EDENOR S.A.

 

 

 

 

 

 

 

 

CONDENSED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2015 AND FOR THE THREE-MONTH PERIOD

ENDED MARCH 31, 2015, PRESENTED WITH COMPARATIVE FIGURES

 

 

 

 

 

 

CONTENTS

 

 

 

 

 

 

 

Legal Information

 

 

Corporate name: Empresa Distribuidora y Comercializadora Norte S.A.

Legal address: 6363 Del Libertador Ave., City of Buenos Aires

 

Main business: Distribution and sale of electricity in the area and under the terms of the concession agreement by which this public service is regulated.

 

Date of registration with the Public Registry of Commerce:

-          of the Articles of Incorporation: August 3, 1992

-          of the last amendment to the By-laws: May 28, 2007

 

Term of the Corporation: August 3, 2087

 

Registration number with the “Inspección General de Justicia” (the Argentine governmental regulatory agency of corporations): 1,559,940

 

Parent company: Electricidad Argentina S.A. (EASA)

 

Legal address: 3302 Ortiz de Ocampo, Building 4, City of Buenos Aires

 

Main business of the parent company:  Investment in Edenor’s Class “A” shares and rendering of technical advisory, management, sales, technology transfer and other services related to the distribution of electricity.

 

Interest held by the parent company in capital stock and votes: 51.54%

 

 

CAPITAL STRUCTURE

 

AS OF MARCH 31, 2015

 

(amounts stated in pesos)

 

 

(1)                    Includes 9,412,500 treasury shares as of March 31, 2015 and December 31, 2014.

 

 

 

 

 

Edenor S.A.

Condensed Interim Statement of Financial Position

as of March 31, 2015 presented with comparative figures

(Stated in thousands of pesos)

 

 

 

 

 

 

 

 

Edenor S.A.

Condensed Interim Statement of Financial Position

as of March 31, 2015, presented with comparative figures (Continued)

(Stated in thousands of pesos)

 

 

 

The accompanying notes are an integral part of these Financial Statements.

 

 

Edenor S.A.

Condensed Interim Statement of Comprehensive Income (Loss)

for the three-month period ended March 31, 2015, presented with comparative figures

(Stated in thousands of pesos)

 

 

 

 

Edenor S.A.

Condensed Interim Statement of Changes in Equity

for the three-month period ended March 31, 2015, presented with comparative figures

(Stated in thousands of pesos)

 

 

The accompanying notes are an integral part of these Financial Statements.

 

 

Edenor S.A.

Condensed Interim Statement of Cash Flows

for the three-month period ended March 31, 2015, presented with comparative figures

(Stated in thousands of pesos)

 

 

 

 

 

Edenor S.A.

Condensed Interim Statement of Cash Flows

for the three-month period ended March 31, 2015, presented with comparative figures

(Continued)

(Stated in thousands of pesos)

 

 

 

 

The accompanying notes are an integral part of these Financial Statements.

 

1.                   General information

 

History and development of the Company

 

Empresa Distribuidora Norte S.A. (EDENOR S.A. or the Company) was organized on July 21, 1992 by Decree No. 714/92 in connection with the privatization and concession process of the distribution and sale of electric power carried out by Servicios Eléctricos del Gran Buenos Aires S.A. (SEGBA S.A.).

 

By means of an International Public Bidding, the Federal Government awarded 51% of the Company’s capital stock, represented by the Class "A" shares, to the bid made by Electricidad Argentina S.A. (EASA), the parent company of Edenor S.A. The award as well as the transfer contract were approved on August 24, 1992 by Decree No. 1,507/92 of the Federal Government.

 

On September 1, 1992, EASA took over the operations of EDENOR S.A.

 

The corporate purpose of EDENOR S.A. is to engage in the distribution and sale of electricity within the concession area. Furthermore, among other activities, the Company may subscribe or acquire shares of other electricity distribution companies, subject to the approval of the regulatory agency, assign the use of 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 S.A. or through subsidiaries or related companies. In addition, the Company may act as trustee of trusts created under Argentine laws.

 

 

The Company’s economic and financial situation

 

In fiscal years 2014, 2012 and 2011, the Company recorded negative operating and net results, and both its liquidity level and working capital, even in fiscal year 2013, were severely affected. This situation is due mainly to both the continuous increase of its operating costs that are necessary to maintain the level of the service, and the delay in obtaining rate increases and/or recognition of its real higher costs (“CMM”), as stipulated in Section 4 of the Adjustment Agreement, including the review procedure in the event of deviations exceeding 5%.

 

In spite of the above-mentioned situation, it is worth mentioning that, in general terms, the quality of the electricity distribution service has been maintained and the constant year-on-year increase in the demand for electricity that has accompanied the economic growth and the standard of living of the last years has also been satisfied. Due to both the continuous increase recorded in the costs associated with the provision of the service and the need for additional investments to meet the increased demand, the Company has adopted a series of measures aimed at mitigating the negative effects of this situation on its financial structure, minimizing the impact thereof on the sources of employment, the execution of the investment plan or the carrying out of the essential operation and maintenance works that are necessary to maintain the provision of the public service in a satisfactory manner in terms of quality and safety.

 

The Company has made a series of presentations before control agencies, regulatory authorities and courts in order to jointly instrument the necessary mechanisms to contribute to an efficient and safe provision of the distribution service, the maintenance of the level of investments and the compliance with the increased demand.

 

 

 

 

 

Although the partial recognition of higher costs (as stipulated in Section 4.2 of the Adjustment Agreement) for the period May 2007 through January 2015, implemented by Energy Secretariat (SE) Resolution 250/13 and SE Notes 6852/13, 4012/14, 486/14,1136/14 and SE resolution 32/15  represented a significant step towards the recovery of the Company’s economic and financial situation, the effects thereof did not allow for the absorption of neither operating nor investment costs or for the payment of financial services.  However, the constant increase in the operating costs that are necessary to maintain the level of the service, and the delay in obtaining genuine rate increases will continue to deteriorate the Company’s operating results, demonstrating that this recognition has been insufficient to restore the balance that the economic and financial equation of the public service, object of the concession, requires.

 

As a consequence of that which has been previously described, the Company has permanently maintained during the last four fiscal years a working capital deficit, inasmuch as it had neither the necessary nor the adequate conditions to come to the financial market to make up the deficit of both its operations and the investment plans necessary to maintain the quality of the service, object of the concession. As of March 31, 2015, the negative working capital amounts to $1,917.6 million.

 

In view of the above, the Company obtained from the Federal Government the granting of loans for consumption (mutuums) in order to be able to afford specific aspects, such as: a) the salary increases granted to Company employees represented by the Sindicato de Luz y Fuerza (Electric Light and Power Labor Union) as from May 1, 2014 and other benefits, applicable also to those contractors whose employees are included in the collective bargaining agreements of the aforementioned union (Note 2.c); and b) the investment plan due to the temporary insufficiency of the funds obtained from the fixed charges established by Resolution 347/12 (Note 2.c.).

 

Additionally, on March 13, 2015, the Official Gazette published SE Resolution 32/15, issued by the Energy Secretariat, which, addressing the need for the adjustment of the economic and financial situation of distribution companies and considering it necessary that urgent and temporary measures should be adopted in order to maintain the normal provision of the public service, object of the concession (Note 2.b).

 

Based on the cost increase estimates and financial projections made by the Company, considering the  measures of SE Resolution 32/15, the Board of Directors believes that financial resources will be available, at least during fiscal year 2015, to cover not only the operating costs and debt interest payments, but also part of the investment plans, if the payment plan to be defined with CAMMESA (Wholesale Electric Market Management Company) for the settlement of the remaining debt with the MEM (Wholesale Electric Market) conforms to the generation of surplus cash flows. Compliance with the investment plans will depend on whether the assistance received until now under the respective Loan for consumption (Mutuum) continues.

 

Although these temporary measures help decrease the degree of uncertainty concerning the Company’s financial ability for the next 2015 fiscal year, the Board of Directors believes that the sustainable recovery of the economic and financial equation of the public service, object of the concession, will fundamentally depend on the application of a Tariff Structure Review (RTI) that takes into consideration the permanent development of operating costs, that allows for the payment of the required investments to meet the increasing demand with the quality levels stipulated in the Concession Agreement, that makes it possible to have access to financing sources and cover the corresponding costs and that allows, at the same time, for the generation of a reasonable return on the investment.

 

The Company Board of Directors will continue to take steps before the regulatory authority aimed not only at monitoring the compliance with and effectiveness of the temporary measures adopted until now but also at obtaining compliance with the provisions of both the Adjustment Agreement and SE Resolution 32/15 concerning the carrying out of the RTI.

 

To date, the outcome of the RTI continues to be uncertain as to both its timing and final form.

 

Furthermore, although the conditions of uncertainty existing in previous fiscal years have been mitigated as compared to short-term projections by the temporary measures adopted by the Federal Government, it cannot be assured that such measures will continue to be effective after this first year of application inasmuch as the effectiveness thereof will depend on the increase of costs in subsequent periods and the availability of resources of the Federal Government to absorb them and, at the same time, continue with the assistance provided through the Loans for consumption (Mutuums), until the RTI is resolved in a satisfactory manner.

 

 

2.                  Regulatory framework

 

As of the date of the issuance of this Condensed Interim Financial Statements do not exist significant changes compared to the situation described by the Company as of December 31, 2014, except for the mentioned below:                           

 

 

a)      PUREE – CMM (Program for the Rational Use of Electric Power – Cost Monitoring Mechanism)

 

 

The impact of SE Resolution 250/13, subsequent Notes and SE Resolution 32/2015 on the Statement of financial position is summarized below:

 

(1)      Includes CMM amount receivable recognized in prior fiscal years for $ 45.5 million.

 

 

b)      SE Resolution 32/15

 

On March 11, 2015, the SE issued SE Resolution 32/15, whereby it:

 

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

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

 

b)     Establishes that, as from February 1, 2015, the PUREE (Program for the Rational Use of Electricity Power) related funds to which SE Resolution 745/05 refers (Note 2.c.IV) will be regarded as part of the Company’s income on account of the RTI and earmarked to cover the higher costs of the provision of the public service, object of the concession.

 

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

 

d)     Instructs CAMMESA to issue LVFVD (Sale Settlements with Maturity Dates to be Determined) in favor of the Company for the surplus amounts in favor of the Company, resulting from the offsetting process indicated in the preceding paragraph, and for the amounts owed by the Company under the Loans for consumption (Mutuums) granted for higher salary costs.

 

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

 

f)      Establishes that the Company will neither distribute dividends nor use the income deriving from this resolution as detailed in paragraph a) to pay loans with financial entities, restructure financial debts, acquire other companies, grant loans, or carry out other transactions that are not strictly related to the payment of its obligations with the MEM, the payment of salaries of the Company’s own or hired personnel or the making of payments to suppliers of goods and/or services related to the provision of the public service of electricity distribution.

 

 

g)     Establishes that the Company shall observe the provisions of clause 22.1 of the Adjustment Agreement and suspend any administrative claim and/or judicial action it may have brought against the Federal Government, the SE and/or the ENRE in relation to the compliance with clause 4.2 of the Adjustment Agreement and the provisions of clauses of this resolution.

 

 

The following table summarized the impacts of SE Resolution 32/2015 except as mentioned in Note 2.a. in the Statement of Financial Position and the Statement of Comprehensive Income (Loss).

 

 

 

 

At the date of issuance of these financial statements, the Company Management is analyzing the steps to be followed as indicated in section 14 of SE Resolution 32/15 in relation to that which has been detailed in the preceding caption g).

 

                At the date of presentation of these financial statements, the Company has received $ 708.2 million as temporary increase in income, in accordance with that which has been indicated in the preceding caption a) of this note, for the months of February and March 2015.

 

 

 

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

 

At the date of issuance of these condensed interim financial statements, there are no significant changes with respect to the situation reported by the Company as of December 31, 2014, except for the following:

 

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

 

On January 13 and March 13, 2015, the loan for consumption (mutuum) agreement was extended, as instructed by the Energy Secretariat to CAMMESA, for an additional amount of $ 1.04 billion and $ 304.7 million, respectively.

 

As of March 31, 2015, the debt related to this concept amounts to $ 714.5 million (comprised of $ 677.8 million principal and $ 36.7 million in accrued interest) which is disclosed in the Other non-current payables account.

 

2) Higher salary costs

 

SE Resolution 32/15, mentioned before, resolves the emission of LVFVD be issued in favor of the Company for the amounts generated from this Loan for consumption (Mutuum) received by the Company to afford the salary increases deriving from the application of Resolution 836/14 of the Ministry of Labor, Employment and Social Security; allowing the Company to offset them against the outstanding balances for this concept.

 

In this regard, as of March 31, 2015, the Company made the pertinent recordings, fully settling the $ 484.4 million liability for this concept, thus generating a positive result of $ 464.8 million relating to the principal received and interest accrued during fiscal year 2014, which has been disclosed in income on account of the RTI – SE Res. 32/15 line item of the income statement, and a positive result of $ 19,6 million, relating to interest accrued during the first quarter of 2015, which has been disclosed in the Financial expenses line item of the income statement.

 

 

3.                  Basis of preparation

 

These condensed interim financial statements for the periods ended March 31, 2015 and 2014 have been prepared in accordance with IAS 34 “Interim Financial Reporting”.

 

This condensed interim financial information must be read in conjunction with the financial statements of the Company as of December 31, 2014, which have been prepared in accordance with IFRS. These condensed interim financial statements are expressed in Argentine pesos, unless otherwise stated. They have been prepared under the historical cost convention, modified by the measurement of financial assets at fair value.

 

These condensed interim financial statements for the three month periods ended March 31, 2015 and 2014 have not been audited. The Company’s management estimates they include all the necessary adjustments to present fairly the results of operations for each period. The income for the three month periods ended March 31, 2015 and 2014 does not necessarily reflect in proportion the Company’s results for the complete year.

 

These condensed interim financial statements were approved for issue by the Company Board of Directors on May 8, 2015.

 

 

Comparative information

 

Balances as of December 31, 2014 and for three month periods ended on March 31, 2014, included in these condensed interim financial statements for comparative purposes, are derived from the financial statements at those dates.

 

 

4.                  Accounting policies

 

The accounting policies adopted for these condensed interim financial statements are consistent with those used in the preparation of the financial statements for the last financial year, which ended December 31, 2014.

 

There are no new IFRS or IFRIC applicable as from the period being reported that have a material impact on the Company’s condensed interim financial statements.

 

These condensed interim financial statements must be read together with the audited financial statements as of December 31, 2014, which have been prepared in accordance with IFRS.

 

·         Income recognition on account of the RTI - SE Resolution 32/15

 

The recognition established by Resolution 32/15 falls within the scope of IAS 20, since it implies a compensation to cover the costs and investments associated with the normal performance of the provision of the public service concession.

 

Their recognition is made at fair value when there is reasonable assurance that will be collected and have met the service.

 

Such concept has been disclosure in the line, "Income recognition on account of the RTI - SE Resolution 32/15" line item of the Condensed Interim Statement of Comprehensive Income (Loss).

 

 

5.                   Financial risk management

 

 

The Company’s activities and the market in which it operates expose it to a series of financial risks: market risk (including currency risk, cash flows interest rate risk, fair value interest rate risk and price risk), credit risk and liquidity risk.

 

There have been no significant changes in the Company’s risk management policies since the last fiscal year end.

 

 

·         Currency risk

 

As of March 31, 2015 and December 31, 2014, the Company’s balances in foreign currency are as follow:

 

 

(1)   The exchange rates used are those of Banco Nación in effect as of March 31, 2015 for US Dollars (USD), Euros (EUR), Swiss Francs (CHF) and Norwegian Krones (NOK).  An average exchange rate is used for balances with related parties.

 

 

·         Fair value estimate

 

The Company classifies the measurements of financial instruments at fair value using a fair value hierarchy that reflects the relevance of the variables used to carry out such measurements. The fair value hierarchy has the following levels:

 

-          Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

-          Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from the prices).

 

-          Level 3: inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).

 

 

The table below shows the Company’s financial assets and liabilities measured at fair value as of March 31, 2015 and December 31, 2014:

 

 

 

6.                  Critical accounting estimates and judgments

 

The preparation of the condensed interim financial statements requires the Company management to make estimates and assessments concerning the future, exercise critical judgments and make assumptions that affect the application of the accounting policies and the reported amounts of assets and liabilities and revenues and expenses.

 

These estimates and judgments are permanently evaluated and are based upon past experience and other factors that are reasonable under the existing circumstances. Future actual results may differ from the estimates and assessments made at the date of preparation of these condensed interim financial statements.

 

In preparing these condensed interim financial statements, there have been no changes in either the critical judgments made by the Company when applying its accounting policies or the information sources of estimation uncertainty with respect to those applied in the financial statements for the year ended December 31, 2014.

 

a)      Impairment of long-lived assets

 

From the implementation of SE Res. 32/15 which established a temporary increase in income as from February 1, 2015, the projected and discounted cash flows used by the Company to determine the recoverability of property, plant and equipment have been updated.

 

 

The future increase in electricity rates used by the Company to assess the recoverability of its long-lived assets as of March 31, 2015 is based on the rights to which the Company is entitled, as stipulated in the Concession Agreement and the agreements described in Note 2 to the financial statements as of December 31, 2014. Furthermore, the actions taken to maintain and guarantee the provision of the public service, the presentations made before regulatory authorities, the status quo of the discussions that are being held with government representatives, the announcements made by government officials concerning possible changes in the sector’s revenues to restore the economic and financial equation, and certain adopted measures, such as those described in Notes 2 to these financial statements, have also been considered. The Company Management estimates that it is reasonable to expect that new increases in revenues will be obtained as from 2016.

 

In spite of the current economic and financial situation described in Note 1 to these financial statements, the Company has made its projections under the assumption that the electricity rates will be improved according to the circumstances. However, the Company may not ensure that the future performance of the variables used to make its projections will be in line with what it has estimated. Therefore, significant differences may arise in relation to the estimates used and assessments made at the date of preparation of these financial statements.

 

In order to contemplate the estimation risk contained in the projections of the aforementioned variables, the Company has considered three different probability-weighted scenarios. Although in all of them it is estimated that the Company will succeed in reaching an acceptable agreement with the Government resulting in a gradual tariff increase, the Company has considered different timing and magnitude of an increase in the DAV (Distribution Added Value).

 

The scenarios considered are as follow:

 

a) Scenario called Pessimistic scenario: in this scenario, the Company contemplates the effects of SE Resolution 32/15 and assumes modest electricity rate increases as from 2016 as a result of the gradual implementation of an RTI. CAMMESA’s financial assistance, as regards the reception of the loan for consumption (mutuum) for the Extraordinary Investment Plan, is maintained. In 2017, the accumulated debt for energy purchases begin to be paid and past higher real costs (not covered by the CMM) would be recognized, which would allow for the offsetting of the accumulated debts with CAMMESA for interest accrued. Probability of occurrence assigned 20%.

 

b) Scenario called Intermediate scenario: in this case, the Company contemplates the effects of SE Resolution 32/15 and assumes reasonable electricity rate increases as from 2016, as a result of the gradual implementation of an RTI. CAMMESA’s financial assistance, as regards the reception of the loan for consumption (mutuum) for the Extraordinary Investment Plan, is maintained. In 2017, the accumulated debt for energy purchases begin to be paid and past higher real costs (not covered by the CMM) would be recognized, which would allow for the offsetting of the accumulated debts with CAMMESA for interest accrued. Probability of occurrence assigned 65%.

 

c) Scenario called Optimistic scenario: in this case, the Company contemplates the effects of SE Resolution 32/15 and assumes increases higher than those of the intermediate scenario as from 2016, as a result of the gradual implementation of an RTI. CAMMESA’s financial assistance, as regards the reception of the loan for consumption (mutuum) for the Extraordinary Investment Plan, is maintained. In 2017, the accumulated debt for energy purchases begin to be paid and past higher real costs (not covered by the CMM) would be recognized, which would allow for the offsetting of the accumulated debts with CAMMESA for interest accrued. Probability of occurrence assigned 15%.

 

The Company has assigned to these three scenarios the previously described percentages of probability of occurrence based mainly on the experience with past delays in the tariff renegotiation process, the present economic and financial situation, the status quo of the conversations that are being held with the Federal Government and the need to maintain the public service, object of the concession, in operation.

 

An after tax discount rate (WACC) in pesos stated in nominal terms of 24.5% has been used in all the scenarios.

 

 

Sensitivity analysis:

 

The main factors that could result in impairment charges in future periods are: i) a distortion in the nature, opportunity and modality of the electricity rate increases and recognition of cost adjustments, and ii) the development of the costs to be incurred. These factors have been taken into account in the aforementioned weight of scenarios. Due to the inherent uncertainty involved in these assumptions, the Company estimates that any sensitivity analysis that considers changes in any of them considered individually could lead to distorting conclusions.

 

Based on the conclusions previously mentioned, the valuation of property, plant and equipment, taken as a whole, does not exceed its recoverable value, which is measured as the value in use as of March 31, 2015.

 

b)      Going concern

 

These financial statements have been prepared in accordance with the accounting principles applicable to a going concern, assuming that the Company will continue to operate normally during fiscal year 2015 because in the Company’s opinion SE Resolution 32/15 provides greater certainty concerning the financial conditions existing prior to the issuance thereof and constitutes a reasonable basis for the commencement of the RTI.

 

 

7.                   Contingencies and lawsuits

 

At the date of issuance of these condensed interim financial statements, there are no significant changes with respect to the situation reported by the Company in the financial statements as of December 31, 2014, except for the following:

 

 

·         Legal action brought by the Company (“EDENOR S.A. VS FEDERAL GOVERNMENT – MINISTRY OF FEDERAL PLANNING / PROCEEDING FOR THE DETERMINATION OF A CLAIM AND MOTION TO LITIGATE IN FORMA PAUPERIS”)

 

On June 28, 2013, the Company instituted these proceedings for the recognizance of a claim and the related leave to proceed in forma pauperis, both pending in the Federal Court of Original Jurisdiction in Contentious and Administrative Federal Matters No. 11 – Clerk’s Office No. 22.

 

Purpose of the main proceedings: To sue for breach of contract due to the Federal Government’s failure to perform in accordance with the terms of the “Memorandum of Understanding concerning the Renegotiation of the Concession Agreement” (“Acta Acuerdo de Renegociación del Contrato de Concesion” – Adjustment Agreement) entered into with Edenor in 2006, and for damages caused as a result of such breach.

 

Procedural stage of the proceedings: On November 22, 2013, the Company amended the complaint so as to extend it and claim more damages as a consequence of the Federal Government’s omission to perform the obligations under the aforementioned “Adjustment Agreement”. On February 3, 2015, the court hearing the case ordered that notice of the complaint be served to be answered within the time limit prescribed by law, which at the date of issuance of these financial statements has already taken place.

 

Provisional Remedy:  In the same action, in February 2014, the Company applied for the immediate granting of a provisional remedy in order to maintain an efficient and safe service, requesting that until judgment is passed on the merits of the case, the Federal Government be compelled to provide the Company with economic assistance, whether by means of a temporary rate adjustment or through government grants. After notice was served upon and answered by the Federal Government – Ministry of Federal Planning, on May 27, 2014, the court hearing the case rejected the provisional remedy sought by the Company, decision which was confirmed by Division V of the Appellate Court and notified to Edenor on December 19, 2014.

 

Resolution 32 of the Energy Secretariat: On March 13, 2015, the Official Gazette published SE Resolution No. 32, which approved a temporary increase in the Company’s income in order for the latter to cover the expenses and afford the investments associated with the functioning of the electricity distribution service it provides and established that the Company would be required to observe the provisions of Clause 22.1 of the Adjustment Agreement with regard to the administrative claims and/or judicial actions it might have brought against the Federal Government, the Energy Secretariat and/or the ENRE concerning compliance with Clause 4.2 of the Adjustment Agreement, i.e. the non implementation of the Cost Monitoring Mechanism (CMM). To date, the Company is analyzing the scope of that requirement and assessing whether it is in agreement with the law.

 

 

Conclusion: It is estimated that this action will not be terminated in 2015.

 

 

·         Study, Review and Inspection of Works in Public Spaces Fees (TERI)

 

At the date of issuance of these condensed interim financial statements, the Company has received assessments and demand for payment notices from the Government of the City of Buenos Aires for a total amount of $ 35.8 million for this concept.

 

In the Company’s opinion these fees are not applicable in accordance with federal regulations, the case law and the procedural status of judicial decisions. Therefore, the Management of the Company as well as its external legal advisors believe that there exist good reasons to support the Company’s position and have this tax claim rejected by a court of law. Therefore, the probability of an outflow of resources on account of such contingency has been regarded as low.

 

 

8.                  Property, plant and equipment

 

 

·            During the period ended March 31, 2015, direct costs capitalized amounted to $ 52.3 million.

 

·            Financial costs capitalized for the period ended March 31, 2015 amounted to $ 55.9 million.

 

 

 

 

·            During the period ended March 31, 2014, direct costs capitalized amounted to $ 21.6 million.

 

·            Financial costs capitalized for the period ended March 31, 2014 amounted to $ 3.1 million.

 

 

 

9.                  Other receivables

 

 

(1)    As of March 31, 2015, the net position held by the Company with the FOCEDE is comprised of the following:

 

 

 

The roll forward of the allowance for the impairment of other receivables is as follows:

 

 

10.               Trade receivables

 

 

(1)                  Net of stabilization factor.

 

 

 

The roll forward of the allowance for the impairment of trade receivables is as follows:

 

 

11.                Financial assets at fair value through profit or loss