PAM Pampa Energia SA

NOTE 1: GENERAL INFORMATION

1.1 General information of the Company

The Company is a fully integrated power company in Argentina which directly and through its subsidiaries, participates in the electric energy and gas value chains.

In the generation segment, the Company, directly and through its subsidiaries and joint ventures, has a 4,944 MW installed capacity, which represents approximately 12% of Argentina’s installed capacity, being one of the fourth largest independent generator in the country. Additionally, the Company is currently undergoing a process to expand its capacity by 295 MW.

In the distribution segment, the Company has a controlling interest in Edenor, the largest electricity distributor in Argentina, which has approximately 3.1 million customers and a concession area covering the Northern part of the City of Buenos Aires and Northwestern Greater Buenos Aires.

In the oil and gas segment, the Company is one of the leading oil and natural gas producers in Argentina, with operations in 13 production areas and 5 exploratory areas and a production level of 7 million m3/day of natural gas and 4.5 thousand barrels of oil equivalent per day for oil during the nine-month period ended September 30, 2020. Its main natural gas production blocks are located in the Provinces of Neuquén and Río Negro.

In the petrochemical segment the operations are based in the Argentine Republic, where the Company operates three high-complexity plants that produce styrene, synthetic rubber and polystyrene, with a local market share between 80% and 100%.

Finally, through its holding and others segment, the Company participates in the electricity and gas transportation businesses. In the transmission business, the Company jointly controls Citelec, which has a controlling interest in Transener, a company engaged in the operation and maintenance of a 21,020 km high-voltage electricity transmission network in Argentina with an 85% share in the Argentine electricity transmission market. In the gas transportation business, the Company jointly controls CIESA, which has a controlling interest in TGS, a company holding a concession for the transportation of natural gas with 9,231 km of gas pipelines in the center, west and south of Argentina, and which is also engaged in the processing and sale of natural gas liquids through the Cerri Complex, located in Bahía Blanca, in the Province of Buenos Aires. Besides, the Company owns a 28.5% direct interest in Refinor, which has a refinery with an installed capacity of 25.8 kb of oil per day and 92 gas stations Additionally, the segment includes advisory services provided to related companies.

1.2 Impact of the Coronavirus outbreak on our Operations

The outbreak and spread of a virus known as "Coronavirus" (or COVID-19) by the end of 2019 has brought about several consequences globally. Among the most relevant impacts, a significant economic downturn was evidenced worldwide, the impacts and scopes of which are still unknown.

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (In millions of Argentine Pesos (“$”))

NOTE 1: (Continuation)

On March 11, the World Health Organization declared COVID-19 a global pandemic. Given the magnitude of the spread of the virus, in March 2020 several governments around the world implemented drastic measures to contain it, including, but not limited to, the closure of borders and the mandatory lockdown of the population, halting non-essential economic activities and generating a pronounced global economic recession.

As from the month of May, several countries in Europe, Asia and Oceania started a gradual lockdown easing process; however, some areas experienced a new increase in infection levels, which led to the temporary reimplementation of some measures. For its part, the American continent maintains high infection rates.

In Argentina, the Federal Government decreed the nationwide social, preventive and mandatory lockdown effective from March 20 to March 31, allowing for the movement of persons exclusively in association with the provision of essential products and services. However, this term was repeatedly extended, although incorporating certain relaxation measures based on the epidemiological and health situation in the different areas of the country. In this respect, on July 18, the Federal Government formalized a scheme for the gradual resuming of commercial, industrial and social activities in the Buenos Aires Metropolitan Area (AMBA). Finally, on November 7, 2020, the Federal Government declared the social, preventive and mandatory distancing for the AMBA and all provincial districts meeting certain parameters associated with the health system’s capacity and the community spread of the virus.

These situations have adversely affected the energy industry in the country, as detailed below:

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NOTE 1: (Continuation)

The Company’s management is monitoring the situation and adopting measures aiming to safeguard its staff's health integrity, maintain operations and preserve its financial position. These actions include, among others, the implementation of a remote working scheme for all positions allowing it, the reinforcement of preventive protocols in the assets where the presence of staff is essential to guarantee the proper and timely performance of operation and maintenance tasks, and the search for financing opportunities under reasonable market conditions. Currently, and in line with recent social distancing measures in AMBA, the Company is planning a gradual and safe return program for certain remote positions effective as from November 16, 2020 after refurbishing the building to meet the defined distancing standards (hygiene, temperature monitoring, ventilation, etc.)

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (In millions of Argentine Pesos (“$”))

NOTE 1: (Continuation)

As regards consolidated condensed interim financial statements as of September 30, 2020, the main impacts caused by the previously described circumstances are outlined below:

- Assessment of the recoverable value of Property, plant and equipment: The decrease in prices and the industry’s demand constitutes an impairment indicator under IAS 36 and, therefore, the corresponding recoverable amount tests have been performed. See details in Note 6.1.1.

- Impairment of inventory: The fall in reference prices, mainly in petrochemicals, has generated the posting of an allowance for impairment of inventory for $ 706 million, as March 31, 2020. See Notes 6.1.1 and 11.4.

As of September 30, 2020, no additional indications have been identified which may impact the assumptions taken into consideration in the above-mentioned recoverability assessments.

The full scope of the COVID-19 outbreak and its impact in the economy of the country is still unknown and impossible to predict in a reasonable manner. However, even though significant adverse effects have resulted and are expected to continue in the short term, it is anticipated that they will not affect the Company’s business continuity. Given its current financial soundness, the Company estimates that it will be able to continue meeting its financial commitments over the next twelve months.

However, it is impossible to foresee how measures will continue evolving and their impact on the economy in general and the Company in particular, as well as to which extent the Company’s business and the results of its operations will be affected in the future.

NOTE 2: REGULATORY FRAMEWORK

2.1 Generation

2.1.1 New Remuneration scheme at the Spot market

On February 27, 2020, SE Resolution No. 31/20 was published in the Official Gazette, superseding the remuneration scheme established by SRRYME Resolution No. 1/19.

The new scheme reduces prices ​​of the remuneration for available power capacity, and furthermore transfers the remuneration prices ​​to Argentine pesos by applying a 60 $/U$S exchange rate. However, it establishes that prices will be monthly updated through a factor contemplating a 60% adjustment by IPC and a 40% adjustment by IPIM. However, subsequently, through Note No. 2020-24910606-APN-SE#MDP of April 8, 2020, the SE instructed CAMMESA to postpone until further decision the application of the aforementioned automatic adjustment mechanism.

Furthermore, it establishes an additional remuneration for the power generated in those hours of maximum thermal requirement of the month. In the case of thermal generators, the average generated power will be considered, and in the case of hydroelectric generators, the average operated power will be considered.

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (In millions of Argentine Pesos (“$”))

NOTE 2: (Continuation)

Finally, it maintains prices of the remuneration for generated and operated energy.

Resolution SE No. 31/20 amendments with an impact on the Company's remuneration scheme are detailed below:

2.1.1.1 Remuneration for Available Power Capacity

a) Thermal Power Generation

The Resolution maintains in effect a remuneration made up of a minimum or base power capacity payment for generators with no availability commitments, and another for offered guaranteed power capacity.

Prices of 360 thousand and 270 thousand $/MW-month were established as remuneration for guaranteed power capacity for the summer-winter and autumn-spring periods, respectively, implying a 14% and 18% decreases for the summer-winter and autumn-spring periods, respectively for enabled generators, except for Internal Combustion Engines with capacity less than or equal to 42 MW, for which prices were established at 420 thousand and 330 thousand $/MW-month for the summer-winter and autumn-spring periods, respectively.

On the other hand, it establishes an additional remuneration for power generated in the hours of maximum thermal requirement of the month (hmrt), which corresponds to the 50 hours with the largest dispatch of thermal generation of each month divided into two blocks of 25 hours each, with prices of 45 thousand and 22.5 thousand $/MW-hmrt for the first and second block, respectively for the summer-winter periods and 7.5 thousand $/MW-hmrt only for the first block for the autumn-spring periods.

Like SRRYME Resolution No. 1/19, Resolution SE No. 31/20, applies a coefficient derived from the unit’s average utilization factor during the last twelve months to the power capacity remuneration. Although it maintains the formula Resolution SRRYME 1/19 scheme, in case if the usage factor is lower than 30%, it establishes a 60% of the power capacity payment will be collected, except for Internal Combustion Engines with capacity less than or equal to 42 MW, that will collect 70% of the power capacity payment.

b) Hydroelectric Generation

Power capacity availability is determined independently of the reservoir level, the contributions made, or the expenses incurred. Furthermore, in the case of pumping hydroelectric power plants, the operation as turbine and pump at all hours within the period is considered to calculate availability.

The base remuneration is determined by the actual power capacity plus that under programmed and/or agreed maintenance, with prices ranging from 132,000 to 297,000 $/MW-month, depending on the scale and type of power plant, that considering the elimination of the additional remuneration set by SRRYME Resolution No. 1/19, implied a 45% and 12% decrease for conventional and pumping hydroelectric power plants, respectively. It should be noted that, in order to mitigate the incidence of plants’ programmed maintenance, and as a signal for their optimization, a 1.05 factor will be applied to power capacity prices.

In case of hydroelectric power plants maintaining control structures on river courses and not having an associated power plant, a 1.20 factor will be applied to the plant at the headwaters.

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (In millions of Argentine Pesos (“$”))

NOTE 2: (Continuation)

On the other hand, it establishes an additional remuneration for power operated in the hours of maximum thermal requirement of the month, with a price of 32.5 thousand $/MW-hmrt applying a 1.2 and 0.6 factor for the first and second 25 hmrt block, respectively, for the summer-winter periods and 0.2 factor only for the first 25 hmrt block for the autumn-spring periods.

c) Wind generation

No remuneration related to power capacity availability is set, establishing a single remuneration value for generated energy (see next item).

2.1.1.2 Remuneration for Generated and Operated Energy

It establishes a remuneration for Generated Energy with prices ranging between 240 and 420 $/MWh, depending on the type of fuel and a remuneration for Operated Energy applicable to the integration of hourly power capacities for the period, with an 84 $/MWh price for any type of fuel, thus maintaining prices established by SRRYME Resolution No. 1/19.

It should be noted that, in the event that the generation unit is dispatched outside the optimal dispatch, remuneration for generated energy will be set at 60% of the net installed power capacity, regardless of the energy delivered by the generation unit.

In the case of hydroelectric plants, prices for Energy Generated and Operated under Resolution SE No. 31/20 are remunerated at 210 $/MWh and 84 $/MWh, respectively, maintaining prices ​​established by SRRYME Resolution No. 1/19. The remuneration for operated energy must correspond to the optimal dispatch of the system, however, the resolution does not indicate what the consequence would be otherwise.

In the case of hydroelectric pumping plants, both the energy generated and the one consumed for pumping, by the energy pumped, and the energy operated are considered. In addition, if it functions as a synchronous compensator, 60 $/MVAr will be recognized for the megavolt exchanged with the network when required and 84 $/MWh for the energy operated.

As regards energy generated from unconventional sources, Resolution SE No. 31/20 establishes a single remuneration value of 1,680 $/MWh, irrespective of the source used, maintaining the value established by SRRYME Resolution No. 1/19. Energy generated prior to the commissioning by the OED will be remunerated at 50% of the above-mentioned remuneration.

2.1.2 Extraordinary payment mechanism for Large Users

With regards to the impact of the mandatory lockdown mentioned in Note 1.2, through Note No. 2020-24708517-APN-SSEE#MDP, the SE approved an extraordinary payment mechanism for Large Users, that purchase electricity directly to CAMMESA, allowing to pay only a portion of the invoice for the supply at maturity, and to extend the payment of the balance for a period of 15 days to 6 months, depending on the drop in demand. No penalties or surcharges will be applied to such amounts. This mechanism will apply to maturities that occur from April 1, 2020 and up to 60 days after the removal of the mandatory lockdown.

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (In millions of Argentine Pesos (“$”))

NOTE 2: (Continuation)

2.1.3 Seasonal Programming

The SE Resolution No. 70/20, issued on May 5, 2020, approved the seasonal programming for the May–October 2020 winter period. Seasonal prices remain unchanged until October 2020, with a power capacity reference price of $ 80,000/MW-month and an energy reference price for residential customers of $ 1,852/MWh (for the peak demand) effective as from February 2019, as well as energy reference prices effective for the 2019 winter period of $ 2,902 /MWh for the May, 1 - July 31, 2020 period and $ 3,042 /MWh for the August, 1 - October 31, 2020 period, in both cases for large users and $ 1,985 /MWh for the May, 1 - July 31, 2020 period and $ 2,122 /MWh for the August, 1 - October 31, 2020 period for the remaining non-residential users. The stabilized price set by SSEE Provision No. 75/18 for the extra high voltage power transmission and the retail-based main transmission price also remained unchanged.

SE Resolution No. 295/20, published on August 14, 2020, approved the final summer seasonal programming for the February - April 2020 period, keeping the reference price for power capacity and the stabilized price for energy in the MEM approved by SRRyME Resolution No. 14/19, as well as the values for the high-voltage and main distribution electricity transmission service set by SSEE Provision No. 75/18. It is worth highlighting that these values were maintained in the winter seasonal programming approved by SE Resolution No. 70/20.

2.1.4. Generation projects

As a result of the COVID-19 pandemic (see Note 1.2), through Note NO-2020-37458730-APN-SE#MDP the SE instructed the temporary suspension of terms for the execution of the contracts under the RenovAr Programs (Rounds 1, 1.5, 2 and 3), former SE Resolution No. 712/09, former MEyM Resolution No. 202/16 and former SEE Resolution No. 287/17, as well as for projects within the framework of former MEyM Resolution No. 281/17. The instruction applies to projects which had not been previously commissioned as from March 12, 2020 and until September 12, 2020, both dates inclusive. Consequently, the temporary suspension of notices of non-compliance with the scheduled work progress dates was instructed, both regarding the increase in the contract performance bond and the imposition of the stipulated penalties, as applicable, under all agreements entered into pursuant to such resolutions.

Furthermore, it ordered the temporary suspension of notices of breach upon failure to comply with the date scheduled for the commercial commissioning of projects with a dispatch priority under the terms of former MEyM Resolution No. 281/17, and of the collection of the amounts stipulated in the event of breach, in all cases keeping the timely granted dispatch priorities.

2.1.5. Relaxation of late interest and charges in the payment of the economic transaction

SE Resolution No. 148/20 extended until December 31, 2020 the 50% reduction in late payment surcharges to MEM agents pursuant to SRRyME Resolution No. 29/19, which maintained the provisions of Note NO-2018-26558746-APN-SSEE#MEM. This measure in no way affects the Extraordinary Payment Mechanism for Large Users detailed in Note 2.1.2.

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (In millions of Argentine Pesos (“$”))

NOTE 2: (Continuation)

2.2.1        Edenor’s economic and financial situation

Edenor has registered negative working capital in the last fiscal year. This situation is mainly due to the suspension of the rate update from February 2019 to date, despite the constant increase in operating costs and investments necessary for the operation of the network and to maintain the quality of service, in a inflationary context and sustained recession in which the Argentine economy has been since mid-2018. Edenor has been significantly affected by the rate freeze, so its income corresponds to December 2018 values, despite having gone through the last twenty months with high levels of inflation and, we are faced with uncertainty as to when the cost update will finally be recognized. Additionally, this situation was aggravated by the recent effects of COVID-19, described in Note 1.2.

Additionally, the enactment, by the end of 2019, of Law No. 27,541 on Social Solidarity and Production Reactivation in the framework of the Economic Emergency, whereby the PEN was authorized to keep electricity rates under federal jurisdiction unchanged for one hundred and eighty days, the ENRE’s instruction directing edenor not to increase its electricity rates, and the issuance on June 19, 2020 of Executive Order No. 543 that extended said period for another one hundred and eighty calendar days, postponing the update of the electricity rate schedule, generate an impact directly on Edenor’s financial soundness.

Despite the previously described situation, it is worth pointing out that, in general terms, the quality of the electricity distribution service has been significantly improved, both in duration and frequency of power cuts. In view of the continuous increase of the costs associated with the provision of the service, as well as the need for additional investments to meet the demand, Edenor, as previously mentioned, is analyzing different measures aimed at mitigating the negative effects of this situation on its financial structure, minimizing the impact on the sources of employment, the execution of the investment plan, and the carrying out of the essential operation, maintenance and improvement-related works that are necessary to maintain the provision of the public service, object of the concession, in a satisfactory manner in terms of quality and safety.

It is in this regard that Edenor was forced to partially postpone payments to CAMMESA for energy purchased in the Wholesale Electricity Market (“MEM”) as from the maturities that have occurred since March 2020; payment obligations which, although Edenor has been partially regularizing, as of September 30, 2020 accumulate a principal balance of $ 20.1 million, plus interest and charges for $ 1.3 million.

Taking into consideration that the realization of the measures necessary to reverse the manifested negative trend depends on the occurrence of certain events that are not under Edenor’s control, the Board of Directors has raised substantial doubt about edenor’s ability to continue as a going concern, which may result in Edenor’s being obliged to defer certain payment obligations or unable to meet expectations for salary increases or the increases recorded in third-party costs.

2.2.2 Intervention of the Regulatory Authority

On March 16, 2020, by means of Executive Order No. 277/20, the PEN provided, within the framework of the public emergency and in accordance with the provisions of Law No. 27,541 on Social Solidarity and Production Reactivation, for the intervention of the ENRE until December 31, 2020.

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (In millions of Argentine Pesos (“$”))

NOTE 2: (Continuation)

2.2.3. Freeze on Electricity Rates

On June 19, 2020, DNU No. 543/2020 was issued, whereby the authority to keep the electricity rates under federal jurisdiction unchanged was extended for an additional term of 180 calendar days.

Nevertheless, at the date of issuance of these financial statements, Edenor has duly submitted to the ENRE the adjustment request of its Own Distribution Costs (CPD), pursuant to the provisions of Appendix XV of ENRE Resolution No. 63/2017 “Procedure for determining the electricity rate schedule”, in accordance with the following detail:

⁽¹⁾   The CPD adjustment applicable in August 2019 was deferred until January 2020 by means of the Electricity Rate Schedule Maintenance Agreement.

The indicated CPD and the other concepts detailed in the “Electricity Rate Schedule Maintenance Agreement” entered into with the Federal Government on September 19, 2019, neither transferred to tariffs nor authorized to be collected by other means accumulate as of September 30, 2020 a total of approximately $ 15.6 millions, without considering interest.

As a consequence of the described situation, the Chamber of Deputies gave preliminary approval to the 2021 budget bill, which, in its section 87, provides for a system for the settlement of debts with CAMMESA and/or the MEM that Distribution Companies had accumulated as of September 30, 2020, whether on account of the consumption of energy, power, interest and/or penalties, in accordance with the conditions to be set out by the application authority, which may provide for credits equivalent to up to five times the monthly average bill or to sixty-six percent of the existing debt, whereas the remaining debt is to be paid in up to sixty monthly installments, with a grace period of up to six months, and at the rate in effect in the MEM, reduced by fifty percent. At the date of these condensed interim financial statements, its approval by the Senate is still pending.

On March 21, 2020, by means of Resolution No. 3/2020, the ENRE resolved to instruct distribution companies to: i) immediately suspend customer service, with the closure of all the commercial offices during the mandatory and preventive social isolation period; ii) implement an electronic system to deal with customer commercial proceedings/inquiries and claims; and iii) provide only for the movement of those human resources required for the continuity of the essential provision of the public service of electricity distribution in the technical and operational aspects of their respective areas.

Furthermore, by means of ENRE Note dated July 2, 2020, the ENRE reiterated its instruction as to only provide for the movement of those human resources required for the continuity of the essential provision of the public service of electricity distribution in the technical and operational aspects of the respective networks.

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (In millions of Argentine Pesos (“$”))

NOTE 2: (Continuation)

On March 25, 2020 the PEN issued DNU No. 311/2020 and its subsequent regulation, as amended, prohibiting utility companies from shutting off services to certain customers (detailed therein) as from March 1, 2020, during the period between April 24, 2020 and December 31, 2020 (extended for 180 calendar days by DNU 543/2020). Additionally, the Order provides that the customers who have a prepaid system and do not pay for the recharges, will receive the service as normal and usual during that same period. The detailed aspects impact directly on Edenor’s operations, its economic and financial situation, and outlook as the necessary resources to deal with those situations have not been defined.

By means of Resolution No. 173/2020 (which regulates DNU 311/2020, as amended by DNU 756/2020), on April 18, 2020, the Ministry of Productive Development provided that the consumers benefitted from the prohibition against the interruption of the service due to non-payment of up to seven bills (universe of customers mentioned in the preceding paragraph), may pay their unpaid bills for the electricity distribution service in up to 30 monthly, equal and consecutive installments with an interest rate to be determined by the application authority, with the first installment maturing on September 30, 2020. This resolution applies only to a specific group of customers, which is deemed to be in a more vulnerable situation, detailed in the resolution, and whose scope at the date of issuance of these condensed interim financial statements is still pending definition by the application authority. Furthermore, the financing may be applied to the purchase of energy Edenor makes from the MEM associated with these consumptions.

In the framework of the mandatory and preventive social isolation provided for by the PEN and the provisions of ENRE Resolution No. 3/2020, on April 13, 2020, the Regulatory Authority authorized Edenor to apply the methodology for validating meter readings and consumption estimates (ENRE Resolution No. 209/2018), excluding the cases of remote readings and non-metered consumptions. Furthermore, the ENRE issued two instructions, one of them on April 30, 2020 and the other on May 5, 2020, in relation to the application of the aforementioned methodology, mainly with regard to the communication to be provided to customers, the mechanisms for challenging meter readings and the information about this process to be provided on a periodical basis to the Regulatory Authority. Subsequently, on May 6, 2020, the ENRE authorized Distribution Companies to perform meter reading activities for the electricity consumption of medium and large demand user categories, tariff 2 and 3.

In this regard, by means of Resolution No. 27/2020, the ENRE resolved that in the case of T1R (small-demand residential tariff) category users with no remote meter reading, the lowest consumption recorded over the last three years prior to the issuance of the bill for the same estimated period is to be applied until actual meter readings are available.

Furthermore, by means of Resolution No. 35/2020, the ENRE resolved that T2 (medium-demand), T3 (large-demand) and Wheeling system tariff category users subject to compliance with the mandatory lockdown, who have suffered a reduction of at least 50% in their demand for power, may either suspend payment or make partial payments on account of the contracted power under electricity supply contracts, until 70% of the demand is recovered, maintaining the obligation to pay the other charges.

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (In millions of Argentine Pesos (“$”))

NOTE 2: (Continuation)

Finally, on May 15, 2020, by means of note dated May 15, 2020, the ENRE instructed Edenor to begin to carry out reading tasks of T1 (small-demand tariff) users’ meters so that the billing reflects actual consumption.

In this regard, it was provided that if from the previous consumption estimate process a difference arises in favor of the user, it must be reimbursed by Edenor in the first bill with actual reading. Furthermore, if the difference is in favor of Edenor, the resulting amount will have to be paid in 6 equal and consecutive installments, which will be included in the bills to be issued with the consumption recorded as from September 1, 2020, which was extended to November 1, 2020.

Finally, by means of note dated October 26, 2020, the ENRE suspended the commencement of the payment of the installments of the amounts owed by T1 (small-demand tariff) users until new instructions are given in this regard.

All that which has been previously described impacts on Edenor’s economic and financial situation.

At the date of issuance of these condensed interim financial statements, and despite the unilateral breach by the grantor of the concession of the Electricity Rate Schedule Maintenance Agreement signed with the Federal Government on September 19, 2019, Edenor has complied with the payment of the six penalty-related installments, whose payment had been deferred.

Furthermore, on June 3, 2020, by means of Resolution No. 42/2020, the ENRE approved the new methodology for crediting and distributing the penalties payable to all the active users, and the regulations of the methodology for crediting the penalties payable to disconnected users, as well as the manner in which distribution companies must produce that information and send it to the ENRE. As of September 30, 2020, the totality of the penalties payable to active users have been credited.

2.3 Oil and natural gas

2.3.1 Natural gas market

2.3.1.1 Public Tender for Gas Supply on a Binding Basis for Distribution Companies

The natural gas supply agreements executed with gas distribution companies under the MEGSA in the month of February, 2019 expired on March 31, 2020. However, some gas distribution companies informed the Company that, pursuant to the SE instruction issued through Note No. 2020-25148550-APN-SE#MDP, producers are obliged to extend supply agreements until June 2020.

As of the issuance of these consolidated condensed interim financial statements, the Company has not been served of any administrative notice by the enforcement authority; however, as from April 2020, it has decided to enter into short-term (monthly) or daily spot agreements with certain gas distribution companies.

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (In millions of Argentine Pesos (“$”))

NOTE 2: (Continuation)

Moreover, since April 2020 the Company has received letters from certain gas distribution utilities informing on the partial payment of invoices for gas purchase bills under the natural gas supply agreements terminated on March 31, 2020 alleging the social, preventive and mandatory lockdown set forth by Executive Order No. 297/20 and pursuant to Executive Order No. 311/20, which banned gas supply disconnections to certain users in case of delinquency. After conducting commercial proceedings, most distributors began to complete the above-mentioned partial payments, significantly decreasing their debts with the Company. For the remaining balances, courses of action will be evaluated, and a reservation of all rights under the supply agreements has been made. Finally, it is worth highlighting that the sale of natural gas to distributors represents on average less than 5% of the total sales of the oil and gas segment.

Moreover, ENARGAS Resolution No. 27/20, published in the Public Gazette on April 27, 2020, abrogated ENARGAS Resolution No. 72/19, which set up the methodology for passing the gas price on to tariffs, notwithstanding the possible various responsibilities or consequences that may arise from the applicable reviews of the Solidarity Law and Executive Order No. 278/20, which will be dealt with on a separate basis. In this sense, Executive Order No. 543/20 extended, for 180 days as from its expiration on June 23, 2020, the term provided for in the Solidarity Law whereby the PEN was empowered to freeze electricity and natural gas tariffs under federal jurisdiction, and to conduct the tariff review process.

Besides, in 2020 the Company has not collected any of the overdue installments for the $1,219 million receivable generated in the April 2018 - March 2019 period as a result of differences between the price stipulated in the gas sales agreements (billed in U.S. dollars) and the price of the input recognized in the gas distributors’ tariffs, which were taken on by the Federal Government pursuant to Executive Order No. 1,053/18 that provided for its payment in 30 monthly installments as from December 2019.

Act No. 26,122 provides that the Standing Bicameral Committee should rule on the validity or invalidity of an executive order and submit its report to the plenary session of each Chamber for its express treatment; emergency executive orders are deemed overturned if they are repealed by both Chambers.

On July 14, 2020, the Standing Bicameral Committee ruled on the invalidity of Executive Order No. 1,053/18 and submitted its report declaring the nullity of the executive order to both Chambers for its express treatment. On July 23, 2020, the report was approved by the Chamber of Senators; however, as of the date hereof the Chamber of Deputies has not given its final decision in this respect and, consequently, the executive order remains in force.

It is worth highlighting that, even if the executive order is actually repealed by both Chambers and, therefore, it is deemed abrogated, Section 24 of this law preserves the rights acquired by producers during its period of validity.

Despite the validity of the executive order and the repeated requests to the authorities by gas producers, the corresponding transfers to the overdue installments have not been verified, significantly affecting the recoverability of this receivable. Consequently, as of September 30, 2020, the Company has recorded impairment losses in the amount of $888 million (US$13 million).

It should be noted that the Company is evaluating the possibility to initiate the pertinent proceedings for the collection of the overdue installments.

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (In millions of Argentine Pesos (“$”))

NOTE 2: (Continuation)

2.3.1.2 Acquisition of Natural Gas for Generation

Following the centralization of natural gas supply in CAMMESA effective since December 2019, this company launched successive tenders without a purchase commitment (the daily purchased volume depends on the thermal units’ dispatch).

On January 29, 2020, CAMMESA launched a tender for the purchase of the gas volumes required to meet the generation demand for the month of February 2020, but with a 30% DoP over the daily order. Since then, CAMMESA has replicated this methodology from March to October 2020 tenders. Pampa took part in these tenders. Prices obtained in the tenders launched by CAMMESA have shown a sustained downward trend, with respect to the prices of 2019.

2.3.2 Oil market

On May 18, 2020 Executive Order No. 488/20 was issued, which provides for a series of measures aiming to preserve crude oil’ exploration and production activities; its main provisions are outlined below:

The effectiveness of the support price for the sale of crude oil in the domestic market, established by Executive Order No. 488/20, terminated on August 31, 2020, as the international Brent crude oil price exceeded US$45/bbl for the tenth consecutive day, the condition established by this Executive Order to render the support price ineffective.

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (In millions of Argentine Pesos (“$”))

NOTE 2: (Continuation)

As regards the oil market, after the cutbacks on supply implemented by the OPEC and OPEC+ and the gradual easing of lockdown measures attempted by several countries, a recovery trend was evidenced in the listings of crude oil and its derivatives, with the Brent crude oil showing a sustained price above 40 US$/bbl as from mid-June, after reaching a minimum value below 20 US$/bbl in the month of April 2020.

Besides, the domestic demand for fuels has evidenced a moderate recovery after its unprecedented drop in the month of April, in line with the easing of restrictions on movement. However, this recovery, added to the high level of existing inventories, was insufficient for the existing crude oil supply level. In view of this scenario, Pampa made a series of export shipments of Escalante crude oil from the Termap terminal in Caleta Córdova, Province of Chubut, for a total of 183 thousand barrels, and of Medanito crude oil from the Oiltanking Ebytem terminal located at Puerto Rosales, Province of Buenos Aires, for a total of 94 thousand barrels, all of them to the United States as final destination.

Hydrocarbon exploration and exploitation levy

Executive Order No. 771/20 updates the value of the hydrocarbon exploration and exploitation levy payable on a yearly basis to the Federal Government or the Provincial Jurisdiction, as applicable, effective as from fiscal year 2021. It establishes an exploration levy for an amount in pesos equivalent to 0.46, 1.84 and 32.22 oil barrels per square kilometer for the first period, the second period and the term extension, respectively, as well as an exploitation levy for a maximum amount in pesos equivalent to 8.28 oil barrels per square kilometer or fraction.

NOTE 3: BASIS OF PREPARATION

The Argentine Securities and Exchange Commission (CNV), under Title IV: “Periodic Reporting System”- Chapter III: “Provisions applicable to the form of presentation and valuation of financial statements” - Section 1 of its Rules, has provided for the application of Technical Resolution No. 26 (TR 26) of the Argentine Federation of Professional Councils in Economic Sciences (FACPCE), as amended, which adopts International Financing Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) for certain entities covered by the public offering regime set forth by Act No. 17811, whether on account of their capital stock or corporate bonds, or because they have requested an authorization to be covered by such regime.

These Condensed Interim Financial Statements for the nine-month period ended September 30, 2020 have been prepared pursuant to the provisions of IAS 34, “Interim Financial Information”, are expressed in million pesos and were approved for their issuance by the Company’s Board of Directors on August 11, 2020.

Due to the mandatory lockdown provided by the national authorities (DNU No. 297/20, subsequently extended, and complementary regulations), the Company is unable to proceed with the transcription of these consolidated condensed interim financial statements to the corresponding legal books.

The information included in the consolidated condensed interim financial statements is recorded in US dollars, which is the Company’s functional currency and, in accordance with CNV requirements, is presented in pesos, the legal currency in Argentina.

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NOTE 3: (Continuation)

This condensed interim financial information had been prepared under the historical cost convention, modified by the measurement of financial assets at fair value through profit or loss. These financial statements do not include all the information that would be required for complete annual financial statements and, therefore, they should be read together with the annual financial statements as of December 31, 2019, which have been prepared under IFRS.

These consolidated condensed interim financial statements for the nine-month period ended September 30, 2020 have not been audited. The Company’s management estimates they include all the necessary adjustments to state fairly the results of operations for each period. The results for the nine-month period ended September 30, 2020, does not necessarily reflect in proportion the Company’s results for the complete year.

The accounting policies have been consistently applied to all entities within the Group.

Comparative information

The information as of December 31, 2019 disclosed for comparative purposes arises from the consolidated financial statements as of that date and the figures for the nine and three-month periods ended September 30, 2019, with the exception of what is mentioned in Note 4.

Additionallly, certain non-significant reclassifications have been made to those financial statements´ figures to keep the consistency in the presentation with the figures of the current period.

NOTE 4: ACCOUNTING POLICIES

The accounting policies applied in these consolidated condensed interim financial statements are consistent with those used in the consolidated financial statements for the last fiscal year, which ended on December 31, 2019, except for the classification of commercial interest in the statement of comprehensive income, as the Company understands that the items corresponding to late payment surcharges in the cancellation of sales receivables and surcharges applied to Edenor’s customers on account of late payment or other penalties associated with the distribution of electricity provide relevant information on the business operations and operating flows rather than represent the Company’s financial performance and, therefore, they are disclosed under Other operating income. Management considers that this presentation better reflects the impacts of the operating cycle, allowing for a unified presentation together with other expenses already disclosed under operating expenses (including the impairment of receivables), mainly considering the context detailed in Note 1.2, which furthered the delay in payment terms to generators, hydrocarbon producers and electricity distributors, in the latter case also including the restriction of certain measures aiming to limit customers’ payment delays. In this sense, figures corresponding to commercial interest presented in comparative form have been reclassified from Financial income to Other operating income to maintain consistency with this period’s figures.

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NOTE 4: (Continuation)

The Company has applied the following standards and / or amendments for the first time as of January 1, 2020:

The application of the detailed standards and amendments did not have any impact on the results of the operations or the financial position of the Company.

NOTE 5: GROUP STRUCTURE

5.1 Business combinations

5.1.1 Mergers

On March 9, 2020, the Company and CPB’s respective Board of Directors approved the merger through absorption process between the Company, as absorbing company, and CPB, as absorbed company, establishing January 1, 2020 as the actual merger date as from which all CPB’s rights and obligations, assets and liabilities were incorporated into the Company’s equity.

On May 11, 2020, the Company and CPB’s respective Extraordinary Shareholders’ Meetings approved the merger process, its registration with the Public Registry remaining pending.

On June 19, 2020, the Company, PACOGEN and PHA’s respective Boards of Directors approved the process for the merger through absorption between the Company, as absorbing company, and PACOGEN and PHA, as absorbed companies, establishing April 1, 2020 as the actual merger date, as from which all PACOGEN and PHA’s rights and obligations, assets and liabilities were incorporated into the Company’s equity. On August 7, 2020, the Company, PACOGEN and PH’s respective Meetings of Shareholders approved the merger process, its registration with the Public Registry still being pending.

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NOTE 5: (Continuation)

As from such merger, the Company became simultaneously the beneficiary, remainder beneficiary and trustee under the CIESA Trust.

On March 24, 2020, the Trustee transferred to PHA all common shares in book-entry form with a face value of $ 1 each and each granting the right to one vote issued by CIESA and held by the CIESA Trust, which as a whole represent 40% of CIESA’s capital stock and voting rights.

Until all expenses and taxes associated with the transfer of the Trust Estate have been canceled, the CIESA Trust will remain in effect and the Trustee will maintain such capacity. The Company will assume all payment obligations for the applicable taxes and expenses resulting from the transfer of the Trust Estate.

On September 21, 2020, the respective Boards of Directors of the Company, PP, Transelec and other affiliates resolved to move forward with a process for the final merger through absorption between the Company, as absorbing company, and PP, Transelec and other affiliates, as absorbed companies, establishing October 1, 2020 as the actual merger date, date as from which the absorbed companies will be merged into the Company

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NOTE 5: (Continuation)

5.2 Interest in subsidiaries, associates and joint ventures

5.2.1 Subsidiaries information

Unless otherwise indicated, the capital stock of the subsidiaries consists of common shares, each granting the right to one vote. The country of the registered office is also the principal place where the subsidiary develops its activities.

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⁽¹⁾ The Company holds a 15.91% indirect interest through PEB.

⁽²⁾ The Company holds a 2.093% directan and indirect interest in TGS and a 50% interest in CIESA, a company that holds a 51% interest in the share capital of TGS. therefore, the Company has an indirect participation of 25.50% in TGS

⁽³⁾ Through a 50% interest, the company jointly controls Citelec, company that controls Transener with 52.65% of the shares and votes. As a result, the Company has an indirect participation of 26.33% in Transener.

⁽⁴⁾ See Note 5.1.1.

⁽⁵⁾ As of September 30, 2020 the quotation of TGS´s ordinary shares and ADR published on the BCBA and the NYSE was $ 116.6 and U$S 4.16 per share, respectively, granting to Pampa (direct and indirect) ownership an approximate stake market value of $ 25,561 million.

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The following tables show the breakdown of the result from investments in associates and joint ventures:

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5.2.2.1 Investment in CIESA/TGS

5.2.2.1.1 Impact of COVID-19 on TGS’s operations

As regards COVID-19 and the Government measures to contain its spread, TGS has mainly identified the following impacts: (i) delays in collections associated with the natural gas transportation business, where, although a recent improvement has been experienced, it cannot be guaranteed that this situation will be maintained over time, due to the suspension of public utility disconnections for non-payment and the implementation of several measures aiming to sustain the income of the most impacted economic sectors; and (ii) a scenario of high volatility in benchmark international prices for the liquid fuels produced and sold by TGS.

TGS has assessed that the above-mentioned factors constitute an impairment indicator under IAS 36; therefore, recoverable amount tests have been performed as of March 31, 2020 on the assets included in Property, property, plant and equipment, and no need for impairment has been identified. As of September 30, 2020, no new factors have been identified adversely affecting the underlying assumptions in the recoverable amount of the assets recognized under Property, plant and equipment against the last assessment performed on March 31, 2020.

5.2.2.1.2 TGS’s Acquisition of own shares programme

On March 6, 2020, TGS’ Board of Directors approved a sixth TGS share repurchase program for a $ 2,500 million maximum amount to invest.

Later on, on August 21, 2020, TGS’s Board of Directors approved a new Share Buyback Program for a maximum investment amount of $3,000 million (values effective as of its creation date), which will be effective until March 22, 2021.

As of September 30, 2020, TGS holds 38.9 million own treasury shares, which represent 4.89% of its total capital stock.

5.2.2.1.3 Acquisition of TGS’s ADRs by the Company

During the nine-month period ended September 30, 2020, the Company acquired a total of 635,380 TGS’s ADRs at an acquisition cost of U$S 4.7 per ADR.

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NOTE 5: (Continuation)

5.2.2.2 Investment in Citelec

5.2.2.2.1 Acquisition of Transener’s CBs by the Company

During the nine-month period 2020, the Company acquired a total nominal value of U$S 1.2 million of Transener’s CBs Series II 2021.

5.2.2.3 Investment in OCP

On January 16, 2020, Oleoducto de Crudos Pesados ​​Ecuador S.A. (in advance “OCP S.A.” a subsidiary of OCP Ltd) received a notice of arbitration from a client with whom it had a transport contract called ISTA. The notification alleges the existence of a dispute regarding the declaration of certain events provided for in the contract and the rights and obligations arising from them. OCP S.A. answered the notification on March 9, 2020 before the arbitration tribunal selected to this purpose. Likewise, OCP S.A. initiated a counterclaim for considering the carrier's claims invalid, as it was motivated in the breach of their own contracts in Ecuador. OCP S.A. received a response to the counterclaim on April 22, 2020, which is being analyzed. As of the issuance of these consolidated condensed interim financial statements, there are no further advances to be reported Lastly, it is estimated that this proceeding will not have a significant impact on the Company’s financial position.

On April 7, 2020, a Force Majeure event occurred, consisting of the sinking and landslide in the San Rafael sector, on the border of the provinces of Sucumbíos and Napo, Ecuador, which caused the rupture of the “Oleoducto de Crudos Pesados” pipeline, on April 8, 2020, at KP 93 + 469. This event also affected the “SOTE” Trans-Ecuadorian Pipeline System and the Shushufindi-Quito Pipeline. On May 7, 2020, OCP S.A. restarted operations and resumed the provision of the crude oil transportation service after completing the construction of a variant that allowed the restoration of the crude oil pipeline system. Furthermore, upon the occurrence of the Force Majeure event, several organizations and natural persons filed a constitutional complaint against OCP S.A., the Ministry of Energy, the Ministry of the Environment and Water, Petroecuador and the Ministry of Health alleging the infringement of several constitutional rights. As of the issuance of these Condensed Interim Financial Statements, the safeguard action has been disallowed; however, the plaintiffs may file an appeal to a higher instance. It is worth highlighting that OCP S.A. is in compliance with and about to complete the remediation plan submitted by the competent body.

The Company considered that the decrease in revenues and the increase in costs resulting from the Force Majeure event described in the previous paragraph, added to the impact of the decrease in the volume of transported crude oil resulting from the closure of borders as a measure to contain the spread of COVID-19 in Ecuador, constitute an impairment indicator under IAS 36 and, therefore, recoverable amount tests for its investment in OCP Ltd. have been performed as of September 30, 2020. In order to assess its interest in OCP Ltd., the Company has calculated the present value of the future cash flows it expects to obtain from the collection of dividends taking into consideration the concession term, which extends until 2023, and a 15.1% discount rate, generating the recognition of a US$3 million impairment loss as of June 30, 2020. As of September 30, 2020, no additional indicators have been identified which may impact the assumptions taken into consideration in the above-mentioned recoverability assessment.

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NOTE 5: (Continuation)

5.2.2.3 Investment in CTB

5.2.2.3.1. Application to enter the public offering system

On July 23, 2020, CTB’s Extraordinary General Shareholders’ Meeting resolved to approve CTB’s application to the CNV to enter the public offering system for the offering of corporate bonds, the creation of a global program of simple corporate bonds non-convertible into shares for up to US$200 million or its equivalent in other currencies or units of value, and the issuance of corporate bonds under such program up to its maximum amount, at any time, to be issued in one or more classes and/or series, which authorization was granted by the CNV on September 24, 2020.

5.2.2.3.2 Redemption of VRDs of the Enarsa-Barragán Financial Trust

On October 16, 2020, as approved by its Board of Directors on October 2, 2020, CTB, acting in its capacity as trustor under the Enarsa-Barragán Financial Trust Agreement entered into among CTB, BICE Fideicomisos S.A., in its capacity as trustee (the “Trustee”) and CAMMESA, in its capacity as assigned debtor, made a partial early redemption of the VRDs issued under the Enarsa-Barragán Financial Trust for a total amount of US$130 million, to be applied to the payment of the amortization installments and deferred interest, also paying the interest accrued as of the redemption date plus accessory expenses. Besides, as a result of the VRDs redemption, CTB and the holders of 100% of the outstanding VRDs agreed on a modification to the VRDs payment schedule. In this respect, CTB has requested the Trustee to cancel the redeemed VRDs and to perform all necessary acts and enter into all applicable agreements to make the necessary modifications to the applicable documents.

In order to implement the above-mentioned redemption, on October 15, 2020 CTB and the Lenders entered into an amendment to the terms of the Syndicated Loan Agreement so that the Lenders may allow for the application of the Company’s funds to the early partial redemption of the VRDs without observing the pari passu principle stipulated in such agreement and in the Inter-Creditor Agreement. Additionally, the Company provided a contingent guarantee in favor of the Lenders of the Syndicated Loan Agreement in consideration of the granting of the above-mentioned modifications.

As of the issuance hereof, total outstanding VRDs (amortization installments plus deferred interest, as these terms are defined in the Trust Agreement) amount to US$223.7 million, and, after the above-mentioned redemption and its later cancellation, which is still pending, will amount to US$93.7 million.

Chirete

On account of the discovery of commercially exploitable oil, on April 26, 2019 a hydrocarbon exploitation concession for “Los Blancos” block, corresponding to the exploration license for the Chirete area, was requested for a 95 square kilometer area.

On October 13, 2020, the Province of Salta issued Executive Order No. 662/20 granting an exploitation concession over Los Blancos block to the companies “Pampa Energía” and “High Luck Group Limited” for a term of 25 years as from its publication date.

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NOTE 5: (Continuation)

In turn, the Executive Order establishes an Investment Plan in this lot for a total amount of US$57 million for the 2020-2024 period. Additionally, this Executive Order provides for the relinquishment of the remaining area of the Chirete block, which totals 801 square kilometers.

NOTE 6: RISKS

6.1 Critical accounting estimates and judgments

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

Mentioned estimates and judgments are evaluated on a continuous basis and are based on past experiences and other reasonable factors under the existing circumstances. Actual future results might differ from the estimates and evaluations made at the date of preparation of these unaudited condensed interim financial statements.

In the preparation of these unaudited condensed interim financial statements, management judgements on applying the Company’s accounting policies and sources of information used for the respective estimates are the same as those applied in the Financial Statements for the year ended December 31, 2019, except for the following information:

6.1.1 Impairment of non-financial assets

The Company regularly monitors the existence of events or changes in circumstances which may indicate that its non-financial assets’ book value may not be recoverable.

As described in Note 1.2, the measures implemented by Governments worldwide and specifically in Argentina to contain the spread of COVID-19 have generated several consequences in economic activities and business both globally and domestically.

In the Generation segment, revenues from the energy sold in the spot market have been adversely affected by the implementation of SE Resolution No. 31/20, which, effective as from February 1, 2020, provided for the pesification of the whole remuneration scheme, with monthly updates in line with the evolution of inflation, and the reduction of availability power capacity payments. Furthermore, the profitability of this market is expected to deteriorate even further on account of the suspension of the automatic price inflation adjustment mechanism (Note NO-2020-24910606-APN-SE#MDP issued on April 8, 2020), added to increasing delays in CAMMESA collections, which have been affected since last year due to delays in payments by electricity distribution companies and fiscal restrictions, and which aggravated by the social lockdown.

However, it is worth highlighting that the most significant portion of revenues in the Generation segment derives from energy remunerated under a differential scheme (that is, supply agreements with large users in the MATER, Energía Plus or supply agreements entered into with CAMMESA), which have not been affected by the previously mentioned regulations.

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NOTE 6: (Continuation)

Furthermore, in the Distribution segment, Edenor’s tariff freeze since March 2019, added to the constant increase in operating costs to provide adequate service levels, was aggravated by the effect of the social, mandatory and preventive lockdown, which resulted in: (i) an increase in customers’ delinquency rates, mainly on account of the suspension of due dates and the delivery of free electricity to certain customer segments; (ii) the decrease in domestic demand during the first months following the declaration of the pandemic as a result of the slump in non-essential commercial and industrial activities, which was offset by an increase in residential consumption; (iii) the interruption of the chain of payments; and (iv) the energy theft levels.

Additionally, in the Oil and Gas segment, even though gas prices have experienced a sustained reduction since August 2018, the demand for gas has been affected by the COVID-19 to a lesser extent than that for oil, a sector that has experienced a collapse in the sold volumes as a result of the sharp drop in the demand for refined products and the exhaustion of the storage capacity. Additionally, international prices have experienced a steep decline, affecting the profitability of the sector and its reserves replenishment. However, the Federal Government has implemented a support price for domestic production which is higher than the international benchmark (See Note 2.3.2.)

As regards outlooks for the gas market, a product which represents approximately 90% of our hydrocarbon production, the social, mandatory and preventive lockdown has caused a decrease in the SADI’s electricity generation, which has resulted in a lower thermal dispatch and, consequently, lower gas consumptions by CAMMESA, added to the decrease in the non-essential industrial demand, which exacerbated the excess supply in the summer months and led to lower tendered gas prices and decreases in the domestic gas production.

Even though it is expected that the prices may continue to be depressed throughout 2020, the Argentine energy matrix is highly dependent on gas consumption and, despite the drop in domestic demand, the country will continue buying gas from Bolivia and imported LNG. Therefore, a significant price recovery is expected, at least as from 2021, as a necessary incentive for the reversal of the decrease in the domestic supply as a result of the reduction in investments, allowing to reach a break-even price in the medium and long term.

Finally, in the petrochemicals segment, there has been a considerable decrease in the demand for some of the main products produced and sold by the Company, such as styrene and octane bases, and the production and sale of rubber , during the months of April and May, was suspended as it was not considered an essential activity under the COVID-19 related measures adopted by the National Government, which affected the recoverability of inventories of several raw materials and stock for sale, thus recording an impairment of inventories for $ 706 million (US$ 11 million) as of March 31, 2020

Therefore, in view of the above-mentioned indications of impairment, the Company has updated, as of September 30, 2020, its estimates on the recoverable value of the CGUs making up the Generation, Distribution, and Oil and Gas segments as of December 31, 2019.

The methodology used in the estimation of the recoverable amount consisted of calculating the value in use of each CGU based on the present value of future net cash flows expected to be derived from the CGU, discounted with a rate reflecting the weighted average cost of the capital employed.

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NOTE 6: (Continuation)

Cash flows were prepared based on estimates on the future behavior of certain variables that are sensitive in the determination of the value in use, including the following: (i) the reference prices for products; (ii) the nature, timing and modality of the electricity rate increases and/or the recognition of cost adjustments in Edenor; (iii) demand projections per type of product; (iv) costs evolution; and (v) investment needs in accordance with the service quality levels required by Edenor’s regulatory authority; (vi) macroeconomic variables such as inflation and exchange rates, etc.

6.1.1.1. Generation segment

As of September 30, 2020, the assessment of recoverability for the Güemes, Piedra Buena and Piquirenda power plants and the Pichi Picun Leufú and Nihuiles hydroelectric power plants making up the Generation segment, which revenues are fully generated in the spot market, resulted in the recognition of impairment losses for $ 3,610 million (US$ 56 million).

The projections used in the calculation of the recoverable value as of September 30, 2020 take into consideration several alternatives based on past experience on regulations set by the SE, weighed with reference to: i) the partial re-implementation and the frequency of application of the automatic inflation adjustment mechanism for the spot remuneration; ii) the extension of the financing term granted to CAMMESA and the later normalization to the levels observed in 2019; and iii) a 11.5% WACC rate before taxes.

The Company has conducted a sensitivity analysis of the segment’s recoverable amount regarding: i) discount rate: a 1% increase or decrease in the discount rate would involve a $ 537 million increase or decrease in impairment losses, respectively, and ii) price of energy in the spot market: a 2% increase or decrease in the price would involve a $ 585 million increase or decrease in impairment losses, respectively.

As of September 30, 2020, no additional indicators have been identified which may impact the assumptions taken into consideration in the recoverability assessments for the segment.

6.1.1.2 Distribution segment

Edenor has made its projections under the assumption that in the next few years it will obtain the delayed electricity rates updates to which it is entitled in accordance with the applicable regulations, using a Discount rate (WACC) in dollars of 11.41% and taking into account the following effects resulting from the situation mentioned in Note 1:

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NOTE 6: (Continuation)

However, given the complexity of the country’s macroeconomic scenario, exacerbated by the effects of the pandemic, Edenor’s Management is not in a position to ensure that the future performance of the assumptions used in making its projections will be in line with what it has estimated at the date of preparation of these condensed interim financial statements.

In order to consider the estimation risk included in the projections of the aforementioned variables, Edenor has taken into consideration three alternative probability-weighted scenarios, which are detailed below:

Edenor has assigned to these three scenarios the previously described probability of occurrence percentages based mainly on experience and giving consideration to the current economic and financial situation.

As of March 31, 2020, the value of the assets of the Distribution segment does not exceed their recoverable value and as of September 30, 2020, there are no new indications that show the possible existence of impairment.

6.1.1.3 Oil & Gas segment

As of September 30, 2020, the book value of the Oil and Gas segment assets, including the goodwill assigned to the segment, does not exceed their recoverable value.

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NOTE 6: (Continuation)

The projections used in the calculation of the recoverable amount as of September 30, 2020 take into consideration the following assumptions for gas: i) Year 2020: continuation of the downward trend shown in the gas prices and a 15% reduction in operating and maintenance costs and a 10% reduction in investments associated with the review of contracts and works with minimum staff to maintain social distancing until the end of the year; ii) Year 2021: strong price recovery (approximately 40%) necessary as an incentive for the reversal of the decrease in the domestic offer as a result of cutbacks in investments; iii) Year 2022 onwards: the break-even price is reached, in line with a prudent development of unconventional reserves in Vaca Muerta. In the case of oil, a gradual recovery from the current prices is expected, with a return to prices prior to COVID-19 being expected just as from 2024. The WACC discount rate is 13.4%.

6.2 Financial risk management

The Company’s activities are subject to several financial risks: market risk (including the exchange rate risk, the interest rate risk and price risk), credit risk and liquidity risk.

No significant changes have arisen in risk management policies since last year.

It should be noted that the Company operates in an economic context which main variables have recently suffered significant volatility as a result of political and economic events both domestically and internationally, as described in Note 1.2.

The impact of COVID-19, added to the special circumstances of the sovereign debt renegotiation being conducted since the end of 2019, had an impact in the international financial markets, which has also adversely affected the cost of access to financing, hedging activities, liquidity and access to capital for emerging markets in general, and particularly for Argentina. As regards access to domestic financing, an increase in liquidity in pesos has been experienced throughout the market, which has significantly reduced the cost of financing, especially in the very short term.

All these impacts may potentially affect the Company’s capacity to obtain financing for its operations in a timely manner, and under acceptable and efficient terms, costs and conditions in line with the Company’s business needs.

On April 30, 2020, the BCRA issued Communication “A” 7001, which introduced restrictions, in addition to those already in existence, to access the foreign exchange market (“MULC”) associated, among other factors, with transactions with stock market assets by companies.

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NOTE 6: (Continuation)

Later on, the BCRA issued several Communications (including, but not limited to, Communications “A” 7030, 7042, 7052, 7068 and 7123) strengthening the current exchange restrictions and amending certain provisions of Communication “A” 7001, which provided, among other issues, as follows:

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NOTE 6: (Continuation)

Besides, effective as from September 15, 2020, BCRA’s Board of Directors approved a series of additional measures through the issuance of Communications “A” 7106, 7133 and 7142. These communications provided, among other aspects, for the following:

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NOTE 6: (Continuation)

For the refinancing granted by the original creditor, the computation of new foreign financial debts granted by other creditors and settled through the MULC by the customer will be admissible. In the case of debt securities publicly registered in the country and denominated in foreign currency, the computation of new issuances meeting the conditions set forth in the applicable regulations will also be permitted. The obligation to submit a refinancing plan will not apply in the following cases: (i) debts with international organizations or their associated agencies or guaranteed by them, (ii) borrowings granted to the debtor by official credit agencies or guaranteed by them, and (iii) if the amount for which access to the MULC is requested for the cancellation of principal of this kind of borrowings does not exceed an amount equivalent to US$1,000,000 per calendar month.

In the case of access to the MULC for the early cancellation of principal and interest of foreign financial debts or debt securities publicly registered in the country and denominated in foreign currency, access to the MULC is allowed up to 30 calendar days before the maturity date when such early cancellation is made under a debt refinancing process meeting the previously described terms and all conditions set forth by the applicable regulations have been verified. Furthermore, access to the MULC before the maturity date will be allowed to cancel interest of foreign financial debts or debt securities publicly registered in the country and denominated in foreign currency if this early cancellation is made under a swap process for debt securities issued by the customer, provided all conditions required by the regulation have been verified.

This foreign exchange restrictions, or others which may be issued in the future, may affect the Company’s capacity to access the MULC to acquire the foreign currency necessary to meet its financial obligations.

The Company’s Management permanently monitors the evolution of situations affecting its business to determine possible steps to take and identify potential impacts on its assets and financial position. The Company’s financial statements should be read in the light of these circumstances.

It is worth highlighting that the Company currently has a strong level of liquidity, which allows it to properly face such volatility.

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (In millions of Argentine Pesos (“$”))

NOTE 7: SEGMENT INFORMATION

The Company is an integrated energy company in Argentina, which mainly participates in the electricity and oil and gas value chains.

Through its own activities, subsidiaries and share holdings in joint ventures and associates, and based on the business nature, customer portfolio and risks involved, the following business segments were identified:

Electricity Generation, mainly consisting of the Company’s direct and indirect interests in HINISA, HIDISA, Greenwind, CTB, TMB, TJSM and through its own electricity generation activities through Central Térmica Güemes, Piedra Buena, Piquirenda, Loma de la Lata, Genelba, EcoEnergía, Pilar, I. White, the Pichi Picún Leufú hydroelectric complex and the wind power park Pampa Energía II and III.

Electricity Distribution, consisting of the Company’s indirect interest in Edenor.

Oil and Gas, mainly consisting of the Company’s own interests in oil and gas areas and through its direct interest in PACOSA and indirectly in OCP.

Petrochemicals, comprising the Company’s own styrenics operations and the catalytic reformer plant operations conducted in Argentine plants.

Holding and Other Business, mainly consisting of financial investment transactions, holding activities, interests in the associate Refinor and in joint businesses CITELEC and CIESA and their respective subsidiaries, which hold the concession over the high voltage electricity transmission nationwide and over gas transportation in the South of the country, respectively.

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (in millions of Argentine Pesos (“$”) – unless otherwise stated - See Note 3)

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (in millions of Argentine Pesos (“$”) – unless otherwise stated - See Note 3)

Free translation from the original prepared in Spanish for publication in Argentina Notes to the unaudited consolidated condensed interim financial statements (continuation) For the nine-month period ended September 30, 2020, presented in comparative format (in millions of Argentine Pesos (“$”) – unless otherwise stated - See Note 3)