UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

_____________

FORM 6-K

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities and Exchange Act of 1934

For August 31, 2018

Commission file number: 1-13.396

Transportadora de Gas del Sur S.A.

Don Bosco 3672, Fifth Floor

1206 Capital Federal

Argentina

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  X  Form 40-F   

Indicate by check mark if registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): __

Indicate by check mark if registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): __

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to the Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes    No X  

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

Condensed Interim Consolidated

Financial Statements

as of and for the six-month period

ended June 30, 2018

             

English translation of the original prepared in Spanish for publication in Argentina

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2018 ^{(1 )}

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the Company's consolidated financial statements as of June 30, 2018 and December 31, 2017, and for the six-month periods ended June 30, 2018 and 2017. These condensed interim consolidated financial statements have been prepared in accordance with and complied with IAS 34 issued by the International Accounting Standards Board (“IASB”) adopted by the Comisión Nacional de Valores ("CNV") through the provisions of Title IV, Chapter I, Section I, Article 1 – B.1 of the Rules of the CNV ("New Text 2013" or "NT 2013").

The condensed interim consolidated financial statements of the Company for the six-month periods ended June 30, 2018 and 2017 have been subject to a jointly review performed by Price Waterhouse & Co. S.R.L. ("Price") and Pistrelli, Henry Martin and Asociados S.R.L. The Company’s consolidated financial statements for the six-month periods ended June 30, 2016, 2015 and 2014 have been subject to a review performed by Price.

1. Results of Operations

The following table presents a summary of the consolidated results of operations for the six-month periods ended June 30, 2018 and 2017:

Overview

For the six-month period ended June 30, 2018, the Company has reported a total comprehensive income of Ps. 2,834.9 million, compared with a total comprehensive income of Ps. 1,300.4 million reported in the same period last year, representing a Ps. 1,534.5 million increase.

This positive variation was mainly due to the increase in operating income of Ps. 3,467.9 million, which amounted to Ps. 5,724.9 million in first half of 2018 in comparison with Ps. 2,257.0 million obtained in the same period last year.

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Revenues derived from Natural Gas Transportation segment in the second quarter of 2018 increased by Ps. 3,576.2 million, compared to the same period in 2017. This positive variation is mainly due to the effect of the full application throughout the 2018 period of the tariff increase granted by Resolution No. 120/2017 (the “Resolution 120”), Resolution No 4362/2017 (the “Resolution 4362”) and Resolution No. 310/2018 (“Resolution 310”). On the other hand, revenues derived from Liquids Production and Commercialization segment increased by Ps. 2,413.4 million, compared to the same period last year. This positive variation is mainly due to the increase in the reference prices of liquids shipped. These effects were partially offset by higher operating costs and administration and selling expenses of Ps. 2,239.2 million.

Additionally, the negative other operating results showed an increase of Ps. 561.7 million mainly as a consequence of the payment of Ps. 553.4 million, in May 2018, as a result of the adverse ruling issued by the International Court of Arbitration ("ICC") in connection with the arbitration process in the “ Cámara de Comercio Internacional ”, which began on May 8, 2015 against the Company in an amount of US$ 306.3 million from Pan American Energy LLC Argentine Branch and Pan American Sur SA (the "Arbitration").

Net financial results showed a negative variation of Ps. 1,435.2 million, mainly as a result of the higher depreciation of the Argentine peso during the first half of 2018 compare to the same period last year. This effect was partially offset by higher interest income generated by financial assets.

On March 27, 2018, the Executive Branch of Argentina issued Decree No. 250/2018 (the “Decree 250”) ratifying the 2017 Integral Renegotiation Agreement. This decree represents the conclusion of the Integral Tariff Review process (“RTI” for its acronym in Spanish) and the completion of the 2017 Transitional Agreement, and thus, the final renegotiation of the license after seventeen years of negotiations.

As a result of the foregoing, (i) TGS is entitled to the final tariff increase stipulated in Resolution 4362 (finally granted by Resolution No. 310/2018 –“Resolution 310”-), and (ii) TGS and its shareholders must withdraw before June 26, 2018 any claims made against the Government due to the impact in its business as a result of the Public Emergency Law, including the ICSID Claim.

Net revenues

Natural Gas Transportation

The Natural Gas Transportation business segment represented approximately 46.8% and 35.1% of TGS’ total net revenues during the six-month period ended June 30, 2018 and 2017, respectively. These business segment´s revenues are mainly derived from firm Natural Gas Transportation contracts, under which pipeline capacity is reserved and paid for, regardless of actual usage by the customer. The Company also provides interruptible natural gas transportation services subject to availability of the pipeline capacity. In addition, TGS renders operation and maintenance services for the Natural Gas Transportation facilities, which belong to the gas trusts ( fideicomisos de gas ) created by the Argentine Government to expand the capacity of the Argentine natural gas transportation pipeline system. In November 2005, ENARGAS created the Charge for Access and Use (“CAU”) to compensate TGS for the operation and maintenance of the Natural Gas Transportation assets which belong to the Gas Trusts.

Revenues derived from Natural Gas Transportation segment in the first half 2018 increased by Ps. 3,576.2 million, compared to those obtained in the same period of 2017. This increase is mainly due to the combined effect of the tariff increases, weighted averages, granted by ENARGAS according to:

·

Resolution 4362 starting April 1, 2017, equivalent to 58%;

·

Resolution 120 starting December 1, 2017, equivalent to 78%; and

·

Resolution 310 starting April 1, 2018, equivalent to 50%.

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Production and Commercialization of Liquids

Liquids Production and Commercialization segment revenues accounted for approximately 47.6% and 58.0% of the total net revenues in the six-months periods ended June 30, 2018 and 2017, respectively. Liquids Production and Commercialization consists of natural gas processing activities conducted at the Cerri Complex, located near the city of Bahía Blanca, Province of Buenos Aires, where all of TGS’s main natural gas pipelines connect, and where ethane, propane, butane and natural gasoline are recovered. TGS sells its production of liquids in the domestic and the international markets. TGS sells part of its production of propane and butane to liquids marketers in the domestic market. The remainder of these products and all of its natural gasoline are exported at current international market prices. Ethane is entirely sold in the domestic market to PBB-Polisur S.A. (“Polisur”) at agreed prices.

Liquids Production and Commercialization segment revenues reached Ps. 5,588.2 million in the six-month period ended June 30, 2018, a 76.0% increase or Ps. 2,413.4 million in comparison with the same period of 2017. The main cause of the increase in net revenues corresponds to the effect of the increase in the exchange rate on sales that are denominated in US dollars. Additionally, favoring this positive effect, during the first half of 2018 there was an increase in the international reference prices.

In addition, and favoring the positive impact of international reference prices, total volumes shipped increased by 12.0% or 63,401 short tons in the first half of 2018 compared to the same period in 2017. It is worth noting that the increase in tons dispatched was due to the greater volumes of ethane delivered to Polisur. This effect was partially offset by lower tons exported.

On January 8, 2018, the Company succeeded in concluding with Petrobras Global Trading B.V. a sale agreement for natural gasoline, which will be valid until January 2019.

On March 27, 2018, the Secretary of Hydrocarbon Resources (“SRH”) issued Resolution No 5/2018 by which, starting April 1, 2018, increases the price of the products contributed to the Households with Bottles Program, being Ps. 5,416 and Ps. 5,502 per ton of butane and propane, respectively.

Moreover, on May 30, 2018, the Company celebrated the sixteenth extension to the Propane Supply Network Agreement ("Propane Network Agreement") effective for the period April 1, 2018 - December 31, 2019. This extension also meant an increase in the sale price of this product.

Regarding the ethane contract, its maturity date was effective on May 1, 2018. After that date, the Company continued normally delivering this product to Polisur while negotiations to reach a new agreement are taking place.

Other services

The Company renders “midstream” services that mainly consist of gas conditioning, gathering and compression services, which are generally rendered at wellhead, as well as activities related to construction, operation and maintenance of pipelines and compressor plants. Other services also include telecommunication services rendered by Telcosur S.A., a company controlled by TGS.

Other Services revenues increased by Ps. 279.2 million in the first half 2018 compared to the same period of the previous year. The increase corresponds mainly to the effect of the variation in the exchange rate on sales denominated in US dollars and secondly to higher operating and maintenance, and construction services rendered.

It is noteworthy that on April 3, 2018, the Company, the Undersecretariat of Energy, Mining and Hydrocarbons of the province of Neuquén and Gas y Petróleo de Neuquén S.A., signed an agreement which grants TGS the transportation concession and allows TGS to invest in a gathering pipeline and a treatment plant which will cross a number of fields in the Vaca Muerta formation. Additionally, TGS will construct and operate a natural gas conditioning plant. The

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agreement was subsequently ratified by Decree No. 379/18 of the Executive Power of the Province of Neuquén.

The gathering pipeline, which will connect the Rincón La Ceniza area to the main transportation systems, will have a transportation capacity of 1.3 Bcf/d and a length of 57 miles. The treatment plant, which will adapt the quality of the natural gas before it enters the main natural gas transportation pipelines, will have an initial capacity of 177 MMcf/d. The amount of the investment related to the project’s first stage is estimated in US$ 250 million and its execution will be implemented throughout the rest of the year 2018 and during part of the year 2019 (Northern Section).

Subsequently, on June 7, 2018, the Company entered into a complementary agreement with the agencies of the Province of Neuquén mentioned above. This agreement was ratified by Decree No. 836/18 of the Executive Brach of the Province of Neuquén. The agreement approves the extension of the concession by which TGS will be allowed to build a second tranche of the catchment pipeline mentioned above (the "South Tranche").

The South Tranche will extend from 32.5 Km progressive of the North Tranche of the transportation concession to 41 Km progressive of the El Mangrullo - Aguada La Arena pipeline, requiring an investment of US$ 41 million. It will allow transporting up to 883 Bcf/d, and will have an extension of 33 km. The qualification of the work is scheduled for April 2019.

Cost of sales and administrative and selling expenses

Cost of sales, administrative and selling expenses increased approximately Ps. 2,239.2 million, or 68.9% in the six-month period ended June 30, 2018 when compared to the same period last year. This variation is mainly due to: (i) the increase in the price of natural gas used as Replacement of Thermal Plant Reduction in the Cerri Complex (“RTP”), (ii) higher fees and third party services mainly for the operation of the natural gas transportation system, (iii) the turnover tax charge, and (iv) higher labor costs.

The following table shows the main components of cost of sales and administrative and selling expenses and its main variations for the six-month periods ended June 30, 2018 and 2017:

Other operating results

The other operating results recorded a negative variation of Ps. 561.7 million mainly explained by the Ps. 553.4 million payment in May 2018 as a consequence of the adverse result of the Arbitration and the positive result registered in the first half of 2017 due to the recovery obtained from the loss that occurred in the Polisur production plant. This effect was partially offset by a lower negative charge for provisions for contingencies in the first half of 2018.

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Net financial results

The negative financial results for the six-month period ended June 30, 2018 had a negative effect of Ps. 1,435.2 million compared to the same period of 2017.  The breakdown of net financial results is as follows:

This negative variation is mainly due to the impact of the foreign exchange rate loss, net for Ps. 1,776.1 million as a result of the depreciation of the Argentine peso with respect to the US dollar occurred in the first half of 2018, as opposed to the appreciation of the same period of 2017 mainly in the financial indebtedness.                 

The selling exchange rate for the peso ended on June 30, 2018 in a value of Ps. 28.85 per US dollar, representing an increase of 54.7% (or Ps. 10.20 per US dollar) respect to the exchange rate in place at the year ended 2017. As of June 30, 2017, the exchange rate had suffered a decrease in 4.7% (or Ps 0.74 per US dollar) when compared with the listed price at the end of the year 2016.

This effect was partially offset by higher interest income generated by financial assets. This variation was mainly due to higher capital invested. On the other hand, interest generated by liabilities increased due to: (i) increase in the average exchange rate; (ii) the result generated by the prepayment of Class 1 Notes issued in February 2014 (the "2014 Notes") and (iii) the higher interest accrued by Class 2 Notes ( the "2018 Notes") issued on May 2, 2018.

Income tax expense

For the six-month period ended June 30, 2018, TGS reported a Ps. 1,202.8 million income tax loss, having reported in the same period of 2017 an income tax loss of Ps. 704.3 million. This negative variation is due to the higher taxable income in the first half of 2018. This effect was partially offset by a decrease in the income tax rate (from 35% to 30%) according to Law No. 27,430.

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2. Liquidity

The Company’s primary sources and application of funds during the six-month periods ended June 30, 2018 and 2017 are shown in the table below:

The net positive variation in cash and cash equivalents in the first half of 2018 was Ps. 2,703.9 million higher than the cash and cash equivalents variation reported in same period of 2017.

The increase in the net cash flow was due to a higher cash flow generated by operations for Ps. 758.5 million, primarily as a result of the improvement in operating income, partially compensated by higher income tax payments and a negative variation in the working capital.

On the other hand, the net cash flow used for investing activities showed a negative variation of Ps. 3,376.6 million as a result of an increase in financial assets not considered cash equivalents. This effect was partially offset by higher capital expenditures related to the Five-Year Investment Plan committed according to the provisions of the RTI.

Regarding the net cash flow generated by the financing activities, it was increased by Ps. 5,322.0 million as a result of the proceeds from 2018 Notes under the Short and Medium Term Notes Program for a maximum amount of US$ 700,000,000 approved by the CNV (the "2017 Program").

The proceeds of the 2018 Notes of US$ 495.5 million were allocated to repurchase the Class 1 Notes and to the total redemption of Class 1 Notes for US$ 207.3 million (including premiums paid). The remainder of the funds raised will be mainly used to make investments in capital goods.

On the other hand, during the first half of 2018, the Company allocated Ps. 521.0 million to the treasury share repurchase program approved by the Board of Directors of the Company on May 9, 2018.

Finally, on July 6, 2018, the Board of Directors of the Company, in use of the powers delegated by the Shareholders' Meeting, ordered the payment of a cash dividend of Ps. 912.0 million, which was completed on July 17, 2018.

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3. Second Quarter 2018 vs. Second Quarter 2017

For the second quarter of 2018, TGS posted total comprehensive income of Ps. 1,099.9 million, compared to Ps. 635.6 million recorded in the 2017 period.

Total net revenues for the second quarter of 2018 increased by Ps. 3,876.6  million or 132.7% over the same period of the previous year.

Net revenues from Natural Gas Transportation segment during the second quarter of 2018 increased by Ps. 2,123.9 million from those recorded in the same period of 2017. This positive variation is mainly due to the effect of the full application of the tariff increase granted by Resolutions 120 and 310 in the 2018 period.

Liquids revenues increased Ps. 1,582.0 million in the second quarter of 2018, from the second quarter of 2017. The revenue increase is mainly due to the impact of the increase in the exchange rate on sales denominated in US dollars, the greater volumes of ethane dispatched and the increase in international reference prices.

 

In terms of volumes shipped, the increase of 53,755 short tons, or 21.8%, represented a positive variation on sales revenues, standing out the increase in the exported volumes and the shipments of ethane made during the second quarter of 2018.

Other services revenues rose by Ps. 170.7 million in the second quarter of 2018. The increase corresponds mainly to the effect of the variation in the exchange rate on sales denominated in US dollars. Additionally, during the second quarter of 2018, higher services were recorded due to: (i) construction services rendered in the province of Santa Fe, (ii) compression and treatment of natural gas and (iii) operation and maintenance.

Cost of sales and administrative and selling expenses rose by approximately Ps. 1,453.3 million in the second quarter of 2018 compared to same period in 2017. This variation is mainly due to: (i) the increase in costs of natural gas used as RTP, (ii) labor costs, (iii) turnover tax and the ENARGAS inspection and control licensee fee, and (iv) other operating costs of the natural gas transportation system.

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Other negative operating results recorded in the second quarter of 2018 amounted to Ps. 523.3 million, compared to the negative result of Ps. 36.5 million reported in the same period 2017. This variation was due to the negative result recorded in the second quarter of 2018 as a result of the resolution of the Arbitration mentioned above.

In the second quarter of 2018, negative financial results rose by Ps. 1,294.3 million compared to the same period in 2017. This variation is mainly attributable to: (i) the higher negative charge for exchange differences as a result of the higher depreciation of the Argentine peso against the US dollar over the net liability position in foreign currency, (ii) the higher interest generated by the 2018 Notes and (iii) the results generated by the redemption of 2014 Notes. These effects were partially offset by higher interest generated by financial assets.

4. Consolidated Financial Position Summary

Summary of the consolidated financial position information as of June 30, 2018, 2017, 2016, 2015 and 2014:

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5. Consolidated Comprehensive Income Summary

Summary of the consolidated comprehensive income information for the six-month periods ended June 30, 2018, 2017, 2016, 2015 and 2014:

6. Consolidated Cash Flows Summary

Summary of the consolidated cash flows information for the six-month periods ended June 30, 2018, 2017, 2016, 2015 and 2014:

7. Statistical Data (Physical Units)

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8. Comparative ratios

9. Other Information

TGS share market value in Buenos Aires Stock Exchange at closing of last business day (in Argentine pesos per share)

10. Outlook

The end of the RTI process constitutes a fundamental milestone in the tariff recomposition of the Company as it generates a certainty framework for the Natural Gas Transportation business that will allow TGS to accompany the energy development of Argentina.

For this process, the Five-Year Investment Plan is crucial as it will ensure that the pipeline system responds to the needs derived from the development of the country's gas reserves. TGS will focus on management to achieve compliance and maintenance of the five-year plan mentioned above. This will continue enabling us to develop a reliable and safe Natural Gas Transportation business, which has characterized this Company in its 26 years of existence.

In the Liquids Production and Commercialization segment, the strategy will be aimed at optimizing the production mix that allows prioritizing those products and distribution channels that provide higher margins. In addition, the Company will work in maximizing the access to RTP at reasonable costs, in a context of higher cost of natural gas and in a framework of recovery of the sale prices of the products destined to the supply programs to the local market. For this, it will be very important to be efficient in the management of our assets, ensuring a coordinated, safe and efficient operation.

In the "Other Services" segment, in an even more challenging framework, the focus will be on developing attractive businesses that allow us to anticipate the needs of our clients and industries, showing the excellence with which TGS provides services and satisfies his needs. The Argentina's energy development requires a great effort from all stakeholders and TGS gets ready to have a

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leading role. Accordingly, TGS will advance in the execution of the works related to the North and South Tranche and the conditioning plant in the Vaca Muerta area.

In financial terms, TGS plans to access financing to carry out the implementation of the demanding Five-Year Investment Plan and investment projects of non-regulated businesses. The objective of the Company is to maintain an optimal capital structure in accordance with its investment needs, at a reasonable financing cost, in order to maximize profitability for shareholders.

As regards their daily operations, TGS will remain committed to continuous improvement of each of its processes to optimize the use of the resources and to reduce operating costs. To this end, the Company will carry out actions aimed at the reduction of cost without affecting the reliability and availability of the pipeline system. We will continue with the implementation of various actions, such as the standardization and systematization of risk management in pipelines, compressor stations and processing facilities. Finally, we will deepen training initiatives for the staff for technical and management training resources.

Autonomous City of Buenos Aires, August 8, 2018

      Gustavo Mariani

                               Chairman of the Board of Directors

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English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2018 AND 2017

  (Stated in thousands of pesos as described in Note 3 except for basic and diluted earnings per share)

 

Gustavo Mariani

Chairman of the Board of Directors

1

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017

(Stated in thousands of pesos as described in Note 3)

Gustavo Mariani

Chairman of the Board of Directors

2

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2018 AND 2017

(Stated in thousands of pesos as described in Note 3)

Gustavo Mariani

Chairman of the Board of Directors

3

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2018 AND 2017

(Stated in thousands of pesos as described in Note 3)

_____________________________________________________________________________________________________

 

Gustavo Mariani

Chairman of the Board of Directors

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English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

(Stated in thousands of pesos as described in Note 3, unless otherwise stated)

_____________________________________________________________________________________________________

1.

GENERAL INFORMATION

Business Overview

Transportadora de Gas del Sur S.A. (“TGS”) is one of the companies created as a result of the privatization of Gas del Estado S.E. (“GdE”). TGS commenced operations on December 29, 1992 and it is mainly engaged in the Transportation of Natural Gas, and Production and Commercialization of natural gas Liquids (“Liquids”). TGS’s pipeline system connects major natural gas fields in southern and western Argentina with natural gas distributors and industries in those areas and in the greater Buenos Aires area. The natural gas transportation license to operate this system was exclusively granted to TGS for a period of thirty-five years (“the License”). TGS is entitled to a one-time extension of ten years provided that it has essentially met the obligations imposed by the License and by the Ente Nacional Regulador del Gas (National Gas Regulatory Body or “ENARGAS”). The General Cerri Gas Processing Complex (the “Cerri Complex”), where TGS processes natural gas to obtain liquids, was transferred from GdE along with the gas transmission assets. TGS also provides midstream services, which mainly consist of gas treatment, removal of impurities from the natural gas stream, gas compression, wellhead gas gathering and pipeline construction, operation and maintenance services. In addition, telecommunications services are provided through the subsidiary Telcosur S.A. (“Telcosur”). These services consist of data transmission services through a network of terrestrial and digital radio relay.

On April 26, 2017, the Ordinary and Extraordinary Shareholders’ Meeting (the “Shareholders’ Meeting”) approved the amendment of TGS’ bylaws (the “Statutory Modification”) in order to: (i) expand the corporate purpose in order to incorporate the development of complementary, accessory, related and / or derived activities of natural gas transportation, such as the generation and sale of electricity and the provision of other services for the hydrocarbons sector in general, and (ii) the creation of an Executive Committee of the Board of Directors under the terms of Article 269 of the General Companies Law. The objective is to provide this Administration body with greater flexibility in decision-making. In relation to compliance with the regulatory requirements, it has been recorded that the Statutory Modification has not received comments from ENARGAS, in what concerns its competence, as informed by a note dated April 25, 2017, nor from (ii) the Comisión Nacional de Valores ("CNV"), which has made up the Statutory Modification through a note dated April 18, 2017.

On July 14, 2017, through the issuance of Resolution No. 18,852, the CNV approved the Statutory Modification, which finally was approved by the General Inspection of Justice on July 25, 2017.

Major Shareholders

TGS’s controlling shareholder is Compañía de Inversiones de Energía S.A. (“CIESA”), which holds 51% of the common stock. Local and foreign investors hold the remaining ownership of TGS’s common stock. CIESA is under co-control of: (i) Pampa Energía S.A. (“Pampa Energía”), which holds 10% of CIESA’s common stock, (ii) CIESA Trust (whose trustee is TMF Trust Company (Argentina) S.A and whose beneficiary is Petrobras Hispano Argentina SA, a wholly owned subsidiary of by Pampa Energía) (the "Trust"), who has a trust shareholding of 40% of the share capital of CIESA) and (iii) Grupo Inversor Petroquímica S.L. (member of GIP Group, headed by Sielecki´s family; “GIP”), and PCT L.L.C. ("PCT"), which directly and together with WST S.A. (Member of Werthein Group, "WST") indirectly through PEPCA S.A. ("PEPCA"), hold a 50% of the shareholding in CIESA in the following shares: GIP 27.10%, WST 4.58% and PCT 18.32%.

 

The current shareholding structure of CIESA is the result of the exercise of the exchange contemplated in the transaction entered into between the current shareholders of the Company. This transaction was duly approved by ENARGAS on August 9, 2016 and December 29, 2016, by virtue of the different stages carried out until its final completion.

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English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

(Stated in thousands of pesos as described in Note 3, unless otherwise stated)

_____________________________________________________________________________________________________

On the other hand, by virtue of the acquisition made by Pampa Energía to an affiliate of Petróleo Brasileiro S.A., 100% of the share capital of Petrobras Participaciones S.L., controlling company of Petrobras Argentina S.A. ("Petrobras") and consequently the indirect control of Petrobras Hispano Argentina SA, on February 16, 2017, the Extraordinary Shareholders' Meetings of Pampa Energía and Petrobras approved the Prior Merger Commitment between Pampa Energía, as the absorbing company and Petrobras as absorbed company and the dissolution without liquidation of Petrobras.

The merger was effective as from November 1, 2016, the date on which the transfer to the acquiring company of all the rights and obligations, assets and liabilities of the absorbed company takes effect.

On April 26, 2018, the CNV notified to its board of directors the approval of the merger, which was registered in the Public Registry on May 2, 2018.

2.

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

TGS files its condensed interim consolidated financial statements for the six-month periods ended June 30, 2018 and 2017 in compliance with the provisions of the New Text 2013 of the CNV. In these condensed interim consolidated financial statements, TGS and its consolidated subsidiaries (Telcosur and CTG Energía S.A. (“CTG”)), are jointly referred to as “the Company”.

The condensed interim consolidated financial statements were approved and authorized for issuance by the Board of Directors on August 8, 2018.

3.

BASIS OF PRESENTATION

These condensed interim consolidated financial statements have been prepared in accordance with and complied with International Accounting Standard 34 (“IAS 34”) issued by the International Accounting Standards Board (“IASB”) adopted by the CNV through NT 2013.

These condensed interim consolidated financial statements do not include all information and disclosures required for annual financial statements and should be read in conjunction with TGS’ annual financial statements as of December 31, 2017 issued on March 7, 2018.

Detailed data reflecting subsidiary control as of June 30, 2018 is as follows:

⁽¹⁾ This company was acquired on August 8, 2017.

The subsidiary CTG Energía S.A. does not record operations or significant assets and liabilities.

The interim condensed consolidated financial statements for the six-month period ended June 30, 2018 have not been audited. The Management of the Company estimates that they include all the necessary adjustments to reasonably present the results of each period. The results of the six-month period ended June 30, 2018, do not necessarily reflect the proportion of the results of the Company for the full fiscal year.

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English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

(Stated in thousands of pesos as described in Note 3, unless otherwise stated)

_____________________________________________________________________________________________________

Functional and presentation currency

The condensed interim consolidated financial statements are stated in thousands of Argentine pesos (“Ps.” or “pesos”), the functional currency of the Company and its subsidiaries.

 

IAS 29 "Financial reporting in hyperinflationary economies" requires that the financial statements of an entity whose functional currency is that of a hyperinflationary economy, regardless of whether they are based on the historical cost method or the current cost method, are expressed in terms of the current unit of measure at the reporting date of the reporting period. In order to conclude about the existence of a hyperinflationary economy, the standard details a series of factors to consider including a cumulative rate of inflation in three years that approaches or exceeds 100%.

The three-year cumulative inflation rate calculated on the basis of the Wholesale Price Index published by the Instituto Nacional de Estadísticas y Censos ("INDEC") did not exceed 100% during 2017 or even in lower levels than during 2016. However, this trend has reversed during the first half of 2018 and it is expected that the three-year cumulative inflation rate will exceed 100% for the rest of 2018 and that other qualitative indicators do not contradict the conclusion that Argentina must be considered as a hyper-inflationary economy for accounting purposes. In this scenario, Management understands that there is sufficient evidence to conclude that Argentina is a hyper-inflationary economy under the terms of IAS 29, effective for the periods ended as from July 1, 2018 and after.

IAS 29 requires that the financial statements should be restated with the aim of considering changes in the general purchasing power of the currency, so that they are expressed in the current measuring unit at the end of the reporting period. Those requirements also include the comparative information of the financial statements.

The restatement mechanism establishes that monetary assets and liabilities will not be restated since they are already expressed in the current unit of measurement at the end of the reporting period. Assets and liabilities subject to adjustments based on specific agreements will be adjusted in accordance with such agreements. The non-monetary items measured at their current values ​ ​ at the end of the reporting period, such as the net realization value or others, do not need to be restated. The remaining non-monetary assets and liabilities will be restated by a general price index. The gain or loss from the net monetary position is included in the profit or loss of the reporting period, revealing this information in a separate line item.

As a result, in the event that the Company has a net monetary liability position (monetary liabilities exceeding monetary assets), it will gain purchasing power. Otherwise, if the monetary position is positive, it will lose it.

As of the date of issuance of these interim condensed consolidated financial statements, Presidential Decree No. 664/2003 continues to be in effect, and thus, control agencies were instructed not to accept financial statements adjusted for inflation.

As of June 30, 2018, the restatement criteria of the financial information established by IAS 29 have not been applied.

For this reason, certain macroeconomic variables that affect the Company's business, such as supplies and payroll costs, should be considered in the evaluation and interpretation of the financial situation and results presented by the Company in these condensed interim consolidated financial statements.

As of the date of issuance of these interim condensed consolidated financial statements, the Company's Management is in the process of analyzing and calculating the requirements established in IAS 29.

7

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

(Stated in thousands of pesos as described in Note 3, unless otherwise stated)

_____________________________________________________________________________________________________

4.

SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied to these condensed interim consolidated financial statements are consistent with those used in the financial statements for the last financial year prepared under IFRS, which ended on December 31, 2017, except for what it is mentioned below.

Effective January 1, 2018, the Company has begun to apply the provisions of IFRS 15 for revenue recognition and IFRS 9 for the recognition of Financial Instruments.

IFRS 15 Revenue from contracts with customers

The Company has adopted IFRS 15 using the modified retrospective method. Accordingly, the information presented as of December 31, 2017 and for the six-month period ended on June 30, 2017 has not been restated.

The core principle of IFRS 15 is that an entity shall assess the goods or services promised in a contract with a customer and shall identify its performance obligations. IFRS 15 introduces a 5-step approach to recognize revenue:

Step 1: Identify the contract with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

Given the analysis carried out by management, the Company has concluded that revenue recognition practices, in accordance with IAS 18,  IAS11 and related interpretations effective as of December 31, 2017, are consistent with IFRS 15 practices. Accordingly, the Company did not recognize any initial impact in its accumulated retained earnings as of January 1, 2018.

The Company has made certain reclassifications on the statement of financial position in order to reflect classification and terminology used by IFRS 15. They correspond to the contract liabilities in relation to the advances from customers as prepayments for services to be rendered, which were previously presented as “Advances from Customers” line items (Ps. 379,173 as of January 1, 2018).

The following table shows the impact in the Statement of Financial Position as January 1, 2018:

In addition, as of June 30, 2018, the Company has recognized Contract Assets for unbilled work in progress by Ps. 54,822.

In Note 8 – Business Segment information, the Company includes disaggregated revenue information from contract with customers into categories that depict the nature, amount and timing of its revenues.

8

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

(Stated in thousands of pesos as described in Note 3, unless otherwise stated)

_____________________________________________________________________________________________________

The Company's accounting policies for the recognition of revenues as set forth in IFRS 15 are included below:

Natural Gas Transportation

Natural Gas transportation services includes: (i) firm natural gas transportation, whose revenues are recognized when the capacity is reserved and paid for regardless of actual usage by the customer (ii) interruptible natural gas transportation and exchange and displacement services whose revenues are recognized when services are rendered and (iii) the operation and maintenance service of the assets affected by the natural gas transportation service corresponding to the expansions promoted by the Government and whose ownership corresponds to the trusts created for such purpose whose revenues are recognized when services are rendered.

The applicable rates arise from the tariff tables published by the ENARGAS. Thus Company’s revenues are recognized by the amount for which it will be entitled to receive as consideration.

At the end of each month, TGS recognizes its revenues from sales equivalent to the firm reserved capacity, the volumes of natural gas transported under the modalities of interruptible and exchange and displacement and by the operation and maintenance services. In return, a trade receivable is recognized which represents an unconditional right that the Company has to receive the consideration owed by the customer. On the other hand, the billing of the service is done monthly and according to the guidelines established by the ENARGAS, the consideration is received within said calendar month.

The application of IFRS 15 has not had an impact on the accounting policies of the Company regarding the recognition of revenues of this business segment.

Liquids Production and Commercialization

This business segment includes: (i) production and commercialization of liquids on our own account, and (ii) other liquid services.

Domestic Market

In the domestic market, TGS sells the production of propane and butane to LPG retailers in the framework of the programs created by the National Government to supply the domestic market. The sale prices are determined by the Secretary of Hydrocarbon Resources (“ SHR ”). For more information, see note 17. Regulatory framework for the consolidated financial statements as of December 31, 2017.

The price of those tons of propane and butane that are not sold within the framework of the aforementioned programs is determined by the Ministry of Energy ("MINEM") based on the international reference prices.

Regarding ethane sales, they are made to PBB Polisur S.A., the only customer to whom this product is sold. This contract has an extension of one year. Pursuant to this agreement, the ethane price is calculated by each party and is subject to adjustments, including the quantity of ethane dispatch. This agreement also includes take or pay (“ TOP ”) and deliver or pay (“ DOP ”) commitments for minimum annual quantities. For the estimation of the price of the transaction, the Company uses the most probable amount method. In this regard, the Company only recognizes those transactions where it is highly probable that they will not be reversed in the future.

Foreign Market

In the foreign market, the Company markets propane, butane and natural gasoline to international traders ("traders") and other clients of worldwide renown, some of them through trucks.

9

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

(Stated in thousands of pesos as described in Note 3, unless otherwise stated)

_____________________________________________________________________________________________________

These sales are made under short-term contracts (less than one year), with the price determined as reference to international prices plus / minus a fixed amount per ton sold. There are no variable consideration components in these contracts.

For both domestic and foreign market sales, TGS transfers control and recognizes revenues when the products are delivered to the customer and therefore the product has been accepted and there is no evidence of the existence of pending obligations by the customer or the Company. It is at that moment when a trade receivable is recognized given that the receipt of the consideration is unconditional and only the passage of time is the only requirement for receiving the consideration owed by the customer.

Other liquids services

Our Liquids production and commercialization segment also comprises storage and dispatch by truck and subsequent shipment of the liquids extracted at the Cerri Complex to facilities located in Puerto Galván.

Revenues from sales are recognized when the service is effectively rendered, that is, after the dispatch to each vessel. The price is agreed by the parties being a fixed amount per ton of product dispatched, there being no variable components in them. These services are billed monthly, at which time an unconditional right to receive the consideration from the client arises.

The application of IFRS 15 has not had an impact on the accounting policies of the Company regarding the recognition of revenues of this business segment.

Other services

The services included in the Other Services segment consist mainly of the treatment, removal of impurities and natural gas compression, as well as inspection and maintenance of pipelines and compressor plants and services of steam generation for electricity production and management services for expansion works and steam generation for the production of electricity.

Revenues from sales of this business segment are recognized in the period in which the service is provided. The sale price is determined according to what arises from the contractual conditions agreed between TGS and its customers. The consideration is determined as a fixed amount per volume of natural gas processed. In all cases, the recognition and billing of sales income is made on a monthly basis so that at that time a sales credit is recorded.

Revenue from the Company's participation in the joint operation with SACDE Sociedad Argentina de Construccion y Desarrollo Estratégico S.A. ("SACDE") ("UT"), which correspond to the construction activities provided by it, are recognized based on the physical progress of the work. To calculate the costs associated with such income, the UT adopts the criterion of applying the estimated final margin for the work to the accrued income in each period.

The application of IFRS 15 has not had an impact on the accounting policies of the Company regarding the recognition of revenues of this business segment.

Telecommunications

Revenues from the provision of Telecommunications services are recognized in the statement of comprehensive income at the time of effective performance of the service. The sale price is determined according to what arises from the contractual conditions agreed between TGS and its customers. The consideration is determined as a fixed monthly amount. In all cases, the recognition and billing of sales income is made on a monthly basis so that at that time a sales credit is recorded.

The application of IFRS 15 has not had an impact on the accounting policies of the Company regarding the recognition of revenues of this business segment.

10

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

(Stated in thousands of pesos as described in Note 3, unless otherwise stated)

_____________________________________________________________________________________________________

Financial components

The Company does not have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

IFRS 9 – Financial Instruments

IFRS 9 replaces, as from January 1, 2018, IAS 39 Financial Instruments: Recognition and Measurement, bringing together the three aspects of the accounting of financial instruments: classification and measurement; impairment; and hedge accounting.

The Company has applied IFRS 9 retroactively, starting on January 1, 2018.

Given the analysis carried out by management, the Company did not record any adjustments to the accumulated earnings as of January 1, 2018, since the Company's practices as of January 1, 2018 were consistent with IFRS 9. Therefore, the application of the IFRS 9 did not imply that the Company should make changes to the disclosures made as of December 31, 2017 in its financial statements.

The Company made use of the exemption that allows it not to restate the comparative information of previous years with respect to changes in classification and measurement (including impairment). As a result, the Company did not apply the requirements of IFRS 9 to the comparative period presented, which is why the comparative information as of December 31, 2017 and for the six-month period ended June 30, 2017 was not modified.

a)

Classification and measurement of financial assets and financial liabilities

IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities.

However, IFRS 9 introduces a new classification approach for financial assets, based on two concepts: the characteristics of the contractual cash flows of the financial asset and the company's business model. Under this new approach, the four classification categories of IAS 39 are replaced by the following three categories:

- amortized cost; if the financial assets are kept within a business model whose objective is to obtain contractual cash flows that represent only payment of principal and interest;

- fair value with changes in other comprehensive income, if financial assets are held in a business model whose objective is achieved by obtaining contractual cash flows and selling financial assets; or

- fair value through profit or loss, residual category comprising financial instruments that are not held under one of the two business models indicated above, including those held for trading and those designated at fair value on initial recognition.

The table below shows a comparison of the measurement criteria used for financial assets according to IAS 39, in contrast to the criteria used since the adoption of IFRS 9:

11

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

(Stated in thousands of pesos as described in Note 3, unless otherwise stated)

_____________________________________________________________________________________________________

b)

Impairment of financial assets and liabilities

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with an “expected credit loss” (ECL) model. This will require that considerable judgment be applied with respect to how changes in economic factors affect ECL, which will be determined on a weighted average basis. The ECL result from the difference between the contractual cash flows and the flows at current value that the Company expects to receive.

The new impairment model will be applicable to financial assets measured at amortized cost or at fair value through changes in other comprehensive income, except for investments in equity instruments, and to the assets of contracts recognized under IFRS 15.

Under IFRS 9, allowances for losses will be measured using one of the following basis:

• Expected credit losses of 12 months: These are expected credit losses that result from possible default events within 12 months after the filing date; and

• Expected credit losses during the life of the asset: These are expected credit losses that result from possible events of default during the expected life of a financial instrument.

Given the nature of the clients with which TGS operates and its history of uncollectibility, the Company did not identify that the change in approach to the impairment method in accordance with that proposed by IFRS 9 results in the recognition of any adjustment to the balances at January 1, 2018.

In addition, in the case of financial investments and in accordance with current investment policies, the Company monitors the credit rating and the credit risk that these instruments have. Based on the analysis made, the Company did not identify that any adjustment should be made to the balances as of January 1, 2018 of said instruments.

Treasury shares

Own equity instruments that are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is recognized on the purchase, sale or cancellation of the Company's treasury shares. Any difference between the carrying amount and the consideration, if reissued, is recognized as a premium on common stock.

12

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

(Stated in thousands of pesos as described in Note 3, unless otherwise stated)

_____________________________________________________________________________________________________

5.

FINANCIAL RISK MANAGEMENT

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

There have been no significant changes since the last annual financial statements in risk management policies, except for what is mentioned below:

Foreign exchange risk and interest rate risk

As of June 30, 2018, the Company´s financial debt is denominated in US dollars and accrues fixed interest rates. The Company does not have financial liabilities exposed to a variable interest rate.

In the second quarter of 2018, due to a combination of external and local factors of the macroeconomic context, the exchange rate of the US dollar increased by 43%, going from Ps. 20.15 to Ps. 28.85.

As of June 30, 2018, 67% of the Company's fund placements are denominated in US dollars, which also mitigates this risk. During the six-month period ended June 30, 2018, sales revenues denominated in US dollars amounted to 47%.

The foregoing allows us to conclude that the Company managed to limit the impact of the recent turbulence in the exchange rate on the future cancellation of indebtedness.

Considering that the Company has a net liability financial position in US dollars, during the second quarter of 2018, the Company recorded a net loss on foreign exchange of Ps. 1,704,300.

The Company's Management estimates that, based on the net liability position as of June 30, 2018 amounting to US$ 169,242 thousand, an appreciation of 10% in the exchange rate of the US dollar against the Argentine peso, with all the other economic-financial variables remaining stable, could result in a pre-tax loss of Ps. 569,961. A depreciation of 10% of the US dollar against the Argentine peso would have an equal and opposite effect in the Statement of Comprehensive Income. This sensitivity analysis is theoretical since the actual impacts could differ significantly and vary over time.

6.

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The preparation of the condensed interim consolidated financial statements in accordance with generally accepted accounting principles requires management to make accounting estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. These estimates require management to make difficult, subjective or complex judgments and estimates about matters that are inherently uncertain. Management bases its estimates on various factors, including past trends, expectation of future events regarding the outcome of events and results and other assumptions that it believes are reasonable.

In the preparation of these condensed interim financial statements, the key assumptions used to make such estimates are the same as those applied in the consolidated financial statements for the year ended December 31, 2017.

13

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

(Stated in thousands of pesos as described in Note 3, unless otherwise stated)

_____________________________________________________________________________________________________

7.

SUPPLEMENTAL CASH FLOW INFORMATION

For purposes of the condensed interim consolidated statement of cash flows, the Company considers all highly liquid temporary investments with an original maturity of three months or less at the time of purchase to be cash equivalents. The cash flow statement has been prepared using the indirect method, which requires a series of adjustments to reconcile net income for the period to net cash flows from operating activities.

Non-cash investing and financing activities for the six-month periods ended June 30, 2018 and 2017 are presented below:

Note 14 includes a reconciliation between the opening and closing balance of the financial liabilities arising from financing activities.

8.

CONSOLIDATED BUSINESS SEGMENT INFORMATION

IFRS 8 “Operating Segments” requires an entity to report financial and descriptive information about its reportable segments, which are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM is the Board of Directors.

The Company analyzes its businesses into four segments: (i) Natural Gas Transportation Services, (ii) Liquids Production and Commercialization, (iii) Other Services, and (iv) Telecommunications. These last three business segments are not regulated by ENARGAS. Production and Commercialization of Liquids segment is regulated by the MINEM and the Secretariat of Hydrocarbons Resources.

Detailed information on each business segment for the six-month periods ended June 30, 2018 and 2017 is disclosed below:  

14

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

(Stated in thousands of pesos as described in Note 3, unless otherwise stated)

_____________________________________________________________________________________________________

Disaggregation of net revenues

Below is a table in which net revenues are disaggregated considering the type of market and the opportunity to satisfy performance obligations:

Net Revenues as of June 30, 2018 according to the type of service in each business segment:

a)

Natural gas transportation:

b)

Production and commercialization of Liquids:

c)

Other Services

15

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

(Stated in thousands of pesos as described in Note 3, unless otherwise stated)

_____________________________________________________________________________________________________

9.

SUMMARY OF SIGNIFICANT STATEMENT OF FINANCIAL POSITION AND STATEMENT OF COMPREHENSIVE INCOME ITEMS

a)

Other receivables

b)

Trade receivables

The movement of the allowance for doubtful accounts is as follows:

16

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

(Stated in thousands of pesos as described in Note 3, unless otherwise stated)

_____________________________________________________________________________________________________

c)

Cash and cash equivalents

 

d)

Contract Liabilities ⁽¹⁾

 

e)

Advances from customers ⁽¹⁾

⁽¹⁾

For additional information, see Note 4 – “IFRS 15, revenue recognition.”

f)

Other payables

 

17

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

(Stated in thousands of pesos as described in Note 3, unless otherwise stated)

_____________________________________________________________________________________________________

g)

Taxes payables

 

h)

Trade payables

i)

Cost of sales

18

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3)

___________________________________________________________________________________________________________________________________________________________

j)

Expenses by nature – Information required under art. 64 paragraph I, clause B)  Commercial Companies Law for the six-month period ended June 30, 2018 and 2017

19

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3, unless otherwise stated)

k)

Net financial results

 

l)

Other operating results

 

m)

 Other financial assets at fair value through profit or loss

n)

Other financial assets at amortized cost

o)

Payroll and social security taxes payable

20

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3, unless otherwise stated)

10.

INVESTMENTS IN ASSOCIATES

11.

JOINT ARRANGEMENTS

The breakdown of the amounts included in the statements of financial position related to the Company's participation in the UT as of June 30 2018 and December 31, 2017, and its results for the six-month periods as of June 30, 2018 and 2017 is the following:

12.

SHARE OF PROFIT FROM ASSOCIATES

21

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3, unless otherwise stated)

___________________________________________________________________________________________________________________________________________________________

13.

PROPERTY, PLANT AND EQUIPMENT

22

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3, unless otherwise stated)

14.

LOANS

Issuance of Notes

On May 2, 2018, within the framework of the Short and Medium Term Notes Program for a maximum amount of US$ 700,000,000 approved by the CNV (the "2017 Program"), the Company issued Notes Class 2 (the " 2018 Notes") according to the following characteristics:

	2018 Notes
Amount in US$	500,000,000
Interest Rate	6.75% annual
Issuance price	99.725%
	Scheduled payment date	Percentage of the principal to be paid
Amortization	May 2, 2025	100%
Frequency of interest payment	Semiannual, payable on May 2 and November 2 of each year.
Guarantor	None

The authorization for the public offering of the 2017 Program was granted by the CNV through Resolutions No. 17,262 and 18,938 dated January 3, 2014 and September 15, 2017, respectively.

The funds obtained by the Company are applied to:

i. The repurchase of the Class 1 Notes (the "2014 Notes") for US$ 86,511,165;

ii. the cancellation and total redemption of the 2014 Notes for US$ 120,786,581;

iii. the balance of net funds to make investments in capital expenditures.

Covenants

As of the date of issuance of these interim condensed consolidated financial statements, the Company has complied with a series of restrictions derived from its current financial agreements, which include, among others, those related to obtaining new loans, payment of dividends, granting of guarantees, disposal of certain assets and make certain transactions with related parties.

The Company may contract new debts under the following conditions, among others:

a. To the extent that after the new debt has been incurred (i) the consolidated coverage ratio (calculated as the quotient of the consolidated adjusted EBITDA -earnings before financial results, income tax, depreciation and amortization-) and the consolidated interest expense) is equal or higher than 2.0:1; and (ii) the consolidated debt ratio (calculated as the quotient of the consolidated debt and the consolidated EBITDA) is equal to or lower than 3.5:1.

b. For the refinancing of the outstanding financial debt.

c. Originated by customer advances.

The Company may pay dividends under the following conditions: (i) the Company is not in default under 2018 Notes, and (ii) immediately after any dividend payment, the Company may incur new debts according to the provisions in point a. of the preceding paragraph.

23

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3, unless otherwise stated)

Short-term and long-term loans as of June 30, 2018 and December 31, 2017 comprise the following:

Loans are totally denominated in US dollars.

The activity of the loans as of June 30, 2018 and 2017 is the following:

  

The following are the maturities of the financial leasing in force as of June 30, 2018 (not including issuing costs):

24

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3, unless otherwise stated)

15.

INCOME TAX AND DEFERRED TAX

As of the date of the issuance of these condensed interim consolidated financial statements, there are no significant changes with respect to the deferred tax composition disclosed by the Company as of December 31, 2017.  

The reconciliation between the tax computed for tax purposes and the income tax expense charged to the statement of comprehensive income in the six-month periods ended June 30, 2018 and 2017 is as follows:

16.

PROVISIONS

 

25

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3, unless otherwise stated)

17.

FINANCIAL INSTRUMENTS BY CATEGORY AND HIERARCHY

1.1 Financial instrument categories

There have been no significant changes regarding the accounting policies for the categorization of financial instruments since the policies disclosed by the Company as of December 31, 2017.

The categories of financial assets and liabilities as of June 30, 2018 and December 31, 2017 are as follows (According to the transition methods chosen, the comparative information has not been restated, see Note 3):

26

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3, unless otherwise stated)

1.2

Fair value measurement hierarchy and estimates

According to IFRS 13, the fair value hierarchy introduces three levels of inputs based on the lowest level of input significant to the overall fair value. These levels are:

·

Level 1: includes financial assets and liabilities whose fair values are estimated using quoted prices (unadjusted) in active markets for identical assets and liabilities. The instruments included in this level primarily include balances in mutual funds and public or private bonds listed on the Bolsas y Mercados Argentinos S.A. (“BYMA”). The mutual funds mainly made their placements in letters issued by the Central Bank of the Argentine Republic.

·

Level 2: includes financial assets and liabilities whose fair value is estimated using different assumptions quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (for example, derived from prices). Within this level, the Company includes those derivate financial instruments for which it was not able to find an active market.

·

Level 3: includes financial instruments for which the assumptions used in estimating fair value are not based on observable market information.

The table below shows different assets at their fair value classified by hierarchy as of June 30, 2018:

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English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3, unless otherwise stated)

The fair value amount of the financial assets is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

As of June 30, 2018, the carrying amount of certain financial instruments used by the Company including cash, cash equivalents, other investments, receivables, payables and short-term loans are representative of fair value because of the short-term nature of these instruments.

The estimated fair value of other Non-current assets and Other loans does not differ significantly from the carrying amount. The following table reflects the carrying amount and estimated fair value of the 2018 Notes at June 30, 2018, based on their quoted market price:

18

ASSETS AND LIABILITIES IN FOREIGN CURRENCY

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English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3, unless otherwise stated)

19

REGULATORY FRAMEWORK

The main regulatory issues are described in Note 17 to the annual consolidated financial statements. The update information for the six-month period ended June 30, 2018 is described below:

a)

General framework of the regulated segment and general tariff situation

On March 27, 2018, the Executive Branch of the Argentine Government issued the Decree No. 250/2018 (the “Decree 250”) ratifying the 2017 Integral Renegotiation Agreement. This decree represents the conclusion of the Integral Tariff Review process (“RTI” for its acronym in Spanish) and the completion of the 2017 Transitional Agreement, and thus, the final renegotiation of the license after seventeen years of negotiations. As a result of the foregoing, (i) TGS is entitled to the final tariff increase stipulated in Resolution No. 4362/2017 (finally granted by Resolution No. 310/2018 –“Resolution 310”-), and (ii) TGS and its shareholders must withdraw before June 26, 2018 any claims made against the Government due to the impact in its business as a result of the Public Emergency Law, including the ICSID Claim.

In this regard and in the context of the public hearing held on February 20, 2018, by means of Resolution 310, dated March 27, 2018, ENARGAS granted an increase of 50% over the tariff of the natural gas transportation service and the CAU. It should be noted that this increase includes the last stage of the total tariff increase granted by Resolution 4362, of 214.2% and 37% in the natural gas transportation service and in the CAU, respectively, that within the framework of Resolution No. 74/2017 of the MINEM provided that it should be granted in 3 stages.

On May 4, 2018, ENARGAS notified TGS the full compliance with 2016 Investment Plan that was committed by the Company in the Transitional Agreement concluded on February 24, 2016.

After having effectively complied with the 2016 Investment Plan and having completed the RTI process, the Company does not have regulatory restrictions for the distribution and payment of dividends.

Acquisition of the Rights of Arbitration Proceedings

As mentioned above, by virtue of the ratification of the 2017 Integral Renegotiation Agreement, the Company desisted from the Arbitration Proceeding before the ICSID on June 26, 2018.

b)

Regulatory Framework for non-regulated segments

On March 27, 2018, the Secretariat of Hydrocarbon Resources ("SRH") issued Resolution No. 5/2018, which increases as from April 1, 2018, the price of the products contributed to the Households with Bottles Program (" Plan Hogar ") created by Decree No. 470/15 to Ps. 5.416 and Ps. 5,502 per ton of butane and propane, respectively. On the other hand, the compensation received from the National Government remained at Ps. 550 / tn.

Regarding the propane sold through the Propane for Networks Agreement, on May 30, 2018, the Company initiated the sixteenth extension by which the methodology for determining the price and volumes for the period April 1, 2018 - December 31, 2019 is established.

During 2017 and the first half of 2018, the Company received the amount of Ps. 216,107 and Ps. 198,943, for subsidies for the Programs mentioned above, respectively.

As of June 30, 2018, the Argentine Government owes the Company Ps. 108,336 for these concepts.

29

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3, unless otherwise stated)

20

COMMON STOCK AND DIVIDENDS

a)

Common stock structure and shares’ public offer

As of June 30, 2018 and 2017, TGS’ common stock was as follows:

	Amount of common stock, subscribed, issued, paid in, and authorized for public offer
Common Shares Class (Face value $ 1, 1 vote)	Outstanding shares	Treasury Shares	Common Stock
Class “A”	405,192,594	-	405,192,594
Class “B”	383,103,694	6,198,995	389,302,689
Total	788,296,288	6,198,995	794,495,283

TGS's shares are traded on the BYMA and under the form of the ADSs (registered with the Securities and Exchange Commission (“SEC”) and representing 5 shares each) on the New York Stock Exchange.

b)

Dividends Distribution

After having effectively complied with the 2016 Investment Plan and having completed the RTI process, the Company does not have regulatory restrictions for the distribution and payment of dividends.

c)

Acquisition of treasury shares

On May 9, 2018, TGS’ Board of Directors approved a Program for the Acquisition of Shares of the Company in the Argentine peso market (the "Share Repurchase Program"). Considering the solid cash and investment position of the Company, this program was approved due to the distortion evidenced by the Company's economic value, measured by its current business and those derived from projects in development, and the price of the quotation of their shares in the market.

Considering the realized and liquid gains that arose from the financial statements for the three-month period ended March 31, 2018, the Board determined the maximum amount to be invested in Ps. 1,700,000. The deadline within which the acquisitions may be carried out will expire on September 10, 2018.

As of June 30, 2018, the Company held 6,198,995 treasury shares, representing 0.78% of the total common stock. The acquisition cost in the market amounted to Ps. 521,292, which, in accordance with the provisions of Title IV, Chapter III, article 3.11.c of the Rules of the CNV, restricts the amount of the retained earnings that the Company may distribute.

As of June 30, 2018, operations for the acquisition of treasury shares for a total of 610,000 shares are pending.

21

LEGAL CLAIMS AND OTHER MATTERS

The main changes occurring between January 1, 2018 and the date of issuance of these condensed interim consolidated financial statements are as follows. For further information regarding the claims and legal matters of the Company, see Note 19 “Legal Claims and Other Matters” to the consolidated financial statements as of December 31, 2017, issued on March 7, 2018.

a)

Action for annulment of ENARGAS Resolutions No. I-1,982/11 and No. I-1,991/11 (the “Resolutions”)

On March 14, 2018, the Company obtained a new extension of the precautionary measure over the action for annulment of the Resolutions (which prevents the National Government from claiming to TGS the payment of the amounts resulting from the new value of the Charge for the period from

30

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3, unless otherwise stated)

November 2011 to March 2016), thus extending its validity until September 2018, or until the dictating of the sentence that solves the matter, whichever occurs sooner.

TGS’s Management believes it has sufficient valid arguments to defend its position, and thus, the Company has not recorded the increase of the charge for natural gas consumptions from the date of obtaining the injunction until April 1, 2016, effective date of Resolution 28.

b)

Arbitral claim

On April 20, 2018, the Company was notified by the International Court of Arbitration (“ICC”) that on April 18, 2018, that entity received the draft judgment from the Arbitral Tribunal, which was finally approved on May 4, 2018.

On May 28, 2018, the ICC issued the final award by which it partially acknowledged the claim and ruled that the Company must pay damages to Pan American Energy LLC Argentina Branch and Pan American Sur S.A. in the amount of US$ 19 million, plus interest accrued as from May 8, 2015 until the date of actual payment. This payment was made on June 14, 2018 for an amount of Ps. 553,443 (equivalent to US$ 21.3 million).

22

BALANCES AND TRANSACTIONS WITH RELATED COMPANIES

Key management compensation

The accrued amounts corresponding to the compensation of the members of the Board of Directors, the Statutory Committee and the Executive Committee for the six-month periods ended June 30, 2018 and 2017 were Ps. 40,490 and Ps. 23,544, respectively.

Balances and transactions with related parties

The detail of significant outstanding balances for transactions entered into by TGS and its related parties as of June 30, 2018 and December 31, 2017 is as follows:

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English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3, unless otherwise stated)

The detail of significant transactions with related parties for the six-month period ended June 30, 2018 and 2017 is as follows:

Six-month period ended June 30, 2018:

Six-month period ended June 30, 2017:

23

ASSOCIATES AND JOINT AGREEMENT

Link:

Link was created in February 2001, with the purpose of the operation of a natural gas transportation system, which links TGS’s natural gas transportation system with the Cruz del Sur S.A. pipeline. The connection pipeline extends from Buchanan, located in the high-pressure ring that surrounds the city of Buenos Aires, which is part of TGS’s pipeline system, to Punta Lara. TGS’s ownership interest in such company is 49% and Dinarel S.A. holds the remaining 51%.

32

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3, unless otherwise stated)

TGU:

TGU is a company incorporated in Uruguay. This company rendered operation and maintenance services to Gasoducto Cruz del Sur S.A. and its contract terminated in 2010. TGS holds 49% of its common stock and Petrobras Argentina (being merged with Pampa Energía) holds the remaining 51%.

EGS (in liquidation):

In September 2003, EGS, a company registered in Argentina, was incorporated. The ownership is distributed between TGS (49%) and TGU (51%). EGS operates its own pipeline, which connects TGS’s main pipeline system in the Province of Santa Cruz with a delivery point on the border with Chile.

In October 2012, ENARGAS issued a resolution which authorizes EGS to transfer the connection pipeline and service offerings in operation to TGS. On November 13, 2013, the sale of all the fixed assets of EGS to TGS for an amount of US$ 350,000 was made, the existing natural gas transportation contracts were transferred and the procedures to dissolve the Company were initiated.

The Board of Directors Meeting held on January 13, 2016, approved to initiate the necessary steps for the dissolution of EGS. The Extraordinary Shareholders Meeting held on March 10, 2016 appointed EGS’ liquidator.

UT:

The Board of Directors of TGS approved the agreement to set up the UT together with SACDE. The objective of the UT is the assembly of pipes for the construction of the project of "Expansion of the System of Transportation and Distribution of Natural Gas" in the Province of Santa Fe, called by National Public Bid No. 452-0004-LPU17 by the MINEM (the "Work").

On October 27, 2017, TGS - SACDE UT signed the corresponding work contract with the MINEM.

The Work will generate a joint revenue of approximately Ps. 946 million (VAT included) and the maximum execution period was set in 365 days, counted from the signing of the certificate of commencement of the works, held on November 15, 2017.

The validity of the UT will be until it has fulfilled its purpose, once the Work is completed and until the end of the guarantee period, set at 18 months from the provisional reception.

As of June 30, 2018, the Work is being executed.

24    CONTRACTUAL OBLIGATIONS

The contractual commitments are described in Note 21 to the annual consolidated financial statements. The news for the six-month period ended June 30, 2018 are described below:

Vaca Muerta Project :

On April 3, 2018, TGS, the province of Neuquén and Gas y Petróleo de Neuquén S.A., signed an agreement which grants TGS the transport concession and will allow the Company to invest in gathering pipelines and treatment plants that will permit the injection of the natural gas proceeding from the existing gas projects in the basin to Neuba II natural gas pipeline.

The gathering pipeline, which will connect the Rincón La Ceniza area to the main transportation systems, will have a transportation capacity of 1.3 Bcf/d and a length of 57 miles. The treatment plant, which will adapt the quality of the natural gas before it enters the main natural gas transportation pipelines, will have an initial capacity of 177 MMcf/d. The amount of the investment related to the project’s first stage is estimated in US$250 million and its execution will be implemented throughout the rest of the year 2018 and during part of the year 2019.

33

English translation of the original prepared in Spanish for publication in Argentina

TRANSPORTADORA DE GAS DEL SUR S.A.

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2018 AND COMPARATIVE INFORMATION

 (Stated in thousands of pesos as described in Note 3, unless otherwise stated)

Subsequently, on June 7, 2018, the Company entered into a complementary agreement with the agencies of the Province of Neuquén mentioned above. This agreement was ratified by Decree No. 836/18 of the Executive Brach of the Province of Neuquén. The agreement approves the extension of the concession by which TGS will be allowed to build a second tranche of the catchment pipeline mentioned above (the "South Tranche").

The South Tranche will extend from 32.5 Km progressive of the North Tranche of the transportation concession to 41 Km progressive of the El Mangrullo - Aguada La Arena pipeline, requiring an investment of US$ 41 million. It will allow transporting up to 883 Bcf/d, and will have an extension of 33 km. The qualification of the work is scheduled for April 2019.

25. SUBSEQUENT EVENTS

There were no significant subsequent events between the end of the six-month period ended June 30, 2018 and the date of the approval (issuance) of these condensed interim consolidated financial statements in addition to those mentioned below:

Dividend Payment

The Board of Directors of the Company, in accordance with the powers delegated by the Ordinary and Extraordinary General Meeting of April 10, 2018, ordered at its meeting held on July 6, 2018, the payment of a cash dividend of Ps. 912,010 (approximately Ps.1.15 per share). This dividend payment was effective on July 17, 2018.

26

INFORMATION REQUIRED BY ARTICLE 26 OF SECTION VII CHAPTER IV TITLE II OF CNV RULES

In order to comply with General Resolution No. 629/2014 TGS informs that by August 8, 2018, supporting and management documentation related to open tax periods is safeguarded by Iron Mountain Argentina S.A. at its facilities are located at 2396 Amancio Alcorta Avenue in the Autonomous City of Buenos Aires.

As for commercial books and accounting records, they are situated in the headquarters of the Company in areas that ensure its preservation and inalterability.

The Company has available in its headquarters to CNV details of the documentation given in safeguard to third parties.

Gustavo Mariani

Chairman of the Board of Directors

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English translation of the original report issued in Spanish for publication in Argentina

REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION

To the Shareholders, President and Directors of

Transportadora de Gas del Sur S.A.

Legal address: Don Bosco 3672, 5 ^th Floor

Ciudad Autónoma de Buenos Aires

CUIT N° 30-65786206-8

I. Report on the Financial Statements

Introduction

1. We have reviewed the accompanying condensed interim consolidated financial statements of Transportadora de Gas del Sur S.A., which comprises: (a) the consolidated statement of financial position at June 30, 2018, (b) the consolidated statements of comprehensive income for the three and six months period ended at June 30, 2018, and the statements of changes in equity and cash flows for the six-month period then ended, and (c) a summary of significant accounting policies and other explanatory notes.

2. The balances and other information corresponding to the fiscal year 2017 and to its interim periods are an integral part of the financial statements mentioned above; therefore, they must be considered in connection with these financial statements.

Responsibility of the Board of Directors

3. The Company’s Board of Directors is responsible for the preparation and presentation of these condensed interim consolidated financial statements under the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), and adopted by the Federación Argentina de Consejos Profesionales de Ciencias Económicas (“FACPCE”) as its professional accounting standards and added by the Comisión Nacional de Valores (“CNV”) to its regulations; therefore, it is responsible for the preparation and presentation of the condensed interim consolidated financial statements mentioned above in accordance with International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”). The Company’s Board of Directors is also responsible for performing the internal control procedures that they may deem necessary to enable the preparation of the condensed interim consolidated financial statements that are free from material misstatements, either due to errors or irregularities.

Scope of review

4. Our responsibility is to express a conclusion on the accompanying consolidated financial statements based on our review, which was conducted in accordance with International Standard on Review Engagements 2410, 'Review of interim financial information performed by the independent auditor of the entity', as issued by the International Auditing and Assurance Standards Board (“IAASB”), and adopted by the FACPCE as its standard of review in Argentina by Technical Resolution N° 33. Such standard requires auditor to comply with the ethical requirements relevant to the audit of the Company’s annual financial statements. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and

English translation of the original report issued in Spanish for publication in Argentina

consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

5. Based on our review, nothing has come to our attention that causes us to believe that the condensed interim consolidated financial statements mentioned in paragraph 1. are not prepared, in all material respects, in accordance with IAS 34.

II. Report on other legal and regulatory requirements

In compliance with current regulations, we report that:

a)

The transcription of the condensed interim consolidated financial statements mentioned in paragraph 1.  into the “Inventory and Balance Sheet” book of Transportadora de Gas del Sur S.A. is pending. Except for the aforementioned, based on our review, nothing has come to our attention that causes us to believe that such financial statements are not prepared, in all material respects, in accordance with the provisions of the Commercial Companies Law and pertinent resolutions of the CNV;

b)

Except as mentioned in the previous paragraph, the condensed  interim separate financial statements  of Transportadora de Gas del Sur S.A. as of June 30, 2018 arise from accounting records kept in all formal respects in accordance with current legal regulations;

c)

The information included in points 4, 5, 6 and 8 in the “Analysis of financial conditions and results of operations  for the six-month period ended June 30, 2018”, which is presented together with the condensed interim financial statements to comply with CNV regulations, arise from the corresponding condensed interim consolidated financial statement at June 30, 2018 attached herein, and from the condensed interim consolidated financial statements: i) at June 30, 2017 on which we issued our review report on August 7, 2017, and ii) at June 30, 2016, 2015 and 2014, which are not attached to this document and on which Price Waterhouse & Co. S.R.L. issued their review reports on  July 25, 2016, July 29, 2015 and July 29, 2014, respectively.

d)

At June 30, 2018, the liabilities accrued in employee and employer contributions to the Argentine Integrated Social Security System according to the Company's accounting records amounted to $ 38,891,989, none of which was claimable at that date.

City of Buenos Aires, August 8, 2018.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Transportadora de Gas del Sur S.A.

By:	/s/Alejandro M. Basso
		Name:	Alejandro M. Basso
		Title:	Vice President of Administration, Finance and Services

By:	/s/Hernán D. Flores Gómez
	Name:	Hernán Diego Flores Gómez
	Title:	Legal Affairs Vice President

Date: August 31, 2018

Footnotes

¹⁽⁾ Not covered by Auditor’s Report on Review of Interim Financial Information, except for items 4, 5, 6 and 8.