Company Quick10K Filing
Edenor
20-F 2020-12-31 Filed 2021-04-26
20-F 2019-12-31 Filed 2020-04-27
20-F 2018-12-31 Filed 2019-04-30
20-F 2017-12-31 Filed 2018-04-27
20-F 2016-12-31 Filed 2017-04-28
20-F 2015-12-31 Filed 2016-04-28
20-F 2014-12-31 Filed 2015-05-12
20-F 2013-12-31 Filed 2014-04-28
20-F 2012-12-31 Filed 2013-04-30
20-F 2011-12-31 Filed 2012-04-26
20-F 2010-12-31 Filed 2011-06-14
20-F 2009-12-31 Filed 2010-06-08

EDN 20F Annual Report

Part I
Item 1. Identity of Directors, Senior Management and Advisors
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
Item 4. Information on The Company
Item 4A. Unresolved Staff Comments
Item 5. Operating and Financial Review and Prospects
Item 6. Directors, Senior Management and Employees
Item 7. Major Shareholders and Related Party Transactions
Item 8. Financial Information
Item 9. The Offer and Listing
Item 10. Additional Information
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 12. Description of Securities Other Than Equity Securities
Part II
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 16A. Audit Committee Financial Expert
Item 16B. Code of Ethics
Item 16C. Principal Accountant Fees and Services
Item 16D. Exemptions From The Listing Standards for Audit Committees
Item 16E. Purchases of Equity Securities By The Issuer and Affiliated Purchasers
Item 16F. Change in Registrant's Certifying Accountant
Item 16G. Corporate Governance
Item 16 H. Mine Safety Disclosures
Part III
Item 17. Financial Statements
Item 18. Financial Statements
Item 19. Exhibits
Note 1 | General Information
Note 2 | Regulatory Framework
Note 3 | Basis of Preparation
Note 4 | Accounting Policies
Note 4.1 | New Accounting Standards, Amendments and Interpretations Issued By The Iasb
Note 4.2 | Property, Plant and Equipment
Note 4.3 | Interests in Joint Ventures
Note 4.4 | Revenue Recognition
Note 4.5 | Effects of The Changes in Foreign Currency Exchange Rates
Note 4.6 | Trade and Other Receivables
Note 4.7 | Inventories
Note 4.8 | Financial Assets
Note 4.8.1 | Classification
Note 4.8.2 | Recognition and Measurement
Note 4.8.3 | Impairment of Financial Assets
Note 4.8.4 | Offsetting of Financial Instruments
Note 4.9 | Derivative Financial Instruments
Note 4.10 | Cash and Cash Equivalents
Note 4.11 | Equity
Note 4.12 | Trade and Other Payables
Note 4.13 | Borrowings
Note 4.14 | Deferred Revenue
Note 4.15 | Employee Benefits
Note 4.16 | Income Tax and Tax on Minimum Presumed Income
Note 4.17 | Lease of Use
Note 4.18 | Provisions and Contingencies
Note 4.19 | Balances with Related Parties
Note 4.20 | Higher Costs and Income Recognition
Note 5 | Financial Risk Management
Note 5.1 | Financial Risk Factors
Note 5.2 | Concentration Risk Factors
Note 5.3 | Capital Risk Management
Note 5.4 | Regulatory Risk Factors
Note 5.5 | Fair Value Estimate
Note 6 | Critical Accounting Estimates and Judgments
Note 7 | Interest in Joint Venture
Note 8 | Contingent and Lawsuits
Note 9 | Property, Plant and Equipment
Note 10 | Financial Instruments
Note 10.1 | Financial Instruments By Category
Note 10.2 | Credit Quality of Financial Assets
Note 11 | Other Receivables
Note 12 | Trade Receivables
Note 13 | Financial Assets At Fair Value Through Profit or Loss
Note 14 | Financial Assets At Amortized Cost
Note 15 | Inventories
Note 16 | Cash and Cash Equivalents
Note 17 | Share Capital and Additional Paid-In Capital
Note 18 | Allocation of Profits
Note 19 | Trade Payables
Note 20 | Other Payables
Note 21 | Deferred Revenue
Note 22 | Borrowings
Note 23 | Salaries and Social Security Taxes
Note 24 | Benefit Plans
Note 25 | The Company's Share-Based Compensation Plan
Note 26 | Income Tax and Tax on Minimum Presumed Income / Deferred Tax
Note 27 | Income Tax / Tax on Minimum Presumed Income Payable, Net
Note 28 | Tax Liabilities
Note 29 | Lease of Use
Note 30 | Provisions
Note 31 | Revenue From Sales
Note 32 | Expenses By Nature
Note 33 | Other Operating Expense, Net
Note 34 | Net Financial Expense
Note 35 | Basic and Diluted Earnings (Loss) per Share
Note 36 | Related-Party Transactions
Note 37 | Trust for The Management of Electric Power Transmission Works
Note 38 | Electric Works Arrangement - Agreement for The Supply of Electric Power To Mitre and Sarmiento Railway Lines
Note 39 | Construction Works - San Miguel and San MartíN Transformer Centers
Note 40 | Agreement for The Execution of Works - La Matanza Municipality
Note 41 | Request for Removal of Facilities To Carry Out Expansion Works in Jorge Newbery Airport Southern Head Station
Note 42 | Safekeeping of Documentation
Note 43 | Parent Company Merger Process
Note 44 | Ordinary and Extraordinary Shareholders' Meeting
EX-12.1 exhibit12_1.htm
EX-12.2 exhibit12_2.htm
EX-13.1 exhibit13_1.htm

Edenor Earnings 2017-12-31

Balance SheetIncome StatementCash Flow

20-F 1 ednaform-20f.htm 20-F ednaform-20f.htm - Generated by SEC Publisher for SEC Filing  

As filed with the Securities and Exchange Commission on April 26, 2018

 

 UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017 Commission File Number: 001-33422

Empresa Distribuidora y Comercializadora Norte S.A.
(Exact name of Registrant as specified in its charter)

Distribution and Marketing Company of the North S.A.

Argentine Republic

(Translation of Registrant’s name into English)

(Jurisdiction of incorporation or organization)

Avenida Del Libertador 6363

Ciudad de Buenos Aires, C1428ARG

Buenos Aires, Argentina
(Address of principal executive offices)

Leandro Montero

Tel.: +54 11 4346 5510 / Fax: +54 11 4346 5325 Avenida Del Libertador 6363 (C1428ARG)
Buenos Aires, Argentina

Chief Financial Officer

(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:

Name of each exchange on which registered

Class B Common Shares

New York Stock Exchange, Inc.*

American Depositary Shares, or ADSs, evidenced by American Depositary Receipts, each representing 20 Class B Common Shares

New York Stock Exchange, Inc.

*    Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

__________

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: N/A

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: 462,292,111 Class A Common Shares, 442,210,385 Class B Common Shares and 1,952,604 Class C Common Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨ No x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934.  Yes ¨ No x

Note:  Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every

Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T 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 the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer

¨

Accelerated Filer

x

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 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 by the International Accounting Standards Board
x Other ¨


 
 

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 by Rule 12b-2 of the Exchange Act).  Yes ¨ No x


 

 

PART I

Item 1.

Identity of Directors, Senior Management and Advisors

1

Item 2.

Offer Statistics and Expected Timetable

1

Item 3.

Key Information

1

Item 4.

Information on the Company

37

Item 4A.

Unresolved Staff Comments

73

Item 5.

Operating and Financial Review and Prospects

73

Item 6.

Directors, Senior Management and Employees

114

Item 7.

Major Shareholders and Related Party Transactions

126

Item 8.

Financial Information

131

Item 9.

The Offer and Listing

137

Item 10.

Additional Information

141

Item 11.

Quantitative and Qualitative Disclosures about Market Risk

164

Item 12.

Description of Securities Other than Equity Securities

166

 

 

 

PART II

Item 13.

Defaults, Dividend Arrearages and Delinquencies

167

Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds

167

Item 15.

Controls and Procedures

167

Item 16A.

Audit Committee Financial Expert

168

Item 16B.

Code of Ethics

169

Item 16C.

Principal Accountant Fees and Services

169

Item 16D.

Exemptions from the Listing Standards for Audit Committees

169

Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

169

Item 16F.

Change in Registrant’s Certifying Accountant

169

Item 16G.

Corporate Governance

169

Item 16H.

Mine Safety Disclosures

174

 

 

 

PART III

Item 17.

Financial Statements

175

Item 18.

Financial Statements

175

Item 19.

Exhibits

175

 

 

 

Index to Financial Statements

F-1

 

 

 


 
 

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

In this annual report, except as otherwise specified, references to “we”, “us”, “our” and “the Company” are references to (i) Empresa Distribuidora y Comercializadora Norte S.A., or “Edenor”, on a standalone basis prior to March 1, 2011, (ii) Edenor, Empresa Distribuidora Eléctrica Regional S.A. (“Emdersa”) and Aeseba S.A. (“Aeseba”), between March 1, 2011 and March 31, 2013, (iii) Edenor and Emdersa, between March 1, 2011 and September 30, 2013, and (iv) Edenor on a standalone basis, from October 1, 2013 through the date of filing of this annual report. References to Edenor, Emdersa and/or Aeseba on a standalone basis are made by naming each company as the case may be. For more information, see “Item 4Information on the CompanyHistory and Development of the Company.”

 

FORWARD‑LOOKING STATEMENTS

This annual report includes forward‑looking statements, principally under the captions “Item 3. Key Information - Risk Factors”, “Item 4. Information on the Company” and “Item 5. Operating and Financial Review and Prospects”. We have based these forward‑looking statements largely on our current beliefs, expectations and projections about future events and financial trends affecting our business.  Forward‑looking statements may also be identified by words such as “believes”, “expects”, “anticipates”, “projects”, “intends”, “should”, “seeks”, “estimates”, “future” or similar expressions. Many important factors, in addition to those discussed elsewhere in this annual report, could cause our actual results to differ materially from those expressed or implied in our forward‑looking statements, including, among other things:

·         The treatment of pending obligations to the RTI;

·         uncertainties related to future Government interventions or legal actions;

·         general political, economic, social, demographic and business conditions in the Republic of Argentina, or “Argentina” and particularly in the geographic market we serve;

·         the evolution of energy losses and the impact of fines and penalties and uncollectable debt;

·         the impact of regulatory reform and changes in the regulatory environment in which we operate;

·         electricity shortages;

·         potential disruption or interruption of our service;

·         the revocation or amendment of our concession by the granting authority;

·         our ability to implement our capital expenditure plan, including our ability to arrange financing when required and on reasonable terms;

·         fluctuations in exchange rates, including a devaluation of the Peso;

·         the impact of high rates of inflation on our costs; and,

·         additional matters identified in “Risk factors”.

                                                 

 


 
 

Forward‑looking statements speak only as of the date they were made, and we undertake no obligation to update publicly or to revise any forward‑looking statements after we file this annual report because of new information, future events or other factors. In light of these limitations, undue reliance should not be placed on forward‑looking statements contained in this annual report.

SELECTED FINANCIAL DATA

The following tables present our summary financial data for the years ended December 31, 2017, 2016, 2015, 2014 and 2013. This information should be read in conjunction with our audited financial statements as of December 31, 2017 and 2016 and for each of the three years in the period ended December 31, 2017 (the Financial Statements”), the related notes thereto and the information under “Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report. The financial data as of December 31, 2017, have been derived from our Financial Statements.

Our Financial Statements have been prepared in accordance with International Financing Reporting Standards (“IFRSˮ), as issued by the International Accounting Standards Board (“IASBˮ), and these have been approved by resolution of the board of directors’ meeting held on March 7, 2018.  See “Item 18—Financial Statements.

The selected statement of comprehensive income (loss) data for the years ended December 31, 2017, 2016 and 2015, and the selected statement of financial position data as of December 31, 2017 and 2016 have been prepared in accordance with IFRS, as issued by the IASB, and have been derived from our financial statements, which were audited by Price Waterhouse & Co. S.R.L. (“PwC”), member firm of PricewaterhouseCoopers network. The financial data as of December 31, 2015, 2014 and 2013 is derived from our audited consolidated financial statements that are not included in this annual report, which were also audited by PwC. The selected consolidated statement of comprehensive income (loss) for the year ended December 31, 2014 and 2013, and the selected consolidated statement of financial position as of December 31, 2015, 2014 and 2013, have been prepared in accordance with IFRS as issued by the IASB, and have been derived from our audited financial statements that are not included in this annual report, which were audited by Price Waterhouse & Co. S.R.L., member firm of PricewaterhouseCoopers network, an independent registered public accounting firm.

Our financial statements are stated in Argentine pesos, our functional currency. IAS 29 (Financial Reporting in Hyperinflationary Economies) requires that the financial statements of an entity whose functional currency is the currency of a hyperinflationary economy, whether they are based on the historical cost method or the current cost method, be stated in terms of the measuring unit current at the closing date of the reporting year. For such purpose, in general terms, the inflation produced from the acquisition date or the revaluation date, as applicable, must be computed in non-monetary items. In order to conclude whether the economy is a hyperinflationary economy, the standard details a series of factors to be considered, among which the existence of a cumulative inflation rate over three years that approaches or exceeds 100% is included. Taking into consideration the inconsistency of the published inflation data, the downward trend of the level of inflation, the fact that the other indicators are insufficient to reach a definite conclusion, and the fact that the current legal framework does not allow for the filing with control authorities of inflation-adjusted financial statements, and in line with the International Practices Task Force’s conclusion, there is insufficient evidence to conclude that Argentina is a hyperinflationary economy as of December 31, 2017. Therefore, the restatement criteria established in IAS 29 have not been applied during the prior year and we have not restated our audited financial statements.

Although the Argentine economy does not currently meet the necessary conditions to qualify as a hyperinflationary economy in accordance with IAS 29, and taking into account the legal and regulatory limitations imposed by professional bodies and control authorities for the preparation of adjusted financial statements as of December 31, 2017, certain macroeconomic variables that affect the Company’s business, such as salary costs and the prices of supplies, have suffered somewhat important annual variations, a circumstance that must be taken into account when evaluating and interpreting the Company’s financial position and results of operations in these financial statements.

We believe that the measures adopted by the Argentine Government during 2016 to stabilize electricity rates throughout the energy sector, together with the implementation of the RTI process beginning on February 1, 2017, will have a positive impact on our operating and financial results. Our board of directors is optimistic that the new tariff schedule (set in force by Resolution No. 63/17 of the ENRE) will establish a regulatory framework with clear and precise rules, which will make possible for us not only to cover our operation costs, afford our investment plans and meet debt interest payments, but also to deal with the impact of the different variables that affect our business from time to time.

Despite the progress achieved in relation to the completion of the RTI process, as of this annual report, the definitive treatment to be given by the ME&M to all the issues resulting from the non-compliance with the Adjustment Agreement, including the remaining balances and other effects caused by the partial measures adopted under the RTI process, has yet to be defined. These issues, include, among others:

·         the treatment to be given to the funds received from the Argentine Government through the loans for consumption (mutuums) agreements entered into with Compañía Administradora del Mercado Mayorista Eléctrico (“CAMMESA”) for the fulfillment of the Extraordinary Investment Plan, granted to cover the insufficiency of the FOCEDE’s funds;

·         the conditions for the settlement of the balance outstanding with CAMMESA at the date of issuance of SEE Resolution No. 32/15; and

·         the treatment to be given to the Penalties and Discounts determined by the ENRE, whose payment/crediting is pending.

 

 

 

 
 

On April 26, 2017, we were notified by Note No 2016-01193748 that the ME&M decided that the SEE, with the support of the Under-Secretariat for Tariff Policy Coordination and the ENRE, would be responsible for determining (within a period of 120 days) whether any pending obligations under the Adjustment Agreement remained outstanding as of the effective date of the applicable electricity tariff schedules resulting from the implementation of the RTI process. If any such obligations remained outstanding, the treatment to be given to those obligations was also to be determined by the SEE as described above. The Company has submitted the information requested by the ME&M as part of its efforts to comply with these requirements. However, as of the date of this annual report, due to the fact that a definitive decision on the treatment of these obligations is still pending, the Company started negotiations with the SEE thereon.

On January 31, 2017, the ENRE issued Resolution No. 63/17, pursuant to which it implemented the definitive electricity rate schedules, the cost review mechanism, the required quality levels, and all the other rights and obligations that we must comply with as of February 2017. The aforementioned regulation was amended by the ENRE by means of the issuance of Resolutions Nos. 81/17, 82/17, and 92/17, and Note No. 124,898. Pursuant to Resolution No. 63/17, the ENRE, as instructed by the ME&M, shall limit the increase in the VAD resulting from the RTI process and applicable as from February 1, 2017, to a maximum of 42% vis-á-vis the VAD in effect at the date of issuance of the aforementioned resolution, with the remaining value of the new VAD being applied in two stages, the first of them in November 2017 and the second in February 2018.

In addition, the ENRE recognized and allowed the Company to bill the VAD difference arising as a consequence of the gradual application of the tariff increase recognized in the RTI in 48 installments as from February 1, 2018, which was incorporated into the VAD’s value resulting as of that date. As of December 31, 2017, the amount arising from such deferred income and not recognized by the Company in these financial statements amounts approximately to Ps. 4.9 billion, before indexing.

Moreover, Resolution No. 63/17 sets forth the procedure for determining the mechanism for monitoring the variation of the CPD, whose “trigger clause” will be applicable when the variation recorded in the six-month period being controlled exceeds 5%. In August 2017, upon meeting the conditions precedent to the application of trigger clauses, the Company requested that it be allowed to apply the variation recorded in the CPD in the first January–June 2017 six-month control period, which amounted to 11.63%.

Additionally, ENRE Resolution No. 329/17 provides the procedure to be applied for the billing of the deferred income, stating that those amounts will be adjusted as of February 2018, applying for such purpose the methodology for the redetermination of the Company’s recognized own distribution costs set forth in caption c2) of Sub-Appendix II to Resolution No. 63/17, and billed in 48 installments as from February 1, 2018..

On November 30, 2017, by means of Resolution No. 603/17, the ENRE approved the CPD values, applicable as from December 1, 2017, and retroactively to consumption recorded in the months of August through November 2017. That amount totals Ps. 753.9 million and was billed in two installments, December 2017 and January 2018. Additionally, the resolution approved Company’s electricity rate schedule applicable to consumption recorded as from December 1, 2017.

On January 31, 2018, the ENRE issued Resolution No. 33/18 whereby it approved the values of CPD, the values of the monthly installment to be applied in accordance with the provisions of ENRE Resolution No. 329/17, and the values of the Company’s electricity rate schedule applicable to consumption recorded as of February 1, 2018. Additionally, it provided that the average electricity rate value amounts to 2.4627 Ps./KWh.

Our Financial Statements are included in this annual report beginning on page F-1

 

 

 


 

In accordance with the decision of our board of directors to divest and sell the subsidiary Aeseba as of March 31, 2013 and the subsidiaries Emdersa Holding S.A. (“Emdersa Holding” or “EHSA”), including Emdersa and its subsidiaries, Empresa Distribuidora de San Luis S.A. (“Edesal”), Empresa Distribuidora de La Rioja S.A. (“Edelar”), Empresa Distribuidora de Salta S.A. (“Edesa”) and Emdersa Generación Salta S.A. (“EGSSA”), as of December 31, 2011, we have classified the corresponding assets and liabilities associated to these subsidiaries in the consolidated financial statements as of December 31, 2013, 2012 and 2011 as “Assets of disposal groups classified as held for sale” and “Liabilities of disposal groups classified as held for sale”. As of April 5, 2013, the Company sold its stake in Aeseba. The corresponding charges to results have been included within “Loss from Discontinued operations” line item in our consolidated statements of comprehensive loss for the year ended December 31, 2013.

 

In this annual report, except as otherwise specified, references to “$”, “U.S.$” and “Dollars” are to U.S. Dollars, and references to “Ps.” and “Pesos” are to Argentine Pesos.  Solely for the convenience of the reader, Peso amounts as of and for the year ended December 31, 2017 have been translated into U.S. Dollars at the selling exchange rate for U.S. Dollars quoted by Banco de la Nación Argentina (the “Banco Nación”) on December 31, 2017, which was Ps. 18.649 to U.S.$ 1.00, unless otherwise indicated. The U.S. Dollar equivalent information should not be construed to imply that the Peso amounts represent, or could have been or could be converted into, U.S. Dollars at such rates or any other rate. See “Item 3. Key Information—Exchange Rates” and “Item 3.  Key Information—Risk Factors—Risks Relating to Argentina—Fluctuations in the value of the Peso could adversely affect the Argentine economy, and, in turn adversely affect our results of operations.”

Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, any discrepancies between the totals and the sums of amounts are due to rounding.

Statement of comprehensive income (loss) *

 

 

2017

 

2017

 

2016

 

2015

 

2014

 

2013

 

 

 US$

 

 Ps.

 

 Ps.

 

 Ps.

 

 Ps.

 

 Ps.

Continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

Revenue from sales  (1)

 

           1.305,2

 

         24.340,0

 

         13.079,6

 

           3.802,2

 

           3.598,4

 

           3.440,7

Electric power purchases

 

            (687,7)

 

       (12.825,6)

 

         (6.060,3)

 

         (2.022,0)

 

         (1.878,1)

 

         (2.050,3)

Subtotal

 

             617,5

 

       11.514,4

 

          7.019,3

 

          1.780,2

 

          1.720,3

 

          1.390,4

Transmission and distribution expenses

 

            (258,9)

 

         (4.828,9)

 

         (6.147,2)

 

         (3.153,7)

 

         (2.825,1)

 

         (2.055,3)

 Gross income (Loss)

 

             358,6

 

          6.685,5

 

             872,1

 

       (1.373,5)

 

       (1.104,8)

 

          (664,9)

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling expenses

 

            (111,5)

 

         (2.078,9)

 

         (1.616,7)

 

            (832,8)

 

            (657,9)

 

            (548,3)

Administrative expenses

 

              (77,8)

 

         (1.450,6)

 

         (1.162,3)

 

            (706,1)

 

            (496,8)

 

            (324,8)

Other operating income

 

                  5,2

 

                97,1

 

                87,9

 

                80,0

 

                53,2

 

                62,3

Other operating expense

 

              (40,7)

 

            (758,5)

 

            (463,9)

 

            (502,5)

 

            (318,7)

 

            (142,8)

Gain from acquisition of companies

 

                      -

 

                      -

 

                      -

 

                      -

 

                      -

 

                      -

Operating profit (loss) before SE Resolution 250/13 and subsequent Notes

 

133,8

 

          2.494,6

 

       (2.283,0)

 

       (3.334,9)

 

       (2.525,0)

 

       (1.618,5)

Recognition of income – provisional remedies – MEyM Note 2016-04484723

 

                      -

 

                      -

 

           1.125,6

 

                      -

 

                      -

 

                      -

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

 

                      -

 

                      -

 

              419,7

 

           5.025,1

 

                      -

 

                      -

Higher costs recognition - SE Resolution 250/13 and subsequents Notes

 

                      -

 

                      -

 

                81,5

 

              551,5

 

           2.271,9

 

           2.933,1

Operating profit (loss)

 

             133,8

 

          2.494,6

 

          (656,1)

 

          2.241,7

 

          (253,1)

 

          1.314,6

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial income

 

                14,6

 

              272,3

 

              196,8

 

                96,2

 

              235,5

 

              287,1

Financial expenses  (2)

 

              (82,7)

 

         (1.541,5)

 

         (1.444,9)

 

            (450,0)

 

            (592,0)

 

            (504,9)

Other financial expense

 

                (5,5)

 

            (101,9)

 

              (27,5)

 

            (561,7)

 

            (324,5)

 

            (273,1)

Net financial expense

 

             (73,6)

 

       (1.371,1)

 

       (1.275,6)

 

          (915,5)

 

          (681,0)

 

          (490,9)

Profit (loss) before taxes

 

               60,2

 

          1.123,5

 

       (1.931,7)

 

          1.326,2

 

          (934,1)

 

             823,7

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax

 

              (23,7)

 

            (441,2)

 

              743,1

 

            (183,8)

 

              154,4

 

                44,1

Profit (loss) for the year from continuing operations

 

36,5

 

             682,3

 

       (1.188,7)

 

          1.142,4

 

          (779,7)

 

             867,8

 

 

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

 

 

 

 

                      -

 

                      -

 

                      -

 

              (95,1)

Profit (loss) for the year

 

36,5

 

             682,3

 

       (1.188,7)

 

          1.142,4

 

          (779,7)

 

             772,7

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit (loss) for the year attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

Owners of the Company

 

                36,5

 

              682,3

 

         (1.188,7)

 

           1.142,4

 

            (779,7)

 

              771,7

Non-controlling interests

 

                      -

 

                      -

 

                      -

 

                      -

 

                      -

 

                  1,0

Profit (loss) for the year

 

36,5

 

             682,3

 

       (1.188,7)

 

          1.142,4

 

          (779,7)

 

             772,7

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit (Loss) for the year attributable to the owners of the parent

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

                36,5

 

              682,3

 

         (1.188,7)

 

           1.142,4

 

            (779,7)

 

              867,9

Discontinued operations

 

                      -

 

                      -

 

                      -

 

                      -

 

                      -

 

              (96,2)

 

 

               36,5

 

             682,3

 

       (1.188,7)

 

          1.142,4

 

          (779,7)

 

             771,7

 

 

 

 


Statement of comprehensive income (loss) * (continued)

    2017   2017   2016   2015   2014   2013
     US$     Ps.     Ps.     Ps.     Ps.     Ps. 
Other comprehensive income                        
Items that will not be reclassified to profit or loss                        
Results related to benefit plans   0,8   14,0   7,8   (3,7)   (17,8)   (21,0)
Tax effect of actuarial (losses) income on benefit plans   (0,3)   (4,9)   (2,7)   1,3   6,2   7,4
Total other comprehensive income (loss)    0,5   9,1   5,1    (2,4)    (11,6)    (13,6)
                         
                         
                         
Comprehensive income for the year attributable to:                        
Owners of the parent    37,1   691,3     (1.183,6)    1.140,0   (791,3)   758,1
Non-controlling interests       -       -       -       -       -   1,0
Comprehensive income (loss) for the year    37,1    691,3   (1.183,6)   1.140,0   (791,3)    759,1
                         
Profit (loss) for the year attributable to the owners of the parent                        
Continuing operations   37,1   691,3     (1.183,6)    1.140,0   (791,3)   757,1
Discontinued operations       -       -       -       -       -   1,0
     37,1    691,3   (1.183,6)   1.140,0   (791,3)    758,1
                         
Basic and diluted earnings (loss) per share:                        
Basic and diluted earnings (loss) per share from continuing operations   0,041   0,76   (1,33)   1,27   (0,87)   0,97
Basic and diluted earnings (loss) per share from discontinued operations       -       -       -       -       -   (0,11)
                         
Basic and diluted earnings (loss) per ADS (3):                        
Basic and diluted earnings (loss) per ADS from continuing operations   0,825   15,39   (26,60)   25,40   (17,40)   19,40
Basic and diluted earnings (loss) per ADS from discontinued operations       -       -       -       -       -   (2,20)

 

(*)      Certain amounts of the presented financial data for comparative purposes have been reclassified (with regard to the financial statements as of such dates) following the disclosure criteria used for the financial statements as of December 31, 2017.

(1)     Revenue from operations is recognized on an accrual basis and derives mainly from electricity distribution. Such revenue includes electricity supplied, whether billed or unbilled, at the end of each year.

(2)     Net of interest capitalized at December 31, 2017, 2016, 2015, 2014 and 2013 for Ps. 234 million, Ps. 189.7 million, Ps. 255.9 million, Ps. 123.9 million and Ps. 24.5 million, respectively.

(3)     Each ADS represents 20 Class B common shares.

 

 

 


Statement of financial position

 

 

 

2017

 

2017

 

2016

 

2015

 

2014

 

2013

 

 

 US$

 

 Ps.

 

 Ps.

 

 Ps.

 

 Ps.

 

 Ps.

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

               794.3

 

          14,812.0

 

          11,197.0

 

            8,885.8

 

            6,652.5

 

            5,189.3

Interest in joint ventures

 

                      -

 

                   0.4

 

                   0.4

 

                   0.4

 

                   0.4

 

                   0.4

Deferred tax asset

 

                 63.6

 

            1,187.0

 

            1,019.0

 

                 50.0

 

                 87.2

 

                      -

Other receivables

 

                   2.3

 

                 42.4

 

                 50.5

 

               153.8

 

               249.2

 

               199.4

Financial assets at amortized cost

 

                      -

 

                      -

 

                 44.4

 

                      -

 

                      -

 

                      -

Financial assets at fair value through profit or loss

 

                      -

 

                      -

 

                      -

 

                 23.6

 

                      -

 

                      -

Total non-current assets

 

             860.2

 

        16,041.8

 

        12,311.4

 

          9,113.6

 

          6,989.3

 

          5,389.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

                 21.0

 

               391.9

 

               287.8

 

               134.9

 

                 74.0

 

                 83.9

Other receivables

 

                 10.8

 

               200.6

 

               179.3

 

            1,079.8

 

               250.3

 

               522.1

Trade receivables

 

               304.5

 

            5,678.9

 

            3,901.1

 

               963.0

 

               882.9

 

               803.1

Financial assets at fair value through profit or loss

 

               155.4

 

            2,897.3

 

            1,993.9

 

            1,560.4

 

               254.4

 

               216.4

Financial assets at amortized cost

 

                   0.6

 

                 11.5

 

                   1.5

 

                      -

 

                      -

 

                      -

Derivative financial instruments

 

                      -

 

                      -

 

                      -

 

                   0.2

 

                      -

 

                      -

Cash and cash equivalents

 

                   4.4

 

                 82.9

 

               258.6

 

               129.0

 

               179.1

 

               243.5

Total current assets

 

             496.7

 

          9,263.1

 

          6,622.2

 

          3,867.3

 

          1,640.7

 

          1,869.0

TOTAL ASSETS

 

          1,356.9

 

        25,304.9

 

        18,933.5

 

        12,980.9

 

          8,630.0

 

          7,258.1

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Capital and reserves attributable to the owners

 

 

 

 

 

 

 

 

 

 

 

 

Share capital

 

                 48.2

 

               898.7

 

               897.0

 

               897.0

 

               897.0

 

               897.0

Adjustment to share capital

 

                 21.4

 

               399.5

 

               397.7

 

               397.7

 

               397.7

 

               397.7

Additional paid-in capital

 

                   1.7

 

                 31.6

 

                   3.5

 

                   3.5

 

                   3.5

 

                   3.5

Treasury stock

 

                   0.4

 

                   7.8

 

                   9.4

 

                   9.4

 

                   9.4

 

                   9.4

Adjustment to treasury stock

 

                   0.5

 

                   8.6

 

                 10.3

 

                 10.3

 

                 10.3

 

                 10.3

Legal reserve

 

                   3.9

 

                 73.3

 

                 73.3

 

                      -

 

                      -

 

                      -

Opcional reserve

 

                   9.4

 

               176.1

 

               176.1

 

                      -

 

                      -

 

                      -

Other reserve

 

                      -

 

                      -

 

                 20.3

 

                      -

 

                      -

 

                      -

Other comprehensive (loss) income

 

                (1.5)

 

              (28.1)

 

              (37.2)

 

              (42.3)

 

              (39.9)

 

              (28.3)

Accumulated deficit

 

              (27.2)

 

            (506.5)

 

         (1,188.6)

 

               249.4

 

            (893.0)

 

            (113.3)

TOTAL EQUITY

 

                56.8

 

          1,061.0

 

             361.8

 

          1,525.0

 

             385.0

 

          1,176.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Trade payables

 

                 12.9

 

               240.9

 

               232.9

 

               225.0

 

               231.1

 

               220.8

Other payables (1)

 

               323.6

 

            6,034.2

 

            5,103.3

 

            2,391.9

 

            1,644.6

 

               944.7

Borrowings

 

               224.8

 

            4,191.7

 

            2,769.6

 

            2,461.0

 

            1,598.4

 

            1,309.9

Deferred revenue

 

                 10.4

 

               194.6

 

               200.0

 

               153.8

 

               109.1

 

                 33.7

Salaries and social security taxes payable

 

                   6.4

 

               119.7

 

                 94.3

 

                 80.0

 

                 62.9

 

                 26.0

Benefit plans

 

                 17.4

 

               323.6

 

               266.1

 

               204.4

 

               150.4

 

               102.7

Deferred tax liability

 

                      -

 

                      -

 

                      -

 

                      -

 

                      -

 

                 73.4

Tax liabilities

 

                      -

 

                      -

 

                   0.7

 

                   1.9

 

                   3.2

 

                   4.4

Provisions

 

                 32.1

 

               598.1

 

               341.4

 

               259.6

 

               112.1

 

                 83.1

Total non-current liabilities

 

             627.6

 

        11,702.8

 

          9,008.3

 

          5,777.6

 

          3,911.8

 

          2,798.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Trade payables

 

               493.1

 

            9,195.3

 

            6,821.1

 

            4,475.4

 

            3,299.6

 

            2,481.2

Other payables (1)

 

                 19.9

 

               370.4

 

               134.8

 

               151.7

 

               187.1

 

               147.2

Borrowings

 

                   3.8

 

                 71.2

 

                 53.7

 

                 48.8

 

                 34.0

 

                 40.6

Derivative financial instruments

 

                      -

 

                   0.2

 

                      -

 

                      -

 

                   5.9

 

                      -

Deferred revenue

 

                   0.2

 

                   3.4

 

                   0.8

 

                   0.8

 

                   0.8

 

                      -

Salaries and social security taxes payable

 

                 65.4

 

            1,219.6

 

            1,032.2

 

               733.1

 

               610.6

 

               420.9

Benefit plans

 

                   1.7

 

                 31.4

 

                 33.4

 

                 28.3

 

                 10.6

 

                      -

Tax payable

 

                 25.0

 

               466.7

 

               155.2

 

                 16.3

 

                      -

 

                      -

Tax liabilities

 

                 56.5

 

            1,053.5

 

            1,244.5

 

               153.4

 

               160.5

 

               182.5

Provisions

 

                   6.9

 

               129.3

 

                 87.9

 

                 70.5

 

                 24.1

 

                 10.7

Total current liabilities

 

             672.5

 

        12,541.0

 

          9,563.4

 

          5,678.3

 

          4,333.2

 

          3,283.1

TOTAL LIABILITIES

 

          1,300.1

 

        24,243.8

 

        18,571.7

 

        11,455.9

 

          8,245.0

 

          6,081.8

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

 

          1,356.9

 

        25,304.8

 

        18,933.5

 

        12,980.9

 

          8,630.0

 

          7,258.1

 

 

(1)    Includes the amounts collected through the Program for the Rational Use of Electricity Power (PUREE). As of December, 31, 2014 and 2013 net of Ps. 2,235.1 million and Ps. 1,661.1 million, respectively, compensated pursuant to Resolution No. 250/2013 and Notes 6,852/2013, 4,012/14, 486/14 and 1,136/14, which as of December 31, 2014 and 2013 to Ps. 17.5 million and Ps. 108.6 million, respectively, included under current and non-current liabilities. Edenor was permitted to retain funds from the PUREE that it would otherwise be required to transfer to CAMMESA according to Resolution No. 1,037/07 of the SE. Since the issuance of Resolution No. 32/15, the PUREE funds are considered part of Edenor’s income on account of the future RTI. ME&M Resolution No. 7/16, SEE Resolution No. 32/15 was repealed and the ENRE was instructed to adopt measures, within its field of competence, to finish the RTI. This resolution granted the Company a temporary increase in income, recorded on February 2015 on the RTI account line item, in order for the Company to cover the expenses and afford the investments associated with the normal provision of electricity service.

 

 

 

 


 

Statement of Cash flows

 

    2017   2017   2016   2015   2014   2013
     US$     Ps.     Ps.     Ps.     Ps.     Ps. 
Cash flows from operating activities                        
Profit (Loss) for the year   36,6   682,2     (1.188,6)       1.142,4   (779,7)   772,7
Adjustments to reconcile net profit (loss) to net cash flows provided by operating activities:                        
Depreciation of property, plant and equipment   23,1   430,3   351,6   281,4   237,6   212,1
Loss on disposals of property, plant and equipment   0,6   10,5   40,5   3,5   1,0   1,2
Net accrued interest   68,0       1.268,0       1.244,9   333,7   341,0   196,6
Exchange differences   20,5   382,0   417,7   894,8   427,9   365,8
Income tax   23,7   441,2   (743,1)   183,7   (154,4)   (44,1)
Allowance for the impairment of trade and other receivables, net of recovery   12,6   235,1   227,7   24,1   19,7   33,7
Adjustment to present value of receivables   -   0,3   (2,9)   (5,4)   (8,1)   (2,4)
Provision for contingencies   18,1   338,0   151,0   226,4   75,4   36,0
Other expenses - FOCEDE   -   -   14,7   59,6   97,7   -
Changes in fair value of financial assets   (15,9)   (296,3)   (404,2)   (323,6)   (67,6)   (16,1)
Accrual of benefit plans   5,8   107,8   105,4   89,3   51,4   22,5
Higher costs recognition - SEE Resolution 250/13 and subsequents Notes   -   -   (81,5)   (551,5)     (2.271,9)     (2.933,1)
Income recognition on account of the RTI - SEE Resolution 32/15   -   -   (419,7)   (495,5)   -   -
Recognition of income – provisional remedies – MINEM Note 2016-04484723   -   -     (1.125,6)   -   -   -
Net gain from the repurchase of Corporate Bonds   -   -   -   -   (44,4)   (88,9)
Income from non-reimbursable customer contributions   (0,2)   (2,8)   (0,8)   (0,8)   -   -
Other reserve constitution - Share bases compensation plan   0,4   7,8   20,3   -   -   -
Discontinued operations   -   -   -   -   -   168,6
Changes in operating assets and liabilities:                         
Increase in trade receivables    (93,8)     (1.748,5)     (2.973,8)   (40,6)   (55,3)   (48,5)
Decrease (Increase) in other receivables    1,0   19,0       1.063,5   375,6   (134,7)   (111,7)
(Increase) Decrease in inventories   (1,2)   (23,2)   (152,9)   (60,9)   9,9   (42,7)
Increase in deferred revenue   -   -   46,9   45,5   76,2   (0,7)
Increase (Decrease) in trade payables    81,1       1.513,0       2.780,9   660,8   (528,4)   (87,0)
Increase in salaries and social security payable   11,4   213,2   313,3   139,7   226,7   95,3
Decrease in benefit plans   (2,1)   (38,3)   (30,8)   (21,2)   (11,0)   (7,9)
(Decrease) Increase in tax liabilities   (13,3)   (248,3)   990,2   (141,0)   (28,7)   (44,9)
Increase (Decrease) in other payables   15,9   296,8       2.338,4   (62,1)   262,3   262,0
Funds obtained from the program for the rational use of electric power (PUREE) (SE Resolution No. 1037/07)   -   -   -   25,6   482,9   491,9
Decrease in provisions   (2,1)   (39,9)   (51,8)   (32,6)   (33,0)   (25,3)
Payment of Tax payable   (14,2)   (264,6)   -   -   -   -
Subtotal before variations of debts with Cammesa    176,0      3.283,3      2.931,4      2.751,0   (1.807,4)      (794,9)
Increase in account payables with Cammesa   -   -   -   251,0       2.974,9       2.231,5
Net cash flows provided by operating activities    176,0      3.283,3      2.931,4      3.002,0      1.167,4      1.436,5
                         
Cash flows from investing activities                        
Payment of property, plant and equipment    (194,8)     (3.632,2)     (2.474,6)     (2.095,5)     (1.400,1)   (892,4)
Net (payment for) collection of purchase / sale of financial assets at fair value   (24,2)   (450,6)   89,1     (1.012,0)   (64,6)   (97,4)
Collection of financial receivables with related companies -   -   -   -   -   2,1
Collection of receivables from sale of subsidiaries 1,9   36,3   12,0   4,3   3,0   2,9
Discontinued operations    -   -   -   -   -   (124,2)
Net cash flows used in investing activities      (217,1)   (4.046,5)   (2.373,5)   (3.103,2)   (1.461,7)   (1.109,0)

 

(1)       Includes the increase in account payable with CAMMESA. As of December 31, 2015, 2014 and 2013, amounted to Ps. 251.0, Ps. 2,974.9 and Ps. 2,231.5, respectively. See “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Sources and uses of Funds”.

 


 

Statement of Cash flows (continued)

 

    2017   2017   2016   2015   2014   2013
     US$     Ps.     Ps.     Ps.     Ps.     Ps. 
Cash flows from financing activities                        
Proceeds from borrowings     46,7   870,9   -   -   -   -
Repayment of principal on loans   -   -   -   -     (0,4)   (25,5)
Payment of interest on loans   (15,2)   (283,4)   (266,0)   (172,9)   (155,3)   (177,0)
Proceeds from PP&E mutuum   -               100,0    
Proceeds from Salaries mutuum   -   -   -   214,9   280,6   -
Repurchase of corporate notes   -   -     (4,9)   -   -   -
Payment of redemption on corporate notes   -   -   (221,8)   -   -   -
Discontinued operations    -   -   -   -   -     25,4
Net cash flows used in provided financing activities    31,5   587,5   (492,7)    42,0   224,9   (177,1)
                         
Decrease in cash and cash equivalents     (9,6)   (175,7)    65,1   (59,3)   (69,4)   150,5
                         
Cash and cash equivalents at beginning of year      13,9   258,6   129,0   179,1   243,5     71,1
Cash and cash equivalents at beginning of year included in assets of disposal group classified as held for sale   -   -   -   -   -     11,2
Exchange differences in cash and cash equivalents   -   -     64,5       9,1       5,1     10,7
Increase (Decrease) in cash and cash equivalents     (9,4)   (175,7)     65,1   (59,2)   (69,5)   150,5
Cash and cash equivalents at the end of year        4,5    82,9   258,6   129,0   179,1   243,5
                         
                         
Supplemental cash flows information                        
Non-cash operating, investing and financing activities                        
                         
Financial costs capitalized in property, plant and equipment   (16,8)   (313,7)   (189,7)   (255,9)   (123,9)   (24,5)
                         
Acquisitions of property, plant and equipment through increased trade payables   (21,3)   (396,7)   (205,8)   (166,8)   (144,8)   (126,4)
                         
(Decrease) from offsetting of PUREE-related liability against receivables (SE Resolution 250/13, subsequent Notes and SE Resolution 32/15)   -   -   -     10,6   (574,0)        (1.661,1)
                         
Increase from offsetting of liability with CAMMESA for electricity purchases against receivables (SE Resolution 250/13, subsequent Notes and SE Resolution 32/15)   -   -   -   158,1        (2.218,4)        (1.152,3)
                         
Decrease from offset of other liabilities with CAMMESA for loans for consumption (Mutuums) granted for higher salary costs (SE Resolution 32/15)   -   -   -   (495,5)   -   -
                         
Amounts received from CAMMESA through FOCEDE   -   -   -   723,6   100,0   -
                         
Decrease in financial assets at fair value from repurchase of Corporate Notes   -   -   -   -     91,6   165,1
                         
                         
Increase in financial assets at fair value from subsidiary sale   -   -   -   -   -   (334,3)
                         
Decrease of other receivables for collection of corporate notes with related companies   -   -   -   -   -     52,8
                         
Net increase of trade receivables from assets of disposal group classified as held for sale   -   -   -   -   -   (44,6)
                         
Acquisitions of property, plant and equipment through increased debt FOTAE   -   -   -   -   (32,9)   (49,0)
 

 

 

Year ended December 31,

 

 

 

 

 

 

 

2017

 

2016

 

2015

 

2014

 

2013

Operating data

 

 

 

 

 

 

 

 

 

Energy sales (in GWh): 

21,503

 

22,253

 

22,380

 

21,292

 

21,654

     Residential

9,143

 

9,708

 

9,671

 

9,114

 

9,114

     Small Commercial

1,760

 

1,819

 

1,878

 

1,714

 

1,780

     Medium Commercial

1,754

 

1,820

 

1,828

 

1,712

 

1,828

     Industrial

3,687

 

3,677

 

3,680

 

3,431

 

3,458

     Wheeling System(1)

3,968

 

4,014

 

4,200

 

4,213

 

4,374

     Public Lighting

708

 

704

 

688

 

678

 

683

     Shantytowns

483

 

511

 

435

 

430

 

417

Customers (in thousands) (2)

2,950

 

2,866

 

2,835

 

2,801

 

2,772

Energy Losses (%)

17.1%

 

17.0%

 

14.9%

 

13.8%

 

13.0%

MWh sold per employee

4,490

 

4,743

 

4,766

 

4,936

 

6,077

Customers per employee

616

 

611

 

604

 

649

 

778

 

(1)       Wheeling system charges represent our tariffs for large users, which consist of a fixed charge for recognized technical losses and a charge for our distribution margins but exclude charges for electric power purchases, which are undertaken directly between generators and large users.

(2)       We define a customer as one meter. We may supply more than one consumer through a single meter. In particular, because we measure our energy sales to each shantytown collectively using a single meter, each shantytown is counted as a single customer.

 

 


 
 

EXCHANGE RATES

From April 1, 1991 until the end of 2001, Law No. 23,928 (the “Convertibility Law”) established a fixed exchange rate under which the Central Bank of Argentina (Banco Central de la República Argentina, the “Central Bank”) was obliged to sell U.S. Dollars at a fixed rate of one Peso per U.S. Dollar (the “Convertibility Regime”). On January 6, 2002, the Argentine Congress enacted the Public Emergency Law No. 25,561 (the “Public Emergency Law”), formally putting an end to the Convertibility Regime and abandoning over ten years of U.S. Dollar-Peso parity. For a brief period following the end of the Convertibility Regime, the Public Emergency Law established a temporary of time dual exchange rate system. Since February 2002, the Peso has been allowed to float freely against other currencies, although the Government could intervene by buying and selling foreign currency on its own account. The Public Emergency Law granted the Executive Branch of the Argentine Government the power to set the exchange rate between the Peso and foreign currencies and to issue regulations related to the foreign exchange market. The Public Emergency law has been extended until December 31, 2017. As of the date of this annual report, the Public Emergency Law has been repealed.

After several years of moderate variations in the nominal exchange rate, the Peso lost more than 30% of its value with respect to the U.S. Dollar in each of 2013 and 2014, and in 2015, the Peso lost approximately 53% of its value with respect to the U.S. Dollar, including a depreciation of approximately 36% mainly experienced after December 17, 2015 following the announcement of the lifting of a significant portion of exchange restrictions (See “—Risk Factors—Factors Relating to Argentina—Fluctuations in the value of the Peso could adversely affect the Argentine economy and, in turn, adversely affect our results of operations”). This was followed by a devaluation of the Peso with respect to the U.S. Dollar of approximately 20% from January 1, 2016 through February 29, 2016. From March 1, 2016, through December 31, 2016, the Peso lost approximately 0.6% with respect to the U.S. Dollar. During 2017, the Peso lost approximately 17% of its value with respect to the U.S. Dollar.

There can be no assurance that the Argentine Peso will not depreciate or appreciate again in the future.

The following table sets forth the annual high, low, average and period-end exchange rates for U.S. Dollars for the periods indicated, expressed in Pesos per U.S. Dollar at the purchasing exchange rate and not adjusted for inflation. When preparing our financial statements, we utilize the selling exchange rates for U.S. Dollars quoted by the Banco Nación to translate our U.S. Dollar denominated assets and liabilities into Pesos. The Federal Reserve Bank of New York does not report a noon buying rate for Pesos.

 

    Low   High   Average   Period End
    (Pesos per U.S. Dollar)
Year ended December 31,                        
2013   4,93     6,52     5,48 (1)   6,52  
2014   6,54     8,56     8,23 (1)   8,55  
2015   8,56     13,40     9,51 (1)   13,04  
2016   13,20     16,03     14,79 (1)   15,89  
2017   15,19     19,20     16,73 (1)   18,65  
                         
Month                        
novembro-17   17,31 (2)   17,65 (2)   17,48     17,31  
dezembro-17   17,23 (2)   19,20 (2)   17,75     18,65  
janeiro-18   18,41 (2)   19,65 (2)   19,04     19,65  
fevereiro-18   19,38 (2)   20,20 (2)   19,83     20,11  
março-18   20,15 (2)   20,41 (2)   20,24     20,15  
April-2018 (3)   20,16 (2)   20,22 (2)   20,19     20,18  
_____________________                        
Source: Banco Nación                        

 

(1)       Represents the average of the exchange rates on the last day of each month during the period.

(2)       Average of the lowest and highest daily rates in the month.

(3)       Represents the corresponding exchange rates from April 1 through April 17, 2018.

 

 

 
 

RISK FACTORS

Risks Related to Argentina

Overview

We are a stock corporation (sociedad anónima) incorporated under the laws of the Republic of Argentina and all of our revenues are earned in Argentina and all of our operations, facilities, and customers are located in Argentina. Accordingly, our financial condition and results of operations depend to a significant extent on macroeconomic, regulatory, political and financial conditions prevailing in Argentina, including growth rates, inflation rates, currency exchange rates, taxes, interest rates, and other local, regional and international events and conditions that may affect Argentina in any manner. For example, slower economic growth or economic recession could lead to a decreased demand for electricity in our concession area or to a decline in the purchasing power of our customers, which, in turn, could lead to a decrease in collection rates from our customers or increased energy losses due to illegal use of our service. Actions of the Argentine Government concerning the economy, including measures with respect to inflation, interest rates, price controls (including tariffs and other compensation of public services), foreign exchange controls and taxes, have had and may in the future have a material adverse effect on private sector entities, including us.

We cannot assure you that the Argentine Government will not adopt other policies that could adversely affect the Argentine economy or our business, financial condition or 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 ADSs and Class B common shares to decline.

A global or regional financial crisis and unfavorable credit and market conditions may negatively affect our liquidity, customers, business, and results of operations

The effects of a global or regional financial crisis and related turmoil in the global financial system may have a negative impact on our business, financial condition and results of operations, which is likely to be more severe on an emerging market economy, such as Argentina. This was the case in 2008, when the global economic crisis led to a sudden economic decline in Argentina in 2009, accompanied by inflationary pressures, depreciation of the Peso and a drop in consumer and investor confidence.

The effects of an economic crisis on our customers and on us cannot be predicted. Weak global and local economic conditions could lead to reduced demand or lower prices for energy, hydrocarbons and related oil products and petrochemicals, which could have a negative effect on our revenues. Economic factors such as unemployment, inflation and the unavailability of credit could also have a material adverse effect on demand for energy and, therefore, on our business financial condition and results of operations. The financial and economic situation in Argentina or in other countries in Latin America, such as Brazil, may also have a negative impact on us and third parties with whom we do, or may do, business.

In addition, the global economic crisis that began in the fourth quarter of 2008, triggering an international stock market crash and the insolvency of major financial institutions, limited the ability of Argentine companies to access international financial markets as they had prior to the crisis or made such access significantly more costly. A similar global or regional financial crisis in the future could limit our ability to access the credit or capital markets at a time when we require financing, thereby impairing our flexibility to react to changing economic and business conditions. For these reasons, any of the foregoing factors could together or independently have an adverse effect on our results of operations and financial condition and cause the market value of our ADSs to decline.

The Argentine economy remains vulnerable and any significant decline may adversely affect our business, results of operations, and financial condition

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 and a stable rate of inflation, national employment levels and the circumstances of Argentina’s regional trade partners. Although the Argentine economy has recently shown positive signs and begun to restore confidence and access to worldwide international financial markets under the current administration, it remains vulnerable, as reflected by the following economic conditions:

·         according to the revised calculation of 2004 gross domestic product (“GDP”) published by the Instituto Nacional de Estadística y Censos (National Statistics and Census Institute or “INDEC”) on June 29, 2016, which forms the basis for the real GDP calculation for every year after 2004, and recent data published by the INDEC in 2018, for the year ended December 31, 2017, Argentina’s real GDP increase by 2.8% compared to the same period in 2016. Argentina’s performance has depended to a significant extent on high commodity prices which, despite having favorable long-term trends, are volatile in the short-term and beyond the control of the Argentine Government and the private sector;

·         continued increases in public expenditures have resulted and could continue to result in fiscal deficits and affect economic growth;

·         inflation remains high and may continue at those levels in the future;

·         investment as a percentage of GDP remains low to sustain the growth rate of the past decade;

·         several protests or strikes took place during 2017, which adversely affects the stability of the political, social and economic environment and may negatively impact the global financial market’s confidence in the Argentine economy. We cannot guarantee that these kinds of events will not occur in the future;

 

 


 
 

·         energy or natural gas supply may not be sufficient to supply increased industrial activity (thereby limiting industrial development) and consumption;

·         unemployment and informal employment remain high; and

·         the Argentine Government’s economic expectations may not be met and the process of restoring the confidence in the Argentine economy may take longer than anticipated.

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, or cause the market value of our ADSs and our Class B common shares to decline.

We cannot assure you that a decline in economic growth, an increase in economic instability or the expansion of economic policies and measures taken or that may be adopted in the future 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, would not have an adverse effect on our business, financial condition or results of operations or would not have a negative impact on the market value of our ADSs and Class B common shares.

The impact of congressional and presidential elections on the future economic and political environment of Argentina remains uncertain, but likely to be material

Since taking office on December 10, 2015, the Macri administration has announced and implemented several significant economic and policy reforms, including:

·         Electricity system state of emergency and reforms. On December 16, 2015, the Macri administration declared a state of emergency of the national electricity system that was in effect until December 31, 2017. The state of emergency allowed the Argentine Government to take actions designed to guarantee the supply of electricity. In addition, following the Macri administration’s announcement that it would reexamine energy subsidy policies, the ME&M increased electricity rates for the wholesale market for purchases made between February 1 through April 30, 2016. This increase was used to reduce subsidies to the sector. On January 29, 2016, the ENRE, through Resolution No. 1/16 approved a new tariff structure for electricity distribution which became effective on February 1, 2016, and introduced different prices depending on the categories of customers. Such resolution also contemplated a social tariff applicable to residential customers who comply with certain consumption requirements, which included a full exemption for monthly consumptions equal to or below 150 KWh and other tariff benefits for customers who exceed such consumption levels but achieve a monthly consumption lower than that of the same period in the immediately preceding year. On the same date, through Resolution No. 2/16, the ENRE partially repealed Resolution No. 347/12, discontinuing the FOCEDE (as defined below) and ordered us to open a special bank account with a Central Bank authorized entity where the funds received pursuant to Resolution No. 347/12 were be deposited through February 2016. By correcting tariffs, reducing subsidies and modifying the regulatory framework, the Macri administration aimed at correcting distortions in the energy sector and stimulating investment. Following the tariff increases, preliminary injunctions were requested by customers, and non-Governmental organizations that defend customers’ rights, some of which were granted by Argentine courts. Among others, two separate orders led to the suspension of end-user electricity tariff increases in the Province of Buenos Aires and in the entire territory of Argentina. 

 

 


 
 

However, on September 6, 2016, the Argentine Supreme Court reversed the injunctions that had suspended end-user electricity tariff increases on the basis of formal objections and procedural defects and, therefore, as of the date of this annual report, increases to end-user electricity tariffs are no longer suspended. On September 12, 2016, pursuant to an Argentine Supreme Court decision, a public hearing conducted by the ME&M was held in relation to the approval of a new gas tariff schedule. In October 2016, such new gas tariff schedule was approved by the Macri administration establishing increases in tariffs ranging between 300% and 500%. On October 28, 2016, a non-binding public hearing was conducted by the ME&M and the ENRE to discuss tariff proposals submitted by distribution companies covering the greater Buenos Aires area (with approximately 15 million inhabitants), including us, for the 2017-2021 period within the framework of the RTI. On February 1, 2017, the ENRE enacted several resolutions which, among other policy changes, implemented a reduction of electricity tariff subsidies, and an increase in electricity tariffs for their residential customers. Such increases ranged between 61% and 148%, according to the amount of electricity consumption. During 2017, lower court injunctions suspended end-user electricity tariff increases, implemented as of February 1, 2017, in the provinces of Buenos Aires and Chaco. On November 30, 2017 and on January 31, 2018, the ENRE enacted the resolutions No. 603/17 and No. 33/18, respectively, which, among others, approved own distribution costs (“CPD”) values, applicable as from December 1, 2017, and retroactively to consumption recorded in the months of August through November 2017 and the values of CPD, the values of the monthly installment to be applied in accordance with the provisions of ENRE Resolution No. 329/17 and the values of the Edenor’s electricity rate schedule applicable to consumption recorded as from February 1, 2018. As of the date of this annual report, the tariff tables for the transport and distribution of electric energy during the five-year period 2017-2021 were effective and not subject to any injunctions. See “Item 5—Operating and Financial Review and Prospects—Integral Tariff Revision.”

  • Transport and distribution of natural gas reforms. On September 12, 2016, pursuant to an Argentine Supreme Court decision, a public hearing conducted by the ME&M was held for the approval of a new gas tariff schedule. In this regard, the ME&M issued Resolution No. 28/2016 and Resolution No. 31/16, pursuant to which it fixed the prices of natural gas at the supply point (“PIST”) and the tariffs of distribution and transportation of natural gas that will reach residential and commercial users throughout the country, as well as to the supply of compressed natural gas to service stations and electricity generating plants and instructed the Ente Nacional Regulador del Gas (“ENARGAS”) to carry out RTI process, to determine the tariffs of distribution and transportation of natural gas applicable throughout the country. The RTI concluded on March 27, 2018, and a new tariff schedule applicable to the transportation and distribution of natural gas has been published and will be in effect during the five-year period from April 2017 to March 2022.
  • INDEC reforms. Regarding the reliability of the information produced by the INDEC, the Macri administration appointed Mr. Jorge Todesca, previously a director of a private consulting firm, as head of the agency. The INDEC has implemented certain methodological reforms and adjusted certain macroeconomic statistics on the basis of such reforms. On January 8, 2016, Decree No. 55/2016 was issued by the Argentine Government declaring a state of administrative emergency on the national statistical system and on the official agency in charge of the system, the INDEC, which remained in effect until December 31, 2016. Following the emergency declaration, the INDEC ceased publishing statistical data until a rearrangement of its technical and administrative structure was finalized. During the implementation of these reforms, however, the INDEC used official consumer price index (“CPI”) figures and other statistics published by the Province of San Luis and the City of Buenos Aires for reference as a benchmark of national inflation. As of the date of this annual report, the INDEC has published certain revised data, including the CPI monthly data since May 2016 and foreign trade and balance of payment statistics. On June 29, 2016, the INDEC published a report including revised GDP data for the years 2004 through 2015. On September 22, 2016, the INDEC resumed publication of its essential goods and services basket assessment. On November 9, 2016, the IMF Executive Board lifted its censure on the Republic of Argentina, noting that the Republic of Argentina had resumed the publication of data in a manner consistent with its obligations under the Articles of Agreement of the International Monetary Fund (IMF). The INDEC GDP data for 2016 shows a 2.2% GDP contraction compared to 2015. The INDEC GDP data for 2016 showed a 2.2% GDP contraction compared to 2015, while for 2017 showed a 2.8% GDP increased compared to 2016. See “—Risks Related to Argentina—The credibility of several Argentine economic indexes was called into question, which may lead to a lack of confidence in the Argentine economy and, in turn, limit our ability to access credit and the capital markets.”
  • Foreign exchange reforms. In addition, the Macri administration implemented certain reforms to the foreign exchange market regulatory framework that provided greater flexibility and easier access to the foreign exchange market. The principal measures adopted as of the date of this annual report included (i) the elimination of the requirement to register foreign exchange transactions in the Argentine Tax Authority’s (“AFIP”) database, (ii) the elimination of the requirement to transfer the proceeds of new financial indebtedness transactions into Argentina and settle such proceeds through the single and free floating foreign exchange market (the “MULC”), (iii) a decrease from 30% to 0% of the registered, non-transferable and non-interest-bearing deposit required in connection with certain transactions involving foreign currency inflows, and (iv) the elimination of the requirement of a minimum holding period (72 business hours) for purchases and subsequent sales of the securities. On January 11, 2018, with the aim of providing more flexibility to the foreign exchange system and promoting competition, allowing the entrance of new players to the system, the free floating foreign exchange market was created by means of Decree No. 27/2018. For additional information see “Item 10. Additional Information – Exchange Controls”. The exchange rate published by Banco Nación as of April 17, 2018 was Ps. 20.18 to U.S.$1.00.
  • Foreign trade reforms. The Macri administration eliminated export duties on wheat, corn, beef and regional products, and reduced the export duty on soybeans by 5%, to 30%. Further, the 5% export duty on most industrial expor