UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549  FORM 20-F  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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TABLE OF CONTENTS  PART IItem 1.

   Identity of Directors, Senior Management and Advisors

   9Item 2.

   Offer Statistics and Expected Timetable

   9Item 3.

   Key Information

   9Selected Financial Data

   9Exchange Rates

   11Risk Factors

   13Item 4.

   Information on the Company

   50History and Development of the Company

   50Our Business

   50The Argentine Electricity Sector

   110Item 4A.

   Unresolved Staff Comments

   140Item 5.

   Operating and Financial Review and Prospects

   140Item 6.

   Directors, Senior Management and Employees

   216Item 7.

   Major Shareholders and Related Party Transactions

   228Item 8.

   Financial Information

   230Consolidated Financial Statements

   230Legal Proceedings

   230Dividends

   240Item 9.

   The Offer and Listing

   241Trading History

   241The Argentine Securities Market

   243Item 10.

   Additional Information

   246Memorandum and Articles of Association

   246Material Contracts

   246Exchange Controls

   246Taxation

   249Dividends and Paying Agents

   253Documents on Display

   254Item 11.

   Quantitative and Qualitative Disclosures about Market Risk

   255Item 12.

   Description of Securities Other than Equity Securities

   260Description of American Depositary Shares

   260PART IIItem 13.

   Defaults, Dividend Arrearages and Delinquencies

   262Item 14.

   Material Modifications to the Rights of Security Holders and Use of Proceeds

   262Item 15.

   Controls and Procedures

   262Item 16A.

   Audit Committee Financial Expert

   263Item 16B.

   Code of Ethics

   263Item 16C.

   Principal Accountant Fees and Services

   263Item 16D.

   Exemptions from the Listing Standards for Audit Committees

   264Item 16E.

   Purchases of Equity Securities by the Issuer and Affiliated Purchasers

   264Item 16F.

   Change in Registrant’s Certifying Accountant

   264Item 16G.

   Corporate Governance

   265Item 16 H.

   Mine Safety Disclosure

   270PART IIIItem 17.

   Financial Statements

   271Item 18.

   Financial Statements

   271Item 19.

   Exhibits

   271Index to Financial Statements

   F1


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PRESENTATION OF INFORMATION In this annual report, we use the terms “we,” “us,” “our,” the “registrant” and the “Company” to refer to Pampa Energía S.A. Financial Information 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 “Consolidated Financial Statements”).  The 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 Consolidated Financial Statements. Our Consolidated Financial Statements are set forth in Item 18 beginning on page F-1 of this annual report. Our 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 the Consolidated Financial Statement included herein have been approved by resolution of the Board of Directors’ meeting of the Company held on April 27, 2016. Significant Acquisitions We started acquiring our principal generation, transmission, distribution and other core assets in 2006. Before these acquisitions, 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. Accordingly, prior to the second half of 2006, we had no relevant operating history, comparable financial statements or business track record that might constitute a basis for comparing or evaluating the performance of our operations or business prospects following our significant acquisitions. Our significant acquisitions include Electricidad Argentina S.A. (“EASA”) in September 2007, which owns a controlling stake in our distribution subsidiary, Empresa Distribuidora y Comercializadora Norte S.A. (“Edenor”); Corporación Independiente de Energía S.A. (“CIE”) in August 2007 (now known as Inversora Piedra Buena S.A. or “IPB”), which owns our subsidiary Central Piedra Buena S.A. (“Piedra Buena” or “CPB”) generation facilities; the assets comprising Central Térmica Loma de la Lata S.A. (“Loma de la Lata” or “CTLL”) in May 2007; Pampa Inversiones S.A. (“PISA” or “Pampa Inversiones”) in January 2007; a direct interest in Central Térmica Güemes S.A. (“Güemes” or “CTG”); a direct interest in Inversora Nihuiles S.A. (“Nihuiles”) and Inversora Diamante S.A. (“Diamante”) in October 2006, which in turn own our two hydroelectric generation plants Hidroeléctrica Nihuiles (under the company Hidroeléctrica los Nihuiles S.A. (“HINISA”)) and Hidroeléctrica Diamante (under the company Hidroeléctrica Diamante S.A. (“HIDISA”)), respectively, a direct interest in Petrolera Pampa S.A. (“Petrolera Pampa”) in February 2009; and a  joint controlling interest in Compañía Inversora en Transmisión Eléctrica Citelec S.A. (“Citelec”) in September 2006, which owns a controlling stake in Transener. Recent Developments Authorization of the merger among CTG, EGSSAH and EGSSA On September 27, 2013, the boards of directors of CTG, EGSSA Holding S.A. (“EGSSAH”) and Emdersa Generación Salta S.A. (“EGSSA”) resolved that it would be beneficial for these companies if they were merged into a single company, where CTG would be the surviving company and EGSSAH and EGSSA the merged companies. The purpose of the merger was to optimize the resources of each of the companies by simplifying and consolidating their administrative and operational structure. For accounting, fiscal and legal purposes, the effective corporate reorganization date was retroactive to October 1, 2013.  As a result of this merger, as EGSSAH was a public company, having its shares listed in the Mercado de Valores de Buenos Aires S.A. (the “Buenos Aires Stock


Market” or “MERVAL”), CTG as the surviving company requested the relevant authorities for its shares to be listed in the Buenos Aires Stock Market.  In November 2015, the approvals of the relevant authorities were granted and CTG’s shares were listed in the Buenos Aires Stock Market.For more information please see “Item 4.Our Business—Generation Business—Güemes—History.”


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CTG and ENDISA On November 18, 2015, the board of directors of CTG and Energía Distribuída S.A. (“ENDISA”) resolved that it would be beneficial for these companies to merge into a single company, where CTG would be the surviving company. The purpose of this merger is to optimize the resources of each of the companies by simplifying and consolidating their administrative and operational structure. On March 4, 2016, and in connection with the required procedures, the board of directors of ENDISA and CTG approved the special financial statements required for the merger, the preliminary merger agreement executed between CTG and ENDISA, and the offering memorandum that describes the terms and conditions of the merger. For accounting, fiscal and legal purposes, the merger will be effective from January 1, 2016. On April 14 and April 21, 2016, the shareholders of CTG and ENDISA, respectively, approved the merger and all of its documentation. On March 8, 2016, the administrative approvals of the CNV and the BCBA were requested, which, as of the date of this annual report have not been granted. Also, as of the date of this annual report, the definitive merger agreement had not been executed and, therefore, the approvals of the provincial authorities and of the IGJ are still pending.  If the approvals of the merger are not be obtained, the Company does not expect significant negative effects arising as a consequence thereof, due to the fact that CTG and ENDISA were consolidated before the merger and will continue to be consolidated after it. CIESA Transaction–Assignment of ICSID Claim Pursuant to a Call Option Agreement (the “Call Option Agreement”) dated March 11, 2011,entered into by and among the Company, Inversiones Argentina II and GEB Corp. (parent company of Inversiones Argentina II), on such date, the Company purchased an option for U.S.$ 1.0 million, exercisable at any time during a period of 18 months thereafter, to acquire the rights over the lawsuit initiated by Ponderosa Assets L.P. and Enron Creditors Recovery Corp. (the “Arbitration”) against the Republic of Argentina before the International Centre for Settlement of Investment Disputes (the “ICSID”) of the World Bank (the “ICSID Claim”) for freezing and pesifing U.S. dollar-based gas transportation tariffs in violation of certain provisions of the bilateral investment treaty between the United States and Argentina (see “Item 3. -Risk Factors – Our Generation Business”).  On October 6, 2011 the Company exercised the option and, therefore, in consideration of the amount of U.S.$ 25 million acquired the rights over the ICSID Claim  to control, suspend and waive the Arbitration proceedings against the Republic of Argentina pursuant to the Call Option Agreement. On November 20, 2012, Ponderosa Assets Holding I LLC and Ponderosa Assets Holding II LLC (two subsidiaries of Pampa Inversiones) entered into an assignment agreement with Enron Creditors Recovery Corp., Citicorp North America, Inc., Atlantic Commercial Finance, Inc., Enron Global Power & Pipelines L.L.C., and Citibank N.A., pursuant to which (i) Enron Creditors Recovery Corp. transferred all of its right, title and interest in and to the general partnership interest in Ponderosa Assets L.P. to Ponderosa Assets Holding I LLC, and (ii) each of Citicorp North America, Inc., Atlantic Commercial Finance, Inc., Enron Global Power & Pipelines L.L.C. and any other relevant affiliate of Enron Creditors Recovery Corp. transferred all of its rights, title and interest in and to the limited partnership interests in Ponderosa Assets L.P. to Ponderosa Assets Holding II LLC. As a consequence thereof, Ponderosa Assets Holding I LLC and Ponderosa Assets Holding II LLC became the owners of Ponderosa Assets L.P., which is the formal plaintiff under the ICSID Claim. On October 7, 2015, pursuant to the occurrence of certain events relating to an increase in TGS’s tariff 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. For further information please see “Item 5. – Operating and Financial Review and Prospects – Debt.”


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Execution of Warrants On September 27, 2006, we executed the Opportunities Assignment Agreement with Marcelo Mindlin, Damián Mindlin, Gustavo Mariani and Ricardo Torres (the “Key Executives”.  As amended, the Opportunities Assignment Agreement provided that, until September 28, 2014, these four individuals were obliged to offer to us on a priority basis any investment opportunity relating to assets and opportunities in the energy sector (including electricity, oil and gas and alternative energies) in all the stages of its production and commercialization in or outside Argentina that each of these four individuals or all of them as a group may identify, provided that such investment was within our financial possibilities. As consideration for Marcelo Mindlin, Damián Mindlin, Gustavo Mariani and Ricardo Torres’ agreeing to offer to us the investment opportunities mentioned above, our shareholders approved the issuance of certain warrants to these four individuals on June 16, 2006.  Such warrants were issued to these individuals on September 27, 2006.  As amended, the warrants agreements provide that the warrants shall confer to the Key Executives (or any company controlled by any of them that holds such warrants), on their respective exercise date, the right to subscribe for shares of our common stock representing 20% of our capital stock before the execution of the warrants.  The warrants were issued in three series divided into three equal parts (Series I, II and III). Series I, Series II and Series III warrants vested by fifths on each of September 28, 2010, September 28, 2011, September 28, 2012, September 28, 2013, and September 28, 2014.  The exercise period for such warrants was 15 years, commencing on their issuance date on September 27, 2006. The exercise price of the warrants was U.S. $ 0.27. On November 23, 2015, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“BAML”) notified us, on behalf of the holders of the warrants, of their decision to exercise, the outstanding warrants, which granted them the right to subscribe 381,548,564 of our shares of our common sotck.  The aggregate exercise price of the warrants paid by the Key Executives was U.S.$ 103,018,112, which was payable to us in Pesos as provided in the warrant agreements. As a consequence, we issued the underlying amount of new shares of our common stock, of which (i) a portion was sold in the form of ADSs in a public offering, and (ii) the remainder was delivered to the holders of warrants in the form of ADSs. After the exercise of the warrants and the issuance of the shares, the new shares represent a 22.5% of our capital stock. This capital increase, as well as the public offering and listing of the shares issued, had been duly authorized by the Argentine National Exchange Commission and the Buenos Aires Stock Exchange. Legal proceedings involving the Loma de la Lata Project  In 2007, Loma de la Lata entered into certain agreements in order to procure and build an expansion of its Loma de la Lata Power Plant through the conversion to a combined cycle by adding three heat recovery steam generators and one steam turbine of 178MW (the “Loma de la Lata Project” or the “Expansion”). For such purpose, on September 6, 2007 Loma de la Lata entered into (i) a construction turnkey contract (as amended, the “Construction Agreement”) with a joint venture formed by Isolux Corsan Argentina SA and Tecna Estudios y Proyectos de Ingeniería S.A. (collectively, the “Builder” or “Contractor”), and (ii) a contract to supply materials, equipment and spare parts from abroad in connection with the project (as periodically amended, the “Supply Agreement”, and together with the Construction Agreement, the “Project Agreements”) with a Joint Venture formed under Law No.18/1.982 of Spain between Isolux Ingeniería SA and Tecna Proyectos y Operaciones S.A. (the “Supplier” and, together with the Builder, the “Project Counterparties”). As a consequence of the delays in the Loma de la Lata Project, the lower power of the steam turbine installed, and certain defaults of the Project Counterparties in their obligations assumed under the Project Agreements, Loma de la Lata, in exercise of its contractual rights, required of the Project Counterparties the payment of the penalties for the delays established in the Construction Agreement and of damages for the other breaches. Both requirements were rejected, and Loma de la Lata executed the bank guarantees issued under the Project Agreements.


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In this context, in 2011, the International Chamber of Commerce Secretary, notified Loma de la Lata that an arbitration request had been filed by the Contractor.  On December 30, 2011, Loma de la Lata rejected before the Court of the International Chamber of Commerce the claim of the Contractor and filed a counterclaim with respect to the Project Counterparties for the integral recovery of the damages caused as a consequence of both parties defaults under the Project Agreements.  On March 27, 2013, the parties filed their respective briefs of their claims (the Contractor for the amount of U.S.$ 97,546,030.40 and Loma de la Lata for the amount of U.S.$ 228,245,293.), presenting the corresponding evidence. On July 26, 2013, the parties submitted their respective responses, and on October 15, 2013, they submitted their last responses before the hearings. Such hearings took place in March 2014 and in May 2014 where the parties submitted their final allegations.  On June 11, 2015, the arbitral award on this dispute was issued in which, (i) breaches by the Project Counterparties were acknowledged, (ii) the Project Counterparties were ordered to pay for the damages to Loma de la Lata an amount of U.S.$ 49.3 million, and (iii) such amount was offset with certain credits of the Project Counterparties against Loma de la Lata, which resulted in a final amount due by the Project Counterparties to Loma de la Lata of U.S.$15.1 million (the “Arbitral Award”).  On December 3, 2015, Loma de la Lata and the Project Counterparties entered into an agreement to comply with the Arbitral Award, pursuant to which the Project Counterparties agreed to pay Loma de la Lata an amount of U.S.$. 15.3 million, in four different installments, the first three of U.S.$. 4 million and the last one of U.S.$. 3.3 million, each to be due on December 12, 2015, January 30, 2016, February 27, 2016 and March 30, 2016, respectively (the “Payment Agreement”). The Payment Agreement is governed under the laws of Spain and the parties agreed to submit any dispute the jurisdiction of the courts of Spain.  The Project Counterparties breached the Payment Agreement by failing to timely pay the installments of the Payment Agreement. Loma de la Lata initiated the enforcement of the Payment Agreement before the courts of Spain As of the date of this annual report, Loma de la Lata had received the full amount under the Payment Agrement which amounted to U.$.S15.7 million, including interests and costs, the first week of May, 2016. For further information please see “Item 8. – Legal Proceedings involving Loma de la Lata.”  Potential acquisition of Petrobras Argentina S.A. The Company and Petroleo Brasileiro S.A. (“Petrobras Brasil”) are in negotiations for the acquisition by the Company of 67.2% of the capital stock and voting rights of Petrobras Argentina S.A. (“Petrobras”) owned by Petrobras Participaciones S.L., a wholly owned subsidiary of Petrobras Brasil (the “Petrobras Acquisition”). On March 1, 2016, the Company and Petrobras Brasil executed an Exclusivity Agreement, pursuant to which the parties agreed to a 30-day exclusivity period, which was extended until May 1, 2016, to continue their advanced negotiations in connection with the Petrobras Acquisition. The consummation of the Petrobras Acquisition is subject to the successful completion of the negotiation of the terms and conditions and the execution of definitive documents relating to such transaction, and the approval of such terms, conditions and documents by the corporate bodies of Petrobras Brasil and the Company. The closing of the Petrobras Acquisition will also be subject to the satisfaction of conditions precedent usual and customary for transactions of this nature, including regulatory approvals, to be included in the definitive documents. As of the date of this annual report, the parties are still negotiating the terms and conditions of the Petrobras Acquisition. Potential sale of our indirect stake in Transportadora de Gas del Sur As part of the Company’s ongoing evaluation of its corporate strategy, including the potential acquisition of new assets, on March 9, 2016, its Board of Directors approved the commencement of negotiations regarding the sale of the Company’s indirect stake in TGS. For a brief description about TGS, please see “Item 4. – Our Business – TGS”. On April 22, 2016, the Company agreed with Harz Energy, a subsidiary of Grupo Neuss (the “Potential Buyer”) a 45-day exclusivity period to complete the sale of the Company’s indirect stake in TGS. The Company and the Potential Buyer agreed certain terms and commercial conditions including (i) as consideration for granting to the Potential Buyer the exclusivity period, the Potential Buyer paid to the Company U.S.$ 3.0 million which would be deemed as an advance payment of a portion of the purchase price; and (ii) in the event that the sale of TGS to the Potential Buyer is completed, the purchase price will be U.S.$ 250 million.


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Acquisition of Greenwind S.A – Eolic Project In order to continue expanding the Company’s generation business, on April 18, 2016, Loma de la Lata acquired 100% of the capital stock and shares of Greenwind S.A. (“Greenwind”), for an amount of U.S.$ 2.1 millon. Greenwind is a company incorporated under the laws of Argentina whose purpose is to develop an eolic project named “Corti” which will consist of a wind farm with a 100MW capacity, located in Bahía Blanca, Province of Buenos Aires. For such purpose, Greenwind has a legal right of use and profit from the 1,500 hectare and a wind measurement for a 4 year period. Functional and Presentation Currency The Company and almost all of its subsidiaries keep their accounting records and prepare their financial statements in Argentine Pesos, which is their functional currency and also the presentation currency incorporated in the Consolidated Financial Statements. Our subsidiary PISA, however, maintains its accounting records and prepares its financial statements in Uruguayan Pesos but its functional currency is Argentine Pesos. Our Consolidated Financial Statements include the results of this subsidiary translated into Argentine Pesos. Assets and liabilities are translated at year-end exchange rates, and revenue and expense accounts are translated at average exchange rates for the year. Certain financial information contained in this annual report has been presented in U.S. Dollars (See “Exchange rate” below). Rounding Certain figures included in this annual report (including percentage amounts) have been subject to rounding adjustments.  Accordingly, certain totals may therefore not precisely equal the sum of the numbers presented. Exchange Rate In this annual report, except as otherwise specified, references to “U.S.$” and “Dollars” are to U.S. Dollars, and references to “Ps.”, “AR$” and “Pesos” are to Argentine Pesos.  Solely for the convenience of the reader, we have converted certain amounts included in “Item 3.  Key Information” and elsewhere in this annual report from Pesos into Dollars using, for the information provided as of December 31, 2015, the seller exchange rate reported by the Banco de la Nación Argentina (“Banco Nación”), as of December 31, 2015 of U.S. $1.00 = Ps. 12.99, unless otherwise indicated.  These conversions should not be considered representations that any such amounts have been, could have been or could be converted into U.S. Dollars at that or at any other exchange rate.  On April 19, 2016, the exchange rate was Ps. 14.19, to U.S.$ 1.  As a result of fluctuations in the Dollar/Argentine Peso exchange rate, the exchange rate at such date may not be indicative of current or future exchange rates. See “Item 3. Key Information—Exchange Rates” and “Item 3.  Key Information—Risk Factors—Risks Relating to Argentina—Fluctuations in the value of the Argentine Peso could adversely affect the Argentine economy, which could, in turn adversely affect our results of operations.”  The Federal Reserve Bank of New York does not report a noon buying rate for Pesos.  For more information regarding historical exchange rates, see “Item 3.  Key Information-Exchange Rates.”  FORWARD-LOOKING STATEMENTS This annual report contains estimates and forward-looking statements, principally in “Item 3.- Risk Factors,” “Item 4.- Our Business” and “Item5.- Operating and Financial Review and Prospects.”  Some of the matters discussed concerning our business operations and financial performance include estimates and forward-looking statements within the meaning of the U.S. Securities Act of 1933, as amended (the “Securities Act”) and the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our estimates and forward-looking statements are mainly based on our current expectations and estimates on future events and trends that affect or may affect our businesses and results of operations.  Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of information currently available to us.


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Our estimates and forward-looking statements may be influenced by the following factors, among others: ·our ability to arrange financing under reasonable terms; ·the outcome and timing of the tariff renegotiation process of our regulated businesses and uncertainties relating to the government future approvals to increase or otherwise adjust such tariffs; ·changes in the laws and regulations applicable to energy and electricity and oil and gas sectors in Argentina; ·government interventions, resulting in changes in the economy, taxes, tariffs or regulatory framework, or in the delay or withholding of governmental approvals; ·general economic, social and political conditions in Argentina, and other regions where we or our subsidiaries operate, such as the rate of economic growth, fluctuations in exchange rates of the Peso or inflation; ·restrictions on the ability to exchange Pesos into foreign currencies or to transfer funds abroad; ·competition in the electricity, public utility services and related industries; ·the impact of high rates of inflation on our costs; ·deterioration in regional and national business and economic conditions in Argentina; and ·other risks factors discussed under “Item 3.  Risk Factors.” The words “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify estimates and forward-looking statements.  Estimates and forward-looking statements speak only as of the date they were made, and we undertake no obligation to update or to renew any estimates and/or forward-looking statements because of new information, future events or other factors.  Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance.  Our future results may differ materially from those expressed in these estimates and forward-looking statements.  In light of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this annual report might not occur and our future results and our performance may differ materially from those expressed in these forward-looking statements due to factors including, but not limited to, those mentioned above.


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PART I Item 1. Identity of Directors, Senior Management and Advisors Not applicable. Item 2.             Offer Statistics and Expected Timetable Not applicable. Item 3.             Key Information 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 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. You should read the information below in conjunction with our 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.”


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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.”


10

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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

   

   1,314,310,895CASH FLOW DATANet cash generated by operating activities

   

   352,629,902

   

   4,580,662,424

   

   2,574,156,965

   

   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

   

   203,029,408

   

   2,637,352,005

   

   (147,688,277)

   

   (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  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.


11

---



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.


12

---



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.  
 13


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.


14

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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.”


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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.


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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.


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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, the Argentine government has reached settlement agreements with holders of a significant portion of the defaulted bonds. 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.


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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.


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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.


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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.


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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 ofCasación, 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. 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.


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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.


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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.


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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.


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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.


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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 successfull 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 occurrs, 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.


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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.


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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.


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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.


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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 costos 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.


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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.


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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.


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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 accured nterests amounting to Ps. 1,502.6 million in accordance with the Instrumental Agreements and the Renewal Agreement.


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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 outstading 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.


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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.


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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.


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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 throught SE Resolutino 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.


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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 “the Note” 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, the Note provides that fines and penalties that fall within the purview of the Note are to accrue interest from last day of the semester 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 the amount of such fines and penalties 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.


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****As of the date of this annual report, fines and penalties in an aggregate amount equal to Ps. 757.2 million 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. If the ENRE interprets 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 verbal exchanges with certain officials the Macri administration, believes that fines and penalties already imposed on Edenor (but not yet paid) should also bear interest until 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 its 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 was caused by the Argentine Government and was not within its control. Additionally, if such adjustments are made applicable to Edenor, Edenor believes the Argentine Government would be binding Edenor to the terms of the Adjustment Agreement without taking into account that it has not recognized certain of its rights thereunder, such as Edenor’s right to have tariffs adjusted to reflect increases in operation costs that are necessary for adequately providing its services. 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 lossesexperienced 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: ·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 mayrequest 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.


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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.  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.


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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. 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 Edenors’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.


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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. 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.”


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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 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.


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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. 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.


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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. 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.


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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. 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.


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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. 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 percentageranges 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.


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Item 4. Information on the Company HISTORY AND DEVELOPMENT OF THE COMPANY Pampa Energía S.A. (in English, Pampa Energy Inc., hereinafter referred to as “Pampa Energía”) is incorporated as asociedad anónimaunder the laws of Argentina.  Our principal executive offices are located at Ortiz de Ocampo 3302, Building #4, City of Buenos Aires, Argentina (C1425DSR).  Our telephone number is + 54 11 4809 9500.  Our website address is www.pampaenergia.com.  None of the information available on our website or elsewhere will be deemed to be included or incorporated by reference into this annual report. We were incorporated on February 20, 1945, for a duration of 99 years, until June 30, 2044, under the name Frigorífico La Pampa S.A.  In 2003, we suspended our former business activities, which were limited to the ownership and operation of a cold storage warehouse building.  In 2005, Messrs. Damián Mindlin, Gustavo Mariani and Ricardo Torres acquired a controlling stake in us.  Following this acquisition, we changed our corporate name to Pampa Holding S.A.  As a result of several acquisitions we have made since 2006, we are currently the largest fully integrated electricity company in Argentina and, through our subsidiaries and joint controlled companies, we are engaged in the generation, transmission and distribution of electricity in Argentina and also in the oil and gas business.  We changed our corporate name again to Pampa Energía S.A. in September 2008 and have operated under this name since then. We operate our electricity businesses in a highly regulated environment.  Our hydroelectric generation activities and our transmission and distribution activities are subject to the terms of concessions granted by the Argentine Government.  Our oil and gas business is also operated under a highly regulated environment and our upstream operations are subject to the terms of concession agreements with provincial governments and joint venture agreements (joint operations for accounting purposes) with our partners.  In addition, our electricity prices and our transmission and distributions tariffs are subject to regulation by Argentine Government, acting through the ME&M and its Secretariats and the ENRE, and respective provincial governments, acting through the respective provincial authorities. OUR BUSINESS Overview We are the largest fully integrated electricity company in Argentina.  Our generation subsidiaries had an aggregate installed generating capacity of 2,217 MW as of December 31, 2015, representing 6.6% of the installed generating capacity in Argentina at such date, and generated a total of 8,057 net GWh of electricity during the year ended December 31, 2015, representing approximately 6% of total electricity generated in Argentina during such period.  We own an indirect  joint controlling interest in Transener, which operates and maintains the largest high voltage electricity transmission system in Argentina, with approximately 18,523 km (including Transba) of high voltage transmission lines that, as of December 31, 2015, represented approximately 90% of the high voltage system in Argentina, according to the information made available by CAMMESA.  We believe that our subsidiary Edenor is the largest electricity distribution company in Argentina, in terms of number of customers and electricity sold (in terms of both GWh and Pesos) in 2015, based on publicly available figures released by electricity distribution companies in Argentina. Our principal assets, as of the date of this annual report, are divided among our electricity generation, transmission and distribution businesses, as follows: ·Generation.  Our generation assets include: -HINISA and HIDISA, two hydroelectric power generation systems with an aggregate installed capacity of 653 MW located in the Province of Mendoza, which we acquired in October 2006; Güemes, including (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 Martin, in the Province of Salta, which we acquired in March 2011;


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-Loma de la Lata, a thermal generation plant with an installed capacity of 553 MW (includes 178 MW from closing of the combined cycle, which started commercial operations on November 1, 2011 at 165 MW) located in the Province of Neuquén (close to one of Argentina’s largest gas fields bearing the same name as the plant), which we acquired in May 2007. Loma de la Lata is finalizing a new expansion through the construction of new gas turbines which will increase its installed capacity by 120 MW. For further information please see “Item 4. – Our Business – Generation – Loma de la Lata – Loma de la Lata 2014 expansion project”; and -Piedra Buena, a thermal generation plant with an installed capacity of 620 MW located in Ingeniero White, Bahia Blanca, in the Province of Buenos Aires, which we acquired in August 2007. -100% of Greenwind whose purpose is to develop an eolic project named “Corti” which will consist of a wind farm with a 100MW capacity, located in Bahía Blanca, Province of Buenos Aires. For such purpose, Greenwind has a legal right of use and profit from a land ofthe 1,500 hectares and with a wind measurement for a 4 year period.·Transmission.We participate in the electricity transmission business through our  jointly controlling interest in Transener, which owns, operates and maintains the largest high voltage electricity transmission system in Argentina, and, through its subsidiary Transba, which owns and operates a separate high voltage transmission system located within the Province of Buenos Aires.  We acquired our joint controlling interest in Transener in September 2006. ·Distribution.We are engaged in the electricity distribution business through our subsidiary Edenor, which holds a concession to distribute electricity on an exclusive basis to the northwestern zone of the greater Buenos Aires metropolitan area and the northern portion of the City of Buenos Aires, comprising an area of 4,637 square kilometers and a population of approximately 2.8 million customers.  We acquired our controlling interest in Edenor in September 2007. ·Oil and Gas.We are engaged in the oil and gas business through our subsidiary Petrolera Pampa. We own 49.6% of its capital stock. In addition to our principal electricity assets, we hold other non-electricity assets and investments, including: a 10% stake in the share capital of CIESA; and the character of“Beneficiario”(interest beneficiary) and“Fidecomisario”(principal beneficiary) under the MSA Trust, owner of 40% of the capital stock of CIESA; and our investments in Bodega Loma la Lata S.A.  Please see “Item 5. Operating and Financial Review and Prospects—Overview”. Organizational structure The following chart sets forth our corporate structure as of the date of this annual report.


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Our Generation Business The following chart depicts our electricity generation assets and our respective shares of the Argentine power generation market as of and for the years ended December 31, 2015, 2014 and 2013.Our generation operations derive revenues from the sale of electricity in the spot market and under term contracts, includingEnergía Pluscontracts and WEM Supply Agreements. Hydroelectric

   Thermal

   TotalSummary of Electricty Generation Assets

   HINISA

   HIDISA

   CTG

   CTLLL

   CPB

   CTPInstalledCapacity (MW)

   265

   388

   361

   553

   620

   30

   2,217Market Share

   0.8%

   1.2%

   1.1%

   1.7%

   1.9%

   0.1%

   7.1%Net Generation 2015 (GWh)

   538

   367

   1,682

   2,582

   2,737

   152

   8,057Market Share

   0.4%

   0.3%

   1.3%

   1.9%

   2.0%

   0.1%

   6.0%Sales 2015 (GWh)

   539

   367

   2,283

   2,582

   2,739

   152

   8,661Net Generation 2014 (GWh)

   516

   322

   1,528

   3,421

   3,090

   131

   9,008Variation Net Generation 2015-2014

   +4.3%

   +13.8%

   +10.0%

   -24.5%

   -11.4%

   +15.7%

   -10.6%Sales 2014 (GWh)

   549

   351

   2,124

   3,502

   3,144

   131

   9,802Net Generation 2013 (GWh)

   616

   421

   1,675

   1,947

   2,229

   130

   7,018Market Share

   -16.2%

   -23.4%

   -8.8%

   75.7%

   38.6%

   0.6%

   28.4%Sales 2013 (GWh)

   833

   630

   2,268

   2,372

   2,676

   130

   8,909Average Price 2015 (Ps. / MWh)

   160.2

   174.5

   304.2

   407.1

   152.2

   699.6

   279.3Average Gross Margin 2015 (Ps. / MWh)

   22.4

   -14.1

   111.4

   322.7

   41.9

   n.a.

   141.5Average Gross Margin 2014 (Ps. / MWh)

   20.6

   -24.2

   102.4

   228.8

   39.7

   n.a.

   118.3Average Gross Margin 2013 (Ps. / MWh)

   33.1

   27.9

   51.9

   103.0

   -12.0

   n.a.

   44.45


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Sources: Pampa Energía S.A. and CAMMESA Note: gross margin before amortization and depreciation. (1) Due to CTG’s merger with EGSSA and EGSSA Holding, the 2013 average price and gross margin takes into account CTP results. (2)CTLL’s installed capacity includes 178 MW from conversion to combined cycle, which was commissioned on November 1, 2011 at 165 MW.  We are involved in several projects within the framework of the Argentine Government’sEnergía Plusregulations and other market-based pricing frameworks. OurEnergía Plusprojects include: ·Güemes’ Open-Cycle: this project was the first of theEnergía Plusexpansion projects completed.  Construction was completed on the project in July 2008, and commercial operations began in September 2008.  The project consisted of a new natural gas-powered turbo generator.  As a result of the commencement of commercial operations, Güemes’s installed capacity increased by approximately 40%, or an additional 100 MW, reaching a total installed capacity of approximately 361 MW.  The supplier of the new equipment was GE Packaged Power.  The new open-cycle has an efficiency of approximately 1,998 kilocalories per kilowatt hour (Kcal/KWh), or 43%. ·Loma de la Lata Project: this project consisted of the expansion of Loma de la Lata’s gross electricity generation capacity by 178 MW by means of converting the plant into a combined cycle system generator.  Commercial operations began in November 1, 2011.  The project consisted of installing a new Siemens steam-turbine generator of three heat-recovery steam generators in order to increase capacity of the plant by 178 MW, reaching a total installed capacity of approximately 553 MW.  Because of certain problems with the new turbine, the increase was of 165MW instead of 178MW (see “Item 4. - Our Business – Loma de la Lata” and “Item 8. - Legal Proceedings – Legal proceedings involving Loma de la Lata”).  Other Projects  ·Central Térmica Piquirenda: According to the Complementary Agreement (as defined hereinafter) executed by the Pampa Generators (as defined hereinafter), the parties must build a new power generation plant with a total capacity of 45 MW (hereinafter the “Project CTP”). The Project CTP is divided in two stages, the first stage consists in building the new plant with a generation capacity of 30 MW, and the second stage consists on increasing the generation capacity by incorporating the remaining 15 MW. The plant will be constructed in the premises of Central Térmica Piquirenda, which is owned by CTG. The first stage of the Project CTP was concluded according to the original schedule.  The construction of the second stage of the Project CTP has not yet started due to the failure by the Secretariat of Energy to fulfill its obligation to cancel the Sales Settlements with Maturity Dates To Be Determined (“LVFVDs,” per the initials in Spanish -a regime under which generators of electricity receive partial payment for amounts due to them for energy provided to the system, with the rest of such amounts remaining in the form of a credit) up to the required amount of 30% of the investment made for the first stage as established in the Complementary Agreement.  According to the Specific Conditions,the second stage of the Project CTP shall not be performed. The engines that amounted to the 15 MW of the secong stage shall be installed in Loma de la Lata (See “Item 4. – Our Business – Our Generation Business – Loma de la Lata’s 2014 Expansion Project”). ·Loma de la Lata’s 2014 Expansion Project:In September 2014, the Argentine Government, through the Secretariat of Energy, and the leading companies of the Argentine energy sector (including Loma de la Lata, CPB, CTG, HIDISA, HINISA and EGSSA (now merged into CTG)), executed the 2014 Thermal Generation Expansion Agreement for the expansion of the total thermal


generation capacity in Argentina.  The 2014 Thermal Generation Expansion Agreement contemplates the execution of individual agreements between the Secretariat of Energy and each generation company (and its affiliates) to provide for the specific terms and conditions for the execution of new generation projects. On October 27, 2014, Pampa’s Generators executed the Specific Conditions.


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Under the 2014 Expansion Agreements, subject to the satisfaction of certain conditions precedent  provided in the Specific Conditions, Pampa’s Generators agreed to expand the generating capacity of Loma de la Lata by 120 MW through the installation of a new aero-derivative gas-fired turbine generator (105 MW) and two gas-powered motor-generators (15 MW).For further information please see “Item4. - Our Business – Generation Business – Loma de la Lata – Loma de la Lata’s 2014 Expansion Project.” Nihuiles and Diamante History In May 2006, we entered into a stock purchase agreement with EDF International S.A. (“EDFI”), a wholly owned subsidiary of Electricité de France (“EDF”), to acquire approximately 64.9% of the voting capital stock of Nihuiles and 56.0% of the voting capital stock of Diamante.  Simultaneously, we entered into an agreement with Stein Ferroaleaciones S.A. (“Stein”) pursuant to which Stein agreed to pay 15% of the purchase price owed to EDFI in consideration for a 9.7% equity interest in Nihuiles and an 8.4% interest in Diamante.  In addition, in June 2006, we made an offer to Banco Galicia to purchase its 12.5% interest in Nihuiles and its 12.5% interest in Diamante.  On that same date, we also made an offer to Nucleamiento Inversor S.A. (“NISA”) to purchase its 22.6% interest in Nihuiles and its 31.5% interest in Diamante.  All of these offers were accepted in June 2006 and all transactions, including the purchase from EDFI and the transaction with Stein, closed in October 2006.  As a result of these transactions, we acquired 90.3% of the capital stock of Nihuiles and 91.6% of the capital stock of Diamante, for a total purchase price of U.S. $55.1 million.In January 2008, we acquired the shares previously held by HIDISA’s Employee Participation Program, representing 2% of the capital stock of HIDISA.  Following this acquisition, all Class C shares of HIDISA were converted to Class B shares, which are freely transferable to third parties.  As a result, we currently control, directly and indirectly, 61% of the capital stock and votingrights 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 for Ps.4.4 million.  As a result we now indirectly own 52.04% of the shares and votes of HINISA. In October 2006, we entered into a shareholders’ agreement with Ultracore Energy S.A. (“Ultracore”), a company controlled by the Stein family, and Stein, which sets forth the rights and obligations of the respective parties with respect to Nihuiles and Diamante.  Among other things, such agreement provides for: (1)a right of first refusal in our favor; (2)a tag along right in favor of Ultracore, by which Ultracore is entitled to include its shares in any sale by us of our own shares; (3)the right of Ultracore to appoint one director and one alternate director in each of HINISA, HIDISA, Nihuiles and Diamante; (4)a veto right in favor of Ultracore in respect of certain governance matters; and (5)our obligation to cause HINISA’s board of directors to consider the execution of an electric energy supply agreement with Stein. Additionally, through Provincial Law No. 8,423, the Province of Mendoza created the companyEmpresa Mendocina de Energía Sociedad Anónima con Participación Estatal Mayoritaria(“EMESA”).  Finally, on November 5, 2013, through Provincial Decree No. 2,058, the Province of Mendoza transferred all the equity owned in HIDISA and HINISA to EMESA.


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Below are charts depicting the corporate structures of Nihuiles and Diamante as of the date of this annual report: Nihuiles Description: Agus Diamante   Nihuiles Nihuiles is a holding company that owns Class A and Class B shares representing 31.63% and 20.41%, respectively, of the voting capital stock of HINISA, a hydroelectric generation company with an installed capacity of 265.2 MW located in the Province of Mendoza.  HINISA operates under a provincial concession for the hydroelectric use of water from the Atuel River, located in the department of San Rafael in the Province of Mendoza (approximately 1,100 km southwest of Buenos Aires) and under a national concession for the generation and commercialization of hydroelectric power.  In addition, HINISA owns 4.5% of the capital stock of Termoeléctrica José de San Martín S.A. and 4.5% of the capital stock of Termoeléctrica Manuel Belgrano S.A.


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The Province of Mendoza, through EMESA, currently owns Class D shares representing 10.21% of the capital stock of HINISA and Class C shares representing 37.75% of the capital stock of HINISA, and publicly announced in 2006 its intention to sell its Class C shares.  Pursuant to HINISA’s public concession contracts, if the Province of Mendoza sells its Class C shares in HINISA, Nihuiles would be required to sell its Class B shares of HINISA (representing 20% of HINISA’s capital stock) through a public offering promptly after the Province’s sale of its Class C shares.  Assuming that the Province of Mendoza sells its 37.75% interest in HINISA, and consequently Nihuiles is required to sell its Class B shares (representing 20% of the capital stock of HINISA), Nihuiles would no longer own a controlling interest in HINISA and would not be permitted to purchase any additional shares (of any class) of HINISA.  Neither Nihuiles nor we have 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 Class B shares of HINISA.  As a result, such shares may be sold at a time and price per share that is adverse to our interests.  As of the date of this annual report, the Province of Mendoza has expressed no intention to modify HINISA’s by-laws.  See “Item 3.  Key Information—Risk Factors—Risks Relating to our Generation Business—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.”  We are currently monitoring circumstances with the Province of Mendoza and analyzing our situation in order to preserve all available options to us in the event of a possible sale of the capital stock of HINISA by the Province. In addition, pursuant to Decree No. 334/2006 promulgated by the Province of Mendoza, HINISA’s by-laws may be amended to ensure that the Province retains certain governance rights in HINISA after disposing of its Class C shares.  The proposed amendments, which would be subject to the approval of our board of directors, would include the Province of Mendoza’s right to vote in respect of any of the following actions: (1) any action that may directly affect the interest of minority shareholders, such as profit distribution policy, exploitation, management and external advisory costs, etc.; (2) changes to the terms and conditions relating to Nihuiles’ electricity generation as a result of the development of the Grande River and Atuel River projects; (3) certain changes to the operational conditions of Nihuiles; and (4) any agreements within the term market of the WEM. Pursuant to the Decree No. 1651/2007 of the Province of Mendoza, the Province has initiated a public bidding process in order to select a financial advisor to advise the Province in the public offering of its Class C shares and, if such offering is successful, to advise the Province in the sale of its Class D shares.  As of the date of this annual report, we are not aware of the selection of any such financial advisor.In addition, Decree No.1838/2008 of the Province of Mendoza states that, notwithstanding the provisions of Decree No. 1651/2007, the time period granted to HINISA to obtain the authorization for a public offering of the Class C shares, remains suspended.  As a result, HINISA is not currently seeking any authorization to complete a public offering. Diamante Diamante is a holding company that owns 59% of the voting capital stock of HIDISA, a hydroelectric generation company with an installed capacity of 388 MW located in the Province of Mendoza.  HIDISA operates under a provincial concession for the hydroelectric use of water from the Diamante River, located in the department of San Rafael in the Province of Mendoza, and under a national concession for the generation and commercialization of hydroelectric power.  HIDISA owns 2.4% of the capital stock of Termoeléctrica José de San Martín S.A. and 2.4% of the capital stock of Termoeléctrica Manuel Belgrano S.A. Summary of HINISA and HIDISA concessions HINISA’s and HIDISA’s main corporate purpose is the generation, sale and bulk trading of electric power through the exploitation of hydroelectric systems pursuant to the terms and conditions of the following concessions: ·Provincial concessions granted by the government of the Province of Mendoza with similar terms and conditions (for HINISA and HIDISA) and at each company’s own risk for the hydroelectric exploitation of the Atuel River, in the case of HINISA, and the Diamante River, in the case of HIDISA.  These concessions were granted pursuant to Provincial Law No. 6,088 dated December 21, 1993 and related provisions.


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·National concessions granted by the Argentine Government with similar terms and conditions (for HINISA and HIDISA) and at each company’s own risk for hydroelectric power generation through HINISA’s and HIDISA’s respective hydroelectric systems.  These concessions were granted pursuant to Laws No. 15,336, No. 23,696 and No. 24,065 and related provisions. Term.The term of the HINISA and HIDISA concession agreements is 30 years, starting from June 1, 1994 in the case of HINISA and October 19, 1994 in the case of HIDISA. The following authorities oversee HINISA and HIDISA’s fulfillment of their obligations under their respective concession agreement: ·The Secretariat of Energy (currently, the Secretariat of Electric Energy), which is the governing authority under the concession granted by the Argentine Government.  Pursuant to Decree No. 570/96, certain responsibilities and authority of the Secretariat of Energy were transferred to the ENRE; ·The Ministry of Infrastructure of the Province of Mendoza, which is the governing authority under the concession granted by the provincial authorities; ·The Province of Mendoza’s Irrigation General Department, which is the governing authority with respect to irrigation matters (in cooperation with Obras Sanitarias de Mendoza S.A.); ·TheOrganismo Regulador de Seguridad de Presas, (the Dam Safety Regulating Body,or “ORSEP”), which is the governing authority with respect to dam safety matters; and ·The Secretariat of the Environment of the Province of Mendoza, which is the governing authority with respect to environmental matters. Royalty payments.Each of HINISA and HIDISA is required under the respective concessions to make the following monthly royalty payments: ·Royalties in favor of (1) the Province of Mendoza, up to 12% in the case of HIDISA and up to 6% in the case of HINISA, and (2) the Province of La Pampa, up to 6% in the case of HINISA, in each case, of the amount resulting from the application of the corresponding bulk sale rate to the electricity sold, pursuant to the provisions of Section 43 of Law No. 15,336, as amended by Law No. 23,164.  Pursuant to applicable regulations, in order to establish the basis for the calculation of such royalties, the monomic price (the price of electricity that includes both the price of energy and the capacity charge) of the electricity produced resulting from the following formula should be used: the sum of the value of power generated at the hour value fixed by the wholesale market plus the amount receivable for the power rendered to the spot market if such power were sold within a certain month, divided by the total power generated during the given month; ·Royalties in favor of the Argentine Government of (1) up to 2.5% of the amount used as the basis for the royalties calculation in the case of HIDISA, and (2) up to 1.5%, estimated on the same basis in the case of HINISA; and ·Royalties in favor of the Province of Mendoza of up to 2.5% of the amount used as the basis for the royalties calculation for both HINISA and HIDISA. Contingency fund.HINISA and HIDISA, along with the other Argentine hydroelectric generation companies, are obligated to make quarterly payments to a foundation that owns and manages a contingency fund created to cover up to 80% of the aggregate amount of potential costs relating to any repair of the hydroelectric systems at any of the hydroelectric generation companies’ plants, including those of HINISA and HIDISA, that are not covered by their respective insurance policies. As a result of the economic crisis in Argentina in 2001 and 2002, the foundation’s administrative council decided that the contribution to the contingency fund in U.S. Dollars required under the concessions, the bidding


terms and conditions and the relevant provisions of HINISA’s and HIDISA’s by-laws should be converted into Pesos at an exchange rate of Ps. 1.00 = U.S. $1.00.  The indexation clauses contained in such concessions were also replaced with the “CER” (a benchmark stabilization coefficient).  Upon the conversion from U.S. Dollars to Pesos, the Peso value of the contingency fund exceeded the required funding.  As a result, HINISA and HIDISA, along with the other hydroelectric generation companies, have suspended payments to the contingency fund.  However, we can make no assurance that HINISA and HIDISA will not be required to resume making payments to the contingency fund in the future.


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From the effective date of the concessions until the suspension of payments, HINISA and HIDISA made contributions totaling U.S. $1.3 million and U.S. $1.9 million, respectively. HINISA and HIDISA are subject to potential penalties and fines under their respective concessions that are calculated on the basis of the aggregate gross amount invoiced for the 12-month period preceding the imposition of any such penalty.  Such penalties and fines range from 0.1% to 1% (in cases of breach of the terms of the agreement or regulations applicable to electric power generation, dam safety, water management, environmental protection, and non-compliance of instructions from ORSEP, CAMMESA, any of the governing authorities or the ENRE); from 0.02% to 0.2% (in cases of delays or lack of payment of contributions to the contingency fund and insurance policies and for taking action without prior authorization of the respective governing authorities), from 0.01% to 0.1% (in cases of failure to submit any requested information or failure to file mandatory reports); from 0.03% to 0.3% (in cases of failure to keep routes and roads open to traffic and free from soil, air or water pollution, and delays in the fulfillment of mandatory works) and from 1% to 10% (in cases of any actions considered by the governing authorities as termination events under the concessions).  In the event that the fines levied over a 12-month period exceed 20% of the gross amount invoiced for power sales, the granting authority would be entitled to terminate the relevant concession agreement. Performance guaranties.As security for the performance of their obligations under the respective concessions, HINISA and HIDISA have each deposited Ps. 2.0 million for the benefit of the relevant granting authority under the respective concession.  Absent any set off by the relevant granting authority in the event of a breach or any other event of non-compliance under the terms of the respective concession agreements, the guarantee amounts would be released to HINISA and HIDISA, respectively, upon the expiration or termination of the respective concession agreements. Termination of concessions.HIDISA and HINISA’s concession agreements may be terminated for the following reasons: ·Breach of material contractual and legal obligations.  In such case, HINISA or HIDISA, as applicable, shall remain in charge of their concessions during a transitional period established by the granting authority, not exceeding 12 months, and shall indemnify the Argentine Government and the Province of Mendoza for any damages caused (the granting authorities may also apply the performance guarantee amounts toward the payment of any damages).  Within 90 days following the receipt of the relevant termination notice, a new company must be incorporated, which would be granted a similar concession and a public bidding process would be called for the purpose of selling the shares of such newly formed company.  After deducting all fines, interest and withholdings for prospective claims, the balance would be distributed to HINISA or HIDISA, as applicable, as the only compensation for the transfer of the concessions; ·Certain bankruptcy events in respect of HINISA or HIDISA (as applicable), including any liquidation or winding-up proceedings.  In such case, the termination of the relevant concession shall be automatic; ·Force majeureor certain actions by third parties that prevent the compliance by HINISA and HIDISA of their respective obligations under their respective concession agreements; or ·Expiration of the respective terms of the concession agreements.


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In addition, Section 14(d) of Law No. 6088 of the Province of Mendoza provides for the termination of the concessions for reasons of public interest or expropriation for public use. After the termination of the concession agreements for any cause, any assets transferred to HINISA and HIDISA under the respective concession agreements shall be reassigned to the Province of Mendoza and the Argentine Government, as applicable. HINISA’s operations HINISA holds a concession for the generation, sale and bulk trading of electricity from Nihuiles’ hydroelectric system (the “Nihuiles System”).  The Nihuiles System consists of three dams and three hydroelectric power generation plants (Nihuil I, Nihuil II and Nihuil III), as well as a compensator dam, which is used to manage the system’s water flow for irrigation purposes.  The Nihuiles System is located in the Atuel River in the department of San Rafael in the Province of Mendoza.  The City of San Rafael is located approximately 1,100 km southwest of Buenos Aires and 75 km from Nihuil I.  The Nihuiles System covers a total distance of approximately 40 km with a height ranging from 440 m to 480 m.  The Nihuiles System has a total nominal installed capacity of 265.2 MW.  Since 1990, the average annual generation has totaled 847 GWh, with the highest level of generation (1,250 GWh) recorded in 2006 and the lowest level (516 GWh) recorded in 2014. HINISA’s revenues consist of sales of energy and capacity.  In 2015, 98% of HINISA’s sales were into the spot market.  Total revenues for the year ended December 31, 2015 were Ps. 86.3 million, due to energy sales of 539 GWh, 1.9% lower than in 2014, with a hydraulic contribution of 674 Hm3, 12% higher than in 2014. The following chart shows certain relevant statistical data on HINISA(1): 2011

   2012(*)

   2013(*)

   2014(*)

   2015(*)Net Generation (GWh)

   586

   689

   616

   516

   538Energy Purchases (GWh)

   287

   276

   217

   33

   1Total Energy Sales (GWh)

   873

   965

   833

   549

   539Average Price (Ps. / MWh)

   190.7

   186.2

   167.3

   155.6

   160.2Average Gross Margin (Ps. / MWh)

   63.6

   60.2

   33.1

   20.6

   22.4
 (*) Note: Gross Margin before depreciation and amortization.  HIDISA’s operations HIDISA holds a concession for the generation, sale and bulk trading of electricity from Diamante’s hydroelectric system (the “Diamante System”).  The Diamante System consists of three dams and three hydroelectric power generation plants (Agua del Toro, Los Reyunos and El Tigre).  The Diamante System covers a total distance of approximately 55 km with a height differential between 873 m and 1,338 m.  The Diamante System has a total nominal installed capacity and effective power of 388.4 MW.  Since 1990, the average annual generation has totaled 569 GWh, with the highest level of generation (943 GWh) recorded in 2006 and the lowest level (322 GWh) recorded in 2014. HIDISA’s revenues consist of sales of energy and capacity.  In 2015, 100% of HIDISA’s sales were into the spot market.  Total revenues for the year ended December 31, 2015 were Ps. 63.9 million, for energy sales of 367 GWh, 4.4% higher than in 2014, with a hydraulic contribution of 700 Hm3, 9.0% higher than in 2014.  The following chart shows certain relevant statistical data on HIDISA:


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2011

   2012(*)

   2013(*)

   2014(*)

   2015(*)Net Generation (GWh)

   406

   441

   421

   322

   367Energy Purchases (GWh)

   300

   280

   209

   29

   0Total Energy Sales (GWh)

   706

   721

   630

   351

   367Average Price (Ps. / MWh)

   217.9

   215.9

   202.7

   166.2

   174.5Average Gross Margin (Ps. / MWh)

   44.1

   49.6

   27.9

   (24.2)

   (14.1)
 (*) Note: Gross Margin before depreciation and amortization.  Güemes Central Térmica Güemes History Our thermal generation plant Central Térmica Güemes, is located in the northwestern region of Argentina, in the City of General Güemes, Province of Salta.  This plant is a major generator within the WEM.  Güemes was privatized in 1992 and awarded to the consortium composed of Iberdrola, Duke, TCW and certain other investors.  The purchase price paid by this consortium was U.S. $86.2 million for 60% of the capital stock of Güemes, in addition to the assumption of U.S. $60 million in indebtedness. In November 2006 and December 2006, we entered into purchase agreements to acquire indirect control of Güemes for a total purchase price of U.S. $16.6 million.  In January 2007, we consummated the acquisition through the purchase of (1) 100% of the voting capital stock of Dilurey S.A. (“Dilurey”), a corporation organized under the laws of Uruguay, which held at that time 90% of the capital stock of Powerco, a corporation organized in the Province of Salta, which in turn owned 60% of the voting capital stock of Güemes, and (2) an additional 8% of the capital stock of Powerco S.A. (“Powerco”).  On June 9, 2010, Dilurey changed its name to Pampa Inversiones.  In November 2006, we also entered into a one-year option agreement with Mr. Carlos Armando Peralta, the former chief executive officer of Güemes, pursuant to which Mr. Peralta and we had an option to sell or purchase, respectively, shares of Powerco representing 2% of Powerco’s capital stock held by Mr. Peralta.  In August 2007, pursuant to this option agreement, we acquired the remaining 2% of the capital stock of Powerco from Mr. Peralta for U.S. $460,000.  In September 2007, Loma de la Lata, one of our wholly owned subsidiaries, subscribed 180,869,600 non-voting preferred shares issued by Güemes, which were subsequently converted into ordinary shares (representing 74.20% of Güemes’ total voting capital stock).  In addition, on October 3, 2008, we acquired all of the shares of the Güemes employee stock ownership program (representing 2.58% of Güemes’ total voting capital stock). On September 27, 2013, the boards of directors of CTG, EGSSAH and EGSSA resolved that it would be beneficial for these companies if they were merged into a single company, where CTG would be the surviving company and EGSSAH and EGSSA the merged companies. The purpose of this merger is to optimize the resources of each of the companies by simplifying and consolidating their administrative and operational structure. On November 5, 2013, pursuant to the required procedures, the boards of directors of CTG, EGSSAH and EGSSA approved the special financial statements of each Company for merger purposes, the preliminary merger agreement executed among CTG, EGSSAH and EGSSA, and the offering memorandum that describes the terms and conditions of the merger. For accounting, fiscal and legal purposes, the effective corporate reorganization date was retroactive to October 1, 2013. On December 20, 2013, a shareholders’ meeting of each company took place, where the merger and all of the documentation relating to it were approved. On February 13, 2014 the final merger agreement was executed.  As a result of this merger, as EGSSAH was a public company, having its shares listed in the Mercado de Valores deBuenos Aires S.A. (the “Buenos Aires Stock Market” or “MERVAL”), CTG as the surviving company requested the relevant authorities for its shares to be listed in the Buenos Aires Stock Market.


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In November 2015, the approvals of the relevant authorities were granted and CTG’s shares were listed in the MERVAL The shareholders of Güemes are (i) the Company which currently holds, directly and indirectly, 90.43% of Güemes’ voting capital stock, (ii) the Argentine Government which holds 6.70% of Güemes’ voting capital stock, and (iii) minority public shareholders and the ANSES, which hold the remaining 2.87% of Güemes’ voting capital stock. Also, on November 18, 2015, the board of directors of CTG and ENDISA resolved that it would be beneficial for these companies to merge into a single company, where CTG would be the surviving company. The purpose of this merger is to optimize the resources of each of the companies by simplifying and consolidating their administrative and operational structure. On March 4, 2016, and in connection with the required procedures, the boards of directors of ENDISA and CTG approved the special financial statements required for the merger, the preliminary merger agreement executed between CTG and ENDISA, and the offering memorandum that describes the terms and conditions of the merger. For accounting, fiscal and legal purposes, the merger will be effective from January 1, 2016. On April 14 and April 21, 2016, the shareholders of CTG and ENDISA, respectively, approved the merger and all of its documentation. On March 8, 2016, the administrative approvals of the CNV and the BCBA were requested, which, as of the date of this annual report had not been granted. Also, as of the date of this annual report, the definitive merger agreement has not been executed and, therefore, the approvals of the provincial authorities and of the IGJ were still pending.  If the approvals of the merger are not obtained, the Company does not expect significant negative effects arising as a consequence thereof, due to the fact that CTG and ENDISA were consolidated before the merger and will continue to be consolidated after it. Central Térmica Piquirenda Central Térmica Piquirenda (“CTP”) is located in the northwestern region of Argentina, in a location known as Piquirenda, District of Aguaray, Department of General San Martín, Province of Salta. The construction started in early 2008 and was completed by 2010. It has a 30 MW thermal electricity generation plant comprised of ten GE Jenbacher JGS 620 gas-powered motor-generators, which represent 0.1% of the installed capacity in Argentina. CTP started commercial operations on May 3, 2011. On July 15, 2011, CTP executed the WEM Supply Agreements under SE Resolution No. 220/2007. The agreed price is U.S.$18,000/MW per month and the amount recognized as maintenance and operation costs is U.S.$10/MWh, adding a variable price for cost of fuel. On July 14, 2011, under SE Note No. 4,997, the SE authorized CTP to fire Gas Plus as generation fuel. Below there is a chart depicting the corporate structure of Güemes as of the date of this annual report:


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Operations The following chart shows certain relevant statistical data onGüemes: 2011

   2012

   2013

   2014

   2015Net Generation (GWh)

   1,846

   1,533

   1,675

   1,528

   1,682Energy Purchases (GWh)

   480

   483

   593

   596

   601Total Energy Sales (GWh)

   2,325

   2,016

   2,268

   2,124

   2,283Average Price (Ps. / MWh)

   224.1

   218.6

   196.8

   293

   304.2Average Gross Margin (Ps. / MWh)

   64.8

   41.3

   51.9

   102.4

   111.4
  The following chart shows certain relevant statistical data on CTP: 2011

   2012

   2013

   2014

   2015Net Generation (GWh)

   66

   110

   130

   131

   152Average Price (Ps. / MWh)

   388

   411.8

   440.3

   678.2

   699.6Average Gross Margin (Ps. / MWh)

   125.8

   222.2

   n.a.

   n.a.

   n.a.
  Note: Gross Margin before depreciation and amortization. * Due to CTG merger with EGSSA and EGSSA Holding, the 2013 average price and gross margin takes into account CTP results.


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Güemes has a total installed capacity of 361 MW, comprised of 261 MW steam generation units and a 100 MW gas combustion turbine.  Güemes had net production of 1,682 GWh in 2015.  Güemes provides system quality assurance (frequency and voltage) to the northwestern and northern regions of Argentina and, due to its geographical location, it is able to receive gas from Bolivia.  Güemes steam turbines are open cycle generation units with a gross capacity of 261 MW and an average availability level of net production of 1.7 million MWh per year.  Güemes steam turbine combustion equipment is comprised of two Skoda steam turbines, with a gross capacity of 63 MW each, and a third Skoda steam turbine with a gross capacity of 135 MW.  Güemes gas turbine equipment is comprised of a GE MW LMS100 aero-derivative gas-fired turbine generator with a gross capacity of 100 MW.  Güemes mostly sells electricity to the local spot market and to the Energía Plus market (see “Güemes - Expansion Project” below). Total revenues for the year ended December 31, 2015 (which includes CTG and CTP) were Ps. 801 million, for energy sales of 2,283 GWh for CTG, 7.5% higher than in 2014 and for energy sales of 152GWh for CTP, 15.7% higher than in 2014.  In 2015, Güemes’ generation depended on (i) electricity demand in the provinces of Salta and Jujuy, (ii) the availability of natural gas, and (iii) the transmission restrictions. Güemes expansion project Consistent with our strategy of enhancing the value and profitability of our generation assets by expanding the generating capacity of certain of our power generation plants within the framework of theEnergía Plusregulations, in 2008 we completed the first of these projects, which expanded Güemes’ generation capacity through the installation of a new, state-of-the-art gas-fired turbine. Construction was completed in July 2008, and commercial operations commenced in September 2008.  Güemes’ installed capacity increased by approximately 40%, or an additional 100 MW, reaching a total installed capacity of approximately 361 MW.  The new open-cycle has an efficiency of approximately 1,998 kilocalories per kilowatt hour (Kcal/KWh), or 43%.  Our investment in this expansion project totaled approximately U.S. $65 million (see “Item 4. - Our Business – Our Generation Business”). Royalty assignment agreement In June 2007, Güemes and the Province of Salta entered into a royalty assignment agreement pursuant to which the Province has agreed to assign natural gas to Güemes, which the Province is entitled to collect as in-kind royalties in respect of natural gas produced within the provincial territory.  In consideration for such assignment, Güemes will pay a 5% premium over the applicable average wellhead gas price.  The term of the agreement is five years, starting from the date of the first delivery of natural gas, and is subject to an automatic renewal clause.  The daily amount under the agreement may reach 500,000 m3 per day if the production of gas in the Province of Salta increases from the production level existing at the time of the agreement’s execution.  As of the date of this annual report, Güemes had not requested any deliveries under this agreement because it was able to supply the new 100 MW of generation with gas contracted with several suppliers, such as Pan American Energy LLC or Petrolera Pampa. Loma de la Lata History In December 2006, Central Puerto S.A. (Central Puerto) agreed to sell and assign to us all of the property (both tangible and intangible), land, assets, equipment and personnel (including contracts relating to management personnel) that comprised Central Puerto’s thermal generation plant located at Loma de la Lata in the Province of Neuquén, for a total purchase price of U.S. $60 million.  The purchase of the Loma de la Lata generation asset from Central Puerto was consummated in May 2007.


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On December 17, 2013, the boards of directors of CTLL and Powerco resolved that it would be beneficial for these companies to merge into a single company, where CTLL would be the surviving company and Powerco the merged company. The purpose of this merger was to optimize the resources of each of the companies by simplifying and consolidating their administrative and operational structure. On March 7, 2014, and in connection with the required procedures, the boards of directors of CTLL and Powerco approved the special financial statements for merger purposes of each Company, the preliminary merger agreement executed among CTLL and Powerco, and the offering memorandum that describes the terms and conditions of the merger. For accounting, fiscal and legal purposes, the corporate reorganization was deemed effective from January 1, 2014. The shareholders’ meeting of each company took place on April 28, 2014, where the merger and all of the documentation relating to it was approved. On June 3, 2014, the final merger agreement was executed and on September 15, 2015, the merger was finally registered before the corresponding authorities.  Operations Loma de la Lata owns the thermal generation plant located at Loma de la Lata in the Province of Neuquén, which has an installed capacity of approximately 553 MW.  The Loma de la Lata plant has three gas turbines with a capacity of 125 MW each and a one steam turbine with capacity of 178 MW and is located near one of the largest gas fields in Argentina bearing the same name.  Loma de la Lata had a net production of 2,582 GWh in 2015, 26.3% lower than in 2014.Total revenues for the year ended December 31, 2015, were Ps. 1,051 million, 10.98% higher than in 2014. During the period 1997-2015, the average annual generation has totaled 1,499 GWh, with the highest level of generation (3,421 GWh) recorded in 2014 and the lowest level (272 GWh) recorded in 2002. The following chart shows certain relevant statistical data on Loma de la Lata: 2011

   2012

   2013

   2014

   2015Net Generation (GWh)

   1,185

   2,479

   1,947

   3,421

   2,582Energy Purchases (GWh)

   14

   290

   425

   81

   --Total Energy Sales (GWh)

   1,199

   2,769

   2,372

   3,502

   2,582Average Price (Ps. / MWh)

   202.9

   260.4

   237.3

   270.4

   407.1Average Gross Margin (Ps. / MWh)

   58.6

   118.9

   103

   228.8

   322.7
  (*) Note: Gross Margin before depreciation and amortization.  Loma de la Lata expansion project On November 1, 2011, the Company initiated the commercial operations of the Loma de la Lata Project, which involved the expansion of gross generation capacity in Loma de la Lata by approximately 165 MW by converting the plant into a generating combined cycle unit. The project increased the capacity of Loma de la Lata by approximately 50% without the need for additional gas consumption, resulting in greater efficiency. For the expansion mentioned above, the Company has entered into two Project Agreements. Project Agreements In 2007, Loma de la Lata entered into certain agreements in order to procure and build the Expansion. For such purpose, on September 6, 2007 Loma de la Lata entered into  the Project Agreements with the Project Counterparties.


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Under the Project Agreements, it was expected that commercial operation of the Project would begin in June 2010, the time that was set for the delivery of the formal provisional acceptance of the Loma de la Lata plant under the Project Agreements. Due to different problems, mostly related to the Contractor’s breach, such as delays in compliance and labor disputes, the parties agreed to postpone the beginning of commercial operations until December 5, 2010. Despite the new settled date, new delays by the Project Counterparties occurred and, in addition to this on February 8, 2011, an operational error, along with an error in design, took place causing extensive damage to the steam turbine, which caused further delays in the startup (the “February 8 Event”).  Consequently, it became necessary to undertake a comprehensive repair of the steam turbine and other parts, which included the performance of tests and an integral review of the turbine.  The greater part of the damage was caused in the turbine rotor, which was repaired but will have to be replaced in no more than three years from the beginning of the commercial operation, if operated at nominal load, based on the recommendation of the manufacturer. In this context, on March 30, 2011, the Project Counterparties made an offer to Loma de la Lata (the “Offer”) which provided (i) the necessary mechanisms to be adopted in order to repair the damages, (ii) a discount (granted as compensation for breaches) equivalent to the last payment due under the Project Agreements which would be effective upon Provisional Acceptance, and (iii) the steps to be followed in order to initiate the commercial operation of the Project. In connection with the February 8 Event, Loma de la Lata filed the corresponding claims before the insurance companies in order to be compensated for the loss of profits and for the additional financial and administrative costs incurred in connection with the delay of commercial operation of the Expansion. The insurance companies recognized compensation in favor of Loma de la Lata in an amount of U.S.$ 30.5 million. As described above, under the terms and conditions of the Offer, the Project Counterparties granted Loma de la Lata a compensation for breaches in an amount equal to the amount of the last payment to be made under the Project Agreements which would be effective upon the delivery of the formal provisional acceptance of the Expansion pursuant to the terms of the Project Agreements. The total compensation (including the adjustment) was valued at U.S.$ 18 million.  The Offer was accepted by Loma de la Lata. In August 2011, while repairs of the turbine were still taking place, the Project Counterparties informed Loma de la Lata that Siemens A.G., the turbine manufacturer, had detected some defects on similar steam turbines which generated vibrations in the last stage blades. This generated the need for additional modifications to the turbine which would imply a restriction on the power output until the redesign and reengineering of the extracted blades was performed, which was estimated to take at least two years. In that context, the last stage blades were replaced by a baffle plate, which further delayed the Project’s commercial operation date. Finally, the commercial operation of the Expansion began on November 1, 2011, with a provisory baffle plate and blade dummies, with a power of 165 MW. The provisional blade wheel should be replaced when the Project Counterparties and the turbine supplier find a solution to the problem. Additionally, it is estimated that the process of replacing the blades will take about a month. The Project had a total cost of approximately U.S.$ 230.3 million plus VAT, excluding financial capital costs. In addition, the Project Agreements provide the application of certain compensations for delays or failures attributable to the Contractor for not delivering the Project in due time. Given the delays in the handover of the Project, the lower power of the steam turbine installed, and certain defaults of the Project Counterparties to the obligations assumed under the Project Agreements, Loma de la Lata, in exercise of its contractual rights, required the Project Counterparties the payment of the additional penalties for the delays established in the Construction Agreement and of damages for the other breaches. Both requirements were rejected, and Loma de la Lata executed the banking guarantees issued by BBVA and Commerzbank to secure the Project Counterparties’ obligations under the Project Agreements.


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In this context, in 2011, the International Chamber of Commerce’ Secretary, notified Loma de la Lata that an arbitration request had been filed by the Contractor, pursuant to which the Contractor claimed, among other things, the refund of the sums received for the foreclosure of the guarantees.  On December 30, 2011, Loma de la Lata rejected the claim filed by the Contractor before the Court of the International Chamber of Commerce and filed a counterclaim against the Project Counterparties for the integral recovery of the damages caused as a consequence of the Project Counterparties’ defaults under the Project Agreements. See “Item 8. - Legal Proceedings involving Loma de la Lata”.  On November 14, 2012, another major incident occurred in the plant. A failure of the steam turbine protection systems, due to a defective design, caused severe damage to the steam turbine and associated equipment. Loma de la Lata included a claim for the damages produced by the event in the arbitration process against the Project Counterparties, and notified the insurance companies in order to be compensated for the damage suffered. See - “Insurance Claim” below. The steam turbine went back into commercial operation in June 2013.  Agreements in connection with the Loma de la Lata Expansion Project In December 2008, Loma de la Lata and the S E executed the“Convenio Marco para el Cierre del Ciclo Combinado Loma de la Lata”, setting forth the specific conditions for the construction and operation of the Project. Under such agreement, the SE agreed to make the necessary amendments to the existing regulation at the date of the agreement, to acknowledge Loma de la Lata an additional 10% of the cost associated with the supply of natural gas, under the Gas Plus Program, for the operation of Loma de la Lata’s plant. On October 4, 2009, Loma de la Lata entered into a WEM Supply Agreement under SE Resolution No. 220/2007 with CAMMESA to sell CAMMESA a part of the net power capacity resulting from the expansion project and the corresponding generated electricity.  This agreement covers a minimum of 50% of the net capacity generated by the expansion project, with the final percentage to be determined at the time commercial operation begin and will depend on the amount of credits, from Loma de la Lata’s or third parties, arising from SE Resolution No.406/2003, that are allocated to the Project.  The agreement sets a capacity payment of U.S.$ 33,383 per MW-month and an energy payment of U.S.$4 per MWh. The term of the agreement is 10 years from the date in which commercial operation begin.  Loma de la Lata intends to sell the remaining electricity generated by the additional power generation capacity resulting from the Loma de la Lata expansion project under theEnergía Plusprogram. For this reason, Loma de la Lata presents twoEnergía Pluscontracts to CAMMESA with a report of Loma de la Lata’s generation costs, according to the applicable procedures. To become effective, these contracts are sent to theMinisterio de Planificación Federal, Inversión Pública y Servicios(Federal Planning, Public Investment and Service Ministry), where they must be approved. As of the date of this annual report, the Federal Planning, Public Investment and Service Ministry has not approved the contracts. On December 15, 2010, Loma de la Lata executed an amendment to the above-mentioned contract by means of which Loma de la Lata may sell the total capacity and energy generated by the new generation unit to CAMMESA for a period of three years. The term of the amendment was extended to the total term of the WEM Supply Agreement pursuant to the Specific Conditions (See Item 4.– Our Business – Our Generation Business -Loma de la Lata’s 2014 Expansion Project). Natural gas supply To be able to sell the electricity generated by the Loma de la Lata expansion project under the agreement with CAMMESA, Loma de la Lata needed to have firm gas supply contracts in place at the time it began commercial operations. Loma de la Lata is located close to the largest gas field in Argentina, which bears the same name.  This gas field is 100% owned by YPF, the largest oil and gas company in Argentina.  The Loma de la Lata gas field delivers approximately 33,000 Dam3 per day.  Loma de la Lata’s maximum gas consumption is estimated at approximately 2,700 Dam3 per day.  Loma de la Lata has also acquired from Central Puerto the gas pipeline that connects the plant to YPF’s gas field and is able to enter into gas supply agreements with gas producers other than YPF and then swap them with YPF in exchange for gas at the site.


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Because Loma de la Lata’s Project helps to reduce the consumption of fuel oil and/or gas oil by the Argentine electric system, Loma de la Lata has been granted by the Secretariat of Energy the right to pass through to customers, in its variable cost of production, the cost of gas that Loma de la Lata purchases through the Gas Plus scheme.  The Gas Plus isa program launched by the Secretariat of Energy in order to stimulate natural gas production in tight sands and other new fields.  As stated in SE Resolution No. 24/2008, producers of natural gas will receive a higher price for natural gas volumes sold under this program, but the profit for each development project has to be approved by the Secretariat of Energy.  The authorized pricesof gas under the Gas Plus program as of the date of this annual report (U.S. $5.20 per MM BTU) are higher than the regulated gas prices for thermal generation.As a result of this agreement, the Company, and Loma de la Lata in particular, will become an important consumer of gas obtained under the Gas Plus program in Argentina.Moreover, 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”. During 2015, Loma de la Lata was a party to the following gas agreements (the “Natural Gas Supply Agreements”): ·Firm gas supply agreement with Pan American Energy LLC Argentine branch for up to 2,528 Dam3 per day expiring in December 2015, having a one year-term automatic renewal clause. ·Firm gas supply agreement with Petrolera Pampa for up to 172 Dam3 per day expiring September 2015, having a one year-term automatic renewal clause. As of the issuance of SE Resolution No. 529/2014, 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 (See “Item 3. – Key Information – Risk Factors – Risk Relating to our Generation Business – Our ability to generate electricity in out 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”). Consequently, as of the termination of the current gas supply agreements, Loma de la Lata will not need to have firm gas supply agreements to ensure the availability of the WEM Supply Agreement executed under SE Resolution No. 220/2007. In September 2015, CAMMESA informed Loma de la Lata that, in accordance with the provisions of 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) 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.” As a consequence thereof: (i) on September 3, 2015 Loma de la Lata declared the force majeure of the Natural Gas Agreement with Pan American Energy LLC Argentine branch, resulting in the suspension of the obligations of Loma de Lata thereunder, and filed claims against CAMMESA in connection with such agreement; and (ii) on January 1, 2016, declared the force majeure of the Natural Gas Agreement with Petrolera Pampa, resulting in the suspension of the obligations of Loma de Lata thereunder, and filed claims against CAMMESA in connection with such agreement.  As of the date of this annual report, the administrative claims filed by Loma de la Lata against CAMMESA are still pending. Loma de la Lata’s 2014 Expansion Project In September 2014, the Argentine Government, through the Secretariat of Energy, and the leading companies of the Argentine energy sector (including Pampa’s Generator), executed the 2014 Thermal Generation Expansion Agreement for the expansion of the total thermal generation capacity in Argentina. The 2014 Thermal Generation Expansion Agreement contemplates the execution of individual agreements between the Secretariat of Energy and each corporation (and its affiliates) to provide for the specific terms and conditions for the execution of new generation projects. On October 27, 2014, the Pampa’s Generators executed the Specific Conditions.


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Under the 2014 Thermal Generation Expansion Agreement and the Specific Conditions, subject to the satisfaction of certain conditions precedent (including the execution of a WEM Supply Agreement under SE Resolution No. 220/2007, Pampa’s Generators agreed to execute the Loma de la Lata 2014 Expansion Project to expand the generation capacity of Loma de la Lata by 120MW. The Loma de la Lata 2014 Expansion Project will be financed by CAMMESA up to an amount equivalent to:(i) the credits arising from the 2008-2015 LVFVDs accrued by Pampa’s Generators as of SE Resolution No. 406/2003 which are not committed to other projects; and (ii) the credits arising from the LVFVDs to be accrued by Pampa’s Generators until December 2015 (included) 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 (see “Item 4. The Argentine Electricity Sector - SE Resolution No. 95/2013, as amended – New price scheme and other modifications to the WEM”). In order to commit the credits specified in (i) and (ii), Pampa’s Generators assigned said credits to CAMMESA. The amounts arising from the credits specified in (i) and (ii) above shall be transferred to an account administered by CAMMESA. In order to draw such funds CTLL executed a loan agreement with CAMMESA (see “Item 5.- Debt – Generation – Loma de la Lata). As of December 31, 2015, CAMMESA transferred a total amount of Ps. 735.7 million which were applied to the contracts for the installation of the aero-derivative gas-fired turbine. The remuneration scheme for the Loma de la Lata 2014 Expansion Project includes, a WEM Supply Agreement under SE Resolution No. 220/2007 and the scheme established for the remuneration of the generation sector provided in SE Resolution No. 95/2013, as amended. The portion of the generation capacity to be remunerated under the WEM Supply Agreement shall be equal to the percentage resulting from the sum of: (i) the LVFVDs applied for the previous Loma de la Lata’s project and the CTP Project and (ii) the payments made by Loma de la Lata in cash for the Loma de la Lata 2014 Expansion Project; over the total amount of the cost of the Loma de la Lata 2014 Expansion Project.  Such percentage shall apply over the net generation capacity of the unit. As of the date of this annual report, Loma de la Lata is negotiating with CAMMESA the WEM Supply Agreement under SE Resolution No. 220/2007.  Therefore, such condition precedent for the execution of the Loma de la Lata 2014 Expansion Project provided in the Specific Conditions has not been met yet. Piedra Buena History In July 2007, we entered into a stock purchase agreement with Albanesi S.A. and certain subsidiaries of Matlin Patterson for the acquisition of 100% of the capital stock of IBP, which in turn holds 100% of the capital stock of Piedra Buena, which owns a thermal generation plant located in Ingeniero White, Bahía Blanca, in the Province of Buenos Aires, approximately 600 kilometers from the City of Buenos Aires.  The total purchase price for the acquisition, which closed in August 2007, was U.S. $85 million and also included the acquisition of 100% of the capital stock of IPC Operations Limited, a company organized in the United Kingdom whose Argentine subsidiary provides certain management services to Piedra Buena. Operations Piedra Buena is an open-cycle thermal generation plant with an installed capacity of 620 MW, consisting of two identical conventional units (Unit 29 and Unit 30) with a capacity of 310 MW each.  Piedra Buena can be powered either by natural gas or by No. 6 fuel oil (though it was originally designed and partially equipped to burn coal as well).  The plant currently stores up to 60,000 m3 of fuel oil in two separate storage tanks and owns, operates and maintains a 22-kilometer natural gas pipeline that is connected to the main pipeline of TGS.  Furthermore, given Piedra Buena’s 39-hectare area, the plant’s fuel storage capacity could be expanded.  Piedra Buena supplies the electricity it generates through its 27-kilometer 500 kV transmission lines, which are connected to the 500 kV transmission system.  In addition, Piedra Buena has its own facilities at the Bahía Blanca port, and although Piedra Buena shares these facilities with other companies, it has a priority access right to use the port’s loading facilities.  Piedra Buena sells electricity to the spot market.


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Piedra Buena’s revenues consist of sales of energy and capacity. Total revenues for the year ended December 31, 2015, were Ps. 417 million, for energy sales of 2,739 GWh, 12.9% lower than in 2014. During the 1997-2015 period, the average annual generation has totaled 2,197 GWh, with the highest level of generation (3,434 GWh) recorded in 2011 and the lowest level (189 GWh) recorded in 2002. The following chart shows certain relevant statistical data on Piedra Buena: 2011

   2012

   2013

   2014

   2015Net Generation (GWh)

   3,434

   3,265

   2,229

   3,090

   2,737Energy Purchases (GWh)

   718

   565

   447

   55

   2Total Energy Sales (GWh)

   4,152

   3,829

   2,676

   3,144

   2,739Average Price (Ps. / MWh)

   424

   539.80

   144.10

   129.2

   152.2Average Gross Margin (Ps. / MWh)

   28.90

   1.80

   (12.00)

   39.7

   41.9
  (*) Note: Gross Margin before depreciation and amortization.  As of the date of this annual report, Piedra Buena is not buying natural gas nor fuel oil pursuant to SE Resolution No. 95/2013. Consequently, CAMMESA centralizes the acquisition of fuels for WEM’s generators (for more information please see “Item 4.-Our Business – The Argentine Electric Sector - SE Resolution No. 95/2013, as amended – New price scheme and other modifications to the WEM”). It only maintains natural gas transport contracts that were active at the time such resolution was issued, such as, for example, the interruptible and firm gas transportation contracts with TGS for up to 3,600 Dam3 per day and the firm gas transportation contract with Pampa Comercializadora S.A. In order to perform the major maintenance works in Units 29 and 30 scheduled for the years 2015 and 2016, respectively, CPB executed a loan agreement with CAMMESA (see “Item 5. – Debt – Generation – Piedra Buena”). Our Transmission Business Citelec History In September 2006, we entered into a stock purchase agreement with Dolphin Opportunity LLC, a related party of the Company, to acquire 68,400,462 shares of Transelec Argentina S.A. (“Transelec”), representing 89.76% of Transelec’s capital stock, at a purchase price of U.S. $48.5 million.  The remaining 10.24% of Transelec’s capital stock was acquired in January 2008 from Marcelo Mindlin, Damián Mindlin and Gustavo Mariani upon the exercise of the put option held by them at a price of Ps. 38.8 million (U.S. $12.3 million). Transelec owns 50% of Citelec’s capital stock, which in turn owns 52.65% of the capital stock of Transener, the largest high voltage electricity transmission company in Argentina.  Transener’s Class B common shares are listed on the Buenos Aires Stock Exchange, and the remaining 47.3% of Transener is held by minority public shareholders and the ANSES.  The remaining 50% of Citelec’s capital stock was more recently acquired equally by Electroingeniería S.A., which in turn transferred its participation to Grupo Eling S.A. and the Argentine state-owned company, Energía Argentina S.A. (“Enarsa”). Transener was privatized in July 1993, when Citelec was awarded the Argentine Government’s controlling stake in Transener.  In August 1997, the Province of Buenos Aires privatized Transba, a company organized in March 1996 to own and operate the regional electricity transmission system of the Province of Buenos Aires.  Transener acquired 90% of Transba’s capital stock on August 5, 1997.


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Transener’s operations Transener is a leading utility company engaged in the supply of high voltage electricity transmission in Argentina.  Transener operates and maintains the leading electricity transmission system in Argentina at the 500 kv level under a concession agreement under which Transener holds an exclusive 95-year concession to provide high voltage electricity transmission services throughout the Transener network spanning 12,279 km Transener also indirectly owns and operates one of the six regional transmission networks in Argentina, the Transba network.  The Transba concession grants Transba an exclusive 95-year concession to provide electricity transmission services (from the 66 kV to the 220 kV levels) in the Province of Buenos Aires via trunk lines, which are the main transmission lines that connect to all other lower voltage transmission systems owned and maintained by distribution companies in a certain region, throughout the Transba network spanning approximately 6,159 km. Transener also generates additional revenues from, among other things, the construction, operation and maintenance of the Fourth Line, and services provided to third parties. The Company, Grupo Eling S.A. and Enarsa entered into an operating agreement under which each of the Company, Grupo Eling S.A. and Enarsa provides to Transener certain services, expertise, know-how and technical assistance in connection with Transener’s operations.  In addition, the Company, Electroingeniería and Enarsa provide advice and coordination services in the areas of human resources, general administration, information systems, quality control and consulting.  The operating fee payable by Transener under such agreement is equal to 2.75% of its annual revenues and the insurances cost of the operators directly related with the provision of services under operating agreements.  Fees for operating services are included as a component of operating expenses in Transener’s consolidated statements and in 2015 represented approximately Ps. 30.3million. The following chart depicts the organizational structure through which Transener operates:  Our transmission operations generate both regulated and non-regulated revenues.  Regulated revenues are derived from tariffs for the transmission of electricity over Transener’s high voltage system.  On a consolidated basis, Transener’s net regulated revenues for the year ended December 31, 2015, were Ps. 1,759.1 million (Ps. 879.6 million on a proportional interest basis), representing 90.4% of Transener’s consolidated net revenues for such period. We derive 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 IVC pursuant to the Definitive Agreement, the Instrumental Agreement and the Renewal Agreement, and (e) other services. On April 25, 2012, the ENRE issued Resolution No. 90/2012, which established a new annual fee 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 the year 2011.


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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 (including interest) as from August 2012 and instructed CAMMESA to make the respective adjustments.  On September 13, 2013, Transener presented a motion for reconsideration of theResolution 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 (including interest) as from August 2012, and instructed CAMMESA to make further adjustments.  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 Resolution No. 244/2013.On March 12, 2014, the ENRE issued Resolution No. 79/2014, through which it established a new annual rate of Ps. 156.2 million effective as from August 2013, and instructed CAMMESA to make the adjustments necessary fot he retroactive payment (including the corresponding interest).On April 3, 2014, Transener presented a Motion for Reconsideration of ENREResolution No. 79/2014, which was partially accepted by the ENRE. As a consequence, on November 12, 2014, the ENRE issued Resolution No. 332/2014, through which it established a new annual rate of Ps. 158.6 million from August 2013, and instructed CAMMESA to make the adjustments necessary fot he 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.  Additionally, Transener requested that the ENRE 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 the ENRE Resolution No. 272/2015, including the interest applicable to such remuneration.  Other non-regulated revenues for Transener are generated through services provided to third parties with assets not covered by its concession, such as: ·the participation in NIS expansion projects (other than Fourth Line Revenue) under construction, operation and maintenance contracts approved by the ENRE; ·supervision of independent transmission companies that perform construction, operation and maintenance operations relating to NIS expansion; ·priority maintenance and construction work required under SE Resolution No. 1/2003 and its modifications and amendments; ·the operation and maintenance of NIS expansion projects of the Plan Federal de Transporte; ·the operation and maintenance of certain assets of the Transener network; ·operation and maintenance services provided to third parties who are not independent transmission companies; ·non-network line operation and maintenance; ·international operations; and ·other services (which include, among others, technical assistance, engineering services, equipment installation and training).


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Transener’s international operations mainly consisted of the operation and maintenance of high voltage transmissions lines in Brazil, through the provision of contracted services to certain companies that were awarded transmission concessions in Brazil.  Most of these contracts were concluded in 2007.  In 2009, Transener entered into new contracts to deliver services in Brazil.  In 2010, Transenerwrote-down its investment in Transener Internacional Ltda., due to the adverse situation that the subsidiary was going through. On March 25, 2012, Transener’s board of directors approved the termination of three remaining operation and maintenance agreements. For this reason, the results related to the operation of such subsidiary are presented as discontinued operations. 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. Tariffs The tariffs that Transener and Transba receive under their concession agreements are reviewed periodically by the ENRE in accordance with such concession agreements and with Argentine Law No. 24,065 (the Electricity Law) 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 theRevisión Tarifaria Integral(Integral Tariff Review, or the Transener RTI), pursuant to which rules Transener’s tariffs were increased by an average of 31% and Transba’s tariffs were increased by an average of 25%.  These agreements also provide rules for the full tariff review to be conducted by the ENRE. Transition period rules The following is a brief summary of the principal rules for the transition period: Tariffs.Transener received an average tariff increase of 31% and Transba received an average tariff increase of 25%, commencing on June 1, 2005. See “Electricity prices and tariff – Tariff”. Penalty system.Penalties related to quality of service under the concessions, which otherwise would be payable by Transener, may be applied by Transener to investments in addition to the investments included in the Transener RTI, provided that Transener has met certain applicable service quality standards.  No penalties will be applied to Transener in connection with certain outages that are not attributable to Transener. Financial projections.  Transener’s current agreement with the Argentine Government is based on economic and financial projections for 2005 that were submitted by Transener, including operating costs, investments, amortizations, taxes, fees and cash balance estimations.  The tariff may be adjusted by the ENRE during the transition period depending on cost-variations over costs reflected in the 2005 financial projections.  Transener must also comply with the investments included in these financial projections in order to use its cash balance to pay dividends and debt.  Transener must report on a quarterly basis to the ENRE with respect to its financial performance.


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Cost increases and the Instrumental Agreements Transener and Transba requested ENRE to readjust their respective tariffs taking into account the impact of the salary increases resulting from the application of Decrees No. 392/2003, 1347/2003, 2005/2004 and 1295/2005 and the increases in operating costs that Transener and Transba have incurred since December 2004.  For this purpose, Transener and Transba requested the recognition of the impact of these increases on salaries and operating costs in their remuneration.On July 31, 2008, the ENRE adopted Resolutions No. 328/2008 and No. 327/2008, which granted Transener and Transba an adjustment in their tariffs to partially compensate them for these cost increases.  The adjusted tariffs are effective retroactively as from July 1, 2008.  Because the real tariff increases granted by the ENRE (23.4% and 28.0% for Transener and Transba, respectively) did not match the real cost increase incurred as of 2004, Transener and Transba had submitted administrative claims seeking to be compensated for this difference. 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 certified the costs 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 definitive agreements (the “Definitive Agreements”) for such purpose.  In that sense, Transener and Transba, unsuccessfully required the ENRE to recognize the cost increases in the tariff that occurred after the execution of the Definitive Agreements, which led to the initiation of judicial claims by both companies.  The UNIREN ACT has stated that the mechanism for the monitoring of costs and the regime of service quality had been set to last up to the enforcement of Transener and Transba’s RTI, respectively, that the delay in the definition of such process was not attributable to Transener and Transba and it could not lead to undermine their rights. Finally, on December 21, 2010, the Instrumental Agreement related to the Definitive Agreements was executed with the Secretariat of Energy and the ENRE, 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 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 variations of costs 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.


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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 (the “Financing Agreements”). On January 5, 2010, extensions of the above-mentioned agreements were subscribed for an amount up to Ps. 107.7 million and Ps. 42.7 million, for Transener and Transba, respectively (together, the “Addenda I”).  On May 2, 2011, new extensions of the Financing Agreements (“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 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, which will be effective until December 31, 2015, and which set forth:  (i)the recognition of receivables by Transener and Transba resulting from cost variations during the December 2010 – December 2012 period, calculated through the IVC of Memorandum of Agreement; (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 incurred from January 1, 2013 to December 31, 2015; and (iv)the execution of a new Addendum with CAMMESA including the amount of the generated receivables and the applicable interest until their actual cancellation.  On October 25, 2013, and February 14, 2014, Transba and Transener negotiated the Addenda III. On September 2, 2014, Transener and Transba executed with CAMMESA the financing agreements for the implementation of the 2013 and 2014 Renewal Agreements (the “New Financing Agreements”).  The New Financing Agreements provided: i) that the Financing Agreements, together with their Addendums I, II and III, were 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 outstading 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, 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 financial statements, up to the amounts received as of December 31, 2015, through the financing of CAMMESA. Consequently, net revenues amounting to Ps. 1,326.2 million and Ps. 850


million, and interest income amounting to Ps. 176.4 million and Ps. 281.4 million, have been registered by Transener and Transba during the fiscal years ended December 31, 2015 and 2014, respectively.


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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. Full Tariff Review (Transener RTI) According to the terms of the 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 the 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. In August 2005 Transener and Transba presented their respective tariff proposals for the new tariff regime to be implemented in February 2006 and May 2006, respectively.  However, on January 13, 2006, the ENRE issued Resolution No. 60, postponing the public hearing that was originally scheduled for February 23, 2006.  Subsequently, the ENRE issued Resolution No. 423/2006 extending the application of the tariff scheme and the other transition period rules from February 1, 2006 (in the case of Transener) and from May 2006 (in the case Transba) until, in each case, the conclusion of the Transener RTI process.  On June 6, 2007, in accordance with the terms of the Transener’s agreement with the Argentine Government and Law No. 24.065, the ENRE requested that Transener and Transba submit their respective tariff proposals.  In September 2007, Transener and Transba again presented their respective tariff and regulation proposals to the ENRE for the five-year period from 2008 to 2013. On July 30, 2008, the Secretariat of Energy adopted SE Resolutions No. 869/2008 and No. 870/2008, which established that the new tariffs to be adopted pursuant to the Transener RTI will become effective in February 2009.  Pursuant to such resolutions, Transener and Transba submitted their tariff proposals on December 3 and 4, 2008, respectively.  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 its SE Resolutions No. 869/2008 and 870/2008 whereby new tariff schedules had to be approved in February 2009.  In October 2009, the two companies filed actions with the courts for the protection of their constitutional rights on the grounds of the delay by ENRE to call the Public Hearing and institute the RTI process, and to ask the court to order the ENRE to inform the reasons for the delay and to set a new deadline for establishing the new tariff schedule.  On April 27, 2010, a ruling was issued by a federal court requiring the ENRE to respond to the requests of the two companies, using the information filed on December 3, 2008, within the term of 20 days. The ENRE appealed the ruling. On December 21, 2010, while the appeal was still pending, we entered into the Instrumental Agreements with the ENRE. As a result of the execution of the Instrumental Agreements, we dropped our claim against the ENRE. Considering that the Instrumental Agreements expired on December 31, 2011, Transener and Transba believe that they would be in a legal position to re-submit their claims against the ENRE in order to obtain a new tariff pursuant to the RTI.  See “Item 3. -Risk Factors – Risks related 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”. The Transener Concession Agreement Transener entered into a concession agreement with the Secretariat of Energy on July 16, 1993 (the “Transener Concession Agreement”).  The Transener Concession Agreement grants Transener the exclusive right (subject to certain limitations described below) to provide service of high voltage electricity transmission throughout the Transener network until July 17, 2088.  The Argentine Government may grant Transener an extension of the


concession for up to ten years at no additional cost, provided that Transener requests such extension at least 18 months prior to the expiration of the concession.  If such extension is granted, the Argentine Government is entitled to terminate the exclusivity of the concession.


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Under the terms of the Transener concession agreement, Transener is required to, among other things, transmit high voltage electricity in compliance with certain quality standards, provide access to existing transmission capacity in the Transener network to WEM agents, comply with social security and environmental regulations and operate and maintain the transmission system in compliance with required quality standards.In addition, the Transener Concession Agreement requires Transener to monitor the expansions of the Transener network, inform CAMMESA of any new connections to the Transener network, provide CAMMESA with information required for the administration of the WEM and process any request for expansion to the Transener network. The 95-year term of the Transener concession is divided into nine management periods.  The first management period, which began in 1993, has a 15-year term, and each subsequent management period lasts ten years.  At least six months prior to the commencement of each ten-year management period, the ENRE is required to call for bids for the purchase of the controlling stake in Transener (represented by Transener’s Class A shares).  The then current owner(s) of the controlling stake in Transener may submit (under seal) their valuation of the controlling stake in Transener and, if their valuation is greater than or equal to the amount of the highest bid submitted by other parties, the owners of such controlling stake will retain ownership of such interest in Transener without making any payment to the Argentine Government.  Consequently, if the owner(s) of the controlling stake in Transener wish to retain control at the end of any management period, they may bid an amount that would ensure their continued control without incurring any additional cost as a result of such bid.  In the event another bid exceeds that of the then current owners of the controlling stake in Transener, the party submitting such bid would receive the controlling stake in consideration for the submitted bid amount, which would be paid to the then current owners of the controlling stake in Transener.  Transener’s rights and obligations under its concession agreements will not be affected by any change in the ownership of the controlling stake.As of the date of this annual report, the Transener Concession Agreement is in its second management period, which is scheduled to end on July 2018, although Transener has requested that the ENRE extend the first management period for five years after the completion of the FTR in accordance with the Definitive Agreements with Transener. The transmission service provided by Transener is granted on an exclusive basis because it is considered a natural monopoly.  If technological innovations could make the provision of such service under competitive conditions actually practicable, the Argentine Government reserves the right to terminate the exclusivity of Transener’s concession.  Such right by the Argentine Government may only be exercised at the beginning of each management period provided that notice of such exercise is communicated to the then current owners of the controlling stake in Transener no later than six months prior to the commencement of the following management period. The Argentine Government may terminate the Transener concession only if Transener enters into bankruptcy, and Transener may terminate the concession agreement if the government breaches the terms of the concession.  In addition, Transener’s concession includes a pledge in favor of the Argentine Government of all of the Transener Class A Shares held by Citelec, which constitute a controlling stake in Transener.  Upon the occurrence of certain events of default specified in the concession agreement (including, among others, if (1) penalties in any 12-month period exceed 5% of our total regulated revenue during such 12-month period; (2) a transmission line or connection equipment is out of service for more than 30 days; (3) the Transener network has on average, more than 2.5 forced outages per 100km over a 12-month period); or (4) a transformer is out of service for more than 60 days), the Argentine Government may enforce the pledge on the Class A Shares and sell the controlling stake in Transener in a public bidding process in which the holders of such controlling stake will not be allowed to participate.  However, the enforcement of the pledge does not cause the termination of Transener’s concession.  The concession could only be revoked if Transener is declared bankrupt (in which case, the Argentine Government would have the right under the concession to foreclose its pledge over the Class A shares). The Transba Concession Agreement The Transba concession agreement, which is similar to Transener’s concession agreement, was entered into by Transba and the Secretariat of Energy on July 31, 1997.  Transba’s concession grants to Transba an exclusive


right to provide service of electricity transmission throughout the Transba network until August 1, 2092.  The Argentine Government may grant Transba an extension of the concession for up to 10 years with no additional cost, provided that Transba requests such extension at least 18 months prior to the expiration of the concession.  If such extension is granted, the Argentine Government is entitled to terminate the exclusivity of the concession.


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Under the concession, Transba is required to, among other things, transmit electricity via trunk lines in compliance with certain quality standards, provide access to existing transmission capacity in the Transba network to WEM agents and maintain the Transba network to ensure continued provision of the services.  In addition, Transba’s concession requires the monitoring of connections to the Transba network, the provision of information to CAMMESA about any new connections to the Transba network, the provision of information to CAMMESA required for the administration of the WEM and process any request for expansion in the transmission capacity of the Transba network. Transba’s concession is also similar in other material respects to Transener’s concession and provides for, among other things, nine management periods of ten years each (or, in the case of the first such management period, 15 years) commencing on the date of Transba’s concession agreement, a bidding procedure with respect to controlling stake in Transba and termination provisions similar to those included in Transener’s concession agreement.  In addition, Transba’s concession agreement also provides for a pledge in favor of the Argentine Government of all of Transba Class A Shares that are held by Transener, which constitute the Transener’s controlling stake in Transba.  Upon the occurrence of certain events of default, specified in Transba’s concession agreement (including, among others, if (1) penalties in any 12-month period exceed 15% of Transba’s total revenues, (2) a transmission line is out of service for more than, or connection equipment is out of service for more than 30 days, or (3) the Transba network has on average more than seven forced outages per 100 km over a 12-month period) or (4) a transformer is out of service for more than 45 days), the Argentine Government may enforce the pledge on the Class A shares of Transba held by Transener and sell such shares in a public bidding process, pursuant to which Transener would lose its controlling stake in Transba. Property, plant and equipment As of December 31, 2015, Transener operated and maintained the following assets throughout 22 provinces in Argentina:


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As of December 31, 2015, Transba operated and maintained the following assets in the province of Buenos Aires:   Our Distribution Business Electricidad Argentina (EASA) EASA is the holding company of Edenor, our main distribution subsidiary.  In June 2007, we agreed to acquire from EASA’s former indirect shareholders their interests in Dolphin Energía S.A. (“DESA”) and IEASA S.A. (“IEASA”), which collectively held 100% of EASA’s capital stock, in exchange for new shares of our capital stock.  The total number of shares of our capital stock to be received by the indirect EASA shareholders was subsequently adjusted pursuant to the terms of a stock subscription agreement entered into in July 2007.  Following the receipt of a fairness opinion and the favorable review by our audit committee, the terms of such transaction were approved by our shareholders at a meeting held on August 30, 2007.  The transaction closed on September 28, 2007, on which date we issued 480,194,242 shares of our capital stock to the former indirect shareholders of EASA.  On March 28, 2011, DESA and IEASA merged, the surviving company being IEASA. Prior to its acquisition in September 2005 by, among others, DESA and IEASA, EASA’s capital stock was held by EDFI, and was engaged in certain other business activities (including holding the capital stock of other EDF affiliates).  Since October 2005, EASA’s activities have been limited to the holding of its 51% controlling stake in Edenor and to providing certain financial consulting services to Edenor.  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 new U.S. Dollar‐denominated notes in exchange for the cancellation of approximately 99.94% of its outstanding financial debt.  Since EASA’s activities are limited to the holding of its controlling stake in Edenor, EASA’s ability to meet its debt service obligations under these new notes depends largely on the payment by Edenor of dividends or other distributions or payments to EASA.


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In April 2007, Edenor completed the initial public offering of its Class B common shares, in the form of shares and ADSs.  Edenor’s ADSs are listed on The New York Stock Exchange under the symbol “EDN”, and its Class B shares are listed on the Buenos Aires Stock Exchange under the same symbol.  Following the initial public offering, EASA continues to hold 51% of Edenor’s common stock (in the form of Class A shares), and substantially all of the remaining 48.46% of Edenor’s common stock is held by the public. In accordance with the terms of Edenor’s concession, EASA has pledged its 51% stake in Edenor to the Argentine Government to secure the obligations set forth in the concession.  See “Item 4. Our Business – Our Distribution Business - Empresa Distribuidora y Comercializadora Norte (Edenor)—Edenor’s Concession—Pledge of Class A Shares.” Empresa Distribuidora y Comercializadora Norte (Edenor) We believe Edenor was the largest electricity distribution company in Argentina in terms of number of customers and electricity sold (both in GWh and in Pesos) in 2015.  Edenor holds a concession to distribute electricity on an exclusive basis to the northwestern zone of the greater Buenos Aires metropolitan area and the northern portion of the City of Buenos Aires, comprising an area of 4,637 square kilometers and a population of approximately seven million people.  As of December 31, 2015, Edenor served 2,835,229customers. Merger process On October 7, 2013, Edenor resolved to initiate the proceedings pursuant to which Edenor will absorb Emdersa Holding S.A. (“EMDERSAH”) in order to optimize its resources, simplifying its corporate, administrative and operating structure.  On December 20, 2013, the merger of EMDERSAH into Edenor was approved by an extraordinary shareholders’ meeting, as well as all documentation and information required by applicable regulation towards that end. As of the date of this annual report, the approval of the merger by the Superintendence of Corporations (Inspección General de Justiciaor “IGJ”) is pending. The effective reorganization date for all legal, accounting and tax purposes will be retroactive to October 1, 2013 (For more information please see “Item 4. Our Business – Asset Sales and Acquisitions”). Edenor’s concession Edenor is a public service company incorporated on July 21, 1992 as part of the privatization of the Argentine state‐owned electricity utility, SEGBA.  At the time of privatization, SEGBA was divided into three electricity distribution companies, including Edenor, and four electricity generation companies, and, as part of the privatization process, in August 1992 the Argentine Government granted Edenor a concession to distribute electricity on an exclusive basis within a specified area, which we refer to as Edenor’s service area, for a period of 95 years. In September 2005, Edenor entered into the Adjustment Agreement.  The ratification of the Adjustment Agreement by the Argentine Government was completed in January 2007 (the “Adjustement Agreement”).  Pursuant to the Adjustment Agreement, the Argentine Government granted Edenor an increase of 28% in its distribution margin, subject to a cap in the increase of Edenor’s average tariff of 15%, to be allocated solely to Edenor’s non-residential customers (including large users that purchase electricity in the wheeling system).  The increase is effective retroactively from November 1, 2005 and will remain in effect until the approval of a new tariff scheme under the Edenor RTI.  The following are the key provisions of the Adjustment Agreement, which are described elsewhere in this annual report: ·a cost adjustment mechanism (CMM), pursuant to which Edenor’s distribution costs are reviewed semiannually (or, under certain circumstances, more often) and adjusted if deemed appropriate by the ENRE to cover increases in Edenor’s distribution costs; ·an obligation to make capital expenditures of approximately Ps. 204 million for specific projects in 2006, which Edenor complied with although it was not required to, given that the Adjustment Agreement was not ratified in 2006;


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·Edenor’s obligation to meet specified more stringent service quality standards than as originally contemplated in its concession; ·a restriction on Edenor’s ability to pay dividends without prior ENRE approval during the period in which Edenor is conducting the RTI; ·forgiveness of approximately one-third of Edenor’s accrued and unpaid fines, subject to meeting certain conditions relating to capital expenditures obligations and service quality standards, and a 7-year payment plan for the balance, commencing 180 days after the date on which the RTI comes into effect; ·Edenor’s obligation to apply a social tariff regime for low-income customers, which regime will be defined in the context of the RTI; and ·Edenor’s obligation to extend its network to provide service to certain rural areas. For more information see “Tariffs.” *Term.*Edenor’s concession currently expires on August 31, 2087, and can be extended for one additional 10-year period at Edenor’s request and can be extended for one additional 10-year period if Edenor requests the extension at least 15 months before expiration. The Argentine Government may choose, however, to grant Edenor the extension on a non-exclusive basis. The concession period was initially divided into an initial management period of 15 years expiring August 31, 2007, followed by eight ten-year periods. However, in July 2007, the initial management period was extended, at Edenor’s request, for an additional five-year period from the entry into force of the new tariff structure to be adopted under the Edenor RTI. The remaining ten-year periods will run from the expiration of the extension of the initial management period. In addition, before the end of each management period under the concession, the ENRE will arrange for an international public bidding procedure to be conducted for the sale of 51 % of Edenor’s capital stock and voting rights in similar conditions to those under which EASA acquired its stake. If EASA is the highest bidder or if EASA’s bid equals the highest bid, it will retain 51% of Edenor’s stock, but no funds need to be paid to the Argentine Government and EASA will have no further obligation with respect to its bid. There is no restriction as to the amount EASA may bid.** *Obligations.*Under the concession, Edenor is obligated to supply electricity upon request by the owner or occupant of any premises in its service area. Edenor is entitled to charge for the electricity supplied at rates that are established by tariffs set by the ENRE. Pursuant to its concession, Edenor must also meet specified service quality standards relating to: ·the time required to connect new users; ·voltage fluctuations; ·interruptions or reductions in service; and ·the supply of electricity for public lighting and to certain municipalities. Edenor’s concession requires it to make the necessary investments to establish and maintain quality of service standards and to comply with stringent minimum public safety standards as specified in the concession. Edenor is also required to furnish the ENRE with all information requested by it and must obtain the ENRE’s prior consent for the disposition of assets that are assigned to the provision of electricity distribution services. The ENRE also requires Edenor to compile and periodically submit various types of reports regarding the quality of its service and other technical and commercial data. Under Edenor’s concession, Edenor may also be required to continue rendering services after the termination of the concession term upon the request of the Argentine Government, but for a period not to exceed 12 months. Fines and penalties.  Under the terms of the concession, the ENRE may impose fines and penalties if Edenor fails to comply with its obligations , including a failure to meet any of the quality


and delivery standards set forth in the concession.  The ENRE may also impose fines for any of network installations that it considers may pose a safety or security hazard in public spaces, including streets and sidewalks.  In addition, the ENRE may impose fines for inconsistency in technical information required to be furnished to the ENRE.


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When Edenor entered into the Adjustment Agreement in September 2005, the ENRE approved a payment plan in respect of approximately Ps. 116 million of Edenor’s accrued fines and penalties and agreed, subject to the condition that Edenor meets the quality standards and capital expenditure requirements specified in the Adjustment Agreement, to waive approximately Ps. 58 million of accrued and unpaid fines and penalties. Under such payment plan, the penalties and fines to be paid to users were to be repaid in fourteen semiannual installments, with the first installment due upon the termination of a 180-day grace period beginning on the date the RTI’s resulting tariff structure comes into effect. Because the Adjustment Agreement was not ratified until January 2007, Edenor recalculated the amounts of accrued fines and penalties credited thereof, according to the increase of the VAD charged to customers (including the CMM adjustments which have been transferred to customers for a total amount of Ps.17.2 million) up to the date of their credit to the customers’ accounts. On December 22, 2015, considering the existence of cash flow and the strong possibility that such penalties to be paid to users would not be waived, Edenor decided to make the payment to users in the form of one single credit, which was made to the users’ accounts for an amount Ps.152.2 million in the aggregate. In addition, a total of Ps.33.7 million in the aggregate remains available for those clients which had not an active service as of December 22, 2015. During 2015, Edenor entered into a settlement agreement with the ENRE (the “ENRE Settlement”), under which Edenor agreed to pay final penalties imposed and which have been juditially challenged by Edenor, with an adverse result, for an amount of Ps. 85.7 million plus interest of Ps. 84.2 million. These fines and penalties were all paid to the Argentine Government and not to users. In 2015, the fines and penalties imposed on us by the ENRE amounted to Ps. 281.7 million, which represented 7.6% of our energy sales. As of December 31, 2015, total accrued fines and penalties imposed on us amounted to Ps.1,253.1 million, including Ps.186.3 million under the ENRE settlement, Ps. 364.1 million in penalties accrued but not yet imposed on us and Ps. 702.7 million penalties imposed on us but not yet paid. Although in Edenor’s opinion, the RTI process will have to factor in a revised analysis of the treatment to be given to the penalties and discounts determined in prior periods and 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, recent developments may indicate otherwise. Such recent developments include verbal exchanges with certain officials of the new administration, and the issuance of the Note by the ENRE on April 15, 2016, 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 us 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 our “remuneration” at such date. In addition, fines and penalties that fall within the purview of the Note will accrue interest from the last date of the semester on which the event giving rise to the penalty occurred until the date they are paid by us. As of the date of this annual report, fines and penalties in an aggregate amount equal to Ps. 757.2 million are subject to the Note. Such amount as adjusted to reflect accrued interest according to the Note would increase by Ps. 129.0 million. In Edenor's opinion, any adjustments to its 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 it because the delay in imposing such fines and penalties was caused by the Argentine Government and was not within Edenor's control. Additionally. if any adjustments are made applicable to Edenor, Edenor understands the Argentine Government would be binding Edenor to the terms of the Adjustment Agreement without taking into account that it has not recognized certain of Edenor'a rights thereunder, such as Edenor's right to have tariffs adjusted to reflect increases in operation costs that are necessary for adequately providing its services. On March 28, 2016, Edenor was notified of ENRE Resolution No. 31/2016 pursuant to which it was instructed to compensate the small residential customers (T1R) who had been affected by the power outages occurred during the period between February 12, 2016 and February 18, 2016. The amount of such compensation depends on the duration of each relevant power outages. The total compensation to be paid amounts to Ps. 73 million. Pledge of Class A shares.  In accordance with the concession, EASA has pledged its 51% stake in Edenor to the Argentine Government to secure the obligations set forth in the concession.  The Adjustment Agreement extends the pledge to secure the obligations under that agreement as well.  The Argentine Government may foreclose its pledge over the Class A shares and sell them in a public bidding process if any of the following occur: ·Edenor incurs penalties in excess of 20% of its gross energy sales, net of taxes (which corresponds to our energy sales) in any given year; ·EASA fails to obtain the ENRE’s approval in connection with the disposition of the Class A shares; ·material and repeated breaches of the concession that are not remedied upon request of the ENRE; ·EASA creates any lien or encumbrances on the Class A shares (other than the pledge to the Argentine Government); ·EASA or Edenor obstruct the sale of the Class A shares at the end of any management period under our concession;


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·Edenor’s articles of incorporation or voting rights are amended in a way that modifies the voting rights of the Class A shares without the ENRE’s approval; or ·Edenor, or any existing or former shareholder of EASA who has brought claims against the Argentine Government in the ICSID does not desist from its ICSID claims against the Argentine Government following completion of the Edenor RTI and the approval of a new tariff regime. Revocation of concession.  The Argentine Government has the right to revoke the concession if Edenor enters into bankruptcy and the government decides that it shall not continue rendering services, in which case all of its assets will be transferred to a new state‐owned company that will be sold in an international public bidding process.  At the conclusion of this bidding process, the purchase price will be delivered to the bankruptcy court in favor of Edenor’s creditors, net of any debt owed by Edenor to the Argentine Government, and any residual proceeds will be distributed to Edenor’s shareholders. Tariffs.Under the terms of Edenor’s concession, the tariffs charged by Edenor (other than those applied to customers in the wheeling system) 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 distribution 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 ·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) do not include, therefore, 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.  As a result, although the amounts billed to wheeling system customers are relatively lower than those billed to other large users, namely industrial users, the distribution margin on sales to wheeling system customers is similar to that of other large users because Edenor does not incur the corresponding cost of electric power purchases related to those sales. According to the current regulatory framework, the ENRE is required to adjust the seasonal price charged to distributors in the wholesale electricity market every six months.  However, between January 2005 and November 2008, the ENRE failed to make these adjustments.  In November 2008, the ENRE issued Resolution No. 628/2008, which established the new tariffs applied by Edenor as of October 1, 2008 and modified seasonal prices charged to distributors, including the consumption levels that make up the pricing ladder.  The new pricing ladder sets prices according to the following levels of consumption: bimonthly consumption up to 1,000 kWh; bimonthly consumption greater than 1,000 kWh and less than or equal to 1,400 kWh; bimonthly consumption greater than 1,400 kWh and less than or equal to 2,800 kWh; and bimonthly consumption greater than 2,800 kWh.  In addition, the ENRE authorized Edenor to pass through some regulatory charges associated with the electric power purchases to its customers, excluding residential customers with consumption levels below 1,000 kWh. On November 7, 2011, the Secretariat of Energy issued SE Resolution No. 1301/2011 establishing seasonal summer programming, eliminating subsidies for certain economic activities for which the relevant customers, according to such resolution, are in a position to pay the real costs of the service. This provision has been extended to residential users discriminated by geographic area and type of residence. These revised rate schedules did not affect Edenor’s VAD.


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Edenor’s concession authorizes it to charge VAD for its services to seek to cover its operating expenses, taxes and amortization expenses and to provide Edenor with an adequate return on its asset base.  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 indexes.  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 of 28% in Edenor’s distribution margin, including a 5% increase to fund specified capital expenditures required by the Adjustment Agreement, subject to a 15% cap on the increase of Edenor’s average tariff.  Although this increase applies to all of Edenor’s tariff categories, the amount of the increase was only allocated to Edenor’s non-residential customers (including wheeling customers), which customers, as a result, experienced an increase in VAD greater than 28%, 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 the CMM, which requires the ENRE to review Edenor’s actual distribution costs every six months (in May and November of each year).  If the variation between Edenor’s actual distribution costs and Edenor’s recognized distribution costs (as adjusted by any subsequent CMM) is 5% or more, the ENRE is required to adjust Edenor’s distribution margin to reflect Edenor’s actual distribution cost base.  Edenor may also request that the CMM be applied at any time that the variation between Edenor’s actual distribution costs and Edenor’s then recognized distribution costs is 10% or more.  On January 30, 2007, in addition to formally approving Edenor’s new tariff schedule reflecting the 28% increase provided by the Adjustment Agreement, the ENRE applied the CMM retroactively in each of May and November 2006, which resulted in an additional 8.032% increase in Edenor’s distribution margins effective May 1, 2006.  This increase, when compounded with the 28% increase granted under the Adjustment Agreement, resulted in an overall 38.3% increase in Edenor’s distribution margins. Also on February 13, 2007, the ENRE authorized Edenor to bill our customers (excluding residential customers) the retroactive portion of the 38.3% increase (corresponding to the period from November 2005 to January 2007), which amounted to Ps. 218.6 million and which we have continued to invoice in 55 monthly installments since February 2007.  As of the date of this annual report, Edenor had invoiced the total amount. In October 2007, the Secretariat of Energy issued SE Resolution No. 1037/2007, which granted Edenor an increase of 9.63% in its distribution margins to reflect an increase in its distribution cost base for the period from May 1, 2006 to April 30, 2007, compared to the recognized distribution cost base as adjusted by the May 2006 CMM. However, this increase was not incorporated into their tariff structure, and, instead, Edenor was allowed to retain the funds that they are required to collect and transfer to the fund established by thePlan de Uso Racional de la Energía Eléctrica(Rational Use of Electric Energy Plan, or the “PUREE”), a program established by the Argentine Government in 2003 in an attempt to curb increases in energy demand, to cover such CMM increase and future CMM increases. In July 2008, Edenor obtained an increase of approximately 17.9% in their distribution margin, which they incorporated into that tariff structure. This increase represented the 9.63% CMM increase corresponding to the period from May 2006 to April 2007 and the 7.56% CMM increase corresponding to the period from May 2007 to October 2007. These CMM adjustments were included in their tariff structure as of July 1, 2008 and resulted in an average increase of 10% for customers in the small commercial, medium commercial, industrial and wheeling system categories and in an average increase of 21% for residential customers with bimonthly consumption levels over 650 kWh.  In addition, the ENRE authorized Edenor to be reimbursed for the retroactive portion of the 7.56% CMM increase amounting to Ps. 45.5 million for the period between November 2007 and June 2008, from the PUREE funds.


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Edenor requested several additional increases under the CMM since May 2008, all of which have been recognized by ENRE pursuant to SE Resolution No.250/2013 and SE Resolution No. 32/2015 with retroactive effect from May 2008. However, these increases have not been incorporated into Edenor’s tariff structure in a timely manner. On May 7, 2013, pursuant to the SE Resolution No. 250/2013, Edenor was authorized to compensate with the CMM recognition, the debt registered under the PUREE for the period from May 2008 through February 28, 2013.  In addition, CAMMESA was instructed to issue sale settlements with maturity dates to be determined for the surplus generated after compensation between the credits of the CMM and the PUREE debts, to partially compensate the debt with the WEM. Edenor was also entitled to deposit the remaining sale settlements with maturity dates to be determined in the trust created pursuant to ENRE’s Resolution No. 347/2012. As of the date of this annual report, all the sale settlements with maturity dates to be determined issued by CAMMESA were offset with PUREE debts or with commercial debt with CAMMESA.  On November 23, 2015, the ENRE issued Resolution No. 347/2012 pursuant to which distribution companies were authorized, as from the issuance thereof, to include a fixed amount for small-demand (T1) customers and a variable amount for medium and large-demand (T2 and T3) customers as an additional charge in their bills, calculated as a percentage of power charges. Such charges, which are clearly indicated in the bills sent to customers, were deposited into a special trust account created by ENRE Resolution No. 347/2012 (namely, the “FOCEDE”) and exclusively used for the execution of distribution infrastructure and corrective maintenance works on the facilities of each of the distribution companies. ENRE Resolution No. 2/2016 partially repealed EMRE Resolution No. 347/2012, discontinuing the FOCEDE and ordering Edenor to open a special bank account with a Central Bank authorized entity where the funds received pursuant to Resolution No. 347/2012 must be deposited.  In March 2015, the SE issued Resolution No. 32/2015 granting Edenor a temporary increase in income through funds provided by CAMMESA, which was applicable retroactively as from February 1, 2015, to pay for costs and investments associated with the regular provision of the public service of distribution of energy on account of the future RTI. Such additional income resulted from the difference between the “theoretical” tariff schedules set forth in such resolution and the tariff schedule in force at each time for each category of user, according to calculations made by the ENRE, which had been reported monthly to the SE and CAMMESA. In this respect, CAMMESA had transferred the funds contributed by the Argentine Government, in accordance with the values reported by the ENRE.  As from February 1, 2015, the PUREE funds were considered as part of Edenor’s income on account of the future RTI. Edenor was entitled to offset the debts for PUREE with claims arising from the calculation of CMM until that date, including the application of interest that could correspond to both concepts. Any amount of PUREE funds in excess of those applied to offset CMM-related claims as described in the previous sentence were to be offset against debts arising from loans granted by CAMMESA in connection with the mandatory salary increases.  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 to cancel the obligations owed to it for the provision of electricity.  On December 16, 2015, 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 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 is in force; (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 ENRE


Resolution No. 347/2012. Resolution No. 2/2016 of the ENRE partially repealed Resolution No. 347/2012, discontinuing the FOCEDE and ordering Edenor to open a special bank account with a Central Bank authorized entity where the funds received pursuant to Resolution No. 347/2012 must be deposited.


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Pursuant to ME&M Resolution No. 7/2016, the ENRE issued Resolution No. 1/16 establishing a new tariff structure. The following table sets forth the relative weight of our distribution margin in our average tariffs per category of customer (other than wheeling system, public lighting and shantytown customers) in our concession area at the dates indicated. Although the VAD and electric power purchases per category of customer are the same, we are subject to different taxes in the Province of Buenos Aires and the City of Buenos Aires.   ______________________ (1)T1R1 refers to residential customers whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is less than or equal to 300 kWh.  T1R2 refers to residential customers whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 300 kWh but less than 650 kWh. TIR3 refers to residential customers whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 650 kWh but less than 800 kWh.  TIR4 refers to residential customers whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 800 kWh but less than 900 kWh. TIR5 refers to residential customers whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 900kWh but less than 1,000 kWh TIR6 refers to residential customers whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 1,000 kWh  but less than 1,200 kWh. TIR7 refers to residential customers whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 1,200 kWh but less than 1,400 kWh. TIR8 refers to residential customers whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 1,400 kWh but less than 2,800 kWh.  TIR9 refers to residential customers whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 2,800kWh.  T1G1 refers to commercial customers whose peak capacity demand is less than 10kW and whose bimonthly energy demand is less than or equal to 1600 kWh.  T1G2 refers to commercial customers whose peak capacity demand is less than 10 kW and whose bimonthly energy demand is greater than 1600 kWh but less than 4,000 kWh. T1G3 refers to commercial customers whose peak capacity demand is greater than 4,000 kWh.  T2 refers to commercial customers whose peak capacity demand is greater than 10 kW but less than 50 KW.  T3 refers to customers whose peak capacity demand is equal to or greater than 50 kW.  The T3 category is applied to high-demand customers according to the voltage (tension) at which each customer is connected.  Low tension is defined as voltage less than or equal to 1 kV and medium tension is defined as voltage greater than 1kV but less than 66 kV. (2)On November 7, 2011, SE Resolution No. 1301/2011 was enactedc, which established the summer scheduling, eliminating government grants to certain economic activities, which, in accordance with the provisions of the resolution, are in conditions to pay the actual cost that needs to be incurred for being supplied with their demand of electricity. The removal of government grants has been extended to residential customers, who were classified by geographical areas and type of residence. The modification related only to electricity purchase prices in the WEM, for which reason the Company’s VAD (value added for distribution) remained practically unchanged. (3)On January 29, 2016, the ENRE issued Resolution No. 1/2016establishing new tariff structure.  Customers.As of December 31, 2015, Edenor served 2,835,229 customers.  Edenor defines a “customer” as one meter. Edenor classifies its customers pursuant to the following tariff categories:


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·Residential(T1-R1 to T1-R7): residential customers whose peak capacity demand is less than 10kW.  In 2015, this category accounted for approximately 43% of Edenor’s electricity sales. ·Small commercial(T1-G1 and T1-G3): commercial customers whose peak capacity demand is less than 10kW.  In 2015, this category accounted for approximately 8% of Edenor’s electricity sales. ·Medium commercial(T2): customers whose peak capacity demand is equal to or greater than 10kW but less than 50kW.  In 2015, this category accounted for approximately 8% of Edenor’s electricity sales. ·Industrial(T3): industrial customers whose peak capacity demand is equal to or greater than 50kW.  In 2015, this category accounted for approximately 17% of Edenor’s electricity sales.  This category does not include customers who purchase their electricity requirements directly through the wholesale electricity market under the wheeling system. ·Wheeling System: large users who purchase their electricity requirements directly from generation or broker companies through the wholesale electricity market.  In 2015, the total number of such large users was 708, and this category represented approximately 19% of our electricity sales. ·Others: public lighting (T1-PL) and shantytown customers whose peak capacity demand is less than 10kW.  In 2015, this category accounted for approximately 5% of Edenor’s electricity sales. Edenor strives to maintain an accurate categorization of its customers in order to charge the appropriate tariff to each customer.  In particular, Edenor focuses on its residential tariff categorizations to both minimize the number of commercial and industrial customers who are classified as residential customers and to identify residential customers whose peak capacity demand exceeds 10kW and which therefore, do not qualify as residential users. Shantytowns.In accordance with the terms of its concessionand given the nature of public service that the distribution of electricity is granted under Argentine law, Edenoris required to supply electricity to all users whithin the concession area, including low-income areas and shantytowns located within its service area.  In October 2003, Edenor, Edesur and Edelap entered into a framework agreement with the Argentine Government and the Province of Buenos Aires to regulate their supply to low-income areas and shantytowns.  Under this agreement, Edenor has the right to receive compensation for the services provided to to shantytowns from funds collected from residents of each relevant shantytown, the Municipality in which it is located and, if there is a shortfall, by a special fund sponsored by the Argentine Government and the Government of the Province of Buenos Aires.  The Argentine Government contributes an amount equal to 21%, and the Province of Buenos Aires 15.5%, of such compensation, net of taxes, paid by those customers with payment problems and meter irregularities that is transfer to distributors as compensation. On June 23, 2008, Edenor signed an amendment to the Framework Agreement with the Argentine Government, the Province of Buenos Aires and other national electric distributors agreeing to extend the Framework Agreement for four years from January 1, 2007 (the “Amended 2003 Framework Agreement”).  The Argentine Government ratified the amendment on September 22, 2008 and the Province of Buenos Aires ratified the amendment on May 15, 2009. On July 22, 2011, Edenor, together with Edesur and Edelap, entered into an Addendum with the Argentine Government and the Government of the Province of Buenos Aires, to extend the Amended 2003 Framework Agreement for a term of four years.  Such extension was approved on September 21, 2012 by Resolution No. 248/2012 issued by the ENRE and ratified by the Ministry of Federal Planning, Public Investment and Services through Resolution No. 247/2012.  As of December 31, 2014, the Amended 2003 Framework Agreement expired. As of the date of this annual report negotiations with the Argentine Government and the Government of the Province of Buenos Aires to enter into a new agreement are ongoing.  At December 31, 2015, 2014 and 2013, receivable balances with the Argentine Government and the Government of the Province of Buenos Aires amounted to Ps. 75.8 million, Ps. 75.8 million and Ps. 56.9 million,


respectively. Due to the expiration of the Agreement, during the fiscal year 2015, Edenor has not recorded revenue for Ps. 32.4 million.


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Energy losses.  Energy losses are equivalent to the difference between energy purchased and energy sold.  Technical losses represent the energy that is lost during transmission and distribution within the network as a consequence of natural heating of the conductors that transmit electricity from the generating plants to the customers.  Non-technical losses are primarily due to illegal use of Edenor’s services.  Energy losses require Edenor to purchase additional electricity to satisfy demand and its concession allows Edenor to recover from its customers the cost of these purchases up to a loss factor specified in the concession for each tariff category.  The average loss factor under Edenor’s concession is 10%. The following table illustrates Edenor’s estimation of the approximate breakdown between technical and non-technical energy losses experienced in its service area since 2006. Edenor believes that non-technical losses could increase in 2016 following the establishment of the new tariff structure pursuant to Resolution No 1/16 of the ENRE.  Oil and Gas Petrolera Pampa On January 21, 2009, we constituted Petrolera Pampa in order to supply our thermal plants.  The Gas Plus Program, which was promoted by the government to attract investments,was a motivation to follow this path.  The first agreements were made through partnerships in projects with proved gasreservesto be developed by major oil and gas companies like Ysur (formerly Apache) and Petrobras. The next step for the company was to negotiate agreements that involve potential oil and gas production with Petrolera Pampa as operator.  In 2013, we executed an investment agreement with YPF, by which Petrolera Pampa has committed to invest U.S.$151.5 million in exchange for 50% of the hydrocarbons production from the Rincón del Mangrullo block (the “Block”), located in the province of Neuquén. For further information please see “Petrolera Pampa’s Projects – Investment Agreement with YPF”. On November 6, 2013, the shareholders’ meeting of Petrolera Pampa resolved to request the authorization of the CNV for an initial public offering of its shares in the Buenos Aires Stock Market, increasing its capital stock for up to an amount of 59,700,000 shares. On December 12, 2013, through Resolution No. 17,248, the CNV granted Petrolera Pampa the required authorizations for the initial public offering of its shares (the “IPO”). As a consequence, on January 14, 2014, Petrolera Pampa issued 59,700,000 new ordinary shares with a par value of Ps.1 and entitled to 1 vote per share, representing 50% of Petrolera Pampa’s capital stock. Additionally, the shareholders of Petrolera Pampa prior to the IPO (the Company and Pampa Participaciones) assigned to their shareholders as of October 15, 2013, their preemptive and accretion rights over the capital stock increase. Thus, as a result of the capital stock issuance, 17,839,483 shares were subscribed in exercise of such preemptive rights and 41,860,517 were subscribed in exercise of such accretion rights. As of the date of this annual report, we directly and indirectly control 49.6% of Petrolera Pampa’s capital stock. Introduction to the Hydrocarbon Market - Market De-regulation Until the early 1990s, the Argentine Government ran most hydrocarbon-related activities, including exploration, production and transportation. Despite the fact that theLey de Hidrocarburos(the“Hydrocarbons Law”), which was passed in 1967, allowed the government to grant exploration permits and concessions to the private sector, this power was rarely exercised. Prior to 1989, private sector companies were engaged in exploitation


activities through services agreements with YPF. The oil thus extracted was delivered to YPF, which would then allocate it to refineries. Oil prices were fixed by the Argentine Government at levels that were generally significantly below international prices.


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In 1989, with the enactment of theLey de Reforma del Estado y Emergencia Económica(Law for the Reform of the State and Economic Emergency), the hydrocarbon sector was de-regulated.  The new regulatory framework included the following: certain exploitation concessions were to be awarded through a bidding process; partnering agreements could be made with YPF to explore and exploit certain productive areas; starting in 1991, official prices for crude and refined products would be eliminated; and starting in 1994, the price of gas at the wellhead would be de-regulated.  Another development was the creation of a regulatory entity vested with powers to enforce the newly-established framework, the ENARGAS. The reform of the sector led to the free establishment of prices and a more efficient market, as a result of the participation of private sector players and competition.  Total gas output rose by 83% in the period from 1992 to 2002, and oil output rose by 37% during the same period.  Gas reserves increased by 23% and oil reserves increased by 40% during the same period. TheLey de Emergencia Pública(Public Emergency Law), which was passed in 2002, introduced changes to the dynamics of the hydrocarbon sector.  Some of the provisions under that law include withholdings on exports of liquid hydrocarbons and their by-products, limits on price increases in the gas market and certain restrictions on exports. As it relates to jurisdiction matters, it is important to clarify that with the enactment of the Law No. 26,197 the“Hydrocarbons Short Law”(Ley Corta de Hidrocarburos), in 2007, the Argentine provinces received ownership rights over the reserves of crude oil and gas situated within their territories, and the provinces themselves were empowered to grant concessions to private companies. In July 2012, the Argentine Government issued Decree No. 1277/2012 through which it regulated Law No. 26,741, and repealed those provisions of Decrees No. 1055/89, 1212/89 and 1589/89 which provided: (i) the right to dispose of hydrocarbon production (both placed on the domestic market and for export), (ii) free pricing, and (iii) exemption from any duty, law and/or retention on exports and imports hydrocarbons. In turn, it created the National Register of Hydrocarbon Investments wherein Hydrocarbon sector companies must register and the Committee on Strategic Planning and Coordination of the National Investment Plan for Hydrocarbons, whose main role will be to carry out the National Investment Plan for Hydrocarbon (“Plan Nacional de Inversiones Hidrocarburiferas”), for which companies must timely provide to the Committee the technical, quantitative and/or economic information that is requested, is necessary to evaluate the performance of the sector. Companies must also submit an Annual Investment Plan conforming to the National Investment Plan for Hydrocarbons. The Decree also authorizes the Commission to publish reference prices for each of the components of costs and sales, and reference prices for fuel, which is intended to allow coverage of production costs attributable to the activity while obtaining a reasonable profit margin. The Commission may apply different types of sanctions for noncompliance. On October 31, 2014, the Argentine Congress enacted Law No. 27,007, which amended the Hydrocarbons Law in certain aspects mainly relating to the exploration and production of unconventional hydrocarbons (which were not regulated in the previous Law), the extension of the concessions and royalties rates, as follows: ·Regarding exploration permits, the term of permits for conventional exploration is divided into 2 periods of up to 3 years each plus a discretionary extension of up to 5 years.  Thus, the maximum possible duration of exploration permits is reduced from 14 to 11 years. ·For unconventional exploration, the term of permits is divided into two 4-year terms, plus a discretionary extension of up to 5 years, providing for a maximum term of 13 years. In the case of off shore permits, the term is divided in two periods of up to 3 years (with a discretional extension of 1 year each period) and a discretional extension for up to 5 year, providing for a maximum term of 13 years.


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·Regarding exploitation concession, the term of conventional production concessions has been maintained in 25 years. For unconventional exploitations, a 35-year term is provided, including an initial pilot plan of up to 5 years. For offshore production, concessions will be granted for periods of up to 10 years.  Under the previous Hydrocarbons Law regime, the concessions could be extended only once for a 10-year term.  Law No. 27,007 establishes successive extensions to conventional and unconventional concessions for 10-year periods. Even the concessions which are currently in force and those which have already been extended once, can be extended again. ·In respect of the reservation of areas and the carry method, Law No. 27,007 eliminates the possibility for the Federal Government and the Provinces to reserve areas for the exploitation by public entities or state-owned companies as from the date in which Law No. 27,007 entered into force and effect. However, contracts already executed by said provincial entities or companies for the exploration and development of reserved areas continue to be subject to the regulations in force prior ro Law No. 27,007. ·Regarding exploration permits and production concessions, Law No. 27,007 updates the values of the applicable rights.  In the case of exploration permits, it establishes the possibility of compensating up to 90% with investments in exploration during the second period of the term and of the extension, when applicable. ·Regarding royalties, the general 12% rate provided in the Hydrocarbons Law is maintained. As in the previous law, the possibility of reducing the rate in exceptional cases up to 5% is also maintained, as well as the possibility of increasing it 3% upon successive extensions. It also introduces a maximum limit to such rate in all cases of 18%.  It also provides the possibility for the grantor to apply a reduced rate of up to 50% for projects of (i) production in which enhanced or impoved oil recovery techniques are applied, (ii) for extra-heavy oil exploitations and (iii) for offshore explotaitions. Law No. 27,007 provides that the National Executive Branch shall include in the Promotional Investment Regime established by Decree No. 929/2013 the direct investment projects that contemplate investments for an amount of U.S.$ 250 million in a 3-year period. Currently, the benefits under this regime apply to projects for amounts higher than U.S.$ 1,000 million in a 5-years period. The benefits under this promotional regime will be enjoyed after the third year and shall apply to 20% of the production of the project, in the case of on shore projects –whether conventional or unconventional- and to 60%, in the case of offshore projects. To qualify as an off shore project, the wells’ depth measured between the surface and the seabed must be of at least 90 meters. Law No. 27,007 also provides two contributions payable to the Provinces in connection with the projects subject to this promotional regime: (i) 2.5% of the initial investment to develop corporate social responsibility projects, payable by the owner of the project and (ii) a contribution, which amount shall be determined by the Commission created by Decree No. 1277/2012 considering the size and scope of the project, to develop infrastructure projects in the relevant Province and payable by the Federal Government. Finally, Law No. 27,007 provides that the Federal Government and the provinces will promote the adoption of uniform fiscal legislation to foster hydrocarbon activities. On January 4, 2016, the Argentine Government issued Decree No. 272/15, which dissolved the Hydrocarbons Commission created by Decree No. 1277/12 and transferred the duties and authority of the former Hydrocarbons Commission to the ME&M. Gas Market Various reforms of the gas market aim to regulate the supply of gas to ensure that priority demand (i.e., households and small retailers) is met.  This scheme is known as the Producers’ Agreement. In this respect, demand is divided into the following segments:


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·Households and small retailers (“priority demand”) ·Compressed natural gas ·Industrial/ power plants ·Exports Each segment pays a different price for gas, with the industrial and the export segments being the only segments that admit the free establishment of prices.  The new regulatory structure, which was established by Resolution No. 208/2004, Resolution No. 599/2007 and Resolution No. 1070/2010, among others, set forth that each producer must maintain sales of gas to each sector at the same levels as in 2006, and if they do not on grounds of decreased output, there will be a re-allocation of their gas in such a manner as to ensure that priority demand should always be met.  The prices in local currency of the regulated segments, except for the priority demand segment, underwent slight increases in the past years, in order to gradually move them nearer the unregulated price, which is much higher than the present-day prices in the rest of the sectors. The rate of growth in investments in recent years was not the same as that experienced in the 1990s. As a result, output could not keep up with demand and, therefore, exports were reduced to a minimum, and in winter time, the industrial sector is sporadically subject to interruptions in supply.  This circumstance, compounded by a decline in the volume of reserves, resulted in a strong decline in the reserves/production ratio, down from 21.6 years in 1992 to less than 10 years in 2010, the last year for which this information is available. In addition, in 2007, through the state-run energy company ENARSA, the government started to import gas from Bolivia and to request shipments of liquefied natural gas tankers to meet the system’s minimum demand levels, replacing part of the gas used by power plants with alternative fossil fuels such as diesel oil and fuel oil. The above-mentioned gas imports are financed through a trust that is funded through a specific charge in the bills of non-priority users. In view of this trend, the government decided to introduce new resolutions seeking to incentivize investment and production. The SE Resolution No. 24/2008 (subsequently amended by SE Resolution No. 1031/2008) instituted the Gas Plus Program. The main incentive to gas producers is that gas extracted within the framework of the program can be freely disposed and commercialized. To qualify for the program producers are required to submit a project of investments in new gas blocks, in blocks that have not been in production since 2004 or in blocks that are geologically complex (compact sand or with low permeability). In addition, to be eligible for this program –unless the applicant is a new company– the firm must be in compliance with its output quotas as established in the Producers’ Agreement. Petrolera Pampa was organized in 2009 with a view to taking advantage of the benefits offered by the Gas Plus Program. In February 2013, the Commission’s Resolution No. 1/2013 was published, creating the Encouragement Program for Excess Injection of Natural Gas (thePrograma de Estímulo a la Inyección Excedente de Gas Naturalor “Encouragement Program”) whose objective is to evaluate and approve projects that contribute to national self-sufficiency in hydrocarbons through increases in gas production and injection into the domestic market, and projects that generate higher levels of activity, investment and employment in the sector. Companies which participate in the Encouragement Program agree to a minimum injection volume (the “Base Volume”) to be sold at a fixed price (the “Base Price”) and can expect to receive U.S.$7.5/MMBTU for any injection volume in excess of the Base Volume (the “Excess Injection”).  The Argentine Government undertakes to pay a monthly compensation for: (i) any difference that between U.S.$7.5 /MMBTU and the price actually received from the sale of the Excess Injection and (ii) any difference between the Base Price and the price actually received from the sale of the Injection Base. Petrolera Pampa’s project was approved under the Encouragement Program and became effective on March 2013.


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Before the Hydrocarbons Commission was dissolved, it passed two other resolutions creating the “Stimulus Program for Companies with low Injection of Natural Gas” (Resolution No. 60/2013) and the “Stimulus Program for Companies without Injection of Natural Gas” (Resolution No. 185/2015), which provided the same benefits as the Natural Gas Stimulus Program. Petrolera Pampa does not participate in these programs. In July 2015, the Hydrocarbons Commission issued Resolution No. 123/2015, which created the “Areas and Participation Acquisition Rules” under the Natural Gas Stimulus Program and specified the requirements of the presentation that must be filed by all companies that acquire any participation in hydrocarbon areas. Crude Oil Market Also seeking to encourage investment and production, several resolutions have been issued relating to the crude oil market.  The most important, Resolution 394/2007, which imposes further restrictions on exports of crude by fixing their price, had the effect of leaving producers indifferent when deciding between serving the local or the international market as the state would capture any extraordinary revenue that the producer could earn on exports. The production of crude oil has shown a downward trend in recent years. Therefore, as was the case in the gas market, the government started a search for the tools and regulations that could serve to again find the path to growth.  ThePetróleo PlusProgram(Resolution No. 1312/2008) was created with that objective. According to thePetróleo PlusProgram, oil producers able to prove an increase in their production of oil and the replenishment of their proven reserves will be entitled to a series of tax credits that they may apply to the payment of export duties on their oil, liquefied petroleum gas and other by-products that are due under Resolution No.394/2007. ThePetróleo Plusprogram came into force on December 1, 2008, with retroactive effect to October 1, 2008.  These tax credit certificates issued by the Secretariat of Energy are transferable. In February 2012, thePetróleo Plus Programwas suspended for companies that produce more than 1,300 m3/day of oil due to the modification of the market conditions under which such program was initially created, by giving compensation to certain companies to improve the final price of exported oil. This compensation was eliminated by the Ministry of Economy’s Resolution No. 1/2013 mentioned below. The Secretariat of Energy through SE Resolution No. 438/2012, granted to companies that export oil and produce less than 1,300 m3/day a compensation of 28 U.S.$ / bbl.  On January 3, 2013, the Ministry of Economy issued Resolution No. 1/2013 which raised the cutoff values of Resolution No. 394/2007 from U.S.$ 42/bbl to U.S.$ 70/ bbl, thus increasing income accruing to the oil exporters.  On December 29, 2014, the Ministry of Economy issued Resolution No. 1,077/2014 which revoked Resolution No. 394/2007 and established new export tax rates which are linked to the international price of crude oil to be determined from monthly Brent reference value minus eight dollar per barrel (8.0 US $ / Bbl). The new regime set as the cutoff value the amount of U.S.$ 71 / Bbl.  If the international price of oil does not exceed U.S.$ 71 / Bbl, the producer shall pay export duties of 1% of that value.  Above U.S.$ 80 (which yield an international price of U.S.$ 72 / Bbl) variable deductions will be settled.  In February, 2015, the Commission’s Resolution No. 14/2015 was published, creating thePrograma de Estímulo a la Produccion de Petroleo(the “Oil Encouragement Program”).  Companies which participate in the Oil Encouragement Program, agree to a minimum production (the “Base Production”) and can expect to receive U.S.$ 3/Bbl or U.S.$ 2/Bbl (depending if it is for local market or for export) for any Bbl in excess of the Base Production up to a maximum price per Bbl of 70 U.S.$ /Bbl for Escalante oil and 84 U.S.$/Bbl for Medanito oil.  On July 13, 2015, the Argentine Government issued Decree No. 1330/2015, which terminated thePetróleo Plus Programand established a mechanism to pay back the tax credits of such program.


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Petrolera Pampa’s Projects Investment Agreement with YPF  On November 6, 2013, Petrolera Pampa entered into an agreement (“YPF Agreement”) through which Petrolera Pampa committed to invest U.S.$151.5 million in exchange for a 50% interest (the “Assigned Share”) in the hydrocarbon production of the Rincón del Mangrullo block (the “RDM Block”), which is located in the province of Neuquén, and comprises the formations up to and including the Mulichinco formation.  The Assigned Share represents 50% of the rights and duties relating to the production of hydrocarbons in the RDM Block, except for certain existing wells that were previously drilled by YPF and specific wells that were to be drilled at YPF’s sole cost and expense and owned by YPF.  Production in the RDM Block began in July 2014.  The RDM Block’s concession expires in 2022.  YPF, as operator of this block, has agreed to use its best efforts to obtain an extension of the concession beyond 2022, which must be granted by the province of Neuquén. The YPF Agreement had two initial investments phases: Phase one: §Petrolera Pampa committed to invest U.S.$80.0 million in the drilling, completion and commissioning of approximately 17 wells in the western RDM Block during this phase, in addition to U.S.$1.5 million in the completion of three-dimensional seismic surveys covering approximately 40 square kilometers. §YPF committed to the drilling, completion and commissioning of 17 additional wells in the eastern RDM Block.  YPF also committed to build a pipeline and all necessary facilities to transport the gas produced in this block.  The pipeline covers approximately 55 kilometers and connects to the trunk pipeline system.  Petrolera Pampa has committed to pay fees for the use of the pipeline and facilities. §Phase one of this project was completed in October 2014. Under the terms of theYPF Agreement, Petrolera Pampa had the option, but were not required, to continue with phase two of the project.  Upon completion of phase one, in October 2014, Petrolera Pampa accepted the option to complete phase two of the project. Phase two: §Petrolera Pampa committed to invest U.S.$70.0 million in the drilling, completion and commissioning of approximately 15 wells anywhere in the RDM Block. §Phase two of this project was completed in May 2015. In accordance with the YPF Agreement, Petrolera Pampa has a 50% interest in the hydrocarbon production of the wells drilled during phases one and two, while YPF has the remaining 50% interest.  YPF also has a 100% stake in certain wells that were drilled prior to the date of the YPF Agreement, in addition to the wells drilled at its sole cost and expense (17 of such YPF-owned wells were completed during phase one). Once phases one and two were completed on schedule, Petrolera Pampa and YPF had the option to continue jointly developing the RDM Block until the end of the concession period in 2022, or as further extended.  In May 2015, Petrolera Pampa and YPF agreed to extend the drilling program beyond phase two with the drilling of 35 additional wells, representing an additional investment by us of approximately U.S.$70.0 million.  As a result, during the year ended December 31, 2015, a total of 50 wells (consisting of the 15 wells drilled during phase two and 35 additional wells) were drilled in connection with the YPF Agreement.  In accordance with the terms of the YPF Agreement, all hydrocarbon production and the cost of wells drilled after the completion of phases one and two are allocated to Petrolera Pampa and YPF in accordance with our respective interests (50% each).  In addition, all


operating costs, including lifting and transportation costs, royalties of 12% and surface rights, are borne proportionally based on Petrolera Pampa’s respective 50% interests in the joint venture.


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YPF Addendum  On May 26, 2015, Petrolera Pampa entered into the Addendum to modify certain terms and conditions of the YPF Agreement and increase Petrolera Pampa’s investment commitments.  The principal changes to the YPF Agreement, which took effect retroactively as from January 1, 2015, were as follows: ·All formations covered by the RDM Block’s concession were included in the YPF Agreement, excluding only the Vaca Muerta and Quintuco formations.  ·Petrolera Pampacommitted to jointly invest with YPF to expand existing evacuation and processing facilities in the RDM Block.Petrolera Pampa’stotal investment in these facilities is expected to reach approximately U.S.$65.0 million.  In exchange,Petrolera Pampaacquired (retroactively, effective as from January 1, 2015) a 50% right over the hydrocarbon production of all wells in the RDM Block, including the wells that are wholly owned by YPF.  ·Petrolera Pampacommitted to invest in exploratory activities in the Lajas formation, which forms part of the RDM Block.  ·For the period 2016-2017,Petrolera Pampacommitted to invest an additional U.S.$22.5 million, which will be used for well drilling in the Mulichinco formation and/or additional investments to improve the evacuation and processing facilities in the RDM Block.  The first well in the Lajas formation was drilled but has not yet been completed as of the date of this annual report.  It has not yet been determined whether this well is productive or dry.  As a result of the changes implemented through the Addendum, Petrolera Pampa’s average natural gas production in the RDM Block increased by 300,000 m3/d.  In addition, Petrolera Pampa retroactively recognized 63.7 million m3 of natural gas and 1,820 m3 of oil for the period between January 1, 2015 and the date of the Addendum, for which Petrolera Pampa expects to receive compensation by April 2016.  Under the terms of the Addendum, YPF is to assign to Petrolera Pampa, during the period between July 2015 and April 2016, a total of 63.7 million m3 of natural gas and 1,820 m3 of oil from its interest in the total hydrocarbon production of the RDM block.  Accordingly, during this period Petrolera Pampa expects to sell more than 50% of the total hydrocarbon production of the RDM Block.  As of December 31, 2015, we received compensation for 41 million m3 of natural gas, representing revenues totaling approximately U.S.$64.5 million.  In connection with the YPF Agreement and its Addendum, Petrolera Pampa has committed to invest a total of approximately U.S.$350.0 million for the period 2014-2017.  As of December 31, 2015, investments made under this agreement amounted to approximately U.S.$ 218 million.  As of December 31, 2015, natural gas production under the YPF Agreement amounted to approximately 2,100 thousand m3 per day (including 300,000 m3 in the form of compensation), representing 83% of Petrolera Pampa’s aggregate volume of natural gas production for such month.  Facilities in the RDM Block  As of the date of this annual report, theevacuation and processing facilitieslocated in the RDM Block have a total maximum processing capacity of 3,300,000 m3/d ofnatural gas.  In connection with the YPF Agreement and its Addendum, Petrolera Pampa is investing in a newprocessingplant and compression facilities in the RDM Block that are expected to increase the block’s total production capacity to 4,000,000 m3/d. The pipeline that connects the field to the trunk pipeline in Loma la Lata has a total transportation capacity of approximately9,000,000m3/d.


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Investment Agreements with Petrobras Argentina  In each of 2010 and 2013, Petrolera Pampa entered into investment agreements with Petrobras Argentina (“Petrobras I” and “Petrobras II,” as described below) relating to the El Mangrullo block, for which Petrobras Argentina is the operator.  Accordingly, Petrolera Pampa acquired 43% of the right to freely dispose of the hydrocarbon production at the wellhead and to commercialize and process the hydrocarbons obtained from certain wells to be drilled in this block, subject to the terms of each of these agreements.  The hydrocarbon production resulting from Petrobras I and II may be sold under the Gas Plus Program and is subject to 14% royalties.  The concession for the El Mangrullo block expires in 2025.  Petrobras I  On December 7, 2010, Petrolera Pampa entered into our first investment agreement with PetrobrasArgentina(“Petrobras I”) relating to the El Mangrullo block.  Under the terms of this agreement, Petrolera Pampa committed to an initial investment of the lower of (i) U.S.$16.0 million and (ii) the amount required for the drilling and termination of four wells.  This agreement established an investment period of four years, during which additional drilling investments were required in order to maintain a minimum daily production level of 400,000 m3 of natural gas (the “Daily Target”).  After Petrolera Pampa made its initial investment of U.S.$16.0 million, Petrolera Pampa was responsible for 43% of any additional investments required to maintain the Daily Target for four years, while Petrobras Argentina was responsible for the remaining 57% of such investments.  To maintain the Daily Target level for the four-year period, nine wells were expected to be drilled, representing a total investment of U.S.$24.0 million for Petrolera Pampa (U.S.$16.0 million for the first four wells and U.S.$8.0 million for the remainder).  However, the natural gas production of only five wells was sufficient to satisfy the Daily Target level during the four-year period, which ended in October 2015.  As of the date of this annual report, Petrolera Pampacontinues to be entitled to its proportionate share of the hydrocarbon production from the wells drilled under Petrobras I until the end of the concession period or the end of the useful life of such wells, whichever occurs first.  As of December 31, 2015,Petrolera Pampa’stotal investments under this agreement amounted to approximately U.S.$21.0 millionandgas production reached 184,000 m3 per day.  Petrobras II  On February 7, 2013, Petrolera Pampa entered into our second investment agreement with PetrobrasArgentina(“Petrobras II”) relating to the El Mangrullo block.  Under the terms of this agreement, Petrolera Pampa committed to an initial investment of the lower of (i) U.S.$22.0 million and (ii) the amount required for the drilling and termination of four wells.  Petrolera Pampa is responsible for 47% of any additional investments required to maintain the Daily Target during a four-year period, which will end in 2017, while Petrobras Argentina is responsible for the remainder.  To meet the Daily Target, nine wells are expected to be drilled, representing a total investment of U.S.$33.0 million for Petrolera Pampa.  After the four-year period is completed, Petrolera Pampa will continue to be entitled to its proportionate share of production from the wells drilled under Petrobras II until the end of the concession period or the end of the useful life of such wells, whichever occurs first.  As of December 31, 2015, six wells had been drilled in connection with this agreement (five of which are productive and one of which is dry), representing an aggregate investment by us of approximately U.S.$29.3 million, and gas production reached 167,000 m3 per day.  As of the date of this annual report, the Daily Target has been met since July 2013. Investment Agreement with Ysur (formerly Apache)  On December 1, 2010, Petrolera Pampa entered into an investment agreement with Ysur (formerly Apache) to jointly engage in the development and exploitation of unconventional gas in the Anticlinal Campamento and Estación Fernández Oro blocks.  Ysur is the operator of these blocks, which are located in the provinces of Neuquén and Río Negro, respectively. Under the terms of this agreement, Petrolera Pampa had a 15% share in the committed investment (initially estimated at U.S.$20.0 million) and the operating expenses incurred in developing such production, through which


Petrolera Pampa has obtained a proportional share of the sale of such production.  The royalties for Anticlinal Campamento and Estación Fernández Oro blocks have been set at 15%.


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Petrolera Pampa continues to be entitled to the proportionate share of production from the 22 wells drilled under the agreement until the end of the concession term in 2026 or the end of the useful life of these wells, whichever occurs first.  As of December 31, 2015, gas production reached 58,000 m3 per day. Agreement with Rovella Carranza  In September 2010, we entered into an agreement with Rovella Carranza S.A.(“Rovella Carranza”)through which Petrolera Pampa agreed to provide hydrocarbon exploration, development and production services in the Senillosa exploration block in exchange for a 50% share of the hydrocarbon production in this block.  Of the remaining 50% of the hydrocarbon production in this block, Rovella Carranza is entitled to a 35% share, while G&P, the concessionaire of this block, has a 15% share.  Under the terms of this agreement, Petrolera Pampa is the operator of the Senillosa block.  As of December 31, 2015, Petrolera Pampa had made investments totaling approximately U.S.$12.5 million.  In December 2015, average daily production of this block reached 10,000 m3, representing less than 1% of Petrolera Pampa’s aggregate volume of daily hydrocarbon production. Caracol Norte Block Agreement  On May 19, 2011, Petrolera Pampa entered into an agreement with Rovella Energía S.A. (“Rovella Energía”) and G&P (the “Caracol Norte Investment Agreement”), through which Petrolera Pampa agreed to provide, as operator, hydrocarbon exploration, development and production services in the Caracol Norte block in exchange for a 60% share of all hydrocarbon production in the block.  Petrolera Pampa committed to an initial investment of U.S.$3.7 million.  After carrying out preliminary activities in this block,Petrolera Pampadecided not to make any further investments.  Accordingly, on June 4, 2015,Petrolera Pampaand Rovella Energía agreed to transfer our rights and obligations under the Caracol Norte Investment Agreement to Petroleos Sudamericanos SA, Homaq SA and JCR S.A.  In accordance withPetrolera Pampa’sproportionate interest in the investment agreement, it expects to receive U.S.$133,000 from this sale once certain conditions precedent are satisfied.  As of the date of this annual report, the completion of this transfer remains subject to environmental authorization and the issuance of a provincial decree.  Oil and Gas Reserves and Production Overview  Proved oil and natural gas reserves are those estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be economically producible from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations.  Under Law No. 26,197, the Argentine provinces own the hydrocarbon reserves located within their territories.  Pursuant to concessions granted by Argentine provinces to Petrolera Pampa and its joint venture partners, Petrolera Pampa has the right to extract, but not own, certain oil and gas reserves and to sell the resulting production.  As of the date of this annual report, Petrolera Pampa’s exploration and development activities are limited to reserves located in Argentina. Petrolera Pampa seeks to identify new oil and gas reservoirs through joint venture agreements with the aim of increasing the future replacement rate of proved reserves.  From 2011 to 2015, Petrolera Pampa and its partners completed the drilling of 121 exploration and development wells.  During 2015, Petrolera Pampa average success rate for development wells was 97%.  Internal controls over reserves and reserves audits Petrolera Pampa maintains an internal staff of petroleum engineers and geosciences professionals who work closely with the Independent Reserves Engineers Firm, to ensure the integrity, accuracy and timeliness of data furnished to its Independent Reserves Engineers Firm in their estimation process and who have knowledge of the


specific properties under evaluation.  Petrolera Pampa’s Director of Geology Development is primarily responsible for overseeing the preparation of Petrolera Pampa’s reserves estimates and for the internal control over its reserves estimation, generation and management and acquisition and divestiture opportunities evaluation. See “Management.”


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In order to ensure the quality and consistency of Petrolera Pampa’s reserves estimates and reserves disclosures, Petrolera Pampa maintains and complies with a reserves process that satisfies the following key control objectives: ·estimates are prepared using generally accepted practices and methodologies; ·estimates are prepared objectively and free of bias; ·estimates and changes therein are prepared on a timely basis; ·estimates and changes therein are properly supported and approved; and ·estimates and related disclosures are prepared in accordance with regulatory requirements. Throughout each fiscal year, Petrolera Pampa’s technical team meets with the Independent Reserves Engineers Firm, who are provided with full access to complete and accurate information pertaining to the properties to be evaluated and all applicable personnel.  This independent assessment of the internally-generated reserves estimates is beneficial in ensuring that interpretations and judgments are reasonable and that the estimates are free of preparer and management bias.  The audit conducted by the Independent Reserves Engineers Firm consisted primarily of:  (1)analysis of historical static and dynamic reservoir data provided by Petrolera Pampa; (2) construction or updating of the Independent Reserves Engineers Firm’s own static and dynamic reservoir characterization models of Petrolera Pampa’s oil fields; (3) economic analysis of selected fields; and (4) a review of Petrolera Pampa’s production forecasts and reserves estimates. Independent Reserves Engineers Firm  Reserves estimates as of December 31, 2015, for Argentina included in this annual report are based on the Reserves Report prepared by the Independent Reserves Engineers Firm, dated as of March 4, 2016. The Reserves Report, a copy of which has been filed as an exhibit to this annual report, was prepared in accordance with SEC rules, regulations, definitions and guidelines at our request in order to estimate reserves and for the areas and period indicated therein.  The Independent Reserves Engineers Firm, a Dallas corporation with offices in Dallas and Houston, has been providing consulting services to the oil and gas industry for more than 55 years. The firm has more than 155 professionals, including engineers, geologists, geophysicists, petrophysicists and economists that are engaged in the appraisal of oil and gas properties, the evaluation of hydrocarbon and other mineral prospects, basin evaluations, comprehensive field studies and equity studies related to the domestic and international energy industry. The Independent Reserves Engineers Firm restricts its activities exclusively to consultation and does not accept contingency fees, nor does it own operating interests in any oil, gas or mineral properties, or securities or notes of its clients. The firm subscribes to a code of professional conduct, and its employees actively support their related technical and professional societies. The firm is a Texas Registered Engineering Firm.  The Reserves Report covered 100% of our total reserves. In connection with the preparation of the Reserves Report, the Independent Reserves Engineers Firm prepared its own estimates of our proved reserves. In the process of the reserves evaluation, the Independent Reserves Engineers Firmdid not independently verify the accuracy and completeness of information and data furnished by us with respect to ownership interests, oil and gas production, well test data, historical costs of operation and development, product prices, or any agreements relating to current and future operations of the fields and sales of production. However, if in the course of the examination something came to the attention of the Independent Reserves Engineers Firm that brought into question the validity or sufficiency of any such information or data, the Independent Reserves Engineers Firm did not rely on such information or data until it had satisfactorily resolved its questions relating thereto or had independently verified such information or data. the Independent Reserves Engineers Firm independently prepared reserves estimates to conform to the guidelines of the SEC, including the criteria of “reasonable certainty,” as it pertains to expectations about the recoverability of reserves in future years, under existing economic and operating conditions, consistent


with the definition of SEC  Regulation S-X Section 210.4-10(a). the Independent Reserves Engineers Firm issued the Reserves Report based upon its evaluation. The Independent Reserves Engineers Firm’s primary economic assumptions in estimates included oil and gas sales prices determined according to SEC guidelines, future expenditures and other economic assumptions (including interests, royalties and taxes) as provided by us. The assumptions, data, methods and procedures used, including the percentage of our total reserves reviewed in connection with the preparation of the Reserves Report were appropriate for the purpose served by such report, and the Independent Reserves Engineers Firm used all methods and procedures as it considered necessary under the circumstances to prepare such reports.


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However, uncertainties are inherent in estimating quantities of reserves, including many factors beyond our and our independent reserves engineers’ control. Reserves engineering is a subjective process of estimating subsurface accumulations of oil and natural gas that cannot be measured in an exact manner, and the accuracy of any reserves estimate is a function of the quality of available data and its interpretation. As a result, estimates by different engineers often vary, sometimes significantly. In addition, physical factors such as the results of drilling, testing and production subsequent to the date of an estimate, economic factors such as changes in product prices or development and production expenses, and regulatory factors, such as royalties, development and environmental permitting and concession terms, may require revision of such estimates. Our operations may also be affected by unanticipated changes in regulations concerning the oil and gas industry in the countries in which we operate, which may impact our ability to recover the estimated reserves. Accordingly, oil and natural gas quantities ultimately recovered will vary from reserves estimates.   Technology used in reserves estimation  According to SEC guidelines, proved reserves are those quantities of oil and gas which, by analysis of geoscience and engineering data, can be estimated with “reasonable certainty” to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.  The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. The term “reasonable certainty” implies a high degree of confidence that the quantities of oil and/or natural gas actually recovered will equal or exceed the estimate. Reasonable certainty can be established using techniques that have been proved effective by actual production from projects in the same reservoir or an analogous reservoir or by other evidence using reliable technology that establishes reasonable certainty. Reliable technology is a grouping of one or more technologies (including computational methods) that have been field tested and have been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation.  There are various generally accepted methodologies for estimating reserves including volumetrics, decline analysis, material balance, simulation models and analogies. Estimates may be prepared using either deterministic methods. The particular method chosen should be based on the evaluator’s professional judgment as being the most appropriate, given the geological nature of the property, the extent of its operating history and the quality of available information. It may be appropriate to employ several methods in reaching an estimate for the property.  Estimates must be prepared using all available information (open and cased hole logs, core analyses, geologic maps, seismic interpretation, production/injection data and pressure test analysis). Supporting data, such as working interest, royalties and operating costs, must be maintained and updated when such information changes materially.  Petrolera Pampa’s estimated proved reserves as of December 31, 2015 are based on estimates generated through the integration of available and appropriate data, utilizing well-established technologies that have been demonstrated in the field to yield repeatable and consistent results.  Data used in these integrated assessments include information obtained directly from the subsurface via wellbore, such as well logs, reservoir core samples, fluid samples, static and dynamic pressure information, production test data, and surveillance and performance information.  The data utilized also include subsurface information obtained through indirect measurements, including high quality 2-D and 3-D seismic data, calibrated with available well control.  Where applicable, geological outcrop information was also


utilized.  The tools used to interpret and integrate all this data included both proprietary and commercial software for reservoir modeling, simulation and data analysis.  In some circumstances, where appropriate analog reservoir models are available, reservoir parameters from these analog models were used to increase the reliability of Petrolera Pampa’s reserves estimates.


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Reserves  Prior to 2015, Petrolera Pampadid not have any third-party reserves certification reports because such reports were not required under any reporting requirements to which Petrolera Pampa is subject. Accordingly, the information underlying such third-party reports and certain of the información 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,Petrolera Pampais unable to provide comparisons between information on the values of reserves in 2015 with values from years prior to 2015. The following table sets forth Petrolera Pampa’s oil and natural gas net proved reserves as of December 31, 2015, which are based on theIndependent Reserves Engineers’Reserves Report.  Summary of Oil and Gas(1) Proved Reserves as of December 31, 2015Based on Average Fiscal Year Prices Crude Oil and Condensates(2)

   Natural Gas(2)(in thousands of barrels)

   (in millions of cubic feet)Proved developed and undeveloped reservesProved developed reserves

   357.6

   81,894.5Proved undeveloped reserves

   25.0

   22,309.2Total proved reserves

   382.6

   104,203.6
 
 Note:   Numbers may not total due to rounding. (1)      Petrolera Pampa does not currently produce synthetic oil or synthetic gas, or other natural resources from which synthetic oil or synthetic gas can be produced. (2)      Natural Gas reserves include the fraction of liquefiable hydrocarbons recoverable in natural gas processing plants located at fields. Source:  Petrolera Pampa. Proved Undeveloped Reserves  As of December 31, 2015, our total proved undeveloped reserves of crude oil and condensatesamounted to 25 thousand of barrels and our total proved undeveloped reserves of natural gas amounted to22,309.2 millions of cubic feet. Prior to 2015, we were not required to prepare and disclose reserves datain accordance with the requirements of Subpart 1200 of Regulation S-K. As a result, our internal estimatesof reserves data prior to 2015 are not comparable with the information on the values of reserves in 2015.Due to the lack of comparability between our internal data relating to reserves as of January 1 andDecember 31, 2015, we are unable to determine whether there were material changes in our provedundeveloped reserves during that period. During 2015, we incurred approximately U.S.$172 million in capitalexpenditures to convert proved undeveloped reserves to proved developed reserves, of which approximatelyU.S.$165.8. million, U.S.$6.0 million and U.S.$0.3 million were made in the Rincón del Mangrullo Block,El Mangrullo block and Senillosa block, respectively.  Oil and gas production, production prices and production costs  The following table sets forth certain information onPetrolera Pampa’sproduction of oil and natural gas, segmented by investment agreement, for each of the years ended December 31, 2015, 2014 and 2013.


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Drilling activities  The following table shows the number of wells drilled by Petrolera Pampa or its consortiums in which we had a working interest, segmented by investment agreement, for each of the years ended December 31, 2015, 2014 and 2013.  All of Petrolera Pampa’s drilling activityoccurred in Argentine territory.  As of year ended December 31,2015

   

   2014

   

   2013YPF (*)

   Petrobras I

   Petrobras II

   Ysur

   Senillosa

   Total Petrolera

   

   YPF

   Petrobras I

   Petrobras II

   Ysur

   Senillosa

   Total Petrolera

   

   YPF

   Petrobras I

   Petrobras II

   Ysur

   Senillosa

   Total PetroleraExploratory WellsOil Productive

   

   

   

   

   

   0

   

   

   

   

   

   

   0

   

   

   

   

   

   

   0Gas Productive

   

   

   

   

   

   0

   

   

   

   

   

   

   0

   

   

   

   

   

   1

   1Subtotal Productive

   0

   0

   0

   0

   0

   0

   

   0

   0

   0

   0

   0

   0

   

   0

   0

   0

   0

   1

   1Dry

   

   

   

   

   

   0

   

   

   

   

   

   

   0

   

   

   

   

   

   2

   2Total Exploratory Wells

   0

   0

   0

   0

   0

   0

   

   0

   0

   0

   0

   0

   0

   

   0

   0

   0

   0

   3

   3Development WellsOil Productive

   

   

   

   

   

   0

   

   

   

   

   

   

   0

   

   

   

   

   

   

   0Gas Productive

   64

   

   1

   

   

   65

   

   14

   

   2

   

   

   16

   

   

   1

   2

   3

   

   6Subtotal Productive

   64

   0

   1

   0

   0

   65

   

   14

   0

   2

   0

   0

   16

   

   0

   1

   2

   3

   0

   6Dry

   1

   

   1

   

   

   2

   

   

   

   

   

   

   0

   

   

   

   

   

   

   0Total Development Wells

   65

   0

   2

   0

   0

   67

   

   14

   0

   2

   0

   0

   16

   

   0

   1

   2

   3

   0

   6


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(*) Three additional wells have been drilled during 2015 and are under analysis.   Developed and undeveloped acreage  The following table sets forth Petrolera Pampa’s total gross and net developed and undeveloped acreage in Argentina as of December 31, 2015.  Acreage (1)ArgentinaCrude Oil and Condensates

   Natural GasTotal developed acreageGross

   0

   28,203Net

   0

   13,312Total undeveloped acreageGross

   0

   7,413Net

   0

   3,655Total developed and undeveloped acreageGross

   0

   35,616Net

   0

   16,966(1) Defined as acreage assignable to productive wells. Net acreage based on our working interest.
  Productive wells  The following table sets forth Petrolera Pampa’s total gross productive wells, segmented by investment agreement, as of December 31, 2015.  Productive wells consist of producing wells and wells capable of production, including natural gas wells awaiting pipeline connections to commence deliveries and oil wells awaiting connection to production facilities.  Gross wells are the total number of producing wells in which Petrolera Pampa has an interest.  Productive WellsYPF

   Petrobras I

   Petrobras II

   Ysur

   Senillosa

   Total PetroleraOil Wells

   0

   0

   0

   0

   0

   0Gas Wells

   78

   5

   5

   22

   2

   112
  Present activities  The following table shows the number of wells, segmented by investment agreement, that are in the process of being drilled or are in active completion stages as of December 31, 2015.  All of Petrolera Pampa present activities are carried out in Argentine territory.  Wells in process of being drilled or in active completionYPF

   Petrobras I

   Petrobras II

   Ysur

   Senillosa

   Total PetroleraOil Wells

   0

   0

   0

   0

   0

   0Gas Wells

   16

   0

   0

   0

   0

   16


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During 2015, the first well in the Lajas formation was drilled but has not yet been completed.  As of the date of this annual report, preliminary results cannot assure whether this well is productive or dry.  Delivery commitments  Certain of Petrolera Pampa’s contracts specify the delivery of determinable quantities of natural gas in the near future.  As of December 31, 2015, Petrolera Pampa is contractually committed to deliver approximately 1,700,000 m3 per day in the future (80% expiring in 2016). According to Petrolera Pampa’s estimates, as of December 31, 2015, our contractual delivery commitments for the next three years could be met with Petrolera Pampa’s own production and, if necessary, with purchases from third parties. Due to market conditions in Argentina, most natural gas producers enter into contracts for the production and sale of natural gas within one year of expected production.  Almost all of the contracts under which Petrolera Pampa has natural gas delivery commitments expire during 2016 (with only two contracts for a total amount of 350,000 m3 per day expiring in 2017).  We expect to renew our existing contracts and enter into new contracts with similar terms in the future. With respect to crude oil, Petrolera Pampa sells substantially all of its production to small refineries or to its joint venture partners.  As of December 31, 2015, Petrolera Pampa is not contractually committed to deliver material quantities of crude oil to third parties in the future.   Other Projects As of the date of this annual report, Petrolera Pampa is negotiating new agreements for the exploitation and exploration of hydrocarbons in Argentina. TGS The Company owns 100% of the shares of PEPCA S.A. (“PEPCA”), which in turn owns 10% in CIESA, which in turn owns 51% of TGS.  Also, the Company holds, through PISA,the character of “Beneficiario” and “Fideicomisario” under the MSA Trust, owner of 40% of the capital stock of CIESA (See “CIESA Transaction” below).  Therefore,given that the stake in such company constitutes an interest in an associate, it is measured under the equity method of accounting for the 10% of CIESA and under the fair market value method for the 40% of the MSA Trust, in the Consolidated Financial Statements.TGS is the largest gas transportation company in Argentina, and it operates the most extensive gas pipeline system in Latin America.  In addition, it is leader in the production and sale of natural gas liquids (NGLs) for the domestic and export markets.  It carries out this business from the General Cerri Complex, located in Bahía Blanca, Province of Buenos Aires.  Moreover, TGS provides natural gas integral solutions, and since 1998 it has entered the telecommunications business through its subsidiary company Telcosur S.A. Since 2011, the Company is entitled to the following rights, among others: -Appointment of one director in CIESA and TGS; -Appointment of the Vice Chairman in CIESA and TGS; -First refusal right in CIESA; and -Approval of CIESA’s and TGS’ annual budget. The following table summarizes TGS’ main technical and financial indicators:


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2014

   2015Technical InformationGas TransportationAverage firm capacity purchases (in million m3 per day)

   80.4

   80.6Average deliveries (in million m3 per day)

   65.4

   66.0Production and selling of liquidsTotal liquid production (in thousand tons)

   969.9

   924.2Gas processing capacity (in million m3 per day)

   46.0

   46.0Storage capacity (in tons)

   54,840

   54,840Financial Information*Revenues

   4,304.0

   4,226.6Fiscal year’s results

   105.0

   (172.1)Net cash flow provided by operating activities

   1,019.0

   489.3Net cash flow used in investment activities

   (194.4)

   (250.5)Net cash flow (used) generated in financing activities

   (982.4)

   (294.6)Current Assets

   1,959.0

   2,230.2Non-Current Assets

   4,215.5

   4,416.4Total Assets

   6,174.4

   6,646.6Current Liabilities

   1,251.8

   1,320.6Non-current Liabilities

   3,055.1

   3,630.6Total Liabilities

   4,306.9

   4,951.1Shareholders’ Equity

   1,867.5

   1,695.4
 * Consolidated Financial Statements, figures in million pesos. ** Amounts show continuous operations only.   CIESA Transaction  On January 27, 2011, we acquired from AEI and through our subsidiary PISA, all of the issued and outstanding capital stock of Inversiones Argentina I, a company incorporated in the Cayman Islands to which AEI had previously assigned all of its right, title and interest to U.S.$ 199.6 million nominal value of the floating rate notes due April 22, 2002, issued by CIESA on April 22, 1997 (the “CIESA Bonds”), other liabilities of CIESA arising from two derivatives transactions (together with the CIESA Bonds, the “CIESA Liabilities”) and the rights over certain lawsuits related to the CIESA Bonds. The CIESA Bonds have been in default since a missed principal repayment due on April 22, 2002. Pampa acquired the capital stock of Inversiones Argentina I for U.S.$ 136 million, while the assets of such company, including the CIESA Bonds and accrued and unpaid interest, had a total value of approximately U.S.$ 322 million. CIESA is the controlling company of TGS. TGS is a leading gas transportation company in Argentina. TGS is also one of the leading natural gas liquid producers and traders, and an important provider of midstream services, including business structuring, turnkey construction and operation and maintenance of facilities used for gas storage, conditioning and transportation. On April 8, 2011, we acquired, directly and indirectly, 100% of the capital stock of Enron Pipeline Company Argentina S.A. (now known as PEPCA), which


owns 10% of the capital stock of CIESA, which in turn owned 55.3% of the share capital of TGS, for a total price of U.S.$ 29.0 million.


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In connection with the acquisition of the CIESA Bonds and the other assets related to CIESA described above, on April 28, 2011, the Company and its subsidiaries Inversiones Argentina I, Pampa Inversiones  and PEPCA entered into an agreement (the “Acta Acuerdo”) with Petrobras Energía , Petrobras Hispano S.A. (“Petrobras Hispano”), and CIESA, pursuant to which the parties thereto agreed to (i) continue negotiating to reach an agreement to re-implement the restructuring of the CIESA Liabilities, (ii) cause CIESA to vote in favor of a dividend payment by TGS in an amount of approximately U.S.$ 239 million (the “TGS Dividend”), which was declared by the shareholders’ meeting of TGS on April 29, 2011 and (iii) set up a trust (the “MSA Trust”) to hold CIESA’s pro rata portion of the TGS Dividend which, to the extent the restructuring of the CIESA Liabilities is completed, will be distributed as follows: (x) an amount equal to 4.3% of the TGS Dividend will be distributed to the Company (or its designee) and (y) the remainder, net of CIESA operating expenses for fiscal year 2011, will be distributed to the shareholders of CIESA following the restructuring of the CIESA Liabilities pro rata to their respective holding in CIESA. To the extent the restructuring of the CIESA Liabilities is not achieved as agreed by the parties to the Acta Acuerdo, the pro rata portion of the TGS Dividend held in trust shall be distributed to CIESA. On May 10, 2011, we entered into a Memorandum of Understanding (the “MOU”) with Inversiones Argentina I, Pampa Inversiones S.A., PEPCA, Petrobras Energía, Petrobras Hispano Argentina S.A. and CIESA, in which the parties to the MOU agreed: (i) to suspend (“standstill”) until May 10, 2012, the action captioned “Compañía de Inversiones de Energía S.A. v. AEI, AEI v. Compañía de Inversiones de Energía S.A., Petrobras Energía, Petrobras Hispano Argentina S.A., Héctor Daniel Casal, Claudio Fontes Nunes and Rigoberto Mejía Aravena” (the “CIESA Action”), pending before the Supreme Court of the State of New York (Index No. 600245/09E), and to make best efforts to re-implement (x) the financial restructuring set forth in the Restructuring Agreement executed on September 1, 2005 among CIESA, Petrobras Energía, Petrobras Hispano Argentina S.A., PEPCA, ABN AMRO Bank N.V. Argentine branch (acting in its capacity as trustee) and the financial creditors of CIESA, as amended from time to time (the “Restructuring Agreement”), regarding the CIESA Bonds and (y) two derivatives transactions originally executed between CIESA and J. Aron & Company on August 3, 2000, and between CIESA and Morgan Guaranty Trust Company of New York on August 4, 2000, respectively. Following the execution of the MOU we have become a party to the Restructuring Agreement. The foregoing is subject to obtaining the necessary governmental approvals to (i) implement the Restructuring Agreement; and (ii) timely withdraw all the claims and actions relating to the CIESA Action. As the Argentine antitrust approval required to implement the Restructuring Agreement had not been legally issued and the parties did not agree to extend either the MOU that expired on May 11, 2012 or the CIESA Action, on July 13, 2012, the parties to the Restructuring Agreement, including the Company, entered into a Fifth Amendment to the Restructuring Agreement pursuant to which (i) in exchange for U.S.$ 46,033,917 principal amount of debt owed to Pampa Inversiones, CIESA irrevocably designated and appointed Pampa Inversiones as sole and exclusive beneficiary of the two hundred fifty five million, five hundred twenty seven thousand, four hundred seventy seven (255,527,477) CIESA shares and, accordingly, Pampa Inversiones became the sole “Beneficiario” and “Fideicomisario” under the MSA Trust; and (ii) CIESA assigned to Pampa Inversiones any rights it might otherwise retain for having been a “Beneficiario” and “Fideicomisario” under the MSA Trust to instruct the MSA trustee and to receive any proceeds of theBienes Fideicomitidos. In the Company’s opinion, the abovementioned transaction was tacitly approved by the Argentine Antitrust Commision. The grounds for deeming the transaction approved are that (i) as of December 2011 there was a positive ruling from said commission recommending the Secretary of Interior Commerce to approve the Company’s purchase of 40% of the capital stock and votes in CIESA, and (ii) since such ruling, the commission has not issued any resolution advising on the contrary. Accordingly, the Company believes that the terms and conditions of the Restructuring Agreement have been met and therefore it believes that it would be in a legal and factual position to assume the right to co-control CIESA, and indirectly TGS. As of the date of this annual report, the board of directors of the Company is evaluating the legal and factual implications and other courses of action without having yet made a decision. Additionally, on July 13, 2012, Petrobras, Petrobras Hispano Argentina S.A., the Company, Pampa Inversiones and Inversiones Argentina I entered into a Settlement Agreement (the “Settlement Agreement”) with the


intention to terminate and extinguish to the fullest extent permitted by law the CIESA Action and to mutually release each other from all claims and actions in such CIESA Action. On October 25, 2012, the conditions to which the Settlement Agreement was subject were satisfied, thus terminating and extinguishing the CIESA Action.


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Pursuant to the Settlement Agreement and as a condition thereto, the above mentioned parties totally cancelled all of CIESA’s debt due and outstanding since the year 2002. As compensation, PISA received from CIESA: (i) ownership of 34,133,200 ordinary Class B shares issued by TGS, representing 4.3% of the capital stock and voting rights in TGS; (ii) a payment of U.S.$ 86,997,232; and (iii) the appointment of PISA as beneficiary and trustee under the Trust Agreement dated August 29, 2005, pursuant to which The Royal Bank of Scotland, Argentine branch, holds in trust 40% of CIESA’s shares (the “Shares held in Trust”). Consequently, once the pending governmental approval has been obtained, the Shares held in Trust will be transferred to Pampa pursuant to the terms of the Restructuring Agreement executed by CIESA and its financial creditors, as amended.  Pursuant to a Call Option Agreement (the “Call Option Agreement”) dated March 11, 2001,entered into by and among the Company, Inversiones Argentina II and GEB Corp. (parent company of Inversiones Argentina II), on such date, the Company purchased an option for U.S.$ 1.0 million, exercisable at any time during a period of 18 months thereafter, to acquire either (i) the rights over the lawsuit initiated by Ponderosa Assets L.P. and Enron Creditors Recovery Corp. (the “Arbitration”) against the Republic of Argentina before the International Centre for Settlement of Investment Disputes (the “ICSID”) of the World Bank (the “ICSID Claim”) for freezing and pesifing U.S. dollar-based gas transportation tariffs in violation of certain provisions of the bilateral investment treaty between the United States and Argentina (see “Item 3. -Risk Factors – Our Generation Business”) or, (ii) at the Company’s option, all of the issued and outstanding capital stock of Inversiones Argentina II.  On October 7, 2011 the Company exercised the option and, therefore, in consideration of the amount of U.S.$ 25 million acquired the rights over the ICSID Claim (and therefore not the capital stock of Inversiones Argentina II) to control, suspend and waive the Arbitration proceedings against the Republic of Argentina pursuant to the Call Option Agreement. On July 31, 2012, the ICSID Arbitration Court ordered, in accordance with the instructions timely given by the Company, the suspension of the arbitration proceeding brought by the Plaintiffs against the Republic of Argentina originally involving an amount in dispute which would currently amount to approximately U.S.$ 167 million. Such suspension was requested pursuant to the commitment undertaken with the Argentine Antitrust Commission and the ENERGAS by CIESA, PEPCA, Petrobras and the Company on August 29, 2011, in the filings submitted before both entities seeking the approval of CIESA’s Restructuring Agreement. In this respect, as of the date of this annual report, the corresponding governmental approvals have not yet been granted. In connection with the above mentioned claims, on November 20, 2012, Ponderosa Assets Holding I LLC and Ponderosa Assets Holding II LLC (two new subsidiaries of Pampa Inversiones specially created for this transaction) entered into an assignment agreement with Enron Creditors Recovery Corp., Citicorp North America, Inc., Atlantic Commercial Finance, Inc., Enron Global Power & Pipelines L.L.C., and Citibank N.A., pursuant to which (i) Enron Creditors Recovery Corp. transferred all of its right, title and interest in and to the general partnership interest in Ponderosa Assets L.P. to Ponderosa Assets Holding I LLC, and (ii) each of Citicorp North America, Inc., Atlantic Commercial Finance, Inc., Enron Global Power & Pipelines L.L.C. and any other relevant affiliate of Enron Creditors Recovery Corp. transferred all of its right, title and interest in and to the limited partnership interests in Ponderosa Assets L.P. to Ponderosa Assets Holding II LLC; therefore, Ponderosa Assets Holding I LLC and Ponderosa Assets Holding II LLC became the owners of Ponderosa Assets L.P., which is the formal plaintiff under the ICSID Claim. On October 7, 2015, pursuant to the occurrence of certain events relating to an increase in TGS’s tariff 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 to cancel the amounts owed under the loan. For further information regarding the loan granted by TGS to the Company, please see “Item 5 – Operating and Financial Review and Prospects - Debt.” Description of Business Segments Regulated Segment: Gas Transportation


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In 2015, revenues from the gas transportation increased by Ps.269.9 million to Ps.1,014.0 million, from Ps.744.1 million in 2014. This rise was a result of a 44.3% increase in the natural gas transportation service and a 73.2% increase in the Single Access Chart (“CAU”) passed by Resolution No. 3,347/2015 under the transitory agreement set out in Executive Order No. 1,918/2009. Such increases, which had a minimum impact on end users, were insufficient to offset sustained operating cost increases following the passing and enactment of Public Emergency and Exchange Rate Regime Reform Act No. 25,561 in January 2002, the operation of which was later extended on several occasions. In September 2015, after the occurrence of the condition provided in the loan agreement granted by TGS to the Company which triggered its mandatory prepayment, the Company assigned to, and TGS acquired, all rights in the Arbitration Proceeding, including the right to suspend and waive its rights thereunder. The exercise of the Arbitration Proceeding’s rights will allow TGS to continue with the tariff renegotiation process and to fulfill the conditions necessary for the execution and implementation of the Comprehensive Agreement. As a result, in October 2015, TGS signed the new text of the Comprehensive Agreement, thus amending the agreement entered into in October 2011 and updating it in compliance with ENARGAS Resolutions No. 2,852/14 and 3,347/15. However, the constant increase in operating costs necessary to provide a reliable transportation system and the failure to update tariffs resulted in the substantial deterioration of operating results in this segment. TGS intends to continue taking necessary steps to obtain a proper and fair tariff update so that revenues become consistent with cost increases, ensuring the provisions of the service. In 2015, the daily average quantity of natural gas introduced into the gas pipeline system operated by TGS was higher than in 2014. During the winter of 2015, the TGS gas pipeline system was fairly responsive to meeting demand, but the regulatory authority continued restricting the supply of natural gas to the industrial market in order to reallocate gas to so-called priority users, mainly residential, commercial, and compressed natural gas (“CNG”) users. Imposed restrictions affected both direct carriers that maintain natural gas transportation service agreements with TGS and grid-connected industries within the country’s distribution zones and nearby gas field areas. However, these industrial restrictions were lower as a result of a decrease in residential consumption due to higher ambient temperatures compared to the previous year. Regarding gas pipeline system expansions, progress was made in the development of the natural gas transportation capacity expansion works commenced in 2006, which will allow for transportation of a total incremental volume of 10.7 million m3 a day, of which 8.7 million m3/d are enabled and supported by currently effective firm gas transportation contracts. For the provision of enabled transportation services, TGS receives a monthly CAU, which has remained unchanged since its creation in 2005. These expansion works —planned in successive commissioning stages— are developed and funded under the Gas Trust Program, with cash contributions by third-party investors, gas producers, and carriers awarded with the incremental transportation capacity bidding process, with a structure contemplating recovery through revenues from specific fiduciary fees, paid by all transportation company carriers and distribution company users who have entered into firm service agreements. During the development of expansion works, TGS undertakes the role of Project Technical Manager for the works to be executed on its gas pipeline system. Non-Regulated Segment: Production and Marketing of Gas Liquids Unlike the gas transportation business, the production and sale of gas liquids is not regulated by ENARGAS. In 2015, this segment’s revenues accounted for 69% of TGS total revenues, which have decreased by Ps.335.5 million this year, from Ps.3,243.3 million recorded in 2014 to Ps.2,907.8 million in 2015. Gas liquids production and selling activities are conducted at the Cerri Complex, located close to Bahía Blanca, which is supplied by all of TGS’ main gas pipelines. Ethane, propane, butane and natural gasoline are recovered at such industrial complex. TGS sells these liquids to both domestic and foreign markets. On the domestic market, propane and butane are sold to fractionation companies. On the foreign market, the sale of these products


and natural gasoline is made at current international market prices. Ethane is sold to Polisur at a price mutually agreed by the parties.


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In 2015, the production of liquids decreased by 45,744 tons, or 4.7%, mainly as a result of the lower number of tons of ethane purchased by Polisur. In 2015, sales increased by 26,172 tons, compared to 313,269 tons in 2014, to 339,441 tons. Faced with the decline in international reference prices for natural gas liquids, on December 31, 2014 the Ministry of Economy issued Resolution No. 1,077/2014, which amended the system applicable to withholding taxes on natural gasoline to reduce the impact of the decline in international reference prices for natural gas. For natural gas liquids, different withholding rates were based on the international reference price (defined as the reference Brent oil price minus U.S.$ 8 per barrel or “PI”). When the PI is lower than U.S.$ 71 per barrel, the withholding rate will be 1%, and when the PI is equal to or higher than this amount, the rate will be assessed based on the following formula: (PI – 70) / 70 x 100 (the actual rate being applicable on the PI exceeding U.S.$ 70/ton). Additionally, the Ministry of Economy issued Resolution No. 60/2015, which provides that: (i) if the liquefied petroleum gas (“LPG”) product’s international price informed on a daily basis by the SE falls below the reference price (U.S.$.464/ton for propane/U.S.$.478/ton for butane), the witholding rate will be 1%; and (ii) if such international price is higher than the reference price, the producer will only be authorized to receive the maximum amount set forth in Resolution No. 60/15 (U.S.$.460/ton for propane/U.S.$.473/ton for butane), and the balance will be paid as withholding taxes. In 2015, TGS continued participating in the program for the supply of butane for gas containers at subsidized prices. In 2015, such resolution was amended by Executive Order No. 470/2015 and regulated through SEE Resolution No. 49/2015 and No. 70/15. Through such regulations, the National Government created a program called “Houses with Carafes” (the “New Stabilization Program”) replacing the Prices Stabilization Agreement entered into in 2008 between producers and the SE (the “2008 Stabilization Agreement”). Although these regulations increased the price and the participation allocated to the supply of the product to the domestic market, such regulations oblige TGS to produce and market the LPG volumes required by the SEE at lower-than-market prices. As a result, production costs are not met and operating margins are negative. Throughout 2015, TGS filed claims aimed to safeguard its rights and ameliorate losses generated by the supply of LPG. Several positive modifications were introduced to the internal prices regime for the commercialization of LPG to customers not covered by the New Stabilization Program. On March 16, 2015, SE Resolution No. 36/2015 was passed, pursuant to which the prices for the sale of LPG in the domestic market were made equivalent to export prices effective as of April 1, 2015. There was an increase in the sales price of ethane to Polisur to reflect the natural gas cost increases. However, the volume of ethane sold during the summer periods lowered for commercial reasons beyond TGS’ control. On December 31, 2015, the agreement with Polisur (TGS’s only customer purchasing ethane) expired. As a result, TGS is currently negotiating the terms and conditions for the new agreement extending it to guarantee the profitability of the supply of this product within the current business context. Meanwhile, TGS will continue selling ethane to Polisur under the terms mutually agreed for each specific product delivery. The decrease in international reference prices, together with the current issues described above, have contributed to a decrease in the operating margins with which TGS operates in this segment. The situation could be improved by implementating several measures to increase the recovery of natural gas liquids at the Cerri Complex and renegotiating natural gas supply agreements aimed at guaranteeing the supply of gas at reasonable prices, which resulted in a 6% decrease in gas purchase prices in comparison to 2014.


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Sales of Gas Liquids by Destination Market In Thousands of Tons, 2010-2015  Source: TGS. Non-Regulated Segment: Other Services The Other Services segment is not regulated by ENARGAS. TGS provides so-called ‘midstream’ services, which mainly consist of treatment, impurity separation and gas compression. It may also include gas extraction and transportation at gas fields, construction services, inspection and maintenance of compression plants and gas pipelines, and steam generation services for the production of electricity. This business segment also includes revenues from telecommunication services provided through the subsidiary Telcosur S.A. (“Telcosur”). This segment represented 7% of TGS’ total income in 2015. During 2015, even though there was a decrease in revenues for compression and treatment services upon the expiration of certain contracts, the impact was wholly offset by the generation of new business associated with engineering, construction, and operation and maintenance services for natural gas facilities. TGS also continued providing management services for the execution of the extension works begun in 2006 under the Financial Trusts Program. Regarding telecommunication services provided by Telcosur, during 2015 its business consolidation strategy was reinforced through the renewal of transmission capacity agreements and the execution of new agreements with carrier and corporate customers.  Capital Expenditures For a discussion of our capital expenditures, see “Item 5.  Operating and Financial Review and Prospects—Capital Expenditures.” Property, Plant and Equipment We maintain our headquarters at Ortiz de Ocampo 3302, Building #4, City of Buenos Aires, Argentina (C1425DSR).  For lease of the office space, our payments averaged U.S. $83,451 per month in 2015 (approximately U.S. $25.6 per m2).  For building expenses, our monthly payments in 2015 averaged approximately Ps 140,631.  We moved to this brand-new single location in the Barrio Parque area of the City of Buenos Aires during the second half of 2009. The following table sets forth our total property, plant and equipment for the periods indicated:


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Insurance In our generation business, we carry full insurance for each of our generation assets, including business interruption and general liability insurance.  The total generation assets covered under these policies are valued at U.S. $2,296 million.  In our transmission business we are insured for damage to property including damages due to electrical malfunction, tornados, hurricanes and earthquakes for losses up to U.S.$2,042.4 million for Transener and U.S.$472.3 million for Transba.  As is standard in the electricity transmission sector, electricity towers and transmission lines are not covered by these policies, nor is the loss of our concession.  However, Transba has insured its towers and transmission lines for up to U.S. $1 million.  In our distribution business, our physical assets are insured for up to U.S. $1,299.5 million; however, we do not carry insurance coverage for losses caused by network or business interruption, including loss of our concession.  Asset Sales and Acquisitions  Spin-off Process – EMDERSA  In order to carry out the sale of certain of Empresa Distribuidora Eléctrica Regional S.A.’s (“EMDERSA”) former subsidiaries, Edenor, the controlling company of EMDERSA, was required to cause EMDERSA to complete a partial spin-off process (the “Spin-off Process”), which resulted in the creation of three new investment companies, (i) EDESAL Holding S.A. (“EDESALH”), holder of 99.99% of the capital stock and votes of Empresa Distribuidora San Luis S.A. (“EDESAL”), (ii) EDESA Holding S.A. (“EDESAH”), holder of 90% of the capital stock and votes of Empresa Distribuidora de Electricidad de Salta S.A. (“EDESA”), and (iii) EGSSAH, holder of 99.99% of EGGSA’s capital stock and votes. EMDERSA was to retain 99.99% of the capital stock and voting rights in EDELAR. On December 16, 2011, at EMDERSA’s Extraordinary General Shareholders’ Meeting, which was resumed on January 13, 2012 after a recess, the Spin-off Process was approved. The Spin-off Process has also been approved by the CNV and registered with the IGJ, together with the registration of the three new companies. On November 8, 2012, the new companies were authorized by the National Securities Commission to go public, and they obtained admission to listing on the BCBA.  EDELAR and EMDERSA Sale  On September 17, 2013, Edenor’s Board of Directors approved an irrevocable offer to Energía Riojana S.A. (ERSA) and the Government of the Province of La Rioja for the (i) sale of Edenor’s indirect stake in Emdersa, Edelar’s parent company, and (ii) assignment of certain account receivables that Edenor had against Emdersa and Edelar. On October 4, 2013, ERSA and the Government of the Province of La Rioja in its capacity as controlling shareholder of ERSA accepted the offer. The transaction closed on October 30, 2013. The price agreed upon was Ps. 75.2 million payable in 120 monthly and consecutive installments. In November 2015, we began to pay the installments in accordance with the agreed schedule.  AESEBA and EDEN Sale  On February 27, 2013, Edenor’s Board of Directors unanimously approved an offer sent by Servicios Eléctricos Norte BA S.L. (the “Buyer”) for (i) the acquisition of the shares representing 100% of the capital stock and voting rights of AESEBA, an electric utility company, which owns 90% of the outstanding capital stock of Empresa Distribuidora de Energía Norte S.A. (“EDEN”), an electricity distribution company holding the concession


area in the north region of the Province of Buenos Aires; and (ii) the assignment of certain credits that EASA (the controlling company of Edenor) had with EDEN. The price offered by the Buyer has been paid through the assignment to Edenor of certain rights under a trust established for purposes of the transaction to receive debt securities of Edenor, in an amount equivalent, as of the date of the acceptance of the offer, to U.S.$85 million face value, which are to be cancelled by Edenor as such bonds are released to it in accordance with the terms and conditions of the trust. As part of the transaction, and in order to guarantee the obtention of funds necessary to acquire the Edenor bonds to be received by such company, U.S.$8.5 million of Argentine sovereign debt bonds multiplied by a certain factor was to be deposited into the trust on or before April 30, 2013.  As collateral for the portion of the price to be paid at that later date, the Buyer granted a pledge over 30% of the shares of AESEBA. On April 5, 2013 the transaction was settled in accordance with the terms described above. At the closing of the transaction, Edenor received the rights as beneficiary under the Trust. With the proceeds of the liquidation of the bonds received the Trust will purchase Edenor Class 9 and Class 7 Corporate Notes due in 2022 and 2017, respectively. As of the date of this annual report, the Trust has purchased the totality of Edenor corporate Notes due in 2017 and 2022 indicated in the respective trust agreement for U.S.$.10 million and U.S.$.68 million of nominal value, respectively. On March 27, 2014, these Corporate Notes were cancelled. Finally, on April 5, 2014 the Trust was terminated and liquidated.


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THE ARGENTINE ELECTRICITY SECTOR History Electricity was first made available in Argentina in 1887 with the first public street lighting in Buenos Aires.  The Argentine Government’s involvement in the electricity sector began in 1946 with the creation of theDirección General de Centrales Eléctricas del Estado(General Directorate of Electric Power Plants of the State) to construct and operate electricity generation plants.  In 1947, the Argentine Government createdAgua y Energía Eléctrica S.A.(Water and Electricity, or “AyEE”) to develop a system of hydroelectric generation, transmission and distribution for Argentina. In 1961, the Argentine Government granted a concession toCompañía Italo Argentina de Electricidad(Italian‐Argentine Electricity Company, or “CIADE”) for the distribution of electricity in a part of the City of Buenos Aires.  In 1962, the Argentine Government granted a concession formerly held by theCompañía Argentina de Electricidad(Argentine Electricity Company, or “CADE”) toServicios Eléctricos del Gran Buenos Aires(Electricity Services of Greater Buenos Aires, or “SEGBA”) for the generation and distribution of electricity to parts of Buenos Aires.  In 1967, the Argentine Government granted a concession to Hidroeléctrica Norpatagónica S.A. (Hidronor) to build and operate a series of hydroelectric generation facilities.  In 1978, CIADE transferred all of its assets to the Argentine Government, following which CIADE’s business became government‐owned and operated. By 1990, virtually all of the electricity supply in Argentina was controlled by the public sector (97% of total generation).  The Argentine Government had assumed responsibility for the regulation of the industry at the national level and controlled all of the national electricity companies, AyEE, SEGBA and Hidronor.  The Argentine Government also represented Argentine interests in generation facilities developed or operated jointly with Uruguay, Paraguay and Brazil.  In addition, several of the Argentine provinces operated their own electricity companies.  Inefficient management and inadequate capital spending, which prevailed under national and provincial government control, were in large measure responsible for the deterioration of physical equipment, decline in quality of service and proliferation of financial losses that occurred during this period. In 1991, as part of the economic plan adopted by former President Carlos Menem, the Argentine Government undertook an extensive privatization program of all major state‐owned industries, including within the electricity generation, transmission and distribution sectors.  In 1992, the Argentine Congress adopted Law No. 24,065, the Electricity Regulation Framework (a supplement to Law No. 15,336, Federal Electricity Law, and its Administrative Order No. 1,398/92), which was the keystone for the reform and privatization of the sector.  The goal of the law was to modernize the electricity sector by promoting efficiency, competition, improved service and private investment.  It restructured and reorganized the sector, and provided for the privatization of virtually all business activities that had been carried out by Argentine state-owned enterprises.  The law established the basis for the ENRE and other institutional authorities in the sector, the administration of the wholesale electricity market, or WEM, pricing at the spot, tariff-setting in regulated areas and for evaluating assets to be privatized.  This law also


had a profound, albeit indirect, impact at the provincial level, as virtually all of the provinces followed the regulatory and institutional guidelines of this law.  Finally, this law, which continues to provide the framework for regulation of the electricity sector since the privatization of this sector, divided generation, transmission and distribution of electricity into separate businesses, each subject to segment-specific regulation.


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Under Law No. 24,065, distribution and transmission activities are considered public services and defined as natural monopolies.  These activities are completely regulated by the government and require a concession.  Although the concessions granted to distributors do not impose specific investment parameters, distributors are obligated to connect new customers and meet any increased demand.  The expansion of existing transmission facilities by the respective concessionaires is not restricted.  In contrast, generation, although regulated by the government, is not deemed a monopoly activity and is subject to free competition by new market entrants. Operation of hydroelectric power plants requires a concession from the government and a concession or permission for using the natural resources from the respective provincial government.  New generation projects do not require concessions but must be registered with the Secretariat of Energy. Many of the provincial governments, following the privatization path in the sector, have established their own politically and financially independent regulatory bodies at the provincial level.  Local distribution in the provinces (except the City of Buenos Aires and certain areas of the Province of Buenos Aires that were served by SEGBA and today are served by Edenor and EDESUR) is regulated by each province. Previously, the utilities themselves had played a major role in making sector policies and setting tariffs for the provinces. At the end of 2001 and beginning of 2002, Argentina experienced an unprecedented crisis that virtually paralyzed the country’s economy through most of 2002 and led to radical changes in government policies.  See “Item 5.  Operating and Financial Review and Prospects—Factors Affecting our Results of Operations—Argentine economic conditions and inflation.” The crisis and the government’s policies during this period severely affected the electricity sector.  Pursuant to the Public Emergency Law, the Argentine Government, among other measures: ·converted electricity prices and transmission and distribution 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 transmission and distribution tariffs, revoked all price adjustment provisions and inflation indexation mechanisms in public utility concessions (including electricity transmission and distribution concessions), and empowered the Executive Branch to conduct a renegotiation of these concessions, including the tariffs for electricity transmission and distribution services; and ·required that spot prices on the wholesale electricity market be calculated based on the price of natural gas (which is also regulated by the Argentine Government), regardless of the alternative fuels actually used in generation activities, even if gas is unavailable. These measures created a huge structural deficit in the operation of the wholesale electricity market and, combined with the devaluation of the Peso and high rates of inflation, had a severe effect on the electricity sector in Argentina, as electricity companies experienced a decline in revenues in real terms and a deterioration of their operating performance and financial condition.  Most electricity companies had also incurred large amounts of foreign currency indebtedness under the Convertibility regime.  Following the elimination of the Convertibility regime and the resulting devaluation of the Peso, the debt service burden of these companies increased sharply, leading many of these companies to suspend payments on their foreign currency debt in 2002.  This situation caused many Argentine electricity generators, transmission companies and distributors to defer further investments in their networks.  As a result, Argentine electricity market participants, particularly generators, are currently operating at near full capacity, which could lead to insufficient supply to meet a growing national energy demand.  In addition, the economic crisis and the resulting emergency measures had a material adverse effect on other energy sectors, including oil and gas companies, which has led to a significant reduction in natural gas supplies to generation companies that use this commodity in their generation activities. To address the electricity crisis, in December 2004 the Argentine Government adopted new rules to readapt or readjust the marketplace, but these rules were not to come into effect until the construction of two new 800 MW


combined cycle generators were completed.  These generators commenced operations at full capacity in the first half of 2010.  The costs of construction were primarily financed with net revenues of generators derived from energy sales in the spot market, with special charges to non-residential consumers per MWh of energy billed and with specific charges from CAMMESA applicable to large users that were deposited in the FONINVEMEM. See “Regulatory and Legal Framework—FONINVEMEM.”


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The construction of these new generators reflects a recent trend by the Argentine Government to take a more active role in promoting energy investments in Argentina.  An example of this is the creation of Energía Argentina S.A. (ENARSA) (Law 25,943) with the purpose of developing almost every activity in the energy sector, from the exploration and exploitation of hydrocarbons, the transport and distribution of natural gas, to the generation, transmission and distribution of energy.  In addition to these projects, in April 2006 the Argentine Congress enacted a law that authorized the Executive Branch to create a special fund to finance infrastructure improvements in the Argentine energy sector through the expansion of generation, distribution and transmission infrastructure relating to natural gas, propane and electricity.  The special fund would obtain funds throughcargos específicos(specific charges) passed on to customers as an itemization on their energy bills. In September 2006 the Argentine Government, in an effort to respond to the sustained increase in energy demand following Argentina’s economic recovery after the crisis, adopted new measures that seek to ensure that energy available in the market is used primarily to service residential users and industrial and commercial users whose energy demand is at or below 300 kW and do not have access to other viable energy alternatives.  In addition, these measures seek to create incentives for generation plants to meet increasing energy needs by allowing them to sell new energy generation into theEnergía Plus(Energy Plus) program.  The maximum price to be charged for each project that seeks to sell energy under the Energy Plus Program should be approved by the Federal Planning, Public Investment and Service Ministry. See “Regulatory and Legal Framework—Energía Plus.” Continuing with the trend to encourage the installation of new generation, the Secretariat of Energy by means of its SE Resolution No. 220/2007 and modifications thereto, allowed CAMMESA to execute WEM Supply Agreements with a generator agent of the WEM. The values to be paid by CAMMESA in consideration for the capacity and the energy supplied by the generator must be approved by the Secretariat of Energy. The generator shall guarantee certain availability of the generation units (established as a percentage), and if it fails to do so, penalties apply. In 2008, the Secretariat of Energy allowed CAMMESA to execute WEM Supply Agreements with generators the intention of which is to execute plans to repair and/or repower their generating equipment, and for the cost which would exceed 50% of the revenues that they expect to receive on the sales to the spot market. Since 2013, the Secretariat of Energy introduced material changes to the structure and operation of the WEM (see “Item 4. – The Argentine Electricity Sector - SE Resolution No. 95/2013, as amended – New price scheme and other modifications to the WEM”). 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 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. The ME&M, issued Resolution No. 7/2016 pursuant to which it instructed the ENRE to, among others, (i) adjust the VAD using the transitional tariff regime included in 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 RTI that has to be implemented before December 31, 2016. Also the Resolution No. 7/2016 derogated the PUREE and SE Resolution No. 32/2015. ENRE’s Resolutions No. 1/2016 and 2/2016 approved Edenor’s and Edesur’s new tariffs and intended to terminate the trust created for controlling the funds collected for the construction of distribution works.


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The Wholesale Electricity Market Transactions among different participants in the electricity industry take place through the wholesale electricity market, or WEM, which was organized concurrently with the privatization process as a competitive market in which generators, distributors and certain large users of electricity could buy and sell electricity at prices determined by supply and demand, and were allowed to enter into long-term electricity supply contracts.  The WEM consists of: ·a term market where quantities, prices and contractual conditions are agreed upon directly between sellers and buyers (after the enactment of SE Resolution No. 95/2013, this was limited to the Energy Plus market); ·a spot market where prices are established on an hourly basis as a function of economic production cost; and ·a stabilized pricing system of spot prices, which we refer to as the seasonal price, set on a semi-annual basis and designed to mitigate the volatility of spot prices for purchases of electricity by distributors.  The following chart shows the relationships among the various actors in the WEM:   CAMMESA The creation of the WEM made it necessary to create an entity in charge of the management of the WEM and the dispatch of electricity into the NIS.  The duties were entrusted to CAMMESA, a private company created for this purpose. CAMMESA is in charge of: ·the dispatch of electricity into the NIS, maximizing the NIS’s safety and the quality of electricity supplied and minimizing wholesale prices in the spot market; ·planning energy capacity needs and optimizing energy use in accordance with the rules set forth from time to time by the Secretariat of Energy; ·monitoring the operation of the term market and administering the technical dispatch of electricity under agreements entered into in that market; ·acting as agent of the various WEM agents and carrying out the duties entrusted to it in connection with the electricity industry, including billing and collecting payments for transactions between WEM


agents (upon enactment of SE Resolution No. 95/2013, this was limited to the contracts then in force and, thereafter, to those contracts executed under Energy Plus Program);


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·purchasing and/or selling electric power from abroad or to other countries by performing the relevant import/export transactions; ·purchasing and administrating of fuels for the WEM generators (according to section 8 of SE Resolution No.95/2013 and section 4 of SE Resolution No. 529/2014); and ·providing consulting and other related services. Five groups of entities each hold 20% of the capital stock of CAMMESA.  The five groups are the Argentine Government, the associations that represent the generation companies, transmission companies, distribution companies and large users. CAMMESA is managed by a board formed by representatives of its shareholders.  The board of CAMMESA is composed of ten regular and ten alternate directors.  Each of the associations that represent generation companies, transmission companies, distribution companies and large users are entitled to appoint two regular and two alternate directors of CAMMESA.  The other directors of CAMMESA are the Under Secretariat of Electric Energy, who is the board chairman in virtue of the delegation of the Minister of Federal Planning, Public Investment and Services, and an independent member, who acts as vice chairman.  The decisions adopted by the board of directors require the affirmative vote of the board chairman.  CAMMESA’s operating costs are financed through mandatory contributions by the WEM agents. Key Participants Generators Generators are companies with electricity generating plants that sell output either partially or wholly through the NIS.  Generators are subjected to the scheduling and dispatch rules set out in the regulations and managed by CAMMESA.  Privately owned generators may also enter into direct contracts with distributors or large users.  However this possibility was suspended by SE Resolution No. 95/2013.  As of December 31, 2015, Argentina had a nominal installed capacity as reported by CAMMESA of approximately 33,493 MW.  In 2015, thermal generation generated 86,482 GWh (64%), hidroelectrical energy generated 40,888 GWh (30%) , the nuclear energy generated 6,519 GWh (5%) and the fotovatic and eolic energy generated 608 GWh. In 2015, imports amounted to 1,655 GWh and exports to 53GWh. The following table sets forth the primary participants in the Argentine electricity generation sector as of December 31, 2015, including the total capacity of each:


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Source: CAMMESA  Transmitters Transmission companies hold a concession to transmit electric energy from the bulk supply point to electricity distributors.  The transmission activity in Argentina is subdivided into two systems: the High Voltage Transmission System (STEEAT), which operates at 500 kV and transports electricity between regions, and the regional distribution system (STEEDT) which operates at 132/220 kV and connects generators, distributors and large users within the same region.  Transener is the only company in charge of the STEEAT, and six regional companies operate within the STEEDT (Litsa, Transnoa, Transnea, Transpa, Transba and Distrocuyo).  In addition to these companies, there are also independent transmission companies that operate under a technical license provided by the STEEAT or STEEDT companies. Transmission and distribution services are carried out through concessions.  These concessions are re-distributed periodically based on a re-bidding process.  Transmission companies are responsible for the operation and maintenance of their networks, but not for the expansion of the system.  The transmission concessions operate under the technical, safety and reliability standards established by the ENRE.  Penalties are applied whenever a transmission concessionaire fails to meet these criteria, particularly those regarding outages and grid downtime.  Generators can only build lines to connect to the grid, or directly to customers.  Users pay for new transmission capacity undertaken by them or on their behalf.  A public hearing process for these projects is conducted by the


ENRE, which issues a “Certificate of Public Convenience and Necessity.”  Transmission or distribution networks connected to an integrated system must provide open access to third parties under a regulated toll system unless there is a capacity constraint.


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Distributors Distributors are companies holding a concession to distribute electricity to consumers.  Distributors are required to supply any and all demand of electricity in their exclusive areas of concession, at prices (tariffs) and conditions set in regulation.  Penalties for non-supply are included in the concessions agreements.  The three distribution companies divested from SEGBA (Edenor, Edesur and Edelap) represent more than 45% of the electricity market in Argentina.  Only a few distribution companies (i.e.,Empresa Provincial de Energía de Córdoba, Empresa de Energía de Santa Fé and Energía de Misiones) remain in the hands of the provincial governments and cooperatives.  Edelap has been transferred to the jurisdiction of the Province of Buenos Aires. TheOrganismo de Control de Energía Eléctria de la Provincia de Buenos Aires(“OCEBA”) monitors compliance by Buenos Aires Province distributors, including Eden, Edes and Edea as well as the municipal distributors with the provisions of their respective concession agreements.  We and Edesur are the largest distribution companies and, together with Edelap, originally comprised SEGBA, which was divided into three distribution companies at the time of its privatization in 1992. Concessions were issued for distribution and retail sale, with specific terms for the concessionaire stated in the contract.  The concession periods are divided into “management periods” that allow the concessionaire to give up the concession at certain intervals. Large users The wholesale electricity market classifies large users of energy into three categories: (1) GUMAs, (2) GUMEs and, (3) GUPAs. Each of these categories of users has different requirements with respect to purchases of their energy demand.  For example, GUMAs are required to purchase 50% of their demand through supply contracts and the remainder in the spot market, while GUMEs and GUPAs are required to purchase all of their demand through supply contracts. Regulatory and Legal Framework Role of the government During the 1990s, the Argentine Government restricted its participation in the electricity market to regulatory oversight and policy-making activities.  These activities were assigned to agencies that have a close working relationship with one another and occasionally even overlap in their responsibilities.  The Argentine Government has limited its holding in the commercial sector to the operation of the international hydropower projects and to the nuclear power plants.  Provincial authorities followed the Argentine Government by divesting of commercial interests and creating separate policy-making and regulatory entities for the provincial sector. However such policies have been left aside upon the economic crisis of 2001. Pursuant to the Public Emergency Law, the Argentine Government has intervened in the utilities sector, including in the activities of electricity transmission and distribution. In fact, the concessions that had been granted years before were subject to a renegotiation process that, in many cases, is still in progress. In connection with the generation sector, the Argentine Government adopted several measures that affected the commercialization of capacity and energy in the WEM (such as SE Resolution No. 95/2013 and its amendments).


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Entities and jurisdiction The new Argentine Government, elected on November 22, 2015, effected changes in its internal organization, pursuant to which, among other measures, it created the ME&M and replaced the Secretariat of Energy with the Secretariat of Electric Energy (“SEE”) and other secretariats.  The SEE is the principal national regulatory authority for the electricity sector.  The Federal Board of Electric Energy, composed of representatives from each of Argentina’s 24 provinces (including the City of Buenos Aires), advises the SEE and the ME&M on policies related to the coordination and harmonization of these policies.  The Secretariat of Energy is also in charge of overseeing the electricity sector and proposing any changes needed in the market. The ENRE is an autonomous supervisory body that operates under the ME&M.  The ENRE supervises the compliance of regulated transmission and distribution entities with established laws, regulations and operating criteria, including quality of service and environmental standards and guidelines against monopolistic behavior in the market.  The ENRE also undertakes or resolves disputes among the different players of the sector and protects consumer interests.  According to Law No. 24,065, the board of the ENRE is composed of five members, selected through a competitive process, after which the Executive Branch and the Federal Board of Electric Energy nominate them for the approval by the Congress.  At least a portion of the ENRE’s budgetary requirements is funded through fees from sector enterprises, and its professional staff is competitively hired. In addition, the OCEBA is the regulator for Eden. The OCEBA exercises control and supervision over, and regulatory and judicial activities related to electric power by Buenos Aires Province distributors, including Eden, Edes and Edea as well as the municipal distributors (also known as “cooperatives”).  It was created as a result of the privatization process and the concession of public services and activities of general interest. Limits and restrictions To preserve competition in the electricity market, participants in the electricity sector are subject to vertical and horizontal restrictions, depending on the market segment in which they operate. Vertical restrictions The vertical restrictions apply to companies that intend to participate simultaneously in different sub-sectors of the electricity market.  These vertical restrictions were imposed by Law No. 24,065, and apply differently depending on each sub-sector as follows: Generators ·Under Section 31 of Law No. 24,065, neither a generation company, nor any of its controlled companies or its controlling company, can be an owner or a majority shareholder of a transmitter company or the controlling entity of a transmitter company; and ·Under Section 9 of Decree No. 1,398/1992, since a distribution company cannot own generation units, a holder of generation units cannot own distributions concessions.  However, the shareholders of the electricity generator may own an entity that holds distribution units, either by themselves or through any other entity created with the purpose of owning or controlling distribution units. Transmitters ·Under Section 31 of Law No. 24,065, neither a transmission company nor any of its controlled companies or its controlling entity, can be owner or majority shareholder or the controlling company of a generation company; ·Under Section 31 of Law No. 24,065, neither a transmission company nor any of its controlled companies nor its controlling company, can be owner or majority shareholder or the controlling company of a distribution company; and


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·Under Section 30 of Law No. 24,065, transmission companies cannot buy or sell electric energy. Distributors ·Under provision 31 of Law No. 24,065, neither a distribution company, nor any of its controlled companies or its controlling company, can be owner or majority shareholder or the controlling company of a transmission company; and ·Under Section 9 of Decree No. 1,398/1992, a distribution company cannot own generation units.  However, the shareholders of the electricity distributor may own generation units, either by themselves or through any other entity created with the purpose of owning or controlling generation units. Definition of control The term “control” referred to in Section 31 of Law No. 24,065 (which establishes vertical restrictions), is not defined in the Electricity Regulation Framework.  Section 33 of the Argentine Companies Law states that “companies are considered as controlled by others when the holding company, either directly or through another company: (1) holds an interest, under any circumstance, that grants the necessary votes to control the corporate will in board meetings or ordinary shareholders’ meetings; or (2) exercises a dominant influence as a consequence of holding shares, quotas or equity interest or due to special linkage between the companies.”  We cannot assure you, however, that the electricity regulators will apply this standard of control in implementing the restrictions described above. The regulatory framework outlined above prohibits the concurrent ownership or control of (1) generation and transmission companies, and (2) distribution and transmission companies.  Although we are a fully integrated electricity company engaged in the generation, transmission and distribution of electricity in Argentina, we are in compliance with these legal restrictions, as we do not hold a controlling interest, either directly or indirectly, in Transener. Horizontal restrictions In addition to the vertical restrictions described above, distribution and transmission companies are subject to horizontal restrictions, as described below. Transmitters ·According to Section 32 of Law No. 24,065, two or more transmission companies can merge or be part of a same economic group only if they obtain an express approval from the ENRE.  Such approval is also necessary when a transmission company intends to acquire shares of another electricity transmission company; ·Pursuant to the concession agreements that govern the services rendered by private companies operating transmission lines above 132Kw and below 140Kw, the service is rendered by the concessionaire on an exclusive basis over certain areas indicated in the concession agreement; and ·Pursuant to the concession agreements that govern the services rendered by the private company operating the high-tension transmission services equal to or higher than 220Kw, the company must render the service on an exclusive basis and is entitled to render the service throughout the entire country, without territorial limitations. Distributors ·Two or more distribution companies can merge or be part of a same economic group only if they obtain an express approval from the ENRE.  Such approval is necessary when a distribution company intends to acquire shares of another electricity transmission or distribution company; and


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·Pursuant to the concession agreements that govern the services rendered by private companies operating distribution networks, the service is rendered by the concessionaire on an exclusive basis over certain areas indicated in the concession agreement. Electricity Prices Spot prices The emergency regulations enacted after the Argentine crisis in 2001 had a significant impact on energy prices.  Among the measures implemented pursuant to the emergency regulations were the pesification of prices in the wholesale electricity market, known as the spot market, and the requirement that all spot prices be calculated based on the price of natural gas, even in circumstances where alternative fuel such as diesel is purchased to meet demand due to the lack of supply of natural gas. Prior to the crisis, energy prices in the spot market were 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 spot price reflected supply and demand in the wholesale electricity market at any given time, which CAMMESA determined using different supply and demand scenarios that dispatched the optimum amount of available supply, taking into account the restrictions of the transmission grid, in such a way as to meet demand requirements while seeking to minimize the production cost and the cost associated with reducing risk of system failure.  The spot price set by CAMMESA compensated generators according to the cost of the next unit to be dispatched as measured at the Ezeiza 500 kV substation, which is the system’s load center and is in close proximity to the City of Buenos Aires.  Dispatch order was determined by plant efficiency and the marginal cost of providing energy.  In determining the spot price, CAMMESA also would consider the different costs incurred by generators outside the province of Buenos Aires. In addition to energy payments for actual output at the prevailing spot market prices, generators would receive compensation for capacity placed at the disposal of the spot market, including stand-by capacity, additional stand-by capacity (for system capacity shortages) and ancillary services (such as frequency regulation and voltage control).  Capacity payments were originally established and set in U.S. Dollars to allow generators to cover their foreign‐denominated costs that were not covered by the spot price.  However, in 2002, the Argentine Government set capacity payments in reference to the Peso thereby limiting the purpose for which capacity payments were established. In 2003, the Secretariat of Energy adopted a resolution that set the spot price in the WEM based on the cost of natural gas as declared by gas-fired power stations, even if gas was not available to these power stations. This pricing policy, which continues to govern the establishment of prices in the spot market, does not depend on the marginal cost of the last power station dispatched.  Rather, the spot price as recognized is equal to the marginal cost of the last gas-fired power station dispatched, regardless of whether that station has gas availability.  As a result, if the power station dispatched last is fuel-oil-fed, the remaining power stations dispatched are not granted recognition of that fuel-oil-fed power station’s cut-off price.  Rather, the remaining power stations are granted recognition for the cost that would have resulted if natural gas had been available and utilized. In 2008, as was the case in 2007, despite an initiative, known as theProyecto de Inyección Adicional Permanente(The Permanent Additional Injection Project, IAP Project), of theSub Secretaría de Combustibles(Under-Secretariat of Fuels) to increase the volume of gas channeled into electricity generation, the supply of gas was insufficient to meet electricity generation needs. Consequently, in 2008, the use of liquid fuels in the generation of electricity increased.  The Argentine electricity sector consumed more gas oil and fuel oil in 2008 (718,000 tons and 2.3 million tons, respectively) than in any prior year.  The high demand for gas, coupled with record high nominal oil prices in the international market, resulted in an increase in the costs of producing energy in 2008. The regulatory framework governing payment for generation capacity continued to be the same that governed in 2002, with generators receiving compensation for available capacity at Ps. 12 per MW until December 2010.  On November 25, 2010, the Secretariat of Energy entered into an agreement with all private generators in order to increase the installed capacity during 2011 (see “Price Scheme – 2008-2011 Agreement” below).  The agreement provides that the government will recognize from Ps. 35 per MW-hrp (hrp stands for hours in which


capacity is being paid) to Ps. 42 per MW-hrp depending on the technology of the unit and its capacity, to generators that present projects to increase capacity and can provide capacity with adequate availability, as defined in the agreement.  Furthermore, the remuneration to cover operation and maintenance costs will also increase from Ps. 7.96 per MWh to Ps. 11.96 per MWh for natural gas generation and from Ps. 12.96 per MWh to Ps. 20.96 per MWh for alternative fuel generation (liquid fuels).  In addition, all hydroelectric units with an installed capacity less than 250 MW will receive their energy spot markets sales according to the priority provided in subsection e), section 4 of SE Resolution No. 406/2003.


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In 2008, the Secretariat of Energy changed the amount paid to generators in exchange for energy generated through fuel oil and financed by the generators.  The price paid by generators for the purchase of fuel oil was capped at U.S. $60.50/barrel plus an additional 10% of the total purchase cost for financial and administrative charges.  In recognition of this price increase, the Secretariat of Energy instructed CAMMESA to recognize, as of April 24, 2008, the maximum capped price plus the 10% administrative cost, plus the cost of shipping the fuel oil, for the purchase of fuel oil of national origin by electricity generators.  In October 2008, in reaction to significant variations in the price of crude oil and its derivatives in the international fuel market, the Secretariat of Energy again revised the calculation for the price of fuel oil.  Specifically, the Secretariat of Energy instructed CAMMESA to recognize, as of November 1, 2008, a price based on a weekly average of 10 listed prices, less a differential of U.S. $2.50/barrel, plus the 10% for administrative and financial expenses, plus the shipping cost.  In the event that listed prices in the international market increase, the maximum benchmark price to be recognized will be U.S. $60.50/barrel, plus the 10% for administrative costs, plus the cost of shipping. In April 2011,the Secretariat of Energy instructed CAMMESA to recognize to generatorsa price of U.S.$ 62/bbl  for fuel oil produced with crude oil owned by refineries. In the case that fuel oil was produced with crude oil purchased by refineries, the price for that fuel oil should be lesser of theprice based on a weekly average of 10 listed prices, less a differential of U.S. $2.50/barrel,and the price of Escalante crude oil for the domestic month plus U.S.$16,50/bbl.The maximum benchmark price to be recognized will be U.S. $60.50/barrel, plus 10% ofU.S.$/bblfor administrative costs, plus the cost of shipping. This price recognition mechanism was in force until December 2011, from which point onward it returned to the mechanism established in 2008. In April 2012, the Secretariat of Energy instructed CAMMESA to centralize purchases of fuel oil of national origin to main suppliers in order to optimize fuel oil supply to thermal generators. The established term for this instruction covered the period from April 2012 through May 2013. The Secretariat of Energy entitled CAMMESA to pay to the main suppliers for purchases of fuel oil of national origin a higher capped price (based on the Escalante crude oil domestic price) than the in force price authorized to be recognized to WEM thermal generators. In response to this instruction, CAMMESA was notified of a reservation of the right to acquire fuel oil directly from suppliers by Piedra Buena, subject to applicable technical and commercial conditions. On March 26, 2013, the Secretariat of Energy issued SE Resolution No. 95/2013, appointing CAMMESA to centralize the acquisition and distribution of the fuels needed for electricity generation and establishing a new remuneration scheme for generators, which was later amended by SE Resolution No. 529/2014, 482/2015 and 22/2016 (see“Item 4. – The Argentine Electricity Sector - SE Resolution No. 95/2013, as amended- New Price Scheme and other modifications to the WEM” below). Seasonal prices The emergency regulations also made significant changes to the seasonal prices charged to distributors in the wholesale electricity market, including the implementation of a cap (which varies depending on the category of customer) on the cost of electricity charged by CAMMESA to distributors at a price significantly below the spot price charged by generators.  These prices did not change from January 2005 until November 2008.  See “Item 5. Operating and Financial Review and Prospects—Electricity Prices and Tariffs.”


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Prior to implementation of the emergency regulations, seasonal prices were regulated by CAMMESA as follows: ·prices charged by CAMMESA to distributors changed only twice per year (in summer and winter), with interim quarterly revisions in case of significant changes in the spot energy price, despite prices charged by generators in the wholesale electricity market fluctuating constantly; ·prices were determined by CAMMESA based on the average cost of providing one MWh of additional energy (its marginal cost), as well as the costs associated with the failure of the system and several other factors; and ·CAMMESA would use seasonal database and optimization models in determining the seasonal prices and would consider both anticipated energy supplies and demand as follows: 3⁄4in determining supply, CAMMESA would consider energy supplies provided by generators based on their expected availability, committed imports of electricity and the availability declared by generators; and 3⁄4in determining demand, CAMMESA included the requirements of distributors and large users purchasing in the wholesale electricity market as well as committed exports. 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 most energy subsidies and a substantial increase in electricity rates for individuals. Resolution No. 6/2016 introduced different prices depending on customers’ categories. Such resolution also contemplates a social tariff for residential customers who comply with certain consumption requirements, which includes a full exemption for monthly consumptions below or equal to 150 Kwh and preferential tariffs for customers who exceed such consumption level but achieve a monthly consumption lower than that of the same period in the immediately preceding year. This resolution also establishes tariff benefits addressed to residential customers for reducing their consumption. Stabilization fund The stabilization fund, managed by CAMMESA, was created to absorb the difference between purchases by distributors at seasonal prices and payments to generators for energy sales at the spot price.  When the spot price was lower than the seasonal price, the stabilization fund increased, and when the spot price was higher than the seasonal price, the stabilization fund decreased.  The outstanding balance of this fund at any given time reflected the accumulation of differences between the seasonal price and the hourly energy price in the spot market.  The stabilization fund was required to maintain a minimum amount to cover payments to generators if prices in the spot market during the quarter exceeded the seasonal price. Billing of all wholesale electricity market transactions is performed monthly through CAMMESA, which acts as the clearing agent for all purchases between participants in the market.  Payments are made approximately 40 days after the end of each month. However, due to the default of the other WEM’s agents –mainly distributors- during 2013 such payment period increased to an average of 90 days. The stabilization fund was adversely affected as a result of the modifications to the spot price and the seasonal price made by the emergency regulations, pursuant to which seasonal prices were set below spot prices resulting in large deficits in the stabilization fund.  As of December 31, 2015, the stabilization fund balance was approximately Ps. 26,376 million.  This deficit has been financed by the Argentine Government through loans to CAMMESA, FONINVEMEM funds, and through another specific agreements between the Secretariat of Energy and the generators, but these actions continue to be insufficient to cover the differences between the spot price and the seasonal price.


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Term market Generators may also enter into agreements in the term market to supply energy and capacity to distributors and large users.  Distributors are able to purchase energy through agreements in the term market instead of purchasing energy in the spot market.  Term agreements typically stipulate a price based on the spot price plus a margin.  Prices in the term market have sometimes been lower than the seasonal price that distributors are required to pay in the spot market.  However, as a result of the emergency regulations, prices in the term market are currently higher than seasonal prices, particularly with respect to residential tariffs, making it unattractive to distributors to purchase energy under term contracts while prices remain at their current levels. The term market was suspended by SE Resolution No. 95/2013 (see“Item 4. – The Argentine Electricity Sector - SE Resolution No. 95/2013, as amended- New Price Scheme and other modifications to the WEM” below). FONINVEMEM In 2004, the Argentine Government, seeking to increase thermal generation capacity, created a fund called FONINVEMEM to be administered by CAMMESA and to provide funds for investment in thermal generation.  To provide capital for the FONINVEMEM, the Secretariat of Energy invited all WEM participants holding interest-bearing receivable credits against CAMMESA, also known as LVFVDs (Sales Settlements with Due Date to be Determined), that originated from January 2004 to December 2006 to contribute these credits to the FONINVEMEM.  In exchange, generators were entitled to participate in the construction of two new 800 MW combined cycle generators to be financed with funds from the FONINVEMEM.  Consequently, on December 13, 2005, the generating companies “Sociedad Termoeléctrica Manuel Belgrano S.A.” and “Sociedad Termoeléctrica José de San Martín S.A.” were created.  Generators that opted to participate in these projects received ten-year take-or-pay supply contracts of electricity and an equity interest in the two new power projects, which were scheduled to commence operations at full capacity in the first half of 2010.  As of the date of this annual report, both combined cycle generators had started operations as closed-cycle generations units.  In addition, the Argentine Government required generators to contribute 65% of their profits (in the case of hydroelectric generators) or variable margins (in the case of thermal generators) to the FONINVEMEM, to be repaid in 120 installments or, at each generator’s option, capitalized in the new power projects.  However, because total investment in these two projects was expected to exceed available financing from the FONINVEMEM, in 2005 the Argentine Government created special charges to non-residential consumers per MWh of energy billed and specific charges applicable to large users, in each case to be deposited in the FONINVEMEM. Our outstanding balance for LVFVDs related to the years 2004 through 2006 under FONINVEMEM, plus accrued interest as of December 31, 2015, net of the realized collections if applicable and at its book value, add up to approximately Ps. 46.9 million.  Since March 2010, CAMMESA has started paying the corresponding installments as stated in the FONINVEMEM conditions.  Therefore, as of that month, we started collecting the first installment payments related to receivables of our hydroelectric units, Piedra Buena and Güemes. In 2007, the Argentine Government amended the terms of the FONINVEMEM by reducing mandatory contributions from generators to 50% of profits or variable margins.  Repayment of these contributions will also be made in 120 installments at LIBOR plus 1% margin.  However, generators will no longer be permitted to capitalize their contributions.  In addition, on May 31, 2007, the Secretariat of Energy offered generators the opportunity to allocate credits contributed to the FONINVEMEN in 2007 to new electricity investments, so long as these investments were at least four times higher than the amount of the credits.  In addition, the following conditions must be met: ·the investment project had to consist of the construction of a new generation plant or the installation of a new generation unit in an existing plant, or must involve an increase in the height of hydroelectric plants that produces an increase in generation; ·the reserved energy and capacity may be sold in the term market (includingEnergía Plus), and no exports are allowed during the first ten years; ·the project had to be submitted within 45 days from the date of publication of the resolution of the Secretariat of Energy approving this regime; and


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·the construction must have commenced before March 2008. In accordance with this resolution, we submitted all of our installed capacity expansion projects against our FONINVEMEN credits for 2007.  These projects include HINISA, HIDISA, Piedra Buena, Güemes and Loma de la Lata, for an aggregate amount of approximately U.S. $13 million as of December 2007.  On June 20, 2008 the Secretariat of Energy verified the Company’s proposal and instructed CAMMESA to pay the 2007 LVFVDs, which as of December 31, 2008, had been duly collected. In 2012 and 2013 the Secretariat of Energy (pursuant to SE Resolution No. 1261/2012 and Note No. 5568/13) approved the works in order to accomplish an increase in the total capacity of Termoeléctrica Manuel Belgrano and Termoeléctrica José de San Martín and to undertake the aforementioned, instructed CAMMESA to request the shareholders of Termoeléctrica Manuel Belgrano and Termoeléctrica José de San Martín to allocate a portion of their LVFVD accrued during 2008-2011 not used in other projects for this purpose. HIDISA, HINISA, CPB and CTG adhere to such request, which resulted in the partial termination of certain assignments executed with CTLL for the allocation of such LVFVDs to the CTLL Project.For more information please see “Item4. - Our Business – Generation Business – Loma de la Lata – Loma de la Lata’s 2014 Expansion Project.” The LVFVD allocated to the expansion of Termoeléctrica Manuel Belgrano and Termoeléctrica José de San Martín will be repaid pursuant to the scheme governing repayment of original investments in these power plants, converted into Dollars at the rate established by the BCRA (”Tipo de Cambio de Referencia Comunicación A 3500 (Mayorista)”) on the date of the effective payment to the contractors of the works. As of the date of this annual report, CAMMESA repaid some of the LVFVD’s allocated to such projects. As of the date of this annual report, Termoeléctrica Manuel Belgrano and Termoeléctrica José de San Martín executed the amendments to their WEM Supply Agreement. WEM Supply Agreements under SE Resolution No. 220/2007 Aiming to modify the market conditions allowing for new investments to increase the generation offer, the Secretariat of Energy passed Resolution No. 220/2007, which empowers CAMMESA to enter into “WEM Supply Agreements” with WEM generating agents for the energy produced with new generation equipment. They will be long-term agreements, and the values to be paid by CAMMESA in consideration of the capacity and the energy supplied by the generator must be approved by the Secretariat of Energy. The generator shall guarantee certain availability of the generation units (established as a percentage), and if it fails to do so, penalties apply. On October 4, 2009, Loma de la Lata entered into a WEM Supply Agreement under SE Resolution No. 220/2007 with CAMMESA, to sell CAMMESA a part of the net power capacity resulting from the expansion project and the corresponding generated electricity.  This agreement covers a minimum of 50% of the net capacity generated by the expansion project, with the final percentage to be determined at the time commercial operation begins, and depended upon the amount of credits, from Loma de la Lata or third parties, arising from Resolution No.406/2003 of the Secretariat of Energy, that are allocated to the expansion project.  The agreement sets a capacity payment of U.S.$ 33.383 per MW-month and an energy payment of U.S.$ 4 per MWh. The term of the agreement is 10 years from the date on which commercial operation begins. On December 15, 2010, Loma de la Lata executed an Amendment to the above mentioned contract, by means of which Loma de la Lata may sell the total capacity and energy generated by the new generation unit to CAMMESA. Altought the original term of this Amendment expired in October 2014, through the execution of the Specific Conditions, such term was extended until 2021. On July 15, 2011, as a result of the commitments included in the Complementary Agreement, EGSSA (now merged into CTG. Please see “Item 4. - Our Business – Our Generation Business – Güemes - History”) entered into a WEM Supply Agreement under SE Resolution No. 220/2007 with CAMMESA, to sell to CAMMESA Central Térmica Piquirenda’s total capacity. The agreement sets a capacity payment for each of the two stages of the project


of U.S.$ 14,760 per MW-month and U.S.$ 14,525 per MW-month, respectively. The term of the agreement is 10 years from the date in which commercial operation of each stage begins.


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In both cases—Loma de la Lata and EGSSA (now merged into CTG. Please see“Item 4.-Our Business – Our Generation Business – Güemes - History”)—the generator guarantees a certain availability of the units involved in the agreement. If the units do not meet such minimum availability, CAMMESA may apply penalties which are discounted from the revenues to be paid for the capacity and energy sold under the agreements. WEM Supply Agreements under SE Resolution No. 724/2008 On July 24, 2008, the Secretariat of Energy issued Resolution No. 724/2008 authorizing the execution of WEM committed supply agreements with generation agents, related to the repair and/or repowering of generation units and/or related equipment.  This Resolution applies to those WEM generation agents filing plans to repair and/or repower their generating equipment and for which costs would exceed 50% of the revenues that they expect to receive on the spot market.  Pursuant to the terms of the Resolution, the Secretariat of Energy evaluates the proposals filed by generation agents and determines which ones are eligible to enter a committed supply agreement.  The Secretariat of Energy also determines whether the generation agent is eligible to receive financing for the difference between the costs of repairs and the compensation to be received under the proposed agreement.  Under this Resolution, Loma de la Lata has signed agreements that permit it to recover receivables from CAMMESA up to 50% of the cost of any repairs or repowering of generation units and related equipment.  Under such agreements, in connection with Loma de la Lata’s expansion project, the generation subsidiaries have assigned to this project their consolidated receivables accrued from 2008 and 2010. In addition under such agreements Loma de la Lata has issued several credit assignment agreements with other WEM generators (related companies and third parties) in connection with their LVFVDs accumulated between January 1, 2008 and December 31, 2010 by virtue of Subsection c) of SE Resolution No. 406/2003, as well as the LVFVDs accumulated for the Procedure to Dispatch Natural Gas for the Generation of Electricity. Said assignment may be total and/or partial depending on CAMMESA’s cash and cash equivalents.  Such agreements establish the terms and conditions of each assignment, which will be carried out fully or partially as CAMMESA settles the respective receivables, upon which Loma de la Lata will settle the unpaid amounts to the counterparties, according to the conditions established in every agreement. CAMMESA had partially cancelled the LVFVDs allocated in Loma de la Lata’s WEM Supply Agreement under SE Resolution No. 724/2008. Upon such breach, Loma de la Lata had filed the appropriate administrative remedy in order to safeguard its rights, and seeking the total cancellation of such LVFVD. As of the date of this annual report, CTLL had filed a claim against the Argentine Government seeking the cancellation of such LVFVD (see “Item 8. Legal Proceedings”). Price Scheme – 2008-2011 Agreement On November 25, 2010, the Secretariat of Energy entered into the 2008-2011 Agreement with all private generators in order to increase the installed capacity during 2011—by the cancellation of the LVFVD accrued by the generators between 2008 and 2011—and to establish a new scheme for the remuneration of generators’ sales in the spot market. In addition, according to the 2008-2011 Agreement, all hydroelectric units with an installed capacity of less than 250 MW will receive their energy spot markets sales according to the priority provided in subsection e), section 4 of SE Resolution No. 406/2003. In order to increase the total installed capacity in the WEM, the 2008-2011 Agreement established a financial scheme that comprises the amounts charged to end-users by means of the“Cargo Transitorio para la Conformación del Fondo Acuerdo 2008-2011”and the amounts derived from the repayment of the contributions made according to section 4.d.2 of the“Acuerdo Definitivo para la Gestión y Operación de los Proyectos para la Readaptación del MEM en el marco de la Resolución SE 1.427/04.”The generator should be in charge of the execution of the works for the installation of the new facilities. The LVFVD accrued by the generators between 2008 and 2011 shall be cancelled by WEM Supply Agreements to be executed with the generators for the new generation facilities. Repayment of the LVFVD will be made in 120 installments at LIBOR plus 5% margin.


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The 2008-2011 Agreement provides that the government will recognize from Ps. 35 per MW-hrp (hrp stands for hours in which capacity is being paid) to Ps. 42 per MW-hrp depending on the technology of the unit and its capacity, to generators that can meet the availability objective, as defined in the 2008-2011 Agreement. Furthermore, the remuneration to cover operation and maintenance costs will also increase from Ps. 7.96 per MWh to Ps. 11.96 per MWh for natural gas generation and from Ps. 12.96 per MWh to Ps. 20.96 per MWh for alternative fuel generation (liquid fuels). The above mentioned remunerations should have been recognized and paid upon the execution of the 2008-2011 Agreement. However, by means of Note No. 924/11, the Secretariat of Energy instructed CAMMESA to consider such remunerations as LVFVD until the execution of the complementary agreements to the 2008-2011 Agreement. According to section 8 of the 2008-2011 Agreement, its implementation required the execution of complementary agreements between the Secretariat of Energy and the generators. On April 1, 2011, the Company and the Pampa Generators―executed the“Acuerdo para el Aumento de la Disponibilidad de Generación Térmica”(“Complementary Agreement”) with the Secretariat of Energy. In the Complementary Agreement, the Pampa Generators committed themselves to construct the Project CTP. The project will comprise two stages of 30 MW and 15 MW, respectively. The Secretariat of Energy committed itself to instruct CAMMESA to pay the LVFVD accrued by the Pampa Generators between 2008 and 2011—not included in a WEM Supply Agreement under SE Resolution No. 724/2008—up to an amount equal to the 30% of the investments on the Project. The first stage of the Project CTP was concluded as scheduled. Pursuant to the Specific Conditions,the second stage of Project CTP shall not be executed. Instead, the engines that amounted to the 15 MW under the secong stage of Project CTP shall be installed in Loma de la Lata (See “Item 4. – Our Business – Our Generation Business – Loma de la Lata’s 2014 Expansion Project”). On October 17, 2011, CAMMESA sent a brief to the Secretariat of Energy in relation to the first stage of the Project, concluding that the maximum value to be recognized in favor of the Pampa Generators according to the Complementary Agreement amounted to U.S.$ 8,083,799.  However, as of the date of this annual report, the LVFVD has not been cancelled.  The Pampa Generators have filed the appropriate administrative remedies (see “Item 8. Legal Proceedings”)”. The outstanding balance of 2008, 2009, 2010 and 2011 LVFVD, plus interest accrued, at its book value, added up to approximately Ps. 480.1 million as of December 31, 2015. On January 24, 2011, the Secretariat of Energy instructed CAMMESA (by SE Note No. 495/2011) to suspend the recognition of the remunerations included in the 2008-2011 Agreement. Such instruction was confirmed by SE Note No. 1269/12 and by other communications by means of which the Secretariat of Energy answered the Pampa Generators’ claims to such instructions. Such instructions constitute a breach of the commitments made by the Secretariat of Energy in the 2008-2011 Agreement. While the Pampa Generators have filed the appropriate administrative remedies (see “Item 8. Legal Proceedings”) in order to be entitled to participate in the new remuneration scheme established by SE Resolution No. 95/2013, the Pampa Generators were forced to desist from pursuing such remedies. Energía Plus In September 2006, the Secretariat of Energy issued Resolution No. 1281/2006 in an effort to respond to the sustained increase in energy demand following Argentina’s economic recovery after the crisis.  This resolution seeks to create incentives for energy generation plants in order to meet increasing energy needs.  The resolution’s principal objective is to ensure that energy available in the market is used primarily to service residential users and industrial and commercial users whose energy demand is at or below 300 kW and who do not have access to other viable energy alternatives.  To achieve this, the resolution provides that: ·large users in the wholesale electricity market and large customers of distribution companies (in both cases above 300 kilowatts), will be authorized to secure energy supply up to their “base demand” (equal to their demand in 2005) by entering into term contracts; and


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·large users in the wholesale electricity market and large customers of distribution companies (in both cases above 300 kilowatts) must satisfy any consumption in excess of their base demand with energy from theEnergía Plussystem at prices that should be approved by the Ministerio de Planificación Federal, Inversión Pública y Servicios (Ministry of Federal Planning, Public Investment and Services).  TheEnergía Plussystem consists of the supply of additional energy generation from new generation and/or generating agents, co-generators or auto-generators that are not agents of the electricity market or who as of the date of the resolution were not part of the WEM. The resolution also established the price large users are required to pay for excess demand, if not previously contracted underEnergía Plus, which a price closer to the marginal cost of operations.  This marginal cost is equal to the generation cost of the last generation unit transmitted to supply the incremental demand for electricity at any given time.  The Secretariat of Energy established certain temporary price caps to be paid by large users for any excess demand (as of the date of this annual report, Ps. 550 per MWh for GUDIs and Ps. 450 per MWh for GUMEs and GUMAs).  Additionally, generators must grant the supply of energy to the customers even if they cannot generate the energy at their plants. For information about our projects aimed at taking advantage of theEnergía Plusplan.  See “Item 4. —Our Business—Our Generation Business.” Procedure for the Dispatch of Natural Gas for Power Generation On October 7, 2009, SE Note No. 6866/09, instructed CAMMESA to convene the WEM’s generators to adhere to the “Procedure for the Dispatch of Natural Gas for Power Generation” (hereinafter the “Procedure”).  The Procedure provides that, in the event that the natural gas system is affected by operational restrictions, the natural gas and the transport that each generator has acquired will be assigned to CAMMESA and in turn redistributed by CAMMESA in order to maximize the generation capacity. In consideration for such assignment in favor of CAMMESA, the generator will be entitled to collect the highest value between the positive difference between the Spot Price and the Variable Production Cost (“VPC”) (calculated with natural gas) and 2.50U. S.$./MWh. If the unit was on service, such value would be calculated over the maximum value between the energy delivered and the energy that would have been delivered if the unit VPC was inferior to the WEM’s Marginal Operational Cost. If the unit was out of service, the above mentioned value would be calculated over the energy that would have been delivered if such unit had had natural gas and had assigned such gas to CAMMESA (the unit VPC must be inferior to the WEM’s Marginal Operational Cost).  The original duration of the Procedure included the winters of 2009, 2010 and 2011. However, through Note No. 6169/10, the Secretariat of Energy instructed CAMMESA to convene the WEM’s generators to adhere to the application of the Procedure from October 2010 to May 2011 and from September to December of 2011. In virtue of the large number of generators that adhered, through Note No.6503/10, the Secretariat of Energy instructed CAMMESA to apply the Procedure during the above mentioned periods.  On November 16, 2010, through Notes No.7584/2010 and 7585/2010, the Secretariat of Energy instructed CAMMESA to convene the WEM’s generators to adhere to the assignment mechanism provided in such Resolution. In both cases the generator that adheres to the cited mechanisms, accepts to assign in favor of CAMMESA the natural gas and transport acquired in order to maximize the generation capacity. While the mechanism established in Note No.7584/10 of the Secretariat of Energy was directed to the generators included under the “Energía Plus” program, the mechanism provided in Note No.7585/10 was directed to generators that had acquired its provision of natural gas under “Gas Plus” program.  The assignment of natural gas volumes acquired by the generators that adhere to the above mentioned mechanism shall not affect the support of its contracts in the WEM or those executed under the regime established in SE Resolution No. 220/2007.  According to Note No.7585/10 of the Secretariat of Energy, such assignment shall not affect the remuneration earned for the capacity provided, the recognition of the costs associated to said fuel and the overruns


associated to them, nor the amounts due in virtue of the application of Subsection c), Section 4 of SE Resolution No. 406/2003, in respect of those that would have been due to the assignor.


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The mechanisms approved by Notes No. 7584/2010 and 7585/2010 of the Secretariat of Energy were to be applied up to December 31, 2011. However, through Note No. 8692/2011, the Secretariat of Energy instructed CAMMESA to convene the WEM’s generator for their adherence to the application of the mechanism approved by Notes No. 6866/2009, 7584/2010 and 7585/2010 during 2012. Considering the high degree of adherence, the Secretariat of Energy, through Note No. 187/2011, instructed CAMMESA to continue with the application of such mechanism during 2012. In November 2012, the Secretariat of Energy (by SE Note No. 7469/12) extended the application of the above mentioned schemes until April 31, 2013.  In April 2013, under the modifications implemented by the SE Resolution No. 95/2013, the Secretariat of Energy (by SE Note No. 2053/13) extended the application of the abovementioned schemes indefinitely. This extension will apply to adhering agents not expressing their rejection. Natural Gas Supply under the Gas Plus Program By means of SE Notes No. 3456/2012 and 4377/2012, 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. In this sense it addressed two cases as follows: (i) With regard to the first case, the Secretariat of Energy established that, provided that the Gas Plus price agreed between the producer and the generator, is not higher than the one recognized by CAMMESA, the volumes must be accepted by CAMMESA. (ii) With regard to the second case, as the contract price is, in general, equal to the maximum prices approved for the Gas Plus Program, in order to avoid “unintended results that can generate distortions,” the contract price should be equal to the value that CAMMESA recognizes, or the maximum value, whichever is the lesser. Moreover, the Secretariat of Energy established that “in such cases” CAMMESA will have priority to contract the volume directly with the producer. Additionally, the Secretariat of Energy stipulated that the highest value that CAMMESA shall recognize is U.S.$ 5.20/MMBTU and this is the value that shall be applied for “any other case that does not fit the characteristics indicated.” CAMMESA, through Note No. B-73079-1, sent a copy to the generators of the above mentioned note and included its interpretation of Note No. 3456/12’s provisions. CAMMESA understood that the maximum price to recognize shall be U.S.$ 5.20/MMBTU and that for those proposals to work together with the mechanism that was set up by SE Note No. 7585/11 (which has thus far not expressly been approved), the generator must inform the corresponding producer of the provisions of the note in order to make the direct offer to CAMMESA of the volumes previously agreed with the generator. CAMMESA does not distinguish the priority to buy between cases (i) and (ii). Asociación de Generadores de Energía Eléctrica de la República Argentina(“AGEERA”) sent a note to the Secretariat of Energy with some considerations, with the purpose of requesting that the Secretariat of Energy clarify the concepts included by CAMMESA in Note No. B-73079-1. The Secretariat of Energy, by means of Note No. 4377/12, instructed CAMMESA to consider, in the case indicated in (i) above, those generating units under WEM Supply Agreements under SE Resolution No. 220/2007, including within this category the units of Loma de la Lata and EGSSA (now merged into CTG. Please see “Item 4. – Our Business – Our Generation Business – Güemes – History”), both Pampa subsidiaries.


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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) recognize 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”. As a consequence thereof: (i) on September 3, 2015 Loma de la Lata declared the force majeure of the Natural Gas Agreement with Pan American Energy LLC Argentine branch, resulting in the suspension of the obligations of Loma de Lata thereunder, and filed claims against CAMMESA in connection with such agreement; and (ii) on January 1, 2016, declared the force majeure of the Natural Gas Agreement with Petrolera Pampa, resulting in the suspension of the obligations of Loma de Lata thereunder, and filed claims against CAMMESA in connection with such agreement.  As of the date of this annual report, the administrative claims filed by Loma de la Lata against CAMMESA are still pending. SE Resolution No. 95/2013, as amended– New price scheme and other modifications to the WEM New Price scheme for generation SE Resolution No. 95/2013 established a new general price scheme for the whole generation sector (generators, autogenerators and cogenerators) excluding: (i) binational hydroelectric plants and nuclear plants; and (ii) the capacity and energy included in specific contracts with a differential price scheme under SE Resolutions No. 1193/2005, 1281/2006, 220/2007, 1836/2007, 200/2009, 712/2009, 762/2009, 108/2011 and 137/2011 (hereinafter, the “Comprised Generators”). The new price scheme shall be applicable as of the economic transactions recorded during February 2013. However, the effective application to each generator agent requires that such agent desist from any and all administrative or judicial procedures initiated against the Argentine Government, the Secretariat of Energy and/or CAMMESA in relation to the 2008-2011 Agreement and/or the application of SE Resolution No. 406/2003. Moreover, such agent shall renounce any right to initiate or promote any administrative or judicial procedure against the Argentine Government, the Secretariat of Energy and/or CAMMESA in relation to the 2008-2011 Agreement and/or the application of SE Resolution No. 406/2003. Any Comprised Generator that does not fulfill the requirements to desist from and renounce to, any right with respect to such actions, shall not be entitled to participate in the new price scheme. The price scheme established by SE Resolution No. 95/2013 was amended by SE Resolutions No. 529/2014, 482/2015 and 22/2016. SE Resolution 482/2015 provides for: i) the retroactive adjustment of prices from February 2015, ii) the modification of the calculation of the variable transport fees for hydroelectric and renewable generators, iii) the creation of a new remuneration named “Additional Resources for Investments FONINVEMEM 2015-2018”; iv) the creation of a new remuneration named “Additional Remuneration FONINVEMEM 2015-2018” applicable to the units to be installed under the FONINVEMEM 2015-2018; v) the creation of an additional efficiency and production remuneration; and vi) the modification of the calculation of the Fixed Cost Remuneration and the Additional Maintenance Remuneration. SEE Resolution No. 22/2016 established adjustments to the remuneration with the aim of temporarily supporting the operation and maintenance of the generation plants until the entry into force of regulatory measures currently being considered by the National Government. The price scheme under SE Resolution 95/2013, as amended by SE Resolution No. 529/2014, SE Resolution No. 482/2015 and SEE Resolution No. 22/2016, is described below: i)Fixed Costs Remuneration: it remunerates for thePotencia Puesta a Disposición(available capacity or “PPAD”) in the hours in which such capacity is remunerated (“hrp”).


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a)thermic (TG, TV, CC) units, according to the parameters defined in the resolution and the following remuneration;  Technology and Scale

   Ps/MW-HrpGas Turbine Unit with a capacity = 50 MW

   152.3Gas Turbine Unit with a capacity > 50 MW

   108.8Steam Turbine Unit with a capacity = 100 MW

   180.9Steam Turbine Unit with a capacity > 100 MW

   129.2Combined Cycle Units with a capacity = 150 MW

   101.2Combined Cycle Units with a capacity > 150 MW

   84.3Hydroelectric Unit with a capacity = 50 MW

   299.2Hydroelectric Unit with a capacity between 50MW and = 120 MW

   227.5Hydroelectric Unit with a capacity between 120 MW and 300 MW

   107.8Hydroelectric Unit with a capacity > 300 MW

   59.8Internal combustion motors

   180.9Wind farms

   ---Solar Photovaltaic Power Plants

   ---Biomass and Biogas – Solid Urban Waste Power Plants

   ---
  The calculation of the remuneration is variable according to the Actual Availability (AA), Target Availability (TA), the Average Historic Availability (AHA) and the season of the year. The formula defines a base percentage to be applied to the Fixed Costs Remuneration according to the following values:  Combined Cycle Units

   June – July – August

   December – January – February

   March – April – May

   September – October - NovemberAA > 95%

   110%

   100%85% < AA = 95%

   105%

   100%75% < AA = 85%

   85%

   85%AA = 75%

   70%

   70%
  Steam-Gas Turbine Units

   June – July – August

   December – January - February

   March – April – May

   September – October - NovemberAA > 90%

   110%

   100%80% < AA = 90%

   105%

   100%70% < AA = 80%

   85%

   85%AA =70%

   70%

   70%


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Internal Combustion Motors

   June – July – August

   December – January - February

   March – April – May

   September – October - NovemberAA > 90%

   110%

   100%80% < AA = 90%

   105%

   100%70% < AA = 80%

   85%

   85%AA =70%

   70%

   70%
  Fifty percent (50%) of the difference between the AA and the AHA of each generator shall be added or subtracted to the base percentage, with a minimum of 70% and a maximum of 100% or 110% according to the season of the year.  Resolution SEE No. 22/2016 established a 20% increase in the Fixed Costs Remuneration of hydroelectric generators which operate and maintain infrastructure used for controlling watercourses (such as dams), with no hydroelectric power plant directly associated to them. HINISA shall be entitled to collect this increase for its Valle Grande facilities.   ii)Variable Costs Remuneration: the SE Resolution No. 95/2013, as amended, established a new remuneration that replaced the Variable Maintenance Costs (“Costos Variables de Mantenimiento”) and Other Non-Fuel Variable Costs (“Otros Costos Variables No Combustibles”). These are calculated taking into the account the energy generated with each kind of fuel and on a monthly basis.  Technology and Scale

   Fueled with (Pesos / MWh):Natural

   Gas

   Liquid Fuels

   Coal

   BiofuelsGas Turbine Unit with a capacity = 50 MW

   46.3

   81.1

   -

   154.3Gas Turbine Unit with a capacity > 50 MW

   46.3

   81.1

   -

   154.3Steam Turbine Unit with a capacity = 100 MW

   46.3

   81.1

   139.0

   154.3Steam Turbine Unit with a capacity > 100 MW

   46.3

   81.1

   139.0

   154.3Combined Cycle Units with a capacity = 150 MW

   46.3

   81.1

   -

   154.3Combined Cycle Units with a capacity > 150 MW

   46.3

   81.1

   -

   154.3Hydroelectric Unit with a capacity =50 MW

   36.7Hydroelectric Unit with a capacity between 50MW and =120MW

   36.7Hydroelectric Unit with a capacity between 120MW and 300 MW

   36.7Hydroelectric Unit with a capacity >300MW

   36.7Internal combustion motors

   74.1

   111.2

   ---

   148.3Wind farms

   112.0Solar Photovaltaic Power Plant

   126.0Biomass and Biogas – Solid Urban Waste

   Equal to the applicable thermal technology and scale provided above


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Resolution SEE No. 22/2016 modified the basis for the calculation of the Variable Costs Remuneration for pump hydroelectric power plants. Such remuneration shall consider both the energy generated by the power plant and the energy consumed for pumping. This modification shall benefit HIDISA’s Los Reyunos power plant. iii)Additional Remuneration: applicable to the Comprised Generators. Part of the remuneration shall be directed to “new infrastructure projects in the Energy Sector,” which are still to be defined by the Secretariat of Electric Energy, through a trust. Technology and Scale

   Destined to:Generator

   Pesos / MWh

   Trust

   Pesos / MWhGas Turbine Unit with a capacity = 50 MW

   13.7

   5.9Gas Turbine Unit with a capacity > 50 MW

   11.7

   7.8Steam Turbine Unit with a capacity = 100 MW

   13.7

   5.9Steam Turbine Unit with a capacity > 100 MW

   11.7

   7.8Combined Cycle Units with a capacity = 150 MW

   13.7

   5.9Combined Cycle Units with a capacity > 150 MW

   11.7

   7.8Hydroelectric Unit with a capacity =50MW

   84.2

   14.9Hydroelectric Unit with a capacity between 50MW and = 120 MW

   84.2

   14.9Hydroelectric Unit with a capacity between 120 MW y 300 MW

   59.4

   39.6Hydroelectric Unit with a capacity > 300 MW

   54.0

   36.0Internal combustion motors

   13.7

   5.90Wind farms

   ---------------Solar Photovaltaic Power Plant

   ---------------Biomass and Biogas – Solid Urban Waste Power Plants

   ---------------
  iv)Additional Maintenance Remuneration: applicable since February 2014 and calculated taking into the account the energy generated on a monthly basis. Such credits shall be liquidated as LVFVDs and shall be applied exclusively for the execution of major maintenance works approved by the SEE. SEE Resolution No. 482/2015 and SEE Resolution No. 22/2016 updated the values and included hydroelectric generators.  Technology and Scale

   Pesos/MWhGas Turbine Unit with a capacity = 50 MW

   45.1Gas Turbine Unit with a capacity > 50 MW

   45.1Steam Turbine Unit with a capacity = 100 MW

   45.1Steam Turbine Unit with a capacity > 100 MW

   45.1Combined Cycle Units with a capacity = 150 MW

   39.5Combined Cycle Units with a capacity > 150 MW

   39.5Hydroelectric Unit with a capacity = 50MW

   16Hydroelectric Unit with a capacity between 50 MW and =120 MW

   16Hydroelectric Unit with a capacity between 120 MM and 300 MW

   16Hydroelectric Unit with a capacity > 300 MW

   16Internal combustion mototrs

   45.1Wind farms

   ------Solar Photovaltaic Power Plant

   ------Biomass and Biogas – Solid Urban Waste Power Plants

   ------
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Additionally, SE Resolution No. 482/15 provided that the Additional Maintenance Remuneration shall be calculated taking into consideration (i) the accumulated energy generated in the preceeding year and (ii) the number of times that the applicable units starts as per the request of CAMMESA. v)Production and Efficiency Incentives These are  comprised of an increase in the Variable Costs Remuneration as of the fulfillment of certain conditions, as set forth below. The “Production” incentive consists of a 10% and 15% increase in the Variable Costs Remuneration of thermal units operating with liquid fuel or coal, respectively, when their aggregate production in the calendar year exceeds 25% to 50%, respectively, of their production capacity with liquid fuel or coal, as applicable. The “Efficiency” incentive consists of the acknowledgment of an Additional Remuneration equal to the Variable Costs Remuneration for the porcentual difference between the real fuel consumption and the referenced fuel consumption defined for each type of technology and fuel set forth in SEE Resolution No. 482/2015. The comparison shall be quarterly. Variable Costs Remuneration shall not be affected when the real fuel consumption is higher than the reference fuel consumption. The reference fuel consumption values are: Technology

   Natural Gas

   Alternatives (FO/GO/Coal)Kcal/kWh

   Kcal/kWhGas Turbine

   2,400

   2,600Steam Turbine

   2,600

   2,600Internal Combustion Motors

   2,150

   2,300Combined Cycles (GT > 180 MW)

   1,680

   1,820Other Combined Cycles

   1,880

   2,000
 vi)Additional Resources for Investments FONINVEMEM 2015-2018 As established in the 2015-2018 Generators Agreement (see “2015-2018 Generators Agreement” below), these resources will be applied pursuant to the FONINVEMEM 2015-2018 by generators that have a new generation


project approved by the SEE, to the works that will be executed under such projects. SEE Resolution No. 482/2015 provides that these resources are not a right vested to generators. Such resources cannot be construed as a right, therefore if any generator breaches the specific terms and conditions applicable to the project that they would undertake, the SEE can transfer such resources allocated to such generator to another generator.


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Technology and Scale

   Pesos/MWhGas Turbine Unit with a capacity = 50 MW

   15.8Gas Turbine Unit with a capacity > 50 MW

   15.8Steam Turbine Unit with a capacity = 100 MW

   15.8Steam Turbine Unit with a capacity > 100 MW

   15.8Combined Cycle Units with a capacity = 150 MW

   15.8Combined Cycle Units with a capacity > 150 MW

   15.8Hydroelectric Unit with a capacity = 50 MW

   6.3Hydroelectric Unit with a capacity between 50 MW and =120 MW

   6.3Hydroelectric Unit with a capacity between 120 MW y 300 MW

   6.3Hydroelectric Unit with a capacity > 300 MW

   6.3Internal combustion motors

   15.8Wind farms

   -----------Solar Photovoltaic Power Plant

   -----------Biomass and Biogas – Solid Urban Waste Power Plants

   -----------
  vii)Additional Remuneration FONINVEMEM 2015-2018 It is comprised of an additiona remuneration for the units to be installed under the 2015-2018 Generators Agreement and FONINVEMEM 2015-2018 equal to 50% of the Additional Remuneration allocated to each generator. The Additional Remuneration FONINVEMEM 2015-2018 shall apply for up to 10 years from the commercial operation of the generation unit. The sum of the concepts detailed above constitutes the total remuneration to be liquidated in favor of the Comprised Generators, deducting there from the energy and capacity included in term contracts or in other agreements, which are valued according to the corresponding Market Price, and any other charge or service to be charged to the generator. In order to qualify for the foregoing remuneration, each Comprised Generator shall present, for each month, an affidavit with the corresponding backup documents, including the amounts invoiced for its sales in the Term Market (except for the earnings derived from the contracts excluded under section 1 of SE Resolution No. 95/2013), the result of which shall be compared to deductions made by CAMMESA. In case of discrepancies in favor of the generator, CAMMESA shall invoice to the generator the difference. Payment Priority


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SE Resolution No. 95/2013 excludes the application of SE Resolution No. 406/2003 to the new price scheme defined therein. It establishes two priorities. The first one includes the Fixed Costs Remuneration, the Variable Costs Remuneration and the recognition of fuel costs. The second order of priority includes the Additional Remuneration. Notwithstanding the foregoing, CAMMESA shall − according to the instructions of the Secretariat of Energy – make such priority order compatible with the one in force at the date of its publication,i.e.the criteria defined in SE Resolution No. 406/2003. Additionally, it was established that the Fixed Costs Remuneration, the Variable Costs Remuneration and the Additional Payment accrued directly by the generator and the recognition of costs of fuels, shall be paid with the priority defined in subsection e) of section 4 of Resolution No. 406/2003 of the Secretariat of Energy. The remuneration of certain services provided by the generators to the WEM accrue with the priority established in subsection d) of section 4 of SE Resolution No. 406/2003, while the Additional Payment destined to the abovementioned trust accrue with the priority established in subsection c).  In Note No. 4858/13 CAMMESA was instructed to implement a priority payment mechanism in order to maintain a similar liquidity in relation to generators’ collections before the entry into force of SE Resolution No. 95/2013. To that extent:  i.CAMMESA shall collect payments from WEM Large Users; and ii.CAMMESA shall use such funds to pay, in the first place, the Fixed Cost Remuneration, then the Variable Cost Remuneration and, finally, the Additional Payment destined directly to generators. The distribution shall be made in proportion to the relative participation of each generator in each category. Recognition of fuels costs SE Resolution No. 95/2013 appointed CAMMESA to centralize the acquisition and dispatch of fuels for generation. Generators cannot renew or extend the contracts with their providers. However, until the termination of such agreements, CAMMESA will continue to recognize such costs at the reference price, the associated freight, the costs associated with the transport and distribution of natural gas and the corresponding fees and taxes. For such costs to be recognized, two conditions must be met: (i) the costs to be recognized should represent concepts recognized by CAMMESA as of the publication of the resolution; and (ii) the costs should be derived from agreements executed before the entry into force of the resolution. SE Resolution No. 529/2014 extended the centralization of the acquisition and dispatch of fuel for generation to the generators, cogenerators and autogenerators included under SE Resolutions Nos. 1193/2005, 220/2007, 1836/2007, 200/2009, 712/2009, 762/2009, 108/2011 and 137/2011.  For revenue calculation purposes, the generator’s availability shall be considered independently from the availability of fuels. The only generators that may contract fuel supply are those contemplated under SE Resolution No. 1281/2006 or those that didn’t adhere to the SE Resolution No. 95/2013, as amended. Trust for the execution of projects in the electricity sector As described above, part of the Additional Remuneration shall be transferred to a trust for the execution of works in the electricity sector. Additionally, SE Resolution No. 95/2013 sets forth that the Secretariat of Energy will define the mechanism under which the LVFVDs issued by CAMMESA pursuant to SE Resolution No. 406/2003 should be destined to the such trust when they are not comprised within either (i) general or specific agreements entered into with the Secretariat of Energy; (ii) provisions aimed at the execution of investment works; or (iii) existing equipment maintenance tasks.


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As of September 2013, CAMMESA began the recognition of such remuneration as LVFVDs. As of the date of this annual report, the SEE has not established the necessary mechanisms in order to create the trust but permitted the application of such LVFVD to a specific project (See. “Item 4 – Our Business – Our Generation Business – Loma de la Lata - Loma de la Lata’s 2014 Expansion Project”). Term Market Suspension The Secretariat of Energy suspended the incorporation, extension or renewal of the contracts in the Term Market, excluding the contracts executed under the resolutions and the special regime cited in article 1 of SE Resolution No. 95/2013. Notwithstanding the foregoing, the Term Market contracts in force as of the date of the resolution shall remain in force and be administered by CAMMESA until their termination. Upon their termination, the Large Users shall contract for their supply directly from CAMMESA under the conditions to be determined by the Secretariat of Energy. Royalties The new price scheme defined in SE Resolution No. 95/2013 shall not be applicable for the calculation and payment of the royalties to be paid under Laws No. 15,336 and 23,164. Application criteria  The Secretariat of Energy issued several notes in order to establish the criteria for the application of the changes included in SE Resolution No. 95/2013.  In Note No. 2053/13, the Secretariat of Energy defined the criteria for the application of the new price scheme. Such new regime shall be applied by CAMMESA from February 2013 or from the date that is up to three months  prior to the reception by the Secretariat of Energy of the withdrawal of any claim regarding de 2008-2011 Agreement or SE Resolution 406/2003, against the Argentine Government, the Secretariat of Energy and/or CAMMESA.  In Notes No. 2053/13, 3229/13 and 3902/13, the Secretariat or Energy regulated the contracts to be executed between WEM Large Users and CAMMESA.  On the other hand, the Secretariat of Energy instructed CAMMESA to classify WEM generation units in those categories established in SE Resolution No. 95/2013. CTLL, CTG, CPB, HIDISA and HINISA units were classified as:


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Power Plant

   Generating Unit

   Technology

   CapacityGUEMTV11

   TV

   <100 MWGUEMTV12

   TV

   <100 MWCTGGUEMTV13

   TV

   >100 MWGUEMTG01

   TG

   >50 MWBBLATV29

   TV

   >100 MWCPBBBLATV30

   TV

   >100 MWLDLATG01

   TG

   >100 MWCTLL

   LDLATG02

   TG

   >100 MWLDLATG03

   TG

   >100 MWADTOHI

   HI

   Between 120 MW and 300 MWHIDISA

   LREYHB

   HI

   Between 120 MW and 300 MWETIGHI

   HI

   < 120 MWNIH1HI

   HI

   Between 120 MW and 300 MWHINISA

   NIH2HI

   HI

   Between 120 MW and 300 MWNIH3HI

   HI

   Between 120 MW and 300 MW




In such context, CPB, CTLL, CTG, HIDISA and HINISA withdrew the claims initiated in relation to the breach of the 2008-2011 Agreement and refrained from filing new claims in connection with such breach and/or in relation to SE Resolution No. 406/2003. Thus, such generators were entitled to participate in the remuneration scheme established in SE Resolution No. 95/2013. In the case of CPB, CTLL and CTG, the new scheme applied beginning February 2013, while in the case of HIDSA and HINISA (at their own request) the new scheme was applied beginning November 2013.

Generators dispatch

In Note No. 5129/13, the Secretariat of Energy instructed CAMMESA to optimize the use of fuels and the dispatch of WEM generators.CAMMESA must order the dispatch according the actual costs according to the available fuels and it actual supply cost. Such changes may vary the dispatch of our generator.

2015-2018 Generators Agreement



In July 2015 CTLL, CPB, CTG, HIDISA and HINISA executed the“Acuerdo para la Gestión y Operación de Proyectos, Aumento de la Disponibilidad de Generación Térmica y Adaptación de la Remuneración de la Generación 2015-2018”(the “2015-2018 Generators Agreement”) proposed by the Argentine Government to increase the WEM generation capacity through the construction of new capacity expansion project financed by: i) LVFVD arising from SE Resolution No. 406/2003 which were not applied for the financing of other projects; ii) the Additional Remuneration destined to the trust as set forth in SE Resolution No. 95/2013; iii) Additional Resources for Investments FONINVEMEM 2015-2018 (items (i) to (iii) as the “Comitted Receivables”), and iv) additional funding either by the National Government or by the generators.



Any additional funding in excess of the Comitted Receivables shall be repaid with the energy price and capacity under a WEM Supply Contract which shall cover the percentage of the capacity of the new power generation unit equivalent to the percentage that such additional funding represent over the total investment in the


project. The percentage equivalent to the committed receivables shall be repaid by the remuneration scheme established by SE Resolution No. 95/2013 as amended.






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The Argentine Government shall have a participation in the voting capital stock of the companies that will execute the new projects equivalent to the funds that it distributes.  During the second half of 2015, CTLL, CPB, CTG, HIDISA and HINISA, negotiated with the Argentine Government the execution of the required specific agreements in order to perform new generation projects which included an expansion of Loma de la Lata capacity and the construction of wind farms that, as of the date of this annual report weren’t agreed.


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Item 4A.  Unresolved Staff Comments Not applicable. 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 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. 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


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-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. 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.


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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. 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.


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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. 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.  
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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. 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.  
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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. 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.   
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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.  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.


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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”): ·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.   
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Monthly Average Monomic Cost (Ps. Per MWh)  Source: CAMMESA. It includes charges for excess demand, imports from Brazil and WEM supply agreements.   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 the


Transener 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%.  
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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. 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:    
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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.  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 outstading 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 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.  
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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 ·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.


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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 Edenor inasmuch as the inaction and discretionary decisions of the Argentine Government 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.  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:


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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. 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


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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:  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:


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Argentina’s Installed Capacity 100%=33.5GW   Source: CAMMESA  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.


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Critical Accounting Policies and Judgments In the preparation of the 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 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


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


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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.


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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.


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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 evaluat 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.


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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 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 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.


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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 penalizables 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.


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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.


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For the year ended December 31,2015

   

   2014

   

   2013(in millons of pesos)Revenue

   7,160.8

   

   6,204.6

   

   5,335.0Cost of sales

   (7,092.8)

   

   (6,029.1)

   

   (5,603.3)Gross profit (loss)

   68.0

   

   175.6

   

   (268.3)Selling expenses

   (972.7)

   

   (713.4)

   

   (634.2)Administrative expenses

   (1,239.4)

   

   (837.5)

   

   (563.9)Other operating income

   940.7

   

   312.0

   

   466.2Other operating expenses

   (754.4)

   

   (447.1)

   

   (204.0)Reversal of impairment of property, plant and equipment

   25.3

   

   88.4

   

   -Share of profit (loss) of joint ventures

   9.3

   

   34.2

   

   (4.8)Share of (loss) profit of associates

   (9.9)

   

   (1.6)

   

   2.2Operating loss before higher costs recognition and SE Resolution No. 32/15

   (1,933.2)

   

   (1,389.3)

   

   (1,206.7)Income recognition on account of the RTI - SE Resolution No. 32/15

   5,025.1

   

   -

   

   -Higher Costs Recognition - SE Resolution No. 250/13 and subsequent Notes

   551.5

   

   2,271.9

   

   2,933.1Operating profit (loss)

   3,643.4

   

   882.6

   

   1,726.3Financial income

   348.5

   

   440.5

   

   336.3Financial cost

   (1,257.3)

   

   (1,113.2)

   

   (813.9)Other finance results

   1,701.0

   

   420.1

   

   (519.3)Financial results, net

   792.2

   

   (252.6)

   

   (996.8)Profit (Loss) before income tax

   4,435.6

   

   630.0

   

   729.5Income tax

   (586.8)

   

   (100.4)

   

   12.2Profit (Loss) for the year from continuing operations

   3,848.8

   

   529.5

   

   741.6Discontinued operations

   -

   

   -

   

   (126.9)Total Profit (Loss) of the year

   3,848.8

   

   529.5

   

   614.8Total Profit (Loss) of the year attributable to:Owners of the company

   3,065.1

   

   743.2

   

   286.1Non - controlling interest

   783.7

   

   (213.6)

   

   328.7


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For the year ended December 31,2015

   

   2014

   

   2013(in millons of pesos)RevenueGeneration

   2,473.2

   

   2,275.5

   

   1,731.3Transmission

   973.4

   

   738.4

   

   436.9Distribution

   3,802.2

   

   3,598.4

   

   3,440.7Oil and gas

   943.5

   

   356.8

   

   170.1Holding and others

   53.6

   

   67.2

   

   43.9Eliminations

   (111.7)

   

   (93.2)

   

   (51.0)Subtotal Sales

   8,134.2

   

   6,943.1

   

   5,771.9Sales from interest in joint ventures

   (973.4)

   

   (738.4)

   

   (436.9)Total Sales

   7,160.8

   

   6,204.6

   

   5,335.0Gross profit (loss)Generation

   1,135.8

   

   1,098.8

   

   304.5Transmission

   307.4

   

   198.7

   

   43.2Distribution

   (1,386.9)

   

   (1,118.1)

   

   (681.8)Oil and gas

   283.5

   

   155.6

   

   81.9Holding and others

   51.3

   

   65.3

   

   43.0Eliminations

   (15.7)

   

   (26.0)

   

   (16.0)Subtotal Gross (loss) profit

   375.4

   

   374.3

   

   (225.1)Gross loss (profit) from interest in joint ventures

   (307.4)

   

   (198.7)

   

   (43.2)Total Gross profit

   68.0

   

   175.6

   

   (268.3)Operating profit (loss)Generation

   886.8

   

   1,009.1

   

   402.8Transmission

   169.4

   

   99.3

   

   (21.9)Distribution

   2,140.2

   

   (281.5)

   

   1,288.4Oil and gas

   484.8

   

   134.9

   

   73.5Holding and others

   122.4

   

   (13.6)

   

   (31.5)Eliminations

   -

   

   (0.4)

   

   (2.0)Subtotal operating profit (loss)

   3,803.7

   

   947.8

   

   1,709.3Operating profit (loss) from interest in joint ventures

   (160.3)

   

   (65.2)

   

   17.0Total operating profit (loss)

   3,643.4

   

   882.6

   

   1,726.3Total profit (loss) of the yearGeneration

   549.8

   

   633.0

   

   (207.8)Transmission

   9.1

   

   34.1

   

   (4.9)Distribution

   612.8

   

   (1,101.4)

   

   508.1Oil and gas

   351.7

   

   83.9

   

   37.2Holding and others

   2,325.3

   

   879.9

   

   282.2Total profit (loss) of the year

   3,848.8

   

   529.5

   

   614.8Total profit (loss) attributable to owners of the companyGeneration

   496.9

   

   529.3

   

   (191.9)Transmission (1)

   9.1

   

   34.1

   

   (4.9)Distribution

   59.1

   

   (742.1)

   

   163.5Oil and gas

   174.6

   

   41.9

   

   37.2Holding and others

   2,325.4

   

   879.9

   

   282.2Total profit (loss) attributable to owners of the company

   3,065.1

   

   743.2

   

   286.1Total profit (loss) attributable to non - controlling interestGeneration

   52.9

   

   103.6

   

   (15.9)Distribution

   553.7

   

   (359.2)

   

   344.6Oil and gas

   177.1

   

   42.0

   

   -Total profit (loss) attributable to non - controlling interest

   783.7

   

   (213.6)

   

   328.7(1)For the purposes of presenting segment information the indirect interest of our segment Transmission has been consolidated proportionally.


163

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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 a 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 a 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 Consolidated Financial Statement.


164

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Yearended 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: Fiscal Years Ended December 31,In GWh

   2015

   2014Net generation

   Purchases

   Total sales

   Net generation

   Purchases

   Total salesHydroelectric facilities:HINISA

   538.1

   0.5

   538.6

   516.1

   33.0

   549.1HIDISA

   366.8

   0.0

   366.8

   322.4

   28.9

   351.3Thermal facilities:CTG

   1,681.7

   601.0

   2,282.8

   1,528.2

   596.2

   2,124.4CTLL

   2,581.8

   0.0

   2,581.8

   3,420.9

   80.8

   3,501.7CTP*

   151.6

   0.0

   151.6

   131.1

   0.0

   131.1CPB

   2,736.7

   2.4

   2,739.1

   3,089.6

   54.8

   3,144.4Total

   8,056.8

   603.9

   8,660.7

   9,008.3

   793.6

   9,802.0Note: All figures have been subject to rounding, so figures shown as totals may not sum.




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:








165

---



Fiscal Years Ended December 31,Cost of Sales, in AR$mm except %

   2015

   2014Hydroelectric facilities:Labor costs

   74.0

   45.0%

   55.3

   34.1%Amortization for intangible assets

   19.4

   11.8%

   19.4

   12.0%Royalties

   19.2

   11.6%

   18.1

   11.2%Repairs and Maintenance

   15.3

   9.3%

   10.3

   6.3%Rental and insurance

   7.2

   4.4%

   6.3

   3.9%Material consumption

   5.9

   3.6%

   3.1

   1.9%Fees for third-party services

   2.4

   1.5%

   2.3

   1.4%Energy purchases

   2.2

   1.4%

   25.1

   15.5%Depreciation of property, plant and equipment

   1.8

   1.1%

   1.7

   1.1%Others

   17.1

   10.4%

   20.4

   12.6%Total hydroelectric

   164.6

   100.0%

   162.2

   100.0%Thermal facilities:Labor costs

   287.6

   24.5%

   215.6

   21.3%Energy purchases

   210.2

   17.9%

   218.5

   21.5%Gas consumption

   148.8

   12.7%

   213.8

   21.1%Depreciation of property, plant and equipment

   123.5

   10.5%

   107.1

   10.6%Repairs and Maintenance

   112.2

   9.6%

   74.3

   7.3%Material consumption

   79.7

   6.8%

   42.2

   4.2%Rental and insurance

   69.9

   6.0%

   42.1

   4.2%Fees for third-party services

   49.0

   4.2%

   20.8

   2.1%Penalties

   3.2

   0.3%

   11.4

   1.1%Others

   88.8

   7.6%

   68.6

   6.8%Total thermal

   1,172.9

   100.0%

   1,014.5

   100.0%Total

   1,337.5

   100.0%

   1,176.7

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:


166

---



Fiscal Years Ended December 31,Selling Expenses, in AR$mm except %

   2015

   2014Taxes, rates and contributions

   10.5

   44.6%

   9.1

   50.6%Labor costs

   7.8

   33.3%

   4.8

   26.9%Doubtful accounts

   2.7

   11.6%

   1.5

   8.3%Others

   2.5

   10.5%

   2.5

   14.1%Total

   23.5

   100.0%

   17.9

   100.0%Of which:Hydroelectric

   9.7

   41.2%

   8.4

   46.8%Thermal

   13.8

   58.8%

   9.5

   53.2%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:   Fiscal Years Ended December 31,Administrative Expenses, in AR$mm except %

   2015

   2014Labor costs

   170.6

   65.0%

   105.7

   52.8%Fees for third-party services

   43.8

   16.7%

   50.4

   25.2%Rental and insurance

   13.2

   5.0%

   12.1

   6.1%Depreciation of property, plant and equipment

   4.1

   1.6%

   5.7

   2.8%Taxes, rates and contributions

   2.2

   0.8%

   5.2

   2.6%Others

   28.7

   10.9%

   20.9

   10.5%Total

   262.7

   100.0%

   200.0

   100.0%Of which:Hydroelectric

   26.5

   10.1%

   21.5

   10.8%Thermal

   236.2

   89.9%

   178.5

   89.2%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
    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:


167

---



Fiscal Years Ended December 31,Other Op. Income & Expenses, in AR$mm except %

   2015

   2014Income recognition for arbitral proceedings

   74.8

   624.6%

   -

   -Debit and credit tax

   (54.1)

   (451.6%)

   (30.9)

   (77.4%)Provision for fiscal credits

   (12.1)

   (101.0%)

   (4.0)

   (10.0%)Recovery of receivables

   0.8

   6.6%

   49.5

   124.0%Recovery of penalties

   7.2

   59.9%

   -

   -Provision for contigencies

   (1.6)

   (13.3%)

   (20.1)

   (50.4%)Recovery of insurance

   0.0

   0.3%

   5.6

   14.1%Recovery of tax on gross income

   -

   -

   37.9

   95.1%Other operating costs for contract termination

   -

   -

   (11.4)

   (28.5%)Others

   (3.1)

   (25.7%)

   13.2

   33.0%Total

   12.0

   100.0%

   39.9

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:


168

---



Fiscal Years Ended December 31,Financial Results, in AR$mm except %

   2015

   2014Financial incomeCommercial interest

   192.8

   63.9%

   179.2

   74.4%Financial interest

   78.3

   26.0%

   61.7

   25.6%Arbitral proceedings interest

   30.4

   10.1%

   0.0

   0.0%Subtotal

   301.5

   100.0%

   240.9

   100.0%Financial costFinancial interest

   (284.7)

   79.6%

   (222.8)

   71.7%Fiscal interest

   (48.8)

   13.7%

   (31.7)

   10.2%Commercial interest

   (2.1)

   0.6%

   (1.1)

   0.4%Others

   (21.9)

   6.1%

   (55.2)

   17.7%Subtotal

   (357.5)

   100.0%

   (310.8)

   100.0%Other financial resultsForeign exchange differences, net

   (153.7)

   173.5%

   (417.9)

   508.0%Changes in the fair value of financial instruments

   45.1

   (51.0%)

   116.1

   (141.1%)Results from current value measurement

   20.0

   (22.5%)

   216.4

   (263.1%)Other financial results

   -

   -

   3.2

   (3.8%)Subtotal

   (88.6)

   100.0%

   (82.3)

   100.0%Total

   (144.6)

   100.0%

   (152.1)

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:


169

---



Fiscal Years Ended December 31,Cost of Sales, in AR$mm except %

   2015

   2014Labor costs

   391.7

   58.8%

   298.8

   55.4%Depreciation of property, plant and equipment

   44.9

   6.7%

   42.8

   7.9%Transport and per diem

   30.8

   4.6%

   23.0

   4.3%Repairs and Maintenance

   30.4

   4.6%

   25.7

   4.8%Rental and insurance

   27.4

   4.1%

   23.1

   4.3%Fees for third-party services

   18.4

   2.8%

   13.7

   2.5%Material consumption

   12.5

   1.9%

   52.6

   9.7%Others

   109.9

   16.5%

   60.0

   11.1%Total

   666.0

   100.0%

   539.7

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:   Fiscal Years Ended December 31,Administrative Expenses, in AR$mm except %

   2015

   2014Labor costs

   93.2

   74.2%

   67.1

   73.1%Fees for third-party services

   7.3

   5.8%

   6.0

   6.5%Rental and insurance

   5.2

   4.1%

   3.4

   3.7%Depreciation of property, plant and equipment

   4.5

   3.6%

   4.3

   4.7%Others

   15.4

   12.3%

   11.0

   12.0%Total

   125.6

   100.0%

   91.8

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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:


170

---



Fiscal Years Ended December 31,Other Op. Income & Expenses, in AR$mm except %

   2015

   2014Debit and credit tax

   (12.2)

   98.3%

   (11.1)

   146.1%Recovery of insurance

   -

   -

   2.7

   (35.6%)Others

   (0.2)

   1.7%

   0.8

   (10.4%)Total

   (12.4)

   100.0%

   (7.6)

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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:  Fiscal Years Ended December 31,Financial Results, in AR$mm except %

   2015

   2014Financial incomeFinancial interest

   193.8

   100.0%

   226.1

   100.0%Subtotal

   193.8

   100.0%

   226.1

   100.0%Financial costFinancial interest

   (61.4)

   99.0%

   (58.9)

   99.2%Others

   (0.6)

   1.0%

   (0.5)

   0.8%Subtotal

   (62.0)

   100.0%

   (59.4)

   100.0%Other financial resultsForeign exchange differences, net

   (253.9)

   99.7%

   (138.4)

   97.4%Others

   (0.7)

   0.3%

   (3.6)

   2.6%Subtotal

   (254.7)

   100.0%

   (142.0)

   100.0%Total

   (122.9)

   100.0%

   24.7

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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.


171

---



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:  Fiscal Years Ended December 31,Cost of Sales, in AR$mm except %

   2015

   2014Energy purchases

   2,022.0

   39.0%

   1,878.1

   39.8%Labor costs

   1,859.7

   35.8%

   1,373.2

   29.1%Fees for third-party services

   463.2

   8.9%

   714.3

   15.1%Penalties

   257.3

   5.0%

   233.9

   5.0%Depreciation of property, plant and equipment

   240.1

   4.6%

   211.8

   4.5%Material consumption

   211.4

   4.1%

   205.9

   4.4%Others

   135.3

   2.6%

   99.4

   2.1%Total

   5,189.0

   100.0%

   4,716.5

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:  Fiscal Years Ended December 31,Selling Expenses, in AR$mm except %

   2015

   2014Fees for third-party services

   329.5

   39.5%

   262.8

   39.9%Labor costs

   299.8

   36.0%

   249.0

   37.8%Communication Expenses

   58.7

   7.0%

   39.1

   5.9%Taxes, rates and contributions

   48.5

   5.8%

   42.2

   6.4%Penalties

   24.4

   2.9%

   18.4

   2.8%Doubtful accounts

   24.1

   2.9%

   21.5

   3.3%Others

   48.4

   5.8%

   25.9

   3.9%Total

   833.4

   100.0%

   658.9

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.


172

---



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:   Fiscal Years Ended December 31,Administrative Expenses, in AR$mm except %

   2015

   2014Labor costs

   332.3

   46.7%

   245.5

   48.1%Fees for third-party services

   214.8

   30.2%

   157.8

   30.9%Insurance and rentals

   58.2

   8.2%

   35.2

   6.9%Security surveillance expenses

   24.1

   3.4%

   15.1

   3.0%Others

   82.5

   11.6%

   56.6

   11.1%Total

   711.9

   100.0%

   510.3

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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:  Fiscal Years Ended December 31,Other Op. Income & Expenses, in AR$mm except %

   2015

   2014Provision for contigencies

   (226.4)

   44.9%

   (75.4)

   28.3%Debit and credit tax

   (86.3)

   17.1%

   (65.1)

   24.5%Allowance for uncollectible tax credits

   (80.7)

   16.0%

   (0.1)

   0.0%Other expenses FOCEDE

   (59.6)

   11.8%

   (97.7)

   36.7%Income from services to third-parties

   53.6

   (10.6%)

   33.3

   (12.5%)Voluntary retirements

   (43.2)

   8.6%

   (25.0)

   9.4%Net expenses for technical functions

   (12.9)

   2.6%

   (16.2)

   6.1%Others

   (48.8)

   9.7%

   (19.8)

   7.4%Total

   (504.3)

   100.0%

   (266.1)

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:


173

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Fiscal Years Ended December 31,Financial Results, in AR$mm except %

   2015

   2014Financial incomeFinancial interest

   50.1

   52.1%

   195.7

   81.9%Commercial interest

   46.1

   47.9%

   43.3

   18.1%Subtotal

   96.2

   100.0%

   239.0

   100.0%Financial costFinancial interest

   (360.2)

   62.4%

   (193.6)

   28.0%Commercial interest

   (192.5)

   33.4%

   (459.7)

   66.4%Fiscal interest

   (4.1)

   0.7%

   (5.9)

   0.9%Others

   (20.2)

   3.5%

   (33.3)

   4.8%Subtotal

   (577.0)

   100.0%

   (692.5)

   100.0%Other financial resultsForeign exchange differences, net

   (1,225.1)

   140.8%

   (647.8)

   122.7%Changes in the fair value of financial instruments

   351.8

   (40.4%)

   68.1

   (12.9%)Result from repurchase of financial debt

   -

   -

   44.4

   (8.4%)Others

   3.0

   (0.3%)

   7.3

   (1.4%)Subtotal

   (870.3)

   100.0%

   (528.1)

   100.0%Total

   (1,351.1)

   100.0%

   (981.6)

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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 .


174

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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:  Fiscal Years Ended December 31,2015

   2014Oil (m3/d)Ysur

   5.3

   9.3Petrobras

   4.6

   3.9YPF

   15.8

   2.9Total

   25.7

   16.1Gas (m3/d)Ysur

   65.2

   90.7Petrobras

   366.1

   365.1YPF

   994.5

   355.7Senillosa

   14.2

   -Total

   1,439.9

   811.5Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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:   Fiscal Years Ended December 31,Cost of Sales, in AR$mm except %

   2015

   2014Depreciation of property, plant and equipment

   275.0

   41.7%

   80.6

   40.1%Gas production

   162.8

   24.7%

   37.6

   18.7%Royalties

   119.5

   18.1%

   49.4

   24.6%Fees for third-party services

   71.4

   10.8%

   17.3

   8.6%Labor costs

   10.4

   1.6%

   6.8

   3.4%Others

   20.9

   3.2%

   9.4

   4.6%Total

   660.0

   100.0%

   201.2

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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:


175

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Fiscal Years Ended December 31,Selling Expenses, in AR$mm except %

   2015

   2014Compensation agreements

   74.3

   64.2%

   19.3

   52.9%Taxes, rates and contributions

   35.9

   31.0%

   13.2

   36.1%Others

   5.6

   4.8%

   4.0

   11.0%Total

   115.7

   100.0%

   36.5

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:  Fiscal Years Ended December 31,Administrative Expenses, in AR$mm except %

   2015

   2014Compensation agreements

   101.0

   67.5%

   25.6

   36.0%Labor costs

   20.9

   14.0%

   13.6

   19.2%Fees for third-party services

   19.6

   13.1%

   25.7

   36.2%Others

   8.2

   5.5%

   6.1

   8.6%Total

   149.7

   100.0%

   71.1

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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:   Fiscal Years Ended December 31,Other Op. Income & Expenses, in AR$mm except %

   2015

   2014Res. No, 1/13 Natural Gas Excess Injection Income

   546.8

   117.1%

   127.1

   146.4%Compensation agreements

   (48.3)

   (10.4%)

   (16.7)

   (19.2%)Debit and credit tax

   (32.8)

   (7.0%)

   (12.8)

   (14.8%)Decrease in property, plant and equipment

   (3.0)

   (0.7%)

   (21.8)

   (25.1%)Recovery of expenses

   -

   -

   6.5

   7.5%Others

   4.1

   0.9%

   4.5

   5.1%Total

   466.8

   100.0%

   86.9

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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.


176

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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:  Fiscal Years Ended December 31,Financial Results, in AR$mm except %

   2015

   2014Financial incomeFinancial interest

   11.9

   100.0%

   12.7

   98.3%Commercial interest

   0.0

   0.0%

   0.2

   1.7%Subtotal

   11.9

   100.0%

   12.9

   100.0%Financial costFinancial interest

   (381.5)

   98.0%

   (173.5)

   98.2%Others

   (7.8)

   2.0%

   (3.2)

   1.8%Subtotal

   (389.3)

   100.0%

   (176.7)

   100.0%Other financial resultsChanges in the fair value of financial instruments

   246.2

   60.3%

   144.3

   117.3%Foreign exchange differences, net

   180.7

   44.3%

   (21.3)

   (17.3%)Asset retirement obligation

   (18.9)

   (4.6%)

   -

   -Subtotal

   408.0

   100.0%

   123.0

   100.0%Total

   30.5

   100.0%

   (40.7)

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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.


177

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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:  Fiscal Years Ended December 31,Cost of Sales, in AR$mm except %

   2015

   2014Labor costs

   1.2

   51.1%

   0.5

   23.2%Inventory purchases

   0.8

   33.9%

   1.2

   59.8%Others

   0.3

   15.0%

   0.3

   17.0%Total

   2.3

   100.0%

   2.0

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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:  Fiscal Years Ended December 31,Administrative Expenses, in AR$mm except %

   2015

   2014Taxes, rates and contributions

   32.2

   24.6%

   13.5

   16.6%Directors' and statutory auditors' fees

   31.4

   24.0%

   12.1

   14.8%Fees for third-party services

   31.3

   23.9%

   12.3

   15.1%Labor costs

   19.0

   14.5%

   23.2

   28.4%Directors' options reserve

   0.0

   0.0%

   6.7

   8.2%Others

   16.9

   12.9%

   13.7

   16.8%Total

   130.7

   100.0%

   81.5

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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:


178

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Fiscal Years Ended December 31,Other Op. Income & Expenses, in AR$mm except %

   2015

   2014Gain from discharge/cancellation of TGS Loan

   215.4

   101.7%

   0.0

   -Debit and credit tax

   (3.3)

   (1.6%)

   (0.9)

   (21.7%)Provision for fiscal credits

   (2.5)

   (1.2%)

   (0.2)

   (4.7%)Recovery of expenses

   2.4

   1.2%

   1.7

   40.3%Provision for contingencies

   (0.1)

   (0.1%)

   (0.9)

   (21.8%)Dividends

   0.0

   -

   3.4

   82.3%Others

   (0.1)

   (0.0%)

   1.1

   25.5%Total

   211.8

   100.0%

   4.2

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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 ilustrates the main components of financial results from our holding and others segment for the specified periods:  Fiscal Years Ended December 31,Financial Results, in AR$mm except %

   2015

   2014Financial incomeFinancial interest

   25.5

   100.0%

   13.1

   100.0%Subtotal

   25.5

   100.0%

   13.1

   100.0%Financial costFiscal interest

   (21.7)

   108.1%

   (13.4)

   (1,575.5%)Financial interest

   2.8

   (13.9%)

   16.3

   1,918.3%Others

   (1.2)

   5.8%

   (2.1)

   (242.8%)Subtotal

   (20.1)

   100.0%

   0.8

   100.0%Other financial resultsChanges in the fair value of financial instruments

   1,637.0

   72.7%

   562.2

   62.0%Foreign exchange differences, net

   605.0

   26.9%

   343.0

   37.8%Result from repurchase of Corporate Bonds

   9.9

   0.4%

   2.7

   0.3%Others

   (0.0)

   (0.0%)

   (0.5)

   (0.1%)Subtotal

   2,251.9

   100.0%

   907.5

   100.0%Total

   2,257.4

   100.0%

   921.4

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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.


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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.


180

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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 sheme 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:  Fiscal Years Ended December 31,In GWh

   2014

   2013Net generation

   Purchases

   Total sales

   Net generation

   Purchases

   Total salesHydroelectric facilities:HINISA

   516.1

   33.0

   549.1

   616.1

   216.8

   832.9HIDISA

   322.4

   28.9

   351.3

   420.8

   209.2

   629.9Thermal facilities:CTG

   1,528.2

   596.2

   2,124.4

   1,674.8

   592.8

   2,267.6CTLL

   3,420.9

   80.8

   3,501.7

   1,947.1

   425.1

   2,372.2CTP*

   131.1

   0.0

   131.1

   130.3

   0.0

   130.3CPB

   3,089.6

   54.8

   3,144.4

   2,229.2

   446.7

   2,675.9Total

   9,008.3

   793.6

   9,802.0

   7,018.4

   1,890.5

   8,909.8Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:


181

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Fiscal Years Ended December 31,Cost of Sales, in AR$mm except %

   2014

   2013Hydroelectric facilities:Labor costs

   55.3

   34.1%

   41.7

   17.1%Energy purchases

   25.1

   15.5%

   131.2

   54.0%Amortization for intangible assets

   19.4

   12.0%

   19.4

   8.0%Royalties

   18.1

   11.2%

   21.5

   8.9%Repairs and Maintenance

   10.3

   6.3%

   7.2

   3.0%Rental and insurance

   6.3

   3.9%

   4.3

   1.8%Material consumption

   3.1

   1.9%

   2.3

   0.9%Fees for third-party services

   2.3

   1.4%

   1.7

   0.7%Depreciation of property, plant and equipment

   1.7

   1.1%

   1.7

   0.7%Others

   20.4

   12.6%

   12.0

   4.9%Total hydroelectric

   162.2

   100.0%

   243.0

   100.0%Thermal facilities:Energy purchases

   218.5

   21.5%

   414.9

   35.0%Labor costs

   215.6

   21.3%

   152.8

   12.9%Gas consumption

   213.8

   21.1%

   182.5

   15.4%Depreciation of property, plant and equipment

   107.1

   10.6%

   80.0

   6.8%Repairs and Maintenance

   74.3

   7.3%

   93.3

   7.9%Material consumption

   42.2

   4.2%

   38.4

   3.2%Rental and insurance

   42.1

   4.2%

   40.8

   3.4%Fees for third-party services

   20.8

   2.1%

   21.0

   1.8%Penalties

   11.4

   1.1%

   71.0

   6.0%Liquid fuel consumption

   0.0

   0.0%

   29.3

   2.5%Others

   68.6

   6.8%

   59.7

   5.0%Total thermal

   1,014.5

   100.0%

   1,183.8

   100.0%Total

   1,176.7

   100.0%

   1,426.8

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
 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:


182

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Fiscal Years Ended December 31,Selling Expenses, in AR$mm except %

   2014

   2013Taxes, rates and contributions

   9.1

   50.6%

   53.8

   68.5%Labor costs

   4.8

   26.9%

   4.7

   6.0%Doubtful accounts

   1.5

   8.3%

   17.6

   22.5%Others

   2.5

   14.1%

   2.4

   3.0%Total

   17.9

   100.0%

   78.5

   100.0%Of which:Hydroelectric

   8.4

   46.8%

   22.0

   28.1%Thermal

   9.5

   53.2%

   56.5

   71.9%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
 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:  Fiscal Years Ended December 31,Administrative Expenses, in AR$mm except %

   2014

   2013Labor costs

   105.7

   52.8%

   76.0

   54.6%Fees for third-party services

   50.4

   25.2%

   28.1

   20.2%Rental and insurance

   12.1

   6.1%

   5.1

   3.7%Depreciation of property, plant and equipment

   5.7

   2.8%

   6.4

   4.6%Taxes, rates and contributions

   5.2

   2.6%

   5.7

   4.1%Others

   20.9

   10.5%

   17.8

   12.8%Total

   200.0

   100.0%

   139.0

   100.0%Of which:Hydroelectric

   21.5

   10.8%

   20.2

   14.5%Thermal

   178.5

   89.2%

   118.8

   85.5%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:


183

---



Fiscal Years Ended December 31,Other Op. Income & Expenses, in AR$mm except %

   2014

   2013Recovery of receivables

   49.5

   124.0%

   0.5

   0.2%Recovery of tax on gross income

   37.9

   95.1%

   -

   -Debit and credit tax

   (30.9)

   (77.4%)

   (25.4)

   (8.0%)Provision for contigencies

   (20.1)

   (50.4%)

   -

   -Other operating costs for contract termination

   (11.4)

   (28.5%)

   -

   -Recovery of insurance

   5.6

   14.1%

   246.0

   77.9%Provision for fiscal credits

   (4.0)

   (10.0%)

   (7.7)

   (2.4%)Recognition of March Agreement

   -

   -

   85.2

   27.0%Others

   13.2

   33.0%

   17.3

   5.5%Total

   39.9

   100.0%

   315.9

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:


184

---



Fiscal Years Ended December 31,Financial Results, in AR$mm except %

   2014

   2013Financial incomeCommercial interest

   179.2

   74.4%

   48.4

   75.7%Financial interest

   61.7

   25.6%

   15.5

   24.3%Others

   0.0

   0.0%

   0.0

   0.1%Subtotal

   240.9

   100.0%

   63.9

   100.0%Financial costFinancial interest

   (222.8)

   71.7%

   (176.7)

   81.6%Fiscal interest

   (31.7)

   10.2%

   (22.2)

   10.3%Commercial interest

   (1.1)

   0.4%

   (11.3)

   5.2%Others

   (55.2)

   17.7%

   (6.2)

   2.9%Subtotal

   (310.8)

   100.0%

   (216.5)

   100.0%Other financial resultsForeign exchange differences, net

   (417.9)

   508.0%

   (313.1)

   71.6%Results from current value measurement

   216.4

   (263.1%)

   (159.2)

   36.4%Changes in the fair value of financial instruments

   116.1

   (141.1%)

   34.9

   (8.0%)Other financial results

   3.2

   (3.8%)

   -

   -Subtotal

   (82.3)

   100.0%

   (437.5)

   100.0%Total

   (152.1)

   100.0%

   (590.0)

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
 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:


185

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Fiscal Years Ended December 31,Cost of Sales, in AR$mm except %

   2014

   2013Labor costs

   298.8

   55.4%

   215.8

   54.8%Material comsuption

   52.6

   9.7%

   12.1

   3.1%Depreciation of property, plant and equipment

   42.8

   7.9%

   40.9

   10.4%Repairs and Maintenance

   25.7

   4.8%

   20.4

   5.2%Rental and insurance

   23.1

   4.3%

   3.2

   0.8%Transport and per diem

   23.0

   4.3%

   18.4

   4.7%Fees for third-party services

   13.7

   2.5%

   10.4

   2.6%Others

   60.0

   11.1%

   72.5

   18.4%Total

   539.7

   100.0%

   393.7

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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:  Fiscal Years Ended December 31,Administrative Expenses, in AR$mm except %

   2014

   2013Labor costs

   67.1

   73.1%

   44.3

   65.4%Fees for third-party services

   6.0

   6.5%

   4.3

   6.4%Depreciation of property, plant and equipment

   4.3

   4.7%

   4.2

   6.2%Insurance and rentals

   3.4

   3.7%

   5.1

   7.5%Others

   11.0

   12.0%

   9.8

   14.5%Total

   91.8

   100.0%

   67.7

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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:


186

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Fiscal Years Ended December 31,Other Op. Income & Expenses, in AR$mm except %

   2014

   2013Debit and credit tax

   (11.1)

   146.1%

   (7.0)

   (269.2%)Recovery of insurance

   2.7

   (35.6%)

   9.3

   357.7%Others

   0.8

   (10.4%)

   0.3

   11.5%Total

   (7.6)

   100.0%

   2.6

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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:   Fiscal Years Ended December 31,Financial Results, in AR$mm except %

   2014

   2013Financial incomeFinancial interest

   226.1

   100.0%

   173.0

   100.0%Subtotal

   226.1

   100.0%

   173.0

   100.0%Financial costFinancial interest

   (58.9)

   99.2%

   (41.5)

   99.0%Others

   (0.5)

   0.8%

   (0.4)

   1.0%Subtotal

   (59.4)

   100.0%

   (41.9)

   100.0%Other financial resultsForeign exchange differences, net

   (138.4)

   97.4%

   (122.0)

   106.2%Others

   (3.6)

   2.6%

   7.1

   0.3%Subtotal

   (142.0)

   100.0%

   (114.9)

   100.0%Total

   24.7

   100.0%

   16.2

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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.


187

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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:  Fiscal Years Ended December 31,Cost of Sales, in AR$mm except %

   2014

   2013Energy purchases

   1,878.1

   39.8%

   2,050.3

   49.7%Labor costs

   1,373.2

   29.1%

   790.7

   19.2%Fees for third-party services

   714.3

   15.1%

   665.1

   16.1%Penalties

   233.9

   5.0%

   234.8

   5.7%Depreciation of property, plant and equipment

   211.8

   4.5%

   201.7

   4.9%Materials for works

   205.9

   4.4%

   121.9

   3.0%Others

   99.4

   2.1%

   58.0

   1.4%Total

   4,716.5

   100.0%

   4,122.5

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
   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:   Fiscal Years Ended December 31,Selling Expenses, in AR$mm except %

   2014

   2013Fees for third-party services

   262.8

   39.9%

   198.5

   36.1%Labor costs

   249.0

   37.8%

   179.4

   32.7%Taxes, rates and contributions

   42.2

   6.4%

   34.3

   6.3%Communication Expenses

   39.1

   5.9%

   32.6

   5.9%Doubtful accounts

   21.5

   3.3%

   38.0

   6.9%Penalties

   18.4

   2.8%

   52.7

   9.6%Others

   25.9

   3.9%

   13.7

   2.5%Total

   658.9

   100.0%

   549.1

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:


188

---



Fiscal Years Ended December 31,Administrative Expenses, in AR$mm except %

   2014

   2013Labor costs

   245.5

   48.1%

   152.7

   45.9%Fees for third-party services

   157.8

   30.9%

   107.1

   32.2%Insurance and rentals

   35.2

   6.9%

   21.9

   6.6%Security surveillance expenses

   15.1

   3.0%

   10.4

   3.1%Others

   56.6

   11.1%

   40.6

   12.2%Total

   510.3

   100.0%

   332.6

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:   Fiscal Years Ended December 31,Other Op. Income & Expenses, in AR$mm except %

   2014

   2013Other expenses FOCEDE

   (97.7)

   36.7%

   -

   -Provision for contigencies

   (75.4)

   28.3%

   (36.0)

   44.4%Debit and credit tax

   (65.1)

   24.5%

   (55.8)

   68.8%Income from services to third-parties

   33.3

   (12.5%)

   21.7

   (26.7%)Voluntary retirements

   (25.0)

   9.4%

   (15.9)

   19.6%Net expenses for technical functions

   (16.2)

   6.1%

   (15.5)

   19.2%Allowance for uncollectible tax credits

   (0.1)

   0.0%

   -

   -Others

   (19.8)

   7.4%

   20.4

   (25.2%)Total

   (266.1)

   100.0%

   (81.2)

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:


189

---



Fiscal Years Ended December 31,Financial Results, in AR$mm except %

   2014

   2013Financial incomeFinancial interest

   195.7

   81.9%

   238.0

   82.9%Commercial interest

   43.3

   18.1%

   49.1

   17.1%Subtotal

   239.0

   100.0%

   287.1

   100.0%Financial costCommercial interest

   (459.7)

   66.4%

   (325.8)

   57.6%Financial interest

   (193.6)

   28.0%

   (214.7)

   37.9%Fiscal interest

   (5.9)

   0.9%

   (13.8)

   2.4%Others

   (33.3)

   4.8%

   (11.5)

   2.0%Subtotal

   (692.5)

   100.0%

   (565.8)

   100.0%Other financial resultsForeign exchange differences, net

   (647.8)

   122.7%

   (532.5)

   125.1%Changes in the fair value of financial instruments

   68.1

   (12.9%)

   15.0

   (3.5%)Result from repurchase of financial debt

   44.4

   (8.4%)

   88.9

   (20.9%)Others

   7.3

   (1.4%)

   3.1

   (0.7%)Subtotal

   (528.1)

   100.0%

   (425.5)

   100.0%Total

   (981.6)

   100.0%

   (704.2)

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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.


190

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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 :  Fiscal Years Ended December 31,2014

   2013Oil (m3/d)Ysur

   9.3

   11.2Petrobras

   3.9

   4.2YPF

   2.9

   0.0Total

   16.1

   15.4Gas (m3/d)Ysur

   90.7

   98.1Petrobras

   365.1

   275.6YPF

   355.7

   -Total

   811.5

   373.7Note: All figures have been subject to rounding, so figures shown as totals may not sum.
 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:  Fiscal Years Ended December 31,Cost of Sales, in AR$mm except %

   2014

   2013Depreciation of property, plant and equipment

   80.6

   40.1%

   35.6

   40.4%Royalties

   49.4

   24.6%

   24.03

   27.3%Gas production

   37.6

   18.7%

   11.6

   13.1%Fees for third-party services

   17.3

   8.6%

   9.1

   10.3%Labor costs

   6.8

   3.4%

   3.9

   4.4%Others

   9.4

   4.6%

   4.0

   4.5%Total

   201.2

   100.0%

   88.2

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:


191

---



Fiscal Years Ended December 31,Selling Expenses, in AR$mm except %

   2014

   2013Compensation agreements

   19.3

   52.9%

   1.9

   22.5%Taxes, rates and contributions

   13.2

   36.1%

   5.3

   62.2%Others

   4.0

   11.0%

   1.3

   15.4%Total

   36.5

   100.0%

   8.5

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:  Fiscal Years Ended December 31,Administrative Expenses, in AR$mm except %

   2014

   2013Fees for third-party services

   25.7

   36.2%

   5.3

   20.3%Compensation agreements

   25.6

   36.0%

   7.0

   26.8%Labor costs

   13.6

   19.2%

   7.8

   29.8%Others

   6.1

   8.6%

   6.1

   23.2%Total

   71.1

   100.0%

   26.1

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:  Fiscal Years Ended December 31,Other Op. Income & Expenses, in AR$mm except %

   2014

   2013Res. No, 1/13 Natural Gas Excess Injection Income

   127.1

   146.4%

   22.6

   86.4%Decrease in property, plant and equipment

   (21.8)

   (25.1%)

   (3.6)

   (13.9%)Compensation agreements

   (16.7)

   (19.2%)

   0.0

   -Debit and credit tax

   (12.8)

   (14.8%)

   (1.7)

   (6.5%)Recovery of expenses

   6.5

   7.5%

   6.9

   26.4%Others

   4.5

   5.1%

   2.0

   7.7%Total

   86.9

   100.0%

   26.1

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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.


192

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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: Fiscal Years Ended December 31,Financial Results, in AR$mm except %

   2014

   2013Financial incomeFinancial interest

   12.7

   98.3%

   2.0

   97.0%Others

   0.2

   1.7%

   0.1

   3.0%Subtotal

   12.9

   100.0%

   2.1

   100.0%Financial costFinancial interest

   (173.5)

   98.2%

   (58.5)

   97.3%Others

   (3.2)

   1.8%

   (1.6)

   2.7%Subtotal

   (176.7)

   100.0%

   (60.1)

   100.0%Other financial resultsChanges in the fair value of financial instruments

   144.3

   117.3%

   38.1

   146.4%Foreign exchange differences, net

   (21.3)

   (17.3%)

   (12.1)

   (46.4%)Subtotal

   123.0

   100.0%

   26.0

   100.0%Total

   (40.7)

   100.0%

   (32.0)

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
 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.


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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:  Fiscal Years Ended December 31,Cost of Sales, in AR$mm except %

   2014

   2013Inventory purchases

   1.2

   59.8%

   0.2

   20.0%Labor costs

   0.5

   23.2%

   0.4

   45.3%Others

   0.3

   17.0%

   0.3

   34.6%Total

   2.0

   100.0%

   0.8

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:  Fiscal Years Ended December 31,Administrative Expenses, in AR$mm except %

   2014

   2013Labor costs

   23.2

   28.4%

   17.8

   22.8%Taxes, rates and contributions

   13.5

   16.6%

   18.1

   23.2%Fees for third-party services

   12.3

   15.1%

   11.8

   15.0%Directors' and statutory auditors' fees

   12.1

   14.8%

   12.5

   16.0%Directors' options reserve

   6.7

   8.2%

   8.9

   11.4%Others

   13.7

   16.8%

   9.1

   11.6%Total

   81.5

   100.0%

   78.2

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
  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:


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Fiscal Years Ended December 31,Other Op. Income & Expenses, in AR$mm except %

   2014

   2013Dividends

   3.4

   82.3%

   4.5

   355.0%Recovery of expenses

   1.7

   40.3%

   3.1

   241.2%Provision for contingencies

   (0.9)

   (21.8%)

   (0.4)

   (31.3%)Debit and credit tax

   (0.9)

   (21.7%)

   (0.9)

   (68.4%)Provision for fiscal credits

   (0.2)

   (4.7%)

   (2.3)

   (183.9%)Others

   1.1

   25.5%

   (2.7)

   (212.6%)Total

   4.2

   100.0%

   1.3

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
 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: Fiscal Years Ended December 31,Financial Results, in AR$mm except %

   2014

   2013Financial incomeFinancial interest

   13.1

   100.0%

   4.5

   100.0%Subtotal

   13.1

   100.0%

   4.5

   100.0%Financial costFinancial interest

   16.3

   1,918.3%

   16.5

   230.6%Fiscal interest

   (13.4)

   (1,575.5%)

   (4.9)

   (68.3%)Others

   (2.1)

   (242.8%)

   (4.5)

   (62.3%)Subtotal

   0.8

   100.0%

   7.1

   100.0%Other financial resultsChanges in the fair value of financial instruments

   562.2

   62.0%

   207.9

   65.4%Foreign exchange differences, net

   343.0

   37.8%

   113.5

   35.7%Result from repurchase of Corporate Bonds

   2.7

   0.3%

   -

   -Others

   (0.5)

   (0.1%)

   (3.7)

   (1.2%)Subtotal

   907.5

   100.0%

   317.7

   100.0%Total

   921.4

   100.0%

   329.4

   100.0%Note: All figures have been subject to rounding, so figures shown as totals may not sum.
 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.


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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.


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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 millon, 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.”


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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 extensions of loans for consumption (mutumms)) 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;(mutuumm); allowing any amounts discussed thereunder to be offset with outstanding balances of LVFVDs. The LVFVDs were issued on July 16, 2015 to offset the debt under the loan for consumption (mutuum) and assignment of secured receivables agreement entered into to pay for the higher salaries cost. As of December 31, 2015, the total debt under these loans (mutumms 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.


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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: At December 31,2015

   

   2014

   

   2013(in millions of pesos)Cash at the beginning of the year

   

   335.2

   

   341.7

   

   167.8Net cash generated by operating activities

   

   4,580.7

   

   2,574.2

   

   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

   

   2,637.4

   

   (147.7)

   

   (76.9)Foreing currency exchange difference generated by cash and cash equivalent

   77.8

   

   39.1

   

   51.2Cash and cash equivalent at the end of the year

   

   516.6

   

   335.2

   

   341.7


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Net cash generated by operating activities Net cash generated by operating activities amounted to Ps. 4,580.7 million for the year ended December 31, 2015, attributable principally to net income adjustements 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. 796.9 million for the year ended December 31, 2015. These changes in operating assets and liabilities were primarily due to a Ps. 1,189.6 million increase in proceeds from account payables and loans 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. 1,712.3 million increase in trade and other receivables. Edenor understands the debt with CAMMESA as a type of assistance program to cope with Edenor’s need of cash for specific purposes. All these supplementary measures were used by the Argentine Government so as to avoid increasing the tariffs. Net cash generated by operating activities amounted to Ps. 2,574.2 million for the year ended December 31, 2014, attributable principally to net income adjustements 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. 3,407.6 million for the year ended December 31, 2014. These changes in operating assets and liabilities were primarily due to a Ps. 3,455.5 million increase in proceeds from accounts payable and loans (mutuum) 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 adjustements 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 payable and loans 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. **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 equivalent were partially offset by net cash and cash equivalents


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.


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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 equivalent were partially offset by net cash and cash equivalents 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 equivalent 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. 2,637.4 million fortheyear ended December 31, 2015, principally due to Ps. 4,793.3 million generated by borrowings at our different segments and Ps. 998.8 million of capital contributions that we received. These uses 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 used in our financing activities amounted to Ps. 147.7 million fortheyear ended December 31, 2014, principally due to payments of Ps. 2,821.4 made in connection with bank and financial borrowings (including principal and interest) by all of our segments. These uses of cash and cash equivalents were partially offset by Ps. 2,519.4 million of net cash and cash equivalent generated by borrowings at our different 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 equivalents were partially offset by Ps. 656.5 million of net cash and cash equivalent generated by borrowings at our different segments and Ps. 25.4 million generated in connection with discontinued operations at our distribution segment. Capital Expenditures The following table sets forth our capital expenditures for the years ended December 31, 2015 and 2014:  At December 31,2015

   

   2014(in millions of pesos)Generation

   Ps.

   1,515.6

   

   Ps.

   387.0Distribution

   

   2,518.2

   

   

   1,701.8Oil and gas

   

   2,213.6

   

   

   618.8Holding and others

   

   0.5

   

   

   1.6Ps.

   6,247.9

   

   Ps.

   2,709.2
  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.


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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 real property with the aim of concentrating centralized functions and reducing rental costs and the risk of future increases in rent, for a total amount of Ps.439.2 million, which was fully paid, as of December 31, 2015. 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 Consolidated Financial Statements. 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.


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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. 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


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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. 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.


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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; 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.$11,799,879 plus VAT and Ps. 7,217,000 plus VAT, to conduct major maintenance works at Loma de la Lata’s plant. The financing will (i) be disbursed in different installments according to a work plan, (ii) paid in 36 equal and consecutive installments (with the possibility to extend the maturity up to 12 months) the first of them maturing one month after the end of the works and the availability of the unit LDLTAG02, (iii) bear interest at a variable rate, and (iv) be secured with the assignment and transferr to CAMMESA of 100% of its current and future receivables derived from theRemuneración Adicional Directa a Generadoresand from theRemuneración de los Mantenimientos no Recurrentes, (except for the ones already assigned to other projects or agreements), both accrued and to be accrued, excluding those receivables already assigned. After the end of the works, Loma de la Lata ir required to have an availability of 90%. If Loma de la Lata fails to accomplish the required availability, it shall pay the whole applicable installment on the stipulated maturity date. After unit LDLATG02's maintenance was completed, the unit became operative on December 21, 2014. Loma de la Lata later requested the execution of an Addendum to the Loan Agreement to conduct the maintenance of unit LDLATG03. On August 20, 2015, Addendum I to this Agreement was executed, which extended the financing to an amount equivalent in Pesos to U.S.$ 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.


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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. 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.


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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 outstading 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. 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.


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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. 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


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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 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.


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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. 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 outstading 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 montlhy 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 moths 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.


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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. Payments due by periodTotal

   

   Less than 1 year

   

   1 - 3 years

   

   3 - 5 years

   

   More than 5 years

   

   UntilPayments ObligationsDebt obligations and commercial debt obligations (1)

   10.753,7

   

   2.203,6

   

   2.220,1

   

   3.794,6

   

   2.535,4Capital Expenditures(2)

   4.246,8

   

   3.311,1

   

   476,3

   

   149,3

   

   310,2Royalty payments(3)

   391,5

   

   25,1

   

   52,3

   

   52,4

   

   261,7Operating leases(4)

   78,3

   

   47,9

   

   30,1

   

   0,3

   

   -15.470,3

   

   5.587,7

   

   2.778,8

   

   3.996,5

   

   3.107,3-

   

   -Purchase ObligationsNatural gas purchase agreements for electricity generation(5)

   1.393,2

   

   1.393,2

   

   -

   

   -

   

   -

   

   2016Natural gas transportation agreement(6)

   99,0

   

   4,0

   

   7,9

   

   7,9

   

   79,2

   

   20461.492,2

   

   1.397,1

   

   7,9

   

   7,9

   

   79,2OtherAccrued fines and penalties(7)

   1.253,1

   

   116,7

   

   1.136,4

   

   -

   

   -Total

   18.215,6

   

   7.101,5

   

   3.923,2

   

   4.004,5

   

   3.186,5 **** ****
 (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.”




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Payments due by periodTotal

   

   Less than 1 year

   

   1 - 3 years

   

   3 - 5 years

   

   More than 5 yearsSales ObligationsElectric Power (1)

   2,508.9

   

   1,960.1

   

   548.7Total

   2,508.9

   

   1,960.1

   

   548.7

   

   -

   

   -
  
 (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.   
  212


Item 6.  Directors, Senior Management and Employees General We are managed by our board of directors, which is composed of ten directors and equal or less number of alternate directors subject to the Annual Shareholders’ Meeting decision. Five of our ten directors are independent according to the criteria and requirements for independent directors under applicable Argentine law. Four of our alternate directors are independent. The directors are elected on a staggered basis each year (three directors at a time in each of the first two years of a three-year cycle, and four in the third year). Our directors are elected for a three-fiscal-year term and can be reelected except for our independent directors, who cannot be reelected for successive terms. Pursuant to section 12 of our by-laws, any shareholder or group of shareholders who holds more than 3% of our capital stock (each, a “Proposing Shareholder”) may require our board of directors to give notice to our other shareholders of the candidate or candidates to be nominated by such shareholder or group of shareholders at our shareholders’ meeting for election of our board of directors.  To such end, the relevant slate executed by the Proposing Shareholder or its representatives, as applicable, will be sent to the chairman of our board of directors, no less than five business days prior to the date of the relevant shareholders’ meeting, to be published in the Bulletin of the Buenos Aires Stock Exchange at least two days prior to the date of our shareholders’ meeting.  To facilitate the formation of the slates and the record of the candidates’ names, as of the date of the first notice calling for the relevant meeting, a special book will be made available to our shareholders at our registered office in which the names of the candidates proposed by any proposing shareholder shall be recorded.  Similarly, our board of directors will propose to the shareholders’ meeting the candidates for election by slate or, if election by slate is objected to, individually.  The names of the candidates proposed by the board will be made known to all our shareholders together with the slates proposed by the Proposing Shareholder.  In addition, no proposal for the election of directors may be made, either before or during the shareholders’ meeting, unless written evidence of acceptance of office by the proposed candidates is submitted to us.  Such slate or person, as the case may be, who obtains the vote of a majority of the shares present at the meeting will be declared elected.  If no slate obtains such majority, a new vote will be taken in which the two slates or persons that obtained the largest number of votes will take part, and the slate or person who obtains the largest number of votes will be declared elected.  The preceding rules will not prevent a shareholder who is present at the shareholders’ meeting from proposing candidates not included in the proposals from our board of directors. Duties and Liabilities of Directors Pursuant to section 59 of theLey General de Sociedades No. 19,550(Argentine Business Companies Law, or “BCL”), directors have the obligation to perform their duties with the loyalty and the diligence of a prudent business person.  Directors are jointly and severally liable to the company, the shareholders and third parties for the improper performance of their duties, for violating the law, the company’s by-laws or regulations, if any, and for any damage caused by fraud, abuse of authority or negligence, as provided for in Section 274 of the BCL.  The following are considered integral to a director’s duty of loyalty: (1) the prohibition on using corporate assets and confidential information for private purposes; (2) the prohibition on taking advantage, or to allow another to take advantage, by action or omission, of the business opportunities of the company; (3) the obligation to exercise board powers only for the purposes for which the law, the company’s by-laws or the shareholders’ or the board of directors’ resolution have intended; and (4) the obligation to take strict care so that acts of the board are not contrary, directly or indirectly, to the company’s interests.  A director must inform the board of directors and the supervisory committee of any conflicting interest he or she may have in a proposed transaction and must abstain from voting thereon. A director shall not be responsible for the decisions taken in a board of directors’ meeting as long as he or she states his or her opposition in writing and informs the supervisory committee before any claim arises.  A director’s decision approved by the company’s shareholders releases that director of any responsibility for his decision, unless shareholders representing 5% or more of the company’s capital stock object to that approval, or the decision was taken in violation of applicable law or the company’s by-laws.  The company is entitled to file judicial actions against a director if a majority of the company’s shareholders at a shareholders’ meeting request that action.


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Under the BCL, the board of directors is in charge of the administration of the company and, therefore, makes any and all decisions in connection therewith, as well as those decisions expressly provided for in the BCL, the company’s by-laws and other applicable regulations.  Furthermore, the board is generally responsible for the execution of the resolutions passed by shareholders’ meetings and for the performance of any particular task expressly delegated by the shareholders.  In general, our board of directors may be more involved in operating decision-making than might be customary in other jurisdictions.  Under the BCL, the duties and responsibilities of an alternate director, when acting in the place of a director on a temporary or permanent basis, are the same as those discussed above for directors.  They have no other duties or responsibilities as alternate directors. Board of Directors The following table sets forth information about the members and alternate members of our board of directors, five of whom have terms that expired in December 2016, while five have terms that will expire in December 2017 and the remaining ten have terms that will expire in December 2018. In accordance with Argentine law, each member maintains his or her position on the board until a new shareholders’ meeting elects new directors. 
  (1)Independent Directors under Argentine law and under Rule 10A-3 under the Securities Exchange Act of 1934, as amended.  Marcos Marcelo Mindlin, Damián Miguel Mindlin and Alejandro Mindlin are brothers.  There are no other family relationships between the other members of our board of directors.


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Senior Management The table below sets forth certain information concerning our senior management: Name

   Position

   AgeMarcos Marcelo Mindlin

   Executive Director

   52Gustavo Mariani

   Chairman, Co-Chief Executive Officer, Chief Generation Manager and Chief of New Business

   45Ricardo Alejandro Torres

   Vice Chairman, Co-Chief Executive Officer and Chief Financial Officer and Chief of Distribution

   58Damián Miguel Mindlin

   Chief Investment Portfolio Manager

   50Horacio Turri

   Oil & Gas Director

   55Gabriel Cohen

   Corporate Financing Director

   51Orlando Escudero

   Operations and Maintenance Co-Director

   58Ruben Turienzo

   Commercial Director

   51Mario Ricardo Cebreiro

   Human Recourses Director and Operations and Maintenance Co-Director

   63Gerardo Paz

   Legal Director

   47Mauricio Penta

   Administration, Tax, Accounting, Managerial Control, Purchasing and Insurance Director

   39
  The business address of each of our current directors and executive officers is Ortiz de Ocampo 3302, Building #4, City of Buenos Aires, Argentina (C1425DSR). Set forth below are brief biographical descriptions of the members of our board of directors and our senior management. Gustavo Marianiwas born on September 9, 1970. Mr. Mariani holds a degree in Economics from the Universidad de Belgrano and a Master’s degree in Business Administration from the Universidad del CEMA (Center of Macroeconomic Studies) and also is a Chartered Financial Analyst (CFA) since 1998.  He has been a member of our board of directors since November 2005 and elected as Chairman in 2013.  Mr. Mariani joined Grupo Dolphin in 1993 as an analyst and also served as an investment portfolio manager.He currently serves as Director of Bodega Loma la Lata S.A., CPB, CTG, Loma de La Lata, GMA Warrants S.A., Transener, Compañía de Inversiones S.A., Citelec, Comunicaciones y Consumo S.A., Consultores Fund Management S.A., Dolphin Créditos S.A., Dolphin Créditos Holding S.A., Dolphin Finance S.A, Grupo Mtres S.A., Dolphin Inversora S.A., IEASA, EASA, Transba, Edenor, Energía Distribuida S.A., PEPCA, Grupo Dolphin S.A. Grupo Dolphin Holding S.A., HIDISA, HINISA, Nihuiles, Diamante, IPB, Orígenes Seguros de Vida S.A., Orígenes Seguros de Retiro S.A., Pampa Comercializadora S.A., Pampa F&F LLC, Pampa Participaciones II, Pampa Participaciones, Transelec, Petrolera Pampa, CIESA, Sitios Argentinos S.A. and TGS and as alternate liquidator of CAM Gerenciadora S.A. (en liquidación).Also, Mr. Mariani is the executive secretary of the management board of “Fundación Pampa Energía Comprometidos con la Educación.” Ricardo Alejandro Torreswas born on March 26, 1958.  Mr. Torres holds a degree in Accounting from the Universidad de Buenos Aires and a Master’s degree in Business Administration from the Instituto de Altos Estudios Empresariales-Escuela de Negocios de la Universidad Austral.  He has been a member of our board of directors since November 2005 and was elected as Vice Chairman in 2013.  Mr. Torres is, since March 2012, Chairman of the Board of Directors of Edenor.  Mr. Torres has also held a post as a profesor of Tax and Finance at the school of Economics of theUniversidad de Buenos Aires.He currently serves as director of Bodega Loma la Lata S.A., CPB, CTG,Loma de la Lata, Energía Distribuida S.A., EASA, PEPCA,HIDISA, HINISA, IEASA, Diamante, Nihuiles,IPB, Pampa Comercializadora S.A., PISA, Pampa Participaciones, Pampa Participaciones II, Petrolera Pampa, Ponderosa Assets Holding I LLC. Ponderosa Assets Holding II LLC, RT Warrants S.A., Transelec, Pop Argentina S.R.L. (Partner), Todos Capital S.R.L. (Partner);Citelec (alternate director), Orígenes Seguros de Vida S.A., Orígenes Seguro de Retiro S.A., Transba (alternate director).Also, Mr. Torres is the vocal of the management board of “Fundación Pampa Energía Comprometidos con la Educación.”


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Marcos Marcelo Mindlinwas born on January 19, 1964.  He has been a member of our board of directors since 2006.  He is a member of the Council of the Americas.  Mr. Mindlin received a Master of Science in Business Administration from the Universidad del CEMA (Center of Macroeconomic Studies).  He also holds a degree in Economics from theUniversidad de Buenos Aires. In 2008, Mr. Mindlin founded and since that time has directed a charity foundation called “Fundación Pampa Energía Comprometidos con la Educación” whose purpose is to improve childhood development and education.  Mr. Mindlin is also a member and was Chairman of the Board of the Executive Committee of Tzedaka, a leading Jewish-Argentine foundation.  From 1989 to 2004, Mr. Mindlin served as the founder, Senior Portfolio Manager and a shareholder of Grupo Dolphin.  From 1991 to 2003, Mr. Mindlin was also a shareholder, Vice-Chairman and Chief Financial Officer of Inversiones y Representaciones S.A. (IRSA), a leading Argentine real estate company listed on the New York Stock Exchange.  In November 2003, Mr. Mindlin resigned from IRSA to focus his work on Grupo Dolphin.  Mr. Mindlin has extensive expertise in Latin America through his role as Chairman of the board of directors of Grupo Dolphin and several of its affiliates.  From 1999 to 2004, Mr. Mindlin also served as Vice President of Alto Palermo S.A. (a leading owner and operator of shopping centers in Buenos Aires), Vice President at Cresud S.A.I.C. (one of the largest listed agricultural companies in Argentina) and as Director and member of the Executive Committee of Banco Hipotecario, the leading mortgage bank in Argentina.Mr. Mindlin also serves as director of Edenor, Grupo Dolphin S.A., Dolphin Finance S.A., EASA, IEASA, HINISA, HIDISA, Transelec, Loma de la Lata, Güemes, Diamante, Nihuiles, Dolphin Créditos S.A., Dolphin Créditos Holding S.A., Dolphin Inversora S.A., Piedra Buena, IPB, Petrolera Pampa, Pampa Participaciones II S.A., Energía Distribuida S.A., Pampa Participaciones S.A., Bodega Loma la Lata S.A., PEPCA, Grupo Dolphing Holding S.A., Orígenes Seguros de Retiro S.A., Orígenes Seguros de Vida S.A.Consultores Fund Management, Sitios Argentinos S.A.,Pampa Comercializadora S.A.and Mindlin Warrants S.A. Damián Miguel Mindlinwas born on January 3, 1966.  He has been a member of our board of directors since November 2005.  Mr. Mindlin joined Grupo Dolphin in 1991 as a shareholder and a director.  Since November 2003, Mr. Mindlin has served as Investment Portfolio Manager of Grupo Dolphin.  Also, Mr. Mindlin is the vice president of management board of “Fundación Pampa Energía Comprometidos con la Educación”.Additionally, he currently serves as director ofEdenor (alternate director),Grupo Dolphin S.A., Dolphin Finance S.A., EASA, IEASA, HINISA, HIDISA, Transelec, Pampa Participaciones S.A.,  Güemes, Diamante, Nihuiles, Piedra Buena, IPB, Dolphin Créditos S.A., Dolphin Créditos Holding.S.A., Dolphin Inversora S.A., Petrolera Pampa, Pampa Participaciones II S.A., Energía Distribuida S.A., Pampa Inversiones, Bodega Loma la Lata S.A., PEPCA(alternate director), Citelec(alternate director), Grupo Dolphin Holding S.A., ARPHC S.A., Estancia María S.A., Pampa Comercializadora S.A., Consultores Fund Management, Grupo Mtres S.A., Pampa F&F andDMM Warrants S.A., Orígenes Seguros de Vida S.A., Orígenes Seguros de Retiro S.A. and Sitios Argentinos S.A. and as Liquidator of CAM Gerenciadora S.A. (en liquidación). Diego Martín Salaverriwas born on August 7, 1964. He has been a member of our board of directors since June 2006.  He is a founding partner of the Argentine law firm of Salaverri, Dellatorre, Burgio & Wetzler Malbrán.  He earned a degree in law in 1988 from the Universidad Católica Argentina, Buenos Aires.  He is member of the board of directors of Edenor(alternate director), Estancia María S.A., Socotherm Amercias S.A. and ARPHC S.A. He is also a member of the supervisory committee of Dolphin Créditos S.A., Dolphin Créditos Holding S.A., Grupo Dolphin Holding S.A., Dolphin Finance S.A., Orígenes Seguros de Retiro S.A., Orígenes Seguros de Vida S.A., CIESA, and TGS. Until 2007, he was a member of the board of directors of EASA.  Mr. Salaverri resigned from his position as director of EASA at the November 14, 2007 meeting of the board of directors of EASA.  Mr. Salaverri is also an alternate member of the statutory audit committee of GSF S.A. and Partners I S.A.   **


216

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Carlos Tovagliariwas born on December 27, 1959.  Mr. Tovagliari has been an alternate director of the Company and Güemes since 2013.  He also serves as vicepresident and CEO of Pop Argentina S.R.L.  Previously, he worked at Inversiones y Representaciones S.A. and at Petersen Thiele y Cruz S.A. Mr. Tovagliari holds a degree in Industrial Engineering from the Universidad de Buenos Aires. Clarisa Lifsicwas born on July 28, 1962.  On April 29, 2016 she joined the Company as a member of the board of directors.  Mrs. Lifstic is presently Secretary of State in the Ministry of Communication. She is also Director of Axis Investment and Director and Co-founder of Fondo de Inversion en Tierras SA. She was formerly Chairman of the Board and CEO of Banco Hipotecario from 2003 to 2009. Prior to that, she was Director of the Board of Cresud, Dolphin Fund Plc and Cactus Argentina, among others. Mrs. Lifstic holds a Bachelor in Economics from the University of Buenos Aires, where she graduated with honors and a Master of Science in Management from the Massachusetts Institute of Technology (Summa Cum Laude). Santiago Alberdiwas born on April 6, 1983.  On April 29, 2016 joined the Company as a member of the board of directors. Previously to joining the Company he worked at the Instituto de Juegos de Apuestas de la Ciudad autónoma de Buenos Aires. Mr. Alberdi holds a lawyer degree from the Universidad de Buenos Aires. Julio Suaya Demaríawas born on November 29, 1974. On April 29, 2016 joined the Company as a member of the board of directors. Currently Mr. Suaya Demaría has a main role as a Manager for an International Turism company. In the past he has developed his professional skills with critical leadership roles in various business units in companies from diverse industries such a Telefonica de Argentina, Cohen Sociedad de Bolsa and MP&M Comunicacion among others. Mr. Suaya Demaría has a degree in Business Administration from the Universidad Católica Argentina. Javier Campos Malbránwas born on June 27, 1958.  On April 29, 2016 he joined the Company as a member of the board of directors.  Mr. Campos Malbrán is an experienced entrepreneur and an investor in different areas. He is Founder and CEO at Casa Cor events Brasil’s,  #1 Expo of Architecture & Design from1987 to 2004 and President of its Spain/Portugal Branch from 1992 to 2010.  He is currently Owner and CEO of 107.9 FM Station in Buenos Aires and President and Founder of La Colina Golf & Polo real state project in Opendoor Bs. As. Pablo Díazwas born on June 26, 1957.  Mr. Díaz has been an alternate director of our company since June 2006.  Previously, he was an advisor to the federalSubsecretaría de Energía Eléctrica(the Sub-Secretariat for Electrical Energy).He currently serves as director of Piedra Buena (alternate), Güemes (alternate), Loma de la Lata (alternate), Citelec, Transener, Edenor, Transba (alternate), HIDISA (alternate), HINISA (alternate), IEASA (alternate), Diamante (alternate), Nihuiles (alternate), IPB (alternate), Pampa Comercializadora S.A.(alternate), Pampa Participaciones S.A. (alternate), Pampa Participaciones II S.A. (alternate), Transelec. Alejandro Mindlinwas born on August 30, 1975.  Mr. Mindlin has been an alternate director of Pampa since June 2006.  Also, Mr. Mindlin is a member of the management board of “Fundación Pampa Energía Comprometidos con la Educación”.   Mr. Mindlin has a B.A. in Middle Eastern History and Languages from Tel Aviv University, as well as a film director’s degree. Gabriel Cohenwas born on September 11, 1964.  Mr. Cohen has been an alternate director of Pampa since June 2006, and he is presently vicepresident of Transener and president of CITELEC S.A. and TRANSBA S.A.  Mr. Cohen holds a degree in Business Administration from the Universidad de Buenos Aires.  In addition, he worked for 15 years at Citibank, N.A., serving at the bank’s offices in Buenos Aires and Paris, holding different positions in financial control, treasury, investment banking, corporate banking and debt restructuring processes.He currently serves as alternate director of Bodega Loma la Lata S.A., Güemes, EASA, Energía Distribuida S.A., HIDISA, HINISA, IEASA, Diamante, Nihuiles, IPB, Pampa Comercializadora S.A., Pampa Participaciones S.A., Pampa Participaciones II S.A., Transelec. Carlos Perez Bellowas born on September 19, 1954.  He has been an alternate director of Pampa since April 2013.  Mr. Perez Bello also serves as director of Mantero, Arcucci&Asociados and of Pereira, Teliz, Bonin & Asociados and is the president of theComisión de Cambio y Competitividad del CPCECABA, of the red de Apoyo del Club Argentino de Negocios de Familia and of the red de Apoyo del Centro de Entrepreneurship of the IAE.  Mr. Perez Bello holds a degree in Public Accounting from the Universidad de Belgrano.  Also Mr. Perez Bello has a post graduate degree in Commercialization and Agro Business and a master’s degree in Business Administration. Brian Hendersonwas born on September 23, 1945. Mr. Henderson is a technical advisor of Grupo Dolphin S.A.  Previously, Mr. Henderson served as director of the Latin America Region of National Grid, Silica Networks and Manquehue Net Telecomunicaciones (Chile) and vicepresident of commercial operations of Energy Charter Oak for America, Africa and Europe. Before Charter Oak Energy, Mr Henderson served as vicepresident and CEO of Deutsche Babcock Riley, Canada Inc. Mr. Henderson is the 2nd Vicepresident of Transba.  He is also director of Güemes, Citelec, HINISA(alternate director), HIDISA(alternate director), Diamante(alternate director), Nihuiles(alternate director), Pampa Participaciones II S.A.(alternate director), Transelec(alternate director), Transener(alternate director), Energía Distribuída S.A.(alternate director), Transba, Bodega Loma la Lata S.A.(alternate director). He holds a degree in Industrial Engineering from the Hebum University. Mariano Batistellawas born on July 31, 1982. He has been an alternate director of the Company since 2013. He currently works as Investor Relations Officer, Planning Manager and Special Projects Manager of the Company. Mr. Batistella worked in investment banking at Goldman Sachs. Mr. Batistella holds a degree in business administration from the Universidad de San Andres and has a postgraduate degree in finance from the same institution.  He currently serves as alternate director for Edenor, CIESA and TGS. Gerardo Carlos Pazwas born on October 24, 1968. Mr Paz holds a law degree from the Universidad Nacional de Córdoba and a Masters in Business Law form the Escuela Superior de Economía y Adminsitración de Empresas.  He currently serves as alternate auditor for CAMMESA, director of Termoeléctrica San Martín S.A. and Termoeléctrica Manuel Belgrano S.A., and alternate director of EASA, Edenor, HIDISA, HINISA, Pampa Comercializadora S.A., Petrolera Pampa and Güemes.


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José María Tenaillónwas born on October 23, 1979.  On April 29, 2016 he joined the Company as an alternate member of the board of directors.  Mr. Tenaillon worked in Severgnini, RObiola Grinberg y Larrechea from 1998 to 2000, in Liendo & Castiñeyras from 2000 to 2005, in the CNV during 2005 and 2006, in Zang, Bergel & Viñes during 2006 and 2007, in Marval, O Farrell y Mairal from 2007 to 2010. Since 2010, Mr. Tenaillon works in Fondo de Garantía de Sustentabilidad. Mr. Tenaillon holds a lawyer degree from the Universidad de Buenos Aires. Juan Francisco Gómezwas born on March 17, 1988.  On April 29, 2016 he joined the Company as an alternate member of the board of directors.Mr. Gómez works at Fondo de Garantía de Sustentabilidad since 2010.Mr. Gómez holds a degree in Economics from the Universidad de Buenos Aires and a master’s degree (thesis pending) in Economics from Universidad de Buenos Aires. Mariano González Alzagawas born on December 21, 1975.  On April 29, 2016 he joined the Company as an alternate member of the board of directors.  Mr. Gonzalez Alzaga worked at Edesur S.A. from 1998 to 2000. Mr. Gonzalez Alzaga holds a degree in business administration from the Universidad Torcuato Di Tella. Horacio Turriwas born on March 19, 1961.  Mr. Turri is an industrial engineer and received his degree at Instituto Tecnológico Buenos Aires.  From March 2000 to June 2008, Mr. Turri served as Chief Executive Officer of Central Puerto S.A.  Since August 1997, to March 2000, he was Chief Executive Officer of Hidroeléctrica Piedra del Águila.  From 1994 to 1997 he was Chief Executive Officer of Gener Argentina S.A.  Prior to 1994, he was Development Assistant Manager at Central Puerto S.A. He worked as an analyst of investment projects in the oil, gas and electricity sectors at SACEIF Luis Dreyfus from 1990 to 1992. He also worked at Arthur Andersen & Co. and Schlumberger Wireline in 1987-1990 and 1985-1987, respectively. Orlando Escuderowas born on January 2, 1958. Mr. Escudero has worked in the Company since 2007. He also worked at Central Puerto S.A. and Hidroeléctrica Piedra del Aguila S.A. from 1992 to 2007 and at Segba S.A. from 1983 to 1992.  Mr. Escudero holds a degree in mechanical and naval engineering from the Universidad de Buenos Aires and a master’s degree in business administration, also from the Universidad de Buenos Aires. Ruben Turienzowas born on July 23, 1964. Mr. Turiezo has worked in the Company since 2007. He also worked at Hidroeléctrica Piedra del Aguila S.A. and Central Puerto S.A. He was also a director of CAMMESA for seven years and president of AGEERA. Mr. Turienzo holds a degree in electrical engineering from the Universidad Nacional del Sur and holds a master’s degree in business from the Universidad del CEMA. Mario Ricardo Cebreirowas born on April 12, 1953.  Mr. Cebreiro has a degree in electrical engineering from the Universidad Nacional del Sur.  From June 2008 to August 2011, he served as Chief of Central Piedra Buena.  From August 2004 to April 2008, he was Chief Operating Officer of Distrocuyo.  From September 2000 to 2004 he was Chief of Research and Development at Electricité de France.  Prior to 2000, he was Chief Operating Officer of Transba, Chief Operating Officer of ESEBA Generación and Chief of Central Termoeléctrica Necochea. Mauricio Pentawas born on July 23, 1976. Mr. Penta has worked in the Company since 2007.  Mr. Penta is an accountant and holds a degree in accounting from the UADE and has a master’s degree in business administration, from the IAE. Independence of the Members of Our Board of Directors Pursuant to CNV regulations, a director shall not be considered independent in certain situations, including where a director: (1)owns a 15% equity interest in the relevant company, or a lesser interest if such director has the right to appoint one or more directors of the company (hereinafter, a significant participation) or has a significant participation in a corporation having a significant participation in the company or a significant influence on the company; (2)is a member of the board or depends on shareholders, or is otherwise related to shareholders, having a significant participation in the company or of other corporations in which these shareholders have directly or indirectly a significant participation or significant influence; (3)is or has been in the previous three years an employee of the company; (4)has a professional relationship or is a member of a corporation that maintains professional relationships with, or receives remuneration (other than the one received in consideration of his performance as a director) from the company or its shareholders having a direct or indirect significant participation or significant influence on the same, or with corporations in which the shareholders also have a direct or indirect significant participation or a significance influence;


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(5)directly or indirectly sells or provides goods or services to the company or to the shareholders of the same who have a direct or indirect significant participation or significant influence, for higher amounts than his remuneration as a member of the administrative body; or (6)is the spouse or parent (up to the second level of affinity or up to the fourth level of consanguinity) of persons who, if they were members of the administrative body, would not be independent, according to the above listed rules. The following directors, including alternate directors, do not qualify as independent members of our board of directors in accordance with the CNV criteria: Marcos Marcelo Mindlin, Ricardo Alejandro Torres, Damián Miguel Mindlin, Gustavo Mariani, Diego Martín Salaverri, Pablo Diaz, Alejandro Mindlin, Gabriel Cohen, Mariano Batistella, Brian Henderson and Gerardo Carlos Paz. On the other hand, the following directors, including alternate directors, qualify as independent members of our board of directors according to the above mentioned criteria: Clarisa Lifsic, Santiago Alberdi, Javier Campos Malbrán, Julio Suaya Demaría, José María Tenaillón, Mariano González Álzaga, Juan Francisco Gómez, Carlos Perez Bello, and Carlos Tovagliari. The Argentine independence standards under CNV rules differ in many ways from the NYSE, NASDAQ or the U.S. federal securities law standards. Audit Committee According to the provisions of Section 109 of the CML, the Company established an audit committee. During the extraordinary shareholders’ meeting held on April 26, 2013, our shareholders approved an amendment to the audit committee’s charter, which regulates the audit committee’s structure and functions. The main purpose of said amendment was to update the charter as per the most recent provisions of the CML. Composition Our audit committee is comprised of three members of the board.All the members of our audit committee must be independent according to the audit charter and must have professional experience in finance, accounting, law and/or management. Budget Our audit committee will have an annual budget approved by the ordinary annual shareholders’ meeting based on available funds from, without limitation, our revenues, investments and cost savings. Duties and authority Our audit committee is responsible for the performance of the duties that fall within its scope of authority pursuant to the provisions of the CML.  These duties include, among other things, the following: ·supervising the operation of the internal control systems and the administrive-accounting system of the Company as well as the reliability of the administrative-accounting system and of all the financial information for any other material facts submitted to the consideration of the authorities in compliance with the applicable reporting requirements in force; ·issuing an opinion on the external auditors nominated by the board of directors to be retained by the Company and verifying if they are independent pursuant to the CML; ·reviewing the plans submitted by the external auditors, supervising and assessing their performance and issuing an opinion thereon upon the presentation and publication of the Company’s annual financial statements; ·supervising compliance with the risk management information policies in place in the Company;


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·approving transactions with related parties in the events set forth in the applicable law and issue an opion in such respect and inform the same pursuant to the provisions of the applicable law to the extent there is or may be and alleged conflict of interest in the Company; ·providing the market with complete information regarding transactions in connection of which there is a conflicts of interest with the members of our corporate bodies or controlling shareholders; ·approving the submission by the board of directors of any proposed compensation to the Company’s executives to the consideration of the shareholders’ meeting; ·verifying compliance with applicable standards of conduct; ·nominating two independent candidates for each renewal election for the board of directors to include one of them in the slate to be submitted to the shareholders’ meeting for the appointment of directors members of the audit committee; ·issuing an opinion on the absence of any default by the executives under the Opportunities Assignment Agreement approved by the shareholders’ meeting held on June 16, 2006 and executed on September 27, 2006, at least ten days in advance of the date on which each series of warrants vests and within twenty days of receiving notice from one of the executives of an event of acceleration, if applicable; ·approving any proposal related to the remuneration and compensation of our directors, before any such proposal is submitted to shareholders for consideration.  In reviewing such proposals the audit committee may consult with internationally recognized experts in the matter to make sure that our directors and executive officers earn compensation similar to the compensation received by other persons holding similar positions; and ·advising our board of directors with respect to the nomination of independent director candidates to be members of the audit committee. Compensation policy Our audit committee charter provides that any proposed compensation to the Company’s executives, must be similar to any remuneration paid to persons in comparable positions, in Argentina and/or abroad, engaged in the management of private equity and investments activities. In addition, according to applicable regulation, such compensation must be based on the contribution made by each executive, as well as the Company’s financial condition and result of operations.  Any proposal for remuneration that is not duly considered and approved by our audit committee cannot be submitted for the consideration of the shareholders’ meeting. Nomination policy The members of our audit committee are responsible for nominating two independent director candidates (based on the criteria and requirements for independent directors under applicable Argentine law) each time a renewal of directors must take place. In accordance with applicable regulations, all members of our audit committee are independent. As of the date of this annual report, the only member of the audit committee is Carlos Tovagliari. A meeting of our Board of Directors is scheduled to take place on May 11, 2016. In such meeting, two additional independent directors (under Argentine law and Rule 10A-3) are expected to be appointed as members of our audit committee. For biographical information on the member of the audit committee see his biography under “Board of Directors”.


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Supervisory Committee Our current by-laws set forth a supervisory committee composed of three regulars and three alternate members. The members of the supervisory committee shall hold office for a term of three fiscal years.  Pursuant to the BCL, only lawyers and accountants admitted to practice in Argentina may serve as members of a supervisory committee of an Argentinesociedad anónima,or limited liability corporation. The primary responsibilities of the supervisory committee are to monitor the management’s compliance with the BCL, the by-laws, its regulations, if any, and the shareholders’ resolutions, and to perform these duties include,inter alia, the following: (1)attending meetings of the board of directors, executive committee, audit committee and shareholders; (2)calling extraordinary shareholders’ meetings when deemed necessary and ordinary and special shareholders’ meetings when not called by the board of directors; (3)investigating written complaints of shareholders; and (4)monitoring the operation of the Ethics line through which executives and employees of the Company may make, among others, complaints regarding accounting, internal control and audit matters. In performing these functions, the supervisory committee does not control our operations or assess the merits of the decisions made by the directors.  The duties and responsibilities of an alternate statutory auditor, when acting in the place of a statutory auditor on a temporary or permanent basis, are the same as those discussed above for statutory auditors.  They have no other duties or responsibilities as alternate statutory auditors. The following table sets forth certain relevant information of the members of our supervisory committee. Name

   Position

   AgeJorge Roberto Pardo

   Statutory Auditor

   62Germán Wetzler Malbrán

   Statutory Auditor

   45José Daniel Abelovich

   Statutory Auditor

   59Marcelo Héctor Fuxman

   Alternate Statutory Auditor

   60Victoria Hitce

   Alternate Statutory Auditor

   39Silvia Alejandra Rodriguez

   Alternate Statutory Auditor

   43
  Set forth below are brief biographical descriptions of the members of our supervisory committee: Jorge Roberto Pardowas born on March 31, 1953. He has been a member of our supervisory committee since April 2015. From 1993 to 2015, Mr. Pardo served in the internal audit body of the Argentine Government (Sindicatura General de la Nación). He also serves in the supervisory committee for several Argentine companies, including Nación Bursátil Sociedad de Bolsa S.A., Nación Fideicomisos S.A. and Compañía de Transporte de Energía Eléctrica en Alta Tensión Transener S.A. Mr. Pardo holds a degree in Public Accounting from the Universidad de Buenos Aires.  Marcelo Héctor Fuxmanwas born on November 30, 1955.  He has been a member of our supervisory committee since June 2006.  Mr. Fuxman holds a degree in Accounting from the Universidad de Buenos Aires.  Mr. Fuxman is a partner of Abelovich, Polano & Asociados/NEXIA INTERNATIONAL, an auditing firm, and managing partner of Real Estate Investments S.R.L.He currently serves as Director of Abelovich, Polano & Asoc. S.R.L., Abus las Americas I S.A., Abus Securities S.A., Advanced Capital Securities S.A., Agra Argentina S.A., Agro Managers S.A., Agro Investment S.A., Agrotech S.A., Alto Palermo S.A., Arcos del Gourmet S.A., Austral Gold Argentina BACSAA S.A., Banco de Crédito y Securitización S.A., Banco Hipotecario S.A., Baicom Networks S.A., BH Valores S.A. de Sociedad de Bolsa, BHN Seguros Generales S.A., BHN Sociedad de Inversión S.A., BHN


Vida S.A., Bitania 26 S.A., Boulevard Norte S.A., Cactus Argentina S.A., Güemes, Loma de la Lata, Transener, Citelec, Conil S.A., Convexity Sociedad Gerente de Fondos Comunes de Inversión S.A., Cresud SACIF y A, Cyrsa S.A., Dolphin Créditos S.A., Dolphin Créditos Holding S.A., Dolphin Finance S.A., E-Commerce Latina S.A., EASA, Emprendimiento Recoleta S.A., Emprendimientos del Puerto S.A., Transba, Edenor, Exportaciones Agroindustriales Argentinas S.A., Fibesa S.A., Futuros y Opciones.com S.A., FYO Trading S.A., Grupo Dolphin Holding S.A., HIDISA, Hoteles Argentinos S.A., Inversora Bolívar S.A., IRSA Inversiones y Representaciones S.A., Jordelis S.A., La Clara de Banderaló S.A., La Pionera de Anta S.A., Llao – Llao Resorts S.A., Nuevas Fronteras S.A., Nabsa Corporation, Nuevo Puerto Santa Fe S.A., Orígenes Seguros de Retiro S.A., Orígenes Seguros de Vida S.A., Oberli S.A., Palermo Invest S.A., Panamerican Mall S.A., Petrolera Pampa, Préstamos y Servicios S.A., Proyectos Edilicios S.A., Puerto Retiro S.A., Quality Invest S.A., Palermo Invest S.A., Real Estate Investments S.R.L., Shopping Neuquén S.A., Solares de Santa María S.A., Tarshop S.A., Torres del Puerto S.A., Torres de Puerto Madero S.A., TGS and Unicity S.A.


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Germán Wetzler Malbránwas born on April 25, 1970. He has been a member of our supervisory committee since April 2010, as well as member the supervisory committee of many of our subsidiaries. Mr. Wetzler Malbrán holds a law degree from the Universidad Católica Argentina.  Mr. Wetzler Malbrán is a founder partner of Salaverri, Dellatorre, Burgio & Wetzler Malbrán law firm.He is a member of the statutory audit committee of Loma de la Lata, IPB, IEASA, Pampa Participaciones S.A., Pampa Participaciones II S.A., Petrolera Pampa, Bodega Loma la Lata S.A., Transelec, Diamante, Nihuiles, PEPCA, Los Yaros Agropecuaria S.A and Agropecuaria La Volanta S.A.He currently serves as alternate director of ARPHC S.A. and Estancia María S.A. Additionally, Mr. Wetzler Malbrán serves as an alternate member of statutory auditor of Grupo Dolphin Holding S.A., Orígenes Seguros de Retiro S.A., Orígenes Seguros de Vida S.A. and Dolphin Finance S.A., among others. Silvia Alejandra Rodríguezwas born on December 15, 1972.  She has been a member of oursupervisory committeesince April 2011.  Ms. Rodriguez holds a law degree from the Universidad de Buenos Aires.  Since October 2009, Ms. Rodriguez has served in the internal audit body of the Argentine Government (Sindicatura General de Empresas Públicas-Sindicatura General de la Nación). She also serves asa member of the statutory audit committee of Parque Eólico Arauco S.A.P.E.M., Agua y Saneamiento S.A. and Nucleoeléctrica Argentina S.A., asalternate member of the statutory audit committee ofArsat S.A., Telecom S.A., Ferrosur Roca S.A., Ferroexpreso S.A. and CEAT S.A. José Daniel Abelovichwas born on July 20, 1956.  He has been a member of oursupervisory committeesince 2007.  Mr. Abelovich holds a degree in Public Accounting from the Universidad de Buenos Aires.  Mr. Abelovich is a partner of Abelovich, Polano & Asociados/NEXIA INTERNATIONAL,an auditing firm.Mr. Abelovich also serves as member of the of the following supervisory committees, among aothers, ofAlto Palermo S.A., Arcos del Gourmet S.A., Banco de Crédito y Securitización S.A., Banco Hipotecario S.A., BH Valores S.A. de Sociedad de Bolsa, BHN Seguros Generales S.A., BHN Sociedad de Inversión S.A., BHN Vida S.A., Transener, Citelec, Convexity Sociedad Gerente de Fondos Comunes de Inversión S.A., Cresud SACIF y A, EASA, Emprendimiento Recoleta S.A., Transba, Edenor, Hoteles Argentinos S.A., Inversora Bolívar S.A., IRSA Inversiones y Representaciones S.A., Llao – Llao Resorts S.A., Nuevas Fronteras S.A., Orígenes Seguros de Retiro S.A., Orígenes Seguros de Vida S.A., Palermo Invest S.A., Panamerican Mall S.A., Petrolera Pampa, Shopping Neuquén S.A., Solares de Santa María S.A., Tarshop S.A. and Unicity S.A. Victoria Hitcewas born on April 9, 1977.  She has been an alternate member of our supervisory committee since April 2015. Ms. Hitce received her law degree from theUniversidad Católica Argentina. She is a founding partner of the Argentine law firm Salaverri, Dellatorre, Burgio & Wetzler Malbrán. Mrs. Hitce serves as a member of the supervisory committee of Bodega Loma La Lata S.A., IEASA, Diamante, Nihuiles, IPB, Pampa Participaciones II S.A., Pampa Participaciones S.A., PEPCA S.A., Transelec and as an alternate member of the supervisory committee of Dolphin Créditos Holding S.A., Dolphin Créditos S.A., Dolphin Finance S.A. and EASA. Corporate Governance The Company enacted a comprehensive code of trading as well as a business code of conduct. ·Policy of Trading. This Policy was approved by the board of directors on June 14, 2007 and its latest amendment was approved through by the board of directors’ meeting held on January 27, 2015. It has


been implemented in order to avoid ‘insider trading’ practices by the Company’s employees (i.e, to prevent the use of non-public material information to gain advantage for oneself or for others, either directly or indirectly). The Policy applies to the Company’s staff and its subsidiaries, including directors, supervisory committee members, and senior management lines, and it extends to their families or persons who live with them, as well as to certain suppliers.


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·Business Code of Conduct approved by the board of directors’ meeting held on December 10, 2007. This Code not only states the ethical principles that constitute the foundation of the relationship between the Company, its employees and suppliers, but also offers the means and instruments that guarantee the transparency of issues and problems affecting the management of the Company. As part of the various corporate governance policies adopted, the Company’s approved implementing the Ethics Hotline as an exclusive channel to report, under strict confidentiality, any suspected misconduct or breach of the Code. Additionally, the Company adopted the following policies and practices: ·Self-Assessment Questionnaire for the Board of Directors.  In 2008 the Company’s Board of Directors passed the implementation of a self-assessment questionnaire to annually examine and assess its own performance and management. The Company’s Corporate Law Division is in charge of examining and filing each questionnaire with the individual answers given by the Board members and, based on the results, it shall submit to the Company’s board of directors all the proposed measures deemed useful to improve the performance of the board of directors’ duties. ·Internal Policy on Transactions with Related Parties.According to the provisions the CML, the Company approved the Internal Policy of Transactions with Related Parties.  Pursuant to such policy and as stated in the applicable regulations, all high-value transactions  (i.e.all exceeding 1% of the equity of the Company) made by the Company with individuals and/or legal entities which are considered as ‘related parties’ pursuant to the provisions set forth in applicable regulations, must be subject to a specific prior authorization and control procedure that is carried out under the coordination of the Company’s Corporate Law Division and which involves both the Companys’s board of directors and its Audit Committee, as the case may be. The Company adopted as well the following polices: ·Pre-approval of Principal Accountant Services. This Policy standardizes an internal process that allows the Audit Committee to comply with its obligation to grant prior approval for hiring an external auditor for the provision of any kind of authorized service to the Company or any of its subsidiaries. ·Fraud Prevention Procedures. In accordance with the provisions of the U.S. Foreign Corrupt Act and in addition to the Business Code of Conduct, the Company adopted the Fraudulent Practices Prevention Program, which sets out the responsibilities, duties and methodology necessary to prevent and detect any misconduct and/or fraudulent behavior within the Company and/or any of its subsidiaries. ·Policy on Material Information’s Disclousure. This Policy was approved with the aim of standardizing the basic principles concerning the way in which Company’s material information disclosure processes operate, in accordance with the regulatory requirements of the securities markets on which the Company’s securities are listed or those in which it is registered to such end. To ensure the duly execution and compliance with the internal dispositions and applicable regulations as regards this matter, the Company established an Information Disclosure Committee. Compensation of Directors and Officers The BCL provides that the compensation payable to all directors (including those directors who are also members of senior management) in a fiscal year may not exceed 5% of net income for such fiscal year, if the company is not paying dividends in respect of such net income.  The BCL increases the annual limitation on director


compensation to up to 25% of net income if all the net income for such year is distributed as dividend.  The percentage decreases proportionally based on the relation between the net income and the dividends distributed.  The BCL also provides that the shareholders’ meeting may approve the remuneration of the directors in excess of the limits set by the BCL in case the company has no net income or the net income is low, if the relevant directors performed during such fiscal year special commitments or technical-administrative functions.  The audit committee approves proposals presented by our board of directors with respect to the compensation of our directors who are also executive officers.  See “Audit Committee—Compensation Policy.”  The compensation of all directors and members of the supervisory committee requires shareholders’ approval at an ordinary shareholders’ meeting.


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For the fiscal year ended December 31, 2015, fees paid during that year to our directors and executive officers who are also members of our Board of Directors amounted to Ps.50 million, and fees accrued during that year to our directors and executive officers who are also members of our Board of Directors amounted to Ps.26.6 million. We do not currently have any pension plan in place for our directors and executive officers. Share Ownership As of April 19, 2016, Marcos Marcelo Mindlin, Gustavo Mariani, Ricardo Alejandro Torres and Diego Martín Salaverri each owns shares representing, in the aggregate, 11.2%, 2.4%, 1.5%, 2.4% and 0.0%, respectively of our capital stock.  No other member of our board of directors or our senior management beneficially owns any shares of our capital stock.  See “Item 7. Major Shareholders and Related Party Transactions.” Employees Excluding those employed by us on a temporary basis, at December 31, 2015, we, together with our jointly controlled companies, had 6,325 full time employees.  The following table sets forth the number of our full-time employees by segment for the periods indicated:  ______________________ (1)Includes the total number of employees of each company in which we have a  jointly controlling interest.  See “Presentation of Information—Financial Information—Proportionate consolidation of certain subsidiaries”.  Approximately 81.0% of our work force is affiliated with a union and/or is a party to a collective bargaining agreement.  We have completed salary negotiations for 2015.  We maintain a positive relationship with each of the employee unions at our subsidiary companies.  The distribution sector started, in March, the salary negotiations for 2016.  Negotiations have not been completed yet, as of the date of this annual report. We offer a variety of benefits beyond those required by the Argentine Labor Contract Law, but make no payments to retirees or terminated employees.  In accordance with the agreements we have entered with the unions at some of our subsidiaries, we are required to pay certain seniority premiums to retiring employees as a one time payment upon retirement.


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Item 7.  Major Shareholders and Related Party Transactions Major Shareholders Prior to May 31, 2006, we had 6 million outstanding common shares, with a par value of Ps. 1.00 per share.  On May 31, 2006, September 28, 2006 and February 1, 2007, we consummated capital increases of 140 million, 300 million and 600 million additional shares, respectively.  Also, on September 28, 2007, we issued an additional 480,194,242 shares to the former indirect shareholders of EASA (including shares in the form of GDSs) in connection with our acquisition of Edenor.  Due to the recent international economic crises and the fluctuation in the price of our shares, on September 8, 2008, and again on April 16, 2009, our board of directors approved a share repurchase program, through which we have acquired 211,883,347 shares, or 13.9%, of our then outstanding capital stock, through transactions in the local market.  In the meeting held on April 23, 2010, our shareholders decided to reduce our capital stock in the amount equal to the shares acquired under our share repurchase program.  On March 8, 2010, the Buenos Aires Stock Exchange authorized the share capital reduction approved by our shareholders.  On September 13, 2010, the CNV proceeded with the reduction of capital. On September 27, 2006, we executed the Opportunities Assignment Agreement with the Key Executives.  As amended, the Opportunities Assignment Agreement provided that, until September 28, 2014, these four individuals were obliged to offer to us on a priority basis any investment opportunity relating to assets and opportunities in the energy sector (including electricity, oil and gas and alternative energies) in all the stages of its production and commercialization in or outside Argentina that each of these four individuals or all of them as a group may identify, provided that such investment was within our financial possibilities. As consideration for Marcelo Mindlin, Damián Mindlin, Gustavo Mariani and Ricardo Torres’ agreeing to offer to us the investment opportunities mentioned above, our shareholders approved the issuance of certain warrants to these four individuals on June 16, 2006.  Such warrants were issued to these individuals on September 27, 2006 pursuant to the capital stock increase in the Company approved in September 2006.  As amended, the warrants agreements provide that the warrants shall confer to the Key Executives (or any company controlled by any of them that holds such warrants), on their respective exercise date, the right to subscribe for shares of our common stock representing 20% of our outstanding capital.  The warrants are issued in three series divided into three equal parts (Series I, II and III). Series I, Series II and Series III warrants have vested by fifths on each of September 28, 2010, September 28, 2011, September 28, 2012, September 28, 2013, and September 28, 2014.  The exercise period for such warrants was 15 years, commencing on their issuance date on September 27, 2006. The exercise price of the warrants is U.S. $ 0.27. On November 23, 2015, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“BAML”) notified us, on behalf of the holders of warrants, of their decision to exercise, the outstanding warrants, which granted them the right to subscribe 381,548,564 of our shares or our common stock.  The aggregate exercise price of the warrants paid by the Key Executives was U.S.$ 103,018,112.28, which was payable to us in Pesos as provided in the warrant agreements. As a consequence, we issued new shares of our common stock, of which (i) a portion were sold in the form of ADSs in a public offering, and (ii) the remainder were delivered to the holders of warrants in the form of ADSs. As a result, as of the date of this annual report, our share capital authorized for public trading is Ps. 1,695,859,459, represented by 1,695,859,459 common shares of par value Ps. 1 and with right to one vote per share.  The ADS Depositary has informed us that, as of April 19, 2016, there were approximately 44 million outstanding ADSs. As of such date, there was one registered holder of our ADSs in the United States. Since certain of our ADSs are held by brokers or other nominees, the number of direct record holders in the United States may not be fully indicative of the number of direct beneficial owners in the United States of our ADSs, or of where the direct


beneficial owners of such ADSs are resident.  We have no information concerning holders with registered addresses in the United States that hold our shares which are not represented by ADSs.


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The table below sets forth information concerning the beneficial ownership of our common shares as of April 19, 2016: 
  (1)     On November 20, 2008, the Argentine Congress passed a law unifying the Argentine pension and retirement system into a system publicly administered by theAdministración Nacional de la Seguridad Social(National Social Security Agency, or ANSES) and eliminating the retirement savings system previously administered by private pension funds under the supervision of a governmental agency. In accordance with the new law, private pension funds transferred all of the assets administered by them under the retirement savings system to the ANSES.  These transferred assets included 295,765,953 common shares of the Company, representing 20.50% of our capital stock at that date. The ANSES is subject to the same investment rules, prohibitions and restrictions that were applicable to the Argentine private pension funds under the retirement savings system, except as described in the following sentence.  On April 12, 2011, the Executive Power issued Emergency Decree No. 441, which annulled the restrictions under Section 76(f) of Law No. 24,241on the exercise of more than 5% of the voting power in any local or foreign company, such as the Company, in any meeting of shareholders, irrespective of the actual interest held in the relevant company's capital stock.  The annulment of the restrictions under Section 76(f) of Law No. 24,241 came into effect on April 14, 2011.  As of such date, ANSES may exercise its voting power in any local or foreign company, such as the Company, based on the actual interest held in the relevant company’s capital stock.  Related Party Transactions Argentine corporate law permits directors of a corporation to enter into transactions with that corporation provided that any such transactions are consistent with prevailing market practice.  The CML provides that corporations whose shares are subject to public offering must submit to their respective audit committees the approval of any transaction with a related party involving an amount that exceeds 1% of the corporation’s net worth. Except as set forth below and as otherwise permitted under applicable law, we are currently not party to any transactions with, and have not made any significant loans to, any of our directors, key management personnel or other related persons, and have not provided any guarantees for the benefit of such persons, nor are there any such transactions contemplated with any such persons. Legal Services During the year ended December 31, 2012, we engaged the services of the Argentine law firm Errecondo, Salaverri, Dellatorre, González & Burgio and also of the Argentine law firm Salaverri, Dellatorre, Burgio & Wetzler Malbrán. During the year ended December 31, 2013, 2014 and 2015, we engaged the services of the Argentine law firm Salaverri, Dellatorre, Burgio & Wetzler Malbrán.  One of our directors, Diego Martín Salaverri, one member of the supervisory committee, German Wetzler Malbran, and one alternate member of our supervisory committee, Santiago Dellatorre, are partners of Salaverri, Dellatorre, Burgio & Wetzler Malbrán.


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Item 8.   Financial Information CONSOLIDATED FINANCIAL STATEMENTS See “Item 18.  Financial Statements” beginning on page F-1. LEGAL PROCEEDINGS In the normal course of business, we are a party to lawsuits of various types.  Our management evaluates the merit of each claim and assesses the likely outcome, recording an accrual in our financial statements for the related contingent liability when an unfavorable decision is probable and the amount may be reasonably estimated.  At December 31, 2015, we had established accruals in the aggregate amount of Ps. 335.2 million to cover potential losses from such claims and legal proceedings.The abovementioned amount, 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 Consolidated Financial Statements.Except as disclosed below, we are not a party to any legal proceedings or claims that may have a material adverse effect on our financial position or results of operations. Generation Legal proceedings involving Piedra Buena’s real estate Pursuant to the contracts relating to Piedra Buena’s privatization in 1997, the Province of Buenos Aires transferred all the assets comprising the Piedra Buena facilities to Piedra Buena.  Although the real property on which the plant was built was not registered in the name of the Province of Buenos Aires, the Province assumed the obligation to transfer the real property with clear and marketable title to Piedra Buena.  As of the date of this annual report, the Province of Buenos Aires has not transferred the real property with clear and marketable title to Piedra Buena but did initiate the expropriation process required to begin the transfer process.  Nonetheless, Piedra Buena initiated legal action against the Province of Buenos Aires in order to avoid an expiration of the statute of limitations for an action claiming the transfer of real property. In addition, the Province of Buenos Aires transferred the rights to a 22-kilometer gas pipeline, which runs from Transportadora del Gas del Sur’s General Cerri Plant to Piedra Buena’s Plant in Ingeniero White, Province of Buenos Aires, and the rights over a 27-kilometer electricity transmission line, which runs from Piedra Buena’s Plant in Ingeniero White, Province of Buenos Aires to Estación Transformadora Bahía Blanca.  Both the pipeline and the transmission line were built on third party land.  Therefore, the Province of Buenos Aires agreed to create administrative easements on the third party land in order to transfer good title for the use of the pipeline and transmission line.  The Province of Buenos Aires has not yet created the administrative easements, and 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 owners of the land through which the pipeline and the electricity transmission line of Piedra Buena run seeking compensation for the use of their land.  As of the date of this annual report, these complaints have been limited to such letters and no judicial or administrative action has been filed.  As a result, no reserve has been established in Piedra Buena’s financial statements in connection with these real property issues. Legal proceedings involving Loma de la Lata  As a consequence of the delays in the hand-over of the Loma de la Lata Project, the lower power of the steam turbine installed, and certain defaults of the Project Counterparties in their obligations assumed under the Project Agreements, Loma de la Lata, in exercise of its contractual rights, required of the Project Counterparties the payment of the penalties for the delays established in the Construction Agreement and of damages for the other breaches. Both requirements were rejected, and Loma de la Lata executed the bank guarantees issued under the Project Agreements.  Subsequently, the Contractor requested Loma de la Lata to issue the formal certificate of provisional acceptance of the Loma de la Lata Project, which was rejected as the Contractor did not comply with the terms and


conditions required to that end. Loma de la Lata proposed to sign an alternative certificate of provisional acceptance reflecting the real situation of the plant as of November 2011. The parties did not reach an agreement.


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As a result of the execution of the bank guarantees of the Project Counterparties, Loma de la Lata collected from BBVA Banco Francés S.A. and from Commerzbank AG approximately U.S.$20 million.  In this context, in 2011, the International Chamber of Commerce Secretary, notified Loma de la Lata that an arbitration request had been filed by the Contractor, pursuant to which the Contractor claimed:  a.The delivery of the formal provisional acceptance of the Loma de la Lata Project under the Construction Agreement. b.The refund of the sums received for the foreclosure of the guarantees issued by BBVA Banco Francés S.A. c.The payment of damages as a consequence of items a. and b. above.  On December 30, 2011, Loma de la Lata rejected before the Court of the International Chamber of Commerce the claim of the Contractor and filed a counterclaim with respect to the Project Counterparties for the integral recovery of the damages caused as a consequence of both parties defaults under the Project Agreements.  As a consequence of the execution of guarantees, the Contractor filed a claim before an Argentine court requesting a lien over certain assets of Loma de la Lata as a preemptive measure in relation to the arbitration described above, through which the Contractor was claiming the reimbursement of the amounts paid by BBVA Banco Francés S.A. under such guarantees. On December 27, 2011, Güemes was notified of the attachment of the shares owned by Loma de la Lata which represent a 74.2% of the capital stock and votes of Güemes, for the amount of U.S.$ 8,179,840.42. Such lien also included the attachment of any sums that Loma de la Lata received from CAMMESA (the “Attachments”).  On January 11, 2012, the court that ordered the Attachments, accepted the requirement from Loma de la Lata to replace the Attachments for a bail insurance.  As of the date of this annual report, such replacement is in place.  On May 21, 2012, the Court of Appeals in Commercial Matters of Buenos Aires, confirmed the lien requested by the Contractor, which should remain in place until final resolution of the arbitration dispute.  In addition to the above mentioned developments, Loma de la Lata had also executed a guarantee issued by Commerzbank Madrid branch for the amount of U.S.$ 13,207,650, to guarantee the obligations of the Supplier under the Supply Agreement. This execution was carried on after the Supplier rejected Loma de la Lata’s request to pay the damages (valuated approximately in U.S.$ 27 million) caused, among other issues, by the failure of the Supplier to deliver a turbine that generates approximately 176MW.  In order to prevent the payment of the guarantee described above, the Contractor required a preemptive measure to a commercial court in Madrid, Spain, which was granted on December 29, 2011, and notified to Loma de la Lata on January 23, 2012. Such measure ordered Loma de la Lata to abstain from executing the guarantee for an amount that exceeds U.S.$ 1.200.000. Such amount is the amount of the performance penalties that the Supplier alleged to be the only amount owed to Loma de la Lata under the Supply Agreement.  Additionally, the measure ordered the bank to abstain from paying Loma de la Lata any amount in excess of U.S.$ 1,200,000 until the arbitration process is concluded.  On January 26, 2012, Loma de la Lata was notified that the Supplier had extended the scope of the claim filed in the arbitration process, in order to include a claim for damages regarding the execution of the guarantee issued by the Commerzbank.  Loma de la Lata opposed to the preemptive measure granted in Madrid and on March 20, 2012 such preemptive measure was revoked by the Spanish court which had granted it, in light of the arguments presented by Loma de la Lata. The Contractor submitted an appeal of such measure, and on February 3, 2014 the Court of Appeals of Madrid (Audiencia Provincial de Madrid) confirmed the first instance judgment rejecting the Contractors’ arguments.


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On October 2012, Loma de la Lata was notified of an extension of the lien adopted by the Buenos Aires courts, in this instance with respect to the sum of U.S.$ 11,986,458 which corresponds to the amounts transferred to Loma de la Lata by Commerzbank, minus the sum of U.S.$ 1,221,192 that the Project Counterparties consider to be owed to Loma de la Lata. The latter appealed such decision and on December 5, 2014, the Court of Appeals confirmed the lien imposed by the first instance court. Nonetheless, Loma de la Lata obtained an order of the judge to replace the Attachments for bail insurance.  On November 14, 2012, there was a new blackout in the plant as a result of an outage in the transmission lines that connect the plant to the WEM. Such event caused an outage of the gas units and the steam unit of the plant. The outage of the steam unit occurred in such conditions that it produced major damages to the turbine and the generator. Loma de la Lata gave the corresponding notices to the insurance companies, the Contractor and to CAMMESA.  The Contractor alleged that the guarantee period had expired and the final reception of the plant had operated, thus it rejected any responsibility for the event and its consequences.  The claims made by Loma de la Lata to the insurance companies included the damages for business interruption and material damages and repairs, and it totaled U.$.S 43.7 million, which the insurance companies recognized and paid to Loma de la Lata during the last quarter of 2013. The steam turbine was out of service for 7 months and recommenced operations on June 13, 2013.  The claims to the Contractor regarding the November 14, 2012 event were included in the arbitration referred above.  On March 27, 2013, the parties filed their respective briefs of their claims (the Contractor for the amount of U.S.$ 97,546,030.40 and Loma de la Lata for the amount of U.S.$ 228,245,293.), presenting the corresponding evidence. On July 26, 2013 the parties submitted their respective responses, and on October 15, 2013, they submitted their last responses before the hearings. Such hearings took place in March 2014 and in May 2014 the parties submitted their final allegations.  On June 11, 2015, the arbitral award on this dispute was issued, in which: (i) breaches by the Project Counterparties were acknowledged, and (ii) the Project Counterparties were ordered to pay for the damages to Loma de la Lata for an amount of U.S.$ 49.3 million and (iii) such amount was offset with certain credits of the Project Counterparties had against Loma de la Lata, which resulted in a final amount due by the Project Counterparties to Loma de la Lata of U.S.$15.1 million (the “Arbitral Award”).  On December 3, 2015, Loma de la Lata and the Project Counterparties entered into an agreement to comply with the Arbitral Award, pursuant to which the Project Counterparties agreed to pay Loma de la Lata an amount of U.S.$. 15.2 million, in four different installments, the first three for U.S.$ 4 million due on December 30, 2015, January 30, 2016 and Fabruary 27, 2016, respectively and the fourth and last one, for the outstanding amount maturing on March 30, 2016 (the “Payment Agreement”). The Payment Agreement is governed under the laws of Spain and the parties agreed to submit any dispue to the jurisdiction of the courts of Spain.  The Project Counterparties breached the Payment Agreement by failing to timely pay the installments. Loma de la Lata initiated the enforcement of the Payment Agreement before the courts of Spain.  As of the date of this annual report, Loma de la Lata had received the full amount due under the Payment Agreement, which amounted to U.S.$15.7 million, including interest and costs, the first week of May 2016.  Breach of the 2008-2011 Agreement  On March 22, 2012, PESA’s affiliates, Güemes, Loma de la Lata, Piedra Buena, EGSSA (now merged into CTG. Please see “Item 4. Our Business – Our Generations Business – Güemes – History”) and HIDISA, filed aReclamo Administrativo Previorequesting the cancelation of the LVFVDs accrued on 2011 for a total amount of U.S. $ 8,083,799 based on the provisions of the Complementary Agreement (see Item 5. “Operating and Financial Review and Prospects-Previous Scheme for Recognizing Costs and Remuneration”).


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Moreover, and in virtue of the amounts due to Güemes, Loma de la Lata and Piedra Buena and based on the provisions of the 2008-2011 Agreement, and the instructions given by the Secretariat of Energy to CAMMESA by means of the Notes No. 495/12 and 1269/12, such companies filed a Reclamo Administrativo Previo requesting the fulfillment of the 2008-2011 Agreement and the amounts accordingly owed in concept of damages and interest accrued derived from such breach.  Hidoeléctrica Nihuiles has filed aReclamo Administrativo Previoin order to seek compensation due to the Secretariat of Energy’s breach of the 2008-2011 Agreement related to the liquidation of its commercial transactions in the WEM.  As a consequence of the enactment of SE Resolution No. 95/2013 and, in order to be able to participate in the new remuneration scheme, Güemes, Loma de la Lata, Piedra Buena, HINISA and HIDISA withdrew the claims filed in connection to the breach of the 2008-2011 Agreement and renounced to file new claims on such matter and/or in relation to SE Resolution No.406/2003.  Such withdrawal did not include the claims filed seeking the cancellation of the LVFVD allocated in Central Térmica Piquirenda Project. On this matter, on June 28, 2013, Loma de la Lata, Piedra Buena, Güemes and HIDISA filed a claim against the Argentine Government.  As indicated above, the unpaid LVFVD allocated to the Project CTP were allocated to Loma de la Lata’s 2014 Expansion Project. The Specific Conditions established that the parties thereto shall suspend the abovementioned claim for a 6 months period (with automatic renewals). Under argentine procedural law, such suspension requires the filing of a joint request by the parties to the claim. However, the plaintiffs filed a petition to the court requiring the suspension of the claims. The court granted the suspension. As of the date of this annual report, the claim remains suspended.  Breach of Loma de la Lata’s WEM Supply Agreement under SE Resolution No. 724/2008  On April 14, 2008, Loma de la Lata entered into a WEM Supply Agreement under SE Resolution No. 724/2008 with CAMMESA (see “Item 4. – The Argentine Electricity Sector - WEM Supply Agreements under SE Resolution No. 724/2008”). CAMMESA had partially cancelled the LVFVDs allocated under such agreement. Upon such breach by CAMMESA, Loma de la Lata filed, on May 22, 2012, – aReclamo Administrativo Previoin order to safeguard its rights and seeking the total cancellation of such LVFVDs plus damages. On June 28, 2013, Loma de la Lata filed a claim against the Argentine Government seeking the cancellation of such LVFVD plus damages. As indicated above, the unpaid LVFVD allocated in CTP Project were allocated to Loma de la Lata’s 2014 Expansion Project. The Specific Conditions established that the parties thereto shall suspend the abovementioned claim for a 6 months period (with an automatic renewals). Under argentine procedural law, such suspension requires the filing of a joint request by the parties to the claim. However, Loma de la Lata filed a petition to the court requiring the suspension of the claims. The court did not grant the suspension and required the Secretariat of Energy’s consent. After Loma de la Lata’s appeal, the court granted the suspension. As of the date of this annual report, the claim remains suspended.  CTLL’s Gas Plus costs recognition 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”. As a consequence thereof: (i) on September 3, 2015 Loma de la Lata declared the force majeure of the Natural Gas Agreement with Pan American Energy LLC Argentine branch, resulting in the suspension of the


obligations of Loma de Lata thereunder, and filed claims against CAMMESA in connection with such agreement; and (ii) on January 1, 2016, declared the force majeure of the Natural Gas Agreement with Petrolera Pampa, resulting in the suspension of the obligations of Loma de Lata thereunder, and filed claims against CAMMESA in connection with such agreement.  As of the date of this annual report, the administrative claims filed by Loma de la Lata against CAMMESA are still pending.


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The former SE did not addressed Loma de la Lata’s petition. Consequently, on November 13th, 2015, Loma de la Lata filed aReclamo Administrativo Previoin order to revert CAMMESA’s unilateral decision and seek compensation for the damages. As of the date of this annual report the claim has not been decided. Transmission Transener legal proceedings Transener is party to several civil, tax, commercial, easement and labor proceedings in the ordinary course of business.  As of December 31, 2015, Transener had established reserves in the aggregate amount of approximately Ps. 64.2 million to cover potential losses related to such claims. Distribution Proceedings Challenging the Renegotiation of Edenor’s Concession In December 2009, an Argentine consumer association,Unión de Usuarios y Consumidores, brought an action against Edenor and the Argentine Government before a federal administrative court seeking to (i) abrogate Clause 4.6 of Annex I of the Adjustment Agreement, which provides that the tariff increase has retroactive effects; (ii) annul ENRE Resolution No. 51/2007, which authorizes the retroactive increase of tariffs in Edenor’s favor; and (iii) obtain an order that requires that Edenor reimburse its customers the full amounts paid by them based on the retroactive tariff increase and that such reimbursement be made by crediting our customers’ accounts. On November 11, 2010, the judge upheld the claim and ordered that (i) Clause 4.1 of Annex I of Decree No. 1957/06 and Articles 2, 3 and 4 of ENRE ResolutionNo.51/2007, which had authorized the retroactive rate increase for the period between 11/1/2005 and 1/31/2007, be annulled; (ii) the fees collected retroactively during such period be repaid to Edenor’s customers; (iii) the ENRE be instructed to control our distribution of refunds and to report the results to the court; and (iv) each party bear its own court-related costs. On November 25, 2010, Edenor appealed the court’s order and requested that the court’s order be stayed pending a decision on the appeal.  On December 2, 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 in Edenor’s favor. The plaintiff filed a Federal Extraordinary Appeal, which admissibility was granted as of November 3, 2011.  On October 1, 2013, the Supreme Court dismissed the appeal.  As a result, the decision of the Administrative Court of Appeals in our favor became final. We cannot assure you that other actions or requests for injunctive relief will not be brought by these or other groups seeking to reverse the adjustments Edenor have obtained or to block any further adjustments to our tariffs. Preliminary Injunction of the Public Ombudsman On October 31, 2008, the SE approved the seasonal reference prices of power and energy in the Wholesale Electricity Market. Consequently, the ENRE applied the new rate schedule as of October 1, 2008.  The new rate schedule passed the purchase price of electricity as well as the other costs related to the Wholesale Electricity Market, including transmission, onto the final customer. In response to the new tariff schedule, theDefensor del Pueblo de la Nación(National Public Ombudsman, the “Ombudsman”) filed a claim opposing the resolutions that approved the October 1, 2008 tariff schedule and naming Edenor as a third-party defendant.  On January 27, 2009, the ENRE notified Edenor of a preliminary injunction, as a result of the Ombudsman’s claim, pursuant to which Edenor was ordered to refrain from cutting the


energy supply to customers challenging the October 2008 tariff increase until a decision is reached with respect to the claim. We have appealed this injunction along with the Argentine government through various legal actions. On August 20, 2013, the Court of First Instance in Federal Administrative Claims(Juzgado en lo Contencioso Administrativo Federal)dismissed the judicial remedy action initiated.


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This decision was appealed by the plaintiff and upheld in its entirety by the Administrative Court of Appeals (Cámara Nacional de Apelaciones en lo Contencioso Administrativo Federal – Sala IV) on May 20, 2014. The Ombudsman filed a Federal Extraordinary Appeal with the Supreme Court.At the request of Edenor, on September 29, 2014, the relevant court of first instance formally declared the loss of validity of the injunction timely delivered, thus being the authorized to issue the respective dunning notices to Edenor and act in each case as provided in the rules of supply its concession agreement. However, by Note No. 114,039/2014 dated October 11, 2014, the ENRE instructed Edenor to refrain from cutting supply to users with unpaid balances until the number of affected users and the amounts owed are reported by Edenor and such report’s accuracy is evaluated and confirmed by the ENRE. Once the above was accomplished, the relevant court revoked the measures issued in 2009. The Ombudsman filed an extraordinary federal appeal against such decision, which was ruled against by the acting court. The Ombudsman filed a complaint to the Argentine Supreme Court which was dismissed thus ending the proceedings. On August 14, 2009, the SE issued Resolution No. 652/2009, which ordered the suspension of the then applicable reference market prices of energy, and established new reference prices for the periods from June to July 2009 and from August to September 2009, reinstating partial government subsidies to the electricity generation sector. Furthermore, the resolution also established the unsubsidized reference market prices of energy for the months of June and July 2009 and August to October 2009.  On October 26, 2009, Edenor received notice of a complaint filed by a consumer association, the Consumer’s Cooperative for Community Action, against the Argentine Government, the ENRE, Edesur, Edelap and Edenor. In accordance with the terms of the complaint, two additional associations for the defense of consumer rights, Association for the Legal Defense of Consumers(Asociación de Defensa de los Derechos de los Usuarios y Consumidores) and Consumers Union Legal Defense (Unión de Usuarios y Consumidores en Defensa de sus Derechos), have joined the complaint. The remedies sought in the complaint are as follow: ·that all the most recent tariff resolutions be declared null and unconstitutional (ENRE Resolution No. 324/2008 – 365/2008 – 628/2008, 645/2008 and SE No. 1169/2008 – 797/2008 – 1170/2008 and its annexes) and, as a consequence, that the amounts billed by virtue of these resolutions be refunded; ·that all the defendants be required to carry out the RTI; ·that the resolutions issued by the SE that extend the transition period of the Adjustment Agreement be declared null and unconstitutional; ·that the defendants be ordered to carry out the sale process, through an international public bidding, of their respective class “A” shares, due to the fact that the management period of the respective concessions has ended; ·that the resolutions as well as any act performed by a governmental authority that modify contractual renegotiations be declared null and unconstitutional; ·that the resolutions that extend the management periods contemplated in the defendant’s respective concessions be declared null and unconstitutional; and


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·that, alternatively, should the main claim be rejected, the defendants be ordered to bill all customers on a bi-monthly basis. Additionally, the plaintiffs requested that the court issue a preliminary injunction suspending the rate hikes established in the resolutions questioned by the plaintiffs and that, alternatively, the application of the resolutions be partially suspended. Finally, the plaintiffs also requested that the application authority be ordered not to approve new increases other than within the framework of the RTI process. Edenor answered the complaint denying all its terms and requesting the summoning of CAMMESA as a third-party. The relevant court upheld the third-party summon and CAMMESA answered such third-party summon The Argentine Government answered the complaint filed against it by arguing lack of personal jurisdiction (“falta de legitimación pasiva”).  A decision on this case is pending. We can give no assurance that these actions or other potential future actions or requests for injunctive relief will not reverse the adjustments Edenor has obtained or block any further adjustments to our tariffs. Breach of Contract Claims In March 2010,Consumidores Financieros, Asociación Civil Para Su Defensa,a consumers’ association, instituted an action against Edenor and Edesur in the National Court of First Instance in Federal Administrative Claims Tribunal No. 2, Secretariat 3 (Juzgado Nacional de Primera Instancia en lo Contencioso Administrativo Federal No 2, Secretería 3) seeking repayment to customers for alleged excess charges over the course of the past 10 years. The action is based on three claims.  First, the plaintiffs claim a refund for the percentage payment of VAT over a taxable base they allege was inappropriately increased to include an amount that exceeded Edenor’s and Edesur’s own payments to the wholesale electricity market. Second, the plaintiffs claim a refund for charges relating to interest on payments by customers that the plaintiffs claim Edenor and Edesur failed to adjust to reflect the actual number of days the payment was outstanding. Finally, the plaintiffs claim a refund for late payment charges from 2008 onwards calculated at the rate of thetasa pasiva(the interest rate thatBanco de la Nación Argentinapays on deposits) in alleged contravention of the Law of Consumer Defense (Ley de Defensa del Consumidor) in April 2008. Edenor has given express directions to its legal advisors to contest the suit and all related claims and, on April 22, 2010, Edenor answered the complaint and filed a motion to dismiss for lack of standing on the part of the plaintiffs, requesting, at such opportunity, that a summons be served upon the Argentine Government, theFederal Tax Administration Agency (“AFIP”)and the ENRE as third-party defendants. Although plaintiffs’ opposition to the requested summons has not been resolved, the proceedings were brought to trial, in response to which Edenor filed a motion for reversal with a supplementary appeal. The court ordered the summoning as third parties of the Argentine Government, ENRE and AFIP, which was already effected. A decision on this case is pending. On October 21, 2011, Edenor was notified of a lawsuit filed by the Association for the Defense of Rights of Users and Consumers (Asociación de Defensa de Derechos de Usuarios y Consumidores, or “ADDUC”) requesting that the interviewing Court (i) order the reduction or moderation of penalty interest rates or late payment interest that Edenor charges to customers, because such rates allegedly violate Art. 31 of Law 24,240, and (ii) declare the non-implementation of the agreements or conventions which have stipulated the interest rates that we apply to its customers, and of the administrative regulations on the basis of which we justify the interest charging and (iii) orders the restitution of wrongfully perceived interests of customers provided since August 15, 2008 until the day that Edenor complies with the order of interest reduction. The plaintiff also requested the reinstatement of VAT (21%) and other taxes charged on the portion of charges unlawfully perceived. On November 11, 2011, Edenor answered the complaint and filed a motion to dismiss for both lack of standing and the fact that the claims at issue were being litigated in another lawsuit (lis pendens). The summoning as third-party of ENRE was also requested. On April 8, 2014, the court decided to grant the motion to dismiss on account of the existence of other action pending (lis pendens) and ordered that the proceedings be referred to such other court, to be consolidated with such other case“Consumidores Financieros Asociación Civil c/EDESUR y Otro s/ incumplimiento contractual”. We can give no assurance that these actions or other potential future actions or requests for injunctive relief will not reverse the adjustments Edenor has obtained or block any further adjustments to our tariffs.


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Legal actions brought by Edenor On February 9, 2011, Edenor challenged Resolution No. 32/2011 of the ENRE which, in the context of the power cuts that occurred between December 20 and December 31, 2010, established the following: - That Edenor be fined in the amount of Ps. 750,000 due to its failure to comply with the obligations arising from the Concession Agreement and Section 27 of Law No. 24,065. - That Edenor be fined in the amount of Ps. 375,000 due to its failure to comply with the obligations arising from Section 25 of the Concession Agreement and Resolution No. 905/1999 of the ENRE. - That Edenor’s customers be paid the following amounts as compensation for the power cuts suffered: Ps. 180 to each small-demand residential customer who suffered power cuts that lasted more than 12 continuous hours, Ps. 350 of each of those who suffered power cuts that lasted more than 24 continuous hours, and Ps. 450 to of each of 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. Edenor has filed a direct appeal with the Appellate Court in Contentious and Administrative Federal Matters No. 1, requesting that such resolution be declared null and void. Additionally, we filed a petition requesting injunctive relief aimed at suspending the application of the fine imposed until a decision on the direct appeal is issued. On July 8, 2011, we requested that process be served on the ENRE. On October 28, 2011, the court denied the request for injunctive relief. As a consequence, Edenor filed a Federal Extraordinary Appeal with the Supreme Court which was dismissed. Edenor then filed another appeal with the Supreme Court (“Recurso de Queja por apelación denegada”) requesting review of the rejected federal extraordinary appeal, which as of the date of this annual report had not been resolved. On April 24, 2013, Edenor was notified of the decision of the Appellate Court in Contentious and Administrative Federal Matters No. 1 to deny direct appeal filed by Edenor. On May 3, 2013 and May 13, 2013, Edenor filed an Ordinary Appeal and a Federal Extraordinary Appeal, respectively, with the Supreme Court. On November 7, 2014, Edenor’s Ordinary Appeal was rejected and Edenor’s Federal Extraordinary Appeal, partially granted. Edenor timely submitted an extraordinary appeal on account of the partially denied appeal (“Recurso de Queja por Recurso Extraordinario Denegado”). As of the date of this annual report, the appeals to the Supreme Court on the merits and on the denial of injunctive relief have not been resolved yet. As of December 31, 2014, the provision recorded in relation to the aforementioned compensations amounted to Ps. 34.9 million, including principal amount and accrued interest. On December 7, 2012, Edenor challenged Resolution No. 336/2012 of the ENRE pursuant to which: -Edenor is to determine the customers affected by the power cuts that occurred as a consequence of failures between October 29 and November 14, 2012; -Edenor is to determine the discounts to be recognized to each of the customers identified in accordance with the preceding caption; -Edenor is to credit such discounts on account of the final discounts that will result from the evaluation of the Technical Service Quality relating to the six-month control period; -Edenor is to compensate each small-demand residential customer (T1R) who has been affected by the power cuts occurred during the aforementioned period. The amount of the compensation will depend on the length of the power cut, provided, however, that such power cut lasted more than 12 continuous hours.


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This resolution has been challenged by Edenor by means of a direct appeal (“Recurso Directo”), which is pending before the Court of Appeals in Contentious and Administratvie Federal Matters (Chamber No.4).  The appeal, which was filed on February 4, 2014, has not been served upon the ENRE yet. As of April 14, 2016, the ENRE had not yet submitted an answer to the complaint.  On December 28, 2012, Edenor filed anacción de amparo(judicial remedy action) against ENRE seeking to protect Edenor’s constitutional rights relating to the provision of a secure and continuing public service of distribution of energy. To file theamparoEdenor has considered unconstitutional the ENRE’s failure to implement the necessary measures to guarantee the provision of the public service of distribution of energy, such as the failure to recognize the CMM adjustments that Edenor has requested and the delay in implementing the new tariff structure under the RTI, which have led to an unstable situation that threatens the regular provision of the public service. As a consequence, Edenor is seeking to obtain the necessary funds to provide the public service of distribution of energy as contemplated in its concession agreement. On February 19, 2013, the National Court of First Instance in Federal Administrative Claims Tribunal No. 12 (Juzgado Nacional de Primera Instancia en lo Contencioso Administrativo Federal No 12) served summons to ENRE and denied the preliminary injunction requested by Edenor. Edenor decided to discontinue this action. As a consequence of Resolution No. 250/2013, issued by the SE partially modifying the situation described in the previous paragraph, Edenor attempted to resolve throughout the initiated judicial remedy of December 2012 and the requirements of art. 12 (abandonment of actions in process). On May 29, 2013, Edenor discontinued the action. As of the date of this annual report, the issue regarding the legal expenses of the process had not been resolved. On June 28, 2013, Edenor initiated a legal action against the Ministry of Planning, Public Investment and Services pursuant to the acknowledgment process and benefit of litigation without expenses, both entertained by theNational Court of First Instance in Federal Administrative Claims Tribunal No. 11 (Juzgado Nacional de Primera Instancia en lo Contencioso Administrativo Federal No 12). Breach by the Argentine Government of the agreed terms under the Adjustment Agreement was claimed and compensation of damages sought. On November 22, 2013, Edenor amended the complaint so as to claim additional damages as a consequence of the Argentine 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 Argentine Government.  Subsequently, Edenor informed the Court of the issuance of SE Resolution No. 32/2015 as new event (“hecho nuevo”), under the terms of Section 365 of the Federal Code of Civil and Commercial Procedure. After notice was served, the court rejected the treatment thereof as an “event”, holding Edenor liable for costs. Edenor filed an appeal, which was admitted “with a delayed 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 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. 32/2015, notice of which has been served upon the defendant. On February 16, 2016, Edenor reiterated the request due to the revocation of SE Resolution No. 32/2015. The motion to litigate without liability for court fees or costs, which was filed on July 2, 2013, is at the discovery period. Additionally, and in the same action, in February 2014,Edenorapplied 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 the Company 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.


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In December 2015, Edenor filed a petition for a declaratory judgment and requested injunctive relief with the City of Buenos Aires Courts in Contentious and Tax-Related Matters (Fuero Contencioso Administrativo y Tributario de la Ciudad de Buenos Aires), in connection with a claim by the City of Buenos Aires against Edenor in connection with an alleged local tax liability (relating to the Study, Review and Inspection of Works in Public Spaces Fees, the “TERI”). The injunctive relief requested aims at suspending the foreclosure proceedings initiated by the City of Buenos Aires and avoiding an attachment on Edenor’s assets. As of the date of the filing of the petition, the City of Buenos Aires’ claim amounted to Ps. 28.8 million. In Edenor’s opinion, such local taxes are not applicable to it under federal regulations and case law. Edenor’s management and its external counsel understand that there are reasonable grounds to believe that Edenor should prevail on this matter.  Legal Proceedings involving the Company and its subsidiaries Tax on minimum presumed income Tax refund claim The Company and CTLL have filed different petitions for refund against AFIP – DGI for the application of the minimum notional income tax corresponding to the fiscal years 2008 and 2009 and, CPB, corresponding to the fiscal years 2002.  This claim seeks the refund of Ps. 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 did not answer the claim, the Company and certain subsidiaries brought the tax refund claim before a National First Instance Administrative Litigation Court and simultaneously requested the granting of interim injunctive relief so that AFIP refrains from demanding payment or instituting tax execution proceedings or lock action against the companies. Regarding the interim relief filed, on May 10, 2011 and March 3, 2011, we were notified of the judgment of First Instance, whereby the precautionary measures requested by the Company and certain subsidiaries, respectively, were rejected. Also, on December 30, 2008, CPB filed a tax refund claim before AFIP regarding the income tax payable for fiscal year 2002. This claim seeks the refund of Ps.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 Court. On March 10, 2015 CPB was notified of a judgment upholding its tax refund claim.  The National Treasury filed an appeal to the ruling.  On August 3, 2015 a second-instance court dismissed the appeal filed by the National Treasury. The National Treasury filed an extraordinary appeal to such dismissal on August 18, 2015. The extraordinary appeal was dismissed, and such decision was not challenged by the Treasury.  As a result, the ruling in favor of CPB is deemed a final and conclusive judgment. 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 and 3013, based on the decision by the Supreme Court of Justice of Argentina passed on June 15, 2010 ( “Hermitage” case).


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In this 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 for the fiscal years mentioned. The Court overseeing the proceedings decided to reject the precautionary measures, a decision that was appealed by the Company and certain subsidiaries. At the date of this annual report, the presiding judge has not ruled on the precautionary measures for the fiscal period 2013 or on the merits. As at December 31, 2015 and 2014, the Company held a provision for the minimum notional income tax for the fiscal years mentioned and for the proportional tax estimated for this year for a total amount of Ps. 256.6 million and Ps. 207.2 million, respectively, including compensatory interest. DIVIDENDS In accordance with the provisions of the Argentine Personal Asset Tax Law, we are required to pay the personal asset tax, payable by all of our shareholders who are subject to the tax to theAdministración Federal de Ingresos Públicos(Argentine Tax Authority, or AFIP) as of December 31 of each year.  Although the law permits companies to recover the amounts paid, recovery can be burdensome.  In practice, companies usually bear the cost of this tax, which adversely affects their results and does not generate any income tax deduction.After review and analysis of the alternatives for public companies in Argentina to recover such tax payments, we established a policy inDecember 2007 to pay a dividend in advance of the tax payment in an offsetting amount. We did not declare any dividends for the fiscal years ended on either December 31, 2012, December 31, 2013, December 31, 2014 or December 31, 2015. We have paid no other dividends over the past three years.  Although we do not have a formal dividend policy, we could decide to pay dividends in the future in accordance with applicable law and based on various factors then existing.  See “Item 10.  Additional Information—Share Capital—Dividends.” **SIGNIFICANT CHANGES** Except to the facts below, there are no significant changes to the financial information included in the most recent audited financial statements contained in this annual report. 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. 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).


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Item 9.           The Offer and Listing TRADING HISTORY Our capital stock is comprised of common shares, with a par value of Ps. 1.00 each.  For a summary of the number of outstanding shares of each series, see “Item 10.  Additional Information—Share Capital.”  Each share entitles the holder thereof to one vote at shareholders’ meetings.  All outstanding shares are fully paid in and our common shares have been listed on the Buenos Aires Stock Exchange since 1947.  Since October 9, 2009, our ADSs have been listed on the NYSE.  The ADSs have been issued by the Bank of New York as depositary.  Each ADS represents 25 common shares. Shares Our common shares are currently traded on the Buenos Aires Stock Exchange under the symbol “PAMP”, and our ADSs are traded on the YSE under the symbol “PAM”. The following table sets forth, for the years indicated, the reported high and low sales prices as well as the average daily trading volume of our shares traded on the Buenos Aires Stock Exchange, and of our ADSs traded on the NYSE: The following table sets forth, for the periods indicated, the reported high and low sales prices as well as the average daily trading volume of our shares traded on the Buenos Aires Stock Exchange, and of our ADSs traded on the NYSE:


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The following table sets forth, for the months indicated, the reported high and low sales prices as well as the average daily trading volume of our shares traded on the Buenos Aires Stock Exchange, and of our ADSs traded on the NYSE:   (1)Values provided by Bloomberg. (2)Values available for our ADSs from October 9, 2010, the first trading date on the NYSE. (3)As of April 19, 2016.  Share Repurchase Program  Due to the recent international economic crisis and the fluctuation in the price of our shares, on September 8, 2008, our board of directors approved a share repurchase program, through which we have acquired shares through transactions in the local market.  In addition, we have launched three local tender offers for the acquisition of our ordinary shares in recent months.  After each of our tender offers were completed, we resumed open market repurchases.  In first local tender offer, launched on October 21, 2008, we acquired 70,000,000 shares of our common stock.  In the second local tender offer, launched on November 7, 2008, we acquired 15,384,730 shares of our common stock. In the third local tender offer, launched on January 30, 2009, we acquired 46,689,578 shares of


our common stock.  With this third tender offer our total holdings of our common stock reached 10% of our total capital stock, the maximum amount that listed companies are permitted to acquire under applicable Argentine regulations.  However, due to the current instability in stock prices, the CNV waived this 10% limit until June 2009.  On April 16, 2009, our board renewed the share repurchase authorization, and we continued repurchasing shares in the open market until June 30, 2009.  As of May 31, 2010, we held 211,883,347 shares, or 13.9%, of our capital stock.


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In the meeting held on April 23, 2010, our shareholders decided to reduce our capital stock in the amount equal to the shares acquired under our share repurchase program.  On March 8, 2010, the Buenos Aires Stock Exchange authorized the share capital reduction approved by our shareholders.  On September 13, 2010, the Argentine Securities Commission proceeded with the reduction of capital. Finally on December 1, 2015, after the execution of the warrants by the Key Executives (Please see “Item 7. – Majer Shareholders and Related Party Transactions”), our share capital authorized for public trading as of the date of this annual report is Ps. 1,695,859,459, represented by 1,695,859,459 common shares of par value Ps. 1 and with right to one vote per share. Global Depositary Receipts (“GDRs”) From December 21, 2006, to October 9, 2009 our GDRs were listed on the Luxembourg Stock Exchange and traded on the Euro MTF Market, the exchange-regulated market operated by the Luxembourg Stock Exchange.  Each GDR represented 25 common shares.  There was practically no trading activity on the Euro MTF Market of our shares.  The last trade occurred on March 5, 2007.  On August 5, 2009, the U.S. Securities and Exchange Commission (“SEC”) declared effective the registration of our common shares and our American Depositary Shares (“ADSs”) under the U.S. Securities Exchange Act of 1934.  On August 14, 2009, we convertedall of our outstanding GDRs into ADSs. American Depositary Shares (“ADSs”) Since October 9, 2009, our ADSs have been listed on the New York Stock Exchange (NYSE) and trade under the ticker PAM.  Each ADS represents 25 common shares (or a right to receive 25 common shares).  Each ADS will also represent any other securities, cash or other property which may be held by the ADS Depositary, the Bank of New York Mellon.  The ADS Depositary’s office at which the ADRs are administered is located at 101 Barclay Street, Floor 4E, New York, NY 10286.  See “Item 12.  Description of Securities Other than Equity Securities—Description of American Depositary Shares.”  The Designated Market Maker on the trading floor of the NYSE for our ADSs is Barclays Capital. The ADS Depositary has informed us that, as of April 19, 2016, there were approximately 44 million outstanding ADSs. THE ARGENTINE SECURITIES MARKET Trading on the Mercado de Valores de Buenos Aires Trading in the Argentine securities market Pursuant to the provisions of the CML, securities market in Argentina is comprised of several markets that require authorization from the CNV to operate (the “Authorized Markets”), including the MERVAL, the Mercado Abierto Electrónico S.A., the Mercado Argentino de Valores S.A., the Mercado de Valores de Córdoba S.A., the Mercado a Término de Rosario S.A., among others.  The CML allows the authorized Markets to delegate certain of its duties and rights as a market to other qualified entities, as previously authorized by the CNV.  Securities listed on these exchanges include corporate equity and bonds and government securities. Prior to the issuance of the CML, the Buenos Aires Stock Exchange was the principal and longest-established exchange in Argentina and is currently the fourth largest exchange in Latin America in terms of market capitalization.  The Buenos Aires Stock Exchange began operating in 1854 and accounted for approximately 95% of all equity trading in Argentina.  In addition, through separate agreements with the Buenos Aires Stock Exchange, all of the securities listed on the Buenos Aires Stock Exchange could be listed and subsequently traded on the Córdoba,


Rosario, Mendoza, La Plata and Santa Fe exchanges, by virtue of which many transactions originating on these exchanges related to Buenos Aires Stock Exchange-listed companies and were subsequently settled in Buenos Aires.  With the enactment of the CML, securities listed on the Buenos Aires Stock Exchange are now listed in the MERVAL.


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Although companies may list all of their capital on the MERVAL or any other Authorized Market, controlling shareholders in Argentina typically retain the majority of a company’s capital stock, resulting in a relatively small percentage of active trading of the companies’ stock by the public on any such Authorized Market. Argentina’s equity markets have historically been comprised of individual investors, though in the past years, there has been an increase in the level of investment by institutional investors in these markets.  The participation of theAdministración Nacional de la Seguridad Social(ANSES) as equity holder in Argentine publicly traded companies after the elimination of the Argentine pension funds resulted in a decrease in the trading of equity in the MERVAL; however, Argentinefondos comunes de inversión(mutual funds), insurance companies and other institutional investor continue sustaining trading in the MERVAL.  During the year ended December 31, 2015, the total value traded of shares on the MERVAL was Ps. 46,665 million. The MERVAL is the largest authorized market in Argentina.  Pursuant to Resolution No. 17,501, the CNV authorized the MERVAL to operate as an Authorized Market, and allowed MERVAL to delegate certain of its rights and duties as a market in the Buenos Aires Stock Exchange, including without limitation, the right to authorize the listing of issuers and securities in the MERVAL, and the right to publish the daily marketgazette. Trading on the MERVAL is conducted either through the traditional auction system from 11:00 a.m. to 5:00 p.m. on trading days, or through theSistema Integrado de Negociación Asistida por Computación(Computer-Assisted Integrated Negotiation System, or SINAC).  SINAC is a computer trading system that permits trading in both debt and equity securities and is accessed by brokers directly from workstations located in their offices.  Currently, all transactions relating to listed negotiable obligations and listed government securities can be effectuated through SINAC.  In order to control price volatility, MERVAL imposes a 15-minute suspension on trading when the price of a security registers a variation in price between 10% and 15% and between 15% and 20%.  Any additional 5% variation in the price of a security will result in additional 10-minute successive suspension periods. Recently, the shareholders of MERVAL and the Buenos Aires Stock Exchange entered into a framework agreement to create Bolsas y Mercados Argentinos S.A. for purposes of operating a stock market in accordance with the requirements of the newly enacted CML. The new company will be incorporated as a result of a spin-off of certain assets of MERVAL relating to its stock market business and shall be further capitalized by the Buenos Aires Stock Exchange. Authorization for the public offering of its shares has been requested to the CNV. Further, MERVAL and the Buenos Aires Stock Exchange entered into a memorandum of understanding with (i) Mercado de Valores de Córdoba S.A., to integrate the stock market of Córdoba into a federal stock market managed by Bolsas y Mercados Argentinos S.A., and (ii) several brokers of the city of Santa Fe, Province of Santa Fe, for them to act within such federal market. As of the date of this annual report, the required authorizations from the CNV in respect of the abovementioned spin-off of MERVAL and the public offering of the shares of Bolsas y Mercados Argentinos S.A. are still pending.  Therefore, MERVAL is still operating as an Authorized Market, and the Buenos Aires Stock Exchange is in charge of the rights and duties that MERVAL delegated to it, as authorized by the CNV. Regulation of the Argentine securities market The Argentine securities market is regulated and overseen by the CNV, pursuant to Law No. 26,831,  as well as stockbroker transactions, market operations, the public offering of securities, corporate governance matters relating to public companies and the trading of futures and options.  Argentine insurance companies are regulated by a government agency, theSuperintendencia de Seguros de la Nación, whereas financial institutions are regulated primarily by the Central Bank.


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In Argentina, debt and equity securities traded on an exchange or the over-the-counter market must, unless otherwise instructed by their shareholders, be deposited with Caja de Valores S.A. (“Caja de Valores”), a corporation owned by the Buenos Aires Stock Exchange, MERVAL and certain provincial exchanges.  Caja de Valores is the central securities depositary of Argentina and provides central depositary facilities, as well as acting as a clearinghouse for securities trading and as a transfer and paying agent for securities transactions.  Additionally, Caja de Valores handles the settlement of securities transactions carried out by the Buenos Aires Stock Exchange and operates the computerized exchange information system mentioned above. Despite a change in the legal framework of Argentine securities trading in the early 1990s, which permitted the issuance and trading of new financial products in the Argentine capital markets, including commercial paper, new types of corporate bonds and futures and options, and significant corporate governance regulations introduced in 2001 as further described below, there is still a relatively low level of regulation of the market for Argentine securities and investors’ activities in such markets and enforcement of them has been extremely limited.  Because of the limited exposure and regulation in these markets, there may be less publicly available information about Argentine companies than is regularly published by or about companies in the United States and certain other countries.  However, the CNV has taken significant steps to strengthen disclosure and regulatory standards for the Argentine securities market, including the issuance of regulations prohibiting insider trading and requiring insiders to report on their ownership of securities, with associated penalties for noncompliance. In order to improve Argentine securities market regulation, the Argentine Government issued Decree No. 677/2001 on June 1, 2001, which provided certain guidelines and provisions relating to capital markets transparency and best practices.  Decree No. 677/2001 applied to individuals and entities that participate in the public offering of securities, as well as to stock exchanges.    Further improvements to Argentine securities market regulations were introduced in December 2011 when the Argentine Congress enacted changes to the Argentine Criminal Code to include insider trading as a criminal offense. Also, on November 29, 2012, the Argentine Government enacted the CML which revoked law No. 17,811 and Decree No. 677/2001. However, CML incorporated most of the provisions established in those regulations.  In this respect, the following key provisions of Decree No. 677/2001 have been incorporated into the CML, among others:  the definition of the term “security”; corporate governance requirements, including the obligation for publicly-listed companies to have an audit committee composed of three or more members of the board of directors (the majority of which must be independent under CNV regulations); the regulation of market stabilization transactions under certain circumstances; regulation governing insider trading, market manipulation and securities fraud; and the regulation of going-private transaction and acquisitions of voting shares, including controlling stakes in public companies. In addition, the CML included relevant changes for the modernization and future design of the Argentine capital markets, such as granting regulatory powers and resources to the CNV, providing for a mandatory tender offer system and other provisions such as certain requirements for brokers/dealers and other market participants.  These provisions were regulated by the CNV through Resolution No. 622/2013. Before offering securities to the public in Argentina, an issuer must meet certain requirements established by the CNV with regard to the issuer’s assets, operating history and management, among others, and only securities for which an application for a public offering has been approved by the CNV may be listed on a stock exchange.  Despite these requirements imposed by the CNV, CNV approval does not imply any kind of certification as to the quality of the securities or the solvency of the issuer, although issuers of listed securities are required to file unaudited quarterly financial statements and audited annual financial statements and various other periodic reports with the CNV and the stock exchange on which their securities are listed, as well as to report to the CNV and the relevant stock exchange any event related to the issuer and its shareholders that may affect materially the value or trading volume of the securities traded.


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Item 10.         Additional Information MEMORANDUM AND ARTICLES OF ASSOCIATION Please see our registration statement under the Securities Act filed on Form 20-F on August 3, 2009. MATERIAL CONTRACTS The Opportunities Assignment Agreement that we entered into with Marcelo Mindlin, Damián Mindlin, Gustavo Mariani and Ricardo Torres was filed as exhibit Exhibit 2.2 to our Registration Statement on Form 20-F (File No. 001-34429) on August 3, 2009 and incorporated by reference herein. EXCHANGE CONTROLS Prior to December 1989, the Argentine foreign exchange market was subject to exchange controls. From December 1989 until April 1991, Argentina had a freely floating exchange rate for all foreign currency transactions, and the transfer of dividend payments in foreign currency abroad and the repatriation of capital were permitted without prior approval of the Central Bank. From April 1, 1991, when the Convertibility Law became effective, until December 21, 2001, when the Central Bank closed the foreign exchange market, the Argentine peso was freely convertible into U.S. dollars. On December 3, 2001, the Argentine government imposed a number of monetary and currency exchange control measures through Decree 1570/01, which included restrictions on the free disposition of funds deposited with banks and tight restrictions on transferring funds abroad (including the transfer of funds to pay dividends) without the Central Bank’s prior authorization subject to specific exceptions for transfers related to foreign trade. In June 2003, the Argentine government set restrictions on capital flows into Argentina, which mainly consisted of a prohibition against the transfer abroad of any funds until 180 days after their entry into the country. In January 2002, the Argentine government issued the Public Emergency Law and declared a state of public emergency in respect of its social, economic, administrative, financial and foreign exchange matters, authorizing the Argentine government to establish a system to determine the foreign exchange rate between the Peso and foreign currencies and to issue foreign exchange-related rules and regulations.  Within this context, on February 8, 2002, through Decree No. 260/2002, the Argentine government established (i) the MULC through which all foreign exchange transactions in foreign currency must be conducted, and (ii) that foreign exchange transactions in foreign currency must be conducted at the foreign exchange rate to be freely agreed upon among contracting parties, subject to the requirements and regulations imposed by the Argentine Central Bank.  A summary of the main regulations is set forth below. On June 9, 2005, through Decree No. 616/2005, the Argentine government mandated that (i) all inflows of funds into the local foreign exchange market arising from foreign debts incurred by residents (including both individuals and legal entities in the Argentine private sector), other than those concerning foreign trade financing and primary issuances of debt securities offered to the public and listed on self-regulated markets, and (ii) all inflows of funds by non-residents channeled through the MULC and intended to be held in local currency for acquiring all types of financial assets or liabilities in the financial or non-financial private sector (except for foreign direct investments and primary issuances of debt securities and shares offered to the public and listed on self-regulated markets), as well as investments in securities issued by the public sector and acquired in secondary markets, had to meet the following requirements: (a) such inflows of funds could only be transferred outside the local foreign exchange market at the expiration of a term of 365 calendar days from the date of settlement of such funds into Pesos; (b) the proceeds of such inflows of funds had to be credited to an account in the local banking system; (c) a non-transferable and non-interest-bearing deposit for 30% of the amount of the transaction had to be kept in Argentina for a period of 365 calendar days, in accordance with the terms and conditions set forth in the applicable regulations (the “Deposit”); and (d) the Deposit had to be denominated in U.S. Dollars and held in Argentine financial institutions, and it may not be used to guarantee or serve as collateral for any type of credit transactions. The requirements of Decree No. 616/2005 were subsequently eased.


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On December 16, 2015, following the election of President Macri, the newly appointed Central Bank authorities issued Communication “A” 5850, which lifted many of the existing restrictions and, among other things, established free access to the MULC to purchase foreign currency for general purposes (subject to certain limits set forth below) without requiring the Central Bank’s or the AFIP’s prior authorization, reduced the period in which incoming funds must remain in Argentina from 365 calendar days to 120 calendar days and also reduced the Deposit from 30% to 0%. Although these recent changes to the Argentine government’s foreign exchange policies allow all individuals free access to the local foreign exchange market, certain restrictions remain, including the following: ·Argentine residents have free access to the MULC, provided the total amount transacted in the market does not exceed the equivalent of U.S.$2,000,000 per month, per person; ·any proceeds from the sale of foreign currency in the local exchange market that exceeds the equivalent of U.S.$2,500 per month must be credited to a checking or savings account in Pesos at a domestic financial institution; ·although the requirement of mandatory inflow and settlement of funds resulting from foreign indebtedness transactions is no longer in effect, the transfer and sale of funds in the local foreign exchange market will be necessary to make any payments of principal or interest through the local foreign exchange market; and ·foreign indebtedness incurred or renewed after December 17, 2015 must remain in Argentina for a minimum period of at least 120 concurrent days, commencing on the date on which the funds are transferred into Argentina.  Under the exchange regulations currently in force, restrictions exist in respect of the repatrition of funds or investments by non-Argentine residents.  For instance the repatriation by non-Argentine residents of funds received as a result of the sale of our common shares in the secondary market is subject to demonstrating that the funds used to make the investment in such common shares were transferred to Argentina at least 120 days before the proposed repatriation and obtaining a certificate from an Argentine financial entity or Argentine stock exchange stating the date and amount of the settlement of said funds in the MULC.  The transfer abroad of dividend payments is currently authorized by applicable regulations to the extent that such dividend payments are made in connection with audited financial statemtns and are approved by a shareholders’ meeting.  The Argentine government may, in the future, impose additional controls on the foreign exchange market and on capital flows from and into Argentina, in response to capital flight or depreciation of the Peso.  These restrictions may have a negative effect on the Argentine economy and our business if imposed in an economic environment where access to local capital is constrained. See “—Risk Factors—The implementation 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.”


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Money Laundering On April 13, 2000, the Argentine Congress passed Law No. 25,246, as amended by Laws No. 26,087, 26,119,  26,268 and 26,683 (the Money Laundering Law), which establishes an administrative criminal system and supersedes various sections of the Argentine Penal Code relating to money laundering.  This law defines money laundering as crime, stating that a crime is committed whenever a person converts, transfers, manages, sells, encumbers, or otherwise uses money, or any other assets, connected with a crime in which that person has not participated, with the possible result that the original or substituted assets may appear to be of a legitimate origin, provided the applicable amount of money or value of the relevant assets exceeds Ps. 300,000, whether such amount results from one or more transactions. In addition, the Money Laundering Law created the Financial Information Unit, which is charged with the handling and the transmission of information in order to prevent the laundering of assets originating from: ·Crimes related to illegal trafficking and commercialization of narcotics (Law No. 23,737); ·Crimes related to arms trafficking (Law No. 22,415); ·Crimes related to the activities of an illegal association as defined in Article 210 bis of the Penal Code; ·Illegal acts committed by illegal associations (Article 210 of the Penal Code) organized to commit crimes for with political or racial objectives; ·Crimes of fraud against the Public Administration (Article 174, Section 5 of the Penal Code); ·Crime against the Public Administration under Chapters VI, VII, IX and IX bis of Title XI of Book Two of the Penal Code; ·Crimes of underage prostitution and child pornography under Articles 125, 125 bis, 127 bis and 128 of the Penal Code; and ·Crimes related to terrorism financing (Article 213quarterof the Penal Code). Argentina’s Money Laundering Law, like other international money laundering laws, does not designate sole responsibility to the Argentine Government for the monitoring of these criminal activities, but rather also delegates certain obligations to various private sector entities (including the Company) such as banks, stockbrokers, stock market entities and insurance companies.  These obligations essentially consist of information gathering functions, such as: ·obtaining from clients documents that indisputably prove the identity, legal status, domicile and other information, to accomplish any type of activity intended; ·reporting any suspicious activity or operation; and ·keeping any monitoring activities in connection with a proceeding pursuant to the Money Laundering Law confidential from both clients and third parties. In addition, Central Bank regulations require that Argentine banks undertake certain minimum procedures to prevent money laundering.  CNV regulations also require that the issuers and traders of publicly traded securities in Argentina and those persons participating in financial trusts and common investment funds subject to the CNV’s control comply with certain obligations and requirements relating to money laundering prevention and to the suppression of the financing of terrorism. Financial entities must inform theUnidad de Información Financiera(“UIF”) about any suspicious or unusual transaction, or transactions lacking economical or legal justification, or being unnecessarily complex.  The Central Bank publishes a list of “non-cooperating” jurisdictions.  The UIF has regulated the duty to report through


Resolutions 229/2011.  In addition, it has established guidelines and internal procedures for unusual or suspicious transactions which must be implemented by financial institutions and other entities.


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CNV regulations provide that entities involved in the public offering of securities (other than issuers), including, among others, underwriters of any primary issuance of securities, must comply with the standards set by the UIF.  In particular, they must comply with the obligation regarding customer identification and required information, record-keeping, precautions to be taken to report suspicious operations, policies and procedures to prevent money laundering and terrorist financing. With respect to issuers (such as the Company), CNV regulations provide that any entity performing significant capital contributions or loans must be identified, whether or not a shareholder at the time of the contributions, and must meet the requirements for general participants in the public offering of securities, provided in the CNV regulations and the UIF regulations, especially with regards to the identification of such persons and to the origin and legality of the funds and loans provided. On June 1, 2011 the Argentine Congress adopted law 26,683. Pursuant to such law, money laundering is now an autonomous crime and self-money laundering is also punished.  The law also extended the reporting obligations to certain private sector parties not obliged before, and also extended from 30 to 150 days the lapse of time within which certain private entities are required to report suspicious activities or operations, in order to permit those entities to analyze transactions and operations in more detail before reporting them to the relevant authorities. TAXATION The following summary contains a description of the principal Argentine and U.S. federal income tax consequences of the acquisition, ownership and disposition of common shares or ADSs, but it does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase common shares or ADSs.  The summary is based upon the tax laws of Argentina and regulations thereunder and on the tax laws of the United States and regulations thereunder as in effect on the date hereof, which are subject to change.Investors should consult their own tax advisors as to the tax consequences of the acquisition, ownership and disposition of common shares or ADSs. Although there is at present no income tax treaty between Argentina and the United States, the tax authorities of the two countries have had discussions that may culminate in such a treaty.  No assurance can be given, however, as to whether or when a treaty will enter into force or how it will affect the U.S. holders of common shares or ADSs. Argentine Tax Considerations **Dividends tax** Dividends paid on our common shares or ADSs to individuals or undivided estates domiciled in Argentina and non-resident persons (whether individuals or legal entities) are subject to income withholding tax at a 10% rate as a single and final payment (except for dividends paid out in the form of shares or quotas).  Additionally, such dividends paid in excess of our taxable accumulated income at the previous fiscal period are subject to a withholding at the rate of 35% in respect of the excess portion of the dividends paid.If applicable, the 10% withholding will apply on the amount resulting from subtracting the 35 % withholding from the dividends or earnings distribution amount.Both the 10% and the 35% withholdings are subject to the limits set forth by double taxation treaties in force. See “Tax Treaties” below. ***Capital gains tax*** Resident individuals The Income Tax Reform introduced by Law No. 26,893 (the “Income Tax Reform”) provided for the taxation of resident individuals’ income resulting from the purchase and sale, exchange or other disposition of shares not listed on stock exchanges or securities markets as authorized by the CNV, irrespective of the frequency or regularity of such operations.This income is subject in all cases to the 15% tax rate.


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Notwithstanding the above, based on certain tax precedents, there may be support to argue that gains obtained by resident individuals from the disposal of ADSs should be considered as foreign source income. Recently, the Argentine Tax Authority understood that foreign source income obtained by resident individuals is taxed at a 9% to 35% rate.  As this is a controversial issue, a case by case analysis is required. Foreign beneficiaries Pursuant to the Income Tax Reform, all income resulting from the purchase and sale, exchange or other disposition of shares and other securities earned by foreign beneficiaries will be subject to the Income Tax, whether they are listed on stock exchanges or securities markets and/or have an authorization for public offering or whether they do not meet such requirements.These provisions will apply to foreign individual and legal entities at a 15% rate on the net capital gain or at a 13.5% rate on the gross price. Notwithstanding the above, based on certain tax precedents, there may be support to argue that gains obtained by foreign beneficiaries from the disposal of ADSs should be regarded as foreign source income and, therefore, not subject to Argentine income tax. As this is a controversial issue, a case by case analysis is required. Local entities Capital gains obtained by Argentine entities in general, entities organized or incorporated under Argentine law, certain traders and intermediaries, local branches of non Argentine entities, sole proprietorships and individuals carrying on certain commercial activities in Argentina derived from the sale, exchange or other disposition of our common shares or ADSs are subject to income tax at the rate of 35%.  Losses arising from the sale of our common shares or ADSs can be applied to offset such income. **Personal assets tax** Argentine entities, such as us, have to pay the personal assets tax corresponding to Argentine and foreign individuals and foreign entities for the holding of our shares at December 31 of each year.  The applicable tax rate is 0.5% and is levied on the equity value, or the book value, of the shares arising from the last balance sheet.  Pursuant to the Personal Assets Tax Law, the Argentine company is entitled to seek reimbursement of such paid tax from the applicable Argentine individuals and/or foreign shareholders or by withholding dividend payments. Tax on Minimum Notional Income (Impuesto a la Ganancia Mínima Presunta or “IGMP”) Companies domiciled in Argentina, partnerships, foundations, sole proprietorships, trusts, certain mutual funds organized in Argentina, and permanent business establishments owned by foreign persons, among other taxpayers, shall apply a 1% rate to the total value of assets held by such persons, above an aggregate nominal amount of Ps. 200,000. Nevertheless, common shares and ADSs issued by entities subject to such tax are exempt from the IGMP. Gross Income Tax The gross income tax is a local tax; therefore, the rules of the relevant provincial jurisdiction should be considered, which may levy this tax on the customary purchase and sale, exchange or other disposition of common shares and ADSs, and/or the collection of dividends at an average rate of 6%, unless an exemption is applicable. In the particular case of the City of Buenos Aires, any transaction involving common shares and/or the collection of dividends and revaluations is exempt from this tax. **Value added tax** The sale, exchange or other disposition of our common shares or ADSs and the distribution of dividends are exempted from the value added tax.


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***Transfer taxes*** The sale, exchange or other disposition of our common shares or ADSs is not subject to transfer taxes. Stamp taxes Stamp taxes may apply in the City of Buenos Aires and in certain Argentine provinces in case transfer of our common shares or ADSs is performed or executed in such jurisdictions by means of written agreements. ***Other taxes*** There are no Argentine inheritance or succession taxes applicable to the ownership, transfer or disposition of our common shares or ADSs.  In addition, neither the minimum notional income tax nor any local gross turnover tax is applicable to the ownership, transfer or disposition of our common shares or ADSs. ***Tax treaties*** Argentina has signed tax treaties for the avoidance of double taxation with Australia, Belgium, Spain, Bolivia, Brazil, Canada, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Russia, Sweden, Uruguay and the United Kingdom.  There is currently no tax treaty or convention in effect between Argentina and the United States.  It is not clear when, if ever, a treaty will be ratified or entered into effect.  As a result, the Argentine tax consequences described in this section will apply, without modification, to a holder of our common shares or ADSs that is a U.S. resident.  Foreign shareholders located in certain jurisdictions with a tax treaty in force with Argentina may be exempted from the payment of the personal asset tax. UnitedStatesFederalIncomeTaxConsiderations This summary describes certain U.S. federal income tax consequences for a U.S. holder (as defined below) of acquiring, owning, and disposing of ADSs.  This summary applies to a holder only if such holder holds the ADSs as capital assets for tax purposes.  This summary does not address the Medicare tax on net investment income and does not apply to investors that are members of a class of holders subject to special rules, such as: ·a dealer in securities or currencies; ·a trader in securities that elects to use a mark-to-market method of accounting for securities holdings; ·a bank; ·a life insurance company; ·a tax-exempt organization; ·a person that holds ADSs that are a hedge or that are hedged against interest rate or currency risks; ·a person that holds ADSs as part of a straddle or conversion transaction for tax purposes; ·a person who is liable for the alternative minimum tax; ·a person whose functional currency for U.S. tax purposes is not the U.S. Dollar; or ·a person that owns or is deemed to own 10% or more of any class of our stock. This summary is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations promulgated thereunder, published rulings and court decisions, all as currently in effect.  These laws are subject to change, possibly on a retroactive basis.  Investors should consult their own tax advisors


concerning the consequences of purchasing, owning, and disposing of ADSs in their particular circumstances, including the possible application of state, local, non-U.S. or other tax laws.  For purposes of this summary, an investor is a “U.S. holder” if such investor is a beneficial owner of an ADS and is:


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·a citizen or resident of the United States; ·a U.S. domestic corporation; or ·otherwise subject to U.S. federal income tax on a net income basis with respect to income from the ADS. If a partnership holds our ADSs, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership.  An investor who is a partner of a partnership holding our ADSs should consult its own tax advisor. In general, if an investor is the beneficial owner of ADSs, such investor will be treated as the beneficial owner of the common stock represented by those ADSs for U.S. federal income tax purposes, and no gain or loss will be recognized if such investor exchanges an ADS for the common stock represented by that ADS. ***Dividends*** The gross amount of distributions that investors receive (prior to deduction of Argentine taxes) generally will be subject to U.S. federal income taxation as foreign source dividend income, to the extent paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles.  Dividends paid in Argentine Pesos will be included in an investor’s income in a U.S. Dollar amount calculated by reference to the exchange rate in effect on the date of the depositary’s receipt of the dividend, regardless of whether the payment is in fact converted into U.S. Dollars.  A U.S. holder will have a tax basis in such Pesos for U.S. federal income tax purposes equal to the U.S. Dollar value on the date of such receipt.  Any subsequent gain or loss in respect of such Pesos arising from exchange rate fluctuations will be ordinary income or loss and will be treated as income from U.S. sources for foreign tax credit purposes.  If such a dividend is converted into U.S. Dollars on the date of receipt, investors generally should not be required to recognize foreign currency gain or loss in respect of the dividend income.  Subject to certain exceptions for short-term (60 days or less) and hedged positions, the U.S. Dollar amount of dividends received by an individual U.S. holder in respect of ADSs generally will be subject to taxation at a maximum rate of 20% if the dividends are “qualified dividends.” Dividends paid on the ADSs will be treated as qualified dividends if (1) the ADSs are readily tradable on an established securities market in the United States and (2) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign investment company (PFIC).  The ADSs are listed on the New York Stock Exchange and will qualify as readily tradable on an established securities market in the United States so long as they are so listed.  Based on our Consolidated Financial Statements and relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 2014 taxable year.  In addition, based on our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for our 2015 taxable year. Based on existing guidance, it is not entirely clear whether dividends received with respect to the common shares will be treated as qualified dividends, because the common shares are not themselves listed on a U.S. exchange.  In addition, the U.S. Treasury has announced its intention to promulgate rules pursuant to which holders of ADSs and intermediaries through whom such securities are held will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividends.  Because such procedures have not yet been issued, it is not clear whether we will be able to comply with them.  U.S. holders of ADSs should consult their own tax advisors regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances. Distributions of additional shares in respect of ADSs that are made as part of a pro-rata distribution to all of our shareholders generally will not be subject to U.S. federal income tax.


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***Sale or other disposition*** Upon a sale or other disposition of ADSs, an investor will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the U.S. Dollar value of the amount realized and such investor’s tax basis, determined in U.S. Dollars, in the ADSs.  Generally, such gain or loss realized on the sale or other disposition of ADSs will be treated as U.S. source capital gain or loss, and will be long-term capital gain or loss if the ADSs were held for more than one year.  The ability to offset capital losses against ordinary income is limited.  Long-term capital gain recognized by an individual U.S. holder, generally is subject to taxation at a reduced rate. ***Foreign tax credit considerations*** Investors should consult their own tax advisors to determine whether they are subject to any special rules that limit their ability to make effective use of foreign tax credits.  If no such rules apply, investors may claim a credit against their U.S. federal income tax liability for Argentine taxes withheld from cash dividends on the ADSs, so long as they have owned the ADSs (and not entered into specified kinds of hedging transactions) for at least a 16-day period that includes the ex-dividend date.  It is unclear whether the Argentine personal assets tax (as described in “—Argentine Tax Considerations”) is treated as an income tax for U.S. federal income tax purposes.  If the Argentine personal assets tax is not treated as an income tax for U.S. federal income tax purposes, a U.S. holder would be unable to claim a foreign tax credit for any Argentine personal assets tax withheld.  A U.S. holder may be able to deduct such tax in computing its U.S. federal income tax liability, subject to applicable limitations.  The calculation of foreign tax credits and, in the case of a U.S. holder that elects to deduct foreign taxes, the availability of deductions, involve the application of complex rules that depend on a U.S. holder’s particular circumstances.  Investors should consult their own tax advisors regarding the creditability or deductibility of such taxes. ***U.S. information reporting and backup withholding rules*** Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries are subject to information reporting unless the holder is an exempt recipient and may also be subject to backup withholding unless the holder (1) provides its taxpayer identification number and certifies that it is not subject to backup withholding or (2) otherwise establishes an exemption from backup withholding.  Investors may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim or refund with the Internal Revenue Service and filing any required information.  DIVIDENDS AND PAYING AGENTS The holders of ADSs are entitled to receive dividends to the same extent as the owners of our common shares.  We have not paid any dividends in the last three fiscal years.  See “Item 8.—Dividends.”  However, we could decide to pay dividends in the future in accordance with applicable law and based on various factors then existing, including: ·our financial condition, operating results and current and anticipated cash needs; ·general economic and business conditions; ·our strategic plans and business prospects; ·legal, contractual and regulatory restrictions on our ability to pay dividends; and ·other factors that our board of directors may consider to be relevant. Under the BCL, the declaration and payment of annual dividends, to the extent that the company presents retained earnings in accordance with IFRS and CNV regulations, are determined by shareholders at the annual ordinary shareholders’ meeting.  In addition, under the BCL, 5% of the net income for the fiscal year calculated in accordance with IFRS and CNV regulations must be appropriated by resolution adopted at shareholders’ meetings to a legal reserve until such reserve equals 20% of the capital stock.  This legal reserve is not available for distribution.


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**Amount Available for Distribution** Dividends may be lawfully declared and paid only out of our earnings stated in our annual financial statements approved by the annual ordinary shareholders’ meeting.  Under the BCL, listed companies (such as ourselves) may distribute provisional dividends or dividends in advance resulting from interim audited financial statements. Under the BCL and our by-laws, our annual net income (as adjusted to reflect changes in prior years’ results) is allocated in the following order: (1) to comply with our legal reserve requirement of 5% of our net income until such reserve equals 20% of the capital stock; (2) for voluntary or contingent reserves, as may be resolved from time to time by our shareholders at the annual ordinary shareholders’ meeting; (3) the remainder of the net income for the year may be distributed as dividends on common shares, and/or (4) as otherwise decided by our shareholders at the annual ordinary shareholders’ meeting. The board of directors submits our financial statements for the preceding fiscal year, together with reports thereon by the supervisory committee and the independent accountants, at the annual ordinary shareholders’ meeting for approval.  Within four months of the end of each fiscal year, an ordinary shareholders’ meeting must be held to approve our annual financial statements and determine the appropriation of our net income for such year. Under applicable CNV regulations, cash dividends must be paid to shareholders within 30 days of the shareholders’ meeting approving such dividends.  In the case of stock dividends, shares are required to be delivered within three months of our receipt of notice of the authorization by the CNV for the public offering of the shares relating to such dividends.  The statute of limitations in respect of the right of any shareholder to receive dividends declared by the shareholders’ meeting is three years from the date on which it has been made available to the shareholder. DOCUMENTS ON DISPLAY The materials included in this annual report in Form F-20, and exhibits therein, may be inspected and copied at the Securities and Exchange Commission’s Public Reference Room at 100 F Street,N.E.,Washington, D.C.  20549.  You may obtain information on the operation of the Public Reference Room by calling the SEC at1-800-SEC-0330.Any SEC filings we make are also available to the public over the Internet at the SEC’s website: www.sec.gov.


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Item 11.         Quantitative and Qualitative Disclosures about Market Risk Qualitative Disclosure Market risk generally represents the risk that losses may occur in the value of financial instruments as a result of movements in interest rates, foreign currency exchange rates or commodity prices.  We are exposed to changes in financial market conditions in the normal course of our business due to our use of certain financial instruments as well as transactions incurred in various foreign currencies. In the normal course of business, we are exposed to interest rate and exchange rates risks, primarily related to changes in exchanges rates and interest rates.  We manage our exposure to these risks through the use of various financial instruments. 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 Badlar 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. 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.


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The following chart shows the opening of the Company’s loans classified by interest rate and the currency in which they are denominated:   Exchange Rate Risks 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 Loma de la Lata and the SE or EGSSA (actually merged with CTG) and the SE, pursuant to SE Resolution No.  220/2007, 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 SE Resolution No. 220/2007. 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 U.S. 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, Loma de la Lata has conducted forward transactions to purchase U.S. Dollars with pesos for US$ 72 million at an average exchange rate of Ps. 14.18 to a U.S. dollar, with maturities between January and June, 2016. However, 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 SE Resolution No. 220/2007, 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 the loan agreement and its collateral subscribed with CAMMESA during April 2014. In addition, a substantial portion of its financial debt with related companies is denominated in U.S. dollars. In the distribution segment, Edenor’s exposure to currency risk relates to the collection of its revenue in pesos, in conformity with regulated electricity tariff that are not indexed in relation to the U.S. dollar, whereas a significant portion of its existing financial liabilities is denominated in U.S. 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 fowards. Nevertheless, as of December 31, 2015, it has not been able to hedge its exposure to the U.S. dollar under terms it may consider viable.


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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 Notes) and the results of its operations. In the Oil and Gas segment, part of the Petrolera Pampa’s income is denominated in U.S. Dollars but collectable in Pesos. Most of the financial debt of Petrolera Pampa 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%). Petrolera Pampa contracted investment commitments and operating expenses are denominated in U.S. 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, Petrolera Pampa has conducted forward transactions to purchase U.S. Dollars with pesos for US$ 83 million at an average exchange rate of Ps. 14.08 to a U.S. dollar, with maturities between January and June, 2016. The economic impact of forward transactions to purchase U.S. Dollars with Pesos in all of our segments resulted in an income of Ps. 471.8 million, which is disclosed in “Foreign currency exchange difference”, under “Other financial results” in the Statement of Comprehensive Income. On December 17, 2015, the 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 the Financial Statements, the devaluation of the Peso increased, as compared to its value at year-end, by approximately 17%. This variation would generate a negative impact of Ps. 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.   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 . 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 TGS’s ADRs. 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 over 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:


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Sesitivity Analysis Disclosures 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 income:  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:   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:     255


***Quantitative Disclosure*** The chart below provides quantitative information about our financial debt as of December 31, 2014, that is sensitive to changes in interest rates and foreign exchange rates. Foreign Currency Exchange Rate Risk and Interest Rate Risk


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Item 12.         Description of Securities Other than Equity Securities DESCRIPTION OF AMERICAN DEPOSITARY SHARES Payment of Taxes You will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until such taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your American Depositary Shares to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes.  Fees and Expenses for Holders of ADRs Persons depositing or withdrawing sharesor ADS holders must pay:

   For:·U.S. $ 5.00 (or less) per 100 ADSs (or portion of 100 ADSs)

   ·Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property; and

   ·Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates·U.S. $ 0.02 (or less) per ADS

   ·Any cash distribution to ADS holders·A fee equivalent to the fee that would be payable by you if the Company distributes shares and you deposit the shares with the depositary for issuance of ADSs

   ·Distribution of securities to holders of deposited securities which are distributed by the depositary to ADS holders·U.S. $ 0.02 (or less) per ADS per calendar year

   ·Depositary services·Registration or transfer fees

   ·Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares·Expenses of the depositary

   ·Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement); and

   ·Converting foreign currency to U.S. Dollars·Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes

   ·As necessary·Any charges incurred by the depositary or its agents for servicing the deposited securities

   ·As necessary


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Depositary Payments to the Company The Bank of New York Mellon, as depositary, has agreed to reimburse us for expenses they incur that are related to establishment and maintenance expenses of the ADS program. The depositary has agreed to reimburse us for its continuing annual stock exchange listing fees. The depositary has also agreed to pay the standard out-of-pocket maintenance costs for the ADRs, which consist of the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls. It has also agreed to reimburse us annually for certain investor relationship programs or special investor relations promotional activities. In certain instances, the depositary has agreed to provide additional payments to the Company based on any applicable performance indicators relating to the ADR facility.  There are limits on the amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available us is not necessarily tied to the amount of fees the depositary collects from investors. The depositary collects fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them.  The depositary collects fees related to making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees.  The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them.  The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid. From June, 2015, to the date of this annual report, the Company received from the depositary U.S. $ 299,669. for continuing annual stock exchange listing fees, standard out-of-pocket maintenance costs for the ADRs (consisting of the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls), any applicable performance indicators relating to the ADR facility, underwriting fees and legal fees.


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PART II Item 13.         Defaults, Dividend Arrearages and Delinquencies Not applicable. Item 14.         Material Modifications to the Rights of Security Holders and Use of Proceeds Not applicable. Item 15.         Controls and Procedures (a) 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 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.  (b) Management’s Annual Report on Internal Control over Financial Reporting 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 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. Management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2015. In making this assessment, management used the criteria set forth by the Committee of


Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).  Based on our assessment and those criteria, management believes that the company maintained effective internal control over financial reporting as of December 31, 2015.


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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. (c) 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. (d) 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. Item 16A.      Audit Committee Financial Expert On April 29, 2016, the term as member of our board of directors of Marcelo P. Blanco, our former audit committee financial expert, expired. A meeting of our Board of Directors is scheduled to take place on May 11, 2016. In such meeting, two additional independent directors (under Argentine law and Rule 10A-3) are expected to be appointed as members of our audit committee, one of which is expected to be an “audit committee financial expert” as defined in Item 16A of Form 20-F under the Securities and Exchange Act of 1934 and pursuant to section 407 of Sarbanes Oxley Act. Item 16B.      Code of Ethics We adopted a Business Code of Conduct in 2007, which applies to all of our employees, including our principal executive, financial and accounting officers, as well as other corporate governance policies (see “Item 6 – Directors, Senior Management and Employees – Corporate Governance”).  Our Business Code of Conduct is posted, in both English and Spanish, on our website at http://www.pampaenergia.com.ar. Item 16C.      Principal Accountant Fees and Services Fees Paid to the Principal Accountant  Price Waterhouse & Co. S.R.L. acted as our independent registered public accounting for the fiscal years ended December 31, 2015, 2014 and 2013.  The following table discloses the services rendered to Pampa Energía S.A. and its consolidated companies by Price Waterhouse & Co. S.R.L and the fees billed for those services:


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Year ended December 31,2015

   

   2014

   

   2013(in thousands of Ps.)Audit Fees (1)

   14,404.5

   

   10,329.8

   

   11,919.5Audit-related Fees (2)

   305.3

   

   252.2

   

   361.1Tax Fees (3)

   69.9

   

   38.2

   

   32.2Other non-audit Fees (4)

   233.0

   

   252.1

   

   24.4Total

   15,012.8

   

   10,872.2

   

   12,337.1
  (1)            Audit Fees comprised of audit of the financial statements of the Company and its subsidiaries, the review of the interim financial statements, review of the Company’s annual report on Form 20-F, work to comply with the requirements of the Sarbanes Oxley – Section 404 and other services rendered by the external auditor in connection with statutory or regulatory filings or engagements. (2)            Audit-related Fees comprised of those outside the normal scope of the services included in an audit but are nevertheless reasonably related to the performance of the audit or review of financial statements of the Company or its subsidiaries and may be effectively and efficiently rendered by the external auditor because of his knowledge of the financial information of the Company. (3)            Tax Fees comprised of services rendered by the external auditor for tax compliance. (4)           Services included under this heading include permissible advisory services consisting in the analysis of transactions.   For a description of the permissible services included under these headings, please see the description of the categories of services of the “Audit Committee’s Pre-approval Policy” described below. All of our audit fees, and audit-related fees, contained in the above table were billed by Price Waterhouse & Co. S.R.L. Audit Committee’s Pre-approval Policy  The Audit Committee has developed a Pre-approval Policy regarding the engagement of services by the external auditor, establishing the obligation to obtain prior approval from the audit committee for any service to be rendered by the external auditor to the Company or any of its subsidiaries. The policy ensures that the external auditor preserves its independence and is applicable to the Company and its subsidiaries. Services pre-approved by the audit committee of Edenor do not require pre-approval by the audit committee of Pampa Energía, but are reported to the latter. The Audit Committee has delegated to one of its members the authority to grant pre-approvals to auditors.  The decision of that member to pre-approve a service is presented to the full audit committee at each of its scheduled meetings. Pre-approval is required for all services rendered by the external auditor. Item 16D.      Exemptions from the Listing Standards for Audit Committees Not applicable. Item 16E.      Purchases of Equity Securities by the Issuer and Affiliated Purchasers There were no shares purchased during 2015 by us or on our behalf, or by or on behalf of any affiliated purchaser.  Item 16F.      Change in Registrant’s Certifying Accountant Not applicable.


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Item 16G.     Corporate Governance Among the corporate governance principles that are applicable at Pampa Energía S.A. are several provisions of Argentine law, including, but without limitation: (i) the BCL; (ii) the CML; and (iii) the regulations of the CNV approved on September 5, 2013 (the “Regulations”). In addition, we follow certain corporate governance guidelines and practices that prevail in the international markets and in international regulations applicable to us (sometimes mandatory), including United States law. On August 27, 2009, we registered with the SEC as a “foreign private issuer” and began to trade its American Depositary Shares on the NYSE. Thus, we are subject to the provisions of Section 303A.11 of the NYSE’s Listed Company Manual (“LCM”) and Item 16.G of Form 20-F of the SEC, which require foreign issuers to disclose the differences existing between their corporate governance practices and the corporate governance requirements for U.S. domestic companies under their applicable listing standards. The following table provides the comparison required under the aforementioned Section 303A.11 of the NYSE LCM and Item 16.G of the SEC’s Form 20-F:  CORPORATE GOVERNANCE PRACTICES COMPARATIVE TABLENYSE REQUIREMENTS for DOMESTIC COMPANIES

   REQUIREMENTS AND OUR PRACTICESNYSE LCM

   DESCRIPTION

   DESCRIPTIONSection 303A.01

   Independent directors must constitute the majority of a listed company’s board of directors.

   Under Argentine law, the board of directors of a listed company need not be composed of a majority of independent directors. Nonetheless, the CML and the CNV’s Regulations require listed companies to have a sufficient number of independent directors to form the audit committee, which must be composed of a majority of independent members.

   

   Although not required by Argentine law, and in accordance with our audit committee’s regulations, all the members of our audit committee must qualify as independent.Section 303A.02

   This rule establishes the standards that determine whether a director qualifies as independent.

   

   It provides that directors cannot qualify as independent unless the board of directors finds them to have no material relationship with the listed company. A number of per se exclusions from independence apply, generally triggered by having a connection, individually or through an immediate family member, to the listed company or to a company that has a material relationship with the listed company as a shareholder, employee, officer, or director of the listed company.

   The CNV’s Regulations, specifically Article 11 of Section III, Chapter III, Title II I, indicate the criteria for establishing independence of a director. They provide that any director who does any of the following is not independent:

   

   (i)Is a member of the board of directors of or employee of any of the shareholders with material holdings 2in the company or of other companies whose shareholders have direct or indirect material holdings;

   (ii)works at the company in an employment relationship or worked in an employment relationship at any time in the past 3 years;

   (iii)performs professional services or belongs to a company or professional association that provides such services to the company or its shareholders with material holdings;

   (iv)directly or indirectly has a material holding in the company;

   (v)directly or indirectly sells or supplies goods or services to the company and/or its direct or indirect shareholders with material holdings;

   (vi)is spouse, relative to the fourth degree of consanguinity, or relative to the second degree of affinity of any individuals who would qualify as non-independent if they were members of the management body.

   

   In addition, Article 4 of Section III, Chapter I, Title XII of the CNV’s Regulations provides that at each election of directors, the non-independence or independence of any candidates proposed at the shareholders’ meeting must be disclosed. Moreover, after the shareholders’ meeting in which directors are appointed, the personal data of the appointed directors and their qualification as independent or non-independent (in the latter case in the form of an affidavit executed by each director) must be disclosed to the CNV and the exchanges where the company has its securities listed.Section 303A.03

   This rule requires regularly scheduled meetings of non-executive directors to increase the involvement and efficiency of such director.

   Argentine law does not require that non-executive directors hold separate meetings. Non-executive directors attend the general board meetings, which must be held at least every three months pursuant to Section 267 of the BCL. Notwithstanding the aforementioned, our by-law in article 20 thereof, set forth that the board meetings must be held at least once a month.Section 303A.04

   Listed companies must organize an Appointment and Corporate Governance Committee composed entirely of independent directors.

   The organization of an Appointment and Corporate Governance Committee is not mandatory. In most cases, the functions of such committee are functions that the Audit Committee is already required to perform. Nonetheless, the CNV’s Regulations suggest (among its non-binding recommendations) that an Appointment and Corporate Governance Committee be organized.

   

   We have determined not to organize an Appointment and Corporate Governance Committee because its functions are already covered by the Audit Committee. Additionally and with respect to corporate governance matters, the Legal and Compliance Corporate Department of Pampa Energía S.A. oversees this area.Section 303A.05

   Listed companies must organize a Compensation Committee composed entirely of independent directors.

   The organization of a Compensation Committee is not mandatory under Argentine law. In most cases, the functions of such a committee are included in the functions that the audit committee is required to perform. However, the CNV’s Regulations suggest (among its non-binding recommendations) that a Compensation Committee be organized.

   

   At Pampa Energía S.A., the audit committee approves the compensation of executive officers who also are directors of the Company before submitting a compensation plan for consideration at a shareholders’ meeting.Section 303A.06

   Listed companies must organize an audit committee that meets the requirements set forth in the Securities Exchange Act of 1934.

   Pursuant to Section 303A.00, Pampa Energía S.A., as a foreign private issuer, is subject to Rule 303A.06, and we are in full compliance.Section

   303A.07

   The audit committee must have at least 3 members, all of whom must qualify as independent.

   

   

   

   

   

   

   

   In addition, the audit committee must have written regulations establishing: (i) the purpose of the committee; (ii) the annual assessment of the committee’s performance; and (iii) the committee’s obligations and responsibilities.

   

   

   

   

   

   

   Finally, the rule establishes that listed companies must have internal audit functions within their organization in order to assist both the audit committee and the company’s management in matters related to risk and internal control processes.

   Article 109 of the CML and Article 16, Section 5, Chapter III, Title II of the CNV Regulations provide that the audit committee must have at least 3 board members, the majority of whom must qualify as independent. All the members of our audit committee qualify as independent.

   

   Argentine law does not require the audit committee to issue its own regulations. The scope of the committee’s powers and obligations is detailed in Article 110 of the CML and Article 17 and following sections of Section 5, Chapter III, Title II, of the CNV’s Regulations. Such obligations and responsibilities are similar to those attributed to this body under the U.S. law.

   

   Our audit committee has its own written regulations, adopted by the shareholders’ meeting.

   

   

   Argentine law does not require the audit committee to conduct an annual self-assessment. However, the CNV’s Regulations recommend that all directors (i.e., not only the independent directors who are members of the audit committee) complete a self-assessment.

   

   We have adopted this recommendation and have developed a self-assessment form to be completed by all our directors at the close of each fiscal year.

   

   Argentine laws contain no rules regarding internal audit functions. However, in 2010 Pampa hired, as a new staff member, a professional to perform the duties of an internal auditor who is supervised by, and reports to, Pampa’s Audit Committee. Additionally, Pampa’s internal auditor relies on the aid ofAbelovich, Polano y Asociados, the professional services firm that performs the field work in terms of internal controls. Pampa’s Audit Committee regularly reviews, during its meetings, the internal audit reports submitted to it.Section 303A.08

   The shareholders must be given the opportunity to vote on equity-compensation plans and their material revisions, although there are exceptions to this requirement, such as when these compensation plans serve as labor incentive tools.

   Directors’ compensation is fixed at the ordinary shareholders’ meeting (Section 234, Subsection 2, of the BCL). That compensation is for national currency cash. We do not provide equity compensation to officers or directors.

   

   Our shareholders approved the issuance of warrants to our executive directors as consideration for the execution of an Opportunities Assignment Agreement between the company and the directors. Moreover, any amendment or new issuance of warrants must be approved by the shareholders’ meeting. Beyond those warrants, it is not a practice of the Company to provide any equity compensation to their officers.Section 303A.09

   Listed companies must adopt and disclose their corporate governance guidelines.

   Listed companies must meet the annual disclosure requirements of the CNV’s Regulations. Listed companies must issue a report stating whether and how they followed the recommendations provided by the CNV’s Regulations or explaining the reasons for their failure to adopt such recommendations, either fully or in part, and/or whether they plan to adopt them in the future. This information must appear in their annual report, attached to the financial statements for the relevant fiscal year as a separate exhibit. Once filed with the CNV and the exchanges where the company is listed, the CNV’s Regulations report qualifies as public information.

   

   We comply with the CNV’s Regulations annual disclosure requirements and fully disclose all corporate governance policies and practices. This information may be viewed on the company’s website, www.pampaenergia.com.Section 303A.10

   Listed companies must adopt and disclose to the market a Code of Ethics and Business Conduct which is applicable to their directors, managers and employees. In addition, any waiver of the provisions contained in this Code in favor of any of the parties that are subject to it must be immediately disclosed.

   Under Argentine law there is no requirement that listed companies adopt a Code of Ethics and Business Conduct.

   

   Nonetheless, in 2008, our board of directors approved a Code of Business Conduct applicable to all the employees, interns and trainees of Pampa Energía S.A. and of its controlled and related companies and subsidiaries. This Code is applicable to all directors and statutory auditors of Pampa Energía S.A. and its controlled and related companies and subsidiaries, as well as to their suppliers and consultants. Additionally, in 2010, Pampa’s Management Committee approved the implementation of the Ethics Hotline as a channel to be solely used for reporting, in the strictest confidentiality, any presumed irregularity concerning the Business Conduct Code and/or violations thereof.Section 303A.12

   The Chief Executive Officer (CEO) of a listed company must certify on a yearly basis that he or she has no knowledge of any violation or default of the corporate governance standards.

   

   Additionally, the CEO must report any default or violation of the corporate governance standards contained in the NYSE LCM by any of the company’s executives to the NYSE immediately.

   

   Finally, listed companies must file an annual statement and updated reports with the NYSE disclosing any changes in the composition of their board of directors or any of the committees described in Section 302A of the NYSE LCM.

   Pursuant to Section 303A.00, Pampa Energía S.A., as a foreign private issuer, is subject to Section 303A.12, with the exception of the annual CEO certification. Pampa Energía S.A. is in full compliance with the applicable provisions.
  1 Under Argentine law, a “material holding” is defined as any shareholding equivalent to at least 15% of a company’s capital stock.


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Item 16H. Mine Safety Disclosure  Not applicable.


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PART III Item 17.         Financial Statements Not applicable. Item 18.         Financial Statements Our Consolidated Financial Statements are included in this annual report beginning on page F-1. Item 19.         Exhibits Documents filed as exhibits to this annual report: 1.1

   Amended and Restated By-laws (estatutos sociales) of the Registrant (English translation)(previously filed as 6-K (File No. 001-34429) on November 11, 2015 and incorporated by reference herein.)2.1

   Form of Amended and Restated Deposit Agreement among the Registrant, the Bank of New York, as depositary, and Holders from time to time of American Depositary Shares issued thereunder (previously filed as Exhibit 2.1 to our Registration Statement on Form 20-F (File No. 001-34429) on August 3, 2009 and incorporated by reference herein.)4.1

   Opportunities Assignment Agreement among Marcelo Mindlin, Damián Mindlin, Gustavo Mariani, Ricardo Torres and the Registrant, dated as of September 28, 2006 and its subsequent amendments dated September 28, 2007 and April 16, 2009 (English translation) (previously filed as Exhibit 2.2 to our Registration Statement on Form 20-F (File No. 001-34429) on August 3, 2009 and incorporated by reference herein.)4.2

   Amended and Restated Warrant Agreement, among Marcelo Mindlin and the Registrant, dated as of September 28, 2007 (English translation) (previously filed as Exhibit 2.3 to our Registration Statement on Form 20-F (File No. 001-34429) on August 3, 2009 and incorporated by reference herein.)4.3

   Amended and Restated Warrant Agreement, among Damián Mindlin and the Registrant, dated as of September 28, 2007 (English translation) (previously filed as Exhibit 2.4 to our Registration Statement on Form 20-F (File No. 001-34429) on August 3, 2009 and incorporated by reference herein.)4.4

   Amended and Restated Warrant Agreement, among Gustavo Mariani and the Registrant, dated as of September 28, 2007 (English translation) (previously filed as Exhibit 2.5 to our Registration Statement on Form 20-F (File No. 001-34429) on August 3, 2009 and incorporated by reference herein.)4.5

   Amended and Restated Warrant Agreement, among Ricardo Torres and the Registrant, dated as of September 28, 2007 (English translation)(previously filed as Exhibit 2.6 to our Registration Statement on Form 20-F (File No. 001-34429) on August 3, 2009 and incorporated by reference herein.)4.6

   Stock Subscription Agreement among Marcelo Mindlin, Damián Mindlin, Gustavo Mariani, Latin American Energy LLC, New Equity Ventures LLC, Deutsche Bank AG, London branch and the Registrant, dated as of July 31, 2007 (previously filed as Exhibit 2.7 to our Registration Statement on Form 20-F (File No. 001-34429) on August 3, 2009 and incorporated by reference herein.)8.1

   List of significant subsidiaries of Pampa Energía S.A.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 2002.13.1

   Certification of Co-Chief Executive Officers and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.13.2

   Reserves Report of Netherland, Sewell and Associates, Inc., dated as of March 4, 2016
 264


SIGNATURE **** The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F 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 TorresTitle: Co-Chief Executive Officer




By:/s/ Gustavo MarianiName: Gustavo MarianiTitle: Co-Chief Executive Officer






Date: April 29, 2016











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INDEX TO FINANCIAL STATEMENTS Pampa Energía S.A.
 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-13Consolidated Statement of Cash Flows

   F-16Notes to the Consolidated Financial Statements

   F-19


F - 1

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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.
Also in our opinion, the Company maintained, 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). 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 in  Management’s Annual Report on Internal Control Over Financial
Reporting appearing under Item 15 of this Annual Report on Form 20-F. 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.  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.
 ****


F - 3

---



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, March 09, 2016.    /s/PRICE WATERHOUSE & CO. S.R.L.Andrés Suarez (Partner)
 ****


F - 4

---



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

---



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

---



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
      ComissionSIGEN
    
    National Comptroller OfficeSSN
    
    Superintendencia de Seguros de la
      NaciónST
    
    Secretary of LaborTG
    
    Gas Turbine


F - 7

---



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

---



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 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
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 consolidated financial statements.


F - 15

---



CONSOLIDATEDSTATEMENT OF CASH FLOWS For the years ended December 31, 2015, 2014 and
2013 (In Argentine Pesos (“$”) – unless otherwise
stated)   Note
    
    12.31.2015
    
    12.31.2014
    
    12.31.2013Cash 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
    
    
    (1,712,278,963)
    
    (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 (Decrease) in
      trade and other payables
    
    
    1,061,352,687
    
    (29,446,104)
    
    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 debts with CAMMESA
    
    
    3,391,107,721
    
    (881,340,635)
    
    (575,280,403)Increase in account payable
      and loans (MUTUUM) with CAMMESA in distribution
    
    
    1,189,554,703
    
    3,455,497,600
    
    2,231,477,000Net cash generated by
      operating activities
    
    
    4,580,662,424
    
    2,574,156,965
    
    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

---



CONSOLIDATED STATEMENT OF CASH
FLOWS(Continuation)   Note
    
    12.31.2015
    
    12.31.2014
    
    12.31.2013Cash 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
    
    
    -
    
    -
    
    25,388,000Net cash geterated by (used
      in) financing activities
    
    
    2,637,352,005
    
    (147,688,277)
    
    (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

---



CONSOLIDATED STATEMENT OF CASH FLOWS(Continuation)   Note

   

   12.31.2015

   

   12.31.2014

   

   12.31.2013Significant 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 form loans for consumption (mutuums) granted for higer salary cost (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

   

   

   -

   

   -

   

   44,626,592
  The accompanying notes are an integral part of these consolidated financial statements.




F - 18

---



**NOTES TO THE 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.  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 - 19

---



NOTES TO THE 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 - 20

---



NOTES TO THE 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 - 21

---



NOTES TO THE 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 - 22

---



NOTES TO THE 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 - 23

---



NOTES TO THE 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 - 24

---



NOTES TO THE 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 - 25

---



NOTES TO THE 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 - 26

---



NOTES TO THE 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 - 27

---



NOTES TO THE 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 - 28

---



NOTES TO THE 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 - 29

---



NOTES TO THE 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.





F - 30

---



NOTES TO THE 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.






F - 31

---



NOTES TO THE 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.





F - 32

---



NOTES TO THE 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.







F - 33

---



NOTES TO THE 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.







F - 34

---



NOTES TO THE 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.





F - 35

---



NOTES TO THE 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 stablished 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.





F - 36

---



NOTES TO THE 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.





F - 37

---



NOTES TO THE 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.







F - 38

---



NOTES TO THE 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.





F - 39

---



NOTES TO THE 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.









F - 40

---



NOTES TO THE 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.









F - 41

---



NOTES TO THE 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.







F - 42

---



NOTES TO THE 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.









F - 43

---



NOTES TO THE 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.







F - 44

---



NOTES TO THE 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.









F - 45

---



NOTES TO THE 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.









F - 46

---



NOTES TO THE 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.







F - 47

---



NOTES TO THE 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.





F - 48

---



NOTES TO THE 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.









F - 49

---



NOTES TO THE 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 Penalities



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.





F - 50

---



NOTES TO THE 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.









F - 51

---



NOTES TO THE 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.





F - 52

---



NOTES TO THE 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.





F - 53

---



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


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.





F - 54

---



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


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.





F - 55

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


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.










F - 56

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


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.









F - 57

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NOTES TO THE 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 atraction 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.







F - 58

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NOTES TO THE 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.





F - 59

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NOTES TO THE 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.









F - 60

---



NOTES TO THE 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 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 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 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 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 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 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 consolidated financial statements are described in Note
5.

These consolidated financial statements have been
approved for issue by the Board of Directors dated March 9, 2016.

Comparative
information

Balances as of
December 31, 2014, included in these 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.







F - 61

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NOTES TO THE 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.







F - 62

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NOTES TO THE 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 mayority 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.





F - 63

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NOTES TO THE 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.







F - 64

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NOTES TO THE 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.









F - 65

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NOTES TO THE 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.





F - 66

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NOTES TO THE 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.





F - 67

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




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 usesful life of 83 years,
while the HIDISA and HINISA  has a usesful 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 datescannot 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.







F - 68

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




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.





F - 69

---



NOTES TO THE 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.





F - 70

---



NOTES TO THE 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 stablished 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.









F - 71

---



NOTES TO THE 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.







F - 72

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NOTES TO THE 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.





F - 73

---



NOTES TO THE 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.





F - 74

---



NOTES TO THE 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.







F - 75

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NOTES TO THE 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.





F - 76

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NOTES TO THE 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.





F - 77

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NOTES TO THE 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







F - 78

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


NOTE
4:(Continuation)

f.Retained earnings(Acumulated 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.





F - 79

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NOTES TO THE 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.





F - 80

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NOTES TO THE 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.





F - 81

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NOTES TO THE 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.





F - 82

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NOTES TO THE 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.











F - 83

---



NOTES TO THE 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
collectibility is reasonably assured.










F - 84

---



NOTES TO THE 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.









F - 85

---



NOTES TO THE 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.





F - 86

---



NOTES TO THE 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.





F - 87

---



NOTES TO THE 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:





F - 88

---



NOTES TO THE 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 stablished 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.





F - 89

---



NOTES TO THE 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 fulfilment 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.





F - 90

---



NOTES TO THE 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.





F - 91

---



NOTES TO THE 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.





F - 92

---



NOTES TO THE 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.





F - 93

---



NOTES TO THE 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.





F - 94

---



NOTES TO THE 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.





F - 95

---



NOTES TO THE 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 - 96

---



NOTES TO THE 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 - 97

---



NOTES TO THE 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 fowards.
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 - 98

---



NOTES TO THE 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 - 99

---



NOTES TO THE 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
      12.31.2014
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---- |  | -------------------------- |  | ---------------- |  | ---------------------- |  | ----------------------
|                                                                                                                                                                                                                                                                                                                         |      |  |                           
|CURRENT
      LIABILITIES                                                                                                                                                                                                                                                                                                |      |  |                            |  |                  |  |                        |  |                       
|                                                                                                                                                                                                                                                                                                                         |      |  |                            |  |                  |  |                        |  |                       
|Trade and other
      payables                                                                                                                                                                                                                                                                                           |      |  |                            |  |                  |  |                        |  |                       
|Third
    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)              
|Borrowings                                                                                                                                                                                                                                                                                                               |      |  |                            |  |                  |  |                        |  |                       
|Related
      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 payable                                                                                                                                                                                                                                                                               |      |  |                            |  |                  |  |                        |  |                       
|Third
    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 - 100

---



NOTES TO THE 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 - 101

---



NOTES TO THE 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 - 102

---



NOTES TO THE 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 - 103

---



NOTES TO THE 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 - 104

---



NOTES TO THE 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 - 105

---



NOTES TO THE 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 - 106

---



NOTES TO THE 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 - 107

---



NOTES TO THE 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 - 108

---



NOTES TO THE 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 - 109

---



NOTES TO THE 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 - 110

---



NOTES TO THE 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 - 111

---



NOTES TO THE 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) Summarised
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 - 112

---



NOTES TO THE 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
    
    6,989,315,674-Borrowings
    
    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 - 113

---



NOTES TO THE 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 - 114

---



NOTES TO THE 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 - 115

---



NOTES TO THE 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 - 116

---



NOTES TO THE 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 - 117

---



NOTES TO THE 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 - 118

---



NOTES TO THE 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 - 119

---



NOTES TO THE 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 - 120

---



NOTES TO THE 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 - 121

---



NOTES TO THE 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 - 122

---



NOTES TO THE 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 - 123

---



NOTES TO THE 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 - 124

---



NOTES TO THE 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 - 125

---



NOTES TO THE 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 - 126

---



NOTES TO THE 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 - 127

---



NOTES TO THE 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 - 128

---



NOTES TO THE 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):



12.31.2015Fixed 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 - 129

---



NOTES TO THE 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 - 130

---



NOTES TO THE 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 - 131

---



NOTES TO THE 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 - 132

---



NOTES TO THE 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 - 133

---



NOTES TO THE 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 basic 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 basic 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 - 134

---



NOTES TO THE 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 Citibnak 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 - 135

---



NOTES TO THE 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 basic 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 basic 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 - 136

---



NOTES TO THE 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 millon
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.








F - 137

---



NOTES TO THE 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 - 138

---



NOTES TO THE 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 - 139

---



NOTES TO THE 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 - 140

---



NOTES TO THE 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 - 141

---



NOTES TO THE 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 asigned 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 - 142

---



NOTES TO THE 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:



Serie
    Issuance date
    Nominal Amount
    Interest Rate
    Payment:Capital
    Interest1
    October 6, 2011
    46,654,990
    Badlar +
      3.5%
    360 days
    Quaterly2
    May 11, 2012
    32,564,000
    Badlar +
      2.75%
    360 days
    Quaterly3
    October 3, 2012
    34,396,246
    Badlar +
      4.25%
    360 days
    Quaterly4
    USD
      6,520,523
    4.25%
    360 days
    Quaterly5
    March 27,
      2013
    77,821,661
    Badlar +
      2.99%
    365 days
    Quaterly6
    USD
      4,342,138
    0.01%
    365
    days
    Quaterly7
    October 3,
      2013
    65,400,000
    Badlar +
      4%
    365
    days
    Quaterly8
    April 28,
      2014
    122,950,000
    Badlar +
      3.95%
    365
    days
    Quaterly9
    October 3,
      2014
    76,450,000
    Badlar +
      3.95%
    365
    days
    Quaterly11
    Februry 26,
      2015
    89.940.000
    28%
    365
    days
    Quaterly12
    April 30,
      2015
    137.000.000
    28,5%
    365
    days
    Quaterly







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 modificated the Program increasing the amount up to US$ 125
million and US$ 250 or its equivalent in other currencies,
respectively.







F - 143

---



NOTES TO THE 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:



Serie
    Issuance date
    Nominal Amount
    Interest
      rate
    Payment:Capital
    Interest1
    June 28,
      2013
    254,810,000
    Badlar +
    3%
    3 years
    Quaterly2
    June 6,
      2014
    525,362,500
    Badlar
    3 years
    Quaterly3
    February 26,
      2015
    51,027,777
    Badlar +
    5%
    1 year and 9 months
    Quaterly4
    February 26,
      2015
    U$S
      18,549,000
    5%
    1 year and 9
      months
    Quaterly5
    April 30,
      2015
    49,870,000
    Badlar +
      4,5%
    1 year and 6
      months
    Quaterly6
    February 3,
      2016
    309,874,000
    Badlar +
    5%
    1 year and 3
      months
    Quaterly




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.







F - 144

---



NOTES TO THE 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:









F - 145

---



NOTES TO THE 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”).







F - 146

---



NOTES TO THE 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








F - 147

---



NOTES TO THE 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 - 148

---



NOTES TO THE 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 - 149

---



NOTES TO THE 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 - 150

---



NOTES TO THE 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 - 151

---



NOTES TO THE 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 - 152

---



NOTES TO THE 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 - 153

---



NOTES TO THE 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 - 154

---



NOTES TO THE 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 - 155

---



NOTES TO THE 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 - 156

---



NOTES TO THE 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 - 157

---



NOTES TO THE 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 - 158

---



NOTES TO THE 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 - 159

---



NOTES TO THE 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 - 160

---



NOTES TO THE 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 - 161

---



NOTES TO THE 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 - 162

---



NOTES TO THE 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 - 163

---



NOTES TO THE 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 andothers
    
    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 - 164

---



NOTES TO THE 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 - 165

---



NOTES TO THE 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 - 166

---



NOTES TO THE 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 - 167

---



NOTES TO THE 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 - 168

---



NOTES TO THE 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
    
    Segmentinformation
    
    Results frominterest in
      jointventures
    
    Consolidatedcomprehensivetotal 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 - 169

---



NOTES TO THE 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)
    
    Segmentinformation
    
    Results frominterest in
      jointventures
    
    Consolidatedcomprehensivetotal 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)
    
    Segmentinformation
    
    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)
    
    Segmentinformation
    
    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 - 170

---



NOTES TO THE 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 - 171

---



NOTES TO THE 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 - 172

---



NOTES TO THE 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 - 173

---



NOTES TO THE 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 - 174

---



NOTES TO THE 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
    
    Tradepayables
    
    Otherspayables
    
    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
    
    Tradereceivables
    
    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 - 175

---



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


NOTE
35:(Continuation)





As of December 31, 2014
    
    Tradepayables
    
    Otherspayables
    
    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
    
    Financialassets/liabilitiesat amortized
      cost
    
    Financialassets/liabilitiesat fair value
      through profit and losss
    
    Subtotalfinancialassets/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 - 176

---



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


NOTE
36:(Continuation)





As of December 31, 2014
    
    Financialassets/liabilitiesat amortized
      cost
    
    Financialassets/liabilitiesat fair value
      through profit and losss
    
    Subtotalfinancialassets/liabilities
    
    Non financialassets/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
    
    Financialassets/liabilitiesat amortized
      cost
    
    Financialassets/liabilitiesat fair value
      through profit and losss
    
    Subtotalfinancialassets/liabilities
    
    Non Financialassets/ 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
    
    Financialassets/liabilitiesat amortized
      cost
    
    Financialassets/liabilitiesat fair value
      with changes in profit and losss
    
    Subtotalfinancialassets/liabilities at
      amortized cost
    
    Non Financialassets/ liabilitiesat
      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 - 177

---



NOTES TO THE 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 - 178

---



NOTES TO THE 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 - 179

---



NOTES TO THE 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 - 180

---



NOTES TO THE 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 dees 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 - 181

---



NOTES TO THE 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 - 182

---



NOTES TO THE 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

Mminimum 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 - 183

---



NOTES TO THE 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 - 184

---



NOTES TO THE 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 - 185

---



NOTES TO THE 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 - 186

---



NOTES TO THE 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 - 187

---



NOTES TO THE 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 - 188

---



NOTES TO THE 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-judgement 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 - 189

---



NOTES TO THE 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 statue 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 - 190

---



NOTES TO THE 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 - 191

---



NOTES TO THE 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 - 192

---



NOTES TO THE 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






F - 193

---



NOTES TO THE 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.









F - 194

---



NOTES TO THE 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.















F - 195

---



NOTES TO THE 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 - 196

---



NOTES TO THE 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 - 197

---



NOTES TO THE 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.







F - 198

---



NOTES TO THE 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.











F - 199

---



NOTES TO THE 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:







F - 200

---



NOTES TO THE 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.







F - 201

---



NOTES TO THE 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.











F - 202

---



NOTES TO THE 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 - 203

---



NOTES TO THE 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.









F - 204

---



NOTES TO THE 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.Contrato de realización de obra Municipalidad de la
Matanza



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







F - 205

---



NOTES TO THE 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-stablished 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.













F - 206

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NOTES TO THE 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).




F - 207

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NOTES TO THE 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.




F - 208

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NOTES TO THE 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 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 granted to employees  On January 18, 2016, Edenor entered into two agreements, one with the Sindicato de Luz y Fuerza de Capital Federal and another one with the Asociación del Personal Superior de Empresas de Energía, pursuant to which Edenor agreed to grant, on a voluntary and one-time basis, to all the employees who are subject to the collective bargaining agreements of the aforementioned union/association an extraordinary bonus of $ 5,000 to be 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 Company employees.  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 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. 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.  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 Petroleo Brasileiro S.A. 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.




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




NOTE 52: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 CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)  NOTE 52: (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 CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)  NOTE 52: (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 CONSOLIDATED FINANCIAL STATEMENTS (in Argentine Pesos (“$”) – unless otherwise stated)   NOTE 52: (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.




F - 215

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NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (in Argentine Pesos (“$”) –
unless otherwise stated)   NOTE 52: (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.




F - 216