NOTE
1
: GENERAL INFORMATION
The Company is
the largest fully integrated power company in Argentina and, through its
subsidiaries, it participates in the electricity and oil and gas value
chains.
In the
generation segment, the Company has a 3,656 MW installed capacity, which
represents approximately 10.1% of Argentina’s installed capacity, and is the
second largest independent generator in the country. Additionally, the Company
is currently undergoing a process to expand its capacity by
598 MW.
In the
distribution segment, the Company has a controlling interest in Edenor, the
largest electricity distributor in Argentina, which has 2.9 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 16 production areas and 8 exploratory
areas and a production level of 8 million m3/day of natural gas and
22,100 barrels of oil equivalent for oil and NGLs. Its main natural gas
production blocks are Rincón del Mangrullo, El Mangrullo, Río Neuquén and Sierra
Chata, located in the Provinces of Neuquén and Río Negro, whereas its main oil
production areas are 25 de Mayo-Medanito S.E., El Tordillo and Entre
Lomas-Bajada del Palo, located in the Provinces of Río Negro, Neuquén and
Chubut. A large part of its gas production is sold under the Natural Gas Surplus
Injection Program and the Natural Gas Surplus Injection Program for Companies
with Reduced Injection at a total price of U$S 7.5/million BTU.
Additionally, the Company operates in 4 production areas in Venezuela, with a
crude oil production of 1,700 barrels/day, and has a 23.1% interest in
Oldelval, a company engaged in the transportation of crude oil from the Neuquén
basin to the Province of Buenos Aires.
In the
refining and distribution segment, the Company owns the Dr. Ricardo Eliçabe
Refinery in the City of Bahía Blanca, which has a 30,200 bbl/day capacity,
and has a 28.5% interest in Refinor (owner of a refinery located in Campo Durán,
Province of Salta, and 79 gas stations in Northern Argentina). Furthermore,
the Company sells fuels through a network of 254 gas stations located in
the center and south of the country, and has a storage capacity of
2.5 million barrels distributed among the Dr. Ricardo Eliçabe Refinery and
the Dock Sud and Caleta Paula Terminals. Additionally, the Company produces
lubricants in its Avellaneda industrial plant.
In the
petrochemicals segment, the Company has three high-complexity plants producing a
wide variety of petrochemical products, including styrenics and synthetic
rubber, and holding a large market share.
12
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
1
:
(Continuation)
Finally,
through its holding and others segment, the Company participates in the
electricity and gas transportation businesses, conducts financial investment
transactions and maintains investments in other companies having complementary
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 20,718 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 9,184 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.
NOTE
2
: REGULATORY FRAMEWORK
The main
regulatory provisions affecting the electricity market and the activities of the
company have been detailed in the financial statements for the year ended
December 31, 2016, with the exception of the changes stated below.
2.1
Generation
2.1.1. SEE
Resolution No. 19-E/17 –
New
Remuneration Scheme for generation
On February 2,
2017, the SEE issued Resolution No. 19-E/17 (the "Resolution"), which replaces
the remuneration scheme set forth by Resolution No. 22/16 (update of the
remuneration scheme implemented by Res. No. 95/13 and previously updated by Res.
No. 529/14 and Res. No. 482/15) and establishes guidelines for the remuneration
to generation plants as from the commercial transaction corresponding to
February 1, 2017.
The Resolution
provides for remunerative items based on technology and scale, establishing
dollar-denominated prices payable in pesos at the BCRA’s exchange rate effective
on the last business day of the month of the applicable economic transaction;
the transaction's maturity will be the one provided for in CAMMESA's
Proceedings.
2.1.1.1 Remuneration for Available Power Capacity
Thermal Power
Generators
The Resolution
provides for a minimum remuneration for power capacity based on technology and
scale, and allows generating, co-generating and self-generating agents owning
conventional thermal power stations to offer Guaranteed Availability Commitments
for the energy and power capacity generated by their units not committed under
the Energía Plus service modality or under the WEM Supply Agreement pursuant to
Resolution No. 220/07.
13
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
2
:
(Continuation)
Availability
Commitments for each unit should be declared for a term of three years, together
with information for the Summer Seasonal Programming (except for 2017, where
information may be submitted within the term for the winter seasonal period),
with the possibility to offer different availability values for summer and
winter six-month periods.
Finally,
generators will enter into a Guaranteed Availability Commitment Agreement with
CAMMESA, which may assign it to the demand as defined by the SEE. The committed
thermal generators’ remuneration for power capacity will be proportional to
their compliance.
-
Minimum Remuneration: It applies to generators with no
Availability Commitments
Technology/Scale
|
Minimum Price [U$S/MW- month]
|
Large CC
Capacity > 150 MW
|
3,050
|
Large TV
Capacity > 100 MW
|
4,350
|
Small TV
Capacity ≤ 100 MW
|
5,700
|
Large TG
Capacity > 50 MW
|
3,550
|
Internal
Combustion Engines
|
5,700
|
-
Base Remuneration: It applies to generators with
Availability Commitments
Period
|
Base Price
[U$S/MW- month]
|
May 17 –
Oct. 17
|
6,000
|
Nov. 17
onwards
|
7,000
|
-
Additional Remuneration: Remuneration for the additional
available power capacity aiming to encourage Availability Commitments for the
periods with a higher system demand. CAMMESA will define a Monthly Thermal
Generation Goal for the set of qualified generators on a bi-monthly basis and
will call for additional power capacity availability offers with prices not
exceeding the additional price.
Period
|
Additional Price [U$S/MW-
month]
|
May 17 –
Oct. 17
|
1,000
|
Nov. 17
onwards
|
2,000
|
Hydroelectric
Generators
In the case of
hydroelectric power plants, a base remuneration and an additional remuneration
for power capacity were established.
14
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
2
:
(Continuation)
Power capacity
availability is determined independently of the reservoir level, the
contributions made, or the expenses incurred. Furthermore, in the case of
pumping hydroelectric power plants, the following is considered to calculate
availability: i) the operation as turbine at all hours within the period, and
ii) the availability as pump at off-peak hours every day and on non-business
days.
The base
remuneration is determined by the actual power capacity plus that under
programmed and/or agreed maintenance:
Technology/Scale
|
Base Price (U$S/MW- month)
|
Medium
HI Capacity > 120 ≤ 300 MW
|
3,000
|
Small HI
Capacity > 50 ≤ 120 MW
|
4,500
|
Large
Pumped HI Capacity > 120 ≤ 300 MW
|
2,000
|
Similarly to
the provisions of Resolution No. 22/16, in the 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.
The additional
remuneration applies to power plants of any scale for their actual availability
and based on the applicable period:
Type of
Power Plant
|
Period
|
Additional Price (U$S/MW-
month)
|
Conventional
|
May 17 – Oct. 17
|
500
|
Nov. 17 onwards
|
1,000
|
Pumped
|
May 17 – Oct. 17
|
-
|
Nov. 17 onwards
|
500
|
As from
November 2017, the allocation and collection of 50% of the additional
remuneration will be conditional upon the generator: i) taking out insurance, to
CAMMESA’s satisfaction, to cover for major incidents on critical equipment; and
ii) the progressive updating of the plant's control systems pursuant to an
investment plan to be submitted based on criteria to be defined by the
SEE.
Other
Technologies
The
remuneration is made up of a base price and an additional price associated with
the availability of the installed equipment with an operating permanence longer
than 12 months as from the beginning of the Summer Seasonal
Programming.
Technology/Scale
|
Price
|
Base (U$S/MWh)
|
Additional (U$S/MWh)
|
Wind
Power
|
7.5
|
17.5
|
15
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
2
:
(Continuation)
2.1.1.2 Remuneration for Generated and Operated Energy
The
remuneration for Generated Energy is valued at variable prices according to the
type of fuel:
Technology/Scale
|
Natural Gas
[U$S/MWh]
|
Hydrocarbons (U$S/MWh)
|
Large CC
Capacity > 150 MW
|
5.0
|
8.0
|
Large TV
Capacity > 100 MW
|
5.0
|
8.0
|
Small TV
Capacity ≤ 100 MW
|
5.0
|
8.0
|
Large TG
Capacity > 50 MW
|
5.0
|
8.0
|
Internal
Combustion Engines
|
7.0
|
10.0
|
The
remuneration for Operated Energy applies to the integration of hourly power
capacities for the period, and is valued at U$S 2.0/MWh for any type of
fuel.
In the case of hydroelectric plants, prices for Generated
and Operated Energy are as follows:
Technology/Scale
|
Generated Energy [U$S/MWh]
|
Operated Energy [U$S/MWh]
|
Medium
HI Capacity > 120 ≤ 300 MW
|
3.5
|
1.4
|
Small HI
Capacity > 50 ≤ 120 MW
|
3.5
|
1.4
|
Large
Pumped HI Capacity > 120 ≤ 300 MW
|
3.5
|
1.4
|
2.1.1.3 Additional Remuneration for Efficiency
The Resolution
keeps in force the additional remuneration for efficiency created by Resolution
No. 482/15.
2.1.1.4 Additional Remuneration for Low-Use Thermal
Generators
The Resolution
provides for an additional remuneration for low-use thermal generators having
frequent startups based on the monthly generated energy for a price of U$S
2.6/MWh multiplied by the usage/startup factor.
The usage
factor is based on the Rated Power Use Factor recorded during the last rolling
year, which will have a 0.5 value for thermal units with a usage factor lower
than 30% and a 1.0 value for units with a usage factor lower than 15%. In all
other cases, the factor will equal 0.0.
The startup
factor is established based on startups recorded during the last rolling year
for issues associated with the economic dispatch made by CAMMESA. It will have a
0.0 value for units with up to 74 startups, a 0.1 value for units recording
between 75 and 149 startups, and a 0.2 value for units recording more
than 150 startups. In all other cases, the factor will equal 0.
16
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
2
:
(Continuation)
2.1.1.5 Repayment of Overhaul Financing (applicable to
thermal and hydroelectric generators)
The Resolution
abrogates the Maintenance Remuneration and provides that, as regards the
repayment of outstanding loans applicable to thermal and hydroelectric
generators, credits already accrued and/or committed to the cancellation of such
maintenance works will be applied first. The balance will be repaid by
discounting U$S 1/MWh for the energy generated until the total cancellation of
the financing.
2.1.2.
Recategorization of hydroelectric power plants of subsidiary
HINISA:
On April 10,
2017, the SEE provided for the recategorization of the Nihuil I, Nihuil II and
Nihuil III plants as small-scale plants for the application of the effective
remuneration scheme. Thus, the SEE rectified the incorrect categorization
initially assigned to these plants in line with the repeated claims lodged by
the Company since April 25, 2013.
Pursuant to
the terms of the SEE's instruction to CAMMESA, the recategorization is effective
as from April 2017.
The impact of
this recategorization represents a 50% increase in the base remuneration for
power capacity, which thus rises from U$S 3,000 - month to U$S 4,500
-month.
2.1.3.
Signature of the WEM Supply Agreement SE Resolution No. 2207/07
On July 14,
2017, CTLL entered into with CAMMESA the WEM Supply Agreement under SE
Resolution No. 220/07 for the new 105 MW high-efficiency gas turbine,
retroactively as of July 15, 2016, date on which it was commissioned for
service, committing a 79.35 MW, which represents 75.6%, of the turbine's
power capacity. The remaining 24.4% capacity will continue to be compensated
under SEE Resolution No. 19/2017.
The economic
impact of the new remuneration for CTLL amounted to
$ 378 million
,
which is
recognized in the Statement of Comprehensive Income under Revenues from sales as
of September 30, 2017.
2.1.4. Resolution No. 281/17 -
MAT Renewable Electric Power Regime
On August 22,
2017, the MEyM issued Resolution No. 281/17 approving a regime which lays down
the conditions for compliance by GUME and GUDI with average electricity demands
equal to or greater than 300 kW to make individual purchases within the MAT of
electric power from renewable sources or through self-generation from renewable
sources, subject to the obligation set forth in Section 9 of Act No.
27,191.
The purchase
conditions between the demand agents and WEM agents which are renewable energy
generating, co-generating or self-generating agents or suppliers, as well as
their economic transactions within the WEM, will be governed by the provisions
of Act No. 24,065 and its regulatory provisions; the WEM operating procedures
and, specifically, by Acts No. 26,190 and 27,191, and Executive Order No.
531/16, as amended.
Qualified
Projects
The projects
will meet the following requirements: a) They should be commissioned for
commercial operation after January 1, 2017; b) They should be registered with
the Registry of Renewable Electric Power Generation Projects (RENPER); c) The
Projects should not be committed under any other contractual regime or for
already contractualized capacity, being qualified the expansion or repowering;
and d) extensions of projects committed under contracts with CAMMESA should have
a commercial measuring system allowing for the independent measuring of the
electricity supplied by the expansion.
17
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
2
:
(Continuation)
Promotional
Benefits
Owners of
projects operating under the regime may obtain, among others, the following
promotional benefits: i) accelerated income tax depreciation; ii) anticipated
VAT recovery; and iii) extension of the term to offset tax loss-carryforwards
with income.
In order to
derive these promotional benefits, the Undersecretariat of Renewable Energy will
establish: i) a reference value for technological investments to determine the
project’s performance starting date, which will be deemed to take place when at
least 15% of the total investments foreseen for the project by December 31, 2017
have been made, and ii) maximum tax benefits per megawatt for each
technology.
Sale of the
Renewable Energy Offer
Owners of
qualified projects and suppliers may, under certain circumstances established in
these provisions, sell electric power under MAT contracts, sell it to CAMMESA or
participate in the Spot market by selling the surplus generated and not marketed
electric power.
The executed
contracts will be administered and managed in accordance with the WEM
Procedures. The administration conditions will be informed together with the
presentation to the Entity Responsible for the Dispatch (OED). Contractual
terms, notwithstanding the maximum price set forth in Section 9 of Act No.
27,191, may be freely agreed between the parties, although the committed
electricity volumes will be limited by the electric power from renewable sources
produced by the generator or supplied by other generators or suppliers with
which it has purchase agreements in place.
The Company is
currently analyzing the possibility to make sales under this
modality.
2.1.5. New
Generation Projects
Under the
National Government’s call for the expansion of the generation offer, the
Company participates in the following thermal generation, renewable energy,
co-generation and combined cycle closing projects:
2.1.5.1. Thermal Generation
Central
Térmica Parque Pilar
On August 31,
2017, CAMMESA declared the commercial commissioning of Central Térmica Parque
Pilar pursuant to the Wholesale Power Purchase entered into between CAMMESA and
the Company as awardee under the Call to Companies interested in Offering New
Generation Capacity pursuant to SEE Resolution No. 21/2016.
The project,
consisting of the construction of a new power plant in the Pilar Industrial
Complex (located at Pilar, Province of Buenos Aires), is made up of 6
cutting-edge and high efficiency Wärtsilä engine generators with a total
100 MW capacity and the possibility to run on natural gas or,
alternatively, fuel oil.
It is worth
pointing out that the commercial commissioning was achieved before the
contractually agreed terms, as from which time the applicable supply obligations
became effective.
18
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
2
:
(Continuation)
CTLL
Under the
Wholesale Demand Agreement executed between CAMMESA and CTLL as awardee under
the Call to Offer New Generation Capacity according to SEE Resolution No. 21/16,
on August 5, 2017, CAMMESA declared the commercial commissioning of the new
105 MW high-efficiency gas turbine.
Thus, the
commissioning was accomplished as and when required under the Agreement, and the
relevant supply commitments entered into force.
The project,
which consisted of the installation of a new 105 MW high-efficiency turbine
in CTLL, increased the capacity of this plant to 750 MW and required an
approximate US$ 90 million investment.
It is worth
highlighting that the new General Electric TG05 turbine is the same model as the
gas turbines installed in CTLL (TG04) and in CTG (TG01), which have been
developed with the latest technology allowing for maximum efficiency and
versatility, with the possibility to reach maximum load in only 10 minutes
and with reduced maintenance times.
Additionally,
CTLL is currently building in Ingeniero White, Bahía Blanca, a new 100 MW
capacity power plant, also awarded under the Call to Companies interested in
Offering New Generation Capacity pursuant to SEE Resolution No. 21/2016, which
commissioning is expected for the last quarter of 2017.
2.1.5.2. Renewable generation
On August 17,
2017, the MEyM issued Resolution No. 275-E/17 calling for a new round for bids
under the National and International Open Call for the Hiring of Energy from
Renewable Sources within the WEM.
The call’s
purpose is to install new power capacity for up to 1,200 MW from renewable
sources, taking into consideration the source of energy, power capacity,
technology and region, with a maximum price for each specific
technology.
On October 19,
2017 technical proposals were opened. 228 projects were submitted for a
total offered capacity of 9.401 MW (pursuant to the bid specifications, the
goal was to hire 1,200 MW among all technologies), including 58 wind
farm projects for a total offered capacity of 3,817 MW and 99 solar
farm projects for a total capacity of 5,291 MW.
Within this
framework, the Company filed the projects: a) Parques Eólicos del Fin del Mundo,
with an offered capacity of 50 MW; and b) Parque Eólico Las Armas, with an
offered capacity of 33 MW.
The rating of
the offers is scheduled for November 20, 2017, whereas the opening of the
economic proposals and the later award of projects are expected for November 23
and 29, 2017 respectively.
19
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
2
:
(Continuation)
2.1.5.3
Co-generation and Closing of Combined Cycles
Pursuant to
SEE Resolution No. 420/2017, SEE Resolution No. 287/17 was published, which
opened a call for bids to all parties interested in developing projects for
co-generation and the closing of combined cycles over existing equipment,
without limit to the power capacity to be installed. The projects should have
low specific consumption (lower than 1,680 kcal/kWh with natural gas and
1,820 kcal/kWh with alternative liquid fuels).
It is a
condition that the new capacity should not exceed the existing electric power
transmission capacity; otherwise, the cost of the necessary extensions will be
assumed by the Bidder.
Awarded
projects will be remunerated under a Wholesale Demand Agreement and will have a
payment priority equivalent to the recognition of fuel costs by the WEM for a
term of 15 years. The remuneration will be made up of the available power
capacity price, plus variable non-fuel cost for the delivered power, plus fuel
cost (if offered), less penalties and fuel surpluses. Power capacity surpluses
are remunerated pursuant to SEE Resolution No. 19-E/17. The
demand contracts
payment
priority will be the same than that applicable to the coverage of fuel
generation costs.
Within this
framework, 19 projects for the closing of combined cycles for a total
capacity of 1,884 MW and 21 co-generation projects for a total
capacity of 2,713 MW were filed.
The Company
and its subsidiaries have submitted offers for the execution of three projects:
i) a co-generation project at the Puerto General San Martín plant; ii) the
closing of CTLL’s combined cycle; and iii) the closing of Genelba Plus’ combined
cycle.
Through
Resolution No. 820-E/17, the SEE awarded only three co-generation projects (not
including the one filed by the Company) for a power capacity of 506 MW, and
called the remaining offerors with qualifying offers to improve their
offers.
Through
Resolution No. 926-E/17, the SEE awarded the projects to be executed following
the request to improve offers for a total capacity of 1,304 MW set forth in
SEE Resolution No. 820-E/17.
Genelba Plus’
closing to combined cycle, which will add an incremental capacity of 383 MW
to the Genelba power plant’s current facilities, is among the nine selected
projects.
The project
consists of the installation of a new gas turbine and a steam turbine, as well
as other enhancement works over the current Genelba Plus gas turbine, which
altogether will complete the second combined cycle at Genelba, with a total
gross power of 552 MW. The Project’s investment budget is estimated to be
approximately U$S 360 million, and the consortium of Siemens and Techint will be
responsible for the supply of the equipment, as well as for the construction and
commissioning of the Project on a turnkey basis. Its commissioning at open cycle
is expected for the second quarter of 2019, and as closed cycle for the second
quarter of 2020.
With this
expansion, Genelba, which is located in Marcos Paz, Province of Buenos Aires,
will have two combined cycles and reach an installed capacity of 1.2 GW.
Currently, Genelba generates electric power with a 674 MW combined cycle
and a 169 MW Genelba Plus gas turbine, where the Project will be
conducted.
20
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
2
:
(Continuation)
2.2
Distribution
2.2.1.
Tariff Structure Review
On January 31,
2017, the ENRE issued Resolution No. 63/17, pursuant to which it determined the
definitive Electricity Rate Schedules, the review of costs, the required quality
levels, and all the other rights and obligations that are to be applied and
complied with by Edenor as from February 1, 2017. The above-mentioned regulation
was adapted by the ENRE by means of the issuance of Resolutions Nos. 81/17,
82/17, and 92/17, and Note No. 124,898.
The
aforementioned resolution states that the ENRE, as instructed by the MEyM, shall
limit the increase in the VAD resulting from the RTI process and applicable as
from February 1, 2017, to a maximum of 42%, as compared to the VAD in effect at
the date of issuance of the aforementioned resolution, with the remaining value
of the new VAD being applied in two stages, the first of them in November 2017
and the last one in February 2018.
In addition to
that which has been previously mentioned, the ENRE shall recognize and allow
Edenor to bill the VAD difference arising as a consequence of the gradual
application of the tariff increase recognized in the RTI in 48 installments as
from February 1, 2018, which will be incorporated into the VAD’s value resulting
as of that date.
Moreover, the
aforementioned regulation sets forth the procedure for determining the mechanism
for monitoring the variation of Edenor’s Own Distribution Costs (CPD), whose
“trigger clause” will be applicable when the variation recorded in the six-month
period being controlled exceeds 5%. In this regard, in August 2017, having the
condition for the trigger clause to apply been met, Edenor requested that it be
allowed to apply the variation recorded in the CPD in the first January–June
2017 six-month control period, which amounted to 11.63%.
Finally, ENRE
Resolution No. 329/17 determines the procedure to be applied for the billing of
the deferred income, setting that those amounts will be adjusted as of February
2018 applying for such purpose the Methodology for the Redetermination of the
Company’s Recognized Own Distribution Costs, set forth in caption c2) of
Sub-Appendix II to ENRE Resolution No. 63/17, and billed in 48 installments as
from February 1, 2018.
As of
September 30, 2017, the amount arising from such deferred income and not
recognized by Edenor in these condensed interim financial statements amounts
approximately to $ 4.2 billion.
21
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
2
:
(Continuation)
2.2.2.
Penalties
In addition to
that which has been mentioned in Note 2.3 to the financial statements as of
December 31, 2016, the following is worth pointing out:
2.2.2.1.
ENRE Note No. 125,248 dated March 29, 2017
It sets the
new penalty determination and adjustment mechanisms in relation to the control
procedures, the service quality assessment methodologies, and the penalty system
applicable as from February 1, 2017 for the 2017 – 2021 period set by ENRE
Resolution No. 63/17, providing for the following:
i)
Penalty values shall be determined on the basis of the
kWh value, the average electricity rate, the cost of energy not supplied or
other economic parameter at the value in effect at the first day of the control
period or the value in effect at the date of the penalizable event for penalties
arising from specific events.
ii)
For
all the events that occurred during the transition period (the period between
the signing of the Adjustment Agreement and the effective date of the RTI) for
which a penalty has not been imposed, penalties shall be adjusted by the
consumer price index (IPC) used by the Argentine Central Bank (BCRA) to produce
the multilateral real exchange rate index (ITCRM) for the month prior to the end
of the control period or that for the month prior to the date of occurrence of
the penalizable event for penalties arising from specific events, until the date
on which the penalty is imposed. This mechanism is also applicable to the
concepts penalized after April 15, 2016 (ENRE Note No. 120,151) and until the
effective date of the RTI. This adjustment will be part of the penalty principal
amount.
iii)
Unpaid
penalties will accrue interest at the Banco de la Nación Argentina lending rate
for thirty-day discount transactions from the date of the resolution to the date
of actual payment, as interest on late payment. In the case of penalties
relating to Customer service, the calculated amount shall be increased by
50%.
iv)
Penalties
subsequent to February 1, 2017 will be valued at the kWh value or the cost of
energy not supplied of the first day of the control period or of the day of
occurrence of the penalizable event for penalties arising from specific events.
Those concepts will not be adjusted by the IPC, applying the interest on late
payment established in iii) above. Moreover, an additional fine equivalent to
twice the amount of the penalty will be determined if payment is not made in due
time and manner.
The impact of
these new penalty determination and adjustment mechanisms has been quantified by
Edenor and recognized as of September 30, 2017 (Note 22).
In accordance
with the provisions of Sub-Appendix XVI to ENRE Resolution No. 63/17, Edenor is
required to submit in a term of 60 calendar days the calculation of global
indicators, interruptions for which force majeure had been alleged, the
calculation of individual indicators, and will determine the related discounts,
crediting the amounts thereof within 10 business days. In turn, the ENRE will
examine the information submitted by Edenor, and in the event that the crediting
of such discounts were not verified will impose a fine, payable to the Treasury,
equivalent to twice the value that should have been recorded. At the date of
these condensed interim financial statements, Edenor has submitted the
aforementioned information relating to the six-month period ended August 31,
2017.
22
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
2
:
(Continuation)
2.2.2.2
Penalty Adjustment
In different
resolutions concerning penalties relating to the Quality of the Commercial and
Technical Service, the Regulatory Entity has provided for the application of
increases and adjustments, applying for such purpose a criterion different from
the one applied by Edenor.
In this
regard, Edenor does not know the formula used for obtaining such increase;
therefore, it challenged the aforementioned resolutions requesting the
suspension of their effects, which are not included within the amount of the
provision for penalties recognized as of September 30, 2017.
2.2.3.
Framework agreement
The approval
of the extension of the Framework Agreement until September 30, 2017 was signed
on August 3, 2017. The signing of the aforementioned agreement represents the
recognition of revenue in favor of the Company relating to the distribution of
electricity to low-income areas and shantytowns for the January 1, 2015 -
September 30, 2017 period for an amount of $ 268.1 million.
In this
regard, on October 23, 2017, the Company received a payment from the Federal
Government for $ 122.6 million.
2.2.4
Regulatory framework of Edenor – Law on electricity
dependent patients
On May 17,
2017, Law No. 27,351 was passed, which guarantees the permanent and free of
charge supply of electricity to those individuals who qualify as dependent on
power for reasons of health and require medical equipment necessary to avoid
risks in their lives or health. The law states that the account holder of the
service or someone who lives with him/her (a cohabitant) that is registered as
“Electricity dependent for reasons of health” will be exempt from the payment of
any and all connection fees and will benefit from a special free of charge
tariff treatment in the electric power supply service under national
jurisdiction, which consists in the recognition of the entire amount of the
power bill.
On July 26,
2017, the ENRE issued Resolution No. 292, stating that those discounts are to be
made as from the effective date of the aforementioned law, and instructing
CAMMESA to implement those discounts in its billing to distribution companies.
The amounts paid by customers for the bills covered by
this Resolution will be made available in the stipulated time limits.
According to
Executive Order 740 of the PEN, dated September 20, 2017, the MEyEM will be the
Authority of Application of Law No. 27,351, whereas the Ministry of Health will
be responsible for determining the conditions necessary to be met for
registration with the “Registry of Electricity Dependent for Reasons of Health”
and will issue the clarifying and supplementary regulations for the application
thereof.
On September
25, 2017, the National Ministry of Health issued Resolution No. 1538-E/17, which
creates the Registry of Electricity Dependent for Reasons of Health (RECS),
within the orbit of the National Ministry of Health, operating under the
authority of the Undersecretariat for the Management of Health Care
Services.
At the date of
issuance of these condensed interim financial statements no further regulations
have been issued concerning Law No. 27,351.
23
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
2
:
(Continuation)
2.3
Gas transportation
On March 30,
2017, TGS and the Federal Government executed a new transitory agreement (the
“2017 Transitory Agreement”). In this sense, ENARGAS issued Resolution No.
I-4362 approving: (i) the RTI and the new tariff chart applicable to TGS; (ii) a
Five-Year Investment Plan (April 2017 through March 2022) to be conducted by
TGS; and (iii) a non-automatic mechanism for bi-annual updates in natural gas
transportation tariffs
and investment commitments. For the calculation of the
adjustment
will contemplate the evolution of the Wholesale Price
Index published by the INDEC.
As regards the
tariff scheme, the MEyM issued Resolution No. 74-E/2017 setting a limitation on
the tariff increase resulting from the RTI process, which will be applied in
three stages. The first stage will be effective as from April 1, 2017 and
involves a 64.2% tariff increase. The remaining tariff increases will be granted
as from December 1, 2017 (40% of the total increase) and April 1, 2018 (30% of
the total increase).
2.4
Energy transportation
Pursuant to
Resolution No. 524/16, which establishes the program applicable to the RTI
process for Electric Power Transmission during 2016, on January 31, 2017, the
ENRE issued Resolutions No. 66/17 and No. 73/17, which established, among
others, the following provisions: (i) the tariffs in force for the 2017/2021
five-year period, and (ii) these resolutions provide for an investment plan for
the 2017/2021 five-year period in the amounts of $3,336 million and
$2,251 million for Transener and Transba, respectively.
Furthermore,
the ENRE established the mechanism for adjusting the remuneration, the service
quality system and the applicable penalties, the reward system and the
investment plan to be executed by both companies during such period.
Due to the
differences among the several tariff proposals submitted under the Full Tariff
Review process initiated by the ENRE, on April 7 and 21, 2017, Transener and
Transba, respectively, filed a Motion for Reconsideration and Appeal against
ENRE Resolutions No. 66/2017, 84/2017, 139/2017, 73/2017, 88/2017 and 138/2017,
whereby the ENRE approved the tariff system applicable to Transener and Transba,
respectively, for the 2017/2021 period.
On October 31,
2017, ENRE Resolutions No. 516/2017 and 517/17 were notified, whereby the ENRE
partially upheld the motions for reconsideration filed against ENRE Resolutions
No. 66/17 and 73/17 by Transener and Transba S.A., respectively.
Furthermore,
these resolutions provide for a new tariff scheme applicable to Transener and
Transba S.A. retroactively to February 2017. The Company is currently analyzing
them to evaluate their impact on such companies.
24
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
2
:
(Continuation)
2.5
Refining and distribution
During 2017,
the Company continued working in line with the provisions of Resolution
No. 5/16 of the Secretary of Hydrocarbon Resources regarding fuel
specifications.
As regards the
quality of diesel oil, the Company is conducting a bidding process for the
execution of the investments necessary for the construction and startup of a
hydrotreating unit, which is expected to be operative in 2020, so that fuels
should match the quality requirements set forth by Resolution
No. 5/16.
This progress
was duly informed to the authorities, thus meeting the provisions of Resolution
No. 5/16 on the presentation of adequacy plans and investment programs necessary
to meet fuel specifications.
As regards
pump prices, during the nine-month period ended September 30, 2017, the Company
has made adjustments pursuant to the Producers and Refiners Agreement promoted
by the MEyM, which was adhered to by the Company and the main companies in this
sector. The MEyM has informed of the suspension of the “Agreement for the
Transition to International Prices” applicable to pump prices and to the cost of
crude oil as a raw material effective as from October 1, 2017. Going forward,
pump prices and the domestic price for crude oil barrels to be used as raw
material for refining will be determined based on the domestic market
rules.
The agreement
had established a gradual convergence path for the domestic price of crude oil
until achieving parity with international markets in 2017, as well as a price
adjustment mechanism for the pump prices of refined products.
2.6
Oil and Gas Exploration and Production
2.6.1. Program
for the Encouragement of Investments in the Development of Unconventional
Natural Gas Production
On March 6,
2017 MEyM Resolution No. 46-E/2017 was published, which created the Program
for the Encouragement of Investments in the Development of Natural Gas
Production from Unconventional Reservoirs (the “Program”) seeking to encourage
investments for the production of natural gas through unconventional methods in
the Neuquén basin and effective until December 31, 2021.
To join this
program, an investment plan should be submitted for concessions located in the
Neuquén basin producing unconventional natural gas; the program consists of the
payment of a compensation to be determined on a monthly basis by multiplying the
sold gas volume from the covered concessions by the difference between its
minimum price and its actual price (the average volume billed by each company in
the domestic market). The minimum price is U$S 7.50 per million BTU for the
year 2018, and it will be later decreased by U$S 0.50 per million BTU per
year until reaching U$S 6.00 per million BTU for the year 2021. The company
may collect compensations under this program as from the month following the
submission of the application to join the program or the month of January, 2018,
whichever is later, and until December 2021, both dates inclusive. Compensations
assessed as indicated above will be payable as follows: 88% to the companies
joining the program, and the remaining 12% to the province where the concession
covered by the program is located. Compensations will be assessed in U.S.
dollars but will be payable in Argentine pesos at the exchange rate for sales
operations of Banco de la Nación Argentina effective on the last business day of
the month corresponding to the production subject to compensation.
25
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
2
:
(Continuation)
On November 2,
2017 MEyM Resolution No. 419/2017 was published in the Official Gazette.
This resolution amends Resolution No. 46-E/2017 and divides concessions
according to whether their initial unconventional production is higher or lower
than 500,000 m3/d (monthly average for the July 2016-June 2017 period); in the
case of concessions with a production higher than 500,000 m3/d, production is
discounted for the payment of the compensation. The market average price is
informed by the enforcement authority as the market weighted average, and
covered concessions should have a 500,000 m3/d minimum average annual production
by December 31, 2019.
The Company is
currently analyzing several projects to submit under this call.
2.6.2. Natural Gas
Price
On February
16, 2017 MEyM Resolution No. 29-E/2017 was published, which called for a Public
Hearing to analyze new Transportation System Entry Point (PIST) prices for
natural gas and propane gas for the distribution of undiluted propane gas
through grids that would be valid for six-month periods as from April 1, 2017,
in line with the gradual reduction of subsidies established by MEyM Resolution
No. 212/16.
On March 30,
2017, after the conduct of the public hearing, the MEyM issued Resolution
No.74-E/2017 establishing new PIST prices, which represented an improvement in
the Company’s sales revenues.
2.6.3. Investment Agreement with
YPF for the “Rincón del Mangrullo” Area
On August 1,
2017, YPF entered into an Agreement with the Province of Neuquén for the
awarding of an unconventional exploitation concession in the Rincón del
Mangrullo area, which will have to be approved by a provincial executive
order.
The main
commitments of the Agreement are as follows:
-
A 35-year
extension of the exploitation concession,
-
A commitment
to pay a bond, a corporate social responsibility contribution and the stamp tax
for a total amount of U$S 20 million, and
-
An investment
commitment of U$S 150 million aiming to further the development of the
Mulichinco formation (tight gas) and to explore the potential of the Lajas and
Vaca Muerta formations.
Although
PEPASA will participate in this new unconventional concession in Rincón del
Mangrullo jointly with YPF, its investment commitment will amount to 30% of the
total amount agreed upon between YPF and the Province of Neuquén as PEPASA’s
Agreement with YPF does not include the Vaca Muerta formation.
2.6.4 MEyM Resolution No. 80-E/2017 – Acquisition of
Natural Gas for the Sale of CNG.
On April 5,
2017, MEyM Resolution No. 80-E/2017 was published in the BO, which provides
that, effective as from May 1, 2017, users acquiring natural gas for the sale of
CNG will have the option of purchasing it either from distribution service
providers in their distribution area or directly from natural gas producers or
suppliers.
26
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
2
:
(Continuation)
The Resolution
provides that users electing to purchase natural gas directly from producers or
suppliers should comply with the proportions assigned to each of the basins
included in the area distributor’s tariff schemes, as well as with the
applicable retained gas percentages.
In this line,
users choosing to modify their purchase modality may not change it for a term of
12 months as from the exercise of such option.
Furthermore,
if the user does not state its intention to modify its natural gas purchase
option, it will be deemed that it has chosen to keep acquiring the whole service
from the natural gas distribution service provider of its distribution
area.
This
resolution allows the Company to sell its natural gas production directly to CNG
stations.
2.6.5. ENARGAS Resolution No. 4502/17 – Proceeding for
Dispatch Administration.
On June 17,
2017, ENARGAS Resolution No. 4502/17 was published in the BO This Resolution
approved the Procedure for Dispatch Administration by the Emergency Executive
Committee (the “CEE”) and mainly provides for the following
guidelines:
i)
An emergency may be declared by carriers, distribution
service providers or ENARGAS when it is considered that the priority demand is
at stake;
ii)
The
carriers and/or ENARGAS will summon all CEE participants, including the loader
which, based on the geographic area, may influence the resolution of the
situation, as well as suppliers and direct users consuming more than
500,000 m3/day;
iii)
In case the
CEE fails to agree on how to distribute the supply to satisfy the unmet priority
demand, ENARGAS will make a determination taking into consideration each
producer’s available quantities minus the amounts it has already committed to
meet another priority demand, with a progressive allocation until matching the
proportional quota of each producer in the unmet priority demand.
iv)
The
information on the offer and demand will be provided by carriers and
ENARGAS;
v)
Decisions by a CEE will be binding on all participants in
the gas industry;
vi)
Carriers and
distribution service providers will be responsible for the follow-up, control
and compensation of imbalances; and
vii)
Although the
goal is that imbalances should tend to zero, tolerance bands are allowable, but
loaders may not accumulate negative imbalances surpassing such tolerance
bands.
Future
decisions by this emergency committee may affect the Company’s sales
revenues.
27
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
2
:
(Continuation)
2.6.6. 594/17. Termination of ENARGAS
Intervention.
On July 31,
2017, Executive Order No. 594/17 was published in the BO. This Executive Order
terminates the intervention of ENARGAS, an autarchic entity within the MEyM’s
jurisdiction, and provides for the appointment of the following positions:
vice-president, first board member, second board member, and full board
member.
Finally,
Executive Order No. 594/17 provides that until the National Executive Branch
appoints ENARGAS board of directors’ chairman, his or her duties will be vested
in the vice-president.
NOTE 3
: BASIS OF PRESENTATION
These
unaudited condensed interim financial statements for the nine and three-month
periods ended on September 30, 2017 have been prepared in accordance with the
provisions of IAS 34 "Interim Financial Reporting".
This unaudited
condensed interim financial information should be read in conjunction with the
consolidated financial statements of the Company as of December 31, 2016, which
have been prepared in accordance with IFRS, as issued by the IASB. These
unaudited consolidated condensed interim financial statements are expressed in
Argentine pesos. They have been prepared under the historical cost convention,
modified by the measurement of financial assets at fair value.
These
unaudited condensed interim financial statements for the nine and three-month
periods ended September 30, 2017 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 three-month period ended
September 30, 2017, does not necessarily reflect in proportion the Company’s
results for the complete year.
These
unaudited condensed interim financial statements have been approved for their
issuance by the Company’s Board of Directors on November 9, 2017.
Comparative information
Balances as of
December 31, 2016 and for the nine and three-month periods ended on September
30, 2016, included in these unaudited condensed interim financial statements for
comparative purposes, are derived from the financial statements at those dates.
Certain reclassifications have been made to those financial statements to keep
the consistency in the presentation with the amounts of the current
period.
The income recognition on account of the RTI - SE
Resolution No. 32/15 and the higher costs recognition - SE Resolution No. 250/13
and subsequent Notes
are shown under Other operating income. T
his reclassification impacts the Statement of
Comprehensive Income presented in comparative form.
The results of operations with non-controlling interests
not representing a loss of control and reserves for stock-based compensation
plans are disclosed under “Other reserves”, rather than under “Share premium and
other reserves” as previously disclosed.
T
his reclassification impacts the Statement of Financial
Position and the Statement of Changes in Shareholders’ Equity presented in
comparative form.
28
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
4
: ACCOUNTING POLICIES
The accounting
policies applied in these unaudited condensed interim financial statements are
consistent with those used in the financial statements for the last fiscal year
prepared under IFRSs, which ended on December 31, 2016.
On June 2,
2017, the Company entered into cash settlement stock-based compensation
agreements with its main executives officers based on market value of shares’
appreciation.
This
compensation is recorded pursuant to the guidelines of IFRS 2. The fair value of
the services received is measured through the estimation of the appreciation of
the share using the Black-Scholes-Merton financial valuation model.
The fair value
of the amount payable for the compensation agreements is accrued and recognized
as an expense, with the resulting increase in liabilities. The liability is
revalued on each balance sheet date. Any change in the fair value of the
liability is recognized in profit or loss.
In Note 36 to
the condensed interim financial statements the conditions of the compensation
agreements, payment conditions and the main variables considered in the
valuation model are detailed.
At the time of
issuance of its next annual financial statements, the Company will apply the
standards effective during fiscal year 2017 indicated in Note 4.2. to the
Financial Statements as of December 31, 2016 (IAS 7: “Statement of Cash Flows”
and IAS 12: “Income Taxes”). The Company estimates that these modifications will
have no impact on the Company’s operating results or financial situation, but
will only involve new disclosures.
As of
September 30, 2016, the IASB has issued the following standards and
interpretations:
IFRS 17
"Insurance contracts"
In May 2017,
the IASB issued IFRS 17 that replaces IFRS 4, which was brought in as an interim
standard in 2004 establishing the dispensation to carry on accounting for
insurance contracts using national accounting standards, resulting in a
multitude of different approaches. IFRS 17 establishes the principles for
recognition, measurement, presentation and disclosure related to insurance
contracts and shall by applied for annual reporting periods beginning on or
after January 1, 2021, permitting early application for entities that apply IFRS
9 and IFRS 15.
The Company is
analyzing the impact of the application of IFRS 17, however, it estimates that
the application of IFRS 17 will not have an impact on the results of operations
or financial position of the Company.
29
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
4
:
(Continuation)
IFRIC 23
"Uncertainty over Income Tax Treatments"
In June 2017,
the IASB issued IFRIC 23 clarifying how to apply IAS 12 when there is
uncertainty over income tax treatments to determine income tax. According to the
interpretation, an entity shall reflect the effect of the uncertain tax
treatment by using the method that better predicts the resolution of the
uncertainty, either through the most likely amount method or the expected value
method. Additionally, an entity shall assume that the taxation authority will
examine the amounts and has full knowledge of all related information in
assessing an uncertain tax treatment in the determination of income tax. The
interpretation shall apply for annual reporting periods beginning on or after
January 1, 2019, permitting early application.
The Company is
analyzing the impact of the application of IFRIC 23, however, it estimates that
the application of IFRIC 23 will not have material impact on the results of
operations or the financial situation of the Company.
Accounting
Standards issued by the IASB applicable to fiscal years beginning on or after
January 1, 2017
IFRS 15
“Revenue from Contracts with Customers”
This standard
was issued in May 2014 and, in September 2015, its effective date was postponed
to January 1, 2018. This standard establishes the principles applicable to the
recognition of earnings and imposes information requirements on the nature,
amount, timing, and uncertainty of revenue and cash flows arising from contracts
with customers. The basic principle implies the recognition of earnings
involving the transfer of goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. The Company is completing the analysis of
the impact of its application, and expects to provide an estimate of such impact
on the issuance of the financial statements as of December 31, 2017.
IFRS 9
“Financial Instruments”
This standard
was amended in July 2014. The new version supersedes all previous versions of
IFRS 9 and is effective for periods starting as from January 1, 2018. This
version adds a new depreciation model based on expected losses and some minor
modifications to the classification and measurement of financial assets. The
Company has adopted the first phase of IFRS 9 as of the transition date and
is finishing the analysis of the impact of the application of the modifications
and remaining phases, and expects to provide an estimate of such impact on the
issuance of the financial statements as of December 31, 2017.
30
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
5
: 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, 2016.
NOTE
6
: 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.
NOTE
7
: INVESTMENTS IN SUBSIDIARIES
Merger of
Subsidiaries
The following
corporate reorganizations seek to derive important benefits for the Group, as
they will allow for a higher operating efficiency, an optimized use of available
resources, the leveraging of technical, administrative and financial structures,
and the implementation of converging policies, strategies and goals.
Furthermore, the high complementarity between the participating companies will
be leveraged, thus reducing costs resulting from the duplication and overlapping
of operating and administrative structures.
The merger's
effective date
detailed below
was fixed on
January 1, 2017, as from which date the transfer to the acquiring companies of
the whole net worth of the acquired companies became effective, all the rights
and obligations, assets and liabilities of the acquired companies thus being
incorporated into the acquiring companies' net worth, all of which subject to
the corresponding corporate approvals under the applicable law, the approval by
the ENRE
in the corresponding case
and
the registration with the Public Registry of Commerce of the merger and the
dissolution without liquidation of the acquired companies.
These
reorganizations were implemented by means of a merger through absorption
process, whereby the acquired companies will be dissolved without going into
liquidation, subject to the provisions of the prior merger through absorption
commitment, and sections 82 through 87 of the
Ley General de
Sociedades No. 19,550
(Argentine
Business Companies Law, or “BCL”) and its amending provisions, the CNV
provisions, the BCBA Listing Rules and other provisions, the IGJ provisions and
all other applicable legal and regulatory provisions in force.
31
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
7
:
(Continuation)
Corporate
reorganizations correspond to business combinations between companies under
common control, and therefore there is no effect in these unaudited consolidated
condensed interim financial statements.
7.1.
CTLL, EASA and IEASA
On December 7
and 22, 2016, the Board of Directors of CTLL, EASA and IEASA resolved to
initiate all necessary tasks and procedures for the merger through absorption
among CTLL, as absorbing company, and EASA and IEASA, as absorbed companies.
As part of the
analysis of this reorganization and in order for the process to be feasible,
EASA's management concluded that it was necessary that the debt EASA held with
holders of Class A and B Discount Corporate Bonds issued on July 19, 2006 and
maturing in 2021 be capitalized.
On March 27,
2017, EASA's Extraordinary General Meeting of Shareholders approved the
capitalization of the total
of the negotiable obligations mentioned
above.
The capitalization was accepted by PISA in its capacity
as sole holder.
On May 18,
2017, the Extraordinary Meetings of Shareholders of the involved companies
resolved to call for an adjournment in the merger approval discussions, subject
to the ENRE’s approval, which were later resumed on June 16, 2017, although
deferring the consideration of the merger as the authorization.
By Board
Resolution No. 347 passed on August 11, 2017, the ENRE resolved, by a majority
of votes, to reject the request for authorization submitted by CTLL. CTLL has
appealed this Resolution before the SEE timely and in due form as it considers
that it does not conform to law.
As at the
issuance of these Condensed Interim Consolidated Financial Statements, the SEE
has not issued a decision in this respect. Should the required approvals fail to
be obtained, the Company will have to roll back the effects of the merger and,
in accordance with this change of scenario, it may have to derecognize assets
for deferred taxes recognized during this period.
7.2.
PACOSA and WEBSA
On December 7,
2016, the Boards of Directors of PACOSA and WEBSA resolved to begin all
necessary tasks and procedures for the merger through absorption between PACOSA,
as absorbing company, and WEBSA as absorbed company.
Pursuant to
the prior merger commitment approved by PACOSA and WEBSA's Boards of Directors
on March 7, 2017, each WEBSA shareholder will receive, as consideration for each
share it held before the merger, 3.305882 ordinary shares of PACOSA with a face
value of $1 each, and each granting the right to one vote.
As a result of
the above-mentioned exchange ratio, PACOSA will issue 13,310,739 common
shares in book-entry form with a face value of $1 each, and each granting the
right to one vote and, after the merger through absorption is effected, PACOSA’s
capital stock will consist of 33,010,739 common shares.
As of the
issuance of these financial statements, the merger is pending registration with
the Public Registry, to which effect the intervening companies are filing all
applicable presentations with the corresponding bodies.
32
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 8
: INVESTMENTS IN JOINT VENTURES
The following
table presents the main activity and information from the financial statements
used for the valuation, and percentages of participation in joint
ventures:
|
|
|
|
Information about the issuer
|
|
|
Main activity
|
|
Date
|
|
Share capital
|
|
Profit (loss) of the period
|
|
Equity
|
|
Direct and indirect participation
%
|
CIESA
(1)
|
|
Investment
|
|
09.30.2017
|
|
639
|
|
916
|
|
2,460
|
|
50%
|
Citelec
(2)
|
|
Investment
|
|
09.30.2017
|
|
555
|
|
729
|
|
1,045
|
|
50%
|
Greenwind
(3)
|
|
Generation
|
|
09.30.2017
|
|
5
|
|
(13)
|
|
313
|
|
50%
|
(1)
The Company holds a direct and indirect interest of 50%
in CIESA, a company that holds a 51% interest in the share capital of
TGS.
As a result, the company indirectly owns a
25.50% stake in TGS.
(2)
Through a 50% interest, the company co-controls Citelec,
company that controlled Transener with 52.65% of the shares and
votes.
As a result, the company indirectly owns a
26.33% stake in Transener.
(3)
See Note 8.2.
The details of the valuations of
interests in joint ventures is as follows:
|
|
09.30.2017
|
|
12.31.2016
|
CIESA
|
|
3,993
|
|
3,532
|
Citelec
|
|
528
|
|
167
|
Greenwind
|
|
171
|
|
-
|
|
|
4,692
|
|
3,699
|
The breakdown of the result from interests in joint
ventures is as follows:
|
|
09.30.2017
|
|
09.30.2016
|
CIESA
|
|
463
|
|
(48)
|
Citelec
|
|
361
|
|
(146)
|
Greenwind
|
|
(4)
|
|
-
|
|
|
820
|
|
(194)
|
The evolution of interests in joint ventures is as
follows:
|
Note
|
|
09.30.2017
|
|
09.30.2016
|
At the beginning of the year
|
|
|
3,699
|
|
224
|
Reclasifications
|
8.2
|
|
175
|
|
-
|
Increase for subsidiries acquisition
|
|
|
-
|
|
3,407
|
Other decreases
|
|
|
(2)
|
|
(24)
|
Share of profit (loss)
|
|
|
820
|
|
(194)
|
At the end of the period
|
|
|
4,692
|
|
3,413
|
33
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
8
:
(Continuation)
8.1. Swap of
participations in TGS
As part of the
sale of the indirect interest in TGS perfected on July
27, 2016
, the Company acquired an option, valid until February
2017, to swap the rights as sole beneficiary of the trust holding 40% of CIESA's
capital stock and voting rights (“CIESA Trust”) in exchange for the shares that
PHA and the Company holds in CIESA, 25% and 15%, respectively (the
“Exchange”).
On January 17,
2017, the exchange whereby the Purchasers transferred to PHA their capacity as
beneficiaries and trustees of the trust holding 40% of CIESA's capital stock and
voting rights, and the Company and PHA transferred to the Purchasers shares
representing 40% of CIESA’s capital stock and voting rights, was perfected. The
Company thus keeping a 10% direct interest in CIESA's capital stock and voting
rights. The Exchange had been approved by ENARGAS on December 29, 2016. The
Purchasers and the Company’s direct and indirect interests in TGS remain
unaltered as a result of the Exchange.
Also, on the
same day, the Purchasers paid the Company and PISA the remaining purchase price
under the share purchase agreement dated July 18, 2016, for a total of US $ 80
million plus interest.
On January 11,
2017, the CNDC (
National Commission for the Defense of
Competition)
approved the acquisition by the Company of 40% of CIESA’s
capital stock, an interest that had been acquired by the Company through CIESA’s
financial debt swap executed on July, 2012 and 100% of PEPCA shares acquired on
March, 2011.
As a result of this and the Exchange, Pampa
became the controlling party of the CIESA Trust.
8.2. Sale of
interest in Greenwind
Greenwind is
developing an investment project consisting of the construction and subsequent
operation of a 100 MW capacity wind farm located in Bahía Blanca, Province
of Buenos Aires (the “Corti Wind Farm”).
With the
purpose of incorporating into the project a strategic partner contributing part
of the investments necessary for the development of the Corti Wind Farm, on
March 10, 2017, CTLL and PP entered into an agreement with Valdatana Servicios y
Gestiones S.L.U., an entity which later changed its name to Viento Solutions
S.L. (the “Purchaser”), an investment vehicle led by Castlelake LP (a global
private firm
which manages private funds
)
for the sale of certain shares held by CTLL and PP in Greenwind for a total
amount of U$S 11.2 million, representing 50% of Greenwind’s capital
stock and rights.
As a result of
the transaction, the Company has deconsolidated Greenwind's assets and
liabilities and presents its interest in the joint venture based on the equity
method of accounting.
34
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 9
: INVESTMENTS IN ASSOCIATES
The following
table presents the main activity and information from the financial statements
used for valuation and percentages of participation in
associates:
|
|
|
|
Information about the issuer
|
|
|
Main activity
|
|
Date
|
|
Share capital
|
|
Profit (loss) of the period
|
|
Equity
|
|
Direct and indirect participation
%
|
Refinor
|
|
Refinery
|
|
06.30.2017
|
|
92
|
|
(33)
|
|
957
|
|
28.50%
|
Oldelval
|
|
Transport of hydrocarbons
|
|
09.30.2017
|
|
110
|
|
135
|
|
576
|
|
23.10%
|
The detail of the valuations of the investments in
associates is as follows:
|
|
09.30.2017
|
|
12.31.2016
|
Refinor
|
|
619
|
|
602
|
Oldelval
|
|
205
|
|
184
|
Other
|
|
1
|
|
1
|
|
|
825
|
|
787
|
The breakdown of the result from investments in
associates is as follows:
|
|
09.30.2017
|
|
09.30.2016
|
Oldelval
|
|
28
|
|
4
|
Refinor
|
|
17
|
|
1
|
CIESA
|
|
-
|
|
(3)
|
|
|
45
|
|
2
|
The evolution of investments in associates is as
follows:
|
Note
|
|
09.30.2017
|
|
09.30.2016
|
At the beginning of the year
|
|
|
787
|
|
123
|
Dividends
|
30
|
|
(7)
|
|
(4)
|
Increase for subsidiries acquisition
|
|
|
-
|
|
777
|
Decreases on disposal of investment in
subsidiary
|
|
-
|
|
(117)
|
Share of profit
|
|
|
45
|
|
2
|
At the end of the period
|
|
|
825
|
|
781
|
35
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 10
: PROPERTY, PLANT AND EQUIPMENT
|
|
|
Original values
|
|
|
Type of good
|
|
|
At the
beginning
|
|
Translation effect
|
|
Increase for subsidiries acquisition
|
|
Increases
|
|
Decreases
|
|
Transfers
|
|
At the end
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
1,193
|
|
-
|
|
-
|
|
54
|
|
(582)
|
|
12
|
|
677
|
Buildings
|
|
|
2,090
|
|
-
|
|
-
|
|
-
|
|
(2)
|
|
204
|
|
2,292
|
Equipment and machinery
(a)
|
8,732
|
|
8
|
|
-
|
|
21
|
|
(25)
|
|
3,804
|
|
12,540
|
High, medium and low voltage lines
|
4,416
|
|
-
|
|
-
|
|
-
|
|
(13)
|
|
818
|
|
5,221
|
Substations
|
|
|
1,673
|
|
-
|
|
-
|
|
-
|
|
-
|
|
168
|
|
1,841
|
Transforming chamber and platforms
|
1,004
|
|
-
|
|
-
|
|
-
|
|
(2)
|
|
210
|
|
1,212
|
Meters
|
|
|
885
|
|
-
|
|
-
|
|
-
|
|
-
|
|
46
|
|
931
|
Wells
|
|
|
10,522
|
|
429
|
|
-
|
|
65
|
|
(83)
|
|
1,873
|
|
12,806
|
Mining property
|
|
|
5,033
|
|
42
|
|
-
|
|
220
|
|
-
|
|
-
|
|
5,295
|
Gas plant
|
|
|
751
|
|
-
|
|
-
|
|
-
|
|
-
|
|
71
|
|
822
|
Vehicles
|
|
|
296
|
|
1
|
|
-
|
|
46
|
|
(4)
|
|
3
|
|
342
|
Furniture and fixtures and software
equipment
|
287
|
|
3
|
|
-
|
|
176
|
|
(1)
|
|
52
|
|
517
|
Communication equipments
|
93
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
93
|
Materials and spare parts
|
|
628
|
|
2
|
|
-
|
|
227
|
|
(26)
|
|
(219)
|
|
612
|
Refining and distribution industrial
complex
|
873
|
|
-
|
|
-
|
|
-
|
|
-
|
|
77
|
|
950
|
Petrochemical industrial complex
|
756
|
|
-
|
|
-
|
|
-
|
|
-
|
|
96
|
|
852
|
Work in progress
|
|
|
6,560
|
|
17
|
|
-
|
|
8,693
|
|
(4)
|
|
(6,469)
|
|
8,797
|
Advances to suppliers
|
|
786
|
|
-
|
|
-
|
|
1,084
|
|
(270)
|
|
(853)
|
|
747
|
Other goods
|
|
|
12
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at 09.30.2017
|
|
|
46,590
|
|
502
|
|
-
|
|
10,586
|
|
(1,012)
|
|
(107)
|
|
56,559
|
Total at 09.30.2016
|
|
|
17,333
|
|
211
|
|
20,873
|
|
5,011
|
|
(626)
|
|
-
|
|
42,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Includes equipment and machinery of
generation.
36
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 10:
(Continuation)
|
|
|
Depreciation
|
|
Net book values
|
Type of good
|
|
|
At the
beginning
|
|
Decreases and
translation effect
|
|
For the period
|
|
At the end
|
|
At the end
|
|
At 12.31.2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
677
|
|
1,193
|
Buildings
|
|
|
(177)
|
|
-
|
|
(85)
|
|
(262)
|
|
2,030
|
|
1,913
|
Equipment and machinery
|
|
(970)
|
|
14
|
|
(711)
|
|
(1,667)
|
|
10,873
|
|
7,762
|
High, medium and low voltage lines
|
(820)
|
|
10
|
|
(120)
|
|
(930)
|
|
4,291
|
|
3,596
|
Substations
|
|
|
(331)
|
|
-
|
|
(43)
|
|
(374)
|
|
1,467
|
|
1,342
|
Transforming chamber and platforms
|
(200)
|
|
1
|
|
(28)
|
|
(227)
|
|
985
|
|
804
|
Meters
|
|
|
(315)
|
|
-
|
|
(35)
|
|
(350)
|
|
581
|
|
570
|
Wells
|
|
|
(1,665)
|
|
(72)
|
|
(1,747)
|
|
(3,484)
|
|
9,322
|
|
8,857
|
Mining property
|
|
|
(630)
|
|
(5)
|
|
(701)
|
|
(1,336)
|
|
3,959
|
|
4,403
|
Gas plant
|
|
|
(121)
|
|
-
|
|
(151)
|
|
(272)
|
|
550
|
|
630
|
Vehicles
|
|
|
(122)
|
|
3
|
|
(48)
|
|
(167)
|
|
175
|
|
174
|
Furniture and fixtures and software
equipment
|
(23)
|
|
1
|
|
(96)
|
|
(118)
|
|
399
|
|
264
|
Communication equipments
|
(39)
|
|
-
|
|
(3)
|
|
(42)
|
|
51
|
|
54
|
Materials and spare parts
|
|
(18)
|
|
-
|
|
(3)
|
|
(21)
|
|
591
|
|
610
|
Refining and distribution industrial
complex
|
(36)
|
|
-
|
|
(55)
|
|
(91)
|
|
859
|
|
837
|
Petrochemical industrial complex
|
(27)
|
|
-
|
|
(82)
|
|
(109)
|
|
743
|
|
729
|
Work in progress
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
8,797
|
|
6,560
|
Advances to suppliers
|
|
-
|
|
-
|
|
-
|
|
-
|
|
747
|
|
786
|
Other goods
|
|
|
(6)
|
|
-
|
|
(1)
|
|
(7)
|
|
5
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at 09.30.2017
|
|
|
(5,500)
|
|
(48)
|
|
(3,909)
|
|
(9,457)
|
|
47,102
|
|
|
Total at 09.30.2016
|
|
|
(2,824)
|
|
145
|
|
(1,768)
|
|
(4,447)
|
|
|
|
|
Total at 12.31.2016
|
|
|
|
|
|
|
|
|
|
|
|
|
41,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos (“$”) – unless otherwise stated)
NOTE 10:
(Continuation)
Borrowing costs capitalized in the book value of property, plant and equipment during the periods ended September 30, 2017 and 2016 amounted to $ 414 million and $ 153 million respectively.
Labor costs capitalized in the book value of property, plant and equipment during the periods ended September 30, 2017 and 2016 amounted to $ 257 million and $ 329 million respectively.
NOTE 11
: INTANGIBLE ASSETS
|
|
Original values
|
Type of good
|
|
At the
beginning
|
|
Increase for subsidiries acquisition
|
|
Decrease
|
|
At the end
|
|
|
|
|
|
|
|
|
|
Concession agreements
|
|
951
|
|
-
|
|
-
|
|
951
|
Goodwill
|
|
999
|
|
-
|
|
-
|
|
999
|
Intangibles identified in acquisitions of companies
|
|
327
|
|
-
|
|
(50)
|
|
277
|
Others
|
|
14
|
|
-
|
|
(1)
|
|
13
|
Total at 09.30.2017
|
|
2,291
|
|
-
|
|
(51)
|
|
2,240
|
Total at 09.30.2016
|
|
965
|
|
1,380
|
|
12
|
|
2,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
Type of good
|
|
At the
beginning
|
|
For the period
|
|
At the end
|
|
|
|
|
|
|
|
|
|
|
|
Concession agreements
|
|
(249)
|
|
(21)
|
|
(270)
|
|
|
Intangibles identified in acquisitions of companies
|
|
(28)
|
|
(32)
|
|
(60)
|
|
|
Others
|
|
-
|
|
(1)
|
|
(1)
|
|
|
Total at 09.30.2017
|
|
(277)
|
|
(54)
|
|
(331)
|
|
|
Total at 09.30.2016
|
|
(231)
|
|
(28)
|
|
(259)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book values
|
|
|
|
|
Type of good
|
|
At the end
|
|
At 12.31.2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concession agreements
|
|
681
|
|
702
|
|
|
|
|
Goodwill
|
|
999
|
|
999
|
|
|
|
|
Intangibles identified in acquisitions of companies
|
217
|
|
299
|
|
|
|
|
Others
|
|
12
|
|
14
|
|
|
|
|
Total at 09.30.2017
|
|
1,909
|
|
|
|
|
|
|
Total at 12.31.2016
|
|
|
|
2,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos (“$”) – unless otherwise stated)
NOTE 12
: FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
Non current
|
|
09.30.2017
|
|
12.31.2016
|
Shares
|
|
150
|
|
150
|
Government securities
|
|
-
|
|
592
|
Total non current
|
|
150
|
|
742
|
|
|
|
|
|
Current
|
|
|
|
|
Government securities
|
|
4,867
|
|
984
|
Corporate securities
|
|
-
|
|
12
|
Investment funds
|
|
6,996
|
|
3,189
|
Other
|
|
1
|
|
3
|
Total current
|
|
11,864
|
|
4,188
|
NOTE 13
: FINANCIAL ASSETS AT AMORTIZATED COST
|
|
09.30.2017
|
|
12.31.2016
|
Non current
|
|
|
|
|
Government securities
|
|
-
|
|
44
|
Corporate securities
|
|
1
|
|
1
|
Financial Trustee - Gasoducto Sur Work
|
|
-
|
|
17
|
Total non current
|
|
1
|
|
62
|
|
|
|
|
|
Current
|
|
|
|
|
Government securities
|
|
23
|
|
2
|
Financial Trustee - Gasoducto Sur Work
|
|
18
|
|
21
|
Total current
|
|
214
|
|
23
|
39
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos (“$”) – unless otherwise stated)
NOTE 14
: DEFERRED TAX ASSETS AND LIABILITIES, INCOME TAX AND MINIMUM NOTIONAL INCOME TAX CREDIT
The composition of the deferred tax assets and liabilities is as follows:
|
|
09.30.2017
|
|
12.31.2016
|
Tax loss-carryforwards
|
|
1,397
|
|
942
|
Trade and other receivables
|
|
180
|
|
194
|
Trade and other payables
|
|
1,280
|
|
1,124
|
Defined benefit plans
|
|
400
|
|
361
|
Taxes payable
|
|
224
|
|
224
|
Provisions
|
|
1,387
|
|
1,735
|
Other
|
|
96
|
|
126
|
Deferred tax asset
|
|
4,964
|
|
4,706
|
|
|
|
|
|
|
|
|
|
|
|
|
09.30.2017
|
|
12.31.2016
|
Property, plant and equipment
|
|
(4,579)
|
|
(4,637)
|
Intangible assets
|
|
(281)
|
|
(294)
|
Trade and other receivables
|
|
(994)
|
|
(851)
|
Financial assets at fair value through profit and loss
|
(77)
|
|
(95)
|
Borrowings
|
|
(85)
|
|
-
|
Investments in joint ventures and associates
|
|
(974)
|
|
(1,329)
|
Other
|
|
(23)
|
|
(64)
|
Deferred tax liabilities
|
|
(7,013)
|
|
(7,270)
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets and liabilities are offset in the following cases: a) when there is a legally enforceable right to offset tax assets and liabilities; and b) when deferred income tax charges are associated with the same fiscal authority. The following amounts, determined after their adequate offset, are disclosed in the statement of financial position:
|
|
09.30.2017
|
12.31.2016
|
Deferred tax asset
|
|
1,636
|
|
1,232
|
Deferred tax liabilities
|
|
(3,685)
|
|
(3,796)
|
Net deferred tax liabilities
|
(2,049)
|
|
(2,564)
|
40
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos (“$”) – unless otherwise stated)
NOTE 14
:
(Continuation)
The breakdown of income tax charge is:
|
|
|
|
|
|
09.30.2017
|
|
09.30.2016
|
Current tax
|
|
|
1,364
|
|
565
|
Deferred tax
|
|
|
(607)
|
|
(1,139)
|
Direct charges for income tax
|
|
|
(79)
|
|
-
|
Difference in the estimate of previous fiscal year income tax and the income return
|
(329)
|
|
(5)
|
Minimum notional tax
|
|
|
-
|
|
54
|
Total income tax expense (gain)
|
|
|
349
|
|
(525)
|
|
|
|
|
|
|
|
|
|
Below is a reconciliation between income tax expense and the amount resulting from application of the tax rate on the income before taxes:
|
|
|
09.30.2017
|
|
09.30.2016
|
Profit (loss) before tax
|
|
|
4,319
|
|
(2,069)
|
Current tax rate
|
|
|
35%
|
|
35%
|
Result at the tax rate
|
|
|
1,512
|
|
(724)
|
Share of profit of joint ventures and associates
|
(288)
|
|
59
|
Non-taxable results
|
|
|
(368)
|
|
(419)
|
Non-deductible cost
|
|
|
89
|
|
(5)
|
Non-deductible provisions
|
|
|
121
|
|
20
|
Difference in the estimate of previous fiscal year income tax and the income tax statement, net of deferred tax effect
|
(57)
|
|
17
|
Effect by different functional currency in the tax base
|
96
|
|
13
|
Other
|
|
|
(44)
|
|
3
|
Expiration of tax loss-carryforwards
|
|
2
|
|
18
|
Minimum notional income tax credit
|
|
-
|
|
54
|
Tax loss-carryforwards not previously recognized
|
(714)
|
|
-
|
Deferred tax assets not recognized
|
|
-
|
|
439
|
Total income tax expense (gain)
|
|
|
349
|
|
(525)
|
|
|
|
|
|
|
|
41
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 15
:
Trade and Other receivables
Non Current
|
Note
|
|
09.30.2017
|
|
12.31.2016
|
|
|
|
|
|
|
CAMMESA Consolidated Receivable Res. SE Nº 406/03
Inc. c)
|
1,972
|
|
1,702
|
Additional Remuneration Trusts Res. No.
95/13
|
|
|
701
|
|
584
|
Receivable for refining and distribution
sales
|
|
|
6
|
|
6
|
Trade receivables, net
|
|
|
2,679
|
|
2,292
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax credits
|
|
|
338
|
|
533
|
Allowance for tax credits
|
|
|
(35)
|
|
(105)
|
Related parties
|
30
|
|
755
|
|
740
|
Prepaid expenses
|
|
|
23
|
|
26
|
Financial credit
|
|
|
39
|
|
44
|
Guarantee deposits
|
|
|
286
|
|
80
|
Contractual receivables in Ecuador
|
|
|
926
|
|
850
|
Receivable for sale of property, plant and
equipment
|
|
384
|
|
-
|
Other
|
|
|
12
|
|
9
|
Other receivables, net
|
|
|
2,728
|
|
2,177
|
|
|
|
|
|
|
Total non current
|
|
|
5,407
|
|
4,469
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
Receivables from energy distribution
sales
|
|
|
5,286
|
|
4,138
|
Receivables from MAT
|
|
|
330
|
|
311
|
CAMMESA
|
|
|
1,982
|
|
1,501
|
CAMMESA Consolidated Receivable Res. SE Nº 406/03
Inc. c)
|
|
26
|
|
27
|
Maintenance remuneration
|
|
|
364
|
|
492
|
Receivables from oil and gas sales
|
|
|
1,451
|
|
1,038
|
Receivables from refinery and distribution
sales
|
|
|
915
|
|
949
|
Receivables from petrochemistry sales
|
|
|
985
|
|
744
|
Related parties
|
30
|
|
112
|
|
108
|
Other
|
|
|
78
|
|
25
|
Allowance for doubtful accounts
|
|
|
(641)
|
|
(429)
|
Trade receivables, net
|
|
|
10,888
|
|
8,904
|
|
|
|
|
|
|
|
|
42
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
15:
(Continuation)
|
Note
|
|
09.30.2017
|
|
12.31.2016
|
|
|
|
|
|
|
Tax credits
|
|
|
1,053
|
|
415
|
Advances to suppliers
|
|
|
53
|
|
24
|
Advances to employees
|
|
|
20
|
|
17
|
Related parties
|
30
|
|
174
|
|
98
|
Prepaid expenses
|
|
|
130
|
|
121
|
Receivables for non-electrical
activities
|
|
|
211
|
|
228
|
Financial credit
|
|
|
76
|
|
126
|
Receivable for the sale of interests in
subsidiaries and financial instruments
|
-
|
|
1,263
|
Guarantee deposits
|
|
|
591
|
|
941
|
Natural Gas Surplus Injection Promotion Program
|
|
|
2,461
|
|
1,582
|
Expenses to be recovered
|
|
|
373
|
|
314
|
Other
|
|
|
253
|
|
258
|
Allowance for other receivables
|
|
|
(147)
|
|
(147)
|
Other receivables, net
|
|
|
5,248
|
|
5,240
|
|
|
|
|
|
|
Total current
|
|
|
16,136
|
|
14,144
|
Book value of
current trade and other financial receivables is similar to their fair value due
to their short-term maturity.
Trade
receivables and other long-term financial receivables are measured at amortized
cost, which does not differ materially from its fair value.
43
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 15:
(Continuation)
The movements in the allowance for impairment of trade
receivables are as follows:
|
|
|
09.30.2017
|
|
09.30.2016
|
At the beginning
|
|
|
429
|
|
88
|
Allowance for impairment
|
|
|
241
|
|
86
|
Decreases
|
|
|
(28)
|
|
(24)
|
Reversal of unused amounts
|
|
|
(1)
|
|
(2)
|
Increases for purchases of
subsidiaries
|
|
|
-
|
|
142
|
At the end of the period
|
|
|
641
|
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
The movements in the allowance for impairment of
other receivables are as follows:
|
|
|
|
|
|
|
|
|
|
09.30.2017
|
|
09.30.2016
|
At the beginning
|
|
|
252
|
|
314
|
Allowance for impairment
|
|
|
34
|
|
94
|
Decreases
|
|
|
(14)
|
|
(10)
|
Decreases for deconsolidation
|
|
|
-
|
|
(3)
|
Reversal of unused amounts
|
|
|
(90)
|
|
(5)
|
At the end of the period
|
|
|
182
|
|
390
|
NOTE 16
: CASH AND CASH EQUIVALENTS
|
|
09.30.2017
|
|
12.31.2016
|
Cash
|
|
15
|
|
16
|
Banks
|
|
432
|
|
1,305
|
Checks to be deposit
|
|
1
|
|
3
|
Investment funds
|
|
-
|
|
61
|
Time deposits
|
|
14
|
|
36
|
|
|
462
|
|
1,421
|
NOTE 17
: SHARE CAPITAL
As of
September 30, 2017, the Company´s share capital consisted of 1,836,494.69 common
shares in book-entry form with a face value of $ 1 each and each granting
the right to one vote.
Pursuant to
the Final Merger Commitment approved by the Boards of Directors of Pampa
Energía, Petrobras, PEISA and Albares on April 19, 2017 and as a result of the
indicated approved exchange ratio, the Company will issue 101,873,741 common
shares with a face value of $ 1 each and each granting the right to one
vote; consequently, after the perfection of the merger through absorption, the
Company's capital stock will amount to 1,938,368,431 common
shares.
As
of September 30, 2017, the Company holds 2,500,000 treasury shares (Note
36)
.
44
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 18:
TRADE AND
OTHER PAYABLES
Non Current
|
Note
|
|
09.30.2017
|
|
12.31.2016
|
|
|
|
|
|
|
Customer contributions
|
|
|
77
|
|
98
|
Funding contributions for substations
|
|
|
60
|
|
52
|
Customer guarantees
|
|
|
95
|
|
83
|
Trade payables
|
|
|
232
|
|
233
|
|
|
|
|
|
|
ENRE Penalties and discounts
|
|
|
3,603
|
|
3,477
|
Loans (mutuums) with CAMMESA
|
|
|
1,496
|
|
1,347
|
Compensation agreements
|
|
|
67
|
|
-
|
Liability with FOTAE
|
|
|
186
|
|
173
|
Payment agreement with ENRE
|
|
|
86
|
|
106
|
Other
|
|
|
5
|
|
-
|
Other payables
|
|
|
5,443
|
|
5,103
|
Total non current
|
|
|
5,675
|
|
5,336
|
|
|
|
|
|
|
Current
|
Non Current
|
|
|
|
|
|
|
|
|
|
|
Suppliers
|
|
|
6,636
|
|
5,705
|
CAMMESA
|
|
|
6,800
|
|
5,470
|
Customer contributions
|
|
|
19
|
|
46
|
Discounts to customers
|
|
|
37
|
|
37
|
Funding contributions substations
|
|
|
10
|
|
22
|
Customer advances
|
|
|
204
|
|
384
|
Customer guarantees
|
|
|
1
|
|
15
|
Related parties
|
30
|
|
86
|
|
181
|
Other
|
|
|
6
|
|
6
|
Trade payables
|
|
|
13,799
|
|
11,866
|
|
|
|
|
|
|
ENRE Penalties and discounts
|
|
|
318
|
|
56
|
Related parties
|
30
|
|
15
|
|
14
|
Advances for works to be executed
|
|
|
14
|
|
14
|
Compensation agreements
|
|
|
462
|
|
708
|
Payment agreements with ENRE
|
|
|
63
|
|
60
|
Other creditors
|
|
|
216
|
|
55
|
Other
|
|
|
34
|
|
94
|
Other payables
|
|
|
1,122
|
|
1,001
|
|
|
|
|
|
|
Total current
|
|
|
14,921
|
|
12,867
|
The fair
values of non-current customer contributions as of September 30, 2017 and
December 31, 2016 amount to $130 million and $ 132 million, respectively. The
fair values are determined based on estimated discounted cash flows in
accordance with a market rate for this type of transactions. The applicable fair
value category is Level 3.
45
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
18
:
(Continuation)
The book value of other non-current financial liabilities
are measured at amortized cost, which does not significantly differ from its
fair value.
The book value
of the compensation arrangements approximates their fair value due to valuation
characteristics.
The book value
of other financial liabilities included in trade and other payables approximates
their fair value.
NOTE 19
: BORROWINGS
Non Current
|
Note
|
|
30.09.2017
|
|
31.12.2016
|
|
|
|
|
|
|
Financial borrowings
|
|
|
4,202
|
|
691
|
Corporate bonds
|
|
|
25,706
|
|
12,158
|
CAMMESA financing
|
|
|
3,129
|
|
2,421
|
Related parties
|
30
|
|
16
|
|
16
|
|
|
|
33,053
|
|
15,286
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
Bank overdrafts
|
|
|
-
|
|
846
|
Financial borrowings
|
|
|
4,434
|
|
7,539
|
Corporate bonds
|
|
|
469
|
|
2,246
|
CAMMESA financing
|
|
|
59
|
|
34
|
Related parties
|
30
|
|
-
|
|
21
|
|
|
|
4,962
|
|
10,686
|
As of September 30, 2017 and December 31, 2016, the fair
values of the Group’s Non Current Corporate Bonds amount approximately to $
28,386 million and $ 14,108 million, respectively. Such values were calculated
on the basis of the estimated market price of the Company’s corporate notes at
the end of each period/year (Fair value category Level 1 and 2).
The book value
of current borrowings approximates their fair value due to their short-term
maturity.
CAMMESA financing approximate to its fair value as it is
subject to a variable rate.
The other long-term borrowing were measured at amortized
cost, which does not differ significantly from its fair value.
The main variations in the Group's financial structure
during the nine-month period ended September 30, 2017 and until the date of
issuance of these unaudited condensed interim financial statements are described
below.
As at the issuance of these condensed interim financial
statements, the Company is in compliance with the covenants established in its
indebtedness.
46
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos (“$”) – unless otherwise stated)
NOTE 19
:
(Continuation)
19.1 Generation
CTLL
On February 2 and 7, 2017, CTLL fully redeemed the principal and interest balance of its Class 3 y Class C CBs for a total amount of $ 51 million and $ 258 million, respectively. The redemption was performed pursuant to each Prospectus Supplement's specific terms and conditions and was paid using own funds.
Additionally, on May 11, 2017 CTLL redeemed 100% of its outstanding CBs at Par for a total nominal amount of U$S 3.9 million and maturing in 2017, at a redemption price of U$S 1,000 for each U$S 1,000 of outstanding face value, plus U$S 77,783 as accrued and unpaid interest until, but excluding, the redemption date.
On July 28, 2017, CTLL executed a loan agreement for up to U$S 55 million with Finnish Export Credit Limited; this credit facility was structured by Crédit Agricole Corporate and Investment Bank (“CACIB”) with the purpose of partially financing the installation of a new Wärtsilä engine generator power plant with a 100 MW capacity in Ingeniero White.
On September 15, 2017, once all the above conditions had been met, it proceeded to disburse the entire loan
The loan will be secured by a credit guarantee, 95% of which will be granted by Finnvera Plc. (the Export Credit Agency of the Republic of Finland), and the remaining 5% of which will be granted by CACIB; as well as a guarantee to be granted by the Company.
The loan will accrue interest at a variable rate consisting of the nine-month LIBO rate plus and a guarantee premium on the principal in consideration of the credit guarantee to be granted by Finnvera Plc and CACIB.
Principal will be repaid in 14 semiannual, equal and consecutive installments, the first one maturing six months as from: (i) the commercial commissioning of the plant, or (ii) November 25, 2017, whichever occurs earlier.
CTG
On August 14, 2017 CTG redeemed 100% of its outstanding CBs Class 7 for a total amount of $ 173 million and $ 10 million as accrued and unpaid interest until the redemption date.
On September 11, 2017, CTG redeemed 100% of its outstanding Class 8 CBs for a total face value of US$ 1.4 million plus interest accrued until the redemption date.
47
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
19
:
(Continuation)
Greenwind
On September
27, 2017, Greenwind entered into an A/B loan agreement whereby the
Inter-American Investment Corporation (“IIC”) and Banco Interamericano de
Desarrollo, as “A Lenders”, and Banco Santander and Industrial and Commercial
Bank of China Limited Dubai (ICBC) Branch, as “B Lenders”, granted financing to
Greenwind in the amount of US$ 104 million, which will be used to finance
the construction, operation and maintenance of a 100 MW wind farm which is
currently being developed in Bahía Blanca, Province of Buenos Aires.
The facility
will have a nine-year term as from its execution date and will be repaid in
14 monthly consecutive installments, the first one becoming due on May 15,
2020. Tranche A of the facility, for an amount of US$ 31.5 million and
effective during the first three years, will accrue interest at a fixed base
rate plus an applicable margin; as from the fourth year and until maturity, the
facility will accrue interest at the six-month Libor rate plus the applicable
margin. Tranche B of the facility, which is made up of two tranches of US$
35 million and US$ 37.5 million each, will accrue interest at a fixed rate
plus the applicable margin and the six-month Libor rate plus the applicable
margin, respectively, during the first three years; as from the fourth year and
until the facility’s maturity, both sub-tranches will bear interest at the
six-month Libor rate plus the applicable margin. The applicable margin will
initially be 3%, and will increase to 6% towards the facility’s maturity.
Pampa issued a
bond for the whole facility’s principal to guarantee the operation.
On October 20,
2017, the first disbursement of the facility was made for an amount of US$
52 million.
19.2 Oil and
gas
PEPASA
During
February and August 2017, PEPASA entered into various financial loan agreements
with local financial institutions for U$S 130 million, with maturity between
November 2017, and May 2020.
These loans accrue interest at an average fixed rate of
3.9%.
48
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
19
:
(Continuation)
Proceeds were
destined to the financing of working capital and the early cancellation of the
syndicated loan for $ 142 million; Class 14 VCPs in the amount of
$ 296 million; and Series 2, 7 and 8 CBs for $ 525 million, $ 310 million
and $ 403 million, respectively.
On March 15,
2017, PEPASA made an early cancellation of the remaining balance loan executed
with Banco Santander on June 10, 2016 in the amount of U$S 105 million.
19.3 Holding
and others
19.3.1.
Syndicated Loan
On December 7,
2016 and January 18 and 26, 2017, the Company paid off U$S 130 million,
U$S 70 million and U$S 71 million, respectively, of the Dollar
denominated Acquisition Tranche (Note 20 to the consolidated financial
statements as of December 31, 2016). Thus, as of January 26, 2017, the Company
had wholly cancelled the Dollar denominated Acquisition Tranche.
On December 7,
2016, the Company cancelled $ 1,000 million of the Peso-denominated Offer
Tranche. Later on, through successive payments during the months of January and
February 2017, the Company wholly repaid the Peso-denominated Offer
Tranche.
19.3.2.
YPF
Financing
On March 9,
2017, the Board Directors resolved to approve the cancellation by YPF of the
price balance payable for the transfer to YPF of 33.33% of all rights and
obligations over the Río Neuquén Concession and the rights and obligations
representing 80% of the Aguada de la Arena area Joint Venture, through the
assignment of the loan the Company held with YPF, since Pampa and Petrobras are
undergoing a merger process, and the Company has taken on the management of
Petrobras pursuant to the decision made by the Shareholders’ Meeting dated
February 16, 2017. Furthermore, the Board of Directors agreed that Pampa, in its
capacity as assigned debtor, should replace YPF. Finally, the parties agreed on
the repayment of the due balances under the described terms and
conditions.
19.3.3
Other Local
Financing
During April
2017, the Company canceled a bank loan with Santander Rio for an amount of U$S
15 million.
During May
2017, the Company entered into financial loan agreements with different local
financial institutions for a total amount of U$S 144 million, maturing in May
2020 and in May 2021, at an average fixed rate of 4.4%.
In October
2017, the Company entered into several bank loan agreements with different local
financial entities for a total amount of $ 2,270 million, finally maturing
in August 2018 and October 2019 and accruing interest at a 22% weighted-average
fixed rate. Additionally, it executed several export financing operations with
different local financial entities for a total amount of US$ 68 million,
finally maturing in August, October and December 2018 and accruing interest at a
2.8% average fixed rate.
49
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos (“$”) – unless otherwise stated)
NOTE 19
:
(Continuation)
19.3.4.
Global corporate bonds program
On January 22, 2016, the Company’s Ordinary and Extraordinary General Shareholders’ Meeting approved the creation of a global Simple Corporate Bond Program, not convertible into shares, for up to U$S 500 million or its equivalent in other currencies, and the issue to its maximum amount at any time, to be issued in one or more classes and / or series.
On November 17, 2016, the Company’s Ordinary Meeting of Shareholders approved the extension for up to U$S 1,000 million or its equivalent in foreign currencies and the issuance of corporate bonds (simple, non-convertible into shares) for up to the maximum amount set in the Corporate Bonds Program outstanding at any time, to be issued in one or more classes and/or series.
The Company’s General Extraordinary Shareholders’ Meeting held on April 7, 2017, approved an increase for up to U$S 2,000 million of the Pampa Corporate Bonds Program and to modify its terms and conditions to allow for the possibility of issuing either simple (non-convertible into shares) or convertible notes.
Additionally, the Company's Shareholders’ Meeting resolved to approve:
i)
the issuance of Corporate Bonds convertible into common shares and American Depositary Shares (“ADR”) for a face value of up to U$S 500 million;
ii)
that the issuance only be made if the Company's ADRs listing price reaches a minimum U$S 60 per ADR at the time the Board of Directors resolves to issue. In case the Convertible Bonds are issued, holders will have the option to convert their CBs into common shares and/or ADRs at a conversion price to be set by the Board of Directors, which may not be lower than the ADRs listing price at the time of issuance of the Convertible CBs plus a 30% conversion premium;
iii)
a capital stock increase and the corresponding share issuance authorization to the extent it becomes necessary to satisfy the requests for conversion. Common shares to be issued as a result of the conversion will be entitled to dividends as from the date the conversion right is exercised;
iv)
as regards the Board of Directors' proposal for the potential issuance of convertible bonds by the Company: (a) to cancel preemptive and accretion rights pursuant to the last paragraph of section 12 of the Corporate Bonds Act or, if permitted by the regulations in force, under the terms set forth by such regulations; or (b) if the requirements for the approval of subparagraph (a) are not met and in order to avoid an excessive delay in the placement of Corporate Bonds, to reduce the term of exercise of the subscription rights as permitted by Section 12 of Act No. 23,576 to 10 days and to cancel accretion rights; or (c) if the requirements set forth in subparagraphs (a) and (b) above are not met, to reduce the term to exercise the preemptive right to 10 days pursuant to Section 194 of the Companies Act. With a 70.03% capital stock majority, this motion was approved in whole except for the cancellation of preemptive and accretion rights pursuant to the last paragraph of Section 12 of the Corporate Bonds Act by in accordance with regulations in force.
Finally, on June 26, 2017, the Company’s Board of Directors approved the terms and conditions of the Convertible Corporate Bonds, which approval will only become effective when the listing price for the Company’s ADR reaches a minimum U$S 60 per ADR.
50
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 19
:
(Continuation)
19.3.4.1.
Issuance of
Bonds
On January 24,
2017, the Company issued Class 1 Corporate Bonds for a face value of
U$S 750 million with an issuance price of 99.136%, which accrue interest at
a 7.5% fixed rate and will mature on January 24, 2027. Interest are payable
semiannually as from July 24, 2017. Funds derived from the issuance of these CBs
will be destined to investing in physical assets located in Argentina; financing
working capital in Argentina; refinancing liabilities and/or making capital
contributions in controlled companies or affiliates to use funds for the
above-mentioned purposes.
In its meeting
held on June 2, 2017, the Board of Directors approved the issuance of
Class 2 Corporate Bonds, which has been suspended until the Company informs
of a new Award Date through the issuance of a supplementary notice pursuant to
the provisions of the suspension notice dated June 29, 2017.
NOTE
20
: PROVISIONS
|
|
Note
|
|
09.30.2017
|
|
12.31.2016
|
Non Current
|
|
|
|
|
|
|
Provisions for contingencies
|
|
|
|
3,197
|
|
3,977
|
Asset retirement obligation
|
|
|
|
1,916
|
|
1,719
|
Environmental remediation
|
|
|
|
180
|
|
174
|
Onerous contract (Ship or pay)
|
|
30
|
|
50
|
|
366
|
Other provisions
|
|
|
|
34
|
|
31
|
|
|
|
|
5,377
|
|
6,267
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Provisions for contingencies
|
|
|
|
130
|
|
94
|
Asset retirement obligation
|
|
|
|
131
|
|
143
|
Environmental remediation
|
|
|
|
104
|
|
175
|
Onerous contract (Ship or pay)
|
|
30
|
|
440
|
|
394
|
|
|
|
|
808
|
|
806
|
|
|
09.30.2017
|
|
|
For
contingencies
|
|
Asset retirement obligation
|
|
For environmental remediation
|
Non Current
|
|
|
|
|
|
|
At the beginning of the year
|
|
3,977
|
|
1,719
|
|
174
|
Increases
|
|
606
|
|
218
|
|
15
|
Reclasification
|
|
(209)
|
|
-
|
|
(2)
|
Decreases
|
|
(828)
|
|
-
|
|
(5)
|
Reversal of unused amounts
|
|
(349)
|
|
(21)
|
|
(2)
|
At the end of the period
|
|
3,197
|
|
1,916
|
|
180
|
51
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos (“$”) – unless otherwise stated)
NOTE 20
:
(Continuation)
|
|
09.30.2017
|
|
|
For
contingencies
|
|
Asset retirement obligation
|
|
For environmental remediation
|
Current
|
|
|
|
|
|
|
At the beginning of the year
|
|
94
|
|
143
|
|
175
|
Increases
|
|
69
|
|
16
|
|
12
|
Reclasification
|
|
-
|
|
-
|
|
2
|
Decreases
|
|
(33)
|
|
(28)
|
|
(85)
|
At the end of the period
|
|
130
|
|
131
|
|
104
|
|
|
|
|
|
|
|
|
|
09.30.2016
|
|
|
For
contingencies
|
|
Asset retirement obligation
|
|
For environmental remediation
|
Non Current
|
|
|
|
|
|
|
At the beginning of the year
|
|
265
|
|
49
|
|
-
|
Increases
|
|
222
|
|
75
|
|
3
|
Increases for purchases of subsidiaries
|
2,747
|
|
1,147
|
|
111
|
Decreases
|
|
(11)
|
|
-
|
|
(4)
|
Decreases for desconsolidation
|
|
(1)
|
|
-
|
|
-
|
At the end of the year
|
|
3,222
|
|
1,271
|
|
110
|
|
|
|
|
|
|
|
|
|
09.30.2016
|
|
|
For
contingencies
|
|
Asset retirement obligation
|
|
For environmental remediation
|
Current
|
|
|
|
|
|
|
At the beginning of the year
|
|
71
|
|
-
|
|
-
|
Increases
|
|
64
|
|
87
|
|
90
|
Increases for purchases of subsidiaries
|
3
|
|
63
|
|
124
|
Decreases
|
|
(35)
|
|
(22)
|
|
(33)
|
At the end of the year
|
|
103
|
|
128
|
|
181
|
Arbitration Oil Combustibles S
.
A.
As of the date of issuance of these unaudited condensed interim financial statements, the parties agreed to terminate the arbitration, stating that they have no more claims with each other, not generating any meaningful impacts on the Company’s results.
52
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos (“$”) – unless otherwise stated)
NOTE 21
:
REVENUE
|
09.30.2017
|
|
09.30.2016
|
|
|
|
|
Sales of energy to the SPOT Market
|
3,960
|
|
1,307
|
Sales of energy by contract
|
2,751
|
|
1,638
|
Other sales
|
20
|
|
8
|
Generation subtotal
|
6,731
|
|
2,953
|
|
|
|
|
Energy sales
|
17,462
|
|
9,032
|
Right of use of poles
|
88
|
|
72
|
Connection and reconnection charges
|
26
|
|
13
|
Distribution subtotal
|
17,576
|
|
9,117
|
|
|
|
|
Oil, gas and liquid sales
|
5,873
|
|
3,564
|
Other sales
|
491
|
|
-
|
Oil and gas subtotal
|
6,364
|
|
3,564
|
|
|
|
|
Administrative services sales
|
276
|
|
25
|
Other sales
|
6
|
|
16
|
Holding and others subtotal
|
282
|
|
41
|
|
|
|
|
Refinery and distribution sales
|
11,865
|
|
1,710
|
Refinery and distribution subtotal
|
11,865
|
|
1,710
|
|
|
|
|
Petrochemicals sales
|
5,340
|
|
895
|
Petrochemicals subtotal
|
5,340
|
|
895
|
Total revenue
|
48,158
|
|
18,280
|
53
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
22
: COST OF SALES
|
09.30.2017
|
|
09.30.2016
|
Inventories at the beginning of the
year
|
3,360
|
|
225
|
|
|
|
|
Plus: Charges for the period
|
|
|
|
Incorporation of inventories for acquisition of
companies
|
-
|
|
3,072
|
Purchases of inventories, energy and gas
|
20,813
|
|
7,101
|
Salaries and social security charges
|
3,830
|
|
2,435
|
Benefits to the personnel
|
187
|
|
81
|
Accrual of defined benefit plans
|
143
|
|
80
|
Fees and compensation for services
|
2,460
|
|
920
|
Property, plant and equipment
depreciations
|
3,675
|
|
1,679
|
Intangible assets amortization
|
22
|
|
28
|
Transport of energy
|
66
|
|
8
|
Consumption of materials
|
647
|
|
284
|
Penalties
(1)
|
174
|
|
1,847
|
Maintenance
|
398
|
|
187
|
Canons and Royalties
|
1,661
|
|
589
|
Environmental control
|
66
|
|
15
|
Rental and insurance
|
210
|
|
114
|
Surveillance and security
|
124
|
|
67
|
Taxes, rates and contributions
|
109
|
|
33
|
Communications
|
34
|
|
26
|
Water consumption
|
19
|
|
13
|
Other
|
110
|
|
56
|
Subtotal
|
34,748
|
|
18,635
|
|
|
|
|
Less: Inventories at the end of the
period
|
(4,154)
|
|
(3,370)
|
Total cost of sales
|
33,954
|
|
15,490
|
(1)
Includes a recovery of $ 414 million (Note
2.2.2) net of the charge for the period of $ 588 million.
54
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 23
:
SELLING EXPENSES
|
|
|
09.30.2017
|
|
09.30.2016
|
Salaries and social security charges
|
|
|
813
|
|
408
|
Benefits to the personnel
|
|
|
33
|
|
14
|
Accrual of defined benefit plans
|
|
|
13
|
|
9
|
Fees and compensation for services
|
|
|
474
|
|
356
|
Compensation agreements
|
|
|
102
|
|
91
|
Property, plant and equipment
depreciations
|
|
|
131
|
|
53
|
Intangibles assets amortizations
|
|
|
32
|
|
-
|
Taxes, rates and contributions
|
|
|
842
|
|
259
|
Communications
|
|
|
132
|
|
78
|
Penalties
|
|
|
112
|
|
174
|
Doubtful accounts
|
|
|
221
|
|
95
|
Surveillance and security
|
|
|
48
|
|
3
|
Transport
|
|
|
447
|
|
108
|
Maintenance
|
|
|
93
|
|
29
|
Other
|
|
|
117
|
|
25
|
Total selling expenses
|
|
|
3,610
|
|
1,702
|
NOTE 24
:
ADMINISTRATIVE EXPENSES
|
|
|
09.30.2017
|
|
09.30.2016
|
Salaries and social security charges
|
|
|
1,527
|
|
954
|
Benefits to the personnel
|
|
|
94
|
|
41
|
Accrual of defined benefit plans
|
|
|
103
|
|
29
|
Fees and compensation for services
|
|
|
987
|
|
864
|
Compensation agreements
|
|
|
300
|
|
139
|
Directors' and Syndicates' fees
|
|
|
49
|
|
48
|
Property, plant and equipment
depreciations
|
|
|
103
|
|
36
|
Consumption of materials
|
|
|
43
|
|
23
|
Maintenance
|
|
|
42
|
|
15
|
Transport and per diem
|
|
|
17
|
|
13
|
Rental and insurance
|
|
|
107
|
|
88
|
Surveillance and security
|
|
|
67
|
|
43
|
Taxes, rates and contributions
|
|
|
60
|
|
32
|
Communications
|
|
|
35
|
|
18
|
Institutional advertising and
promotion
|
|
|
29
|
|
25
|
Other
|
|
|
48
|
|
11
|
Total administrative expenses
|
|
|
3,611
|
|
2,379
|
NOTE 25
: EXPLORATION EXPENSES
|
|
|
09.30.2017
|
|
09.30.2016
|
Geological and geophysical expenses
|
|
|
24
|
|
20
|
Decrease in abandoned and unproductive wells
|
|
|
27
|
|
56
|
Total exploration expenses
|
|
|
51
|
|
76
|
55
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 26
: OTHER OPERATING INCOME AND EXPENSES
Other operating income
|
Note
|
|
09.30.2017
|
|
09.30.2016
|
Recovery of expenses
|
|
|
1
|
|
40
|
Recovery of doubtful accounts
|
|
|
80
|
|
5
|
Surplus Gas Injection Compensation
|
|
|
1,895
|
|
1,502
|
Commissions on municipal tax
collections
|
|
|
21
|
|
15
|
Services to third parties
|
|
|
266
|
|
46
|
Profit for property, plant and equipment
sale
|
|
|
28
|
|
358
|
Dividends received
|
|
|
33
|
|
6
|
Income recognition on account of the RTI - SE Res.
No. 32/15
|
|
|
-
|
|
419
|
Higher costs recognition - SE Res. No. 250/13 and
subsequent Notes
|
|
-
|
|
82
|
Reversal of contingencies provision
|
|
|
501
|
|
-
|
Other
|
|
|
130
|
|
53
|
Total other operating income
|
|
|
2,955
|
|
2,526
|
|
|
|
|
|
|
Other operating expenses
|
|
|
|
|
|
Provision for contingencies
|
|
|
(669)
|
|
(278)
|
Voluntary retirements - bonus
|
|
|
(36)
|
|
(27)
|
Decrease in property, plant and equipment
|
|
|
(10)
|
|
(49)
|
Severance payments
|
|
|
(20)
|
|
(11)
|
Allowance for uncollectible tax
credits
|
|
|
(31)
|
|
(23)
|
Net expense for technical functions
|
|
|
(34)
|
|
(15)
|
Tax on bank transactions
|
|
|
(667)
|
|
(294)
|
Other expenses FOCEDE
|
|
|
-
|
|
(15)
|
Cost for services provided to third
parties
|
|
|
(24)
|
|
(23)
|
Compensation agreements
|
|
|
(45)
|
|
(58)
|
Donations and contributions
|
|
|
(25)
|
|
(6)
|
Institutional relationships
|
|
|
(50)
|
|
(14)
|
Extraordinary Canon
|
|
|
(246)
|
|
-
|
Contingent consideration
|
35
|
|
(171)
|
|
-
|
Cease of operations in Medanito
|
|
|
-
|
|
(213)
|
Onerous contract (Ship or Pay)
|
|
|
(9)
|
|
-
|
Other
|
|
|
(426)
|
|
(91)
|
Total other operating expenses
|
|
|
(2,463)
|
|
(1,117)
|
|
|
|
|
|
|
|
56
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 27
:
FINANCIAL RESULTS
Finance income
|
|
09.30.2017
|
|
09.30.2016
|
Commercial interest
|
|
707
|
|
409
|
Financial interest
|
|
241
|
|
61
|
Other interest
|
|
99
|
|
13
|
Total finance income
|
|
1,047
|
|
483
|
|
|
|
|
|
Finance expenses
|
|
|
|
|
Commercial interest
|
|
(735)
|
|
(822)
|
Fiscal interest
|
|
(184)
|
|
(118)
|
Financial interest
|
|
(2,666)
|
|
(2,028)
|
Other interest
|
|
(13)
|
|
(21)
|
Taxes and bank commissions
|
|
(69)
|
|
(25)
|
Other financial expenses
|
|
(25)
|
|
(25)
|
Total financial expenses
|
|
(3,692)
|
|
(3,039)
|
|
|
|
|
|
Other financial results
|
|
|
|
|
Foreign currency exchange difference,
net
|
|
(2,033)
|
|
(693)
|
Changes in the fair value of financial
instruments
|
|
863
|
|
875
|
Discounted value measurement
|
|
(92)
|
|
(1)
|
Asset retirement obligation
|
|
(67)
|
|
(28)
|
Other financial results
|
|
4
|
|
4
|
Total other financial results
|
|
(1,325)
|
|
157
|
|
|
|
|
|
Total financial results, net
|
|
(3,970)
|
|
(2,399)
|
NOTE 28
: EARNING (LOSS) PER SHARE
a)
Basic
Basic earnings
(loss) per share are calculated by dividing the result attributable to the
Company’s equity interest holders by the weighted average of outstanding common
shares during the period.
b)
Diluted
Diluted
earnings (loss) per share are calculated by adjusting the weighted average of
outstanding common shares to reflect the conversion of all dilutive potential
common shares.
Potential
common shares will be deemed dilutive only when their conversion into common
shares may reduce the earnings per share or increase losses per share of the
continuing business. Potential common shares will be deemed anti-dilutive when
their conversion into common shares may result in an increase in the earnings
per share or a decrease in the losses per share of the continuing
operations.
The
calculation of diluted earnings (loss) per share does not entail a conversion,
the exercise or another issuance of shares which may have an dilutive or
anti-dilutive effect on the results per share whereby as of September 30, 2016,
the diluted earnings per share is equal to basic. As of September 30, 2017, the
Company does not hold any significant potential dilutive shares, therefore there
are no differences with the basic earnings (loss) per share.
57
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 28:
(Continuation)
|
09.30.2017
|
|
09.30.2016
|
Earning (loss) attributable to the equity holders
of the Company
|
3,094
|
|
(993)
|
Weighted average amount of outstanding
shares
|
1,936
|
|
1,696
|
Basic and diluted earnings (loss) per
share
|
1.5981
|
|
(0.5855)
|
NOTE 29
: SEGMENT
INFORMATION
The Company is
an integrated energy company in Argentina, which participates in the various
segments of the electricity sector, in the exploration and production of gas and
oil, in petrochemicals and in the refining and distribution of fuels.
Through its
own activities, subsidiaries and holdings in joint ventures and affiliates, and
based on the business nature, customer portfolio and risks involved, we were
able to identify the following business segments:
Electricity
Generation
, consisting of the Company’s direct and indirect
interests in CPB, CTG, CTLL, HINISA, HIDISA, PACOSA, Greenwind, PEFMSA, PEA,
Enecor, TMB, TJSM and through its own electricity generation activities through
Central Térmica Genelba and EcoEnergía, the Pichi Picún Leufú hydroelectric
complex.
Electricity
Distribution
, consisting
of the Company’s indirect interest in Edenor.
Oil and
Gas
, consisting of the Company’s own interests in oil and
gas areas and through its direct interest in PEPASA, PELSA and investments in
Oldelval and OCP associates.
Refining and
Distribution
, consisting
of the Company’s own operations in the refinery at Bahía Blanca and the service
station network, the equity interest in Refinor associate and the
commercialization of the oil produced in Argentina, which is transferred at
market prices from the Oil and Gas segment. The Refining and Distribution
segment has a common strategy in line with the integration of Company operations
and according to the industry regulations seeking to meet the domestic market
supply.
Petrochemicals
, comprising
of the Company’s own styrenics operations and the catalytic reformer plant
operations conducted in Argentine plants.
Holding and
Other Business
, consisting
of financial investment transactions, holding activities, interests 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.
The Company
manages its operating segment based on its individual net results.
Taking into
account that the segments indicated above have been restructured as a
consequence of the acquisition of Petrobras as of July 27, 2016, the comparative
information by segment has been restated to reflect the current
segmentation.
58
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos (“$”) – unless otherwise stated)
NOTE 29
:
(Continuation)
Consolidated profit and loss information as of September 30, 2017
|
|
Generation
|
|
Distribution
of energy
(1)
|
|
Oil and gas
|
|
Refining &
Distribution
|
|
Petrochemicals
|
|
Holding and others
|
|
Eliminations
|
|
Consolidated
|
Revenue
|
|
6,731
|
|
17,576
|
|
6,364
|
|
11,865
|
|
5,340
|
|
282
|
|
-
|
|
48,158
|
Intersegment sales
|
|
44
|
|
-
|
|
5,595
|
|
389
|
|
34
|
|
30
|
|
(6,092)
|
|
-
|
Cost of sales
|
|
(3,732)
|
|
(12,720)
|
|
(8,113)
|
|
(10,540)
|
|
(4,923)
|
|
(3)
|
|
6,077
|
|
(33,954)
|
Gross profit (loss)
|
|
3,043
|
|
4,856
|
|
3,846
|
|
1,714
|
|
451
|
|
309
|
|
(15)
|
|
14,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
(63)
|
|
(1,460)
|
|
(476)
|
|
(1,422)
|
|
(208)
|
|
-
|
|
19
|
|
(3,610)
|
Administrative expenses
|
|
(267)
|
|
(1,009)
|
|
(810)
|
|
(53)
|
|
(51)
|
|
(1,454)
|
|
33
|
|
(3,611)
|
Exploration expenses
|
|
-
|
|
-
|
|
(51)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(51)
|
Other operating income
|
|
374
|
|
70
|
|
2,050
|
|
164
|
|
35
|
|
262
|
|
-
|
|
2,955
|
Other operating expenses
|
|
(156)
|
|
(612)
|
|
(610)
|
|
(66)
|
|
(332)
|
|
(687)
|
|
-
|
|
(2,463)
|
Share of profit (loss) from joint ventures
|
|
(4)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
824
|
|
-
|
|
820
|
Share of profit from associates
|
|
-
|
|
-
|
|
28
|
|
17
|
|
-
|
|
-
|
|
-
|
|
45
|
Operating profit (loss)
|
|
2,927
|
|
1,845
|
|
3,977
|
|
354
|
|
(105)
|
|
(746)
|
|
37
|
|
8,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income
|
|
612
|
|
182
|
|
97
|
|
14
|
|
10
|
|
170
|
|
(38)
|
|
1,047
|
Financial expenses
|
|
(723)
|
|
(1,152)
|
|
(241)
|
|
(13)
|
|
-
|
|
(1,601)
|
|
38
|
|
(3,692)
|
Other financial results
|
|
54
|
|
71
|
|
(335)
|
|
(11)
|
|
(22)
|
|
(1,082)
|
|
-
|
|
(1,325)
|
Financial results, net
|
|
(57)
|
|
(899)
|
|
(479)
|
|
(10)
|
|
(12)
|
|
(2,513)
|
|
-
|
|
(3,970)
|
Profit (loss) before income tax
|
|
2,870
|
|
946
|
|
3,498
|
|
344
|
|
(117)
|
|
(3,259)
|
|
37
|
|
4,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax and minimum notional income tax
|
|
57
|
|
(256)
|
|
(550)
|
|
(8)
|
|
-
|
|
408
|
|
-
|
|
(349)
|
Profit (loss) for the period
|
|
2,927
|
|
690
|
|
2,948
|
|
336
|
|
(117)
|
|
(2,851)
|
|
37
|
|
3,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
(2)
|
|
554
|
|
320
|
|
2,787
|
|
174
|
|
84
|
|
44
|
|
-
|
|
3,963
|
59
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
29
:
(Continuation)
Consolidated profit and loss information as of
September 30, 2017
|
|
Generation
|
|
Distribution
of energy (1)
|
|
Oil and gas
|
|
Refining &
Distribution
|
|
Petrochemicals
|
|
Holding and others
|
|
Eliminations
|
|
Consolidated
|
Total profit (loss) attributable
to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company
|
|
2,805
|
|
370
|
|
2,514
|
|
336
|
|
(117)
|
|
(2,851)
|
|
37
|
|
3,094
|
Non - controlling interest
|
|
122
|
|
320
|
|
434
|
|
-
|
|
-
|
|
-
|
|
-
|
|
876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated statement of financial position as of
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
23,021
|
|
22,305
|
|
18,141
|
|
3,295
|
|
6,949
|
|
26,880
|
|
(6,001)
|
|
94,590
|
Liabilities
|
|
10,349
|
|
21,257
|
|
11,916
|
|
2,251
|
|
3,810
|
|
32,737
|
|
(6,028)
|
|
76,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional consolidated information as of September
30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increases in property, plant and
equipment
|
|
4,728
|
|
2,873
|
|
2,753
|
|
123
|
|
59
|
|
50
|
|
-
|
|
10,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Includes financial results generated by Corporated
Bonds issued by EASA and other consolidation adjustments.
|
(2)
Includes amortization and depreciation of
property, plant and equipment and intangible assets (recognized in cost of
sales, administrative expenses and selling
expenses).
|
60
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos (“$”) – unless otherwise stated)
NOTE 29
:
(Continuation)
Consolidated profit and loss information as of September 30, 2016
|
|
Generation
|
|
Distribution
of energy
(1)
|
|
Oil and gas
|
|
Refining &
Distribution
|
|
Petrochemicals
|
|
Holding and others
|
|
Eliminations
|
|
Consolidated
|
Revenue
|
|
2,953
|
|
9,117
|
|
3,564
|
|
1,710
|
|
895
|
|
41
|
|
-
|
|
18,280
|
Intersegment sales
|
|
9
|
|
-
|
|
584
|
|
1,015
|
|
20
|
|
17
|
|
(1,645)
|
|
-
|
Cost of sales
|
|
(1,601)
|
|
(9,351)
|
|
(2,956)
|
|
(2,515)
|
|
(714)
|
|
(2)
|
|
1,649
|
|
(15,490)
|
Gross profit (loss)
|
|
1,361
|
|
(234)
|
|
1,192
|
|
210
|
|
201
|
|
56
|
|
4
|
|
2,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
(37)
|
|
(1,101)
|
|
(217)
|
|
(304)
|
|
(43)
|
|
-
|
|
-
|
|
(1,702)
|
Administrative expenses
|
|
(323)
|
|
(819)
|
|
(368)
|
|
(7)
|
|
(6)
|
|
(873)
|
|
17
|
|
(2,379)
|
Exploration expenses
|
|
-
|
|
-
|
|
(76)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(76)
|
Other operating income
|
|
30
|
|
558
|
|
1,881
|
|
33
|
|
(6)
|
|
30
|
|
-
|
|
2,526
|
Other operating expenses
|
|
(66)
|
|
(357)
|
|
(460)
|
|
5
|
|
(113)
|
|
(127)
|
|
1
|
|
(1,117)
|
Share of loss from joint ventures
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(194)
|
|
-
|
|
(194)
|
Share of profit (loss) from associates
|
|
-
|
|
-
|
|
4
|
|
1
|
|
-
|
|
(3)
|
|
-
|
|
2
|
Income from the sale of subsidiaries and financial assets
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
480
|
|
-
|
|
480
|
Operating profit (loss)
|
|
965
|
|
(1,953)
|
|
1,956
|
|
(62)
|
|
33
|
|
(631)
|
|
22
|
|
330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income
|
|
354
|
|
140
|
|
39
|
|
1
|
|
1
|
|
18
|
|
(70)
|
|
483
|
Financial expenses
|
|
(549)
|
|
(1,233)
|
|
(574)
|
|
(5)
|
|
-
|
|
(748)
|
|
70
|
|
(3,039)
|
Other financial results
|
|
175
|
|
(288)
|
|
(75)
|
|
(4)
|
|
(5)
|
|
355
|
|
(1)
|
|
157
|
Financial results, net
|
|
(20)
|
|
(1,381)
|
|
(610)
|
|
(8)
|
|
(4)
|
|
(375)
|
|
(1)
|
|
(2,399)
|
Profit (loss) before income tax
|
|
945
|
|
(3,334)
|
|
1,346
|
|
(70)
|
|
29
|
|
(1,006)
|
|
21
|
|
(2,069)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax and minimum notional income tax
|
|
(255)
|
|
1,078
|
|
(241)
|
|
(2)
|
|
-
|
|
(55)
|
|
-
|
|
525
|
Profit (loss) for the period
|
|
690
|
|
(2,256)
|
|
1,105
|
|
(72)
|
|
29
|
|
(1,061)
|
|
21
|
|
(1,544)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
(2)
|
|
209
|
|
267
|
|
1,254
|
|
45
|
|
10
|
|
11
|
|
-
|
|
1,796
|
61
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
29
:
(Continuation)
Consolidated profit and loss information as of
September 30, 2016
|
|
Generation
|
|
Distribution
of energy
(1)
|
|
Oil and gas
|
|
Refining &
Distribution
|
|
Petrochemicals
|
|
Holding and others
|
|
Eliminations
|
|
Consolidated
|
Total profit (loss) attributable
to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company
|
|
606
|
|
(1,363)
|
|
885
|
|
(72)
|
|
29
|
|
(1,099)
|
|
21
|
|
(993)
|
Non - controlling interest
|
|
84
|
|
(893)
|
|
220
|
|
-
|
|
-
|
|
38
|
|
-
|
|
(551)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated statement of financial position as of
December 31,2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
19,577
|
|
17,219
|
|
19,414
|
|
6,259
|
|
2,812
|
|
19,494
|
|
(7,498)
|
|
77,277
|
Liabilities
|
|
8,632
|
|
18,856
|
|
11,662
|
|
3,267
|
|
2,401
|
|
25,883
|
|
(7,498)
|
|
63,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional consolidated information as of December
31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increases in property, plant and
equipment
|
|
1,322
|
|
2,009
|
|
1,542
|
|
63
|
|
18
|
|
57
|
|
-
|
|
5,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Includes financial results generated by Corporated
Bonds issued by EASA for $ 256 million and other consolidation
adjustments.
|
(2)
Includes amortization and depreciation of property,
plant and equipment and intangible assets (recognized in cost of sales,
administrative expenses and selling expenses).
|
Accounting
criteria used by the subsidiaries to measure results, assets and liabilities of
the segments is consistent with that used in the consolidated financial
statements. Transactions between different segments are conducted under market
conditions. Assets and liabilities are allocated based on the segment’s
activity.
62
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 30
:
RELATED PARTIES´ TRANSACTIONS
a)
Sales of goods and services
|
|
09.30.2017
|
|
09.30.2016
|
Joint ventures:
|
|
|
|
|
Transener
(1)
|
|
34
|
|
5
|
TGS
(2)
|
|
364
|
|
-
|
Other related parties:
|
|
|
|
|
TGS
(2)
|
|
-
|
|
132
|
CYCSA
|
|
-
|
|
2
|
Refinor
(3)
|
|
96
|
|
19
|
Oldelval
|
|
2
|
|
1
|
|
|
496
|
|
159
|
(1)
Corresponds primarily to advisory services in technical
assistance.
(2)
Corresponds primarily to advisory services in technical
assistance and sale of refined products.
(3)
Corresponds mainly to the sale of crude oil.
b)
Purchases of goods and services
|
|
09.30.2017
|
|
09.30.2016
|
Joint ventures:
|
|
|
|
|
Transener
|
|
(4)
|
|
(1)
|
TGS
(1)
|
|
(147)
|
|
(61)
|
SACME
|
|
(33)
|
|
(26)
|
Other related parties:
|
|
|
|
|
Origenes Vida
|
|
(10)
|
|
(4)
|
Refinor
(2)
|
|
(266)
|
|
(39)
|
Oldelval
(3)
|
|
(51)
|
|
(13)
|
|
|
(511)
|
|
(144)
|
(1)
Corresponds
mainly to natural gas transportation services.
(2)
Corresponds
mainly to the purchase of refined products.
(3)
Corresponds
mainly to oil transportation services.
c)
Fees for services
|
|
09.30.2017
|
|
09.30.2016
|
Other related parties:
|
|
|
|
|
Salaverri, Dellatorre, Burgio &
Wetzler
|
(14)
|
|
(22)
|
|
|
(14)
|
|
(22)
|
Corresponds to fees for legal
advice.
63
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
30
:
(Continuation)
d)
Other operating expenses
|
|
09.30.2017
|
|
09.30.2016
|
Other related parties:
|
|
|
|
|
Foundation
|
|
(24)
|
|
(5)
|
|
|
(24)
|
|
(5)
|
Corresponds to
donations.
e)
Financial income
|
|
09.30.2017
|
|
09.30.2016
|
Joint ventures:
|
|
|
|
|
TGS
|
|
48
|
|
-
|
|
|
48
|
|
-
|
Corresponds to finance leases
f)
Financial
expenses
|
|
09.30.2017
|
|
09.30.2016
|
Other related parties:
|
|
|
|
|
Orígenes Retiro
|
|
(5)
|
|
(5)
|
Grupo EMES
|
|
-
|
|
(308)
|
|
|
(5)
|
|
(313)
|
g)
Distribuited
dividends
|
|
09.30.2017
|
|
09.30.2016
|
Other related parties:
|
|
|
|
|
CIESA
|
|
-
|
|
4
|
Oldelval
|
|
7
|
|
-
|
|
|
|
|
|
|
|
7
|
|
4
|
h)
Distribuited dividends
Other related parties:
|
|
09.30.2017
|
|
09.30.2016
|
EMESA
|
|
(43)
|
|
-
|
APCO Oil
|
|
(45)
|
|
(44)
|
|
|
(88)
|
|
-
|
64
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 30
:
(Continuation)
i)
Transactions with
corporate bonds
Sale of corporate
bonds
|
|
09.30.2017
|
|
09.30.2016
|
Other related parties:
|
|
|
|
|
Orígenes Retiro
|
|
-
|
|
590
|
|
|
-
|
|
590
|
Purchase of corporate
bonds
|
|
09.30.2017
|
|
09.30.2016
|
Other related parties:
|
|
|
|
|
Orígenes Retiro
|
|
-
|
|
478
|
|
|
-
|
|
478
|
j)
Balances with related
parties:
As of September 30, 2017
|
|
Trade
receivables
|
|
Other receivables
|
|
|
Current
|
|
Non Current
|
|
Current
|
Joint ventures:
|
|
|
|
|
|
|
Transener
|
|
11
|
|
-
|
|
-
|
TGS
|
|
73
|
|
749
|
|
66
|
Greenwind
|
|
-
|
|
-
|
|
98
|
SACME
|
|
-
|
|
6
|
|
-
|
Other related parties:
|
|
|
|
|
|
|
Ultracore
|
|
-
|
|
-
|
|
9
|
Refinor
|
|
27
|
|
-
|
|
-
|
Other
|
|
1
|
|
-
|
|
1
|
|
|
112
|
|
755
|
|
174
|
As of September 30, 2017
|
|
Trade payables
|
|
Other payables
|
|
Borrowings
|
|
Provisions
|
|
Current
|
|
Current
|
|
Non Current
|
|
Current
|
|
Non Current
|
|
Current
|
Joint ventures:
|
|
|
|
|
|
|
|
|
|
|
|
|
TGS
|
|
28
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
SACME
|
|
-
|
|
4
|
|
-
|
|
-
|
|
-
|
|
-
|
Other related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
Orígenes Retiro
|
|
-
|
|
-
|
|
16
|
|
-
|
|
-
|
|
-
|
OCP
|
|
-
|
|
-
|
|
-
|
|
-
|
|
50
|
|
440
|
UTE Apache
|
|
-
|
|
4
|
|
-
|
|
-
|
|
-
|
|
-
|
Refinor
|
|
41
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Oldelval
|
|
17
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Other
|
|
-
|
|
7
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
86
|
|
15
|
|
16
|
|
-
|
|
50
|
|
440
|
65
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 30
:
(Continuation)
As of December 31, 2016
|
|
Trade
receivables
|
|
Other receivables
|
|
Current
|
|
Non Current
|
|
Current
|
Joint ventures:
|
|
|
|
|
|
|
Transener
|
|
10
|
|
-
|
|
-
|
TGS
|
|
90
|
|
733
|
|
88
|
SACME
|
|
-
|
|
7
|
|
1
|
Other related parties:
|
|
|
|
|
|
|
Ultracore
|
|
-
|
|
-
|
|
4
|
Refinor
|
|
6
|
|
-
|
|
4
|
Oldelval
|
|
1
|
|
-
|
|
-
|
Other
|
|
1
|
|
-
|
|
1
|
|
|
108
|
|
740
|
|
98
|
As of December 31, 2016
|
|
Trade payables
|
|
Other payables
|
|
Borrowings
|
|
Provisions
|
|
Current
|
|
Current
|
|
Non Current
|
|
Current
|
|
Non Current
|
|
Current
|
Joint ventures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Transener
|
|
9
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
TGS
|
|
116
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
SACME
|
|
-
|
|
5
|
|
-
|
|
-
|
|
-
|
|
-
|
Other related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
Orígenes Retiro
|
|
-
|
|
-
|
|
16
|
|
21
|
|
-
|
|
-
|
OCP
|
|
-
|
|
-
|
|
-
|
|
-
|
|
366
|
|
394
|
UTE Apache
|
|
-
|
|
5
|
|
-
|
|
-
|
|
-
|
|
-
|
Refinor
|
|
32
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Oldelval
|
|
22
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
Other
|
|
2
|
|
4
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
181
|
|
14
|
|
16
|
|
21
|
|
366
|
|
394
|
66
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 31
: FINANCIAL INSTRUMENTS
The following
chart shows the Company’s financial assets measured at fair value and classified
according to their hierarchy as of September 30, 2017 and December 31,
2016.
As of September 30, 2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
Financial assets at fair value through profit and
loss
|
|
|
|
|
|
|
|
|
Government securities
|
|
4,867
|
|
-
|
|
-
|
|
4,867
|
Shares
|
|
-
|
|
-
|
|
150
|
|
150
|
Investment funds
|
|
6,996
|
|
-
|
|
-
|
|
6,996
|
Other
|
|
1
|
|
-
|
|
-
|
|
1
|
Derivative financial instruments
|
|
-
|
|
4
|
|
-
|
|
4
|
Other receivables
|
|
227
|
|
-
|
|
-
|
|
227
|
Total assets
|
|
12,091
|
|
4
|
|
150
|
|
12,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
Financial assets at fair value through profit and
loss
|
|
|
|
|
|
|
|
|
Corporate securities
|
|
12
|
|
-
|
|
-
|
|
12
|
Government securities
|
|
1,576
|
|
-
|
|
-
|
|
1,576
|
Trust
|
|
-
|
|
-
|
|
150
|
|
150
|
Investment funds
|
|
3,189
|
|
-
|
|
-
|
|
3,189
|
Other
|
|
3
|
|
-
|
|
-
|
|
3
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
Investment
funds
|
|
61
|
|
-
|
|
-
|
|
61
|
Derivative financial instruments
|
|
-
|
|
13
|
|
-
|
|
13
|
Other receivables
|
|
29
|
|
-
|
|
-
|
|
29
|
Total assets
|
|
4,870
|
|
13
|
|
150
|
|
5,033
|
The techniques
used for the measurement of assets at fair value through profit and loss,
classified as Level 2 and 3, are detailed below:
- Derivative
Financial Instruments: calculated from variations between market prices at the
closing date, and the prices at the time of agreement.
- Shares: they
were determined based on Income approach through the Indirect Cash Flow method
(net present value of expected future cash flows) and the discount rates used
were estimated taking the Weighted Average Cost of Capital (“WACC”) rate as a
parameter.
67
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos (“$”) – unless otherwise stated)
NOTE 32
: ASSETS AND LIABILITIES IN FOREIGN CURRENCY
|
|
|
|
|
|
|
|
|
|
|
Type
|
|
Amount of
foreign
currency
|
|
Exchange
rate
(1)
|
|
Total
09.30.2017
|
|
Total
12.31.2016
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
Financial instruments
|
|
|
|
|
|
|
|
|
|
Financial assets at amortized cost
|
|
|
|
|
|
|
|
|
|
Third parties
|
U$S
|
|
-
|
|
-
|
|
-
|
|
1
|
Other receivables
|
|
|
|
|
|
|
|
|
|
Related parties
|
U$S
|
|
43.4
|
|
17.260
|
|
749
|
|
733
|
Third parties
|
U$S
|
|
93.1
|
|
17.210
|
|
1,602
|
|
934
|
Financial assets at fair value through profit and loss
|
|
|
|
|
|
|
|
|
Third parties
|
U$S
|
|
0.1
|
|
17.210
|
|
1
|
|
513
|
Total non current assets
|
|
|
|
|
|
|
2,352
|
|
2,181
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value through profit and loss
|
|
|
|
|
|
|
|
|
Third parties
|
U$S
|
|
250.8
|
|
17.210
|
|
4,316
|
|
678
|
Derivative financial instruments
|
|
|
|
|
|
|
|
|
|
Third parties
|
U$S
|
|
0.7
|
|
17.210
|
|
12
|
|
-
|
Trade and other receivables
|
|
|
|
|
|
|
|
|
|
Related parties
|
U$S
|
|
9.4
|
|
17.260
|
|
162
|
|
106
|
Third parties
|
U$S
|
|
131.1
|
|
17.210
|
|
2,256
|
|
4,464
|
|
EUR
|
|
0.1
|
|
20.294
|
|
2
|
|
1
|
|
VEF
|
|
-
|
|
0.0000
|
|
-
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
U$S
|
|
12.8
|
|
17.210
|
|
220
|
|
1,087
|
|
EUR
|
|
2.4
|
|
20.294
|
|
49
|
|
2
|
Total current assets
|
|
|
|
|
|
|
7,017
|
|
6,340
|
Non Financial instruments
|
|
|
|
|
|
|
|
|
|
Non current assets classified as held for sale
|
U$S
|
|
1.9
|
|
17.210
|
|
32
|
|
19
|
Total assets
|
|
|
|
|
|
|
9,401
|
|
8,540
|
68
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos (“$”) – unless otherwise stated)
NOTE 32
:
(Continuation)
|
|
|
|
|
|
|
|
|
|
|
Type
|
|
Amount of
foreign
currency
|
|
Exchange
rate (1)
|
|
Total
09.30.2017
|
|
Total
12.31.2016
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
|
|
|
|
|
|
|
Third parties
|
U$S
|
|
3.9
|
|
17.310
|
|
67
|
|
-
|
Borrowings
|
|
|
|
|
|
|
|
|
|
Related parties
|
U$S
|
|
-
|
|
-
|
|
-
|
|
16
|
Third parties
|
U$S
|
|
1,680.9
|
|
17.310
|
|
29,097
|
|
11,737
|
|
|
|
|
|
|
|
|
|
|
Non financial instruments
|
|
|
|
|
|
|
|
|
|
Provisions
|
|
|
|
|
|
|
|
|
|
Related parties
|
U$S
|
|
2.9
|
|
17.260
|
|
50
|
|
366
|
Third parties
|
U$S
|
|
159.2
|
|
17.310
|
|
2,756
|
|
2,378
|
Total non current liabilities
|
|
|
|
|
|
|
31,970
|
|
14,497
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
|
|
|
|
|
|
|
Related parties
|
U$S
|
|
2.9
|
|
17.260
|
|
50
|
|
95
|
Third parties
|
U$S
|
|
228.9
|
|
17.310
|
|
3,963
|
|
3,447
|
|
EUR
|
|
1.7
|
|
20.455
|
|
34
|
|
57
|
|
SEK
|
|
5.0
|
|
2.127
|
|
12
|
|
6
|
|
VEF
|
|
-
|
|
0.000
|
|
-
|
|
5
|
Borrowings
|
|
|
|
|
|
|
|
|
|
Third parties
|
U$S
|
|
151.2
|
|
17.310
|
|
2,617
|
|
5,398
|
|
|
|
|
|
|
|
|
|
|
Non financial instruments
|
|
|
|
|
|
|
|
|
|
Salaries and social security payable
|
|
|
|
|
|
|
|
|
|
Third parties
|
U$S
|
|
0.1
|
|
17.310
|
|
1
|
|
1
|
Taxes payables
|
|
|
|
|
|
|
|
|
|
Third parties
|
U$S
|
|
0.8
|
|
17.310
|
|
14
|
|
11
|
Provisions
|
|
|
|
|
|
|
|
|
|
Related parties
|
U$S
|
|
25.9
|
|
17.260
|
|
446
|
|
394
|
Third parties
|
U$S
|
|
13.2
|
|
17.310
|
|
229
|
|
307
|
Total current liabilities
|
|
|
|
|
|
|
7,366
|
|
9,721
|
Total liabilities
|
|
|
|
|
|
|
39,336
|
|
24,218
|
|
|
|
|
|
|
|
|
|
|
(1)
The Exchange rates correspond to September 30, 2017 by the National Bank for U.S. dollars (U$S), euros (EUR) and Swedish kroner (SEK). The exchange rates used correspond to those published by the Central Bank of Venezuela for the bolivar (VEF). For balances with related parties, the Exchange rate used is the average.
69
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE 33
: ECONOMIC AND FINANCIAL SITUATION OF DISTRIBUTION
SEGMENT
The measures
adopted by the Federal Government, aimed at resolving the electricity rate
situation of the electric power sector during 2016, together with the
application of the RTI as from February 1, 2017 are making it possible to
gradually restore Edenor’s economic and financial equation; therefore, Edenor’s
Board of Directors is optimistic that the new electricity rates will result in
Edenor’s operating once again under a regulatory framework with clear and
precise rules, which will make it possible to not only cover the operation
costs, afford the investment plans and meet debt interest payments, but also
deal with the impact of the different variables that affect Edenor’s
business.
As of
September 30, 2017, Edenor’s comprehensive income for the nine-month period
amounts to $ 678 million – profit-, whereas the working capital totals $ 4.1
billion – deficit-, which includes the amount owed to CAMMESA for $ 4.4 billion
(principal plus interest accrued as of September 30, 2017).
Edenor’s
equity and negative working capital reflect the deteriorated financial and cash
position Edenor still has as a consequence of both the Federal Government’s
delay in the compliance with certain obligations under the Adjustment Agreement
and the constant increase in operating costs in prior fiscal years, which Edenor
absorbed in order to comply with the execution of the investment plan and the
carrying out of the essential operation and maintenance works necessary to
maintain the provision of the public service object of the concession in a
satisfactory manner in terms of quality and safety.
Despite the
previously described progress achieved with regard to the completion of the RTI
process, at the date of issuance of these condensed interim financial
statements, the definitive treatment to be given, by the MEyM, to all the issues
resulting from the non-compliance with the Adjustment Agreement, including the
remaining balances and other effects caused by the partial measures adopted, has
yet to be defined.
These issues,
among other, are the following:
i)
the
treatment to be given to the funds received from the Federal Government through
the loans for consumption (mutuums) agreements entered into with CAMMESA for the
fulfillment of the Extraordinary Investment Plan, granted to cover the
insufficiency of the FOCEDE’s funds;
ii)
the
conditions for the settlement of the balance outstanding with CAMMESA at the
date of issuance of SEE Resolution No. 32/15;
iii)
the treatment
to be given to the Penalties and Discounts determined by the ENRE, whose
payment/crediting is pending.
In this
regard, on April 26, 2017 Edenor was notified that the MEyM had provided that,
once the RTI process is completed, the SEE -with the participation of the
Under-Secretariat for Tariff Policy Coordination- and the ENRE, shall determine
in a term of 120 days whether any pending obligations exist until the effective
date of the electricity rate schedules resulting from the RTI and in connection
with the Adjustment Agreement entered into on February 13, 2006. In such a case,
the treatment to be given to those obligations shall also be determined. Edenor
has submitted the information requested by the MEyM in the framework of this
requirement. At the date of issuance of these condensed interim financial
statements such situation is still pending resolution.
70
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
34
: DISCONTINUATION OF THE ARBITRATION PROCEEDING BEFORE
THE ICSID
On March 28,
2017 the Secretariat of the World Bank’s International Centre for Settlement of
Investment Disputes ("ICSID") took note of the discontinuance of the arbitration
proceeding brought by EDF International and EASA in August 2003 regarding the
breach of Edenor's concession agreement as a result of the passing of Public
Emergency and Exchange Rate Regime Reform Act No. 25,561. The claimants'
waiver was a condition of Edenor's Contract Renegotiation Memorandum of
Understanding which had to be met after the issuance of the tariff scheme
resulting from the Full Tariff Review, which was implemented through ENRE
Resolution No. 63/2017 dated February 1, 2017 and is effective as from such
date.
NOTE
35
: REGULARIZATION REGIME (MORATORIUM)
Between the 29 and the 31 of March 2017
,
the Company adhered to the regularization regime (moratorium) provided for Law
No. 27,260 in relation to certain tax claims and provisions. The Company related
liabilities were mainly attributable to contingencies identified in Petrobras’s
acquisition process including interpretation differences with the Argentine tax
authority regarding i) the time of recording well abandonment expenses for
income tax purposes, ii) the exemption from the Tax on Personal Assets as
Substitute Taxpayer for the shareholder PPSL; iii) the Tariff heading used by
the Company for certain exported products; and iv) inaccurate customs regarding
the importation of a turbine supplied by Siemens Germany, including certain
spare parts that had not been required nor declared by the Company. In relation
to the last matter described before, the Company entered into an agreement with
Siemens pursuant to which Pampa will receive the reimbursement of related
incurred costs. As of December 31, 2016, the carrying amount of the matters that
were included in the moratorium amounted to $ 1,332 million and $ 668 million
disclosed as provisions and tax payables, respectively.
As the
adhesion to the regularization regime established benefits of releasing tax
fines and reducing compensatory interests, the Company has recorded on March 31,
2017 a net gain after income tax effects of $335 million, which in turn,
generated the payment of approximately $171 million to Petrobras Brazil as
contingent consideration payable in accordance to the share purchase agreement
for the acquisition of Petrobras.
On April 18, 2017, the Company paid this
obligation.
71
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
36
: SHARE BASED PAYMENTS
Company Value
Sharing (the “Company-Value Compensation”) in PEPASA
On January 18,
2017, PEPASA’s officers requested to receive a significant portion of the right
due as of that date, which was paid by the Company on January 31,
2017.
Edenor´s Share-based Compensation Plan
In the last
months of fiscal year 2016, Edenor’s Board of Directors proposed that the
treasury shares be used for the implementation of a long-term incentive plan in
favor of executive directors, managers or other personnel holding key executive
positions in the Company in an employment relationship with the latter and those
who in the future are invited to participate, under the terms of section 67 of
Law No. 26,831 on Capital Markets. The plan was ratified and approved by the
ordinary and extraordinary shareholders’ meeting held on April 18, 2017.
At the date of
issuance of these condensed interim financial statements, Edenor awarded a total
of 1,618,332 shares to executive directors and managers as additional
remuneration for their performance in special processes developed during fiscal
year 2016.
The fair value
of the previously referred to shares at the award date, amounted to $ 42 million
and has been recorded in the Salaries and social security taxes line item, with
a contra account in Equity.
Pampa
Energia
(i)
Stock-based Compensation Plan - Specific Program for the
2017-2019 Period
On
April 7, 2017, the Company's Shareholders’ Meeting ratified the approval of the
Stock-based Compensation Plan by the Board of Directors on its February 8, 2017
meeting, as well as its terms and conditions; and approved the cancellation of
the preferential offer to shareholders in respect to the disposition of such
shares as authorized by Section 67 of Capital Markets' Act No. 26,831 for
the purposes of implementing such Plan.
As
of the issuance date of these Condensed Interim Financial Statements, the
Company has determined that 383,198 treasury shares should be delivered to
employees pursuant to the first Specific Program (2017-2019 period), with vests
in March 2017, 2018 and 2019, of 33%, 33% and 34%, respectively.
As
of the issuance date of these Condensed Interim Financial Statements, the
Company has acquired 193,000 treasury shares and 92,280 treasury ADRs for an
amount of $ 72 million, which will be destined to the implementation
of the Company's Stock-based Compensation Plan.
(ii)
Compensation agreements for the Company´s Senior
Management
On
June 2, 2017, the Board of Directors approved the execution and signing of
compensation agreements with the Company’s main officers (the “Senior
Management”), conditional upon their approval by the Annual Ordinary Meeting of
Shareholders to be held each year. These agreements are effective as of January
1, 2017.
72
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
36
:
(Continuation)
In
accordance with international practices, the purpose of these agreements is to
efficiently align the Senior Management’s interests with those of the Company
and its shareholders, creating value for them only inasmuch as value is
generated for shareholders, that is, if the Company’s market value increases.
Under these agreements, the Senior Management will be
entitled to a fixed compensation and an annual, variable and contingent
long-term compensation related to the Company’s annual market value
appreciation, with a cap on the Company’s operating income
With the purpose of avoiding duplication, any analogous
compensation that the Senior Management had received from any of the Company’s
subsidiaries, will be deducted from the compensation amount in proportion to the
Company’s interests in such subsidiaries.
As
of September 30, 2017, the Company recognized in its Statement of Comprehensive
Income $ 155 million as the cost of such compensation indicated, offsetting
entries $ 145 million in Other Payables and $ 10 million
in
Equity
.
NOTE 37
: CORPORATE
REORGANIZATION
2016
Reorganization
Following the
acquisition of Petrobras Argentina, Pampa Energía started a corporate
reorganization plan with the purpose of simplifying and maximizing the
efficiency of the Company’s structure. The proposed reorganizations will allow
the Company to derive significant operative and economic advantages, including,
but not limited to, those associated with a higher operating efficiency; an
optimized use of available resources, and the streamlining of technical,
administrative and financial structures.
In this line,
the Company, as absorbing company, party of the first part, and Petrobras
Argentina S.A., Petrobras Energia Internacional S.A. and Albares Renovables
Argentina S.A., as absorbed companies, parties of the second part, the
Shareholders’ meetings executed the Final Merger Agreement at the beginning of
this year. As of the issuance of these financial statements, the merger is
pending registration with the Public Registry, to which effect the Company is
filing all applicable presentations with the corresponding bodies.
2017
Reorganization:
On June 26,
2017, the Board of Directors instructed the Company’s Management to start the
proceedings allowing to evaluate the benefits of a merger through absorption
process between the Company, as absorbing company, and certain companies of the
group, as absorbed companies.
73
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
37
:
(Continuation)
On September
22, 2017, the Company’s Board of Directors informed that the companies which
will take part in these merger will be the Company, as absorbing company, and
BLL, CTG, CTLL, EG3 Red, INDISA, INNISA, IPB, PPII, Transelec and PEPASA, as
absorbed companies, in line with the tax neutrality terms set forth by Section
77 and following ones of the Income Tax Act. Furthermore, it determined that the
merger would become effective on October 1, 2017, date as from which the
transfer of the absorbed companies’ equity to the absorbing company will become
effective and, therefore, all their rights and obligations, assets and
liabilities will become incorporated into the absorbing company’s equity, all of
which subject to the corresponding corporate approvals under the applicable law
and the registration with the Public Registry of Commerce of the merger and the
dissolution without liquidation of the absorbed companies.
Except for
PEPASA, CTG, INNISA and INDISA, which have a non-controlling interest, there
will no exchange ratio for the other companies subject-matter of the merger as
the Company directly and/or indirectly holds 100% of the capital stock of such
companies.
Lastly, since
PEPASA and the Company’s assets are subject to the public offering system and
listed in ByMA, the Board of Directors decided to propose to the Shareholders’
Meeting an exchange ratio based on the volume-weighted average price of the
Company and PEPASA’s shares traded over the last six months, determined
retroactively as from the Board meeting’s date, with a resulting exchange ratio
of 2,2699 common shares in book-entry form with a face value of $ 1 each and
each granting the right to one vote for each PEPASA common share in book-entry
form with a face value of $ 1 and granting the right to one vote.
This merger
will entail important benefits for the Company and all its corporate group, as
it will allow for enhanced operating efficiency; an optimized use of available
resources; the leveraging of technical, administrative and financial structures;
and the implementation of converging policies, strategies and goals.
Furthermore, the high complementarity between the participating companies will
be leveraged, thus reducing costs resulting from the duplication and overlapping
of operating and administrative structures.
The Absorbing
Company and the Absorbed Companies are currently performing the necessary
procedures before the applicable entities in order to obtain the authorizations,
registrations and recordings necessary for the Absorbing Company to operate as
the continuing company in the merger. Notwithstanding that, in view of the need
to request and obtain a large number of authorizations, registrations and
recordings which must be granted by several national, provincial and municipal
entities and the impossibility to obtain such approvals on a simultaneous basis,
some absorbed companies will exceptionally continue operating and performing
certain activities on behalf and at the expense of the Absorbing Company with
the sole purpose of not hindering their course of business until all
authorizations, registrations and recordings are finally obtained.
74
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
38
: INCIDENT AT CENTRAL TÉRMICA GENELBA
On September
22, 2017 a major incident occurred in the TG11 unit, which makes up Central
Térmica Genelba’s combined cycle plant, and which resulted in severe damage to
the turbine’s generator. Following the incident, the combined-cycle generation
capacity has been reduced by 50% (330 MW).
The Company is
currently evaluating the cause of the failure together with the generator’s
manufacturer (SIEMENS), as well as different repair alternatives and
times.
As a result of
this event, all applicable claims were filed and notices were given to insurance
companies.
Repair tasks
are expected to be completed by the end of the year.
NOTE
39
: SUBSEQUENT EVENTS
39.1.
Distribution of electricity
Edenor - MEyM
Resolution No. 840-E/17
On October 4,
2017, by means of Resolution No. 840-E/17, the MEyM recognized in favor of
Edenor an amount of $ 323 million for the works carried out prior to the ending
of the FOCEDE, requiring as a condition for such recognition to take place that
Edenor notify both the Energy Secretariat and the ENRE of its decision to not
only abandon any and all administrative and/or judicial claims filed, but also
waive its right to any other future claim against the Federal Government, the
MEyM, the SEE, the ENRE and/or CAMMESA based on the FOCEDE trust.
In this
regard, on October 9, 2017, Edenor expressed that it had no administrative or
judicial claims against such institutions on the aforementioned ground, and that
the recourse (“recurso directo”) filed in 2015 against ENRE’s Resolution No.
356/14, pursuant to which a fine had been imposed on the Company due to the
non-application of the FOCEDE’s remaining funds in due time, was not considered
within the scope of such requirement.
At the date of
these condensed interim financial statements, Edenor is taking the appropriate
steps in order for the aforementioned recognition to take place.
Edenor’s
Financial Loan
On October 11,
2017, Edenor was granted a 36-month term loan by the Industrial and Commercial
Bank of China Dubai (ICBC) Branch, for an amount of USD 50 million. The proceeds
of the loan will be used to finance Edenor investment plan and working capital,
making it possible to partially offset the impact generated by the deferral of
income mentioned in Note 2.2.1. Furthermore, it must be pointed out that such
loan constitutes an “Allowed Indebtedness” within the limits stipulated in the
Corporate Notes due 2022.
75
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
39
:
(Continuation)
39.2 Oil and
gas
Termination of
Petrolera Pampa’s Service at Medanito - La Pampa Block
Pursuant to
the submitted Offer, the provision of Operating Services, whereby PEPASA
committed to perform operation tasks for the exploitation of hydrocarbons in the
“25 de Mayo – Medanito SE” area, La Pampa section, terminated on October 28,
2017. PEPASA performed all its obligations under the offer, returned the
facilities as and when required and in an operating status, and provided all the
applicable environmental documentation.
Tender for
Hydrocarbon Exploration Licenses in Unconventional Blocks
Under the
Public Tender No 1/2017 - V Round, for the selection of companies interested in
the exploration, development and eventual exploitation of the blocks located in
the Province of Neuquén and concessional in favor of the Gas y Petróleo del
Neuquén S.A. (‘GyP’), on November 1, 2017, the Board of Directors of GyP has
proceed to award in favor of the Company for the offer summited for Las Tacanas
Norte block.
Las Tacanas
Norte block has a 120 km2 surface and is adjacent to El Mangrullo block, which
is currently operated by the Company. The accepted offer consists of a
perforation of 8 wells with the objective toward Vaca Muerta formation, and
other exploratory studies. The exploratory license is for a 4-year term
(2018-2021).
39.3. Refining
and Distribution
Suspension of
the “Agreement for the Transition to International Prices”
As a result of
the suspension of the “Agreement for the Transition to International Prices”
described in Note 2.5., on October 1, 2017 the Company increased its prices for
high-grade gasoline and gas oil by 11%, and for Podium gasoline and Podium
diesel by 5% in its distributor channel.
Furthermore,
on October 23, 2017, the Company increased its prices for Podium gasoline by
12%, for high-grade gasoline and Podium diesel by 10%, and for gas oil by 9% in
its gas station network.
Bioethanol
Price Adjustment
On October 31,
2017, MEyM Resolution No. 415-E/2017 was published in the BO, which modifies the
procedure to determine the purchase price for corn- or sugarcane-based
bioethanol to be blended with gasoline for automotive use. This modification
results in a decrease in the purchase costs of bioethanol, a raw material which
should make up 12% of the volume of gasoline for automotive use sold in the
Argentine territory.
Therefore, on
November 4, 2017, Pampa accompanied the measure adopted by the major market
players by reducing suggested gasoline prices at gas stations, thus transferring
this cost reduction to end consumers, except in the Provinces of Chubut and
Santa Cruz.
76
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos (“$”) – unless otherwise stated)
NOTE 39
:
(Continuation)
39.4 Call for Public Hearings
a)
Gas transportation
On October 20, 2017, ENARGAS issued Resolution No. 62/2017 calling for a public hearing to discuss a transitory tariff update to be charged against the tariff increase resulting from the RTI process. This public hearing, which will be held on November 14, 2017, will determine the new tariff charts applicable to TGS effective as from December 1, 2017.
b)
Distribution of electricity
By means of Resolution No. 526/2017, the ENRE calls a public hearing to be held on November 17, 2017 with the purpose of informing about the impact on Edenor’s customer bills of the measures to be implemented by the MEyM as a result of the public hearing that such Ministry has called (MEyM Resolution No.403-E/2017) in relation to: (i) the new power and energy reference prices in the MEM relating to the 2017-2018 summer period; (ii) the stimulus plan that rewards electric power-savings; (iii) the social tariff, and; (iv) the electric power distribution methodology.
As a consequence of that which has been previously mentioned, by means of ENRE Note No. 128,399, Edenor was informed that the MEyM had instructed the ENRE to postpone until December 1, 2017 the application of the tariff increase established in the RTI for November 1, with the result of such increase being recognized in real terms, using for such purpose the adjustment mechanism provided for in ENRE Resolution No. 63/2017.
Furthermore, with regard to the deferral of the collection of the CPD adjustment that was to be applied as from August 2017, it is instructed that in order for such adjustment to be recognized in real terms, such concept shall be applied as from December 1, 2017, using also the adjustment mechanism mentioned in the preceding paragraph.
The Company is currently analyzing the scope of the aforementioned measures and their impact, if there were any, on its projected revenues.
c)
Natural Gas Production
MEyM Resolution No. 400-E/17, published in the BO on October 23, 2017, calls for a Public Hearing to discuss new Transportation System Entry Point (“PIST”) prices for natural gas and propane gas for the distribution of undiluted propane gas through grids effective as from December 1, 2017.
The Public Hearing, which will be conducted pursuant to the General Regulations for Public Hearings within the National Executive Branch approved as Schedule I by Section 1 of Executive Order No. 1.172/03, will take place on November 15, 2017.
77
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM
FINANCIAL STATEMENTS
(in millions of Argentine Pesos
(“$”) – unless otherwise stated)
NOTE
39
:
(Continuation)
39.5 National
Executive Order No. 882/2017
On November 1,
2017 and pursuant to Executive Order No. 882/2017, the National Government
provided for the following:
a)
The
creation of a company named Integración Energética Argentina S.A., which will
result from the merger of the current companies Energía Argentina S.A. (ENARSA)
and Emprendimientos Binacionales S.A. (EBISA), aiming to have a single company
to manage all energy projects undertaken by the National Government, and
b)
The
transfer of the equity interest and rights on assets held by the National
Government (either on its own behalf or through ENARSA) in the energy sector,
including, but not limited to, thermal power plants, Citelec and Central Puerto.
In the case of
Ensenada de Barragán and Brigadier López power plants, the prospective purchaser
will have to undertake to complete the works for their closing to combined
cycles.
78