UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C.
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, 2009
  Commission
File number: 001-33422
  Empresa
Distribuidora y Comercializadora Norte S.A.
 (Exact
name of registrant as specified in its charter)


Distribution
      and Marketing Company of the North S.A.
            Argentine
      Republic(Translation
      of registrant’s name into English)
            (Jurisdiction
      of incorporation or organization)


Azopardo
1025


Ciudad
de Buenos Aires, C1107ADQ


Buenos
Aires, Argentina


(Address
of principal executive offices)


Ivana Del
Rossi


54 11
4346 5127 / 54 11 4346 5325


Azopardo
1025 (C1107ADQ) Bs. As.


Investor
Relations Officer


Securities
registered or to be registered pursuant to Section 12(b) of the
Act:




Title of each class:
                  Name of each exchange on which registeredClass
      B Shares
                  New
      York Stock Exchange, Inc.*American
      Depositary Shares, or ADSs, evidenced by American
                    Depositary
      Receipts, each representing 20 Class B Shares
                  New
      York Stock Exchange,
Inc.


*
            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: N/A


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:
462,292,111 Class A Ordinary Shares, 442,210,385 Class B Ordinary Shares and
1,952,604 Class C Ordinary Shares


Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes
 ̈ No þ


If
this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Sections 13 or 15(d)
of the Securities Exchange Act of 1934.  Yes  ̈ No þ


Note:  Checking
the box above will not relieve any registrant required to file reports pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their
obligations under those Sections.


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.  Yes þ 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 filer þ 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  ̈ IFRS  ̈ Other þ


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 þ


If
this is an annual report, indicate by check mark whether the registrant is a
shell company (as defined by Rule 12b-2 of the Exchange
Act).  Yes  ̈ No þ










Item
      1.
                    Identity
      of Directors, Senior Management and Advisors
                    2Item
      2.
                    Offer
      Statistics and Expected Timetable
                    2Item
      3.
                    Key
      Information
                    2Item
      4.
                    Information
      on the Company
                    21Item
      4A.
                    Unresolved
      Staff Comments
                    46Item
      5.
                    Operating
      and Financial Review and Prospects
                    46Item
      6.
                    Directors,
      Senior Management and Employees
                    86Item
      7.
                    Major
      Shareholders and Related Party Transactions
                    95Item
      8.
                    Financial
      Information
                    99Item
      9.
                    The
      Offer and Listing
                    103Item
      10.
                    Additional
      Information
                    106Item
      11.
                    Quantitative
      and Qualitative Disclosures about Market Risk
                    123Item
      12.
                    Description
      of Securities Other than Equity Securities
                    124Item
      13.
                    Defaults,
      Dividend Arrearages and Delinquencies
                    126Item
      14.
                    Material
      Modifications to the Rights of Security Holders and Use of
      Proceeds
                    126Item
      15.
                    Controls
      and Procedures
                    126Item
      16A.
                    Audit
      Committee Financial Expert
                    127Item
      16B.
                    Code
      of Ethics
                    128Item
      16C.
                    Principal
      Accountant Fees and Services
                    128Item
      16D.
                    Exemptions
      from the Listing Standards for Audit Committees
                    128Item
      16E.
                    Purchases
      of Equity Securities by the Issuer and Affiliated
    Purchasers
                    128Item
      16G.
                    Corporate
      Governance
                    129Item
      17.
                    Financial
      Statements
                    132Item
      18.
                    Financial
      Statements
                    132Item
      19.
                    Exhibits
                    132Index
      to Financial Statements
                    F-1







PART I




Introduction




Empresa
Distribuidora y Comercializadora Norte S.A., or Edenor, is a sociedad anónima (limited
liability corporation) organized under the laws of the Argentine Republic, or
Argentina.  Our principal executive offices are located at Azopardo
1025, Ciudad de Buenos Aires, C1107ADQ, Buenos Aires, Argentina.




Item
      1.
            Identity of Directors, Senior
      Management and Advisors




Not
applicable.




Item
      2.
            Offer Statistics and Expected
      Timetable




Not
applicable.




Item
      3.
            Key
      Information




FORWARD-LOOKING
STATEMENTS




This
annual report includes forward-looking statements, principally under the
captions “Item 3. Key Information—Risk factors,” “Item 4. Information on the
Company” and “Item 5. Operating and Financial Review and Prospects.”
We have based these forward-looking statements largely on our current beliefs,
expectations and projections about future events and financial trends affecting
our business.  Forward-looking statements may also be identified by
words such as “believes,” “expects,” “anticipates,” “projects,” “intends,”
“should,” “seeks,” “estimates,” “future” or similar expressions.  Many
important factors, in addition to those discussed elsewhere in this annual
report, could cause our actual results to differ materially from those expressed
or implied in our forward-looking statements, including, among other
things:




·
            the
      outcome and timing of the integral tariff revision process we are
      currently undertaking with the Ente Nacional Regulador de la
      Electricidad (Argentine National Electricity Regulator, or the ENRE) and,
      more generally, uncertainties relating to future government approvals to
      increase or adjust our tariffs;




·
            general
      political, economic, social, demographic and business conditions in
      Argentina and particularly in the geographic market we
    serve;




·
            the
      global financial crisis and its impact on liquidity and access to
      capital;




·
            the
      impact of regulatory reform and changes in the regulatory environment in
      which we operate;




·
            electricity
      shortages;




·
            potential
      disruption or interruption of our
service;




·
            restrictions
      on the ability to exchange Pesos into foreign currencies or to transfer
      funds abroad;




·
            the
      revocation or amendment of our concession by the granting
      authority;




·
            our
      ability to implement our capital expenditure plan, including our ability
      to arrange financing when required and on reasonable
  terms;




·
            fluctuations
      in inflation and exchange rates, including a devaluation of the Peso;
      and




·
            additional
      matters identified in “Risk
factors.”




2


Forward-looking
statements speak only as of the date they were made, and we undertake no
obligation to update publicly or to revise any forward-looking statements after
we file this annual report because of new information, future events or other
factors.  In light of these limitations, undue reliance should not be
placed on forward-looking statements contained in this annual
report.




SELECTED
FINANCIAL DATA




The
following table presents selected financial and operating data.  This
information should be read in conjunction with our audited financial statements
and related notes and “Item 5. Operating and Financial Review and Prospects”
included elsewhere in this annual report.




The financial data as of
December 31, 2009 and 2008 and for each of the three years in the period
ended December 31, 2009 are derived from our audited financial statements,
which were audited by Price Waterhouse & Co. S.R.L., member firm of
PricewaterhouseCoopers, for the years ended December 31, 2009 and 2008 and
Deloitte & Co. S.R.L., member firm of Deloitte & Touche
Tohmatsu, for the year ended December 31, 2007. We engaged
Price Waterhouse & Co. S.R.L as our new auditors in April 2008, in order to
consolidate our audit with that of our controlling shareholder, Pampa Energia
S.A., also audited by Price Waterhouse & Co. S.R.L.  Our audited
financial statements have been prepared in accordance with generally accepted
accounting principles in the City of Buenos Aires, which we refer to as
Argentine GAAP and which differ in certain significant respects from U.S.
Generally Accepted Accounting Principles (U.S.GAAP).  Note 27 to
our audited financial statements included elsewhere in this annual report
provides a description of the significant differences between Argentine GAAP and
U.S. GAAP, as they relate to us, and a reconciliation to U.S. GAAP of net income
for the years then ended December 31, 2009, 2008 and 2007 and shareholders’
equity as of December 31, 2009 and2008.




In this
annual report, except as otherwise specified, references to “$”, “U.S. $”
and “Dollars” are to U.S. Dollars, and references to “Ps. ” and “Pesos” are
to Argentine Pesos.  Solely for the convenience of the reader, Peso
amounts as of and for the year ended December 31, 2009 have been translated
into U.S. Dollars at the buying rate for U.S. Dollars quoted by Banco de la
Nación Argentina (Banco Nación) on December 31, 2009 of Ps. 3.80 to
U.S. $1.00.  The U.S. Dollar equivalent information should not be
construed to imply that the Peso amounts represent, or could have been or could
be converted into, U.S. Dollars at such rates or any other rate.  See
“Item 3. Key Information – Exchange rates.”




Under
Argentine GAAP, we generally are not required to record the effects of inflation
in our financial statements.  However, because Argentina experienced a
high rate of inflation in 2002, with the wholesale price index increasing by
approximately 118%, we were required by Decree No. 1269/2002 and Comisión Nacional de Valores
(National Securities Commission or CNV) Resolution No. 415/2002 to restate
our financial statements in constant Pesos in accordance with Argentine
GAAP.  On March 25, 2003, Decree No. 664/2003 rescinded the
requirement that financial statements be prepared in constant currency,
effective for financial periods on or after March 1, 2003.  As a
result, we are not required to restate and have not restated our financial
statements for inflation after February 28, 2003.  See
note 2 to our audited financial statements included in this annual
report.


3


Certain
figures included in this annual report have been subject to rounding
adjustments.  Accordingly, figures shown as totals may not sum due to
rounding.




For the year ended December 31,2009
                                                                                            
                                                                                            
                                                                                            2008
                                                                                            
                                                                                            
                                                                                            2007
                                                                                            
                                                                                            
                                                                                            2006
                                                                                            
                                                                                            
                                                                                            2005(in millions, except for per share and per ADS data)Statement of operations dataArgentine
      GAAPNet sales(1)
                                                                                            
                                                                                            U.S.
      $
                                                                                            546.8
                                                                                            
                                                                                            
                                                                                            Ps.
                                                                                            2,077.9
                                                                                            
                                                                                            
                                                                                            Ps.
                                                                                            2,000.2
                                                                                            
                                                                                            
                                                                                            Ps.
                                                                                            1,981.9
                                                                                            
                                                                                            
                                                                                            Ps.
                                                                                            1,378.3
                                                                                            
                                                                                            
                                                                                            Ps.
                                                                                            1,262.2Electric
      power purchases
                                                                                            
                                                                                            
                                                                                            (264.0
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (1,003.4
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (934.7
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (889.9
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (799.1
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (757.7
                                                                                            )Gross
      margin
                                                                                            
                                                                                            
                                                                                            282.8
                                                                                            
                                                                                            
                                                                                            
                                                                                            1,074.5
                                                                                            
                                                                                            
                                                                                            
                                                                                            1,065.5
                                                                                            
                                                                                            
                                                                                            
                                                                                            1,092.0
                                                                                            
                                                                                            
                                                                                            
                                                                                            579.3
                                                                                            
                                                                                            
                                                                                            
                                                                                            504.5Transmission
      and distribution expenses
                                                                                            
                                                                                            
                                                                                            (144.4
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (548.6
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (497.9
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (417.6
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (362.1
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (346.1
                                                                                            )Selling
      expenses
                                                                                            
                                                                                            
                                                                                            (41.8
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (158.9
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (126.0
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (120.6
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (87.9
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (86.0
                                                                                            )Administrative
      expenses
                                                                                            
                                                                                            
                                                                                            (46.5
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (176.6
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (138.7
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (124.7
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (93.3
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (72.9
                                                                                            )Net
      operating income (loss)
                                                                                            
                                                                                            
                                                                                            50.1
                                                                                            
                                                                                            
                                                                                            
                                                                                            190.4
                                                                                            
                                                                                            
                                                                                            
                                                                                            302.9
                                                                                            
                                                                                            
                                                                                            
                                                                                            429.2
                                                                                            
                                                                                            
                                                                                            
                                                                                            35.9
                                                                                            
                                                                                            
                                                                                            
                                                                                            (0.4
                                                                                            )Other
      income (expenses), net
                                                                                            
                                                                                            
                                                                                            6.1
                                                                                            
                                                                                            
                                                                                            
                                                                                            23.2
                                                                                            
                                                                                            
                                                                                            
                                                                                            (29.9
                                                                                            )
                                                                                            
                                                                                            
                                                                                            1.0
                                                                                            
                                                                                            
                                                                                            
                                                                                            (22.9
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (0.7
                                                                                            )Financial
      income (expenses) and holding gains (losses):Generated
      by assets:Exchange
      difference
                                                                                            
                                                                                            
                                                                                            5.6
                                                                                            
                                                                                            
                                                                                            
                                                                                            21.4
                                                                                            
                                                                                            
                                                                                            
                                                                                            8.1
                                                                                            
                                                                                            
                                                                                            
                                                                                            (0.9
                                                                                            )
                                                                                            
                                                                                            
                                                                                            2.6
                                                                                            
                                                                                            
                                                                                            
                                                                                            2.1Interest
                                                                                            
                                                                                            
                                                                                            4.3
                                                                                            
                                                                                            
                                                                                            
                                                                                            16.2
                                                                                            
                                                                                            
                                                                                            
                                                                                            9.8
                                                                                            
                                                                                            
                                                                                            
                                                                                            13.4
                                                                                            
                                                                                            
                                                                                            
                                                                                            13.9
                                                                                            
                                                                                            
                                                                                            
                                                                                            12.9Holding
      results
                                                                                            
                                                                                            
                                                                                            9.9
                                                                                            
                                                                                            
                                                                                            
                                                                                            37.6
                                                                                            
                                                                                            
                                                                                            
                                                                                            (7.3
                                                                                            )
                                                                                            
                                                                                            
                                                                                            0.1
                                                                                            
                                                                                            
                                                                                            
                                                                                            0.1
                                                                                            
                                                                                            
                                                                                            
                                                                                            (0.6
                                                                                            )Generated
      by liabilities:Financial
      expenses
                                                                                            
                                                                                            
                                                                                            (3.1
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (11.7
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (10.0
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (21.0
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (25.4
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (14.1
                                                                                            )Exchange
      difference
                                                                                            
                                                                                            
                                                                                            (26.1
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (99.1
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (92.7
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (29.9
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (13.3
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (29.0
                                                                                            )Interest
                                                                                            
                                                                                            
                                                                                            (23.1
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (87.7
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (95.3
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (74.5
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (101.3
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (119.5
                                                                                            )Holding
      results
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            (0.2
                                                                                            )Adjustment to present value of the retroactive
      tariff increase arising from the application of the new electricity rate
      schedule and other receivables(2)
                                                                                            
                                                                                            
                                                                                            0.9
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.4
                                                                                            
                                                                                            
                                                                                            
                                                                                            13.5
                                                                                            
                                                                                            
                                                                                            
                                                                                            (29.6
                                                                                            )
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —Gain
      on extinguishment of formerdebt(3)
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            179.2
                                                                                            
                                                                                            
                                                                                            
                                                                                            —Adjustment to present value of notes(4)
                                                                                            
                                                                                            
                                                                                            (1.4
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (5.2
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (8.5
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (21.5
                                                                                            )
                                                                                            
                                                                                            
                                                                                            57.1
                                                                                            
                                                                                            
                                                                                            
                                                                                            —Gain (loss) from the purchase of notes(5)
                                                                                            
                                                                                            
                                                                                            21.4
                                                                                            
                                                                                            
                                                                                            
                                                                                            81.4
                                                                                            
                                                                                            
                                                                                            
                                                                                            93.6
                                                                                            
                                                                                            
                                                                                            
                                                                                            (10.2
                                                                                            )
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —Adjustment to present value of purchased notes(4)
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            (8.6
                                                                                            )
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —Income
      (loss) before taxes
                                                                                            
                                                                                            
                                                                                            44.6
                                                                                            
                                                                                            
                                                                                            
                                                                                            169.9
                                                                                            
                                                                                            
                                                                                            
                                                                                            184.3
                                                                                            
                                                                                            
                                                                                            
                                                                                            247.4
                                                                                            
                                                                                            
                                                                                            
                                                                                            125.9
                                                                                            
                                                                                            
                                                                                            
                                                                                            (149.6
                                                                                            )Income tax(6)
                                                                                            
                                                                                            
                                                                                            (20.9
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (79.3
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (61.2
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (125.0
                                                                                            )
                                                                                            
                                                                                            
                                                                                            167.2
                                                                                            
                                                                                            
                                                                                            
                                                                                            —Net
      income (loss)
                                                                                            
                                                                                            U.S.
      $
                                                                                            23.7
                                                                                            
                                                                                            
                                                                                            Ps.
                                                                                            90.6
                                                                                            
                                                                                            
                                                                                            Ps.
                                                                                            123.1
                                                                                            
                                                                                            
                                                                                            Ps.
                                                                                            122.5
                                                                                            
                                                                                            
                                                                                            Ps.
                                                                                            293.1
                                                                                            
                                                                                            
                                                                                            Ps.
                                                                                            (149.6)Net  income
      (loss) per ordinary share – basic and diluted
                                                                                            
                                                                                            
                                                                                            0.027
                                                                                            
                                                                                            
                                                                                            
                                                                                            0.101
                                                                                            
                                                                                            
                                                                                            
                                                                                            0.137
                                                                                            
                                                                                            
                                                                                            
                                                                                            0.135
                                                                                            
                                                                                            
                                                                                            
                                                                                            0.352
                                                                                            
                                                                                            
                                                                                            
                                                                                            (0.180
                                                                                            )Dividends declared per ordinary share(7)
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —Net
      income per ADS(8) —
      basic and diluted
                                                                                            
                                                                                            
                                                                                            0.54
                                                                                            
                                                                                            
                                                                                            
                                                                                            2.02
                                                                                            
                                                                                            
                                                                                            
                                                                                            2.716
                                                                                            
                                                                                            
                                                                                            
                                                                                            2.702
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —Number
      of shares outstanding
                                                                                            
                                                                                            
                                                                                            906,455,100
                                                                                            
                                                                                            
                                                                                            
                                                                                            906,455,100
                                                                                            
                                                                                            
                                                                                            
                                                                                            906,455,100
                                                                                            
                                                                                            
                                                                                            
                                                                                            906,455,100
                                                                                            
                                                                                            
                                                                                            
                                                                                            831,610,200
                                                                                            
                                                                                            
                                                                                            
                                                                                            831,610,200U.S.
      GAAPNet
      sales/service revenues
                                                                                            
                                                                                            U.S.
      $
                                                                                            569.3
                                                                                            
                                                                                            
                                                                                            Ps.
                                                                                            2,163.3
                                                                                            
                                                                                            
                                                                                            Ps.
                                                                                            2,059.0
                                                                                            
                                                                                            
                                                                                            Ps.
                                                                                            1,937.0
                                                                                            
                                                                                            
                                                                                            Ps.
                                                                                            1,403.5
                                                                                            
                                                                                            
                                                                                            Ps.
                                                                                            1,334.9Electric
      power purchases
                                                                                            
                                                                                            
                                                                                            (264.1
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (1,003.4
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (934.7
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (889.9
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (799.1
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (757.7
                                                                                            )Transmission
      and distribution expenses
                                                                                            
                                                                                            
                                                                                            (164.2
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (624.0
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (577.0
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (477.5
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (450.3
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (425.3
                                                                                            )Gross
      margin
                                                                                            
                                                                                            
                                                                                            141.0
                                                                                            
                                                                                            
                                                                                            
                                                                                            535.9
                                                                                            
                                                                                            
                                                                                            
                                                                                            547.3
                                                                                            
                                                                                            
                                                                                            
                                                                                            569.6
                                                                                            
                                                                                            
                                                                                            
                                                                                            154.1
                                                                                            
                                                                                            
                                                                                            
                                                                                            151.0Operating
      expenses, net
                                                                                            
                                                                                            
                                                                                            (86.1
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (327.2
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (296.6
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (207.5
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (194.1
                                                                                            )
                                                                                            
                                                                                            
                                                                                            185.0Net
      operating income (loss)
                                                                                            
                                                                                            
                                                                                            54.9
                                                                                            
                                                                                            
                                                                                            
                                                                                            208.7
                                                                                            
                                                                                            
                                                                                            
                                                                                            250.7
                                                                                            
                                                                                            
                                                                                            
                                                                                            362.1
                                                                                            
                                                                                            
                                                                                            
                                                                                            40.0
                                                                                            
                                                                                            
                                                                                            
                                                                                            (33.1
                                                                                            )Financial
      (expense), net and holding gains
                                                                                            
                                                                                            
                                                                                            (11.2
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (42.6
                                                                                            )
                                                                                            
                                                                                            
                                                                                            82.0
                                                                                            
                                                                                            
                                                                                            
                                                                                            (46.5
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (133.3
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (139.1
                                                                                            )Net
      income (loss) before income taxes
                                                                                            
                                                                                            
                                                                                            43.7
                                                                                            
                                                                                            
                                                                                            
                                                                                            166.2
                                                                                            
                                                                                            
                                                                                            
                                                                                            332.7
                                                                                            
                                                                                            
                                                                                            
                                                                                            315.7
                                                                                            
                                                                                            
                                                                                            
                                                                                            (173.3
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (172.1
                                                                                            )Income
      tax
                                                                                            
                                                                                            
                                                                                            (24.5
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (93.1
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (68.2
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (99.9
                                                                                            )
                                                                                            
                                                                                            
                                                                                            128.0
                                                                                            
                                                                                            
                                                                                            
                                                                                            8.1Net
      income (loss) for the year
                                                                                            
                                                                                            
                                                                                            19.2
                                                                                            
                                                                                            
                                                                                            
                                                                                            73.1
                                                                                            
                                                                                            
                                                                                            
                                                                                            264.5
                                                                                            
                                                                                            
                                                                                            
                                                                                            215.8
                                                                                            
                                                                                            
                                                                                            
                                                                                            (45.3
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (164.0
                                                                                            )Net income (loss) per ordinary share – basic and
      diluted(7)
                                                                                            
                                                                                            
                                                                                            0.021
                                                                                            
                                                                                            
                                                                                            
                                                                                            0.081
                                                                                            
                                                                                            
                                                                                            
                                                                                            0.295
                                                                                            
                                                                                            
                                                                                            
                                                                                            0.238
                                                                                            
                                                                                            
                                                                                            
                                                                                            (0.054
                                                                                            )
                                                                                            
                                                                                            
                                                                                            (0.197
                                                                                            )Net
      income  per ADS(8) —
      basic and diluted
                                                                                            
                                                                                            
                                                                                            0.43
                                                                                            
                                                                                            
                                                                                            
                                                                                            1.62
                                                                                            
                                                                                            
                                                                                            
                                                                                            5.90
                                                                                            
                                                                                            
                                                                                            
                                                                                            4.761
                                                                                            
                                                                                            
                                                                                            
                                                                                            —
                                                                                            
                                                                                            
                                                                                            
                                                                                            —





(1)
            Net
      sales for 2007 include the retroactive portion of the February 2007 tariff
      increase, which amounts in aggregate to Ps. 218.6 million, and is
      being invoiced in 55 equal and consecutive monthly installments, starting
      in February 2007. As of December 31, 2009 we had invoiced
      Ps. 149.4  million of this
  amount.


(2)
            Reflects
      the adjustment to present value of the retroactive portion of the tariff
      increase that is being invoiced in 55 consecutive monthly installments,
      starting in February 2007, and the adjustment to present value of Ps. 38.4
      million due under the payment plan agreement with the Province of Buenos
      Aires that is being invoiced in 18  installments, starting in
      January 2007.  As of December 31, 2009 and 2008, Ps. 2.3
      million was due under the payment plan agreement with the Province of
      Buenos Aires, and Ps. 69.2 million and Ps. 118.9 million of the
      retroactive tariff increase had not been invoiced in 2009 and 2008,
      respectively.  In accordance with Argentine GAAP, we account for
      these long term receivables at their net present value, which we calculate
      at a discount rate of 10.5% for the retroactive tariff increase and 19.62%
      for the payment plan agreement, recording the resulting non-cash charge as
      an adjustment to present value of these two receivables.  See
      “Item 4. Information on the Company —Framework agreement
      (Shantytowns).”


4





(3)
            Our
      debt restructuring generated a one-time gain of
      Ps. 179.2 million in the year ended December 31, 2006,
      reflecting the recognition of a Ps. 55.3 million waiver of
      principal amount on our financial debt, a Ps. 75 million waiver
      of accrued interest on our financial debt and a Ps. 65.7 million
      waiver of penalties related to the non-payment of our financial debt,
      which more than offset Ps. 16.8 million in related restructuring
      costs.  See “Item 5. Operating and Financial Review and
      Prospects—Liquidity and capital resources—Debt” for a description of the
      restructuring notes.


(4)
            We
      record our financial debt in our balance sheet at fair value reflecting
      our management’s best estimate of the amounts expected to be paid at each
      year end, calculated at a discount rate of 10.5% for the years ended
      December 31, 2009, 2008 and 2007 and 10% for the year ended December 31,
      2006.  We did not record any adjustment to present value in any
      year before the year ended December 31, 2006 because our financial
      debt was in default.


(5)
            In
      2007, we repurchased U.S. $43.7 million principal amount of our
      outstanding Fixed Rate Par Notes due 2016 and redeemed and
      repurchased  U.S. $240 million principal amount of our
      outstanding Discount Notes due 2014. In addition, in the year ended
      December 31, 2008 and 2009, we repurchased U.S. $32.5 million and
      U.S. $32.2 million principal amount of our outstanding Fixed Rate Par
      Notes due 2016, respectively  and U.S. $17.5 million
      and  U.S. $53.8 million  principal amount of our
      outstanding Senior Notes due 2017,
respectively.


(6)
            In
      2006, our income tax result reflects the reversal of net deferred tax
      assets, primarily due to the fact that, as a consequence of the
      ratification of the Adjustment Agreement in January 2007 and the
      renegotiation of our financial debt in April 2006, we generated
      taxable income that allowed us to offset a significant portion of the tax
      loss carryforwards we generated in
2002.


(7)
            We
      have not declared or paid any dividends since August 14,
    2001.


(8)
            Each
      ADS represents 20 Class B ordinary
shares.


5




As of December 31,2009
                      
                      
                      2008
                      
                      
                      2007
                      
                      
                      2006
                      
                      
                      2005(in millions)Balance
      sheet dataArgentine
      GAAPCurrent
      Assets:Cash
      and banks
                      
                      U.S.$
                      2.3
                      
                      
                      Ps.
                      8,7
                      
                      
                      Ps.
                      6.1
                      
                      
                      Ps.
                      3.5
                      
                      
                      Ps.
                      0.5
                      
                      
                      Ps.
                      11.7Investments
                      
                      
                      57.8
                      
                      
                      
                      219,7
                      
                      
                      
                      121.0
                      
                      
                      
                      97.7
                      
                      
                      
                      32.2
                      
                      
                      
                      296.5Trade
      receivables
                      
                      
                      102.4
                      
                      
                      
                      389,2
                      
                      
                      
                      400.4
                      
                      
                      
                      346.0
                      
                      
                      
                      270.9
                      
                      
                      
                      231.9Other
      receivables
                      
                      
                      16.1
                      
                      
                      
                      61,1
                      
                      
                      
                      42.8
                      
                      
                      
                      26.0
                      
                      
                      
                      30.2
                      
                      
                      
                      21.7Supplies
                      
                      
                      3.9
                      
                      
                      
                      14,8
                      
                      
                      
                      16.7
                      
                      
                      
                      23.2
                      
                      
                      
                      13.6
                      
                      
                      
                      13.8Total
      current assets
                      
                      U.S.$
                      182.5
                      
                      
                      Ps.
                      693,5
                      
                      
                      Ps.
                      587.0
                      
                      
                      Ps.
                      496.3
                      
                      
                      Ps.
                      347.5
                      
                      
                      Ps.
                      575.6Non-Current
      Assets:Trade
      receivables
                      
                      
                      22.9
                      
                      
                      
                      87.0
                      
                      
                      
                      111.4
                      
                      
                      
                      100.3
                      
                      
                      
                      —
                      
                      
                      
                      —Other
      receivables
                      
                      
                      23.4
                      
                      
                      
                      88.8
                      
                      
                      
                      99.5
                      
                      
                      
                      144.1
                      
                      
                      
                      256.5
                      
                      
                      
                      74.7Investments
      in other companies
                      
                      
                      0.1
                      
                      
                      
                      0.4
                      
                      
                      
                      0.4
                      
                      
                      
                      0.4
                      
                      
                      
                      0.4
                      
                      
                      
                      0.4Investments
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      67.2
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Supplies
                      
                      
                      4.9
                      
                      
                      
                      18.6
                      
                      
                      
                      12.8
                      
                      
                      
                      13.8
                      
                      
                      
                      4.9
                      
                      
                      
                      36.5Property,
      plant and equipment
                      
                      
                      916.4
                      
                      
                      
                      3,482.4
                      
                      
                      
                      3,256.3
                      
                      
                      
                      3,092.7
                      
                      
                      
                      2,925.4
                      
                      
                      
                      2,889.3Total
      non-current assets
                      
                      U.S.$
                      967.7
                      
                      
                      Ps.
                      3,677.2
                      
                      
                      Ps.
                      3,547.6
                      
                      
                      Ps.
                      3,351.3
                      
                      
                      Ps.
                      3,187.2
                      
                      
                      Ps.
                      3,000.9Total
      assets
                      
                      U.S.$
                      1,150.2
                      
                      
                      Ps.
                      4,370.7
                      
                      
                      Ps.
                      4,134.6
                      
                      
                      Ps.
                      3,847.6
                      
                      
                      Ps.
                      3,534.7
                      
                      
                      Ps.
                      3,576.5Current
      liabilities:Trade
      account payable
                      
                      
                      91.5
                      
                      
                      
                      347.8
                      
                      
                      
                      339.3
                      
                      
                      
                      316.2
                      
                      
                      
                      267.6
                      
                      
                      
                      205.1Loans
                      
                      
                      21.8
                      
                      
                      
                      83.0
                      
                      
                      
                      27.2
                      
                      
                      
                      29.3
                      
                      
                      
                      2.0
                      
                      
                      
                      1,620.1Salaries
      and socialsecurity
      taxes
                      
                      
                      31.2
                      
                      
                      
                      118.4
                      
                      
                      
                      94.8
                      
                      
                      
                      59.9
                      
                      
                      
                      51.4
                      
                      
                      
                      34.1Taxes
                      
                      
                      36.9
                      
                      
                      
                      140.3
                      
                      
                      
                      111.0
                      
                      
                      
                      84.6
                      
                      
                      
                      62.2
                      
                      
                      
                      67.9Other
      liabilities
                      
                      
                      2.1
                      
                      
                      
                      8.0
                      
                      
                      
                      10.5
                      
                      
                      
                      9.7
                      
                      
                      
                      26.4
                      
                      
                      
                      175.8Accrued
      litigation
                      
                      
                      16.5
                      
                      
                      
                      62.8
                      
                      
                      
                      52.8
                      
                      
                      
                      39.9
                      
                      
                      
                      25.9
                      
                      
                      
                      18.3Total
      current liabilities
                      
                      U.S.$
                      200.0
                      
                      
                      Ps.
                      760.3
                      
                      
                      Ps.
                      635.6
                      
                      
                      Ps.
                      539.6
                      
                      
                      Ps.
                      435.6
                      
                      
                      Ps.
                      2,121.3Non-current
      liabilities:Trade
      account payable
                      
                      
                      12.3
                      
                      
                      
                      46.8
                      
                      
                      
                      40.2
                      
                      
                      
                      35.5
                      
                      
                      
                      31.3
                      
                      
                      
                      26.8Loans
                      
                      
                      186.2
                      
                      
                      
                      707.5
                      
                      
                      
                      913.1
                      
                      
                      
                      949.1
                      
                      
                      
                      1,095.5
                      
                      
                      
                      —Salaries
      and socialsecurity
      taxes
                      
                      
                      11.5
                      
                      
                      
                      43.7
                      
                      
                      
                      40.1
                      
                      
                      
                      24.7
                      
                      
                      
                      20.3
                      
                      
                      
                      12.4Taxes
                      
                      
                      2.5
                      
                      
                      
                      9.4
                      
                      
                      
                      0
                      
                      
                      
                      0
                      
                      
                      
                      0
                      
                      
                      
                      0Other
      liabilities
                      
                      
                      160.7
                      
                      
                      
                      610.8
                      
                      
                      
                      369.0
                      
                      
                      
                      281.4
                      
                      
                      
                      241.1
                      
                      
                      
                      —Accrued
      Litigation
                      
                      
                      2.7
                      
                      
                      
                      10.0
                      
                      
                      
                      45.1
                      
                      
                      
                      42.8
                      
                      
                      
                      40.6
                      
                      
                      
                      38.7Total
      non-currentliabilities
                      
                      
                      375.9
                      
                      
                      
                      1,428.2
                      
                      
                      
                      1,407.5
                      
                      
                      
                      1,333.5
                      
                      
                      
                      1,428.7
                      
                      
                      
                      77.8Total
      liabilities
                      
                      U.S.$
                      575.9
                      
                      
                      Ps.
                      2,188.5
                      
                      
                      Ps.
                      2,043.0
                      
                      
                      Ps.
                      1,873.0
                      
                      
                      Ps.
                      1,864.3
                      
                      
                      Ps.
                      2,199.2Shareholders’
      equity
                      
                      
                      574.3
                      
                      
                      
                      2,182.2
                      
                      
                      
                      2,091.6
                      
                      
                      
                      1,974.6
                      
                      
                      
                      1,670.4
                      
                      
                      
                      1,377.3Total
      liabilities and shareholders’ equity
                      
                      U.S.$
                      1,150.2
                      
                      
                      Ps.
                      4,370.7
                      
                      
                      Ps.
                      4,134.6
                      
                      
                      Ps.
                      3,847.6
                      
                      
                      Ps.
                      3,534.7
                      
                      
                      Ps.
                      3,576.5U.S.
      GAAPCurrent
      assets
                      
                      U.S.$
                      185.1
                      
                      
                      Ps.
                      703.3
                      
                      
                      Ps.
                      666.7
                      
                      
                      Ps.
                      536.7
                      
                      
                      Ps.
                      547.0
                      
                      
                      Ps.
                      728.8Property,
      plant and equipment, net
                      
                      
                      934.8
                      
                      
                      
                      3,552.4
                      
                      
                      
                      3,331.2
                      
                      
                      
                      3,175.7
                      
                      
                      
                      3,016.4
                      
                      
                      
                      3,009.7Other
      non-current assets
                      
                      
                      68.5
                      
                      
                      
                      260.4
                      
                      
                      
                      258.4
                      
                      
                      
                      346.6
                      
                      
                      
                      201.5
                      
                      
                      
                      145.5Total
      assets
                      
                      U.S.$
                      1,188.4
                      
                      
                      Ps.
                      4,516.1
                      
                      
                      Ps.
                      4,256.3
                      
                      
                      Ps.
                      4,059.0
                      
                      
                      Ps.
                      3,764.9
                      
                      
                      Ps.
                      3,884.0Current
      liabilities
                      
                      U.S.$
                      208.1
                      
                      
                      Ps.
                      790.9
                      
                      
                      Ps.
                      707.5
                      
                      
                      Ps.
                      573.7
                      
                      
                      Ps.
                      470.0
                      
                      
                      
                      Ps 2,124.8Non-current
      liabilities
                      
                      
                      506.3
                      
                      
                      
                      1,923.8
                      
                      
                      
                      1,821.6
                      
                      
                      
                      2,018.2
                      
                      
                      
                      2,225.1
                      
                      
                      
                      640.3Total
      liabilities
                      
                      
                      714.4
                      
                      
                      
                      2,714.7
                      
                      
                      
                      2,529.1
                      
                      
                      
                      2,591.9
                      
                      
                      
                      2,695.1
                      
                      
                      
                      2,765.1Shareholders’
      equity
                      
                      
                      474.1
                      
                      
                      
                      1,801.4
                      
                      
                      
                      1,727.2
                      
                      
                      
                      1,467.1
                      
                      
                      
                      1,069.8
                      
                      
                      
                      1,118.8Total
      liabilities and shareholders’ equity
                      
                      U.S.$
                      1,188.4
                      
                      
                      Ps.
                      4,516.1
                      
                      
                      Ps.
                      4,256.3
                      
                      
                      Ps.
                      4,059.0
                      
                      
                      Ps.
                      3,764.9
                      
                      
                      Ps.
                      3,884.0




6





Year ended December 31,2009
                                                                                                                  
                                                                                                                  
                                                                                                                  2008
                                                                                                                  
                                                                                                                  
                                                                                                                  2007
                                                                                                                  
                                                                                                                  
                                                                                                                  2006
                                                                                                                  
                                                                                                                  
                                                                                                                  2005(in millions)Cash
      flow dataArgentine
      GAAPOperating
      activities:Net
      income (loss)
                                                                                                                  
                                                                                                                  U.S.$
                                                                                                                  23.8
                                                                                                                  
                                                                                                                  
                                                                                                                  Ps.
                                                                                                                  90.6
                                                                                                                  
                                                                                                                  
                                                                                                                  Ps.
                                                                                                                  123.1
                                                                                                                  
                                                                                                                  
                                                                                                                  Ps.
                                                                                                                  122.5
                                                                                                                  
                                                                                                                  
                                                                                                                  Ps.
                                                                                                                  293.1
                                                                                                                  
                                                                                                                  
                                                                                                                  Ps.
                                                                                                                  (149.6
                                                                                                                  )Adjustment
      to reconcile net income (loss) to net cash flows provided by (used in)
      operating activities:Depreciation
      of property, plant and equipment
                                                                                                                  
                                                                                                                  
                                                                                                                  46.2
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  175.4
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  170.3
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  174.4
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  179.0
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  178.4Retirement
      of property, plant and equipment
                                                                                                                  
                                                                                                                  
                                                                                                                  0.7
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  2.8
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  1.9
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  1.1
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  0.7
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  0.9Gain
      on extinguishment of former debt
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (179.2
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  —Gain
      from investments in affiliated parties
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (0.1
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (0.1
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  —Loss
      (Gain) from investments
                                                                                                                  
                                                                                                                  
                                                                                                                  6.9
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  26.4
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (4.3
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (8.5
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —Adjustment
      to present value of notes
                                                                                                                  
                                                                                                                  
                                                                                                                  1.4
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  5.2
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  8.5
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  21.5
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (57.1
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  —(Gain)
      Loss from the purchase and redemption of notes
                                                                                                                  
                                                                                                                  
                                                                                                                  (21.4
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (81.4
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (93.6
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  10.2
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —Adjustment
      to present value of the repurchased and redeemed notes
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  8.6
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —Exchange
      differences, interest and penalties on loans
                                                                                                                  
                                                                                                                  
                                                                                                                  47.0
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  178.6
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  232.7
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  69.5
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  49.1
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  139.0Supplies
      recovered from third parties
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (5.8
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  —Increase
      in trade receivables due to the unbilled portion of the retroactive tariff
      increase
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (171.3
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —Recovery
      of the accrual for tax contingencies
                                                                                                                  
                                                                                                                  
                                                                                                                  (9.3
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (35.5
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —Income
      tax
                                                                                                                  
                                                                                                                  
                                                                                                                  20.9
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  79.3
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  61.2
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  125.0
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (167.2
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  —Allowance
      for doubtful accounts
                                                                                                                  
                                                                                                                  
                                                                                                                  3.5
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  13.5
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  17.1
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —Reversal
      of the allowance for doubtful accounts
                                                                                                                  
                                                                                                                  
                                                                                                                  (7.1
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (26.9
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (24.0
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —Allowance
      for other doubtful accounts
                                                                                                                  
                                                                                                                  
                                                                                                                  0.9
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  3.3
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  1.7
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —Adjustment
      to net present value of the retroactive tariff increase arising from the
      application of the new electricity rate schedule and of the Payment Plan
      Agreement with the Province of Buenos Aires
                                                                                                                  
                                                                                                                  
                                                                                                                  (0.9
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (3.4
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (13.5
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  29.6
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —Changes
      in operating assets and liabilities:Decrease
      (Increase) in trade receivables (net of the unbilled portion of the
      retroactive tariff increase)
                                                                                                                  
                                                                                                                  
                                                                                                                  12.7
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  48.1
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (49.5
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (36.9
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (39.0
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (37.1
                                                                                                                  )Net
      decrease (increase) in other receivables
                                                                                                                  
                                                                                                                  
                                                                                                                  1.4
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  5.3
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (33.4
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (8.4
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (23.1
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (27.2
                                                                                                                  )(Increase)
      Decrease in supplies
                                                                                                                  
                                                                                                                  
                                                                                                                  (1.0
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (3.9
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  7.4
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (18.4
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  1.4
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (5.4
                                                                                                                  )Increase
      in trade accounts payable
                                                                                                                  
                                                                                                                  
                                                                                                                  4.0
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  15.2
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  27.8
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  52.7
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  67.1
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  54.4Increase
      in salaries and social security taxes
                                                                                                                  
                                                                                                                  
                                                                                                                  7.2
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  27.2
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  50.3
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  12.9
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  25.2
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  4.5(Decrease)
      Increase in taxes
                                                                                                                  
                                                                                                                  
                                                                                                                  (15.0
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (56.9
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  26.4
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  22.5
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (5.7
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  23.6Increase
      in other liabilities
                                                                                                                  
                                                                                                                  
                                                                                                                  62.9
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  239.1
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  78.1
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  17.7
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  91.7
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  36.8Net
      increase in accrued litigation
                                                                                                                  
                                                                                                                  
                                                                                                                  2.8
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  10.6
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  15.1
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  16.2
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  9.5
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  7.7Financial
      interest paid, net of interest capitalized
                                                                                                                  
                                                                                                                  
                                                                                                                  (20.2
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (76.8
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (62.7
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (25.5
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (26.7
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (46.5
                                                                                                                  )Financial
      and commercial interest collected
                                                                                                                  
                                                                                                                  
                                                                                                                  8.5
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  32.2
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  6.9
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  11.6
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  2.2
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  2.0Net
      cash flow provided by operatingactivities
                                                                                                                  
                                                                                                                  
                                                                                                                  175.8
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  668.0
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  547.5
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  427.2
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  215.0
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  181.5Investing
      activities:Additions
      of property, plant and equipment
                                                                                                                  
                                                                                                                  
                                                                                                                  (106.4
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (404.2
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (325.4
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (336.9
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (179.7
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (124.5
                                                                                                                  )Net
      cash flow used in investing activities
                                                                                                                  
                                                                                                                  
                                                                                                                  (106.4
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (404.2
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (325.4
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (336.9
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (179.7
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (124.5
                                                                                                                  )Financing
      activities:Decrease
      (Increase) in current and non-current investments
                                                                                                                  
                                                                                                                  
                                                                                                                  3.6
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  13.6
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (67.9
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —Net
      Decrease in loans
                                                                                                                  
                                                                                                                  
                                                                                                                  (46.2
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (175.4
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (122.9
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (203.6
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (310.8
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  —Capital
      increase
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  181.8
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —Treasury
      Shares
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (6.1
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  —Net
      cash flows used in financingactivities
                                                                                                                  
                                                                                                                  
                                                                                                                  (42.6
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (161.8
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (196.9
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (21.8
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  (310.8
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  —Cash
      variations:Cash
      and cash equivalents at beginning of year
                                                                                                                  
                                                                                                                  U.S.$
                                                                                                                  33.3
                                                                                                                  
                                                                                                                  
                                                                                                                  Ps.
                                                                                                                  126.4
                                                                                                                  
                                                                                                                  
                                                                                                                  Ps.
                                                                                                                  101.2
                                                                                                                  
                                                                                                                  
                                                                                                                  Ps.
                                                                                                                  32.7
                                                                                                                  
                                                                                                                  
                                                                                                                  Ps.
                                                                                                                  308.1
                                                                                                                  
                                                                                                                  
                                                                                                                  Ps.
                                                                                                                  251.1Cash
      and cash equivalents at end of the year
                                                                                                                  
                                                                                                                  
                                                                                                                  60.1
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  228.4
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  126.4
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  101.2
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  32.7
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  308.1Net
      increase (decrease) in cash and cash equivalents
                                                                                                                  
                                                                                                                  
                                                                                                                  26.8
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  102.0
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  25.2
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  68.5
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  (275.5
                                                                                                                  )
                                                                                                                  
                                                                                                                  
                                                                                                                  57.0




7




Year ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006
                  
                  
                  2005Operating
      dataArgentine
      GAAPEnergy
      sales (in GWh):Residential
                  
                  
                  7,344
                  
                  
                  
                  7,545
                  
                  
                  
                  7,148
                  
                  
                  
                  6,250
                  
                  
                  
                  5,819Small
      Commercial
                  
                  
                  1,470
                  
                  
                  
                  1,530
                  
                  
                  
                  1,485
                  
                  
                  
                  1,433
                  
                  
                  
                  1,387Medium
      Commercial
                  
                  
                  1,565
                  
                  
                  
                  1,597
                  
                  
                  
                  1,552
                  
                  
                  
                  1,446
                  
                  
                  
                  1,354Industrial
                  
                  
                  3,204
                  
                  
                  
                  3,277
                  
                  
                  
                  3,628
                  
                  
                  
                  3,364
                  
                  
                  
                  3,195Wheeling
      system(1)
                  
                  
                  3,622
                  
                  
                  
                  3,700
                  
                  
                  
                  3,111
                  
                  
                  
                  3,211
                  
                  
                  
                  2,984Others:Public
      Lighting
                  
                  
                  644
                  
                  
                  
                  644
                  
                  
                  
                  643
                  
                  
                  
                  650
                  
                  
                  
                  642Shantytowns
                  
                  
                  351
                  
                  
                  
                  304
                  
                  
                  
                  301
                  
                  
                  
                  261
                  
                  
                  
                  279Others(2)
                  
                  
                  19
                  
                  
                  
                  19
                  
                  
                  
                  18
                  
                  
                  
                  18
                  
                  
                  
                  17Customers
      (in thousands)(3)
                  
                  
                  2,605
                  
                  
                  
                  2,537
                  
                  
                  
                  2,490
                  
                  
                  
                  2,445
                  
                  
                  
                  2,404Energy
      losses (%)
                  
                  
                  11.9
                  %
                  
                  
                  10.8
                  %
                  
                  
                  11.6
                  %
                  
                  
                  11.1
                  %
                  
                  
                  11.0
                  %MWh
      sold by employee
                  
                  
                  6,936.1
                  
                  
                  
                  7,392.8
                  
                  
                  
                  7,230.6
                  
                  
                  
                  6,736.6
                  
                  
                  
                  6,395.9Customers
      per employee
                  
                  
                  978
                  
                  
                  
                  997
                  
                  
                  
                  998
                  
                  
                  
                  982
                  
                  
                  
                  971





(1)
            Wheeling
      charges represent our tariffs for large users, which consist of a fixed
      charge for recognized technical losses and a charge for our distribution
      margins but exclude charges for electric power purchases, which are
      undertaken directly between generators and large
  users.


(2)
            Represents
      energy consumed internally by our company and our
    facilities.


(3)
            We
      define a customer as one meter.  We may supply more than one
      consumer through a single meter.  In particular, because we
      measure our energy sales to each shantytown collectively using a single
      meter, each shantytown is counted as a single
  customer.




EXCHANGE
RATES




From
April 1, 1991 until the end of 2001, the Convertibility Law established a
fixed exchange rate under which the Central Bank was obliged to sell U.S.
Dollars at a fixed rate of one Peso per U.S. Dollar.  On
January 6, 2002, the Argentine Congress enacted the Public Emergency Law,
formally putting an end to the regime of the Convertibility Law and abandoning
over ten years of U.S. Dollar-Peso parity.  The Public Emergency Law
grants the executive branch of the Argentine government the power to set the
exchange rate between the Peso and foreign currencies and to issue regulations
related to the foreign exchange market.  The Public Emergency law has
been extended until December 31, 2011.  For a brief period following
the end of the Convertibility Regime, the Public Emergency Law established a
temporary dual exchange rate system.  Since February 2002, the
Peso has been allowed to float freely against other currencies.




The
following table sets forth the annual high, low, average and period-end exchange
rates for U.S. Dollars for the periods indicated, expressed in Pesos per U.S.
Dollar at the purchasing exchange rate and not adjusted for
inflation.  When preparing our financial statements, we utilize the
selling exchange rates for U.S. Dollars quoted by Banco Nación to translate our
U.S. Dollar denominated assets and liabilities into Pesos.  The
Federal Reserve Bank of New York does not report a noon buying rate for
Pesos.




Low
              
              
              High
              
              
              Average
              
              
              Period End(Pesos per U.S. Dollar)Year
      ended December 31,2005
              
              
              2.86
              
              
              
              3.04
              
              
              
              2.92
              (1)
              
              
              3.032006
              
              
              3.03
              
              
              
              3.11
              
              
              
              3.07
              (1)
              
              
              3.062007
              
              
              3.06
              
              
              
              3.18
              
              
              
              3.12
              (1)
              
              
              3.152008
              
              
              3.01
              
              
              
              3.47
              
              
              
              3.16
              (1)
              
              
              3.452009
              
              
              3.45
              
              
              
              3.88
              
              
              
              3.73
              (1)
              
              
              3.80MonthDecember
      2009
              
              
              3.79
              
              
              
              3.82
              
              
              
              3.80
              (2)
              
              
              3.80January
      2010
              
              
              3.79
              
              
              
              3.83
              
              
              
              3.80
              (2)
              
              
              3.83February
      2010
              
              
              3.83
              
              
              
              3.86
              
              
              
              3.85
              (2)
              
              
              3.86March
      2010
              
              
              3.86
              
              
              
              3.88
              
              
              
              3.86
              (2)
              
              
              3.88April
      2010
              
              
              3.86
              
              
              
              3.89
              
              
              
              3.88
              (2)
              
              
              3.89May
      2010(3)
              
              
              3.89
              
              
              
              3.91
              
              
              
              3.90
              (2)
              
              
              3.90





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 corresponding exchange rates from May 1 through May
  26.




8


RISK
FACTORS


Risks
related to Argentina




Overview




We are a
sociedad anónima
(limited liability corporation) incorporated under the laws of the Republic of
Argentina and all of our revenues are earned in Argentina and 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 and political
conditions prevailing in Argentina.  For example, lower economic
growth or economic recession could lead to lower demand for electricity in our
concession area or a decline in purchasing power of our customers, which, in
turn, could lead to lower collections from our clients or growth in energy
losses due to illegal use of our service.  Argentine government
actions concerning the economy, including decisions with respect to inflation,
interest rates, price controls, foreign exchange controls and taxes, have had
and could continue to have a material adverse effect on private sector entities,
including us.  To address Argentina’s economic crisis in 2001 and
2002, for example, the Argentine government took measures, such as the freeze of
electricity distribution margins and pesification of our tariffs, which had a
severe effect on our financial condition and led us to suspend payments on our
financial debt.  We cannot provide any assurance whether the Argentine
government will adopt other policies that could adversely affect the economy or
our business.  In addition, we cannot provide any assurance that
future economic, social and political developments in Argentina, over which we
have no control, will not impair our business, financial condition or results of
operations.




The
global financial crisis and unfavorable credit and market conditions that
commenced in 2007 have affected and could continue to negatively affect the
Argentine economy and may negatively affect our liquidity, customers, business,
and results of operations




The
ongoing effects of the global 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.  The effect of this
current economic crisis on our customers and on us cannot be
predicted.  Weak economic conditions could lead to reduced demand for
energy, which could have a negative effect on our revenues.  In
addition, our ability to access the credit or capital markets may be restricted
at a time when we would need financing, which could have an impact on our
flexibility to react to changing economic and business
conditions.  For these reasons, any of the foregoing factors or a
combination of these factors could have an adverse effect on our results of
operations and financial condition and cause the market value of our ADSs to
decline.




Argentina’s
economic recovery since the 2001 economic crisis may not be sustainable in light
of current economic conditions, and any significant decline could adversely
affect our financial condition




During
2001 and 2002, Argentina went through a period of severe political, economic and
social crisis.  Although the economy has recovered significantly since
the 2001 crisis, uncertainty remains as to the sustainability of economic growth
and stability.  Although Argentina’s economy continued to grow in
2009, growth occurred at a less rapid pace than in the previous six years, due
to the economic slowdown that started in the last quarter of 2008 and that
continued into 2009. Sustainable economic growth is dependent on a variety of
factors, including international demand for Argentine exports, the stability and
competitiveness of the Peso against foreign currencies, confidence among
consumers and foreign and domestic investors and a stable and relatively low
rate of inflation.




The
Argentine economy remains fragile, as reflected by the following economic
conditions:




·
            unemployment
      remains high;




·
            the
      availability of long-term fixed rate credit is
  scarce;




·
            investment
      as a percentage of GDP remains low;




·
            the
      current fiscal surplus is at risk of becoming a fiscal
      deficit;




·
            inflation
      has risen recently and threatens to
accelerate;




9




·
            the
      regulatory environment continues to be
  uncertain;




·
            the
      country’s public debt remains high and international financing is limited;
      and




·
            the
      recovery has depended to some extent on high commodity prices, which are
      volatile and beyond the control of the Argentine
    government.




As in the
recent past, Argentina’s economy may suffer if political and social pressures
inhibit the implementation by the Argentine government of policies designed to
maintain price stability, generate growth and enhance consumers and investor
confidence. This, in turn, could lead to lower demand for our services as well
as lower collection rates from clients and growth in energy losses due to
illegal use of our services, which could materially adversely affect our
financial condition and results of operations.  Furthermore, as it has
done in the past, the Argentine government could respond to a lack of economic
growth or stability by adopting measures that affect private sector enterprises,
including the tariff restrictions imposed on public utility companies such as
several of our subsidiaries.




We cannot
provide any assurance that a decline in economic growth or increased economic
instability, 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 and Class B
common shares.




A
return to a high inflation environment may have adverse effects on the Argentine
economy, which could, in turn, have a material adverse effect on our results of
operations




According
to data published by the Instituto Nacional de Estadística y
Censos (National Statistics and Census Institute, or INDEC), the rate of
inflation  reached 7.7% in 2009, 7.2% in 2008 and 8.5% in 2007. Over
the course of the past several years, the Argentine government has implemented
several programs to control inflation and monitor prices for most relevant goods
and services.  These government actions included price support
arrangements agreed to by the Argentine government and private sector companies
in several industries and markets.




Despite
the relatively flat rate of change in inflation in the past two years,
uncertainty surrounding future inflation and the current economic situation
could slow economic recovery.  In the past, inflation has materially
undermined the Argentine economy and the government’s ability to create
conditions that permit growth.  A return to a high inflation
environment would also undermine Argentina’s foreign competitiveness by diluting
the effects of the Peso devaluation, with the same negative effects on the level
of economic activity.  In turn, a portion of the Argentine debt is
adjusted by the Coeficiente de
Estabilización de Referencia (Stabilization Coefficient, or CER Index), a
currency index, which is strongly related to inflation.  Therefore,
any significant increase in inflation would cause an increase in the external
debt and consequently in Argentina’s financial obligations, which could further
exacerbate the stress on the Argentine economy.  A high inflation
environment could also temporarily undermine our results of operations as a
result of a lag in cost adjustments, and we may be unable to adjust our tariffs
accordingly.  In addition, a return to high inflation would undermine
the confidence in Argentina’s banking system in general, which would further
limit the availability of domestic and international credit to businesses, which
could adversely affect our ability to finance our working capital needs on
favorable terms, and adversely affect our results of operations.




10




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 may in turn
limit our ability to access the credit and capital markets




In
January 2007, INDEC modified its methodology used to calculate the consumer
price index (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.  Several economists as well as the
international and Argentine press have suggested that this change in methodology
was related to the Argentine government’s policy aimed at curbing
inflation.  Further, at the time that INDEC adopted this change in
methodology, the Argentine government also replaced several key personnel at
INDEC.  The alleged governmental interference prompted complaints from
the technical staff at INDEC, which, in turn, has led to the initiation of
several judicial investigations involving members of the Argentine government
and aimed at determining whether there was a breach of classified statistical
information relating to the collection of data used in the calculation of the
CPI.  These events have affected the credibility of the CPI index
published by INDEC, as well as other indexes published by INDEC that require the
CPI for their own calculation, including the poverty index, the unemployment
index as well as the calculation of the GDP, among others.  If these
investigations result in a finding that the methodologies used to calculate the
CPI or other INDEC indexes derived from the CPI were manipulated by the
Argentine government, or if it is determined that it is necessary to correct the
CPI and the other INDEC indexes derived from the CPI as a result of the
methodology used by INDEC, there could be a significant decrease in confidence
in the Argentine economy.  With credit to emerging market nations
already tenuous as a result of the global economic crisis, our ability to access
credit and capital markets to finance our operations and growth in the future
could be further limited by the uncertainty relating to the accuracy of the
economic indices in question which could adversely affect our results of
operations and financial conditions and cause the market value of our ADSs and
Class B common shares to decline.




Argentina’s
ability to obtain financing from international markets is limited, which may
impair its ability to implement reforms and foster economic growth, and
consequently, may affect our business, results of operations and prospects for
growth




In 2005,
Argentina restructured part of its sovereign debt that had been in default since
the end of 2001.  The Argentine government announced that as a result
of the restructuring, it had approximately U.S. $126.6 billion in total
outstanding debt remaining.  Of this amount, approximately U.S. $19.5
billion correspond to defaulted bonds owned by creditors who did not
participate in the restructuring of the external financial
debt.  Some bondholders in the United States, Italy and Germany have
filed legal actions against Argentina, and holdout creditors may initiate new
suits in the future.  Additionally, foreign shareholders of several
Argentine companies, including public utilities and a group of bondholders that
did not participate in the sovereign restructuring, have filed claims totaling
approximately U.S. $17.0 billion before the International Centre for Settlement
of Investment Disputes (ICSID) alleging that certain government measures are
inconsistent with the fair and equitable treatment standards set forth in
various bilateral investment treaties to which Argentina is a
party.  To date, ICSID has rendered decisions against Argentina
in eight of these cases, requiring the Argentine government to pay U.S. $913
million plus interest in claims and legal fees.  In 2009, three groups
of bondholders that declined to participate in the restructuring of the external
public debt presented claims before ICSID totaling over U.S. $4.4
billion.




Argentina’s
past default and its failure to restructure completely its remaining sovereign
debt and fully negotiate with the holdout creditors may limit Argentina’s
ability to reenter the international capital markets.  Litigation
initiated by holdout creditors as well as ICSID claims have resulted and may
continue to result in judgments against the Argentine government which, if not
paid, could prevent Argentina from obtaining credit from multilateral
organizations.  Judgment creditors have sought and may continue to
seek attachment orders or injunctions relating to assets of Argentina that the
government intended for other uses.  In addition, in May 2009, a
number of members of the United States Congress supported by a civil society
group called the American Task Force Argentina introduced legislation that would
deny foreign states in default of U.S. court judgments exceeding U.S.$100
million for more than two years, such as Argentina, access to U.S. capital
markets.  Although the United States Congress has not taken any
significant steps towards adopting such legislation, we can make no assurance
that this legislation or other political actions designed to limit Argentina’s
access to capital markets will not take effect.  As a result of
Argentina’s default and the events that have followed it, the government may not
have the financial resources necessary to implement reforms and foster economic
growth, which, in turn, could have a material adverse effect on the country’s
economy and, consequently, our businesses and results of
operations.  Furthermore, Argentina’s inability to obtain credit in
international markets could have a direct impact on our own ability to access
international credit markets to finance our operations and
growth.




11






Significant
fluctuations in the value of the Peso against the U.S. Dollar may adversely
affect the Argentine economy, which could, in turn adversely affect our results
of operations




Despite
the positive effects the depreciation of the Peso in 2002 had on the
export-oriented sectors of the Argentine economy, the depreciation has also had
a far-reaching negative impact on a range of businesses and on individuals’
financial positions.  The devaluation of the Peso had a negative
impact on the ability of Argentine businesses to honor their foreign
currency-denominated debt, led to very high inflation initially, significantly
reduced real wages, had a negative impact on businesses whose success is
dependent on domestic market demand, including public utilities and the
financial industry, and adversely affected the government’s ability to honor its
foreign debt obligations.  If the Peso devalues significantly, all of
the negative effects on the Argentine economy related to such devaluation could
recur, with adverse consequences to our businesses, our results of operations
and the market value of our ADSs and Class B common shares.  Moreover,
it would likely result in a decline in the value of our shares and ADSs as
measured in U.S. Dollars.




Similarly,
a substantial increase in the value of the Peso against the U.S. Dollar also
presents risks for the Argentine economy, including, for example, a reduction in
exports.  This could have a negative effect on economic growth and
employment and reduce the Argentine public sector’s revenues by reducing tax
collection in real terms, all of which could have a material adverse effect on
our business as a result of the weakening of the Argentine economy in
general.




Government
measures to address social unrest may adversely affect the Argentine economy and
thereby affect our business and results of operations.




During
the economic crisis in 2001 and 2002, Argentina experienced social and political
turmoil, including civil unrest, riots, looting, nationwide protests, strikes
and street demonstrations.  Despite the economic recovery and relative
stabilization since 2002, the social and political tensions and high levels of
poverty and unemployment continue.  Future government policies to
preempt, or respond to, social unrest may include expropriation,
nationalization, forced renegotiation or modification of existing contracts,
suspension of the enforcement of creditors’ rights and shareholders’ rights, new
taxation policies, including royalty and tax increases and retroactive tax
claims, and changes in laws, regulations and policies affecting foreign trade
and investment.  These policies could destabilize the country, both
socially and politically, and adversely and materially affect the Argentine
economy.




More
recently, in March 2008, the Argentine Ministry of Economy and Production
announced the adoption of new taxes on exports of a number of agricultural
products.  The new taxes were to be calculated at incremental rates as
the price for the exported products increase, and represented a significant
increase in taxes on exports by the agricultural sector in
Argentina.  The adoption of these taxes met significant opposition
from various political and economic groups with ties to the Argentine
agricultural sector, including strikes by agricultural producers around the
country, roadblocks to prevent the circulation of agricultural goods within
Argentina and massive demonstrations in the City of Buenos Aires and other major
Argentine cities.  Although these measures did not pass the Argentine
congress, we cannot make assurances that the Argentine government will not seek
to reintroduce the export taxes or adopt other measures affecting this or other
sectors of the economy (including the electricity sector) to compensate for the
lost revenues associated with these taxes.  These uncertainties could
lead to further social unrest that could adversely affect the Argentine
economy.  In addition, economic distress may lead to lower demand for
energy, lower collections from our clients, as well as growth of energy losses
due to illegal use of our services.  We may also experience increased
damages to our networks as a result of protesters or illicit activity, which may
increase as a result of the decline in economic conditions, all of which, in
turn may have a material adverse effect on our financial condition and results
of operations and the market value of our ADSs and Class B common
shares.




Exchange
controls, transfer restrictions and other policies of the Argentine government
have limited and can be expected to continue to limit the availability of
international and local credit or otherwise adversely affect our
business




In 2001
and the first half of 2002, Argentina experienced a massive withdrawal of
deposits from the Argentine financial system in a short period of time, which
precipitated a liquidity crisis within the Argentine financial system and
prompted the Argentine government to impose exchange controls and restrictions
on the ability of depositors to withdraw their deposits.  These
restrictions have been substantially eased; however, in June 2005 the Argentine
government adopted various other rules and regulations that established
restrictive controls on capital inflows.  See “Item 10. Additional
Information—Exchange Controls.”   In the event of a future shock,
the Argentine government could impose further exchange controls or restrictions
on the movement of capital and take other measures that could limit our ability
to access international capital markets, impair our ability to make dividend
payments abroad or adversely affect our business and results of operations,
which may adversely affect the market value of our ADSs and Class B common
shares.


12




In recent
years a significant portion of the local demand for debt of Argentina companies
has come from the private Argentine pension funds.  In response to the
global economic crisis, in December 2008, the Argentine Congress passed a law
unifying the Argentine pension and retirement system into a system publicly
administered by the Administración Nacional de la
Seguridad Social (National Social Security Agency, or ANSES) and
eliminating the retirement savings system previously administered by private
pension funds.  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.  It is difficult to evaluate the real impact of
this measure, but after these changes the demand for local debt in Argentina has
been negatively affected.  A significant decrease in the demand for
local debt could have an adverse impact on our ability to raise capital to
refinance our indebtedness or finance capital expenditures, which may adversely
affect the market value of our ADSs and Class B common shares.




The
Argentine economy could be adversely affected by economic developments in other
global markets




Financial
and securities markets in Argentina are influenced, to varying degrees, by
economic and market conditions in other global markets.  Although
economic conditions vary from country to country, investors’ perception of the
events occurring in one country may substantially affect capital flows into and
securities from issuers 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 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, Argentina continues to be affected by
events in the economies of its major regional partners, including, for example,
currency devaluations caused by the global economic crisis.




Furthermore,
the Argentine economy may be affected by events in developed economies which are
trading partners or that impact the global economy.  Economic
conditions and credit availability in Argentina  were affected by an
economic and banking crisis in the United States in 2008 and
2009.  When the crisis began, major financial institutions suffered
considerable losses, investor confidence in the global financial system was
shaken and various financial institutions required government bailouts or ceased
operations altogether.  The deterioration in any area of the global
economy, as well as the economic conditions in our principal regional partners,
including the members of Mercosur, could have an adverse material effect on the
Argentine economy and, indirectly, on our business, financial condition and
results of operations.




Risks
relating to the electricity distribution sector




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 resolutions, which made a number of
material changes to the regulatory framework applicable to the electricity
sector.  These changes, which severely affected electricity
distribution companies, included the freezing of distribution margins, the
revocation of adjustment and inflation indexation mechanisms and a limitation on
charging our customers the increases of certain regulatory
charges.  In addition, a new price-setting mechanism was introduced in
the wholesale electricity market, which had a significant impact on electricity
generators and has led to significant price mismatches between participants in
our market.  The Argentine government continues to intervene in this
sector, including granting temporary margin increases, proposing a new social
tariff regime for residents of poverty-stricken areas, creating specific charges
to raise funds that are transferred to government-managed trust funds that
finance investments in distribution infrastructure and mandating investments for
the construction of new generation plants and the expansion of existing
transmission and distribution networks.  We cannot make assurances
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 ADSs and Class B common shares or that
the Argentine government will not adopt emergency legislation similar to the
Public Emergency Law, or other similar resolutions, in the future that 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.


13




Electricity
distributors were severely affected by the emergency measures adopted during the
economic crisis, many of which remain in effect




Distribution
tariffs include a regulated margin that is intended to cover the costs of
distribution and provide an adequate return over the distributor’s asset
base.  Under the Convertibility regime, distribution tariffs were
calculated in U.S. Dollars and distribution margins were adjusted periodically
to reflect variations in U.S. inflation indexes.  Pursuant to the
Public Emergency Law, in January 2002 the Argentine government froze all
distribution margins, revoked all margin adjustment provisions in distribution
concessions and converted distribution tariffs into 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
distribution revenues in real terms and an increase of distribution costs in
real terms, which could no longer be recovered through adjustments to the
distribution margin.  This situation, in turn, led many public utility
companies, including us and other important distribution companies, to suspend
payments on their financial debt (which continued to be denominated in U.S.
Dollars despite the pesification of revenues), which effectively prevented these
companies from obtaining further financing in the domestic or international
credit markets and making additional investments.  Although the
Argentine government has recently granted temporary relief to some distribution
companies, including an increase in distribution margins and a temporary cost
adjustment mechanism, distribution companies are currently involved in
discussions with regulators on additional, permanent measures needed to adapt
the current tariff scheme to the post-crisis situation of this
sector.  We cannot make assurances that these measures will be adopted
or implemented or that, if adopted, they will be sufficient to address the
structural problems created for our company by the economic crisis and its
aftermath.




Electricity
demand has grown significantly in recent periods and may be affected by recent
or future tariff increases, which could lead distribution companies, such as us,
to record lower revenues




During
the 2001 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.  Despite the
decline in the electricity demand registered in 2009,  in the years
following the economic crisis of 2001 electricity demand has experienced
significant growth, increasing an estimated average of approximately 5.8% per
annum from 2003 through 2008.  This increase in demand reflects the
relative low cost, in real terms, of electricity to consumers due to the freeze
of distribution margins and the elimination of the inflation adjustment
provisions in distribution concessions coupled with the devaluation of the Peso
and inflation.  The executive branch of the Argentine government
granted temporary increases in distribution margins, and we are currently
negotiating further increases and adjustments to our tariff schemes with the
Argentine government.  Although the increases in electricity
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 (including increases on tariffs for residential users) will not
have a material adverse effect on electricity demand or a decline in collections
from customers which, in turn, may lead electricity distribution companies, such
as us, to record lower revenues and results of operations than currently
anticipated, and may have a material adverse effect on the market value of our
ADSs and Class B common shares.




Energy
shortages may act as a brake on growing demand for electricity and disrupt
distribution companies’ ability to deliver electricity to their customers, which
could result in customer claims and material penalties imposed on these
companies




In recent
years, the condition of the Argentine electricity market has provided little
incentive to generators to further invest in increasing their generation
capacity, which would require material long-term financial
commitments.  As a result, Argentine electricity generators are
currently operating at near full capacity and could be required to ration supply
in order to meet a national energy demand that exceeds the current generation
capacity.    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.  In an attempt to address
this situation, in September 2006 the Argentine government adopted measures
requiring large industrial users to limit their energy consumption to their
“base demand” (equal to their demand in 2005) and to secure any additional
energy needs in excess of their base demand from sources other than the national
grid.  Large users that do not comply with these measures can be
subject to penalties imposed by the Argentine government.  These
measures, however, have not led to a significant reduction in demand by these
users, despite requests from, and penalties imposed by, the Argentine
government.  As a result, electricity generators may not to be able to
guarantee the supply of electricity to distribution companies, which, in turn,
could prevent these companies, including our company, from experiencing
continued growth in their businesses and could lead to failures to provide
electricity to customers.  Under Argentine law, distribution companies
are responsible to their customers for any disruption in the supply of
electricity.  As a result, distribution companies may face customer
claims and fines and penalties for disruptions caused by energy shortages unless
the relevant Argentine authorities determine that energy shortages constitute
force majeure.  To date, the Argentine authorities have not been
called upon to decide under which conditions energy shortages may constitute
force majeure.  In the past, however, the Argentine authorities have
recognized the existence of force majeure only in limited circumstances, such as
internal malfunctions at the customer’s facilities, extraordinary meteorological
events (such as major storms) and third party work in public
thoroughfares.  We cannot make assurances that we will not experience
a lack of energy supply that could adversely affect our business, financial
condition and results of operations.


14




Risks
relating to our business




Our
business and prospects depend on our ability to negotiate further improvements
to our tariff structure, including increases in our distribution
margin




We are
currently engaged in a Revisión Tarifaria Integral
(integral tariff revision process, or RTI) with the ENRE.  The goal of
the RTI is to achieve a comprehensive revision of our tariff structure,
including further increases in our distribution margins and periodic adjustments
based on changes in our cost base, to provide us with an adequate return on our
asset base.  Although we believe the RTI will result in a new tariff
structure, we cannot make assurances that the RTI will conclude in a timely
manner or at all, or that the new tariff structure will effectively cover all of
our costs and provide us with an adequate return on our asset
base.  Moreover, the RTI could result in the adoption of an entirely
new regulatory framework for our business, with additional terms and
restrictions on our 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
our operations.  If we are not successful in achieving a satisfactory
renegotiation of our tariff structure, our business, financial condition and
results of operations may be materially adversely affected and the value of our
Class B common shares and ADSs may decline.




We
may not be able to adjust our tariffs to reflect increases in our distribution
costs in a timely manner, or at all, which may have a material adverse effect on
our results of operations




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 (CMM), requires the ENRE to
review our actual distribution costs every six months (in May and November of
each year) and adjust our distribution margins to reflect variations of 5% or
more in our distribution cost base.  We may also request that the ENRE
apply the CMM at any time that the variation in our distribution cost base is at
least 10% or more.  Any adjustments, however, are subject to the
ENRE’s assessment of variations in our costs, and we cannot guarantee that the
ENRE will approve adjustments that are sufficient to cover our actual
incremental costs.  In the past, even when the ENRE has approved
adjustments to our tariffs, there has been a lag from when we actually
experience increases in our distribution costs and when we receive increased
revenues following the corresponding adjustments to our distribution margins
pursuant to the CMM.  Despite the adjustment we were granted under the
CMM in October 2007 and July 2008, we cannot make assurances that we will
receive similar adjustments in the future. As of the date of this annual report
we have requested four increases under the CMM that are still subject to ENRE ́s
review.  If we are not able to recover all of these incremental costs
or there is a significant lag time between when we incur the incremental costs
and when we receive increased revenues, we may experience a decline in our
results of operations, which may have a material adverse effect on the value of
our ADSs and Class B common shares.


15


Our
tariff adjustments may be subject to challenge by Argentine consumer and other
groups




In
November 2006, two Argentine consumer associations, Asociación Civil por la Igualdad y
la Justicia (Civil Association for Equality and Justice, or ACIJ) and
Consumidores Libres
Cooperativa Limitada de Provisión de Servicios de Acción Comunitaria
(Consumers’ Cooperative for Community Action), brought an action against us and
the Argentine government before a federal administrative court seeking to block
the ratification of the adjustment of our tariffs on the grounds that the
approval mechanism was unconstitutional.  Because the court dismissed
these claims and ruled in our favor, in April 2008, the ACIJ filed another
complaint challenging the procedures utilized by the Argentine congress in
approving these adjustments.  In addition, in January 2009, the defensor del pueblo (Public
Ombudsman) filed a complaint opposing the October 2008 adjustment to our
tariffs, and naming us as a third-party defendant.  On January 27,
2009, the ENRE notified us of a preliminary injunction, as a result of the
Ombudsman’s claim, pursuant to which we were 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 and the Argentine
government have appealed the injunction several times, the resolution of which
is still pending as of the date of this annual report.  See “Item
8.  Financial Information—Legal Proceedings—Distribution—Proceedings
challenging the renegotiation of our concession.”  We cannot make
assurances regarding how these complaints will be resolved nor can we make
assurances that other actions or requests for injunctive relief will not be
brought by these or other groups seeking to reverse the adjustments we have
obtained or to block any further adjustments to our distribution
tariffs.  If these legal challenges are successful and prevent 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 on our financial
condition and the market value of our ADSs and our Class B common
shares.




We
have been, and may continue to be, subject to fines and penalties that could
have a material adverse effect on our results of operations




We
operate in a highly regulated environment and have 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.  After 2001, the amount of fines and penalties imposed on our
company has increased significantly, which we believe is mainly due to the
economic and political environment in Argentina following the recent economic
crisis.  Although the Argentine government has agreed to forgive a
significant portion of our accrued fines and penalties pursuant to the
Adjustment Agreement and to allow us to repay the remaining balance over time,
this forgiveness and repayment plan is subject to a number of conditions,
including compliance with quality of service standards, reporting obligations
and required capital investments.  As of December 31, 2009, our
accrued fines and penalties totaled Ps. 377.5 million (taking into account
our adjustment to fines and penalties following the ratification of the
Adjustment Agreement).  If we fail to comply with any of these
requirements, the Argentine government may seek to obtain payment of these fines
and penalties by our company.  In addition, we cannot make assurances
that we will not incur material fines in the future, which could have a material
adverse effect on our results of operations.




If
we are unable to control our energy losses, our results of operations could be
adversely affected




Our
concession does not allow us to pass through to our customers the cost of
additional energy purchased to cover any energy losses that exceed the loss
factor contemplated by our concession, which is, on average, 10%.  As
a result, if we experience energy losses in excess of those contemplated by our
concession, we may record lower operating profits than we
anticipate.  Prior to the economic crisis in 2001, we had been able to
reduce the high level of energy losses experienced at the time of the
privatization to the levels contemplated (and reimbursed) under our
concession.  However, during the economic crisis and during the year
ended December 31, 2009, our level of energy losses, particularly our
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.    Our energy losses amounted to 11.9% in
2009.  We cannot make assurances that our energy losses will not grow
in future periods, which may lead us to have lower margins and could adversely
affect our results of operations and financial condition.


16




The
Argentine government could foreclose its pledge over our Class A shares
under certain circumstances, which could have a material adverse effect on our
business and financial condition




Pursuant
to our concession and the provisions of the Adjustment Agreement, the Argentine
government will have the right to foreclose its pledge over our Class A
shares and sell these shares to a third party buyer if:




·
            the
      fines and penalties we incur in any given year exceed 20% of our gross
      energy sales, net of taxes (which corresponds to our energy
      sales);




·
            we
      repeatedly and materially breach our concession and do not remedy these
      breaches upon the request of the
ENRE;




·
            our
      controlling shareholder, EASA, creates any lien or encumbrance over our
      Class A shares (other than the existing pledge in favor of the
      Argentine government);




·
            we
      or EASA obstruct the sale of Class A shares at the end of any
      management period under our
concession;




·
            EASA
      fails to obtain the ENRE’s approval in connection with the disposition of
      our Class A shares;




·
            our
      shareholders amend our articles of incorporation or voting rights in a way
      that modifies the voting rights of the Class A shares without the
      ENRE’s approval; or




·
            EASA
      does not desist from its ICSID claims against the Argentine government
      following completion of the RTI and the approval of a new tariff
      regime.




In 2009,
the fines and penalties imposed on us by the ENRE amounted to Ps. 58.5
million, which represented 2.8% of our energy sales.  See “Item 4.
Information on the Company—Our concession—Fines and penalties.”




Pending
the sale of our Class A shares following a foreclosure of its pledge, the
Argentine government also has the right to exercise the voting rights of the
Class A shares.  In addition, the foreclosure by the Argentine
government of the pledge on our Class A shares may be deemed to constitute
a change of control under the terms of our restructured debt, which would
require us to offer to repurchase all such debt at its nominal
value.  We cannot make assurances that we will have sufficient funds
or access to financing to effect such repurchases.  If the Argentine
government forecloses its pledge over our Class A shares, the market value of
our ADSs and Class B common shares could be significantly affected.




We
employ a largely unionized labor force and could be subject to an organized
labor action




As of
December 31, 2009, approximately 81% of our employees were union members and we
have had an agreement in place with the two unions representing our employees
since 1995.  Although our relations with unions are currently stable,
we cannot make assurances that we will not experience work disruptions or
stoppages in the future, which could have a material adverse effect on our
business and revenues, especially in light of the social tensions generated in
Argentina by the economic crisis.  We cannot make assurances that we
will be able to negotiate salary 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.




We
might incur material labor liabilities in connection with our
outsourcing




We have
outsourced a number of activities related to our business to third party
contractors in order to maintain a flexible cost base that allows us both to
maintain a lower cost base and respond more quickly to changes in our
market.  We had approximately 3,611 third-party employees under
contract with our company as of December 31, 2009.  Although we
have very strict policies regarding compliance with labor and social security
obligations by our contractors, we are not in a position to ensure that
contractors’ employees will not initiate legal actions to seek indemnification
from us based upon a number of judicial rulings issued by labor courts in
Argentina recognizing joint and several liability between the contractor and the
entity to which it is supplying services under certain
circumstances.  If we are not able to prevail in any of these
proceedings, we might be forced to incur material labor liabilities, which may
have an adverse effect on our results of operations.


17




We
currently are not able to effectively hedge our currency risk in full and, as a
result, a devaluation of the Peso may have a material adverse effect on our
results of operations and financial condition




Our
revenues are collected 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.  We currently seek to hedge this risk in part
by converting a portion of our excess cash denominated in Pesos into U.S.
Dollars and investing those funds outside Argentina, as permitted by applicable
Argentine Central Bank regulations, entering in currency forward contracts, but
we continue to have substantial exposure to the U.S. Dollar.  We
cannot make assurances that the Argentine government will continue to allow us
to access the market to acquire U.S. Dollars in the manner we have done so to
date.  Although we may also seek to enter into further hedging
transactions to cover all or a part of our remaining exposure, we have not been
able to hedge all of our exposure to the U.S. Dollar on terms we consider viable
for our company.  If we continue to be unable to effectively hedge all
or a significant portion of our currency risk exposure, a devaluation of the
Peso may significantly increase our debt service burden, which, in turn, may
have a material adverse effect on our financial condition and results of
operations.  See “Item 11. Quantitative and Qualitative Disclosures
about Market Risk.”




Our
insurance may not be sufficient to cover certain losses




As of
December 31, 2009, our physical assets are insured for up to
U.S. $562.5 million.  However, we do not carry insurance
coverage for losses caused by our network or business interruption, including
loss of our concession.  Although we believe that our insurance
coverage is commensurate with standards for the international electricity
distribution industry, no assurance can be given of the existence or sufficiency
of risk coverage for any particular risk or loss.  If an accident or
other event occurs that is not covered by our current insurance policies, we may
experience material losses or have to disburse significant amounts from our own
funds, which may have a material adverse effect on our results of operations and
financial condition.




A
substantial number of our assets are not subject to attachment or
foreclosure




A
substantial number of our assets are essential to the public service we
provide.  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, whether as a guarantee for an ongoing legal action or to allow
for the enforcement of a legal judgment.  Accordingly, the enforcement
of judgments obtained against us by our shareholders may be substantially
limited to the extent our shareholders seek to attach those assets to obtain
payment on their judgment.




If
our 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.  EASA’s
ability to meet its debt service obligations under these notes depends largely
on our ability to pay dividends or make distributions or payments to EASA, and
our failure to do so could result in EASA becoming subject to actions by its
creditors, including attachments of EASA’s assets and petitions for involuntary
bankruptcy proceedings.  If EASA’s creditors were to attach our Class
A shares held by EASA, the Argentine government would have the right under our
concession to foreclose its pledge over our Class A shares, which could trigger
a repurchase obligation under the terms of our restructured debt and have a
material adverse effect on the market value of our ADSs and Class B common
shares.




Our
exclusive right to distribute electricity may be adversely affected by
technological or other changes in the energy distribution industry




Although
our concession grants us the exclusive right to distribute electricity within
our service area, this exclusivity may be terminated in whole or in part if
technological changes make it possible for the energy distribution industry to
evolve from its present condition as a natural monopoly into a competitive
business.  Although, to our knowledge, there are currently no projects
to introduce new technologies in the medium or long-term which could reasonably
be expected to alter the current landscape of the electricity distribution
business, we cannot make assurances that future developments will not introduce
competition 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 have a material
adverse effect on our financial condition, results of operations and
prospects.


18




Risks
relating to ADSs and our Class B common shares




Restrictions
on the movement of capital out of Argentina may impair the ability of holders of
ADRs to receive dividends and distributions on, and the proceeds of any sale of,
the Class B common shares underlying 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 these kinds 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, the requirement for
Central Bank approval prior to acquiring foreign currency for certain types of
investments and the requirement that 30% of certain types of capital inflows
into Argentina be deposited in a non-interest-bearing account in an Argentine
bank for a period of one year.  Although the transfer of funds abroad
in order to pay dividends no longer requires Central Bank approval, restrictions
on the movement of capital to and from Argentina such as the ones which
previously existed could, if reinstated, impair or prevent the conversion of
dividends, distributions, or the proceeds from any sale of Class B common
shares, as the case may be, from Pesos into U.S. Dollars and the remittance of
the U.S. Dollars abroad.  We cannot make assurances 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 convert for the
account of the ADR holders who have not been paid.




Our
ability to pay dividends is limited




In
accordance with Argentine corporate law, we may pay dividends in Pesos out of
retained earnings, if any, as set forth in our audited financial statements
prepared in accordance with Argentine GAAP.  Our ability to pay
dividends, however, is restricted pursuant to the indenture we entered into when
we restructured our financial debt.  Pursuant to this indenture, our
ability to pay dividends is limited at any time that our leverage ratio, as
defined in the indenture, exceeds 2.5, unless we attain an international
investment grade rating on our long term debt from an internationally recognized
rating agency.  Our leverage ratio is defined in the indenture as our
total indebtedness (without giving effect to the discount to net present value
applied to our restructured debt) over EBITDA, as defined in the
indenture.  EBITDA is defined in the indenture as our operating income
plus amortization of intangible assets and non-current assets, depreciation of
fixed assets and any other non-cash charges.  If our leverage ratio is
greater than 2.5, we will only be able to pay dividends using a specified
portion of our excess cash (as defined in the indenture), which ranges from 25%
to 50% of our excess cash depending on our leverage ratio.  In
addition, if our leverage ratio exceeds 3.5 we will not be able to pay any
dividends to our shareholders.  We cannot make assurances that we will
be able to generate excess cash under the indenture at any time or that our
leverage ratio will allow us to pay dividends at any given time.  In
addition, pursuant to the Adjustment Agreement, we have agreed not to pay
dividends without the ENRE’s prior approval until we complete the integral
tariff review process with the ENRE.  We cannot make assurances
regarding when this process will be completed.




Our
shareholders’ 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 ADR
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.


19




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 ADRs at a potential
disadvantage.




Holders
of ADRs may be unable to exercise voting rights with respect to the Class B
common shares underlying the ADSs at our shareholders’ meetings




ADRs
represent ADSs being held by the depositary in the name of the holder of the
ADR.  As such, we will not treat holders of ADRs as one of our
shareholders and holders of ADRs will not have shareholder
rights.  The depositary will be the holder of the common shares
underlying the ADSs and holders may exercise voting rights with respect to the
Class B common 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 Class
B common 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 common 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 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 Class B
common 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 Class B common shares and Class
B common shares represented by ADSs may not be voted as the holders of ADRs
desire.  Class B common shares represented by ADSs for which the
depositary fails to receive timely voting instructions may, if requested by our
company, be voted as we instruct at the corresponding meeting.




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 bylaws may be held
jointly and severally liable for damages to us or to other third parties,
including other shareholders.


20





Item
      4.
            Information on the
      Company




We
believe we are the largest electricity distribution company in Argentina and one
of the largest in Latin America in terms of number of customers and electricity
sold (both in GWh and in Pesos) in 2009.  We hold 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, 2009, we
served 2,604,612 customers.  The following table shows the percentage
of the electricity produced and sold by generating companies that was purchased
by us in the periods indicated:




Demand (GWh)Wholesale Electricity
                  Market(1)
              
              
              Edenor
                  Demand(2)
              
              
              Edenor Demand as a
                  % of Wholesale
                  Electricity Market2009
              
              
              104,592
              
              
              
              20,676
              
              
              
              19.8
              %2008
              
              
              105,959
              
              
              
              20,863
              
              
              
              19.7
              %2007
              
              
              102,950
              
              
              
              20,233
              
              
              
              19.7
              %




Source:Compañía
Administradora del Mercado Mayorista Eléctrico, S.A.(CAMMESA)


(1)
            Includes
      demand in the Mercado
      Eléctrico Mayorista Sistema Patagónico (Patagonia wholesale
      electricity market, or MEMSP).


(2)
            Calculated
      as electricity purchased by us and our wheeling system
      customers.




THE
ARGENTINE ELECTRICITY INDUSTRY




Historical
background




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 the Dirección 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 created Agua 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 to the Compañía 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 the Compañía Argentina de
Electricidad (Argentine Electricity Company, or CADE) to Servicios Eléctricos del Gran Buenos
Aires (Electricity Services of Greater Buenos Aires, or SEGBA), our
predecessor, 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 January 1992, the
Argentine federal congress adopted the Regulatory Framework Law (Law No.
24,065), which established guidelines for the restructuring and privatization of
the electricity sector.  The Regulatory Framework 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 and subjected each to appropriate
regulation.


21




The
ultimate objective of the privatization process was to achieve a reduction in
rates paid by users and improve quality of service through
competition.  The privatization process commenced in
February 1992 with the sale of several large thermal generation facilities
formerly operated by SEGBA, and continued with the sale of transmission and
distribution facilities (including those currently operated by our company) and
additional thermoelectric and hydroelectric generation facilities.




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.” The crisis and the government’s
policies during this period severely affected the electricity
sector.  Pursuant to the Public Emergency Law that the Argentine
Congress enacted to address the crisis, 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 energy concessions);
    and




·
            empowered
      the executive branch to conduct a renegotiation of public utility
      contracts (including energy concessions), including the tariffs for public
      utility services.




These
measures, combined with the devaluation of the Peso and high rates of inflation,
had a severe effect on public utilities in Argentina, including our
company.  Because public utilities were no longer able to increase
tariffs to cover their cost increases, the impact of inflation on costs led to
decreases in their revenues in real terms and a deterioration of their operating
performance and financial condition.  Most public utilities had also
incurred large amounts of foreign currency indebtedness under the fixed
one-to-one Peso per Dollar exchange rate of the Convertibility regime and,
following the elimination of the Convertibility regime and the resulting
devaluation of the Peso, the debt service burden of these utilities increased
sharply, which led many of these utilities to suspend payments on their foreign
currency debt in 2002.  This situation caused many Argentine
electricity generators, transmission companies and distributors to defer making
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.




The
Argentine government has repeatedly intervened in and modified the rules of the
wholesale electricity market since 2002 in an effort to address the electricity
crisis generated by the economic crisis.  These modifications include
the establishment of caps on the prices paid by distributors for electricity
power purchases and the requirement that all prices charged by generators be
calculated based on the price of natural gas (also regulated by the Argentine
government) regardless of the fuel actually used in generation
activities.  These modifications have created a huge structural
deficit in the operation of the wholesale electricity market.  The
Argentine government has made some attempts at correcting these problems,
including proposing new rules to structure the wholesale electricity market in
December 2004 and creating a special fund to finance infrastructure improvements
in the energy sector in April 2006, but little progress has been made in
advancing a system-wide solution to the problems confronting Argentina’s
electricity sector.


22


In 2009,
the Argentine government completed construction and began operation of two new
800 MW combined cycle generators constructed as part of the government’s effort
to increase energy supply.    The costs of construction were
financed with net revenues of generators derived from energy sales in the spot
market and through specific charges from CAMMESA applicable to large
users.  These funds had been deposited in the Fondo de Inversiones Necesarias que
Permitan Incrementar la Oferta de Energía Eléctrica en el Mercado Eléctrico
Mayorista (Fund for Investments Required to Increase Electricity Supply
in the Wholesale Electricity Market, or FONINVEMEM).




In
September 2006 the Secretaría de Energía
(Secretary of Energy) of the Ministerio de Planificación Federal,
Inversión Pública y Servicios (Ministry of Federal Planning, Public
Investment and Services) issued Resolution No. 1281/06 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 those
industrial and commercial users whose energy demand is at or below 300 kilowatts
(kW) and who lack 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 kW), such as us, will be
      authorized to secure energy supply up to their “base demand” (equal to
      their demand in 2005) by entering into term contracts;
  and




·
            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 the Energía Plus (Energy
      Plus) system at unregulated market prices.  The Energy Plus
      system consists of the supply of additional energy generation from new
      generation and/or generating agents, co-generators or auto-generators who
      are not agents of the electricity market or who as of the date of the
      resolution were not part of the wholesale electricity
      market.  Large users in the wholesale electricity market and
      large customers of distribution companies can also enter into contracts
      directly with these new generators or purchase energy at unregulated
      market prices through CAMMESA.




This
resolution helped us to mitigate the risk of energy shortages due to a lack of
electricity generation.  See “Business—Our concession—Our
obligations.”




Regulatory
authorities




The
principal regulatory authorities responsible for the Argentine electricity
industry are:




(1)
            the
      Secretary of Energy of the Ministry of Federal Planning, Public Investment
      and Services, and




(2)
            the
      Ente Nacional Regulador
      de la Electricidad (National Electricity Regulator, or the
      ENRE).




The
Secretary of Energy advises the Argentine government on matters related to the
electricity sector and is responsible for the application of the policies
concerning the Argentine electricity industry.




The ENRE
is an autonomous agency created by the Regulatory Framework Law.  The
ENRE has a variety of regulatory and jurisdictional powers, including, among
others:




·
            enforcement
      of compliance with the Regulatory Framework Law and related
      regulations;




·
            control
      of the delivery of electric services and enforcement of compliance with
      the terms of concessions;




·
            adoption
      of rules applicable to generators, transmitters, distributors, electricity
      users and other related parties concerning safety, technical procedures,
      measurement and billing of electricity consumption, interruption and
      reconnection of supplies, third-party access to real estate used in the
      electricity industry and quality of services
  offered;




·
            prevention
      of anticompetitive, monopolistic and discriminatory conduct between
      participants in the electricity
industry;




·
            imposition
      of penalties for violations of concessions or other related regulations;
      and




23




·
            arbitration
      of conflicts between electricity sector
  participants.




The ENRE
is managed by a five-member board of directors appointed by the executive branch
of the Argentine government.  Two of these five members are nominated
by the Consejo Federal de la
Energía Eléctrica (Federal Council on Electricity, or
CFEE).  The CFEE is funded with a percentage of revenues collected by
CAMMESA for each MWh sold in the market.  Sixty percent of the funds
received by the CFEE are reserved for the Fondo Subsidiario para
Compensaciones Regionales de Tarifas a Usuarios Finales (Regional Tariff
Subsidy Fund for End Users), from which the CFEE makes distributions to
provinces that have met certain specified tariff provisions.  The
remaining forty percent is used for investments related to the development of
electrical services in the interior regions of Argentina.




The
wholesale electricity market




Overview




The
Secretary of Energy established the wholesale electricity market in
August 1991 to allow electricity generators, distributors and other agents
to buy and sell electricity in spot transactions or under long-term supply
contracts at prices determined by the forces of supply and demand.




The
wholesale electricity market consists of:




·
            a
      term market in which generators, distributors and large users enter into
      long-term agreements on quantities, prices and
  conditions;




·
            a
      spot market, in which prices are established on an hourly basis as a
      function of economic production costs, represented by the short-term
      marginal cost of production measured at the Ezeiza 500 kV substation, the
      system’s load center, and demand;
and




·
            a
      stabilization fund, managed by CAMMESA, that absorbs the differences
      between purchases by distributors at seasonal prices and payments to
      generators for energy sales at the spot
price.




Operation
of the wholesale electricity market




The
operation of the wholesale electricity market is administered by the Compañía Administradora del Mercado
Mayorista Eléctrico S.A.(Wholesale Electricity Market Administration
Company, or
CAMMESA).  CAMMESA was created in July 1992 by the Argentine
government, which currently owns 20% of CAMMESA’s capital stock.  The
remaining 80% is owned by various associations that represent wholesale
electricity market participants, including generators, transmitters,
distributors, large users and electricity brokers.




CAMMESA
is in charge of:




·
            managing
      the national interconnection system pursuant to the Regulatory Framework
      Law and related regulations, which
includes:




·
            determining
      technical and economic dispatch of electricity (i.e., schedule of
      production for all generating units on a power system to match production
      with demand) in the national interconnection
  system;




·
            maximizing
      the system’s security and the quality of electricity
    supplied;




·
            minimizing
      wholesale prices in the spot
market;




·
            planning
      energy capacity needs and optimizing energy use pursuant to the rules set
      out from time to time by the Secretary of Energy,
  and




·
            monitoring
      the operation of the term market and administering the technical dispatch
      of electricity pursuant to any agreements entered into in such
      market;




·
            acting
      as agent of the various wholesale electricity market
      participants;




24




·
            purchasing
      or selling electricity from or to other countries by performing the
      relevant import/export operations;
and




·
            providing
      consulting and other services related to these
  activities.




The
operating costs of CAMMESA are covered by mandatory contributions made by
wholesale electricity market participants.  CAMMESA’s annual budget is
subject to a mandatory cap equivalent to 0.85% of the aggregate amount of
transactions in the wholesale electricity market projected for that
year.




Wholesale
electricity market participants




The main
participants in the wholesale electricity market are generation, transmission
and distribution companies.  Large users and traders participate also
in the wholesale electricity market, but to a lesser extent.




Generators




According
to a recent report issued by CAMMESA, there are 62 generation companies and 17
auto generation companies, in Argentina, most of which operate more than one
generation plant.  As of December 31, 2009, Argentina’s installed
power capacity was 31,625 MW.  Of this amount, 54% was derived from
thermal generation, 42% from hydraulic generation and 4% from nuclear
generation.  Private generators participate in CAMMESA through the
Asociación de Generadores de
Energía Eléctrica de la República Argentina (Argentine Association of
Electric Power Generators, or AGEERA), which is entitled to appoint two acting
and two alternate directors of CAMMESA.




Transmitters




Electricity
is transmitted from power generation facilities to distributors through high
voltage power transmission systems.  Transmitters do not engage in
purchases or sales of power.  Transmission services are governed by
the Regulatory Framework Law and related regulations promulgated by the
Secretary of Energy.




In
Argentina, transmission is carried at 500 kV, 300 kV, 220 kV and 132 kV through
the national interconnection system.  The national interconnection
system consists primarily of overhead lines and sub-stations (i.e., assemblies
of equipment through which electricity delivered by transmission circuits is
passed and converted into voltages suitable for use by end users) and covers
approximately 90% of the country.  The majority of the national
interconnection system, including almost all of the 500 kV transmission lines,
has been privatized and is owned by Compañía de Transporte de Energía Eléctrica
en Alta Tensión S.A. (Transener), which is indirectly co-controlled by Pampa
Energía S.A., a public company managed by Grupo Dolphin’s principals and our
controlling shareholder.  Regional transmission companies, most of
which have been privatized, own the remaining portion of the national
interconnection system.  Supply points link the national
interconnection system to the distribution systems, and there are
interconnections between the transmission systems of Argentina, Brazil, Uruguay
and Paraguay allowing for the import or export of electricity from one system to
another.




Transmission
companies also participate in CAMMESA by appointing two acting and two alternate
directors through the Asociación de Transportistas de
Energía Eléctrica de la República Argentina (Argentine Association of
Electric Power Transmitters, or ATEERA).




Distributors




Each
distributor supplies electricity to consumers and operates the related
distribution network in a specified geographic area pursuant to a
concession.  Each concession establishes, among other things, the
concession area, the quality of service required, the rates paid by consumers
for service and an obligation to satisfy demand.  The ENRE monitors
compliance by federal distributors, including us, Empresa Distribuidora Sur S.A.
(Edesur) and Empresa Distribuidora La Plata S.A. (Edelap), with the provisions
of our respective concessions and with the Regulatory Framework Law, and
provides a mechanism for public hearings at which complaints against
distributors can be heard and resolved.  In turn, provincial
regulatory agencies monitor compliance by local distributors with their
respective concessions and with local regulatory frameworks.


25




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.




Distributors
participate in CAMMESA by appointing two acting and two alternate directors
through the Argentine Association of Asociación de Distribuidores de
Energía Eléctrica de la República Argentina (Electric Power
Distributors, or
ADEERA).




Large
users




The
wholesale electricity market classifies large users of energy into three
categories: Grandes Usuarios
Mayores (Major Large Users, or GUMAs), Grandes Usuarios Menores
(Minor Large Users, or GUMEs) and Grandes Usuarios Particulares
(Particular Large Users, or 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.




Large
users participate in CAMMESA by appointing two acting and two alternate
directors through the Asociación de Grandes Usuarios de
Energía Eléctrica de la República Argentina (Argentine Association of
Electric Power Large Users, or AGUEERA).




Traders




Since
1997, traders are authorized to participate in the wholesale electricity market
by intermediating block sales of energy.  Currently, there are eight
authorized traders in the wholesale electricity market, several of which conduct
transactions with Comercializadora de Energía del Mercosur S.A. (CEMSA) in the
export market.




Spot
market




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 were 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 last
unit to be dispatched for the next unit as measured at the Ezeiza 500 Kv
substation, which is the system’s load center and is in close proximity of 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 not in the vicinity 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.


26




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 pricing ladder organized by level of customer consumption
(which varies depending on the category of customer) charged by CAMMESA to
distributors at a price significantly below the spot price charged by
generators.  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 passed Resolution 628/08
establishing a new distribution tariff as from October 1, 2008 and modified
seasonal prices charged to distributors, including the consumption levels that
make up the pricing ladder.




On August
14, 2009, ENRE adopted Resolution No. 433/2009 approving two tariff charts to be
applied by Edenor. The first one applied retroactively for the period from June
1, 2009 to July 31, 2009. The second rate chart was effective for the period
from August 1, 2009 to September 30, 2009. These charts were based on the new
subsidized seasonal prices set forth Resolution No. 652/09 issued by the
Secretary of Energy. The new price charts aimed at reducing the impact of
increased winter electrical energy consumption on the invoicing of residential
customers with bi-monthly consumption exceeding 1,000 kWh. The modification to
the ENRE rate charts did not have any effect on our VAD.  The ENRE
also instrumented us to break down the floating charges of all invoices into the
amounts subsidized and not subsidized by the Argentine government.





As of
October 1, 2009, the tariff chart of October 2008 was reinstated pursuant to
ENRE Resolution No. 628/2008. The floating charge of all invoices continues to
be broken down into the amounts subsidized and not subsidized by the Argentine
Government.





Prior to
implementation of the emergency regulations, seasonal prices were determined by
CAMMESA based on an estimate of the weighted average spot price that would be
paid by the next generator that would come on-line to satisfy a theoretical
increase in demand (marginal cost), as well as the costs associated with the
failure of the system and several other factors.  CAMMESA would use a
seasonal database and optimization models in determining the seasonal prices and
would consider both anticipated energy supplies and demand, including, expected
availability of generating capacity, committed imports and exports of
electricity and the requirements of distributors and large users.




Stabilization
Fund




The
stabilization fund, managed by CAMMESA, absorbs the difference between purchases
by distributors at seasonal prices and payments to generators for energy sales
at the spot price.  When the spot price is lower than the seasonal
price, the stabilization fund increases, and when the spot price is higher than
the seasonal price, the stabilization fund decreases.  The outstanding
balance of this fund at any given time reflects the accumulation of differences
between the seasonal price and the hourly energy price in the spot
market.  The stabilization fund is required to maintain a minimum
amount to cover payments to generators if prices in the spot market during the
quarter exceed 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.




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, 2009, the
stabilization fund deficit totaled approximately
Ps. 24,000 million.  This deficit has been financed by the
Argentine government through loans to CAMMESA and with FONINVEMEM funds, but
these continue to be insufficient to cover the differences between the spot
price and the seasonal price.


27




Term
market




Generators
are able to 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 at times been lower than the seasonal price that distributors are
required to pay in the spot market.  However, as a result of the
emergency regulations, spot 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.




HISTORY
AND DEVELOPMENT OF THE COMPANY




We are a
public service company incorporated as an Argentine sociedad anónima (limited
liability corporation) on July 21, 1992 under the name Empresa Distribuidora
Norte Sociedad Anónima.  We were incorporated as part of the
privatization of the Argentine state-owned electricity utility, Servicios
Eléctricos del Gran Buenos Aires S.A. (SEGBA).  In anticipation of its
privatization, SEGBA was divided into three electricity distribution companies,
including our company, and four electricity generation companies, and on
May 14, 1992, the Argentine Ministry of Economy and Public Works and
Utilities (currently the Ministry of Economy and Public Finance) approved the
public sale of all of our company’s Class A shares, representing 51% of the
capital stock of our company.




A group
of international investors, which included EDF International S.A. (a wholly
owned subsidiary of EDF), presented a bid for our Class A shares through
Electricidad Argentina S.A. (EASA), an Argentine company.  EASA was
awarded the bid and, in August 1992, EASA and the Argentine government
entered into a stock purchase agreement relating to the purchase of our
Class A shares.  In addition, on August 5, 1992, the
Argentine government granted our company a concession to distribute electricity
on an exclusive basis within our concession area for a period of
95 years.  On September 1, 1992, EASA acquired the
Class A shares and became our controlling shareholder.




In
June 1996, our shareholders approved the change of our company’s name to
Empresa Distribuidora y Comercializadora Norte S.A. (EDENOR S.A.) to more
accurately reflect the description of our core business.  The
amendment to our bylaws related to our name change was approved by the ENRE and
registered with the Public Registry of Commerce in 1997.




In 2001,
EDF International S.A. (EDFI) acquired, in a series of transactions, all of the
shares of EASA held by EASA’s other shareholders, ENDESA Internacional, YPF
S.A., which was the surviving company of Astra, and SAUR.  As a
result, EASA became a wholly owned subsidiary of EDFI.  In addition,
EDFI purchased all of the Class B shares of our company held by these
shareholders, increasing its direct and indirect interest in our company to
90%.




On
January 6, 2002, the Argentine congress enacted the Public Emergency Law,
which authorized the Argentine government to implement certain measures to
overcome the country’s economic crisis.  Under the Public Emergency
Law, the Argentine government altered the terms of our concession and the
concessions of other public utility services by renegotiating tariffs, freezing
distribution margins and revoking price adjustment mechanisms, among other
measures.




In
September 2005, Dolphin Energía and IEASA acquired an indirect controlling
stake in our company from EDFI.  Dolphin Energía and IEASA were at the
time of such acquisition controlled by the principals of Grupo Dolphin, an
Argentine advisory and consulting firm that carries out private equity
activities.  On September 28, 2007, Pampa Energía acquired all the
outstanding capital stock of Dolphin Energía and IEASA from the then current
shareholders of these companies, in exchange for common stock of Pampa
Energía.  Pampa Energía, which is managed by Grupo Dolphin’s
principals, owns a 50% interest in the company that co-controls the principal
electricity transmission company in Argentina, Compañía de Transporte de Energía
Eléctrica en Alta Tensión S.A. (Transener).  In addition, Pampa
Energía has controlling stakes in five generation plants located in the Salta,
Mendoza, Neuquén and Buenos Aires provinces (Hidroeléctrica Nihuiles,
Hidroeléctrica Diamante, Central Térmica Güemes, Central Térmica Loma de la Lata
and Central Piedra Buena).  See “Item 7. Major Shareholders and
Related Party Transactions.”


28




In April
2007, we completed the initial public offering of our Class B common shares, in
the form of shares and American depositary shares, or ADSs.  We and
certain of our shareholders sold 18,050,097 ADSs, representing 361,001,940 Class
B common shares, in an offering in the United States and elsewhere outside
Argentina, and our Employee Stock Participation Program sold 81,208,416 Class B
common shares in a concurrent offering in Argentina.  Our ADSs are
listed in The New York Stock Exchange under the symbol “EDN,” and our Class B
shares are listed on the Buenos Aires Stock Exchange under the same
symbol.  We received approximately U.S. $61.4 million in proceeds
from the initial public offering, before expenses, which we used to repurchase a
part of our outstanding debt.  Following the initial public offering,
EASA continues to hold 51% of our common shares, and approximately 49% are held
by the public.  See “Item 7. Major Shareholders and Related Party
Transactions.”




On
November 20, 2008, the Argentine Congress passed a law unifying the Argentine
pension and retirement system into a system publicly administered by the Administración 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.  As of March 5,
2010, ANSES hold 229,125,205 of our Class B shares, representing 25.3% of our
capital stock.




BUSINESS
OVERVIEW




Our
strengths




We
believe our main strengths are the following:




·
            We believe we are the largest
      electricity distributor in Argentinain terms of number of
      customers and electricity sold (both in GWh and in pesos) in
      2009.  We serve the largest number of electricity customers in
      Argentina, which at December 31, 2009 amounted to 2,604,612
      customers.  Our electricity purchases, used to meet customer
      demand in our service area, accounted for approximately 19.8% of total
      electricity demand in the country in 2009.  As a result of being
      the largest electricity distributor in Argentina in terms of volume and
      customers, we have strong bargaining power with respect to many of our
      operating expenses, including salaries, and benefit from economies of
      scale.  We also actively participate in industry decision making
      bodies and are working closely with the Argentine government to address
      Argentina’s current energy
challenges.




·
            We distribute electricity to
      an attractive and diversified client base in a highly developed area of
      Argentina.We operate on an exclusive basis in the
      northwestern zone of the greater Buenos Aires metropolitan area and the
      northern portion of the City of Buenos Aires, which is one of Argentina’s
      largest industrial and commercial centers.  We have a highly
      concentrated, urban client base characterized by high purchasing power and
      low delinquency in payments of electricity bills (with an average of less
      than four days of past due bills outstanding).  Our
      geographically concentrated and urban client base also allows us to
      operate more efficiently with relatively lower distribution
      costs.  Finally, we have a balanced distribution of clients
      (residential, commercial,
industrial).




·
            We have substantial experience
      in the operation of electricity distribution systems with strong operating
      performance and efficiency for the characteristics of our concession
      area.  We have substantial experience in the operation of
      electricity distribution systems and have received multiple ISO
      certifications on our commercial, technical and administrative processes,
      including on the quality of our services and safety and environmental
      standards.  We were declared by the ENRE a self-operating
      business in 1997, which means we are not required to have a strategic
      operator conduct our business and allows us to act as an operator in other
      electricity businesses.  We believe that our energy losses are
      low compared to other electricity distribution companies in Latin
      America.  In addition, we have maintained what we believe are
      optimal levels of operating efficiency, with 978 customers per employee
      and 6,936.1 MWh sold per employee in
2009.




·
            We have a well-balanced
      capital structure.  As of December 31, 2009, our
      financial debt amounted to U.S. $208.0 million, including U.S. $196.6
      million principal amount of notes.  We have continued to
      strengthen our capital structure during 2009 acquiring through market
      purchases U.S. $32.2 million principal amount of Fixed Rate Par Notes
      due 2016 and U.S. $53.8 million principal amount of Senior Notes due
      2017.




29




·
            We have a stable, committed
      and seasoned management team.Our management team has
      not changed significantly since 1992, despite the changes to and from
      foreign ownership of our company since our privatization.  In
      accordance with our concession, we are operating our electricity
      distribution business without the assistance of an external technical
      operator.  Our new controlling shareholder has maintained our
      management team, and added financial expertise.  We encourage
      internal promotion and provide training and other opportunities for our
      employees to continue to grow with our
business.




Our
strategy




Our goal
is to continue to serve the strong demand in our concession area, while
maximizing profitability and shareholder value.  We are seeking to
realize this goal through the following key business strategies:




·
            Complete our tariff
      renegotiation process.  On November 12, 2009, we
      submitted our tariff proposal to ENRE's Board of Directors in response to
      the ENRE’s request as part of the integral tariff revision
      process.  Our integral tariff proposal includes, among other
      factors, a recalculation of the compensation we receive for our
      distribution services based on a revision of our asset base and rate of
      return. Furthermore Our proposal presented the ENRE with three options for
      the revised tariff scheme based on three different scenarios and each of
      which implementation of the tariff increase in three equal semiannual
      installments.




·
            Continue to serve our
      concession area with a high quality of service.We aim
      to continue serving our clients in accordance with the terms of our
      concession, distributing electricity within our area meeting or exceeding
      the required quality standards.  We intend to continue to
      dedicate a significant portion of our capital expenditures to the
      maintenance, enhancement and expansion of our network to achieve this
      goal.




·
            Undertake a reclassification
      of our smaller customers by economic activity rather than level of demand
      to optimize our tariff base.  We intend to reclassify our
      client base based on type of economic activity and purchasing power rather
      than only on levels of electricity demand.  We believe this will
      allow us to shift clients who currently fall within our lowest tariff
      categories, to other, more appropriate categories, including professionals
      and small businesses which, due to their low demand, are currently
      classified as residential customers, and to charge them
      accordingly.




·
            Focus on increasing our
      operating efficiency and optimizing our level of energy
      losses.  We are committing significant resources to
      improving the quality of our technical services and the safety of our
      public infrastructure to allow us to reduce the amount of fines imposed by
      Argentine regulatory authorities in the ordinary course of our
      operations.  We intend to build new entry points for our network
      in Tigre (previously called Escobar), Province of Buenos Aires, and
      Malaver, City of Buenos Aires, which will significantly improve the
      quality and reliability of our network.  Currently, our
      objective is to maintain energy losses at an optimum level, taking into
      account the marginal cost of reducing such losses and the level at which,
      pursuant to the terms of our concession, we are reimbursed for the cost of
      such losses.




Our
concession




By a
concession dated August 5, 1992, the Argentine government granted us the
exclusive right to distribute electricity within our concession area for a
period of 95 years.  Our concession will expire on
August 31, 2087 and can be extended for one additional 10-year period if we
request the extension at least 15 months before expiration.  The
Argentine government may choose, however, to grant us 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 10-year periods.  However, the initial management
period may be extended at our option, with the ENRE’s approval, for an
additional 5-year period from the entry into force of the new tariff structure
to be adopted under the integral tariff revision process.  We
presented a request for such extension in May 2007 and on July 5, 2007, the
ENRE, pursuant to ENRE resolution No. 467/2007, agreed to extend the initial
management period for an additional five years from the date that the new tariff
structure is adopted under the RTI.  The remaining 10-year periods
will run from the expiration of the extension of the initial management
period.


30




On
January 6, 2002, the Argentine congress enacted the Public Emergency Law,
which empowered the Argentine government to implement, among other things,
monetary, financial and foreign exchange measures to overcome the economic
crisis.  These measures, combined with the devaluation of the Peso and
high rates of inflation, had a severe effect on public utilities in Argentina,
including our company.  Under the Public Emergency Law, the Argentine
government converted public utility tariffs from their original U.S. Dollar
values to Pesos at an exchange 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 Executive Branch to
conduct a renegotiation of public utility contracts (including our concession)
and the tariffs set therein (including our tariffs).




In
September 2005 we and the Argentine government entered into an Adjustment
Agreement, which was ratified by the Argentine executive branch in
January 2007.  Because a new Argentine Minister of Economy took
office thereafter, we formally re-executed the Adjustment Agreement with the
Argentine government on February 13, 2007 under the same terms and
conditions originally agreed.




Pursuant
to the Adjustment Agreement, the Argentine government granted us an increase of
28% in our distribution margin, which is effective retroactively as of
November 1, 2005.  The Adjustment Agreement is intended to apply
transitionally until we complete the RTI with the ENRE in accordance with the
terms of the Adjustment Agreement.  See “Item 5. Operating and
Financial Review and Prospects —Factors affecting our results of
operations—Tariffs.” In addition, because the Adjustment Agreement is effective
retroactively as of November 1, 2005, the ENRE applied the CMM
retroactively in each of May and November 2006, the dates in each year on
which the ENRE is required to apply the CMM.  In the May 2006
CMM, the ENRE determined that our distribution cost base increased by 8.032%
(compared to the distribution cost base recognized in the Adjustment Agreement),
and, accordingly, approved an equivalent increase in our distribution margin
effective May 1, 2006.  This increase, when compounded with the
28% VAD increase granted under the Adjustment Agreement, results in an overall
38.3% increase in our distribution margins charged to our non-residential
customers.  Also on February 13, 2007, the ENRE authorized us to
bill our clients (excluding residential clients) 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 December 31, 2009, we
had invoiced Ps. 149.4 million of the total amount.




In
October 2007, the Argentine Secretary of Energy published Resolution No
1037/2007, which granted us an increase of 9.63% to our distribution margins to
reflect an increase in our 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
our tariff structure, and, instead, we were allowed to retain the funds that we
are required to collect and transfer to the PUREE to cover this CMM increase and
future CMM increases.  In July 2008, we obtained an increase of
approximately 17.9% to our distribution margin, which we incorporated into our
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 our 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 an average increase of
21% for residential customers with bimonthly consumption levels over 650
kWh.  In addition, the ENRE authorized us to be reimbursed for the
retroactive portion of the 7.56% CMM increase for the period between November
2007 and June 2008, from the PUREE funds.




Furthermore,
we requested an additional increase to our distribution margins under the CMM to
account for fluctuations in the distribution cost base for the period from
November 2007 to April 2008, in comparison to the distribution cost base
recognized by the CMM in November 2007.  In 2008, the ENRE adopted
Note No 81.399, which authorized a 5.791% increase under the CMM.  As
of the date of this annual report, the ENRE has not approved a new tariff scheme
including this tariff increase.




As of
December 31, 2009, we have submitted to the ENRE three additional requests from
CMM adjustments as described in the table below:


31





Assessment Period
              
              Application Date
              
              CMM Adjustment RequestedMay
      2008 – October 2008
              
              November
      2008
              
              5.684%November
      2008 - April 2009
              
              May
      2009
              
              5.068%May
      2009 – October 2009
              
              November
      2009
              
              5.041%





As of the
date of this annual report, the ENRE has not responded to these
requests.





Although
we believe that these increases comply with the terms of the CMM, we cannot
assure that the ENRE will grant us these increases in full, or at all, or if
granted, that we will be able to bill our customers or otherwise recover these
increases from other sources of payment (such as PUREE).




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 our distribution costs
      are reviewed semiannually (or, under certain circumstances, more often)
      and adjusted if deemed appropriate by the ENRE to cover increases in our
      distribution costs;




·
            an
      obligation to make capital expenditures of approximately
      Ps. 204 million for specified projects in 2006, which we
      complied with although we were not required to given that the Adjustment
      Agreement was not ratified in 2006;




·
            our
      obligation to meet specified service quality standards more stringent than
      the ones originally contemplated in our
  concession;




·
            a
      restriction on our ability to pay dividends without prior ENRE approval
      during the period in which we are conducting the
  RTI;




·
            forgiveness
      of approximately one-third of our accrued and unpaid fines, subject to
      certain conditions relating to compliance with our 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;




·
            our
      obligation to apply a social tariff regime for low-income customers, which
      regime will be defined in the context of the RTI;
  and




·
            our
      obligation to extend our network to provide service to certain rural
      areas.




Currently,
the RTI has not yet been completed and although we are currently in discussions
with the Argentine government regarding the RTI, we cannot predict when or how
the RTI will be implemented.




Geographic
Exclusivity




The
concession gives us the exclusive right to distribute electricity within the
concession area during the term of the concession.  Under our
concession, neither the national nor the provincial or local governments may
grant further concessions to operate electricity distribution services within
our concession area.  In that respect, we are obligated to satisfy all
of the demand for electricity originated in the concession area, maintaining at
all times a service quality standard that has been established in the
concession.  This geographic exclusivity may be terminated in whole or
in part by the executive branch if technological changes make it possible for
the energy distribution industry to evolve from its present condition as a
natural monopoly into a competitive business.  However, the Argentine
government may only exercise its right to alter or suppress our geographical
exclusivity at the end of each management period under our concession, by prior
written notice at least six months before the expiration of the then current
management period.


32




We divide
our concession area into the following operating territories:




Operating
      territory
                      
                      DistrictsMorón
                      
                      Morón,
      Ituzaingó, Hurlingham, Merlo, Marcos Paz, Las Heras and La
      MatanzaNorte
                      
                      Ciudad
      de Buenos Aires, San Martín and Tres de FebreroOlivos
                      
                      Vicente
      López, San Isidro, San Fernando, Tigre and EscobarPilar
                      
                      Moreno,
      Gral, Rodríguez, Pilar, Malvinas Argentinas, J.C.  Paz and San
      Miguel




The table
below sets forth certain information relating to our operating territories as of
and for the period ended December 31, 2009:




Operating territory
                        
                        Area
                            (km2)
                        
                        
                        Customers
                            (in thousands)
                        
                        
                        % of SalesMorón
                        
                        
                        1,761
                        
                        
                        
                        840.6
                        
                        
                        
                        32.3
                        %
                        
                        
                        26.6
                        %Norte
                        
                        
                        164
                        
                        
                        
                        811.5
                        
                        
                        
                        31.2
                        %
                        
                        
                        32.0
                        %Olivos
                        
                        
                        1,624
                        
                        
                        
                        480.2
                        
                        
                        
                        18.4
                        %
                        
                        
                        23.0
                        %Pilar
                        
                        
                        1,088
                        
                        
                        
                        472.3
                        
                        
                        
                        18.1
                        %
                        
                        
                        18.4
                        %Total
                        
                        
                        4,637
                        
                        
                        
                        2,604.6
                        
                        
                        
                        100
                        %
                        
                        
                        100
                        %




According
to INDEC, the Pilar area experienced the highest population growth rate of the
Buenos Aires metropolitan region between 1991 and 2001, growing by 56.6% from
approximately 149,070 people in 1991 to approximately 233,508 people in
2001.  Today, some of the most affluent neighborhoods and upscale
commercial centers and businesses are located in the Pilar area.




Our
obligations




We are
obligated to supply electricity upon request by the owner or occupant of any
premises in our concession area.  We are entitled to charge for the
electricity supplied at rates that are established by tariffs set with the prior
approval of the ENRE under applicable regulations.  Pursuant to our
concession, we 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.




Our
concession requires us 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 our concession.  We are 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 our electricity distribution services.  The ENRE
also requires us to compile and submit various types of reports regarding the
quality of our service and other technical and commercial data, which we must
periodically report to the ENRE.




Under our
concession, we 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.




We are
obligated to allow certain third parties (other agents and large users) to
access any available transportation capacity within our distribution system upon
payment of a wheeling fee.  Consequently, Edenor must render the
distribution service on an uninterrupted basis to satisfy any reasonable
demand.  We are prohibited from engaging in practices that limit
competition or result in monopolistic abuses.


33


In
addition, the Adjustment Agreement requires us and our shareholders and former
shareholders to suspend all claims and legal proceedings (including arbitration
actions) in administrative, state or federal courts located in Argentina or
abroad, that are related to measures adopted since the Public Emergency Law was
enacted.  After the completion of the RTI, we and our shareholders and
former shareholders must completely waive and desist from all of the above
mentioned claims and legal proceedings.  If our shareholders or former
shareholders do not desist from these claims, the Argentine government will have
the right to foreclose its pledge over our Class A shares and sell these
shares to a third party buyer.  If the company or any shareholder or
former shareholder re-establishes or initiates a new claim, we must hold
harmless the Argentine government in respect of amounts it is required to pay
pursuant to such claims.  EDFI and EASA have suspended all such claims
against the Argentine government as part of the Adjustment Agreement and, in
connection with its sale of its controlling stake in Edenor, EDFI has agreed to
withdraw its claims against the Argentine government before the ICSID at the
request of Dolphin Energía S.A.




In
accordance with our concession, our controlling shareholder, EASA, has pledged
its 51% stake in our company to the Argentine government to secure obligations
under the concession.  The Adjustment Agreement requires the pledge to
be extended to secure our obligations under this agreement.




Quality
standards




Pursuant
to the concession, we are required to meet specified quality standards with
respect to the quality of the product (electricity) and the delivery of the
product.  The quality standards relating to the product quality refer
to the electricity’s voltage levels.  A disturbance occurs when there
is a change in the voltage level.  The concession requires that the
voltage level that we deliver must be 3x380/220 V; 13.2 kV; 33kV; 132 kV; 220
kV.  The concession provides that disturbances in the voltage level
may not exceed the following (in accordance with international
standards):




High
      voltage
                  -5.0%
      to   +5.0%Overhead
      network (medium or low voltage)
                  -8.0%
      to   +8.0%Buried
      network (medium or low voltage)
                  -5.0%
      to   +5.0%Rural
                  -10.0%
      to +10.0%




A fine is
imposed under the concession for disturbances that exceed the above-mentioned
limits for 3.0% or more of the total amount of time that electricity is
provided.  The amount of the fine depends on the magnitude of the
disturbance.  As the disturbance’s percentage increases (or decreases)
from the contracted tension level, the rate of the fine per kWh
increases.  These fines are credited to the affected user’s next
bill.




The
standards for delivery of the product set forth in the concession refer to the
frequency and duration of the interruptions.  The following table sets
forth the standards set forth in the concession with respect to the frequency
and duration of interruptions per customer during the current management
period:




Category of user
                    
                    Frequency of
                        interruptions
                        (maximum number of
                        interruptions per
                        semester)
                    
                    Duration of interruption
                        (maximum amount of time
                        per interruption)(1)High
      voltage
                    
                    3
                    
                    2
      hoursMedium
      voltage
                    
                    4
                    
                    3
      hoursLow
      voltage: (small and medium demand)
                    
                    6
                    
                    10
      hoursLarge
      demand
                    
                    6
                    
                    6
      hours





(1)
            Interruptions
      of less than three minutes are not
recorded.





These
standards may be subject to change during subsequent management periods and/or
pursuant to the outcome of the RTI.




In
addition, pursuant to the Adjustment Agreement, we have agreed to comply with a
medium delivery standard that reflects our actual average delivery standards
during the period from 2001 through 2003.  This medium delivery
standard requires us to comply with a maximum number of interruptions per
semester, on average, of 2.761 and a maximum duration of interruption, on
average, of 5.386 hours.  If we do not meet the delivery
standards required by our concession, as set forth in the table above, but are
otherwise in compliance with the medium delivery standard under the Adjustment
Agreement, we may withhold payment of any fines that may be imposed under our
concession for this failure and use this amount of unpaid fines for our capital
expenditures.  If we fail to comply with this measure, we will be
required to pay the fines.


34




Pursuant
to our concession, the ENRE may fine us if one of our customers suffers more
than the maximum number of interruptions specified for its category (excluding
interruptions of less than 3 minutes) or suffers interruptions for a longer time
than the time specified for its category.  We pay these fines by
granting credits to the affected customers in their electricity
bills.  Fines are calculated at a rate per kWh that varies depending
on the particular tariff or price schedule that is applicable to the
user.  Following the privatization of our company in 1992, we have
been able to improve our quality of service from an average of 22 hours of
interruptions per customer and 13 interruptions per customer in 1992 to an
average of 7.33 hours of interruptions per customer and 4.98 interruptions
per customer in 2000, the last full year prior to the Argentine
crisis.




The
following table sets forth the frequency and duration of interruptions of our
service in the periods indicated:




Year ended December 31,2009
                
                
                2008
                
                
                2007
                
                
                2006
                
                
                2005Average
      frequency of interruptions
                
                
                4.42
                
                
                
                4.10
                
                
                
                3.47
                
                
                
                2.81
                
                
                
                3.38Average
      duration of interruption (in hours)
                
                
                8.79
                
                
                
                8.31
                
                
                
                6.59
                
                
                
                5.01
                
                
                
                5.10




Additionally,
in order to satisfy quality standards, we must meet certain operating
requirements relating to commercial service, including maintenance of the
distribution network so as to minimize failures and to maximize the useful life
of fixed assets and billings on actual meter readings to generate customer
bills.  We may bill customers using estimates in cases of force majeure, but we may not
send a customer more than two successive estimated bills, if billed bimonthly,
or, in other cases, more than three successive estimated
bills.  Furthermore, estimated bills cannot exceed 8% of total
billings in each category of customers.




Fines
and penalties




Pursuant
to our concession, the ENRE may impose various fines and penalties on us if we
fail to comply with our obligations under the concession, including our failure
to meet any of the quality and delivery standards described
above.  Because we are required to pay for the fines imposed for
violations of our quality or delivery standards by granting credits to our
customers, we operate since 1996 a central information system that allows us to
credit fines directly to our customers who are affected by these quality or
delivery deficiencies.




The ENRE
may also fine us for any of our network installations that it considers may pose
a safety or security hazard in public spaces, including streets and
sidewalks.  In addition, the ENRE may fine us for inconsistency in
technical information required to be furnished to the ENRE.




Fines and
penalties for violations of public safety and reporting violations are deposited
in the Reserva de Fondos de
Terceros del ENRE (Third Party Reserve Fund of the ENRE) in an account in
the Banco Nación.  Payments accrue in that account until the account
reaches Ps. 3 million and then, with the ENRE’s authorization, the
amount is proportionally distributed among our customers.




When we
entered into the Adjustment Agreement in September 2005, the ENRE granted
us a payment plan in respect of approximately Ps. 116 million of our
accrued fines and penalties and agreed, subject to the condition that we meet
the quality standards and capital expenditure requirements specified in the
Adjustment Agreement, to forgive approximately Ps. 58 million of our
accrued fines and penalties.  Because the Adjustment Agreement was not
ratified until January 2007, we have recalculated the amounts of accrued
fines and penalties subject to the payment plan under the terms of the
Adjustment Agreement as well as the amounts subject to
forgiveness.  In addition, we were also required to make an adjustment
as of December 31, 2006, totaling Ps. 47.0 million to the accrued
fines and penalties under the payment plan in order to reflect the increase to
our VAD pursuant to the Adjustment Agreement, and we will be required to make
further adjustments to our payment plan to reflect the impact of future
increases in our distribution margins, including the CMM
adjustments.  For the years ended on December 31, 2008 and 2007, we
recorded adjustments of Ps. 17.2 million and Ps. 18.1 million, respectively, to
reflect CMM adjustments.  We estimate that the ENRE will forgive
approximately Ps. 71.4 million of our accrued fines and penalties upon
the completion of the RTI, and that we will be required to pay approximately
Ps. 306.1 million in accordance with the payment plan provided for in
the Adjustment Agreement.  This payment plan allows us to repay these
fines and penalties in fourteen semiannual installments commencing after a
180-day grace period from the date the RTI comes into effect.


35




In 2009,
the fines and penalties imposed on us by the ENRE amounted to
Ps. 58.5 million, which represented 2.8% of our energy
sales.  As of December 31, 2009 our accrued fines and penalties
imposed by the ENRE amounted to Ps. 377.5 million.




The
following table shows the adjustments to our accruals for potential ENRE fines
and penalties, including current fines and penalties and adjustments to past
fines due to increases in our tariffs pursuant to the Adjustment Agreement, for
the periods specified:




Year ended December 31,(in millions of Pesos)2009
              
              
              2008
              
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003
              
              
              2002
              
              
              2001
              
              
              2000Accruals
      at beginning of year
              
              
              331.6
              
              
              
              281.4
              
              
              
              241.1
              
              
              
              169.7
              
              
              
              99.3
              
              
              
              63.4
              
              
              
              49.0
              
              
              
              19.0
              
              
              
              13.6
              
              
              
              17.4ENRE
      Fines and Penalties
              
              
              58.5
              
              
              
              34.8
              
              
              
              23.9
              
              
              
              25.2
              
              
              
              72.7
              
              
              
              36.0
              
              
              
              14.6
              
              
              
              31.7
              
              
              
              16.4
              
              
              
              13.6Quality
      of Technical Service
              
              
              15.0
              
              
              
              15.2
              
              
              
              7.0
              
              
              
              10.4
              
              
              
              4.9
              
              
              
              4.7
              
              
              
              3.2
              
              
              
              5.6
              
              
              
              5.2
              
              
              
              4.0Quality
      of Technical Product
              
              
              3.1
              
              
              
              3.0
              
              
              
              0.9
              
              
              
              0.6
              
              
              
              1.1
              
              
              
              6.9
              
              
              
              6.5
              
              
              
              5.5
              
              
              
              2.9
              
              
              
              2.9Quality
      of Commercial Service
              
              
              2.4
              
              
              
              1.6
              
              
              
              1.1
              
              
              
              1.2
              
              
              
              —
              
              
              
              1.2
              
              
              
              0.5
              
              
              
              1.5
              
              
              
              1.7
              
              
              
              0.9Public
      Safety
              
              
              34.0
              
              
              
              11.6
              
              
              
              10.3
              
              
              
              6.7
              
              
              
              25.4
              
              
              
              10.9
              
              
              
              2.0
              
              
              
              4.9
              
              
              
              4.2
              
              
              
              6.3Transport
      Technical Function
              
              
              0.3
              
              
              
              0.3
              
              
              
              0.2
              
              
              
              0.4
              
              
              
              —
              
              
              
              0.2
              
              
              
              0.2
              
              
              
              0.2
              
              
              
              —
              
              
              
              0.3Reporting
      Violations
              
              
              3.7
              
              
              
              3.1
              
              
              
              4.4
              
              
              
              5.6
              
              
              
              33.7
              
              
              
              12.2
              
              
              
              1.7
              
              
              
              4.9
              
              
              
              1.9
              
              
              
              (0.2
              )Others
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              0.2
              
              
              
              7.5
              
              
              
              —
              
              
              
              0.4
              
              
              
              9.0
              
              
              
              0.5
              
              
              
              (0.5
              )Less:
      Paid during period:Quality
      of Technical Service
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              1.6
              
              
              
              —
              
              
              
              —
              
              
              
              0.9
              
              
              
              3.3
              
              
              
              5.6Quality
      of Technical Product
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              2.3
              
              
              
              4.2Quality
      of Commercial Service
              
              
              3.7
              
              
              
              —
              
              
              
              1.5
              
              
              
              0.4
              
              
              
              0.1
              
              
              
              0.1
              
              
              
              0.1
              
              
              
              0.3
              
              
              
              1.4
              
              
              
              1.0Public
      Safety
              
              
              8.9
              
              
              
              1.8
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              2.1
              
              
              
              6.1Transport
      Technical Function
              
              
              —
              
              
              
              —
              
              
              
              0.1
              
              
              
              0.3
              
              
              
              —
              
              
              
              —
              
              
              
              0.1
              
              
              
              0.3
              
              
              
              0.2
              
              
              
              0.5Others
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              0.6
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              1.8
              
              
              
              —Total
      paid during period
              
              
              12.6
              
              
              
              1.8
              
              
              
              1.7
              
              
              
              0.7
              
              
              
              2.4
              
              
              
              0.1
              
              
              
              0.2
              
              
              
              1.6
              
              
              
              11.1
              
              
              
              17.4Plus:
      Adjustment to fines and penalties pursuant to the ratification of the
      AdjustmentAgreement
              
              
              —
              
              
              
              17.2
              
              
              
              18.1
              
              
              
              47.0
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —Accruals
      at year-end
              
              
              377.5
              
              
              
              331.6
              
              
              
              281.4
              
              
              
              241.1
              
              
              
              169.7
              
              
              
              99.2
              
              
              
              63.4
              
              
              
              49.0
              
              
              
              19.0
              
              
              
              13.6





Note: The
facts or events that generated the amounts charged in each period may have
occurred in prior periods and not necessarily in the period in which the charge
is made.





Foreclosure
of pledge over our Class A shares or revocation of our
concession




The
Argentine government may foreclose its pledge over our Class A shares and
sell them in an public bidding process if any of the following
occur:




·
            we
      incur penalties in excess of 20% of our gross energy sales, net of taxes
      (which corresponds to our energy sales) in any given
  year;




·
            our
      controlling shareholder, EASA, fails to obtain the ENRE’s approval in
      connection with the disposition of our Class A
  shares;




·
            material
      and repeated breaches of our concession that are not remedied upon request
      of the ENRE;




·
            EASA
      creates any lien or encumbrances on our 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;




36




·
            our
      shareholders amend our articles of incorporation or voting rights in a way
      that modifies the voting rights of the Class A shares without the
      ENRE’s approval; or




·
            our
      shareholders or former shareholders fail to desist from any ICSID claims
      against the Argentine government following completion of the RTI and the
      approval of a new tariff regime.




Upon the
occurrence of any of these events, the Argentine government will have the right
to foreclose its pledge over our Class A shares and exercise the voting
rights of the Class A shares until the transfer of such shares to a new
purchaser occurs, at which time EASA will receive the proceeds of such transfer,
net of a specified penalty payable to the Argentine government.




In
addition, under our concession, the Argentine government has the right to revoke
our concession if we enter into bankruptcy and the government decides that we
shall not continue rendering services, in which case all of our 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 our
creditors, net of any debt owed by us to the Argentine
government.  Any residual proceeds will be distributed among our
shareholders.




Periodic
bidding for control of Edenor




Before
the end of each management period under our concession, the ENRE will arrange
for an international public bidding procedure to be conducted for the sale of
51% of our capital stock and voting rights in similar conditions to those under
which EASA acquired its stake.  EASA will be entitled to participate
in the bid.  The person or group offering the highest price will
acquire the stock and will pay the offered price to EASA.  If EASA is
the highest bidder or if EASA’s bid equals the highest bid, it will retain 51%
of our 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.  In the event EASA fails to
submit a bid or its bid is lower than the highest bid, the Class A shares
will be transferred to the highest bidder and the price paid by the purchaser
(except for any amounts owed to the Argentine government) will be delivered to
EASA.




The first
management period was set to expire August 31, 2007.  We
presented a request for a five-year extension of the initial management period
in May 2007 and on July 5, 2007, the ENRE, pursuant to the ENRE resolution No.
467/2007, agreed to extend the initial management period for an additional five
years from the date that the new tariff structure is adopted under the
RTI.  The remaining 10-year periods will run from the expiration of
the extension of the initial management period.




Default
of the Argentine government




If the
Argentine government breaches its obligations in such a way that we cannot
comply with our obligation under the concession or in such a way that the
distribution service is materially affected, we can request the termination of
the concession, after giving the Argentine government 90 days’ prior
notice.  Upon termination of the concession, all our assets used to
provide electricity 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 us, net of the payment of any debt owed by us to the
Argentine government, plus compensation established as a percentage of the
bidding price, ranging from 10% to 30% depending on the management period in
which the sale occurs.




Our
network




As of
December 31, 2009, the system through which we supply electricity was composed
of 70 Sub-Stations of high/high voltage, high/high/medium voltage,
high/medium voltage, representing 13,404 MVA of transformer capacity and
1,365 kilometers of high-voltage power lines 220 kV and
132 kV.  The distribution system of medium/low voltage was
comprised of 14,879 transformers of medium/low voltage, representing 5,643
MVA of transformer capacity, 9,191 kilometers of medium-voltage power lines
33 and 13.2 kV and 24,761 kilometers of low-voltage power lines
380 V.


37




The
following table provides certain information concerning our transmission and
distribution system as of the dates presented:




At December 31,2009
              
              
              2008
              
              
              2007Kilometers
      of transmission linesHigh
      voltage
              
              
              1,365
              
              
              
              1,364
              
              
              
              1,338Medium
      voltage
              
              
              9,191
              
              
              
              8,890
              
              
              
              8,806Low
      voltage
              
              
              24,761
              
              
              
              24,445
              
              
              
              23,910Total
              
              
              35,317
              
              
              
              34,699
              
              
              
              34,054Transformer
      capacity (MVA)High
      voltage/high voltage
              
              
              7,048
              
              
              
              7,048
              
              
              
              7,128High
      voltage/medium voltage
              
              
              6,356
              
              
              
              6,106
              
              
              
              5,866Medium
      voltage/low voltage and medium voltage/medium voltage
              
              
              5,643
              
              
              
              5,369
              
              
              
              5,136Total
              
              
              19,047
              
              
              
              18,523
              
              
              
              18,130




Access is
provided from points of connection with the national interconnection grid, (500
kV-220 kV Rodríguez, 220 kV Ezeiza) and from the local Puerto and Costanera
power plants.  Our transmission and subtransmisson system (“HV
System”) is composed of the 220kV and 132kV head sub-stations: Casanova,
Matanza, Ramos Mejía, Morón, Agronomía, Puerto Nuevo, Nuevo Puerto, Malaver,
Colegiales, Edison, Matheu, Talar and Zappalorto.




This HV
System, together with the Edesur and Edelap systems, forms the Greater Buenos
Aires (GBA) system.  The GBA system is operated by the Sociedad
Anónima Centro de Movimiento de Energía (SACME), of which Edenor and Edesur own
50% of the shares.  SACME is responsible for the management of
regional high-voltage distribution in the greater Buenos Aires metropolitan
area, coordinating, controlling and supervising the operation of the generation,
transmission and sub-transmission network in the City of Buenos Aires and the
greater Buenos Aires metropolitan areas, including coordination with Sistema Interconectado
Nacional (the National Network System or NIS) in the Edenor and Edesur
concession areas.  SACME also represents its shareholders in the
control of distribution for those concession areas.




We
distribute energy from the sub-stations of high/medium voltage through the
primary 13.2kV and 33kV system to a secondary 380/220 V low-voltage
system.  Our distribution network, consisting of several transformers,
power lines and substations, distributes the electricity to final users with
varied voltages depending on the requirements of end users.  Certain
customers, however, are supplied with power at significantly higher
voltages.




We are
currently working with the Argentine government and Edesur to construct two new
entry points for our network, the first named “Oscar Smith” (previously called
“Norte”) and the other “Puerto Nuevo-Malaver-Costanera”.  These new
entry points would significantly improve the quality and reliability of our
network.  On April 4, 2008, we entered into an agreement with the
Minsterio de Planificación
Federal, Inversión Pública y Servicios(the Ministry of Federal Planning,
Public Investment and Services) to build the new 500/220 kV “Oscar Smith”
transformer station at the Partido de Tigre.  This new transformer
station will serve to connect our network with the Sistema Argentino de
Interconexión (Argentine Interconnection System, or SADI).  We
believe that this new entry point will allow us to meet the increasing energy
demands in the medium and long term throughout our concession
area.  See “Item 5.  Operating and Financial Review and
Prospects—Factors affecting our results of operations—Demand—Capacity
demand.”




Systems




In 2009,
we have been working on the following projects:




·
            We
      continued with the implementation of the  CC&B (Customer
      Care & Billing) software for the complete renewal of our commercial
      systems. The project began in August 2008 and is scheduled to conclude in
      the first half of 2011;




38




·
            In
      August 2009, we began in collaboration with Microsoft, the migration of
      our technological platform, which will allow us to improve our net
      services, data storage and email.




·
            In
      October 2009, we signed a printer renting contract with Lexmark, which
      will allow us to replace all our printers unifying our printing services
      and reducing and rationalizing our related
  costs.




Customers




The
following graph shows the evolution of our customer base through December 31,
2009:









As of
December 31, 2009, we served 2,604,612 customers.  We define a
“customer” as one meter. We classify our customers pursuant to the following
tariff categories:




·
            Residential
      (T1-R1 to R9): residential customers whose peak capacity demand is less
      than 10kW.  In 2009, this category accounted for approximately
      40% of electricity sales.




·
            Small
      commercial (T1-G1 and T1-G2): commercial customers whose peak capacity
      demand is less than 10kW.  In 2009, this category accounted for
      approximately 8% of electricity
sales.




·
            Medium
      commercial (T2): customers whose peak capacity demand is equal to or
      greater than 10kW but less than 50kW.  In 2009, this category
      accounted for approximately 9% of electricity
  sales.




·
            Industrial
      (T3): industrial customers whose peak capacity demand is equal to or
      greater than 50kW.  This category is applied to high-demand
      customers according to the voltage at which each customer is
      connected.  The voltage ranges included in this category are the
      following: (i) Low Voltage (LV): voltage less than or equal to 1 kV; (ii)
      Medium Voltage (MV): voltage greater than 1kV but less than 66 kV; and
      (iii) High Voltage (HV): voltage equal to or greater than
      66kV.  In 2009, this category accounted for approximately 18% of
      our 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.  These tariffs follow the same structure as those
      applied under the Industrial category described above.  As of
      December 31, 2009, the total number of such large users was 636, and in
      2009 this category represented approximately 20% of our electricity
      sales.




39




·
            Others:
      public lighting (T1-PL) and shantytown customers whose peak capacity
      demand is less than 10kW.  In 2009, this category accounted for
      approximately 5% of electricity sales.  See “—Framework
      agreement (Shantytowns).”




We try to
maintain an accurate categorization of our customers in order to charge the
appropriate tariff to each of our customers.  In particular, we focus
on our residential tariff categorizations to both minimize the number of
commercial and industrial customers who are classified as residential customers
and identify residential customers whose peak capacity demand exceeds 10kW and
therefore do not qualify as residential users.




We rely
on the following measures to detect incorrectly categorized
customers:




·
            reporting
      by our employees tasked with reading meters to identify observed
      commercial activities which are being performed by residential
      customers,




·
            conducting
      internet surveys to identify advertisements for commercial services (such
      as medical or other professional services) that are linked to a
      residential customer’s address, and




·
            analyzing
      customer demand to determine whether we should further evaluate the peak
      capacity demand of a given customer whose use might exceed
      10kW.




Reading,
billing and collecting




We bill
our customers based on their category of service.  Residential and
small commercial customers are billed a fixed charge payable bimonthly and a
variable charge based on each unit of energy consumed.  The price of
these charges, in turn, is determined based on the bimonthly consumption
registered by each customer, which is divided into subcategories for each of our
residential and small commercial customers as follows:




Residential (Tariff
1-R):




·
            Tariff
      1-R1: bimonthly energy demand less than or equal to 300
  kWh




·
            Tariff
      1-R2: bimonthly energy demand greater than 301
  kWh




·
            Tariff
      1-R3: bimonthly energy demand greater than 651 kWh and less than 800
      kWh.




·
            Tariff
      1-R4: bimonthly energy demand greater than 801 kWh and less than 900
      kWh.




·
            Tariff
      1-R5: bimonthly energy demand greater than 901 kWh and less than 1000
      kWh.




·
            Tariff
      1-R6: bimonthly energy demand greater than 1001 kWh and less than 1200
      kWh.




·
            Tariff
      1-R7: bimonthly energy demand greater than 1201 kWh and less than 1400
      kWh.




·
            Tariff
      1-R8: bimonthly energy demand greater than 1401 kWh and less than 2800
      kWh.




·
            Tariff
      1-R9: bimonthly energy demand greater than 2800
  kWh.




Small commercial (Tariff
1-G):




·
            Tariff
      1-G1: bimonthly energy demand less than or equal to 1600
    kWh




·
            Tariff
      1-G2: bimonthly energy demand greater than 1600 kWh but less than or equal
      to 4000 kWh




·
            Tariff
      1-G3: bimonthly energy demand greater than 4000
  kWh




Medium
commercial customers (Tariff T2) are billed a fixed charge based on a fixed
amount of capacity that is payable monthly and a variable charge based on each
unit of energy consumed.




Industrial
customers (Tariff T3) are billed two monthly fixed charges based on capacity
during peak hours and non-peak hours and three variable charges for each unit of
energy consumed, which charges vary based on whether the unit was consumed
during peak hours (from 6 p.m.  to 11 p.m.), horas de valle (valley hours,
from 11 p.m.  to 5 a.m.) or during the remaining hours of
the day (from 5 a.m.  to 6 p.m.).


40




Public
lighting customers are billed a monthly variable energy charge based on each
unit of energy consumed.




The table
below shows the number of our customers per category at the dates
indicated.




At December 31,2009
                
                
                2008
                
                
                2007Residential
                
                
                2,271,960
                
                
                
                2,206,847
                
                
                
                2,162,586Small
      commercial
                
                
                297,070
                
                
                
                295,827
                
                
                
                292,617Medium
      commercial
                
                
                28,923
                
                
                
                28,397
                
                
                
                28,676Industrial
                
                
                5,628
                
                
                
                5,437
                
                
                
                5,217Wheeling
      system
                
                
                636
                
                
                
                626
                
                
                
                569Other*
                
                
                395
                
                
                
                393
                
                
                
                399Total
                
                
                2,604,612
                
                
                
                2,537,527
                
                
                
                2,490,064





*
            Represents
      public lighting and shantytown
customers.





Since
1995, we have maintained two billing systems: one for small- and medium-demand
customers and other for large users.  Both permit the integration of
the reading, billing, collection processes and the tracing of the delinquent
balances of customers included in those demand categories.




All of
the meters are read with portable meter-reading terminals, either with manual
access or optical reading (in the case of electronic meters for medium
commercial and industrial customers).  The systems validate the
readings, and any inconsistent reading is checked in the
field.  Estimates of customer usage are no longer used as a result of
this new billing system.  Once the invoices are printed, they are
distributed by independent contractors in each operating area, subject to strict
controls.




More than
70% of the bills are paid through banking institutions, automatic credit via
card debit or in stores, including supermarkets and
pharmacies.  Customers pay the remainder at any of our
28 commercial offices.  In summary, automation of these processes
has led to high quality billing, reducing the billing cycle from 87 days to
less than 54 days over the last few years.  In addition, we use
various incentive plans to increase payment of outstanding bills by our
customers.




Slow-Paying
Accounts and Past Due Receivables




When we
assumed the operation of the distribution system from SEGBA in
September 1992, many residential electricity meters had not been read for
months, individual customer account information was unreliable or nonexistent,
and billing and collection systems and procedures required substantial
improvement.  The state of these customer records made it difficult to
determine how much electricity individual customers had used and whether they
were delinquent in paying for the service.  As a result, one of our
primary objectives since 1992 has been to address and minimize slow-paying
accounts and past due receivables.




Since
1992, many procedures have been established to reduce delinquency and make
collection possible.  Our Commercial Department oversees the strict
observance of such procedures.




Municipalities’
accounts form a significant number of our arrears accounts.  The
methods of collection on such arrears vary for each municipality.  One
method of collection is to withhold from the municipalities certain taxes
collected by us from the public on behalf of the municipalities and using such
taxes to offset any past due amounts owed to us by such
municipalities.  Another method of collection is entering into
refinancing agreements with the municipalities.  These procedures
allowed reducing significantly the number of arrears accounts.




Our  past
due receivables increased from Ps. 31.5 million in 2008 to Ps. 56.0 million in
2009.




This
increase in past due receivables was the result of the preliminary injunction
that the Ombudsman challenging the October 2008 adjustment to our tariffs
received.  The preliminary injunction prohibits us from cutting the
supply of energy to customers challenging the October 2008 tariff increase until
a decision is reached with respect to the Ombudsman’s claim.  See
“Item 8. Financial Information – Legal and Administrative Proceedings – Legal
proceedings – Preliminary Injunction of the Ombudsman.”  Although we
felt the brunt of the injunction in February and March 2009, it continues to
adversely impact our collections.




41




The
following paragraph shows our monthly delinquent balances in 2009:











The
following graph shows our delinquent balances as of December 31 of each
year:









We also
supply energy to low-income areas pursuant to the framework agreement with the
Argentine government and the Province of Buenos Aires for which certain payments
are still owed to us.  See “—Framework agreement
(Shantytowns).”


42


Energy
losses




Energy
losses are equivalent to the difference between energy purchased and energy sold
and may be classified as technical and non-technical
losses.  Technical losses represent the energy that is lost during
transmission and distribution within the network as a consequence of natural
heating of the transformers and conductors which transmit the electricity from
the generating plants to the customers.  These losses typically
increase in proportion to the amount of energy volume distributed (as has been
the case for us in recent years).  Technical losses are normal for any
energy distributor and cannot be completely eliminated but can be reduced by
improvements in the network.  We believe that the level of technical
losses is approximately 7% in countries with distribution networks similar to
ours.  Non-technical losses represent the remainder of our energy
losses and are primarily due to illegal use of our services and administrative
and technical errors.




Energy
losses require us to purchase additional energy to satisfy apparent demand,
thereby increasing costs.  Furthermore, illegally tied-in customers
typically consume more electricity than the average level of consumption for
their category.  We are unable to recover from customers the cost of
electricity purchased beyond the loss factor established as 10% (on average)
pursuant to our concession.  The reduction of energy losses therefore
reduces the amount of energy that we have to purchase to satisfy apparent demand
but cannot invoice, and increases the amount of electricity actually
sold.




At the
time of privatization of the electricity sector in 1992, our total energy losses
were approximately 30%.  At that time, our non-technical losses were
estimated at 21%, with over half of that amount due to fraud and illegal use of
our service.  In response to the high level of losses, we implemented
a loss reduction plan in 1992 which emphasized accurate measurement of energy
consumption through periodic inspections, reduction of administrative errors,
regularization of shanty towns, reduction of illegal direct connections,
provision of services to shantytowns and reduction of technical
losses.




In the
year 2000, our losses were close to the 10% target rate established in our
concession and recognized in tariffs.  However, as a result of the
economic, political and social crisis that erupted in 2001, the level of energy
losses began to escalate again due to increased poverty levels and payment
delinquency.  Fraud control by Edenor workers was often impeded due to
the increased aggression from customers during monitoring
visits.  Such incidents have decreased since 2004, however, due to
improved socioeconomic conditions and the efforts of our
management.  Due to the inefficiencies associated with reducing our
energy losses below the level at which we are reimbursed pursuant to our
concession, we currently do not intend to significantly lower our level of
losses.




At
present, our goal is to maintain our energy losses at an optimal level, taking
into account the cost of reducing such losses and the level at which we are
reimbursed for the cost of these losses under our concession.  Our
procedures for maintaining an optimal level of losses are focused on improving
collections to ensure that customers pay for all the energy that they consume
and making investments in our network to control technical losses.  To
reduce the theft of electricity we have implemented vigilance and special
technologies, such as much higher networks that cannot be reached using normal
ladders, shields close to the electricity posts, concentric cables, shielded
meters and suspension of electricity service, among other
remedies.  We are experimenting with other programs including teaching
low-income customers how to ration their consumption, providing low-income
customers with the option of paying in installments and the installation of
4,800 prepaid meters.  We also plan to encourage, through subsidies,
the installation of special low-energy lamps.  A final decision with
respect to the implementation of these energy sales measures on a large scale is
currently under evaluation by the ENRE.  In addition, the national
government has implemented a program through PRONUREE (Programa Nacional de Uso Racional y
Eficiente de la Energía) to distribute low energy consumption lamps to
our clients through agreements with local municipalities.  In 2008 and
2009, over 2,400,000 of such lamps were distributed to our clients through this
program.




The
following table illustrates our estimation of the approximate breakdown between
technical and non-technical energy losses experienced in our concession area in
the last ten years.




Year ended December 31,2009
              
              
              2008
              
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004
              
              
              2003
              
              
              2002
              
              
              2001
              
              
              2000
              
              
              1999Technical
      losses
              
              
              9.8
              %
              
              
              9.8
              %
              
              
              9.6
              %
              
              
              8.6
              %
              
              
              8.3
              %
              
              
              8.1
              %
              
              
              8.0
              %
              
              
              7.8
              %
              
              
              7.5
              %
              
              
              7.3
              %
              
              
              8.0
              %Non-technical
      losses
              
              
              2.1
              %
              
              
              1.0
              %
              
              
              2.0
              %
              
              
              2.5
              %
              
              
              2.7
              %
              
              
              3.4
              %
              
              
              4.7
              %
              
              
              4.5
              %
              
              
              3.6
              %
              
              
              2.7
              %
              
              
              2.2
              %Total
      losses
              
              
              11.9
              %
              
              
              10.8
              %
              
              
              11.6
              %
              
              
              11.1
              %
              
              
              11.0
              %
              
              
              11.5
              %
              
              
              12.7
              %
              
              
              12.3
              %
              
              
              11.1
              %
              
              
              10.0
              %
              
              
              10.1
              %




43





Framework
agreement (Shantytowns)




In
January 1994, we and Edesur entered into the framework agreement with the
Argentine government and the Province of Buenos Aires to regulate our supply to
low-income areas and shantytowns.  Pursuant to the framework
agreement, we agreed to supply electricity and, if feasible, install individual
meters within each shantytown.  However, given the lack of adequate
space or streets between shantytown homes, in many instances we were only able
to install a single meter at the boundary of each shantytown to measure its
collective consumption.  Under the terms of the framework agreement,
we were entitled to receive compensation from (a) the municipality in which
the shantytowns were located, (b) a federal fund, first, for any
non-payment in respect of the electricity supplied to the shantytowns and,
second, for losses up to Ps. 20 million incurred prior to the signing
of the framework agreement, and (c) a provincial fund for capital
expenditures made to regularize the shantytown energy supply.




In
October 2003, we, together with Edesur and Edelap, signed a new framework
agreement with the Argentine government and the Province of Buenos Aires, which
was applicable retroactively as of September 2002 and was to expire on the
earlier of December 31, 2006 or the full regularization of electricity
supply to the shantytowns.  Under this 2003 framework agreement, we
are compensated for the service we provide to shantytowns by a commission formed
in each shantytown that collects funds from residents of the
shantytown.  In addition, we are compensated separately by the
municipality in which each shantytown is located, and, if there is any payment
shortfall, by a special fund which the Argentine government, and the Province of
Buenos Aires support.  Specifically, the Argentine government
contributes an amount equal to 21% and the Province of Buenos Aires contributes
an amount equal to 15.5% of the compensation, net of taxes, paid by those
customers with payment problems and meter irregularities who have been
regularized under the framework agreement.  Under the framework
agreement, we may also suspend service to regularized clients for lack of
payment.




In
October 2006, we and the Province of Buenos Aires entered into a payment
plan agreement with respect to amounts owed to us by the Province of Buenos
Aires under the framework agreement with respect to periods prior to
2007.  Pursuant to the payment plan agreement, we submitted a
statement of claims owed to us for the service we provided in low-income and
shantytown areas between September 2002 and June 2006.  The
Province of Buenos Aires verified these claims in accordance with the terms of
the framework agreement and began paying these claims in 18 equal consecutive
monthly installments.  Furthermore, as part of the payment plan
agreement, the Province of Buenos Aires agreed to pay the first six installments
of our claims, irrespective of whether verification of such claims had taken
place, and to pay any amounts corresponding with the services we provided to
low-income areas and shantytowns during the second half of 2006.  We
agreed to waive our right to interest accrued on outstanding amounts owed to us
under the framework agreement, provided the Province of Buenos Aires complies
with its obligations under the payment plan.  As of December 31, 2009,
the Government of the Province of Buenos Aires owed us Ps. 2.3 million of the
total amount due under this new agreement.




On June
23, 2008, we signed an amendment to the framework agreement with the Argentine
government, the Province of Buenos Aires and the other national electric
distributors agreeing to extend the framework agreement for four years from
January 1, 2007.  The Argentine government ratified the amendment on
September 22, 2008 and on June 18, 2009 the Province of Buenos Aires published
the ratification of this Addendum in the Official Bulletin of the Province of
Buenos Aires,.  Throughout this process, we have continued to supply
energy to the shantytowns.  During November and December 2009, we
received from the Argentine government payments for a total amount of Ps.20
million. In March and May 2010, we received from the Argentine government
payments of Ps.5.0 million and Ps.3.1 million, respectively..




Our
receivables for amounts accrued but not yet paid for the supply of energy to
shantytowns under the framework agreement amounted to Ps. 54.8 million as of
December 31, 2009 and Ps. 49.4 million as of December 31, 2008.




In March
2010, the Company signed with the Government of the Province of Buenos Aires a
payment plan agreement with respect to amounts owed to us by the Province of
Buenos Aires under the new framework agreement. The Government of the Province
of Buenos Aires agreed to pay the amount due through Cancellation Bonds “Bonos
de Cancelación de Deuda”. The agreement was signed at referendum of the
ratification by the Provincial Executive Power and the Company's Board of
Directors. The Company’s managing board ratified the agreement in the meeting
held on April 27, 2010. During May 2010, the Company received payments from the
Government of the Province of Buenos Aires for Ps.1.6 million in cash and
Ps.30.1 million (face value) with Cancellation Bonds.





44




Insurance




As of
December 31, 2009, we are insured for loss or damage to property, including
damage due to floods, fires and earthquakes covering amounts up to
U.S. $562.5 million, with the following deductibles:




·
            transformers,
      with a deductible of U.S. $100,000 to U.S. $750,000 (depending on the
      capacity);




·
            equipment
      of sub-stations (not including transformers), with a deductible of U.S.
      $50,000.




·
            commercial
      offices, with a deductible of U.S. $1,500 for each
  office.




·
            deposits
      and other properties, with a deductible of U.S. $25,000;
    and,




·
            terrorist
      acts up to U.S. $10 million, with a deductible of U.S.
      $50,000.




We
maintain customary directors’ and officers’ liability insurance, a civil
liability insurance (covering damages to third parties), workmen’s compensation,
automobile, life and theft/burglary insurance policies subject to customary
deductibles and limitations.  Mandatory life insurance for each
employee is maintained in accordance with Argentine law.  Although we
do not have business interruption insurance, we consider our insurance coverage
to be adequate and in accordance with the standards prevailing for the
industry.  See “Item 3. Key Information. Risk Factors—Risks Relating
to Our Business—Our insurance may not be sufficient to cover certain
losses.”




Environmental
management




In
Argentina, the national government, the provinces and the government of the City
of Buenos Aires are entitled to legislate on natural resources and environmental
protection issues.  The 1994 Constitution reaffirms this principle,
assigning to the Argentine federal government the establishment of broad
environmental guidelines and to the provinces the duty to implement the
necessary legislation to attain national environmental goals.  The
environmental policy for the electricity market is formulated by the Secretary
of Energy and implemented by the ENRE.  Areas regulated by the ENRE
include the tolerance level for electromagnetic fields, radio interference,
voltage of contact and pass, liquid spills, disposal and handling of solid
wastes, noise and vibration admissible levels and use, and the transport on and
storage of toxic substances, including polychlorinated biphenil (PCB), a viscous
substance which was historically used to lubricate electrical
transformers.  The Argentine Environmental Law requires that we
eliminate the PCB in our transformers before the end of 2010.




In 2009,
Edenor completed the removal of PCBs from all its transformers with cooling oils
and emissions exceeding 50 ppm (parts per million).





As part
of our investment plan, we made important improvements to our network and
implemented environmental tests to evaluate the impact of these improvements on
the environment and the surrounding areas.  We are currently engaged,
together with environmental governmental entities, in the application of
procedures to decontaminate mineral oils.  We are required to apply
for licenses from the ENRE for all our business activities, including those
related to the environment.  We believe that we are in compliance in
all material respects with all applicable environmental standards, rules and
regulations established by the ENRE, the Secretary of Energy and federal,
provincial and municipal authorities.  We have implemented
environmental variables testing programs to evaluate environmental variances and
to take corrective actions when necessary.  In addition, we have in
place an environmental emergency plan to reduce potential adverse consequences
if an environment accident should occur.  Finally, as part of our
environmental actions, we improved the program of rational uses of energy in our
buildings and in our customer equipment.




On
October 19, 1999, the Instituto Argentino de
Normalización (the Argentine Institute of Normalization) certified that
we have an Environmental Management System that is in accordance with the
requirements of the standards set by the International Standardization
Organization (ISO) as specified in its release, ISO 14001, which relates
specifically to environmental management systems.  This certification
is reaffirmed on an annual basis, most recently as of October 2009.




45




Argentine
law requires all persons whose activities risk environmental damage, such as us,
to obtain environmental insurance up to a certain minimum coverage or set aside
funds in an environmental restoration fund to pay for environmental liabilities
that may arise.  As of the date of this annual report, the Superintendencia de Seguros de la
Nación(the Superintendent of Insurance) has only approved one
environmental insurance policy that meets with the legal
requisites.  We have explored the possibility of setting up an
environmental restoration fund, yet it is not clear what the appropriate size or
scope of the fund would be.  We continue to consult with leading
insurance companies to evaluate our alternatives.  We have conducted a
review of the possible impact and effects our activities might have on the
environment, and we have implemented certain preventative measures and
operational controls as a result.  We also have an environmental
emergency plan that details the steps that would be taken in the case our
operations resulted in any environmental damage.




Seasonality




For a
discussion of seasonality of demand see “Item 5. Operating and Financial Review
and Prospects—Demand—Seasonality of Demand.”




PROPERTY,
PLANT AND EQUIPMENT




Our main
properties are transmission lines, substations and distribution networks, all of
which are located in the northwestern area of the greater Buenos Aires
metropolitan area and the northern area of the City of Buenos
Aires.  Substantially all of our properties are held in concession to
provide the electricity distribution service, which, by nature, is considered to
be an essential public service.  In accordance with Argentine
legislation and court precedents, assets which are affected to rendering an
essential public service are not subject to attachment or attachment in aid of
execution and therefore, enforcement of judgments against us may be
substantially limited.  The net book value of the property, plant and
equipment recorded on our balance sheet as of December 31, 2009 was
Ps. 3,482.4 million.  The net book value of the property, plant
and equipment recorded on our balance sheet as of December 31, 2008 and 2007 was
Ps. 3,256.3 million and  Ps. 3,092.7 million,
respectively.




Our gross
asset base represents property, plant and equipment related to our distribution
services.  Because our total property, plant and equipment represents
substantially the same assets, but calculated at historical cost as adjusted by
inflation through February 2003, we believe the inflation-adjusted value of
our property, plant and equipment is an accurate measure of our asset base for
purposes of calculating our return on our assets.  See “Item 5.
Operating and Financial Review and Prospects—Factors affecting our results of
operations—Tariffs—Distribution margin or value-added for distribution
(VAD)—Revisión Tarifaria
Integral (Integral Tariff Revision, or RTI).” The last adjustment for
inflation to our property, plant and equipment was registered in
February 2003 in accordance with Argentine GAAP.  Accordingly, we
estimate the effects of inflation on our property, plant and equipment for
periods after February 2003 for purposes of determining the value of our
gross asset base in connection with our concession.  See Note 2
to our audited financial statements included elsewhere in this annual
report.




Item
      4A.
            Unresolved
      Staff Comments




None.




Item
      5.
            Operating and Financial Review
      and Prospects




The
following discussion should be read in conjunction with our audited financial
statements as of December 31, 2009 and 2008 and for the years ended December 31,
2009, 2008 and 2007.  Our audited financial statements have been
prepared in accordance with Argentine GAAP, which differ in certain significant
respects from U.S. GAAP.  Note 27 to our audited financial statements
included elsewhere in this annual report provides a description of the
significant differences between Argentine GAAP and U.S. GAAP, as they relate to
us, and a reconciliation to U.S. GAAP of net income for the years ended December
31,2009, 2008 and 2007 and shareholders’ equity as of December 31,2009 and
2008.  Our financial statements have not been adjusted for inflation
after February 28, 2003, in accordance with Argentine GAAP.  See “Item
3. Key Information—Selected financial data.”




46




OPERATING
RESULTS




We
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, with a population
of approximately seven million people.  Pursuant to our concession, we
have the exclusive right to distribute electricity to all users within our
concession area, including to wholesale electricity market
participants.  At December 31, 2009, we had 2,604,612
customers.




We serve
two markets: the regulated market, which is comprised of users who are unable to
purchase their electricity requirements directly through the wholesale
electricity market, and the unregulated market, which is comprised of large
users that purchase their electricity requirements directly from generators in
the wholesale electricity market.  The terms and conditions of our
services and the tariffs we charge users in both the regulated and unregulated
markets are regulated by the ENRE.




Factors
affecting our results of operations




Our net
sales consist mainly of net energy sales to users in our service
area.  Our net energy sales reflect the tariffs we charge our
customers (which include our energy purchase costs) and reflect deductions for
fines and penalties we incur during the year.  Any adjustments,
however, to our accrual for fines and penalties resulting from increases in our
distribution margins are recorded under financial income (expenses) and holding
gains (losses).  See “Item 4. Information on the Company—Our
concession —Fines and penalties.”




In
addition, our net sales include late payment charges we bill our customers for
delays in payment of their bills, connection and reconnection charges and leases
of poles and other network equipment.




If we
fail to comply with the obligations under our concession, we may become subject
to fines and penalties imposed by the ENRE.  Some of these fines and
penalties are payable by granting credits or bonuses to our customers to offset
a portion of their electricity charges.  Fines and penalties that are
not directly related to our customers, such as fines for public safety
violations, are paid directly to the ENRE.  We deducted approximately
Ps. 58.5 million in fines and penalties from our revenues in 2009,
Ps. 34.8 million in 2008 and Ps. 23.9 million in
2007.  We incurred significantly higher levels of fines and penalties
last year, due to an increase in underlying cost of energy factors upon which
the fines and penalties are calculated.  In
September 2005, we entered into an agreement with the Argentine government,
which was formally re-executed in February 2006 and ratified in
January 2007, pursuant to which the Argentine government has agreed,
subject to certain conditions, to forgive approximately one-third of our accrued
and unpaid fines and penalties and grant us a payment plan for the remainder of
these fines and penalties, which will be adjusted for future increases in our
distribution margins, if any.  See “Item 4. Information on the
Company—Our concession —Fines and penalties.”





47




The
following table sets forth the composition of our net sales for the periods
indicated:




Year ended December 31,2009
              
              
              2008
              
              
              2007(in millions of Ps.)Energy
      sales (1)
              
              Ps.
              2,094.3
              
              
              Ps.
              2,000.8
              
              
              Ps.
              1,972.7Fines
      and penalties
              
              
              (58.5
              )
              
              
              (34.8
              )
              
              
              (23.9
              )Net
      energy sales
              
              
              2,035.8
              
              
              
              1,966.0
              
              
              
              1,948.7Late
      payment charges
              
              
              20.7
              
              
              
              17.8
              
              
              
              17.1Connection
      charges
              
              
              5.7
              
              
              
              3.7
              
              
              
              4.0Reconnection
      charges
              
              
              2.0
              
              
              
              2.2
              
              
              
              1.4Pole
      leases
              
              
              13.7
              
              
              
              10.5
              
              
              
              10.7Net
      sales
              
              Ps.
              2,077.9
              
              
              Ps.
              2,000.2
              
              
              Ps.
              1,981.9





(1)
              Energy
      sales for 2007 include the retroactive portion of the February 2007 VAD
      increase, which amounts in aggregate to Ps. 218.6 million and is
      being invoiced in 55 consecutive monthly installments.  We began
      invoicing these installments in February 2007 and, as of December 31,
      2009, we had invoiced Ps. 149.4 million of this amount.




The
following tables show our energy sales by category of customer (in GWh and in
Pesos) for the periods indicated:




Year ended December 31,2009
              
              
              2008
              
              
              2007
              
              
              2006
              
              
              2005(in GWh)Residential
              
              
              7,344
              
              
              
              40
              %
              
              
              7,545
              
              
              
              41
              %
              
              
              7,148
              
              
              
              40
              %
              
              
              6,250
              
              
              
              38
              %
              
              
              5,819
              
              
              
              37
              %Small
      commercial
              
              
              1,470
              
              
              
              8
              %
              
              
              1,530
              
              
              
              8
              %
              
              
              1,485
              
              
              
              8
              %
              
              
              1,433
              
              
              
              9
              %
              
              
              1,387
              
              
              
              9
              %Medium
      commercial
              
              
              1,565
              
              
              
              8
              %
              
              
              1,597
              
              
              
              9
              %
              
              
              1,552
              
              
              
              9
              %
              
              
              1,446
              
              
              
              9
              %
              
              
              1,354
              
              
              
              9
              %Industrial
              
              
              3,204
              
              
              
              18
              %
              
              
              3,277
              
              
              
              18
              %
              
              
              3,628
              
              
              
              20
              %
              
              
              3,364
              
              
              
              20
              %
              
              
              3,195
              
              
              
              20
              %Wheeling
      system(1)
              
              
              3,622
              
              
              
              20
              %
              
              
              3,700
              
              
              
              20
              %
              
              
              3,111
              
              
              
              17
              %
              
              
              3,211
              
              
              
              19
              %
              
              
              2,984
              
              
              
              19
              %Others:Public
      lighting
              
              
              644
              
              
              
              4
              %
              
              
              644
              
              
              
              3
              %
              
              
              643
              
              
              
              4
              %
              
              
              650
              
              
              
              4
              %
              
              
              642
              
              
              
              4
              %Shantytowns
              
              
              351
              
              
              
              2
              %
              
              
              304
              
              
              
              2
              %
              
              
              301
              
              
              
              2
              %
              
              
              261
              
              
              
              2
              %
              
              
              279
              
              
              
              2
              %Others(2)
              
              
              20
              
              
              
              —
              
              
              
              19
              
              
              
              —
              
              
              
              19
              
              
              
              —
              
              
              
              18
              
              
              
              —
              
              
              
              17
              
              
              
              —Total
              
              
              18,220
              
              
              
              100
              %
              
              
              18,616
              
              
              
              100
              %
              
              
              17,886
              
              
              
              100
              %
              
              
              16,632
              
              
              
              100
              %
              
              
              15,677
              
              
              
              100
              %





(1)
            Wheeling
      charges represent our tariffs for large users, which consist of a fixed
      charge for recognized technical losses and a charge for our distribution
      margins but exclude charges for electric power purchases, which are
      undertaken directly between generators and large
  users.


(2)
            Represents
      energy consumed internally by our company and our
    facilities.




Year ended December 31,2009
              
              
              2008(2)
              
              
              2007(1)
              
              
              2006
              
              
              2005(in millions of Pesos)Residential
              
              Ps.
              679.6
              
              
              
              32
              %
              
              Ps.
              575.8
              
              
              
              30
              %
              
              Ps.
              488.7
              
              
              
              29
              %
              
              Ps.
              445.4
              
              
              
              32
              %
              
              Ps.
              421.8
              
              
              
              32
              %Small
      commercial
              
              
              322.3
              
              
              
              15
              %
              
              
              307.7
              
              
              
              16
              %
              
              
              276.5
              
              
              
              16
              %
              
              
              202.7
              
              
              
              15
              %
              
              
              197.2
              
              
              
              15
              %Medium
      commercial
              
              
              335.4
              
              
              
              16
              %
              
              
              317.4
              
              
              
              17
              %
              
              
              288.1
              
              
              
              17
              %
              
              
              216.5
              
              
              
              16
              %
              
              
              204.1
              
              
              
              16
              %Industrial
              
              
              569.2
              
              
              
              27
              %
              
              
              498.2
              
              
              
              26
              %
              
              
              481.9
              
              
              
              28
              %
              
              
              376.8
              
              
              
              27
              %
              
              
              358.6
              
              
              
              27
              %Wheeling
      system(3)
              
              
              139.2
              
              
              
              7
              %
              
              
              113.6
              
              
              
              6
              %
              
              
              84.9
              
              
              
              5
              %
              
              
              60.7
              
              
              
              4
              %
              
              
              57.1
              
              
              
              4
              %Others:Public
      lighting
              
              
              55.3
              
              
              
              3
              %
              
              
              55.9
              
              
              
              3
              %
              
              
              55.2
              
              
              
              3
              %
              
              
              46.9
              
              
              
              4
              %
              
              
              46.3
              
              
              
              4
              %Shantytowns
      and
                others
      (4)
              
              
              (6.7
              )
              
              
              0
              %
              
              
              47.6
              
              
              
              2
              %
              
              
              29.1
              
              
              
              2
              %
              
              
              23.6
              
              
              
              2
              %
              
              
              26.0
              
              
              
              2
              %Total
              
              Ps.
              2,094.3
              
              
              
              100
              %
              
              Ps.
              1,916.2
              
              
              
              100
              %
              
              Ps.
              1,704.4
              
              
              
              100
              %
              
              Ps.
              1,372.5
              
              
              
              100
              %
              
              Ps.
              1,311.0
              
              
              
              100
              %





(1)
            Does
      not include the retroactive portion (Ps. 218.6 million ) of our
      February 2007 VAD increase, of which we have invoiced Ps. 149.4
      million as of December 31, 2009, and the CMM adjustment for the period May
      2006 – April 2007, applicable as of May 1, 2007 and collected through
      PUREE funds, for a total amount of Ps. 49.6
  million.


(2)
            Does
      not include CMM adjustment collected through PUREE funds, which amount to
      Ps. 84.6 million.


(3)
            Wheeling
      charges represent our tariffs for large users, which consist of a fixed
      charge for recognized energy losses and a charge for our distribution
      margins but exclude charges for electric power purchases, which are
      undertaken directly between generators and large
  users.


(4)
            In
      2009, shantytown sales totaled Ps. 28.4 million; this amount was adjusted
      by various accounting changes and changes to rate charts imposed by the
      ENRE in June and July 2009.




Our
revenues and results of operations are principally affected by economic
conditions in Argentina, changes in our regulated tariffs and fluctuations in
demand for electricity within our service area.  To a lesser extent,
our revenues and results of operations are also affected by service
interruptions or reductions in excess of those contemplated by our concession,
which may lead us to incur fines and penalties imposed by the ENRE.





48




Argentine
Economic Conditions and Inflation




Because a
substantial portion 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 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 Argentine government in favor of the electricity
sector, such as incentives for the construction of additional generation
facilities and the creation of fiduciary 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:




Year ended December 31,2009
              
              
              2008
              
              
              2007
              
              
              2006
              
              
              2005Real
      GDP (% change)
              
              
              1.0
              
              
              
              7.0
              
              
              
              8.7
              
              
              
              8.5
              
              
              
              9.2Nominal
      GDP (in millions of Pesos)
              
              
              1,146,258
              
              
              
              1,038,188
              
              
              
              812,456
              
              
              
              654,413
              
              
              
              531,939Real
      Consumption (% change)
              
              
              1.1
              
              
              
              6.7
              
              
              
              8.8
              
              
              
              7.4
              
              
              
              8.5Real
      Investment (% change)
              
              
              (7.6
              )
              
              
              9.0
              
              
              
              13.6
              
              
              
              18.2
              
              
              
              22.7Industrial
      Production (% change)
              
              
              0.4
              
              
              
              5.0
              
              
              
              7.6
              
              
              
              8.9
              
              
              
              7.5Consumer
      Price Index
              
              
              7.7
              
              
              
              7.2
              
              
              
              8.5
              
              
              
              9.8
              
              
              
              12.3Nominal
      Exchange Rate (in Ps. /U.S.$ at year end)
              
              
              3.80
              
              
              
              3.45
              
              
              
              3.15
              
              
              
              3.06
              
              
              
              3.04Exports
      (in millions of U.S.$)
              
              
              55,750
              
              
              
              70,589
              
              
              
              55,933
              
              
              
              46,569
              
              
              
              40,013Imports
      (in millions of U.S.$)
              
              
              38,771
              
              
              
              55,413
              
              
              
              44,780
              
              
              
              34,159
              
              
              
              28,692Trade
      Balance (in millions of U.S.$)
              
              
              16,979
              
              
              
              13,176
              
              
              
              11,153
              
              
              
              12,410
              
              
              
              11,321Current
      Account (% of GDP)
              
              
              2.8
              
              
              
              2.5
              
              
              
              2.7
              
              
              
              3.6
              
              
              
              2.9Reserves
      (in millions of U.S.$)
              
              
              46,355
              
              
              
              46,383
              
              
              
              46,176
              
              
              
              32,037
              
              
              
              28,077Tax
      Collection (in millions of Pesos)
              
              
              304,930
              
              
              
              269,375
              
              
              
              199,781
              
              
              
              150,008
              
              
              
              119,252Primary
      Surplus (in millions of Pesos)
              
              
              17,286
              
              
              
              32,529
              
              
              
              25,719
              
              
              
              23,156
              
              
              
              19,661Public
      Debt (% of GDP at December 31)*
              
              
              46.4
              
              
              
              48.5
              
              
              
              55.9
              
              
              
              64.6
              
              
              
              71.7Public
      Debt Service (% of GDP)
              
              
              5.4
              
              
              
              4.9
              
              
              
              5.8
              
              
              
              5.1
              
              
              
              5.4External
      Debt (% of GDP at December 31)
              
              
              40.6
              
              
              
              39.2
              
              
              
              47.9
              
              
              
              51.5
              
              
              
              62.9





Sources: INDEC; Central Bank;
Ministry of Economy and Production.


* Does
not include hold outs




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 Convertibility regime, 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 co-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.





49





The
Convertibility regime temporarily 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 a de facto devaluation 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 vice-president 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 Convertibility regime, 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 our company) 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 wholesale
price index increased by approximately 118% and the Argentine consumer price
index 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
Convertibility regime, recover access to financial markets, reduce government
spending, restore liquidity to the financial system, reduce unemployment and
generally stimulate the economy.




Pursuant
to the Public Emergency Law, the Argentine government, among other
measures:




·
            converted
      public utility tariffs from their original U.S. Dollar values to
      Pesos at a rate of Ps. 1.00 per
  U.S. $1.00;




·
            froze
      all regulated distribution margins relating to the provision of public
      utility services (including electricity distribution
      services);





50




·
            revoked
      all price adjustment provisions and inflation indexation mechanisms in
      public utility concessions (including our concession);
  and




·
            empowered
      the 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 utilities in Argentina (including our
company).  Because public utilities 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 utilities 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
Convertibility regime and 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 utilities significantly increased, which when combined
with the margin freeze and conversion of tariffs from U.S. Dollars to
Pesos, led many of these utilities (including our company) 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. $126.6 billion and extended payment
terms.  Approximately U.S. $19.5 billion of defaulted bonds
held by creditors who did not participate in the exchange offer remain
outstanding according to the Argentine Ministry of Economy and
Production.  On January 3, 2006, Argentina completed an early
repayment of all of its outstanding indebtedness with the IMF, for an amount
totaling approximately U.S. $10.0 billion owing under credit
lines.




From 2003
to 2007, the economy continued recovering from the 2001 economic
crisis.  The economy grew by 8.8% in 2003, 9.0% in 2004, 9.2% in 2005,
8.5% in 2006 and 8.7% in 2007, led by domestic demand and
exports.  From a demand perspective, private sector spending was
accompanied by a combination of liberal monetary and conservative fiscal
policies.  Growth in spending, however, consistently exceeded the rate
of increase in revenue and nominal GDP growth.  From a supply
perspective, the trade sector benefited from a depressed real exchange rate,
which was supported by the intervention of the Central Bank in the foreign
exchange market.  Real exports improved, in part due to growth in
Brazil, and the current account improved significantly, registering surpluses in
2004, 2005, 2006 and 2007.




On
December 10, 2007, Cristina Fernández de Kirchner, wife of the ex-President Dr.
Néstor Kirchner, was inaugurated as President of Argentina for a four-year
term.




Argentina
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.





51




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 sector has adverse 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 the Ministerio 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 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 Argentina economy,
according to official indicators, grew by only 1%, and according to private
indicators, contract 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 the interest rates
increased at specific moments during the course of the year, the exchange market
did remain relatively stable throughout.




By the
second quarter of 2009, due to improvements in the global economy and the
relative stability of the domestic financial markets, the Argentine economy
began to recover.





Tariffs




Our
revenues and margins are substantially dependent on the composition of our
tariffs and on the tariff setting and adjustment process contemplated by our
concession.  Our management is currently focused on the renegotiation
of our tariff structure, which, if successful, would have a significant impact
on our results of operations.





52




The
following chart shows the variation in our average tariff, including taxes, (in
Ps. /MWh) in the periods indicated:









Our
tariffs for all of our customers (other than customers in the wheeling system)
are composed of:




·
            the
      cost of electric power purchases, which we pass on to our 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 our energy losses in our distribution activities (determined by
      reference to a fixed percentage of energy and power capacity for each
      respective voltage level set forth in our
  concession);




·
            our
      regulated distribution margin, which is known as the value-added for
      distribution, or VAD; and




·
            any
      taxes imposed by the Province of Buenos Aires or the City of Buenos Aires,
      which may differ in each
jurisdiction.




Certain
of our large users (which we refer to as wheeling system customers) are eligible
to purchase their energy needs directly from generators in the wholesale
electricity market and to acquire from us only the service of delivering that
electricity to them.  Our 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 losses (determined by reference to a fixed percentage of energy
and power capacity for each respective voltage level set forth in our
concession) and our 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 the same as for sales to other large users
because we do not incur the corresponding cost of electric power purchases
related to those sales.




Recognition
of cost of electric power purchases




As part
of our tariffs, we bill our customers for the costs of our electric power
purchases, which include energy and capacity charges.  In general, we
purchase electric power at a seasonal price, which is approved by the ENRE every
six months and reviewed quarterly.   Our electric power purchase
price reflects transportation costs and certain other regulatory charges (such
as the charges imposed by the Fondo Nacional de Energía Eléctrica(National Electricity Energy Fund)).





53





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. 628/08, which established the new tariffs applied by Edenor as of
October 1, 2008 (see “— Tariffs — Distribution margin or value added for
distribution (VAD) — Adjustment Agreement”) 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 us to pass through some regulatory charges
associated with the electric power purchases to our customers, excluding
residential customers with consumption levels below 1,000 kWh.




On August
14, 2009, ENRE adopted Resolution No. 433/2009 approving two tariff charts to be
applied by Edenor. The first one applied retroactively for the period from June
1, 2009 to July 31, 2009. The second rate chart was effective for the period
from August 1, 2009 to September 30, 2009. These charts were based on the new
subsidized seasonal prices set forth Resolution No. 652/09 issued by the
Secretary of Energy. The new price charts aimed at reducing the impact of
increased winter electrical energy consumption on the invoicing of residential
customers with bi-monthly consumption exceeding 1,000 kWh. The modification to
the ENRE rate charts did not have any effect on our VAD.  The ENRE
also instrumented usto break down the floating charges of all invoices into the
amounts subsidized and not subsidized by the Argentine government.





As of
October 1, 2009, the tariff chart of October 2008 was reinstated pursuant to
ENRE Resolution No. 628/2008. The floating charge of all invoices continues to
be broken down into the amounts subsidized and not subsidized by the Argentine
Government.





Upon
the ratification of the Adjustment Agreement, we again were allowed to charge
our non-residential customers for increases in regulatory charges.  As
part of the RTI, we also expect we will be able to bill residential customers
for accrued amounts under these increases, which we were not permitted to do
under the Adjustment Agreement.




We
purchased a total of 17,040 GWh in 2009, 17,169 GWh in 2008 and 17,122 GWh in
2007 (excluding wheeling system demand).  Until 2004, we purchased a
portion of our energy needs under long-term supply
contracts.  Following the adoption of certain amendments to the
pricing rules applicable to the wholesale electricity market pursuant to the
Public Emergency Law, however, we currently purchase all of our energy supply in
the wholesale electricity market at the spot price.  We have not
purchased any energy under long-term supply contracts since 2004 and we do not
anticipate making any material purchases of energy in the term market in the
near future.




Recognition
of cost of energy losses




Energy
losses are equivalent to the difference between energy purchased (including
wheeling system demand) and energy sold.  These losses may be
classified as technical and non-technical losses.  Technical losses
represent the energy that is lost during transmission and distribution within
the network as a consequence of natural heating of the conductors and
transformers that transmit electricity from the generating plants to the
customers.  Non-technical losses represent the remainder of our energy
losses and are primarily due to illegal use of our services.  Energy
losses require us to purchase additional electricity to satisfy demand and our
concession allows us to recover from our customers the cost of these purchases
up to a loss factor specified in our concession for each tariff
category.  Our loss factor under our concession is, on average,
10%.  Our management is focused on taking the necessary measures to
ensure that our energy losses do not increase above current levels because of
their direct impact on our gross margins.  However, due to the
inefficiencies associated with reducing our energy losses below the level at
which we are reimbursed pursuant to our concession (i.e., 10%), we currently do
not intend to significantly lower our level of losses.




At the
time of our privatization, our total energy losses represented approximately 30%
of our energy purchases, of which more than two thirds were non-technical losses
attributable to fraud and illegal use of our service.  Beginning in
1992, we implemented a loss reduction plan (plan de disciplina del
mercado, or market discipline plan) that allowed us to gradually reduce
our total energy losses to 10.0% by 2000, with non-technical losses of
2.7%.  However, beginning in mid-2001 and up until 2004, we
experienced an increase in our non-technical losses, as the economic crisis
eroded the ability of our customers to pay their bills, and in our technical
losses in proportion with the increased volume of energy we supplied during
those periods.  Our total losses amounted to 11.6% in 2007, 10.8% in
2008 and 11.9% in 2009.





54




The
following table sets forth the approximate breakdown between technical and
non-technical energy losses experienced in our concession area over the periods
indicated:




Year ended December 31,2009
                
                
                2008
                
                
                2007Technical
      losses
                
                
                9.8
                %
                
                
                9.8
                %
                
                
                9.6
                %Non-technical
      losses
                
                
                2.1
                %
                
                
                1.0
                %
                
                
                2.0
                %Total
      losses
                
                
                11.9
                %
                
                
                10.8
                %
                
                
                11.6
                %





Our
capital expenditure program includes investments to improve and update our
network, which we believe will allow us to maintain our technical losses at
current levels despite further increases in demand.  See “Item 4.
Information on the Company—Energy losses.”




Distribution
margin or value-added for distribution (VAD)




Our
concession authorizes us to charge a distribution margin for our services to
seek to cover our operating expenses, taxes and amortization expenses and to
provide us with an adequate return on our asset base.




Historical Overview of
VAD.Our concession originally contemplated a fixed
distribution margin for each tariff parameter with semiannual adjustments based
on variations in the U.S. wholesale price index (67% of the distribution margin)
and the U.S. consumer price index (the remaining 33% of the distribution
margin).  However, pursuant to the Public Emergency Law, all
adjustment clauses in U.S. Dollars or other foreign currencies and indexation
clauses based on foreign indexes or other indexation mechanisms included in
contracts to be performed by the Argentine government were
revoked.  As a result, the adjustment provisions contained in our
concession are no longer in force and, from January 2002 through
January 2007, we were required to charge the same fixed distribution margin
in Pesos established in 2002, without any type of currency or inflation
adjustment.  These measures, coupled with the effect of accumulated
inflation since 2002 and the devaluation of the Peso, have had a material
adverse effect on our financial condition, results of operation and cash flows,
leading us to record net losses.




Adjustment
Agreement.On September 21, 2005, we entered into the
Acta Acuerdo sobre la
Adecuación del Contrato de Concesión del Servicio Público de Distribución y
Comercialización de Energía Eléctrica (Adjustment Agreement), an
agreement with the Argentine government relating to the adjustment and
renegotiation of the terms of our concession.  Because a new Minister
of Economy took office thereafter, we formally re-executed the Adjustment
Agreement with the Argentine government on February 13, 2006 under the same
terms and conditions originally agreed.  The ratification of the
Adjustment Agreement by the Argentine government was completed in
January 2007.  Pursuant to the Adjustment Agreement, the
Argentine government granted us an increase of 28% in our distribution margin,
which includes a 5% increase to fund specified capital expenditures we are
required to make under the Adjustment Agreement.  See “—Liquidity and
Capital Resources—Capital expenditures.” This increase was subject to a cap in
the increase of our average tariff of 15%.  Although this increase was
applied to the distribution margin as a whole, the amount of the increase was
allocated to our non-residential customers (including large users that purchase
electricity in the wheeling system) only, which, as a result, experienced an
increase in VAD greater than 28%, while our 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 RTI.





55





The
Adjustment Agreement also contemplates a cost adjustment mechanism for the
transition period during which the integral tariff review process is being
conducted.  This mechanism, known as the Cost Monitoring Mechanism, or
CMM, requires the ENRE to review our actual distribution costs every six months
(in May and November of each year).  If the variation between our
actual distribution costs and our recognized distribution costs (as initially
contemplated in the Adjustment Agreement or, if adjusted by any subsequent CMM,
the most recent distribution cost base established by a CMM) is 5% or more, the
ENRE is required to adjust our distribution margin to reflect our actual
distribution cost base.  The ENRE’s review is based on our
distribution costs during the six-month period ending two months prior to the
date on which the ENRE is required to apply the cost adjustment mechanism (on
May 1 and November 1) and any adjustment will become effective from
such date.  The CMM takes into consideration, among other factors, the
wholesale and consumer price indexes, current exchange rates, the price of
diesel and construction costs and salaries, all of which are weighted based on
their relative importance to operating costs and capital
expenditures.  We may also request that the CMM be applied at any time
that the variation between our actual distribution costs and our then recognized
distribution costs is at least 10% or more, and any adjustment to our
distribution cost base that results from this CMM will become effective
retroactively from the date we present the CMM request to the
ENRE.  We cannot make any assurances, however, that we will receive
any future increases under the CMM.




On
January 30, 2007, the ENRE formally approved our new tariff schedule
reflecting the 28% increase in the distribution margins charged to our
non-residential customers contemplated by the Adjustment
Agreement.  In addition, because the Adjustment Agreement is effective
retroactively as of November 1, 2005, the ENRE applied the CMM
retroactively in each of May and November 2006, the dates in each year on
which the ENRE is required to apply the CMM.  In the May 2006
CMM, the ENRE determined that our distribution cost base increased by 8.032%
(compared to the distribution cost base originally recognized in the Adjustment
Agreement), and, accordingly, approved an equivalent increase in our
distribution margins effective May 1, 2006.  This increase, when
compounded with the 28% increase granted under the Adjustment Agreement, results
in an overall 38.3% increase in our distribution margins charged to our
non-residential customers.  In the November 2006 CMM, the ENRE
determined that our distribution cost base increased by 4.6% (compared to our
distribution cost base as adjusted by the May 2006 CMM), and accordingly,
did not approve any further increase in our distribution margins at such
time.




The ENRE
also authorized us to charge our non-residential customers the retroactive
portion of these tariff increases for the period from November 2005 through
January 2007, which amounts in the aggregate to
Ps. 218.6 million, which is being invoiced in 55 consecutive monthly
installments beginning in February 2007, representing approximately
Ps. 48 million each year. As of December 31, 2009, we had invoiced Ps.
149.4 million of this amount.




In
October 2007, the Argentine Secretary of Energy published Resolution No
1037/2007, which granted us an increase of 9.63% to our distribution margins to
reflect an increase in our 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
our tariff structure, and, instead, we were allowed to retain the funds that we
are required to collect and transfer to the PUREE to cover this CMM increase and
future CMM increases.  In November 2007, we began accounting for the
retroactive portion of the May 2007 CMM increase for the period from May 1, 2007
to October 31, 2007, which amounted to Ps. 49.6 million.




In July
2008, we obtained an increase of approximately 17.9% to our distribution margin,
which we incorporated into our 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 our 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 an
average increase of 21% for residential customers with bimonthly consumption
levels over 650 kWh.  In addition, the ENRE authorized us to be
reimbursed for the retroactive portion of the 7.56% CMM increase for the period
between November 2007 and June 2008, from the PUREE funds.




Furthermore,
we requested an additional increase to our distribution margins under the CMM to
account for fluctuations in the distribution cost base for the period from
November 2007 to April 2008, in comparison to the distribution cost base
recognized by the CMM in November 2007.  The ENRE adopted Note No
81.399, which authorized a 5.791% increase under the CMM.  As of the
date of this annual report, the ENRE has not approved a new tariff scheme
including this tariff increase.




As of
December 31, 2009, we have submitted to the ENRE three additional requests from
CMM adjustments as described in the table below:





56





Assessment Period
                          
                          Application Date
                          
                          CMM Adjustment
                            RequestedMay
      2008 – October 2008
                          
                          November
      2008
                          
                          
                          5.684
                          %November
      2008 - April 2009
                          
                          May
      2009
                          
                          
                          5.068
                          %May
      2009 – October 2009
                          
                          November
      2009
                          
                          
                          5.041
                          %





As of the
date of this annual report, the ENRE has not responded to these
requests.


Although
we believe that these increases comply with the terms of the CMM, we cannot
assure you that the ENRE will grant us these increases in full, or at all, or if
granted, that we will be able to bill our customers or otherwise recover these
increases from other sources of payment (such as PUREE).




These
increases, and any further increases granted under the CMM, will remain in force
until the approval of a new tariff structure under the RTI.





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.




VAD
              
              
              Average Taxes
              
              
              Electric Power PurchasesTariff(1)
              
              November
                  2001
              
              
              January
                  2005
              
              
              February
                  2007
              
              
              October
                  2008
              
              
              November
                  2001
              
              
              January
                  2005
              
              
              February
                  2007
              
              
              October
                  2008
              
              
              November
                  2001
              
              
              January
                  2005
              
              
              February
                  2007
              
              
              October
                  2008ResidentialTIRI
      (0-300)
              
              
              49.40
              %
              
              
              44.50
              %
              
              
              44.50
              %
              
              
              44.69
              %
              
              
              28.70
              %
              
              
              28.70
              %
              
              
              28.70
              %
              
              
              28.70
              %
              
              
              21.90
              %
              
              
              26.80
              %
              
              
              26.80
              %
              
              
              26.61
              %TIRI2
      (301-650)
              
              
              36.20
              %
              
              
              33.00
              %
              
              
              33.00
              %
              
              
              30.81
              %
              
              
              29.20
              %
              
              
              29.20
              %
              
              
              29.20
              %
              
              
              29.23
              %
              
              
              34.60
              %
              
              
              37.80
              %
              
              
              37.80
              %
              
              
              39.95
              %TIR#
      (651-800)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              32.08
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              29.23
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              38.68
              %TIR4
      (801-900)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              31.63
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              29.23
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              39.13
              %TIR5
      (90-1000)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              32.75
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              29.23
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              38.02
              %TIR6
      (1001-1200)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              26.29
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              29.23
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              44.48
              %TIR
      7 (1201-1400)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              27.18
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              29.23
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              43.59
              %TIR8
      (1401-2800)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              25.94
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              29.23
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              44.83
              %TIR9
      (> 2800)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              22.50
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              29.23
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              48.26
              %Commercial
      - small demandsTIG1
              
              
              55.10
              %
              
              
              40.00
              %
              
              
              47.80
              %
              
              
              48.76
              %
              
              
              25.70
              %
              
              
              25.70
              %
              
              
              25.70
              %
              
              
              25.68
              %
              
              
              19.20
              %
              
              
              34.30
              %
              
              
              26.50
              %
              
              
              25.55
              %TIG2
              
              
              53.60
              %
              
              
              31.10
              %
              
              
              43.60
              %
              
              
              42.39
              %
              
              
              25.60
              %
              
              
              25.60
              %
              
              
              25.60
              %
              
              
              25.64
              %
              
              
              20.70
              %
              
              
              43.20
              %
              
              
              30.70
              %
              
              
              31.97
              %Commercial
      - medium demandT2
              
              
              43.30
              %
              
              
              27.90
              %
              
              
              35.50
              %
              
              
              38.03
              %
              
              
              25.60
              %
              
              
              25.60
              %
              
              
              25.60
              %
              
              
              25.63
              %
              
              
              31.00
              %
              
              
              46.40
              %
              
              
              38.90
              %
              
              
              36.34
              %IndustrialT3
      low voltage below 300kw
              
              
              44.20
              %
              
              
              26.50
              %
              
              
              34.30
              %
              
              
              37.86
              %
              
              
              25.70
              %
              
              
              25.70
              %
              
              
              25.70
              %
              
              
              25.66
              %
              
              
              30.10
              %
              
              
              47.80
              %
              
              
              40.10
              %
              
              
              36.48
              %T3
      low voltage over 300kw
              
              
              42.60
              %
              
              
              24.50
              %
              
              
              32.10
              %
              
              
              27.09
              %
              
              
              25.60
              %
              
              
              25.60
              %
              
              
              25.60
              %
              
              
              25.62
              %
              
              
              31.80
              %
              
              
              49.90
              %
              
              
              42.30
              %
              
              
              47.29
              %T3
      medium voltage below 300kw
              
              
              29.30
              %
              
              
              14.10
              %
              
              
              19.70
              %
              
              
              25.25
              %
              
              
              25.70
              %
              
              
              25.70
              %
              
              
              25.70
              %
              
              
              25.68
              %
              
              
              45.00
              %
              
              
              60.30
              %
              
              
              54.60
              %
              
              
              49.06
              %T3
      medium volgate over 300kw
              
              
              27.30
              %
              
              
              12.30
              %
              
              
              17.50
              %
              
              
              17.71
              %
              
              
              25.70
              %
              
              
              25.70
              %
              
              
              25.70
              %
              
              
              25.69
              %
              
              
              47.00
              %
              
              
              62.00
              %
              
              
              56.80
              %
              
              
              56.60
              %Average
      Tariff
              
              
              41.20
              %
              
              
              28.50
              %
              
              
              33.90
              %
              
              
              33.16
              %
              
              
              27.20
              %
              
              
              27.20
              %
              
              
              27.20
              %
              
              
              27.24
              %
              
              
              31.50
              %
              
              
              44.20
              %
              
              
              38.90
              %
              
              
              39.60
              %





57







(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 800kWh  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.  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.




Revisión Tarifaria Integral
(Integral Tariff Revision, or RTI).  Pursuant to the Adjustment
Agreement, we are also currently engaged in an integral tariff revision process
with the ENRE.




Our
integral tariff proposal will include, among other factors, a recalculation of
the compensation we receive for our distribution services, including taxes that
are not currently passed through to our customers (such as taxes on financial
transactions), a revised analysis of our distribution costs, modifications to
our quality of service standards and penalty scheme and, finally, a revision of
our asset base and rate of return.  For this purpose, we will present
a post-tax return on our asset base, which we calculate as operating income plus
depreciation of property, plant and equipment, less the tax charge resulting
from the application to this amount of the legal tax rate (currently, 35%),
divided by the value of our gross asset base.  The last adjustment for
inflation to our property, plant and equipment was registered in
February 2003 in accordance with Argentine GAAP.  Accordingly, we
estimate the effects of inflation on our property, plant and equipment for
periods after February 2003 for purposes of determining the value of our
gross asset base in connection with our concession.  See “Item 4.
Information on the Company—Property, plant and equipment.” Based on our method
of calculation, we estimate that the post-tax return on our gross asset base was
2.2% in 2009 (on the basis of a gross asset base valued at
Ps. 10.9 billion at December 31, 2009), which we believe is still
extremely low considering our annual post-tax return before the economic
crisis.  Our average annual post-tax return on our gross asset base
from 1997 through 2001 was 9.6%.  We believe that this method of
calculating our return on assets is consistent with the requirements of the
Adjustment Agreement, although we cannot guarantee that the ENRE will not decide
to use other factors or methods to calculate our return on assets.




On April
30, 2007, the Argentine Secretary of Energy published Resolution No. 434/2007,
which established that the new tariff structure resulting from the RTI would
take effect on February 1, 2008 and would be implemented in two installments, in
February and August 2008.




In July
2008, the Secretary of Energy issued Resolution 865/2008, which reviews the RTI
schedule contemplated by the Adjustment Agreement.  The Secretary
revised the original RTI schedule and stated that the new tariff structure of
the RTI would take effect in February 2009 and that if in February 2009 the
tariff resulting from the RTI were greater than the tariff in place at that
moment, the tariff increase would be applied in three stages: the first
adjustment would take place in February 2009, the second in August 2009 and the
last one in February 2010.




As of the
date of this annual report, no resolution has been issued concerning the
application of the electricity rate schedule resulting from the RTI, which was
expected to be in effect since February 1, 2009.




On
November 12, 2009, we submitted our tariff proposal to the ENRE's Board of
Directors in response to the ENRE’s request in ENRE Resolution No. 467/2008 and
as part of the RTI. Our proposal presented the ENRE with three different options
for the revised tariff scheme based on three different scenarios;  two
scenarios contemplated in Resolution No. 467/08 of the ENRE and a third one
which contemplated a quality regime and cost of undelivered energy similar to
the one currently in effect. Each proposal described the assumptions on which
the proposal was prepared, and the detailed studies supporting each scenario:
projected demand, measurement campaign, environmental management plan, capital
base study, study of the group of facilities required to meet the demand of a
certain homogeneous market in terms of consumption with the lowest costs (known
as “Sistemas Eléctricos Representativos”), contemplated investment plan,
operating costs analysis, profitability rate analysis, resulting revenue
requirement and electricity rate adjustment criterion.





58





We stated
to the ENRE that the sustainability of the proposals depends on the actual
occurrence of the assumptions and that any change in the criteria and/or
parameters contemplated in our proposal could directly affect the economic and
financial equation that supports each of the proposed options.





Furthermore,
the calculations made in each of the three options took into account the
implementation of the tariff in three equal semiannual
installments.




We
anticipate that, once the ENRE has reviewed our integral tariff proposal, it
will hold a public hearing on the proposal, following which we expect that the
ENRE will adopt a revised tariff scheme.




Based on
the parameters of the RTI set forth in the Adjustment Agreement, we expect that
this revised tariff scheme will maintain our then current distribution margins
following the increases granted under the Adjustment Agreement (including any
increases granted pursuant to the CMM) and include a cost adjustment mechanism
similar to the CMM.  Because the RTI is provided for in the Adjustment
Agreement, which was approved by the Argentine Congress and ratified by the
Argentine executive branch, we believe that the ENRE’s decision will not be
subject to ratification procedures.  See “Item 3. Key Information—Risk
factors—Risks relating to our business—The Adjustment Agreement may be subject
to challenge by Argentine consumer and other groups, which, if successful, could
materially adversely affect our ability to implement any tariff adjustments
granted by the Argentine government.”




The
outcome of the renegotiation of our tariff structure, however, is highly
uncertain as to its final result.  We cannot make assurances 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 asset base.  See “Item 3. Key Information—Risk factors—Risks
relating to our business—Our business and prospects depend on our ability to
negotiate further improvements to our tariff structure, including increases in
our distribution margin.”




Social Tariff
Regime.According to the Adjustment Agreement, we will be
required to apply a social tariff regime as part of our revised tariff structure
resulting from the RTI.  This regime is a system of subsidized tariffs
for the poverty-stricken sectors of the community to be approved by the ENRE in
the context of the RTI.  The social tariff regime will provide
poverty-stricken sectors of the community with the same service and quality of
service as other users.  The beneficiaries under this regime must
register with the Argentine government and meet certain criteria, including not
owning more than one home and having a level of electricity consumption that is
not higher than a maximum to be established by the
government.  According to the Adjustment Agreement, the Argentine
government will subsidize the increased costs associated with the social tariff
regime in part with contributions by users not subject to this
regime.  We will be required to cover a portion of these costs by not
charging the beneficiaries of this regime for reconnection expenses and
installation of new equipment, updating our billing system and granting payment
plans to beneficiaries for existing past-due electricity bills.  We
currently anticipate that the incremental cost to us of providing services under
the social tariff regime will not be significant.  However, we cannot
guarantee that the social tariff regime will be implemented in the manner, or
under the terms, we currently anticipate.




Demand




Energy
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.




Electricity
demand




The
following table sets forth the amount of electricity generated in Argentina and
electricity purchases by our company in each of the periods
indicated.





59




Year
                    
                    Electricity Demand(1)
                    
                    
                    Edenor Demand(2)
                    
                    
                    Edenor’s Demand
                        as a% of Total Demand(in GWh)1994
                    
                    
                    55,827
                    
                    
                    
                    11,386
                    
                    
                    
                    20.4
                    %1995
                    
                    
                    57,839
                    
                    
                    
                    11,629
                    
                    
                    
                    20.1
                    %1996
                    
                    
                    61,513
                    
                    
                    
                    12,390
                    
                    
                    
                    20.1
                    %1997
                    
                    
                    66,029
                    
                    
                    
                    13,046
                    
                    
                    
                    19.8
                    %1998
                    
                    
                    69,103
                    
                    
                    
                    13,768
                    
                    
                    
                    19.9
                    %1999
                    
                    
                    71,689
                    
                    
                    
                    14,447
                    
                    
                    
                    20.2
                    %2000
                    
                    
                    75,591
                    
                    
                    
                    15,148
                    
                    
                    
                    20.0
                    %2001
                    
                    
                    78,098
                    
                    
                    
                    15,414
                    
                    
                    
                    19.7
                    %2002
                    
                    
                    76,483
                    
                    
                    
                    14,865
                    
                    
                    
                    19.4
                    %2003
                    
                    
                    82,261
                    
                    
                    
                    15,811
                    
                    
                    
                    19.2
                    %2004
                    
                    
                    87,477
                    
                    
                    
                    16,673
                    
                    
                    
                    19.1
                    %2005
                    
                    
                    92,340
                    
                    
                    
                    17,623
                    
                    
                    
                    19.1
                    %2006
                    
                    
                    97,590
                    
                    
                    
                    18,700
                    
                    
                    
                    19.2
                    %2007
                    
                    
                    102,950
                    
                    
                    
                    20,233
                    
                    
                    
                    19.7
                    %2008
                    
                    
                    105,959
                    
                    
                    
                    20,863
                    
                    
                    
                    19.7
                    %2009
                    
                    
                    104,592
                    
                    
                    
                    20,676
                    
                    
                    
                    19.8
                    %





Source: Compañía Administradora del
Mercado Mayorista Eléctrico, S.A.(CAMMESA)


(1)
            Includes
      demand in the Mercado
      Eléctrico Mayorista Sistema Patagónico (Patagonia wholesale
      electricity market, or MEMSP).


(2)
            Calculated
      as electricity purchased by us and our wheeling system
      customers.





Electricity
demand in our concession area has grown an average of 4.1% per annum since
1994.  The evolution of demand shows two growth periods interrupted by
a slight decline in demand in 2002 attributable to the economic crisis, and a
slight decrease registered in 2009, as a consequence of the international
financial crises..




The
following graph represents the annual growth of energy purchased to satisfy the
demand of each operating area from 2000 through 2009:











60





Beginning
in mid-2001 through 2002, the decline in the overall level of economic activity
and the deterioration in the ability of many of our customers to pay their bills
as a result of the crisis led to an overall decrease in demand for electricity
and an increase in non-technical energy losses.  After the economic
crisis, however, demand started growing again, increasing an average of 5.8% per
annum from 2003 through 2008.  This increase in demand was due to
renewed growth in the Argentine economy since the second half of 2003 and the
relative low cost of energy to consumers, in real terms, resulting from the
freeze of our distribution margin and the elimination of the inflation
adjustment provisions of our concession in 2002.  Demand by
residential customers increased by 5.5% in 2008, primarily due to the addition
of new appliances and the relative low cost of energy, in real
terms.  In 2009, residential demand decreased  by 2.7%, the
first annual decline since the 2002 crisis, resulting from the slowdown in
Argentina's economy this year. Demand by our high-demand customers and wheeling
system customers has also experienced a decrease in 2009 due to a decrease
in  economic activity, particularly in the industrial sector (which
includes wheeling customers), with demand decreasing by 2.2% in
2009.




The small
commercial category of customers registered a decrease in demand in 2002, but
recovered slightly after the initial effects of the economic crisis due to the
sensitivity of customers in this category to the economic status of their small
businesses.  The medium commercial category of customers has generally
demonstrated the same volatility in demand as low-demand customers in recent
years.




Public
lighting demand has declined significantly over the past few years due to the
introduction of low-consumption lighting.  We believe that the public
lighting category will continue to register low demand despite continued
economic expansion and urban development.  After having increased
significantly in 2005, demand in shantytowns stabilized in 2006, remaining in
line with historic growth levels, and was below the increase in demand for our
low demand residential category of customers.  However, overall demand
in this category is relatively small in comparison to other larger categories of
our customers.  See “Item 4. Information on the Company—Framework
agreement (Shantytowns)”




The
Argentine government has also implemented the PUREE in an attempt to curb
increases in energy demand by offering rewards to residential and small
commercial customers who reduce their energy usage in comparison to their use in
2003.  In 2005, the Argentine Government implemented a second version
of the PUREE (PUREE II), which rewards residential and small commercial
customers based on their usage in 2003 and industrial customers based on their
usage in 2004.  The PUREE II also penalizes industrial customers whose
usage exceeds 90% of 2004 levels and penalizes residential customers with
bi-monthly consumption levels at or above 300 KWh and small commercial customers
whose usage exceeds 90% of their usage levels for 2003.  Residential
customers with consumption levels below 300 KWh are exempt from
penalty.  In spite of the PUREE, energy demand has continued to
increase during the three years it has been in effect.




On
October 31, 2008, the Secretary of Energy adopted Resolution 1170/08, which
excludes all the T1G, T2, T3 and T1R customers with bimonthly consumption levels
over and above 1,000 KWh from receiving PUREE reward payments.




On March
2, 2010, the Secretary of Energy adopted Resolution 45/2010, which revised the
calculation of the coefficient used to reward T1R customers with consumption
levels below 1,000 KWh. This resolution decreases the rewards amount that these
users will receive.




We cannot
make assurances that the tariffs that result from the RTI or future economic,
social and political developments in Argentina, over which we have no control,
will not have an adverse effect on energy demand in Argentina.  See
“Item 3. Key Information—Risk factors—Risks related to the electricity
distribution sector—Electricity demand may be affected by recent or future
tariff increases.”




Capacity
demand




Demand
for installed capacity to deliver electricity generally increases with growth in
demand for electricity.  However, since the 2001 crisis, with the
exception of the two thermal generation plants described below, no new
generation plants have been built.  However, the Argentine government
has implemented some economic incentives, such as those contained in the Energía PlusProgram, which
have served to increase generating capacity in existing generation plants such
as Central Térmica Güemes and Central Loma de la Lata. A lack of generation
capacity would place limits on our ability to grow and could lead to increased
service disruptions, which could cause an increase in our fines.  See
“Item 3. Key Information—Risk factors—Risks relating to the electricity
distribution sector—Energy shortages may act as a brake on growing demand for
electricity and disrupt distribution companies’ ability to deliver electricity
to their customers, which could result in customer claims and material penalties
imposed on these companies.”





61




In
response to the lack of private investment in new generation plants, the
Argentine government undertook a project to construct two 800 MW thermal
generation plants, Central Termoeléctrica Manuel Belgrano and Central
Termoeléctrica General San Martín.  Construction of these two plants
was completed and operations commenced in 2009.  The two plants were
constructed with funds derived from three sources: net revenues of generators
derived from energy sales in the spot market, a special charge to our
non-residential customers per MWh of energy billed and a specific charge from
CAMMESA applicable to large users.  In addition to the construction of
these two new thermal generation plants, in September 2006 the Secretary of
Energy of the Ministry of Federal Planning, Public Investment and Services
issued Resolution No. 1281/06 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 to meet increasing energy needs.  The government has
also required us to finance 24%, and Empresa Distribuidora Sur S.A.(Edesur) 26%,
of the construction costs of two high-tension 220 KV lines between the Central Puerto and Central Costanera generators
and the Malaver
network, which will provide access to an additional 600MW of energy from the
Central Puerto and
Central Costanera
generators that currently cannot be distributed due to saturation of their
grids.  We estimate that we will be required to contribute an
aggregate of approximately Ps. 39.3 million to construction of the
Malaver network under
the scheduled capital expenditures of the Adjustment Agreement The actual costs
of this project will be determined at the time we receive and accept bids from
third party contractors in connection with the project.




We cannot
make assurances that these initiatives will be implemented in a timely manner or
that they will be able to serve our energy demands in the manner we
anticipate.




Seasonality
of Demand




Seasonality
has a significant impact on the demand for electricity in our concession area,
with electricity consumption peaks in summer and winter.  The impact
of seasonal changes in demand is registered primarily in our residential and
small commercial customer categories.  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.




The chart
below shows seasonality of demand in our residential customer category for the
periods indicated.










62




The chart
below shows seasonality of demand in our small commercial customer category for
the periods indicated.









The chart
below shows seasonality of demand in our medium commercial customer category for
the periods indicated.









The chart
below shows seasonality of demand in our industrial customer category for the
periods indicated.





63









Taxes
on electricity tariffs




Sales of
electricity within our service area are subject to certain taxes, levies and
charges at the federal, provincial and municipal levels.  These taxes
vary according to location and type of user.  In general, residential
and governmental users are subject to a lower tax rate than commercial and
industrial users.  Similarly, taxes are typically higher in the
Province of Buenos Aires than in the City of Buenos Aires.  All of
these taxes are billed to consumers along with electricity charges.




Framework
agreement (Shantytowns)




We also
supply electricity to low-income areas and shantytowns within our concession
area under a special regime established pursuant to a framework agreement that
we, Edesur and Empresa Distribuidora La Plata S.A. (Edelap) entered into in
October 2003 with the Argentine government and the Province of Buenos
Aires.  The framework agreement contains terms similar to a prior
framework agreement entered into in 1994.  Pursuant to the new
framework agreement, we are compensated for the service we provide to
shantytowns by a commission in each shantytown that collects funds from
residents of the shantytown.  In addition, we are compensated by the
municipality in which each shantytown is located, and, if there is any payment
shortfall, by a special fund to which the Argentine government and the Province
of Buenos Aires each contributes and to which each is severally
liable.  The new framework agreement took effect retroactively from
September 1, 2002 and was to remain in effect through the earlier of
December 31, 2006 or the full normalization of the
shantytowns.




On June
23, 2008, we signed an amendment to the framework agreement with the Argentine
government, the Province of Buenos Aires and the other national electric
distributors agreeing to extend the framework agreement four years from January
1, 2007.  The Argentine government ratified the amendment on September
22, 2008 and the Province of Buenos Aires published the ratification of this
Addendum on June 18, 2009 in the Official Bulletin of the Province of Buenos
Aires,. Throughout this process, we have continued to supply energy to the
shantytowns.




During
November and December 2009, we received from the Argentine government payments
for a total amount of Ps.20 million. In March and May 2010, we received from the
Argentine government payments of Ps. 5.0 million and Ps.3.1 million,
respectively.




Our
receivables for amounts accrued but not yet paid for the supply of energy to
shantytowns under the framework agreement amounted to Ps. 54.8 million as
of December 31, 2009 and Ps. 49.4million as of December 31,
2008.




In
October 2006, we and the Province of Buenos Aires entered into a payment
plan agreement with respect to amounts owed to us by the Province of Buenos
Aires under the new framework agreement with respect to periods prior to
2007.  As of December 31, 2009, the Government of the Province of
Buenos Aires owed us Ps. 2.3 million of the total amount due under the payment
plan agreement.  See “Item 4. Information on the Company—Framework
agreement (Shantytowns).”





64




In March
2010, the Company signed with the Government of the Province of Buenos Aires a
payment plan agreement with respect to amounts owed to us by the Province of
Buenos Aires under the new framework agreement. The Government of the Province
of Buenos Aires agreed to pay the amount due through Cancellation Bonds “Bonos
de Cancelación de Deuda”. The agreement was signed at referendum of the
ratification by the Provincial Executive Power and the Company's Board of
Directors. The Company’s managing board ratified the agreement in the meeting
held on April 27, 2010. During May 2010, the Company received payments from the
Government of the Province of Buenos Aires for Ps.1.6 million in cash and
Ps.30.1 million (face value) with Cancellation Bonds.


Operating
Expenses




Our most
significant operating expenses are transmission and distribution expenses, which
include depreciation charges, salaries and social security taxes, outsourcing
and purchases of materials and supplies, among others.




After
depreciation, our highest expenses are typically salaries and social security
taxes.  We believe that future increases in our salary and social
security expenses will result primarily from salary raises rather than from a
significant growth in our work force, which we anticipate will remain relatively
stable in the near future.  We typically try to reach an agreement at
the beginning of each fiscal year, although we have, in the past, implemented
mid-year salary increases as necessary.




We seek
to maintain a flexible cost base by achieving an optimal level of outsourcing,
which allows us both to maintain a lower cost base and gives us the ability to
respond more quickly to changes in our market.  We had approximately
3,611 third-party employees under contract with our company as of
December 31, 2009, 3,029 as of December 31, 2008 and 3,612 as of December
31, 2007.  The number of third-party employees under contract does not
directly relate to the number of third-party employees actually performing
services for our company at any given time, as we only pay for the services of
these employees on an as-needed basis.  See “Item 6. Directors, Senior
Management and Employees—Employees.”




Our
principal material and supply expenses consist of purchases of wire and
transformers (i.e.,
electromagnetic devices used to change the voltage level of alternating-current
electricity), which we use to maintain our network.





65




Summary
Historical Results of Operations




The
following table provides a summary of our operations for the years ended
December 31, 2009, 2008 and 2007.




Year ended December 31,2009
              
              
              2008
              
              
              2007(in millions of pesos)Net
      sales
              
              Ps.
              2,077.9
              
              
              Ps.
              2,000.2
              
              
              Ps.
              1,981.9Electric
      power purchases
              
              
              (1,003.4
              )
              
              
              (934.7
              )
              
              
              (889.9
              )Gross
      margin
              
              
              1,074.5
              
              
              
              1,065.5
              
              
              
              1,092.0Transmission
      and distribution expenses
              
              
              (548.6
              )
              
              
              (497.9
              )
              
              
              (417.6
              )Selling
      expenses
              
              
              (158.9
              )
              
              
              (126.0
              )
              
              
              (120.6
              )Administrative
      expenses
              
              
              (176.6
              )
              
              
              (138.7
              )
              
              
              (124.7
              )Net
      operating income
              
              
              190.4
              
              
              
              302.9
              
              
              
              429.2Financial
      income (expenses) and holding gains (losses)Generated
      by assets
              
              
              75.2
              
              
              
              10.6
              
              
              
              12.7Generated
      by liabilities
              
              
              (198.5
              )
              
              
              (197.9
              )
              
              
              (125.5
              )Adjustment
      to present value of the retroactive tariff increase arising from the
      application of the new electricity rate schedule and from the Payment Plan
      Agreement with the Province of Buenos Aires
              
              
              3.4
              
              
              
              13.5
              
              
              
              (29.6
              )Adjustment
      to present value of notes
              
              
              (5.2
              )
              
              
              (8.5
              )
              
              
              (21.5
              )Gain
      (loss) from the purchase and redemption of notes
              
              
              81.4
              
              
              
              93.6
              
              
              
              (10.2
              )Adjustment
      to present value of purchase and redeemed notes
              
              
              0
              
              
              
              0
              
              
              
              (8.6
              )Other
      income (expenses), net
              
              
              23.2
              
              
              
              (29.9
              )
              
              
              1.0Net
      income before income tax
              
              
              169.9
              
              
              
              184.3
              
              
              
              247.4Income
      tax
              
              
              (79.3
              )
              
              
              (61.2
              )
              
              
              (125.0
              )Net
      income
              
              Ps.
              90.6
              
              
              Ps.
              123.1
              
              
              Ps.
              122.5




Year
ended December 31, 2009 compared with year ended December 31, 2008.




Net
sales




Net sales
increased Ps. 77.7 million (3.9%) to Ps. 2,077.9 million in the year
ended December 31, 2009 from Ps. 2,000.2 million in the year ended
December 31, 2008.  Net energy sales represented approximately
98.0% of our net sales in 2009 and 98.3% in 2008; late payment charges, pole
leases, and connection and reconnection charges represented the remaining
balance.  Energy sales increased by 4.7% (Ps. 93.5 million) to
Ps. 2,094.3 million in the year ended December 31, 2009 from
Ps. 2,000.8 million in the year ended December 31, 2008.




This
increase in net sales was mainly due to:




·
            An
      increase in the energy purchase price that, since October 2008 we
      have passed on to certain of our customers, due to the tariff schedule set
      by ENRE’s Resolution 628/08 (from June 2009 to August 2009, this increase
      was partially subsidized by the Argentine
  Government);




·
            a
      1.6% increase in capacity demand by certain of our
    customers;




·
            a
      2.7% increase in the number of T1R and T1G customers, which are billed for
      a fixed charge payable bimonthly;
and





66




·
            a
      Ps.7.9 million increase in late payment charges, pole leases, and
      connection and reconnection
charges.




These
increases were partially offset by:




·
            a
      decrease in the volume of energy sold in 2009, compared to the volume of
      energy sold in 2008 (from 18,616 GWh in the year ended December 31,
      2008 to 18,220 GWh in the year ended December 31, 2009), due to an
      increase in demand; and




·
            an
      increase in ENRE penalties of Ps. 23.7
million.




Electric
power purchases




The
amount of electric power purchases increased 7.3% to Ps. 1,003.4 million
for the year ended December 31, 2009 from Ps. 934.7 million in the year
ended December 31, 2008, mainly due to an energy purchase price increase that we
have passed through to certain of our customers (T1R with bimonthly consumption
levels over 1,000 Kwh, T1G and T3 with capacity demand over 300 KW) since
October 2008, in accordance with ENRE’s Resolution 628/08 .




The
volume of energy purchased in the year ended December 31, 2009 was 17,040
GWh, which was 0.8% lower when compared to the year ended December 31,
2008, when we purchased 17,169 GWh (in both cases excluding wheeling system
demand).




Energy
losses increased to 11.9% in the year ended December 31, 2009 from 10.8% in the
year ended December 31, 2008.




Gross
margin




Our gross
margin of Ps. 1,074.5 million in the year ended December 31, 2009 is
in line with the one recorded in the year ended December 31, 2008 of
Ps. 1,065.5 million.




Transmission
and distribution expenses




Transmission
and distribution expenses increased 10.2% to Ps. 548.6 million in the year
ended December 31, 2009 from Ps. 497.9 million in the year ended December
31, 2008, mainly due to a Ps. 44.1 million increase in salaries and social
security taxes, attributable to an increase in compensations granted in 2009,
and a Ps. 16.1 million increase in outsourcing, mainly attributable to
increases in contractors prices. These increases were partially offset by a
decrease of Ps.15.4 million in technical assistance fees in 2009, due to the
termination of the Technical Assistance Agreement certain technical assistance
agreement that were in place.




The
following table sets forth the principal components of our transmission and
distribution expenses for the years indicated:




Year ended December 31,2009
                
                
                % on 2009
                    net sales
                
                
                2008
                
                
                % on 2008
                    net sales(in millions of Pesos)Salaries
      and social security taxes
                
                Ps.
                219.8
                
                
                
                40.1
                %
                
                
                10.6
                %
                
                Ps.
                175.7
                
                
                
                35.3
                %
                
                
                8.8
                %Supplies
      Consumption
                
                
                34.3
                
                
                
                6.3
                %
                
                
                1.7
                %
                
                
                31.9
                
                
                
                6.4
                %
                
                
                1.6
                %Outsourcing
                
                
                110.2
                
                
                
                20.0
                %
                
                
                5.3
                %
                
                
                94.1
                
                
                
                18.9
                %
                
                
                4.7
                %Depreciation
      of property, plant and equipment
                
                
                166.8
                
                
                
                30.4
                %
                
                
                8.0
                %
                
                
                166.0
                
                
                
                33.3
                %
                
                
                8.3
                %Others
                
                
                17.5
                
                
                
                3.2
                %
                
                
                0.8
                %
                
                
                30.2
                
                
                
                6.1
                %
                
                
                1.5
                %Total
                
                Ps.
                548.6
                
                
                
                100.0
                %
                
                
                26.4
                %
                
                Ps.
                497.9
                
                
                
                100.0
                %
                
                
                24.9
                %







67




Selling
expenses




Our
selling expenses are related to customer services provided at our commercial
offices, billing, invoice mailing, collection and collection procedures, as well
as allowances for doubtful accounts. Selling expenses increased 26.1% to
Ps. 158.9 million in the year ended December 31, 2009 from Ps. 126.0
million in the year ended December 31, 2008, primarily as a result of a
Ps. 16.1 million increase in salaries and social security taxes, an
increase of Ps. 5.4 million in outsourcing attributable to price increases
in our outsourcing services contracts, an increase of Ps. 3.2 million in
taxes and charges due to the increase in municipal taxes and the ENRE
contributions and a Ps. 3.3 million increase in our allowance for doubtful
accounts.




The
following table sets forth the principal components of our selling expenses for
the years indicated:




Year ended December 31,2009
                
                
                % on 2009
                    net sales
                
                
                2008
                
                
                % on 2008
                    net sales(in millions of Pesos)Salaries
      and social security taxes
                
                Ps.
                51.6
                
                
                
                32.5
                %
                
                
                2.5
                %
                
                Ps.
                35.5
                
                
                
                28.2
                %
                
                
                1.8
                %Allowance
      for doubtful accounts
                
                
                18.6
                
                
                
                11.7
                %
                
                
                0.9
                %
                
                
                15.3
                
                
                
                12.1
                %
                
                
                0.8
                %Outsourcing
                
                
                40.1
                
                
                
                25.2
                %
                
                
                1.9
                %
                
                
                34.7
                
                
                
                27.5
                %
                
                
                1.7
                %Taxes
      and charges
                
                
                17.9
                
                
                
                11.3
                %
                
                
                0.9
                %
                
                
                14.7
                
                
                
                11.7
                %
                
                
                0.7
                %Others
                
                
                30.8
                
                
                
                19.3
                %
                
                
                1.4
                %
                
                
                25.8
                
                
                
                20.5
                %
                
                
                1.3
                %Total
                
                Ps.
                158.9
                
                
                
                100.0
                %
                
                
                7.6
                %
                
                Ps.
                126.0
                
                
                
                100.0
                %
                
                
                6.3
                %










Administrative
expenses




Our
administrative expenses include, among others, expenses associated with
accounting, payroll administration, personnel training, systems operation,
maintenance and advertising expenses. Administrative expenses increased 27.3% to
Ps. 176.6 million in the year ended December 31, 2009 from
Ps. 138.7 million in the year ended December 31, 2008, primarily as a
result of a Ps. 12.4 million increase in salaries and social security taxes
(attributable to an increase in compensations granted in 2009), a Ps. 5.9
million increase in computer services due to a renewal of certain of our
hardware and software licenses and a Ps.5.5 million increase in tax on financial
transactions due to the repurchase of our financial debt and the issuance of
Class 8 Notes due 2013.




The
following are the principal components of our administrative expenses for the
years indicated:




Year ended December 31,2009
                
                
                % on 2009
                    net sales
                
                
                2008
                
                
                % on 2008
                    net sales(in millions of Pesos)Salaries
      and social security taxes
                
                Ps.
                58.9
                
                
                
                33.4
                %
                
                
                2.8
                %
                
                Ps.
                46.5
                
                
                
                33.5
                %
                
                
                2.3
                %Computer
      services
                
                
                22.8
                
                
                
                12.9
                %
                
                
                1.1
                %
                
                
                16.9
                
                
                
                12.2
                %
                
                
                0.8
                %Outsourcing
                
                
                15.1
                
                
                
                8.5
                %
                
                
                0.7
                %
                
                
                11.4
                
                
                
                8.2
                %
                
                
                0.6
                %Tax
      on financial transactions
                
                
                32.5
                
                
                
                18.4
                %
                
                
                1.6
                %
                
                
                27.0
                
                
                
                19.5
                %
                
                
                1.3
                %Advertising
      expenses
                
                
                16.8
                
                
                
                9.5
                %
                
                
                0.8
                %
                
                
                12.8
                
                
                
                9.2
                %
                
                
                0.6
                %Others
                
                
                30.5
                
                
                
                17.3
                %
                
                
                1.5
                %
                
                
                24.1
                
                
                
                17.4
                %
                
                
                1.3
                %Total
                
                Ps.
                176.6
                
                
                
                100.0
                %
                
                
                8.5
                %
                
                Ps.
                138.7
                
                
                
                100.0
                %
                
                
                6.9
                %





68









Net
operating income




Our net
operating income decreased significantly from Ps. 302.9 million in the year
ended December 31, 2008 to Ps. 190.4 million in the year ended
December 31, 2009.  This decrease is largely due to a 15.9%
increase in the operating expenses, which is attributable to a Ps. 50.7
million increase in transmission and distribution expenses, a Ps. 37.9
million increase in administrative expenses and a Ps. 32.9 million increase
in selling expenses.




Financial
income (expenses) and holding gains (losses)




Financial
income and holding gains generated by assets represented Ps. 75.2 million
in the year ended December 31, 2009, compared to Ps. 10.6 million in the
year ended December 31, 2008.  This increase of Ps. 64.6 million
is primarily due to:




·
            a
      Ps. 44.9 million increase in holding gains resulting from the
      repurchases and valuation of our 2017 and 2016 notes;
  and


·
            a
      Ps. 13.3 million increase in the exchange gains on dollar denominated
      assets due to an increase of the peso-dollar exchange
  rate.




Financial
expenses generated by liabilities which include financial interest, exchange
results and other expenses, were in line with the previous year, from
Ps. 197.9 million in the year ended December 31, 2008 to Ps. 198.5
million in the year ended December 31, 2009.




Adjustment
to present value of notes




We record
our financial debt on our balance sheet at the fair value reflecting our
management’s best estimate of the amounts expected to be paid at each year
end.  The fair value is determined as the present value of the future
cash flows to be paid (including payment of interest) under the terms of the
debt discounted at a rate commensurate with the risk of the debt instrument and
time value of money at the initial measurement.  The adjustment to
present value of the future cash flows of our oustanding debt issued appliying a
market annual interest rate of 10.5%, generated an accounting loss of
Ps. 8.5 million in the year ended December 31, 2008 and accounting non-cash
loss of Ps. 5.2 million in the year ended December 31, 2009.




Adjustment
to present value of the retroactive tariff increase arising from the application
of the new electricity rate schedule and of the Payment Plan Agreement with the
Province of Buenos Aires




The
retroactive portion of the February 2007 tariff increase, which amounts in
aggregate to Ps. 218.6 million, is being invoiced in 55 consecutive monthly
installments to our non-residential customers, starting in February
2007.  As of December 31, 2009, Ps. 149.4 million of the
retroactive tariff adjustment has been invoiced to our non-residential
customers.




In
addition, in October 2006, we entered into a payment plan agreement with the
Province of Buenos Aires with respect to amounts owed to us by the Province of
Buenos Aires under the 2006 framework agreement.  The amounts due
under the payment plan agreement are being invoiced in 18 installments, starting
in January 2007.  As of December 31, 2009, the Province of Buenos
Aires owed us Ps. 2.3 million.




In
accordance with Argentine GAAP, we account for these long term financing plans
at their net present value, which we calculate at a discount rate of 10.5% for
the retroactive tariff increase and 19.62% for the payment plan agreement,
recording the resulting non-cash charge as an adjustment to present value of
these two receivables. We recorded a total non-cash loss of Ps. 3.4 million
in the year ended December 31, 2009 as adjustment to present value of these
receivables, compared to a loss of Ps. 13.5 million in the year ended December
31, 2008.





69




Gain
from repurchase of notes




During
2009 we repurchased and cancelled at market prices U.S. $32.2 million
principal amount of our outstanding Fixed Rate Par Notes due 2016 and
repurchased U.S. $53.8 million principal amount of our outstanding Fixed
Rate Par Notes due 2017.  This transaction generated a net gain of
Ps. 81.4 million.




Other
income (expenses), net




Other
income (expenses), net, includes mainly voluntary retirements, severance
payments and accrual for lawsuits. We recorded a gain of Ps. 23.2 million
in the year ended December 31, 2009, compared to a loss of Ps. 29.9 million
in the year ended December 31, 2008, mainly comprised by due to the
recovery of the allowance for doubtful accounts (Ps. 21.2 million) resulting
from the approval of the New Framework Agreement Addendum that we entered into
with the Argentine government and the Province of Buenos Aires, and the recovery
of the allowance for tax contingencies (Ps. 23.4 million) due to our
registration in the tax regularization plan established in Law n°26.476, both
partially offset by an increase in provisions for accrued litigation (Ps. 15.5
million), voluntary retirements bonuses (Ps. 5.4 million) and severance paid
(Ps.4.4 million).




Income
tax




We
recorded an income tax charge of Ps. 79.3 million in the year ended
December 31, 2009, compared to a charge of Ps. 61.2 million in the year
ended December 31, 2008.




Net
income




We
recorded net income of Ps. 90.6 million in the year ended December 31,
2009, compared to net income of Ps. 123.1 million in the year ended
December 31, 2008.  This decrease of 26.4% is primarily due to the
decrease in the net operating income, partially compensated by better financial
results.




Year
ended December 31, 2008 compared with year ended December 31, 2007.




Net
sales




Net sales
increased Ps. 18.3 million (0.9%) to Ps. 2,000.2 million in the year
ended December 31, 2008 from Ps. 1,981.9 million in the year ended
December 31, 2007.  Net energy sales represented approximately
98.3% of our net sales in 2008 and 2007; late payment charges, pole leases, and
connection and reconnection charges represented the remaining
balance.  Energy sales increased by 1.4% (Ps. 28.1 million) to
Ps. 2,000.8 million in the year ended December 31, 2008 from
Ps. 1,972.7 million in the year ended December 31,
2007.  This variation was significantly affected by the recognition of
the retroactive portion of the February 2007 VAD increase (Ps. 218.6
million) during the first quarter of 2007.  The increase is being
invoiced in 55 equal and consecutive monthly installments, starting in
February 2007.  Excluding this adjustment, our energy sales in
2007 would have been Ps. 1,754.1 million, representing an increase in
energy sales from 2007 to 2008 of 14.1% (Ps. 246.7 million) compared to the
energy sales recorded in 2008.  This increase in energy sales was
mainly due to:




·
            the
      application of a 17.9% increase in our VAD since July 1, 2008
      authorized by the ENRE pursuant to the CMM for the period from May 2007 to
      October 2007, which resulted in tariff increases of 0% to 30% for our
      customers, depending on their level of
  consumption;




·
            the
      retroactive application of the 17.9% VAD increase pursuant to the CMM,
      which represented a Ps. 84.6 million increase in our net sales in
      2008;




·
            the
      energy purchase price increase passed on to some of our customers since
      October 2008; and




·
            a
      4.2% increase in the volume of energy sold in 2008, compared to the volume
      of energy sold in 2007 (from 17,886 GWh in the year ended
      December 31, 2007 to 18,616 GWh in the year ended December 31,
      2008).  The increase in volume is attributable to a 2.3%
      increase in the average GWh consumption per customer and a 1.9% increase
      in the number of our customers in
2008.





70




Electric
power purchases




The
amount of electric power purchases increased 5.0% to Ps. 934.7 million for
the year ended December 31, 2008 from Ps. 889.9 million in the year ended
December 31, 2007, mainly due to an energy purchase price increase applied to
some of our customers (T1R with bimonthly consumption levels over 1,000 Kwh, T1G
and T3 with capacity demand over 300 KW) since October 2008.  This
effect was slightly offset by the transition of a number of our industrial
customers (for whom we purchase energy) to the wheeling system (where
participants purchase energy directly).




The
volume of energy purchased in the year ended December 31, 2008 was 17,169
GWh, which was in line with the year ended December 31, 2007, when we
purchased 17,122 GWh (in both cases excluding wheeling system
demand).




Energy
losses decreased to 10.8% in the year ended December 31, 2008 from 11.6% in the
year ended December 31, 2007.




Gross
margin




Our gross
margin decreased 2.4% to Ps. 1,065.5 million in the year ended
December 31, 2008 from Ps. 1,092.0 million in the year ended
December 31, 2007.  This decrease is mainly due to the recording
of the retroactive portion of the February 2007 VAD, resulting in a positive
impact of Ps. 218.6 million during 2007.  Excluding this effect,
our gross margin during that year would have been Ps. 873.4 million, and
comparing this amount with the gross margin recorded in 2008, the increase in
the gross margin would represent 22.0%.  This increase is attributable
to an increase in the volume of energy sold and to the application of the VAD
increase and the CMM adjustment described above.




Transmission
and distribution expenses




Transmission
and distribution expenses increased 19.2% to Ps. 497.9 million in the year
ended December 31, 2008 from Ps. 417.6 million in the year ended December
31, 2007, mainly due to a Ps. 49.9 million increase in salaries and social
security taxes, attributable to an increase in compensation in the second half
of the year, a Ps. 19.9 million increase in outsourcing, mainly
attributable to greater activity by our contractors, and to a Ps. 9.0
million increase in the consumption of materials associated with preventive
maintenance due to an increase in material prices and an increase in maintenance
activity.




The
following table sets forth the principal components of our transmission and
distribution expenses for the years indicated:




Year ended December 31,2008
                
                
                % on 2008
                    net sales
                
                
                2007
                
                
                % on 2007
                    net sales
                    (excluding
                    unbilled
                    retroactive
                    adjustment)(1)(in millions of Pesos)Salaries
      and social security taxes
                
                Ps.
                175.7
                
                
                
                35.3
                %
                
                
                8.8
                %
                
                Ps.
                125.8
                
                
                
                30.1
                %
                
                
                7.1
                %Supplies
                
                
                31.9
                
                
                
                6.4
                %
                
                
                1.6
                %
                
                
                22.9
                
                
                
                5.5
                %
                
                
                1.3
                %Outsourcing
                
                
                94.1
                
                
                
                18.9
                %
                
                
                4.7
                %
                
                
                74.2
                
                
                
                17.8
                %
                
                
                4.2
                %Depreciation
      of property, plant and equipment
                
                
                166.0
                
                
                
                33.3
                %
                
                
                8.3
                %
                
                
                169.5
                
                
                
                40.6
                %
                
                
                9.6
                %Others
                
                
                30.2
                
                
                
                6.1
                %
                
                
                1.5
                %
                
                
                25.2
                
                
                
                6.0
                %
                
                
                1.5
                %Total
                
                Ps.
                497.9
                
                
                
                100.0
                %
                
                
                24.9
                %
                
                Ps.
                417.6
                
                
                
                100.0
                %
                
                
                23.7
                %





71








1)
            Calculated
      based on net sales as of December 31, 2007 excluding the retroactive
      portion of the February 2007 VAD increase (Ps. 218.6 million), which
      results in net sales of Ps. 1,763.3 million.  The
      retroactive tariff increase is being invoiced in 55 equal and consecutive
      monthly installments, starting on February 2007.  As of
      December 31, 2008, we have billed Ps. 99.7
    million.




Selling
expenses




Our
selling expenses are related to customer services provided at our commercial
offices, billing, invoice mailing, collection and collection procedures, as well
as allowances for doubtful accounts. Selling expenses increased 4.5% to
Ps. 126.0 million in the year ended December 31, 2008 from Ps. 120.6
million in the year ended December 31, 2007, primarily as a result of a
Ps. 10.1 million increase in salaries and social security taxes, an
increase of Ps. 5.3 million in outsourcing attributable to price increases
in our outsourcing services contracts and an increase of Ps. 3.6 million in
taxes and charges due to the increase in municipal and the ENRE
contributions.  These increases were partially offset by a decrease of
Ps. 15.4 million in our allowance for doubtful accounts attributable to the
recovery of the allowance resulting from the supply of electricity to
shantytowns that are covered by the new framework agreement, signed in June
2008.




The
following table sets forth the principal components of our selling expenses for
the years indicated:




Year ended December 31,2008
                
                
                % on 2008
                    net sales
                
                
                2007
                
                
                % on 2007
                    net sales
                    (excluding
                    unbilled
                    retroactive
                    adjustment)(1)(in millions of Pesos)Salaries
      and social security taxes
                
                Ps.
                35.5
                
                
                
                28.2
                %
                
                
                1.8
                %
                
                Ps.
                25.4
                
                
                
                21.0
                %
                
                
                1.4
                %Allowance
      for doubtful accounts
                
                
                15.3
                
                
                
                12.1
                %
                
                
                0.8
                %
                
                
                30.7
                
                
                
                25.5
                %
                
                
                1.7
                %Outsourcing
                
                
                34.7
                
                
                
                27.5
                %
                
                
                1.7
                %
                
                
                29.4
                
                
                
                24.4
                %
                
                
                1.7
                %Taxes
      and charges
                
                
                14.7
                
                
                
                11.7
                %
                
                
                0.7
                %
                
                
                11.1
                
                
                
                9.2
                %
                
                
                0.6
                %Others
                
                
                25.8
                
                
                
                20.5
                %
                
                
                1.3
                %
                
                
                24.0
                
                
                
                19.9
                %
                
                
                1.4
                %Total
                
                Ps.
                126.0
                
                
                
                100.0
                %
                
                
                6.3
                %
                
                Ps.
                120.6
                
                
                
                100.0
                %
                
                
                6.8
                %





1)
            Calculated
      based on net sales as of December 31, 2007 excluding the retroactive
      portion of the February 2007 VAD increase (Ps. 218.6 million) , which
      results in net sales of Ps. 1,763.3 million.  The
      retroactive tariff increase is being invoiced in 55 equal and consecutive
      monthly installments, starting on February 2007.  As of
      December 31, 2008, we have billed Ps. 99.7
    million.




Administrative
expenses




Our
administrative expenses include, among others, expenses associated with
accounting, payroll administration, personnel training, systems operation,
maintenance and advertising expenses. Administrative expenses increased 11.2% to
Ps. 138.7 million in the year ended December 31, 2008 from
Ps. 124.7 million in the year ended December 31, 2007, primarily as a
result of a Ps. 9.9 million increase in salaries and social security taxes
(attributable to an increase in compensation in the second half of the year) and
a Ps. 5.5 million increase in computer services due to a renovation of the
hardware and software.  These increases were partially offset by a
decrease of Ps. 4.5 million in taxes on financial transactions and a
Ps. 2.5 million decrease in advertising expenses (including institutional
relations, radio advertising and community service programs).





72




The
following are the principal components of our administrative expenses for the
years indicated:




Year ended December 31,2008
                
                
                % on 2008
                    net sales
                
                
                2007
                
                
                % on 2007
                    net sales
                    (excluding
                    unbilled
                    retroactive
                    adjustment)(1)(in millions of Pesos)Salaries
      and social security taxes
                
                Ps.
                46.5
                
                
                
                33.5
                %
                
                
                2.3
                %
                
                Ps.
                36.5
                
                
                
                29.3
                %
                
                
                2.1
                %Computer
      services
                
                
                16.9
                
                
                
                12.2
                %
                
                
                0.8
                %
                
                
                11.4
                
                
                
                9.2
                %
                
                
                0.6
                %Outsourcing
                
                
                11.4
                
                
                
                8.2
                %
                
                
                0.6
                %
                
                
                10.9
                
                
                
                8.7
                %
                
                
                0.6
                %Tax
      on financial transactions
                
                
                27.0
                
                
                
                19.5
                %
                
                
                1.3
                %
                
                
                31.5
                
                
                
                25.3
                %
                
                
                1.8
                %Advertising
      expenses
                
                
                12.8
                
                
                
                9.2
                %
                
                
                0.6
                %
                
                
                15.4
                
                
                
                12.3
                %
                
                
                0.9
                %Others
                
                
                24.1
                
                
                
                17.4
                %
                
                
                1.3
                %
                
                
                19.0
                
                
                
                15.2
                %
                
                
                1.1
                %Total
                
                Ps.
                138.7
                
                
                
                100.0
                %
                
                
                6.9
                %
                
                Ps.
                124.7
                
                
                
                100.0
                %
                
                
                7.1
                %





1)
            Calculated
      based on net sales as of December 31, 2007 excluding the retroactive
      portion of the February 2007 VAD increase (Ps. 218.6 million) ,
      which results in net sales of Ps. 1,763.3 million.  The
      retroactive tariff increase is being invoiced in 55 equal and consecutive
      monthly installments, starting on February 2007.  As of
      December 31, 2008, we have billed Ps. 99.7
    million.




Net
operating income (loss)




Our net
operating income decreased significantly from Ps. 429.1 million in the year
ended December 31, 2007 to Ps. 302.9 million in the year ended
December 31, 2008.  This decrease is largely due to the
recognition of the retroactive portion of the February 2007 VAD increase
(Ps. 218.6 million) during the first quarter of 2007.  Excluding
this adjustment, our net operating income in 2007 would have been Ps. 210.6
million, reflecting an increase in net operating income from 2007 to 2008 of
43.8%.  This increase was mainly due to the CMM adjustments described
above and, to a lesser extent, to the increase in the volume of energy and power
capacity sold, which more than offset a Ps. 80.3 million increase in
transmission and distribution expenses, a Ps. 14.1 million increase in
administrative expenses and a Ps. 5.4 million increase in selling
expenses.




Financial
income (expenses) and holding gains (losses)




Financial
income and holding gains generated by assets represented Ps. 10.6 million
in the year ended December 31, 2008, compared to Ps. 12.7 million in the
year ended December 31, 2007.  This decrease of Ps. 2.1 million
is primarily due to a decrease of Ps. 3.6 million in interest
gained.




Financial
expenses generated by liabilities which include financial interest, exchange
results and other expenses, were Ps. 197.9 million in the year ended
December 31, 2008 compared to Ps. 125.5 million in the year ended December
31, 2007.  This Ps. 72.4 million increase is primarily the result
of:




·
            a
      Ps. 20.8 million increase in interest expenses, mainly resulting from
      an increase in the interest rates on our debt in 2008 (an average of 9.1%)
      as compared to 2007 (an average of 4.9%);
and




·
            a
      Ps. 62.8 million increase in exchange losses (Ps. 92.7 million
      in the year ended December 31, 2008, compared to the Ps. 29.9
      million in the year ended December 31, 2007), due to a 9.6% variation
      in the exchange rate of Argentine Pesos for U.S.
  Dollars.




These
increases were partially offset by a decrease in financial expenses of
Ps. 11.0 million in 2008, as compared to 2007.





73




Adjustment
to present value of notes




We record
our financial debt on our balance sheet at the fair value reflecting our
management’s best estimate of the amounts expected to be paid at each year
end.  The fair value is determined as the present value of the future
cash flows to be paid (including payment of interest) under the terms of the
debt discounted at a rate commensurate with the risk of the debt instrument and
time value of money.  In 2006, we restructured all of our outstanding
debt after receiving approval from holders of 100% of our defaulted
debt.  We did not record any adjustment to present value before 2006
because our financial debt was in default.  The adjustment to present
value of the future cash flows of the debt issued in the restructuring, using a
market annual interest rate of 10.5%, generated an accounting loss of
Ps. 21.5 million in the year ended December 31, 2007 and an accounting loss
of Ps. 8.5 million in the year ended December 31, 2008 related to the
non-cash adjustment to present value of payments due on our debt instruments
issued in April 2006.




Adjustment
to present value of the retroactive tariff increase arising from the application
of the new electricity rate schedule and of the Payment Plan Agreement with the
Province of Buenos Aires




The
retroactive portion of the February 2007 tariff increase, which amounts in
aggregate to Ps. 218.6 million, is being invoiced in 55 consecutive monthly
installments to our non-residential customers, starting in February
2007.  As of December 31, 2008, Ps. 99.7 million of the
retroactive tariff adjustment has been invoiced to our non-residential
customers.




In
addition, in October 2006, we entered into a payment plan agreement with the
Province of Buenos Aires with respect to amounts owed to us by the Province of
Buenos Aires under the 2006 framework agreement.  The amounts due
under the payment plan agreement are being invoiced in 18 installments, starting
in January 2007.  As of December 31, 2008, the Province of Buenos
Aires owed us Ps. 2.3 million.




In
accordance with Argentine GAAP, we account for these long term financing plans
at their net present value, which we calculate at a discount rate of 10.5%,
recording the resulting non-cash charge as an adjustment to present value of
these two receivables. We recorded a total non-cash charge of Ps. 13.5
million in the year ended December 31, 2008 as adjustment to present value
of these receivables, compared to a loss of Ps. 29.6 million in the year ended
December 31, 2007.




Gain
from repurchase of notes




In
several transactions in 2007, we repurchased U.S. $43.7 million principal
amount of our outstanding Fixed Rate Par Notes due 2016.  In addition,
we repurchased and redeemed U.S. $240.0 million principal amount of our
outstanding Discount Notes due 2014. These transactions generated a net loss of
Ps. 18.8 million.




During
2008 the Company repurchased and cancelled at market prices U.S. $32.5
million principal amount of our outstanding Fixed Rate Par Notes due 2016 and
repurchased U.S. $17.5 million principal amount of our outstanding Fixed
Rate Par Notes due 2017.  When compared to the fixtures of 2007, this
transaction generated a net gain of Ps. 93.6 million.




Other
income (expenses), net




Other
income (expenses), net, includes mainly voluntary retirements, severance
payments and accrual for lawsuits. We recorded a loss
of  Ps. 29.8 million in the year ended December 31, 2008,
compared to a gain of Ps. 1.0 million in the year ended December 31,
2007, mainly comprised of voluntary retirements (Ps. 31.3 million) due to
an employee reduction in July 2008 and accrued litigations (Ps. 19.9
million), which were partially offset (Ps. 14.1 million) by the recovery of the
allowance for doubtful accounts due to the fact that a new framework agreement
had been signed in June 2008.





74




Income
tax




We
recorded an income tax charge of Ps. 61.2 million in the year ended
December 31, 2008, compared to a charge of Ps. 125.0 million in the year
ended December 31, 2007.




Net
income




We
recorded net income of Ps. 123.1 million in the year ended December 31,
2008, compared to net income of Ps. 122.5 million in the year ended
December 31, 2007.  The 2008 income is in line with the net income of
2007.  However, in 2007 we registered a gain from the recording of the
retroactive tariff increase described above, which resulted in a positive impact
of Ps. 218.6 million for 2007. This increase in net income from 2007 to
2008 was a result of a positive net operating income, which was partially offset
by an increase in financial results and exchange rates
effects.  Losses due to exchange rate effects were in turn partially
compensated for by the gain resulting from the debt repurchases.




LIQUIDITY
AND CAPITAL RESOURCES




Sources
and uses of funds




Historically,
our sources of liquidity have been cash flow from operations and long-term
borrowings.  However, our ability to access the capital and bank loan
markets was effectively eliminated as a result of the economic crisis in
Argentina and our resulting default on our then-outstanding financial debt, as
well as the Argentine government’s imposition of transfer restrictions on
payments of foreign financial obligations.  We have recovered the
ability to incur new financial debt with the closing of our financial debt
restructuring in April 2006.  See “—Debt.”




We expect
to make capital expenditures amounting to approximately
U.S. $100 million on average per year over the next five
years.  Our principal uses of cash are expected to be capital
expenditures and our financial debt service obligations.  We expect
that our principal source of liquidity will be cash flow from operations and, to
a lesser extent, short-term and long-term borrowings, which we expect will be
sufficient to meet our capital requirements in the near future.  In
particular, we may need to incur indebtedness in the long-term to refinance a
portion of our outstanding debt as it becomes due.  However, we are
subject to limitations on our ability to incur new debt and to use our excess
cash under the terms of our restructured debt instruments.  See
“—Debt.”




The table
below reflects our cash and cash equivalents position at the dates indicated and
the net cash provided by (used in) operating, investing and financing activities
during the years indicated:




Year ended December 31,2009
              
              
              2008
              
              
              2007(in millions of Pesos)Cash
      and cash equivalents at the beginning of the year
              
              Ps.
              126.4
              
              
              Ps.
              101.2
              
              
              Ps.
              32.7Net
      cash provided by operating activities
              
              
              668.0
              
              
              
              547.5
              
              
              
              427.2Of
      which:Financial
      interest paid, net of interest capitalized
              
              
              (76.8
              )
              
              
              (62.7
              )
              
              
              (25.5
              )Net
      cash used in investing activities
              
              
              (404.2
              )
              
              
              (325.4
              )
              
              
              (336.9
              )Net
      cash used in financing activities
              
              
              (161.8
              )
              
              
              (197.0
              )
              
              
              (21.8
              )Cash
      and cash equivalents at the end of the year
              
              Ps.
              228.4
              
              
              Ps.
              126.4
              
              
              Ps.
              101.2





Net
cash provided by operating activities




Net cash
provided by operating activities increased by 22.0% to Ps. 668.0 million in
the year ended December 31, 2009, compared to Ps. 547.5 million in the
year ended December 31, 2008.  This increase is attributable
to:





75




·
            positive
      adjustments to net income for non-cash charges in the year ended
      December 31, 2009, including Ps. 178.6 million in exchange
      difference, interest and penalties on loans, Ps. 175.4 million for
      depreciation of property, plant and equipment and Ps. 79.3 million
      for income taxes, which were partially offset by negative adjustments of
      Ps. 81.4 million in gains from the repurchase of notes, Ps. 35.5 million
      in the recovery of the contingencies allowance and Ps. 26.9 million in the
      recovery of the allowance for doubtful accounts,
  and




·
            a
      positive change in assets and liabilities of Ps. 239.1 million
      increase in other liabilities, a Ps. 48.1 million decrease in trade
      accounts receivable, and Ps.27.2 million increase  in salaries
      and social securities taxes. These increases were partially offset by a
      decrease of Ps. 56.9 million in fiscal
  charges.




Net cash
provided by operating activities increased by 28.2% to Ps. 547.5 million in
the year ended December 31, 2008, compared to Ps. 427.2 million in the
year ended December 31, 2007.  This increase is attributable to
positive adjustments to net income for non-cash charges in the year ended
December 31, 2008, including Ps. 232.7 million in exchange difference,
interest and penalties on loans, Ps. 170.3 million for depreciation of
property, plant and equipment, Ps. 61.2 million for income taxes, and
Ps. 8.5 million for adjustment to present value of notes, among others,
which were added to a positive change in assets and liabilities of
Ps. 259.9 million in the year ended December 31, 2008.  This
positive change in operating assets and liabilities is primarily due to a
Ps. 88.2 million decrease in accounts receivable related to the recognition
of the retroactive portion of the VAD increase in the year ended
December 31, 2008, an increase of Ps. 93.2 million in other
liabilities and accrual litigation and, an increase of Ps. 50.3 million in
salaries and social securities taxes, and to a lesser extent, an increase of
Ps. 7.4 million in supplies, a Ps. 26.4 million increase in fiscal
charges and a Ps. 27.8 million increase in trade accounts
payable.  These increases were partially offset by an increase of
Ps. 33.4 million in other receivables.




Net
cash used in investing activities




Net cash
used in investing activities increased 24.2% to Ps. 404.3 million for the year
ended December 31, 2009 from Ps. 325.4 million for the year ended
December 31, 2008.  Over 85% of the total investments were made
in supplies (Ps. 280.8 million) and network maintenance and improvements (Ps.
67.2 million).




Net cash
used in investing activities decreased by 3.4% to Ps. 325.4 million for the year
ended December 31, 2008 from Ps. 336.9 million for the year ended
December 31, 2007.  No significant changes were registered in
investing activities.  In 2008, the principal investments were made in
supplies, as in 2007, and in 2008 less investment was directed toward network
maintenance and improvements than in 2007.




The
changes in net cash used in investing activities in each of these periods were
primarily due to variations in our capital expenditures in accordance with the
investment plan initially contemplated by the Adjustment
Agreement.  See “—Capital expenditures.”




Net
cash used in financing activities




In the
year ended December 2009, we used Ps. 175.4 million primarily to repurchase
Senior Notes due 2017 and Fixed Rate Par Notes due 2016.




In the
year ended December 2008, we used Ps. 122.9 million to repurchased Senior
Notes due 2017 and Fixed Rate Par Notes due 2016.  In addition, part
of our cash position was used to create the Edenor Financial Trust for a total
amount of Ps. 67.9 million.  See “—Debt—Financial Trust
Agreement.”  We also used Ps. 6.1 million to repurchase shares at
market prices at an average price of Ps. 0.65 per share.




On April
30, 2007, we completed a capital increase (in the form of an initial public
offering in local and international markets) pursuant to which we received
Ps. 181.8 million in cash contributions.  In May 2007, we used a
portion of the proceeds of the capital increase (Ps. 110.9 million) to
repurchase part of our outstanding financial debt.





76




On
October 9, 2007 we issued our U.S. $220,000,000 10.5% Senior Notes due
2017.  We used the proceeds from that offering to repurchase
U.S. $204.0 million aggregate principal amount of our Discount Notes due
2014, which were redeemed in full through several transactions during the period
from October through December 2007. We used the balance of the proceeds from the
October debt offering or capital expenditures and working capital
purposes.




Capital
expenditures




Our
concession does not require us to make mandatory capital
expenditures.  Our concession does, however, set forth specific
quality standards that become progressively more stringent over time, which
require us to make additional capital expenditures.  Financial
penalties are imposed on us for non-compliance with the terms of our concession,
including quality standards.




Prior to
our privatization, a low level of capital expenditures and poor maintenance
programs adversely affected the condition of our assets.  After our
privatization in 1992, we developed an aggressive capital expenditure plan to
update the technology of our productive assets, renew our facilities and expand
energy distribution services, automate the control of the distribution network
and improve customer service.  Following the crisis, however, the
freeze of our distribution margins and the pesification of our tariffs and our
inability to obtain financing, coupled with increasing energy losses, forced us
to curtail our capital expenditure program and make only those investments that
were necessary to permit us to comply with quality of service and safety and
environmental requirements, despite increases in demand in recent
years.




We are
currently subject to limitations on the amount of non-mandatory capital
expenditures we may make in a given year pursuant to the terms of our
restructured debt instruments.  Under these debt instruments, we may
make the following amounts (or its equivalent in other currencies) of
non-mandatory capital expenditures:




·
            U.S. $90 million
      in each of 2010 and 2011,




·
            U.S. $86 million
      in 2012,




·
            U.S. $90 million
      in 2013,




·
            U.S. $86 million
      in 2014,




·
            U.S. $87 million
      in 2015, and




·
            U.S. $90 million
      in 2016.




In
addition, we may carry over unused amounts of permitted capital expenditures and
use these amounts to make additional capital expenditures in future years, so
long as these additional capital expenditures do not exceed the amount of
permitted capital expenditures for the prior year.  We are not subject
to any limitations on the amount of capital expenditures we are required to make
pursuant to our concession and applicable laws or regulations.




We
believe that the limits on capital expenditures in the restructuring indenture
currently exceed our anticipated expenditures during each specified
period.




Our
capital expenditures consist of net cash used in investing activities during a
specified period plus supplies purchased in prior periods and used in such
specified period.  The following table sets forth our actual capital
expenditures for the years indicated:





77




Year ended December 31,2009
              
              
              2008
              
              
              2007(in millions of Pesos)Supplies
              
              Ps.
              280.8
              
              
              Ps.
              235.6
              
              
              Ps.
              235.3Network
      maintenance and improvements
              
              
              67.2
              
              
              
              57.6
              
              
              
              70.0Legal
      requirements(1)
              
              
              15.8
              
              
              
              12.2
              
              
              
              12.3Communications
      and telecontrol
              
              
              13.7
              
              
              
              8.7
              
              
              
              7.0Others
              
              
              26.8
              
              
              
              21.8
              
              
              
              18.1Total
              
              Ps.
              404.3
              
              
              Ps.
              335.7
              
              
              Ps.
              342.7





(1)
            Capital
      expenditures required to be made to comply with the ENRE quality standard
      and other regulations.





In 2009,
in accordance with our capital expenditure program, we invested Ps. 404.3
million.  In order to keep pace with the growth in our customer’s base
(our customer base increased 2.7% in 2009, despite a 2.1% decrease in energy
sales by volume during that period) an important portion of our investments were
designed to meet this increase and to improve our grid.  In addition,
we made investments in order to meet our quality standards levels and to
maintain the level of past due receivables.




Our
capital expenditure program for 2010 contemplates total expenditures of
Ps. 400 million.  We can give no assurance that actual
expenditure will not be lower or exceed our current estimate.




Debt




The
economic crisis in Argentina had a material adverse effect on our
operations.  The devaluation of the Argentine Peso caused the Peso
value of our U.S. Dollar-denominated indebtedness to increase significantly,
resulting in significant foreign exchange losses and a significant increase, in
Peso terms, in our debt service requirements.  At the same time, our
cash flow remained Peso-denominated and our distribution margins were frozen and
pesified by the Argentine government pursuant to the Public Emergency
Law.  Moreover, the economic crisis in Argentina had a significant
adverse effect on the overall level of economic activity in Argentina and led to
deterioration in the ability of our customers to pay their
bills.  These developments caused us to announce on September 15,
2002 the suspension of principal payments on our debt.  On
September 26, 2005, our board of directors decided to suspend interest
payments on our debt until the restructuring of this debt was
completed.




The
purpose of the restructuring was to restructure all, or substantially all, of
our outstanding debt, in order to obtain terms that will enable us to service
our debt.  We believe that the restructuring was the most effective
and equitable means of addressing our financial difficulties for the benefit of
the company and our creditors.  We developed a proposal that we
believed was necessary to address our financial and liquidity difficulties,
while we continued to pursue tariff negotiations with the Argentine government
to improve our financial condition and operating performance.




On
January 20, 2006, we launched a voluntary exchange offer and consent
solicitation to the holders of our outstanding financial debt.  All of
these holders elected to participate in the restructuring and, as a result, on
April 24, 2006, we exchanged all of our then-outstanding financial debt for
three series of newly-issued notes, which we refer to as the restructuring
notes:




·
            U.S. $123,773,586
      Fixed Rate Par Notes due December 14, 2016 (of which U.S. $15.3
      million remains outstanding as of the date of this annual report), 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 (of which U.S. $12.6
      million remains outstanding as of the date of this annual report), 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 (as of the date of this annual
      report, none of our Discount Notes due 2014 were outstanding), 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.





78




We are
subject to a number of restrictive covenants under the terms of the
restructuring notes, including the following:




·
            limitations
      on our ability to sell or pledge assets or make investments in third
      parties;




·
            limitations
      on our ability to incur new
indebtedness;




·
            limitations
      on our ability to make capital
expenditures;




·
            limitations
      on our ability to pay dividends;




·
            limitations
      on our ability to repurchase our common shares;
  and




·
            limitations
      on our ability to enter into transactions with shareholders and affiliates
      other than on an arm’s length
basis.




Upon a
change of control (as defined in the indenture for the restructuring notes),
each holder of the restructuring notes will have the right to require us to
repurchase all or a portion of that holder’s notes at par plus accrued and
unpaid interest and additional amounts (as defined in the indenture), if any,
pursuant to an offer made by us on terms set forth in the
indenture.




In
addition, the terms of the restructuring notes require us to apply our excess
cash (as defined in the indenture for the restructuring notes) to specific uses,
including prepayments or repurchases of the notes.  The indenture for
the restructuring notes defines excess cash for these purposes as our earnings
before interest expenses, taxes, depreciation and amortization charges (EBITDA,
as defined in the indenture for the restructuring notes) during a given
six-month period, after adjustments to reflect negative or positive changes in
our working capital and deductions for borrowings, scheduled debt payments,
prepayments, redemptions or repurchases of our debt, capital expenditures,
certain permitted investments, taxes and other cash expenses, in each case
during the same six-month period.  If we generate excess cash (as
defined in the indenture) during any six-month period in which our leverage
ratio (defined in the indenture as our total indebtedness over our 12-month
EBITDA) is greater than 2.5, we will be required to use a portion of our excess
cash to prepay or repurchase the restructuring notes.  If our leverage
ratio is:




·
            greater
      than 2.5, but not greater than 3.0, we must apply 50% of our excess cash
      to prepay or repurchase restructuring
notes;




·
            greater
      than 3.0, but not greater than 3.5, we must apply 75% to prepay or
      repurchase restructuring notes, unless we commit to use 50% of the excess
      cash for capital expenditures, in which case we must apply the remaining
      50% to prepay or repurchase restructuring notes,
  and




·
            greater
      than 3.5, we must apply all of our excess cash to prepay or repurchase
      restructuring notes.




We are
entitled to use any excess cash not allocated to debt prepayments or repurchases
as set forth above for any purpose at our discretion, including dividend
payments.  In addition, most of the restrictive covenants set forth in
the restructuring indenture will be suspended or adjusted if we attain an
international investment grade rating on our long-term debt or if our leverage
ratio (as defined in the indenture) is equal or lower to 2.5.




We are
currently in compliance with all of our financial debt covenants.




During
the year ended December 31, 2007, through various market transactions, we
repurchased U.S. $43.7 million of our outstanding Fixed Rate Par Notes due
2016 and repurchased and redeemed U.S. $240 million Discount Notes due
2014.




In
October 2007, we completed an offering of U.S. $220 million aggregate
principal amount of our 10.5% Senior Notes due 2017, which we refer to as the
senior notes.  The terms of the senior notes are substantially similar
to those of our restructuring notes, except that the senior notes are not
subject to the covenants relating to mandatory prepayments with excess cash and
limitation on capital expenditures.  We used a substantial portion of
the proceeds from that offering to redeem in full our Discount Notes due 2014 in
several transactions throughout the period from October through December
2007.





79




During
2008, we repurchased and cancelled U.S. $32.5 million principal amount of our
Fixed Rate Par Notes due December 2016 and repurchased U.S. $17.5 million Senior
Notes due 2017, in several transactions.




In May
2009, we issued Ps. 75.7 million principal amount of Par Notes due 2013 under
our Medium Term Note Program.  The Par Notes due 2013 are denominated
and payable in Argentine Pesos and accrue interest on a quarterly basis at a
rate equal to the private BADLAR, as published by the Argentine Central Bank,
for each such quarter plus 6.75%.  Principal on the notes is payable
in 13 quarterly installments, starting on May 7, 2010.




During
2009, we repurchased and cancelled U.S. $32.2 million Fixed Rate Par Notes due
2016 and repurchased U.S. $53.8 million Senior Notes due 2017, U.S. $24.5
million of which was transferred to us as a consequence of the dissolution of
the Discretionary Trust described below.




As of the
date of this annual report, we have in our portfolio U.S. $65.3 million Senior
Notes due 2017.




Line
of Credit – Banco Nación Loans




In order
to optimize our management of working capital, in December 2008, as part of our
line of credit with Banco Nación, we received a two-year loan for Ps. 50
million, with no principal payments due for the first six months followed by 18
consecutive monthly payments of amortized principal.  We make monthly
interest payments on accrued interest at a floating rate equal to BAIBOR, as
published by the Argentine Central Bank, plus 5%.




The
outstanding principal amount as of December 31, 2009 was Ps.33.3
million.




Discretionary
Trust Agreement




In
September 2008, we entered into a twenty-year irrevocable and discretionary
trust agreement with Macro Bank Limited.  Under the terms of the
trust, in October 2008 we assigned to the trust, and the trust manages in
accordance with the terms of the trust agreement, certain liquid assets,
including cash, in an initial amount of up to U.S. $23.9
million.  On November 3 and 11, 2008, we carried out an additional
assignment of liquid assets for U.S. $2 million and U.S. $1 million,
respectively.




The funds
of the trust were used to repurchase Par Notes due in 2016 with a nominal value
of U.S. $21.7 million.




On
September 3, 2009, we liquidated the Discretionary Trust and the U.S. $
24.5 million principal amount of Notes held by the Trust were transferred to
us.




CRITICAL
ACCOUNTING POLICIES AND ESTIMATES




A summary
of our significant accounting policies is included in notes 2 and 3 of our
audited financial statements, which are included in this annual
report.  The preparation of financial statements requires our
management to make estimates and assumptions that affect the amounts reported in
our financial statements and accompanying footnotes.  Our estimates
and assumptions are based on historical experiences and changes in the business
environment.  However, actual results may differ from estimates under
different conditions, sometimes materially.  Critical accounting
policies and estimates are defined as those that are both most important to the
portrayal of our financial condition and results and require management’s most
subjective judgments.  Our most critical accounting policies and
estimates are described below.





80




Allowance
for doubtful accounts




Our trade
receivables include services billed but not collected, and services accrued but
not billed as of the end of each year, net of an allowance for doubtful
accounts.  The allowance for doubtful accounts is assessed based on
the historical levels of collections for services billed through the end of each
year and subsequent collections.  Future adjustments to the allowance
may be necessary if future economic conditions differ substantially from the
assumptions used in the assessment for each year.  The related charges
to the allowance for doubtful accounts are included in selling
expenses.




Year ended December 31,2009
                
                
                2008
                
                
                2007(in millions of Ps. )Allowance
      for doubtful accounts:Beginning
      balance
                
                Ps.
                33.1
                
                
                Ps.
                40.0
                
                
                Ps.
                25.6Additions
                
                
                20.3
                
                
                
                23.6
                
                
                
                30.1Retirements
                
                
                (6.8
                )
                
                
                (6.5
                )
                
                
                (15.7
                )Recovery
                
                
                (26.9
                )
                
                
                (24.0
                )
                
                
                —Ending
      balance
                
                Ps.
                19.7
                
                
                Ps.
                33.1
                
                
                Ps.
                40.0




As of
December 31, 2009, 2008 and 2007, the allowance for doubtful accounts was
Ps. 19.7 million, Ps. 33.1 million and Ps. 40.0 million,
respectively.  During 2009, 2008 and 2007, the additions to the
allowance for doubtful accounts amounted to Ps. 20.3 million, Ps. 23.6
million and Ps. 30.1 million, respectively, and the retirements
amounted to Ps. 6.8 million, Ps. 6.5 million and
Ps. 15.7 million, respectively.  The recovery of Ps.26.9
million in 2009 and Ps.24.0 million in 2008, was due to the new framework
agreement that we signed with and was ratified by the Argentine government and
the Province of Buenos Aires.  See “Item 4. Information on the
Company—Framework agreement (Shantytowns).”




Revenue
recognition




We
recognize our revenues from operations, which relate primarily to electricity
distribution, on an accrual basis.  These revenues include energy
supplied (whether billed or unbilled) at year-end, valued on the basis of
applicable tariffs.  We also recognize revenues from other components
of our distribution services, such as new connections, pole rentals and the
transportation of energy to other distribution companies.  We
recognize revenues when our revenue earning process has been substantially
completed, the amount of revenues may be reasonably measured and we believe we
are entitled to enjoy the economic benefit derived from such
revenues.  During 2007, we recognized the retroactive increase in
revenues resulting from the tariff increase pursuant to the ratification of the
Adjustment Agreement when the ENRE issued its resolution authorizing our new
tariff schedule with respect to non-residential customers for the period from
November 2005 through January 31, 2007, and subsequently published such
resolution in the Argentine Official Gazette on February 5, 2007.




On
October 4, 2007 the Official Gazette published Resolution N° 1037/2007 of the
Secretary of Energy. This resolution established that the portion of our tariff
relating to energy purchases, which we ordinarily pass through to our customers,
as well as the amounts corresponding to the CMM for the period from May 2006
through April 2007, would have to be deducted from the funds collected under the
PUREE, until the regulatory authorities adjusted our tariff in order to
compensate us for these amounts.  The resolution also establishes that
the CMM adjustment for the period from May 2006 through April 2007, in effect as
of May 1, 2007, amounts to 9.63%. Additionally, on October 25, 2007 the ENRE
issued Resolution No 710/2007, which approves the use of the PUREE as a CMM
compensation mechanism.  In accordance with this resolution, we
recognize the revenues resulting from the 9.63% CMM adjustment and collected
through the PUREE funds.





81





In July
2008, we obtained an increase of approximately 17.9% to our distribution margin,
which we incorporated into our 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 our 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 an
average increase of 21% for residential customers with bimonthly consumption
levels over 650 kWh.  As of December 31, 2008, we recorded a total
amount of Ps. 84.6 million in net sales for these two CMM
adjustments.




Impairment
of long-lived assets




We
periodically evaluate the carrying value of our long-lived assets for
impairment.  Property, plant and equipment are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the assets may not be recovered.  The value in use was determined as
of December 31, 2009 primarily using the anticipated cash flows discounted
at a rate commensurate with the risk involved.  We have made
projections in order to determine the recoverable value of our non current
assets based on the estimated outcome of the RTI.  No impairment was
recognized during the years presented.  We do not foresee likely
circumstances in the near future that would result in the recognition of an
impairment of long-lived assets.




Accrued
litigation




We
recognize contingent liabilities with respect to existing or potential claims,
lawsuits and other legal proceedings and record an accrual for litigation when
it is probable that future costs will be incurred and these costs can be
reasonably estimated.  These accruals are based on the most recent
developments, our assessment of the likely outcome of the litigation and our
counsel’s advice in dealing with, litigating and settling this and other similar
legal matters.  Changes to the accrual may be necessary if future
events differ substantially from the assumptions used in the assessment for each
period.  In 2009, we recorded a net decrease to our accrual for
litigation of Ps. 24.9 million basically due to recovery of a fiscal
contingency as a consequence of entering into a tax payment plan agreement
offered pursuant to law N° 26476. This amount is
net from the increase generated bynew litigation and changes in our
evaluation of existing litigation.  Our accrual for litigation
amounted to Ps. 72.9 million at December 31, 2009, Ps. 97.8
million at December 31, 2008 and Ps. 82.7 million at December 31,
2007.




Income
tax and tax on presumptive minimum income




Until
December 31, 2002, we determined our income tax charge by applying the
legal tax rate of 35% to our taxable income for the year.  During that
period, the effect of temporary differences between book value and the taxable
basis of our assets and liabilities was not considered.  Since 2003,
current generally accepted accounting principles in Argentina require us to
determine the income tax charge under the deferred tax method.  This
method involves the recognition of certain assets and liabilities in cases where
there is a temporary difference between the accounting valuation and the tax
valuation of those assets and liabilities, excluding differences in price levels
on assets and liabilities as adjusted for inflation and their historical tax
basis, which are treated as permanent differences.




As of
December 31, 2005, a valuation allowance had been recorded in our financial
statements to reduce the deferred tax assets.  Based on available
information as of the end of each of those years, it was more likely than not
that these deferred tax assets would not be realized.  The amount of
the valuation allowance was based on various factors, such as historical taxable
income, projected future taxable income, the experience with previous tax audits
and different interpretations of tax regulations by the tax
authority.  As of December 31, 2006, the valuation allowance of
the deferred tax assets was partially reversed mainly due to the fact that, as a
consequence of the ratification of the Adjustment Agreement in January 2007
and the renegotiation of our financial debt in April 2006, we have expected
to generate taxable income allowing us to offset a significant portion of the
tax loss carryforwards we generated in 2002 before such offset becomes barred by
the applicable statute of limitations.  The reversal of the deferred
tax asset related to the tax loss carryforward was due to a significant increase
in our taxable income, which was partially offset by the tax deduction of the
ENRE penalties in 2007.  In the year ended December 31, 2008, we
reversed the entire valuation allowance of the deferred tax assets.




Our tax
obligation for any given year is equal to the higher of our income tax and our
the tax on our minimum presumed income.  However, to the extent that
our tax on minimum presumed income exceeds our income tax, we earn tax credit
against the payment of any income tax in excess of our tax on minimum presumed
income in the subsequent ten fiscal years. In 2009, our income tax exceeded our
minimum presumed income tax and so we earned no additional credits.





82




Labor
cost liabilities




Labor
cost liabilities and early retirement payables correspond to the following
charges:




·
            paid
      leave for accumulated vacation;




·
            bonuses
      to employees with a specified number of years of employment and who are
      included in our collective bargaining
  agreements;




·
            benefits
      to employees (pension plan) which are included in our collective
      bargaining agreements, to be given at the time of retirement;
      and




·
            early
      retirement payables.




Our
accruals for early retirement payables amounted to Ps. 16.0 million at
December 31, 2009, Ps. 20.9 million at December 31, 2008 and
Ps. 8.0 million at December 31, 2007.




Liabilities
related to bonuses and benefits to employees (pension plans) are calculated
considering all rights accrued by the beneficiaries of both plans as of year end
based on an actuarial report issued by an independent professional as of that
date.  These liabilities are recorded as bonuses accrued and
provisions for benefits to personnel, respectively.  Our liabilities
related to bonuses and benefits to employees (pension plans) amounted to
Ps. 33.9 million at December 31, 2009, Ps. 26.0 million at December
31, 2008 and Ps. 19.0 million at December 31,
2007.  Actuarial calculations are typically based on the following key
assumptions: employee turnover, actual salary increases, mortality ages,
disability studies, retirement age probability studies, discount rates and
inflation.  These assumptions change as market and economic conditions
change.  See notes 3 and 8 to our audited financial statements
included elsewhere in this annual report for further information on our labor
cost liabilities.




Financial
debt




We record
our financial debt in our balance sheet at the fair value reflecting our
management’s best estimate of the amounts expected to be paid at each period
end.  The fair value has been determined as the present value of the
future cash flows to be paid (including payment of interest) under the terms of
the debt discounted at a rate which, in accordance with the criterion we apply,
reasonably reflected market assessment of the time value of money and risk
specific of the debt instruments at the time of their initial
measurement.  During the year ended December 31, 2006, we
recorded the restructuring of debt after receiving consents to our restructuring
from holders of 100% of our defaulted debt.  The debt extinguishment
generated a gain of Ps. 179.2 million.  We did not record
any adjustment to present value before the year ended December 31, 2006
because our financial debt was in default.  The adjustment to present
value of the future cash flows of the debt issued in the restructuring, using a
market interest rate of 10.5% for the year ended December 31, 2009 and 2008,
generated a charge of Ps. 5.2 million and Ps. 8.5 million,
respectively.




During
2007 we used a portion of the proceeds of our initial public offering to
repurchase U.S. $36 million aggregate principal amount of our Discount
Notes due 2014.  In addition, we repurchased U.S. $43.7 million
aggregate principal amount of our Fixed Rate Par Notes due 2016.




On
October 9, 2007 we issued our U.S. $220 million 10.5% Senior Notes due
2017.  We used the proceeds from that offering to repurchase and
redeem in full our Discount Notes due 2014.  We used the balance of
the proceeds from the October debt offering for capital expenditures and working
capital purposes.




During
the years ended December 31, 2009 and December 31, 2008, we repurchased a total
amount of U.S. $32.2 million and U.S. $32.5 million of principal
amount of our Fixed Rate Par Notes due 2016 and U.S. $53.8 million and
U.S. $17.5 million of our Senior Notes due 2017,
respectively.  As of December 31, 2009 we recorded a gain of
Ps. 73.5 million related to these repurchases and
redemptions.  In addition, the adjustment to present value of the cash
flows of these repurchased and redeemed notes, using a market interest rate of
10.5% for the year ended December 31, 2009, generated an accounting gain of
Ps. 7.9 million.





83




In May
2009, we issued Ps. 75.7 million principal amount of Par Notes due 2013 under
our Medium Term Note Program.  The Par Notes due 2013 are denominated
and payable in Argentine Pesos and accrue interest on a quarterly basis at a
rate equal to the private BADLAR, as published by the Argentine Central Bank,
plus 6.75%.  We used proceeds from the this debt offering for capital
expenditures and working capital purposes.




Derivatives
Contracts




Corporate
Notes





During
the year ended December 31, 2008, the Company carried out transactions with
derivative financial instruments with the aim of hedging the foreign currency
exchange rate of the cash flows and derivatives of interest payment
transactions.





These
instruments provided an economic and financial hedge of the amounts in foreign
currency that the Company had to pay on the interest payment dates of its
financial debt –Senior Notes due 2017 and Fixed rate Par Notes due 2016-,
maturing on October 8, 2008, December 11, 2008, April 8, 2009, June 12, 2009,
October 8, 2009 and December 11, 2009, in the event of fluctuations in foreign
currency exchange rates. The Company has not formally designated these
transactions as hedging instruments.





Therefore,
they have been recorded in the accounting at their net realizable value or
settlement value, depending on whether they have been classified as assets or
liabilities, with a contra-account in the financial gains or losses for the
year.





As of
December 31, 2009, these transactions have been fully settled, there being no
outstanding balances.


As of
December 31, 2009 and 2008, income resulting from these transactions amounted to
Ps. 1.6 million and Ps. 5.7 million, respectively, and was recorded in the
Financial income (expense) and holding gains (losses) generated by liabilities
account of the Statement of Income under Exchange difference.





Forward
and Futures Contracts





During
the year ended December 31, 2009, the Company has entered into forward and
futures contracts with the aim of using them as economic instruments in order to
mitigate the risk generated by the fluctuations in the US dollar rate of
exchange.





As of
December 31, 2009, the economic impact of these transactions -including
contracts that have already been settled as well as those currently in effect-,
resulted in a loss of Ps. 12.3 million that has been recorded in the Financial
income (expense) and holding gains (losses) generated by assets account of the
Statement of Income under Holding results.




Adoption of IFRS




On
December 29, 2009, the CNV issued Resolution No. 562 "Adoption of International
Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB)" (“Resolution No. 562”) which requires that companies
under the supervision of the CNV, such as us, prepare their financial statements
in accordance with IFRS as published by the IASB for fiscal periods beginning on
or after January 1, 2012 including comparative information for earlier
periods.




IFRS 1,
First Time Adoption of International Financial Reporting Standards, is the
guidance that is applied during preparation of a company’s first IFRS-based
financial statements. IFRS 1 was created to help companies transition to IFRS
and provides practical accommodations intended to make first-time adoption
cost-effective. It also provides application guidance for addressing difficult
conversion topics.





84




The key
principle of IFRS 1 is full retrospective application of all IFRS standards that
are effective as of the closing balance sheet or reporting date of the first
IFRS financial statements. IFRS 1 requires companies to (i) identify the first
IFRS financial statements; (ii) prepare an opening balance sheet at the date of
transition to IFRS; (iii) select accounting policies that comply with IFRS and
to apply those policies retrospectively to all of the periods presented in the
first IFRS financial statements; (iv) consider whether to apply any of the
optional exemptions from retrospective application; (v) apply the mandatory
exceptions from retrospective application; and (vi) make extensive disclosures
to explain the transition to IFRS. Exemptions provide limited relief for
first-time adopters, mainly in areas where the information needed to apply
IFRS retrospectively may be most challenging to obtain.




The
Company is currently assessing the impact that this change would have on their
respective financial statements, and will continue to monitor the development of
the implementation of IFRS.




PRINCIPAL
DIFFERENCES BETWEEN ARGENTINE GAAP AND U.S. GAAP




Our
financial statements are prepared in accordance with generally accepted
accounting principles in the City of Buenos Aires, Argentina, which we refer to
as Argentine GAAP and which differ in certain significant respects from
U.S. GAAP.  Note 27 to our audited financial statements included
elsewhere in this annual report, provides a description of the significant
differences between Argentine GAAP and U.S. GAAP, as they relate to us, and a
reconciliation to U.S. GAAP of net income for the years ended December 31, 2009,
2008 and 2007 and shareholders’ equity as of December 31, 2009 and
2008.




The
principal differences between Argentine GAAP and U.S. GAAP as they relate to us
in these years are the accounting for the results of our trouble debt
restructuring and repurchases of debt, the treatment of deferred income taxes,
the capitalization of interest, the treatment of asset retirement obligations,
our expenses related to our initial public offering, the treatment of certain
pension plan liabilities, the treatment of the trust consolidation and
accounting for the investments in marketable securities. Each of these
differences affects either net income or shareholders’ equity. See note 27 to
our audited financial statements included elsewhere in this annual report for a
discussion of these differences and the effect on our results of operations and
financial position.




OFF-BALANCE
SHEET ARRANGEMENTS




We did
not have any off-balance sheet arrangements as of December 31, 2009, 2008 and
2007.




TABULAR
DISCLOSURE OF CONTRACTUAL OBLIGATIONS




The
following table summarizes our contractual liabilities and commitments as of
December 31, 2009.  Peso amounts have been translated from U.S. Dollar
amounts at the buying rate for U.S. Dollars quoted by Banco Nación on December
31, 2009 of Ps. 3.80 to U.S. $1.00.




Payments due by periodTotal
                
                
                Less than
                    1 year
                
                
                1-3
                    years
                
                
                4-5
                    years
                
                
                After
                    5 years(in millions of Pesos)Long
      term debt obligations(1)
                
                Ps.
                1,314.5
                
                
                
                124.5
                
                
                
                291.9
                
                
                
                144.3
                
                
                
                753.8Accrued
      fines and penalties(2)
                
                
                377.5
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Financial
      assistance fees(3)
                
                
                9.5
                
                
                
                9.5
                
                
                
                —
                
                
                
                —
                
                
                
                —Operating
      leases(4)
                
                
                11.9
                
                
                
                8.4
                
                
                
                3.2
                
                
                
                0.3
                
                
                
                —Capital
      expenditures(5)
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —Taxes(6)
                
                
                10.6
                
                
                
                1.1
                
                
                
                3.4
                
                
                
                2.3
                
                
                
                3.8Total
                
                Ps.
                1,724.0
                
                
                Ps.
                143.5
                
                
                Ps.
                298.5
                
                
                Ps.
                146.9
                
                
                Ps.
                757.6





85





(1)
            Includes
      amortization of principal and interest payments, including our
      management’s current estimates of future market rates in respect of our
      floating rate debt (which amounted to U.S. $12.7 million as of
      December 31, 2009).  Calculated at the prevailing exchange rate
      as of December 31, 2009, Ps./U.S. $3.80.  See “—Debt”
      for a description of these restructuring notes, including amortization and
      interest payment terms and mandatory prepayment with excess cash
      provisions.  All of our indebtedness is
      unsecured.  None of our indebtedness is
    guaranteed.


(2)
            Includes
      adjustments made to reflect the ratification of the Adjustment
      Agreement.  We were required to make an adjustment to a portion
      of our accrued fines and penalties totaling Ps. 47.0 million to
      reflect the increase to our VAD pursuant to the Adjustment Agreement and
      the May 2006 CMM and Ps. 17.2 million and Ps. 18.1 million to
      reflect the CMM adjustment for the years ended December 31, 2008 and
      2007, respectively.  In addition, pursuant to the terms of the
      Adjustment Agreement, the Argentine government agreed, subject to the
      fulfillment of certain conditions, to forgive, upon the completion of the
      RTI, approximately Ps. 71.4  million of our accrued fines
      and penalties and allow us to pay the remaining Ps. 306.1 million of
      these fines and penalties in semi-annual installments over a 7-year period
      commencing 180 days after the RTI comes into effect.  Because
      the Adjustment Agreement was not ratified until January 2007, we have
      recalculated the amounts of accrued fines and penalties subject to the
      payment plan under the terms of the Adjustment Agreement as well as the
      amounts subject to forgiveness.  See “Item 4. Information on the
      Company—Our concession —Fines and
penalties.”


(3)
            Fees
      payable under our financial services agreement with EASA, our controlling
      shareholder.  This agreement expires in 2010. We are currently
      renegotiating this Agreement. See “Item 7.  Major Shareholders
      and Related Party Transactions—Related Party Transactions— Financial
      Services Agreement with EASA.”


(4)
            Reports
      our minimum required lease
payments.


(5)
            Our
      concession does not require us to make any specified amount of capital
      expenditures, but requires us to meet certain quality and other service
      standards.  See “—Capital
  expenditures.”


(6)
              Represents
      a liability for the tax claim that we have with the Argentine Tax
      Authority related to the income tax deduction of the allowance for bad
      debts for the three fiscal years ended December 31, 1996, December 31,
      1997 and December 31, 1998.  On April 27, 2009, we agreed to the
      tax regularization plan established in Law No. 26,476.  The
      balance is payable in 120 monthly installments at a 0.75% monthly interest
      rate. In accordance with the assessment of the tax regularization plan,
      our outstanding balance amounts to Ps. 12.1 million plus interest in the
      amount of  Ps. 5.2 million. During the year ended December 31,
      2009, we paid Ps.1.5 million of the outstanding balance, thus our
      remaining balance totals Ps.10.6 million, excluding the interest amount.
      Includes only the amortization of
principal.





Item
      6.
            Directors, Senior Management
      and Employees




Directors
and Senior Management




Board
of directors




Our
business and affairs are managed by our board of directors in accordance with
our bylaws and the Argentine Companies Law.  Our bylaws provide that
our board of directors will consist of twelve directors and up to the same
number of alternate directors.  Pursuant to the Argentine Companies
Law, a majority of our directors must be residents of Argentina.




Our
bylaws provide that holders of our Class A shares are entitled to elect
seven directors and up to seven alternate directors, one of which must be
independent in accordance with CNV regulations, holders of our Class B and
Class C shares are entitled to elect five directors and up to five
alternate directors, one of which must be independent in accordance with CNV
regulations.  Holders of Class C shares vote jointly as a single
class with the holders of Class B shares in the election of
directors.  In the absence of a director elected by holders of a class
of shares, any alternate director elected by holders of the same class may
legally attend and vote at meetings of our board of directors.  The
board of directors elects among its members a chairman and a vice
president.




Directors
and alternate directors serve for one-year periods, indefinitely
renewable.




Our
directors and alternate directors are as follows:




Name
            
            Position
            
            Age
            
            Year of appointment
                (class electing director)Alejandro
      Macfarlane
            
            Chairman
      and CEO
            
            44
            
            2010
      (Class A)Marcos
      Marcelo Mindlin**
            
            Vice
      Chairman
            
            46
            
            2010(Class
      A)Damián
      Miguel Mindlin**
            
            Director
            
            44
            
            2010
      (Class A)Gustavo
      Mariani
            
            Director
            
            39
            
            2010
      (Class A)




86




Name
            
            Position
            
            Age
            
            Year of appointment
                (class electing director)Luis
      Pablo Rogelio Pagano
            
            Director
            
            56
            
            2010
      (Class A)Eduardo
      Llanos*
            
            Director
            
            66
            
            2010
      (Class A)Maximiliano
      Alejandro Fernández*
            
            Director
            
            50
            
            2010
      (Class A)Ricardo
      Alejandro Torres
            
            Director
            
            52
            
            2010
      (Class B/C)Diego
      Martín Salaverri
            
            Director
            
            45
            
            2010
      (Class B/C)Edgardo
      Alberto Volosín
            
            Director
            
            56
            
            2010
      (Class B/C)Alfredo
      MacLaughlin *
            
            Director
            
            67
            
            2010
      (Class B/C)Eduardo
      Orlando Quiles*
            
            Director
            
            67
            
            2010
      (Class B/C)Javier
      Douer
            
            Alternate
      Director
            
            36
            
            2010
      (Class A)Pablo
      Díaz
            
            Alternate
      Director
            
            52
            
            2010
      (Class A)Brian
      Henderson
            
            Alternate
      Director
            
            64
            
            2010
      (Class A)Jorge
      Miguel Grecco
            
            Alternate
      Director
            
            49
            
            2010
      (Class A)Ariel
      Schapira
            
            Alternate
      Director
            
            48
            
            2010
      (Class A)Ricardo
      Sericano
            
            Alternate
      Director
            
            61
            
            2010
      (Class A)Jaime
      Barba
            
            Alternate
      Director
            
            46
            
            2010
      (Class A)Maia
      Chmielewski
            
            Alternate
      Director
            
            30
            
            2010
      (Class B/C)Gabriel
      Cohen
            
            Alternate
      Director
            
            45
            
            2010
      (Class B/C)Alejandro
      Mindlin**
            
            Alternate
      Director
            
            34
            
            2010
      (Class B/C)Rafael
      Mancuso*
            
            Alternate
      Director
            
            67
            
            2010
      (Class B/C)Eduardo
      Maggi
            
            Alternate
      Director
            
            54
            
            2010
      (Class B/C)





*
            Independent
      under Argentine law and under Rule 10A-3 under the Securities
      Exchange Act of 1934, as amended.


**
            The
      following family relationships exist within the board of directors: Marcos
      Marcelo Mindlin, Damián Miguel Mindlin and Alejandro Mindlin are
      brothers.




The
following is a brief description of our current directors’ and alternate
directors’ background, experience and principal business
activities:




Alejandro
Macfarlane.Mr. Macfarlane has been the chairman of the board
of directors and CEO of Edenor since 2005.  He serves as president of
ADEERA, the pre-eminent electricity distributors association of Argentina, since
September 2005.  Mr. Macfarlane is also a member of the board of
directors of Macro Bansud Bank and San Antonio International SRL.  He
was a board member of YPF S.A. and has been a member of YPF Foundation since
1999.  He is the president of Grupo AM S.A., a corporate and
institutional relationships consulting firm.  He is member and
director of the Instituto para
el Desarrollo Empresarial Argentino (Argentinean Business Development
Institute, or IDEA) and a member of the Consejo Argentino para las
Relaciones Internacionales (Argentinean Council for International
Relationships, or CARI).




Marcos Marcelo
Mindlin.Mr. Mindlin has been a member of the board of
directors of Edenor since 2005.  Mr. Mindlin has been the vice
chairman of Edenor since 2005.  Mr. Mindlin currently serves as the
chairman of Pampa Energía S.A. and as chairman of the Cámara Argentina de
Energía (CADE), an Argentine energy services institution.  From 1991
to 2003, Mr. Mindlin was the founding partner, vice chairman and CFO of IRSA
Inversiones y Representaciones S.A., a leading Argentine real estate firm, and
director of Banco Hipotecario S.A., the leading mortgage bank in the
country.  In November 2003, Mr. Mindlin resigned from the IRSA
Group to focus his efforts on Grupo Dolphin S.A., an Argentine investment
advisory and private equity firm created in 1990 based in Argentina of which Mr.
Mindlin is a founding shareholder.  Mr. Mindlin received an MBA from
the Universidad del Centro de Estudios Macroeconómicos and a degree in business
administration from the Universidad de Buenos Aires.  In 2002,
Mr. Mindlin founded and managed a non-governmental organization called
Foundation for the Popular Initiative, whose objective is to create political
space for citizens to present popular initiatives in Congress.  In
2008, he founded Fundación
todo por los chicos, whose principal objective is to assist vulnerable
children.  In addition, Mr. Mindlin formerly served as president
of the executive committee of Tzekada, a foundation of the judeo-argentine
community and he is a member of the Council of the Americas.





87




Damián Miguel
Mindlin.Mr. Mindlin has been a member of the board of
directors of Edenor since 2005.  Mr. Mindlin is a shareholder and
director of Grupo Dolphin S.A., an Argentine investment advisory and private
equity firm founded in 1990, and is vice chairman of Pampa Energía
S.A.  Mr. Mindlin is also a member of the board of directors of Pampa
Participaciones S.A., Pampa Real Estate S.A., Compañía Buenos Aires S.A.,
Powerco S.A.  Central Térmica Güemes S.A. and Pampa Participaciones II
S.A. and as vice chairman of Comunicaciones y Servicios S.A., Dilurey S.A.,
Inversora Güemes S.A., Transelec Argentina S.A., Grupo Dolphin S.A., Dolphin
Energía S.A., IEASA S.A., Electricidad Argentina S.A. and Transba
S.A.  He also serves as a member of the board of directors of Edenor
S.A., Citelec S.A., Dolphin Finance S.A., Hidroeléctrica Los Nihuiles S.A.,
Hidroeléctrica Diamante S.A., Préstamos y Servicios S.A., Inversora Dimante
S.A., Inversora Nihuiles S.A., Inversora Ingentis S.A., Central Piedra Buena
S.A., Corporación Independiente de Energía S.A. and as an alternate member of
the board of directors of Compañia de Transporte de Energia Eléctrica en Alta
Tension S.A. (Transener) and Ingentis S.A.




Gustavo
Mariani.Mr. Mariani has been a member of the board of
directors of Edenor since 2005.  Mr. Mariani is a member of the board
of directors and a managing director of Grupo Dolphin S.A., an Argentine
investment advisory and private equity firm.  He joined Grupo Dolphin
S.A. in 1993, as an analyst and then served as a portfolio
manager.  He served as financial and corporate director of IRSA
Inversiones y Representaciones S.A.  Currently, he also serves as
member of the board of directors of each of EASA, IEASA, Dolphin Energia,
Transba, Pampa Energía S.A., Pampa Advisors S.A., Citelec, Transener, Transba
and Dolphin Finance S.A., and alternate director for Transener S.A. and Citelec
S.A.  Mr. Mariani has an MBA from Universidad del Centro de Estudios
Macroeconómicos and a degree in economics from the Universidad de Belgrano in
Buenos Aires.  He is a certified financial analyst since
1998.




Luis Pablo Rogelio
Pagano.Mr. Pagano has been a member of the board of directors
of Edenor since 2005.  Mr. Pagano is the chief financial officer of
Edenor and was also a managing director of Grupo Dolphin S.A.  Prior
to joining Grupo Dolphin S.A. in 2002, Mr. Pagano held various positions,
including general partner and managing director for Newbridge Latin America,
investment banking director for Deutsche Morgan Grenfell in Argentina, vice
president and investment banking director for Citibank N.A. and chief financial
officer for Argentina, Brazil, Paraguay, Uruguay and Chile of Bank of America,
NTSA.  Mr. Pagano received an MBA from the Instituto de Estudios
Superiores de la Empresa (IESE), in Spain and both a CPA and BA in Business
Administration from the Universidad Católica Argentina.




Eduardo Llanos. Mr. Llanos
has been a Director of Edenor since 2008.  Mr. Llanos served as a
member of the Supervisory Committee of Televisión Federal S.A. (Telefé),
Telefónica de Argentina S.A. y Telefónica Holding Argentina S.A.  From
1969 to 2000, Mr. Llanos worked at Arthur Andersen / Pistrelli, Diaz y
Asociados, in the Auditing Division and the Tax Division.  When he
left Arthur Andersen, Mr. Llanos was an International Partner, the Director of
Tax Practice for Argentina, Chile, Uruguay, Paraguay and Boliva and the Director
of Operations in Bolivia.  From 2000 to 2003, Mr. Llanos was a partner
at Estudio E. Llanos y Asociados.  Throughout his career, Mr. Llanos
has taught tax and public finance classes at Universidad de Buenos Aires,
Universidad Nacional de Lomas de Zamora and Universidad de Morón.  Mr.
Llanos graduated with a degree in public accounting from Universidad de Buenos
Aires in 1971.




Maximiliano Alejandro
Fernández.  Mr. Fernández has been a director of Edenor since
2007 and has served as a director of EASA since 2005.  He has been an
associate at Impsat Fiber Network since 1998, and currently serves as president
of Red Alternative S.A.  Mr. Fernández served as the chairperson of
Alternative Gratis S.A, which he founded along with IRSA, until its merger in
2005.  Since 1991, he has worked as an independent contractor in the
telecommunications industry, and, together with Martín Varsavsky, founded, and
until 1995 directed, VIATEL S.R.L. Each of the companies mentioned is a
telecommunications company.  Mr. Fernández is an industrial engineer
and graduate of La Universidad de Buenos Aires.




Ricardo Alejandro
Torres.Mr. Torres has been a director of Edenor since 2007,
and served as an alternate director from 2006 through 2007.  Mr.
Torres has been chief executive officer of Pampa Energía S.A. since
November 2005, before which he was a partner of Darwin Inversiones
S.A.  From 1993 through 2001, Mr. Torres was chief financial officer
of IRSA Inversiones y Representaciones S.A. and a director of Alto Palermo S.A.,
Brazil Realty Empreendimentos e Participações S.A., Abril S.A. and Inversora
Bolívar S.A.  Mr. Torres was also a professor of finance and taxes at
the Faculty of Economic Sciences of the University of Buenos
Aires.  He currently serves as a member of the board of directors of
Pampa Advisors S.A. and Educaria, a private equity fund specializing in the
education sector.  Mr. Torres is a public accountant with a degree
from the University of Buenos Aires and holds an MBA from the Universidad
Austral.





88







Diego Martín
Salaverri.  Mr. Salaverri has been a member of the board of
directors of Edenor since 2007.  He is a founding partner of the
Argentine law firm of Errecondo, Salaverri, Dellatorre, González &
Burgio.  He earned a degree in law in 1988 from the Universidad
Católica Argentina, Buenos Aires.  He is member of the board of
directors of Pampa Energía, Laboratorios Northia SACIFIA, Dico S.A. and Formosa
Refrescos S.A.  He also is a member of the supervisory committee of
Dolphin Creditos S.A., Dolphin Creditos Holding S.A., Pampa Generación S.A.,
Pampa Participaciones S.A., Pampa Participaciones II S.A., Pampa Real Estate
S.A., Energía Distribuida S.A., Inversora Güemes S.A., Grupo STSA and Credit
Group S.A.  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
Inversora Diamante S.A., Compañía Buenos Aires S.A., Inversora Nihuiles S.A.,
GSF S.A. and Maltería del Puerto S.A.




Edgardo Alberto
Volosín.Mr. Volosín has been a member of the board of
directors of Edenor since 2005.  In addition, Mr. Volosín served as
Director of Human Resources and Legal Affairs of Edenor since our privatization
in 1992 through July 2002 and currently serves as Director of Corporate
Affairs, a position which he has held since August 2002.  Mr.
Volosín holds a degree in Law from the Universidad de Belgrano in Buenos
Aires.




Alfredo
MacLaughlin.Mr. MacLaughlin became a member of the board of
directors of Edenor in 2010. He is a licensed attorney and practiced as Counsel
at the Argentine law firm of Cárdenas, Cassagne.  In addition, Mr.
MacLaughlin served as Secretary of Finance of the Republic of Argentina from
December 2005 until December 2006, and has held various other business
and finance positions, including that of Executive Member of Banco Hipotecario
Nacional, President of Deutsche Morgan Grenfell, Argentina, Secretary General of
the Bolsa de Comercio de Buenos Aires, and Director of Telefónica de Argentina
S.A.  Mr. MacLaughlin was also a Director of Edesur from 2001 through
2005.




Eduardo Orlando
Quiles.  Mr. Quiles has been a member of the board of
directors since 2009.  Between 1965 and 1971 he served as the Sindicato de Luz y Fuerza de Capital
Federal (Light and Power Union of the Capital) in the Treasury and
Accounting Department.  Subsequently, he worked as general accountant
at Cooperativa de Crédito Luz y Fuerza Ltda (Credit Union of Light and Power)
until 1980.  Between 1980 and 1985 he served as tax chief in Petersen
Thiele y Cruz S.A.  He holds a CPA from la Universidad Nacional de
Buenos Aires and he has a master degree in professional independent bureau in
taxes and audit.




Javier Douer.Mr.
Douer has been an alternate director of Edenor since 2005.  He has
held various positions with Grupo Dolphin S.A. since 2000 and currently is chief
administrative officer for a group of portfolio companies.  Mr. Douer
holds a bachelor’s degree in business administration from the Universidad de
Palermo, in Buenos Aires, as well as a master’s degree in capital markets from
the Universidad de Buenos Aires.




Pablo Díaz.Mr.
Díaz has been an alternate director of Edenor since 2005.  Mr. Díaz
currently serves as an advisor to the president of Grupo Dolphin
S.A.  He also serves as an alternate director at Transba S.A. and a
Director of Inversora Ingentis S.A., Inversora Nihuiles S.A., Inversora Diamante
S.A., Pampa Participaciones II S.A., Central Térmica Güemes S.A., Corporación
Independiente de Energfía S.A., Hidroeléctrica Diamante S.A., Hidroeléctrica
Nihuiles S.A., Citelec S.A. and Transener S.A.  Previously, he was an
Advisor at the Subsecretaría
de Energía Eléctrica (the Argentine Undersecretary for Electrical Energy)
and has held various positions in the electricity industry.




Brian
Henderson.Mr. Henderson has been an alternate director of
Edenor since 2005.  He has been a technical advisor to Grupo Dolphin
S.A. since 2003.  He also serves as president of Central Piedra Buena
S.A. and Corporación Independiente de Energía S.A.  Mr. Henderson
is also a director of Citelec, Transener S.A., Inversora Nihuiles S.A., and
Central Térmica Güemes S.A. and an alternate director of Dolphin Energía S.A.,
Edenor S.A., Transba S.A., Powerco S.A., IEASA S.A., Inversora Ingentis S.A.,
Termoeléctrica San Martín S.A., Termoeléctrica Manuel Belgrano S.A., Pampa
Participaciones II S.A., Pampa Generación S.A. and Inversora Güemes
S.A.  Previously, Mr. Henderson served as Director of Latin
America for National Grid (UK), president of the board of directors of
Transener, Citelec and Transba.  He was director of Silica Networks
and Manquehue Net Telecomunicaciones (Chile) and vice president of commercial
operations of Charter Oak Energy in Americ, Africa and
Europe.  Mr. Henderson was Vice Chairman and General Manager of
Deutsche Babcock Riley, Canada Inc.  Mr. Henderson has a degree in
electrical engineering from Hebburn College.


89




Jorge Miguel
Grecco.Mr. Grecco has been an alternate director of Edenor
since 2006.  Mr. Grecco served as director of external relations of
Edenor since 2005.  Mr. Grecco has also held positions in various
media companies, including Grupo América, Grupo Cimeco, Infobae, Perfíl, Clarín,
El Heraldo de Buenos Aires, Trespuntos and Somos.  Mr. Grecco is also
a professor of journalism at the University of Belgrano and is a published
author.




Ariel
Schapira.  Mr. Schapira has been an alternate director of
Edenor since 2007.  In addition, since 2007, Mr. Shapira has served as
the director of new business for Grupo Dolphin S.A.  Previously, from
2004 to 2007, he served as the regional director for Latinamérica at Telefónica
Móviles S.A., vice president of marketing and customer operations of Bellsouth
International in Atlanta from 2001 to 2004, manager of marketing and new
business for Compañía de Radiocomunicaciones Móviles S.A. (Movicom Bellsouth)
from 1995 to 2001, CEO and general manager of Radiomensaje S.A. (a joint-venture
with Motorola) from 1995 to 1997, and general manager of Pouyet Tecsel S.A. from
1991 to 1995.  Mr. Schapira is an industrial engineer. He graduated
from la Universidad de Buenos Aires.




Ricardo
Sericano.  Mr. Sericano has been an alternate director at
Edenor since 2007.  In addition, he has served as the technical
director of Edenor since December 2006.  Previously, he served as
manager of engineering and investment and manager of supplies and
logistics.  Before the privatization of the company, Mr. Sericano
served in various offices at ITALO and SEGBA.  He is a
mechanical-electrical engineer.  He received his degree in 1972 from
la Facultad de Ingeniería de la Universidad de Buenos Aires, where he also
taught for 23 years.




Jaime
J. Barba.  Mr. Barba has been an alternate director
at Edenor since 2009.  He also served as legal manager and secretary
of the board of directors at Edenor.  In addition, he is a director
and member of the executive committee at Compañía Administradora del Mercado
Mayorista Eléctrico S.A. (CAMMESA), and a member of the supervisory committees
at Petropack S.A. and Centro de Movimiento de Energía S.A.
(SACME).  Between 1996 and 2004 he worked in various positions at
EDEERSA (Empresa Distribuidora de Energía Entre Rios
SA).  Mr. Barba holds a degree in law from the Universidad
Nacional del Litoral and a master’s from the Direct Development Program at
IAE.




Maia Chmielewski.Ms. Chmielewski
has been an Alternate Director at Edenor since 2007.  She also serves
as an Alternate Director of CIESA S.A. and CPB S.A.  Ms. Chmielewski
serves in the investment group of Pampa Energía S.A.  Ms. Chmielewski
holds both a Bachelor’s degree in Business Economics and in Economics from the
Universidad Torcuato Di Tella in Buenos Aires.




Gabriel Cohen.Mr. Cohen has been an
Alternate Director of Edenor since 2005.  He also has served since
2004 on the board of directors of Citelec, and as Alternate Director of
Transba.  In addition, he worked at Citibank, N.A. for fifteen years,
serving at the bank’s offices in Buenos Aires and Paris, where he has acquired
sound experience in debt restructuring processes.  Mr. Cohen holds a
degree in Business Administration from the Universidad de Buenos
Aires.




Alejandro
Mindlin.Mr. Mindlin has been an alternate director of Edenor
since 2005.  Mr. Mindlin is an alternate director of Pampa Energía
where he serves in the institutional relations and communications
department.  He is also an alternate director of
EASA.  Prior to joining Pampa Energía, Mr. Mindlin served in the
marketing group of Grupo Dolphin S.A.  Mr. Mindlin has a bachelor’s
degree in middle eastern history and languages from the Tel Aviv University, as
well as a film director’s degree.




Eduardo Maggi.Mr. Maggi has
been an alternate director at Edenor since 2007.  He was appointed
director of operations of Edenor in 2001.  Mr. Maggi currently serves
as a director of SACME, which is responsible for the management of regional
high-voltage distribution in the greater Buenos Aires metropolitan area and for
coordinating, controlling and supervising the operation of the generation,
transmission and sub-transmission network in the City of Buenos
Aires.  Previously, Mr. Maggi served as director of operations of two
of Edenor’s operation areas, San Martín and Morón.  Mr. Maggi began
his career at Edenor as a technical manager.  Mr. Maggi received a
degree in engineering from the Universidad Tecnológica Nacional and an MBA from
the Universidad del Salvador y Deusto.


90




Rafael
Mancuso.  Mr. Mancuso has been an alternate director at
Edenor since 2009.  During 2008 and 2007 he has served as member of
the board of directors at Edenor.  He has served as the general
manager of OSTEE since 1993.  He was the general undersecretary of the
Sindicato de Luz y Fuerza de la Capital Federal (Electric Light and Power Labor
Union of the City of Buenos Aires) from 1991 through 1999, for which he also has
served as secretary of social responsibility since
1993.  Mr. Mancuso served as a member of the board of directors
of Central Puerto from 1993 through 1997.




BOARD
PRACTICES




The
duties and responsibilities of the members of our board of directors are set
forth in Argentine law and our bylaws.  Under Argentine law, directors
must perform their duties with loyalty and the diligence of a prudent business
person.  Directors are prohibited from engaging in activities that
compete with our company without express authorization of a shareholders’
meeting.  Certain transactions between directors and our company are
subject to ratification procedures established by Argentine law.




On
May 22, 2001, the Argentine government enacted the Transparency Decree with
the aim of creating an adequate legal framework to strengthen the level of
protection of investors in the market.  Other objectives of the
Transparency Decree were to promote the development, liquidity, stability,
solvency and transparency of the market, generating procedures to guarantee the
efficient distribution of savings and good practices in the administration of
corporations.




The
Transparency Decree imposes the following duties on members of the board of
directors of Argentine public companies:




·
            a
      duty to disclose all material events related to the company, including any
      fact or situation which is capable of affecting the value or trading of
      the securities of the company;




·
            a
      duty of loyalty and diligence;




·
            a
      duty of confidentiality; and




·
            a
      duty to consider the general interests of all shareholders over the
      interests of controlling
shareholders.




There are
no agreements between our company and the members of our board of directors that
provide for any benefits upon termination of their designation as
directors.




None of
our directors maintains service contracts with us except as described in “Item
7. Major Shareholders and Related Party Transactions – Related Party
Transactions.”




The
significant differences between our corporate governance practices and the NYSE
standards are listed on our website in compliance with the NYSE requirements.
For a summary of these differences see item 16; Corporate
Governance.”




Executive
committee




On
October 4, 2007, our board of directors created an executive committee, as
contemplated by our by-laws and Law 19.550, and delegated to the executive
committee the authority to take certain actions on behalf of the
board.  The executive committee complements the work of the board by
executing certain day-to-day tasks required for overseeing our
company.  By creating an executive committee, the board sought to
increase the efficiency with which our company is directed.  The
Executive Committee consists of Alejandro Macfarlane, Marcos Marcelo Mindlin,
Damián Mindlin, Gustavo Mariani, Ricardo Torres and Rogelio
Pagano.


91




Audit
committee




Pursuant
to the Transparency Decree and CNV rules, Argentine public companies must
appoint a comité de
auditoría (audit committee) composed of at least three members of the
board of directors, a majority of which must be independent in accordance with
Argentine law.




Pursuant
to our bylaws, one director is appointed by holders of our Class A shares
and one by holders of our Class B shares.  Our audit committee’s
duties include:




·
            monitoring
      our internal control, administrative and accounting
    systems;




·
            supervising
      the application of our risk management
policies;




·
            providing
      the market adequate information regarding conflicts of interests that may
      arise between our company and our directors or controlling
      shareholders;




·
            rendering
      opinions on transactions with related parties;
  and




·
            supervising
      and reporting to regulatory authorities the existence of any kind of
      conflict of interest.




The
members of our audit committee are:




Name
                          
                          Position
                          
                          Class electing memberAlfredo
      MacLaughlin (1)
                          
                          Member
                          
                          Class
      BMaximiliano
      Alejandro Fernández(1)
                          
                          Member
                          
                          Class
      AEduardo
      Llanos(1)
                          
                          Member
                          
                          Class
      A


(1)    Independent
under Argentine law and under Rule 10A-3 under the Securities Exchange Act of
1934.




Senior
management




The
following table sets forth information regarding our senior
management:




Name
                    
                    Current Position
                    
                    AgeAlejandro
      Macfarlane
                    
                    Chief
      Executive Officer
                    
                    
                    44Luis
      Pablo Rogelio Pagano
                    
                    Chief
      Financial Officer
                    
                    
                    56Ricardo
      Sericano
                    
                    Technical
      Director
                    
                    
                    61Eduardo
      Maggi
                    
                    Director
      of Operations
                    
                    
                    54Victor
      Augusto Ruiz
                    
                    Principal
      Accounting Officer
                    
                    
                    50Jorge
      Miguel Grecco
                    
                    Director
      of External Relations
                    
                    
                    49Edgardo
      Alberto Volosín
                    
                    Director
      of Corporate Affairs
                    
                    
                    56




Víctor Augusto
Ruiz.  Mr. Ruiz began working at Edenor in
1992.  He was one of the original partners from the consortium that
participated in the privatization of our company.  He was part of the
Grupo ASTRA CAPSA (Astra Compañía Argentina de Petroleo
S.A.).  Between 1992 and 2006, he worked as financial statements
sub-manager and accounting sub-manager at Edenor.  Between 2006 and
2008, he worked as tax manager and since August 2008 he has worked as principal
accounting officer.  He is a consultant member of the Tax Commission
and the Accounting Rules and Public Offering Commission at la Cámara de Sociedades Anónimas
(Chamber of Businesses).  Mr. Ruiz holds a CPA from la
Universidad de Buenos Aires and an MBA from la Universidad del Salvador in
Argentina and Deusto in Spain.




Supervisory
committee




Argentine
law requires certain corporations, such as our company, to have a Comisión Fiscalizadora
(supervisory committee).  The supervisory committee is responsible for
overseeing compliance with our bylaws, shareholders’ resolutions and Argentine
law and, without prejudice to the role of external auditors, is required to
present to the shareholders at the annual ordinary general meeting a written
report on the reasonableness of the financial information of the Company’s
annual report and the financial statements presented to the shareholders by our
board of directors.  The members of the supervisory committee are also
authorized to attend board of directors, audit committee and shareholders’
meetings, call extraordinary shareholders’ meetings, and investigate written
complaints of shareholders holding at least 2% of our outstanding
shares.  Pursuant to Argentine law, the members of the supervisory
committee must be licensed attorneys or certified public
accountants.


92




Our
bylaws provide that our supervisory committee must consist of three members and
three alternate members, elected by our shareholders at an ordinary
meeting.  Members of our supervisory committee are elected to serve
one-year terms and may be re-elected.  Pursuant to our bylaws, holders
of our Class A shares are entitled to appoint two members and two alternate
members of the supervisory committee and holders of our Class B and
Class C shares are entitled to collectively appoint one member and one
alternate member.




The
members and alternate members of our supervisory committee are:




Name
                              
                              Position
                              
                              Year of appointment
                                  (class electing member)Javier
      Errecondo
                              
                              Member
                              
                              2010
      (Class A)José
      Daniel Abelovich(1)
                              
                              Member
                              
                              2010
      (Class A)Jorge
      Roberto Pardo
                              
                              Member
                              
                              2010
      (Class B/C)Santiago
      Dellatorre
                              
                              Alternate member
                              
                              2010
      (Class A)Marcelo
      Fuxman(1)
                              
                              Alternate
      member
                              
                              2010
      (Class A)Alejandro
      Gabriel Turri(1)
                              
                              Alternate
      member
                              
                              2010
      (Class B/C)





(1)       Independent
under Argentine law.




Javier
Errecondo.  Mr. Errecondo is a founding partner of the
Argentine law firm Errecondo, Salaverri, Dellatorre, González &
Burgio.  He earned a degree in law in 1985 from the Universidad de
Buenos Aires.  He is a director of Dolphin Créditos S.A. and Nortel
Inversora S.A. and an alternate director of AEI Servicios Argentina S.A.,
Formosa Refrescos S.A. and Dico S.A.  In addition, he is a member of
the statutory audit committees of IEASA, Dolphin Energía and Pampa Energía S.A.,
Desarrollos Caballito S.A., Pegasus Realty S.A., O.P.M. Inmobiliaria S.A.,
Entertainment Depot S.A., EDEN S.A., FinanGroup S.A., GSF S.A., Grupo Union
S.A., Credit Group S.A., Farmacity S.A., Freddo S.A. and AESEBA S.A. and an
alternate member of the statutory audit committees of EASA, Construred S.A. BA
Mall S.R.L., Cablevisión S.A. and Multicanal S.A.




José Daniel
Abelovich.  Mr. Abelovich obtained a degree in accounting from
the Universidad de Buenos Aires. He is a senior partner of the audit firm
Abelovich, Polano & Asociados SRL/ Nexia International, an accounting firm
in Argentina. Formerly, he had been a manager of Harteneck, Lopez y Cia,/Coopers
& Lybrand and has served as a senior advisor for the World Bank. He is a
member of the supervisory committees of Pampa Energía S.A., Transener SA, Cresud
SA, IRSA Inversiones y Representaciones SA, Banco Hipotecario SA, Alto Palermo
SA, among other companies.




Jorge Roberto
Pardo.  Between 1993 and 2008, Mr. Pardo worked at la
Sindicatura General de la Nación (General Union of the Republic of Argentina, or
SIGEN) in several positions, including as Joint General Statutory Auditor of the
Nation.  Between 1983 and 1992 he worked in la Sindicatura General de
Empresas Públicas (General Union of State-Owned Companies, or
SIGEP).  Mr. Pardo holds a CPA from la Universidad de Buenos
Aires.




Santiago
Dellatorre.  Mr. Dellatorreis a founding partner
of the Argentine law firm Errecondo, Salaverri, Dellatorre, González &
Burgio.  He has been a member of the board of directors at Cablevisión
since 2005.  Between 1994 and 1995, Mr. Dellatorre worked as an
international associate at the United States law firm Shearman & Sterling
LLP.  Mr. Dellatorre received his law degree with honors from the
Universidad Católica Argentina in 1990.  He is a director of
Cablevisión S.A. and EDEN S.A., a member of the statutory audit committee of
Empresa de Energía Río Negro S.A. (EdERSA).  In addition, he is an
alternate member of the statutory audit committee of Dolphin Energía S.A., EASA
and GSF S.A.




Marcelo
Fuxman.  Mr. Fuxman  obtained a degree in accounting
from the Universidad de Buenos Aires. He is a  partner of the audit
firm Abelovich, Polano & Asociados SRL/ NEXIA INTERNATIONAL, an accounting
firm in Argentina. He is a member of the supervisory committees of Pampa Energía
S.A., Transener SA, Cresud SA, IRSA Inversiones y Representaciones SA, Banco
Hipotecario SA, Alto Palermo SA, among other companies.


93




Alejandro Gabriel
Turri.  Mr. Turri has worked at SIGEN in various positions
since 1993.  Between 1989 and 1992 he worked at SIGEP and between 1984
and 1988 at the Tribunal de Cuentas de la Nación.  Mr. Turri
holds a CPA and a business administration degree, both from la Universidad de
Buenos Aires.




COMPENSATION




Our board
of directors does not have a compensation or remuneration
committee.  The aggregate remuneration paid to the members and
alternate members of our board of directors, the members and alternate members
of our supervisory committee and our senior management during 2009 was
approximately Ps. 16.7 million.




EMPLOYEES




As of
December 31, 2009, we had 2,691 full-time employees and 30 part-time employees,
for a total of 2,721 employees and  as of December 31, 2008, we had
2,487 full-time employees and 38 part-time employees, for a total of 2,525
employees, and at December 31, 2007 we had 2,465 full-time employees and 43
part-time employees, for a total of 2,508 employees.  As of December
31, 2009, approximately 81% of our full-time employees are subject to two
collective bargaining agreements.  After the privatization, an
employee reduction plan was implemented to reduce the number of employees from
6,368 employees at the time of the privatization.  The employee
reductions were primarily effected through an early retirement
program.  In addition, we implemented an early retirement plan for
those employees who had made the payments required by law and had less than five
years before retirement, offering them monthly payments of 80% of their
pre-retirement net salary.  Access to this plan is conditioned upon
our own approval and the prior separation from our company under an agreement
signed before the Argentine Ministry of Labor.  In July 1995, we
signed two collective bargaining agreements with Sindicato de Luz y Fuerza and
Asociación del Personal
Superior, the two unions that represent our employees.  In
accordance with the union agreements, which have been revised since 1995 but
remain in effect, we created a mediation commission to interpret the agreements
and analyze claims and unresolved issues that arise in our daily
activities.  The most common issues that arise deal with changes to
employment categories, relocation of employees, detailed situations with
personnel and the analysis of the suitability of different technological
advancements.  Currently, our relations with the unions are
stable.  However, we cannot guarantee that we will not experience any
conflicts with our employees in the future, including with our unionized
employees in the context of future negotiations of our collective bargaining
agreements, which could result in events such as strikes or other disruptions
that could have a negative impact on our operations.




We have
outsourced a number of activities related to our business to third party
contractors as we seek to maintain a flexible cost base that allows us both to
maintain a lower cost base and gives us the ability to respond more quickly to
changes in our market.  We had approximately 3,611 third-party
employees under contract with our company as of December 31, 2009, 3,029 as of
December 31, 2008 and 3,612 as of December 31, 2007.  We
calculate our number of third-party employees based on the number of employees
we have under contract, which does not directly relate to the number of
third-party employees performing services for our company at any given time, as
we only pay for services of these employees on an as-needed basis although they
remain under contract for specified periods.  Although we have very
strict policies regarding compliance with labor and social security obligations
by our contractors, we are not in a position to ensure that, if conflicted,
contractors’ employees will not initiate legal actions to seek indemnification
from us based upon a number of judicial rulings issued by labor courts in
Argentina recognizing joint and several liability between the contractor and the
entity to which it is supplying services under certain
circumstances.  As of December 31, 2009, contractors’ employees were
seeking indemnification from us for an aggregate amount of
Ps. 64.2 million, including legal fees and interest and as of such
date, based on legal advice, have recorded accruals for an aggregate amount of
Ps. 36.9 million to cover the liabilities we may have in connection
with such claims.


94




SHARE
OWNERSHIP




None of
the members of our board of directors or our senior management beneficially own
any shares of our capital stock except for Mr.. Diego Martín Salaverri, whom
beneficially owns Class B shares representing less than one percent of our
capital stock.  See “Item 7. Major Shareholders and Related Party
Transactions.”





Item
      7.
            Major Shareholders and Related
      Party Transactions




The
following table sets forth information relating to the ownership of our common
shares as of the date of this annual report.




Class(1)
                
                
                Shares
                
                
                (%)Electricidad
      Argentina S.A.(2)
                
                
                A
                
                
                
                462,292,111
                
                
                
                51.0
                %Employee
      Stock Participation Program
                
                
                C
                
                
                
                1,952,604
                
                
                
                0.2
                %Public
                
                
                B
                
                
                
                203,672,680
                
                
                
                22.5
                %ANSES(3)
                
                
                B
                
                
                
                229,125,205
                
                
                
                25.3
                %Treasury
      Shares
                
                
                B
                
                
                
                9,412,500
                
                
                
                1.0
                %Total
                
                
                
                
                
                
                906,455,100
                
                
                
                100.0
                %





(1)            Each
class of shares entitles holders to one vote per share.




(2)           
All of our Class A shares have been pledged to the Argentine government to
secure our obligations under our concession and cannot be transferred without
the prior approval of the ENRE.  See “Item 4. Information on the
Company—Our concession —Our obligations.” Electricidad Argentina S.A. (EASA) is
an Argentine corporation wholly owned by Dolphin Energía and
IEASA.  Dolphin Energía holds 90% of the voting stock and 92.3% of the
total outstanding stock of EASA, and IEASA holds the remainder.  Pampa
Energía S.A. currently owns 100% of the capital stock of Dolphin Energía and
IEASA.




(3)            On
November 20, 2008, the Argentine Congress passed a law unifying the Argentine
pension and retirement system into a system publicly administered by the
Administración 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 229,125,205 of our Class B
shares, representing 25.3% of our capital stock.  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,
including restrictions on 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.




As of
December 31, 2009, we had approximately 4,177,186 ADSs outstanding, representing
83,543,720 Class B shares.




Acquisition
by Dolphin Energía and IEASA.




In
September 2005, Dolphin Energía and IEASA purchased a controlling stake in the
company from EDFI.  Until September 28, 2007, Dolphin Energía and
IEASA were controlled by the principal members of Grupo Dolphin, Marcos Marcelo
Mindlin, Damián Miguel Mindlin and Gustavo Mariani.  Such principal
members had significant experience investing in Argentine energy sector dating
back to 2004.




Initial
Public Offering




In
April 2007, we completed the initial public offering of our Class B ordinary
shares in the form of American Depository Shares (ADSs).  We and a
group of our shareholders sold 18,050,097 ADSs, representing 361,001,940
ordinary Class B shares, in a offering in the United States and other
jurisdictions outside of Argentina, and the Employee Stock Participation Program
sold 81,208,416 ordinary class B shares in a simultaneous offering in
Argentina.  The ADSs are listed on the New York Stock Exchange under
the symbol “EDN” and the Class B shares are listed on the BASE under the same
symbol.  We received approximately U.S. $61.4 million from the
initial public offering, before costs.  Of this amount, we used
approximately U.S. $36 million to repurchase some of our Discount Notes due
2014.  The remainder of the proceeds from the initial public offering
was used to repurchase some of our Fixed Rate Par Notes due 2016 and for capital
expenditures.  After the initial public offering, our controlling
shareholder continues to own 51% of our ordinary shares.


95




Acquisition
by Pampa Energía S.A.  (Formerly called Pampa Holding SA)




On June
22, 2007,  the principal members of Grupo Dolphin, Marcos Marcelo
Mindlin, Damián Miguel Mindlin and Gustavo Mariani, signed a stock subscription
agreement with Pampa Energía S.A., pursuant to which they agreed to transfer all
of the stock of Dolphin Energía and IEASA to Pampa Energía S.A. in exchange for
common stock of Pampa Energía S.A.  On August 30, 2007, the shareholders of
Pampa Energía S.A. approved this transfer of shares, and the CNV and the BASE
approved the public offering and listing of the shares in September
2007.  The transaction was consummated on September 28, 2007, and as a
result, Pampa Energía S.A. owns 100% of the capital stock of each of Dolphin
Energía and IEASA, which in turn collectively own all of the capital stock of
EASA, our controlling shareholder.  The ratio of exchange of common shares
of Pampa Energía S.A. and shares of Dolphin Energía and IEASA was determined
using the respective averages of the closing prices of Pampa Energía S.A.’s and
our shares on the Buenos Aires Stock Exchange during a 10-trading day period
ending on August 15, 2007, taking into account, in the case of shares of Dolphin
Energía and IEASA, EASA’s stake in our company, the net present value of EASA’s
outstanding indebtedness and the net present value of fees to be paid by us to
EASA under the Financial Services Agreement dated April 4, 2006 between our
company and EASA.  See “Related party transactions—Financial services
agreement with EASA.”




The
former shareholders of Dolphin Energía and IEASA, Messrs. Marcos Marcelo
Mindlin, Damián Mindlin and Gustavo Mariani, are the controlling shareholders of
Grupo Dolphin and are managers of Pampa Energía S.A., an Argentine public
company with a market capitalization (net of repurchases) of Ps. 1,371.8
million as of December 31, 2008.  Pampa Energía S.A. was acquired in
November 2005 by certain principals of Grupo Dolphin to serve as a
corporate vehicle for private equity investments in
Argentina.  Through companies under their control, Messrs. Marcos
Marcelo Mindlin, Damián Mindlin and Gustavo Mariani currently control
approximately 21.04% of the common stock of Pampa Energía S.A.  In
addition, Messrs. Marcos Marcelo Mindlin, Damián Mindlin and Gustavo Mariani,
together with Pampa Energía S.A.’s chief executive officer, hold warrants to
purchase, in the aggregate, approximately 21.4% of the common stock of Pampa
Energía S.A. (on a fully diluted basis).  The board of directors of
Pampa Energía S.A. consists of nine directors, of which five are affiliated with
Grupo Dolphin, including Mr. Marcelo Mindlin, who serves as chairman of the
board of directors, Damian Mindlin, who serves as vice-chairman of the board of
directors, and Gustavo Mariani,.  The principal executive officers of
Pampa Energía S.A., including its chief executive officer, are also affiliated
with Grupo Dolphin.




In
addition to its indirect stake in us, Pampa Energía S.A. currently owns several
investments in the Argentine electricity sector, including a 50% interest in the
controlling shareholder of the principal electricity transmission company in
Argentina, Compañía de Transporte de Energía Eléctrica en Alta Tensión S.A.
(Transener), controlling stakes in five generation plants located in the Buenos
Aires, Salta, Mendoza and Neuquén provinces (Central Piedra Buena S.A.,
Hidroeléctrica Los Nihuiles S.A., Hidroeléctrica Diamante S.A., Central Térmica
Güemes S.A. and Loma de la Lata S.A.).




Share
buy-back program




On
October 23, 2008, we launched a tender offer in Argentina for our shares at a
purchase price of Ps. 0.65 per share.  400,000 ordinary Class B
shares were tendered and purchased pursuant to the offer.




On
November 14, 2008, we commenced an open-market share purchase
program.  Under the terms of the program, we were authorized to
purchase up to Ps. 45 million of our shares, subject to certain volume and
price restrictions.  The open market share purchase program expired on
March 17, 2009.  Pursuant to the program we
purchased  9,012,500 Class B shares, at an average price of
Ps. 0.65 per share, representing approximately 1% of our capital
stock.  We currently hold 9,412,500 Class B shares as treasury
stock.




Employee
Stock Participation Program




At the
time of the privatization of SEGBA (our predecessor), the Argentine government
allocated all of our Class C shares, representing 10% of our outstanding
capital stock, to establish a Programa de Propiedad
Participada (employee stock participation program, or PPP), pursuant to Law
No. 23,696 and regulations thereunder, through which certain eligible employees
(including former employees of SEGBA who became employees of our company) were
each entitled to receive a specified number of our Class C shares,
calculated in accordance with a formula that considered a number of factors,
including the employee’s salary level, position and seniority.  In
order to implement the PPP, a general transfer agreement, a share syndication
agreement and a trust agreement were executed.


96




Pursuant
to the transfer agreement, participant employees were allowed to defer payment
for the Class C shares over time.  As a guarantee for the payment
of the deferred purchase price, the Class C shares were pledged in favor of
the Argentine government.  Furthermore, under the original trust
agreement, the Class C shares were placed in trust by the Argentine
government with Banco Nación, acting as trustee for the Class C shares, for
the benefit of the participant employees and the Argentine
government.  In addition, pursuant to the share syndication agreement,
all political rights of the participant employees (including the right to vote
at our ordinary and extraordinary shareholders’ meetings) were to be exercised
collectively until the payment in full of the deferred purchase price and the
release of the pledge in favor of the Argentine government.  On April
27, 2007, the participant employees paid the deferred purchase price of all of
the Class C shares in full to the Argentine government and, accordingly,
the pledge was released and the share syndication agreement was
terminated.




According
to the regulations applicable to the Employee Stock Participation Program,
participant employees who terminated their employment with our company before
the payment in full of the deferred purchase price to the Argentine government
were required to transfer their shares to the Guarantee and Repurchase Fund, at
a price calculated pursuant to a formula set forth in the transfer
agreement.  As of the date of payment of the deferred purchase price,
the Guarantee and Repurchase Fund had not paid in full the amounts due to the
former participant employees for the transfer of their Class C
Shares.




A number
of former employees of SEGBA and our company have brought claims against the
Guaranty and Repurchase Fund, the Argentine government and, in certain limited
cases, our company, in each case relating to the administration of our Employee
Stock Participation Program.  The plaintiffs who are former employees
of SEGBA were not deemed eligible by the relevant authorities to participate in
the Employee Stock Participation Program at the time of its creation, which
determination these plaintiffs dispute and are seeking compensation
for.  The plaintiffs who are former employees of our company are
either seeking payment of amounts due to them by the Guaranty and Repurchase
Fund for share transfers that occurred upon their retirement from our employment
or disputing the calculation of the amounts paid to them by the Guaranty and
Repurchase Fund.  In several of these claims, the plaintiffs have
obtained attachment orders or injunctive relief against the Guaranty and
Repurchase Fund over approximately 1,567,231 Class C shares and
Ps. 709,149 of the funds on deposit in the fund, in each case up to the
amount of their respective claims.  Because the outcome of these
proceedings has not yet been determined, the Argentine government instructed
Banco Nación to create a Contingency Fund to hold a portion of the proceeds of
the offering of Class B shares by the Employee Stock Participation Program
pending the outcome of these legal proceedings.




According
to the agreements, laws and decrees that govern the Employee Stock Participation
Program, our Class C shares may only be held by our
employees.  Upon the closing of our initial public offering,
substantially all of our Class C shares were converted into Class B shares
and sold.  In accordance with these agreements, laws and decrees, the
rights previously attributable to the Class C shares have been combined
with those attributable to the Class B shares, and holders of the remaining
Class C shares will vote jointly as a single class with the holders of
Class B shares in the election of directors.  Only 1,952,604
Class C shares remain outstanding, representing 0.2% of our capital
stock.




RELATED
PARTY TRANSACTIONS




Financial
Services Agreement with EASA




On
April 4, 2006, we entered into a Financial Services Agreement with EASA
pursuant to which EASA shall provide us with advisory services, as well as
services related to the potential development of new lines of business
compatible with our corporate objectives.  The services to be
performed by EASA include assistance and advice in respect of our financial
performance, our finance management team and our financial decision-making
process, our engagement of financial advisory services firms and the development
of new financial products, the restructuring of our commercial and financial
debt, feasibility, profitability and implementation of new businesses, hedging
and derivatives strategies, relationship with foreign and local financial
institutions, financial aspects of tariffs renegotiation and concession contract
process and our annual budget.


97




The term
of the agreement is 5 years from September 2005, with each party
having the right to terminate it at any time without cause with 60 days
prior notice.  The consideration to be received by EASA is
U.S. $2 million per year, plus Argentine value added tax, and will be
payable in advance in October of each year, or as otherwise agreed by the
parties, with the first payment (for services rendered in the 12-month period
from September 2005) being paid upon approval of the agreement by the audit
committees and boards of directors of both our company and EASA, approvals which
have both been obtained.  The payment related to the first year of
services was made on April 19, 2006.




In April
2008, our board of directors approved an amendment to the EASA agreement
increasing the amount to be paid by us in consideration for the services
provided by EASA to U.S. $2.5 million, plus Argentine value added tax,
payable retroactively from January 1, 2008.  No other terms of the
contract have been modified.




We are
currently renegotiating this agreement.




Agreement
with Comunicaciones y Consumos S.A.




On
March 16, 2007 we entered into an agreement with Comunicaciones y Consumos
S.A. (CYCSA), an Argentine company wholly owned by Messrs. Marcelo Mindlin,
Damian Mindlin and Gustavo Mariani, pursuant to which we granted CYCSA the
exclusive right to provide telecommunication services to our customers through
the use of our network in accordance with Federal Decree 764/2000, which
contemplates the integration of voice, data and imaging services through the
existing infrastructure of electricity distribution companies such as
ours.  Under the terms of this agreement, CYCSA will be responsible
for all expenses relating to the maintenance and adaptation of our network for
use in providing its telecommunications services.  The agreement will
be valid for ten years commencing from the date on which the ENRE approves the
terms of the agreement and the date on which CYCSA’s telecommunications license
is granted approval, which it received on July 11, 2008.  The
agreement also provides for automatic renewal at the expiration of each term for
subsequent five-year periods, unless either party gives notice not less than
120 days prior to the expiration of such term.  Under the
agreement, CYCSA will be required to make periodic requests for access to our
network, which we will evaluate and grant based on available capacity in our
network.  In return for the use of our network, CYCSA will compensate
us with 2% of its annual charges to customers, before taxes, as well as 10% of
any profits derived from its services.  In addition, CYCSA will
indemnify us for any liability arising from the rendering of its services
through our network.  In October 2008, we entered into an amendment to
the agreement with CYCSA granting CYCSA the right to use poles and towers of our
overhead lines to lay a network of fiber optic cables.  The amendment
also grants us the right to use part of the capacity of the fiber optic
cables




In
November 2008, CYCSA and we extended the term of our initial agreement from ten
to twenty years.




Agreement
with Préstamos y Servicios S.A.




On March
16, 2007, we entered into an agreement with Préstamos y Servicios S.A. (PYSSA),
a financial services company indirectly owned by Pampa Holdings LLC, a company
indirectly controlled by Messrs. Marcelo Mindlin, Damian Mindlin and Gustavo
Mariani, pursuant to which we granted PYSSA the exclusive right to conduct its
direct and marketing services through the use of our facilities and mailing
services. Under the terms of the agreement, we agree to provide PYSSA with
office space and allow them to communicate financial and loan offers directly to
our customers. In addition, we include PYSSA marketing material in the invoices
and other mail we send to our customers.  The term of the agreement is
five years, which automatically renews for subsequent five year periods unless
terminated by one of the parties with 120 days notice. In accordance with the
terms of the agreement, PYSSA pays us 2% of the monthly charges collected from
our customers, before taxes, and 10% of profits.  PYSSA has
indemnified us for any obligation arising from the rendering of its
services.  This agreement required authorization from the ENRE, which
it received through Resolution No. 381/2007 on June 15, 2007.


98


On
February 28, 2008, PYSSA informed us that the office space Edenor provides to
PYSSA would be used by personnel of Credilogros Compañía Financiera S.A., a firm
that provides financial services, personal loans and credit
cards.  However, the work of Credilogros Compañía Financiera in our
office space has been temporarily suspended due to the international financial
crisis and its impact on the financial services industry in
Argentina.




The
activities related to this contract are temporarily suspended, as a consequence
of the international financial crisis.







Item
      8.
            Financial
      Information




See
“Item 18. Financial Statements” beginning on page F-1.




LEGAL
AND ADMINISTRATIVE PROCEEDINGS




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, 2009, we had
established accruals in the aggregate amount of Ps. 72.9 million to
cover potential losses from such claims and legal proceedings.  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.




Tax
claims




On
December 1, 2003, the Provincial Board of Electric Power of the Province of
Buenos Aires initiated a claim against us in the amount of
Ps. 51.2 million, which does not include surcharges, interest or
penalties accrued in respect of this amount after the date of the
claim.  At December 31, 2003, the amount of surcharges and
interest accrued on the claim, including applied penalties, was
Ps. 310 million.  In addition, on April 23, 2007, the
Board notified us of an additional claim for Ps. 4.0 million, without
including surcharges, interest or penalties accrued.  The claims are
based on an alleged failure to collect, as collection agent, in respect of
certain taxes established by Decree Laws No. 7290/67 and No. 9038/78 between
July 1997 and June 2001 and between July 2001 and June 2002,
respectively.  On December 23, 2003, we filed an appeal of the
Board’s decision with the provincial Tax Court of Appeals of La Plata, and
enforcement of the judgment was suspended pending the outcome of the
appeal.  On June 14, 2007, the Court granted our appeal and
rejected the Board’s tax claim against us.  On June 27, 2007 the
provincial Tax Court of Appeals of Buenos Aires rendered a favorable decision in
relation to our appeal.  This decision reaffirms a recent decision by
the Supreme Court of the Republic of Argentina in an unrelated case that held
that the regulations were unconstitutional due to the commitment assumed by the
Province of Buenos Aires not to tax the transfer of electric
power.  We have not established any accruals in our financial
statements for this claim.




The
Argentine federal tax authorities have challenged certain income tax deductions
for allowance for doubtful accounts on our income tax returns for fiscal years
1996, 1997 and 1998, and have assessed additional taxes of approximately
Ps. 9.3 million.  Tax related contingencies are subject to
interest charges and, in some cases, fines.  We have appealed the tax
authorities’ ruling before the Argentine federal tax court.  During
the appeal process payment for such claim is suspended.  We have
accounted for an accrual in our financial statements for the contingent tax
liability related to this claim, including interest and penalties.




On April
27, 2009, we agreed to the tax regularization plan established in Law No.
26,476.  The main features of the moratorium offered to participating
companies are as follows:


·
            Waiver
      of fines and penalties on which no final judgment has been issued at the
      time of the company’s adherence to the regularization
  plan;


·
            Waiver
      of late payment/default and penalty interest in the amount exceeding 30%
      of the principal owed;


·
            An
      initial payment equal to 6% of the liability existing at the time of the
      company’s adherence to the regularization
plan;


·
            The
      remaining balance payable in 120 monthly installments with a 0.75% monthly
      interest rate.


99





·
            30%
      to 50% reduction in tax agents and AFIP (the Argentine tax authorities)
      attorneys’ fees.





In
accordance with the assessment of the tax regularization plan, our debt amounts
to Ps. 12.1 million plus interest amounting to Ps. 5.2 million.  We
expect that all federal tax claims against us will be dropped upon our payment
of these amounts.





In 2009,
we paid Ps.1,5 million of this amount, thus the remaining balance of our debt
totals Ps.10.6 million, excluding the interest amount.




Environmental
claims




On
May 24, 2005, three of our employees were indicted on charges of
PCB-related environmental contamination dangerous to human health, which is a
crime under Argentine law.  In connection with this alleged
infraction, the judge sought a pre-judgment attachment of our assets in the
amount of Ps. 150 million to cover the potential cost of environmental
damages and estimated clean-up costs.  On May 30, 2005, we
appealed the charges against our employees as well as the attachment
order.  On December 15, 2005, the court of appeals dismissed the
charges against all three defendants for lack of evidence and, accordingly,
vacated the attachment order.  The decision by the court of appeals
also stated that the trial judge should order the acquittal of two public
officers of the ENRE, who had been indicted on related charges.  This
decision was appealed to the Tribunal de Casación(National Criminal Appellate Court), the highest appellate body for this
matter, which on April 5, 2006 ruled that the appeal of the decision
relating to our employees and our company was not admissible because decisions
rendered on grounds of lack of evidence are not reviewable.  On July
16, 2007, we were notified that on July 11, 2007, the trial judge issued
acquittals for all of our officials and employees who had been
indicted.  On appeal on March 25, 2008, the Sala I de la Cámara Federal de San
Martín (First Court of the Federal Circuit of San Martín) upheld the
acquittals and confirmed the finding that there had been insufficient evidence
to prove any PCB contamination.  On April 18, 2008 the Minsterio Público(Attorney
General) appealed this decision before the First Court of the Federal Circuit of
San Martín and lost the appeal.  On December 29, 2008, the Attorney
General was notified that the National Criminal Appellate Court had rejected the
appeal as well. In response, the Attorney General filed an “extraordinary
appeal”, to which the defense responded. On May 27, 2009, the Tribunal dismissed
the extraordinary appeal filed by the Attorney General on the grounds that it
failed to specifically and reasonably refute the arguments that supported the
resolution being appealed, and proved neither the alleged arbitrariness nor the
violation of constitutional guaranties. The Attorney General filed an appeal
(“Recurso de Queja”) to the Argentine Supreme Court requesting that the appeal
dismissed by the National Criminal Appellate Court be sustained. As of the date
of this annual report, the appeal is being analyzed by the Supreme
Court.





Proceedings
challenging the renegotiation of our concession




In
November 2006, two Argentine consumer associations, Asociación Civil por la Igualdad y
la Justicia (Civil Association for Equality and Justice, or ACIJ) and
Consumidores Libres
Cooperativa Limitada de Provisión de Servicios de Acción Comunitaria
(Consumer’s Cooperative for Community Action), brought an action against us and
the Argentine government before a federal administrative court seeking to block
the ratification of the Adjustment Agreement on the grounds that the approval
mechanism was unconstitutional.  On March 26, 2007, the federal
administrative court dismissed these claims and ruled in our favor on the
grounds that the adoption of Executive Decree No. 1957/06, which ratified the
Adjustment Agreement, rendered the action moot.  ACIJ appealed this
decision on April 12, 2007, and the appeal was decided in our
favor.  However, on April 14, 2008, ACIJ filed another complaint
challenging the procedures utilized by the Argentine Congress in approving the
Adjustment Agreement.  Specifically, the claim alleges that Article 4
of Law No. 24,790, which authorized the Congress to tacitly approve agreements
negotiated between the Argentine government and public service companies, such
as us, violated the congressional procedures established in the Argentine
Constitution.  ACIJ has requested that the Adjustment Agreement be
renegotiated and submitted to Congress for its express approval.  We
have responded to this complaint, which is in the sentencing
period.  However, we cannot make assurances regarding how this latest
complaint will be resolved nor can we make assurances that other actions or
requests for injunctive relief will not be brought by these or other groups
seeking to reverse the adjustments we have obtained or to block any further
adjustments to our tariffs.


100




Preliminary
Injunction of the Public Ombudsman




On
October 31, 2008, the Secretary of Energy approved  new seasonal
reference prices of power and energy in the WEM.  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 WEM, including transmission, to the final
customer.




In
response to the new tariff schedule, the defensor del pueblo de la
nación (National Public Ombudsman) filed a claim opposing the resolutions
establishing the October 1, 2008 tariff schedule and naming us as a third-party
defendant.  On January 27, 2009, the ENRE notified us of a preliminary
injunction, as a result of the Ombudsman’s claim, pursuant to which we were
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, along with the Argentine government, have appealed this
injunction through various legal actions, and the resolution of our most recent
appeal is still pending as of the date of this annual report.




On August
14, 2009, the Secretary of Energy issued Resolution No. 652/09, which ordered
the suspension of the certain 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, we received notice of a complaint filed by two consumer
associations, Consumer’s Cooperative for Community Action and the Unión de Usuarios y
Consumidores against the Argentine government, the ENRE, EDESUR, EDELAP
and us. In accordance with the terms of the complaint, two additional
associations for the defense of consumer rights, Asociación de Defensa de los
Derechos de los Usuarios y Consumidores (Association for the Legal Defense of
Consumers) and Unión de
Usuarios y Consumidores en Defensa de sus Derechos (Consumers Union Legal
Defense), have joined the complaint.





The
remedies sought in the complaint are as follow:




·
            that
      all the most recent resolutions concerning electricity rates issued by the
      ENRE and the Secretary of Energy be declared null and unconstitutional,
      and, as a consequence that the amounts billed by virtue of these
      resolutions be refunded.




·
            that
      all the defendants be carry out the
RTI.




·
            that
      the resolutions issued by the Secretary of Energy 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.




·
            Alternatively,
      should the main claim be rejected, that the defendants be ordered to bill
      all customers on a bimonthly basis.





Additionally,
is the plaintiffs requested that the court issue a preliminary injunction
suspending the rate hikes established in the resolutions questioned by the
plaintiff. Alternatively, the plaintiffs requested that the application of the
resolutions be partially suspended. Finally, the plaintiffs also requested that
the application authority be ordered not to issue new increases other than
within the framework of the RTI process. As of the date of this annual report,
the court has neither granted nor rejected these requests.


101





In March,
2010 Consumidores Financieros,
Asociación Civil Para Su Defensa,a consumers’ association, instituted an
action against us 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 No2, Secretería 3) seeking
repayment to users 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 our 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 we 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 the tasa pasiva(the
interest rate that Banco de la
Nación Argentinapays on deposits) in alleged contravention of the Law of
Consumer Defense (Ley de
Defensa del Consumidor) in April 2008. We have given express directions
to our legal advisors to contest the suit and all related claims.





We can
give no assurance that these actions or other potential future actions or
requests for injunctive relief will not reverse the adjustments we have obtained
or block any further adjustments to our tariffs.




DIVIDENDS




Under
Argentine corporate law, declaration and payment of annual dividends, to the
extent the distribution of available earnings complies with the requirements of
applicable Argentine corporate law, is determined by our shareholders at the
annual ordinary shareholders’ meeting. Generally, but not necessarily, the board
of directors makes a recommendation with respect to the payment of dividends. We
have not declared or paid any dividends since August 14, 2001.




Under the
terms of our financial debt, we are not entitled to distribute any dividends
until April 24, 2008, unless our leverage ratio (as defined in our debt
instruments) is 2.5 or lower or we attain an international investment grade
rating on our long term debt from an internationally recognized rating
agency.  Thereafter, we are only permitted to distribute dividends
under certain circumstances depending on our leverage ratio based on our
financial statements prepared in accordance with Argentine GAAP.  If
our leverage ratio (defined in our debt instruments as our total indebtedness
over our 12-month EBITDA) is 2.5 or lower, or we attain an international
investment grade rating on our long term debt from an internationally recognized
rating agency, we will not be subject to any restrictions under our debt
instruments on our ability to distribute dividends.  However, if our
leverage ratio is greater than 2.5, we will only be entitled to pay dividends if
we generate excess cash (as defined in our debt instruments).  In this
case, we may pay dividends out of excess cash as follows:




·
            if
      our leverage ratio is greater than 2.5, but not greater than 3.0, we may
      apply 50% of our excess cash to pay
dividends;




·
            if
      our leverage ratio is greater than 3.0, but not greater than 3.5, we may
      apply 25% of our excess cash to pay dividends;
  and




·
            if
      our leverage ratio is greater than 3.5, we may not pay
      dividends.




Also,
pursuant to the Adjustment Agreement, we cannot make any dividend payments
without the ENRE’s prior approval during the period in which we are conducting
the RTI.




Amount
available for distribution




Dividends
may be lawfully declared and paid only out of our retained earnings stated in
our yearly financial statements prepared in accordance with Argentine GAAP and
CNV regulations and approved by the annual ordinary  shareholders’
meeting.




According
to Argentine Corporations Law and our by-laws we are required to maintain a
legal reserve of 20% of our then-outstanding capital stock. The legal reserve is
not available for distribution to shareholders. Under Argentine corporate law
and our by-laws, our yearly net income (as adjusted to reflect changes in prior
results) is allocated in the following order:


102




(i)      to
comply with the legal reserve requirement;




(ii)     to
pay the accrued fees of the members of the board of directors and supervisory
committee;




(iii)    to
pay any amounts owed to our employees under the “Bonos de Participación para el
Personal”;




(iv)    for
voluntary or contingent reserves, as may be resolved from time to time by our
shareholders at the annual ordinary shareholders’ meeting; and




(v)     the
remainder of the net income for the year may be distributed as dividends on
common shares or as otherwise decided by our shareholders at the annual ordinary
shareholders’ meeting.




Bonos de Participación para el
Personalare bonds issued to our employees, according to the provisions
of our by-laws, that entitle each holder of the bonds to a pro rata portion of
0.5% of our earnings, after payments of taxes.




The board
of directors submits our financial statements for the preceding fiscal year,
together with reports thereon by the supervisory committee, 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 the
financial statements and determine the allocation 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 of the CNV for the public offering of the
shares arising from such dividends. The statute of limitations to the right of
any shareholder to receive dividends declared by the shareholders’ meeting is 3
years from the date in which they have been made available to the
shareholder.




SIGNIFICANT
CHANGES




Except as
identified in this annual report on Form 20-F, no significant change in our
financial condition has occurred since the date of the most recent audited
financial statements contained in this annual report.




Item
      9.
            The Offer and
      Listing




Since
April 26, 2007, our Class B shares and the ADSs have been listed on the Buenos
Aires Stock Exchange and the NYSE, respectively. The ADSs have been issued by
the Bank of New York as depositary. Each ADS represents 20 Class B
shares.




OFFER
AND LISTING DETAILS




The
following table sets forth, for the period commencing with our initial public
offering on April 30, 2007, the annual high and low market prices for the ADSs
on the New York Stock Exchange and the shares on the Buenos Aires Stock
Exchange.




Buenos Aires Stock
                  Exchange
              
              
              New York Stock
                  ExchangePesos per Share
              
              
              U.S. dollars per ADSHigh
              
              
              Low
              
              
              High
              
              
              Low2007
              
              
              3.97
              
              
              
              2.75
              
              
              
              24.95
              
              
              
              17.652008
              
              
              3.50
              
              
              
              0.56
              
              
              
              22.16
              
              
              
              3.062009
              
              
              1.70
              
              
              
              0.61
              
              
              
              9.02
              
              
              
              3.20




103




The
following table sets forth, for the periods indicated, the reported high and low
sales prices for our shares on the
Buenos Aires Stock Exchange and the reported high and low sales prices for the
ADSs on the New York Stock Exchange.





Buenos Aires Stock
                  Exchange
              
              
              New York Stock
                  ExchangePesos per Share
              
              
              U.S. dollars per ADSHigh
              
              
              Low
              
              
              High
              
              
              Low2008First
      Quarter
              
              
              3.51
              
              
              
              2.95
              
              
              
              22.16
              
              
              
              18.22Second
      Quarter
              
              
              3.29
              
              
              
              1.86
              
              
              
              20.87
              
              
              
              11.35Third
      Quarter
              
              
              2.07
              
              
              
              1.14
              
              
              
              13.53
              
              
              
              6.50Fourth
      Quarter
              
              
              1.21
              
              
              
              0.56
              
              
              
              7.30
              
              
              
              3.06





Buenos Aires Stock
                  Exchange
              
              
              New York Stock
                  ExchangePesos per Share
              
              
              U.S. dollars per ADSHigh
              
              
              Low
              
              
              High
              
              
              Low2009First
      Quarter
              
              
              0.87
              
              
              
              0.61
              
              
              
              4.90
              
              
              
              3.20Second
      Quarter
              
              
              1.08
              
              
              
              0.70
              
              
              
              5.65
              
              
              
              3.65Third
      Quarter
              
              
              1.47
              
              
              
              1.06
              
              
              
              7.80
              
              
              
              5.22Fourth
      Quarter
              
              
              1.70
              
              
              
              1.29
              
              
              
              9.02
              
              
              
              6.95




The
following table sets forth, for the months indicated, the reported high and low
sales price for our shares on the Buenos Aires Stock Exchange and the reported
high and low sales prices for the ADSs on the New York Stock
Exchange.




Buenos Aires Stock
                  Exchange
              
              
              New York Stock
                  ExchangePesos per Share
              
              
              U.S. dollars per ADSHigh
              
              
              Low
              
              
              High
              
              
              Low2009December
              
              
              1.54
              
              
              
              1.30
              
              
              
              8.10
              
              
              
              6.962010January
              
              
              1.59
              
              
              
              1.42
              
              
              
              8.48
              
              
              
              7.48February
              
              
              1.45
              
              
              
              1.33
              
              
              
              7.65
              
              
              
              6.75March
              
              
              1.47
              
              
              
              1.32
              
              
              
              7.62
              
              
              
              6.78April
              
              
              1.54
              
              
              
              1.42
              
              
              
              7.90
              
              
              
              7.05May(1)
              
              
              1.55
              
              
              
              1.45
              
              
              
              7.98
              
              
              
              7.37





(1) Represents the corresponding sale
prices from April 1 through May 6.


104





Markets




Trading
on the Buenos Aires Stock Exchange




Trading
in the Argentine securities market




The
securities market in Argentina is comprised of 11 stock exchanges consisting of
the BCBA, Bahía Blanca, Corrientes, Córdoba, La Plata, La Rioja, Mendoza,
Rosario, Santa Fe, Mar del Plata and Tucumán. Six of these exchanges (Buenos
Aires, Rosario, Córdoba, Mendoza, Santa Fe, and La Rioja) have affiliated stock
markets and, accordingly, are authorized to quote publicly offered securities.
Securities listed on these exchanges include corporate equity and bonds and
government securities.




The BCBA
is the principal and longest-established exchange in Argentina and is currently
the fourth largest exchange in Latin America in terms of market capitalization.
The BCBA began operating in 1854 and accounts for approximately 95% of all
equity trading in Argentina.  Bonds listed on the BCBA may
simultaneously be listed on the Mercado Abierto Electrónico, the Argentine
over-the-counter market, or MAE, pursuant to an agreement between BCBA and MAE
which stipulates that equity securities are to be traded exclusively on the BCBA
while debt securities (both public and private) may be traded on both the MAE
and the BCBA.  In addition, through separate agreements with the BCBA,
all of the securities listed on the BCBA may 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 relate to BCBA-listed
companies and are subsequently settled in Buenos Aires. Although companies may
list all of their capital stock on the BCBA, 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 the BCBA.




Argentina’s
equity markets have historically been comprised of individual investors, though
in recent years, there has been an increase in the level of investment by banks
and insurance companies in these markets.  The fondos comunes de inversión
(Argentine mutual funds), however, still do not actively invest in local equity
markets.  As of December 31, 2009, 74 companies had equity securities
listed on the BCBA, of which the ten most traded companies accounted for
approximately 70.4% of the total market capitalization during 2009.




The
Buenos Aires Stock Market, or Mercado de Valores de Buenos Aires (MERVAL) is the
largest stock market in Argentina and is affiliated with the
BCBA.  MERVAL is a corporation consisting of 133 shareholder members
who are the sole individuals or entities authorized to trade, either as
principals or agents, in the securities listed on the BCBA.  Trading
on the BCBA is conducted either through the traditional auction system from
11:00 a.m. to 5:00 p.m. on trading days, or through the Sistema 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.




Regulation
of the Argentine securities market




The
Argentine securities market is regulated and overseen by the National Securities
Commission or CNV, pursuant to Law No. 17,811, as amended, which in addition to
having created the CNV governs the regulation of security exchanges, 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 pension funds and insurance companies
are regulated by separate government agencies, whereas financial institutions
are regulated primarily by the Central Bank.


105


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. (Stock Exchange Incorporated), a corporation owned by the
BCBA, MERVAL and certain provincial exchanges. Caja de Valores S.A. 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 S.A. handles the settlement of securities transactions carried out by
the BCBA 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, 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. 677/01 on June 1, 2001, which provided certain guidelines
and provisions relating to capital markets transparency and best practices.
Decree No. 677/01 applies to individuals and entities that participate in the
public offering of securities, as well as to stock exchanges. Among its key
provisions, the decree broadens the definition of a “security,” governs the
treatment of negotiable securities, obligates publicly listed companies to form
audit committees comprised of three or more members of the board of directors
(the majority of whom must be independent under CNV regulations), authorizes
market stabilization transactions under certain circumstances, governs insider
trading, market manipulation and securities fraud and regulates going-private
transactions and acquisitions of voting shares, including controlling stakes in
public companies.




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 of the securities
traded.




Item
      10.
            Additional
      Information




MEMORANDUM
AND ARTICLES OF INCORPORATION




Set forth
below is a brief summary of certain significant provisions of our bylaws and
Argentine law. This description does not purport to be complete and is qualified
by reference to our bylaws, which have been filed as an exhibit to this annual
report. For a description of the provisions of our bylaws relating to our board
of directors and statutory auditors, see “Item 6. Directors, Senior
Management and Employees.”




Description
of capital stock




We are a
public service company incorporated on July 21, 1992 as a sociedad anónima,a stock
corporation, duly incorporated under the laws of Argentina for a 95−year period
and registered on August 3, 1992 with the Public Registry of Commerce of the
City of Buenos Aires under Nr. 7041 of Book 111, Volume A of Sociedades
Anónimas.




As of the
date of this annual report, our capital stock consists of Ps. 906,455,100,
represented by 462,292,111 book-entry Class A common shares, with a par value of
one peso each and the right to one vote per share, 442,210,385 book-entry Class
B common shares, with a par value of one peso each and the right to one vote per
share, and 1,952,604 book-entry Class C common shares, with a par value of one
peso each and the right to one vote per share. Under our bylaws, we are required
to ensure, unless the ENRE approves otherwise, that Class A common shares
represent 51% of our outstanding capital stock and that new Class A, Class B and
Class C shares are issued pro
rata to the percentage of the outstanding capital stock represented by
them prior to a capital increase, unless a general or special shareholder’s
meeting approves otherwise. All outstanding shares are fully
paid.


106




Our
shareholders authorized a capital increase of 83,161,020 common shares on June
7, 2006 composed of 42,412,120 Class A common shares, 32,432,797 Class B common
shares and 8,316,102 Class C common shares.  Our Class B shares have
been listed on the Buenos Aires Stock Exchange since 1995 although they have
never been traded effectively on that exchange or any other market. Holders of
Class A common shares may convert any Class B common shares they may hold into
Class A shares, on a one−for−one basis, if such conversion would be required to
maintain at all times 51% of the outstanding capital stock of Edenor. Our Class
A shares have been pledged in favor of the Argentine Government to secure our
obligations under our concession and may not be transferred, even to
shareholders of the same class, without the prior approval of the
ENRE.  Under the Adjustment Agreement, these shares may not be
transferred until the approval of the RTI.




Upon the
closing of our IPO, substantially all Class C shares were converted into Class B
shares.  The rights previously attributable to the Class C shares were
combined with those attributable to the Class B shares, and holders of the
remaining Class C shares vote jointly as a single class with the holders of
Class B shares in the election of directors.




Corporate
purpose




Article 4
of our by-laws establishes that our corporate purpose is to engage in the
distribution and sale of electricity within our concession area. We can also
acquire the capital stock of other electric distribution companies, subject to
regulatory approval, lease our network to provide power line communication or
other voice, data and image transmission services, and render operating,
advisory, training, maintenance, consultancy, management services and know-how
related to the distribution of electricity both in Argentina and abroad. These
activities may be conducted directly by us or through subsidiaries or
affiliates. In addition, we may act as trustees of trusts created under
Argentine law to the extent they are related to credit facilities granted to
vendors and service providers acting in the distribution and sale of electricity
who have guaranties granted by reciprocal guaranty companies owned by
us.




Shareholders’
liability




Shareholder
liability for a company’s losses is limited to the value of the shareholder’s
shareholding in the company. However, under Argentine corporate law,
shareholders who have a conflict of interest with the company with respect to
certain matters and who do not abstain from voting on such matters may be held
liable for damages to the company, provided that their votes were necessary for
the adoption of the relevant decision. In addition, shareholders who voted in
favor of a resolution that is subsequently declared void by a court as contrary
to Argentine law or the company’s bylaws (or regulations, if any) may be held
jointly and severally liable for damages to the company, other shareholders or
third parties resulting from the resolution. See also “Item 3. Key
Information—Risk factors—Risks related to our ADSs and common shares—Our
shareholders may be subject to liability for certain votes of their
securities.”




Appraisal
rights




Whenever
our shareholders approve:




·
            a
      merger or spin-off in which we are not the surviving corporation, unless
      the acquiror shares are authorized for public offering or listed on any
      stock exchange;




·
            a
      transformation of our corporate legal
status;




·
            a
      fundamental change in our by-laws;




·
            a
      change in our domicile outside
Argentina;


107




·
            a
      voluntary termination of the public offering or listing
      authorization;




·
            a
      decision in favor of our continuation upon delisting or cancellation of
      our public offering authorization;
or




·
            a
      total or partial recapitalization following a mandatory reduction of our
      capital or liquidation




any
shareholder that voted against such action or did not attend the relevant
meeting may exercise appraisal rights, that is, the rights to withdraw from the
company and have its shares cancelled in exchange for the book value of its
shares, determined on the basis of our latest balance sheet prepared, or that
should have been prepared, in accordance with Argentine laws and regulations,
provided that such shareholder exercises its appraisal rights within the time
frame set forth below.




Appraisal
rights must be exercised within five days following the meeting at which the
resolution was adopted, in the event of a dissenting shareholder that voted
against such resolution, or within 15 days following such meeting in the case of
a dissenting shareholder that did not attend the meeting and who can prove that
it was a shareholder at the date of the meeting.  In the case of
mergers or spin-offs involving an entity authorized to make public offering of
its shares, appraisal rights may not be exercised if the shares to be received
as a result of the transaction are listed in any stock
exchange.  Appraisal rights are terminated if the resolution giving
rise to such rights is overturned at another shareholders’ meeting held within
60 days as from the meeting at which the resolution was adopted.




Payment
of appraisal rights must be made within one year of the date of the
shareholders’ meeting at which the resolution was adopted, except where the
resolution was to delist the capital stock of the company, in which case the
payment period is reduced to 60 days from the date of the relevant
resolution.




Because
of the absence of legal precedent directly on point, there is doubt as to
whether holders of ADSs will be able to exercise appraisal rights either
directly or through the depositary with respect to Class B shares represented by
ADSs.




Redemption
or repurchase




According
to the Transparency Decree, a sociedad anónima may acquire
its own shares, provided that the public offering and listing thereof has been
authorized, subject to the following terms and conditions and other regulations
that may be issued by the CNV.  The conditions
are:  (a) the shares to be acquired should be fully paid;
(b) there shall be a resolution of the board of directors to such effect,
(c) the acquisition shall be made out of net profits or voluntary reserves;
(d) the total amount of shares acquired by the company, including
previously acquired shares, shall not exceed 10% of the capital stock or such
lower percentage determined by the CNV.  The shares acquired in excess
of such limit shall be disposed of within 90 days after the date of the
acquisition originating the excess.




The
shares acquired by the company shall be disposed of by the company within a
maximum term of three years counted as from the date of the acquisition
thereof.  Upon disposition of the shares, the company shall make a
preemptive rights offering of such shares.  The offer is not mandatory
if the shares are issued in connection with a compensation plan or program for
the company’s employees or if the shares are distributed among all shareholders
in proportion to their shareholding.  If shareholders do not exercise
in whole or in part, their preemptive rights, the sale shall be made in a stock
exchange.




In 2008,
we purchased our class B common shares in Argentina through a public tender
offer and through open market repurchases.  Through both operations,
we repurchased 9,412,500 shares.  On October 31, 2008, we launched a
public tender offer in Argentina for our shares.  According to the
terms of the tender offer, we were permitted to purchase up to 65 million
shares, or 7.17% of our outstanding capital stock, at a price of Ps. 0.65 per
share for a total maximum expenditure of Ps. 45 million.  The CNV
approved the tender offer on October 30, 2008.  The offer expired on
November 14, 2008.


108




Preemptive
and accretion rights




Under
Argentine law, shareholders of any given class of common shares have preemptive
rights, on a pro rata
basis, to subscribe shares of the same class owned by them, and accretion
rights, on a pro rata
basis, to subscribe additional shares of its class or other classes of shares
not subscribed by other shareholders of the same class. Preemptive rights and
accretion rights may be waived only by each shareholder on a case-by-case basis.
Alternatively, pursuant to the Argentine companies law, in exceptional cases and
on a case by case basis when required for the best interest of the company, the
shareholders at an extraordinary meeting with a special majority may decide to
limit or suspend shareholders, preemptive rights, provided that the resolution
is included in the meeting’s agenda and the shares to be issued are paid in kind
or are issued to cancel preexisting obligations.




In the
event of a capital increase, our by-laws provide that holders of Class A, Class
B and Class C shares have preemptive rights, on a pro rata basis, to subscribe
new Class A, Class B or Class C shares, as the case may be, in order to maintain
their pro rata interest
in the company, unless otherwise decided in a general or extraordinary
shareholders’ meeting. The holders of our Class A shares, in any capital
increase, must exercise their preemptive rights to maintain at least 51% of our
capital stock outstanding after giving effect to the capital increase, unless
otherwise authorized by the ENRE or to the extent any other legal mechanism is
used to secure the 51% ownership of our capital stock.  In order for
the participant employees of the PPP to participate in this offering, all of our
Class C shares (including shares of PPP participants who will not participate in
this offering) will be converted into Class B shares.




Pursuant
to Argentine law, if approved by an extraordinary shareholders’ meeting,
companies authorized to make a public offering of their securities may shorten
the period during which preemptive rights may be exercised from 30 to 10 days
following the publication of the offering in the Argentine Official Gazette and
a newspaper of wide circulation in Argentina. Preemptive rights are exercisable
following such publication (which must be made for three days) for a period of
30 days, provided the period is not reduced in the manner described
above.




Shareholders
who have exercised their preemptive rights have the right to exercise accretion
rights, on a pro rata
basis, with respect to any unsubscribed shares. Shares not subscribed by
shareholders by virtue of preemptive or accretion rights may be offered to third
parties.  EASA and certain of our selling shareholders have assigned
their preemptive and accretion rights to the international
underwriters.




Holders
of ADSs may be restricted in their ability to exercise preemptive rights if a
prospectus under the Securities Act relating thereto has not been filed or is
not effective or an exemption is not available.




Voting
rights




Under our
bylaws, each class of common shares entitles the holder thereof to one vote per
share at any meeting of our shareholders.  Under Argentine corporate
law, a shareholder is required to abstain from voting on any resolution in which
its direct or indirect interests conflict with that of, or are different from,
the company.  In the event that such shareholder votes on such
resolution, and such resolution would not have been approved without such
shareholder’s vote, the resolution may be declared void by a court and such
shareholder may be held liable for damages to the company, other shareholders
and third parties.




Registration
requirements of foreign companies holding Class B shares




Under
Argentine regulations, foreign companies that hold shares directly (and not as
ADSs) in an Argentine company must register with the Inspección General de
Justicia (the public registry of commerce) to exercise certain
shareholder rights, including voting rights. The registration requires the
filing of corporate and accounting documents in order to demonstrate that the
foreign shareholder is not a special purpose vehicle organized solely to conduct
business solely in Argentina, is entitled to conduct business in its place of
incorporation and meets certain foreign assets requirements.


109




Liquidation
rights




In the
case of our liquidation or dissolution our assets will be applied to satisfy our
outstanding liabilities and then proportionally distributed among holders of our
common stock without distinction of classes.




Ordinary
and extraordinary shareholders meetings




Shareholders’
meetings may be ordinary meetings or extraordinary meetings. We are required to
convene and hold an ordinary meeting of shareholders within four months of the
close of each fiscal year to consider the matters specified in the first two
paragraphs of Section 234 of the Argentine corporate law, such as the approval
of our financial statements, allocation of net income for such fiscal year,
approval of the reports of the board of directors and the statutory audit
committee and election, performance and remuneration of directors and members of
the statutory audit committee. In addition, pursuant to Public Offering
Transparency Decree 677/2001, at an ordinary shareholders’ meetings, our
shareholders must consider (i) the disposition of, or creation of any lien over,
our assets as long as such decision has not been performed under the ordinary
course of business and (ii) the execution of administration or management
agreements and whether to approve any agreement by virtue of which the assets or
services provided to us are paid partially or totally with a percentage of our
income, results or earnings, if the payment is material when measured against
the volume of the ordinary course of business and our shareholders’ equity.
Other matters which may be considered at an ordinary meeting convened and held
at any time include the responsibility of directors and members of the statutory
audit committee, capital increases and the issuance of certain corporate bonds.
Extraordinary shareholders’ meetings may be called at any time to consider
matters beyond the authority of an ordinary meeting including, without
limitations, the amendment of our by-laws, issuance of debentures, early
dissolution, merger, spin off, reduction of capital stock and redemption of
shares, transformation from one type of entity to another, appointment, removal
and retribution of the liquidators and limitation or suspension of shareholders’
preemptive rights.




Special
shareholders meetings of classes of shares




In the
event a shareholder’s meeting is held to adopt any resolution affecting the
rights of a class of shares, the consent or ratification of shareholders of that
class is required and a special shareholder’s meeting shall be held. The special
shareholder’s meetings shall be governed by the rules provided for the ordinary
shareholder’s meetings.




Notices
of meetings




Notices
of shareholders’ meetings are governed by the provisions of Argentine
Corporations Law. Furthermore, notice of shareholders’ meetings must be
published for five days in the Official Gazette, in an Argentine newspaper of
wide circulation and in the bulletin of the Buenos Aires Stock Exchange, at
least 20 but not more than 45 days prior to the date on which the meeting is to
be held. Such notice must include information regarding the type of meeting to
be held, the date, time and place of such meeting and the agenda.
If  quorum is not available at such meeting, a notice for a second
meeting, which must be held within 30 days of the date on which the first
meeting was called, must be published for three days, at least eight days before
the date of the second meeting. The above−described notices of shareholders’
meetings may be effected simultaneously for the second meeting to be held on the
same day as the first meeting, only in the case of ordinary meetings and special
shareholder’s meetings of a relevant class of shares. Shareholders’ meetings may
be validly held without notice if all shares of our outstanding capital stock
are present and resolutions are adopted by unanimous vote of shares entitled to
vote.




Quorum
and voting requirements




The
quorum for ordinary meetings of shareholders on first call is a majority of the
shares entitled to vote, and action may be taken by the affirmative vote of an
absolute majority of the shares present that are entitled to vote on such
action. If a quorum is not available at the first meeting a second meeting may
be held at which action may be taken by the holders of an absolute majority of
the shares present, regardless of the number of such shares. The quorum for an
extraordinary shareholders’ meeting on first call is 70% of the shares entitled
to vote, and if such quorum is not available, a second meeting may be held, for
which the quorum is 35% of the shares entitled to vote.


110




Action
may be taken at extraordinary shareholders’ meetings by the affirmative vote of
an absolute majority of shares present that are entitled to vote on such action,
except that:  the approval of a majority of shares with voting rights
(for these purposes non−voting preferred shares shall have voting rights),
without application of multiple votes, is required at both the first and second
meeting for:  (i) the transfer of our domicile outside Argentina, (ii)
a fundamental change of the corporate purpose set forth in our bylaws, (iii) our
anticipated dissolution, (iv) the total or partial redemption of shares, or (v)
the transformation of our corporate legal status, in which cases resolutions
shall be adopted by the affirmative vote of the majority of shares with the
right to vote. Preferred shares will be entitled to one vote in these
circumstances. Moreover, pursuant to our by-laws, the extension of the company’s
duration, the withdrawal from public offering or delisting, the total or partial
recapitalization, the merger or spin-off (including if we are the surviving
entity) or the termination of the concession agreement for the distribution and
sale of electricity, on first and second calls, shall be taken by the
affirmative vote of shares representing at least 80% of the outstanding shares
entitled to vote, whether present or not at the shareholder’s meeting, without
application of multiple votes, if applicable. An amendment to our by-laws
requires the prior approval of the ENRE. Shareholder’s meetings shall approve
amendments “ad-referendum” of the ENRE.




Shareholders’
meetings may be called by the board of directors or the members of the statutory
audit committee whenever required by law or whenever they deem it necessary.
Also, the board or the members of the statutory audit committee are required to
call shareholders’ meetings upon the request of shareholders representing an
aggregate of at least five percent of our outstanding capital stock in which
case the meeting must take place within 40 days of such shareholders’ request.
If the board or the statutory audit committee fails to call a meeting following
such a request, a meeting may be ordered by the CNV or by the courts. In order
to attend a meeting, a shareholder must also deposit with us a certificate of
book-entry shares registered in its name and issued by Caja de Valores S.A.at least
three business days prior to the date on which the meeting is to be held. If so
entitled to attend a meeting, a shareholder may be represented by proxy. Proxies
may not be granted to our board, members of the statutory audit committee,
officers or employees.




Election
of directors




Our board
of directors must have 12 acting directors and the number of alternate directors
that the shareholders may resolve in a general annual ordinary meeting or at a
class annual ordinary meeting, such number not to exceed the number of acting
directors. All directors are elected to serve for one fiscal year. Holders of
Class A common shares are entitled to elect, in a general annual ordinary
meeting or at an annual ordinary meeting of Class A holders 7 directors one of
which must be independent in accordance with CNV regulations and our by-laws.
Holders of Class B common shares are entitled to elect, in a general annual
ordinary meeting or at an annual ordinary meeting of Class B holders 4 directors
one of which must also be independent in accordance with CNV regulations and our
by-laws. Holders of Class C common shares are entitled to elect, in a general
annual ordinary meeting or at an annual ordinary meeting of Class C holders 1
director until the percentage of our capital stock represented by Class C common
shares decreases below 6% at which moment holders of Class C common shares will
be required to vote together with holders of Class B common shares to elect, as
a common class, 5 directors.  Upon the closing of the Argentine
offering (to the extent consummated), substantially all Class C shares will have
been converted into Class B shares and  a nominal amount of Class C
shares will remain outstanding.  Accordingly, any rights previously
attributable to the Class C shares will have been combined with those
attributable to the Class B shares, and holders of the remaining Class C shares
will vote jointly as a single class with the holders of Class B shares in the
election of directors.




Form
and transfer




Our
current capital stock is represented by book-entry shares. Our shareholders are
required to hold their shares through book-entries directly made by Caja de Valoresin the stock
registry of the company carried by Caja de Valoresor through
book-entries with brokers, banks and other entities approved by the CNV that
have accounts with Caja de
Valores, or with the participants of the Caja de Valores. Caja de Valoresis in charge
of maintaining a stock registry on our behalf based on information received from
shareholders that chose to hold their shares directly by registration on the
stock registry of the company and from participants of the Caja de Valores, and in
accordance with Argentine law only those holders listed in the stock registry
either directly or through participants of the Caja de Valoreswill be
recognized as shareholders. Shares held by participants of the Caja de Valoreshave the same
rights as shares recorded in our shareholders’ register.


111




MATERIAL
CONTRACTS




We are
party to various contracts in the ordinary course of business.  In the
past two years, we have not entered into any material contracts.




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 decided to
close the foreign exchange market, the Argentine currency 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 without the Central Bank’s prior
authorization subject to specific exceptions for transfers related to foreign
trade.  Beginning in January 2003, the Central Bank has gradually
eased these restrictions and expanded the list of transfers of funds abroad that
do not require its prior authorization.  However, in June 2003
the Argentine government instituted 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 June
2005, the Argentine government issued Decree 616/05, which established
additional restrictions on capital flows.  Pursuant to the decree, all
indebtedness of Argentine residents within the private sector is required to be
agreed upon and repaid not prior to 365 days from the date of entry of the funds
into Argentina, regardless of the form of repayment.  The decree
outlines several types of transaction that are exempt from its requirements,
including foreign trade financings, foreign trade balances of those entities
authorized to carry out foreign exchange, and primary offerings of debt
securities issued pursuant to a public offering and listed on a self-regulated
market.




In
addition, the decree, as supplemented by subsequent regulations, stipulates that
all capital inflows of residents exceeding approximately U.S. $2 million per
month, , as well as all capital inflows of non-residents settled in the local
exchange market destined for local money holdings, acquisition of active or
passive private sector financings  and investments in securities
issued by the public sector that are acquired in secondary markets (excluding
foreign direct investment, which includes capital contributions to local
companies of direct investments (namely, a company in which the foreign direct
investor holds at least 10% of ordinary shares or voting rights, or its
equivalent), and primary offerings of debt securities issued pursuant to a
public offering and listed on a self-regulated market), must meet certain
requirements, including those outlined below:




·
            such
      funds may be transferred only outside the local exchange market after a
      365-day period from the date of entry of the funds into
      Argentina;




·
            any
      pesos resulting from the exchange of such funds are to be credited to an
      account within the Argentine banking system;
and




·
            except
      for certain types of capital inflows, a non-transferable,
      non-interest-bearing U.S. dollar-denominated mandatory deposit must be
      maintained  for a term of 365 calendar days, in an amount equal
      to 30% of any inflow of funds to the local foreign exchange market arising
      from certain enumerated transactions (which mandatory deposit may not be
      used as collateral or guaranty for any
  transaction)




In
addition, on November 16, 2005, the Ministry of Economy and Production issued
Resolution 637/05, pursuant to which Decree 616/05 was regulated, providing that
any inflow of funds to the local exchange market in connection with an initial
public offering of securities, bonds or certificates issued by a trustee under a
trust, whether or not such trust is publicly offered and listed in a
self-regulated market, shall comply with all requirements provided for section 4
of Decree 616/05 whenever such requirements are applicable to the inflow of
funds to the local exchange market in connection with the acquisition of any of
the assets under the trust.


112




The
transfer abroad of dividend payments is currently authorized by applicable
regulations to the extent such dividend payments are made in connection with
audited financial statements and are approved by a shareholders’ meeting. Any
breach of the provisions of Decree No. 616/05 or any other foreign exchange
regulation is subject to criminal penalties of the laws governing the Argentine
exchange market.




Money
laundering




On April
13, 2000, the Argentine Congress passed Law No. 25,246 (the Law of Money
Laundering), 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 a 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 value of the assets exceeds Ps. 50,000, whether such amount results
from one or more transactions.




In
addition, the Law of Money Laundering 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.




The
principal objective of the Law of Money Laundering is to prevent money
laundering.  Like other international money laundering laws, Argentine
law 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 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;




·
            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.




113




TAXATION


The
following summary contains a description of the material 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




The
following discussion is a summary of the material Argentine tax considerations
relating to the purchase, ownership and disposition of our Class B common shares
or ADSs.




Dividends
tax




Dividends
paid on our Class B common shares or ADSs, whether in cash, property or other
equity securities, are not subject to income tax withholding, except for
dividends paid in excess of our taxable accumulated income up to the previous
fiscal period, which are subject to withholding at the rate of 35% in respect of
such excess. This is a final tax and it is not applicable if dividends are paid
in acciones liberadas(shares) rather than in cash.




Capital
gains tax




Due to
certain amendments made to the Argentine Income Tax Law, it is not entirely
clear whether certain amendments concerning payment of income tax on capital
gains arising from the sale, exchange or other disposition of shares are in
effect or not. Although Opinion No. 351 of the National Treasury General
Attorney Office clarified the legal status of certain matters affecting the tax
treatment of capital gains certain issues still remain unclear.




Resident individuals.Under
what we believe to be a reasonable interpretation of existing applicable tax
laws and regulations:  (i) income derived from the sale, exchange or
other disposition of our Class B common shares or ADSs by resident individuals
who do not sell or dispose of Argentine shares on a regular basis would not be
subject to Argentine income tax, and (ii) although there still exists
uncertainty regarding this issue, income derived from the sale, exchange or
other disposition of our Class B common shares or ADSs by resident individuals
who sell or dispose of Argentine shares on a regular basis should be exempt from
Argentine income tax.




Foreign beneficiaries.Capital gains obtained by non resident individuals or foreign entities
from the sale, exchange or other disposition of our Class B common shares or
ADSs are exempt from income tax. Pursuant to a reasonable construction of the
AITL, and although the matter is not completely free from doubt, such treatment
should also apply to those foreign beneficiaries that qualify as “offshore
entities” for purposes of Argentine tax laws.  For this purpose, an
offshore entity is any foreign legal entity which pursuant to its by-laws or to
the applicable regulatory framework (i) its principal activity is to invest
outside the jurisdiction of its incorporation and/or (ii) cannot perform in such
jurisdiction certain transactions.




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 Class B common shares or ADSs are subject to income tax at
the rate of 35%. Losses arising from the sale of our Class B common shares or
ADSs can be applied only to offset such capital gains arising from sales of
shares or ADSs.




114




Personal
Assets tax


Argentine
entities, such as us, have to pay the personal assets tax on behalf of all
Argentine and foreign individuals and undistributed estates of deceased
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 valor patrimonial
proporcional (equity value), or the book value, of the shares arising
from the latest financial statements. Pursuant to the Personal Assets Tax Law,
we are entitled to seek reimbursement of such paid tax from the applicable
Argentine individuals and/or foreign shareholders, even by withholding and/or
foreclosing the shares, or by withholding dividends.




Value
added tax




The sale,
exchange or other disposition of our Class B common shares or ADSs and the
distribution of dividends are exempted from the value added tax.




Transfer
taxes




The sale,
exchange or other disposition of our Class B 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 Class B common shares or ADSs is performed or executed
in such jurisdictions by means of written agreements. Transfer of our Class B
common shares is exempted from stamp tax in the City of Buenos
Aires.




Other
taxes




There are
no Argentine inheritance or succession taxes applicable to the ownership,
transfer or disposition of our Class B common shares or ADSs. In addition,
neither the minimum presumed income tax nor any local gross turnover tax is
applicable to the ownership, transfer or disposition of our Class B common
shares or ADSs.




Tax
treaties




Argentina
has signed tax treaties for the avoidance of double taxation with Australia,
Austria, Belgium, Bolivia, Brazil, Canada, Chile, Denmark, Finland, France,
Germany, Italy, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland 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 Class B 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 assets
tax.




United
States Federal Income Tax Considerations




This
summary describes the material 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 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;


115




·
            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:




·
            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, 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 cash dividends that investors receive (prior to deduction of Argentine
taxes) generally will be subject to U.S. federal income taxation as foreign
source dividend income.  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. 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 before January 1, 2011 generally will be subject to taxation at a maximum
rate of 15% if the dividends are “qualified dividends.” Dividends paid on the
ADSs will be treated as qualified dividends if (i) the ADSs are readily tradable
on an established securities market in the United States and (ii) 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 audited 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 2006 or 2007
taxable years. In addition, based on our audited financial statements and 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 2008 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.


116




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.




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 before January 1, 2011 generally is subject to taxation at a maximum
rate of 15%.




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. Instead of claiming a credit, investors may, at their
election, deduct such Argentine taxes in computing their taxable income, subject
to generally applicable limitations under U.S. tax law. 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 and may be subject to backup withholding unless the holder (1) is a
corporation or other exempt recipient or (2) provides a taxpayer identification
number and certifies that no loss of exemption from backup withholding has
occurred.  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.




DESCRIPTION
OF AMERICAN DEPOSITARY SHARES




American
depositary receipts




The Bank
of New York is the depositary for the American Depositary Shares, also referred
to as ADSs.  Each ADS represents 20 Class B common shares (or a
right to receive 20 Class B common shares) deposited with the principal
Buenos Aires office of Banco Río de la Plata S.A., as custodian for the
depositary in Argentina.  Each ADS will also represent any other
securities, cash or other property which may be held by the
depositary.  The depositary’s office at which the ADRs are
administered is located at 101 Barclay Street, 22W, New York, NY
10280.




The
depositary is required to keep books at its corporate trust office for the
registration of ADSs and transfers of ADSs which at all reasonable times shall
be open for inspection by the holders of ADSs, provided that such inspection
shall not be for the purpose of communicating with holders in the interest of a
business or object other than the business of Edenor or a matter related to the
deposit agreement or the receipts.




Investors
hold ADSs directly either by having an American Depositary Receipt, also
referred to as an ADR, which is a certificate evidencing a specific number of
ADSs, registered in the investor’s name, or by having ADSs registered in the
investor’s name in the Direct Registration System.  Investors also
hold ADSs indirectly by holding a security entitlement in ADSs through the
investor’s broker or other financial institution.  If investors hold
ADSs directly, they are ADS registered holders.  This description
assumes that such investors are ADS registered holders.  If investors
hold the ADSs indirectly, the investors must rely on the procedures of their
broker or other financial institution to assert their rights as ADS registered
holders described in this section.  Investors should consult with
their broker or financial institution to learn what those procedures
are.


117




The
Direct Registration System, or DRS, is a system administered by The Depository
Trust Company, also referred to as DTC, pursuant to which the depositary may
register the ownership of uncertificated ADSs, which ownership shall be
evidenced by periodic statements sent by the depositary to the registered
holders of uncertificated ADSs.




We do not
treat ADS holders as one of our shareholders and ADS holders do not have
shareholder rights. Argentine law governs shareholder rights.  The
depositary is the holder of the common shares underlying the
ADSs.  Holders of ADSs have ADS holder rights.  A deposit
agreement among us, the depositary, the ADS holder, and the beneficial owners of
ADSs sets out ADS holder rights as well as the rights and obligations of the
depositary.  New York law governs the deposit agreement and the
ADSs.




The
following is a summary of the material provisions of the deposit
agreement.  For more complete information, investors should read the
entire deposit agreement and the form of ADR.




Dividends
and other distributions




How
will investors receive dividends and other distributions on the
shares?




The
depositary has agreed to pay to ADS holders the cash dividends or other
distributions it or the custodian receives on common shares or other deposited
securities, after deducting its fees and expenses described
below.  ADS holders will receive these distributions in proportion to
the number of common shares your ADSs represent.




Cash




The
depositary will convert any cash dividend or other cash distribution we pay on
the common shares 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 that 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 ADR holders to whom it is possible to do so.  It may hold the
foreign currency it cannot convert for the account of the ADR holders who have
not been paid.  It will not invest the foreign currency and it will
not be liable for any interest.




Before
making a distribution, the depositary will deduct any withholding taxes that
must be paid.  See  “—Taxation.”  It will
distribute only whole U.S. Dollars and cents and will round fractional cents to
the nearest whole cent.  If the exchange rates fluctuate during a time
when the depositary cannot convert the foreign currency, holders of ADSs may
lose some or all of the value of the distribution.




Shares




The
depositary may distribute additional ADSs representing any common shares we
distribute as a dividend or free distribution.  The depositary will
only distribute whole ADSs.  It will try to sell common shares, in
lieu of delivering a fractional ADS and distribute the net proceeds in the same
way as it does with cash.  The depositary may also sell a portion of
the distributed common shares to pay its fees and expenses in connection with
the distribution.  If the depositary does not distribute additional
ADSs, the outstanding ADSs will also represent the new common
shares.




Rights to purchase additional common
shares




If we
offer holders of our securities any rights to subscribe for additional common
shares or any other rights, the depositary may make these rights available to
holders of ADSs.  If the depositary decides it is not legal and
practical to make the rights available but that it is practical to sell the
rights, the depositary will use reasonable efforts to sell the rights and
distribute the proceeds in the same way as it does with cash.  The
depositary will allow rights that are not distributed or sold to
lapse.  In that case, holders of ADSs will receive no value for
them.


118




If the
depositary makes rights to purchase common shares available to holders of ADSs,
it will exercise the rights and purchase the common shares on their
behalf.  The depositary will then deposit the shares and deliver ADSs
to the investor.  It will only exercise rights if the investor pays it
the exercise price and any other charges the rights require the investor to
pay.




U.S.
securities laws may restrict transfers and cancellation of the ADSs representing
common shares purchased upon exercise of rights.  For example, you may
not be able to trade these ADSs freely in the United States.  In this
case, the depositary may deliver restricted depositary shares that have the same
terms as the ADSs described in this section except for changes needed to put the
necessary restrictions in place.




Other
Distributions




The
depositary will send to holders of ADSs anything else we distribute on deposited
securities by any means it thinks is legal, fair and practical.  If it
cannot make the distribution in that way, the depositary has a
choice.  It may decide to sell what we distributed and distribute the
net proceeds, in the same way as it does with cash.  Or, it may decide
to hold what we distributed, in which case ADSs will also represent the newly
distributed property.  However, the depositary is not required to
distribute any securities (other than ADSs) to holders of ADSs unless it
receives satisfactory evidence from us that it is legal to make that
distribution.  The depositary may sell a portion of the distributed
property to pay its fees and expenses in connection with the
distribution.




The
depositary is not responsible if it decides that it is unlawful or impractical
to make a distribution available to any ADR holders.  We have no
obligation to register ADSs, common shares, rights or other securities under the
Securities Act.  We also have no obligation to take any other
action to permit the distribution of ADSs, common shares, rights or anything
else to ADS holders.  This means that holders of ADSs may not receive
the distributions we make on our common shares or any value for them if it is
illegal or impractical for us to make them available to holders of
ADSs.




Deposit,
withdrawal and cancellation




How
are ADSs issued?




The
depositary will deliver ADSs if the investor or the investor’s broker deposits
common shares or evidence of rights to receive common shares with the
custodian.  Upon payment of its fees and expenses and of any taxes or
charges, such as stamp taxes or stock transfer taxes or fees, the depositary
will register the appropriate number of ADSs in the names the investor
requests.




How
do ADS holders cancel ADSs and obtain shares?




If an
investor surrenders ADSs to the depositary, upon payment of the investor’s fees
and expenses and of any taxes or charges, such as stamp taxes or stock transfer
taxes or fees, the depositary will deliver the common shares and any other
deposited securities underlying the surrendered ADSs to the investor or a
person the investor designates at the office of the custodian.  Or, at
the investor’s request, risk and expense, the depositary will deliver the
deposited securities at its office, if feasible.




How
do ADS holders interchange between certified ADSs and uncertified
ADSs?




Investors
may surrender their ADRs to the depositary for the purpose of exchanging their
ADR for uncertificated ADSs.  The depositary will cancel that ADR and
will send to the ADS registered holder a statement confirming that the ADS
registered holder is the registered holder of uncertificated
ADSs.  Alternatively, upon receipt by the depositary of a proper
instruction from a registered holder of uncertificated ADSs requesting the
exchange of uncertificated ADSs for certificated ADSs, the depositary will
execute and deliver to the ADS registered holder an ADR evidencing those
ADSs.


119




Voting
rights




How
do holders ADSs vote?




Holders
of ADSs may instruct the depositary to vote the number of common shares their
ADSs represent.  If we ask for the instructions of the holders of the
ADSs, the depositary will notify the holders of the ADSs of shareholders’
meetings and the upcoming vote and arrange to deliver our voting materials to
the holder of the ADSs.  Those materials will describe the matters to
be voted on and explain how holders of ADSs may instruct the depositary to vote
the shares or other deposited securities underlying their ADSs as the holder of
the ADSs directs by a specified date.  For instructions to be valid,
the depositary must receive them on or before the date specified.




The
depositary will try, as far as practical, subject to Argentine law and the
provisions of our by-laws or similar documents, to vote or to have its agents
vote the number of common shares or other deposited securities represented by
the ADSs as the holder of the ADSs instructs.  Otherwise, the holder
of the ADSs will not be able to exercise their right to vote unless they
withdraw the shares underlying their ADSs.  In the absence of the
instruction of the holder of the ADSs, our company may request the depositary to
vote as we instruct at the corresponding meeting. The holder of the ADSs may
otherwise not know about the meeting far enough in advance to withdraw the
shares.  We will use our best efforts to request that the depositary
notify holders of ADSs of upcoming votes and ask for the instructions of holders
of ADSs.




If we
timely ask the depositary to solicit the instructions of holders of ADSs and the
depositary does not receive voting instructions from the holder of the ADSs by
the specified date, the depositary will consider the holder of the ADSs to have
authorized and directed it to vote the number of deposited securities
represented by their ADSs in favor of all resolutions proposed by our board of
directors or, if not so proposed, to vote in the same manner as the majority of
all other shares voted in respect of this resolution.  The depositary
will vote as described in the preceding sentence unless we notify the depositary
that:




·
            we
      do not wish the depositary to vote those deposited
    securities;




·
            we
      think there is substantial shareholder opposition to the particular
      question; or




·
            we
      think the particular question would have an adverse impact on our
      shareholders.




Fees
and expenses




Reclassifications,
recapitalizations and mergers




If
      we:
                  
                  Then:Change
      the nominal or par value of our common shares
                    
                    Reclassify,
      split up or consolidate any of the deposited securities
                    
                    Distribute
      securities on the common shares that are not distributed to the holders of
      ADSs
                    
                    Recapitalize,
      reorganize, merge, liquidate, sell all or substantially all of our assets,
      or take any similar action
                  
                  The
      cash, shares or other securities received by the depositary will become
      deposited securities.  Each ADS will automatically represent its
      equal share of the new deposited securities.
                    
                    The
      depositary may distribute some or all of the cash, shares or other
      securities it received.  It may also deliver new ADRs or ask the
      holder of ADSs to surrender their outstanding ADRs in exchange for new
      ADRs identifying the new deposited
securities.


120




Limitations
on obligations and liability




Limits
on our obligations and the obligations of the depositary; limits on liability to
holders of ADRs




The
deposit agreement expressly limits our obligations and the obligations of the
depositary.  It also limits our liability and the liability of the
depositary.  We and the depositary:




·
            are
      only obligated to take the actions specifically set forth in the deposit
      agreement without negligence or bad
faith;




·
            are
      not liable if either of us is prevented or delayed by law or circumstances
      beyond our control from performing our obligations under the deposit
      agreement;




·
            are
      not liable if either of us exercises discretion permitted under the
      deposit agreement;




·
            have
      no obligation to become involved in a lawsuit or other proceeding related
      to the ADRs or the deposit agreement on behalf of holders of ADSs or on
      behalf of any other
party;  and




·
            may
      rely upon any documents we believe in good faith to be genuine and to have
      been signed or presented by the proper
party.




In the
deposit agreement, we agree to indemnify the depositary for acting as
depositary, except for losses caused by the depositary’s own negligence or bad
faith, and the depositary agrees to indemnify us for losses resulting from its
negligence or bad faith.




Requirements
for depositary actions




Before
the depositary will deliver or register a transfer of an ADR, make a
distribution on an ADR, or permit withdrawal of common shares, the depositary
may require:




·
            payment
      of stock transfer or other taxes or other governmental charges and
      transfer or registration fees charged by third parties for the transfer of
      any common shares or other deposited
securities;




·
            satisfactory
      proof of the identity and genuineness of any signature or other
      information it deems necessary; and




·
            compliance
      with regulations it may establish, from time to time, consistent with the
      deposit agreement, including presentation of transfer
      documents.




The
depositary may refuse to deliver ADSs or register transfers of ADSs generally
when the transfer books of the depositary or our transfer books are closed or at
any time if the depositary or we think it advisable to do so.




The
right of holders of ADSs to receive the common shares underlying their
ADRs




Holders
of ADSs have the right to surrender their ADSs and withdraw the underlying
common shares at any time except:




When
temporary delays arise because:  (i) the depositary has closed its
transfer books or we have closed our transfer books; (ii) the transfer of common
shares is blocked to permit voting at a shareholders’ meeting; or (iii) we are
paying a dividend on our common shares.




When
holder of ADSs seeking to withdraw common shares owe money to pay fees, taxes
and similar charges.




When it
is necessary to prohibit withdrawals in order to comply with any laws or
governmental regulations that apply to ADRs or to the withdrawal of common
shares or other deposited securities.




This
right of withdrawal may not be limited by any other provision of the deposit
agreement.


121




Pre-release
of ADSs




The
deposit agreement permits the depositary to deliver ADSs before deposit of the
underlying common shares.  This is called a Pre-Release of the
ADSs.  The depositary may also deliver common shares upon the receipt
and cancellation of pre-released ADSs (even if the ADSs are surrendered before
the Pre-Release transaction has been terminated).  A Pre-Release is
terminated as soon as the underlying common shares are delivered to the
Depositary.  The depositary may receive ADSs instead of common shares
to satisfy a Pre-Release.  The depositary may pre-release ADSs only
under the following conditions:  (a) before or at the time of the
pre-release, the person to whom the pre-release is being made represents to the
depositary in writing that it or its customer (i) owns the common shares or ADSs
to be deposited; (ii) transfers all beneficial right, title and interest in such
common shares or ADSs, as the case may be, to the Depositary in its capacity as
such and for the benefit of the Beneficial Owners, and (iii) will not take any
action with respect to such common shares or ADSs, as the case may be, that is
inconsistent with the transfer of ownership (including, without the consent of
the Depositary, disposing of common shares or ADSs, as the case may be, other
than in satisfaction of such Pre-Release); (b) the pre-release is fully
collateralized with cash or other collateral that the depositary considers
appropriate; (c) the depositary must be able to terminate the pre-release on not
more than five business days’ notice and (d) Pre-Release is subject to such
further indemnities and credit regulations as the Depositary deems
appropriate.  In addition, the depositary will limit the number of
ADSs that may be outstanding at any time as a result of Pre-Release, although
the depositary may disregard the limit from time to time, if it thinks it is
appropriate to do so.




Direct
Registration System




In the
deposit agreement, all parties to the deposit agreement acknowledge that the DRS
and Profile Modification System, or Profile, will apply to uncertificated ADSs
upon acceptance thereof to DRS by DTC.  DRS is the system administered
by DTC pursuant to which the depositary may register the ownership of
uncertificated ADSs, which ownership shall be evidenced by periodic statements
sent by the depositary to the registered holders of uncertificated
ADSs.  Profile is a required feature of DRS which allows a DTC
participant, claiming to act on behalf of a registered holder of ADSs, to direct
the depositary to register a transfer of those ADSs to DTC or its nominee and to
deliver those ADSs to the DTC account of that DTC participant without receipt by
the depositary of prior authorization from the ADS registered holder to register
that transfer.




In
connection with and in accordance with the arrangements and procedures relating
to DRS/Profile, the parties to the deposit agreement understand that the
depositary will not verify, determine or otherwise ascertain that the DTC
participant, which is claiming to be acting on behalf of an ADS registered
holder in requesting registration of transfer and delivery described in the
paragraph above, has the actual authority to act on behalf of the ADS registered
holder (notwithstanding any requirements under the Uniform Commercial
Code).  In the deposit agreement, the parties agree that the
depositary’s reliance on and compliance with instructions received by the
depositary through the DRS/Profile System and in accordance with the deposit
agreement, shall not constitute negligence or bad faith on the part of the
depositary.




Shareholder
communications and inspection of register of holders of ADSs




The
holders of ADSs are holders of deposited securities.  As such, the
depositary will make available for inspection by the holders of ADSs at its
office all communications that it receives from us that we make generally
available to holders of deposited securities.  The depositary will
send holders of ADSs copies of those communications if we ask it
to.  Holders of ADSs have a right to inspect the register of holders
of ADSs, but not for the purpose of contacting those holders about a matter
unrelated to our business or the ADSs.




Amendment
and termination




We may
agree with the depositary to amend the deposit agreement and the ADRs without
the consent of holders of ADSs for any reason.  If an amendment adds
or increases fees or charges, except for taxes and other governmental charges or
expenses of the depositary for registration fees, facsimile costs, delivery
charges or similar items, or prejudices a substantial right of ADR holders, it
will not become effective for outstanding ADRs until 30 days after the
depositary notifies ADR holders of the amendment.  At the time an
amendment becomes effective, the holders of ADSs are considered, by continuing
to hold their ADR, to agree to the amendment and to be bound by the ADRs and the
deposit agreement as amended.


122




The
depositary will terminate the deposit agreement if we ask it to do
so.  The depositary may also terminate the deposit agreement if the
depositary has told us that it would like to resign and we have not appointed a
new depositary bank within 60 days.  In either case, the depositary
must notify the holder of ADSs at least 30 days before termination.




After
termination, the depositary and its agents will do the following under the
deposit agreement but nothing else:  (a) advise the holders of ADSs
that the deposit agreement is terminated, (b) collect distributions on the
deposited securities, (c) sell rights and other property, and (d) deliver common
shares and other deposited securities upon surrenders of ADRs.  One
year after termination, the depositary may sell any remaining deposited
securities by public or private sale.  After that, the depositary will
hold the money it received on the sale, as well as any other cash it is holding
under the deposit agreement for the pro rata benefit of the ADR
holders that have not surrendered their ADRs.  It will not invest the
money and has no liability for interest.  The depositary’s only
obligations will be to account for the money and other cash.  After
termination our only obligations will be to indemnify the depositary and to pay
fees and expenses of the depositary that we agreed to pay.




Fees,
expenses and payment of taxes




See Item
12. Description of Securities other than Equity Securities.




DOCUMENTS
ON DISPLAY




The
materials included in this annual report on Form 20-F, and exhibits
thereto, may be inspected and copied at the Securities and Exchange Commission’s
public reference room in Washington, D.C. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information on the public
reference rooms. The Securities and Exchange Commission maintains a World Wide
Web site on the Internet at http://www.sec.gov that contains reports and
information statements and other information regarding us. The reports and
information statements and other information about us can be downloaded from the
Securities and Exchange Commission’s website.




Item
      11.
            Quantitative and Qualitative
      Disclosures about Market
Risk




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.




As of
December 31, 2009, we have no material exposure to interest rate risk because
only approximately 15.1% of our outstanding financial debt bears interest at
variable rates.  In addition, we have no material exposure to
commodity price risk because our commodities represent less than 1.7% of our
operating expenses.




Foreign
currency risk





We seek
to hedge our exposure to exchange rate risk by maintaining cash and deposits in
U.S. Dollars, and our cash and deposits in U.S. Dollars amounted to
approximately U.S. $44.0million at December 31, 2009 (as compared to
U.S.$27.8 million at December 31, 2008).  In addition, at December 31,
2009, approximately 6% of our operating expenses was denominated in U.S. Dollars
(as compared to 3% of our operating expenses at December 31,
2008).  These costs are principally related to supplies, computer
services, insurance and communications.


123




As of
December 31, 2009, the potential loss to us that would result from a
hypothetical 10% change in foreign currency exchange rates, after giving effect
to the impact of the change on our asset and liabilities denominated in foreign
currency as of December 31, 2009, would be approximately Ps. 54.9 million
(as compared to approximately U.S.$84.6 million as of December 31, 2008), this
decrease in the potential loss is primarily due the repurchases of our
outstanding financial debt  during 2009..  The effect of
such change on our financial expenses is difficult to quantify given the
adjustment mechanisms of the CMM and the integral tariff revision relating to
our costs, both of which would be triggered indirectly by an increase in foreign
currency exchange rates.  The terms of our notes issued in the context
of our debt restructuring allow us to suspend all principal and interest
payments on these notes for 12 months in the event of a 20% or greater
devaluation of the Peso in any consecutive 12-month period.




In 2008,
in order to hedge against the risk of fluctuations in the Dollar-Peso exchange
rate, we entered into several derivative financial instruments (EMTA basis), in
order to cover interest payments on the Senior Notes due 2017 and Fixed Par Rate
Notes due 2016 for the years 2008 and 2009.  These derivative
financial instruments were terminated in December, 2009, and we have not entered
into any new derivative instruments.




During
the year ended December 31, 2009, the Company has entered into forward and
futures contracts with the aim of using them as economic instruments in order to
mitigate the risk generated by the fluctuations in the US dollar rate of
exchange.





As of
December 31, 2009, the Company has entered into contracts with Standard Bank
Argentina S.A. and Banco Finansur S.A., the main features of which are as
follow:





Entity
                    
                    Contracted amount
                      in thousands of US$
                    
                    
                    Average rate
                      of exchange
                    
                    Transaction
                      date
                    
                    Settlement
                      date
                    
                    Book value as of
                      December 31, 2009
                      Assets (in thousands
                      of Ps.)Banco
      Finansur
                    
                    
                    9,000
                    
                    
                    
                    4.1645
                    
                    07/27/2009
                    
                    04/30/2010
                    
                    
                    (1,81
                    )Banco
      Finansur
                    
                    
                    1,000
                    
                    
                    
                    4.2420
                    
                    07/27/2009
                    
                    06/30/2010
                    
                    
                    (202
                    )Standard
      Bank
                    
                    
                    12,000
                    
                    
                    
                    4.4475
                    
                    09/30/2009
                    
                    12/31/2010
                    
                    
                    (1,338
                    )Banco
      Finansur
                    
                    
                    33,000
                    
                    
                    
                    4.2400
                    
                    09/30/2009
                    
                    10/31/2010
                    
                    
                    (1,532
                    )Standard
      Bank
                    
                    
                    10,000
                    
                    
                    
                    4.4475
                    
                    10/01/2009
                    
                    12/31/2010
                    
                    
                    (1,115
                    )65,000
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (6,001
                    )





We may
use derivative instruments as an economic hedge to adjust our exposures or to
reduce our costs of financing. Our hedging practices will be guided by the level
of risk, expectations as to interest or exchange rate movements and the costs of
using derivative instruments. We may enter into new derivative instruments or
modify our practices at any time.




Item
      12.
            Description of Securities
      Other than Equity Securities




Persons
depositing common shares or holders of ADRs will be required to pay certain fees
and expenses, as described in the table below, which the depositary is entitled
to deduct prior to making any cash dividend or other cash distribution on the
deposited shares.




Persons depositing common shares or ADSholders must pay:
            
            For:$5.00
      (or less) per 100 ADSs (or portion of 100 ADSs)
            
            ·Issuance of ADSs, including issuances resulting from a distribution
      of common shares or rights or other property




124




Persons depositing common shares or ADSholders must pay:
                                          
                                          For:·Cancellation of ADSs for the purpose of withdrawal, including if
      the deposit agreement terminates$0.02
      (or less) per ADS
                                          
                                          ·Any cash distribution to the holder of the ADSs$0.02
      (or less) per ADS per year
                                          
                                          ·Depositary servicesA
      fee equivalent to the fee that would be payable if securities distributed
      to the holder of ADSs had been common shares and the shares had been
      deposited for issuance of ADSs
                                          
                                          ·Distribution of securities distributed to holders of deposited
      securities which are distributed by the depositary to ADR
      holdersRegistration
      or transfer fees
                                          
                                          ·Transfer and registration of common shares on our common share
      register to or from the name of the depositary or its agent when the
      holder of ADSs deposits or withdraw common shares.Expenses
      of the depositary in converting foreign currency to U.S.
      DollarsExpenses
      of the depositary
                                          
                                          ·Cable, telex and facsimile transmissions (when expressly provided
      in the deposit agreement)Taxes
      and other governmental charges the depositary or the custodian have to pay
      on any ADSs or common share underlying ADSs, for example, stock transfer
      taxes, stamp duty or withholding taxesAny
      charges incurred by the depositary or its agents for servicing the
      deposited securities
                                          
                                          ·No charges of this type are currently made in the Argentine
      market




Reimbursement
of fees




The Bank
of New York Mellon, as depositary, reimbursed us for certain expenses relating
to our initial public offering and establishment of our ADR program in
2007.  Aside from that initial payment, we do not receive any
reimbursement from the depositary for expenses we incur that related to the
maintenance of the ADS program.




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.


125




Payment
of taxes




The
depositary may deduct the amount of any taxes owed from any payments to the
holder of ADSs.  It may also sell deposited securities, by public or
private sale, to pay any taxes owed.  The holder of ADSs will remain
liable if the proceeds of the sale are not enough to pay the
taxes.  If the depositary sells deposited securities, it will, if
appropriate, reduce the number of ADSs to reflect the sale and pay to the holder
of ADSs any proceeds, or send to the holder of ADSs any property, remaining
after it has paid the taxes.




PART II




Item
      13.
            Defaults, Dividend Arrearages
      and Delinquencies




The
economic crisis in Argentina had a material adverse effect on our
operations.  The devaluation of the Argentine Peso caused the Peso
value of our U.S. Dollar-denominated indebtedness to increase significantly,
resulting in significant foreign exchange losses and a significant increase, in
Peso terms, in our debt service requirements.  At the same time, our
cash flow remained Peso-denominated and our distribution margins were frozen and
pesified by the Argentine government pursuant to the Public Emergency
Law.  Moreover, the economic crisis in Argentina had a significant
adverse effect on the overall level of economic activity in Argentina and led to
deterioration in the ability of our customers to pay their
bills.  These developments caused us to announce on September 15,
2002 the suspension of principal payments on our debt.  On
September 26, 2005, our board of directors decided to suspend interest
payments on our debt until the restructuring of this debt was
completed.




On
January 20, 2006, we launched a voluntary exchange offer and consent
solicitation to the holders of our outstanding financial debt.  All of
these holders elected to participate in the restructuring and, as a result, on
April 24, 2006, we exchanged all of our then-outstanding financial debt for
three series of newly-issued notes, which we refer to as the restructuring
notes.  For a description of our outstanding debt following the
restructuring see “Item 5.—Liquidity and Capital Resources—Debt.”




Item
      14.
            Material Modifications to the
      Rights of Security Holders and Use of
  Proceeds




Use
of Proceeds




On April
30, 2007, we completed an initial public offering.  We received
U.S. $57.7 million in net proceeds from the offering.  We did not
receive any proceeds from the sale of our shares and ADSs by our selling
shareholders in the offering.  We used all of the net proceeds we
received from the offering to repurchase a part of our outstanding Fixed Rate
Par Notes due 2016 and Discount Notes due 2014 in various market repurchase
transactions during 2007 and to make capital expenditures.




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 our
disclosure controls and procedures as of December 31,
2009.


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, our chief
executive officer and chief financial officer concluded that as of
December 31, 2009, 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.




126




(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, 2009. 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.  Based on our assessment and those criteria, management
believes that the company maintained effective internal control over financial
reporting as of December 31, 2009. The effectiveness of the Company ́s internal
control over financial reporting as of December 31, 2009 has been audited by
Price Waterhouse & Co.S.R.L., an independent public accounting firm, as
stated in their Report which appears here in.




(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-2 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 2009 that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.




Item
      16A.
            Audit Committee Financial
      Expert




Our board
of directors has determined that Eduardo Llanos, an independent member of our
board of directors, under Argentine law and Rule 10A-3, is an “audit committee
financial expert” as defined in Item 16A of Form 20F under the Securities and
Exchange Act of 1934.  See “Item 6. Directors, Senior Management and
Employees – Directors and Senior Management – Audit Committee.”


127




Item
      16B.
            Code of
      Ethics




Our company adopted a code of ethics in
2003, which applies to all of our employees, including our principal executive,
financial and accounting officers.  In 2009 we reviewed and updated
our code of ethics, and we expect to post a copy of our revised code of ethics,
in both English and Spanish, on our website at http://www.edenor.com.ar, as soon as
practicable.




Item
      16C.
            Principal Accountant Fees and
      Services




Price
Waterhouse & Co. S.R.L. (member firm of PricewaterhouseCoopers ) acted as
our independent registered public accounting for the fiscal years ended December
31, 2009 and 2008.  The chart below sets forth the fees for services
performed by Price Waterhouse & Co. S.R.L. related to fiscal year 2009 and
2008 (including related expenses), and breaks down these amounts by category of
service in pesos:




Year ended December 31,2009(1)
              
              
              2008(2)Audit
      fees
              
              Ps.
              1,439,164
              
              
              Ps.
              732,328Audit-related
      fees
              
              
              122,500
              
              
              
              24,000Total
              
              Ps.
              1,561,664
              
              
              Ps.
              756,328





(1)
Includes the amount in fees billed in U.S. dollars, which, for the convenience
of the reader, have been converted into Pesos at the buying rate for U.S.
Dollars quoted by Banco Nación on December 31, 2009 of Ps. 3.80 to
U.S. $1.00.


(2)
Includes the amount in fees billed in U.S. dollars, which, for the convenience
of the reader, have been converted into Pesos at the buying rate for U.S.
Dollars quoted by Banco Nación on December 31, 2008 of Ps. 3.453 to
U.S. $1.00.




All of
our audit fees, and audit-related fees, contained in the above table were billed
by Price Waterhouse & Co. S.R.L., independent registered public accounting
firms.




Audit-related
fees in the above table are the aggregate fees for services provided in
connection with various corporate transactions and, such as review of corporate
filings and certifications Audit Committee Pre-Approval Policies and
Procedures.




We have
adopted pre-approval policies and procedures under which all audit and non-audit
services provided by our external auditors must be pre-approved by the audit
committee as set forth in our internal policies. Any service proposals submitted
by external auditors need to be discussed and approved by the audit committee
during its meetings, which take place at least four times a year. Once the
proposed service is approved, we formalize the engagement of services. The
approval of any audit and non-audit services to be provided by our external
auditors is specified in the minutes of our audit committee. In addition, the
members of our board of directors are briefed on matters discussed by the
different committees of our board.




Item
      16D.
            Exemptions from the Listing
      Standards for Audit
Committees




Not
applicable.




Item
      16E.
            Purchases of Equity Securities
      by the Issuer and Affiliated
Purchasers




In 2009
the Company did not purchased any owns equities securities.




Item
      16F.
            Change in Registrant’s
      Certifying Accountant




Not applicable.




128




Item
      16G.
            Corporate
      Governance




Pursuant
to Rule 303A.11 of the Listed Company Manual of the New York Stock Exchange
(NYSE), we are required to provide a summary of the significant ways in which
our corporate governance practices differ from those required for U.S. companies
under the NYSE listing standards.  Our corporate governance practices
are governed by our bylaws, Argentine corporate and securities law (including
the Business Companies Law, Decree N°677/01) and the regulations issued by the
Argentine National Securities Commission (Comisión Nacional de
Valores).




NYSE Listed Company Manual Section 303.A
                        
                        Edenor’s Corporate PracticesSection 303A.01Listed companies
      must have a majority of independent directors.
                        
                        Edenor
      follows Argentine law, which does not require that a majority of the board
      of directors be comprised of independent directors.  Argentine
      law instead requires that public companies in Argentina have a sufficient
      number of independent directors to be able to form an audit committee of
      at least three members, the majority of which must be independent pursuant
      to the criteria established by the CNV.  As of today, four of
      Edenor’s twelve directors were independent under Argentine law and Rule
      10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”).Section 303A.02To qualify as
      “independent,” directors must meet the independence tests specified by the
      NYSE.
                        
                        In
      defining the “independence” of directors, CNV standards (General
      Resolution No. 400) are substantially similar to NYSE
      standards.  In order to meet the CNV definition of independence,
      independence is required with respect to the Company itself and to its
      shareholders with direct or indirect material holdings (35% or more). To
      qualify as an independent director, a director must not perform executive
      functions within the company.  Close relatives of any persons
      who would not qualify as “independent directors” shall also not be
      considered “independent.”
                          
                          The
      board evaluates the independence of each director appointed to the audit
      committee.Section 303A.03Non-management
      directors must meet at regularly scheduled executive meetings not attended
      by management.
                        
                        Neither
      Argentine law nor Edenor’s bylaws require that any such meetings be
      held.
                          Edenor’s
      board of directors as a whole is responsible for monitoring the company’s
      affairs. Under Argentine law, the board of directors may approve the
      delegation of specific responsibilities to designated directors or
      non-director managers of the Company.  Also, it is mandatory for
      public companies to form a supervisory committee (ComisiónFiscalizadora), which is
      responsible for monitoring legal compliance by the Company under Argentine
      law and compliance with its by- laws and shareholders’ resolutions. The
      supervisory committee, without prejudice to the role of external auditors,
      is also required to present to the shareholders at the annual ordinary
      general meeting a written report on the reasonableness of the financial
      information of the Company’s annual report and the financial statements
      presented to the shareholders by Edenor’s board of directors. The
      supervisory committee also presents a report to the board of directors on
      Edenor’s quarterly financial statements. The members of the supervisory
      committee are not directors of the
company.




129




Section 303A.04Listed companies
      shall have a nominating/ corporate governance committee composed entirely
      of independent directors.
                        
                        Neither
      Argentine law nor Edenor’s bylaws require the formation of a nominating
      committee nor a corporate governance committee.
                          
                          The
      board of directors is permitted to and often does nominate board member
      candidates for consideration by the shareholders, who elect the board of
      directors.
                          
                          The
      entire board of directors is charged with overseeing Edenor’s corporate
      governance practices.Section 303A.05Listed companies
      shall have a “compensation committee” comprised entirely of independent
      directors.
                        
                        Neither
      Argentine law nor Edenor’s bylaws require the formation of a “compensation
      committee” and Edenor has no such committee.
                          
                          Shareholders
      at the annual ordinary general meeting determine the fee paid to members
      of the board of directors.
                          
                          The
      CEO of Edenor sets the salary of the other members of the senior
      management. The board of directors determines the salary of the
      CEO.Section 303A.06Listed companies
      must have an “audit committee” that satisfies the requirements of Rule
      10A-3 under the Exchange Act.  Foreign private issuers must
      satisfy the requirements of Rule 10A-3 under the Exchange Act as of July
      31, 2005.
                        
                        Edenor
      is subject to and in compliance with§303A.06
      and Rule 10A-3.  Edenor’s audit committee consists entirely of
      independent members of Edenor’s board of directors.Section 303A.07The audit
      committee must comply with a number of criteria including requirements
      related to the qualifications of its members, the duties and
      responsibilities of its members, and internal and external
      audits.
                        
                        F.   
      As a foreign private issuer, Edenor is not subject to
      §303A.07.  As such, Edenor’s audit committee charter may not
      provide for every one of the specific duties required by
      §303A.07.
                          
                          The
      duties of the audit committee include monitoring Edenor’s internal
      control, administrative and accounting systems; supervising the
      application of Edenor’s risk management policies; providing the market
      adequate information regarding conflicts of interests that may arise
      between Edenor’s company and Edenor’s directors or controlling
      shareholders; rendering opinions on transactions with related parties; and
      supervising and reporting to regulatory authorities the existence of any
      kind of conflict of
interest.




130




Under
      Argentine law, there is no requirement related to the financial expertise
      of the members of the audit committee.  However, the members of
      Edenor’s audit committee have extensive corporate and financial
      experience. At least one member of the audit committee has sufficient
      expertise as an external auditor to be recognized by the board of
      directors of Edenor as an “audit committee financial expert” as defined in
      Item 16A of Form 20F. In accordance with Edenor’s internal policies,
      Edenor’s audit committee must pre-approve all audit and non-audit services
      provided by external auditors.Section 303A.08Shareholders must
      be given the opportunity to vote on all equity-compensation
      plans.
            
            Edenor
      does not have any equity compensation plans and therefore does not have in
      place procedures for shareholder approval of such
plans.Section 303A.09Listed companies
      must adopt and disclose corporate governance guidelines, including several
      issues for which such reporting is mandatory, and include such information
      on the company’s website, which should also include the charters of the
      audit committee, the nominating committee and the compensation
      committee.
              
              Furthermore,
      the board of directors must make a self-assessment of its performance at
      least once a year to determine if it and its committees function
      effectively and report thereon.
            
            Decree
      No. 677/01 (the “Transparency Decree”) requires Edenor to provide
      governance-related information in the annual reports to the CNV, including
      information relating to the decision- making organization (corporate
      governance), the company’s internal control system, norms for director and
      management compensation, stock- options, and any other compensation system
      applying to board members and managers.  All relevant
      information sent by the Company to the CNV is forwarded to the CNV through
      the CNV’s electronic financial reporting database and may be viewed by the
      public on the website of CNV.
              
              Edenor’s
      Annual Report, financial statements and press releases may also be viewed
      on the Company’s Web site (www.edenor.com.ar).  Under Argentine
      law, the board’s performance is evaluated at the annual Shareholders’
      Meeting.Section 303A.10Companies must
      adopt a Code of Business Conduct and Ethics.
            
            Under
      Argentine law there is no requirement that companies adopt a code of
      conduct.  Nonetheless, our company adopted a code of ethics in
      2003, which applies to all of our employees, including our principal
      executive, financial and accounting officers. Following the recent initial
      public offering of our company’s shares and ADSs, in 2009 we reviewed and
      updated  our code of ethics.Section 303A.12(a)The CEO shall on a
      yearly basis certify to NYSE that he/she knows of no violation by the
      company of NYSE rules relating to corporate governance.
            
            No
      similar obligation exists under Argentine legislation.  However,
      in accordance with Argentine law the directors of a company must annually
      submit for its shareholders’ approval such company’s annual report and
      financial statements at such company’s annual shareholders’ meeting. Also,
      Edenor discloses material events in regulatory filings both with the CNV
      in Argentina and with the SEC on form 6K in the United States (as
      “materiality” is understood in each of thoserespective jurisdictions).
      Under applicable rules of the NYSE, Edenor is required to disclose to the
      NYSE certain changes in its audit committee, including any change that
      affects the committee’s
independence.




131




Section 303A.12(b)The CEO shall
      promptly notify the NYSE in writing after any executive officer of the
      company becomes aware of any material non-compliance with any applicable
      provisions of Section 303A of the Listed Company Manual.
            
            Edenor
      is subject to and complies with §303A.12(b), to the extent that it relates
      to the sections of the NYSE Listed Company Manual that apply to foreign
      private issuers.




PART III




Item
      17.
            Financial
      Statements




The
Registrant has responded to Item 18 in lieu of this Item.




Item
      18.
            Financial
      Statements




Reference
is made to pages F-1 to F-86 of this annual report.




Item
      19.
            Exhibits




Documents
filed as exhibits to this annual report:




1.1
            Estatutos sociales
      (corporate bylaws) of Edenor, S.A. (English translation) (previously filed
      as Exhibit 3.1 to Edenor’s Registration Statement on Form F-1 (File No.
      333-141894) on April 4, 2007 and incorporated by reference
      herein.)




2.1
            Form
      of Deposit Agreement among Edenor, S.A., The Bank of New York, as
      depositary, and the Holders from time to time of American Depositary
      Shares issued thereunder, including the form of American Depositary
      Receipts (previously filed as Exhibit 4.1 to Edenor’s Amendment No. 2 to
      Registration Statement on Form F-1 (File No. 333-141894) on April 20, 2007
      and incorporated by reference
herein.)




2.2
            Indenture
      dated April 24, 2006, between Empresa Distribuidora y Comercializadora
      Norte S.A., as Issuer, and The Bank of New York, as Trustee, Co-Registrar
      and Paying Agent, and Banco Santander Río S.A., as Registrar, Transfer and
      Paying Agent in Argentina and Representative of the Trustee in Argentina
      (previously filed as Exhibit 2.2 to Edenor’s Annual Report on
      Form 20-F (File No. 001-33422) on June 26, 2008 and
      incorporated by reference herein).




2.3
            Indenture
      dated October 9, 2007, between Empresa Distribuidora y Comercializadora
      Norte S.A., as Issuer, and The Bank of New York, as Trustee, Co-Registrar
      and Paying Agent, and Banco Santander Río S.A., as Registrar, Transfer and
      Paying Agent in Argentina and Representative of the Trustee in Argentina
      (previously filed as Exhibit 2.3 to Edenor’s Annual Report on
      Form 20-F (File No. 001-33422) on June 26, 2008 and
      incorporated by reference herein).




2.4
            Registration
      Rights Agreement, dated October 9, 2007, between Edenor, S.A. and
      Citigroup Global Markets Inc. and Deutsche Bank Securities Inc. as
      Representatives of the Initial Purchasers (previously filed as
      Exhibit 2.4 to Edenor’s Annual Report on Form 20-F (File
      No. 001-33422) on June 26, 2008 and incorporated by reference
      herein).




12.1
            Certification
      of Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.




132




12.2
            Certification
      of Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.




13.1
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.


133




Index
to financial statements




Audited Financial
Statements
                                              
                                              PageReport
      of Independent Registered Public Accounting Firm Price Waterhouse &
      Co. S.R.L., member firm of PricewaterhouseCoopers, for the year ended
      December 31, 2008 and 2009
                                              
                                              F-2Report
      of Independent Registered Public Accounting Firm Deloitte & Co.
      S.R.L., member firm of Deloitte & Touche Tohmatsu, for the years ended
      December 31, 2007
                                              
                                              F-3Balance
      Sheets as of December 31, 2009 and 2008
                                              
                                              F-4Statements
      of Income for the years ended December 31, 2009, 2008 and
      2007
                                              
                                              F-5Statements
      of Changes in Shareholders’ Equity for the years ended December 31,
      2009, 2008 and 2007
                                              
                                              F-6Statements
      of Cash Flows for the years ended December 31, 2009, 2008 and
      2007
                                              
                                              F-7Notes
      to the Financial Statements
                                              
                                              F-8


F-1


INDEPENDENT AUDITORS’
REPORT


Price
      Waterhouse & Co. S.R.L.Firma
      miembro de PricewaterhouseCoopersBouchard
      557, piso 7°C1106ABG
      - Ciudad de Buenos AiresTel.:
      (54-11) 4850-0000Fax:
      (54-11) 4850-1800www.pwc.com/ar
  Report
of Independent Registered Public Accounting Firm
 
 To the
Shareholders, President and Directors of
 Empresa
Distribuidora y Comercializadora Norte
 Sociedad
Anónima (Edenor S.A.)
  In our
opinion, the accompanying balance sheet and the related statements of income, of
changes in shareholders’ equity and of cash flows present fairly, in all
material respects, the financial position of Edenor S.A. at December 31, 2009
and 2008, and the results of its operations and its cash flows for each of the
two years in the period ended December 31, 2009 in conformity with accounting
principles generally accepted in Argentina. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2009, based on criteria established in Internal
Control - Integrated Framework 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 to
the 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.
 
 Accounting
principles generally accepted in Argentina vary in certain significant respects
from accounting principles generally accepted in the United States of America.
Information relating to the nature and effect of such differences is presented
in Note 27 to the financial statements.
  A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial
statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
 
 Autonomous
City of Buenos Aires, June 7, 2010.
 
 PRICE
      WATERHOUSE & CO. S.R.L./s/
      Daniel A López LadoDaniel
      A López Lado (Partner)




F-2




DELOITTE LOGO


Deloitte
      & Co. S.R.L.Florida
      234, Piso 5°C1005AAFCiudad
      Autónomade
      Buenos AiresArgentinaTel:
      (54-11) 4320-2700Fax:
      (54-11) 4325-8081www.deloitte.com
 
  Report
of Independent Registered Public Accounting Firm
  TO THE
BOARD OF DIRECTORS OF EMPRESA DISTRIBUIDORA Y COMERCIALIZADORA NORTE
S.A.:
  We have
audited the statements of income and cash flows for the year ended December 31,
2007 of EMPRESA DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (an Argentine
Corporation) (the “Company”). These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on
these financial statements based on our audit.
  We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
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, as well as evaluating the overall
financial statement presentation. We believe that our audit provide a reasonable
basis for our opinion.
  In our
opinion, such financial statements present fairly, in all material respects, the
results of its operations and its cash flows for the year ended December 31,
2007 of EMPRESA DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. in accordance with
accounting principles generally accepted in Buenos Aires City,
Argentina.
  As
described in Note 17 b), on January 8, 2007, Decree No. 1957/06, which was
signed by the President of Argentina on December 28, 2006, was published in the
Official Gazette. Pursuant to such Decree, the Federal Government ratified the
Adjustment Agreement for the renegotiation of the concession agreement signed by
the Company. Additionally, on February 5, 2007 the Official Gazette published
ENRE Resolution No. 51/2007 which approves the Company’s new electricity rate
schedule that was effective for electricity consumption beginning as from
February 1, 2007. Revenues from the retroactive tariff increase deriving from
the implementation of the new electricity rate schedule applicable to
non-residential consumption for the period of November 1, 2005 through January
31, 2007 amounting to thousands of Argentine pesos 218.591, have been fully
recognized in the financial statements for the year ended December 31, 2007.
Additionally, as described in Notes 11 and 17 a), as per Resolution N° 1037/2007
of the National Energy Secretariat, the Company recorded as revenue thousands of
Argentine pesos 49.646 corresponding to the Cost Monitoring Mechanism (MMC) for
the period May 2006 through April 2007.
 
 Accounting
principles generally accepted in Buenos Aires City, Argentina vary in certain
significant respects from accounting principles generally accepted in the United
States of America (US GAAP). A description of the significant differences
between such principles and those accounting principles generally accepted in
the United States of America and the effect of those differences on the
determination of the results of operations for the year ended December 31, 2007,
and the additional disclosures required under US GAAP, are set forth in Note 27
to the accompanying financial statements.
 
 Buenos
Aires City, Argentina
 June 25,
2008
  Deloitte
& Co. S.R.L.
 
 
 /s/
Daniel Horacio Recanatini
 Daniel
Horacio Recanatini (Partner)
 
 
 
 Deloitte
refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its
network of member firms, each of which is a legally separate and independent
entity. Please see www.deloitte.com/about for a detailed description of the
legal structure of Deloitte Touche Tohmatsu and its Member
Firms.
  F-3




EMPRESA
      DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (EDENOR
  S.A.)
  BALANCE
SHEETS AS OF DECEMBER 31, 2009 AND 2008





(stated
in thousands of pesos)





2009
                                    
                                    
                                    2008CURRENT
      ASSETSCash
      and banks
                                    
                                    
                                    8,685
                                    
                                    
                                    
                                    6,061Investments
      (Note 26 Exhibit D)
                                    
                                    
                                    219,687
                                    
                                    
                                    
                                    121,019Trade
      receivables (Note 4)
                                    
                                    
                                    389,236
                                    
                                    
                                    
                                    400,491Other
      receivables (Note 5)
                                    
                                    
                                    61,098
                                    
                                    
                                    
                                    42,801Supplies
                                    
                                    
                                    14,854
                                    
                                    
                                    
                                    16,705Total
      Current Assets
                                    
                                    
                                    693,560
                                    
                                    
                                    
                                    587,077NON-CURRENT
      ASSETSTrade
      receivables (Note 4)
                                    
                                    
                                    87,047
                                    
                                    
                                    
                                    111,370Other
      receivables (Note 5)
                                    
                                    
                                    88,756
                                    
                                    
                                    
                                    99,472Investments
      in other companies (Note 26 Exhibit C)
                                    
                                    
                                    408
                                    
                                    
                                    
                                    397Investments
      (Note 26 Exhibit D)
                                    
                                    
                                    0
                                    
                                    
                                    
                                    67,212Supplies
                                    
                                    
                                    18,584
                                    
                                    
                                    
                                    12,844Property,
      plant and equipment (Note 26 Exhibit A)
                                    
                                    
                                    3,482,386
                                    
                                    
                                    
                                    3,256,258Total
      Non-Current Assets
                                    
                                    
                                    3,677,181
                                    
                                    
                                    
                                    3,547,553Total
      Assets
                                    
                                    
                                    4,370,741
                                    
                                    
                                    
                                    4,134,630CURRENT
      LIABILITIESTrade
      accounts payable (Note 6)
                                    
                                    
                                    347,782
                                    
                                    
                                    
                                    339,261Loans
      (Note 7)
                                    
                                    
                                    82,988
                                    
                                    
                                    
                                    27,245Salaries
      and social security taxes (Note 8)
                                    
                                    
                                    118,377
                                    
                                    
                                    
                                    94,787Taxes
      (Note 9)
                                    
                                    
                                    140,301
                                    
                                    
                                    
                                    111,021Other
      liabilities (Note 10)
                                    
                                    
                                    8,012
                                    
                                    
                                    
                                    10,514Accrued
      litigation (Note 26 Exhibit E)
                                    
                                    
                                    62,813
                                    
                                    
                                    
                                    52,756Total
      Current Liabilities
                                    
                                    
                                    760,273
                                    
                                    
                                    
                                    635,584NON-CURRENT
      LIABILITIESTrade
      accounts payable (Note 6)
                                    
                                    
                                    46,854
                                    
                                    
                                    
                                    40,154Loans
      (Note 7)
                                    
                                    
                                    707,499
                                    
                                    
                                    
                                    913,148Salaries
      and social security taxes (Note 8)
                                    
                                    
                                    43,673
                                    
                                    
                                    
                                    40,090Taxes
      (Note 9)
                                    
                                    
                                    9,374
                                    
                                    
                                    
                                    0Other
      liabilities (Note 10)
                                    
                                    
                                    610,775
                                    
                                    
                                    
                                    369,010Accrued
      litigation (Note 26 Exhibit E)
                                    
                                    
                                    10,084
                                    
                                    
                                    
                                    45,078Total
      Non-Current Liabilities
                                    
                                    
                                    1,428,259
                                    
                                    
                                    
                                    1,407,480Total
      Liabilities
                                    
                                    
                                    2,188,532
                                    
                                    
                                    
                                    2,043,064SHAREHOLDERS'
      EQUITY (as per related statements)
                                    
                                    
                                    2,182,209
                                    
                                    
                                    
                                    2,091,566Total
      Liabilities and Shareholders' Equity
                                    
                                    
                                    4,370,741
                                    
                                    
                                    
                                    4,134,630





The
accompanying notes 1 through 27 are an integral part of these financial
statements.


F-4




EMPRESA DISTRIBUIDORA Y COMERCIALIZADORA NORTE
      S.A. (EDENOR S.A.)





STATEMENTS
OF INCOME





FOR THE YEARSENDED DECEMBER 31, 2009, 2008 AND
2007






2009
                      
                      
                      2008
                      
                      
                      2007Net
      sales (Note 11)
                      
                      
                      2,077,860
                      
                      
                      
                      2,000,198
                      
                      
                      
                      1,981,928Electric
      power purchases
                      
                      
                      (1,003,362
                      )
                      
                      
                      (934,660
                      )
                      
                      
                      (889,885
                      )Gross
      margin
                      
                      
                      1,074,498
                      
                      
                      
                      1,065,538
                      
                      
                      
                      1,092,043Transmission
      and distribution expenses (Nota 26ExhibitH)
                      
                      
                      (548,583
                      )
                      
                      
                      (497,870
                      )
                      
                      
                      (417,553
                      )Selling
      expenses (Nota 26 Exhibit H)
                      
                      
                      (158,956
                      )
                      
                      
                      (126,016
                      )
                      
                      
                      (120,633
                      )Administrative
      expenses (Nota 26 Exhibit H)
                      
                      
                      (176,567
                      )
                      
                      
                      (138,737
                      )
                      
                      
                      (124,656
                      )Subtotal
                      
                      
                      190,392
                      
                      
                      
                      302,915
                      
                      
                      
                      429,201Other
      Income (Expense), net (Note 12)
                      
                      
                      23,290
                      
                      
                      
                      (29,825
                      )
                      
                      
                      996Financial
      income (expense) and holding gains (losses)Generated
      by assetsExchange
      difference
                      
                      
                      21,402
                      
                      
                      
                      8,139
                      
                      
                      
                      (855
                      )Interest
                      
                      
                      16,204
                      
                      
                      
                      9,772
                      
                      
                      
                      13,426Holding
      results (Note 22)
                      
                      
                      37,589
                      
                      
                      
                      (7,300
                      )
                      
                      
                      135Generated
      by liabilitiesFinancial
      expenses (*)
                      
                      
                      (11,713
                      )
                      
                      
                      (9,964
                      )
                      
                      
                      (21,042
                      )Exchange
      difference
                      
                      
                      (99,096
                      )
                      
                      
                      (92,707
                      )
                      
                      
                      (29,938
                      )Interest
                      
                      
                      (87,739
                      )
                      
                      
                      (95,273
                      )
                      
                      
                      (74,508
                      )Adjustment
      to present value of the retroactive tariff increase arising from the
      application of the new electricity rate schedule and other receivables
      (Notes 13)
                      
                      
                      3,413
                      
                      
                      
                      13,454
                      
                      
                      
                      (29,618
                      )Adjustment
      to present value of notes (Note 3.j)
                      
                      
                      (5,243
                      )
                      
                      
                      (8,457
                      )
                      
                      
                      (21,495
                      )Gain
      (loss) from the purchase and redemption of notes (Note 14)
                      
                      
                      73,523
                      
                      
                      
                      84,555
                      
                      
                      
                      (10,228
                      )Adjustment
      to present value of purchased and redeemed notes (Nota 3.j y
      14)
                      
                      
                      7,932
                      
                      
                      
                      8,980
                      
                      
                      
                      (8,632
                      )Ordinary
      income before taxes
                      
                      
                      169,954
                      
                      
                      
                      184,289
                      
                      
                      
                      247,442Income
      tax (Note 3.m)
                      
                      
                      (79,311
                      )
                      
                      
                      (61,174
                      )
                      
                      
                      (124,984
                      )Net
      ordinary income for the year
                      
                      
                      90,643
                      
                      
                      
                      123,115
                      
                      
                      
                      122,458Earnings
      per common share
                      
                      
                      0.101
                      
                      
                      
                      0.137
                      
                      
                      
                      0.135





(*) The
breakdown of financial expenses is as follows:





2009
                      
                      
                      2008
                      
                      
                      2007Fees
      related to the Corporate Notes Issuance Program (Note 14)
                      
                      
                      0
                      
                      
                      
                      0
                      
                      
                      
                      (7,403
                      )Financial
      assistance Electricidad Argentina S.A. (Note 15)
                      
                      
                      (9,306
                      )
                      
                      
                      (7,943
                      )
                      
                      
                      (6,219
                      )Withholding
      income tax and other financial expense
                      
                      
                      (2,407
                      )
                      
                      
                      (2,021
                      )
                      
                      
                      (7,420
                      )Total
                      
                      
                      (11,713
                      )
                      
                      
                      (9,964
                      )
                      
                      
                      (21,042
                      )





The
accompanying notes 1 through 27 are an integral part of these financial
statements.


F-5




EMPRESA DISTRIBUIDORA Y COMERCIALIZADORA
      NORTE S.A. (EDENOR S.A.)





STATEMENTS
OF CHANGES IN SHAREHOLDERS’ EQUITY





FOR
THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007





(stated
in thousands of pesos)


Shareholders’
      contributions
                                        
                                        
                                        Retained
      earningsNominal
                                          Value
                                        
                                        
                                        Adjustment to
                                        
                                        
                                        Additional
                                        
                                        
                                        Nominal
                                          Value
                                          Treasury Stock
                                        
                                        
                                        Adjustment
                                          to
      Capital
                                          Treasury Stock
                                        
                                        
                                        
                                        
                                        
                                        Appropriated
                                          Retained
                                          Earnings
                                        
                                        
                                        Unappropriated
                                          (Accumulated
                                          Deficit) Retained(Note 16.a)
                                        
                                        
                                        Capital
                                        
                                        
                                        Paid-in
      Capital
                                        
                                        
                                        Note
      1
                                        
                                        
                                        Note
      1
                                        
                                        
                                        Total
                                        
                                        
                                        Legal
      Reserve
                                        
                                        
                                        Earnings
                                        
                                        
                                        TotalBalance
      as of December 31, 2006
                                        
                                        
                                        831,610
                                        
                                        
                                        
                                        996,489
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,828,099
                                        
                                        
                                        
                                        53,320
                                        
                                        
                                        
                                        (211,069
                                        )
                                        
                                        
                                        1,670,350Capital
      increase resolved by the Board of Directors’meeting held
      on June 14, 2007, as per the powers granted by the
      Shareholders’Meeting of
      June 7,
      2006
                                        
                                        
                                        74,845
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        106,928
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        181,773
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        181,773Net
      income for the year
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        122,458
                                        
                                        
                                        
                                        122,458Balance
      as of December 31, 2007
                                        
                                        
                                        906,455
                                        
                                        
                                        
                                        996,489
                                        
                                        
                                        
                                        106,928
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,009,872
                                        
                                        
                                        
                                        53,320
                                        
                                        
                                        
                                        (88,611
                                        )
                                        
                                        
                                        1,974,581Absorption of
      accumulated deficit resolved by the Shareholders’Meeting held
      on April 15,
      2008
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (88,611
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (88,611
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        88,611
                                        
                                        
                                        
                                        -Acquisition
      of treasury shares
                                        
                                        
                                        (9,412
                                        )
                                        
                                        
                                        (10,347
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        9,412
                                        
                                        
                                        
                                        10,347
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (6,130
                                        )
                                        
                                        
                                        (6,130
                                        )Net
      income for the year
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        123,115
                                        
                                        
                                        
                                        123,115Balance
      as of December 31, 2008
                                        
                                        
                                        897,043
                                        
                                        
                                        
                                        986,142
                                        
                                        
                                        
                                        18,317
                                        
                                        
                                        
                                        9,412
                                        
                                        
                                        
                                        10,347
                                        
                                        
                                        
                                        1,921,261
                                        
                                        
                                        
                                        53,320
                                        
                                        
                                        
                                        116,985
                                        
                                        
                                        
                                        2,091,566Absorption
      resolved by the General Annual Meeting held on March 31, 2009 (Note
      16.d)
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        6,156
                                        
                                        
                                        
                                        (6,156
                                        )
                                        
                                        
                                        -Net
      income for the year
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        90,643
                                        
                                        
                                        
                                        90,643Balance
      as of December 31, 2009
                                        
                                        
                                        897,043
                                        
                                        
                                        
                                        986,142
                                        
                                        
                                        
                                        18,317
                                        
                                        
                                        
                                        9,412
                                        
                                        
                                        
                                        10,347
                                        
                                        
                                        
                                        1,921,261
                                        
                                        
                                        
                                        59,476
                                        
                                        
                                        
                                        201,472
                                        
                                        
                                        
                                        2,182,209





The
accompanying notes 1 through 27 are an integral part of these financial
statements.


F-6


EMPRESA DISTRIBUIDORA Y COMERCIALIZADORA NORTE
      S.A. (EDENOR
S.A.)




STATEMENTS
OF CASH FLOWS




FOR
THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007




(stated
in thousands of pesos)


2009
                                                                            
                                                                            
                                                                            2008
                                                                            
                                                                            
                                                                            2007Cash
      flows from operating activitiesNet
      income for the year
                                                                            
                                                                            
                                                                            90.643
                                                                            
                                                                            
                                                                            
                                                                            123.115
                                                                            
                                                                            
                                                                            
                                                                            122.458Adjustments to
      reconcile net income (loss) to net cash flows providedby operating
      activitiesDepreciation
      of property, plant and equipment (Note 26 Exhibit A)
                                                                            
                                                                            
                                                                            175.419
                                                                            
                                                                            
                                                                            
                                                                            170.263
                                                                            
                                                                            
                                                                            
                                                                            174.357Retirement
      of property, plant and equipment (Note 26 Exhibit A)
                                                                            
                                                                            
                                                                            2.763
                                                                            
                                                                            
                                                                            
                                                                            1.910
                                                                            
                                                                            
                                                                            
                                                                            1.105Gain
      from investments in related company SACME S.A. (Note 26 Exhibit
      C)
                                                                            
                                                                            
                                                                            (11
                                                                            )
                                                                            
                                                                            
                                                                            (7
                                                                            )
                                                                            
                                                                            
                                                                            (12
                                                                            )Loss
      (gain) from investments
                                                                            
                                                                            
                                                                            26.379
                                                                            
                                                                            
                                                                            
                                                                            (4.310
                                                                            )
                                                                            
                                                                            
                                                                            (8.467
                                                                            )Gain
      (loss) from the purchase and redemption of notes (Note 14)
                                                                            
                                                                            
                                                                            (73.523
                                                                            )
                                                                            
                                                                            
                                                                            (84.555
                                                                            )
                                                                            
                                                                            
                                                                            10.228Adjustment
      to present value of purchased and redeemed notes (Nota 3.j y
      14)
                                                                            
                                                                            
                                                                            (7.932
                                                                            )
                                                                            
                                                                            
                                                                            (8.980
                                                                            )
                                                                            
                                                                            
                                                                            8.632Adjustment
      to present value of notes (Note 3.j)
                                                                            
                                                                            
                                                                            5.243
                                                                            
                                                                            
                                                                            
                                                                            8.457
                                                                            
                                                                            
                                                                            
                                                                            21.495Exchange
      difference and interest on loans
                                                                            
                                                                            
                                                                            178.586
                                                                            
                                                                            
                                                                            
                                                                            232.743
                                                                            
                                                                            
                                                                            
                                                                            69.541Recovery
      of the accrual for tax contingencies (Note 26 Exhibit E)
                                                                            
                                                                            
                                                                            (35.553
                                                                            )
                                                                            
                                                                            
                                                                            0
                                                                            
                                                                            
                                                                            
                                                                            0Income
      tax (Note 3.m)
                                                                            
                                                                            
                                                                            79.311
                                                                            
                                                                            
                                                                            
                                                                            61.174
                                                                            
                                                                            
                                                                            
                                                                            124.984Allowance
      for doubtful accounts (Note 26 Exhibit E)
                                                                            
                                                                            
                                                                            13.547
                                                                            
                                                                            
                                                                            
                                                                            17.107
                                                                            
                                                                            
                                                                            
                                                                            14.383Recovery
      of allowance for doubtful accounts (Note 26 Exhibit E)
                                                                            
                                                                            
                                                                            (26.956
                                                                            )
                                                                            
                                                                            
                                                                            (24.016
                                                                            )
                                                                            
                                                                            
                                                                            0Allowance
      for other doubtful accounts (Note 26 Exhibit E)
                                                                            
                                                                            
                                                                            3.335
                                                                            
                                                                            
                                                                            
                                                                            1.673
                                                                            
                                                                            
                                                                            
                                                                            600Adjustment
      to present value of the retroactive tariff increase arising from the
      application of the new electricity rate schedule and other receivables
      (Note 13)
                                                                            
                                                                            
                                                                            (3.413
                                                                            )
                                                                            
                                                                            
                                                                            (13.454
                                                                            )
                                                                            
                                                                            
                                                                            29.618Changes
      in assets and liabilities:Net
      decrease (increase) in trade receivables
                                                                            
                                                                            
                                                                            48.070
                                                                            
                                                                            
                                                                            
                                                                            (49.454
                                                                            )
                                                                            
                                                                            
                                                                            (223.117
                                                                            )Net
      decrease (increase) in other receivables
                                                                            
                                                                            
                                                                            5.342
                                                                            
                                                                            
                                                                            
                                                                            (33.350
                                                                            )
                                                                            
                                                                            
                                                                            (8.385
                                                                            )(Increase)
      decrease in supplies
                                                                            
                                                                            
                                                                            (3.889
                                                                            )
                                                                            
                                                                            
                                                                            7.384
                                                                            
                                                                            
                                                                            
                                                                            (18.377
                                                                            )Increase
      in trade accounts payable
                                                                            
                                                                            
                                                                            15.221
                                                                            
                                                                            
                                                                            
                                                                            27.797
                                                                            
                                                                            
                                                                            
                                                                            52.728Increase
      in salaries and social security taxes
                                                                            
                                                                            
                                                                            27.173
                                                                            
                                                                            
                                                                            
                                                                            50.279
                                                                            
                                                                            
                                                                            
                                                                            12.865(Decrease)
      increase in taxes
                                                                            
                                                                            
                                                                            (56.915
                                                                            )
                                                                            
                                                                            
                                                                            26.380
                                                                            
                                                                            
                                                                            
                                                                            22.449Increase
      in other liabilities
                                                                            
                                                                            
                                                                            239.118
                                                                            
                                                                            
                                                                            
                                                                            78.077
                                                                            
                                                                            
                                                                            
                                                                            17.748Net
      increase in accrued litigation
                                                                            
                                                                            
                                                                            10.616
                                                                            
                                                                            
                                                                            
                                                                            15.123
                                                                            
                                                                            
                                                                            
                                                                            16.191Financial
      interest paid (net of interest capitalized) (Notes 3.g and
      18.b)
                                                                            
                                                                            
                                                                            (76.827
                                                                            )
                                                                            
                                                                            
                                                                            (62.685
                                                                            )
                                                                            
                                                                            
                                                                            (25.484
                                                                            )Financial
      and commercial interest collected (Note 18.b)
                                                                            
                                                                            
                                                                            32.230
                                                                            
                                                                            
                                                                            
                                                                            6.872
                                                                            
                                                                            
                                                                            
                                                                            11.642Net
      cash flows provided by operating activities
                                                                            
                                                                            
                                                                            667.977
                                                                            
                                                                            
                                                                            
                                                                            547.543
                                                                            
                                                                            
                                                                            
                                                                            427.182Cash
      flows from investing activitiesAdditions
      of property, plant and equipment (1)
                                                                            
                                                                            
                                                                            (404.165
                                                                            )
                                                                            
                                                                            
                                                                            (325.380
                                                                            )
                                                                            
                                                                            
                                                                            (336.851
                                                                            )Net
      cash flows used in investing activities
                                                                            
                                                                            
                                                                            (404.165
                                                                            )
                                                                            
                                                                            
                                                                            (325.380
                                                                            )
                                                                            
                                                                            
                                                                            (336.851
                                                                            )Cash
      flows from financing activitiesDecrease
      (increase) in current and non current investments
                                                                            
                                                                            
                                                                            13.614
                                                                            
                                                                            
                                                                            
                                                                            (67.893
                                                                            )
                                                                            
                                                                            
                                                                            0Adquisition
      of treasury shares (Note 1)
                                                                            
                                                                            
                                                                            0
                                                                            
                                                                            
                                                                            
                                                                            (6.130
                                                                            )
                                                                            
                                                                            
                                                                            0Net
      decrease in loans
                                                                            
                                                                            
                                                                            (175.453
                                                                            )
                                                                            
                                                                            
                                                                            (122.939
                                                                            )
                                                                            
                                                                            
                                                                            (203.579
                                                                            )Capital
      increase
                                                                            
                                                                            
                                                                            0
                                                                            
                                                                            
                                                                            
                                                                            0
                                                                            
                                                                            
                                                                            
                                                                            181.773Net
      cash flows used in financing activities
                                                                            
                                                                            
                                                                            (161.839
                                                                            )
                                                                            
                                                                            
                                                                            (196.962
                                                                            )
                                                                            
                                                                            
                                                                            (21.806
                                                                            )Net
      increase in Cash and Cash Equivalents
                                                                            
                                                                            
                                                                            101.973
                                                                            
                                                                            
                                                                            
                                                                            25.201
                                                                            
                                                                            
                                                                            
                                                                            68.525Cash
      and Cash Equivalents at the beginning of year
                                                                            
                                                                            
                                                                            126.399
                                                                            
                                                                            
                                                                            
                                                                            101.198
                                                                            
                                                                            
                                                                            
                                                                            32.673Cash
      and Cash Equivalents at the end of year
                                                                            
                                                                            
                                                                            228.372
                                                                            
                                                                            
                                                                            
                                                                            126.399
                                                                            
                                                                            
                                                                            
                                                                            101.198




(1)
              Net
      of 145 and 8,276 Software lease agreement (Note 3.g) as of December 31,
      2009 and 2008, respectively and 2,066 Capital investments fund - CAMMESA
      (Note 17.b) as of December 31,
2008.




The
accompanying notes 1 through 27 are an integral part of these financial
statements.




F-7




EMPRESA
DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A.


(EDENOR
S.A.)





NOTES TO THE FINANCIAL
STATEMENTS





(amounts
stated in thousands of Argentine
pesos except as otherwise indicated)





1.
            ORGANIZATION AND START
      UP OF THE COMPANY





In
compliance with Law No. 24,065 and in agreement with the reform process of the
Argentine Federal Government and the privatization program of Argentine
state-owned companies, the entire business of generation, transportation,
distribution and sale of electric power carried out by Servicios Eléctricos del
Gran Buenos Aires S.A. (SEGBA) was declared to be subject to privatization; the
operation was divided into seven business units: three for the distribution and
four for the generation of electric power.





On May
14, 1992, the Ministry of Economy and Public Works and Utilities, by Resolution
No. 591/92, approved the Bidding Terms and Conditions (Bid Package) of the
International Public Bidding for the sale of the Class "A" shares, representing
51% of the capital stock of Empresa Distribuidora Norte S.A. (hereinafter,
“EDENOR” or “the Company”) and Empresa Distribuidora Sur S.A. (EDESUR S.A.), two
of the three electric power distribution companies into which SEGBA had been
divided.





EDF
International (EDF S.A.), Empresa Nacional Hidroeléctrica del Ribagorzana, S.A.
(ENHER), Astra Compañía Argentina de Petróleo S.A. (ASTRA), Socièté
D'Amenagement Urbain et Rural (SAUR), Empresa Nacional de Electricidad S.A.
(ENDESA) and J.P. Morgan International Capital Corporation formed Electricidad
Argentina S.A. (EASA) to bid for the Class "A" shares of EDENOR, a company
organized on July 21, 1992 by Decree No. 714/92 of the Federal
Government.





EASA was
awarded the Class “A” shares of EDENOR based on a bid of US$ 427,973,000
(equivalent to the same amount in Argentine pesos as of such date). The
corresponding contract for the transfer of 51% of EDENOR’s capital stock was
executed on August 6, 1992.  The award as well as the transfer
contract were approved on August 24, 1992 by Decree No. 1,507/92 of the Federal
Government. Finally, on September 1, 1992, EASA took over the operations of
EDENOR.





In
accordance with the provisions of Decree No. 282/93 of the Federal Government,
dated February 22, 1993, the recorded values of assets, liabilities and net
capital arising from the transfer of SEGBA, were determined on the basis of the
price actually paid for 51% of EDENOR’s capital stock (represented by the
totality of Class “A” shares). This price was also used as the basis to
determine the value of the remaining 49% of the capital stock. In order to
determine the value of the assets transferred from SEGBA, the amount of
liabilities assumed was added to the value of the total capital stock of
831,610, determined as indicated above. Management estimates that the amounts of
the assets transferred from SEGBA represented their fair values as of the date
of the privatization.





The
corporate purpose of EDENOR is to engage in the distribution and sale of
electricity within the concession area. Furthermore, the Company may subscribe
or acquire shares of other electricity distribution companies, subject to the
approval of the regulatory agency, lease the network to provide electricity
transmission or other voice, data and image transmission services, and render
advisory, training, maintenance, consulting, and management services and
know-how related to the distribution of electricity both in Argentina and
abroad. These activities may be conducted directly by EDENOR or through
subsidiaries or related companies. In addition, the Company may act as trustee
of trusts created under Argentine laws, including extending secured credit
facilities to service vendors and suppliers acting in the distribution and sale
of electricity, who have been granted guarantees by reciprocal guarantee
companies owned by the Company.





On June
12, 1996, the Extraordinary Shareholders’ Meeting approved the change of the
Company’s name to Empresa Distribuidora y Comercializadora Norte S.A. (EDENOR
S.A.) so that the new name would reflect the description of the Company’s core
business. The amendment to the Company’s by-laws as a consequence of the change
of name was approved by the National Regulatory Authority for the Distribution
of Electricity (ENRE - Ente
Nacional Regulador de la Electricidad), through Resolution No. 417/97
and  registered with the Public Registry of Commerce on August 7,
1997.





On May 4
and June 29, 2001, EDF International S.A. (a wholly-owned subsidiary of EDF)
acquired all the shares of EASA and EDENOR held by ENDESA Internacional, YPF
S.A. (surviving company of ASTRA) and SAUR. Therefore, the direct and indirect
interest of EDF International S.A. (EDFI) in EDENOR increased to
90%.


F-8




On June
29, 2005, the Board of Directors of EDF approved a draft agreement with Dolphin
Energía S.A. (Dolphin) pursuant to which it would assign 65% of EDENOR’s capital
stock (held by EDFI) through the transfer of all Class “A” common shares held by
EASA and 14% of the Class “B” common shares. In this manner, EDFI would retain a
25% interest in EDENOR. The remaining 10% would be kept by the employees
according to the Employee Stock Ownership Program (ESOP). The closing of the
agreement took place upon its approval by the corresponding French and Argentine
governmental authorities.





On
September 15, 2005, by virtue of the stock purchase-sale agreement entered into
by EDFI and Dolphin and Dolphin’s subsequent partial assignments of its interest
in EASA and EDENOR to IEASA S.A. (IEASA) and New Equity Ventures LLC (NEV), the
formal take over by Dolphin took place, together with the change in the
Company’s indirect control through the acquisition of 100% of the capital stock
of EASA, which is the controlling company of EDENOR, by Dolphin (90%) and IEASA
(10%). Furthermore, as a result of the aforementioned agreement, the ownership
of the Company’s Class “B” common shares (representing 39% of its capital stock)
changed with 14% of the Company’s capital stock now being held by NEV and the
remaining 25% being kept by EDFI.





On April
28, 2006, the Company’s Board of Directors decided to initiate the public
offering of part of the Company’s capital stock in local and international
markets, including, but not limited to the trading of its shares in the Buenos
Aires Stock Exchange (BCBA) and the New York Stock Exchange (NYSE), United
States of America.





On June
7, 2006, the Ordinary and Extraordinary Shareholders’ Meeting resolved to
increase capital stock up to ten percent (10%), request authorization for the
public offering from both the National Securities Commission (CNV) and the
Securities and Exchange Commission (SEC) of the United States of America, as
well as authorization to trade from both the Buenos Aires Stock Exchange and the
New York Stock Exchange, entrusting the Board of Directors with the task of
taking the necessary steps to implement such resolutions.





Additionally,
it was decided that an American Depositary Receipts (ADRs) program, represented
by American Depositary Shares (ADSs) would be created and that it would be the
responsibility of the Board of Directors to determine the terms and conditions
and the scope of the program.





On June
14, 2007, the Board of Directors approved the final report on Edenor’s capital
increase and public offering process. As a result of the above-mentioned
process, the Company’s Class B shares and American Depositary Shares (“ADSs”),
representing Class B shares, are traded on the Buenos Aires Stock Exchange and
the New York Stock Exchange, respectively. The final capital increase, as
resolved by the above-mentioned Board of Directors, amounted to nine percent
(9%) which is represented by 74,844,900 (seventy-four million eight hundred
forty-four thousand nine hundred) new shares subscribed at the international
primary offering, fully placed as 3,742,245 ADS. It was also reported that a
secondary international offering was made on this date of 207,902,540 Class B
shares.





The
aforementioned issuance was carried out at a price of 2.62 per share. Taking
into account that the nominal value of each share is 1.00, an additional paid-in
capital, amounting to 121,249, was recorded.





For the
year ended December 31, 2007, expenses incurred by the Company in relation to
this process amounted to 14,321, which have been offset against the
aforementioned additional paid-in capital, in accordance with the provisions of
section No. 202 of the Argentine Business Organizations Law No. 19,550. The
resulting balance of the additional paid-in capital, net of expenses, which
amounted to 106,928, was partially used to absorb the accumulated deficit on
April 15, 2008.





The Class
“B” shareholders NEV and EDFI informed the Company that at the secondary
international offering they sold 49,401,480 and 179,049,520 Class “B” shares,
respectively. Additionally, on May 1, 2007, the shareholders NEV and EDFI
informed that they had sold 57,706,040 Class “B” shares at the secondary
international offering when the international underwriters fully exercised the
over-allotment option (green shoe) contemplated in the prospectus for the public
offering and section 2 of the underwriting agreement.





With
regard to the Company’s Class “C” shares held by the Employee Stock Ownership
Program (ESOP), on April 29, 2007 the ESOP was partially cancelled in advance in
conformity with a procedure set forth by the Federal Government, and on April
30, 2007, an amount of 81,208,416 shares, which had been converted into Class
“B” shares on April 27, 2007, was sold at the domestic secondary offering. As of
the date of issuance of these financial statements, an amount of 1,952,604 Class
“C” shares, representing 0.22% of the Company’s capital stock, remains
outstanding.


F-9


Furthermore,
Dolphin and IEASA contributed 38,170,909 Class “B” shares of the Company that
had been transferred to them by NEV to EASA, which is the controlling company.
On April 27, 2007, the contributed shares were converted into Class “A” shares
to ensure that EASA continues to hold 51% of all the Class “A” shares
outstanding. On April 30, 2007, the Company requested that Caja de Valores S.A.
register the new Class “A” shares and extend thereto the regulatory pledge in
favor of the Argentine Government, in compliance with the Bidding Terms and
Conditions of the International Public Bidding, the provisions of the Concession
Agreement of Edenor S.A., and the terms of the related pledge agreements signed
on August 31, 1992 and July 14, 1994 which, in accordance with their second
clause, EASA was required to extend the first-priority preferred security
interest  to any Class “A” Shares of the Company that EASA would
acquire on a date subsequent to those of said Agreements.





Moreover,
section 19 of the Adjustment Agreement entered into by the Company and the
Argentine Government, which was ratified by Decree No. 1957/2006, stipulates
that the pledge on the Company’s shares in favor of the Argentine Government
granted as security for the performance of the Concession Agreement will be
extended to include the performance of the obligations assumed by the Company in
this Adjustment Agreement.





The
Company was notified that on June 22, 2007, the shareholders of Dolphin Energía
S.A. and IEASA S.A. (that own 100% of the stock of Electricidad Argentina S.A.,
the controlling company of Edenor S.A.) and Pampa Energía S.A. entered into a
memorandum of understanding whereby it was agreed that the totality of the
capital stock of Dolphin Energía S.A. and IEASA S.A. would be exchanged for
common shares of Pampa Energía S.A.





Furthermore,
the Company received a notice from EASA whereby it was informed that the
exchange for shares described in the preceding paragraph had formally been
agreed upon on September 28, 2007 under a Stock Subscription Agreement entered
into by Pampa Energía S.A., Marcos Marcelo Mindlin, Damián Miguel Mindlin,
Gustavo Mariani, Latin American Energy LLC, New Equity Ventures LLC and Deutsche
Bank AG, London Branch. Moreover, on such date, Pampa Energía S.A. acquired 100%
of the capital stock of Dolphin Energía S.A. and IEASA S.A, which together own
100% of the capital stock of EASA.





On
October 23, 2008, the Company’s Board of Directors decided to launch a public
offering for the acquisition of the Company’s own shares pursuant to both the
terms of Section 29, Chapter XXVII, Book 9 of the National Securities
Commission’s regulations and the provisions of Section 68 of Law No. 17,811 (as
amended by Decree No. 677/2001).


The
shares acquired by virtue of the aforementioned provisions shall be sold by the
Company within a maximum period of three years as from acquisition date, unless
such period is extended by the Ordinary Shareholders’ Meeting.





On
October 27, 2008, the Company requested authorization for the above-mentioned
public offering from the National Securities Commission (CNV).





Furthermore,
on October 29, 2008, the Company’s Board of Directors modified the basic terms
and conditions of the aforementioned offering.





On
October 30, 2008, the National Securities Commission (CNV) approved the
above-mentioned public offering for the acquisition of the Company’s own shares.
Furthermore, the Company’s Board of Directors fixed the purchase price of the
shares to be acquired within the framework of the offering in the amount of
pesos 0.65.





The main
terms and conditions for the acquisition of the Company’s own shares in the
framework of the offering have been the following:





-
            Maximum
      amount to invest: up to pesos
45,000,000


-
            Maximum
      number of shares included in the offering: up to 65,000,000 common, Class
      B and/or C shares, representing approximately 7.17% of the Company’s
      capital stock, with a nominal value of 1 peso each and the right to one
      vote per share


-
            Source
      of the funds: the acquisition of shares will be made with realized and
      liquid profits resulting from the financial statements for the six-month
      period ended June 30, 2008 and approved by the Company’s Board of
      Directors on August 7, 2008. Additionally, it is stated that the Company
      is liquid and has the necessary economic resources to guarantee full
      satisfaction of the offering.


-
            Scope
      of the offering: it was exclusively carried out in
    Argentina.





On
November 14, 2008, the Company’s Board of Directors decided to continue with the
acquisition process of the Company’s own shares through market transactions in
accordance with the terms of section 68 of Law No. 17,811 (as amended by Decree
No. 677/2001) and the CNV’s Regulations. This decision was taken firstly because
the reasons that motivated the acquisition process through the public offering
mechanism previously described continue to exist, and secondly because such
mechanism would provide the Company with more flexibility to determine the
purchase price of its own shares in a context of high volatility in the market
value of shares in general.


Based on
the foregoing, the Company’s Board of Directors approved the following basic
terms and conditions:


F-10




-
            Maximum
      amount to invest: up to pesos
45,000,000


-
            Maximum
      number of Class B shares to be acquired: the number of common Class B
      shares, with a nominal value of 1 peso each and the right to one vote per
      share, equivalent to the maximum amount to invest, which may not exceed at
      any time, the maximum limit of treasury stock which the Company may own,
      in accordance with applicable
regulations.


-
            Daily
      limit for market transactions: up to 25% of the average daily transaction
      volume in the markets where the shares are listed, for the preceding
      90-day period, in accordance with applicable
  regulations.


-
            Price
      to be paid for the shares: between a minimum of 0.50 and a maximum of 0.80
      peso per share.


-
            Acquisition
      period: 120 calendar days to commence from the working day following the
      date of publication of the information in the Daily Bulletin of the
      Buenos Aires Stock Exchange, which took place on November 17, 2008. Such
      period may be reduced, renewed or extended. Investors will be informed of
      any such reduction, renewal or extension through the above-mentioned
      bulletin.


-
            Source
      of the funds: the acquisition of shares will be made with realized and
      liquid profits resulting from the financial statements for the nine-month
      period ended September 30, 2008 and approved by the Company’s Board of
      Directors on November 5, 2008. Additionally, it is stated that the Company
      is liquid so as to make the aforementioned acquisitions without affecting
      its creditworthiness.





As of
December 31, 2008 the Company acquired, through both acquisition processes, a
total of 9,412,500 class B shares with a nominal value of 1 peso each at an
acquisition cost of 6,130





On March
17, 2009, the 120-calendar-day period stipulated in the terms and conditions for
the repurchase of treasury shares, that had commenced on November 18, 2008, came
to an end.





As of
December 31, 2009 and 2008, the Company’s capital stock, represented by
906,455,100 shares is comprised of the following (Note 16.a):





Holder
                  
                  Number of shares
                  
                  Class
                  
                  % heldEASA
      (1)
                  
                  462,292,111
                  
                  “A”
                  
                  51.00Market
      in general (2)
                  
                  442,210,356
                  
                  “B”
                  
                  48.78Banco
      Nación (3)
                  
                  1,952,604
                  
                  “C”
                  
                  0.22New
      Equity Ventures LLC
                  
                  19
                  
                  “B”
                  
                  0EDF
      Internacional S.A.
                  
                  10
                  
                  “B”
                  
                  0





(1) The
shares are pledged in favor of the Argentine Government as evidenced by the
certificate issued by Caja de Valores.


(2)
Includes 9,412,500 treasury shares as of December 31, 2009 and
2008.


(3)
Trustee of the Employee Stock Ownership Program.





On July
19, 2006, EASA carried out a restructuring of the totality of its financial
debt. If EASA did not comply with its payment obligations under the new debt,
its creditors could obtain an attachment order against the Company’s Class A
shares held by them, and, consequently, the Argentine Government would be
entitled, as stipulated in the concession agreement, to foreclose on the pledged
shares, with an adverse effect on the results of its
operations.





2.
            BASIS OF PRESENTATION
      OF THE FINANCIAL STATEMENTS





Financial
statements presentation





These
financial statements have been prepared in accordance with accounting principles
generally accepted in the City of Buenos Aires, Argentina (hereinafter
“Argentine GAAP”) and the criteria established by the National Securities
Commission (CNV), taking into account that which is mentioned in the following
paragraphs.





The
amounts of these financial statements are stated in thousands of Argentine
pesos.





As from
January 1, 2003 and as required by General Resolution No. 434/03 of the CNV, the
Company reports the results of its operations, determines the values of its
assets and liabilities and determines its profit and loss in conformity with the
provisions of Technical Resolutions (TR) Nos. 8, 9 and 16 through 18 (amended
text June 2003). As from January 1, 2004, the Company has applied the provisions
of TR No. 21 of the Argentine Federation of Professional Councils in Economic
Sciences (FACPCE) as approved by the Professional Council in Economic Sciences
of the Autonomous City of Buenos Aires (CPCECABA), with specific few exceptions
and clarifications introduced by General Resolution No. 459/04 of the
CNV.


F-11




The CNV
through its General Resolutions Nos. 485/05 and 487/06 decided to implement
certain changes in the Argentine GAAP effective for fiscal years or interim
periods beginning as from January 1, 2006, by requiring the application of TR
Nos. 6, 8, 9, 11, 14, 16, 17, 18, 21, 22 and 23 and Interpretations 1, 2, 3, and
4, of the FACPCE with the amendments introduced by such Federation through April
1, 2005 (Resolution No. 312/05) and adopted by the CPCECABA (Resolution CD No.
93/05) with certain amendments and clarifications.





Among the
aforementioned changes the following can be noted: i) the comparison between the
values of certain assets and their recoverable values, using discounted
cash-flows; ii) the consideration of the difference between the accounting and
tax values resulting from the adjustment for inflation included in non-monetary
assets, as a temporary difference, allowing the Company to either recognize a
deferred tax liability or to disclose the effect of such accounting change in a
note to the financial statements and (iii) the capitalization of interest cost
on certain assets (only those assets that require an extended period of time to
be produced or acquired would qualify) during the term of their construction and
until they are in condition to be used.





With
regard to the impact of the application of the change mentioned in the preceding
paragraph under (i) on the Company’s property, plant and equipment, said change
does not have a significant impact on the Company’s financial position or net
income for the year ended December 31, 2009, given that the fair value (defined
as the discounted value of net cash flows arising from both the use of the
assets and their final disposal) exceeds their recorded value (Note
3.g).





With
regard to item (ii), the Company has decided to disclose said effect in a note
to the financial statements. Had the Company chosen to recognize the effect of
the adjustment for inflation of its property, plant and equipment as a temporary
difference, as of December 31, 2009 a deferred tax liability of approximately
383,241 and a credit to net income for the year, under the income tax account,
amounting to 26,980, would have been recorded (Note 3.m).





Additionally,
had the Company elected to recognize a deferred tax liability, in subsequent
years, the Company would have recorded an income tax expense that would have
been lower than the income tax expense that will be recorded as a result of
maintaining the criterion applied up to the moment, whose distribution in
subsequent years has been estimated as follows:





Year
                        
                        Effect on deferred tax result
                          Nominal value2010
                        
                        
                        25,0112011
                        
                        
                        24,0842012
      – 2016
                        
                        
                        106,8662017
      – 2021
                        
                        
                        88,058Remainder
                        
                        
                        139,222Total
                        
                        
                        383,241





Furthermore,
on March 20 and June 12, 2009, the FACPCE approved TR Nos. 26 and 27 "Adoption
of the International Financial Reporting Standards (IFRSs) of the International
Accounting Standards Board (IASB)” and “Changes to TR Nos. 6, 8, 9, 11, 14, 16,
17, 18, 21, 22, 23 and 24” respectively, which will be in effect for fiscal
years beginning as from January 1, 2011. Additionally, the aforementioned TR
have been approved by the Board of the Professional Council in Economic Sciences
of the Autonomous City of Buenos Aires through Resolution No.
52/2009.





Furthermore,
on December 29, 2009, the CNV issued Resolution No. 562, according to which
those entities that make a public offering of their capital stock or corporate
notes pursuant to Law No. 17,811, or have requested authorization for their
being included in such public offering regime would be required to comply with
the provisions of TR No. 26. The application of such regulations will be
mandatory for the Company as from the fiscal year beginning January 1,
2012.





On April
27, 2010, the Company’s Board of Directors approved the specific implementation
plan required by General Resolution No. 562 of the National Securities
Commission. Such approval was informed as a relevant fact on April 28,
2010.





Consideration
of the effects of inflation





The
financial statements fully reflect the effects of the changes in the purchasing
power of the currency through August 31, 1995. As from such date, and in
accordance with Argentine GAAP and the requirements of control authorities, the
restatement of the financial statements to reflect the effects of inflation was
discontinued until December 31, 2001. As from January 1, 2002, and in accordance
with Argentine GAAP, it was established that inflation adjustment be reinstated
and that the accounting basis restated as a result of the change in the
purchasing power of the currency through August 31, 1995, as well as
transactions with original date as from such date through December 31, 2001, be
considered as restated as of the latter date. The financial statements have been
restated to reflect the effects of inflation based on the variations of the
Domestic Wholesale Price Index.


F-12




On March
25, 2003, the Federal Government issued Decree No. 664 establishing that
financial statements for fiscal years ending as from such date had to be
prepared in nominal currency. Consequently, and in accordance with Resolution
No. 441 of the CNV, the Company discontinued the restatement of its financial
statements as from March 1, 2003. This criterion does not agree with Argentine
GAAP which establish that financial statements were to be restated through
September 30, 2003. The Company has estimated that the effect of not having
restated the financial statements through September 30, 2003 is not significant
on the financial statements.





3.
            VALUATION
      CRITERIA





The main
valuation criteria used in the preparation of these financial statements are as
follow:





a)
            Cash
      and banks:





-
            In
      local currency: at nominal value.


-
            In
      foreign currency: at the exchange rate in effect as of the end of each
      year. The corresponding detail is disclosed in Note 26 Exhibit
      G.





b)
            Current
      investments:





-
            Time
      deposits, which include the portion of interest income accrued through the
      end of each year.


-
            Money
      market funds, which have been valued at the prevailing market price as of
      the end of each year.


-
            Corporate
      notes, which have been valued at the prevailing market price as of the end
      of each year.





c)
            Trade
      receivables:





-
            Services
      rendered and billed but not collected, and services rendered but unbilled
      as of the end of each year, at nominal value, except for those indicated
      in the following paragraphs;


-
            Services
      rendered but unbilled as of the end of each year, arising from the
      retroactive increase deriving from the application of the electricity rate
      schedule resulting from the RTT (Note 17.b) have been valued on the basis
      of the best estimate of the amount to be collected, discounted at a 10.5%
      annual nominal rate, which, in accordance with the Company’s criterion,
      reasonably reflected market assessments of the time value of money and
      risks specific to the receivable at the time of their initial
      measurement.


-
            The
      amounts owed by the Government of the Province of Buenos Aires under the
      Framework Agreement (Note 13) have been valued as of December 31, 2009 on
      the basis of the best estimate of the amount to be collected, discounted
      at a 19.62% annual nominal rate, which, in accordance with the Company’s
      criterion, reasonably reflected market assessments of the time value of
      money and risks specific to the receivable at the time of their initial
      measurement.





The
amounts thus determined:





1.
              are
      net of an allowance for doubtful accounts, as described in more detail in
      paragraph h) of this Note.


2.
              consider
      the effects of that which is stated in Note
13.





d)
            Other
      receivables and liabilities (excluding
loans):





-
              In
      local currency: at nominal
value.


-
              In
      foreign currency: at the exchange rate in effect as of the end of each
      year (Note 26 Exhibit G).





Other
receivables and liabilities have been valued as indicated above including, if
any, interest income or expense accrued as of the end of each year. The values
thus obtained do not differ significantly from those that would have been
obtained if the Argentine GAAP had been applied, inasmuch as they establish that
other receivables and liabilities must be valued on the basis of the best
estimate amount to be collected and paid, respectively, discounted at a rate
that reflects the time value of money and the risks specific to the transaction
estimated at the time of their being recorded in assets and liabilities,
respectively.





Liabilities,
excluding loans, have been valued at nominal value including, if any, interest
expense accrued as of the end of each year. The values thus obtained do not
differ significantly from those that would have been obtained if the Argentine
GAAP had been applied, inasmuch as they establish that they must be valued at
their estimated cash price at the time of the transaction, plus interest and
implicit financing components accrued on the basis of the internal rate of
return determined at such opportunity.


F-13




e)
            Supplies:





Supplies
were valued at acquisition cost restated to reflect the effects of inflation as
indicated in Note 2. The consumption of supplies has been valued based on the
average cost method.





The
Company has classified supplies into current and non-current depending on
whether they will be used for maintenance or capital expenditures.





The
carrying value of supplies, taken as a whole, does not exceed their recoverable
value as of the end of each year.





f)
            Non-current
      investments:





-
              50%
      interest held in the related company SACME S.A. (a company organized by
      means of equal contributions by distribution companies EDENOR S.A. and
      EDESUR S.A. in accordance with the Bid Package). SACME S.A. is in charge
      of monitoring the electric power supplied to the aforementioned
      distributors.  As of December 31, 2009 and 2008, the investment
      in SACME has been recorded at its equity value (Note 26 Exhibit
      C).





In order
to determine the equity value, the audited financial statements of SACME S.A. as
of December 31, 2009 and 2008 have been used. The accounting principles used by
SACME are similar to those applied by EDENOR for the preparation of its
financial statements.





-
              Corporate
      Notes of Central Térmica Güemes: As of December 31, 2008, the
      aforementioned corporate notes have been valued at their acquisition value
      plus interest income accrued translated into pesos at the rate of exchange
      in effect as of year-end.


As of
December 31, 2008, interest income accrued was disclosed in current investments
and amounted to 393 (Note 26 Exhibit D).





During
the period ended March 31, 2009, the Company sold the aforementioned corporate
notes, which resulted in a loss of 4,679 that has been included in the Financial
income (expense) and Holding gains (losses) generated by assets account of the
Statement of Income under Holding results.





-
              Municipal
      Financial Restructuring Bonds (Municipal Bonds) issued
      pursuant to Law No. 11,752 of the Province of Buenos Aires: As of December
      31, 2008, they were valued at their acquisition value, including the
      inflation-linked CER (“benchmark stabilization coefficient”) adjustment
      and interest accrued at an annual rate of
4%.


On
December 29, 2009, the Company sold the aforementioned Municipal Bonds. This
transaction resulted in a loss of 1,756 that has been included in the Financial
income (expense) and Holding gains (losses) generated by assets account of the
Statement of Income under Holding results.





-
              Discretionary
      trust: As of December 31, 2008, its value has been based upon the market
      price of the securities kept by the trustee translated into pesos at the
      rate of exchange in effect as of
year-end.


On
September 3, 2009, the discretionary trust was dissolved and the trust property
was liquidated and transferred to the Company (Note 22).





g)
            Property,
      plant and equipment:





Property,
plant and equipment transferred by SEGBA on September 1, 1992 were valued as of
the privatization date as described below, and restated to reflect the effects
of inflation as indicated in Note 2. The total value of the assets transferred
from SEGBA was allocated to individual assets accounts on the basis of
engineering studies conducted by the Company.





The total
value of property, plant and equipment has been determined based on the US$ 427
million price actually paid by EASA for the acquisition of 51% of the Company’s
capital stock at acquisition date.  Such price was used to value the
entire capital stock of EDENOR at 832 million pesos, which, when added to the
fair value of the debts assumed by the Company under the SEGBA Privatization Bid
Package for 139.2 million pesos less the fair value of certain assets received
from SEGBA for 103.2 million, valued property plant and equipment at 868 million
pesos.




F-14




SEGBA
neither prepared separate financial statements nor maintained financial
information or records with respect to its distribution operations or the
operations in which the assets transferred to EDENOR were used. Accordingly, it
was not possible to determine the historical cost of transferred
assets.




Additions
subsequent to such date have been valued at acquisition cost restated to reflect
the effects of inflation as indicated in Note 2, net of the related accumulated
depreciation. Depreciation has been calculated by applying the straight-line
method over the estimated useful life of the assets which was determined on the
basis of the above-mentioned engineering studies. Furthermore, in order to
improve the disclosure of the account, the Company has made certain changes in
the classification of property, plant and equipment based on each technical
process.





In
accordance with the provisions of TR No. 17, financial costs in relation to any
given asset may 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 a
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 or start up of other assets,
depending on the purpose pursued with its production, construction, assembly or
completion. The Company capitalized financial costs on property, plant and
equipment from 1997 to 2001, from 2006 through 2008 and during the year ended
December 31, 2009. Financial costs capitalized for the years ended December 31,
2009 and 2008 amounted to 24,966 and 31,477, respectively.





During
the years ended December 31, 2009 and 2008, direct and indirect costs
capitalized amounted to 49,566 and 41,464 respectively.





Furthermore,
on May 19, 2008 the Company entered into a software lease agreement, which, in
accordance with the provisions of section 4.1 of Technical Resolution No. 18 of
the Professional Council in Economic Sciences of the Autonomous City of Buenos
Aires, has been considered as a Finance Lease. Additionally, on November 27,
2008 the aforementioned agreement was amended so as to extend its
scope.


Common
characteristics of these lease contracts are that they transfer substantially
all the risks and rewards incident to the ownership of the leased asset, whose
ownership title may be transferred or not. In consideration thereof, the Company
(lessee) agrees to make one or more payments that cover the current value of the
asset and the corresponding financial charges.


For this
concept, the Company has recorded 11,849 and 10,103 in the Property, plant and
equipment account (Note 26 Exhibit A), and 3,744 and 8,276 in Other Liabilities
under Other (Note 10) as of December 31, 2009 and 2008, respectively, and 1,088
and 589 in the Statement of Income under Financial interest as of December 31,
2009 and 2008, respectively.





The
recorded value of property, plant and equipment, taken as a whole, does not
exceed their recoverable value as of the end of each year.





h)
              Allowances (Note 26
      Exhibit
      E):





Allowance
for doubtful accounts: it has been recorded to adjust the valuation of trade
receivables and other receivables up to their estimated recoverable value. The
amount of the allowance has been determined based on the historical series of
collections for services billed through the end of each year and collections
subsequent thereto.





Additionally,
for purposes of calculating the amount of the allowance, the Company has
considered a detailed analysis of accounts receivable in
litigation.





The
evolution and balances of allowances have been disclosed in Note 26 Exhibit
E.





i)
              Accrued
      litigation:





Amounts
have been accrued for several contingencies.





1)
              The
      Company is a party to certain lawsuits and administrative proceedings in
      several courts and government agencies, including certain tax
      contingencies arising from the ordinary course of business.  The
      Argentine tax authority (“AFIP”) had challenged certain income tax
      deductions related to allowances for doubtful accounts made by the Company
      on its income tax returns for fiscal years 1996, 1997 and 1998, and had
      assessed additional taxes for approximately 9,300. Tax related
      contingencies were subject to interest charges and, in some cases, to
      fines. For these concepts, the Company had recorded an accrual for 29,521.
      This matter was on appeal to the Federal Tax Court and the Federal
      Appellate Court in Administrative Matters. During the appeal process,
      payment of such claim had been
suspended.


F-15




On April
27, 2009, the Company adhered to the tax regularization plan established in Law
No. 26,476. The main features of the aforementioned moratorium are as
follow:


- Waiver
of fines and penalties on which no final judgment has been issued at the time of
adherence to the regularization plan;


- Waiver
of late payment/default and penalty interest in the amount exceeding 30 % of the
principal owed;


- An
initial payment equal to 6% of the debt existing at the time of adherence to the
regularization plan;


- The
remaining balance payable in 120 monthly installments with a 0.75% monthly
interest rate.


-30% to 50%
reduction in tax agents and AFIP attorneys’ fees.


In
accordance with the assessment of the tax regularization plan, the Company’s
debt amounted to 12,122. During the year ended December 31, 2009, the Company
paid for this concept an amount of 1,487, thus the remaining balance of the
Company’s debt totals 10,635 (Note 9).





2)
              The
      Company is also a party to civil and labor lawsuits in the ordinary course
      of business.


At the
end of each year, management evaluates these contingencies and records an
accrual for related potential losses when: (i) payment thereof is probable, and
(ii) the amount can be reasonably estimated.  The Company estimates
that any loss in excess of amounts accrued in relation to the above matters will
not have a material adverse effect on the Company’s result of operations or its
financial position.





The
evolution and balances of the accrued litigation account have been disclosed in
Note 26 Exhibit E.





j)
              Loans:





As of
December 31, 2009 and 2008, the notes issued in United States dollars (Note 14)
have been valued on the basis of the best estimate of the amount to be paid,
discounted at a 10.5% annual nominal rate, which, in accordance with the
Company’s criterion, reasonably reflects market assessments of the time value of
money and specific debt risks.





The
adjustment to present value of future cash flows of the notes, at the market
rate in effect at the time of the initial measurement, generated losses of 5,243
and 8,457 as of December 31, 2009 and 2008, respectively.





During
the years ended December 31, 2009, 2008 and 2007, the Company purchased at
market prices and in successive operations all “discount notes” and part of the
“fixed rate par notes” due in 2016 and 2017, for nominal values of US$ 86,038
thousand, US$ 50,033 thousand and US$ 283,726 thousand, respectively (Note
14).





As of
December 31, 2009, the principal outstanding balance of the notes amounts to
746,906 (Notes 7 and 14).





The rest
of the financial debts have been valued at nominal value plus interest expense
accrued as of the end of each year. The values thus obtained do not differ
significantly from those that would have been obtained if the Argentine GAAP had
been applied, inasmuch as they establish that financial debts must be valued in
accordance with the amount of money delivered and received, respectively, net of
the transaction costs, plus financial results accrued on the basis of the
internal rate of return estimated at the time of their initial
recognition.





“Derivative
financial instruments” (Note 23) have been valued in accordance with the
provisions of section 2 of Technical Resolution No. 18 of the Argentine
Federation of Professional Councils in Economic Sciences (FACPCE), which require
that all derivative financial instruments be recognized as either assets or
liabilities at their fair value, regardless of whether they are designated as
hedging instruments or not.


Furthermore,
the changes in the accounting basis of financial instruments have been
recognized by the Company in the Financial income (expense) and holding gains
(losses) generated by liabilities account of the Statement of Income under
Exchange difference with a contra-account in Current Liabilities – Loans under
Derivative financial instruments and under Interest as of December 31, 2009 and
2008, respectively (Note 7).





k)
              Shareholders'
      equity accounts:





These
accounts have been restated to reflect the effects of inflation as indicated in
Note 2, except for the "Shareholders’ Contributions - Nominal value" and
“Additional Paid-in Capital” accounts which have been maintained at their
nominal value. The excess of the adjusted value of Capital Stock over its
nominal value has been included in the “Shareholders’ Contributions – Adjustment
to Capital” account.


F-16





The
Treasury Stock account represents the nominal value of the Company’s own shares
acquired by the Company (Note 1)





l)
              Statement
      of income accounts:





-
              The
      accounts that accumulate monetary transactions have been disclosed at
      their nominal values.


-
              Financial
      income (expense) and holding gains (losses) have been disclosed separately
      under income (expense) generated by assets and by
    liabilities.


-
              The
      adjustment to present value of the notes is stated at nominal
      value.


-
              The
      adjustment to present value of trade receivables related to the
      application of the retroactive tariff increase agreed upon in the
      Adjustment Agreement and the Framework Agreement is stated at nominal
      value.





m)
              Income
      tax and tax on minimum presumed
income:





The
Argentine GAAP require the application of the deferred tax method to account for
income tax. This method consists of recognizing deferred tax assets and
liabilities when temporary differences arise from the valuation of assets and
liabilities for accounting and tax purposes. Regarding the restatement of
property, plant and equipment to reflect the effects of inflation, the Company
has applied Resolution MD (the Board) No. 11/03 of the CPCECABA and General
Resolution No. 487/06 of the CNV (Note 2 – Basis of presentation of the
financial statements).





The
reconciliation between the income tax as charged to the statement of income for
the years ended December 31, 2009, 2008 and 2007, and the amount that would
result from applying the tax rate in effect (35%) to the income before taxes for
each year, is as follows:





2009
                          
                          
                          2008
                          
                          
                          2007Income
      for the year before taxes
                          
                          
                          169,954
                          
                          
                          
                          184,289
                          
                          
                          
                          247,442Applicable
      tax rate
                          
                          
                          35
                          %
                          
                          
                          35
                          %
                          
                          
                          35
                          %Income
      for the year at the applicable tax rate
                          
                          
                          59,484
                          
                          
                          
                          64,501
                          
                          
                          
                          86,605Permanent
      differencesAdjustment
      for inflation of property, plant and equipment
                          
                          
                          26,980
                          
                          
                          
                          30,404
                          
                          
                          
                          31,300Accruals
      and other
                          
                          
                          (7,153
                          )
                          
                          
                          (33,731
                          )
                          
                          
                          4,858Total
      income tax charge for the year before allowance for impairment of value of
      deferred tax assets
                          
                          
                          79,311
                          
                          
                          
                          61,174
                          
                          
                          
                          122,763Increase
      in allowance for impairment of value of deferred tax
assets
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          2,221Total
      income tax charge for the year
                          
                          
                          79,311
                          
                          
                          
                          61,174
                          
                          
                          
                          124,984Adjustment
      of Income Tax Return
                          
                          
                          1,636
                          
                          
                          
                          0
                          
                          
                          
                          0Variation
      between deferred assets (liabilities) charged to income
                          
                          
                          14,623
                          
                          
                          
                          38,571
                          
                          
                          
                          (124,984
                          )Income
      tax for the year
                          
                          
                          95,570
                          
                          
                          
                          99,745
                          
                          
                          
                          0





Allowance for impairment of value of deferred tax assetsBalance
      at beginning of year
                      
                      
                      0
                      
                      
                      
                      34,482
                      
                      
                      
                      32,261Use
      of the allowance
                      
                      
                      0
                      
                      
                      
                      (34,482
                      )
                      
                      
                      0Increase
      in  the allowance for impairment of value of deferred tax
      assets
                      
                      
                      0
                      
                      
                      
                      0
                      
                      
                      
                      2,221Balance
      at end of year
                      
                      
                      0
                      
                      
                      
                      0
                      
                      
                      
                      34,482




F-17


Additionally,
the breakdown of deferred tax assets and liabilities as of December 31, 2009,
2008 and 2007 is as follows:





2009
                      
                      
                      2008
                      
                      
                      2007Non-current
      deferred tax assetsTax-loss
      carry forward
                      
                      
                      4,293
                      
                      
                      
                      8,316
                      
                      
                      
                      42,798Accruals
                      
                      
                      127,033
                      
                      
                      
                      74,823
                      
                      
                      
                      45,926Other
                      
                      
                      14,058
                      
                      
                      
                      15,577
                      
                      
                      
                      23,322145,384
                      
                      
                      
                      98,716
                      
                      
                      
                      112,046





2009
                      
                      
                      2008
                      
                      
                      2007Non-current
      deferred tax liabilitiesProperty,
      plant and equipment and other
                      
                      
                      (58,309
                      )
                      
                      
                      (17,948
                      )
                      
                      
                      (35,367
                      )Net
      deferred tax assets before allowance for impairment of value of deffered
      tax assets
                      
                      
                      87,075
                      
                      
                      
                      80,768
                      
                      
                      
                      76,679Allowance
      for impairment of value of deffered tax assets
                      
                      
                      0
                      
                      
                      
                      0
                      
                      
                      
                      (34,482
                      )Net
      deffered tax assets
                      
                      
                      87,075
                      
                      
                      
                      80,768
                      
                      
                      
                      42,197




2009
                      
                      
                      2008
                      
                      
                      2007Net
      deferred tax assets - Initial balance
                      
                      
                      80,768
                      
                      
                      
                      42,197
                      
                      
                      
                      167,181Use
      of tax loss carryforward
                      
                      
                      (8,316
                      )
                      
                      
                      0
                      
                      
                      
                      0Variation
      between deferred assets (liabilities) charged to income
                      
                      
                      14,623
                      
                      
                      
                      38,571
                      
                      
                      
                      (124,984
                      )Net
      deferred tax assets - Ending balance
                      
                      
                      87,075
                      
                      
                      
                      80,768
                      
                      
                      
                      42,197





Additionally,
as of December 31, 2008, the Company had tax credits on minimum presumed income
for payments made in prior years. This tax is complementary to the income tax.
The Company’s tax obligation for a given year will be equal to the higher of
these taxes. However, should the tax on minimum presumed income exceed income
tax in any given fiscal year, such excess will be eligible for credit against a
partial payment of any excess of the income tax over the tax on minimum presumed
income that may arise in any of the ten subsequent fiscal years.





As of
December 31, 2009, no minimum presumed income tax charge has been recorded due
to the fact that it is lower than the charge of the income tax
accrual.





n)
              Operating
      leases





As
lessee, EDENOR has lease contracts (buildings) which classify as operating
leases.





Common
characteristics of these lease contracts are that lease payments (installments)
are established as fixed amounts; there are neither purchase option clauses nor
renewal term clauses (except for the Handling and Energy Transformation Center
contract 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 lease
contracts have cancelable terms and lease periods of two to thirteen
years.





Buildings
are for commercial offices, two warehouses, the headquarters building (comprised
of administration, commercial and technical offices), the Handling and Energy
Transformation Center (two buildings and a plot of land located within the
perimeter of Central Nuevo Puerto and Puerto Nuevo) and Las Heras
substation.





As of
December 31, 2009, 2008 and 2007, future minimum lease payments with respect to
operating leases are as follow:





2009
                    
                    
                    2008
                    
                    
                    20072008
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    2,0522009
                    
                    
                    0
                    
                    
                    
                    6,031
                    
                    
                    
                    1792010
                    
                    
                    8,400
                    
                    
                    
                    5,934
                    
                    
                    
                    1472011
                    
                    
                    2,645
                    
                    
                    
                    2,275
                    
                    
                    
                    1472012
                    
                    
                    336
                    
                    
                    
                    259
                    
                    
                    
                    1472013
                    
                    
                    209
                    
                    
                    
                    203
                    
                    
                    
                    1472014
                    
                    
                    147
                    
                    
                    
                    147
                    
                    
                    
                    02015
                    
                    
                    147
                    
                    
                    
                    0
                    
                    
                    
                    0Total
      future minimum lease payments
                    
                    
                    11,884
                    
                    
                    
                    14,849
                    
                    
                    
                    2,819




F-18





Total
rental expenses for all operating leases for the years ended December 31, 2009,
2008 and 2007 are as follow:





2009
                  
                  
                  2008
                  
                  
                  2007Total
      lease expenses
                  
                  
                  8,478
                  
                  
                  
                  5,013
                  
                  
                  
                  2,405





As
lessor, Edenor has entered into several operating lease contracts with certain
cable television companies granting them the right to use the poles of the
Company’s network. Most of such lease contracts include automatic renewal
clauses.





As of
December 31, 2009, 2008 and 2007, future minimum lease collections with respect
to operating leases are as follow:





2009
                    
                    
                    2008
                    
                    
                    20072008
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    9,6802009
                    
                    
                    0
                    
                    
                    
                    10,303
                    
                    
                    
                    7,5772010
                    
                    
                    12,831
                    
                    
                    
                    1,490
                    
                    
                    
                    142011
                    
                    
                    12,294
                    
                    
                    
                    0
                    
                    
                    
                    92012
                    
                    
                    2,167
                    
                    
                    
                    0
                    
                    
                    
                    92013
                    
                    
                    75
                    
                    
                    
                    0
                    
                    
                    
                    02014
                    
                    
                    18
                    
                    
                    
                    0
                    
                    
                    
                    02015
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    0Total
      future minimum lease collections
                    
                    
                    27,385
                    
                    
                    
                    11,793
                    
                    
                    
                    17,289





Total
rental income for all operating leases for the years ended December 31, 2009,
2008 and 2007, is as follows:





2009
                    
                    
                    2008
                    
                    
                    2007Total
      lease income (Note 11)
                    
                    
                    13,582
                    
                    
                    
                    10,463
                    
                    
                    
                    10,745





o)
              Labor
      cost liabilities and early retirements
payable:





They
include the following charges:


-
              for
      supplementary benefits of leaves of absence derived from accumulated
      vacation,


-
              for
      seniority-based bonus to be granted to employees with a specified number
      of years of employment, as stipulated in collective bargaining agreements
      in effect. As of December 31, 2009 and 2008, the accrual for such bonuses
      amounted to 9,064 and 8,001, respectively (Note 8),
  and


-
              for
      other personnel benefits (pension plan) to be granted to employees upon
      retirement, as stipulated in collective bargaining agreements in effect.
      As of December 31, 2009 and 2008, the accrual for these benefits amounted
      to 24,820 and 18,048, respectively (Note
8).





Liabilities
related to the above-mentioned seniority-based bonus and other personnel
benefits (pension plans) to be granted to employees, have been determined taking
into account all rights accrued by the beneficiaries of both plans as of
December 31, 2009 and 2008, respectively, on the basis of actuarial studies
conducted by an independent actuary as of December 31, 2009 and 2008. Such
liabilities have been disclosed under the “Salaries and social security taxes”
account as seniority-based bonus and other personnel benefits, respectively
(Note 8).





Early
retirements payable corresponds to individual optional agreements. After
employees reach a specific age, the Company may offer them this option. The
related accrued liability represents future payment obligations which as of
December 31, 2009 and 2008 amount to 6,185 and 6,815 (current) and 9,789 and
14,041 (non-current), respectively (Note 8).





The
periodical components of the personnel benefits plan for the years ended
December 31, 2009, 2008 and 2007, which are disclosed in Other income (expense),
net under Voluntary retirements – bonuses (Note 12), are as follow:





2009
                    
                    
                    2008
                    
                    
                    2007Cost
                    
                    
                    1,608
                    
                    
                    
                    1,488
                    
                    
                    
                    1,125Interest
                    
                    
                    4,843
                    
                    
                    
                    4,441
                    
                    
                    
                    2,874Amortization
      of  recognized net actuarial loss
                    
                    
                    1,314
                    
                    
                    
                    779
                    
                    
                    
                    7607,765
                    
                    
                    
                    6,708
                    
                    
                    
                    4,759




F-19


The
detail of the variations in the Company’s payment commitments under the
personnel benefits plan as of December 31, 2009, 2008 and 2007 is as
follows:





2009
                        
                        
                        2008
                        
                        
                        2007Payment
      commitments under the personnel benefits plan at the beginning of the
      year
                        
                        
                        26,623
                        
                        
                        
                        19,083
                        
                        
                        
                        15,352Cost
                        
                        
                        1,608
                        
                        
                        
                        1,488
                        
                        
                        
                        1,125Interest
                        
                        
                        4,843
                        
                        
                        
                        4,441
                        
                        
                        
                        2,874Actuarial
      loss
                        
                        
                        (886
                        )
                        
                        
                        3,638
                        
                        
                        
                        761Benefits
      paid to participating employees
                        
                        
                        (993
                        )
                        
                        
                        (2,027
                        )
                        
                        
                        (1,029
                        )Payment
      commitments under the personnel benefits plan at the end of the
      year
                        
                        
                        31,195
                        
                        
                        
                        26,623
                        
                        
                        
                        19,083Payment
      commitments under the personnel benefits plan at the end of the
      year
                        
                        
                        31,195
                        
                        
                        
                        26,623
                        
                        
                        
                        19,083Unrecognized
      net actuarial loss
                        
                        
                        (6,375
                        )
                        
                        
                        (8,575
                        )
                        
                        
                        (5,716
                        )Total
      personnel benefits plan   (Note 8)
                        
                        
                        24,820
                        
                        
                        
                        18,048
                        
                        
                        
                        13,367





Actuarial
assumptions used were the following:





2009
                    
                    
                    2008
                    
                    
                    2007Discount
      rate
                    
                    
                    25
                    %
                    
                    
                    18
                    %
                    
                    
                    21
                    %Salary
      increase
                    
                    
                    15
                    %
                    
                    
                    15
                    %
                    
                    
                    20
                    %Inflation
                    
                    
                    11.5
                    %
                    
                    
                    11.5
                    %
                    
                    
                    14
                    %





The
actuarial method used by the Company is the “Projected Unit Credit
Method”.





As of
December 31, 2009 and 2008, the Company does not have any assets related to the
personnel benefit plan (pension plan).





p)
              Customer
      deposits and contributions:





Customer
deposits:





Under the
Concession Agreement, the Company is allowed to receive customer deposits in the
following cases:


1.
            When
      the power supply is requested and the user is unable to provide evidence
      of his legal ownership of the
premises;


2.
            When
      service has been suspended more than once in one-year
    period;


3.
            When
      the power supply is reconnected and the Company is able to verify the
      illegal use of the service (fraud).


4.
            When
      the customer is undergoing liquidated bankruptcy or reorganization
      proceedings.





The
Company has decided not to request customer deposits from residential tariff
customers.





Customer
deposits 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 called
“reference” rate.





When a
customer requests that the supply service be disconnected, the customer’s
deposit is credited (principal amount plus any interest accrued up to the date
of reimbursement). Any balance outstanding at the time of requesting the
disconnection of the supply service is deducted from the amount so credited.
Similar procedures are followed when the supply service is disconnected due to a
lack of customer payment. Consequently, the Company recovers, either fully or
partially, any amount owed for electric power consumption.





When the
conditions for which the Company is allowed to receive customer deposits no
longer exist, the principal amount plus any interest accrued thereon are
credited to the customer’s account.





Customer
contributions:





The
Company receives advances from certain customers for services to be provided
based on individual agreements. Such advances are stated at nominal value as of
the end of each year.





q)
              Revenue
      recognition:





Revenues
from operations are recognized on an accrual basis and derive mainly from
electricity distribution. Such revenues include electricity supplied, whether
billed or unbilled, at the end of each year and have been valued on the basis of
applicable tariffs.


F-20




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





All
revenues are recognized when the Company’s revenue earning process has been
substantially completed, the amount of revenues may be reasonably measured and
the economic benefits associated with the transaction flow to the
Company.





During
the year ended December 31, 2007, the Company recognized revenues from the
retroactive tariff increase deriving from the application of the electricity
rate schedule resulting from the RTT to non-residential consumption for the
period of November 2005 through January 31, 2007 (Note 17.b) as it was during
this fiscal year that the new electricity rate schedule was approved by
Resolution No. 51/2007 of the ENRE and applied as from February 1,
2007.





On
October 4, 2007 the Official
Gazette published Resolution No. 1037/2007 of the National Energy
Secretariat. Said resolution establishes that the amounts paid by the Company
for the Quarterly Adjustment Coefficient (CAT) implemented by Section 1 of Law
No. 25,957, as well as the amounts corresponding to the Cost Monitoring
Mechanism (MMC) for the period May 2006 through April 2007 (Note 17 b and c) be
deducted from the funds resulting from the difference between surcharges billed
and discounts made to customers, deriving from the implementation of the Program
for the Rational Use of Electric Power (PUREE), until their transfer to the
tariff is granted by the regulatory authority. The resolution also establishes
that the MMC adjustment for the period May 2006 through April 2007, applicable
as from May 1, 2007, amounts to 9.63 %.





Additionally,
on October 25, 2007 the ENRE issued Resolution No. 710/2007 which approves the
MMC compensation mechanism established in the aforementioned Resolution No.
1037/2007 of the National Energy Secretariat.





The
amounts corresponding to the Cost Monitoring Mechanism (MMC) for the period May
2006 through April 2007 as well as those corresponding to the period May 2007
through October 2007 were transferred to the tariff as from July 1, 2008, in
accordance with the provisions of Resolution No. 324/2008 (Note
17.b).





By Note
No. 1383 dated November 26, 2008 of the National Energy Secretariat, the ENRE
was instructed to consider the earmarking of the funds deriving from the
application of the Cost Monitoring Mechanism (MMC) corresponding to the period
May 2007 through October 2007 whose recognition was pending, and to allow that
such funds be deducted from the excess funds deriving from the application of
the Program for the Rational Use of Electric Power (PUREE), in accordance with
the provisions of Resolution No. 1037/2007 of the National Energy
Secretariat.





r)
              Estimates:





The
preparation of the financial statements in accordance with Argentine GAAP
requires the Company’s Board of Directors and Management to make estimates that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements.
Actual results and amounts may differ from the estimates used in the preparation
of the financial statements.





s)
              Earnings
      per common share:





It has
been computed on the basis of the number of shares outstanding as of December
31, 2009 and 2008 which amounts to 897,042,600 (net of the treasury shares as of
December 31, 2009 and 2008 for 9,412,500). There is no earning (loss) per share
dilution, as the Company has issued neither preferred shares nor corporate notes
convertible into common shares.





t)
              Segment
      information:




In
accordance with the provisions of TR No. 18, the Company is required to disclose
segment information provided certain requirements are met. This Resolution
establishes the criterion to be followed for reporting information on operating
segments in annual financial statements, and requires the reporting of selective
information on operating segments in interim financial reports. Operating
segments are those components of the Company’s activity about which different
financial information may be obtained, whether for the allocation of resources
or the determination of an asset’s performance. TR No. 18 also establishes the
criterion to be applied by the Company to disclose its services, geographical
areas and major customers.


F-21




The
Company is a natural monopoly that operates in a single business segment,
electricity distribution and sale in a specific geographical area, pursuant to
the terms of the concession agreement that governs the provision of this public
service. The Company’s activities have similar economic characteristics and are
similar as to the nature of their products and services and the electricity
distribution process, the type or category of customers, the geographical area
and the methods of distribution. Management evaluates the Company’s performance
based on net income. Accordingly, the disclosure of information as described
above is not necessary.




Additionally,
see Note 27.II.h)




u)
              Risk
      management:





The
Company operates mainly in Argentina. Its business may be affected by inflation,
currency devaluation, regulations, interest rates, price controls, changes in
governmental economic policies, taxes and other political and economic-related
issues affecting the country. The majority of the Company’s assets are either
non-monetary or denominated in Argentine pesos, whereas the majority of its
liabilities are denominated in U.S. dollars. As of December 31, 2009, a minimum
portion of the Company’s debts accrues interest at floating rates; consequently
the Company’s exposure to interest rate risk is limited (Note 14).





As of
December 31, 2009, the Company has entered into forward and futures contracts
with the aim of mitigating the risk generated by the fluctuations in the US
dollar rate of exchange (Notes 7 and 23.b).





v)
              Concentration
      risks:





Related
to customers





The
Company’s accounts receivable derive primarily from the sale of electric
power.





No single
customer accounted for more than 10% of sales for the years ended December 31,
2009 and 2008. The collectibility of trade receivables balances related to the
Framework Agreement, which amount to 54,823 and 49,390 as of December 31, 2009
and 2008, respectively, as disclosed in Notes 4 and 13, is subject to compliance
with the terms of such agreement.





Related
to employees who are union members





As of
December 31, 2009, approximately 83% of the Company’s employees were union
members. Although the relationship with unions is currently stable, the Company
may not ensure that there will be no work disruptions or strikes in the future,
which could have a material adverse effect on the Company’s business and the
results of operations. Furthermore, collective bargaining agreements signed with
unions expired at the end of the 2007 fiscal year. There is no guarantee that
the Company will be able to negotiate new collective bargaining agreements under
the same terms as those currently in place or that there will be no strikes
before or during the negotiation process.





The Bid
Package sets forth the responsibilities of both SEGBA and the Company in
relation to the personnel transferred by SEGBA through Resolution No. 26/92 of
the Energy Secretariat.  According to the Bid Package, SEGBA will be
fully liable for any labor and social security obligations accrued or originated
in events occurred before the take-over date, as well as for any other
obligations deriving from lawsuits in process at such date.





During
2005, two new collective bargaining agreements were signed with the Sindicato de Luz y Fuerza de la
Capital Federal and the Asociación de Personal Superior de
Empresas de Energía, which expired on December 31, 2007 and October 31,
2007, respectively.  These agreements were approved by the Ministry of
Labor and Social Security on November 17, 2006 and October 5, 2006,
respectively.





As of the
date of issuance of these financial statements, meetings aimed at negotiating
the renewal terms of both collective bargaining agreements are being held with
the above-mentioned unions.





w)
              Foreign
      currency translation/
transactions:





The
Company accounts for foreign currency denominated assets and liabilities and
related transactions as follows:





The
accounting measurements of purchases, sales, payments, collections, other
transactions and outstanding balances denominated in foreign currency are
translated into pesos using the exchange rates described below. Thus, the
resulting amount in pesos represents the amount collected or to be collected,
paid or to be paid.


F-22




For
conversion purposes, the following exchange rates are used:





a)    the
exchange rate in effect at the date of the transaction, for payments,
collections and other transactions denominated in foreign currency;
and


b)   the
exchange rate in effect at the date of the financial statements, for assets and
liabilities denominated in foreign currency.





For
transactions and balances denominated in foreign currency, the bid price is used
for assets, and the offer price is used for liabilities.





The
effect of such transactions has been included in the Statement of Income as
“Exchange difference” under “Financial income (expense) and Holding gains
(losses)”.





x)
              Financial
      statements comparison:





Certain
amounts disclosed in the financial statements as of December 31, 2008 have been
reclassified for comparative purposes, following the disclosure criteria used
for the financial statements as of December 31, 2009.





Such
reclassifications do not imply any changes in shareholders’ equity as of
December 31, 2008 or in the results of operations for the fiscal year ended as
of that date.





4.
            TRADE
      RECEIVABLES





The
detail of trade receivables as of December 31, 2009 and 2008 is as
follows:





2009
                        
                        
                        2008Current:Receivables
      from sales of electricity:Billed
                        
                        
                        181,595
                        
                        
                        
                        166,958UnbilledSales
      of electricity
                        
                        
                        139,181
                        
                        
                        
                        164,348Retroactive
      tariff increase arising from the application of the new electricity rate
      schedule (Note 17.b item d)
                        
                        
                        37,391
                        
                        
                        
                        39,361Adjustment
      to present value of the retroactive tariff increase arising from the
      application of the new electricity rate schedule (Note
3.c)
                        
                        
                        (2,516
                        )
                        
                        
                        (2,516
                        )Framework
      Agreement (Notes 3.c, 3.v and 13)
                        
                        
                        36,273
                        
                        
                        
                        49,390Adjustment
      to present value of the Framework Agreement (Notes 3.c, and
      13)
                        
                        
                        (1,406
                        )
                        
                        
                        0Framework
      Agreement - Payment plan agreement with the Province of Bs.
      As.  (Note 13)
                        
                        
                        2,292
                        
                        
                        
                        2,292National
      Fund of Electricity (Note 17.a)
                        
                        
                        2,840
                        
                        
                        
                        2,812Specific
      fee payable for the expansion of the network, transportation and others
      (Note 17.b)
                        
                        
                        2,459
                        
                        
                        
                        929In
      litigation
                        
                        
                        10,815
                        
                        
                        
                        10,014Subtotal
                        
                        
                        408,924
                        
                        
                        
                        433,588Less:Allowance
      for doubtful accounts (Note 26 Exhibit E)
                        
                        
                        (19,688
                        )
                        
                        
                        (33,097
                        )389,236
                        
                        
                        
                        400,491




F-23




Non-Current:Receivables
      from sales of electricity:UnbilledSales
      of electricity
                    
                    
                    45,531
                    
                    
                    
                    45,531Retroactive
      tariff increase arising from the application of the new electricity rate
      schedule (Note 17.b item d)
                    
                    
                    31,795
                    
                    
                    
                    79,487Adjustment
      to present value of the retroactive tariff increase arising from the
      application of the new electricity rate schedule (Note
3.c)
                    
                    
                    (4,119
                    )
                    
                    
                    (13,648
                    )Framework
      Agreement (Notes 3.c, 3.v and 13)
                    
                    
                    18,550
                    
                    
                    
                    0Adjustment
      to present value of the Framework Agreement (Notes 3.c, and
      13)
                    
                    
                    (4,710
                    )
                    
                    
                    087,047
                    
                    
                    
                    111,370





5.
            OTHER
      RECEIVABLES





The
detail of other receivables as of December 31, 2009 and 2008 is as
follows:





2009
                    
                    
                    2008Current:Prepaid
      expenses (1)
                    
                    
                    2,800
                    
                    
                    
                    976Advances
      to suppliers
                    
                    
                    142
                    
                    
                    
                    3,088Advances
      to personnel
                    
                    
                    6,396
                    
                    
                    
                    7,451Related
      parties (Note 15)
                    
                    
                    1,604
                    
                    
                    
                    449Writs
      of attachment under ENRE proceedings
                    
                    
                    0
                    
                    
                    
                    59Receivables
      from activities other than the main activity (2)
                    
                    
                    20,402
                    
                    
                    
                    15,271Allowance
      for other doubtful accounts (Note 26 Exhibit E)
                    
                    
                    (7,908
                    )
                    
                    
                    (4,573
                    )Warranty
      deposits and other (3)
                    
                    
                    32,544
                    
                    
                    
                    0Tax
      credit on minimum presumed income (Note 3.m)
                    
                    
                    0
                    
                    
                    
                    10,255Tax
      on financial transfers
                    
                    
                    682
                    
                    
                    
                    3,866Other
      (4)
                    
                    
                    4,436
                    
                    
                    
                    5,95961,098
                    
                    
                    
                    42,801Non-current:Prepaid
      expenses
                    
                    
                    1,439
                    
                    
                    
                    1,680Tax
      credit on minimum presumed income (Note 3.m)
                    
                    
                    0
                    
                    
                    
                    16,956Net
      deferred tax assets (Note 3.m)
                    
                    
                    87,075
                    
                    
                    
                    80,768Other
                    
                    
                    242
                    
                    
                    
                    6888,756
                    
                    
                    
                    99,472





(1)
            Includes
      447 in foreign currency (Note 26 Exhibit G) as of December 31,
      2009.


(2)
            Includes
      1,367 and 852 in foreign currency (Note 26 Exhibit G) as of December 31,
      2009 and 2008, respectively.


(3)
            Includes
      26,196 related to warranty deposits on derivative financial instruments
      (Notes 3.u and 23.b), 22,899 of which are denominated in foreign currency
      (Note 26 Exhibit G) as of December 31,
2009.


(4)
            Includes
      129 and 11 in foreign currency (Note 26 Exhibit G) as of December 31, 2009
      and 2008, respectively.


F-24




6.
            TRADE ACCOUNTS
      PAYABLE





The
detail of trade accounts payable as of December 31, 2009 and 2008 is as
follows:





2009
                  
                  
                  2008Current:Payables
      for purchase of electricity and other purchases (1)
                  
                  
                  214,693
                  
                  
                  
                  217,086Unbilled
      electric power purchases
                  
                  
                  92,945
                  
                  
                  
                  97,619Customer
      contributions (Note 3.p)
                  
                  
                  28,874
                  
                  
                  
                  23,078Other
      (2)
                  
                  
                  11,270
                  
                  
                  
                  1,478347,782
                  
                  
                  
                  339,261Non-Current:Customer
      deposits (Note 3.p)
                  
                  
                  44,179
                  
                  
                  
                  40,154Other
      (3)
                  
                  
                  2,675
                  
                  
                  
                  046,854
                  
                  
                  
                  40,154





(1)
            Includes
      29,034 and 23,093 in foreign currency (Note 26 Exhibit G) as of December
      31, 2009 and 2008, respectively. Also, includes balances with SACME S.A.
      for 1,000 and 910 as of December 31, 2009 and 2008, respectively, and with
      Préstamos y Servicios S.A for 7 and with Errecondo, Salaverri, Dellatorre,
      Gonzalez & Burgio for 6 as of December 31, 2008 (Note
    15).


(2)
            Includes
      683 related to the debt recognition and refinancing agreement entered into
      with the ONABE (Note 17.c).


(3)
            Debt
      recognition and refinancing agreement entered into with the ONABE (Note
      17.c).





7.
            LOANS





The
detail of loans as of December 31, 2009 and 2008 is as follows:





2009
                        
                        
                        2008Current:Financial
      loans:Principal
      (1)
                        
                        
                        43,333
                        
                        
                        
                        17,771Interest
      (2)
                        
                        
                        305
                        
                        
                        
                        462Subtotal
      financial loans
                        
                        
                        43,638
                        
                        
                        
                        18,233Corporate
      Notes (Note 14):Floating
      Rate Par Notes – Class 8
                        
                        
                        17,464
                        
                        
                        
                        0Interest
      (3)
                        
                        
                        15,885
                        
                        
                        
                        9,012Derivative
      financial instruments (Notes 3.u and 23.b)
                        
                        
                        6,001
                        
                        
                        
                        082,988
                        
                        
                        
                        27,245




2009
                      
                      
                      2008Non-current:Financial
      loans:Principal
                      
                      
                      0
                      
                      
                      
                      33,334Corporate
      Notes (Note 14):Floating
      Rate Par Notes – Class 8
                      
                      
                      58,236
                      
                      
                      
                      0Fixed
      Rate Notes – Class 7 (4)
                      
                      
                      565,022
                      
                      
                      
                      699,232Fixed
      and Incremental Rate Par Notes – Class A (4)
                      
                      
                      58,091
                      
                      
                      
                      148,960Fixed
      and Incremental Rate Par Notes – Class B (4)
                      
                      
                      0
                      
                      
                      
                      15,107Floating
      Rate Par Notes – Class A (4)
                      
                      
                      48,093
                      
                      
                      
                      43,701Subtotal
      corporate notes
                      
                      
                      729,442
                      
                      
                      
                      907,000Adjustment
      to present value of notes  (Note 3.j)
                      
                      
                      (21,943
                      )
                      
                      
                      (27,186
                      )Corporate
      Notes at present value
                      
                      
                      707,499
                      
                      
                      
                      879,814707,499
                      
                      
                      
                      913,148





(1)
            Includes
      1,105 in foreign currency (Note 26 Exhibit G) as of December 31,
      2008.


(2)
            Includes
      35 in foreign currency (Note 26 Exhibit G) as of December 31,
      2008.


(3)
            Includes
      13,996 and 9,012 in foreign currency (Note 26 Exhibit G) as of December
      31, 2009 and 2008, respectively, net of 7,905 related to derivative
      financial instruments as of December 31, 2008 (Note
  23.a).


F-25




(4)
            In
      foreign currency (Note 26 Exhibit G) as of December 31, 2009 and
      2008.




8.
            SALARIES AND SOCIAL
      SECURITY TAXES





The
detail of salaries and social security taxes as of December 31, 2009 and 2008 is
as follows:





2009
                  
                  
                  2008Current:Salaries
      payable and accruals
                  
                  
                  101,435
                  
                  
                  
                  79,315Social
      Security (ANSES)
                  
                  
                  10,757
                  
                  
                  
                  8,657Early
      retirements payable (Note 3.o)
                  
                  
                  6,185
                  
                  
                  
                  6,815118,377
                  
                  
                  
                  94,787Non-Current(Note
      3.o):Personnel
      Benefits Plan
                  
                  
                  24,820
                  
                  
                  
                  18,048Seniority-based
      bonus
                  
                  
                  9,064
                  
                  
                  
                  8,001Early
      retirements payable
                  
                  
                  9,789
                  
                  
                  
                  14,04143,673
                  
                  
                  
                  40,090




9.
            TAXES





The
detail of taxes as of December 31, 2009 and 2008 is as follows:





2009
                  
                  
                  2008Current:Provincial,
      municipal and federal contributions and taxes
                  
                  
                  28,957
                  
                  
                  
                  22,796Value
      Added Tax (VAT)
                  
                  
                  28,554
                  
                  
                  
                  32,912Income
      Tax and Tax on minimum presumed income (net of advances, withholdings and
      payments on account) (Note 3.m)
                  
                  
                  37,867
                  
                  
                  
                  22,151Withholdings
                  
                  
                  9,464
                  
                  
                  
                  5,436Municipal
      taxes
                  
                  
                  24,693
                  
                  
                  
                  21,844Tax
      regularization plan Law No. 26,476 (Note 3.i.1)
                  
                  
                  1,261
                  
                  
                  
                  0Other
                  
                  
                  9,505
                  
                  
                  
                  5,882140,301
                  
                  
                  
                  111,021Non-Current:Tax
      regularization plan Law No. 26,476 (Note 3.i.1)
                  
                  
                  9,374
                  
                  
                  
                  0




10.
            OTHER
      LIABILITIES





The
detail of other liabilities as of December 31, 2009 and 2008 is as
follows:





2009
                    
                    
                    2008Current:Capital
      expenditures fund – CAMMESA (Note 17.b)
                    
                    
                    0
                    
                    
                    
                    2,066Other
      (1)
                    
                    
                    8,012
                    
                    
                    
                    8,4488,012
                    
                    
                    
                    10,514Non-current:ENRE
      penalties (Note 17 a and b)
                    
                    
                    377,456
                    
                    
                    
                    331,613Program
      for the rational use of electric power (PUREE)
                    
                    
                    233,319
                    
                    
                    
                    33,494Other
      (2)
                    
                    
                    0
                    
                    
                    
                    3,903610,775
                    
                    
                    
                    369,010





(1)
            Includes
      1,370 and 1,292 in foreign currency (Note 26 Exhibit G) as of December 31,
      2009 and 2008, respectively.
              Additionally,
      includes 3,744 and 4,373 related to the software lease agreement (Note
      3.g) as of December 31, 2009 and 2008,
  respectively.


(2)
            Software
      lease agreement (Note 3.g).


F-26




11.
            NET
      SALES





The
breakdown of net sales for the years ended December 31, 2009, 2008 and 2007 is
as follows:





2009
                            
                            
                            2008
                            
                            
                            2007Sales
      of electricity (1)
                            
                            
                            2,035,845
                            
                            
                            
                            1,966,017
                            
                            
                            
                            1,948,737Late
      payment charges
                            
                            
                            20,686
                            
                            
                            
                            17,764
                            
                            
                            
                            17,099Right
      of use on poles (Note 3.n)
                            
                            
                            13,582
                            
                            
                            
                            10,463
                            
                            
                            
                            10,745Connection
      charges
                            
                            
                            5,700
                            
                            
                            
                            3,729
                            
                            
                            
                            3,986Reconnection
      charges
                            
                            
                            2,047
                            
                            
                            
                            2,225
                            
                            
                            
                            1,3612,077,860
                            
                            
                            
                            2,000,198
                            
                            
                            
                            1,981,928





(1) Net
of ENRE discounts and penalties for 58,500, 34,775 and 23,940 for the years
ended December 31, 2009, 2008 and 2007, respectively (Note 17 a and b). As of
December 31, 2008 and 2007, includes 84,585 related to the application of the
Cost Monitoring Mechanism (MMC) (Note 17.a) and, 218,591 related to the
retroactive tariff increase arising from the application of the electricity rate
schedule resulting from the RTT (Note 17.b. item d) and 49,646 related to the
Cost Monitoring Mechanism (MMC) (Note 17.a), respectively





12.
            OTHER INCOME (EXPENSE)
      - NET





The
breakdown of other income (expense) - net for the years ended December 31, 2009,
2008 and 2007 is as follows:





2009
                            
                            
                            2008
                            
                            
                            2007Non-operating
      income
                            
                            
                            4,529
                            
                            
                            
                            8,392
                            
                            
                            
                            1,467Commissions
      on municipal taxes collection
                            
                            
                            3,844
                            
                            
                            
                            2,291
                            
                            
                            
                            1,761Net
      expense from technical services
                            
                            
                            (785
                            )
                            
                            
                            (1,566
                            )
                            
                            
                            (1,770
                            )Voluntary
      Retirements - Bonuses
                            
                            
                            (5,381
                            )
                            
                            
                            (31,334
                            )
                            
                            
                            (7,192
                            )Severance
      paid
                            
                            
                            (4,419
                            )
                            
                            
                            (4,228
                            )
                            
                            
                            (4,283
                            )Accrued
      litigation (Note 26 Exhibit E)
                            
                            
                            (15,500
                            )
                            
                            
                            (19,900
                            )
                            
                            
                            (16,750
                            )Disposal
      of property, plant and equipment
                            
                            
                            (2,748
                            )
                            
                            
                            (1,910
                            )
                            
                            
                            (1,105
                            )Recovery
      of allowance for doubtful accounts (1)
                            
                            
                            21,236
                            
                            
                            
                            14,087
                            
                            
                            
                            0Net
      recovery of accrued litigation (2)
                            
                            
                            23,431
                            
                            
                            
                            0
                            
                            
                            
                            0Rebate
      of technical assistance services and financial expenses EDF
      Internacional
                            
                            
                            0
                            
                            
                            
                            0
                            
                            
                            
                            14,485Income
      from reimbursements of network replacement
                            
                            
                            0
                            
                            
                            
                            0
                            
                            
                            
                            7,203Other
                            
                            
                            (917
                            )
                            
                            
                            4,343
                            
                            
                            
                            7,18023,290
                            
                            
                            
                            (29,825
                            )
                            
                            
                            996





(1)
Related to the Framework Agreement (Note 13, Note 26 Exhibits E and
H).


(2)
Related to the Company’s adherence to the tax regularization plan (Note 26
Exhibit E and Note 3.i).





13.
            FRAMEWORK
      AGREEMENT





On
January 10, 1994, the Company, together with EDESUR S.A., the Argentine Federal
Government and the Government of the Province of Buenos Aires signed a Framework
Agreement aimed at resolving the issue of supplying electricity to low-income
areas and shantytowns. Pursuant to such Framework Agreement, the Company is
entitled to receive compensation from a Special Fund for any non-payments of electricity
supplied to low-income areas and shantytowns.





As
permitted by section 13 of the Agreement, which stipulated that the terms and
conditions of the Agreement could be subject to review and/or adjustments under
certain circumstances, and taking into account that not all of the objectives of
the Agreement could be completely fulfilled within the originally stipulated
period, although most of them had been accomplished, and considering also that
new shantytowns had appeared which had to be recognized, the parties agreed to
extend the term of the Agreement for an additional fifty-month period ending
August 31, 2002. During such additional period the original provisions of the
Framework Agreement and the Regulations continued to be in effect. Furthermore,
a new population census was conducted so as to identify those shantytowns which
up to then had not been recognized.


F-27




On
October 6, 2003, the Company signed a new Framework Agreement with the Argentine
Federal Government and the Government of the Province of Buenos Aires, whose
purpose was similar to that of the previous agreement, and which retroactively
covered all the services provided as from September 1, 2002. The term of the new
framework agreement was four years to commence as from January 1, 2003 and could
be renewed for another four-year term should the parties so
agree.  The aforementioned Framework Agreement expired on December 31,
2006





On
October 26, 2006, the Company entered into a Payment Plan Agreement with the
Government of the Province of Buenos Aires which establishes the conditions
according to which the Province of Buenos Aires will honor its obligation to the
Company amounting to 27,114, for the period September 2002 through June 2006,
which the Province agrees to verify in accordance with the provisions of chapter
VI -section 13 and related sections- of the Fund Regulations of the New
Framework Agreement. Furthermore, the Province agrees to pay the debt resulting
from the aforementioned verification, in 18 equal, consecutive and monthly
installments.


As of
December 31, 2009 and 2008, the balance corresponding to the aforementioned
payment plan agreement amounts to 2,292 (Note 4).





On
September 22, 2008, the Official Gazette published
Resolution No. 900/2008 of the Ministry of Federal Planning, Public Investment
and Services which ratifies the Addendum to the New Framework Agreement entered
into by the Federal Government and the Company, according to which the term of
the agreement is renewed for a period of four years to commence as from January
1, 2007.





Furthermore,
on March 11, 2009, by Resolution No. 158/2009, the ENRE approves the extension
of the regulations established in the Addendum to the new Framework Agreement in
the terms of Resolution No. 22/2004.





On June
18, 2009, the Official
Gazette of the Province of Buenos Aires published Decree No. 732, which
ratifies the Addendum to the New Framework Agreement entered into by the
Government of the Province of Buenos Aires and the Company, according to which
the term of the agreement is renewed for a period of four years to commence as
from January 1, 2007 (Note 12, and Note 26 Exhibits E and H).





During
November-December 2009, March and May 2010, the Company received payments from
the Argentine Federal Government for 20,000, 5,004 and 3,082,
respectively.





By virtue
of Law No. 14,062 and Decree No. 2,789/09 of the province of Buenos Aires
related to the issuance of bonds for the cancellation of debts of such province
(Bonos de Cancelación de Deudas de la Provincia de Buenos Aires) and their
regulations, in March 2010, the Company entered into a Payment Plan Agreement
with the Government of the Province of Buenos Aires pursuant to which the
Government of the Province of Buenos Aires agrees to verify and pay with Bonds
for the Cancellation of Debts, the debt stated therein in the amount of 32,797.
The aforementioned agreement was signed subject to the approval of the
Provincial Executive Power and the Company’s Board of Directors. The Company’s
managing board ratified the agreement in the meeting held on April 27, 2010.
During May 2010, the Company received payments from the Government of the
Province of Buenos Aires for 1,600 in cash and 30,400 (face value) with Bonds
for the Cancellation of Debts





As of
December 31, 2009 and 2008, the balances with the Argentine Federal Government
and the Government of the Province of Buenos Aires for this concept amount to
54,823 and 49,390, respectively (Notes 3.c and 4). Due to the fact that the
Framework Agreement has been totally ratified, the Company has provided the ENRE
with the documentation to validate the amounts to be collected for this concept
and has initiated the corresponding collection proceedings.





14.
            CORPORATE NOTES
      PROGRAM





RESTRUCTURING
OF FINANCIAL DEBT





On
January 19, 2006, the Board of Directors approved the launching of a
solicitation of consent for the restructuring of the Company’s financial debt
through the exchange of such debt for a combination of cash and notes (the
Restructuring) pursuant to a voluntary exchange offer (the Voluntary Exchange
Offer) and/or an out-of-court reorganization agreement (Acuerdo Preventivo
Extrajudicial) (the APE).





The
restructuring of the Company’s debt was carried out throughout the fiscal year
ended December 31, 2006. As a result of the restructuring process, the defaulted
debt prior to the restructuring, which amounted to US$ 540.9 million as of
February 22, 2006, was reduced to US$ 376.4 million, with an average term of
more than 8 years, at an average cost of 8% and final maturity in
2019.


F-28





On
February 23, 2006, the Annual General Meeting approved the extension of the
Global Medium-Term Corporate Notes Issuance Program for a Maximum Amount
(outstanding at any time) of up to US$ 600 million (or its equivalent in any
other currency). Said extension was also approved by the CNV through Resolution
No. 15,359 issued by the CNV’s Board of Directors on March 23,
2006.





In the
meeting held on June 14, 2007, the Company’s Board of Directors approved the
updating of the Trust Agreement for the issuance of corporate notes that had
been duly approved by the CNV, as required by section 76 of Chapter VI of the
CNV’s Regulations.





On June
28, 2007, the Company’s Board of Directors’ meeting approved the issuance and
public offering, within the framework of the Program and under the terms of Law
No. 23,576 as amended, of fixed rate Corporate Notes for a nominal value of up
to US$ 250 million with maximum maturity in 2017. On October 9, 2007, the
Company issued and carried out the public offering of Class 7 Corporate Notes
for US$ 220 million. The 10-year term Corporate Notes were issued at an issue
price of 100% of the principal amount, and accrue interest as from the date of
issuance at a fixed rate of 10.5% per annum, payable on April 9 and October 9 of
each year, with the first interest payment maturing on April 9, 2008. The
principal will be amortized by a lump sum payment at maturity date on October 9,
2017. The Company has requested authorization for the trading of the Corporate
Notes on the Buenos Aires Stock Exchange, the Mercado Abierto Electrónico S.A.
(the OTC market of Argentina), the Luxembourg Stock Exchange, and the Euro MTF
Market, which is the alternative market of the Luxembourg Stock Exchange.
Furthermore, the Company may request authorization for the listing of the
Corporate Notes on the PORTAL Market as well as authorization for their trading
and/or negotiation on any other stock exchange and/or self-regulated market of
Argentina  and/or abroad.





Most of
the net proceeds from the sale of the Corporate Notes were used for the
purchase, payment or redemption of the Company’s outstanding Discount Corporate
Notes due in 2014.





Furthermore,
on April 13, 2009, the Company’s Board of Directors approved the issuance and
public offering, within the framework of the Program and under the terms of Law
No. 23,576, as amended, of floating rate Corporate Notes for a nominal value of
up to 150,000 with maximum maturity in 2013.





On May 7,
2009, the Company issued and carried out the public offering of Class 8
Corporate Notes for 75,700. The four-year term corporate notes were issued at an
issue price of 100% of the principal amount and accrue interest as from the date
of issuance at a floating private BADLAR rate plus a spread of 6.75%, payable
quarterly on May 7, August 7, November 7 and February 7 of each year, with the
first interest payment maturing on August 7, 2009.


The
principal will be amortized in 13 consecutive and quarterly installments, with
the first installment maturing on May 7, 2010.


The
Company has requested authorization for the listing of the Corporate Notes on
the Buenos Aires Stock Exchange (BCBA) and admission for trading on the Mercado
Abierto Electrónico S.A. (the OTC market of Argentina).


The
Company used the net proceeds from the sale of the Corporate Notes to finance
the capital expenditures plan.





During
the years ended December 31, 2009, 2008 and 2007, the Company purchased at
market prices and in successive operations all “discount notes” and part of the
“fixed rate par notes” due in 2016 and 2017, for nominal values of US$ 86,038
thousand, US$ 50,033 thousand and U$S 283,726 thousand,
respectively.





Therefore,
the Company’s debt structure as of December 31, 2009 and 2008 was comprised of
the following Notes:





Debt
issued in United States dollars:





Type
                  
                  Class
                  
                  
                  Debt structure
                    as of December
                    31, 2008 in
                    thousands of
                    US $
                  
                  
                  Debt purchase
                    as of December
                    31, 2009 in
                    thousands of
                    US $
                  
                  
                  Debt structure
                    as of December
                    31, 2009 in
                    thousands of
                    US $
                  
                  
                  Balance as of
                    Dec 31, 2009
                    (Note 7) in
                    thousands of
                    PesosFixed
      Rate Par
                  
                  A
                  
                  
                  
                  43,140
                  
                  
                  
                  (27,853
                  )
                  
                  
                  15,287
                  
                  
                  
                  58,091Note
                  
                  B
                  
                  
                  
                  4,375
                  
                  
                  
                  (4,375
                  )
                  
                  
                  0
                  
                  
                  
                  0Floating
      rate Par Note
                  
                  A
                  
                  
                  
                  12,656
                  
                  
                  
                  0
                  
                  
                  
                  12,656
                  
                  
                  
                  48,093Fixed
      Rate Par Note
                  
                  7
                  
                  
                  
                  202,500
                  
                  
                  
                  (53,810
                  )
                  
                  
                  148,690
                  
                  
                  
                  565,022Total
                  
                  
                  
                  
                  
                  262,671
                  
                  
                  
                  (86,038
                  )
                  
                  
                  176,633
                  
                  
                  
                  671,206




F-29




The
economic impact of these transactions resulted in gains of 81,455 and 93,535 as
of December 31, 2009 and 2008, that have been recorded in the Financial income
(expense) and holding gains (losses) generated by assets account of the
Statement of Income under Holding results.





As of
December 31, 2009 and 2008, the Company has in its portfolio Class 7 fixed rate
par notes for nominal values of US$ 65,310 thousand –includes corporate notes
for US$ 24,515 thousand transferred as a consequence of the dissolution of the
Discretionary Trust (Note 22)- and US$ 11,500 thousand,
respectively.





Debt
issued in Argentine pesos:





Type
              
              Class
              
              
              Debt issuance as of
              
              
              Balance as ofMay 7, 2009
              
              
              Dec 31, 2009 (Note 7)in thousands of pesos
              
              
              in thousands of pesosFloating
      Rate Par Note
              
              8
              
              
              
              75,700
              
              
              
              75,700Total
              
              
              
              
              
              75,700
              
              
              
              75,700





Debt
issued in United States dollars:





Type
                        
                        Class
                        
                        
                        Initial debt
                        
                        
                        Debt purchase
                        
                        
                        Debt purchase
                        
                        
                        Post-purchase
                        
                        
                        Balance as ofstructure
                        
                        
                        2007 fiscal year
                        
                        
                        2008 fiscal year
                        
                        
                        debt structure
                        
                        
                        Dec. 31, 2008 (Note 7)in thousands of US$
                        
                        
                        in thousands of US$
                        
                        
                        in thousands of US$
                        
                        
                        in thousands of US$
                        
                        
                        in thousands of pesosA
                        
                        
                        
                        73,485
                        
                        
                        
                        (998
                        )
                        
                        
                        (29,347
                        )
                        
                        
                        43,140
                        
                        
                        
                        148,960Fixed
      Rate Par NoteB
                        
                        
                        
                        50,289
                        
                        
                        
                        (42,728
                        )
                        
                        
                        (3,186
                        )
                        
                        
                        4,375
                        
                        
                        
                        15,107Floating
      Rate Par Note
                        
                        A
                        
                        
                        
                        12,656
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        12,656
                        
                        
                        
                        43,701A
                        
                        
                        
                        152,322
                        
                        
                        
                        (152,322
                        )
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0Discount
      NoteB
                        
                        
                        
                        87,678
                        
                        
                        
                        (87,678
                        )
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0Fixed
      Rate Par Note
                        
                        7
                        
                        
                        
                        220,000
                        
                        
                        
                        0
                        
                        
                        
                        (17,500
                        )
                        
                        
                        202,500
                        
                        
                        
                        699,232Total
                        
                        
                        
                        
                        
                        596,430
                        
                        
                        
                        (283,726
                        )
                        
                        
                        (50,033
                        )
                        
                        
                        262,671
                        
                        
                        
                        907,000


The
principal amortization schedule broken down by year of total debt, without
considering possible adjustments, prepayments, redemptions or cancellations is
detailed in the table below:





Year
                  
                  Amount2010
                  
                  
                  17,4652011
                  
                  
                  31,5012012
                  
                  
                  31,5012013
                  
                  
                  19,8812014
                  
                  
                  8,2162015
                  
                  
                  8,2162016
                  
                  
                  31,4492017
                  
                  
                  569,8302018
                  
                  
                  4,8112019
                  
                  
                  24,036746,906




The main
covenants are the following:





1)
Negative Covenants





The terms
and conditions of the Corporate Notes include a series of negative covenants
that limit the Company’s actions with regard to, among others, the
following:





-
            encumbrance
      or authorization to encumber its property or
  assets;




-
            incurrence
      of indebtedness, in certain specified
cases;


F-30




-
            sale
      of the Company’s assets related to its main
  business;




-
            carrying
      out of transactions with shareholders or related
  parties;




-
              making
      certain payments (including, among others, dividends, purchases of
      Edenor’s common shares or payments on subordinated
  debt).




2)
Suspension of Covenants




Certain
negative covenants stipulated in the trust agreement will be suspended or
adjusted if:





(a)
            The
      Company’s long-term debt rating is raised to Investment Grade,
      or


(b)
            The
      Company’s Level of Indebtedness is equal to or lower than
    2.5.





If the
Company 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.





However,
the reinstatement of the covenants will not affect those acts which the Company
may have performed during the suspension of such covenants.





3)
Registration Rights





In
accordance with the Registration Rights Agreement, the Company filed with the
SEC an application requesting authorization in connection with an authorized
exchange offer of the Corporate Notes for new notes of the same class registered
with the SEC in accordance with the Securities Act, representing the same
outstanding debt and subject to similar terms and conditions.





The
exchanged corporate notes would have no restrictions concerning their transfer
and would be freely transferable after the authorized exchange offer by those
Corporate Notes holders who are not related parties of the Company.





On April
13, 2009, the Company informed the National Securities Commission that under
rule 144 of the US Securities Act of 1933, as amended, the Class 7 Corporate
Notes due in 2017 had become freely transferable to and from any person who is
not a related company of Edenor.





Consequently,
the Company has entered into a complementary agreement in order to exchange the
Regulation S Global Corporate Note (issued for a nominal value of US$ 160,250
thousand) and the Restricted Global Corporate Note (issued for a nominal value
of US$ 59,750 thousand), both of them issued within the framework of the trust
agreement, for one fully registered “Global Corporate Note” with no interest
coupons attached for a nominal value of US$ 220,000 thousand, which will not
bear the restrictive legend, as defined under the trust agreement entered into
on October 9, 2007.





15.
            BALANCES AND
      TRANSACTIONS WITH THE CONTROLLING COMPANY AND RELATEDPARTIES





In the
normal course of business, the Company carries out transactions with the
controlling company and related parties.


F-31




As of
December 31, 2009 and 2008, the outstanding balances with the controlling
company and related parties are as follow:





2009
                            
                            
                            2008Current
      investments(Note 26 Exhibit D)Central
      Térmica Güemes
                            
                            
                            0
                            
                            
                            
                            393Total
                            
                            
                            0
                            
                            
                            
                            393Other
      receivables (Note 5)Electricidad
      Argentina S.A.
                            
                            
                            1
                            
                            
                            
                            1SACME
      S.A.
                            
                            
                            1,603
                            
                            
                            
                            448Total
                            
                            
                            1,604
                            
                            
                            
                            449Trade accounts
      payable (Note 6)Errecondo,
      Salaverri, Dellatorre, Gonzalez & Burgio
                            
                            
                            0
                            
                            
                            
                            (6
                            )SACME
      S.A.
                            
                            
                            (1,000
                            )
                            
                            
                            (910
                            )Préstamos
      y Servicios S.A.
                            
                            
                            0
                            
                            
                            
                            (7
                            )Total
                            
                            
                            (1,000
                            )
                            
                            
                            (923
                            )Non-Current Investments(Note 26 Exhibit D)Central
      Térmica Güemes
                            
                            
                            0
                            
                            
                            
                            10,784Total
                            
                            
                            0
                            
                            
                            
                            10,784





Transactions
carried out with the controlling company and related parties for the years ended
December 31, 2009, 2008 and 2007 are as follow:




2009
              
              
              2008
              
              
              2007Other
      incomeElectricidad
      Argentina S.A.
              
              
              10
              
              
              
              9
              
              
              
              8Préstamos
      y Servicios S.A.
              
              
              9
              
              
              
              2
              
              
              
              0Total
              
              
              19
              
              
              
              11
              
              
              
              8Expenses from servicesSACME
      S.A.
              
              
              (5,068
              )
              
              
              (4,256
              )
              
              
              (3.337
              )Electricidad
      Argentina S.A.
              
              
              0
              
              
              
              (224
              )
              
              
              (275
              )EDF
      S.A. (*)
              
              
              0
              
              
              
              0
              
              
              
              (3,727
              )Préstamos
      y Servicios S.A.
              
              
              (415
              )
              
              
              (42
              )
              
              
              0Errecondo,
      Salaverri, Dellatorre, Gonzalez & Burgio
              
              
              (70
              )
              
              
              (220
              )
              
              
              0Total
              
              
              (5,553
              )
              
              
              (4,742
              )
              
              
              (7,339
              )


2009
                                
                                
                                2008
                                
                                
                                2007Financial expenses and
    interestElectricidad
      Argentina S.A.
                                
                                
                                (9,306
                                )
                                
                                
                                (7,898
                                )
                                
                                
                                (6,219
                                )Errecondo,
      Salaverri, Dellatorre, Gonzalez & Burgio
                                
                                
                                (145
                                )
                                
                                
                                (160
                                )
                                
                                
                                (4,352
                                )Total
                                
                                
                                (9,451
                                )
                                
                                
                                (8,058
                                )
                                
                                
                                (10,571
                                )





(*) As
from the international secondary offering described in Note 1, EDF S.A. and EDF
International are no longer a related party.





Operating
and Technical Assistance Agreements





In
compliance with the provisions of both the Bid Package and the Transfer
Contract, the Company has entered into an Operating Agreement with EDF
International and ENHER, pursuant to which EDF International and ENHER would
provide technical advisory services concerning the distribution and sale of
electricity and would commit their experience and know-how to the achievement of
an efficient and competitive management.


F-32





On July
16, 1999, ENHER assigned its rights and obligations arising from the above
mentioned Operating Agreement to its controlling company ENDESA
S.A.





On May 4,
2001, in compliance with that mentioned in Note 1, ENDESA S.A. assigned its
rights and obligations under the Operating Agreement to EDF International, thus
leaving EDF International as the sole operator.





This
Operating Agreement had an initial 10-year term as from September 1, 1992, which
was extended until August 31, 2007.





The
Company has registered said extension in the National Institute of Copyright
(INPI) - Technology Transfer Division under number 9894.





On
September 15, 2005, EDF International transferred the shares held in EASA (the
controlling company of Edenor) and 14% of EDENOR’s shares to Dolphin. In
connection with such transfer, the parties agreed to terminate the
aforementioned Agreement and reduce the amount owed to EDF International for
unpaid fees which amounted to 25,852.





However,
since the Company still wished to have access to EDF S.A.’s know-how, experience
and technical knowledge in the field of electricity distribution and sale, the
Company and EDF S.A. entered into a new Technical Assistance Agreement for a
period of 5 years or for such period during which Dolphin continued to be the
controlling company of Electricidad Argentina S.A. In accordance with the terms
of the Technical Assistance Agreement, EDENOR would pay EDF S.A. an amount of
US$ 10,000,000 as technical assistance fees in five equal annual installments of
US$ 2,000,000. The first annual payment was made on January 9, 2006 and the
second payment was made on December 14, 2006.





On
December 7, 2005, the Company registered the new agreement in the National
Institute of Copyright (INPI) - Technology Transfer Division under number
11,197.





On
December 27, 2007, the Company and EDF S.A. signed an amendment to the
aforementioned Agreement, pursuant to which the parties agreed that, due to
circumstances beyond their control, during 2006 and 2007 the amount of services
required by the Company and provided by EDF S.A. within the scope of the
Technical Assistance Agreement had been significantly lower than that originally
expected by the parties. On the contrary, during 2008, EDF S.A. will be required
to provide a greater amount of services relating to the Revision of the Company
Tariff Structure process, the changes made to the Company’s commercial and
invoicing system and the broadening of the Company’s investment plan.
Consequently, the Company requested and EDF S.A. granted the following: (i) that
EDF S.A. recognize a rebate of US$ 2,100 thousand, equivalent to 6,613, in
relation to the US$ 4,000 thousand already paid in accordance with the Technical
Assistance Agreement, and (ii) that during 2008 EDF S.A. continue to provide
services under the terms and conditions of the aforementioned Agreement, whose
expiration date was fixed for December 31, 2008.





Based on
the amount of work that is expected, the Company agreed to pay EDF S.A. an
amount of US$ 6,000 thousand.  From such amount, the Company deducted
a total of US$ 4,600 thousand, equivalent to 14,485, which is comprised of: (i)
the aforementioned rebate for US$ 2,100 thousand, and (ii) a receivable for US$
2,500 thousand, recognized by EDF International in favor of the Company as a
reimbursement of the expenses incurred during the year ended December 31, 2006
in relation to the initial public offering of the Company’s capital stock. In
accordance with the agreement signed by the parties, IPO expenses may be offset
against services rendered by any affiliate of EDF International. Accordingly,
after having made such deductions, on December 28, 2007, the Company paid EDF
S.A. the amount of US$ 1,400 thousand.





Agreement
with Electricidad Argentina S.A. (controlling company)





On April
4, 2006, the Company and EASA entered into an agreement pursuant to which EASA
will provide technical advisory services on financial matters as from September
19, 2005 and for a term of five years. In consideration of these services,
EDENOR will pay EASA an annual amount of US$ 2,000,000 plus VAT.  Any
of the parties may terminate the agreement at any time by giving 60 days’
notice, without having to comply with any further obligations or paying any
indemnification to the other party.





At the
meeting held on April 22, 2008, the Board of Directors approved the addendum to
the agreement for the provision of technical advisory services dated March 14,
2008.





The
aforementioned addendum stipulates that the amount to be paid by the Company in
consideration of the services provided by Electricidad Argentina S.A. has been
increased to US$ 2,500,000 plus VAT, payable retroactively as from January 1,
2008. The rest of the contractual terms have not been
modified.


F-33




Agreement
with Comunicaciones y Consumos S.A.





On March
16, 2007, the Company and Comunicaciones y Consumos S.A. (CYCSA) entered into an
agreement pursuant to which the Company granted CYCSA the exclusive right to
provide telecommunications services to the Company customers through the use of
the Company’s network in accordance with the provisions of Decree No. 764/2000
of the Federal Government, which contemplates the integration of voice, data and
image transmission services through the existing infrastructure of electricity
distribution companies such as the Company’s network. In accordance with the
terms of the agreement, CYCSA will be responsible for all maintenance expenses
and expenses related to the adapting of the Company’s network for the rendering
of such telecommunications services. The term of the agreement, which was
originally ten years to commence from the date on which CYCSA were granted the
license to render telecommunications services, was subsequently extended to
twenty years by virtue of an addendum to the agreement. The agreement will be
automatically renewed upon expiration date for subsequent periods of five years,
unless notice to the contrary is given by any of the parties no less than 120
days prior to the expiration of the corresponding period. In accordance with the
agreement, CYCSA shall periodically request access to the Company’s network.
Such request will be evaluated by the Company and access will be granted based
on the available capacity of the network. In consideration of the use of the
network, CYCSA will grant the Company 2% of the annual charges collected from
customers, before taxes, as well as 10% of the profits obtained from provision
of services. Furthermore, CYCSA will indemnify the Company for any obligation
arising from the rendering of the services through the Company’s network. The
agreement was signed on condition that CYCSA was to obtain the
telecommunications license, which was granted by the National Telecommunications
Secretariat through Resolution No. 179/2008.





Furthermore,
the first addendum to the Agreement for the Granting of Permission for the Use
of Electricity Distribution Network was signed on October 27, 2008. Pursuant to
this addendum, the Company granted CYCSA the right to use the poles and towers
of High, Medium and Low-voltage overhead lines and the ducts and/or triple ducts
accompanying High, Medium and Low-voltage ducts for the laying of optical fiber
owned by CYCSA, on condition that the referred to optical fiber does not affect
the normal supply of the public service. Moreover, said addendum grants Edenor
the right to use part of the capacity of the optical fiber to be installed. It
must be pointed out that the aforementioned addendum was approved by the
Company’s Board of Directors at the meeting held on November 5,
2008.





During
November 2008, the Company and CYCSA entered into the second addendum to the
agreement, which modifies section XI of the main agreement (Term of the
Agreement), thus extending the term of the agreement from ten to twenty years to
commence from the date on which it went into effect. The aforementioned addendum
was approved by the Company’s Board of Directors on December 18,
2008.





Agreement
with Préstamos y Servicios S.A.





On March
16, 2007, the Company entered into an agreement with Préstamos y Servicios S.A.
(PYSSA), a company engaged in the rendering of financial services, pursuant to
which the Company granted PYSSA the exclusive right to conduct its direct and
marketing services through the use of the Company’s facilities and mailing
services. As part of the agreement, the Company agreed to provide physical space
in some of its offices so that PYSSA be able to offer financial and loan
services to Company customers. Furthermore, the Company agreed to include PYSSA
marketing material in the mail sent to customers, including the invoices. The
term of the agreement is five years, which will be automatically renewed for
subsequent periods of five years, unless any of the parties gives notice to the
other of his intention to terminate the agreement no less than 120 days prior to
the expiration of the corresponding period. In accordance with the terms of the
agreement, PYSSA will pay the Company 2% of the monthly charges collected from
customers, before taxes, as well as 10% of the profits obtained from its
services. Furthermore, PYSSA agreed to indemnify the Company for any obligation
arising from the rendering of its services. The agreement established that its
term was subject to the authorization of the ENRE, which approved this through
Resolution No. 381/2007.





The
activities related to the aforementioned agreement have been temporarily
suspended in the Company’s offices as a consequence of the international
financial crisis and its impact on that specific segment of the
economy.


F-34


16.
            CAPITAL
      STOCK





a)
              General





As of
December 31, 2009 and 2008, the Company’s capital stock amounts to 906,455,100
shares, represented by 462,292,111 common, book-entry Class A shares with a par
value of one peso each and the right to one vote per share; 442,210,385 common,
book-entry Class B shares with a par value of one peso each and the right to one
vote per share; and 1,952,604 common, book-entry Class C shares with a par value
of one peso each and the right to one vote per share. Each and every share
maintains the same voting rights, i.e. one vote per share. There are no
preferred shares of any kind, dividends and/or preferences in the event of
liquidation, privileged participation rights, prices and dates, or unusual
voting rights. Moreover, there are no significant terms of contracts allowing
for either the issuance of additional shares or any commitment of a similar
nature.





As of
December 31, 2009 and 2008, the Company owns 9,412,500 Class B treasury
shares.





b)
              Restriction
      on the transfer of the Company’s common
shares





The
Company’s by-laws provide that Class “A” shareholders may transfer their shares
only with the prior approval of the ENRE. The ENRE must communicate its decision
within 90 days upon submission of the request for such approval, otherwise the
transfer will be deemed approved.





Furthermore,
Caja de Valores S.A. (the Public Register Office), which keeps the Share
Register of the shares, is entitled (as stated in the Company’s by-laws) to
reject such entries which, at its criterion, do not comply with the rules for
the transfer of common shares included in (i) the Argentine Business
Organizations Law, (ii) the Concession Agreement and (iii) the Company’s
by-laws.





In
addition, the Class “A” shares are pledged during the entire term of the
concession as security for the performance of the obligations assumed under the
Concession Agreement.





Additionally,
in connection with the issuance of Class 2 Corporate Notes, EASA is required to
be the beneficial owner and owner of record of not less than 51% of EDENOR’s
issued, voting and outstanding shares.





Section
ten of the Adjustment Agreement signed with the Grantor of the Concession and
ratified through Decree No. 1957/06 stipulates that from the signing of the
agreement through the end of the Contractual Transition Period, the majority
shareholders may not modify their ownership interest nor sell their
shares.





c)
              Employee
      Stock Ownership Program
(ESOP)





At the
time of the privatization of SEGBA (the Company’s predecessor), the Argentine
Government assigned the Company’s Class C shares, representing 10% of the
Company’s outstanding capital stock, for the creation of an Employee Stock
Ownership Program (ESOP)in compliance with the
provisions of Law No. 23,696 and its regulatory decrees. Through this program,
certain eligible employees (including former SEGBA employees who had been
transferred to the Company) were entitled to receive a specified number of Class
C shares, to be calculated on the basis of a formula that took into
consideration a number of factors including employee salary, position and
seniority. In order to implement the ESOP, a general transfer agreement, a
voting trust agreement and a trust agreement were signed.





Pursuant
to the general transfer agreement, participating employees were allowed to defer
payment of the Class C shares over time. As security for the payment of the
deferred purchase price, the Class C shares were pledged in favor of the
Argentine government. This pledge was released on April 27, 2007 upon full
payment to the Argentine Government of the deferred purchase price of all Class
C shares. Additionally, in accordance with the terms of the original trust
agreement, the Class C shares were held in trust by Banco de la Nación
Argentina, acting as trustee, for the benefit of the ESOP participating
employees and the Argentine Government. Furthermore, in accordance with the
voting trust agreement, all political rights of participating employees
(including the right to vote at ordinary and extraordinary shareholders’
meetings) were to be jointly exercised until full payment of the deferred
purchase price and release of the pledge in favor of the Argentine Government.
On April 27, 2007, ESOP participating employees fully paid the deferred purchase
price to the Argentine Government, accordingly, the pledge was released and the
voting trust agreement was terminated.





In
accordance with the regulations applicable to the ESOP, participating employees
who retired before full payment of the deferred purchase price to the Argentine
Government was made, were required to transfer their shares to the Guarantee and
Repurchase Fund (Fondo de
Garantía y Recompra) at a price to be calculated in accordance with a
formula established in the general transfer agreement. As of the date of payment
of the deferred purchase price, the Guarantee and Repurchase Fund had not fully
paid the amounts due to former ESOP participating employees for the transfer of
their Class C shares.


F-35


A number
of former employees of both SEGBA and the Company have brought legal actions
against the Guarantee and Repurchase Fund, the Argentine Government and, in few
cases, against the Company, in cases in relation to the administration of the
Employee Stock Ownership Program. The plaintiffs who are former employees of
SEGBA were not deemed eligible by the corresponding authorities to participate
in the Employee Stock Ownership Program at the time of its creation. This
decision is being disputed by the plaintiffs who are therefore seeking
compensation. The plaintiffs who are former employees of the Company are
claiming payment for the unpaid amounts owed to them by the Guarantee and
Repurchase Fund either due to non-payment of the transfer of their shares upon
retirement in favor of the Guarantee and Repurchase Fund or incorrect
calculation of amounts paid to them by the Guarantee and Repurchase Fund. In
several of these claims, the plaintiffs have obtained attachment orders or
preliminary injunctions against the Guarantee and Repurchase Fund on Class C
shares and the amounts deposited in such Fund. Due to the fact that the
resolution of these legal proceedings is still pending, the Federal Government
has instructed Banco de la Nación Argentina to create a Contingency Fund so that
a portion of the proceeds of the offering of the Employee Stock Ownership
Program Class C shares be kept during the course of the legal
actions.





No
accrual has been recorded in the financial statements in connection with the
legal actions brought against the Company as the Company’s management believes
that EDENOR is not responsible for the above-mentioned claims.





In
accordance with the agreements, laws and decrees that govern the Employee Stock
Ownership Program, the Class C shares may only be held by personnel of the
Company, therefore before the public offering of the Class C shares that had
been separated from the Program, such shares were converted into Class B shares
and sold. In conformity with the by-laws, the political rights previously
attributable to Class C shares are at present jointly exercised with those
attributable to Class B shares and the holders of the remaining Class C shares
will vote jointly as a single class with the holders of Class B shares when
electing directors and supervisory committee members. As of December 31, 2009
and 2008, 1,952,604 Class C shares, representing 0.22% of the Company’s capital
stock are outstanding (Notes 1 and 16.a).





d)
              Absorption
      of unappropriated retained
earnings:





On March
31, 2009 the General Annual Meeting resolved that the income for the 2008 fiscal
year be absorbed by the Unappropriated retained earnings account:





-
      Income for the 2008 fiscal year
                
                123,115-
      Acquisition of treasury stock (Note 1)
                
                (6,130)-
      Legal Reserve (5% of the income for the year) (Note 24)
                
                (6,156)-
      Unappropriated retained earnings for the 2008 fiscal year
                
                110,829




17.
            REGULATORY
      FRAMEWORK





a)
              General





The
Company's business is regulated by Law No. 24,065, which created the National
Regulatory Authority for the Distribution of Electricity (ENRE). In this
connection, the Company is subject to the regulatory framework provided under
the aforementioned Law and the regulations issued by the ENRE.





The ENRE
is empowered to: a) approve and control tariffs, and b) control the quality of
both the service and the technical product, as established in the Concession
Agreement. Failure to comply with the provisions of such Agreement and the rules
and regulations governing the Company's business will make the Company liable to
penalties that may include the forfeiture of the concession.





As from
September 1, 1996, there has been a change in the methods applied to control the
quality of both the product and the service provided by the Company. Within this
new framework, compensation between areas and circuits of different quality is
not allowed, instead, the specific quality provided to individual customers,
rather than an average customer value must be measured.  As a result,
fines will be credited to users affected by service deficiencies in future
bills. Penalties are imposed in connection with the following major
issues:





1.
            Deviation
      from quality levels of technical product, as measured by voltage levels
      and network variations;


2.
            Deviation
      from quality levels of technical service, as measured by the average
      interruption    frequency per Kilovatios (KVA) and
      total interruption time per KVA;


3.
            Deviation
      from quality levels of commercial service, as measured by the number of
      claims and complaints made by customers, service connection times, the
      number of estimated bills and billing
mistakes;


4.
            Failure
      to comply with information gathering and processing requirements so as to
      evaluate the quality of both the technical product and the technical
      service;


5.
            Failure
      to comply with public safety
regulations.




F-36


As of
December 31, 2009 and 2008, the Company has accrued penalties for resolutions
not yet issued by the ENRE corresponding to the six-month control periods
elapsed over those dates. As of  December 31, 2008, the Company has
applied the adjustment contemplated in the temporary tariff regime (caption b
item vii) and the adjustments established by the electricity rate schedules
applied during the 2008 fiscal year, Resolutions Nos. 324/2008 and 628/2008
(Note 17.b).





As of
December 31, 2009 and 2008, liabilities for penalties amounting to 377,456 and
331,613, respectively, have been included in other non-current liabilities (Note
10).





In
addition, as of December 31, 2009, the Company’s management has considered that
the ENRE has mostly complied with the obligation to suspend lawsuits aimed at
collecting penalties, without prejudice to maintaining an open discussion with
the entity concerning the effective date of the Adjustment Agreement and,
consequently, concerning the penalties included in the renegotiation and those
subject to the criteria of the Transition Period.





Moreover,
on July 12, 2006 the National Energy Secretariat issued Resolution No. 942/2006
which modifies the allocation of any excess funds resulting from the difference
between surcharges billed and discounts made to customers, deriving from the
implementation of the Program for the Rational Use of Electric Power (PUREE),
which provides for the application of both tariff incentives and penalties aimed
at encouraging customers to reduce consumption. As from July 1, 2006, such
excess funds may be applied againstthe amounts
receivable that the Company maintains in the Trade receivables account as
Unbilled –National Fund of Electricity, for “Quarterly Adjustment Coefficient of
the National Fund of Electricity” (section 1 of Law No. 25,957) for 2,840 and
2,812 as of December 31, 2009 and 2008, respectively (Note 4). On August 10,
2006 the ENRE issued Resolution No. 597/2006 which regulates the aforementioned
Resolution No. 942/2006 of the National Energy Secretariat and establishes the
compensation mechanism to be used.





On
October 4, 2007 the Official
Gazette published Resolution No. 1037/2007 of the National Energy
Secretariat. Said resolution establishes that the amounts paid by the Company
for the Quarterly Adjustment Coefficient (CAT) implemented by Section 1 of Law
No. 25,957, as well as the amounts corresponding to the Cost Monitoring
Mechanism (MMC) for the period May 2006 through April 2007 (Note 17.b items b
and c) be deducted from the funds resulting from the difference between
surcharges billed and discounts made to customers, resulting from the
implementation of the Program for the Rational Use of Electric Power (PUREE),
until their transfer to the tariff is granted by the regulatory authority. The
resolution also establishes that the MMC adjustment for the period May 2006
through April 2007, applicable as from May 1, 2007, amounts to 9.63
%.





Additionally,
on October 25, 2007 the ENRE issued Resolution No. 710/2007 which approves the
MMC compensation mechanism established in the aforementioned Resolution No.
1037/2007 of the National Energy Secretariat.





The
amounts corresponding to the Cost Monitoring Mechanism (MMC) for the period May
2006 through April 2007 as well as those corresponding to the period May 2007
through October 2007 were transferred to the tariff as from July 1, 2008, in
accordance with the provisions of Resolution No. 324/2008 (Note
17.b).





By Note
No. 1383 dated November 26, 2008 of the National Energy Secretariat, the ENRE
was instructed to consider the earmarking of the funds deriving from the
application of the Cost Monitoring Mechanism  (MMC) corresponding to
the period May 2007 through October 2007 whose recognition was pending, and to
allow that such funds be deducted from the excess funds deriving from the
application of the Program for the Rational Use of Electric Power (PUREE), in
accordance with the provisions of Resolution No. 1037/2007 of the National
Energy Secretariat. The MMC adjustment for the period May 2007 through October
2007, applicable as from November 1, 2007, amounts to 7.56 %.





Additionally,
as of December 31, 2009, the Company has submitted to the National Regulatory
Authority for the Distribution of Electricity the MMC adjustment requests, in
accordance with the following detail:





Assessment Period
              
              Application Date
              
              MMC AdjustmentNovember
      2007 - April 2008
              
              May
      2008
              
              5.791%May
      2008 – October 2008
              
              November
      2008
              
              5.684%November
      2008 - April 2009
              
              May
      2009
              
              5.068%May
      2009 – October 2009
              
              November
      2009
              
              5.041%





As of the
date of issuance of these financial statements, the approval of the
aforementioned adjustments by the National Regulatory Authority for the
Distribution of Electricity is still pending. Consequently, the Company could
not deduct these CMM from PUREE funds collected during 2009 amounting to 199,825
(Note 10).


F-37




b)
Concession





The term
of the concession is 95 years and may be extended for an additional maximum
period of 10 years. The term of the concession is divided into management
periods: a first period of 15 years and subsequent periods of 10 years. At the
end of each management period, the Class “A” shares representing 51% of EDENOR’s
capital stock, currently held by EASA, must be offered for sale through a public
bidding.  If EASA makes the highest bid, it will continue to own the
Class “A” shares, and no further disbursements will be necessary. On the
contrary, if EASA is not the highest bidder, then the bidder who makes the
highest bid must pay EASA the amount of the bid in accordance with the
conditions of the public bidding.  The proceeds from the sale of Class
“A” shares will be delivered to EASA after deducting any amounts receivable to
which the Grantor of the concession may be entitled.





In
accordance with the provisions of the Concession Agreement, the Company shall
take the necessary measures to guarantee the supply and availability of
electricity so as to meet demand in due time and in accordance with stipulated
quality levels, for which purpose the Company shall be required to guarantee
sources of supply.





For such
purpose, the Company has the exclusive right to render electric power
distribution and sales services within the concession area to all users who are
not authorized to obtain their power supply from the Electric Power Wholesale
Market (MEM), thus being obliged to supply all the electric power that may be
required. In addition, the Company shall allow free access to its facilities to
any MEM agents whenever required, under the terms of the Concession. No specific
fee must be paid by the Company under the Concession Agreement during the term
of the Concession.





On
January 6, 2002, the Federal Executive Power passed Law No. 25,561 whereby
adjustment clauses denominated in US dollars or any other foreign currencies,
indexation clauses based on price indexes from other countries, as well as any
other indexation mechanisms stipulated in the contracts entered into by the
Federal Government, including those related to public utilities, were declared
null and void as from such date. The resulting prices and rates were converted
into Argentine pesos at a rate of 1 peso per US dollar. Furthermore, Law No.
25,561 authorized the Federal Executive Power to renegotiate public utility
contracts taking certain requirements into account.





In
accordance with the provisions of Laws Nos. 25,972, 26,077, 26,204, 26,339,
26,456 and 26,563 both the declaration of economic emergency and the period to
renegotiate public utility contracts were extended through December 31, 2005,
2006 2007, 2008, 2009 and 2011, respectively.





As a part
of the renegotiation process, the Unit of Renegotiation and Analysis of Public
Utility Contracts (UNIREN) proposed the signing of an Adjustment Agreement that
would be the basis of a comprehensive renegotiation agreement of the Concession
Agreement. The Company satisfied the regulatory agency’s requirements; provided
an answer to the proposal and attended the public hearing convened for such
purpose, rejecting in principle the proposal on the grounds that it did not
properly address the need to redefine the terms of the agreement as contemplated
by the law. Nevertheless, the Company ratified its willingness to reach an
understanding that would restore the financial and economic equation of the
concession agreement. On September 21, 2005, the Company signed the Adjustment
Agreement within the framework of the process of renegotiation of the Concession
Agreement set forth in Law No. 25,561 and supplementary regulations. Due to the
appointment of a new Economy and Production Minister, on February 13, 2006 a new
copy of the Adjustment Agreement was signed under the same terms as those
stipulated in the agreement signed on September 21, 2005.





The
Adjustment Agreement establishes the following:





i)
            the
      implementation of a Temporary Tariff Regime (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 tariff of more
      than 15%, and an additional 5% average increase in the value added
      distribution (VAD), allocated to certain specified capital
      expenditures;


ii)
            the
      requirement that during the term of said temporary tariff regime, 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 Revision of the Company Tariff Structure (RTI) which
      will result in a new tariff regime 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 National Regulatory Authority for
      the Distribution of Electricity 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 EDENOR during 2006, plus an
      additional investment of 25.5 million should it be required (item f
      below);


F-38


vii)
            the
      adjustment of the penalties imposed by the ENRE that are payable to
      customers as 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;


viii)
            the
      waiver of the penalties imposed by the ENRE that are payable to the
      Argentine 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;


ix)
            the
      payment term of the penalties imposed by the ENRE, which are described in
      item vii above, is 180 days after the approval of the Revision of the
      Company Tariff Structure (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.





Said
agreement was ratified by the Federal Executive Power through Decree No.
1957/06, signed by the President of Argentina on December 28, 2006 and published
in the Official Gazette
on January 8, 2007. This 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 electric power distribution and sale within the federal
jurisdiction, between the Federal Executive Power and the Company.





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





a)
              A
      23% average increase in distribution costs, service connection costs and
      service reconnection costs in effect which the Company collects as the
      holder of the concession of the public service of electric power
      distribution, except for the residential
  tariffs;


b)
              Implementation
      of an additional 5% average increase in distribution costs, to be applied
      to the execution of the works and infrastructure plan detailed in Appendix
      II of the Adjustment Agreement. In this regard, the Company has set up the
      required fund, which as of December 31, 2009 amounts to 71,897. This
      amount is net of the amounts transferred to CAMMESA for
      45,824;


c)
              Implementation
      of the Cost Monitoring Mechanism (MMC) contemplated in Appendix I of the
      Adjustment Agreement, which for the six-month period beginning November 1,
      2005 and ending April 30, 2006, shows a percentage of 8.032%. This
      percentage will be applied to non-residential consumption recorded from
      May 1, 2006 through January 31,
2007;


d)
              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 (items i) and ii) above) and from May 1, 2006 through January 31,
      2007 (item iii) above);


e)
              Invoicing
      of the differences corresponding to deviations between foreseen physical
      transactions and those effectively carried out and of other concepts
      related to the Wholesale Electric Power Market (MEM), such as the Specific
      fee payable for the Expansion of the Network, Transportation and Others,
      included in Trade Receivables under Receivables from sales of electricity
      as Unbilled (Note 4);


f)
              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.





The
Company has recorded the adjustment of the penalties described in the Adjustment
Agreement for an amount of 17,162 as of December 31, 2008, which is equivalent
to the tariff increases mentioned in the items above.





Revenues
from the retroactive tariff increase deriving from the implementation of the new
electricity rate schedule applicable to non-residential consumption for the
period of November 2005 through January 31, 2007 have been fully recognized in
the financial statements for the year ended December 31, 2007. Such amount,
which totaled 218,591, is being invoiced in 55 equal and consecutive monthly
installments, as described in item b) of paragraph d) of this note. As of
December 31, 2009, the installments corresponding to the months of February 2007
through December 2009 for a total of 149,405 have already been
billed.





On April
30, 2007, the Official
Gazette published Resolution No. 434/2007 of the National Energy
Secretariat which adjusts the time periods set forth in the Adjustment Agreement
signed by the Company and the Grantor of the Concession and ratified by Decree
No. 1957 of the Federal Government dated December 28, 2006.





In this
regard, the aforementioned Resolution provides that the contractual transition
period established in the Adjustment Agreement will be in effect from January 6,
2002 to the date on which the Revision of the Company Tariff Structure (RTI)
established in the aforementioned Adjustment Agreement goes into
effect.


F-39




Furthermore,
the Resolution establishes that the new electricity rate schedule resulting from
the RTI will go into effect on February 1, 2008. It also stipulates that, in the
event that the tariff resulting from the RTI is higher than the tariff
established in section 4 of the Adjustment Agreement, the transfer of the
increase to the tariff will be made in accordance with the provisions of section
13.2 of the Adjustment Agreement, which establish that the first adjustment will
take effect as from February 1, 2008 and the second will take effect six months
later, maintaining the percentages agreed upon in the Adjustment
Agreement.





The
aforementioned Resolution No. 434/2007 establishes that the Company must present
an investment plan before May 1, 2007 (which has already been complied with),
and 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 claims suspended as a consequence of the Adjustment
Agreement if the new electricity rate schedule does not go into effect in the
aforementioned time period.





Furthermore,
on July 7, 2007 the Official
Gazette published Resolution No. 467/07 of the ENRE pursuant to which the
first management period is extended for 5 years to commence as from the date on
which the Revision of the Company Tariff Structure (RTI) goes into effect. Its
original maturity would have taken place on August 31, 2007.





On July
30, 2008, the National Energy Secretariat issued Resolution No. 865/2008 which
modifies Resolution No. 434/2007 and establishes that the electricity rate
schedule resulting from the Revision of the Company Tariff Structure (RTI) will
go into effect in February 2009.


As of the
date of issuance of these financial statements, no resolution has been issued
concerning the application of the electricity rate schedule resulting from the
RTI which was expected to be in effect since February 1, 2009.





On
September 19, 2007, the Energy Secretariat by Note No. 1006/07 requested that
the Company comply with the provisions of Resolutions Nos. 1875 and 223/07 of
the aforementioned Secretariat, dated December 5, 2005 and January 26, 2007,
respectively.





In
accordance with the aforementioned resolutions, the Company must transfer to
CAMMESA, 61.96% of the total amount of the special fund set up in compliance
with Clause 4.7 of the Adjustment Agreement, plus any interest accrued on the
financial investments made by the Company with such funds.  Such funds
will be used for the execution of the works aimed at connecting Central
Costanera and Central Puerto electricity generation plants with Malaver
substation. The Company recorded 807 and 45,017 in Property, plant and equipment
(Note 26 Exhibit A) in the Construction in process account as of December 31,
2009 and 2008, respectively, and 2,066 in Other liabilities in the Capital
Expenditures fund – CAMMESA account (Note 10) as of December 31,
2008.





On July
31, 2008, the National Regulatory Authority for the Distribution of
Electricityissued
Resolution No. 324/2008 which approves the values of the Company’s electricity
rate schedule that contemplates the partial application of the adjustments
corresponding to the Cost Monitoring Mechanism (MMC) and their transfer to the
tariff. The aforementioned electricity rate schedule increases the Company’s
value added distribution by 17.9% and has been applied to consumption recorded
as from July 1, 2008.





Therefore,
the increase in tariffs for final users has ranged from 0% to 30%, on average,
depending on consumption.





Furthermore,
on October 31, 2008, the National Energy Secretariat issued Resolution No.
1169/2008 which approved the new seasonal reference prices of power and energy
in the Electric Power Wholesale Market (MEM).





Consequently,
the ENRE issued Resolution No. 628/2008 which approves the values of the
electricity rate schedule to be applied as from October 1, 2008.





The
aforementioned electricity rate schedule includes 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 the value-added
of distribution of the Company





The
National Ombudsman made a presentation against both the resolutions by which the
new electricity rate schedule had gone into effect as from October 1, 2008 and
the application of the Program for the Rational Use of Electric Power
(PUREE).


F-40


Within
the framework of the case, on January 27, 2009, the ENRE notified the Company of
a preliminary injunction issued by the Court hearing the case as a consequence
of the Ombudsman’s presentation, according to which the Company is prohibited
from cutting power due to the nonpayment of bills issued with the rate hike
resulting from the application of the resolutions questioned by the Ombudsman,
until a final ruling is issued on the case. The injunction has been appealed by
the Company and the Argentine Federal Government. On September 1, 2009, Court
Room V of the National Appellate Court in Federal Administrative Matters
confirmed the first instance decision, thus maintaining in effect the
preliminary injunction issued by the court of original jurisdiction. The Company
filed an “Extraordinary appeal” against this decision, which was also rejected
by the appellate court hearing the case. As a final recourse, on December 7,
2009, the Company filed an appeal (“Queja por Recurso denegado”)
to the Federal Supreme Court requesting that the extraordinary appeal rejected
by the Appellate Court be sustained. The appeal (“Queja por Recurso denegado”)
is currently being analyzed by the Supreme Court. On July 1, 2009, notice of the
proceedings in the matter of “National Ombudsman vs. Federal Government –
Resolution No. 1169 and Others, proceeding to decide a legal issue” was served
upon the Company, which the Company answered in due time and manner. On November
27, 2009, and within the framework of this case, the Court hearing the case
decided to reject that a summons be served upon the firm CAMMESA as a
third-party defendant that had been requested by the Company and EDELAP S.A. The
Company, considering that said decision causes an irreparable harm filed in due
time an appeal, which, as of the date of issuance of these financial statements,
has not yet been granted.





On August
10, 2009, the National Regulatory Authority for the Distribution of Electricity
issued Disposition No. 55/2009, which established a period for the review and
analysis of both the application of Resolution No. 628/2008 of the ENRE
–exceptions to the application of the electricity rate schedule- and the effects
deriving from the implementation thereof. This review and analysis process
consisted of the verification in situ in the three Electricity Distribution
Companies of the correct application of the rate schedule in effect to, and the
effective implementation of exceptions granted for, consumption recorded from
May 2009 to the date of issuance of the aforementioned disposition, in the case
of small-demand residential customers whose consumption exceeded 1,000 kWh
bimonthly and/or 500 kWh per month.


Furthermore,
it was determined that during the period comprehended by the aforementioned
process, Electricity Distribution Companies should not send bills corresponding
to such period in those cases in which consumption exceeded 1,000 kWh bimonthly
and/or 500 kWh per month.





On August
14, 2009, the Energy Secretariat issued Resolution No. 652/09 which ordered the
suspension of the reference market prices of energy set forth in sections 6, 7
and 8 of Resolution No. 1169/08 of that Secretariat, and established new values
for the periods June-July 2009 and August–September 2009, reinstating partial
government grants 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 the quarter August-October
2009.





Consequently,
on August 18, 2009, the Company was notified of Resolution No. 433/2009 of the
ENRE, which approved the values of the Electricity Rate Schedules applicable to
consumption recorded from midnight June 1, 2009, and midnight August 1, 2009.
Additionally, the resolution also approved the values of the Electricity Rate
Schedule with unsubsidized -full- tariffs applicable to consumption recorded
from midnight June 1, 2009, in accordance with the provisions of section 7 of
Resolution No. 652/2009 of the Energy Secretariat.


The
aforementioned resolution instructed Electricity Distribution Companies to issue
new bills to those customers whose situation fell within the scope of the
resolution, following the provisions of Resolution No. 628/2008 of the ENRE,
this time applying the Electricity Rate Schedules approved in Resolution No.
433/09. In the case of bills that had already been paid, Electricity
Distribution Companies were required to credit the corresponding adjustment
against the amount payable in the next billing period.





Additionally,
Electricity Distribution Companies were instructed to break down the variable
charge in all the bills issued to customers into two concepts: “Unsubsidized
Variable Charge” –full tariff- and “Federal Government Grant” –its value is the
difference between the value arising from the full rate schedule and the
subsidized rate schedule-. Moreover, the surcharges billed due to the
application of the Program for the Rational Use of Electric Power (PUREE) had to
be recalculated.





On
September 3, 2009, the Company was notified of Resolution No. 666/2009 of the
Energy Secretariat, which approved the winter quarterly rescheduling for the MEM
for the period August 1, 2009 - October 31, 2009.





On
September 29, 2009, the Company was notified of Resolution No. 469/09 of the
ENRE, whereby the National Regulatory Authority for the Distribution of
Electricity approved the values of the electricity rate schedule, with
unsubsidized full tariffs to be applied as indicated in section 7 of Resolution
No. 652/09 of the Energy Secretariat.  Furthermore, Electricity
Distribution Companies were instructed to include in the bills to be issued to
small demand residential and general-use customers the fixed charges of the
Electricity Rate Schedule approved by Resolution No. 469/09 of the ENRE under
the legend “Unsubsidized Fixed Charge”.





On
October 26, 2009, notice of the complaint “CONSUMIDORES LIBRES COOP. LTADA. DE
PROVISIÓN DE SERVICIOS DE ACCIÓN COMUNITARIA VS Federal Government – National
Energy Secretariat – ENRE, proceedings to decide a legal issue” was served upon
the Company.  The complaint was filed by two consumer associations:
CONSUMIDORES LIBRES COOP. LTADA. DE PROVISIÓN DE SERVICIOS DE ACCIÓN COMUNITARIA
and the UNIÓN DE USUARIOS Y CONSUMIDORES against the Federal Government, the
ENRE, EDESUR, EDELAP and EDENOR, and is pending in the National Court of
Original Jurisdiction in Federal Administrative Matters Number 8, in charge of
Justice Ms. Liliana Heiland, attorney-at-law (deputy). In accordance with the
terms of the complaint, the associations for the defense of consumer rights,
ADDUC and UNIÓN DE USUARIOS Y CONSUMIDORES EN DEFENSA DE SUS DERECHOS, have
joined the complaint.


F-41





The
remedies sought in the complaint are as follow:





a) That
all the last resolutions concerning electricity rates issued by the National
Regulatory Authority for the Distribution of Electricity and the National Energy
Secretariat 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 Revision of the
Tariff Structure (RTI).





c) That
the resolutions issued by the Energy Secretariat 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 contemplated in the
Concession Agreement be declared null and unconstitutional.





g)
Subsidiarily, should the main claim be rejected, that the defendants be ordered
to bill all customers on a bimonthly basis.





Additionally,
it is requested that a preliminary injunction be issued with the aim of
suspending the rate hikes established in the resolutions being questioned by the
plaintiff. Subsidiarily, it is requested that the application of the referred to
resolutions be partially suspended. Finally, it is also subsidiarily requested
by the plaintiff that the application authority be ordered not to issue new
increases other than within the framework of the Revision of the Tariff
Structure process. As of to date, the Court has neither granted nor rejected
that which has been requested.  With regard to the subject matter of
the action, it has been answered by the Company within the contemplated legal
time period and in due manner.





With
reference to that which has been previously mentioned, the objected to rate
increases, with the exception of the one granted by Resolution No. 324/08 of the
ENRE, do not have a direct impact on the added value distribution, inasmuch as
they are the result of the transfer to the tariff of the higher generation costs
ordered by the Grantor of the Concession. These generation increases are
effective for the Company within the pass-throughmechanism in the
tariff.





On
February 11, 2010 the Court hearing the case decided to turn into a regular
process the proceeding that had been brought as an extraordinary summary
proceeding, thus extending the time periods involved in the process. With regard
to the preliminary injunction, on that date, the court ordered the carrying out
of actions to add and clarify existing evidence, prior to taking any decision
thereon.





Within
the contemplated legal time period, the Company answered the complaint rejecting
all its terms and requesting that a summons be served upon CAMMESA as a
third-party defendant. The remaining co-defendants have already answered the
notice of the complaint served upon them.





Furthermore,
on March 31, 2010, notice of the complaint “CONSUMIDORES FINANCIEROS ASOCIACIÓN
CIVIL PARA SU DEFENSA vs. EDENOR S.A – EDESUR S.A for BREACH OF CONTRACT” –
National Court of Original Jurisdiction in Federal Administrative Matters No. 2
– Clerk’s Office No. 15, was served upon the Company.





The
remedies sought in the complaint are as follow:





-           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.





-           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.


F-42





-           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.





On April
22, 2010, the Company answered the complaint and filed a motion to dismiss for
lack of standing (“excepción de falta de legitimación”), requesting, at such
opportunity, that a summons be served upon the Federal Government, the Argentine
tax authorities (“AFIP”) and the ENRE as third-party defendants.





With
regard to the commencement of the Revision of the Tariff Structure, the ENRE has
begun this process, and, on November 12, 2009, the Company submitted its revenue
requirements proposal for the new period, which included the grounds and
criteria based on which the request is made.





By Note
No. 91,241, notified to the Company on December 18, 2009, the ENRE requested
that the Company submit the technical rate schedules resulting from the
preparation of its proposal, which as of the date of issuance of these financial
statements have not yet been submitted due.





In
connection with the process for the sale of the shares, the commencement thereof
-in accordance with the provisions of Resolution No. 467/2007 of the ENRE- must
take place when the five-year tariff period beginning after the ending of the
RTI comes to an end. Additionally, the controlling shareholder -Electricidad
Argentina S.A. - is authorized to present as bidder in the referred to process
and if its offer is selected as the winning bid, the controlling company will
not have to make any disbursement whatsoever to keep the control of
Edenor.





c)  Concession
of the use of real property





Pursuant
to the Bid Package, SEGBA granted the Company 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.





The
Company 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 gratuitous
bailment contract after demanding the performance by the Company of any pending
obligation, in certain specified cases contemplated 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), with
which the Company entered into a debt recognition and refinancing agreement for
4,681 on September 25, 2009.





The form
of payment stipulated in the aforementioned agreement establishes an advance
payment of 1,170, which the Company made on September 25, 2009, and 48
installments of 104 for the remaining balance of 3,511. The installments include
compensatory interest of 18.5% per annum under the French system, and are
payable as from October 2009


As of
December 31, 2009, principal owed for this concept amounts to 3,358, which has
been recorded in Trade accounts payable under Other (Note 6).





As of the
date of issuance of these financial statements, the Company has acquired for an
amount of 12,765, nine of these properties whose gratuitous bailment contracts
had expired. The title deeds of eight of these properties have been executed at
a price of 12,375. As for the remaining property, a down payment of 117 has been
made while the outstanding amount of 273 will be payable upon the execution of
the title deed on a date to be set by the Ministry of Economy.





18.
            CASH FLOW
      INFORMATION





a)
            Cash
      and cash equivalents:





For the
preparation of the Statement of Cash Flows, the Company considers as cash
equivalents all highly liquid investments.


F-43





As of
                              December
                              31, 2009
                            
                            
                            As of
                              December
                              31, 2008
                            
                            
                            As of
                              December
                              31, 2007Cash
      and Banks
                            
                            
                            8,685
                            
                            
                            
                            6,061
                            
                            
                            
                            3,459Time
      deposits
                            
                            
                            27,191
                            
                            
                            
                            0
                            
                            
                            
                            12,087Money
      market funds
                            
                            
                            80,055
                            
                            
                            
                            88,548
                            
                            
                            
                            0Corporate
      notes and Shares
                            
                            
                            112,441
                            
                            
                            
                            393
                            
                            
                            
                            0Notes
      receivable
                            
                            
                            0
                            
                            
                            
                            0
                            
                            
                            
                            85,652Government
      bonds
                            
                            
                            0
                            
                            
                            
                            30,717
                            
                            
                            
                            0Municipal
      bonds
                            
                            
                            0
                            
                            
                            
                            680
                            
                            
                            
                            0Total
      cash and cash equivalents in the Statement of Cash Flows
                            
                            
                            228,372
                            
                            
                            
                            126,399
                            
                            
                            
                            101,198





b)
            Interest
      paid and collected:





For the years ended
                          December 31,2009
                        
                        
                        2008
                        
                        
                        2007Interest
      paid during the year
                        
                        
                        (101,793
                        )
                        
                        
                        (94,162
                        )
                        
                        
                        (38,149
                        )Interest
      collected during the year
                        
                        
                        32,230
                        
                        
                        
                        6,872
                        
                        
                        
                        3,175





19.
            INSURANCE
      COVERAGE





As of
December 31, 2009, the Company carries the following insurance policies for
purposes of safeguarding its assets and commercial operations:





Risk covered
                              
                              Amount insuredComprehensive
      (1)
                              
                              US$
                              526,323,332Mandatory
      life insurance
                              
                              $
                              24,687,000Additional
      life insurance
                              
                              $
                              64,625,540Funeral
      and burial insurance
                              
                              $
                              54,860,000Theft
      of securities
                              
                              US$
                              100,000Vehicles
      (theft, third-party liability
and   damages)
                              
                              $
                              10,322,807Land
      freight
                              
                              US$
                              2,000,000Imports
      freight
                              
                              $
                              2,250,000





(1)
            Includes:
      fire, partial theft, tornado, hurricane, earthquake, earth tremors,
      flooding and debris removal from facilities on facilities providing actual
      service, except for high, medium and low voltage
  networks.





20.
              CLAIM OF THE PROVINCE
      OF BUENOS AIRES BOARD OF ELECTRIC
POWER





On
December 1, 2003, the Board of Electric Power of the Province of Buenos Aires
(Board) filed a claim against EDENOR in the amount of 284,364 that includes
surcharges and interest as of the date of the claim, and imposed penalties for
an amount of 25,963, due to the Company’s alleged failure to act as collecting
agent of certain taxes established by Decrees-law Nos. 7290/67 and 9038/78 from
July 1997 through June 2001.





On
December 23, 2003, the Company appealed the Board's decision with the Tax Court
of the Province of Buenos Aires, which had the effect of temporarily suspending
the Company’s obligation to pay. Such appeals were filed on the grounds that the
Federal Supreme Court had declared that the regulations established by the
aforementioned Decrees-law were unconstitutional, as they were incompatible with
the Province of Buenos Aires’ commitment not to levy any taxes on the transfer
of electricity.





On March
20, 2007, the Board of Electric Power of the Province of Buenos Aires amended
the original complaint to include an additional claim in the amount of 7,720
that includes surcharges and interest as of the date of the claim for the period
of July 2001 through June 2002, extending the claim to certain Company
Directors.





On June
27, 2007, the Tax Court of the Province of Buenos Aires pronounced in favor of
the appeal duly lodged by the Company, thus becoming final.


F-44





At the
same time, on June 23, 2005, a petition for a declaratory judgment proceeding
was filed with the Secretariat of Original Lawsuits of the Federal Supreme
Court, so that the maximum authority clarify the condition of uncertainty
generated by the provincial tax authorities’ insistence on not honoring the
commitment assumed by the Province in the Federal Pact, and their avoidance of
the Federal Supreme Court’s decisions. The aforementioned proceeding is still
pending on the Federal Supreme Court.





Therefore,
no accrual has been recorded for these claims as the Company’s management, based
on both the aforementioned pronouncement and the opinion of its legal advisors,
believes that there exist solid arguments to support its position.





21.
            LEGAL ACTION FOR
      ALLEGED ENVIRONMENTAL
POLLUTION





On May
24, 2005, three of EDENOR’s employees were indicted on charges of
polychlorinated biphenyl (PCB)-related environmental contamination. In
connection with this alleged violation, the judge ordered a preliminary
attachment on the Company's assets in the amount of 150 million pesos to cover
the potential cost of damage repair, environmental restoration and court costs.
On May 30, 2005, the Company filed appeals against both the charges brought
against its employees and the attachment order. On December 15, 2005, the
Federal Court of Appeals of San Martín dismissed the charges against all three
defendants and, accordingly, revoked the attachment order against the Company’s
assets. The decision of the Court of Appeals was based on the fact that the
existence of environmental pollution could not be proved, and, in consequence
whereof, established that the Trial Judge should order the acquittal of two ENRE
public officers who had been indicted on related charges. An appeal against this
decision was filed in the Tribunal de Casación (the
highest appellate body for this matter), which on April 5, 2006 ruled that the
appeal was not admissible.





On July
16, 2007, the Company was notified that on July 11, 2007 the Trial Judge ruled
the definitive acquittal of all Company officials and employees that had been
indicted in the case, thus ordering the closing of the case. This decision could
be appealed.





After the
filing of an appeal, on March 25, 2008, the Federal Court of Appeals of San
Martín confirmed the decision rendered by the court of original jurisdiction
that had ordered the acquittal of Messrs. Daniel José Lello, Luciano Pironio,
Julio Adalberto Márquez, Francisco Ponasso, Henri Lafontaine, Henri Marcel Roger
Ducre and Christian Rolland Nadal, as well as the acquittal of ENRE officers,
Mr. Juan Antonio Legisa and Ms. María Cristina Massei.





In its
decision, the appellate court, quoting the “Chazarreta” judgment as judicial
precedent, stated that the right to defense at trial pursuant to due process,
guaranteed by the Constitution, included the right to obtain a judgment that
would put an end to the situation of uncertainty that implied criminal
prosecution. Furthermore, the appellate court’s decision also stated that if the
Prosecutor, after a thorough investigation, was unable to transfer the
presumption of guilt to the degree of certainty required for a declaration of
criminal liability, the status of innocence should prevail.





Based on
the foregoing, and considering that the preliminary investigation phase had
ended, the Federal Court of Appeals ordered the confirmation of the
aforementioned resolution.





It is
worth mentioning that the dismissal ordered by the judge of original
jurisdiction was appealed by the Prosecutor, who cited the possible dismissal of
criminal action for being beyond the statute of limitations, as a grievance,
among other possibilities, caused by the decision of the court.





However,
after the filing of the corresponding legal briefs by the Company, the appellate
court confirmed the decision of the court of original jurisdiction based on the
aforementioned resolution of the Appellate Court, according to which the
existence of PCB-related environmental pollution had not been
proven.





The
decision, whose reversal was requested by the Prosecutor’s Officethrough an
extraordinary appeal within the period of 10 days as from notice thereof had
been served, was confirmed by the Federal Court of Appeals of San Martín, which
rejected the Prosecuting attorney’s appeal.





The
Prosecutor’s Office filed an appeal (“Recurso de Queja”) to
theTribunal de Casaciónrequesting that the appeal dismissed by the Federal Court of Appeals of
San Martín be sustained. The Tribunal de Casaciónrejected
the appeal as well. The resolution in question was notified to the Prosecutor’s
Office on December 29, 2008. Within the contemplated legal time period, the
Prosecutor’s Office filed with such Tribunal an “Extraordinary
appeal”. The defense has duly answered the notice served. On May 27, 2009, the
Tribunal “dismissed the
extraordinary appeal filed by the Prosecutor’s Office” on the grounds that it
failed to specifically and reasonably refute the arguments that supported the
resolution being appealed, and proved neither the alleged arbitrariness nor the
violation of constitutional guaranties. The Prosecutor’s Office filed an appeal
(“Recurso de Queja”) to
the Federal Supreme Court requesting that the appeal dismissed by the Tribunal de Casación be
sustained. As of the date of issuance of these financial statements, the appeal
is being analyzed by the Supreme Court.


F-45





In the
opinion of the Company’s management and its legal advisors, it is probable that
the appeal will be rejected and the judgment ordering the acquittal of all
defendants will be confirmed.





22.
            DISCRETIONARY TRUST
      AGREEMENT





On
September 30, 2008, the Company and Macro Bank Limited entered into an
irrevocable and discretionary trust agreement.





Through
the establishment of the trust, which was approved by the Board of Directors on
September 29, 2008 and duly informed to control authorities, the Company assigns
the management of certain liquid assets for an initial amount of up to US$
24,000,000, which are to be used in the future in accordance with the terms of
the trust.





The
assignment of liquid assets for an amount of US$ 23,922,000 was carried out on
October 2, 2008.





Furthermore,
on November 3 and 11, 2008, the Company carried out an additional assignment of
liquid assets for US$ 2,000,000 and US$ 1,000,000, respectively.





On
September 3, 2009, the discretionary trust was dissolved and the trust property
was liquidated and transferred to the Company.





As of
December 31, 2009 and 2008, the results generated by this transaction have been
disclosed in the Financial income (expense) and holding gains (losses) generated
by assets account of the Statement of Income under Holding results.





23.
              DERIVATIVE FINANCIAL
      INSTRUMENTS





a)
              Corporate
      Notes





During
the year ended December 31, 2008, the Company carried out transactions with
derivative financial instruments with the aim of hedging the foreign currency
exchange rate of the cash flows and derivatives of interest payment
transactions.





These
instruments provided an economic and financial hedge of the amounts in foreign
currency that the Company had to pay on the interest payment dates of its
financial debt –Class A and B Fixed Rate Par Notes and Class 7 Notes (Note 14)-,
maturing on October 8, 2008, December 11, 2008, April 8, 2009, June 12, 2009,
October 8, 2009 and December 11, 2009, in the event of fluctuations in foreign
currency exchange rates. The Company has not formally designated these
transactions as hedging instruments. Therefore, they have been recorded in the
accounting in accordance with the provisions of Technical Resolution No. 18 of
the Argentine Federation of Professional Councils in Economic Sciences (FACPCE),
which require that derivative instruments not designated as effective hedging
instruments be recorded at their net realizable value or settlement value,
depending on whether they have been classified as assets or liabilities, with a
contra-account in the financial gains or losses for the year.





As of
December 31, 2009, these transactions have been fully settled, there being no
outstanding balances. Additionally, as of December 31, 2008 there existed a
balance of 7,905 for this concept (Note 7).





As of
December 31, 2009 and 2008, income resulting from these transactions amounted to
1,622 and 5,669, respectively, and was recorded in the Financial income
(expense) and holding gains (losses) generated by liabilities account of the
Statement of Income under Exchange difference.





b)
              Forward
      and Futures Contracts





During
the year ended December 31, 2009, the Company has entered into forward and
futures contracts with the aim of using them as economic instruments in order to
mitigate the risk generated by the fluctuations in the US dollar rate of
exchange.


F-46





As of
December 31, 2009, the Company has entered into contracts with Standard Bank
Argentina S.A. and Banco Finansur S.A., the main features of which are as
follow:





Entity
                    
                    Contracted amount
                      in thousands of US$
                    
                    
                    Average rate
                      of exchange
                    
                    Transaction
                      date
                    
                    Settlement
                      date
                    
                    Book value as of
                      December 31, 2009
                      Assets (Liabilities)
                      Note 7Banco
      Finansur
                    
                    
                    9,000
                    
                    
                    
                    4.1645
                    
                    07/27/2009
                    
                    04/30/2010
                    
                    
                    (1,814
                    )Banco
      Finansur
                    
                    
                    1,000
                    
                    
                    
                    4.2420
                    
                    07/27/2009
                    
                    06/30/2010
                    
                    
                    (202
                    )Standard
      Bank
                    
                    
                    12,000
                    
                    
                    
                    4.4475
                    
                    09/30/2009
                    
                    12/31/2010
                    
                    
                    (1,338
                    )Banco
      Finansur
                    
                    
                    33,000
                    
                    
                    
                    4.2400
                    
                    09/30/2009
                    
                    10/31/2010
                    
                    
                    (1,532
                    )Standard
      Bank
                    
                    
                    10,000
                    
                    
                    
                    4.4475
                    
                    10/01/2009
                    
                    12/31/2010
                    
                    
                    (1,115
                    )65,000
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (6,001
                    )





As of
December 31, 2009, the economic impact of these transactions -including
contracts that have already been settled as well as those currently in effect-,
resulted in a loss of 12,266that has been
recorded in the Financial income (expense) and holding gains (losses) generated
by assets account of the Statement of Income under Holding results.





Additionally,
in the case of the futures contract entered into with Banco Finansur S.A., the
Company has provided initial margins for a total of 26,196 which have been
disclosed in the “Other receivables” account (Note 5).





24.
            RESTRICTIONS ON THE
      DISTRIBUTION OF EARNINGS





In
accordance with the provisions of Law No. 19,550, 5% of the net income for the
year must be appropriated to the legal reserve, until such reserve equals 20% of
capital stock. The Ordinary Shareholders’ Meeting held on March 31, 2009
appropriated 6,156 of Unappropriated Retained Earnings as of December 31, 2008
to the aforementioned legal reserve (Note 16.d).





Moreover,
in accordance with the provisions of Law No. 25,063,  passed in
December 1998, dividends to be distributed, whether in cash or in kind, in
excess of accumulated taxable profits as of the fiscal year-end immediately
preceding the date of payment or distribution, shall be subject to a final 35%
income tax withholding, except for those dividends distributed to shareholders
who are residents of countries benefiting from conventions for the avoidance of
double taxation who will be subject to a lower tax rate. For income tax
purposes, accumulated taxable income shall be the unappropriated retained
earnings as of the end of the year immediately preceding the date on which the
above-mentioned law went into effect, less dividends paid plus the taxable
income determined as from such year and dividends or income from related
companies in Argentina.





Since the
restructuring of the Company’s financial debt referred to in Note 14, the
Company was not allowed to distribute dividends until April 24, 2008 or until
such time when the Company’s leverage ratio were lower than 2.5, whichever
occurred first. As from this time, distribution of dividends may only be allowed
under certain circumstances depending on the Company’s indebtedness
ratio.





Certain
restrictions on the distribution of dividends by the Company and the need for
approval by the ENRE for any distribution have been disclosed in Note
17.b).





25.
            BREAKDOWN OF TEMPORARY
      INVESTMENTS, RECEIVABLES AND LIABILITIES BYCOLLECTION AND PAYMENT
      TERMS





As
required by the CNV’s regulations, the balances of the accounts below as of
December 31, 2009, are as follow:


F-47




Term
                    
                    Investments
                    
                    
                    Receivables
                      (1)
                    
                    
                    Financial
                      Debt
                      (Loans)
                    
                    
                    Other payables
                      (2)With no explicit due date
                    
                    
                    0
                    
                    
                    
                    45,531
                    
                    
                    
                    0
                    
                    
                    
                    610,775With due datePast
      due:Up
      to three months
                    
                    
                    0
                    
                    
                    
                    74,676
                    
                    
                    
                    0
                    
                    
                    
                    0From
      three to six months
                    
                    
                    0
                    
                    
                    
                    28,920
                    
                    
                    
                    0
                    
                    
                    
                    0From
      six to nine months
                    
                    
                    0
                    
                    
                    
                    9,199
                    
                    
                    
                    0
                    
                    
                    
                    0From
      nine to twelve months
                    
                    
                    0
                    
                    
                    
                    28,880
                    
                    
                    
                    0
                    
                    
                    
                    0Over
      one year
                    
                    
                    0
                    
                    
                    
                    15,329
                    
                    
                    
                    0
                    
                    
                    
                    0Total
      past due
                    
                    
                    0
                    
                    
                    
                    157,004
                    
                    
                    
                    0
                    
                    
                    
                    0To
      become due:Up
      to three months
                    
                    
                    219,687
                    
                    
                    
                    276,693
                    
                    
                    
                    20,527
                    
                    
                    
                    533,400From
      three to six months
                    
                    
                    0
                    
                    
                    
                    15,192
                    
                    
                    
                    30,167
                    
                    
                    
                    52,254From
      six to nine months
                    
                    
                    0
                    
                    
                    
                    14,739
                    
                    
                    
                    14,155
                    
                    
                    
                    14,402From
      nine to twelve months
                    
                    
                    0
                    
                    
                    
                    14,302
                    
                    
                    
                    18,139
                    
                    
                    
                    14,416Over
      one year
                    
                    
                    0
                    
                    
                    
                    130,272
                    
                    
                    
                    707,499
                    
                    
                    
                    99,901Total
      to become due
                    
                    
                    219,687
                    
                    
                    
                    451,198
                    
                    
                    
                    790,487
                    
                    
                    
                    714,373Total
      with due date
                    
                    
                    219,687
                    
                    
                    
                    608,202
                    
                    
                    
                    790,487
                    
                    
                    
                    714,373Total
                    
                    
                    219,687
                    
                    
                    
                    653,733
                    
                    
                    
                    790,487
                    
                    
                    
                    1,325,148





(1)
Excludes allowances


(2)
Comprises total liabilities except accrued litigation and financial
debt.





The
financial debt mentioned in Note 14 accrues interest at floating and fixed
rates, which amount to approximately 10.67% on average; only 16.57% of the debt
accrues interest at a floating rate whereas the remaining accrues interest at a
fixed rate.





26.
            OTHER
      INFORMATION





The
followings exhibits present additional financial statement disclosure required
under Argentine


F-48


EMPRESA DISTRIBUIDORA Y COMERCIALIZADORA NORTE
      S.A. (EDENOR S.A.)
 
 BALANCE
SHEETS AS OF DECEMBER 31, 2009 AND 2008
 EXHIBIT
A
 PROPERTY,
      PLANT AND EQUIPMENT
                Page
      1 of 2
 (stated
in thousands of pesos)
 Original value
                          
                          
                          Depreciation
                          
                          
                          NetMAIN ACCOUNT
                          
                          At beginning
                            of year
                          
                          
                          Additions
                          
                          
                          Retirements
                          
                          
                          Transfers
                          
                          
                          At end
                            of year
                          
                          
                          At beginning
                            of year
                          
                          
                          Retirements
                          
                          
                          For the
                            year
                          
                          Annual
                            rate
                          
                          At end
                            of year
                          
                          
                          book value
                            2,009FACILITIES
      IN SERVICESubstations
                          
                          
                          887,222
                          
                          
                          
                          0
                          
                          
                          
                          (3,066
                          )
                          
                          
                          143,069
                          
                          
                          
                          1,027,225
                          
                          
                          
                          336,203
                          
                          
                          
                          (2,473
                          )
                          
                          
                          28,442
                          
                          3 -
      4%
                          
                          
                          362,172
                          
                          
                          
                          665,053High
      voltage networks
                          
                          
                          398,304
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          63,968
                          
                          
                          
                          462,272
                          
                          
                          
                          144,675
                          
                          
                          
                          0
                          
                          
                          
                          11,882
                          
                          3 -
      4%
                          
                          
                          156,557
                          
                          
                          
                          305,715Medium
      voltage networks
                          
                          
                          829,470
                          
                          
                          
                          0
                          
                          
                          
                          (597
                          )
                          
                          
                          52,970
                          
                          
                          
                          881,843
                          
                          
                          
                          323,671
                          
                          
                          
                          (223
                          )
                          
                          
                          25,120
                          
                          3 -
      4%
                          
                          
                          348,568
                          
                          
                          
                          533,275Low
      voltage networks
                          
                          
                          1,715,331
                          
                          
                          
                          0
                          
                          
                          
                          (4,153
                          )
                          
                          
                          60,133
                          
                          
                          
                          1,771,311
                          
                          
                          
                          986,478
                          
                          
                          
                          (2,375
                          )
                          
                          
                          48,477
                          
                          4 -
      5%
                          
                          
                          1,032,580
                          
                          
                          
                          738,731Transformation
      chambers and platforms
                          
                          
                          545,342
                          
                          
                          
                          0
                          
                          
                          
                          (46
                          )
                          
                          
                          69,742
                          
                          
                          
                          615,038
                          
                          
                          
                          207,332
                          
                          
                          
                          (43
                          )
                          
                          
                          17,563
                          
                          3 -
      4%
                          
                          
                          224,852
                          
                          
                          
                          390,186Meters
                          
                          
                          631,670
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          48,142
                          
                          
                          
                          679,812
                          
                          
                          
                          260,044
                          
                          
                          
                          0
                          
                          
                          
                          25,582
                          
                          4 -
      5%
                          
                          
                          285,626
                          
                          
                          
                          394,l86Buildings
                          
                          
                          92,514
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          3,860
                          
                          
                          
                          96,374
                          
                          
                          
                          22,056
                          
                          
                          
                          0
                          
                          
                          
                          1,096
                          
                          2 -
      3%
                          
                          
                          23,152
                          
                          
                          
                          73,222Communications
      network and facilities
                          
                          
                          84,223
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          12,092
                          
                          
                          
                          96,315
                          
                          
                          
                          56,824
                          
                          
                          
                          0
                          
                          
                          
                          4,653
                          
                          4 -
      5%
                          
                          
                          61,477
                          
                          
                          
                          34,838Total
      facilities in service
                          
                          
                          5,184,076
                          
                          
                          
                          0
                          
                          
                          
                          (7,862
                          )
                          
                          
                          453,976
                          
                          
                          
                          5,630,190
                          
                          
                          
                          2,337,283
                          
                          
                          
                          (5,114
                          )
                          
                          
                          162,815
                          
                          
                          
                          
                          2,494,984
                          
                          
                          
                          3,135,206FURNITURE,
      TOOLS AND EQUIPMENTFurniture,
      equipment and software projects
                          
                          
                          186,778
                          
                          
                          
                          4,628
                          
                          
                          
                          (68
                          )
                          
                          
                          0
                          
                          
                          
                          191,338
                          
                          
                          
                          167,303
                          
                          
                          
                          (68
                          )
                          
                          
                          10,520
                          
                          12 -
      13%
                          
                          
                          177,755
                          
                          
                          
                          13,583Tools
      and other
                          
                          
                          46,499
                          
                          
                          
                          379
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          46,878
                          
                          
                          
                          43,170
                          
                          
                          
                          0
                          
                          
                          
                          726
                          
                          10 -
      11%
                          
                          
                          43,896
                          
                          
                          
                          2,982Transportation
      equipment
                          
                          
                          18,777
                          
                          
                          
                          5,656
                          
                          
                          
                          (596
                          )
                          
                          
                          0
                          
                          
                          
                          23,837
                          
                          
                          
                          14,097
                          
                          
                          
                          (581
                          )
                          
                          
                          1,358
                          
                          20%
                          
                          
                          14,874
                          
                          
                          
                          8,963Total
      furniture, tools and equipment
                          
                          
                          252,054
                          
                          
                          
                          10,663
                          
                          
                          
                          (664
                          )
                          
                          
                          0
                          
                          
                          
                          262,053
                          
                          
                          
                          224,570
                          
                          
                          
                          (649
                          )
                          
                          
                          12,604
                          
                          
                          
                          
                          236,525
                          
                          
                          
                          25,528Total
      assets subject to depreciation
                          
                          
                          5,436,130
                          
                          
                          
                          10,663
                          
                          
                          
                          (8,526
                          )
                          
                          
                          453,976
                          
                          
                          
                          5,892,243
                          
                          
                          
                          2,561,853
                          
                          
                          
                          (5,763
                          )
                          
                          
                          175,419
                          
                          
                          
                          
                          2,731,509
                          
                          
                          
                          3,160,734CONSTRUCTION
      IN PROCESSTransmission
                          
                          
                          242,401
                          
                          
                          
                          121,965
                          
                          
                          
                          0
                          
                          
                          
                          (207,037
                          )
                          
                          
                          157,329
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          -
                          
                          
                          0
                          
                          
                          
                          157,329Distribution
      and other
                          
                          
                          139,580
                          
                          
                          
                          271,682
                          
                          
                          
                          0
                          
                          
                          
                          (246,939
                          )
                          
                          
                          164,323
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          -
                          
                          
                          0
                          
                          
                          
                          164,323Total
      construction in process
                          
                          
                          381,981
                          
                          
                          
                          393,647
                          
                          
                          
                          0
                          
                          
                          
                          (453,976
                          )
                          
                          
                          321,652
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          0
                          
                          
                          
                          
                          0
                          
                          
                          
                          321,652Total
      2009
                          
                          
                          5,818,111
                          
                          
                          
                          404,310
                          
                          
                          
                          (8,526
                          )
                          
                          
                          0
                          
                          
                          
                          6,213,895
                          
                          
                          
                          2,561,853
                          
                          
                          
                          (5,763
                          )
                          
                          
                          175,419
                          
                          
                          
                          
                          2,731,509
                          
                          
                          
                          3,482,386
 
 The
Additions column in the Distribution and other line includes 1,746 related to
the extension of the software lease agreement (Note 3.g).
  F-49
 
 EMPRESA DISTRIBUIDORA Y COMERCIALIZADORA NORTE
      S.A. (EDENOR S.A.)
 
 FINANCIAL
STATEMENTS AS OF DECEMBER 31, 2008 AND 2007
 EXHIBIT
A
 PROPERTY,
      PLANT AND EQUIPMENT
                Page
      2 of 2
 
 Original value
                                              
                                              
                                              Depreciation
                                              
                                              
                                              Net
                                              
                                              
                                              NetMAIN ACCOUNT
                                              
                                              At beginning
                                                of year
                                              
                                              
                                              Additions
                                              
                                              
                                              Retirements
                                              
                                              
                                              Transfers
                                              
                                              
                                              At end
                                                of year
                                              
                                              
                                              At beginning
                                                of year
                                              
                                              
                                              Retirements
                                              
                                              
                                              For the
                                                year
                                              
                                              Annual
                                                rate
                                              
                                              Useful
                                                lives
                                              
                                              At end
                                                of year
                                              
                                              
                                              book value
                                                2,008
                                              
                                              
                                              book value
                                                2,007FACILITIES
      IN SERVICESubstations
                                              
                                              
                                              872,565
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              (415
                                              )
                                              
                                              
                                              15,072
                                              
                                              
                                              
                                              887,222
                                              
                                              
                                              
                                              310,167
                                              
                                              
                                              
                                              (133
                                              )
                                              
                                              
                                              26,169
                                              
                                              3 -
      4%
                                              
                                              25-35
                                              
                                              
                                              336,203
                                              
                                              
                                              
                                              551,019
                                              
                                              
                                              
                                              562,398High
      voltage networks
                                              
                                              
                                              381,906
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              16,398
                                              
                                              
                                              
                                              398,304
                                              
                                              
                                              
                                              133,599
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              11,076
                                              
                                              3 -
      4%
                                              
                                              25-35
                                              
                                              
                                              144,675
                                              
                                              
                                              
                                              253,629
                                              
                                              
                                              
                                              248,307Medium
      voltage networks
                                              
                                              
                                              773,928
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              (771
                                              )
                                              
                                              
                                              56,313
                                              
                                              
                                              
                                              829,470
                                              
                                              
                                              
                                              299,515
                                              
                                              
                                              
                                              (491
                                              )
                                              
                                              
                                              24,647
                                              
                                              3 -
      4%
                                              
                                              25-35
                                              
                                              
                                              323,671
                                              
                                              
                                              
                                              505,799
                                              
                                              
                                              
                                              474,413Low
      voltage networks
                                              
                                              
                                              1,658,143
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              (2,534
                                              )
                                              
                                              
                                              59,722
                                              
                                              
                                              
                                              1,715,331
                                              
                                              
                                              
                                              936,726
                                              
                                              
                                              
                                              (1,484
                                              )
                                              
                                              
                                              51,236
                                              
                                              4 -
      5%
                                              
                                              20-25
                                              
                                              
                                              986,478
                                              
                                              
                                              
                                              728,853
                                              
                                              
                                              
                                              721,417Transformation
      chambers and platforms
                                              
                                              
                                              491,159
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              (297
                                              )
                                              
                                              
                                              54,480
                                              
                                              
                                              
                                              545,342
                                              
                                              
                                              
                                              191,191
                                              
                                              
                                              
                                              (162
                                              )
                                              
                                              
                                              16,303
                                              
                                              3 -
      4%
                                              
                                              25-33
                                              
                                              
                                              207,332
                                              
                                              
                                              
                                              338,010
                                              
                                              
                                              
                                              299,968Meters
                                              
                                              
                                              583,370
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              48,300
                                              
                                              
                                              
                                              631,670
                                              
                                              
                                              
                                              235,166
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              24,878
                                              
                                              4 -
      5%
                                              
                                              20-25
                                              
                                              
                                              260,044
                                              
                                              
                                              
                                              371,626
                                              
                                              
                                              
                                              348,204Buildings
                                              
                                              
                                              77,579
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              (163
                                              )
                                              
                                              
                                              15,098
                                              
                                              
                                              
                                              92,514
                                              
                                              
                                              
                                              21,053
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              1,003
                                              
                                              2 -
      3%
                                              
                                              33-45
                                              
                                              
                                              22,056
                                              
                                              
                                              
                                              70,458
                                              
                                              
                                              
                                              56,526Communications
      network and facilities
                                              
                                              
                                              84,223
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              84,223
                                              
                                              
                                              
                                              52,600
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              4,224
                                              
                                              4 -
      5%
                                              
                                              20-25
                                              
                                              
                                              56,824
                                              
                                              
                                              
                                              27,399
                                              
                                              
                                              
                                              31,623Total
      facilities in service
                                              
                                              
                                              4,922,873
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              (4,180
                                              )
                                              
                                              
                                              265,383
                                              
                                              
                                              
                                              5,184,076
                                              
                                              
                                              
                                              2,180,017
                                              
                                              
                                              
                                              (2,270
                                              )
                                              
                                              
                                              159,536
                                              
                                              
                                              
                                              
                                              
                                              
                                              2,337,283
                                              
                                              
                                              
                                              2,846,793
                                              
                                              
                                              
                                              2,742,856FURNITURE,
      TOOLS AND EQUIPMENTFurniture,
      equipment and software projects
                                              
                                              
                                              168,208
                                              
                                              
                                              
                                              18,570
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              186,778
                                              
                                              
                                              
                                              158,029
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              9,274
                                              
                                              12 -
      13%
                                              
                                              7-8
                                              
                                              
                                              167,303
                                              
                                              
                                              
                                              19,475
                                              
                                              
                                              
                                              10,179Tools
      and other
                                              
                                              
                                              45,179
                                              
                                              
                                              
                                              1,320
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              46,499
                                              
                                              
                                              
                                              42,448
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              722
                                              
                                              10 -
      11%
                                              
                                              9-10
                                              
                                              
                                              43,170
                                              
                                              
                                              
                                              3,329
                                              
                                              
                                              
                                              2,731Transportation
      equipment
                                              
                                              
                                              15,366
                                              
                                              
                                              
                                              3,827
                                              
                                              
                                              
                                              (416
                                              )
                                              
                                              
                                              0
                                              
                                              
                                              
                                              18,777
                                              
                                              
                                              
                                              13,782
                                              
                                              
                                              
                                              (416
                                              )
                                              
                                              
                                              731
                                              
                                              20%
                                              
                                              5
                                              
                                              
                                              14,097
                                              
                                              
                                              
                                              4,680
                                              
                                              
                                              
                                              1,584Total
      furniture, tools and equipment
                                              
                                              
                                              228,753
                                              
                                              
                                              
                                              23,717
                                              
                                              
                                              
                                              (416
                                              )
                                              
                                              
                                              0
                                              
                                              
                                              
                                              252,054
                                              
                                              
                                              
                                              214,259
                                              
                                              
                                              
                                              (416
                                              )
                                              
                                              
                                              10,727
                                              
                                              
                                              
                                              
                                              
                                              
                                              224,570
                                              
                                              
                                              
                                              27,484
                                              
                                              
                                              
                                              14,494Total
      assets subject to depreciation
                                              
                                              
                                              5,151,626
                                              
                                              
                                              
                                              23,717
                                              
                                              
                                              
                                              (4,596
                                              )
                                              
                                              
                                              265,383
                                              
                                              
                                              
                                              5,436,130
                                              
                                              
                                              
                                              2,394,276
                                              
                                              
                                              
                                              (2,686
                                              )
                                              
                                              
                                              170,263
                                              
                                              
                                              
                                              
                                              
                                              
                                              2,561,853
                                              
                                              
                                              
                                              2,874,277
                                              
                                              
                                              
                                              2,757,350CONSTRUCTION
      IN PROCESSTransmission
                                              
                                              
                                              152,578
                                              
                                              
                                              
                                              121,293
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              (31,470
                                              )
                                              
                                              
                                              242,401
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              -
                                              
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              242,401
                                              
                                              
                                              
                                              152,578Distribution
      and other
                                              
                                              
                                              182,781
                                              
                                              
                                              
                                              190,712
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              (233,913
                                              )
                                              
                                              
                                              139,580
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              -
                                              
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              139,580
                                              
                                              
                                              
                                              182,781Total
      construction in process
                                              
                                              
                                              335,359
                                              
                                              
                                              312,005
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              (265,383
                                              )
                                              
                                              
                                              381,981
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              
                                              
                                              
                                              0
                                              
                                              
                                              
                                              381,981
                                              
                                              
                                              
                                              335,359Total
      2008
                                              
                                              
                                              5,486,985
                                              
                                              
                                              
                                              335,722
                                              
                                              
                                              
                                              (4,596
                                              )
                                              
                                              
                                              0
                                              
                                              
                                              
                                              5,818,111
                                              
                                              
                                              
                                              2,394,276
                                              
                                              
                                              
                                              (2,686
                                              )
                                              
                                              
                                              170,263
                                              
                                              
                                              
                                              
                                              
                                              
                                              2,561,853
                                              
                                              
                                              
                                              3,256,258Total
      2007
                                              
                                              
                                              5,146,176
                                              
                                              
                                              
                                              342,749
                                              
                                              
                                              
                                              (1,940
                                              )
                                              
                                              
                                              0
                                              
                                              
                                              
                                              5,486,985
                                              
                                              
                                              
                                              2,220,754
                                              
                                              
                                              
                                              (835
                                              )
                                              
                                              
                                              174,357
                                              
                                              
                                              
                                              
                                              
                                              
                                              2,394,276
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              3,092,709
  F-50
 EMPRESA
      DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (EDENOR
  S.A.)
  BALANCE
SHEETS AS OF DECEMBER 31, 2009 AND 2008
 EXHIBIT
C
 INVESTMENTS
IN OTHER COMPANIES
 
 (stated
in thousands of pesos)
 
 Information on the IssuerLast financial
      statement issuedNameand features
                                                                          of securities
                                                                        
                                                                        Class
                                                                        
                                                                        Face
                                                                          value
                                                                        
                                                                        Number
                                                                        
                                                                        
                                                                        Adjusted
                                                                          cost
                                                                        
                                                                        Value on
                                                                          equity
                                                                          method
                                                                        
                                                                        Net
                                                                          bookvalue
                                                                          2009
                                                                        
                                                                        Main
                                                                          activity
                                                                        
                                                                        Date
                                                                        
                                                                        Nominal
                                                                          Capital
                                                                          Stock
                                                                        
                                                                        
                                                                        Income
                                                                          for theyear
                                                                        
                                                                        
                                                                        Equity
                                                                        
                                                                        
                                                                        % interest
                                                                          in capital
                                                                          stock
                                                                        
                                                                        
                                                                        Net
                                                                          bookvalue
                                                                          2008NON-CURRENT
                                                                          INVESTMENTSSection
      33 Law No. 19,550
                                                                          as
      amended -Companies-Related
      Company:
                                                                          SACME
      S.A.
                                                                        
                                                                        common
                                                                          non-endorable
                                                                        
                                                                        $
                                                                        1
                                                                        
                                                                        
                                                                        6,000
                                                                        
                                                                        
                                                                        
                                                                        15
                                                                        
                                                                        
                                                                        408
                                                                        
                                                                        
                                                                        408
                                                                        
                                                                        Electric
      power services
                                                                        
                                                                        12/31/2009
                                                                        
                                                                        
                                                                        12
                                                                        
                                                                        
                                                                        
                                                                        22
                                                                        
                                                                        
                                                                        
                                                                        816
                                                                        
                                                                        
                                                                        
                                                                        50
                                                                        
                                                                        
                                                                        
                                                                        397Total
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        408
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        397
  F-51
 
 EMPRESA
      DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (EDENOR
  S.A.)
  BALANCE SHEETS AS OF DECEMBER31, 2009 AND2008
  EXHIBIT
D
  OTHER
INVESTMENTS
    Net
      book valueMAIN
      ACCOUNT
                                              
                                              2009
                                              
                                              
                                              2008CURRENT
      INVESTMENTSTime
      deposits-
      in foreign currency (Exhibit G)
                                              
                                              
                                              27,191
                                              
                                              
                                              
                                              0Money
      market funds-
      in local currency
                                              
                                              
                                              80,055
                                              
                                              
                                              
                                              88,548Municipal
      bonds-
      in local currency
                                              
                                              
                                              0
                                              
                                              
                                              
                                              1,361Government
      bonds-
      in foreign currency (Exhibit G)
                                              
                                              
                                              0
                                              
                                              
                                              
                                              30,717Corporate
      Notes-
      in foreign currency (Exhibit G)
                                              
                                              
                                              112,441
                                              
                                              
                                              
                                              393Total
      Current Investments
                                              
                                              
                                              219,687
                                              
                                              
                                              
                                              121,019NON-CURRENT
      INVESTMENTSMunicipal
      bonds-
      in local currency
                                              
                                              
                                              0
                                              
                                              
                                              
                                              7,483Discretionary
      trust-
      in foreign currency (Exhibit G)
                                              
                                              
                                              0
                                              
                                              
                                              
                                              48,945Corporate
      Notes-
      in foreign currency (Exhibit G)
                                              
                                              
                                              0
                                              
                                              
                                              
                                              10,784Total
      Non-Current Investments
                                              
                                              
                                              0
                                              
                                              
                                              
                                              67,212Total
      Investments
                                              
                                              
                                              219,687
                                              
                                              
                                              
                                              188,231
  F-52
 
 EMPRESA
      DISTRIBUIDORA YCOMERCIALIZADORA
      NORTE S.A. (EDENOR
S.A.)
  BALANCE SHEETSASOF DECEMBER
      31,2009EXHIBIT
      EALLOWANCES
      AND ACCRUALS
                      Page
      1 of
3
  (stated
in thousands of pesos)
 2009MAIN
                            ACCOUNT
                          
                          At
                            beginning
                            of year
                          
                          
                          Additions
                          
                          
                          Retirements
                          
                          
                          Recoveries
                            (1)
                          
                          
                          At
                            end of
                            yearDeducted
      from current assetsFor
      doubtful accounts
                          
                          
                          33,097
                          
                          
                          
                          20,327
                          
                          
                          
                          (6,780
                          )
                          
                          
                          (26,956
                          )
                          
                          
                          19,688For
      other doubtful accounts
                          
                          
                          4,573
                          
                          
                          
                          3,975
                          
                          
                          
                          (640
                          )
                          
                          
                          0
                          
                          
                          
                          7,908Included
      in current liabilitiesAccrued
      litigation
                          
                          
                          52,756
                          
                          
                          
                          15,500
                          
                          
                          
                          (5,443
                          )
                          
                          
                          0
                          
                          
                          
                          62,813Included
      in non-current liabilitiesAccrued
      litigation
                          
                          
                          45,078
                          
                          
                          
                          559
                          
                          
                          
                          0
                          
                          
                          
                          (35,553
                          )
                          
                          
                          10,084
 (1)
              The
      26,956 relate to the Framework Agreement with the Province of Buenos Aires
      (Notes 12 and 13, and Note 26 Exhibit H).
                The 35,553
      relate to the recovery of the accrual for tax contingencies (Notes 3.i and
      12).
  F-53
 
 EMPRESA
      DISTRIBUIDORA YCOMERCIALIZADORA
      NORTE S.A. (EDENOR
S.A.)
 
 EXHIBIT
      EALLOWANCES
      AND ACCRUALS
                    Page
      2 of
3
 
 (stated
in thousands of pesos)
 2008MAIN
                                        ACCOUNT
                                      
                                      At
                                        beginning
                                        of year
                                      
                                      
                                      Additions
                                      
                                      
                                      Retirements
                                      
                                      
                                      Recoveries
                                      
                                      
                                      At
                                        end
                                        ofyearDeducted
      from current assetsFor
      doubtful accounts
                                      
                                      
                                      40,006
                                      
                                      
                                      
                                      23,559
                                      
                                      
                                      
                                      (6,452
                                      )
                                      
                                      
                                      (24,016
                                      )
                                      
                                      
                                      33,097For
      other doubtful accounts
                                      
                                      
                                      2,900
                                      
                                      
                                      
                                      1,673
                                      
                                      
                                      
                                      0
                                      
                                      
                                      
                                      0
                                      
                                      
                                      
                                      4,573Deducted
      from non-current assetsFor
      impairment of value of deferred tax assets
                                      
                                      
                                      34,482
                                      
                                      
                                      
                                      0
                                      
                                      
                                      
                                      (34,482
                                      )
                                      
                                      
                                      0
                                      
                                      
                                      
                                      0Included
      in current liabilitiesAccrued
      litigation
                                      
                                      
                                      39,868
                                      
                                      
                                      
                                      19,900
                                      
                                      
                                      
                                      (7,012
                                      )
                                      
                                      
                                      0
                                      
                                      
                                      
                                      52,756Included
      in non-current liabilitiesAccrued
      litigation
                                      
                                      
                                      42,843
                                      
                                      
                                      
                                      2,235
                                      
                                      
                                      
                                      0
                                      
                                      
                                      
                                      0
                                      
                                      
                                      
                                      45,078
  F-54
  EMPRESA
      DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (EDENOR
  S.A.)
  EXHIBIT
E
 ALLOWANCESAND
      ACCRUALS
                Page
      3 of 3
   2007MAIN
                              ACCOUNT
                            
                            At
                              beginning
                              ofyear
                            
                            
                            Additions
                            
                            
                            Retirements
                            
                            
                            At
                              end
                              of yearDeducted
      from current assetsFor
      doubtful accounts
                            
                            
                            25,623
                            
                            
                            
                            30,100
                            
                            
                            
                            (15,717
                            )
                            
                            
                            40,006For
      other doubtful accounts
                            
                            
                            2,300
                            
                            
                            
                            600
                            
                            
                            
                            0
                            
                            
                            
                            2,900Deducted
      from non-current assetsFor
      impairment of value of Municipal bonds
                            
                            
                            5,918
                            
                            
                            
                            0
                            
                            
                            
                            (5,918
                            )
                            
                            
                            0For
      impairment of value of net deferred tax assets
                            
                            
                            32,261
                            
                            
                            
                            2,221
                            
                            
                            
                            0
                            
                            
                            
                            34,482Included
      in current liabilitiesAccrued
      litigation
                            
                            
                            25,914
                            
                            
                            
                            16,750
                            
                            
                            
                            (2,796
                            )
                            
                            
                            39,868Included
      in non-current liabilitiesAccrued
      litigation
                            
                            
                            40,606
                            
                            
                            
                            2,237
                            
                            
                            
                            0
                            
                            
                            
                            42,843
  F-55
 
 EMPRESA
      DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (EDENOR
  S.A.)
  BALANCE
SHEETS AS OF DECEMBER 31, 2009 AND 2008
 EXHIBIT
G
 FOREIGN
CURRENCY DENOMINATED ASSETS AND LIABILITIES
  2009
                                                                                            
                                                                                            
                                                                                            2008Booked
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            BookedCurrency
                                                                                            
                                                                                            
                                                                                            Exchange
                                                                                            
                                                                                            
                                                                                            amount
      in
                                                                                            
                                                                                            
                                                                                            Currency
                                                                                            
                                                                                            
                                                                                            amount
      inand
                                                                                            
                                                                                            
                                                                                            rate
                                                                                            
                                                                                            
                                                                                            thousands
                                                                                            
                                                                                            
                                                                                            and
                                                                                            
                                                                                            
                                                                                            thousandsAccount
                                                                                            
                                                                                            amount
      (2)
                                                                                            
                                                                                            
                                                                                            (1)
                                                                                            
                                                                                            
                                                                                            of
      pesos
                                                                                            
                                                                                            
                                                                                            amount
      (2)
                                                                                            
                                                                                            
                                                                                            of
      pesosCurrentAssetsCash
      and banks
                                                                                            
                                                                                            US$
                                                                                            292,212
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.760
                                                                                            
                                                                                            
                                                                                            
                                                                                            1,099
                                                                                            
                                                                                            
                                                                                            US$
                                                                                            1,161,320
                                                                                            
                                                                                            
                                                                                            
                                                                                            3,964ECU
                                                                                            42,394
                                                                                            
                                                                                            
                                                                                            
                                                                                            5.3952
                                                                                            
                                                                                            
                                                                                            
                                                                                            229
                                                                                            
                                                                                            
                                                                                            ECU
                                                                                            37,451
                                                                                            
                                                                                            
                                                                                            
                                                                                            177InvestmentsTime
      deposits
                                                                                            
                                                                                            US$
                                                                                            7,226,043
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.760
                                                                                            
                                                                                            
                                                                                            
                                                                                            27,170
                                                                                            
                                                                                            
                                                                                            US$
                                                                                            0
                                                                                            
                                                                                            
                                                                                            
                                                                                            0ECU
                                                                                            3,983
                                                                                            
                                                                                            
                                                                                            
                                                                                            5.3952
                                                                                            
                                                                                            
                                                                                            
                                                                                            21
                                                                                            
                                                                                            
                                                                                            ECU
                                                                                            0
                                                                                            
                                                                                            
                                                                                            
                                                                                            0Government
      bonds
                                                                                            
                                                                                            US$
                                                                                            0
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.760
                                                                                            
                                                                                            
                                                                                            
                                                                                            0
                                                                                            
                                                                                            
                                                                                            US$
                                                                                            8,999,929
                                                                                            
                                                                                            
                                                                                            
                                                                                            30,717Corporate
      Notes
                                                                                            
                                                                                            US$
                                                                                            29,904,415
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.760
                                                                                            
                                                                                            
                                                                                            
                                                                                            112,441
                                                                                            
                                                                                            
                                                                                            US$
                                                                                            115,035
                                                                                            
                                                                                            
                                                                                            
                                                                                            393Other
      receivablesExpenses
      advanced
                                                                                            
                                                                                            US$
                                                                                            118,878
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.760
                                                                                            
                                                                                            
                                                                                            
                                                                                            447
                                                                                            
                                                                                            
                                                                                            US$
                                                                                            0
                                                                                            
                                                                                            
                                                                                            
                                                                                            0Receivables
      from activities other than the main activity
                                                                                            
                                                                                            US$
                                                                                            363,665
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.760
                                                                                            
                                                                                            
                                                                                            
                                                                                            1,367
                                                                                            
                                                                                            
                                                                                            US$
                                                                                            249,534
                                                                                            
                                                                                            
                                                                                            
                                                                                            852Warranty
      deposits
                                                                                            
                                                                                            US$
                                                                                            6,090,200
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.760
                                                                                            
                                                                                            
                                                                                            
                                                                                            22,899
                                                                                            
                                                                                            
                                                                                            US$
                                                                                            0
                                                                                            
                                                                                            
                                                                                            
                                                                                            0Other
                                                                                            
                                                                                            US$
                                                                                            5,600
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.760
                                                                                            
                                                                                            
                                                                                            
                                                                                            21
                                                                                            
                                                                                            
                                                                                            US$
                                                                                            0
                                                                                            
                                                                                            
                                                                                            
                                                                                            0ECU
                                                                                            19,949
                                                                                            
                                                                                            
                                                                                            
                                                                                            5.3952
                                                                                            
                                                                                            
                                                                                            
                                                                                            108
                                                                                            
                                                                                            
                                                                                            ECU
                                                                                            2,285
                                                                                            
                                                                                            
                                                                                            
                                                                                            11Total
      Current Assets
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            165,802
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            36,114Non-Current
      AssetsInvestmentsCorporate
      Notes
                                                                                            
                                                                                            US$
                                                                                            0
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.760
                                                                                            
                                                                                            
                                                                                            
                                                                                            0
                                                                                            
                                                                                            
                                                                                            US$
                                                                                            3,159,764
                                                                                            
                                                                                            
                                                                                            
                                                                                            10,784Discretionary
      trust
                                                                                            
                                                                                            US$
                                                                                            0
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.760
                                                                                            
                                                                                            
                                                                                            
                                                                                            0
                                                                                            
                                                                                            
                                                                                            US$
                                                                                            14,340,663
                                                                                            
                                                                                            
                                                                                            
                                                                                            48,945Total
      Non-Current Assets
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            0
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            59,729Total
      Assets
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            165,802
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            95,843Current
      LiabilitiesTrade
      accounts payable
                                                                                            
                                                                                            US$
                                                                                            6,794,947
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.800
                                                                                            
                                                                                            
                                                                                            
                                                                                            25,821
                                                                                            
                                                                                            
                                                                                            US$
                                                                                            5,443,784
                                                                                            
                                                                                            
                                                                                            
                                                                                            18,797ECU
                                                                                            15,438
                                                                                            
                                                                                            
                                                                                            
                                                                                            5.4530
                                                                                            
                                                                                            
                                                                                            
                                                                                            84
                                                                                            
                                                                                            
                                                                                            ECU
                                                                                            517,726
                                                                                            
                                                                                            
                                                                                            
                                                                                            2,480NOK
                                                                                            0
                                                                                            
                                                                                            
                                                                                            
                                                                                            0.6602
                                                                                            
                                                                                            
                                                                                            
                                                                                            0
                                                                                            
                                                                                            
                                                                                            NOK
                                                                                            667,200
                                                                                            
                                                                                            
                                                                                            
                                                                                            331CHF
                                                                                            108,826
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.6756
                                                                                            
                                                                                            
                                                                                            
                                                                                            400
                                                                                            
                                                                                            
                                                                                            CHF
                                                                                            453,851
                                                                                            
                                                                                            
                                                                                            
                                                                                            1,485LoansCorporate
      Notes
                                                                                            
                                                                                            US$
                                                                                            3,682,978
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.800
                                                                                            
                                                                                            
                                                                                            
                                                                                            13,996
                                                                                            
                                                                                            
                                                                                            US$
                                                                                            2,609,904
                                                                                            
                                                                                            
                                                                                            
                                                                                            9,012Financial
      loans
                                                                                            
                                                                                            ECU
                                                                                            0
                                                                                            
                                                                                            
                                                                                            
                                                                                            5.4530
                                                                                            
                                                                                            
                                                                                            
                                                                                            0
                                                                                            
                                                                                            
                                                                                            ECU
                                                                                            237,978
                                                                                            
                                                                                            
                                                                                            
                                                                                            1,140Other
      liabilitiesOther
                                                                                            
                                                                                            US$
                                                                                            1,065,796
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.800
                                                                                            
                                                                                            
                                                                                            
                                                                                            4,050
                                                                                            
                                                                                            
                                                                                            US$
                                                                                            374,218
                                                                                            
                                                                                            
                                                                                            
                                                                                            1,292ECU
                                                                                            8,913
                                                                                            
                                                                                            
                                                                                            $
                                                                                            5.453
                                                                                            
                                                                                            
                                                                                            
                                                                                            49
                                                                                            
                                                                                            
                                                                                            ECU
                                                                                            0
                                                                                            
                                                                                            
                                                                                            
                                                                                            0Total
      Current Liabilities
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            44,400
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            34,537Non-Current
      LiabilitiesLoansCorporate
      Notes
                                                                                            
                                                                                            US$
                                                                                            176,633,106
                                                                                            
                                                                                            
                                                                                            
                                                                                            3.800
                                                                                            
                                                                                            
                                                                                            
                                                                                            671,206
                                                                                            
                                                                                            
                                                                                            US$
                                                                                            262,670,141
                                                                                            
                                                                                            
                                                                                            
                                                                                            907,000Total
      Non-Current Liabilities
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            671,206
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            907,000Total
      Liabilities
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            715,606
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            
                                                                                            941,537
 
 (1)
Selling and buying exchange rate of Banco de la Nación Argentina in
effect at the end of the year
 (2)
US$ = US Dollar; ECU = Euro; NOK =Norwegian
Krone; CHF Swiss Franc.
 
 F-56
 
 EMPRESA
      DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (EDENOR
  S.A.)
 
 INFORMATION
REQUIRED BY SECTION 64 CLAUSE b) OF LAW No. 19,550
 
 EXHIBIT
H
 
 FOR
THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
 
 (stated in thousands of
    pesos)
                            
                            2009
                            
                            
                            2008
                            
                            
                            2007Description
                            
                            Transmission and
                              Distribution
                              Expenses
                            
                            
                            Selling
                              Expenses
                            
                            
                            Administrative
                              Expenses
                            
                            
                            Total
                            
                            
                            Total
                            
                            
                            TotalSalaries
      and social security taxes
                            
                            
                            219,836
                            
                            
                            
                            51,595
                            
                            
                            
                            58,927
                            
                            
                            
                            330,358
                            
                            
                            
                            257,629
                            
                            
                            
                            187,712Postage
      and telephone
                            
                            
                            4,361
                            
                            
                            
                            8,606
                            
                            
                            
                            2,071
                            
                            
                            
                            15,038
                            
                            
                            
                            12,919
                            
                            
                            
                            10,790Bank
      commissions
                            
                            
                            0
                            
                            
                            
                            9,373
                            
                            
                            
                            0
                            
                            
                            
                            9,373
                            
                            
                            
                            7,529
                            
                            
                            
                            7,816Allowance
      for doubtful accounts (1)
                            
                            
                            0
                            
                            
                            
                            18,582
                            
                            
                            
                            0
                            
                            
                            
                            18,582
                            
                            
                            
                            15,304
                            
                            
                            
                            30,700Supplies
      consumption
                            
                            
                            34,337
                            
                            
                            
                            1,429
                            
                            
                            
                            1,961
                            
                            
                            
                            37,727
                            
                            
                            
                            34,298
                            
                            
                            
                            25,468Work
      by third parties
                            
                            
                            110,184
                            
                            
                            
                            40,095
                            
                            
                            
                            15,062
                            
                            
                            
                            165,341
                            
                            
                            
                            140,129
                            
                            
                            
                            114,422Rent
      and insurance
                            
                            
                            4,869
                            
                            
                            
                            629
                            
                            
                            
                            6,199
                            
                            
                            
                            11,697
                            
                            
                            
                            6,967
                            
                            
                            
                            6,086Security
      services
                            
                            
                            4,568
                            
                            
                            
                            339
                            
                            
                            
                            1,947
                            
                            
                            
                            6,854
                            
                            
                            
                            5,314
                            
                            
                            
                            4,926Fees
                            
                            
                            1,530
                            
                            
                            
                            80
                            
                            
                            
                            4,623
                            
                            
                            
                            6,233
                            
                            
                            
                            6,259
                            
                            
                            
                            4,932Computer
      services
                            
                            
                            13
                            
                            
                            
                            5,760
                            
                            
                            
                            22,829
                            
                            
                            
                            28,602
                            
                            
                            
                            21,148
                            
                            
                            
                            13,548Advertising
                            
                            
                            0
                            
                            
                            
                            0
                            
                            
                            
                            16,769
                            
                            
                            
                            16,769
                            
                            
                            
                            12,849
                            
                            
                            
                            15,362Reimbursements
      to personnel
                            
                            
                            1,687
                            
                            
                            
                            363
                            
                            
                            
                            521
                            
                            
                            
                            2,571
                            
                            
                            
                            6,077
                            
                            
                            
                            8,123Temporary
      personnel
                            
                            
                            183
                            
                            
                            
                            1,141
                            
                            
                            
                            594
                            
                            
                            
                            1,918
                            
                            
                            
                            2,111
                            
                            
                            
                            1,982Depreciation
      of property, plant and equipment
                            
                            
                            166,810
                            
                            
                            
                            2,986
                            
                            
                            
                            5,623
                            
                            
                            
                            175,419
                            
                            
                            
                            170,263
                            
                            
                            
                            174,357Technical
      assistance
                            
                            
                            0
                            
                            
                            
                            0
                            
                            
                            
                            0
                            
                            
                            
                            0
                            
                            
                            
                            15,377
                            
                            
                            
                            8,583Directors
      and Supervisory Committee members’ fees
                            
                            
                            0
                            
                            
                            
                            0
                            
                            
                            
                            2,860
                            
                            
                            
                            2,860
                            
                            
                            
                            2,912
                            
                            
                            
                            1,194Tax
      on financial transactions
                            
                            
                            0
                            
                            
                            
                            0
                            
                            
                            
                            32,533
                            
                            
                            
                            32,533
                            
                            
                            
                            27,001
                            
                            
                            
                            31,544Taxes
      and charges
                            
                            
                            0
                            
                            
                            
                            17,927
                            
                            
                            
                            2,013
                            
                            
                            
                            19,940
                            
                            
                            
                            16,437
                            
                            
                            
                            13,441Other
                            
                            
                            205
                            
                            
                            
                            51
                            
                            
                            
                            2,035
                            
                            
                            
                            2,291
                            
                            
                            
                            2,100
                            
                            
                            
                            1,856Total
      2009
                            
                            
                            548,583
                            
                            
                            
                            158,956
                            
                            
                            
                            176,567
                            
                            
                            
                            884,106
                            
                            
                            
                            -
                            
                            
                            
                            -Total
      2008
                            
                            
                            497,870
                            
                            
                            
                            126,016
                            
                            
                            
                            138,737
                            
                            
                            
                            -
                            
                            
                            
                            762,623
                            
                            
                            
                            -Total
      2007
                            
                            
                            417,553
                            
                            
                            
                            120,633
                            
                            
                            
                            124,656
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            662,842
 
 (1) As of
December 31, 2009, net of the recovery of the allowance Framework Agreement with
the Province of Buenos Aires for 5,720 (Notes 12 and 13 and Note 26 Exhibit
E).
  F-57




27.
            SUMMARY
      OF SIGNIFICANT DIFFERENCES BETWEEN ARGENTINE GAAP AND US
      GAAP





The
Company’s financial statements have been prepared in accordance with Argentine
GAAP and the regulations of the CNV, which differs in certain respects from US
GAAP. Such differences involve certain methods for measuring the amounts shown
in the financial statements, as well as additional disclosures required by US
GAAP and the regulations of the SEC.





As
discussed in Note 2, under Argentine GAAP, the financial statements are
presented in constant pesos based on the application of therein mentioned
resolutions. This reconciliation, as permitted by SEC regulations, does not
include the effects of inflation on US GAAP net income and shareholders’
equity.





I.
            Differences
      in Valuation Methods





The main
differences between Argentine GAAP and US GAAP are described below together with
an explanation, where appropriate, of the method used in the determination of
the adjustments that affect net income and total shareholders’ equity.
References below to “ASC” are to FASB Accounting Standard
Codification.





a)
            Deferred
      income taxes





As
discussed in Note 3.m, under Argentine GAAP the Company accounts for income
taxes using the liability method. Accordingly, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets are also
recognized for tax loss carry-forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date. A
valuation allowance is recognized for that component of deferred tax assets
which is not recoverable. This Argentine GAAP is similar to US GAAP set forth in
Income Taxes topic of the FASB Accounting Standards Codification (“ASC 740”).
However, under Argentine GAAP as discussed in Note 2, the CNV through its
General Resolutions N° 485/05 and 487/06 decided to implement certain changes in
the Argentine GAAP effective for fiscal years or interim periods beginning as
from January 1, 2006, by requiring the application of TR N° 6, 8, 9, 11, 14, 16,
17, 18, 21, and 22 and Interpretations 1, 2, 3, and 4, of the FACPCE with the
amendments introduced by such Federation through April 1, 2005 (Resolution N°
312/05) and adopted by the CPCECABA (Resolution CD N° 93/05) with certain
amendments and clarifications.





Among the
aforementioned changes it is included the consideration of the difference
between the accounting and tax values resulting from the adjustment for
inflation included in non-monetary assets, as a temporary difference, allowing
the Company to either recognize a deferred tax liability or to disclose the
effect of such accounting change in Note 2 to the financial
statements.





The
Company has completed its analysis of the impact of the application of the
change mentioned in the preceding paragraph and it has decided to disclose said
effect in a note to the financial statements and keep treating it as a permanent
difference for deferred income tax purposes. Under US GAAP, the Company applies
Foreign Currency Matters topic – Income tax subtopic section 25 paragraph 5 of
the FASB Accounting Standards Codification which requires such differences to be
treated as temporary differences in calculating deferred income taxes. In
addition, the US GAAP adjustment includes the effect on deferred income taxes of
the described below reconciling items, as appropriate.





Under
Argentine GAAP, the realization of deferred income tax assets depends on the
generation of future taxable income when temporary differences would be
deductible. Accordingly, the Company has considered the reversal of the deferred
income tax liabilities and taxable income projections based on its estimates,
which includes the effects of the tariff increase as described in Note 3.
m).





As of
December 31, 2007, the allowance for impairment of value of deferred tax assets
represented the portion of the tax loss generated in 2002 whose offset against
future taxable income would not be possible after the filing of the 2007 income
tax return, due to the fact that it became statute-barred. As of December 31,
2008, the allowance on the deferred income tax assets was totally reversed out
considering on one hand, that a portion of the tax loss carry forward became
statute –barred and on the other hand, the Company estimates that there will be
future taxable income so that assets temporary differences will be
recovered.





As of
December 31, 2009, there is no allowance for the deferred income tax assets due
to the fact that the Company assesses that it will be recovered with future
taxable income


F-58




Deferred
tax assets are also recognized for tax loss carry forwards. Under ASC 740,
deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets or liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.





ASC 740
provides for more specific rules in determining the valuation allowance for
deferred tax assets. Under this pronouncement, an enterprise must use judgment
in considering the relative impact of negative and positive evidence to
determine if a valuation allowance is needed or not.





In
addition, under Argentine GAAP, deferred tax assets and liabilities are
classified as non current items, while under US GAAP these amounts are
classified as current or non-current based on the classification of the related
asset or liability for financial reporting.  A deferred tax liability
or asset that is not related to an asset or liability for financial reporting,
including deferred tax assets related to tax loss carry-forwards, shall be
classified according to the expected reversal date of the temporary
difference.





The
Company applies ASC section 715-30-25 and the disclosures requirements of ASC
section 715-20-50, as described in Note 27.II.e). As a result, as of December
31, 2009 and 2008, the Company recongnized a deferred tax asset amounting to
2,232 and 3,002, respectively, related to the tax effect on the unrecognized net
actuarial loss.





The
effect of the foregoing US GAAP adjustments on net income and shareholders’
equity are included in the Note 27.I.g) below.





b)
            Interest
      capitalized – net





Through
December 31, 2005, the capitalization of financial costs was discretionary under
Argentine GAAP. Thus, the Company capitalized financial costs in property, plant
and equipments from 1997 to 2001 and subsequently discontinued such
capitalization in 2001 as more fully described in Note 3.g). As from January 1,
2006, and as required by CNV General Resolution N° 485, the capitalization of
financial costs is mandatory, thus, the Company capitalized financial costs
during the years ended December 31, 2009 and 2008.





Under US
GAAP, the Company applied Topic ASC 835 “Interest” whereby interest
capitalization on assets is mandatory for those assets which require a period of
time to get them ready for their intended use.





The
effect of this US GAAP adjustment on net income and shareholders’ equity are
presented in the Note 27.I.g).





c)
            Asset
      retirement obligations - net





Under
Argentine GAAP, in accordance with FAPCE TR 17, EDENOR capitalized in property,
plant and equipments the costs associated with the removal of polychlorinated
biphepyl (PCB) included in the transformers when the removal is
requested.





Capitalization
of these costs is based on the fact that, if a transformer containing PCB is to
be purchased, the de-chlorination cost would be a necessary cost to have the
equipment ready for operation. If de-chlorination cost had not been incurred,
the equipment (i.e. transformers) should have been written off.





Under US
GAAP, the Company applied Topic ASC 410 “Asset Retirement and Environmental
Obligations” which provides guidance on financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs, effective January 1, 2003. This topic of the
FASB Accounting Standards Codification requires the Company to record the fair
value of the legal obligation associated with certain environmental restorations
required upon closure of its facilities. The fair value of the liability is
estimated by discounting the future estimated expenditures related to the
restoration activities. The Company then measures changes in the liability due
to passage of time by applying an interest method of allocation to the amount of
the liability at the beginning of the period. The interest rate used to measure
that change is the credit –adjusted risk- free rate that existed when the
liability, or portion thereof, was initially measured. That amount is recognized
as an increase in the carrying amount of the liability and the expense is
classified as an operating item in the statement of income, referred to as
accretion expense. At the same time this topic of the FASB Accounting Standards
Codification requires the Company to capitalize the new costs arising as the
result of additional liabilities incurred, such as the capitalization of new
equipment, and subsequently allocate that asset retirement cost to expense over
the life of the assets based on the useful life of the assets.





The
Company uses transformers with PCB. Argentine Law requires that the Company
eliminates or reduces to an acceptable level the PCB contained in any of its
transformers by the end of 2010. Accordingly, EDENOR removed PCB from its
transformers during the fiscal year 2008. The Company has determined that PCB
removal represents an asset retirement obligation as defined by the Asset
Retirement and Environmental Obligation Topic of the FASB Accounting Standards
Codification.


F-59





Thus,
under US GAAP an additional asset and liability was recognized as of December
31, 2008 and 2007.





Effects
on US GAAP net income and shareholders’ equity includes:





1. the
amortization of the asset retirement costs which is included in depreciation
expense; and;


2. the
effects of re-measuring the liability due to the passage of time are included as
interest expense.





The
effect of this US GAAP adjustment on net income and shareholders’ equity are
presented in the Note 27.I.g) below.





d)
              Troubled
      debt restructuring





As
explained in Note 14, on February 22, 2006, the Company obtained the consent
from 100% of its bond holders for the restructuring of financial debt amounting
to US$ 540.9 million as of that date.





Under
Argentine GAAP, the restructuring of the financial debt was treated as an
exchange of debt instruments with substantially different terms. As a result,
the Company de-recognized the former debt from the balance sheet and recognized
the new debt at their present value discounted at a 10% market interest rate.
The gain on extinguishment of former debt (net of restructuring costs) recorded
as of December 31, 2006 amounted to 179.2 million.





For US
GAAP purposes, the restructuring of the debt was accounted for in accordance
with Debt topic Trouble Debt Restructurings subtopic of the FASB Accounting
Standards Codification (“ASC 470-60”) as the creditors made certain concessions
due to the financial difficulties of the Company. ASC 470-60 requires that a
comparison be made between the future cash outflows associated with the new debt
instruments (including interest), and the recorded amount of the payables
(including interest, penalties and withholding income tax) at the time of
restructuring. A gain on a troubled debt restructuring is only recognized when
the carrying amount of the payable at the time of restructuring exceeds the
total future cash payments specified by the new debt terms. Since the total
future cash outflows associated with the new debt instruments exceeded the
carrying value of the old debts, no gain on restructuring was recorded under US
GAAP. As a result, the carrying amount of the new debt instruments under US GAAP
was greater than the amount recorded under Argentine GAAP and a new effective
interest rate was determined, which equated the present value of the future cash
payments specified by the new debt instruments with the carrying amount of the
old debt.





Additionally,
for US GAAP purposes, the debt restructuring was completed on April 24, 2006,
which was the date when the cash tender and early payment took effect and the
new notes were issued. In addition to the reversal of the gain recognized under
Argentina GAAP, interest expense from February 22, 2006 to December 31, 2009,
was increased by approximately Ps. 104,3 million for US GAAP purposes. The tax
basis of the new notes (before the adjustment to present value, see below) is
the same as its carrying amount under Argentine GAAP; which differs from the
carrying amount under US GAAP as explained above. Thus, the deferred tax asset
attributable to such difference amounting to Ps. 15,645 and Ps. 35,511 as of
December 31, 2009 and 2008 respectively was included in deferred income tax in
Note 27.I.g) below.





Gain on
troubled debt restructuring, after the repurchases of financial debt, due to
carrying amount exceeding future cash flows amounting to Ps. 66,803 as of
December 31, 2007 also represents a reconciling item.





During
2009 and 2008, the Company repurchased notes due 2016 which constituted an
“Early extinguishment of debt”. The cash flows showed that the carrying amount
of the payable exceeded the future cash payments. So, these facts implied that
gains must be recognized as of the date of the measurements of the debt
amounting to Ps. 150,269 and Ps. 147,537, respectively (excluding the gain on
debt restructuring already recognized in 2007).





The
following items were reversed under US GAAP for the year ended December 31, 2009
and 2008:





- the
adjustment to present value of the notes (loss of Ps. 5,2 million);


- the
loss from the purchase and redemption of notes due in 2016 during 2007 (Ps. 10,2
million);


- the
gain from the purchase and redemption of notes due in 2016 during 2008 (Ps. 55,2
million);


- the
gain from the purchase and redemption of notes due in 2016 during 2009 (Ps. 46,2
million);


- the
adjustment to present value of purchased and redeemed notes due in 2016 during
2007 (loss of Ps. 8,6 million);


- the
adjustment to present value of purchased and redeemed notes due in 2016 during
2008 (gain of Ps. 9,0 million); and,


F-60





- the
adjustment to present value of purchased and redeemed notes due in 2016 during
2009 (gain of Ps. 8,0 million).





Aditionally,
as of December 31, 2009 and 2008, deferred tax assets amounting to 1,835 and
2,960, respectively were recognized under Argentine GAAP as a temporary
difference generated by the adjustment to present value of the notes repurchased
and by the redeemed notes, respectively, which amounts were also reversed under
US GAAP.





The
deferred income tax effect on the trouble debt restructuring (including the
adjustment to present value) amounting to 17,480 was recorded for US GAAP
purposes.





The
effect of these US GAAP adjustments on net income and shareholders’ equity is
presented in the Note 27.I.g) below.





e)
              Investments
      in marketable securities





Under
Argentine GAAP, the Company’s investments in debt and equity securities are
carried at market value with unrealized gains and losses, if any, included in
the statement of income.





Under US
GAAP, the Company has classified these investments as available-for-sale and is
carrying these investments at fair value with unrealized gains and losses, if
any, included in other comprehensive income in the shareholders’ equity in
accordance with topic ASC 320 “Investments – Debt and equity securities”.
Specific identification was used to determine cost in computing realized gain or
loss.  The Company’s investments are considered available-for-sale as
these securities could potentially be sold in response to needs for liquidity,
changes in the availability of and the yield on alternative instruments or
changes in funding sources or terms.





Management
determines the appropriate classification of debt and equity securities at the
time of purchase and reevaluates such designation as of each balance sheet
date.  The topic ASC 320 also states that for individual securities
classified as available-for-sale an enterprise shall determine whether a decline
in fair value below the amortized cost basis is other than
temporary.





December 31, 2009
                      
                      
                      
                      
                      
                      
                      
                      Gross UnrealizedCost
                      
                      
                      Fair Value
                      
                      
                      Gain
                      
                      
                      LossGovernment
      Bonds
                      
                      
                      63,919
                      
                      
                      
                      63,917
                      
                      
                      
                      -
                      
                      
                      
                      (2
                      )Money
      Market Funds
                      
                      
                      80,055
                      
                      
                      
                      80,055
                      
                      
                      
                      -
                      
                      
                      
                      -Corporate
      Debt Securities
                      
                      
                      48,854
                      
                      
                      
                      48,524
                      
                      
                      
                      -
                      
                      
                      
                      (330
                      )Total
                      
                      
                      192,828
                      
                      
                      
                      192,496
                      
                      
                      
                      -
                      
                      
                      
                      (332
                      )





Under US
GAAP, as of December 31, 2009, the Company has assessed if an
other-than-temporary impairment existed.  No other-than-temporary
impairment exists since none of the conditions prescribed by Topic ASC
320-10-35-33A through 33I were complied with.





December 31, 2008
                      
                      
                      
                      
                      
                      
                      
                      Gross UnrealizedCost
                      
                      
                      Fair Value
                      
                      
                      Gain
                      
                      
                      LossGovernment
      Bonds
                      
                      
                      39,561
                      
                      
                      
                      39,561
                      
                      
                      
                      -
                      
                      
                      
                      -Money
      Market Funds
                      
                      
                      88,548
                      
                      
                      
                      88,548
                      
                      
                      
                      -
                      
                      
                      
                      -Corporate
      Debt Securities
                      
                      
                      14,520
                      
                      
                      
                      18,498
                      
                      
                      
                      5,444
                      
                      
                      
                      -Total
                      
                      
                      142,629
                      
                      
                      
                      146,607
                      
                      
                      
                      5,444
                      
                      
                      
                      -


F-61





The
maturities as of December 31, 2009, of the available-for-sale Government
Bonds and Corporate Debt Securities included in the balance sheet were as
follows:





Carrying
                    Value
                  
                  
                  Maturing
                    within 1
                    year
                  
                  
                  Maturing
                    after 1
                    year but
                    within 5
                    years
                  
                  
                  Maturing
                    after 5
                    years but
                    within 10
                    yearsGovernment
      Bonds
                  
                  
                  63,917
                  
                  
                  
                  63,917
                  
                  
                  
                  -
                  
                  
                  
                  -Corporate
      Debt Securities
                  
                  
                  48,524
                  
                  
                  
                  -
                  
                  
                  
                  15,384
                  
                  
                  
                  33,140





f)
              Trust
      Consolidation





Under
Argentina GAAP the Trust was not consolidated with the Company’s financial
statements but included as a non current investment and valued at the fair value
of the outstanding financial instruments as of December 31, 2008.





Under US
GAAP, the Company followed the Consolidation Topic of the FASB Accounting
Standards Codification. The Trust was determined to be a Variable Interest
Entity (VIE) since, as stated in the Edenor’s Financial Trust Agreement, Edenor
has the ability to make decisions about the Trust's activities, is obligated to
absorb the expected losses of the Trust if they occur, and has the right to
receive the expected residual returns of the Trust if they occur. Based on these
facts, as Edenor is the primary beneficiary of the Trust, it had been
consolidated in the Company’s financial statements as of December 31,
2008.





In 2008,
the total amount of Ps. 49,015 was composed of (i) Ps. 32,049, gain
corresponding to the difference between the cost incurred in the acquisition of
the bonds and its respective book value at the acquisition date, (ii) Ps.
16,966, gain, corresponding to the reversal of the loss for the mark to market
adjustment and interest income recorded by the financial trust under Argentine
GAAP.





As
mentioned in Note 22, on September 3, 2009, the discretionary trust was
dissolved and the trust property was liquidated and transferred to the
Company.  As such, during 2009 under US GAAP this adjustment was
reversed.





The
effect of these US GAAP adjustments on net income and shareholders’ equity is
presented in the Note 27.I.g) below.





g)
              Effects
      of conforming to US GAAP





The
reconciliation of reported net income required to conform to US GAAP is as
follows:


F-62




For the year ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Net
      income in accordance with Argentine GAAP
                  
                  
                  90,643
                  
                  
                  
                  123,115
                  
                  
                  
                  122,458Deferred
      income tax (Note 27.II.a)
                  
                  
                  (13,903
                  )
                  
                  
                  (6,989
                  )
                  
                  
                  25,129Interest
      capitalized – net (Note 27.II.b)
                  
                  
                  (5,095
                  )
                  
                  
                  (5,095
                  )
                  
                  
                  (5,095
                  )Asset
      retirement obligations (Note 27.II.c)
                  
                  
                  175
                  
                  
                  
                  (107
                  )
                  
                  
                  (500
                  )Trouble
      debt reestructuring and repurchases of debt (Note 27.II.d)
                  
                  
                  49,944
                  
                  
                  
                  110,032
                  
                  
                  
                  73,805Investments
      in marketable securities (Note 27.I.e)
                  
                  
                  332
                  
                  
                  
                  (5,444
                  )
                  
                  
                  -Trust
      consolidation (Note 27.I.f)
                  
                  
                  (49,015
                  )
                  
                  
                  49,015
                  
                  
                  
                  -Net
      income in accordance US GAAP
                  
                  
                  73,081
                  
                  
                  
                  264,527
                  
                  
                  
                  215,797





The
reconciliation to conform shareholders’ equity amounts to US GAAP is as
follows:





As of December 31,2009
                      
                      
                      2008Shareholders'
      equity in accordance with Argentine GAAP
                      
                      
                      2,182,209
                      
                      
                      
                      2,091,566Deferred
      income tax (Note 27.II.a)
                      
                      
                      (384,673
                      )
                      
                      
                      (370,116
                      )Interest
      capitalized – net (Note 27.II.b)
                      
                      
                      74,494
                      
                      
                      
                      79,589Asset
      retirement obligations (Note 27.II.c)
                      
                      
                      (4,468
                      )
                      
                      
                      (4,643
                      )Trouble
      debt restructuring and repurchases of debt (Note 27.II.d)
                      
                      
                      (59,738
                      )
                      
                      
                      (109,682
                      )Pension
      Plan (Note 27.II.e)
                      
                      
                      (6,375
                      )
                      
                      
                      (8,575
                      )Trust
      consolidation (Note 27.I.f)
                      
                      
                      -
                      
                      
                      
                      49,015Shareholders'
      equity in accordance with US GAAP
                      
                      
                      1,801,449
                      
                      
                      
                      1,727,154





The
changes in shareholders’ equity under US GAAP as of December 31, 2009 and 2008,
are as follows:





For the year ended December 31,2009
                    
                    
                    2008Shareholders'
      equity in accordance with US GAAP - Beginning balance
                    
                    
                    1,727,154
                    
                    
                    
                    1,467,076Net
      income for the year in accordance with US GAAP
                    
                    
                    73,081
                    
                    
                    
                    264,527Capital
      (decrease) increase
                    
                    
                    -
                    
                    
                    
                    (6,130
                    )Accumulated
      Other Comprehensive income - Pension Plan, net of tax and Investments in
      marketable securities, net of tax (Note 27.II.r)
                    
                    
                    1,214
                    
                    
                    
                    1,681Shareholders'
      equity in accordance with US GAAP - Ending balance
                    
                    
                    1,801,449
                    
                    
                    
                    1,727,154





II.
              Additional
      disclosure requirements





a)
              Deferred
      income taxes





The
benefit for income taxes included in the condensed statement of income and
accounted for in accordance with US GAAP is as follows:


F-63





As of December 31,2009
                    
                    
                    2008
                    
                    
                    2007Income
      tax under Argentine GAAP:Current
      income tax
                    
                    
                    (95,570
                    )
                    
                    
                    (99,745
                    )
                    
                    
                    -Adjustment
      to provision 2008
                    
                    
                    1,636
                    
                    
                    
                    -
                    
                    
                    
                    -Deferred
      income tax - benefit (expense)
                    
                    
                    14,623
                    
                    
                    
                    38,571
                    
                    
                    
                    (124,984
                    )Total
      income tax expense under Argentine GAAP
                    
                    
                    (79,311
                    )
                    
                    
                    (61,174
                    )
                    
                    
                    (124,984
                    )US
      GAAP adjustments:Adjustment
      for inflation on property, plant and equipment
                    
                    
                    26,980
                    
                    
                    
                    30,404
                    
                    
                    
                    31,300Interest
      capitalized
                    
                    
                    1,783
                    
                    
                    
                    1,783
                    
                    
                    
                    1,783Deferred
      income tax effect on the adjustment to present value of the
      notes
                    
                    
                    (1,835
                    )
                    
                    
                    (2,960
                    )
                    
                    
                    (7,523
                    )Deferred
      income tax effect on troubled debt restructuring and repurchases of
      debt
                    
                    
                    (15,645
                    )
                    
                    
                    (35,551
                    )
                    
                    
                    (18,308
                    )Asset
      Retirement Obligation
                    
                    
                    (61
                    )
                    
                    
                    38
                    
                    
                    
                    314Accruals
      - ENRE Penalties
                    
                    
                    (24,991
                    )
                    
                    
                    -
                    
                    
                    
                    -Investments
      in marketable securities
                    
                    
                    (116
                    )
                    
                    
                    1,905
                    
                    
                    
                    -Others
                    
                    
                    (18
                    )
                    
                    
                    (2,608
                    )
                    
                    
                    754US
      GAAP adjustments
                    
                    
                    (13,903
                    )
                    
                    
                    (6,989
                    )
                    
                    
                    8,320Increase
      of the allowance for impairment of value of deferred tax
      assets
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    16,809US
      GAAP adjustments including increase of the allowance for impairment of
      value of deferred tax assets
                    
                    
                    (13,903
                    )
                    
                    
                    (6,989
                    )
                    
                    
                    25,129Income
      tax expense under US GAAP
                    
                    
                    (93,214
                    )
                    
                    
                    (68,163
                    )
                    
                    
                    (99,855
                    )





As of December 31,2009
                  
                  
                  2008
                  
                  
                  2007Decrease
      (Increase) of the valuation allowance of value of deferred tax
      assetsUnder
      Argentine GAAP
                  
                  
                  -
                  
                  
                  
                  34,482
                  
                  
                  
                  (2,221
                  )US
      GAAP adjustments
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  16,809Variation
      of the valuation allowance under US GAAP
                  
                  
                  0
                  
                  
                  
                  34,482
                  
                  
                  
                  14,588


F-64


Deferred
tax assets (liabilities) as of December 31, 2009 are summarized as
follows:





As of December 31, 2009Argentine GAAP
                      balance
                    
                    
                    US GAAP
                      adjustment
                    
                    
                    US GAAP
                      balanceDeferred
      tax assetsTax
      losses carry forward
                    
                    
                    4,293
                    
                    
                    
                    -
                    
                    
                    
                    4,293Accruals
                    
                    
                    127,033
                    
                    
                    
                    3,795
                    
                    
                    
                    130,828Troubled
      debt restructuring and repurchases of debt
                    
                    
                    -
                    
                    
                    
                    13,229
                    
                    
                    
                    13,229Others
                    
                    
                    14,058
                    
                    
                    
                    -
                    
                    
                    
                    14,058Total
      deferred tax assets, net
                    
                    
                    145,384
                    
                    
                    
                    17,024
                    
                    
                    
                    162,408Deferred
      tax liabilitiesPP&E
      and others
                    
                    
                    (58,309
                    )
                    
                    
                    (401,697
                    )
                    
                    
                    (460,006
                    )Total
      deferred tax liabilities
                    
                    
                    (58,309
                    )
                    
                    
                    (401,697
                    )
                    
                    
                    (460,006
                    )Total
      net deferred tax assets (liabilities)
                    
                    
                    87,075
                    
                    
                    
                    (384,673
                    )
                    
                    
                    (297,598
                    )





Deferred
tax assets (liabilities) as of December 31, 2008 are summarized as
follows:





As of December 31, 2008Argentine GAAP
                    
                    
                    US GAAP
                    
                    
                    US GAAPbalance
                    
                    
                    adjustment
                    
                    
                    balanceDeferred
      tax assetsTax
      losses carry forward
                    
                    
                    8,316
                    
                    
                    
                    -
                    
                    
                    
                    8,316Accruals
                    
                    
                    74,823
                    
                    
                    
                    29,618
                    
                    
                    
                    104,441Troubled
      debt restructuring and repurchases of debt
                    
                    
                    -
                    
                    
                    
                    28,874
                    
                    
                    
                    28,874Others
                    
                    
                    15,577
                    
                    
                    
                    -
                    
                    
                    
                    15,577Total
      deferred tax assets, net
                    
                    
                    98,716
                    
                    
                    
                    58,492
                    
                    
                    
                    157,208Deferred
      tax liabilitiesPP&E
      and others
                    
                    
                    (17,948
                    )
                    
                    
                    (428,608
                    )
                    
                    
                    (446,556
                    )Total
      deferred tax liabilities
                    
                    
                    (17,948
                    )
                    
                    
                    (428,608
                    )
                    
                    
                    (446,556
                    )Total
      net deferred tax assets (liabilities)
                    
                    
                    80,768
                    
                    
                    
                    (370,116
                    )
                    
                    
                    (289,348
                    )


F-65


A
reconciliation of the Argentine Statutory Income Tax rate to the Company’s
effective tax rate on net income is as follows:





As of December 31,2009
                
                
                2008
                
                
                2007Income
      tax calculated at tax rate on net income before taxes under US
      GAAP
                
                
                (58,203
                )
                
                
                (116,442
                )
                
                
                (110,478
                )Permanent
      differences:Effect
      of Trust consolidation
                
                
                (17,155
                )
                
                
                17,155
                
                
                
                -Other
      non-deductible expenses
                
                
                (17,856
                )
                
                
                (3,358
                )
                
                
                (3,965
                )Subtotal
                
                
                (93,214
                )
                
                
                (102,645
                )
                
                
                (114,443
                )Variation
      of the valuation allowance under US GAAP
                
                
                -
                
                
                
                34,482
                
                
                
                14,588Income
      tax expense under US GAAP
                
                
                (93,214
                )
                
                
                (68,163
                )
                
                
                (99,855
                )





US GAAP
deferred tax assets (liabilities) as of December 31, 2009 and 2008 breakdowns
are summarized below:





As of December 31, 2009Total
                      
                      
                      Current
                      
                      
                      Non CurrentDeferred
      tax assetsTax
      losses carry forward
                      
                      
                      4,293
                      
                      
                      
                      4,293
                      
                      
                      
                      -Accruals
                      
                      
                      130,828
                      
                      
                      
                      967
                      
                      
                      
                      129,861Troubled
      debt restructuring and repurchases of debt
                      
                      
                      13,229
                      
                      
                      
                      -
                      
                      
                      
                      13,229Others
                      
                      
                      14,058
                      
                      
                      
                      4,463
                      
                      
                      
                      9,595Total
      deferred tax assets
                      
                      
                      162,408
                      
                      
                      
                      9,723
                      
                      
                      
                      152,685Deferred
      tax liabilitiesPP&E
      and others
                      
                      
                      (460,006
                      )
                      
                      
                      (30,170
                      )
                      
                      
                      (429,836
                      )Total
      deferred tax liabilities
                      
                      
                      (460,006
                      )
                      
                      
                      (30,170
                      )
                      
                      
                      (429,836
                      )Total
      net deferred tax liabilities
                      
                      
                      (297,598
                      )
                      
                      
                      (20,447
                      )
                      
                      
                      (277,151
                      )





As of December 31, 2008Total
                    
                    
                    Current
                    
                    
                    Non CurrentDeferred
      tax assetsTax
      losses carry forward
                    
                    
                    8,316
                    
                    
                    
                    -
                    
                    
                    
                    8,316Accruals
                    
                    
                    104,441
                    
                    
                    
                    9,176
                    
                    
                    
                    95,265Troubled
      debt restructuring and repurchases of debt
                    
                    
                    28,874
                    
                    
                    
                    -
                    
                    
                    
                    28,874Others
                    
                    
                    15,577
                    
                    
                    
                    5,655
                    
                    
                    
                    9,922Total
      deferred tax assets
                    
                    
                    157,208
                    
                    
                    
                    14,831
                    
                    
                    
                    142,377Deferred
      tax liabilitiesPP&E
      and others
                    
                    
                    (446,556
                    )
                    
                    
                    (29,949
                    )
                    
                    
                    (416,607
                    )Total
      deferred tax liabilities
                    
                    
                    (446,556
                    )
                    
                    
                    (29,949
                    )
                    
                    
                    (416,607
                    )Total
      net deferred tax liabilities
                    
                    
                    (289,348
                    )
                    
                    
                    (15,117
                    )
                    
                    
                    (274,232
                    )


F-66





b)
              Interest
      capitalized – net





In
accordance with ASC topic 835, interests on loans related to works in progress
has been capitalized on the qualifying asset (assets that require an extended
period of time to acquire or produce), during the term of construction until
they were in condition to be used, as follows:





As of December 31,2009
                  
                  
                  2008
                  
                  
                  2007Interest
      expense incurred under US GAAP
                  
                  
                  87,739
                  
                  
                  
                  78,111
                  
                  
                  
                  56,424Interest
      capitalized under US GAAP
                  
                  
                  24,966
                  
                  
                  
                  31,477
                  
                  
                  
                  12,665





Effect on
US GAAP adjustment in net income  is as follows:





For the year ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Depreciation
      on interest capitalized
                  
                  
                  (5,095
                  )
                  
                  
                  (5,095
                  )
                  
                  
                  (5,095
                  )Interest
      capitalized – net (Note 27.I.g)
                  
                  
                  (5,095
                  )
                  
                  
                  (5,095
                  )
                  
                  
                  (5,095
                  )





Effect on
US GAAP adjustment on shareholders’ equity is a follows:





As of December 312009
                    
                    
                    2008Interest
      capitalized
                    
                    
                    125,294
                    
                    
                    
                    125,294Depreciation
      on interest capitalized
                    
                    
                    (50,800
                    )
                    
                    
                    (45,705
                    )Interest
      capitalized – net (Note 27.I.g)
                    
                    
                    74,494
                    
                    
                    
                    79,589





c)
              Asset
      retirement obligations





Under US
GAAP, a decrease in asset must be recognized as of December 31, 2009, as
follows:





As of December 31,2009
                    
                    
                    2008Asset
      retirement costs
                    
                    
                    -
                    
                    
                    
                    (3,509
                    )Less:
      accumulated depreciation
                    
                    
                    (959
                    )
                    
                    
                    (1,134
                    )Net
      book value
                    
                    
                    (959
                    )
                    
                    
                    (4,643
                    )Asset
      retirement obligation
                    
                    
                    -
                    
                    
                    
                    -Net
      Shareholders’ equity impact
                    
                    
                    (959
                    )
                    
                    
                    (4,643
                    )





The
effects on US GAAP net loss and shareholders’ equity are shown in paragraph
below as follows:





1.
            amortization
      of asset retirement costs included in depreciation
  expense;


2.
            effects
      of re-measuring the liability due to the passage of time are reflected as
      interest  expense.





Effects
on US GAAP adjustment in net income is as follows:





As of December 31,2009
                  
                  
                  2008
                  
                  
                  2007Depreciation
      of asset retirement costs
                  
                  
                  175
                  
                  
                  
                  175
                  
                  
                  
                  21Accrued
      interest
                  
                  
                  -
                  
                  
                  
                  (282
                  )
                  
                  
                  (521
                  )Total
      impact (Note 27.I.g)
                  
                  
                  175
                  
                  
                  
                  (107
                  )
                  
                  
                  (500
                  )


F-67





Effects
on US GAAP shareholders’ equity under Argentine GAAP is as follows:





As of December 31,2009
                  
                  
                  2008Accumulated
      depreciation of asset retirement costs
                  
                  
                  (959
                  )
                  
                  
                  (1,134
                  )Accrued
      interest
                  
                  
                  (3,509
                  )
                  
                  
                  (3,509
                  )Total
      impact (Note 27.I.g)
                  
                  
                  (4,468
                  )
                  
                  
                  (4,643
                  )





The
following table shows changes in asset retirement obligation for the years ended
December 31, 2009 and 2008:





Balance
      as of January 1, 2008
                    
                    
                    2,818Accrued
      interest
                    
                    
                    282Payments
                    
                    
                    (3,100
                    )Balance
      as of December  31, 2008
                    
                    
                    0Accrued
      interest
                    
                    
                    -Payments
                    
                    
                    -Balance
      as of December  31, 2009
                    
                    
                    0





d)
              Troubled
      Debt Restructuring and Repurchases of
Debt





The
reconciliation between financial debt under US GAAP and Argentine GAAP as of
December 31, 2009 and 2008 is as follows:





As of December 31,2009
                    
                    
                    2008Financial
      debt (current and non current) under Argentine GAAP
                    
                    
                    790,487
                    
                    
                    
                    940,393Waiver
      of principal
                    
                    
                    55,314
                    
                    
                    
                    55,314Waiver
      of unpaid accrued interest
                    
                    
                    77,658
                    
                    
                    
                    77,658Waiver
      of unpaid accrued penalties
                    
                    
                    65,726
                    
                    
                    
                    65,726Adjustment
      to present value of the notes
                    
                    
                    21,943
                    
                    
                    
                    27,186Interest
      expense
                    
                    
                    104,286
                    
                    
                    
                    52,833Loss
      from the purchase and redemption of notes 2016 during 2007
                    
                    
                    (10,228
                    )
                    
                    
                    (10,228
                    )Gain
      from the purchase and redemption of notes 2016 during 2008
                    
                    
                    55,185
                    
                    
                    
                    55,185Gain
      from the purchase and redemption of notes 2016 during 2009
                    
                    
                    46,182
                    
                    
                    
                    -Adjustment
      to present value of purchased and redeemed notes 2016 during
      2007
                    
                    
                    (8,632
                    )
                    
                    
                    (8,632
                    )Adjustment
      to present value of purchased and redeemed notes 2016 during
      2008
                    
                    
                    8,980
                    
                    
                    
                    8,980Adjustment
      to present value of purchased and redeemed notes 2016 during
      2009
                    
                    
                    7,932
                    
                    
                    
                    -Gain
      on debt restructuring
                    
                    
                    (66,803
                    )
                    
                    
                    (66,803
                    )Gain
      on early extinguishment of debt
                    
                    
                    (297,805
                    )
                    
                    
                    (147,537
                    )Financial
      debt (current and non current) under US GAAP
                    
                    
                    850,225
                    
                    
                    
                    1,050,075Total
      impact in shareholders’ equity under US GAAP (Note 27.I.g)
                    
                    
                    59,738
                    
                    
                    
                    109,682


F-68





Effects
of US GAAP adjustments in net income under Argentine GAAP are as
follows:





For the year ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Gain
      on early extinguishment of debt
                  
                  
                  150,269
                  
                  
                  
                  147,537
                  
                  
                  
                  -Interest
      expense and exchange differences
                  
                  
                  (51,454
                  )
                  
                  
                  18,203
                  
                  
                  
                  (33,353
                  )Adjustment
      to present value of notes
                  
                  
                  5,243
                  
                  
                  
                  8,457
                  
                  
                  
                  21,495Adjustment
      to present value of purchased and redeemed notes due in
    2016
                  
                  
                  (7,932
                  )
                  
                  
                  (8,980
                  )
                  
                  
                  8,632(Gain)
      / Loss from the purchase and redemption of notes due in
    2016
                  
                  
                  (46,182
                  )
                  
                  
                  (55,185
                  )
                  
                  
                  10,228Gain
      on debt restructuring
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  66,803Total
      impact in net income (Note 27.I.g)
                  
                  
                  49,944
                  
                  
                  
                  110,032
                  
                  
                  
                  73,805





e)
              Pension
      Plan





As
indicated in Note 3.o, the Company has a pension plan for benefits to personnel
(employee pension plan). Employee pension costs are recognized in accordance
with Compensation-Retirement Benefits topic of the FASB Accounting Standards
Codification, ASC topic 715. This topic requires the use of an actuarial method
for determining defined benefit pension costs and provides for the deferral of
actuarial gains and losses (in excess of a specific corridor) that result from
changes in assumptions or actual experience differing from assumed. ASC topic
715 also provides for the prospective amortization of costs related to changes
in the benefit plan, as well as the obligation resulting from transition and
requires disclosure of the components of periodic pension costs and the funded
status of pension plans. In addition, ASC topic 715 requires the immediate
recognition of deferred pension costs when some or all of the following
conditions are met:





(a)
pension obligations are settled;


(b)
defined benefits are no longer earned under the plan and the plan is not
replaced by other defined benefit plan;


(c) there
are no remaining plan assets; and


(d)
employees are terminated or the plan ceases to exist.





The
Company has a pension plan covering substantially all of its employees under
collective bargain agreement mentioned in Note 3.o. ASC topic 715 has been
applied from and after January 1, 2003. However, amortization of the net
transition obligation existing at January 1, 1993 has been computed
retroactively as if it had been established on January 1, 1989, which is the
date that ASC topic 715 first became effective for non−US pension
funds.





In
accordance with US GAAP, actual results that differ from Company’s assumptions
are accumulated and amortized over future periods and generally affect Company’s
recognized expenses and recorded obligations in such future periods. While we
believe that our assumptions are appropriate, significant differences in actual
results or significant changes in Company’s assumptions may materially affect
our pension and other postretirement obligations.





During
2005, two new collective bargain agreements were signed with the Sindicato de
Luz y Fuerza de la Capital Federal (Electric Light and Power Labor Union – City
of Buenos Aires) and the Asociación de Personal Superior de Empresas de Energía
(Association of Supervisory Personnel of Energy Companies) expiring December 31,
2007 and October 31, 2007, respectively. On November 17, 2006 and October 5,
2006 the agreements signed with the Electric Light and Power Labor Union – City
of Buenos Aires and the Association of Supervisory Personnel of Energy Companies
have been ratified by the Ministry of Labor and Social Security,
respectively.





As of the
date of issuance of this annual report, meetings aimed at negotiating the
renewal terms of both collective bargaining agreements, are being held with the
above-mentioned unions.





The
Company applies ASC section 715-30-25 and the disclosures requirements of ASC
section 715-20-50. Under provisions of this topic, the Company fully recognized
the underfunded status of defined-benefit pension and postretirement plans as a
liability in the financial statements reducing the Company’s shareholders’
equity through Accumulated OCI account. Unrecognized actuarial losses and gains
are recognized in the statements of income during the expected average remaining
working lives of the employees participating in the plans and the live
expectancy of retired employees.


F-69





The
components of net periodic benefit cost under Argentina GAAP and US GAAP for
2009, 2008 and 2007 are as follows:





As of December 31,2009
                    
                    
                    2008
                    
                    
                    2007Components
      of net year benefit costService
      cost
                    
                    
                    1,608
                    
                    
                    
                    1,488
                    
                    
                    
                    1,125Interest
      cost
                    
                    
                    4,843
                    
                    
                    
                    4,441
                    
                    
                    
                    2,874Recognized
      net actuarial loss
                    
                    
                    1,314
                    
                    
                    
                    779
                    
                    
                    
                    760Net
      year benefit cost
                    
                    
                    7,765
                    
                    
                    
                    6,708
                    
                    
                    
                    4,759





The
changes in benefit obligations for the years ended December 31, 2009 and 2008
are as follows:





As of December 31,2009
                    
                    
                    2008Benefit
      obligation - beginning of year
                    
                    
                    26,623
                    
                    
                    
                    19,083Service
      cost
                    
                    
                    1,608
                    
                    
                    
                    1,488Interest
      cost
                    
                    
                    4,843
                    
                    
                    
                    4,441Actuarial
      (gain)/ loss
                    
                    
                    (886
                    )
                    
                    
                    3,638Benefits
      paid to participants
                    
                    
                    (993
                    )
                    
                    
                    (2,027
                    )Benefit
      obligation – end of year
                    
                    
                    31,195
                    
                    
                    
                    26,623





The
adoption of ASC section 715-30-25-1 on December 31, 2006 resulted in the
recognition of the “unrecognized actuarial loss” amounting to 5,714 as
adjustment to accumulated other comprehensive loss, and a deferred tax asset of
approximately 2,000, also in accumulated other comprehensive loss net of charge
of 3,714 as adjustment to accumulated other comprehensive loss. As of December
31, 2009, 2008 and 2007, the Company recognized a gain of 1,430, a net charge of
1,858 and 1, respectively, as adjustment to accumulated other comprehensive
gain/loss corresponding to the net actuarial gain/loss for the
year.





The
following table shows changes in accumulated other comprehensive gain/loss for
the years ended December 31, 2009, 2008 and 2007:





Net
                    of tax
                  
                  
                  Tax
                    effect
                  
                  
                  Gross
                    amountBalance
      as of January, 2007
                  
                  
                  3,714
                  
                  
                  
                  (2,000
                  )
                  
                  
                  5,714Net
      actuarial loss for the year 2007
                  
                  
                  1
                  
                  
                  
                  (1
                  )
                  
                  
                  2Balance
      as of December 31, 2007
                  
                  
                  3,715
                  
                  
                  
                  (2,001
                  )
                  
                  
                  5,716Net
      actuarial loss for the year 2008
                  
                  
                  1,858
                  
                  
                  
                  (1,001
                  )
                  
                  
                  2,859Balance
      as of December 31, 2008
                  
                  
                  5,573
                  
                  
                  
                  (3,002
                  )
                  
                  
                  8,575Net
      actuarial loss (gain) for the year 2009
                  
                  
                  (1,430
                  )
                  
                  
                  770
                  
                  
                  
                  (2,200
                  )Balance
      as of December 31, 2009
                  
                  
                  4,143
                  
                  
                  
                  (2,232
                  )
                  
                  
                  6,375





The
following yearly pension benefits payments are expected to be made:





2010
                  
                  
                  3,8712011
                  
                  
                  4,1432012
                  
                  
                  5,2492013
                  
                  
                  4,2012014
                  
                  
                  4,8022015-2019
                  
                  
                  21,850




The
components of the projected net periodic pension benefit costs for 2010 are as
follows:


F-70




Service
      cost
                      
                      
                      1,608Interest
      cost
                      
                      
                      4,843Amortization
      of net actuarial loss
                      
                      
                      1,314Net
      year benefit cost
                      
                      
                      7,765





The
following table shows the effect of a 1% change in discount rate on our
projected benefit obligation for the periods indicated:




As of December 31,2009
                  
                  
                  2008
                  
                  
                  2007Projected
      benefit obligation
                  
                  
                  31,195
                  
                  
                  
                  26,623
                  
                  
                  
                  19,083Effect
      of a one-percentage-point increase
                  
                  
                  29,676
                  
                  
                  
                  25,218
                  
                  
                  
                  18,050Effect
      of a one-percentage-point decrease
                  
                  
                  32,935
                  
                  
                  
                  28,227
                  
                  
                  
                  20,261




Assumptions




2009
                    
                    
                    2008
                    
                    
                    2007Weighted—discount
      rate
                    
                    
                    25.0
                    %
                    
                    
                    18.0
                    %
                    
                    
                    21.0
                    %Weighted—salary
      increase
                    
                    
                    15.0
                    %
                    
                    
                    15.0
                    %
                    
                    
                    20.0
                    %Weighted—long
      term inflation
                    
                    
                    11.5
                    %
                    
                    
                    11.5
                    %
                    
                    
                    14.0
                    %





Actuarial
Method: Projected Unit Credit Method





The
Company does not make plan contributions or maintain separate assets to fund the
benefits at retirement. The net periodic pension costs are recognized as
employees render the services necessary to earn pension benefits.





f)
              Trust
      Consolidation





As
discussed in Note 22, on September 30, 2008, the Company and Macro Bank Limited
entered into an irrevocable and discretionary Trust agreement (thereafter “the
Trust”).





Under
Argentina GAAP, the Trust was not consolidated with the Company ́s financial
statements but included as a non current investment and valued at the fair value
of the outstanding financial instruments as of December 31, 2008.





Under US
GAAP, the Trust represented a Variable Interest Entity (VIE) and as such had to
be consolidated in the Company ́s financial statements.





As of
December 31, 2008, the outstanding financial assets held by the Trust and
related accrued interests were as follows:





Amounts in
                    thousands of US$
                  
                  
                  Accrued interests in
                    thousands of US$Cash
                  
                  
                  1,179
                  
                  
                  
                  -Clarín
      Group Notes
                  
                  
                  2,145
                  
                  
                  
                  -Edenor
      Notes due on 2017
                  
                  
                  10,030
                  
                  
                  
                  556Edenor
      Notes due on 2017
                  
                  
                  407
                  
                  
                  
                  23





Under US
GAAP, Transfer and Servicing topic of the FASB Accounting Standards Codification
states that  the reacquisition by the debtor of its outstanding debt
securities whether the securities are canceled or held as so-called treasury
bonds constitutes an extinguishment of the liability. Therefore, the Company
considered that the repurchase made by the financial Trust should be treated as
treasury bonds and, a gain on the transaction was recognized together with the
elimination of the related short-term investment and liability recorded under
Argentine GAAP.





On
September 3, 2009, the discretionary trust was dissolved and the trust property
was liquidated and transferred to the Company.


F-71





g)
              Basic
      and diluted earnings per
share





As
mentioned in Note 3.s, under Argentine GAAP, the Company is required to disclose
earnings per share information in accordance with FACPCE TR 18 for all the years
presented.





Under US
GAAP, basic and diluted earnings per share are presented in conformity with
topic ASC 260 for all years presented.  Pursuant to this topic,
ordinary shares and convertible preferred shares issued or granted for nominal
consideration prior to the anticipated effective date of an initial public
offering must be included in the calculation of basic and diluted earnings per
share as if they had been outstanding for all periods presented. To date, the
Company has not had any issuance or grants for nominal
consideration.





The
following tables set forth the computation of basic and diluted earning per
common share under US GAAP for the years presented:





For the years ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Net Earning per shareNumerator:Net
      income for the year
                  
                  
                  73,081
                  
                  
                  
                  264,527
                  
                  
                  
                  215,797Denominator:Weighted
      average number of shares used in basic and diluted EPS
                  
                  
                  897,042,600
                  
                  
                  
                  897,042,600
                  
                  
                  
                  906,455,100Net
      earning per share - basic and diluted
                  
                  
                  0.081
                  
                  
                  
                  0.295
                  
                  
                  
                  0.238





There are
no potential dilutive equity shares.





h)
              Segment
      information




As stated
in Note 3.t., under Argentine GAAP, the Company is required to disclose segment
information in accordance with RT 18. It establishes standards for reporting
information about operating segments in annual financial statements and requires
reporting of selected information about operating segments in interim financial
reports issued to shareholders. Operating segments are components of a company
about which separate financial information is available that is regularly
evaluated by the chief operating decision maker(s) in deciding how to allocate
resources and assess performance. The statement also establishes standards for
related disclosures about a company’s products and services, geographical areas
and major customers.




Under US
GAAP, criteria set by ASC 280 Segment Reporting topic of the FASB Accounting
Standards Codification is applicable. The Company segment information is based
on the components of a company about which separate financial information is
available and the management’s analysis for making operating
decisions.




The
Company is a natural monopoly that operates in a single business segment,
electricity distribution, in a specific geographical urban area and under the
terms of the concession contract by which this public service is controlled. The
Company activities have similar economic characteristics and are similar in
terms of the nature of their products and services, the nature of the
electricity distribution process, the type or class of customer, the
geographical area, and methods of distribution.  The management
evaluates Company’s performance based on net income.





The
management evaluated if the agreements with Comunicaciones y Consumos S.A. and
Préstamos y Servicios S.A., signed in 2008 as described in Note 15, represented
new business segments and concluded that these operations have no impact both
quantitatively and qualitatively in these financial statements. Thus, no
additional disclosure is required under US GAAP.





i)
              Cash
      flow information





Under
Argentine GAAP, the Company is required to present the statements of cash flows
in the primary financial statements in accordance with TR 9, as amended.
Guidance set forth in TR 9 (as amended) is similar to the guidelines set forth
in ASC 230 “Statement of Cash Flows”.  As described in Note 18.a, the
Company considers all highly liquid investments to be cash
equivalents.


F-72





Under US
GAAP, following Topic 230 “Statement of Cash Flows” (ASC 230), the Company
classified its investments in Corporate Debt Securities within investing
activity.  As their maturity occurs beyond 3 months, the Corporate
Debt Securities are not included as part of cash equivalents.





Under
Argentine GAAP, the Company classified as financing activities purchases and
sales of debt securites, other than cash equivalents.





Under US
GAAP, following ASC 230 and Topic ASC 320 “Investments – Debt and Equity
Securities”, the Company classified those transactions as investing
activities.





The
following table presents the reconciliation of the statement of cash flows
between Argentine GAAP and US GAAP:





For
      the years ended as of December 31,Reconciliation
      of cash flows under Argentine GAAP and US GAAP
                                  
                                  2009
                                  
                                  
                                  2008
                                  
                                  
                                  2007Net
      cash flow provided by operating activities under Argentine
      GAAP
                                  
                                  
                                  667,977
                                  
                                  
                                  
                                  547,543
                                  
                                  
                                  
                                  427,182Reclasification
      from operating activities to investing activities:Effect
      of exchange rate changes on cash and cash equivalents
                                  
                                  
                                  (7,021
                                  )
                                  
                                  
                                  (2,447
                                  )
                                  
                                  
                                  (12,198
                                  )Net
      cash flow provided by operating activities under US GAAP
                                  
                                  
                                  660,956
                                  
                                  
                                  
                                  545,097
                                  
                                  
                                  
                                  414,984Net
      cash flow used in investing activities under Argentine
GAAP
                                  
                                  
                                  (404,165
                                  )
                                  
                                  
                                  (325,380
                                  )
                                  
                                  
                                  (336,851
                                  )Effect
      of consolidation of Edenor’s financial trust
                                  
                                  
                                  (11,345
                                  )
                                  
                                  
                                  11,345Decrease
      (Increase) in current and non current investments
                                  
                                  
                                  13,614
                                  
                                  
                                  
                                  (67,893
                                  )
                                  
                                  
                                  -Debt
      securities classified as cash equivalents under Argentina
    GAAP
                                  
                                  
                                  (48,524
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Net
      cash flow used in investing activities under US GAAP
                                  
                                  
                                  (450,420
                                  )
                                  
                                  
                                  (381,928
                                  )
                                  
                                  
                                  (336,851
                                  )Net
      cash flow used in financing activities under Argentine GAAP
      (*)
                                  
                                  
                                  (161,839
                                  )
                                  
                                  
                                  (196,962
                                  )
                                  
                                  
                                  (21,806
                                  )(Decrease) Increase in
      current and non current investments
                                  
                                  
                                  (13,614
                                  )
                                  
                                  
                                  67,893
                                  
                                  
                                  
                                  -Net
      cash flow used in financing activities under US GAAP
                                  
                                  
                                  (175,453
                                  )
                                  
                                  
                                  (129,069
                                  )
                                  
                                  
                                  (21,806
                                  )Net
      increase in cash and cash equivalents under US GAAP
                                  
                                  
                                  42,104
                                  
                                  
                                  
                                  36,546
                                  
                                  
                                  
                                  68,525Effect
      of exchange rate changes on cash and cash equivalents
                                  
                                  
                                  7,021
                                  
                                  
                                  
                                  2,447
                                  
                                  
                                  
                                  12,198Net
      increase in cash and cash equivalents under US GAAP after effect of
      exchange rate changes on cash and cash equivalents
                                  
                                  
                                  35,083
                                  
                                  
                                  
                                  34,099
                                  
                                  
                                  
                                  56,327Cash
      and cash equivalents at the beginning of the year
                                  
                                  
                                  137,744
                                  
                                  
                                  
                                  101,198
                                  
                                  
                                  
                                  32,673Cash
      and cash equivalents at the end of the year
                                  
                                  
                                  179,848
                                  
                                  
                                  
                                  137,744
                                  
                                  
                                  
                                  101,198





2009
                      
                      
                      2008Cash
      and cash equivalents under Argentine GAAP (Note 18)
                      
                      
                      228,372
                      
                      
                      
                      126,399Effect
      of Trust consolidationCash
                      
                      
                      -
                      
                      
                      
                      4,024Debt
      Securities – third parties debt
                      
                      
                      -
                      
                      
                      
                      7,321Corporate
      Debt Securities – Not qualified as cash equivalent under US GAAP (Note
      27.I.e)
                      
                      
                      (48,524
                      )
                      
                      
                      -Cash
      and cash equivalents in the Statement of Cash Flows under US
      GAAP
                      
                      
                      179,848
                      
                      
                      
                      137,744


F-73





(*)
                                      In
      2007, under US GAAP the breakdown is as follows:Proceeds
      from issuing notes
                                      
                                      
                                      719,838Payments
      on redeemed notes
                                      
                                      
                                      (923,417
                                      )Capital
      increase
                                      
                                      
                                      181,773Net
      cashflow used in financing activities
                                      
                                      
                                      (21,806
                                      )





j)
              ASC
      825, The Fair Value Option for Financial Assets and Financial
      Liabilities





On
January 1, 2008 the Company adopted ASC 825 “Fair value option”, which
permits a company to measure certain financial assets and financial liabilities
at fair value that were not previously required to be measured at fair value.
The Company has not elected to measure any financial assets and financial
liabilities at fair value which were not previously required to be measured at
fair value. Therefore, the adoption of this standard has had no effect on the
Company’s results of operations.





k)
              Fair
      value measurements





The
Company applies ASC Topic 820, Fair Value Measurements (“ASC Topic 820”), which
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date (an exit price). The standard outlines a valuation
framework and creates a fair value hierarchy in order to increase the
consistency and comparability of fair value measurements and the related
disclosures. Under US GAAP, certain assets and liabilities must be measured at
fair value, and ASC Topic 820 details the disclosures that are required for
items measured at fair value.


The
Company has various financial instruments that must be measured under ASC Topic
820 including: certain money market funds, bonds, marketable securities; and
derivatives. None of its current non-financial assets or non-financial
liabilities must be measured at fair value on a recurring basis. The Company
measures its financial assets and liabilities using inputs from the following
three levels of the fair value hierarchy. The three levels are as
follows:





§
            Level
      1 inputs are unadjusted quoted prices in active markets for identical
      assets or liabilities accessible at the measurement
  date.





§
            Level
      2 inputs include quoted prices for similar assets and liabilities in
      active markets, quoted prices for identical or similar assets or
      liabilities in markets that are not active, inputs other than quoted
      prices that are observable for the asset or liability (i.e., interest
      rates, yield curves, etc.), and inputs that are derived principally from
      or corroborated by observable market data by correlation or other means
      (market corroborated inputs).





§
            Level
      3 includes unobservable inputs that reflect the Company’s assumptions
      about the assumptions that market participants would use in pricing the
      asset or liability. The Company develops these inputs based on the best
      information available, including its own
data.


F-74


In
accordance with the fair value hierarchy, the following table shows the fair
value as of year-end 2009, of those financial assets that must be measured at
fair value and were classified as “Investments” and “Loans”:





Fair value measurements as of December 31, 2009Description
                        
                        Balance at
                          year-end
                          2009
                        
                        
                        Level 1
                        
                        
                        Level 2
                        
                        
                        Level 3AssetsGovernment
      Bonds
                        
                        
                        63,917
                        
                        
                        
                        63,917
                        
                        
                        
                        -
                        
                        
                        
                        -Money
      market funds
                        
                        
                        80,055
                        
                        
                        
                        80,055
                        
                        
                        
                        -
                        
                        
                        
                        -Corporate
      Debt Securities
                        
                        
                        48,524
                        
                        
                        
                        48,524
                        
                        
                        
                        -
                        
                        
                        
                        -192,496
                        
                        
                        
                        192,496
                        
                        
                        
                        0
                        
                        
                        
                        0





Most of
the Company’s financial assets and liabilities are valued using market prices on
active markets (level 1). Level 1 instrument valuations are obtained
from real-time quotes for transactions in active exchange markets involving
identical assets. Derivative instruments are valued at fair value obtained from
readily-available pricing sources for comparable instruments (level 2). As of
December 31, 2009, the Company did not have any assets or liabilities
without observable market values that would require a high level of judgment to
determine fair value (level 3).





The
unrealized net gains on short-term investments are reported as a component of
other comprehensive income.





As of
December 31, 2009, the carrying value of the Company’s cash and cash
equivalents approximated their fair value which was held primarily in bank
deposits and there were no financial liabilities measured at fair value. For the
years ended December 31, 2009 and 2008, the Company held no direct investments
in auction rate securities, collateralized debt obligations, structured
investment vehicles or mortgage-backed securities.





l)
              Derivative
      financial instruments





Corporate
Notes





There is
a disclosure difference between Argentina GAAP and US GAAP for the derivate
financial instruments described in Note 23.





Under
Argentina GAAP, as of December 31, 2009, these transactions have been fully
settled, there being no outstanding balances. As of December 31, 2008 a
receivable related to derivate financial instruments amounting to 7,905 offset
Current liabilities-Loan- Interest.





Under US
GAAP, and following topic ASC 815-10-45 such receivable had been included as an
asset in the condensed consolidated balance sheet as of December 31,
2008.





Forward
and Futures Contracts





There is
no difference between Argentina GAAP and US GAAP for these financial
transactions. Thus, it is not deemed necessary to include additional disclosure
under US GAAP in the Company’s financial statements.





Topic ASC
815 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging
activities.





m)
              Statement
      of Income classification differences between Argentine GAAP and US
      GAAP





Net
Sales





Under
Argentine GAAP, during the year ended December 31, 2007, the Company recognized
revenues amounting to 218,591 from the retroactive tariff increase derived from
the application of the new electricity rate schedule to non-residential
consumption for the period since November 2005 through January 31, 2007 (Note
17.b). Due to the fact that such tariff increase is being invoiced in 55 equal
and consecutive monthly installments, adjustments to present value related to
this matter and related to the Payment Plan Agreement with the Province of
Buenos Aires (Note 13), were recorded and included as a separate line below
operating income (amounting to 29,618 for the year ended December 31,
2007).


F-75





For US
GAAP purposes, the discounts resulting from the determination of present value
at the date of transaction offset revenues. Additionally, the amortization of
such discounts should be reported as interest according to ASC 835-30 (amounting
to 14,769 for the year ended December 31, 2007).





Under
Argentine GAAP, penalties have been deducted from sales. For US GAAP purposes,
penalties are included as transmission and distribution expenses (amounting to
58,500, 34,775 and 23,940 for the years ended December 31, 2009, 2008 and
2007).





Under
Argentine GAAP, during the year ended December 31, 2007, the electricity
distributed to shantytowns was recorded as sales. Under US GAAP the conditions
to recognize revenue were not met, thus, such sales have been eliminated in the
Statement of Income (amounting to 24,500). During the year ended December 31,
2008, the Framework Agreement was signed with the Federal Government (September
2008) and therefore, the corresponding allowance for doubtfull accounts was
recovered under Argentina GAAP. Under US GAAP, these sales are recognized since
the conditions required are met (amounting 24,016).





During
the year ended December 31, 2009, the Addendum to the New Framework Agreement
entered into by the Government of the Province of Buenos Aires and the Company,
was ratified by Decree No. 732 published in the Official Gazette of the Province
of Buenos Aires (June 2009). As a consequence, the allowance for doubtfull
accounts was partially recovered under Argentina GAAP. Under US GAAP, these
sales are recognized since the conditions required are met (amounting
26,956).





As a
result of these differences, net sales under US GAAP would have been 2,163,316,
2,058,988 and 1,936,980 for the years ended December 31, 2009, 2008 and 2007,
respectively.





Gross
margin





In
addition to the above explained differences under Argentine GAAP, transmission
and distribution expenses have been included whithin operating expenses, but
excluded from gross margin calculation. Under US GAAP, such expenses have been
included whithin gross margin calculation.





As a
result of these differences, gross margin under US GAAP would have been 535,985,
547,356 and 569,641 for the years ended December 31, 2009, 2008 and 2007,
respectively.





Net
operating income





Under
Argentine GAAP, certain operating expenses have been included as other expenses
- net, excluded from operating income. Under US GAAP, such expenses have been
included as operating expenses - net.





As a
result of these differences, operating income under US GAAP are 208,762, 250,725
and 362,131 for the years ended December 31, 2009, 2008 and 2007,
respectively.





Financial
income (expense), net





Under
Argentine GAAP the adjustment ENRE penalties has been included as Financial
(expense), net and holding gains. Under US GAAP, such adjustment has been
included in penalties as part of Transmission and Distribution Expenses
(amounting to 17,162 and 18,084 for the years ended December 31 2008 and 2007,
respectively). During the year ended December 31, 2009, there was no ENRE
penalties adjustment.





Under
Argentine GAAP, the adjustment to present value of the retroactive tariff
increase and the Payment Plan Agreement with the Province of Buenos Aires has
been included in a separate line below Financial income (expense) and holding
gains (losses). Under US GAAP, the amortization of the discount derived from the
adjustment to present value of the retroactive tariff increase has been
reclassified to interest gain, within Financial income (expense),
net.





In
addition, under US GAAP, Financial income (expense), net includes the adjustment
of Troubled Debt Restructuring and Repurchases of Debt, described in Note
27.I,d), the reversal of the gain obtained by the Trust under Argentine GAAP, as
described in Note 27.I.f) and the adjustment on unrealized loss on
available-for-sale investments as described in Note 27.I.e).


F-76





As a
result of this disclosure difference, Financial (expense) income, net under US
GAAP would have been (42,583), 81,965 and (46,479) for years ended
December 31, 2009, 2008 and 2007, respectively.





The
condensed consolidated statements of income for the years ended December 31,
2009, 2008 and 2007 under US GAAP are as follows:





For the year ended December 31,2009
                
                
                2008
                
                
                2007Net
      sales / Services revenues
                
                
                2,163,316
                
                
                
                2,058,988
                
                
                
                1,936,980Electric
      power purchases
                
                
                (1,003,362
                )
                
                
                (934,660
                )
                
                
                (889,885
                )Transmission
      and Distribution Expenses
                
                
                (623,969
                )
                
                
                (576,972
                )
                
                
                (477,454
                )Gross
      margin
                
                
                535,985
                
                
                
                547,356
                
                
                
                569,641Operating
      expenses, net
                
                
                (327,223
                )
                
                
                (296,631
                )
                
                
                (207,510
                )Net
      operating income
                
                
                208,762
                
                
                
                250,725
                
                
                
                362,131Financial
      (expense) income, net
                
                
                (42,467
                )
                
                
                81,965
                
                
                
                (46,479
                )Net
      income before income tax
                
                
                166,295
                
                
                
                332,690
                
                
                
                315,652Income
      tax expense
                
                
                (93,214
                )
                
                
                (68,163
                )
                
                
                (99,855
                )Net
      income for the year
                
                
                73,081
                
                
                
                264,527
                
                
                
                215,797Earning
      per ordinary share
                
                
                0.081
                
                
                
                0.295
                
                
                
                0.238





The
condensed consolidated balance sheets under US GAAP as of December 31, 2009 and
2008 are as follows:





As of December 31,2009
                
                
                2008Current
      Assets
                
                
                703,283
                
                
                
                666,694Property,
      plant and equipment, net
                
                
                3,552,413
                
                
                
                3,331,204Other
      non-current assets
                
                
                260,404
                
                
                
                258,426Current
      liabilities
                
                
                790,889
                
                
                
                707,536Non-current
      liabilities
                
                
                1,923,762
                
                
                
                1,821,634Shareholders'
      equity
                
                
                1,801,449
                
                
                
                1,727,154





For the year ended December 31,Summary of Condensed Shareholders’ equity in accordance with
                    US GAAP
                  
                  2009
                  
                  
                  2008Common
      stock
                  
                  
                  1,902,944
                  
                  
                  
                  1,902,944Treasury
      stock
                  
                  
                  (6,130
                  )
                  
                  
                  (6,130
                  )Additional
      paid-in capital
                  
                  
                  24,970
                  
                  
                  
                  24,970Legal
      Reserve
                  
                  
                  59,476
                  
                  
                  
                  53,320Accumulated
      deficit
                  
                  
                  (255,787
                  )
                  
                  
                  (514,158
                  )Net
      income
                  
                  
                  73,081
                  
                  
                  
                  264,527Accumulated
      Other Comprehensive Income
                  
                  
                  2,895
                  
                  
                  
                  1,681Total
      Shareholders’ equity
                  
                  
                  1,801,449
                  
                  
                  
                  1,727,154





n)
              Valuation
      of Property, plant and
equipment





Under
Argentine GAAP, assets transferred through the privatization of SEGBA were
valued at their fair value on the privatization date as described in Note
3.g.





Under US
GAAP, following the accommodation allowed as published in the SEC International
Reporting and Disclosure Issues in the Division of Corporation Finance as
revised on November 1, 2004, when reliable fixed asset records are not
available and cannot be reasonably produced, the registrant may use the opening
fair value balances as its costs basis. Thereafter, the assets are reported in
the usual manner with respect to depreciation and evaluation of
impairment.


F-77





Based on
the foregoing, there is no difference between US GAAP and Argentine
GAAP.





o)
              ASC
      740 Income Taxes





ASC 740
defines the criteria an individual tax position must meet for any part of the
benefit of such position to be recognized in the financial statements. This
topic establishes “a more-likely-than-not” recognition threshold that must be
met before a tax benefit can be recognized in the financial statements. The
topic also provides guidance, among other things, on the measurement of the
income tax benefit associated with uncertain tax positions, de-recognition,
classification, interest and penalties and financial statement
disclosures.





As it is
required by this topic, the Company has reassessed whether the
“more-likely-than-not” recognition threshold has been met before a tax benefit
can be recognized and how much of a tax benefits to recognize in the financial
statements. The adoption of the topic did not have an impact on the Company’s
financial position. There were no unrecognized tax benefits as of December 31,
2009.





The
company classifies interest and penalties in the statement of income under the
line “Income tax expense”.





On April
27, 2009, the Company adhered to the income tax regularization plan established
in Law No. 26,476. In accordance with the assessment of the tax regularization
plan, the Company’s debt was settled at Ps. 12,122 plus interest to be accrued.
During the year 2009, the Company paid for this concept an amount of 1,487 and
the remaining balance of the Company’s debt totals 10,635.  As a
consequence of this tax regularization plan, the Company recognized a gain
amounting to Ps. 23,341, net of legal fees amounting to Ps. 2,8 million,
included within provision, in Annex E.





The
reconciliation of the beginning and ending balances of recognized uncertain tax
position as of December 31, 2009 and 2008 is the following:





Recognized
      uncertain tax position as of December 31, 2007
                  
                  
                  36,027Gross
      increase due to interest on prior year uncertain tax
    position
                  
                  
                  2,236Recognized
      uncertain tax position as of December 31, 2008
                  
                  
                  38,263Gross
      decrease due to the assessment of the tax regularization
    plan
                  
                  
                  (38,263
                  )Recognized
      uncertain tax position as of December 31, 2009
                  
                  
                  -





This
decrease is due to the assessment of the tax regularization plan mentioned
above, and therefore there is no need to record an additional income tax
liability.





p)
              Accounting
      for stock transferred by Argentine government to
  employees





Under
Argentine GAAP, there are no specific rules governing the accounting to be
followed by employers when a principal shareholder transfers shares to a
company’s employees (Note 16.c).





Under US
GAAP, the Company follows ASC 718 “Stock compensation”. The economic substance
of a plan establish by the principal stockholders is substantially the same for
the Company and the employee, whether the plan is adopted by the Company or a
principal stockholder. Consequently, the Company should account for this type of
plan when one is established or financed by a principal stockholder unless (1)
the relationship between the stockholder and the company’s employee is one which
would normally result in generosity, (2) the stockholder has an obligation to
the employee which is completely unrelated to the latter’s employment, or (3)
the company clearly does not benefit the transaction. The rationale established
in this Interpretation has been applied to other situations in which a principal
stockholder for the benefit of the company. ASC 225-10 requires any transaction
undertaken by a company’s principal stockholder for the benefit of the company
to be accounted for according to its substance and not its form. Under Topic ASC
718, compensation expense is based on the difference, if any, on the date of the
grant, between the fair value of the Company’s stock and the exercise price. ASC
718-10 defines a “fair value” based method of accounting for an employee stock
option or similar equity investment.





The
Argentine Government agreed to establish a Share Ownership Plan, principally for
the benefit of the former employees of SEGBA transferred to the Company. Under
the terms of the plan, employees eligible to participate acquired the shares of
the Company previously held by the Government for an amount significantly less
than the market value of the shares on September 1, 1992 (“grant date”). The
purchase price formula was originally established during the
privatization.


F-78





Had the
Company been required by SEC regulations to include reconciliation between
Argentine GAAP and US GAAP for the fiscal year 1992, it would have included as a
reconciling item a charge amounting to 6,653 in the Statement of Income.
However, this charge represented a reclassification between equity accounts, and
consequently, it had no impact on shareholders’ equity or cash flows determined
under US GAAP. The charge was calculated based upon the difference between the
estimated total price per share paid by EASA as of the grant date and the
purchase price to be paid by eligible employees.





There
have been no additional grants of stocks to employees since September 1,
1992.





q)
              Repurchase
      of own shares





During
the year ended December 31, 2008, the Company’s Board of Directors decided to
begin with the acquisition process of the Company’s own shares through market
transactions.





Under
Argentine GAAP the Company followed CNV standards and accounted for the
repurchase of own shares by deducting from the shareholders’ equity accounts
‘Nominal Value’ and ‘Adjustment to Capital’ 9,412, and 10,347, respectively,
representing the face value of the shares reacquired in the open market, and
credited the accounts ‘Nominal Value Treasury Stock’ and ‘Adjustment to Capital
Treasury Stock’, by the before mentioned amounts, respectively. Additionally,
‘Unappropriated Retained Earnings’ and ‘Cash and banks’ were deducted by 6,130,
representing the amount effectively paid by the Company to the holders of its
shares.





Under US
GAAP, the Company followed Topic ASC 505 “Treasury Stock” and accounted for the
repurchase of own shares by deducting the shareholders’ equity account ‘Nominal
Value Treasury Stock’ and ‘Cash and banks’ by 6,130.





Under US
GAAP, such transaction does not constitute a GAAP difference in measurement, but
a disclosure difference exist, since the account ‘Nominal Value Treasury Stock’
should represent the amount effectively paid for the shares repurchased, no
impact on capital accounts or retained earnings exist.





During
the year ended December 31, 2009 no other acquisitions have been carried
out.





r)
              Comprehensive
      income





ASC 220,
“Comprehensive Income” establishes guidelines for the reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. Comprehensive income represents the change in
shareholders’ equity of the Company during the year from transactions and other
events and circumstances from non-owner sources. It includes all changes in
equity during a period except those resulting from investments by owners and
distributions to owners.





The
following table summarizes the components of comprehensive income for the years
ended December 31, 2009, 2008 and 2007:





For the year ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Net
      income under US GAAP
                  
                  
                  73,081
                  
                  
                  
                  264,527
                  
                  
                  
                  215,797Other
      comprehensive (loss) income:Unrealized
      gains and losses - Available for sale securities (net of a tax effect of
      116 benefit and (1,905) loss for 2009 and 2008,
    respectively)
                  
                  
                  (216
                  )
                  
                  
                  3,539
                  
                  
                  
                  -Pension
      plan (net of a tax effect of (770) loss, 1,001 benefit and 1 benefit, for
      2009, 2008 and 2007, respectively)
                  
                  
                  1,430
                  
                  
                  
                  (1,858
                  )
                  
                  
                  (1
                  )Comprehensive
      income
                  
                  
                  74,295
                  
                  
                  
                  266,208
                  
                  
                  
                  215,796


F-79





The
following table summarizes the components of accumulated other comprehensive
income for the years ended December 31, 2009, 2008 and 2007:





For the year ended December 31,2009
                      
                      
                      2008
                      
                      
                      2007Accumulated
      unrealized gain on Available for sale securities
                      
                      
                      5,112
                      
                      
                      
                      5,444
                      
                      
                      
                      -Accumulated
      estimated tax (loss) on Available for sale securities
                      
                      
                      (1,789
                      )
                      
                      
                      (1,905
                      )
                      
                      
                      -Accumulated
      pension plan
                      
                      
                      (659
                      )
                      
                      
                      (2,859
                      )
                      
                      
                      2Accumulated
      estimated tax benefit (loss) on pension plan
                      
                      
                      231
                      
                      
                      
                      1,001
                      
                      
                      
                      (1
                      )Accumulated
      Other Comprehensive income
                      
                      
                      2,895
                      
                      
                      
                      1,681
                      
                      
                      
                      1





s)
              Recently
      issued accounting
pronouncements





In May
2009, the FASB amended Accounting Standards Codification Section 855-10,
Subsequent Events, Overall. These amendments establish the general standards of
accounting for, and disclosure of, events that occur after the balance sheet
date, but before financial statements are issued or available to be issued.
These amendments are effective for interim and fiscal periods ending after June
15, 2009. The Company has evaluated subsequent events for the period from
December 31, 2009, the date of these financial statements, through May 31, 2010,
which represents the date the Company intends to file these financial statements
with the Securities and Exchange Commission. Pursuant to the requirements of
Accounting Standards Codification Section 855-10, there were no events or
transactions occurring during this subsequent event reporting period that
require recognition or disclosure in these financial statements.





In June
2009, the FASB issued SFAS No. 168 “The FASB Accounting Standards Codification
TM and the Hierarchy of Generally Accepted Accounting Principles – a replacement
of FASB Statement No. 162”. This Statement establishes that the FASB Accounting
Standards Codification TM (“ASC”) will become the source of authoritative U.S.
generally accepted accounting principles (GAAP) recognized by the FASB to be
applied by nongovernmental entities. Rules and interpretive releases of the
Securities and Exchange Commission (SEC) under authority of federal securities
laws are also sources of authoritative GAAP for SEC registrants. This Statement
is effective for financial statements issued for interim and annual periods
ending after September 15, 2009. The authoritative guidance mentioned in this
Annual Report includes ASC reference. The adoption of this new Standard does not
have a material effect on the Company's financial position, results of
operations, or cash flows.





On June
2009, the FASB issued SFAS 166 “Accounting for Transfers of Financial Assets”
which amends SFAS 140. It improves the relevance and comparability of the
information that a reporting entity provides in its financial statements about a
transfer of financial assets; the effects of a transfer on its financial
position, financial performance, and cash flows; and a transferor’s continuing
involvement, if any, in transferred financial assets. This standard has not been
incorporated into ASC and is effective for fiscal years beginning after November
15, 2009. The adoption of this statement is not expected to have a material
effect on our financial position or results of operations.





In August
2009, the FASB issued Accounting Standards Update No. 2009-04, Accounting for
Redeemable Equity Instruments—Amendment to Section 480-10-S99 (SEC Update),
amending Accounting Standards Codification Section 480-10-S99, Distinguishing
Liabilities from Equity, Overall ("Update No. 2009-04"), which requires certain
securities that are redeemable for cash or other assets to be classified outside
of permanent equity if they are redeemable (1) at a fixed or determinable price
on a fixed or determinable date, (2) at the option of the holder, or (3) upon
the occurrence of an event that is not solely within the control of the issuer.
Update No. 2009-04 is effective for interim and fiscal periods ending after
August 26, 2009. The Company estimates that this statement will not have an
impact on its financial position.





In August
2009, the FASB issued Accounting Standards Update No. 2009-05, Fair Value
Measurements and Disclosures (Topic 820)—Measuring Liabilities at Fair Value,
amending Accounting Standards Codification Section 820-10, Fair Value
Measurements and Disclosures, Overall ("Update No. 2009-05"), which provides
clarification of the fair value measurement of liabilities in circumstances in
which a quoted price in an active market for the identical liability is not
available. Update No. 2009-05 is effective for interim and fiscal periods ending
after August 26, 2009. The Company estimates that this statement will not have
an impact on its financial position.


F-80





FASB ASC
715 provides guidance on an employer’s disclosures about plan assets of a
defined benefit pension or other post-retirement plans. This guidance is
intended to ensure that an employer meets the objectives of the disclosures
about plan assets in an employer’s defined benefit pension or other
postretirement plan to provide users of financial statements with an
understanding of the following: how investment allocation decisions are made;
the major categories of plan assets; the inputs and valuation techniques used to
measure the fair value of plan assets; the effect of fair value measurements
using significant unobservable inputs on changes in plan assets; and significant
concentrations of risk within plan assets. The adoption of this guidance did not
have a significant impact on our financial position or results of
operations.





ASC 350
amends the factors to be considered in developing renewal or extension
assumptions used to determine the useful life of intangible assets under ASC
350. Its intent is to improve the consistency between the useful life of an
intangible asset and the period of expected cash flows used to measure its fair
value. The amendment is effective prospectively for intangible assets acquired
or renewed after January 1, 2009. The adoption of ASC 350 will not have a
material impact on the Company ́s financial statements.





In
January 2010, the FASB issued Accounting Standards Update No. 2010-06, Fair
Value Measurements and Disclosures (Topic 820) – Improving Disclosures about
Fair Value Measurements, amending Accounting Standards Codification Section
820-10, Fair Value Measurements and Disclosures ("Update No. 2010-06"), which
provides new disclosure requirements for in and out transfers of Level 1 and 2
and activity in Level 3 fair value measurements.  It also provides
clarification on certain existing disclosures.  Update No. 2010-06 is
effective for annual and interim reporting periods beginnig after December 15,
2009, except for the requirement to provide the Level 3 activity between
purchases, sales, issuances, and settlements on a gross basis.  That
requirement is effective for fiscal years beginning after December 15, 2010, and
for interim periods within those fiscal years.


F-81


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.
  Empresa
      Distribuidora y Comercializadora Norte
                          Sociedad
      AnónimaBy:
                        /s/
      Luis Pablo Rogelio PaganoName:
                        Luis
      Pablo Rogelio PaganoTitle:
                        Chief
      Financial
Officer
 Date:
June 7, 2010