Company Quick10K Filing
Central Puerto
20-F 2019-12-31 Filed 2020-04-28
20-F 2018-12-31 Filed 2019-04-30
20-F 2017-12-31 Filed 2018-04-27

CEPU 20F Annual Report

Part I
Item 4.B 
Item 5. Operating and Financial Review and Prospects
Item 5.A Operating Results
Item 5.B Liquidity and Capital Resources
Item 5.C Research and Development, Patents and Licenses, Etc.
Item 5.D Trend Information
Item 5.E Off - Balance Sheet Arrangements
Item 5.F Contractual Obligations
Item 5.G Safe Harbor
Item 7.A.  Major Shareholders
Item 7.B Related Party Transactions
Item 7.C Interests of Experts and Counsel
Item 8.A. Consolidated Statements and Other Financial Information.
Item 8.B  Significant Changes
Item 9.A. Offer and Listing Details
Item 9.B. Plan of Distribution
Item 9.C. Markets
Item 9.D. Selling Shareholders
Item 9.E. Dilution
Item 9.F. Expenses of The Issue
Item 10.F Dividends and Paying Agents
Item 10.G Statement By Experts
Item 10.H Documents on Display
Item 10.I. Subsidiary Information
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 12. Description of Securities Other Than Equity Securities
Item 12.A Debt Securities
Item 12.B Warrants and Rights
Item 12.C Other Securities
Item 12.D American Depositary Shares
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications To The Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
Item 16.A Audit Committee Financial Expert
Item 16.B Code of Ethics
Item 16.C Principal Accountant Fees and Services
Item 16.D Exemptions From The Listing Standards for Audit Committees
Item 16.E Purchases of Equity Securities By The Issuer and Affiliated Purchasers
Item 16.F Change in Registrant’S Certifying Accountant
Item 16.G Corporate Governance
Item 16.H. Mine Safety Disclosure
Item 19. Exhibits
EX-1.1 cepu_ex11.htm
EX-2.D cepu_ex2d.htm
EX-4.18 cepu_ex418.htm
EX-8.1 cepu_ex81.htm
EX-12.1 cepu_ex121.htm
EX-12.2 cepu_ex122.htm
EX-13.1 cepu_ex131.htm

Central Puerto Earnings 2019-12-31

Balance SheetIncome StatementCash Flow

20-F 1 cepu_20f.htm 20-F cepu_20f
 

 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 20-F
 
 
☐ 
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒ 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
☐ 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________________ to __________________.
 
OR
☐ 
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Date of event requiring this shell company report __________________.
 
Commission file number 001-38376
 
 
Central Puerto S.A.
(Exact name of Registrant as specified in its charter)
Port Central S.A.
(Translation of Registrant’s name into English)
 
 
REPUBLIC OF ARGENTINA
(Jurisdiction of incorporation or organization)
 
Avenida Thomas Edison 2701
C1104BAB Buenos Aires
Republic of Argentina
(Address of principal executive offices)
 
Fernando Roberto Bonnet
Avenida Thomas Edison 2701
C1104BAB Buenos Aires
Republic of Argentina.
Facsimile: +54 (11) 4317-5900
 Email: inversores@centralpuerto.com
 
 (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
 
 
 
 
Securities registered or to be registered pursuant to Section 12(b) of the Act.
 
Title of each class
Trading Symbol
Name of each exchange on which registered
American Depositary Shares, each representing 10 common shares of Central Puerto S.A.*
CEPU
New York Stock Exchange*
 
Not for trading, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the New York Stock Exchange.
 
Securities registered or to be registered pursuant to Section 12(g) of the Act.
 
None
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
 
None
 
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
 
Title of each class
Outstanding at December 31, 2019
Common shares, nominal value Ps.1.00 per share
1,514,022,256
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
Yes  ☒            No   ☐
 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 
Yes  ☐            No   ☒
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes  ☒           No  ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes  ☒           No  ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  ☒             Accelerated filer   ☐             Non-accelerated filer   ☐           Emerging growth company  ☐
 
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐
 
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
 
 
 
 
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (§ 15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP  ☐             International Financial Reporting Standards as issued             Other  ☐
by the International Accounting Standards Board ☒
 
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
 
Item 17  ☐            Item 18  ☐
 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes  ☐             No  ☒
 
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
 
Yes  ☐             No  ☐



 
 
 
 
TABLE OF CONTENTS
 
Item 1.
Identity of Directors, Senior Management and Advisors
1
Item 2.
Offer Statistics and Expected Timetable
1
Item 3.
Key Information
1
Item 3.A.
Selected Financial Data
1
Item 3.B
Capitalization and indebtedness
5
Item 3.C
Reasons for the offer and use of proceeds
5
Item 3.D
Risk Factors
5
Item 4.
Information of the Company
40
Item 4.A
History and development of the Company
45
Item 4.B
Business overview
50
Item 4.C
Organizational structure
145
Item 4.D
Property, plants and equipment
145
Item 5.
Operating and Financial Review and Prospects
147
Item 5.A
Operating Results
147
Item 5.B
Liquidity and Capital Resources
173
Item 5.C
Research and Development, patents and licenses, etc.
181
Item 5.D
Trend Information
181
Item 5.E
Off-balance sheet arrangements
184
Item 5.F
Contractual Obligations
184
Item 5.G
Safe Harbor
186
Item 6.
Directors, Senior Management and Employees
186
Item 7.
Shareholders and Related Party Transactions
198
Item 7.A.
Major Shareholders
198
Item 7.B
Related Party Transactions
199
Item 7.C
Interests of experts and counsel
201
Item 8.
Financial Information
201
Item 8.A.
Consolidated Statements and Other Financial Information.
201
Item 8.B
Significant Changes
203
Item 9.
The Offer and Listing
204
Item 9.A.
Offer and listing details
204
Item 9.B.
Plan of Distribution
204
Item 9.C.
Markets
204
Item 9.D.
Selling Shareholders
204
Item 9.E.
Dilution
204
Item 9.F.
Expenses of the issue
204
Item 10.
Additional Information
204
Item 10.A.
Share capital
204
Item 10.B.
Memorandum and articles of association
204
 
 
 
 
 
Item 10.C
Material contracts
209
Item 10.D
Exchange Controls
210
Item 10.E
Taxation
215
Item 10.F
Dividends and paying agents
223
Item 10.G
Statement by experts
223
Item 10.H
Documents on display
223
Item 10.I.
Subsidiary Information
223
Item 11.
Quantitative and Qualitative Disclosures about Market Risk
223
Item 12.
Description of Securities Other Than Equity Securities
228
Item 12.A
Debt Securities
228
Item 12.B
Warrants and Rights
228
Item 12.C
Other Securities
228
Item 12.D
American Depositary Shares
228
Item 13.
Defaults, Dividend Arrearages and Delinquencies
229
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
229
Item 15.
Controls and Procedures
229
Item 16.A
Audit committee financial expert
230
Item 16.B
Code of Ethics
230
Item 16.C
Principal Accountant Fees and Services
231
Item 16.D
Exemptions from the Listing Standards for Audit Committees
231
Item 16.E
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
231
Item 16.F
Change in Registrant’s Certifying Accountant
231
Item 16.G
Corporate Governance
232
Item 16.H.
Mine Safety Disclosure
234
Item  17.
Financial Statements
234
Item  18.
Financial Statements
235
Item 19.
Exhibits
235
 
 
 
 
 
 
CERTAIN DEFINITIONS
 
In this annual report, except where otherwise indicated or where the context otherwise requires:
 
“Argentine Corporate Law” refers to Law No. 19,550, as amended;
“Authorized Generators” refers to electricity generators that do not have contracts in the term market in any of its methods;
“BYMA” refers to Bolsas y Mercados Argentinos S.A.;
“CAMMESA” refers to Compañía Administradora del Mercado Mayorista Eléctrico Sociedad Anónima. See “Item 4.B, Business Overview— The Argentine Electric Power Sector—General Overview of Legal Framework—CAMMESA;”
“CNV” refers to the Comisión Nacional de Valores, the Argentine Securities Commission;
“COD” refers to Commercial Operation Date, the day in which a generation unit is authorized by CAMMESA (in Spanish, “Habilitación Comercial”) to sell electric energy through the grid under the applicable commercial conditions;
“CTM” refers to Centrales Térmicas Mendoza S.A.;
“CVO” refers to the thermal plant Central Vuelta de Obligado;
“CVO Agreement” refers to the Agreement for Project Management and Operation, Increase of Thermal Generation Availability and Adaptation of Remuneration for Generation 2008-2011” executed on November 25, 2010 among the Secretariat of Energy and Central Puerto along with other electric power generators;
“CVOSA” refers to Central Vuelta de Obligado S.A.;
“Ecogas” refers collectively to Distribuidora de Gas Cuyana (“DGCU”) and Distribuidora de Gas del Centro (“DGCE”);
“Energía Base” refers to the regulatory framework established under Resolution SE No. 95/13, as amended, and, from February 2017 to February 2019, regulated by Resolution SEE No. 19/17, from March 2019 to January 2020, regulated by Resolution No. 1/19 of the Secretary of Renewable Resources and Electric Market of the National Ministry of Economy and since February 2020 regulated by Resolution No. 31/20 of the Secretary of Energy. See “Item 4.B, Business Overview—The Argentine Electric Power Sector;”
“Energía Plus” refers to the regulatory framework established under Resolution SE No. 1281/06, as amended. See “Item 4.B, Business Overview—The Argentine Electric Power Sector—Structure of the Industry—Energía Plus;”
“FONINVEMEM” or “FONI” refers to the Fondo para Inversiones Necesarias que Permitan Incrementar la Oferta de Energía Eléctrica en el Mercado Eléctrico Mayorista (the Fund for Investments Required to Increase the Electric Power Supply) and similar programs, including the CVO Agreement. See “Item 4.B, Business Overview—The Argentine Electric Power Sector—Structure of the Industry—The FONINVEMEM and Similar Programs;”
“FONINVEMEM Plants” refers to the plants José de San Martín, Manuel Belgrano and Vuelta de Obligado; 
“HPDA” refers Hidroeléctrica Piedra del Águila S.A., the corporation that previously owned the Piedra del Águila plant;
“IEASA” refers to Integración Energética Argentina S.A.;
“IGCE” refers to Inversora de Gas del Centro S.A.;
“IGCU” refers to Inversora de Gas Cuyana S.A.;
“La Plata Plant Sale” refers to the sale of the La Plata plant to YPF EE, effective as of January 5, 2018. For further information on the La Plata Plant Sale, see “Item 4.A. History and development of the Company—La Plata Plant Sale;”
“La Plata Plant Sale Effective Date” is January 5, 2018. For more information on the La Plata Plant Sale Effective Date, see “Item 4.A. History and development of the Company—La Plata Plant Sale;”
“LPC” refers to La Plata Cogeneración S.A., the corporation that owned the La Plata plant prior to us;
“LVFVD” refers to liquidaciones de venta con fecha de vencimientos a definir, or receivables from CAMMESA without a fixed due date. See “Item 4.B, Business Overview—FONINVEMEM and Similar Programs;”
“MATER” refers to Term Market for Renewable Energy (“MATER”) Resolution No. 281-E/17;
“MULC” refers to the foreign exchange market;
“PPA” refers to Power Purchase Agreements, power capacity and energy supply agreements for a defined period of time or energy quantity;
“Resolution SRRyME No. 1/19” refers to the resolution No. 1/19 issued on March 1, 2019 by the Secretary of Renewable Resources and Electric Markey of the National Ministry of Economy by which the Secretary modified the remuneration scheme (for capacity and energy) applicable to Authorized Generators (electricity generators which do not have contracts in the term market in any of its modalities) acting in the WEM;
“Resolution 31/20” or “Res. 31/20” refers to the resolution No. 31/20 issued on February 27, 2020 by the Secretary of Energy of the National Ministry of Production Development by which the Secretary modified the remuneration scheme (for capacity and energy) applicable from February 1, 2020, to Authorized Generators (electricity generators which do not have contracts in the term market in any of its modalities) acting in the WEM;
“SADI” refers to the Argentine Interconnection System;
“sales under contracts” refers collectively to (i) term market sales of energy under contracts with private and public sector counterparties, (ii) sales of energy sold under the Energía Plus and (iii) sales of energy under the RenovAr Program;
 
 
 
 
the “spot market” refers to energy sold by generators to the WEM and remunerated by CAMMESA pursuant to the framework in place prior to the Energía Base. See “Item 4.B, Business Overview—The Argentine Electric Power Sector—Structure of the Industry—Electricity Dispatch and Spot Market Pricing prior to Resolution SE No. 95/13;”
“YPF” refers to YPF S.A., Argentina’s state-owned oil and gas company;
“YPF EE” refers to YPF Energía Eléctrica S.A., a subsidiary of YPF; and
“WEM” refers to the Argentine Mercado Eléctrico Mayorista, the wholesale electric power market. See “Item 4.B, Business Overview—The Argentine Electric Power Sector—General Overview of Legal Framework—CAMMESA.”
 
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
 
Financial Statements
 
We maintain our financial books and records and publish our consolidated financial statements (as defined below) in Argentine pesos, which is our functional currency. This annual report contains our audited consolidated financial statements as of December 31, 2019 and 2018 and for each of the years ended December 31, 2019, 2018, and 2017 (our “audited consolidated financial statements”), which were approved by our board of directors (our “Board of Directors”) on April 22, 2020. Our Board of Directors delegated to our Management the issuance of such financial statements, once the auditor's reports have been issued. The auditor's reports have been issued on April 24,2020.
 
We prepare our audited consolidated financial statements in Argentine pesos and in conformity with the IFRS as issued by the IASB.
 
In accordance with IAS 29, the restatement of the financial statements is necessary when the functional currency of an entity is the currency of a hyperinflationary economy. To define a hyperinflationary state, IAS 29 provides a series of non-exclusive guidelines that consist of (i) analyzing the behavior of the population, prices, interest rates and wages before the evolution of price indexes and the loss of the currency’s purchasing power, and (ii) as a quantitative characteristic, verifying if the three-year cumulative inflation rate approaches or exceeds 100%. Due to macroeconomic factors, the triennial inflation was above that figure in 2018 and Argentina has been considered hyperinflationary since July 1, 2018. See “Risks Relating to Argentina—As of July 1st, 2018, the Argentine Peso qualifies as a currency of a hyperinflationary economy and we are required to restate our historical financial statements to apply inflationary adjustments, which could adversely affect our results of operations and financial condition and those of our Argentine subsidiaries” and “—If the current levels of inflation do not decrease, the Argentine economy could be adversely affected.”
 
Therefore, our audited consolidated financial statements included herein, including the figures for the previous periods (this fact not affecting the decisions taken on the financial information for such periods), and, unless otherwise stated, the financial information included elsewhere in this annual report, were restated to consider the changes in the general purchasing power of the functional currency of the Company (Argentine peso) pursuant to IAS 29 and General Resolution no. 777/2018 of the CNV. Consequently, the financial statements are stated in the current measurement unit as of December 31, 2019. The information included in our audited consolidated financial statements is not comparable to the financial statements previously published by us. For more information, see “Item 5.A. Operating Results—Factors Affecting our Results of Operations—Inflation” and Note 2.1.2 to our audited consolidated financial statements.
 
We remind investors that we are required to file financial statements and other periodic reports with the CNV because we are a public company in Argentina. Investors can access our historical financial statements published in Spanish on the CNV’s website at www.cnv.gob.ar. The information found on the CNV’s website is not a part of this annual report. Investors are cautioned not to place undue reliance on our financial statements not included in this annual report.
 
Currency and Rounding
 
All references herein to “pesos,” “Argentine pesos” or “Ps.” are to Argentine pesos, the legal currency of Argentina. All references to “U.S. dollars,” “dollars” or “US$” are to U.S. dollars. All references to “SEK$” are to Swedish krona. A “billion” is a thousand million.
 
Solely for the convenience of the reader, we have translated certain amounts included in this annual report from pesos into U.S. dollars, unless otherwise indicated, using the seller rate for U.S. dollars quoted by the Banco de la Nación Argentina for wire transfers (divisas) as of December 31, 2019, of Ps.59.89 per US$1.00. The Federal Reserve Bank of New York does not report a noon buying rate for pesos. The U.S. dollar equivalent information presented in this annual report is provided solely for the convenience of the reader and should not be construed to represent that the peso amounts have been, or could have been or could be, converted into U.S. dollars at such rates or at any other rate. See “Item 3.A. Selected Financial Data—Exchange Rates.”
 
Certain figures included in this annual report and in the audited consolidated financial statements contained herein have been rounded for ease of presentation. Percentage figures included in this annual report have in some cases been calculated on the basis of such figures prior to rounding. For this reason, certain percentage amounts in this annual report may vary from those obtained by performing the same calculations using the figures in this annual report and in the consolidated financial statements contained herein. Certain other amounts that appear in this annual report may not sum due to rounding.
 
 
 
 
 
Market Share and Other Information
 
The information set forth in this annual report with respect to the market environment, market developments, growth rates and trends in the markets in which we operate is based on information published by the Argentine federal and local governments through the Instituto Nacional de Estadísiticas y Censos (the National Statistics and Census Institute, or “INDEC”), the Ministry of Interior, the Ministry of Energy, the Banco Central de la República Argentina (the Argentine Central Bank, or “Central Bank”) CAMMESA, the Dirección General de Estadística y Censos de la Ciudad de Buenos Aires (General Directorate of Statistics and Census of the City of Buenos Aires) and the Dirección Provincial de Estadística y Censos de la Provincia de San Luis (Provincial Directorate of Statistics and Census of the Province of San Luis), as well as on independent third-party data, statistical information and reports produced by unaffiliated entities, as well as on our own internal estimates. In addition, this annual report contains information from Vaisala, Inc. (“Vaisala - 3 Tier”), a company that develops, manufactures and markets products and services for environmental and industrial measurement.
 
This annual report also contains estimates that we have made based on third-party market data. Market studies are frequently based on information and assumptions that may not be exact or appropriate.
 
Although we have no reason to believe any of this information or these sources are inaccurate in any material respect, we have not verified the figures, market data or other information on which third parties have based their studies, nor have we confirmed that such third parties have verified the external sources on which such estimates are based. Therefore, we do not guarantee, nor do we assume responsibility for, the accuracy of the information from third-party studies presented in this annual report.
 
This annual report also contains estimates of market data and information derived therefrom which cannot be gathered from publications by market research institutions or any other independent sources. Such information is based on our internal estimates. In many cases there is no publicly available information on such market data, for example from industry associations, public authorities or other organizations and institutions. We believe that these internal estimates of market data and information derived therefrom are helpful in order to give investors a better understanding of the industry in which we operate as well as our position within this industry. Although we believe that our internal market observations are reliable, our estimates are not reviewed or verified by any external sources. These may deviate from estimates made by our competitors or future statistics provided by market research institutes or other independent sources. We cannot assure you that our estimates or the assumptions are accurate or correctly reflect the state and development of, or our position in, the industry.
 
FORWARD-LOOKING STATEMENTS
 
This annual report contains estimates and forward-looking statements, principally in “Item 3.D. Risk Factors,” “Item 4.B. Business Overview” and “Item 5. Operating and Financial Review and Prospects.”
 
Our estimates and forward-looking statements are mainly based on our current beliefs, expectations and estimates of future courses of action, events and trends that affect or may affect our business and results of operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of information currently available to us.
 
Many important factors, in addition to those discussed elsewhere in this annual report, could cause our actual results to differ substantially from those anticipated in our forward-looking statements, including, among other things:
 
changes in general economic, financial, business, political, legal, social or other conditions in Argentina;
changes in conditions elsewhere in Latin America or in either developed or emerging markets;
changes in capital markets in general that may affect policies or attitudes toward lending to or investing in Argentina or Argentine companies, including volatility in domestic and international financial markets;
the impact of political developments and uncertainties relating to political and economic conditions in Argentina, including the policies of the new government in Argentina, on the demand for securities of Argentine companies;
increased inflation;
fluctuations in exchange rates, including a significant devaluation of the Argentine peso;
changes in the law, norms and regulations applicable to the Argentine electric power and energy sector, including changes to the current regulatory frameworks, changes to programs established to incentivize investments in new generation capacity and reductions in government subsidies to consumers;
our ability to develop our expansion projects and to win awards for new potential projects;
increases in financing costs or the inability to obtain additional debt or equity financing on attractive terms, which may limit our ability to fund new activities;
government intervention, including measures that result in changes to the Argentine labor market, exchange market or tax system;
adverse legal or regulatory disputes or proceedings;
changes in the price of energy, power and other related services;
 
 
 
 
changes in the prices and supply of natural gas or liquid fuels;
changes in the amount of rainfall and accumulated water;
changes in environmental regulations, including exposure to risks associated with our business activities;
risks inherent to the demand for and sale of energy;
the operational risks related to the generation, as well as the transmission and distribution, of electric power;
ability to implement our business strategy, including the ability to complete our construction and expansion plans in a timely manner and according to our budget;
competition in the energy sector, including as a result of the construction of new generation capacity;
exposure to credit risk due to credit arrangements with CAMMESA;
our ability to retain key members of our senior management and key technical employees;
the effects of a pandemic or epidemic and any subsequent mandatory regulatory restrictions or containment measures;
our relationship with our employees; and
other factors discussed under “Item 3.D.—Risk Factors” in this annual report.
 
The words “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “forecast” and similar words are intended to identify forward-looking statements. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. Forward-looking statements speak only as of the date they were made, and we do not undertake any obligation to update publicly or to revise any forward-looking statements after we distribute this annual report because of new information, future events or other factors, except as required by applicable law. In light of the risks and uncertainties described above, the forward-looking events and circumstances discussed in this annual report might not occur and do not constitute guarantees of future performance. Because of these uncertainties, you should not make any investment decisions based on these estimates and forward-looking statements.
 
 
 
 
PART I
 
Item 1. 
Identity of Directors, Senior Management and Advisors
 
Not applicable.
 
Item 2. 
Offer Statistics and Expected Timetable
 
Not applicable.
 
Item 3. 
Key Information
 
Item 3.A. 
Selected Financial Data
 
The following tables present selected consolidated financial data for us as of the dates and for the periods indicated. You should read this information in conjunction with our audited consolidated financial statements and related notes beginning on page F-1, and the information under “Item 5.A Operating Results” included elsewhere in this annual report.
 
The selected consolidated financial data as of December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017 has been derived from our audited consolidated financial statements included in this annual report. Prior period amounts have been restated to reflect the La Plata plant operations as discontinued operations in all periods presented. Please see Note 21 to our audited consolidated financial statements for further information on how we have accounted for the La Plata Plant Sale in our audited consolidated financial statements. Our historical results are not necessarily indicative of our future results. Our audited consolidated financial statements have been audited by Pistrelli, Henry Martin y Asociados S.R.L. (a member firm of Ernst & Young Global), an independent registered public accounting firm, whose audit report is included elsewhere in this annual report.
 
We maintain our financial books and records and publish our audited consolidated financial statements in Argentine pesos, which is our functional currency. We prepare our audited consolidated financial statements in Argentine pesos and in conformity with IFRS as issued by the IASB.
 
In accordance with IAS 29, the restatement of the financial statements is necessary when the functional currency of an entity is the currency of a hyperinflationary economy. To define a hyperinflationary state, IAS 29 provides a series of non-exclusive guidelines that consist of (i) analyzing the behavior of the population, prices, interest rates and wages before the evolution of price indexes and the loss of the currency’s purchasing power, and (ii) as a quantitative characteristic, verifying if the three-year cumulative inflation rate approaches or exceeds 100%. Due to macroeconomic factors, the triennial inflation was above that figure in 2018 and Argentina has been considered hyperinflationary since July 1, 2018. See “Risks Relating to Argentina—As of July 1st, 2018, the Argentine Peso qualifies as a currency of a hyperinflationary economy and we are required to restate our historical financial statements to apply inflationary adjustments, which could adversely affect our results of operations and financial condition and those of our Argentine subsidiaries” and “—If the current levels of inflation do not decrease, the Argentine economy could be adversely affected.”
 
Therefore, our audited consolidated financial statements included herein, including the figures for the previous periods (this fact not affecting the decisions taken on the financial information for such periods), and, unless otherwise stated, the financial information included elsewhere in this annual report, were restated to consider the changes in the general purchasing power of the functional currency of the Company (Argentine peso) pursuant to IAS 29 and General Resolution no. 777/2018 of the CNV. Consequently, the financial statements are stated in the current measurement unit as of December 31, 2019. The information included in our audited consolidated financial statements, is not comparable to the financial statements previously published by us. For more information, see “Item 5.A. Operating Results—Factors Affecting our Results of Operations—Inflation” and Note 2.1.2 to our audited consolidated financial statements.
 
The selected consolidated statement of comprehensive income data for the years ended December 31, 2017 and 2016 and the selected consolidated statement of financial position data as of December 31, 2017 have been restated pursuant to IAS 29 to reflect the effect of hyperinflation in Argentina. As a result of such restatement, the selected financial information included in this annual report differ from previously reported financial information.
 
The selected consolidated statement of financial position data as of December 31, 2016 and the selected consolidated statement of financial position and statement of comprehensive income as of and for the year ended December 31, 2015 have not been presented as they cannot be provided on a restated basis without unreasonable effort or expense.
 
Solely for convenience of the reader, Peso amounts as of and for the year ended December 31, 2019 have been translated into U.S. dollars. The rate used to translate such amounts as of December 31, 2019 was Ps. 59.89 to US$1.00, which was the reference exchange rate reported by the Banco de la Nación Argentina for wire transfers (divisas) as of December 30, 2019.
 
 
1
 
 
 
The U.S. dollar equivalent information presented in this annual report is provided solely for the convenience of the reader and should not be construed to represent that the Peso amounts have been, or could have been or could be, converted into, U.S. dollars at such rates or any other rate. See “Item 3.A. Selected Financial Data—Exchange Rates.”
 
Selected Consolidated Statement of Comprehensive Income Data
 
 
 
Year Ended December 31,
 
 
 
(in thousands of US$)(1)
 
 
(in thousands of Ps.)
 
 
 
2019
 
 
2019
 
 
2018
 
 
2017
 
 
2016
 
Continuing operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues 
  600,447 
  35,960,784 
  21,944,761 
  14,827,241 
  10,836,014 
Cost of sales 
  (316,525)
  (18,956,674)
  (9,978,643)
  (7,997,976)
  (7,661,201)
Gross income 
  283,922 
  17,004,110 
  11,966,118 
  6,829,265 
  3,174,813 
Administrative and selling expenses 
  (43,971)
  (2,633,405)
  (2,137,249)
  (1,624,866)
  (1,373,148)
Other operating income
  306,449 
  18,353,204 
  20,341,015 
  1,430,737 
  3,575,439 
Other operating expenses
  (4,521)
  (270,755)
  (204,414)
  (215,578)
  (264,518)
Impairment of property, plant and equipment and intangible assets
  (73,542)
  (4,404,441)
   
   
   
CVO receivables update
   
   
  16,947,737 
   
   
Operating income 
  468,337 
  28,048,713 
  46,913,207 
  6,419,558 
  5,112,586 
Loss on net monetary position 
  (40,604)
  (2,431,753)
  (6,208,977)
  (233,678)
  (2,825,326)
Finance income 
  60,122 
  3,600,707 
  3,507,676 
  2,397,964 
  1,344,364 
Finance expenses 
  (265,902)
  (15,924,867)
  (9,692,797)
  (1,846,995)
  (1,864,368)
Share of the profit of associates 
  18,589 
  1,113,297 
  1,652,445 
  1,804,460 
  650,173 
Income before income tax from continuing operations
  240,543 
  14,406,097 
  36,171,554 
  8,541,309 
  2,427,429 
Income tax for the year 
  (95,930)
  (5,745,242)
  (10,159,632)
  (1,663,201)
  (1,548,195)
Net income for the year from continuing operations
  144,613 
  8,660,855 
  26,011,922 
  6,878,108 
  879,234 
Discontinued operations
    
    
    
    
    
Income after tax for the year from discontinued operations
  - 
  - 
  424,850 
  1,217,236 
  1,241,411 
Net income for the year 
  144,613 
  8,660,855 
  26,436,772 
  8,095,344 
  2,120,645 
Other comprehensive income, net 
  (535)
  (32,070)
  (297,840)
  (801,290)
  550,583 
Total comprehensive income for the year
  144,077 
  8,628,785 
  26,138,932 
  7,294,054 
  2,671,228 
Number of Outstanding Shares (basic and diluted)
  1,505,170,408 
  1,505,170,408 
  1,505,170,408 
  1,505,170,408 
  1,505,170,408 
Net income per share (basic and diluted) 
  0.10 
  5.85 
  17.91 
  5.41 
  1.42 
Net income per share from continuing operations (Ps.)
  0.10 
  5.85 
  17.62 
  4.60 
  0.58 
Cash dividend per share (Ps.) in nominal terms
  0.01 
  0.71 
  0.70 
  0.85 
  0.925 
 
Dividend declaration date 
 
 
November 22,
2019
 
 
April 27,
2018
 
 
August 15,
2017
 
 
October 26,
2016
 
Foreign exchange rate as of the dividend declaration date (2)
Ps. per US$) 
 
  59.77 
  20.54 
  17.07 
  15.21 
Convenience translation of cash dividend per share (US$) in nominal terms (2)
 
  0.011879 
  0.034080 
  0.049795 
  0.060815 
 
(1)
Solely for the convenience of the reader, peso amounts as of December 31, 2019 have been translated into U.S. dollars at the exchange rate as of December 30, 2019 of Ps. 59.89 to US$1.00. See “Exchange Rates” and “Presentation of Financial and Other Information” for further information on recent fluctuations in exchange rates.
(2)
Peso amounts have been translated into U.S. dollars at the exchange rate quoted by Banco de la Nación Argentina for wire transfers as of the date of each dividend declaration date.
 
Selected Consolidated Statement of Financial Position
 
 
 
As of December 31,
 
 
 
(in thousands of US$)(1)
 
 
(in thousands of Ps.)
 
 
 
 
 
 
2019
 
 
2019
 
 
2018
 
 
2017
 
 
2016
 
Capital stock 
  25,280 
  1,514,022 
  1,514,022 
  1,514,022 
  1,514,022 
Equity 
  987,657 
  59,150,797 
  50,655,159 
  26,199,932 
  21,038,164 
Total Assets 
  1,983,569 
  118,795,975 
  88,084,228 
  52,839,883 
  46,763,175 
 
(1) 
Solely for the convenience of the reader, peso amounts as of December 31, 2019 have been translated into U.S. dollars at the exchange rate as of December 30, 2019 of Ps.59.89 to US$1.00. See “—Exchange Rates” and “Presentation of Financial and Other Information” for further information on recent fluctuations in exchange rates.
 
 
2
 
 
 
 
As of December 31,
 
 
 
(in thousands of US$)(1)
 
 
(in thousands of Ps.)
 
 
 
 
 
 
2019
 
 
2019
 
 
2018
 
 
2017
 
Non-current assets
 
 
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment 
  928,700 
  55,619,873 
  34,715,815 
  26,846,322 
Intangible assets 
  136,010 
  8,145,647 
  3,438,508 
  3,059,116 
Investment in associates 
  57,615 
  3,450,569 
  3,074,088 
  2,815,345 
Trade and other receivables (2) 
  404,895 
  24,249,144 
  25,646,335 
  5,910,324 
Other non-financial assets 
  11,508 
  689,185 
  343,163 
  28,893 
Deferred tax asset
  - 
  - 
  - 
  4,609 
Inventories 
  2,407 
  144,169 
  114,893 
  109,507 
Total non-current assets 
  1,541,135 
  92,298,587 
  67,332,802 
  38,774,116 
Current assets
    
    
    
    
Inventories 
  10,980 
  657,594 
  339,810 
  299,418 
Other non-financial assets 
  16,802 
  1,006,247 
  761,670 
  1,069,617 
Trade and other receivables(2) 
  261,161 
  15,640,947 
  16,273,973 
  8,820,661 
Other financial assets 
  128,548 
  7,698,732 
  3,022,238 
  2,522,761 
Cash and cash equivalents 
  24,944 
  1,493,868 
  353,735 
  201,310 
Total current assets 
  442,434 
  26,497,388 
  20,751,426 
  12,913,767 
Assets held for sale
  - 
  - 
  - 
  1,151,999 
Total assets 
  1,983,569 
  118,795,975 
  88,084,228 
  52,839,882 
Equity and liabilities
    
    
    
    
Equity
    
    
    
    
Capital stock 
  25,280 
  1,514,022 
  1,514,022 
  1,514,022 
Adjustment to capital stock 
  307,510 
  18,416,762 
  18,416,762 
  18,416,759 
Legal reserve 
  39,718 
  2,378,736 
  589,783 
  249,947 
Voluntary reserve 
  442,662 
  26,511,002 
  6,778,288 
  1,568,895 
Retained earnings 
  159,285 
  9,539,556 
  22,636,866 
  3,394,024 
Accumulated other comprehensive income 
  974,454 
  58,360,078 
  49,935,721 
  319,970 
Non-controlling interests 
  13,203 
  790,719 
  719,438 
  736,402 
Total equity 
  987,657 
  59,150,797 
  50,655,159 
  26,200,019 
Non-current liabilities
    
    
    
    
Other non-financial liabilities 
  72,711 
  4,354,668 
  3,013,397 
  1,064,534 
Other loans and borrowings 
  512,394 
  30,687,277 
  8,005,484 
  3,358,589 
Borrowings from CAMMESA 
  - 
  - 
  1,544,945 
  2,397,455 
Compensation and employee benefits liabilities 
  3,828 
  229,279 
  228,395 
  256,874 
Previsions 
  156 
  9,348 
  - 
  - 
Deferred income tax liabilities 
  105,363 
  6,310,170 
  7,373,778 
  5,917,983 
Total non-current liabilities 
  694,452 
  41,590,742 
  20,165,999 
  12,995,435 
Current liabilities
    
    
    
    
Trade and other payables 
  98,505 
  5,899,436 
  2,661,249 
  2,310,386 
Other non-financial liabilities 
  28,959 
  1,734,349 
  2,555,070 
  1,498,283 
Other loans and borrowings 
  134,011 
  8,025,892 
  1,034,781 
  3,981,618 
Borrowings from CAMMESA 
  - 
  - 
  2,788,843 
  1,148,363 
Compensation and employee benefits liabilities 
  11,667 
  698,709 
  601,743 
  733,990 
Income tax payable 
  27,861 
  1,668,594 
  6,794,536 
  2,491,165 
Provisions 
  458 
  27,456 
  826,848 
  939,110 
Total current liabilities 
  301,460 
  18,054,436 
  17,263,070 
  13,102,915 
Liabilities directly associated to the assets held for sale
  - 
  - 
  - 
  541,513 
Total liabilities 
  995,912 
  59,645,178 
  37,429,069 
  26,639,863 
Total equity and liabilities 
  1,983,569 
  118,795,975 
  88,084,228 
  52,839,882 
 
(1) 
Solely for the convenience of the reader, peso amounts as of December 31, 2019 have been translated into U.S. dollars at the exchange rate as of December 30, 2019 of Ps.59.89 to US$1.00. See “—Exchange Rates” and “Presentation of Financial and Other Information” for further information on recent fluctuations in exchange rates.
(2) 
Trade and other receivables include receivables from CAMMESA. See “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources,” and “—Receivables from CAMMESA.”
 
Exchange Rates
 
From April 1, 1991 until the end of 2001, Law No. 23,928 (the “Convertibility Law”) established a regime under which the Central Bank was obliged to sell U.S. dollars at a fixed rate of one peso per U.S. dollar. On January 6, 2002, the Argentine Congress enacted the Public Emergency Law, formally ending the regime of the Convertibility Law, abandoning over ten years of U.S. dollar-peso parity and eliminating the requirement that the Central Bank’s reserves in gold, foreign currency and foreign currency denominated debt be at all times equivalent to 100% of the monetary base.
 
3
 
 
 
The Public Emergency Law, which was in effect until December 31, 2017, granted the Argentine Government the power to set the exchange rate between the peso and foreign currencies and to issue regulations related to the MULC. Following a brief period during which the Argentine Government established a temporary dual exchange rate system, pursuant to the Public Emergency Law, the peso has been allowed to float freely against other currencies since February 2002. However, the Argentine Central Bank has had the power to intervene in the exchange rate market by buying and selling foreign currency for its own account, a practice in which it engaged on a regular basis. Particularly since 2011, the Argentine Government has increased controls on exchange rates and the transfer of funds into and out of Argentina.
 
With the tightening of exchange controls beginning in late 2011, in particular with the introduction of measures that allowed limited access to foreign currency by private sector companies and individuals (such as requiring an authorization of tax authorities to access the foreign currency exchange market), the implied exchange rate, as reflected in the quotations for Argentine securities that trade in foreign markets, compared to the corresponding quotations in the local market, increased significantly over the official exchange rate. Most of the foreign exchange restrictions were gradually lifted in since December 2015, and on May 19, 2017, the Central Bank issued Communication “A” 6244, which substantially modified the applicable foreign exchange regulations and eliminated the set of restrictions for accessing the MULC. As a result of the elimination of the limit amount for the purchase of foreign currency without specific allocation or need of prior approval the substantial spread between the official exchange rate and the implicit exchange rate derived from securities transactions has substantially decreased. In addition, by virtue of the 2018 IMF Agreement (see “Item 4. Information of the Company—Recent Political and Economic Developments in Argentina— IMF Agreement”), from October 1, 2018, the Central Bank introduced an exchange rate band. The peso’s exchange rate with the U.S. Dollar was allowed to fluctuate between Ps.34.00 and Ps.44.00 per US$1.00 (range that was adjusted daily at an annual rate of 3% until December 2018, and for the first quarter of 2019, was adjusted daily at an annual rate of 2%) without the Central Bank’s intervention. On April 29, 2019, the Monetary Policy Counsel (Comité de Política Monetaria) of the Central Bank (the “COPOM”) decided to introduce changes to the monetary policy, with an aim to reducing volatility in the foreign exchange market.
 
After the results in the primary elections in August 2019, the peso devalued almost 30% and the share price of listed companies collapsed 38%. The ‘Country Risks’ peaked to one of the highest levels in Argentine history, placing itself above 2000 points on August 28, 2019. As a consequence of the aforementioned effects, in order to control the currency outflow and restrict exchange rate fluctuations, the Central Bank re-implemented exchange controls, in hopes of strengthening the normal functioning of the economy, fostering a prudent administration of the exchange market, reducing the volatility of financial variables and containing the impact of the variations of financial flows on the real economy. For a description of the measures adopted by the Argentine Government and the Central Bank beginning September 1, 2019, see “Item 10.D.—Exchange Controls.”
 
After several years of moderate variations in the nominal exchange rate, in 2012 the peso depreciated approximately 14% with respect to the U.S. dollar. This was followed in 2013 and 2014 by a depreciation of the peso with respect to the U.S. dollar that exceeded 30%, including a loss of approximately 23% in January 2014. In 2015, the peso depreciated approximately 52% with respect to the U.S. dollar, including, approximately, a 10% devaluation from January 1, 2015 to September 30, 2015 and a 38% devaluation during the last quarter of the year, mainly concentrated after December 16, 2015 when certain exchange controls were lifted. In 2017, 2018 and 2019, the peso depreciated approximately 17.36%, 102.16% and 58.86%, respectively, in each case, with respect to the U.S. dollar. The peso depreciated approximately 10.92% from December 31, 2019 through April 24, 2020 ( see “Item 3.D. Risk Factors—Risk Relating to Argentina—Significant fluctuations in the value of the peso could adversely affect the Argentine economy and, in turn, adversely affect our results of operations”).
 
The following table sets forth the annual high, low, average and period-end exchange rates for the periods indicated, expressed in pesos per U.S. dollar and not adjusted for inflation. There can be no assurance that the peso will not depreciate or appreciate again in the future. The Federal Reserve Bank of New York does not report a buying rate for pesos.
 
 
 
Exchange Rates
 
 
 
High(1)
 
 
Low(1)
 
 
Average(1)(2)
 
 
Period-end(1)
 
2015 
  13.4000 
  8.5550 
  9.2653 
  13.0400 
2016 
  16.0300 
  13.2000 
  14.8403 
  15.8900 
2017 
  19.2000 
  15.1900 
  16.5704 
  18.6490 
2018 
  41.2500 
  18.4100 
  28.1762 
  37.7000 
2019
  60.4000 
  36.9000 
  48.2802 
  59.8900 
October 
  60.0000 
  57.6400 
  58.5403 
  59.6700 
November 
  59.9500 
  59.4700 
  59.7315 
  59.9400 
December 
  59.9900 
  59.8150 
  59.8748 
  59.8900 
2020
    
    
    
    
January 
  60.3500 
  59.8150 
  60.0114 
  60.3500 
February 
  62.2100 
  60.4700 
  61.3561 
  62.2100 
March 
  64.4690 
  62.2590 
  63.1241 
  64.4690 
April (3) 
  66.4300 
  64.5290 
  65.5290 
  66.4300 
 
(1) 
Pesos to U.S. dollars exchange rate as quoted by the Banco de la Nación Argentina for wire transfers (divisas).
(2) 
Average of the exchange rates based on working day’s averages for each month.
(3) 
Through April 24, 2020.
 
4
 
 
 
Item 3.B 
Capitalization and indebtedness
 
Not applicable.
 
Item 3.C 
Reasons for the offer and use of proceeds
 
Not applicable.
 
Item 3.D 
Risk Factors
 
You should carefully consider the risks described below, as well as the other information in this annual report. Our business, results of operations, financial condition or prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common shares and ADSs could decline. The risks described below are those known to us and that we currently believe may materially affect us.
 
Risks Relating to Argentina
 
Substantially all of our revenues are generated in Argentina and thus are highly dependent on economic and political conditions in Argentina
 
Central Puerto is an Argentine corporation (sociedad anónima). All of our assets and operations are located in Argentina. Accordingly, our financial condition and results of operations depend to a significant extent on macroeconomic, regulatory, social and political conditions prevailing in Argentina, including the level of growth, inflation rates, foreign exchange rates, interest rates and international developments and conditions that may affect Argentina. In the past, some governments increased direct intervention in the Argentine economy, including the implementation of expropriation measures, price controls, exchange controls and changes in laws and regulations affecting foreign trade and investment. These measures had a material adverse effect on private sector entities, including us. It is possible that similar measures could be adopted by the current or future Argentine Government or that economic, social and political developments in Argentina, over which we have no control, could have a material adverse effect on the Argentine economy and, in turn, adversely affect our financial condition and results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting our Results of Operations—Argentine Economic Conditions and the impact of COVID-19.”
 
The Argentine economy remains vulnerable and any significant decline could adversely affect our results of operations
 
The Argentine economy has experienced significant volatility in recent decades, characterized by periods of low or negative growth, high levels of inflation and currency devaluation. Sustainable economic growth in Argentina is dependent on a variety of factors, including the international demand for Argentine exports, the stability and competitiveness of the peso against foreign currencies, confidence among consumers and foreign and domestic investors, a stable rate of inflation, national employment levels and the circumstances of Argentina’s regional trade partners.
 
Argentina’s economy contracted during 2019 and the country’s economy remains vulnerable and unstable, as reflected by the following economic conditions:
 
inflation remains high and may continue at similar levels in the future; according to a report published by INDEC, cumulative consumer price inflation from December 2018 to December, 2019 was 53.83%, and inflation during January 2020 and February2020, was 2.3% and 2.0%, respectively;
according to the revised calculation of the 2004 Gross Domestic Product (“GDP”) published by the INDEC in March 2017, which forms the basis for the real GDP calculation for every year after 2004, GDP decreased by 2.3% in 2016 (as compared to 2015) and increased by 2.6% in 2015, as compared to a decline of 2.5% in 2014 and growth of 2.4% in 2013. According to the INDEC GDP for 2017 increased by 2.9% while it decreased by 2.5% in 2018. According to preliminary data published by the INDEC on March 25, 2020, GDP for 2019 decreased 2.2%. Argentina’ s GDP performance has depended to a significant extent on high commodity prices which are volatile in the short-term and beyond the control of the Argentine Government and private sector;
Argentina’s public debt as a percentage of GDP remains high;
the discretionary increase in public expenditures has resulted, and could continue to result, in a fiscal deficit;
investment as a percentage of GDP remains low;
a significant number of protests or strikes could take place, as has occurred in the past, which could adversely affect various sectors of the Argentine economy;
energy or natural gas supply may not be sufficient to supply industrial activity (thereby limiting industrial development) and consumption;
unemployment and informal employment remain high, according to INDEC, unemployment rate during the fourth quarter of 2019 was 8.9%; and
in the climate created by the above mentioned conditions, demand for foreign currency could grow, generating a capital flight effect as in recent years.
 
5
 
 
 
Argentina’s fiscal imbalances, its dependence on foreign revenues to cover its fiscal deficit, and material rigidities that have historically limited the ability of the economy to absorb and adapt to external factors, have added to the severity of the current crisis.
 
As a result of the Argentine Peso’s increased volatility, the Argentine government and the Central Bank implemented several measures to restore market confidence and stabilize the value of the Peso. Such measures included, among others, a US$55.7 billion stand-by credit agreement (“SBA”) with the International Monetary Fund (“IMF”), from which, as of the date of this annual report, Argentina has drawn the equivalent of US$44 billion, measures intended to control money supply during 2018 and the first half of 2019 that have been since relaxed, an increase of short term interest rates and the sale by the Central Bank of foreign currency reserves.
 
In addition, in September 2019, in light of the economic instability and the significant devaluation that followed the primary elections as described below, the Argentine government and the Central Bank adopted a series of measures reinstating foreign exchange controls, which apply with respect to access to the foreign exchange market by residents for savings and investment purposes abroad, the payment of external financial debts, the payment of dividends in foreign currency abroad, payments of goods and services in foreign currencies, payments of imports of goods and services, and the obligation to repatriate and settle for pesos the proceeds from exports of goods and services, among others. Other financial transactions such as derivatives and securities related operations, were also covered by the new foreign exchange regime. Following the change in government, the new administration extended the validity of such measures, which were originally in effect until December 31, 2019, and established further restrictions by means of the recently enacted Solidarity Law (as defined below), including a new tax on certain transactions involving the purchase of foreign currency by both Argentine individuals and entities. Although the official exchange rate has stabilized since the adoption of the foreign exchange controls, we cannot assure you that the official exchange rate will not fluctuate significantly in the future. There can be no assurances regarding future modifications to exchange controls. Exchange controls could adversely affect our financial condition or results of operations and our ability to meet our foreign currency obligations and execute our financing plans.
 
As in the recent past, Argentina’s economy may be adversely affected if political and social pressures inhibit the implementation by the Argentine Government of policies designed to control inflation, generate growth and enhance consumer and investor confidence, or if policies implemented by the Argentine Government that are designed to achieve these goals are not successful. These events could materially adversely affect our financial condition and results of operations.
 
Any decline in economic growth, increased economic instability or expansion of economic policies and measures taken by the Argentine Government to control inflation or address other macroeconomic developments that affect private sector entities such as us, all developments over which we have no control, could have an adverse effect on our financial condition or results of operations.
 
Certain risks are inherent in any investment in a company operating in a developing country such as Argentina
 
Argentina is developing country and investing in developing countries generally carries risks. These risks include political, social and economic instability that may affect Argentina’s economic results which can stem from many factors, including the following:
 
high interest rates;
abrupt changes in currency values;
high levels of inflation;
exchange controls;
wage and price controls;
changes in performing contracts;
regulations to import equipment and other necessities relevant for operations;
changes in governmental economic, administrative or tax policies; and
political and social tensions.
 
Any of these factors, as well as volatility in the capital markets, may adversely affect our business, results of operations, financial condition, the value of our ADSs, and our ability to meet our financial obligations.
 
6
 
 
 
Economic and political developments in Argentina and future policies of the Argentine Government, may affect the economy, as well as the operations of the energy industry, including the operations of Central Puerto
 
Since assuming office on December 10, 2019, the Fernandez administration has announced and implemented several significant economic and policy reforms (see “Item 4. Information of the Company—Recent Political and Economic Developments in Argentina.”), including those related to public health concerns derived from the COVID-19 pandemic crisis and its scale and duration discussed elsewhere herein which remain uncertain but could impact our earnings, cash flow and financial condition. As of the date of this annual report, the long-term impact of these measures and any future measures taken by the current administration on the Argentine economy as a whole and the energy sector in particular remains uncertain.
 
As of the date of this annual report, the impact that these measures and any future measures taken by the current administration will have on the Argentine economy as a whole and the electric power industry in particular cannot be predicted. In particular, we have no control over the implementation of the reforms to the regulatory framework that governs our operations and cannot guarantee that these reforms will be implemented or implemented in a manner that will benefit our business. The failure of these measures to achieve their intended goals could adversely affect the Argentine economy, which, in turn may have an adverse effect on our financial condition and results of operations.
 
In addition, we cannot assure you that future economic, regulatory, social and political developments in Argentina will not impair our business, financial condition or results of operations, or cause the market value of our shares to decline.
 
In the event of any economic, social or political crisis, companies operating in Argentina may face the risk of strikes, expropriation, nationalization, mandatory amendment of existing contracts, and changes in taxation policies including tax increases and retroactive tax claims. In addition, Argentine courts have sanctioned modifications on rules related to labor matters, requiring companies to assume greater responsibility for the assumption of costs and risks associated with sub-contracted labor and the calculation of salaries, severance payments and social security contributions. Since we operate in a context in which the governing law and applicable regulations change frequently, also as a result of changes in government administrations, it is difficult to predict if and how our activities will be affected by such changes.
 
We cannot assure you that future economic, regulatory, social and political developments in Argentina will not adversely affect our business, financial condition or results of operations, or cause the decrease of the market value of our securities.
 
If the current levels of inflation do not decrease, the Argentine economy could be adversely affected
 
Historically, inflation has materially undermined the Argentine economy and the Argentine government’s ability to create conditions that permit growth. In recent years, Argentina has experienced high inflation rates. See “—The credibility of several Argentine economic indices has been called into question, which has led to a lack of confidence in the Argentine economy and could affect your evaluation of the market value of the ADSs” below.
 
During 2016, the City of Buenos Aires CPI inflation rate was 41.05%. During 2017, the INDEC’s CPI inflation rate was recorded at 24.8%. The CPI for 2018 was 47.64%, and it was of 53.83% in 2019. In the past, the Argentine Government has implemented programs to control inflation and monitor prices for essential goods and services, including the freezing of the price of certain supermarket products and price support arrangements agreed between the Argentine Government and private sector companies in several industries and markets. Such programs did not address the structural causes of inflation and generally did not reduce inflation.
 
High inflation rates affect Argentina’s foreign competitiveness, social and economic inequality, negatively impacts employment, consumption and the level of economic activity and undermine confidence in Argentina’s banking system, which could further limit the availability of and access by local companies to domestic and international credit.
 
Inflation remains a challenge for Argentina given its persistent nature in recent years. Inflation in Argentina has contributed to a material increase in our costs of operation, in particular labor costs, and negatively impacted our financial condition.
 
Inflation rates could escalate in the future, and there is uncertainty regarding the effects that the measures adopted, or that may be adopted in the future, by the Argentine Government to control inflation may have. As of the date of this annual report, since our sales under Energía Base are denominated in Argentine pesos, any further increase in the rate of inflation that is not coupled with a corresponding increase in our tariffs, or a delay in such tariff increase, would decrease our revenues in real terms and adversely affect our results of operations. See “—Government intervention may adversely affect the Argentine economy and, as a result, our business and results of operations.” Increased inflation could adversely affect the Argentine economy, which in turn may have an adverse effect on our financial condition and results of operations. See “Item 5.A. Operating Results—Factors Affecting Our Results of Operations—Inflation.”
 
 
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As of July 1, 2018, the Argentine Peso qualifies as a currency of a hyperinflationary economy and we are required to restate our historical financial statements to apply inflationary adjustments, which could adversely affect our results of operations and financial condition and those of our Argentine subsidiaries.
 
Pursuant to the International Accounting Standard 29, Financial Reporting in Hyperinflationary Economies (“IAS 29”), the financial statements of entities whose functional currency is that of a hyperinflationary economy must be adjusted for the effects of changes in a general price index. IAS 29 does not prescribe when hyperinflation arises and the International Accounting Standards Board (“IASB”) does not identify specific hyperinflationary jurisdictions. However, IAS 29 provides a series of non-exclusive guidelines that consist of (i) analyzing the behavior of the population, prices, interest rates and wages before the evolution of price indexes and the loss of the currency’s purchasing power, and (ii) as a quantitative characteristic, verifying if the three-year cumulative inflation rate approaches or exceeds 100%. In June 2018, the International Practices Task Force of the Centre for Quality (“IPTF”), which monitors countries experiencing high inflation, categorized Argentina as a country with projected three-year cumulative inflation rate greater than 100%. In addition, certain qualitative macroeconomic factors provided under IAS 29 were also identified. Therefore, Argentine companies using IFRS, such as us, are required to apply IAS 29 to their financial statements for periods ending on and after July 1, 2018.
 
Adjustments to reflect inflation, including tax indexation, such as those required by IAS 29, were originally prohibited pursuant to Law No. 23,928 (the “Law 23,928”). In addition, Decree No. 664/03, issued by the Argentine Government, instructed regulatory authorities, such as the CNV, to accept only financial statements reported in constant currency. However, on December 4, 2018, Law 27,468 (“Law 27,468”) abrogated Decree No. 664/03 and amended Law 23,928 indicating that the prohibition of inflation adjustments no longer applies to financial statements submitted for regulatory purposes. Certain regulatory authorities, such as the CNV, now require that financial statements for periods ended on and after December 31, 2018 should be adjusted for inflation pursuant to IAS 29. As a result, our audited consolidated financial statements included in this annual report, including the figures for the previous periods (this fact not affecting the decisions taken on the financial information for such periods), and, unless otherwise stated, the financial information included elsewhere in this annual report, were restated to consider the changes in the general purchasing power of the functional currency of the Company (Argentine peso) pursuant to IAS 29 and General Resolution no. 777/2018 of the CNV.
 
Accordingly, we have recognized a loss regarding the effect of adjustment by inflation of Ps.2,432 million, Ps.6,209 million and Ps.234 million in our financial statements for the years ended 2019, 2018 and 2017, respectively. See Note 2.1.2 to our financial statements.
 
Law 27,468 also substituted the wholesale price index (“WPI”) for the CPI as the index to benchmark tax indexation, and modified the standards for triggering the tax indexation procedure. In addition, Law 27,468 provides that during the first three years beginning on January 1, 2018, tax indexation will be required if the variation of the CPI exceeds 55% in 2018, 30% in 2019 and 15% in 2020. On December 23, 2019, the National Congress enacted Law No. 27,541 Ley de Solidaridad Social y Reactivación Productiva en el Marco de la Emergencia Pública (the “Solidarity Law”), which, among other measures amended the periods which the tax indexation should be allocated. According to the Solidarity Law, the positive or negative result generated by the application of the inflation adjustment corresponding to the first and second fiscal year beginning on January 1, 2019, shall be charged one sixth (1/6) in that fiscal year and the remaining five sixths (5/6), in equal parts, in the next five fiscal years. For 2019, we recorded a net loss of Ps.426 million in our Income Tax line item of our Statement of Income regarding the application of the above-mentioned tax inflation adjustment.
 
We cannot predict the full future impact that any modifications in the application of the tax indexation procedure and related adjustments will have on our financial statements, or the effects on our effective tax rate or on our business, results of operations and financial condition.
 
The credibility of several Argentine economic indices has been called into question, which has led to a lack of confidence in the Argentine economy and could affect your evaluation of the market value of the ADSs
 
Between 2007 and 2015, the INDEC, the Argentine Government’s principal statistical agency, underwent institutional and methodological reforms that gave rise to controversy regarding the reliability of the information that it produced. Reports published by the IMF had stated that their staff used alternative measures of inflation for macroeconomic surveillance, including data produced by private sources, which have shown inflation rates considerably higher than those published by the INDEC between 2007 and 2015. The IMF also censured Argentina for failing to make sufficient progress, as required under the Articles of Agreement of the IMF, in adopting remedial measures to address the quality of official data, including inflation and GDP data.
 
 
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On January 8, 2016, based on its determination that the INDEC had failed to produce reliable statistical information, particularly with respect to its CPI, GDP, foreign trade and poverty data, the Macri administration declared the national statistical system and the INDEC in a state of administrative emergency through December 31, 2016, which was not renewed. The INDEC suspended publication of certain statistical data until it completed reorganization of its technical and administrative structure to recover its ability to produce sufficient and reliable statistical information. During the first six months of this reorganization period, the INDEC published official CPI figures published by the City of Buenos Aires and the Province of San Luis for reference. On June 29, 2016, the INDEC published a report that included revised GDP data for the years 2004 through 2015. Among other adjustments, in calculating GDP for 2004, the INDEC made changes to the composition of GDP that resulted in a downward adjustment of approximately 12% for that year. In calculating real GDP for subsequent years based on the revised 2004 GDP, the INDEC used deflators that are consistent with its revised methodology to calculate inflation. By understating inflation in the past, the INDEC had overstated growth in real terms. The adjustments made by the INDEC resulted in a determination of real GDP growth for the period 2004-2014 of 44.8%, as opposed to a 63% growth in real terms for the same period resulting from the information used prior to June 29, 2016.
 
Following the publication of revised data and a new inflation index, on November 9, 2016, the IMF lifted the censorship against Argentina, stating that the country had resumed the publication of data in a manner consistent with its obligations under the Articles of Agreement of the IMF.
 
The Argentine Government’s reforms seek to produce official data that meets international standards. In order to be effective, however, reforms require certain implementation steps and the timely collection of data, the success of which may be outside of the Argentine Government’s control. If these reforms cannot be successfully implemented, such failure may adversely affect the Argentine economy, in particular by undermining consumer and investor confidence. The INDEC’s past or future data may be materially revised to reveal a different economic or financial situation in Argentina, which could affect investors’ perception of Argentina, including the market value of the ADSs. In addition, the failure or delays in implementing the expected changes may impair other measures taken by the Central Bank to tackle inflation. This, in turn, could have a negative impact on Argentina’s economy and, as a result, could have an adverse effect on our ability to access international capital markets to finance our operations and growth, adversely affecting our results of operations and financial condition.
 
On February 27, 2020, the Secretariat of Energy issued Resolution 31/20, which replaces the regulatory framework for Energía Base applicable from February 1, 2020. This Resolution established that prices are set in Argentine pesos, and adjusted monthly with the following formula: (i) 60% of the CPI, plus (ii) 40% of the WPI. However, on April 8, 2020, Central Puerto learned that the Secretary of Energy may have instructed CAMMESA to postpone until further notice the application of Annex VI of Res.31/20, related to the price update mechanism described under “Item 4.B. Business Overview—The Argentine Electric Power Sector—Remuneration Scheme—The Current Remuneration Scheme” (“Annex VI”). Accordingly, CAMMESA did not apply the price update mechanism for the March 2020 monthly payments under Energy Base. The Company is evaluating the effects that the non-application of the aforementioned Annex VI would have, as well as the steps to be followed in this regard.
 
Any delay on the application of the price update mechanism described above or deficiency in quality of official data for the CPI and WPI indexes, that significantly underestimates the real inflation in the country, may imply a reduction in our revenues under Energía Base, which may grow less than our costs, affecting our results from operations.
 
Significant fluctuations in the value of the peso could adversely affect the Argentine economy and, in turn, adversely affect our results of operations
 
The depreciation of the peso may have a negative impact on the ability of certain Argentine businesses to service their foreign currency-denominated debt, lead to inflation, significantly reduce real wages and jeopardize the stability of businesses, such as ours, whose success depends on domestic market demand and adversely affect the Argentine Government’s ability to honor its foreign debt obligations. After several years of moderate variations in the nominal exchange rate, the peso depreciated more than 30% with respect to the U.S. dollar in each of 2013 and 2014. In 2015, the peso depreciated approximately 52% with respect to the U.S. dollar, including a 10% depreciation from January 1, 2015 to September 30, 2015 and a 38% depreciation during the last quarter of the year, mainly concentrated after December 16, 2015 once the Macri administration eliminated exchange controls. In 2016, 2017, 2018 and 2019, the peso depreciated approximately 21.86%, 17.36%, 102.16% and 58.86% respectively, in each case, with respect to the U.S. dollar. The peso depreciated approximately 10.92% from December 30, 2019 through April 24, 2020. On April 24, 2020, the exchange rate was Ps. 66.43 to US$1.00, as quoted by the Banco de la Nación Argentina for wire transfers (divisas).
 
 
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As a result of the increased volatility of the Argentine peso (see “Item 3.A. Selected Financial Data—Exchange Rates”), the previous Argentine Government announced several measures aimed at restoring market’s confidence and stabilize the value of the Argentine peso. Measures implemented by the previous Argentine Government included, among others, the 2018 IMF Agreement (see “Item 4. Information of the Company—Recent Political and Economic Developments in Argentina— IMF Agreement”), increase of interest rates and sale of the Central Bank’s foreign currency reserves. More recently, and by virtue of the 2018 IMF Agreement, a new regime was established. This regime sets forth a strict control of the local monetary base, in an attempt to reduce the demand for foreign currency. As of October 1, 2018, the Central Bank introduced an exchange rate band. The peso’s exchange rate with the U.S. Dollar was allowed to fluctuate between Ps.34.00 and Ps.44.00 per US$1.00 (range that was adjusted daily at an annual rate of 3% until December 2018, and for the first quarter of 2019, was adjusted daily at an annual rate of 2%) without the Central Bank’s intervention. On April 29, 2019, the Monetary Policy Counsel (Comité de Política Monetaria) of the Central Bank (the “COPOM”) decided to introduce changes to the monetary policy, with an aim to reducing volatility in the foreign exchange market. After the results in the primary elections in August 2019, the peso devalued almost 30% and the share price of listed companies collapsed 38%. The ‘Country Risks’ peaked to one of the highest levels in Argentine history, placing itself above 2000 points on August 28, 2019. As a consequence of the aforementioned effects, in order to control the currency outflow and restrict exchange rate fluctuations, the Central Bank re-implemented exchange controls, in hopes of strengthening the normal functioning of the economy, fostering a prudent administration of the exchange market, reducing the volatility of financial variables and containing the impact of the variations of financial flows on the real economy.
 
Moreover, it is not possible to predict whether the Argentine Government will be able to comply with all the terms of under its credit with the IMF by 2020. The ability of the Argentine Government to stabilize the exchange market, restore economic growth and comply with the terms of the Agreement with the IMF by 2020 is uncertain. The Argentine macroeconomic environment, in which we operate, was affected by the depreciation referred to above, which had an effect on our financial and economic position. If the Peso depreciates further, all of the negative effects on the Argentine economy related to such depreciation could recur, with adverse consequences to our business, financial condition and results of operations. In addition, we cannot predict whether the Argentine Government will be able to comply with all terms of the 2018 IMF Agreement. The ability of the Argentine Government to stabilize the foreign exchange market, restore economic growth and meet the terms of the 2018 IMF Agreement, is uncertain.
 
In addition, the Republic’s future tax revenue and fiscal results may be insufficient to meet its debt service obligations and the Republic may have to rely in part on additional financing from domestic and international capital markets, the IMF and other potential creditors, in order to meet future debt service obligations. In the future, the Republic may not be able or willing to access international or domestic capital markets, which could have a material adverse effect on the Republic’s ability to make payments on its outstanding public debt, and in turn, could materially adversely affect our financial condition and results of operations.
 
Government intervention may adversely affect the Argentine economy and, as a result, our business and results of operations
 
Previous administrations increased state intervention in the Argentine economy, including through expropriation and nationalization measures, price controls and pervasive exchange controls.
 
In 2008, the national administration absorbed and replaced the former private pension system for a public “pay as you go” pension system. As a result, all resources administered by the private pension funds, including significant equity interests in a wide range of listed companies, were transferred to a separate fund (Fondo de Garantía de Sustentabilidad, or the “FGS”) to be administered by the National Social Security Administration (Administración Nacional de la Seguridad Social, or the “ANSES”). The dissolution of the private pension funds and the transfer of their financial assets to the FGS have had important repercussions on the financing of private sector companies. Debt and equity instruments that previously could be placed with pension fund administrators are now entirely subject to the discretion of the ANSES. Since acquiring equity interests in privately owned companies, through the process of replacing the pension system, the ANSES is entitled to designate representatives of the Argentine Government to the boards of directors of those entities. Pursuant to Decree No. 1,278/12, issued by the Executive branch on July 25, 2012, the ANSES’s representatives must report directly to the Ministry of Economy and are subject to a mandatory information-sharing regime, under which, among other obligations, the representatives must immediately inform the Ministry of Economy of the agenda for each board of directors’ meeting and provide related documentation.
 
In May 2013, the Argentine Congress passed a law providing for the expropriation of 51% of the share capital of YPF (Yacimientos Petroliferos Fiscales S.A.), the principal Argentine oil company, which shares were owned by Repsol, S.A. and its affiliates. In February 2015, the Argentine Government sent a bill to the Argentine Congress in order to revoke certain train concessions, return the national rail network to state control and provide authority to review all concessions currently in effect. The bill was enacted on May 20, 2015 as Law No. 27,132.
 
 
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In addition, on September 23, 2015 the Argentine Congress passed Law No. 27,181, which limits the sale of the Argentine Government’s shares held in Argentine companies without prior approval of two-thirds of the members of the Argentine Congress, with the exception of the Argentine Government’s shareholding in YPF. That law has been abrogated by the new Administration through Law No. 27,260, the “Ley de Sinceramiento Fiscal y Reparación Histórica a los Jubilados”, dated on May 26, 2016.
 
In the future, the Argentine government could re-introduce regulations that result in an increased government intervention. It is widely reported by private sector economists that expropriations, price controls, exchange controls and other direct involvement by previous governments in the economy had an adverse impact on the level of investment in Argentina, the access of Argentine companies to the international capital markets and Argentina’s commercial and diplomatic relations with other countries. Further actions taken by the Argentine Government concerning the economy, including decisions with respect to interest rates, taxes, price controls, salary increases, provision of additional employee benefits and foreign exchange controls could continue to have a material adverse effect on Argentina’s economic growth and in turn affect our financial condition and results of operations. Moreover, any additional Argentine Government policies established to preempt, or in response to, social unrest could adversely and materially affect the economy, and therefore our business, results of operations and financial condition.
 
Government measures, as well as pressure from labor unions, could require salary increases or added benefits, all of which could increase companies’ operating costs
 
In the past, the Argentine Government has passed laws and regulations forcing privately owned companies to maintain certain wage levels and provide added benefits for their employees. Additionally, both public and private sector employers have been subject to strong pressure from the workforce and trade unions to grant salary increases and certain benefits. See “—Risks Relating to Our Business—We could be affected by material actions taken by the trade unions.”
 
Labor relations in Argentina are governed by specific legislation, such as Labor Law No. 20,744 and Collective Bargaining Law No. 14,250, which, among other things, dictate how salary and other labor negotiations are to be conducted. Every industrial or commercial activity is regulated by a specific collective bargaining agreement (“CBA”) that groups companies together according to industry sector and trade union. Although the process of negotiation is standardized, each chamber of industrial or commercial activity separately negotiates the increases of salaries and labor benefits with the relevant trade union of such commercial or industrial activity.
 
Argentine employers, both in the public and private sectors, have experienced significant pressure from their employees and labor organizations to increase wages and to provide additional employee benefits. In August 2012, the Argentine Government established a 25% increase in minimum monthly salary to Ps.2,875, effective as of February 2013. The Argentine Government increased the minimum salary to Ps.3,300 in August 2013, to Ps.3,600 in January 2014, to Ps.4,400 in September 2014 and to Ps.5,588 in August 2015. It further decreed an increase of the minimum salary to Ps.6,060 in January 2016, to Ps.6,810 in June 2016, to Ps.7,560 in September 2016 and to Ps.8,060 in January 2017. In June 2017, the Ministry of Labor raised the minimum salary to Ps.10,000, effective in three tranches: Ps.8,860 as of July 2017, Ps.9,500 as of January 2018, and Ps.10,000 as of July 2018. In August 2018, the Ministry of Labor raised the minimum salary to Ps. 10,700 as of September 2018, Ps. 11,300 as of December 2018, and Ps. 12,500 as of March 2019. In August 2019, the Ministry of Production and Labor raised the minimum salary to Ps. 14,125 as of August 2019, Ps. 15,625 as of September 2019, and Ps. 16,875 as of October 2019. Due to high levels of inflation, both public and private sector employers are experiencing significant pressure from unions and their employees to further increase salaries. In 2015, the INDEC published the Coeficiente de Variación Salarial (Salary Variation Index, or the “CVS”), an index that shows the evolution of salaries. The Salaries Index showed an increase of approximately 27.30%, 30.41% and 44.30% in registered private sector salaries in 2017, 2018 and 2019, respectively.
 
In the future, the Argentine Government could take new measures requiring salary increases or additional benefits for workers, and the labor force and labor unions may apply pressure for such measures. Any such increase in wage or worker benefit could result in added costs and reduced results of operations for Argentine companies, including us. Such added costs could adversely affect our business, financial condition and result of operations.
 
Exchange controls and restrictions on capital inflows and outflows could limit the availability of international credit and could threaten the financial system, adversely affecting the Argentine economy and, as a result, our business
 
In 2001 and 2002, Argentina imposed exchange controls and transfer restrictions, substantially limiting the ability of companies to retain foreign currency or make payments abroad. After 2002, these restrictions, including those requiring the Central Bank’s prior authorization for the transfer of funds abroad to pay principal and interest on debt obligations, were substantially eased through 2007. In addition to the foreign exchange restrictions applicable to outflows, in June 2005 the Argentine Government adopted various rules and regulations that established restrictive controls on capital inflows into Argentina, including a requirement that, for certain funds remitted into Argentina, an amount equal to 30% of the funds must be deposited into an account with a local financial institution as a U.S. dollar deposit for a one-year period without any accrual of interest, benefit or other use as collateral for any transaction.
 
 
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From 2011 and until December 2015, the Argentine Government increased controls on the sale of foreign currency and the acquisition of foreign assets by local residents, limiting the possibility of transferring funds abroad. Furthermore, under regulations issued since 2012 certain foreign exchange transactions were subject to prior approval by the Federal Administration of Public Income (“AFIP”). Through a combination of foreign exchange and tax regulations, previous administrations significantly curtailed access to the MULC by individuals and private-sector entities. In addition, during the years preceding 2015, the Central Bank exercised a de facto prior approval power for certain foreign exchange transactions otherwise authorized to be carried out under the applicable regulations, such as dividend payments or repayment of principal of intercompany loans as well as the import of goods, by means of regulating the amount of foreign currency available to companies to conduct such transactions. The number of exchange controls introduced in the past and in particular after gave rise to an unofficial U.S. dollar trading market, and the peso/U.S. dollar exchange rate in such market substantially differed from the official peso/U.S. dollar exchange rate. See “Exchange Controls.”
 
Additionally, the level of international reserves deposited with the Central Bank significantly decreased from US$47.4 billion as of November 1, 2011 to US$25.6 billion as of December 31, 2015, resulting in a reduced capacity of the Argentine Government to intervene in the MULC and to provide access to such markets to private sector entities like us. The previous administration announced a program intended to increase the level of international reserves deposited with the Central Bank through the execution of certain agreements with several Argentine and foreign entities. As a result of the measures taken under such program and due to the issuance by the Argentine Government of US$16.5 billion and US$2.75 billion of new debt securities in the international capital markets on April 22, 2016 and July 6, 2016, respectively, the level of international reserves increased to US$38.8 billion as of December 31, 2016. As of December 31, 2019, the level of international reserves of the Central Bank totaled US$44.8 billion.
 
The previous administration gradually implemented a series of reforms related to the foreign exchange restrictions, including certain currency controls, in order to provide greater flexibility and access to the MULC. On August 8, 2016 the Central Bank issued Communication “A” 6037, which substantially modified the applicable foreign exchange regulations and eliminated the set of restrictions for accessing the MULC. Effective as of July 1, 2017, pursuant to Communication “A” 6244, all regulations that restricted access to the MULC were repealed, leaving in place only the obligation to comply with a reporting regime. Pursuant to Communication “A” 6401, dated December 26, 2017, a new reporting regime was created, pursuant to which the “Survey on the issuance of foreign notes and liabilities by the financial and private non-financial sector,” established by Communication “A” 3602, and the “Survey on direct investments,” established by Communication “A” 4237, were replaced by a unified report on direct investments and debt. Moreover, by virtue of Communication “A” 6443, which came into force as of March 1, 2018, any company from any sector, which usually operates through the Exchange Market can act as an exchange agency by only registering in the exchange operators’ registry. Argentine residents must comply with the reporting regime, even when the funds have not been sold in the MULC and/or there is no expectation to access the MULC in the future in relation to the funds that must be reported.
 
Since September 2019, with the purpose of strengthening the normal functioning of the economy, fostering a prudent administration of the exchange market, reducing the volatility of financial variables and containing the impact of the variations of financial flows on the real economy, the Argentine Government has reinstated foreign exchange restrictions. The new controls apply with respect to access to the foreign exchange market by residents for savings and investment purposes abroad, the payment of dividends in foreign currency abroad, payments of imports of goods and services, and the obligation to repatriate and settle for pesos the proceeds from exports of goods and services, among others. In that regard, the Company has access to the MULC to pay dividends to non-resident shareholders, without the prior consent of the Central Bank subject that the total amount of transfers executed through the exchange market regulated by the Central Bank for payment of dividends to non-resident shareholders may not exceed 30% of the total value of any new capital contributions made in the Company that had been entered and settled through such exchange market. The total amount paid to non-resident shareholders shall not exceed the corresponding amount denominated in Argentine pesos that was determined by the shareholders' meeting. For further information, see “Exchange Controls.”
 
In the future the Argentine Government could impose further exchange controls, transfer restrictions or restrictions on the movement of capital and/or take other measures in response to capital flight or a significant depreciation of the peso, which could limit our ability to access the international capital markets and impair our ability to make interest, principal or dividend payments abroad. Such measures could lead to renewed political and social tensions and undermine the Argentine Government’s public finances, which could adversely affect Argentina’s economy and prospects for economic growth and, consequently, adversely affect our business and results of operations.
 
 
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Argentina’s ability to obtain financing from international markets is limited, which could affect its capacity to implement reforms and sustain economic growth, and may negatively impact our financial condition or cash flows
 
After Argentina’s default on certain debt payments in 2001, the government successfully restructured 92% of the debt through two debt exchange offers in 2005 and 2010. Nevertheless, holdout creditors filed numerous lawsuits against Argentina in several jurisdictions, including the United States, Italy, Germany and Japan, asserting that Argentina failed to make timely payments of interest and/or principal on their bonds, and seeking judgments for the face value of and/or accrued interest on those bonds. Judgments were issued in numerous proceedings in the United States, Germany and Japan. Although creditors with favorable judgments did not succeed, with a few minor exceptions, in enforcing on those judgments, as a result of decisions adopted by the New York courts in support of those creditors in 2014, Argentina was enjoined from making payments on its bonds issued in the 2005 and 2010 exchange offers unless it satisfied amounts due to the holders of defaulted bonds. The Argentine government took a number of steps intended to continue servicing the bonds issued in the 2005 and 2010 exchange offers, which had limited success. Holdout creditors continued to litigate and succeeded in preventing the Argentine government from regaining market access.
 
Between February and April 2016, the Argentine government entered into agreements in principle with certain holders of defaulted debt and put forward a proposal to other holders of defaulted debt, including those with pending claims in U.S. courts, which resulted in the settlement of substantially all remaining disputes and closure to 15 years of litigation. On April 22, 2016, Argentina issued bonds for US$16.5 billion, and applied US$9.3 billion of the proceeds to satisfy payments under the settlement agreements reached with holders of defaulted debt. Since then, substantially all of the remaining claims under defaulted bonds have been settled.
 
As of the date of this annual report, although litigation initiated by bondholders that have not accepted Argentina’s settlement offer continues in several jurisdictions, the size of the claims involved has decreased significantly.
 
In addition, since 2001 foreign shareholders of some Argentine companies initiated claims for substantial amounts before the International Centre for Settlement of Investment Disputes (“ICSID”) against Argentina, pursuant to the arbitration rules of the United Nations Commission on International Trade Law. Claimants allege that certain measures of the Argentine government issued during the economic crisis of 2001 and 2002 were inconsistent with the norms or standards set forth in several bilateral investment treaties by which Argentina was bound at the time. To date, several of these disputes have been settled, and a significant number of cases are in process or have been temporarily suspended by the agreement of the parties.
 
Between 2016 and early 2018, Argentina regained access to the market and incurred approximately in US$96.3 billion of additional debt. However, as a result of various external and internal factors, during the first half of 2018, access to the market became increasingly onerous. On May 8, 2018, the Macri administration announced that the Argentine government would initiate negotiations with the IMF with a view to entering into a stand-by credit facility that would give Argentina access to financing by the IMF. On June 7, 2018, the Argentine government and the IMF staff reached an understanding on the terms of the SBA for disbursements totaling approximately US$50 billion, which was approved by the IMF’s Executive Board on June 20, 2018. The SBA was intended to provide support to the Macri administration’s economic program, helping build confidence, reduce uncertainties and strengthen Argentina’s economic prospects. On June 22, 2018 the Argentine government made a first drawing of approximately US$15 billion under the SBA. Argentina has received disbursements under the SBA for US$44 billion. Notwithstanding the foregoing, the current administration has publicly announced that they will refrain from requesting additional disbursements under the agreement, and instead vowed to renegotiate its terms and conditions in good faith.
 
Following the execution of the SBA, in August 2018, Argentina faced an unexpected bout of volatility affecting emerging markets generally. In September 2018, the Macri administration discussed with the IMF staff further measures of support in the face of renewed financial volatility and a challenging economic environment. On October 26, 2018, in light of the adjustments to fiscal and monetary policies announced by the Argentine government and the Central Bank, the IMF’s Executive Board allowed the Argentine government to draw the equivalent of US$5.7 billion, bringing total disbursements since June 2018 to approximately US$20.6 billion, approved an augmentation of the SBA increasing total assets to approximately US$57.1 billion for the duration of the program through 2021 and the front loading of the disbursements. Under the revised SBA, IMF resources for Argentina in 2018-19 increased by US$18.9 billion. IMF disbursements for the remainder of 2018 more than doubled compared to the original IMF-supported program, to a total of US$13.4 billion (in addition to the US$15 billion disbursed in June 2018). Disbursements in 2019 were also nearly doubled, to US$22.8 billion, with US$5.9 billion planned for 2020-21.
 
 
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On August 28, 2019, the Macri administration issued a decree deferring the scheduled payment date for 85% of the amounts due on short-term notes maturing in the fourth quarter of 2019, governed by Argentine law and held by institutional investors. Of the deferred amounts, 30% will be repaid 90 days after the original payment date and the remaining 70% will be repaid 180 days after the original payment date, except for payments under Lecaps due 2020 held domestically, which will be repaid entirely 90 days after the original payment date. Amounts due on short-term notes held by individual investors will be paid as originally scheduled. In December 2019, the Fernández administration further extended payments of a series of short term notes denominated in U.S. dollars until the end of August 2020, which were held by institutional investors.
 
Moreover, in December 2019, the Fernández administration further extended by decree payments of a series of short term Argentine-law governed treasury notes denominated in U.S. dollars held by institutional investors through August 2020. Additionally, on February 11, 2020, the Argentine government decreed the extension of maturity to September 30, 2020 of a dollar-linked treasury note governed by Argentine law, which had been originally subscribed to a large extent with U.S. dollar remittances, to avoid a payment with Argentine pesos that would have required significant sterilization efforts by the monetary authority. Also in February 2020, the Argentine Congress enacted a law enabling the government to take all necessary steps toward rendering the Argentine sovereign debt governed by foreign law sustainable. Additionally, an IMF team visited Buenos Aires in February, 2020 to discuss the recent macroeconomic developments and learn more about the Argentine authorities’ economic plans and policies. On February 19, 2020 the IMF staff issued a statement concluding that in light of recent developments and the materialization of certain risks to debt sustainability that were considered during the previous Debt Sustainability Analysis (DSA) published in July 2019, the IMF staff assesses Argentina’s debt to be unsustainable. Accordingly, the IMF staff stated that “a definitive debt operation—yielding a meaningful contribution from private creditors—is required to help restore debt sustainability with high probability”.
 
On April 21, 2020, the Argentine Government announced its offer to exchange external bonds in the aggregate of amount of approximately US$64 billion for new bonds. The Argentine Government did not make the interest payment due on April 22, 2020 with respect to three of its US$-denominated bonds and availed itself of the 30-day grace period provided under the indenture. As of the date of this annual report, there is no certainty on the acceptance the exchange offer will have among the bondholders or whether further negotiations and proposals will be carried out and the consequences of such negotiations.
 
Without renewed access to the financial market the Argentine government may not have the financial resources to implement reforms and boost growth, which could have a significant adverse effect on the country’s economy and, consequently, on our activities. Likewise, Argentina’s inability to obtain credit in international markets could have a direct impact on the Company’s ability to access those markets to finance its operations and its growth, including the financing of capital investments, which would negatively affect our financial condition, results of operations and cash flows. In addition, we cannot predict the outcome of any future restructuring of Argentine sovereign debt. Any new event of default by the Argentine government could negatively affect their valuation and repayment terms, as well as have a material adverse effect on the Argentine economy and, consequently, our business and results of operations.
 
High public expenditures could result in long-lasting adverse consequences for the Argentine economy
 
In recent years, the Argentine Government has substantially increased public expenditures. In 2016, 2017, and 2018, national public sector expenditures increased by 37.0%, 21.8% and 22.4% year over year, respectively (measured in nominal Argentine pesos) and the government reported a primary fiscal deficit of 4.6%, 3.8% and 2.4% of GDP, according to the Argentine Ministry of Treasury. In 2019, national public sector expenditures increased by 37.2%, and the government reported a primary fiscal deficit of 1.0% of GDP. During recent years, the Argentine Government has resorted to the Central Bank and to the ANSES to alleviate part of its funding requirements. Moreover, the primary fiscal balance could be negatively affected in the future if public expenditures continue to increase at a rate higher than revenues due to, for example, social security benefits, financial assistance to provinces with financial problems and increased spending on public works and subsidies, including subsidies to the energy and transportation sectors. A further deterioration in fiscal accounts could negatively affect the government’s ability to access the long-term financial markets and could in turn result in more limited access to such markets by Argentine companies. Additionally, a further deterioration in fiscal accounts could affect the Argentine Government’s ability to continue subsidies for consumers in the energy sector.
 
A decline in international prices for Argentina’s main commodity exports could have an adverse effect on Argentina’s economic growth
 
Argentina’s financial recovery from the 2001-2002 crisis occurred in a context of price increases for Argentina’s commodity exports, such as soy. High commodity prices contributed to the increase in Argentine exports since the third quarter of 2002 and to high government tax on revenues from export withholdings. However, the reliance on the export of certain commodities has caused the Argentine economy to be more vulnerable to fluctuations in their prices.
 
 
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Commodity prices, including for soy, have declined significantly since peak prices due in part to slower growth in China. In addition, from the end of 2017 until April 2018, rains below the average, for several months, plunged Argentina into a severe drought that is presumed to have been the worst drought in the country in a 50 years period. The effects of the drought in agriculture caused important economic problems in the country, with a fall in the soybean harvest of 31% over the previous year, and corn, by 20%, which implied losses by US$6 billion. A continuing decline in the international prices for Argentina’s main commodity exports or any future climatic conditions that may have an adverse effect in agriculture could have a negative impact on the levels of government revenues and the government’s ability to service its sovereign debt, and could either generate recessionary or inflationary pressures, depending on the government’s reaction. Either of these results would adversely impact Argentina’s economy and, therefore, our financial condition.
 
The novel coronavirus could have an adverse effect on our business operations and financial conditions
 
In late December 2019 a notice of pneumonia originating from Wuhan, Hubei province (COVID-19, caused by a novel coronavirus) was reported to the World Health Organization, with cases soon confirmed in multiple provinces in China, as well as in other countries. On March 11, 2020, the World Health Organization characterized the COVID-19 as a pandemic. Several measures have been undertaken by the Argentine government and other governments around the globe, including the use of quarantine, screening at airports and other transport hubs, travel restrictions, suspension of visas, nation-wide lockdowns, closing of public and private institutions, suspension of sport events, restrictions to museums and tourist attractions and extension of holidays, among many others. However, the virus continues to spread globally and, as of the date of this annual report, has affected more than 150 countries and territories around the world, including Argentina. To date, the outbreak of the novel coronavirus has caused significant social and market disruption. For example, the Dow Jones declined by about 18.19% between February 11 and April 14, 2020. The long-term effects to the global economy and the Company of epidemics and other public health crises, such as the on-going novel coronavirus, are difficult to assess or predict, and may include a further decline in the market prices of our shares and ADSs, risks to employee health and safety, risks for the deployment of our services, reduction in the demand of energy, and delays or suspensions in the construction of our expansion projects, among others. Any prolonged restrictive measures put in place in order to control an outbreak of a contagious disease or other adverse public health development may have a material and adverse effect on our business operations. We may also be affected due to the need to implement policies limiting the efficiency and effectiveness of our operations, including home office policies. It is unclear whether these challenges and uncertainties will be contained or resolved, and what effects they may have on the global political and economic conditions in the long term. Additionally, we cannot predict how the disease will evolve in Argentina, nor anticipate what additional restrictions the Argentine government may impose.
 
On March 20, 2020 the Argentine Government issued Decree No. 297/2020 establishing a preventive and mandatory social isolation policy (“the Quarantine”) as a public health measure to contain the effects of the COVID-19 outbreak. Such decree established that during the Quarantine, people must remain in their residence beginning midnight on March 20, 2020 and must refrain from going to their workplaces and may not travel along routes, roads or public spaces. Since the adoption of the Quarantine, the Argentine Government has extended it three times, and as of the date of this annual report it has been extended until May 11, 2020 with some additional excluded activities. We cannot exclude any further extensions or even the restoration of excluded activities after it is lifted.
 
The Quarantine is expected to have a deep impact in the Argentine economy, including drastic reduction in the demand and supply of goods and services, increase in the unemployment rate and poverty levels, businesses bankruptcies, disruption in the payment chain, among many others. Although the Argentine government has adopted measures intended to alleviate the situation (see “Item 4––Recent Developments- Measures Designed to Address the Covid-19 Outbreak”), such measures are expected to significantly increase the governments’ fiscal deficit. If that increase in the deficit is financed with monetary emission, it is highly possible that it will lead to an increase in the rate of inflation and disruptions in the foreign exchange markets.
 
Pursuant to Decree 297/2020, the electricity generation activity was considered an essential service and thus, exempt from the work attendance and travel restrictions. Although our operations personnel was allowed to continue their activities under certain health and sanitary precautions, the rest of our staff continued working remotely. As of the date of this annual report, these restrictions remain in effect.
 
Initially, the construction of energy infrastructure, including our ongoing expansion projects, was not included as an exemption to the Quarantine. On April 7, 2020, the construction of private sector energy infrastructure was included as an essential activity, and consequently, after taking the necessary precautions, the construction resumed on April 9, 2020 for La Genoveva I, and on April 27, 2020 for Terminal 6-San Lorenzo.
 
As additional measures to contain the expansion of COVID-19, international travel (except for certain specific repatriation flights) was suspended.
 
 
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We have identified the following items where this crisis has and may have an impact in the Company:
 
Operations – Power generation
 
Reduction in the electric energy dispatched. Due to the Quarantine, most of the businesses in Argentina, especially in the industrial sector, have not been able to continue operating normally. According to information from CAMMESA, during the first week of April, the total electric energy demand declined by 13.4 %, compared to the same week of the prior year. This reduction is likely to have an impact on the Company’s thermal energy generation department, in particular our units with higher heat rate (less efficient) under the Energía Base Regulatory framework.
 
Increased delays in payments and/or risk of uncollectability from our private clients. Despite the fact that CAMMESA is paying its obligations, the reduced economic activity due to the Quarantine may also affect the cash flows of CAMMESA and of our private clients and increase the delays in their payments and the risk of uncollectabilty of private clients. (See “Item 3.D Risk Factors—Risks Relating to Argentina—We have, in the recent past, been unable to collect payments, or to collect them in a timely manner, from CAMMESA and other customers in the electric power sector”).
 
Greater dependency of CAMMESA on subsidies from the Argentine government. CAMMESA’s cash flows depend on (i) payments from electric energy distribution companies, and (ii) subsidies from the Argentine government. Due to the Law 27,132, tariffs that eligible end users pay to some public utilities under federal jurisdiction, including electric energy distribution companies, were frozen for 180 days until June 30, 2019 (See Item 4. Information of the Company- Recent Political and Economic Developments in Argentina). Furthermore, the Argentine government established a 180-day period, beginning on March 1, 2020, in which the suspension of the electric energy distribution service is not permitted, upon the beneficiary’s failure to pay less than three consecutive invoices, from March 1, 2020. As a consequence, electric energy distribution companies may see a reduction in their collections from clients, which may reduce their payments to CAMMESA, which in turn, may increase CAMMESA’s dependency on subsidies received from the Argentine government to pay for electric energy generation, including payments to electric energy generation companies, such as Central Puerto.
 
Personnel safeguard. We have set a protocol with multiple measures to protect the health of all our personnel. Some of those measures include: a) the isolation of the teams that operate our different units, preventing contact between different teams; b) the avoidance of contact between personnel from different shifts; c) the use of extra protection, and additional sanitary measures; d) using virtual meetings; e) identify key personnel in order to have the necessary back-up teams should a contingency arise and keeping all non-essential personnel for the operation and maintenance of the units working remotely. Although these measures have been effective for the safeguard of our personnel, as of the date of this annual report, we cannot assure you that none of our employees (including key personnel) will be affected by COVID-19.
 
Lack of necessary supplies/equipment, or delays in supplies. The Quarantine may also affect the provision of essential supplies. Although the provision of the necessary supplies is also considered an essential activity under the enacted emergency framework and we usually keep a stock of spare parts, we cannot assure you that the provision of the necessary supplies will not be affected. Furthermore, measures taken by foreign countries in which some of our supplies and spare parts for our units are produced, may also affect our stock of spare parts. Any delay in the provision of essential equipment or supplies may affect our operations.
 
Projects under construction/development
 
The COVID-19 outbreak has had an impact on the projects currently under construction. On February 21, 2020, Vestas Argentina S.A. (“Vestas”) the supplier of the wind turbines of the La Genoveva I wind project, notified the Company that the COVID-19 outbreak affected its manufacturing activities worldwide, causing delays on the supply chain for the delivery of certain Chinese-origin manufacturing components required for the completion of the wind turbines. In its communication, Vestas did not specify the specific impact this situation may have on the agreed upon schedule. However, we reasonably expect delays on the project’s completion. We sent a notice to CAMMESA with the updates received from Vestas in accordance with the force majeure clauses of the PPA to avoid potential penalties should the project suffer unexpected and unforeseen delays. On April 7, 2020, CAMMESA acknowledged receipt of our notice and requested a report on the consequences that the force majeure events have had on the schedule. We expect to experience delays in the estimated COD of the wind farm La Genoveva I (owned by our subsidiary Vientos La Genoveva S.A.U.) which in accordance with the PPA entered into with CAMMESA, had to be completed in May 2020.
 
 
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Additionally, our subsidiary Vientos La Genoveva S.A.U., entered into a loan agreement with the IFC for the construction of the wind farm La Genoveva I. Under the IFC Loan (see Item 5.B. Liquidity and Capital Resources—Indebtedness— Loan from the IFC to the subsidiary Vientos La Genoveva S.A.U.)., Central Puerto S.A., a guarantor, completely, unconditionally and irrevocably guarantees, as the main debtor, all payment obligations undertaken by Vientos La Genoveva S.A.U until the project reaches the project completion date. Any delay in the COD could delay the project completion date, and thus, Central Puerto would remain as the main debtor of this facility.
 
Additionally, although the Quarantine was lifted for private sector energy infrastructure construction on April 7, 2020, we have experienced delays on our project schedule. After taking the necessary precautions, the construction was resumed on April 9, 2020 for La Genoveva I. However, due to these precautionary measures (reduction of personnel working in the project, working hours reduction, and the establishment of a staggered shift) we expect the completion of the project to be delayed.
 
The Quarantine also affected the construction of the Terminal 6-San Lorenzo thermal plant, that was suspended on March 20, 2020, scheduled to be completed in September 2020. After the Quarantine was lifted, we resumed activities on April 27, 2020 after taking the necessary precautions. However, due to the precautionary measures mentioned above, we expect the completion of the project to be delayed. Additionally, travel restrictions and national borders lockdown imposed by the Argentine Government, among others, may delay the arrival of necessary personnel for the project, some of which were expected to arrive from countries affected by the outbreak. We sent a notice to CAMMESA informing about this situation to avoid potential penalties should the project suffer unexpected and unforeseen delays. Although we are confident that due to the extreme circumstances that affect the projects we will be able to obtain a waiver on the Committed COD, we cannot assure you we will in fact secure such waiver from CAMMESA.
 
The effects of the COVID-19 crisis pose challenges to our expansion plans for the Brigadier López plant and the development of the El Puesto solar farm, delaying the start of construction of these projects, not only because of the restrictions to the construction mentioned above, but also due to lower energy demand and difficulties to obtain the necessary financing for the projects in the current markets situation. For more information on see “Item 3D. Risk Factors—Risks Relating to our Business— Factors beyond our control may affect or delay the completion of the awarded projects, or alter our plans for the expansion of our existing plants”. In addition, the COVID-19 crisis may reduce the possibility of new expansion projects and opportunities, for which the company has purchased 3 gas turbines. Item 5.A Operating Results—Factors Affecting our Results from Operations—Proposed Expansion of Our Generating Capacity.
 
The factors mentioned above for both our operation of power generation and the projects under construction/development, may also lead to an impairment of property, plant and equipment and intangible assets, related to a reduction in the assessed value-in-use of certain assets that may exceed their previously-recorded book value, such us our Brigadier López plant and intangible assets associated to it, and some of the gas turbines that the Company holds for potential new projects. Some of the factors that may influence this reduction are the limited useful life of these assets, the current economic uncertainties, the reduction and conversion of the electric and power spot market tariff into Argentine pesos, and in the particular case of the Company’s gas turbines, the uncertainty about the feasibility of new projects that would enable the use of the acquired turbines. For more information, see Item 5.A. Operating Results—Critical Accounting Policies—Impairment of property, plant and equipment and intangible assets.
 
Access to the Capital and Financial Markets
 
Due to the Argentine sovereign debt restructuring ongoing process and to the outbreak of COVID-19, access to the capital and financial markets in Argentina and/or in foreign markets may also be substantially reduced. Although we believe our cash flow and liquidity are adequate and sufficient to meet our working capital debt service obligations and capital expenditure requirements for the foreseeable future, any further deterioration of the current economic situation may result in a deterioration of the Company’s finances, in a context of lack of access or substantial reduction of credit availability in the financial markets, which could affect our financial condition and results of operation.
 
Additionally, the COVID-19 pandemic crisis may also affect the results from our natural gas distribution affiliates. Although these economic activities were also declared essential, and exempt from the Quarantine, the economic downturn caused by this measure is expected to reduce volumes distributed to clients. Moreover, some measures adopted by the Argentine Government to mitigate the effects of the COVID-19 outbreak in the economy are also expected to affect Ecogas’ financial performance, which had already been affected by the 180-day tariff freeze established by Law 27,132, which was in effect until June 30, 2019 (See Item 4. Information of the Company- Recent Political and Economic Developments in Argentina). The Argentine Government established a 180-day period, beginning on March 1, 2020, where the suspension of the natural gas service is not permitted, upon the beneficiary’s failure to pay less than three consecutive invoices, from March 1, 2020. This measure is only applicable to certain users identified in the decree adopting it. This measure is expected to increase the delays and or the uncollectability of payments from such clients. Furthermore, some of the clients may not have access to electronic payment platforms and may typically pay in cash, which may be an obstacle for their ability to pay the bills on time due to the mandatory Quarantine. In the year ended December 31, 2019, IGCE (including a direct interest in DGCE) accounted for 11.80% of our consolidated net income (see Item 4.B. Business Overview—Our Affiliates— Ecogas Group - Inversora de Gas del Centro S.A. (IGCE)”.
 
 
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Finally, any additional measure taken by Argentina or any foreign country to mitigate the effects of the COVID-19 crisis, may directly or indirectly affect our operations, projects under construction/development or our results of operation and financial condition.
 
For more information see “Item 4.A.—Recent Developments—Measures Designed to Address the Covid-19 Outbreak”.
 
The Argentine economy could be adversely affected by economic developments in other markets and by more general “contagion” effects
 
Weak, flat or negative economic growth of any of Argentina’s major trading partners, such as Brazil, China or the United States, could have a material adverse effect on Argentina’s trade balance and adversely affect Argentina’s economic growth. The economic performance of other trading partners such as Chile, Spain and Canada may also affect Argentina’s trade balance.
 
The economy of Brazil, Argentina’s largest export market and the principal source of imports, has experienced heightened negative pressure due to the uncertainties stemming from ongoing political crisis and extensive corruption investigations. Although the Brazilian economy slightly expanded by 1.1% during 2018 and 1.1% during 2019, a deterioration of economic conditions in Brazil may reduce demand for Argentine exports and create advantages for Brazilian imports. In October 2018, candidate Jair Bolsonaro was elected president of Brazil. As a result, uncertainty and expectations have increased in relation to the future management of the president who, might include substantial economic reforms and changes in Brazil’s foreign policy, as stated during his campaign. A further deterioration of economic conditions in Brazil could reduce the demand for Argentine exports and generate advantages for Brazilian imports. There is a possibility that continued uncertainty with respect to Brazil’s economic and political conditions or the occurrence of an economic and political crisis in Brazil might result in an impact on the Argentine economy, and in turn, have a material adverse effect on our business, financial condition and result of operations.
 
The Argentine economy may be affected by “contagion” effects. International investors’ reactions to events occurring in one developing country sometimes appear to follow a “contagion” pattern, in which an entire region or investment class is disfavored by international investors. In the past, the Argentine economy has been adversely affected by such contagion effects on a number of occasions, including the 1994 Mexican financial crisis, the 1997 Asian financial crisis, the 1998 Russian financial crisis, the 1999 depreciation of the Brazilian real, the 2001 collapse of Turkey’s fixed exchange rate regime and the global financial crisis that began in 2008.
 
The Argentine economy may also be affected by conditions in developed economies, such as the United States, that are significant trading partners of Argentina or have influence over world economic cycles. If interest rates increase significantly in developed economies, including the United States, Argentina and its developing economy trading partners, such as Brazil, could find it more difficult and expensive to borrow capital and refinance existing debt, which could adversely affect economic growth in those countries. Decreased growth on the part of Argentina’s trading partners could have a material adverse effect on the markets for Argentina’s exports and, in turn, adversely affect economic growth. Any of these potential risks to the Argentine economy could have a material adverse effect on our business, financial condition and result of operations.
 
On June 23, 2016, the United Kingdom held an in-or-out referendum on the United Kingdom’s membership of the European Union the result of which favored the exit of the United Kingdom from the European Union or “Brexit.” On October 2, 2016, the United Kingdom prime minister announced that Article 50 of the Lisbon Treaty would be triggered before the end of March 2017 and that the Queen's speech will include a Great Repeal Bill to repeal the European Communities Act 1972. On March 16, 2017, the European Union (Notification of Withdrawal) Bill was enacted and a notification under Article 50 was made on March 29, 2017. The triggering of Article 50 initiated a two-year period of negotiation for the United Kingdom to leave the European Union. Following a series of extensions to this period, on January 31, 2020, the United Kingdom left the European Union and entered into a transition period that will end on December 31, 2020. The impact of Brexit on our results of operations is unclear and its long-term effects remain uncertain. Brexit could lead to additional political, legal and economic instability in the European Union and produce a negative impact on the commercial exchange of Argentina with that region.
 
On November 8, 2016, Mr. Donald J. Trump was elected president of the United States. The results of the presidential election have created significant uncertainty about the relationship between the United States and other countries, including with respect to the trade policies, treaties, government regulations and tariffs that could apply to trade between the United States and other nations. Even though President Trump's protectionist measures are not, for the time being, aimed at Argentina, we cannot predict how they will evolve, nor will the effect that the same or any other measure taken by the Trump administration could cause on global economic conditions and the stability of global financial markets. Furthermore, the ongoing trade dispute between United States and China due to tariffs placed on goods traded between them, might have a potential impact in trade-dependent countries such as Argentina.
 
 
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During August 2018, an increase in inflation and a sustained deficit in current accounts, as well as the protectionist measures taken by the United States, doubling the tariffs on steel and aluminum from Turkey, caused a collapse of the Turkish lira against the Dollar that triggered a wave of sales of assets from emerging markets and the significant fall in the prices of shares from these markets, generating a contagion effect in international markets and several stock exchanges in the world, including Argentina.
 
These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets. Any of these factors could depress economic activity and restrict our access to suppliers and have a material adverse effect on our business, financial condition and results of operations.
 
The Argentine banking system may be subject to instability which may affect our operations
 
In recent years, the Argentine financial system grew significantly with a marked increase in loans and private deposits, showing a recovery of credit activity. In spite of the fact that the financial system’s deposits continue to grow in nominal terms, they are mostly short-term deposits and the sources of medium and long-term funding for financial institutions are currently limited. In 2019, although nominal private deposits in pesos increased 36% year-over-year (fueled by the growth of savings and current accounts with a 46% increase) and nominal time deposits increased 25% year-over-year, such nominal increases did not match inflation for the period. Peso-denominated loans increased at a slightly higher pace than that of 2018. During the same period, loans in foreign currency (composed mainly of corporate loans) evidenced a decrease of 33% at the end of 2019. In 2019, private deposits in U.S. dollars declined by 33%.
 
Financial institutions are particularly subject to significant regulation from multiple regulatory authorities, all of whom may, among other things, establish limits on commissions and impose sanctions on the financial institutions. The lack of a stable regulatory framework, or changes to such regulatory framework by the government, could impose significant limitations on the activities of the financial institutions and could induce uncertainty with respect to the financial system stability.
 
The persistence of the current economic crisis or the instability of one or more of the larger banks, public or private, could have a material adverse effect on the prospects for economic growth and political stability in Argentina, resulting in a loss of consumer confidence, lower disposable income and fewer financing alternatives for consumers. These conditions would have a material adverse effect on us by resulting in lower usage of our services, lower sales of devices and the possibility of a higher level of uncollectible accounts or increase the credit risk of the counterparties regarding the Company investments in local financial institutions.
 
Exchange controls and restrictions on transfers abroad and capital inflows limit the availability of international credit.
 
Failure to adequately address actual and perceived risks of institutional deterioration and corruption may adversely affect Argentina’s economy and financial condition, which in turn could adversely affect our business, financial condition and results of operations
 
A lack of a solid institutional framework and corruption have been identified as, and continue to be a significant problem for Argentina. In Transparency International’s 2017 Corruption Perceptions Index survey of 180 countries, Argentina was ranked 85, improving from the previous survey in 2016. In the World Bank’s Doing Business 2019 report, Argentina ranked 119 out of 190 countries, down from 117 in 2018.
 
Recognizing that the failure to address these issues could increase the risk of political instability, distort decision-making processes and adversely affect Argentina’s international reputation and ability to attract foreign investment, the Macri administration has announced several measures aimed at strengthening Argentina’s institutions and reducing corruption. These measures include the reduction of criminal sentences in exchange for cooperation with the government in corruption investigations, increased access to public information, the seizing of assets from corrupt officials, increasing the powers of the Anticorruption Office (Oficina Anticorrupción) and the passing of a new public ethics law, among others. The Argentine Government’s ability to implement these initiatives is uncertain as it would require the involvement of the judicial branch, which is independent, as well as legislative support from opposition parties.
 
Argentina’s political environment has historically influenced, and continues to influence, the performance of the country’s economy. Political crises have affected and continue to affect the confidence of investors and the general public, which have historically resulted in economic deceleration and heightened volatility in the securities with underlying Argentine risk. The recent economic instability in Argentina has contributed to a decline in market confidence in the Argentine economy as well as to a deteriorating political environment.
 
 
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In addition, various ongoing investigations into allegations of money laundering and corruption being conducted by the Office of the Argentine Federal Prosecutor, including the largest such investigation, known as “Los Cuadernos de las Coimas,” or “the Chauffeur's Books” have negatively impacted the Argentine economy and political environment. Certain government officials of previous administrations as well as high ranked officers of companies holding government contracts or concessions have faced or are currently facing allegations of corruption and money laundering as a result of these investigations. These individuals are alleged to have accepted or paid, as applicable, bribes by means of kickbacks on contracts granted by the government to several infrastructure, energy and construction companies. The proceeds from these kickbacks allegedly financed the political campaigns of political parties forming the government from 2011 to 2015. These funds were unaccounted for or not publicly disclosed and were allegedly used to personally enrich certain individuals. Several senior politicians, including members of Congress, and high-ranking executives and officers of major companies in Argentina (i) have been arrested on account of various charges relating to corruption, (ii) entered into plea agreements with prosecutors and (iii) have resigned or been removed from their positions. The potential outcome of the Chauffer’s Books as well as other ongoing corruption-related investigations is uncertain, but they have already had an adverse impact on the reputation of those companies that have been implicated, as well as on the general market perception of the economy, political environment and the capital markets in Argentina. We have no control over and cannot predict for how long the corruption investigations will continue nor whether such investigations or allegations (or any other future investigations or allegations) will lead to further political and economic instability. In addition, we cannot predict the outcome of any such allegations nor their effect on the different sectors of the Argentine economy. See also “We are subject to anticorruption, anti-bribery, anti-money laundering and other laws and regulations.”
 
Risks Relating to the Electric Power Sector in Argentina
 
The Argentine Government has intervened in the electric power sector in the past, and is likely to continue intervening
 
Historically, the Argentine Government has played an active role in the electric power industry through the ownership and management of state-owned companies engaged in the generation, transmission and distribution of electric power. Since 1992 and the privatization of several state-owned companies, the Argentine Government has reduced its control over the industry. However, as is the case in most other countries, the Argentine electric power industry remains subject to strict regulation and government intervention. Moreover, to address the Argentine economic crisis of 2001 and 2002, the Argentine Government adopted Law No. 25,561 (the “Public Emergency Law”) and other regulations, which made a number of material changes to the regulatory framework applicable to the electric power sector. These changes have had significant adverse effects on electric power generation, distribution and transmission companies and included the freezing of distribution margins, the revocation of adjustment and inflation indexation mechanisms for tariffs, a limitation on the ability of electric power distribution companies to pass on to the consumer increases in costs due to regulatory charges and the introduction of a new price-setting mechanism in the WEM, all of which had a significant impact on electric power generators and caused substantial price differences within the market.
 
Previous administrations intervened in the electric power industry by, for example, granting temporary margin increases, proposing a new tariff regime for residents of poverty-stricken areas, increasing remunerations earned by generators for capacity, operation and maintenance services, creating specific charges to raise funds that are transferred to government-managed trust funds that finance investments in generation and distribution infrastructure and mandating investments for the construction of new generation plants and the expansion of existing transmission and distribution networks.
 
For example, in March 2013, pursuant to Resolution No. 95/13, issued by the former Secretariat of Energy, the Argentine Government suspended the renewal of sales contracts in the term market and execution of new agreements in the WEM, and ordered that any demand not satisfied by Argentine generators must be directly supplied by CAMMESA. As a result, Argentine generators are required to supply capacity and energy to CAMMESA at prices fixed by the former Secretariat of Energy.
 
When the previous administration assumed office, the Argentine Government initiated significant reforms to the Argentine electric power industry. On December 16, 2015, the Macri administration declared a state of emergency with respect to the national electric power system that remained in effect until December 31, 2017. The state of emergency allowed the Argentine Government to take actions designed to guarantee the supply of electric power in Argentina, such as instructing the Ministry of Energy and Mining to elaborate and implement, with the cooperation of all federal public entities, a coordinated program to guarantee the quality and security of the electric power system and rationalize public entities’ consumption of energy. In addition, the Argentine Government and certain provincial governments have approved significant price adjustments and tariff increases applicable to certain generation and distribution companies. Following the tariff increases, preliminary injunctions suspending such increases were requested by customers, politicians and non-governmental organizations that defend customers’ rights, which preliminary injunctions were granted by Argentine courts. Among the different rulings in this respect, two recent rulings issued by the Second Division of the Federal Court of Appeals for the City of La Plata and a federal judge from the San Martín district court led to the suspension of end-users tariff increases of electric power in the Province of Buenos Aires and in the whole territory of Argentina, respectively.
 
 
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Pursuant to these injunctions, (i) the end-user tariff increases granted as of February 1, 2016 were suspended retroactively to that date, (ii) end-user bills sent to customers were not to include the increase and (iii) the amounts already collected from end-users as a consequence of consumption recorded before these rulings had to be reimbursed. However, on September 6, 2016, the Supreme Court denied these injunctions that suspended end-users electric power tariff increases, arguing formal objections and procedural defects and therefore, as of the date of this annual report, increases of the electric power end-users tariffs are not suspended.
 
Pursuant to Resolution No. 522/16, the ENRE ordered a public hearing to be held to evaluate the proposals for the full tariff review filed by EDENOR and EDESUR for the period from January 1, 2017 to December 31, 2021. The hearing was held on October 28, 2016. A non-binding public hearing was conducted by the Ministry of Energy and Mining and the ENRE to discuss tariff proposals submitted by distribution companies covering the greater Buenos Aires area (with approximately 15 million inhabitants), including Edenor, for the 2017-2021 period within the framework of the RTI. Following such hearing, on January 31, 2017, the ENRE issued Resolution No. 63/17, pursuant to which such administrative authority approved the tariffs to be applied by EDENOR. In the same sense, Resolution No. 64/17 approved EDESUR’s tariffs.
 
On February 1, 2017, the ENRE enacted several resolutions, which, among other policy changes, implemented a reduction of electric power tariff subsidies and an increase in electric power tariffs for residential customers. Such increases ranged between 61% and 148%, depending on to the amount of the consumer’s electric power consumption.
 
Regarding transmission tariffs, seven public hearings were held pursuant to Resolutions Nos. 601/16, 602/16, 603/16, 604/16, 605/16, 606/16 and 607/16 of the ENRE. In such public hearings, the tariff proposals filed by transmission companies Transener S.A., Distrocuyo S.A., Transcomahue S.A., Ente Provincial de Energía de Neuquén, Transba S.A., Transnea S.A., Transnoa S.A. and Transpa S.A. for the period from January 1, 2017 to December 31, 2021 were evaluated. Pursuant to Resolutions Nos. 66/17, 68/17, 69/17, 71/17, 73/17, 75/17, 77/17 and 79/17, the ENRE approved the new applicable tariffs for such companies.
 
Additionally, in March 2016, the Secretariat of Electric Energy enacted Resolution SEE No. 22/16, through which it adjusted the electric power prices for the sale of energy by generation companies under the Energía Base. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Results of Operations—Our Revenues—The Energía Base.” The Secretariat of Electric Energy cited the fact that WEM prices have been distorted and discourage private sector investment in power generation and that it was necessary to raise tariffs to partially compensate for increasing operation and maintenance costs and to improve the cash flow generation capacity of these companies. On February 1, 2017, the tariff revision process was completed and the new tariff scheme for the following five-year period was enacted.
 
In a change of its criteria on policies applied in the electric power industry, on April 17, 2019, the Macri Administration announced that the tariffs applied by electricity distribution companies will not be increased during the rest of 2019.
 
In addition, on March 1, 2019, by means of Resolution SRRyME No. 1/19, the Argentine Government reduced prices for power capacity and energy under Energía Base, which had been previously increased by Resolution SEE No. 19/17. Furthermore, on February 27, 2020, the Secretary of Energy of the National Ministry of Production Development issued Resolution 31/20, which abrogated Resolution No. 1/19, reducing the remuneration scheme applicable from February 1, 2020 for Authorized Generators in the Wholesale Electricity Market, establishing Energía Base prices in Argentine pesos. We cannot assure you that further reductions of these tariffs will not occur in the future. See “Item 4.B. Business Overview—The Argentine Electric Power Sector—Remuneration Scheme—The Current Remuneration Scheme.”
 
The Argentine Government has also established public bidding processes for the development of new generation projects from both thermal and renewable sources. These measures aim not only to satisfy domestic electric power demand, but also to promote investments in the electric power sector and improve the economic situation of the WEM, which, as discussed above, has faced challenges since 2001.
 
Notwithstanding the recent measures adopted by the Argentine Government, we cannot guarantee that the expected changes to the electric power sector will happen as expected, within the anticipated timeframe or at all. It is possible that certain measures may be adopted by the Argentine Government that could have a material adverse effect on our business and results of operations, or that the Argentine Government may adopt emergency legislation similar to the Public Emergency Law or other similar resolutions in the future that could have a direct impact on the regulatory framework of the electric power industry and indirectly adversely affect the electric power generation industry, and therefore, our business, financial condition and results of operations.
 
 
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On December 23, 2019, the Solidarity Law was passed, by which the economic, financial, administrative, social, sanitary, tariff and energetic emergency was declared. In connection to our business such law provides that (i) natural gas tariffs and energy tariffs to the end user under federal jurisdiction shall remain unchanged for one hundred and eighty (180) days, commencing on December 23, 2019, and (ii) empowered the Executive branch to renegotiate tariffs under federal jurisdiction, either within the framework of the current comprehensive tariff reviews or through an extraordinary revision, in accordance with Law No. 24,065 (Régimen de Energía Eléctrica). In addition, the Solidarity Law also entitles the Executive branch to intervene the ENARGAS and the Federal Electricity Regulatory Agency (“ENRE”).
 
For further updates on the Argentine Government role in the electric power sector, please see “Item 4––Recent Developments”.
 
Electricity generators, distributors and transmitters have been materially and adversely affected by emergency measures adopted in response to Argentina’s economic crisis of 2001 and 2002, many of which remain in effect
 
Since the Argentine economic crisis of 2001 and 2002, Argentina’s electric power sector has been characterized by government regulations and policies that have resulted in significant distortions in the electric power market, particularly with respect to prices, throughout the whole value chain of the sector (generation, transmission and distribution). Historically, Argentine electric power prices were calculated in U.S. dollars and margins were adjusted periodically to reflect variations in relation to costs. In January 2002, the Public Emergency Law authorized the Argentine Government to renegotiate its public utility contracts. Under this law, the Argentine Government revoked provisions in the public utility contracts related to the adjustment and inflation indexation mechanism. Instead, the tariffs on such contracts were frozen and converted from their original U.S. dollar values to Argentine pesos at a rate of Ps.1.00 per US$1.00. For further information on the changes to the legal framework of the Argentine electric power industry caused by the Public Emergency Law, see “The Argentine Electric Power Sector.”
 
These measures, coupled with the effect of high inflation and the depreciation of the peso in recent years, led to a significant decline in revenues and a significant increase of costs in real terms, which could no longer be recovered through margin adjustments or market price-setting mechanisms. This situation, in turn, led many public utility companies to suspend payments on their financial debt (which continued to be denominated in U.S. dollars despite the pesification of revenues), effectively preventing these companies from obtaining further financing in the domestic or international credit markets and making additional investments.
 
After declaring a state of emergency with respect to the national electrical system, the Argentine Government increased electric power tariffs in the WEM under the Energía Base. Preliminary injunctions suspending such increases were requested by customers, politicians and non-governmental organizations, and recent rulings suspended the increases in the whole territory of Argentina. On September 6, 2016, the Supreme Court denied these injunctions that suspended end-users electric power tariff increases, and a public hearing to evaluate the proposals for a full tariff review filed by EDENOR and EDESUR was held on October 28, 2016. The tariff increases were approved on January 31, 2017. In addition, the Argentine Government issued Resolution SE No. 21/16 calling for a public bid process for the installation of new generation capacity from both thermal and renewable sources, offering generators U.S. dollar-denominated rates linked to generation costs for newly available generation capacity. However, tariffs under the Energía Base remain well below historical levels, although there have been important increases and, they are now denominated in U.S. dollars which mitigates the effect of variations in the foreign exchange rate. These measures, or any future measures, may not be sufficient to address the structural problems created by the economic crisis of 2001 and 2002 and its aftermath, and measures similar to those adopted during the economic crisis may not be enacted in the future.
 
On March 1, 2019, by means of Resolution SRRyME No. 1/19, the Argentine Government reduced prices for power capacity and energy under Energía Base, which had been previously increased by Resolution SEE No. 19/17. Furthermore, on February 27, 2020, the Secretary of Energy of the National Ministry of Production Development issued Resolution 31/20, which abrogated Resolution No. 1/19, reducing the remuneration scheme applicable from February 1, 2020 for Authorized Generators in the Wholesale Electricity Market, establishing Energía Base prices in Argentine pesos. We cannot assure you that further reductions of these tariffs will not occur in the future. See “Item 4.B. Business Overview—The Argentine Electric Power Sector—Remuneration Scheme—The Current Remuneration Scheme.”
 
See “—The Argentine Government has intervened in the electric power sector in the past, and is likely to continue intervening.”
 
 
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We have, in the recent past, been unable to collect payments, or to collect them in a timely manner, from CAMMESA and other customers in the electric power sector
 
For the years ended December 31, 2019 and 2018, approximately 76.14% and 88.80%, respectively, of our total revenues came from our sales to CAMMESA. In addition, we receive significant cash flows from CAMMESA in connection with the FONINVEMEM and similar programs. Payments to us by CAMMESA, depend upon payments that CAMMESA in turn receives from other WEM agents such as electric power distributors as well as subsidies from the Argentine Government.
 
Regarding the CVO Agreement, effective as of March 20, 2018, CAMMESA granted the CVO Commercial Approval in the WEM, as a combined cycle, of the thermal plant Central Vuelta de Obligado, which entitled us to receive the collection of the trade receivables under the CVO Agreement. A PPA between the CVO Trust and CAMMESA, through which the CVO Trust makes energy sales and, consequently, receives the cash flow to pay the trade receivables, had to be signed in order to start the collections.
 
The PPA agreement was signed on February 7, 2019, with retroactive effect to March 20, 2018.
 
As a result, the original amortization schedule from the CVO Agreement is in full force and effect.
 
During June and July 2019, Central Puerto collected Ps.2,562 million, in nominal terms (approximately US$58.41 million converted at the exchange rate Communication A 3500 quoted by the Central Bank as of the date of payment) and Ps.825 million, in nominal terms (approximately US$19.70 million converted at the exchange rate Communication A 3500 quoted by the Central Bank as of the date of payment), in both cases including VAT, related to the installments corresponding to the March-December 2018 period of the CVO agreement.
 
During 2019, we collected Ps. 8.45 billion in CVO receivables (including installments 1 to 10), measured in current amounts as of December 31, 2019. Subsequent installments (from installment No. 11) have been collected on their respective due dates.
 
We also receive payments under term market contracts with CAMMESA and FONI trade receivables, which are denominated in U.S. dollars, and converted into Argentine pesos, at the exchange rate of the day prior to the due date of such monthly transaction or installment.
 
In recent years, due to regulatory conditions and long periods of frozen tariffs in Argentina’s electric power sector that affected the profitability and economic viability of power utilities, certain WEM agents defaulted on their payments to CAMMESA, which adversely affected CAMMESA’s ability to meet its payment obligations with electric power generators, including us. As a consequence of delays in payments that CAMMESA received from other WEM agents, we also saw delays in the payments we received under the Energía Base, receiving payments from CAMMESA within approximately 90 days of month-end, rather than the required 42 days after the date of billing. Such payment delays resulted in higher working capital requirements that we would typically finance with our own financing sources. From September 2016 to November 2017 CAMMESA has paid without delays, and since then, there were periods in which CAMMESA experienced delays in paying (for more information on the duration of these delays see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk”). For example, for the monthly transaction related to Energía Base and thermal PPAs of December 2019, with due date on February 12, 2020, we collected 20.40% on February 28, 2020, 45.26% on March 11, 2020, 11.56% on March 19, 2020, 12.47% on March 27, 2020 and the rest on April 8, 2020, 2020. For these delays, we received interests from CAMMESA. Payments related to PPAs under the Renovar Regulatory Framework have not suffered delays. CAMMESA may once again be unable to make payments to generators both in respect of energy dispatched and generation capacity availability on a timely basis or in full, which may substantially and adversely affect our financial position and the results of our operations.
 
In the short term, due to the COVID-19 pandemic crisis, we expect to continue experiencing delays in certain payments from CAMMESA.
 
 
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Electricity demand may be affected by tariff increases, which could lead generation companies like us to record lower revenues
 
During the 2001 and 2002 economic crisis, electric power demand in Argentina decreased due to the decline in the overall level of economic activity and the deterioration in the ability of many consumers to pay their electric power bills. In the years following the 2001 and 2002 economic crisis, electric power demand experienced significant growth, increasing at an estimated average of approximately 3.86% per annum from 2002 through 2015 (despite a decline in 2009), due to its reduced cost as a result of certain energy subsidies, freezing of margins and elimination of inflation adjustment provisions in distribution concessions. In March 2016, the Argentine Government unified and increased wholesale energy prices for all consumption in Argentina, eliminated certain energy subsidies and implemented an incentive plan (through discounts) for residential customers whose electric power consumption is at least 10.00% lower than their consumption for the same month of the previous year. These measures may have caused a reduction in energy demand in Argentina. Demand of electric energy decreased 2.3% in 2016, increased 2.7% in 2017, and decreased 2.5% and 2.16% in 2018 and 2019, respectively. We cannot ascertain as of the date of this annual report if such measures will have further effects on our revenues. Any significant increase in energy prices to consumers (whether through a tariff increase or through a cut in consumer subsidies) could result in a decline in demand for the energy that we generate. Any material adverse effect on electric power demand, in turn, could lead electric power generation companies, like us, to record lower revenues and results of operations than currently anticipated.
 
Argentina has certain energy transmission and distribution limitations that adversely affect the capacity of electric power generators to deliver all of the energy they are able to produce, which results in reduced sales
 
The energy that generators are able to deliver to the transmission system for the further delivery to the distribution system at all times depends on the capacity of the transmission and distribution systems that connects them to it. In the past, the transmission and distribution system operated at near full capacity and both transmission and distributors were not be able to guarantee an increased supply of electric power to their customers. In the past years, the increase in demand for electric power resulted in blackouts in Buenos Aires and other cities around Argentina, which resulted in excess capacity for generators. As a result, the amount of hydroelectric energy and thermal energy generated was larger than what the transmission and distribution systems are capable of transmitting or distributing. Any transmission or distribution limitation for generators could reduce the energy sold, which could adversely affect our financial condition.
 
Our equipment, facilities and operations are subject to environmental, health and safety regulations
 
Our generation business is subject to federal and provincial laws, as well as to the supervision of governmental agencies and regulatory authorities in charge of enforcing environmental laws and policies. We operate in compliance with applicable laws and in accordance with directives issued by the relevant authorities and CAMMESA; however, it is possible that we could be subject to controls, which could result in penalties to be imposed on us, such as the termination of the HPDA Concession Agreement. In addition, future environmental regulations could require us to make investments in order to comply with the requirements set by the authorities, instead of making other scheduled investments and, as a result, could have a material adverse effect on our financial condition and our results of operations.
 
We operate in a heavily regulated sector that imposes significant costs on our business, and we could be subject to fines and liabilities that could have a material adverse effect on our results of operations
 
We are subject to a wide range of federal, provincial and municipal regulations and supervision, including laws and regulations pertaining to tariffs, labor, social security, public health, consumer protection, the environment and competition. Furthermore, Argentina has 23 provinces and one autonomous city (the City of Buenos Aires), each of which, under the Argentine National Constitution, has power to enact legislation concerning taxes, environmental matters and the use of public space. Within each province, municipal governments can also have powers to regulate such matters. Although the generation of electric power is considered an activity of general interest (actividad de interés general) subject to federal legislation, due to the fact that our facilities are located throughout various provinces, we are also subject to provincial and municipal legislation. Future developments in the provinces and municipalities concerning taxes (including sales, security and health and general services taxes), environmental matters, the use of public space or other matters could have a material adverse effect on our business, results of operations and financial condition. Compliance with existing or future legislation and regulations could require us to make material expenditures and divert funds away from planned investments in a manner that could have a material adverse effect on our business, results of operations and financial condition.
 
In addition, our failure to comply with existing regulations and legislation, or reinterpretations of existing regulations and new legislation or regulations, such as those relating to fuel and other storage facilities, volatile materials, cyber security, emissions or air quality, hazardous and solid waste transportation and disposal and other environmental matters, or changes in the nature of the energy regulatory process may subject us to fines and penalties and have a significant adverse impact on our financial results.
 
 
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A cyberattack could adversely affect our business, balance sheet, results of operations and cash flow
 
We depend on the efficient and uninterrupted operation of our inter-plant communication systems, for which we have all our links redundant, providing greater security and minimizing the risks of outage. Additionally, we have redundant links with CAMMESA. Temporary or long-lasting failures of our inter-plant communication systems, including their links redundant, could have a material adverse effect on our operations. In general, information security risks have increased in recent years as a result of the proliferation of new and more sophisticated technologies and also due to cyberattack activities. As part of our development and initiatives, more equipment and systems have been connected to the Internet. We also rely on digital technology including information systems to process financial and operational information. Due to the critical nature of our infrastructure and our business and the increased accessibility allowed through the Internet connection, we could face an increased risk of cyberattacks such as computer break-ins, phishing, identity theft and other disruptions that could negatively affect the security of information stored in and transmitted through our computer systems and network infrastructure. In the event of a cyberattack, we could experience an interruption of our commercial operations, material damage and loss of customer information; a substantial loss of income, suffering response costs and other economic losses; and it could subject us to more regulation and litigation and damage to ou