to the collective bargaining agreements of the aforementioned union/association.  The bonus was paid in two installments of $ 2,000 and $ 3,000 on January 21 and March 21, 2016, respectively. The payment of the aforementioned bonus was extended to all Edenor's employees.  The total recorded charge amounted to $24.9 million.  PESA  Corporate Bonds Program  On January 22, 2016, the Company Ordinary and Extraordinary General Shareholders’ Meeting approved the creation of a global Simple Corporate Bond Program, not convertible into shares, for up to U$S 500 million or its equivalent in other currencies, and the issue under the same program to its maximum amount at any time, to be issued in one or more classes and / or series




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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)
 NOTE 51: (Continuation)  Acquisition of the shares of Petrobras Argentina S.A.  Petroleo Brasileiro S.A. (“Petrobras Brazil”) and the Company have agreed an exclusivity period of 30 days and can be extended for 30 additional days, to continue advanced negotiations for the acquisition of the shares of Petrobras Argentina S.A. in possession of its subsidiary Petrobras Participaciones S.L., equivalent to 67.2% of capital and votes of  Petrobras Argentina S.A. (“Petrobras Argentina”).  Holding the previously referred transaction is subject to the successful negotiation of the terms applicable and relevant documentation and approval of such terms and documentation by the competent corporate bodies of Petrobras Brazil and the Company.  Launching of Negotiations for the Sale of Assets  On March 9, 2016, pursuant to the continuous assessment of Pampa Group’s corporate strategy and in view of the possible incorporation of new assets, the Company’s Board of Directors has decided to start negotiations regarding the possible sale of its indirect interest in TGS, which it holds through a trust classified as Financial assets at fair value through profit and loss (Note 6) as well as its interests in affiliates (Note 9), both included in the Holding and Others segment.  NOTE 52: SUBSEQUENT EVENTS UPDATE AS OF JULY 26, 2016  Generation regulatory framework  SE Resolution No. 22/16 – Update of the Remuneration Scheme implemented by SE Resolution No. 95/13 and previously updated by SE Resolutions No. 529/14 and No. 482/15 On March 30, 2016, SE Resolution No. 22/16 was passed, which abrogated Schedules I, II, III, IV, V, VI and VII of SE Resolution No. 482/15 (which in turn amended SE Resolutions No. 95/13 and 529/14) and provided for a retroactive updating —as from the economic transactions for the month of February, 2016— of the remuneration values for fixed and variable costs and for non-recurring maintenance works (the "Maintenance Remuneration”). The remuneration scheme update comprises the following: i.Fixed Costs Remuneration:  Classification or technology and scale
 $/MW-hrpTG units with power (P) > 50 Mw
 108.8TV units with power (P) < 100 Mw
 180.9TV units with power (P) > 100 Mw
 129.2HI units with power (P) ≤ 50 Mw
 299.2HI units with power (P) between 120 Mw and 300 Mw
 107.8
  Pursuant to SE Resolution No. 22/16, hydroelectric power plants operating and maintaining control structures in river courses (such as derivation channels or compensation reservoirs) and not having an associated hydroelectric power plant should consider a 1.20 increase factor for the remuneration of fixed costs in the plant at the headwaters.


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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)
  NOTE 52: (Continuation) ii.Variable Costs Remuneration: Classification or technology and scale
 Operating with:Natural

   Gas
 FO/GO Hydrocarbons$/MWhTG units with power (P) > 50 Mw
 46.3
 81.1TV units with power (P) < 100 Mw
 46.3
 81.1TV units with power (P) > 100 Mw
 46.3
 81.1
   Hydroelectric Units
 $/MWhHI units with power (P) ≤ 50 Mw
 36.7HI units with power (P) between 120 Mw and 300 Mw
 36.7
 In the case of pumping hydroelectric power plants, both the power generated and the power used for pumping should be considered. iii.Maintenance Remuneration:  Classification or technology and scale
 $/MWhTG units with power (P) > 50 Mw
 45.1TV units with power (P) < 100 Mw
 45.1TV units with power (P) > 100 Mw
 45.1HI units with power (P) ≤ 50 Mw
 16HI units with power (P) between 120 Mw and 300 Mw
 16
   SE Resolution No. 21/16: Call to companies interested in offering new generation capacity  As a result of the state of emergency in the National Electricity Sector, on March 2016, the SE launched an Auction calling for parties interested in offering the construction of new thermal power generation projects (Resolution SE No° 21/2016) with the commitment to making it available through the WEM for the following periods: 2016/2017 summer; ii) 2017 winter, and iii) 2017/2018 summer.  The terms for the call were established in SE Note No. 161/16. The conditions applicable to the generation capacity to be offered include: i) a minimum 40 MW power; ii) each generating unit should have a minimum 10MW power; and iii) the equipment should have double fuel consumption capacity (with certain exceptions).  The offeror should file its offer through two envelopes (a technical and an economic proposal). The economic proposal should provide for a Fixed Price (US$/MW-month) and a Variable Price (not associated with fuel, in US$/MWh).  Successful bidders should enter into a “wholesale demand agreement” with CAMMESA on behalf of the distributors and with GUME.


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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)
  NOTE 52: (Continuation)  Under such framework Pampa’s subsidiaries presented 4 different projects, however only one was awarded. The project awarded consists on the expansion of CTLL’s power plant generation capacity by the installation of a new GE MW LMS100 aero-derivative gas-fired turbine generator with a gross capacity of 105 MW by August 2017. The estimated cost of the project is US$ 90 million plus VAT. CTLL has executed the agreements with the relevant contractors for the execution on the works and the future maintenance of such unit.  Additionally, CTTL entered into power purchase agreement with CAMMESA to sell CAMMESA the corresponding capacity and generated energy for a period of 10 (ten) years from the project’s commercial operations date.  Wind Power Projects In order to continue expanding the Company’s generation business, the Company carried out the following acquisitions:  (i)On April 18, 2016, CTLL acquired 100% of the capital stock and shares of Greenwind S.A. (“Greenwind”) for an amount of US$ 2.1 million. Greenwind is a corporation organized in Argentina the main objective of which is the development of the “Corti” wind power project, which consists of the installation of a 100 MW capacity park in Bahía Blanca, Province of Buenos Aires. Greenwind holds the right of usufruct over a 1,500-hectare plot of land where wind measurements have been taken during the last four years.  (ii)On May 17, 2016, CTLL acquired 100% of the capital stock and shares of Parques Eólicos del Fin del Mundo S.A. (“PEFM”), for an amount of US$ 0.67 million. PEFM is a company incorporated under the laws of Argentina whose purpose is to develop an eolic project named “PARQUE EOLICO DE LA BAHIA” which will consist of a wind farm with a 50MW capacity, located in Bahía Blanca, Province of Buenos Aires. For such purpose, PEFM has a legal right of use and profit from the 500 hectare and a wind measurement for a 4 year period.  Major maintenances  The extension of the loan in order to include the execution of CTLL ́s unit LDLATG01 major maintenances in the amount of US$ 13 million and US$17.8 million, in both cases plus VAT, nationalization and logistics costs and withholdings chargeable on foreign contractors, was approved pursuant to SSETTyDEE Note No. 52/16, and the addendum to the loan agreement was entered into on April 8, 2016.  CPB ́s unit TV29 was released for commercial operation in June 2016, after completion of the necessary tests and trials following the repair of the excitation transformer.  New Generation Project. 2014 Thermal Generation Availability Increase Agreement  In relation to the execution of the CTLL 2014 Expansion Project to expand the generation capacity of CTLL by 120 MW, on July 15, 2016, the commercial operation of the new aero-derivative gas-fired turbine generator (105 MW) started. As of the date of issuance hereof, CTLL is negotiating with CAMMESA the WEM Supply Agreement under SE Resolution N° 220/2007.


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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)
  NOTE 52: (Continuation)  Distribution regulatory framework Penalties By means of ENRE Note No. 120,151, which establishes the new criterion to calculate penalties, Edenor is informed of the payment in Argentine pesos of the penalties stated in kWh. The effect of these resolution has been recorded during 2016. Additionally, considering the aforementioned ENRE Note, Edenor is evaluating with the regulatory authority the scope of the provisions thereof with regard to all the penalties recorded. This includes, for example, clarifying the ENRE’s criterion to define what constitutes “remuneration” for purposes of determining the penalties accrued prior to April 15, 2016 and not yet issued, as well as the obligation to accrue interest on the penalties issued until the date of their cancellation or payment. If the term “remuneration” were interpreted by the ENRE as to include all the amounts received in the form of, for example, government grants, or if the accrual of interest on penalties issued were, in the ENRE’s opinion, applicable, the amount of the provision for penalties could increase significantly. Compensation payable to Customers On March 21, 2016, the ENRE issued Resolution No. 31/2016, pursuant to which it was provided that each small-demand residential customer (T1R) who suffered  power outages between February 12 and 18 2016 must be paid a compensation of (i) six hundred pesos if the power cut lasted more than 12 continuous hours but did not exceed 24 continuous hours; (ii) nine hundred thirty-one pesos if the power cut lasted more than 24 continuous hours but did not exceed 48 hours; and (iii) one thousand sixty-five pesos if the power cut lasted more than 48 continuous hours. The total amount of the compensation payable to customers by way of discounts amounts $ 73 million, which started being credited to customer bills issued as from April 25, 2016. ENRE Resolution 347/12 - Fund for Electric Power Distribution Expansion and Consolidation Works (FOCEDE) According to the provisions of Resolution ENRE No. 2/16, on the discontinuation of the FOCEDE trust, on June 23, 2016 Edenor received $ 86.3 million pesos as reimbursement for the sums transferred to FOCEDE. At the date of issuance of these financial statements, consequently Edenor proceeded to the final settlement of that trust. Edenor’s Precautionary measures As from May 2016 and until the date of issuance of these restated financial statements, Edenor has been notified by several courts from the Province of Buenos Aires of precautionary measures requested by different customers, both individual and districts (Private Hospital de la Merced S.A., Municipio de La Matanza,  Club Atlético 3 de Febrero, Club Ferrocarril Mitre Deportivo Social y Cultural, Sociedad Alemana de Gimnasia de Villa Ballester, Club Social y Deportivo Las Heras, Club Sportivo San Andrés, Cooperativa de Trabajo 19 de Diciembre, San Martín, Pilar and Escobar Municipality’s inhabitants), which all together represent more than 30% of Edenor’s sales, ordering the suspension of the tariff increase provided by Resolutions No. 6/2016 and 7/2016 of the Energy and Mining Ministry and Resolution No. 1/2016 of the ENRE, retroactively to the date such resolutions entered in force (February 2016).


F - 216

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)
  NOTE 52: (Continuation)  These measures (except for the one covering all the Province of Buenos Aires discussed in the paragraph below) required Edenor to refrain from invoicing with the tariff increase, and to return any amounts of the increases already collected, through a credit on the customers’ accounts. Edenor complied with the courts’ resolutions and started to re-issue the invoices based on previous tariff scheme, crediting amounts collected in addition to those tariffs in each client account. The estimated impact of complying with these resolutions at June 30, 2016 amounts to approximately $1,470 million in revenues. The incremental cost related to those revenues are of an estimated amount of $ 681 million.  Also, on July 15, 2016 Edenor has been notified by the ENRE of the issuance by the Second Division of the Federal Court of the City of La Plata, instructing the suspension of the aforementioned tariff increase, applicable to the Province of Buenos Aires. In this case, the resolution from the Court suspends application of the Resolutions mentioned above for a period of three months as from the date of issuance of the injunction, but it does not establish the retroactive application of such suspension.  Edenor has requested the intervening courts to give notice to CAMMESA of the suspension of the resolutions mentioned above, so as to avoid CAMMESA to continue invoicing the energy being purchased by Edenor, and affected by the precautionary measures, with the increased seasonal price established by Resolution 6/2016 of the Ministry of Energy and Mining. Furthermore, Edenor has itself given notice to CAMMESA of such situation.  Edenor has taken all steps within its reach from a judicial standpoint in order to revert this situation and while it awaits courts definitions, it is evaluating its consequences and any further actions to be taken.  Due to these judicial resolutions the Executive Branch, who initially established the tariff increases, requested the Supreme Court of Justice to address the matter and decide on the legality, correspondence and applicability of tariff increases.  Application of Resolutions 6 and 7 of the Ministry of Energy and Mining, and 1/2016 of the ENRE, as of June 30, 2016 purport additional revenue to Edenor for an estimated amount of $ 4,898 million. They also gave place to additional costs (for energy received from CAMMESA) for an estimated amount of $ 2,204 million. Should the Supreme Court declare these Resolutions null and void, such amounts represent the maximum effect in the financial statements as of June 30, 2016.  Notwithstanding the foregoing, in case such resolutions are declared null and void, Edenor understands that the former scheme of Resolution SE No. 32 would re-enter into force, since it was abrogated by Resolution 7, which is now being questioned. In such case the National Government should restart granting assistance to Edenor to pay for its obligations until a new tariff increase is established.  At this moment, it is not possible to estimate the final outcome of this situation. In any case, Edenor continues to prepare its financial statements on a going concern basis, as it believes that, until this situation is solved, the government will not require Edenor to pay CAMMESA for the electricity sold, and will also provide funding to Edenor to settle other liabilities (such as salaries) through the Resolution SE No. 32 or a similar regime.


F - 217

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)
  NOTE 52: (Continuation)  Borrowings  PEPASA  On March 1, 2016, PEPASA executed a loan agreement with Banco Galicia S.A in the amount of $ 100 million at a 32% fixed rate and maturing on February 24, 2017. Interest will be payable on a monthly basis as from the granting date. The loan is guaranteed by a guarantee provided by PEPASA, and funds have been allocated to the refinancing of liabilities.  On March 29, 2016, PEPASA executed with ICBC a new productive loan agreement in the amount of $ 300 million to pay off the loan taken out with the same entity and for the same amount on July 27, 2015.  Its main terms and conditions are described below:  -Interest: at a fixed rate during the first 12 months and at a variable rate during the remaining term, interest being payable on a quarterly basis.  -Repayment: it will be repaid in 10 quarterly consecutive installment, the first installment being payable upon maturity of the nine-month term as from the disbursement date. The first installment will represent 2% of the principal; the second installment, 6.5%; the third and fourth, 11%; the fifth and sixth, 11.25%, and as from the seventh and until the tenth installment, 11.75%;  -Negative Covenants: PEPASA may not create liens on its goods or assets, sell assets, conduct certain operations with affiliates, make certain payments (including, but not limited to, dividends) or perform any act involving a merger, consolidation or spin-off.  -Covenants: PEPASA will be obliged to keep a net financial debt to adjusted Ebitda ratio lower than 2.5x; an adjusted Ebitda to financial expense ratio lower than or equal to 2x; and a minimum shareholders' equity of $ 250, 400 and 500 million during fiscal years ended December 31, 2015, 2016 and 2017, respectively.  On March 29, 2016, PEPASA provided for the early cancellation of $ 165 million with Banco Hipotecario S.A. On April 20, 2016, PEPASA issued Series 14 VCPs for a face value of $ 295.8 million, accruing interest at the Badlar rate plus a 5.9% spread and maturing on April 15, 2017. Interest will be payable on a quarterly basis.  On May 27, 2016, under the Rincón del Mangrullo block investment agreement, PEPASA and YPF agreed that YPF will pay PEPASA ́s investments and expenses up to U$S 28 million, and that this debt will accrue a 5% fixed rate. PEPASA will cancel principal and interests before November 27, 2016.  On June 10, 2016, PEPASA entered into a commercial loan agreement with Banco Santander Río S.A. in an amount up to US$ 120 million, which may be drawn down in one or more drawings during the 45-day period following the date of the loan agreement. The loan issued an interest rate equal to 7.5 % and a maturity of 18 months.  On June 27, 2016, PEPASA issued Ps. 403.3 million of Series 8 Corporate Bonds at a variable interest rate equal to the BADLAR rate plus 4%, and a maturity of 12 months.


F - 218

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)
  NOTE 52: (Continuation)  Edenor  On July 12, 2016 Edenor proceeded to redeem the Corporate Bonds due on 2017. The outstanding amount redeemed was US dollars 14.76 million, 100 % of its nominal value with accrued interest of $ 0.40 million.  Natural Gas Surplus Injection Promotion Program (the “Program”)  On May 20, 2016, Decree No. 704/16 authorized the issuance of U.S. Dollar-denominated bonds issued by the Argentine government (BONAR 2020) for the cancellation of debt outstanding under the Program as of December 31, 2015.  This decree establishes certain restrictions on the transferability of such bonds until December 2017 (monthly 3%) and requires certain information on a monthly basis.  On June 9, 2016, PEPASA submitted a letter accepting payment of $ 455.5 million, the compensation owed to us through December 2015, with US$ 29.5 million BONAR 2020 bonds.  General Ordinary and Extraordinary Shareholders’ Meeting On April 29, 2016, the Company’s General Ordinary Shareholders’ Meeting approved the allocation of earnings for the fiscal year ended December 31, 2015, which amounted to $ 3,065.1 million, as follows: $ 153.3 million to the legal reserve, and $ 2,911.8 million to an the voluntary reserve.  Sale of interests in TGS  On April 22, 2016, the Company agreed with Harz Energy, a subsidiary of the Neuss Group, a 45-day exclusivity period to complete the sale of the Company's shareholding and rights in TGS held indirectly through a trust having 40% of CIESA's capital stock and its additional 10% direct interest in such company.  In consideration of this exclusivity period, Harz Energy has paid to the Company the amount of US$ 3 million to be discounted from the purchase price which, should the operation be completed, would amount to US$ 250 million.  The exclusivity period agreed with Harz Energy, has expired without having finalized the sale of the stock of shares and rights, indirectly owned by the Company in TGS, which implied / resulted in a loss by Grupo Neuss of the compensation paid of US$ 3 million.  On 18 July, 2016 the Company entered into an agreement with Grupo Inversor Petroquímica S.L. (part of Grupo GIP, controlled by the Sielecki family), WST S.A. and PCT L.L.C. (part of Grupo Werthein) (jointly hereafter the “Buyers”) for the sale of the capital stock and rights (the “Transaction”) indirectly owned by the Company in TGS. The base price was established, subject to certain adjustments, in the amount of US$ 241 million.  On 19 de July, 2016 the Buyers paid to the Company the amount of US$ 8 million as part of the purchase price. An additional payment of US$ 153 million shall be paid at the closing of the transaction for the acquisition of Petrobras Argentina S.A. and the remainder US$ 80 million shall be paid on or before February 15, 2017 with a 5% annual interest.


F - 219

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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)
  NOTE 52: (Continuation)  Acquisition of Petrobras Participaciones S.L. Petrobras Brazil and the Company (the “Parties”) have concluded the negotiations of the main terms and conditions to acquire all of the shares of Petrobras Participaciones S.L., the company which owns 67.1933% of Petrobras Argentina’s capital stock and voting rights and certain intercompany indebtedness of Petrobras Participaciones S.L. (“the Transaction”). On May 12, 2016, the final terms and conditions of the agreement have been approved by the Company ́s Board of Directors and Petrobras Brazil ́s Board of Directors. On May 13, 2016, the parties signed the Share Purchase Agreement (the “SPA”). In accordance with terms and conditions of the SPA, the Company has deposited 20% of the base price (US$ 178.4 million) in an escrow account on Citigroup Citibank, NA. The Company will acquire all of the shares of Petrobras Participaciones S.L., upon satisfaction of the conditions precedent for closing of the Transaction.  (i)The base price of the Transaction is US$ 892 million (representing a value of US $1,327 million for 100% of the shares of Petrobras Argentina). The base price is subject to adjustments that have been agreed among the parties and that the Company believe not to be material. (ii)The Company will fund the final Transaction price with a combination of the following: (i) own resources using (a) cash at hand of up to US$ 220 million and (b) up to US$ 250 million  from the sale of interests in TGS, which sale shall be completed prior to Closing of the Transaction; (ii) bank financing of up to US$ 700 million; (iii) private financing of up to US$ 225 million; and (iv) financing to be provided by a vehicle controlled by the controlling shareholders of the Company of up to US$ 50 million. (iii)In addition, Pampa's board of directors approved that, subject to the approval of the board of Petrobras Argentina, an affiliate of Petrobrás Brazil shall acquire from Petrobras Argentina, after closing of the Transaction, 33.6% of the rights and obligations of the Río Neuquén concession area, and the assets related to such interests, as well as 100% of the rights and obligations under the Operating Agreement entered into by Petrobras Argentina – Bolivian Branch and Yacimientos Petrolíferos Fiscales Bolivianos, in relation to the Colpa and Caranda areas in Bolivia, subject to government approvals in Bolivia, for the net amount of US$ 52 million. (iv)YPF S.A. shall acquire the remaining 33.33% of Río Neuquén concession area and 100% of Aguada de la Arena participating interest for US$ 140 million  Cash tender offer and an exchange tender offer  On May 20, 2016 the Board of Directors of the Company decided to launch a mandatory cash tender offer (the “Cash Tender Offer”), in accordance with the provisions of the Argentine capital markets law and the regulations of the CNV relating to mandatory tender offers in case of change of control and indirect acquisition; and simultaneously a voluntary exchange tender offer (the “Exchange Offer” and together with the Cash Offer, the “Offer”), directed to all shareholders in possession of ordinary Class “B”, capital and voting stock with a nominal value of one Argentine peso (Ps. 1) each and one vote per share, currently issued and in circulation of Petrobras Argentina.


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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)  NOTE 52: (Continuation)  The Board of Directors has therefore: (i) approved the public Cash Tender Offer and Exchange Offer, which is subject to the closing of the Transaction and the granting of all necessary approvals by the CNV, (ii) fixed the offer price of the Cash Tender Offer in US$ 0,6574 per share of Petrobras Argentina, subject to certain price adjustments contained in the Transaction agreements; (iii) fix the exchange ratio for the Exchange Offer as the average weighted price of the Company’s shares during the 5 days prior to the opening of the period for the receipt of acceptance of offers divided by the price per share of Petrobras Argentina set for the Cash Tender Offer and will allow, if so decided by Company ́s Shareholders Meeting, the Board of Directors to determine an adjustment factor of more or less 10%; (iv) approved to hold an Ordinary and Extraordinary General Shareholders Meeting to consider, among others, a capital increase for up to Ps. 320 million, that will represent a 15.87% of the Company’s capital stock and votes after the capital increase is perfected and the issuance of shares of Pampa in relation to the Exchange Offer as well as with the suspension of the preferred subscription rights and the amendment of the Company’s corporate purpose.  On June 22, 2016, the General Ordinary and Extraordinary Shareholders’ Meeting of the Company resolved to approve all the decisions submitted for approval by the abovementioned Board of Directors.  The Company is currently evaluating the possibility of, upon Closing of the Transaction and all the relevant corporate and regulatory approvals, merging the Company with Petrobras Argentina, being the Company the surviving entity. For this purpose, the abovementioned Shareholders’ Meeting of the Company resolved to amend Section 4 of the Company ́s Corporate Bylaws referred to the corporate purpose with the purpose of including the main activities of the company to merge.


NOTE 53:SUPLEMENTAL INFORMATION ON OIL AND GAS ACTIVITIES (UNAUDITED)



The following information is presented in accordance with ASC No. 932 "Extractive Activities - Oil and Gas", as amended by ASU 2010 - 03 “Oil and Gas Reserves, Estimation and Disclosures”, issued by FASB in January 2010 in order to align the current estimation and disclosure requirements with the requirements set in the SEC final rules and interpretations, published on December 31, 2008. This information includes the PEPASA's oil and gas production activities.



Table 1 – Cost incurred in exploration, property acquisitions and development



The following table presents those costs capitalized as well as expensed that were incurred during each of the year ended as of December 31, 2015, 2014 and 2013. The acquisition of properties includes the cost of acquisition of proved or unproved oil and gas properties. Exploration costs include geological and geophysical costs, costs necessary for retaining undeveloped properties, drilling costs and exploratory well equipment. Development costs include drilling costs and equipment for developmental wells, the construction of facilities for extraction, treatment and storage of hydrocarbons and all necessary costs to maintain facilities for the existing developed reserves.



12.31.2015
 
 12.31.2014
 
 12.31.2013Acquisition of propertiesProved
 -
 
 -
 
 -Unproved
 -
 
 -
 
 -Total property acquisition
 -
 
 -
 
 -Exploration
 -
 
 -
 
 -Development
 2,213,339,740
 
 617,475,979
 
 129,414,231Total costs incurred
 2,213,339,740
 
 617,475,979
 
 129,414,231










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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)  NOTE 53: (Continuation)  Table 2 – Capitalized cost related to oil and gas producing activities  The following table presents the capitalized costs as of December 31, 2015, 2014 and 2013, for proved and unproved oil and gas properties, and the related accumulated depreciation as of those a dates.  12.31.2015
 
 12.31.2014
 
 12.31.2013Proved propertiesEquipment, camps and other facilities
 193,778,409
 
 4,156,943
 
 1,386,447Mineral interests and wells
 1,928,419,773
 
 796,159,838
 
 247,047,524Other uncompleted projects
 978,039,855
 
 92,975,692
 
 49,165,635Unproved properties
 -
 
 -
 
 -Gross capitalised costs
 3,100,238,037
 
 893,292,473
 
 297,599,606Accumulated depreciation
 (439,877,173)
 
 (164,891,552)
 
 (84,321,270)Total net capitalised costs
 2,660,360,864
 
 728,400,921
 
 213,278,336
  Table 3 – Results of operations for oil and gas producing activities  The breakdown of results of the operations shown below summarizes revenues and expenses directly associated with oil and gas producing activities for the years ended December 31, 2015, 2014 and 2013. Income tax for the years presented was calculated utilizing the statutory tax rates.




12.31.2015
 
 12.31.2014
 
 12.31.2013Revenue
 943,490,833
 
 356,795,685
 
 160,996,690Surplus Gas Injection Compensation Res. No. 1/13
 546,774,869
 
 127,147,619
 
 22,572,407Production costs, excluding depreciationOperating costs
 (265,503,146)
 
 (71,169,816)
 
 (28,087,068)Royalties
 (119,518,449)
 
 (49,429,788)
 
 (22,487,022)Total production costs
 (385,021,595)
 
 (120,599,604)
 
 (50,574,090)Exploration expensesAccretion expense
 (18,899,410)
 
 (47,953)
 
 (33,426)Impairment loss for non-financial assets
 (3,045,986)
 
 (21,783,112)
 
 (3,638,475)Depreciation, depletion and amortization
 (274,985,621)
 
 (80,575,115)
 
 (34,948,339)Results of operations before income tax
 808,313,090
 
 260,937,520
 
 94,374,767Income tax
 (282,909,582)
 
 (91,328,132)
 
 (33,031,168)Results of oil and gas operations
 525,403,509
 
 169,609,388
 
 61,343,599








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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)  NOTE 53: (Continuation)  Table 4- Reserve quantity information  Estimated oil and gas reserves  Proved reserves estimated quantities of oil (including crude oil and condensate) and natural gas, which available geological and engineering data demonstrates with reasonable certainly to be recoverable in the future from known reservoirs under existing economic and operating conditions. Proved developed reserves are proved reserves that can reasonably be expected to be recovered through wells with existing equipment and operating methods. The choice of method or combination of methods employed in the analysis of each reservoir was determined by the stage of development, quality and reliability of basic data, and production history.  PEPASA believes that its estimates of remaining proved recoverable oil and gas reserve volumes are reasonable and such estimates have been prepared in accordance with the SEC Modernization of Oil and Gas Reporting rules, which were issued by the SEC al the end of 2008.  PEPASA estimated its reserves at least once a year. PEPASA's reserves estimation as of December 31, 2015 was based on the Netherland, Sewell & Associates Inc. Reserves Report. Netherland, Sewell & Associates Inc. prepared its proved oil and natural gas reserve estimates in accordance with Rule 4-10 of Regulation S-X, promulgated by the SEC, and in accordance with the oil and gas reserves disclosure provisions of ASC 932 of the FASB Accounting Standards Codification (ASC) relating to Extractive Activities--Oil and Gas (formerly SFAS no. 69 Disclosures about Oil and Gas Producing Activities).  Reserves engineering is a subjective process of estimation of hydrocarbon accumulation, which cannot be accurately measured, and the reserve estimation depends on the quality of available information and the interpretation and judgment of the engineers and geologists. Therefore, the reserves estimations, as well as future production profiles, are often different than the quantities of hydrocarbons which are finally recovered. The accuracy of such estimations depends, in general, on the assumptions on which they are based.  Prior to 2015, PEPASA did not have any third-party reserves certification reports because such reports were not required under any reporting requirements to which PEPASA is subject.  Accordingly, the information underlying such third-party reports and certain of the information specified under the requirements for disclosure by registrants engaged in oil and gas producing activities under Subpart 1200 of Regulation S-K were not prepared for periods prior to December 31, 2015.  As a result, PEPASA is unable to provide comparisons between information on the values of reserves in 2015 with values from years prior to 2015.








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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)   NOTE 53: (Continuation)  The following table sets forth PEPASA’s oil and natural gas net proved reserves as of December 31, 2015, which are based on the Independent Reserves Engineers’ Reserves Report.   12.31.2015Gas
 
 Oil(in millions of cubic feet)
 
 (in thousands of barrels)Net proved developedYSUR
 4,087.5
 
 60.8Petrobras
 19,345.5
 
 43.2YPF
 58,441.0
 
 253.6Senillosa
 20.6
 
 -Net proved undevelopedYSUR
 -
 
 -Petrobras
 1,948.2
 
 4.0YPF
 20,360.9
 
 21.0Senillosa
 -
 
 -Total proved reserves
 104,203.7
 
 382.6
   Table 5- Standardized measure of discounted future net cash flow related to prove oil and gas reserves  The following table discloses estimated future cash flows from future production of proved developed and undeveloped reserves of crude oil, condensate and natural gas. As prescribed by SEC Modernization of Oil and Gas Reporting rules and ASC 932 of the FASB Accounting Standards Codification (ASC) relating to Extractive Activities - Oil and Gas (formerly SFAS no. 69 Disclosures about Oil and Gas Producing Activities), such future net cash flows were estimated using the average first day of the month price during the 12- month period for 2015 and using a 10% annual discount factor. Future development and abandonment costs include estimated drilling costs, development and exploitation installations and abandonment costs. These future development costs were estimated based on evaluations made by the Company. The future income tax was calculated by applying the statutory tax rates in affect in effect in the respective countries in which we have interests, as of the date this supplementary information was filed.  This standardized measure is not intended to be and should not be interpreted as an estimate of the market value of the Company’s reserves. The purpose of this information is to give standardized data to help the users of the financial statements to compare different companies and make certain projections. It is important to point out that this information does not include, among other items, the effect of future changes in prices costs and tax rates, which past experience indicates that are likely to occur, as well as the effect of future cash flows from reserves which have not yet been classified as proved reserves, of a discount factor more representative of the value of money over the lapse of time and of the risks inherent to the production of oil and gas. These future changes may have a significant impact on the future net cash flows disclosed bellow. For all these reasons, this information does not necessarily indicate the perception the Company has on the discounted future net cash flows from the reserve of hydrocarbons.




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NOTES TO THE RESTATED CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)   NOTE 53: (Continuation)  12.31.2015Future cash inflows
 720,632Future production costs
 (226,347)Future development costs
 (72,675)Undiscounted future net cash flows
 421,610Future income tax
 (147,563)10% annual discount
 (73,562)Standarized measure of discounted future net cash flows(1)
 348,048
 (1)Future net revenue is after deductions of Pampa`s share of production taxes, capital costs, and operating expenses but before consideration of any income taxes.




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