Exhibit 2
ANNUAL
REPORT, FINANCIAL STATEMENTS,
INFORMATIVE
SUMMARY, AND
INFORMATION
REQUIRED BY SECTION 68 OF THE
BUENOS
AIRES STOCK EXCHANGE REGULATIONS
AS
OF DECEMBER 31, 2009
TOGETHER
WITH THE AUDITOR’S REPORT AND
THE
REPORT OF THE SUPERVISORY
COMMITTEE
|
Shareholders
and public in general who are interested in learning more about the report
related to the Financial Statements as of December 31, 2009, to be published in
the electronic database of the Securities and Exchange Commission (SEC), please
visit the Edenor website at www.edenor.com
EMPRESA DISTRIBUIDORA Y
COMERCIALIZADORA NORTE S.A. (EDENOR S.A.)
MANAGING AND SUPERVISORY
BOARDS – FISCAL YEAR 2009
The
Board of Directors
The
business of Edenor is managed by the Board of Directors, which is comprised of
12 directors and 12 alternate directors. Four directors and one alternate
director of the above-mentioned directors and alternate directors, respectively,
are independent in accordance with the criteria adopted by the National
Securities Commission. The term of office of all directors is one year and may
be re-elected for successive periods.
In turn,
the Board of Directors delegates specific duties to both an Executive Committee
and the Audit Committee, all the members of which meet independence requirements
in compliance with the provisions of the Sarbanes-Oxley Act (“SOX”).
The
Company has an internal policy in place for the delegation of administrative and
executive powers to directors, managers and assistant managers,
establishing distinct levels of authority that allow for an optimum internal
control system.
The table
below shows Board of Directors members for Fiscal Year 2009:
Name
|
Position
|
Independence
|
Alejandro
Macfarlane
|
Chairman
|
Non-independent
|
Marcos
Marcelo Mindlin
|
Vice-Chairman
|
Non-independent
|
Damián
Miguel Mindlin
|
Director
|
Non-independent
|
Gustavo
Mariani
|
Director
|
Non-independent
|
Luis
Pablo Rogelio Pagano
|
Director
|
Non-independent
|
Maximiliano
Fernández *
|
Director
|
Independent
|
Eduardo
Llanos*
|
Director
|
Independent
|
Edgardo
Volosín
|
Director
|
Non-independent
|
Ricardo
Torres
|
Director
|
Non-independent
|
Diego
Martín Salaverri
|
Director
|
Non-independent
|
Luis
Caputo *
|
Director
|
Independent
|
Eduardo
Orlando Quiles
|
Director
|
Independent
|
Javier
Douer
|
Alternate
Director
|
Non-independent
|
Jorge
Grecco
|
Alternate
Director
|
Non-independent
|
Pablo
Díaz
|
Alternate
Director
|
Non-independent
|
Ariel
Schapira
|
Alternate
Director
|
Non-independent
|
Brian
Henderson
|
Alternate
Director
|
Non-independent
|
Ricardo
Sericano
|
Alternate
Director
|
Non-independent
|
Jaime
Javier Barba
|
Alternate
Director
|
Non-independent
|
Alejandro
Mindlin
|
Alternate
Director
|
Non-independent
|
Maia
Chmielewski
|
Alternate
Director
|
Non-independent
|
Gabriel
Cohen
|
Alternate
Director
|
Non-independent
|
Eduardo
Maggi
|
Alternate
Director
|
Non-independent
|
Rafael
Mancuso
|
Alternate
Director
|
Independent
|
(*) Audit
Committee Members
The
Supervisory Committee
In
accordance with the Company’s By-laws, the Company’s activities will be
supervised by a Supervisory Committee, which will consist of 3 members and 3
alternate members to be elected by the shareholders for a term of one fiscal
year.
The
Supervisory Committee is primarily responsible for overseeing compliance by the
Board of Directors with the Argentine Business Organizations Law, the Company’s
By-laws and the decisions, if any, adopted by Shareholders’ Meetings.
Name
|
Position
|
Independence
|
Javier
Errecondo
|
Member
|
Non-independent
|
José
Daniel Abelovich
|
Member
|
Independent
|
Jorge
Roberto Pardo
|
Member
|
Non-independent
|
Santiago
Dellatorre
|
Alternate
member
|
Non-independent
|
Marcelo
Fuxman
|
Alternate
member
|
Independent
|
Alejandro
Gabriel Turri
|
Alternate
member
|
Non-independent
|
EMPRESA
DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (EDENOR S.A.)
Legal
address: 1025 Azopardo Street – Autonomous City of Buenos Aires
FISCAL
YEAR No. 18 BEGINNING ON JANUARY 1, 2009
FINANCIAL
STATEMENTS AS OF DECEMBER 31, 2009
Main business: Distribution
and sale of electricity in the area and under the terms of the concession
agreement by which this public service is regulated (Note 1).
Date
of registration with the Public Registry of Commerce:
of the Articles of Incorporation:
August 3, 1992
of the last amendment to the
By-laws: May 28, 2007
Term of the Corporation:
Through August 3, 2087
Registration number with the
“Inspección General de Justicia” (the Argentine governmental regulatory agency
of corporations): 1,559,940
CAPITAL
STRUCTURE
AS
OF DECEMBER 31, 2009
(Note
16.a)
(amounts
stated in pesos)
Class of shares
|
|
Subscribed and paid-in
|
|
|
|
|
|
Common,
book-entry shares, face
value 1 and 1 vote per share
|
|
|
|
|
|
|
|
Class
A
|
|
|
462,292,111 |
|
Class
B (1)
|
|
|
442,210,385 |
|
Class
C
|
|
|
1,952,604 |
|
|
|
|
906,455,100 |
|
(1)
Includes 9,412,500 treasury shares as of December 31, 2009 and 2008 (Notes 1 and
3.s).
EMPRESA
DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A.
(EDENOR
S.A.)
NOTES TO THE FINANCIAL
STATEMENTS
AS OF DECEMBER 31, 2009 AND
2008
(amounts
stated in thousands of Argentine
pesos)
1. ORGANIZATION AND START UP OF
THE COMPANY
In
compliance with Law No. 24,065 and in agreement with the reform process of the
Argentine Federal Government and the privatization program of Argentine
state-owned companies, the entire business of generation, transportation,
distribution and sale of electric power carried out by Servicios Eléctricos del
Gran Buenos Aires S.A. (SEGBA) was declared to be subject to privatization; the
operation was divided into seven business units: three for the distribution and
four for the generation of electric power.
On May
14, 1992, the Ministry of Economy and Public Works and Utilities, by Resolution
No. 591/92, approved the Bidding Terms and Conditions (Bid Package) of the
International Public Bidding for the sale of the Class "A" shares, representing
51% of the capital stock of Empresa Distribuidora Norte S.A. (hereinafter,
“EDENOR” or “the Company”) and Empresa Distribuidora Sur S.A. (EDESUR S.A.), two
of the three electric power distribution companies into which SEGBA had been
divided.
EDF
International (EDF S.A.), Empresa Nacional Hidroeléctrica del Ribagorzana, S.A.
(ENHER), Astra Compañía Argentina de Petróleo S.A. (ASTRA), Socièté
D'Amenagement Urbain et Rural (SAUR), Empresa Nacional de Electricidad S.A.
(ENDESA) and J.P. Morgan International Capital Corporation formed Electricidad
Argentina S.A. (EASA) to bid for the Class "A" shares of EDENOR, a company
organized on July 21, 1992 by Decree No. 714/92 of the Federal
Government.
EASA was
awarded the Class “A” shares of EDENOR based on a bid of US$ 427,973,000
(equivalent to the same amount in Argentine pesos as of such date). The
corresponding contract for the transfer of 51% of EDENOR’s capital stock was
executed on August 6, 1992. The award as well as the transfer
contract were approved on August 24, 1992 by Decree No. 1,507/92 of the Federal
Government. Finally, on September 1, 1992, EASA took over the operations of
EDENOR.
In
accordance with the provisions of Decree No. 282/93 of the Federal Government,
dated February 22, 1993, the recorded values of assets, liabilities and net
capital arising from the transfer of SEGBA, were determined on the basis of the
price actually paid for 51% of EDENOR’s capital stock (represented by the
totality of Class “A” shares). This price was also used as the basis to
determine the value of the remaining 49% of the capital stock. In order to
determine the value of the assets transferred from SEGBA, the amount of
liabilities assumed was added to the value of the total capital stock of
831,610, determined as indicated above. Management estimates that the amounts of
the assets transferred from SEGBA represented their fair values as of the date
of the privatization.
The
corporate purpose of EDENOR is to engage in the distribution and sale of
electricity within the concession area. Furthermore, the Company may subscribe
or acquire shares of other electricity distribution companies, subject to the
approval of the regulatory agency, lease the network to provide electricity
transmission or other voice, data and image transmission services, and render
advisory, training, maintenance, consulting, and management services and
know-how related to the distribution of electricity both in Argentina and
abroad. These activities may be conducted directly by EDENOR or through
subsidiaries or related companies. In addition, the Company may act as trustee
of trusts created under Argentine laws, including extending secured credit
facilities to service vendors and suppliers acting in the distribution and sale
of electricity, who have been granted guarantees by reciprocal guarantee
companies owned by the Company.
On June
12, 1996, the Extraordinary Shareholders’ Meeting approved the change of the
Company’s name to Empresa Distribuidora y Comercializadora Norte S.A. (EDENOR
S.A.) so that the new name would reflect the description of the Company’s core
business. The amendment to the Company’s by-laws as a consequence of the change
of name was approved by the National Regulatory Authority for the Distribution
of Electricity (ENRE - Ente
Nacional Regulador de la Electricidad), through Resolution No. 417/97
and registered with the Public Registry of Commerce on August 7,
1997.
On May 4
and June 29, 2001, EDF International S.A. (a wholly-owned subsidiary of EDF)
acquired all the shares of EASA and EDENOR held by ENDESA Internacional, YPF
S.A. (surviving company of ASTRA) and SAUR. Therefore, the direct and indirect
interest of EDF International S.A. (EDFI) in EDENOR increased to
90%.
On June
29, 2005, the Board of Directors of EDF approved a draft agreement with Dolphin
Energía S.A. (Dolphin) pursuant to which it would assign 65% of EDENOR’s capital
stock (held by EDFI) through the transfer of all Class “A” common shares held by
EASA and 14% of the Class “B” common shares. In this manner, EDFI would retain a
25% interest in EDENOR. The remaining 10% would be kept by the employees
according to the Employee Stock Ownership Program (ESOP). The closing of the
agreement took place upon its approval by the corresponding French and Argentine
governmental authorities.
On
September 15, 2005, by virtue of the stock purchase-sale agreement entered into
by EDFI and Dolphin and Dolphin’s subsequent partial assignments of its interest
in EASA and EDENOR to IEASA S.A. (IEASA) and New Equity Ventures LLC (NEV), the
formal take over by Dolphin took place, together with the change in the
Company’s indirect control through the acquisition of 100% of the capital stock
of EASA, which is the controlling company of EDENOR, by Dolphin (90%) and IEASA
(10%). Furthermore, as a result of the aforementioned agreement, the ownership
of the Company’s Class “B” common shares (representing 39% of its capital stock)
changed with 14% of the Company’s capital stock now being held by NEV and the
remaining 25% being kept by EDFI.
On April
28, 2006, the Company’s Board of Directors decided to initiate the public
offering of part of the Company’s capital stock in local and international
markets, including, but not limited to the trading of its shares in the Buenos
Aires Stock Exchange (BCBA) and the New York Stock Exchange (NYSE), United
States of America.
On June
7, 2006, the Ordinary and Extraordinary Shareholders’ Meeting resolved to
increase capital stock up to ten percent (10%), request authorization for the
public offering from both the National Securities Commission (CNV) and the
Securities and Exchange Commission (SEC) of the United States of America, as
well as authorization to trade from both the Buenos Aires Stock Exchange and the
New York Stock Exchange, entrusting the Board of Directors with the task of
taking the necessary steps to implement such resolutions.
Additionally,
it was decided that an American Depositary Receipts (ADRs) program, represented
by American Depositary Shares (ADSs) would be created and that it would be the
responsibility of the Board of Directors to determine the terms and conditions
and the scope of the program.
On June
14, 2007, the Board of Directors approved the final report on Edenor’s capital
increase and public offering process. As a result of the above-mentioned
process, the Company’s Class B shares and American Depositary Shares (“ADSs”),
representing Class B shares, are traded on the Buenos Aires Stock Exchange and
the New York Stock Exchange, respectively. The final capital increase, as
resolved by the above-mentioned Board of Directors, amounted to nine percent
(9%) which is represented by 74,844,900 (seventy-four million eight hundred
forty-four thousand nine hundred) new shares subscribed at the international
primary offering, fully placed as 3,742,245 ADS. It was also reported that a
secondary international offering was made on this date of 207,902,540 Class B
shares.
The
aforementioned issuance was carried out at a price of 2.62 per share. Taking
into account that the nominal value of each share is 1.00, an additional paid-in
capital, amounting to 121,249, was recorded.
The Class
“B” shareholders NEV and EDFI informed the Company that at the secondary
international offering they sold 49,401,480 and 179,049,520 Class “B” shares,
respectively. Additionally, on May 1, 2007, the shareholders NEV and EDFI
informed that they had sold 57,706,040 Class “B” shares at the secondary
international offering when the international underwriters fully exercised the
over-allotment option (green shoe) contemplated in the prospectus for the public
offering and section 2 of the underwriting agreement.
With
regard to the Company’s Class “C” shares held by the Employee Stock Ownership
Program (ESOP), on April 29, 2007 the ESOP was partially cancelled in advance in
conformity with a procedure set forth by the Federal Government, and on April
30, 2007, an amount of 81,208,416 shares, which had been converted into Class
“B” shares on April 27, 2007, was sold at the domestic secondary offering. As of
the date of issuance of these financial statements, an amount of 1,952,604 Class
“C” shares, representing 0.22% of the Company’s capital stock, remains
outstanding.
Furthermore,
Dolphin and IEASA contributed 38,170,909 Class “B” shares of the Company that
had been transferred to them by NEV to EASA, which is the controlling company.
On April 27, 2007, the contributed shares were converted into Class “A” shares
to ensure that EASA continues to hold 51% of all the Class “A” shares
outstanding. On April 30, 2007, the Company requested that Caja de Valores S.A.
register the new Class “A” shares and extend thereto the regulatory pledge in
favor of the Argentine Government, in compliance with the Bidding Terms and
Conditions of the International Public Bidding, the provisions of the Concession
Agreement of Edenor S.A., and the terms of the related pledge agreements signed
on August 31, 1992 and July 14, 1994 which, in accordance with their second
clause, EASA was required to extend the first-priority preferred security
interest to any Class “A” Shares of the Company that EASA would
acquire on a date subsequent to those of said Agreements.
Moreover,
section 19 of the Adjustment Agreement entered into by the Company and the
Argentine Government, which was ratified by Decree No. 1957/2006, stipulates
that the pledge on the Company’s shares in favor of the Argentine Government
granted as security for the performance of the Concession Agreement will be
extended to include the performance of the obligations assumed by the Company in
this Adjustment Agreement.
The
Company was notified that on June 22, 2007, the shareholders of Dolphin Energía
S.A. and IEASA S.A. (that own 100% of the stock of Electricidad Argentina S.A.,
the controlling company of Edenor S.A.) and Pampa Energía S.A. entered into a
memorandum of understanding whereby it was agreed that the totality of the
capital stock of Dolphin Energía S.A. and IEASA S.A. would be exchanged for
common shares of Pampa Energía S.A.
Furthermore,
the Company received a notice from EASA whereby it was informed that the
exchange for shares described in the preceding paragraph had formally been
agreed upon on September 28, 2007 under a Stock Subscription Agreement entered
into by Pampa Energía S.A., Marcos Marcelo Mindlin, Damián Miguel Mindlin,
Gustavo Mariani, Latin American Energy LLC, New Equity Ventures LLC and Deutsche
Bank AG, London Branch. Moreover, on such date, Pampa Energía S.A. acquired 100%
of the capital stock of Dolphin Energía S.A. and IEASA S.A, which together own
100% of the capital stock of EASA.
On
October 23, 2008, the Company’s Board of Directors decided to launch a public
offering for the acquisition of the Company’s own shares pursuant to both the
terms of Section 29, Chapter XXVII, Book 9 of the National Securities
Commission’s regulations and the provisions of Section 68 of Law No. 17,811 (as
amended by Decree No. 677/2001).
The
shares acquired by virtue of the aforementioned provisions shall be sold by the
Company within a maximum period of three years as from acquisition date, unless
such period is extended by the Ordinary Shareholders’ Meeting.
On
October 27, 2008, the Company requested authorization for the above-mentioned
public offering from the National Securities Commission (CNV).
Furthermore,
on October 29, 2008, the Company’s Board of Directors modified the basic terms
and conditions of the aforementioned offering.
On
October 30, 2008, the National Securities Commission (CNV) approved the
above-mentioned public offering for the acquisition of the Company’s own shares.
Furthermore, the Company’s Board of Directors fixed the purchase price of the
shares to be acquired within the framework of the offering in the amount of
pesos 0.65.
The main
terms and conditions for the acquisition of the Company’s own shares in the
framework of the offering have been the following:
|
-
|
Maximum
amount to invest: up to pesos
45,000,000
|
|
-
|
Maximum
number of shares included in the offering: up to 65,000,000 common, Class
B and/or C shares, representing approximately 7.17% of the Company’s
capital stock, with a nominal value of 1 peso each and the right to one
vote per share
|
|
-
|
Source
of the funds: the acquisition of shares will be made with realized and
liquid profits resulting from the financial statements for the six-month
period ended June 30, 2008 and approved by the Company’s Board of
Directors on August 7, 2008. Additionally, it is stated that the Company
is liquid and has the necessary economic resources to guarantee full
satisfaction of the offering.
|
|
-
|
Scope
of the offering: it was exclusively carried out in
Argentina.
|
On
November 14, 2008, the Company’s Board of Directors decided to continue with the
acquisition process of the Company’s own shares through market transactions in
accordance with the terms of section 68 of Law No. 17,811 (as amended by Decree
No. 677/2001) and the CNV’s Regulations. This decision was taken firstly because
the reasons that motivated the acquisition process through the public offering
mechanism previously described continue to exist, and secondly because such
mechanism would provide the Company with more flexibility to determine the
purchase price of its own shares in a context of high volatility in the market
value of shares in general.
Based on
the foregoing, the Company’s Board of Directors approved the following basic
terms and conditions:
|
-
|
Maximum
amount to invest: up to pesos
45,000,000
|
|
-
|
Maximum
number of Class B shares to be acquired: the number of common Class B
shares, with a nominal value of 1 peso each and the right to one vote per
share, equivalent to the maximum amount to invest, which may not exceed at
any time, the maximum limit of treasury stock which the Company may own,
in accordance with applicable
regulations.
|
|
-
|
Daily
limit for market transactions: up to 25% of the average daily transaction
volume in the markets where the shares are listed, for the preceding
90-day period, in accordance with applicable
regulations.
|
|
-
|
Price
to be paid for the shares: between a minimum of 0.50 and a maximum of 0.80
peso per share.
|
|
-
|
Acquisition
period: 120 calendar days to commence from the working day following the
date of publication of the information in the Daily Bulletin of the
Buenos Aires Stock Exchange, which took place on November 17, 2008. Such
period may be reduced, renewed or extended. Investors will be informed of
any such reduction, renewal or extension through the above-mentioned
bulletin.
|
|
-
|
Source
of the funds: the acquisition of shares will be made with realized and
liquid profits resulting from the financial statements for the nine-month
period ended September 30, 2008 and approved by the Company’s Board of
Directors on November 5, 2008. Additionally, it is stated that the Company
is liquid so as to make the aforementioned acquisitions without affecting
its creditworthiness.
|
As of
December 31, 2008 the Company acquired, through both acquisition processes, a
total of 9,412,500 class B shares with a nominal value of 1 peso each at an
acquisition cost of 6,130
On March
17, 2009, the 120-calendar-day period stipulated in the terms and conditions for
the repurchase of treasury shares, that had commenced on November 18, 2008, came
to an end.
As of
December 31, 2009 and 2008, the Company’s capital stock, represented by
906,455,100 shares is comprised of the following (Note 16.a):
Holder
|
Number
of shares
|
Class
|
%
held
|
EASA
(1)
|
462,292,111
|
“A”
|
51.00
|
Market
in general (2)
|
442,210,356
|
“B”
|
48.78
|
Banco
Nación (3)
|
1,952,604
|
“C”
|
0.22
|
New
Equity Ventures LLC
|
19
|
“B”
|
0
|
EDF
Internacional S.A.
|
10
|
“B”
|
0
|
(1) The
shares are pledged in favor of the Argentine Government as evidenced by the
certificate issued by Caja de Valores.
(2)
Includes 9,412,500 treasury shares as of December 31, 2009 and
2008.
(3)
Trustee of the Employee Stock Ownership Program.
On July
19, 2006, EASA carried out a restructuring of the totality of its financial
debt. If EASA did not comply with its payment obligations under the new debt,
its creditors could obtain an attachment order against the Company’s Class A
shares held by them, and, consequently, the Argentine Government would be
entitled, as stipulated in the concession agreement, to foreclose on the pledged
shares, with an adverse effect on the results of its
operations.
2. BASIS OF PRESENTATION OF THE
FINANCIAL STATEMENTS
Financial
statements presentation
These
financial statements have been prepared in accordance with accounting principles
generally accepted in the City of Buenos Aires, Argentina (hereinafter
“Argentine GAAP”) and the criteria established by the National Securities
Commission (CNV), taking into account that which is mentioned in the following
paragraphs.
The
amounts of these financial statements are stated in thousands of Argentine
pesos.
As from
January 1, 2003 and as required by General Resolution No. 434/03 of the CNV, the
Company reports the results of its operations, determines the values of its
assets and liabilities and determines its profit and loss in conformity with the
provisions of Technical Resolutions (TR) Nos. 8, 9 and 16 through 18 (amended
text June 2003). As from January 1, 2004, the Company has applied the provisions
of TR No. 21 of the Argentine Federation of Professional Councils in Economic
Sciences (FACPCE) as approved by the Professional Council in Economic Sciences
of the Autonomous City of Buenos Aires (CPCECABA), with specific few exceptions
and clarifications introduced by General Resolution No. 459/04 of the
CNV.
The CNV
through its General Resolutions Nos. 485/05 and 487/06 decided to implement
certain changes in the Argentine GAAP effective for fiscal years or interim
periods beginning as from January 1, 2006, by requiring the application of TR
Nos. 6, 8, 9, 11, 14, 16, 17, 18, 21, 22 and 23 and Interpretations 1, 2, 3, and
4, of the FACPCE with the amendments introduced by such Federation through April
1, 2005 (Resolution No. 312/05) and adopted by the CPCECABA (Resolution CD No.
93/05) with certain amendments and clarifications.
Among the
aforementioned changes the following can be noted: i) the comparison between the
values of certain assets and their recoverable values, using discounted
cash-flows; ii) the consideration of the difference between the accounting and
tax values resulting from the adjustment for inflation included in non-monetary
assets, as a temporary difference, allowing the Company to either recognize a
deferred tax liability or to disclose the effect of such accounting change in a
note to the financial statements and (iii) the capitalization of interest cost
on certain assets (only those assets that require an extended period of time to
be produced or acquired would qualify) during the term of their construction and
until they are in condition to be used.
With
regard to the impact of the application of the change mentioned in the preceding
paragraph under (i) on the Company’s property, plant and equipment, said change
does not have a significant impact on the Company’s financial position or net
income for the year ended December 31, 2009, given that the fair value (defined
as the discounted value of net cash flows arising from both the use of the
assets and their final disposal) exceeds their recorded value (Note
3.g).
With
regard to item (ii), the Company has decided to disclose said effect in a note
to the financial statements. Had the Company chosen to recognize the effect of
the adjustment for inflation of its property, plant and equipment as a temporary
difference, as of December 31, 2009 a deferred tax liability of approximately
383,241 and a credit to net income for the year, under the income tax account,
amounting to 26,980, would have been recorded (Note 3.m).
Additionally,
had the Company elected to recognize a deferred tax liability, in subsequent
years, the Company would have recorded an income tax expense that would have
been lower than the income tax expense that will be recorded as a result of
maintaining the criterion applied up to the moment, whose distribution in
subsequent years has been estimated as follows:
Year
|
|
Effect
on deferred tax result
Nominal
value
|
|
2010
|
|
|
25,011 |
|
2011
|
|
|
24,084 |
|
2012
– 2016
|
|
|
106,866 |
|
2017
– 2021
|
|
|
88,058 |
|
Remainder
|
|
|
139,222 |
|
Total
|
|
|
383,241 |
|
Furthermore,
on March 20 and June 12, 2009, the FACPCE approved TR Nos. 26 and 27 "Adoption
of the International Financial Reporting Standards (IFRSs) of the International
Accounting Standards Board (IASB)” and “Changes to TR Nos. 6, 8, 9, 11, 14, 16,
17, 18, 21, 22, 23 and 24” respectively, which will be in effect for fiscal
years beginning as from January 1, 2011. Additionally, the aforementioned TR
have been approved by the Board of the Professional Council in Economic Sciences
of the Autonomous City of Buenos Aires through Resolution No.
52/2009.
Furthermore,
on December 29, 2009, the CNV issued Resolution No. 562, according to which
those entities that make a public offering of their capital stock or corporate
notes pursuant to Law No. 17,811, or have requested authorization for their
being included in such public offering regime would be required to comply with
the provisions of TR No. 26. The application of such regulations will be
mandatory for the Company as from the fiscal year beginning January 1,
2012.
As of the
date of issuance of these financial statements, the Company’s Board of Directors
is analyzing the specific implementation plan.
Consideration
of the effects of inflation
The
financial statements fully reflect the effects of the changes in the purchasing
power of the currency through August 31, 1995. As from such date, and in
accordance with Argentine GAAP and the requirements of control authorities, the
restatement of the financial statements to reflect the effects of inflation was
discontinued until December 31, 2001. As from January 1, 2002, and in accordance
with Argentine GAAP, it was established that inflation adjustment be reinstated
and that the accounting basis restated as a result of the change in the
purchasing power of the currency through August 31, 1995, as well as
transactions with original date as from such date through December 31, 2001, be
considered as restated as of the latter date. The financial statements have been
restated to reflect the effects of inflation based on the variations of the
Domestic Wholesale Price Index.
On March
25, 2003, the Federal Government issued Decree No. 664 establishing that
financial statements for fiscal years ending as from such date had to be
prepared in nominal currency. Consequently, and in accordance with Resolution
No. 441 of the CNV, the Company discontinued the restatement of its financial
statements as from March 1, 2003. This criterion does not agree with Argentine
GAAP which establish that financial statements were to be restated through
September 30, 2003. The Company has estimated that the effect of not having
restated the financial statements through September 30, 2003 is not significant
on the financial statements.
3. VALUATION
CRITERIA
The main
valuation criteria used in the preparation of these financial statements are as
follow:
|
-
|
In
local currency: at nominal value.
|
|
-
|
In
foreign currency: at the exchange rate in effect as of the end of each
year. The corresponding detail is disclosed in Exhibit
G.
|
|
-
|
Time
deposits, which include the portion of interest income accrued through the
end of each year.
|
|
-
|
Money
market funds, which have been valued at the prevailing market price as of
the end of each year.
|
|
-
|
Corporate
notes, which have been valued at the prevailing market price as of the end
of each year.
|
|
-
|
Services
rendered and billed but not collected, and services rendered but unbilled
as of the end of each year, at nominal value, except for those indicated
in the following paragraphs;
|
|
-
|
Services
rendered but unbilled as of the end of each year, arising from the
retroactive increase deriving from the application of the electricity rate
schedule resulting from the RTT (Note 17.b) have been valued on the basis
of the best estimate of the amount to be collected, discounted at a 10.5%
annual nominal rate, which, in accordance with the Company’s criterion,
reasonably reflected market assessments of the time value of money and
risks specific to the receivable at the time of their initial
measurement.
|
|
-
|
The
amounts owed by the Government of the Province of Buenos Aires under the
Framework Agreement (Note 13) have been valued as of December 31, 2009 on
the basis of the best estimate of the amount to be collected, discounted
at a 19.62% annual nominal rate, which, in accordance with the Company’s
criterion, reasonably reflected market assessments of the time value of
money and risks specific to the receivable at the time of their initial
measurement.
|
The
amounts thus determined:
|
1.
|
are
net of an allowance for doubtful accounts, as described in more detail in
paragraph h) of this Note.
|
|
2.
|
consider
the effects of that which is stated in Note
13.
|
d)
|
Other
receivables and liabilities (excluding
loans):
|
|
-
|
In
local currency: at nominal value.
|
|
-
|
In
foreign currency: at the exchange rate in effect as of the end of each
year (Exhibit G).
|
Other
receivables and liabilities have been valued as indicated above including, if
any, interest income or expense accrued as of the end of each year. The values
thus obtained do not differ significantly from those that would have been
obtained if the Argentine GAAP had been applied, inasmuch as they establish that
other receivables and liabilities must be valued on the basis of the best
estimate amount to be collected and paid, respectively, discounted at a rate
that reflects the time value of money and the risks specific to the transaction
estimated at the time of their being recorded in assets and liabilities,
respectively.
Liabilities,
excluding loans, have been valued at nominal value including, if any, interest
expense accrued as of the end of each year. The values thus obtained do not
differ significantly from those that would have been obtained if the Argentine
GAAP had been applied, inasmuch as they establish that they
must be valued at their estimated cash price at the time of the transaction,
plus interest and implicit financing components accrued on the basis of the
internal rate of return determined at such opportunity.
Supplies
were valued at acquisition cost restated to reflect the effects of inflation as
indicated in Note 2. The consumption of supplies has been valued based on the
average cost method.
The
Company has classified supplies into current and non-current depending on
whether they will be used for maintenance or capital expenditures.
The
carrying value of supplies, taken as a whole, does not exceed their recoverable
value as of the end of each year.
f)
|
Non-current
investments:
|
|
-
|
50%
interest held in the related company SACME S.A. (a company organized by
means of equal contributions by distribution companies EDENOR S.A. and
EDESUR S.A. in accordance with the Bid Package). SACME S.A. is in charge
of monitoring the electric power supplied to the aforementioned
distributors. As of December 31, 2009 and 2008, the investment
in SACME has been recorded at its equity value (Exhibit
C).
|
In order
to determine the equity value, the audited financial statements of SACME S.A. as
of December 31, 2009 and 2008 have been used. The accounting principles used by
SACME are similar to those applied by EDENOR for the preparation of its
financial statements.
|
-
|
Corporate
Notes of Central Térmica Güemes: As of December 31, 2008, the
aforementioned corporate notes have been valued at their acquisition value
plus interest income accrued translated into pesos at the rate of exchange
in effect as of year-end.
|
As of
December 31, 2008, interest income accrued was disclosed in current investments
and amounted to 393 (Exhibit D).
During
the period ended March 31, 2009, the Company sold the aforementioned corporate
notes, which resulted in a loss of 4,679 that has been included in the Financial
income (expense) and Holding gains (losses) generated by assets account of the
Statement of Income under Holding results.
|
-
|
Municipal
Financial Restructuring Bonds (Municipal Bonds) issued
pursuant to Law No. 11,752 of the Province of Buenos Aires: As of December
31, 2008, they were valued at their acquisition value, including the
inflation-linked CER (“benchmark stabilization coefficient”) adjustment
and interest accrued at an annual rate of
4%.
|
On
December 29, 2009, the Company sold the aforementioned Municipal Bonds. This
transaction resulted in a loss of 1,756 that has been included in the Financial
income (expense) and Holding gains (losses) generated by assets account of the
Statement of Income under Holding results.
|
-
|
Discretionary
trust: As of December 31, 2008, its value has been based upon the market
price of the securities kept by the trustee translated into pesos at the
rate of exchange in effect as of
year-end.
|
On
September 3, 2009, the discretionary trust was dissolved and the trust property
was liquidated and transferred to the Company (Note 22).
g)
|
Property,
plant and equipment:
|
Property,
plant and equipment transferred by SEGBA on September 1, 1992 were valued as of
the privatization date as described below, and restated to reflect the effects
of inflation as indicated in Note 2. The total value of the assets transferred
from SEGBA was allocated to individual assets accounts on the basis of
engineering studies conducted by the Company.
The total
value of property, plant and equipment has been determined based on the US$ 427
million price actually paid by EASA for the acquisition of 51% of the Company’s
capital stock at acquisition date. Such price was used to value the
entire capital stock of EDENOR at 832 million pesos, which, when added to the
fair value of the debts assumed by the Company under the SEGBA Privatization Bid
Package for 139.2 million pesos less the fair value of certain assets received
from SEGBA for 103.2 million, valued property plant and equipment at 868 million
pesos.
SEGBA
neither prepared separate financial statements nor maintained financial
information or records with respect to its distribution operations or the
operations in which the assets transferred to EDENOR were used. Accordingly, it
was not possible to determine the historical cost of transferred
assets.
Additions
subsequent to such date have been valued at acquisition cost restated to reflect
the effects of inflation as indicated in Note 2, net of the related accumulated
depreciation. Depreciation has been calculated by applying the straight-line
method over the estimated useful life of the assets which was determined on the
basis of the above-mentioned engineering studies. Furthermore, in order to
improve the disclosure of the account, the Company has made certain changes in
the classification of property, plant and equipment based on each technical
process.
In
accordance with the provisions of TR No. 17, financial costs in relation to any
given asset may be capitalized when such asset is in the process of production,
construction, assembly or completion, and such processes, due to their nature,
take long periods of time; those processes are not interrupted; the period of
production, construction, assembly or completion does not exceed the technically
required period; the necessary activities to put the asset in a
condition to be used or sold are not substantially complete; and the asset is
not in condition so as to be used in the production or start up of other assets,
depending on the purpose pursued with its production, construction, assembly or
completion. The Company capitalized financial costs on property, plant and
equipment from 1997 to 2001, from 2006 through 2008 and during the year ended
December 31, 2009. Financial costs capitalized for the years ended December 31,
2009 and 2008 amounted to 24,966 and 31,477, respectively.
During
the years ended December 31, 2009 and 2008, direct and indirect costs
capitalized amounted to 49,566 and 41,464 respectively.
Furthermore,
on May 19, 2008 the Company entered into a software lease agreement, which, in
accordance with the provisions of section 4.1 of Technical Resolution No. 18 of
the Professional Council in Economic Sciences of the Autonomous City of Buenos
Aires, has been considered as a Finance Lease. Additionally, on November 27,
2008 the aforementioned agreement was amended so as to extend its
scope.
Common
characteristics of these lease contracts are that they transfer substantially
all the risks and rewards incident to the ownership of the leased asset, whose
ownership title may be transferred or not. In consideration thereof, the Company
(lessee) agrees to make one or more payments that cover the current value of the
asset and the corresponding financial charges.
For this
concept, the Company has recorded 11,849 and 10,103 in the Property, plant and
equipment account (Exhibit A), and 3,744 and 8,276 in Other Liabilities under
Other (Note 10) as of December 31, 2009 and 2008, respectively, and 1,088 and
589 in the Statement of Income under Financial interest as of December 31, 2009
and 2008, respectively.
The
recorded value of property, plant and equipment, taken as a whole, does not
exceed their recoverable value as of the end of each year.
Allowance
for doubtful accounts: it has been recorded to adjust the valuation of trade
receivables and other receivables up to their estimated recoverable value. The
amount of the allowance has been determined based on the historical series of
collections for services billed through the end of each year and collections
subsequent thereto.
Additionally,
for purposes of calculating the amount of the allowance, the Company has
considered a detailed analysis of accounts receivable in
litigation.
The
evolution and balances of allowances have been disclosed in Exhibit
E.
Amounts
have been accrued for several contingencies.
|
1)
|
The
Company is a party to certain lawsuits and administrative proceedings in
several courts and government agencies, including certain tax
contingencies arising from the ordinary course of business. The
Argentine tax authority (“AFIP”) had challenged certain income tax
deductions related to allowances for doubtful accounts made by the Company
on its income tax returns for fiscal years 1996, 1997 and 1998, and had
assessed additional taxes for approximately 9,300. Tax related
contingencies were subject to interest charges and, in some cases, to
fines. For these concepts, the Company had recorded an accrual for 29,521.
This matter was on appeal to the Federal Tax Court and the Federal
Appellate Court in Administrative Matters. During the appeal process,
payment of such claim had been
suspended.
|
On April
27, 2009, the Company adhered to the tax regularization plan established in Law
No. 26,476. The main features of the aforementioned moratorium are as
follow:
- Waiver
of fines and penalties on which no final judgment has been issued at the time of
adherence to the regularization plan;
- Waiver
of late payment/default and penalty interest in the amount exceeding 30 % of the
principal owed;
- An
initial payment equal to 6% of the debt existing at the time of adherence to the
regularization plan;
- The
remaining balance payable in 120 monthly installments with a 0.75% monthly
interest rate.
- 30% to 50%
reduction in tax agents and AFIP attorneys’ fees.
In
accordance with the assessment of the tax regularization plan, the Company’s
debt amounted to 12,122. During the year ended December 31, 2009, the Company
paid for this concept an amount of 1,487, thus the remaining balance of the
Company’s debt totals 10,635 (Note 9).
|
2)
|
The
Company is also a party to civil and labor lawsuits in the ordinary course
of business.
|
At the
end of each year, management evaluates these contingencies and records an
accrual for related potential losses when: (i) payment thereof is probable, and
(ii) the amount can be reasonably estimated. The Company estimates
that any loss in excess of amounts accrued in relation to the above matters will
not have a material adverse effect on the Company’s result of operations or its
financial position.
The
evolution and balances of the accrued litigation account have been disclosed in
Exhibit E.
As of
December 31, 2009 and 2008, the notes issued in United States dollars (Note 14)
have been valued on the basis of the best estimate of the amount to be paid,
discounted at a 10.5% annual nominal rate, which, in accordance with the
Company’s criterion, reasonably reflects market assessments of the time value of
money and specific debt risks.
The
adjustment to present value of future cash flows of the notes, at the market
rate in effect at the time of the initial measurement, generated losses of 5,243
and 8,457 as of December 31, 2009 and 2008, respectively.
During
the years ended December 31, 2009, 2008 and 2007, the Company purchased at
market prices and in successive operations all “discount notes” and part of the
“fixed rate par notes” due in 2016 and 2017, for nominal values of US$ 86,038
thousand, US$ 50,033 thousand and US$ 283,726 thousand, respectively (Note
14).
As of
December 31, 2009, the principal outstanding balance of the notes amounts to
746,906 (Notes 7 and 14).
The rest
of the financial debts have been valued at nominal value plus interest expense
accrued as of the end of each year. The values thus obtained do not differ
significantly from those that would have been obtained if the Argentine GAAP had
been applied, inasmuch as they establish that financial debts must be valued in
accordance with the amount of money delivered and received, respectively, net of
the transaction costs, plus financial results accrued on the basis of the
internal rate of return estimated at the time of their initial
recognition.
“Derivative
financial instruments” (Note 23) have been valued in accordance with the
provisions of section 2 of Technical Resolution No. 18 of the Argentine
Federation of Professional Councils in Economic Sciences (FACPCE), which require
that all derivative financial instruments be recognized as either assets or
liabilities at their fair value, regardless of whether they are designated as
hedging instruments or not.
Furthermore,
the changes in the accounting basis of financial instruments have been
recognized by the Company in the Financial income (expense) and holding gains
(losses) generated by liabilities account of the Statement of Income under
Exchange difference with a contra-account in Current Liabilities – Loans under
Derivative financial instruments and under Interest as of December 31, 2009 and
2008, respectively (Note 7).
k)
|
Shareholders'
equity
accounts:
|
These
accounts have been restated to reflect the effects of inflation as indicated in
Note 2, except for the "Shareholders’ Contributions - Nominal value" and
“Additional Paid-in Capital” accounts which have been maintained at their
nominal value. The excess of the adjusted value of Capital Stock over its
nominal value has been included in the “Shareholders’ Contributions – Adjustment
to Capital” account.
The
Treasury Stock account represents the nominal value of the Company’s own shares
acquired by the Company (Note 1)
l)
|
Statement
of income
accounts:
|
|
-
|
The
accounts that accumulate monetary transactions have been disclosed at
their nominal values.
|
|
-
|
Financial
income (expense) and holding gains (losses) have been disclosed separately
under income (expense) generated by assets and by
liabilities.
|
|
-
|
The
adjustment to present value of the notes is stated at nominal
value.
|
|
-
|
The
adjustment to present value of trade receivables related to the
application of the retroactive tariff increase agreed upon in the
Adjustment Agreement and the Framework Agreement is stated at nominal
value.
|
m)
|
Income
tax and tax on minimum presumed
income:
|
The
Argentine GAAP require the application of the deferred tax method to account for
income tax. This method consists of recognizing deferred tax assets and
liabilities when temporary differences arise from the valuation of assets and
liabilities for accounting and tax purposes. Regarding the restatement of
property, plant and equipment to reflect the effects of inflation, the Company
has applied Resolution MD (the Board) No. 11/03 of the CPCECABA and General
Resolution No. 487/06 of the CNV (Note 2 – Basis of presentation of the
financial statements).
The
reconciliation between the income tax as charged to the statement of income for
the years ended December 31, 2009 and 2008, and the amount that would result
from applying the tax rate in effect (35%) to the income before taxes for each
year, is as follows:
|
|
2009
|
|
|
2008
|
|
Income
for the year before taxes
|
|
|
169,954 |
|
|
|
184,289 |
|
Applicable
tax rate
|
|
|
35 |
% |
|
|
35 |
% |
Income
for the year at the applicable tax rate
|
|
|
59,484 |
|
|
|
64,501 |
|
Permanent
differences
|
|
|
|
|
|
|
|
|
Adjustment
for inflation of property, plant and equipment
|
|
|
26,980 |
|
|
|
30,404 |
|
Accruals
and other
|
|
|
(7,153 |
) |
|
|
(33,731 |
) |
Total
income tax charge for the year
|
|
|
79,311 |
|
|
|
61,174 |
|
Adjustment
of Income Tax Return fiscal year 2008
|
|
|
1,636 |
|
|
|
0 |
|
Variation
between deferred assets (liabilities) charged to income
|
|
|
14,623 |
|
|
|
38,571 |
|
Income
tax for the year
|
|
|
95,570 |
|
|
|
99,745 |
|
Additionally,
the breakdown of deferred tax assets and liabilities as of December 31, 2009 and
2008 is as follows:
|
|
2009
|
|
|
2008
|
|
Non-current
deferred tax assets
|
|
|
|
|
|
|
Tax-loss
carry forward
|
|
|
4,293 |
|
|
|
8,316 |
|
Accruals
|
|
|
127,033 |
|
|
|
74,823 |
|
Other
|
|
|
14,058 |
|
|
|
15,577 |
|
|
|
|
145,384 |
|
|
|
98,716 |
|
|
|
2009
|
|
|
2008
|
|
Non-current
deferred tax liabilities
|
|
|
|
|
|
|
Property,
plant and equipment and other
|
|
|
(58,309 |
) |
|
|
(17,948 |
) |
|
|
|
|
|
|
|
|
|
Net
deferred tax assets
|
|
|
87,075 |
|
|
|
80,768 |
|
|
|
2009
|
|
|
2008
|
|
Net
deferred tax assets - Initial balance
|
|
|
80,768 |
|
|
|
42,197 |
|
Use
of tax loss carryforward
|
|
|
(8,316 |
) |
|
|
0 |
|
Variation
between deferred assets (liabilities) charged to income
|
|
|
14,623 |
|
|
|
38,571 |
|
Net
deferred tax assets - Ending balance
|
|
|
87,075 |
|
|
|
80,768 |
|
Additionally,
as of December 31, 2008, the Company had tax credits on minimum presumed income
for payments made in prior years. This tax is complementary to the income tax.
The Company’s tax obligation for a given year will be equal to the higher of
these taxes. However, should the tax on minimum presumed income exceed income
tax in any given fiscal year, such excess will be eligible for credit against a
partial payment of any excess of the income tax over the tax on minimum presumed
income that may arise in any of the ten subsequent fiscal years.
As of
December 31, 2009, no minimum presumed income tax charge has been recorded due
to the fact that it is lower than the charge of the income tax
accrual.
As
lessee, EDENOR has lease contracts (buildings) which classify as operating
leases.
Common
characteristics of these lease contracts are that lease payments (installments)
are established as fixed amounts; there are neither purchase option clauses nor
renewal term clauses (except for the Handling and Energy Transformation Center
contract that has an automatic renewal clause for the term thereof); and there
are prohibitions such as: transferring or sub-leasing the building, changing its
use and/or making any kind of modifications thereto. All operating lease
contracts have cancelable terms and lease periods of two to thirteen
years.
Buildings
are for commercial offices, two warehouses, the headquarters building (comprised
of administration, commercial and technical offices), the Handling and Energy
Transformation Center (two buildings and a plot of land located within the
perimeter of Central Nuevo Puerto and Puerto Nuevo) and Las Heras
substation.
As of
December 31, 2009 and 2008, future minimum lease payments with respect to
operating leases are as follow:
|
|
2009
|
|
|
2008
|
|
2009
|
|
|
0 |
|
|
|
6,031 |
|
2010
|
|
|
8,400 |
|
|
|
5,934 |
|
2011
|
|
|
2,645 |
|
|
|
2,275 |
|
2012
|
|
|
336 |
|
|
|
259 |
|
2013
|
|
|
209 |
|
|
|
203 |
|
2014
|
|
|
147 |
|
|
|
147 |
|
2015
|
|
|
147 |
|
|
|
0 |
|
Total
future minimum lease payments
|
|
|
11,884 |
|
|
|
14,849 |
|
Total
rental expenses for all operating leases for the years ended December 31, 2009
and 2008 are as follow:
|
|
2009
|
|
|
2008
|
|
Total
lease expenses
|
|
|
8,478 |
|
|
|
5,013 |
|
As
lessor, Edenor has entered into several operating lease contracts with certain
cable television companies granting them the right to use the poles of the
Company’s network. Most of such lease contracts include automatic renewal
clauses.
As of
December 31, 2009 and 2008, future minimum lease collections with respect to
operating leases are as follow:
|
|
2009
|
|
|
2008
|
|
2009
|
|
|
0 |
|
|
|
10,303 |
|
2010
|
|
|
12,831 |
|
|
|
1,490 |
|
2011
|
|
|
12,294 |
|
|
|
0 |
|
2012
|
|
|
2,167 |
|
|
|
0 |
|
2013
|
|
|
75 |
|
|
|
0 |
|
2014
|
|
|
18 |
|
|
|
0 |
|
2015
|
|
|
0 |
|
|
|
0 |
|
Total
future minimum lease collections
|
|
|
27,385 |
|
|
|
11,793 |
|
Total
rental income for all operating leases for the years ended December 31, 2009 and
2008, is as follows:
|
2009
|
2008
|
Total
lease income (Note 11)
|
13,582
|
10,463
|
o)
|
Labor
cost liabilities and early retirements
payable:
|
They
include the following charges:
|
-
|
for
supplementary benefits of leaves of absence derived from accumulated
vacation,
|
|
-
|
for
seniority-based bonus to be granted to employees with a specified number
of years of employment, as stipulated in collective bargaining agreements
in effect. As of December 31, 2009 and 2008, the accrual for such bonuses
amounted to 9,064 and 8,001, respectively (Note
8),
|
|
-
|
for
other personnel benefits (pension plan) to be granted to employees upon
retirement, as stipulated in collective bargaining agreements in effect.
As of December 31, 2009 and 2008, the accrual for these benefits amounted
to 24,820 and 18,048, respectively (Note
8).
|
Liabilities
related to the above-mentioned seniority-based bonus and other personnel
benefits (pension plans) to be granted to employees, have been determined taking
into account all rights accrued by the beneficiaries of both plans as of
December 31, 2009 and 2008, respectively, on the basis of actuarial studies
conducted by an independent actuary as of December 31, 2009 and 2008. Such
liabilities have been disclosed under the “Salaries and social security taxes”
account as seniority-based bonus and other personnel benefits, respectively
(Note 8).
Early
retirements payable corresponds to individual optional agreements. After
employees reach a specific age, the Company may offer them this option. The
related accrued liability represents future payment obligations which as of
December 31, 2009 and 2008 amount to 6,185 and 6,815 (current) and 9,789 and
14,041 (non-current), respectively (Note 8).
The
periodical components of the personnel benefits plan for the years ended
December 31, 2009 and 2008, which are disclosed in Other income (expense), net
under Voluntary retirements – bonuses (Note 12), are as follow:
|
|
2009
|
|
|
2008
|
|
Cost
|
|
|
1,608 |
|
|
|
1,488 |
|
Interest
|
|
|
4,843 |
|
|
|
4,441 |
|
Amortization
of recognized net actuarial loss
|
|
|
1,314 |
|
|
|
779 |
|
|
|
|
7,765 |
|
|
|
6,708 |
|
The
detail of the variations in the Company’s payment commitments under the
personnel benefits plan as of December 31, 2009 and 2008 is as
follows:
|
|
2009
|
|
|
2008
|
|
Payment
commitments under the personnel benefits plan at the beginning of the
year
|
|
|
26,623 |
|
|
|
19,083 |
|
Cost
|
|
|
1,608 |
|
|
|
1,488 |
|
Interest
|
|
|
4,843 |
|
|
|
4,441 |
|
Actuarial
loss
|
|
|
(886 |
) |
|
|
3,638 |
|
Benefits
paid to participating employees
|
|
|
(993 |
) |
|
|
(2,027 |
) |
Payment
commitments under the personnel benefits plan at the end of the
year
|
|
|
31,195 |
|
|
|
26,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment
commitments under the personnel benefits plan at the end of the
year
|
|
|
31,195 |
|
|
|
26,623 |
|
Unrecognized
net actuarial loss
|
|
|
(6,375 |
) |
|
|
(8,575 |
) |
Total
personnel benefits plan (Note 8)
|
|
|
24,820 |
|
|
|
18,048 |
|
Actuarial
assumptions used were the following:
|
|
2009
|
|
|
2008
|
|
Discount
rate
|
|
|
25 |
% |
|
|
18 |
% |
Salary
increase
|
|
|
15 |
% |
|
|
15 |
% |
Inflation
|
|
|
11.5 |
% |
|
|
11.5 |
% |
The
actuarial method used by the Company is the “Projected Unit Credit
Method”.
As of
December 31, 2009 and 2008, the Company does not have any assets related to the
personnel benefit plan (pension plan).
p)
|
Customer
deposits and
contributions:
|
Customer
deposits:
Under the
Concession Agreement, the Company is allowed to receive customer deposits in the
following cases:
|
1.
|
When
the power supply is requested and the user is unable to provide evidence
of his legal ownership of the
premises;
|
|
2.
|
When
service has been suspended more than once in one-year
period;
|
|
3.
|
When
the power supply is reconnected and the Company is able to verify the
illegal use of the service (fraud).
|
|
4.
|
When
the customer is undergoing liquidated bankruptcy or reorganization
proceedings.
|
The
Company has decided not to request customer deposits from residential tariff
customers.
Customer
deposits may be either paid in cash or through the customer’s bill and accrue
monthly interest at a specific rate of Banco de la Nación Argentina called
“reference” rate.
When a
customer requests that the supply service be disconnected, the customer’s
deposit is credited (principal amount plus any interest accrued up to the date
of reimbursement). Any balance outstanding at the time of requesting the
disconnection of the supply service is deducted from the amount so credited.
Similar procedures are followed when the supply service is disconnected due to a
lack of customer payment. Consequently, the Company recovers, either fully or
partially, any amount owed for electric power consumption.
When the
conditions for which the Company is allowed to receive customer deposits no
longer exist, the principal amount plus any interest accrued thereon are
credited to the customer’s account.
Customer
contributions:
The
Company receives advances from certain customers for services to be provided
based on individual agreements. Such advances are stated at nominal value as of
the end of each year.
Revenues
from operations are recognized on an accrual basis and derive mainly from
electricity distribution. Such revenues include electricity supplied, whether
billed or unbilled, at the end of each year and have been valued on the basis of
applicable tariffs.
The
Company also recognizes revenues from other concepts included in distribution
services, such as new connections, rights of use on poles, transportation of
electricity to other distribution companies, etc.
All
revenues are recognized when the Company’s revenue earning process has been
substantially completed, the amount of revenues may be reasonably measured and
the economic benefits associated with the transaction flow to the
Company.
During
the year ended December 31, 2007, the Company recognized revenues from the
retroactive tariff increase deriving from the application of the electricity
rate schedule resulting from the RTT to non-residential consumption for the
period of November 2005 through January 31, 2007 (Note 17.b) as it was during
this fiscal year that the new electricity rate schedule was approved by
Resolution No. 51/2007 of the ENRE and applied as from February 1,
2007.
On
October 4, 2007 the Official
Gazette published Resolution No. 1037/2007 of the National Energy
Secretariat. Said resolution establishes that the amounts paid by the Company
for the Quarterly Adjustment Coefficient (CAT) implemented by Section 1 of Law
No. 25,957, as well as the amounts corresponding to the Cost Monitoring
Mechanism (MMC) for the period May 2006 through April 2007 (Note 17 b and c) be
deducted from the funds resulting from the difference between surcharges billed
and discounts made to customers, deriving from the implementation of the Program
for the Rational Use of Electric Power (PUREE), until their transfer to the
tariff is granted by the regulatory authority. The resolution also establishes
that the MMC adjustment for the period May 2006 through April 2007, applicable
as from May 1, 2007, amounts to 9.63 %.
Additionally,
on October 25, 2007 the ENRE issued Resolution No. 710/2007 which approves the
MMC compensation mechanism established in the aforementioned Resolution No.
1037/2007 of the National Energy Secretariat.
The
amounts corresponding to the Cost Monitoring Mechanism (MMC) for the period May
2006 through April 2007 as well as those corresponding to the period May 2007
through October 2007 were transferred to the tariff as from July 1, 2008, in
accordance with the provisions of Resolution No. 324/2008 (Note
17.b).
By Note
No. 1383 dated November 26, 2008 of the National Energy Secretariat, the ENRE
was instructed to consider the earmarking of the funds deriving from the
application of the Cost Monitoring Mechanism (MMC) corresponding to the period
May 2007 through October 2007 whose recognition was pending, and to allow that
such funds be deducted from the excess funds deriving from the application of
the Program for the Rational Use of Electric Power (PUREE), in accordance with
the provisions of Resolution No. 1037/2007 of the National Energy
Secretariat.
The
preparation of the financial statements in accordance with Argentine GAAP
requires the Company’s Board of Directors and Management to make estimates that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements.
Actual results and amounts may differ from the estimates used in the preparation
of the financial statements.
s)
|
Earnings
per common share:
|
It has
been computed on the basis of the number of shares outstanding as of December
31, 2009 and 2008 which amounts to 897,042,600 (net of the treasury shares as of
December 31, 2009 and 2008 for 9,412,500). There is no earning (loss) per share
dilution, as the Company has issued neither preferred shares nor corporate notes
convertible into common shares.
In
accordance with the provisions of TR No. 18, the Company is required to disclose
segment information provided certain requirements are met. This Resolution
establishes the criterion to be followed for reporting information on operating
segments in annual financial statements, and requires the reporting of selective
information on operating segments in interim financial reports. Operating
segments are those components of the Company’s activity about which different
financial information may be obtained, whether for the allocation of resources
or the determination of an asset’s performance. TR No. 18 also establishes the
criterion to be applied by the Company to disclose its services, geographical
areas and major customers.
The
Company is a natural monopoly that operates in a single business segment,
electricity distribution and sale in a specific geographical area, pursuant to
the terms of the concession agreement that governs the provision of this public
service. The Company’s activities have similar economic characteristics and are
similar as to the nature of their products and services and the electricity
distribution process, the type or category of customers, the geographical area
and the methods of distribution. Management evaluates the Company’s performance
based on net income. Accordingly, the disclosure of information as described
above is not necessary.
The
Company operates mainly in Argentina. Its business may be affected by inflation,
currency devaluation, regulations, interest rates, price controls, changes in
governmental economic policies, taxes and other political and economic-related
issues affecting the country. The majority of the Company’s assets are either
non-monetary or denominated in Argentine pesos, whereas the majority of its
liabilities are denominated in U.S. dollars. As of December 31, 2009, a minimum
portion of the Company’s debts accrues interest at floating rates; consequently
the Company’s exposure to interest rate risk is limited (Note 14).
As of
December 31, 2009, the Company has entered into forward and futures contracts
with the aim of mitigating the risk generated by the fluctuations in the US
dollar rate of exchange (Notes 7 and 23.b).
Related
to customers
The
Company’s accounts receivable derive primarily from the sale of electric
power.
No single
customer accounted for more than 10% of sales for the years ended December 31,
2009 and 2008. The collectibility of trade receivables balances related to the
Framework Agreement, which amount to 54,823 and 49,390 as of December 31, 2009
and 2008, respectively, as disclosed in Notes 4 and 13, is subject to compliance
with the terms of such agreement.
Related
to employees who are union members
As of
December 31, 2009, approximately 83% of the Company’s employees were union
members. Although the relationship with unions is currently stable, the Company
may not ensure that there will be no work disruptions or strikes in the future,
which could have a material adverse effect on the Company’s business and the
results of operations. Furthermore, collective bargaining agreements signed with
unions expired at the end of the 2007 fiscal year. There is no guarantee that
the Company will be able to negotiate new collective bargaining agreements under
the same terms as those currently in place or that there will be no strikes
before or during the negotiation process.
The Bid
Package sets forth the responsibilities of both SEGBA and the Company in
relation to the personnel transferred by SEGBA through Resolution No. 26/92 of
the Energy Secretariat. According to the Bid Package, SEGBA will be
fully liable for any labor and social security obligations accrued or originated
in events occurred before the take-over date, as well as for any other
obligations deriving from lawsuits in process at such date.
During
2005, two new collective bargaining agreements were signed with the Sindicato de Luz y Fuerza de la
Capital Federal and the Asociación de Personal Superior de
Empresas de Energía, which expired on December 31, 2007 and October 31,
2007, respectively. These agreements were approved by the Ministry of
Labor and Social Security on November 17, 2006 and October 5, 2006,
respectively.
As of the
date of issuance of these financial statements, meetings aimed at negotiating
the renewal terms of both collective bargaining agreements are being held with
the above-mentioned unions.
w)
|
Foreign
currency translation/ transactions:
|
The
Company accounts for foreign currency denominated assets and liabilities and
related transactions as follows:
The
accounting measurements of purchases, sales, payments, collections, other
transactions and outstanding balances denominated in foreign currency are
translated into pesos using the exchange rates described below. Thus, the
resulting amount in pesos represents the amount collected or to be collected,
paid or to be paid.
For
conversion purposes, the following exchange rates are used:
a) the
exchange rate in effect at the date of the transaction, for payments,
collections and other transactions denominated in foreign currency;
and
b) the
exchange rate in effect at the date of the financial statements, for assets and
liabilities denominated in foreign currency.
For
transactions and balances denominated in foreign currency, the bid price is used
for assets, and the offer price is used for liabilities.
The
effect of such transactions has been included in the Statement of Income as
“Exchange difference” under “Financial income (expense) and Holding gains
(losses)”.
x)
|
Financial
statements comparison:
|
Certain
amounts disclosed in the financial statements as of December 31, 2008 have been
reclassified for comparative purposes, following the disclosure criteria used
for the financial statements as of December 31, 2009.
Such
reclassifications do not imply any changes in shareholders’ equity as of
December 31, 2008 or in the results of operations for the fiscal year ended as
of that date.
4. TRADE
RECEIVABLES
The
detail of trade receivables as of December 31, 2009 and 2008 is as
follows:
|
|
2009
|
|
|
2008
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
from sales of electricity:
|
|
|
|
|
|
|
Billed
|
|
|
181,595 |
|
|
|
166,958 |
|
|
|
|
|
|
|
|
|
|
Unbilled
|
|
|
|
|
|
|
|
|
Sales
of electricity
|
|
|
139,181 |
|
|
|
164,348 |
|
Retroactive
tariff increase arising from the application of the new electricity rate
schedule (Note 17.b item d)
|
|
|
37,391 |
|
|
|
39,361 |
|
Adjustment
to present value of the retroactive tariff increase arising from the
application of the new electricity rate schedule (Note
3.c)
|
|
|
(2,516 |
) |
|
|
(2,516 |
) |
Framework
Agreement (Notes 3.c, 3.v and 13)
|
|
|
36,273 |
|
|
|
49,390 |
|
Adjustment
to present value of the Framework Agreement (Notes 3.c, and
13)
|
|
|
(1,406 |
) |
|
|
0 |
|
Framework
Agreement - Payment plan agreement with the Province of Bs.
As. (Note 13)
|
|
|
2,292 |
|
|
|
2,292 |
|
National
Fund of Electricity (Note 17.a)
|
|
|
2,840 |
|
|
|
2,812 |
|
Specific
fee payable for the expansion of the network, transportation and others
(Note 17.b)
|
|
|
2,459 |
|
|
|
929 |
|
In
litigation
|
|
|
10,815 |
|
|
|
10,014 |
|
Subtotal
|
|
|
408,924 |
|
|
|
433,588 |
|
Less:
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts (Exhibit E)
|
|
|
(19,688 |
) |
|
|
(33,097 |
) |
|
|
|
389,236 |
|
|
|
400,491 |
|
Non-Current:
|
|
|
|
|
|
|
Receivables
from sales of electricity:
|
|
|
|
|
|
|
Unbilled
|
|
|
|
|
|
|
Sales
of electricity
|
|
|
45,531 |
|
|
|
45,531 |
|
Retroactive
tariff increase arising from the application of the new electricity rate
schedule (Note 17.b item d)
|
|
|
31,795 |
|
|
|
79,487 |
|
Adjustment
to present value of the retroactive tariff increase arising from the
application of the new electricity rate schedule (Note
3.c)
|
|
|
(4,119 |
) |
|
|
(13,648 |
) |
Framework
Agreement (Notes 3.c, 3.v and 13)
|
|
|
18,550 |
|
|
|
0 |
|
Adjustment
to present value of the Framework Agreement (Notes 3.c, and
13)
|
|
|
(4,710 |
) |
|
|
0 |
|
|
|
|
87,047 |
|
|
|
111,370 |
|
5. OTHER
RECEIVABLES
The
detail of other receivables as of December 31, 2009 and 2008 is as
follows:
|
|
2009
|
|
|
2008
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses (1)
|
|
|
2,800 |
|
|
|
976 |
|
Advances
to suppliers
|
|
|
142 |
|
|
|
3,088 |
|
Advances
to personnel
|
|
|
6,396 |
|
|
|
7,451 |
|
Related
parties (Note 15)
|
|
|
1,604 |
|
|
|
449 |
|
Writs
of attachment under ENRE proceedings
|
|
|
0 |
|
|
|
59 |
|
Receivables
from activities other than the main activity (2)
|
|
|
20,402 |
|
|
|
15,271 |
|
Allowance
for other doubtful accounts (Exhibit E)
|
|
|
(7,908 |
) |
|
|
(4,573 |
) |
Warranty
deposits and other (3)
|
|
|
32,544 |
|
|
|
0 |
|
Tax
credit on minimum presumed income (Note 3.m)
|
|
|
0 |
|
|
|
10,255 |
|
Tax
on financial transfers
|
|
|
682 |
|
|
|
3,866 |
|
Other
(4)
|
|
|
4,436 |
|
|
|
5,959 |
|
|
|
|
61,098 |
|
|
|
42,801 |
|
Non-current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid
expenses
|
|
|
1,439 |
|
|
|
1,680 |
|
Tax
credit on minimum presumed income (Note 3.m)
|
|
|
0 |
|
|
|
16,956 |
|
Net
deferred tax assets (Note 3.m)
|
|
|
87,075 |
|
|
|
80,768 |
|
Other
|
|
|
242 |
|
|
|
68 |
|
|
|
|
88,756 |
|
|
|
99,472 |
|
|
(1)
|
Includes
447 in foreign currency (Exhibit G) as of December 31,
2009.
|
|
(2)
|
Includes
1,367 and 852 in foreign currency (Exhibit G) as of December 31, 2009 and
2008, respectively.
|
|
(3)
|
Includes
26,196 related to warranty deposits on derivative financial instruments
(Notes 3.u and 23.b), 22,899 of which are denominated in foreign currency
(Exhibit G) as of December 31,
2009.
|
|
(4)
|
Includes
129 and 11 in foreign currency (Exhibit G) as of December 31, 2009 and
2008, respectively.
|
6. TRADE ACCOUNTS
PAYABLE
The
detail of trade accounts payable as of December 31, 2009 and 2008 is as
follows:
|
|
2009
|
|
|
2008
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payables
for purchase of electricity and other purchases (1)
|
|
|
214,693 |
|
|
|
217,086 |
|
Unbilled
electric power purchases
|
|
|
92,945 |
|
|
|
97,619 |
|
Customer
contributions (Note 3.p)
|
|
|
28,874 |
|
|
|
23,078 |
|
Other
(2)
|
|
|
11,270 |
|
|
|
1,478 |
|
|
|
|
347,782 |
|
|
|
339,261 |
|
Non-Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
deposits (Note 3.p)
|
|
|
44,179 |
|
|
|
40,154 |
|
Other
(3)
|
|
|
2,675 |
|
|
|
0 |
|
|
|
|
46,854 |
|
|
|
40,154 |
|
|
(1)
|
Includes
29,034 and 23,093 in foreign currency (Exhibit G) as of December 31, 2009
and 2008, respectively. Also, includes balances with SACME S.A. for 1,000
and 910 as of December 31, 2009 and 2008, respectively, and with Préstamos
y Servicios S.A for 7 and with Errecondo, Salaverri, Dellatorre, Gonzalez
& Burgio for 6 as of December 31, 2008 (Note
15).
|
|
(2)
|
Includes
683 related to the debt recognition and refinancing agreement entered into
with the ONABE (Note 17.c).
|
|
(3)
|
Debt
recognition and refinancing agreement entered into with the ONABE (Note
17.c).
|
The
detail of loans as of December 31, 2009 and 2008 is as follows:
|
|
2009
|
|
|
2008
|
|
Current:
|
|
|
|
|
|
|
Financial
loans:
|
|
|
|
|
|
|
Principal
(1)
|
|
|
43,333 |
|
|
|
17,771 |
|
Interest
(2)
|
|
|
305 |
|
|
|
462 |
|
Subtotal
financial loans
|
|
|
43,638 |
|
|
|
18,233 |
|
|
|
|
|
|
|
|
|
|
Corporate
Notes (Note 14):
|
|
|
|
|
|
|
|
|
Floating
Rate Par Notes – Class 8
|
|
|
17,464 |
|
|
|
0 |
|
Interest
(3)
|
|
|
15,885 |
|
|
|
9,012 |
|
Derivative
financial instruments (Notes 3.u and 23.b)
|
|
|
6,001 |
|
|
|
0 |
|
|
|
|
82,988 |
|
|
|
27,245 |
|
|
|
2009
|
|
|
2008
|
|
Non-current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
loans:
|
|
|
|
|
|
|
Principal
|
|
|
0 |
|
|
|
33,334 |
|
|
|
|
|
|
|
|
|
|
Corporate
Notes (Note 14):
|
|
|
|
|
|
|
|
|
Floating
Rate Par Notes – Class 8
|
|
|
58,236 |
|
|
|
0 |
|
Fixed
Rate Notes – Class 7 (4)
|
|
|
565,022 |
|
|
|
699,232 |
|
Fixed
and Incremental Rate Par Notes – Class A (4)
|
|
|
58,091 |
|
|
|
148,960 |
|
Fixed
and Incremental Rate Par Notes – Class B (4)
|
|
|
0 |
|
|
|
15,107 |
|
Floating
Rate Par Notes – Class A (4)
|
|
|
48,093 |
|
|
|
43,701 |
|
Subtotal
corporate notes
|
|
|
729,442 |
|
|
|
907,000 |
|
Adjustment
to present value of notes (Note 3.j)
|
|
|
(21,943 |
) |
|
|
(27,186 |
) |
Corporate
Notes at present value
|
|
|
707,499 |
|
|
|
879,814 |
|
|
|
|
707,499 |
|
|
|
913,148 |
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes
1,105 in foreign currency (Exhibit G) as of December 31,
2008.
|
(2)
|
Includes
35 in foreign currency (Exhibit G) as of December 31,
2008.
|
(3)
|
Includes
13,996 and 9,012 in foreign currency (Exhibit G) as of December 31, 2009
and 2008, respectively, net of 7,905 related to derivative financial
instruments as of December 31, 2008 (Note
23.a).
|
(4)
|
In
foreign currency (Exhibit G) as of December 31, 2009 and
2008.
|
8. SALARIES AND SOCIAL SECURITY
TAXES
The
detail of salaries and social security taxes as of December 31, 2009 and 2008 is
as follows:
|
|
2009
|
|
|
2008
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
payable and accruals
|
|
|
101,435 |
|
|
|
79,315 |
|
Social
Security (ANSES)
|
|
|
10,757 |
|
|
|
8,657 |
|
Early
retirements payable (Note 3.o)
|
|
|
6,185 |
|
|
|
6,815 |
|
|
|
|
118,377 |
|
|
|
94,787 |
|
Non-Current (Note
3.o):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
Benefits Plan
|
|
|
24,820 |
|
|
|
18,048 |
|
Seniority-based
bonus
|
|
|
9,064 |
|
|
|
8,001 |
|
Early
retirements payable
|
|
|
9,789 |
|
|
|
14,041 |
|
|
|
|
43,673 |
|
|
|
40,090 |
|
9. TAXES
The
detail of taxes as of December 31, 2009 and 2008 is as follows:
|
|
2009
|
|
|
2008
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provincial,
municipal and federal contributions and taxes
|
|
|
28,957 |
|
|
|
22,796 |
|
Value
Added Tax (VAT)
|
|
|
28,554 |
|
|
|
32,912 |
|
Income
Tax and Tax on minimum presumed income (net of advances, withholdings and
payments on account) (Note 3.m)
|
|
|
37,867 |
|
|
|
22,151 |
|
Withholdings
|
|
|
9,464 |
|
|
|
5,436 |
|
Municipal
taxes
|
|
|
24,693 |
|
|
|
21,844 |
|
Tax
regularization plan Law No. 26,476 (Note 3.i.1)
|
|
|
1,261 |
|
|
|
0 |
|
Other
|
|
|
9,505 |
|
|
|
5,882 |
|
|
|
|
140,301 |
|
|
|
111,021 |
|
|
|
|
|
|
|
|
|
|
Non-Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
regularization plan Law No. 26,476 (Note 3.i.1)
|
|
|
9,374 |
|
|
|
0 |
|
10. OTHER
LIABILITIES
The
detail of other liabilities as of December 31, 2009 and 2008 is as
follows:
|
|
2009
|
|
|
2008
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures fund – CAMMESA (Note 17.b)
|
|
|
0 |
|
|
|
2,066 |
|
Other
(1)
|
|
|
8,012 |
|
|
|
8,448 |
|
|
|
|
8,012 |
|
|
|
10,514 |
|
Non-current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENRE
penalties (Note 17 a and b)
|
|
|
377,456 |
|
|
|
331,613 |
|
Program
for the rational use of electric power (PUREE)
|
|
|
233,319 |
|
|
|
33,494 |
|
Other
(2)
|
|
|
0 |
|
|
|
3,903 |
|
|
|
|
610,775 |
|
|
|
369,010 |
|
|
(1)
|
Includes
1,370 and 1,292 in foreign currency (Exhibit G) as of December 31, 2009
and 2008, respectively.
|
Additionally,
includes 3,744 and 4,373 related to the software lease agreement (Note 3.g) as
of December 31, 2009 and 2008, respectively.
|
(2)
|
Software
lease agreement (Note 3.g).
|
11. NET
SALES
The
breakdown of net sales for the years ended December 31, 2009 and 2008 is as
follows:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Sales
of electricity (1)
|
|
|
2,035,845 |
|
|
|
1,966,017 |
|
Late
payment charges
|
|
|
20,686 |
|
|
|
17,764 |
|
Right
of use on poles (Note 3.n)
|
|
|
13,582 |
|
|
|
10,463 |
|
Connection
charges
|
|
|
5,700 |
|
|
|
3,729 |
|
Reconnection
charges
|
|
|
2,047 |
|
|
|
2,225 |
|
|
|
|
2,077,860 |
|
|
|
2,000,198 |
|
(1) Net
of ENRE discounts and penalties for 58,500 and 34,775 for the years ended
December 31, 2009 and 2008, respectively (Note 17 a and b). As of December 31,
2008, includes 84,585 related to the application of the Cost Monitoring
Mechanism (MMC) (Note 17.a).
12. OTHER INCOME (EXPENSE) -
NET
The
breakdown of other income (expense) - net for the years ended December 31, 2009
and 2008 is as follows:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Non-operating
income
|
|
|
4,529 |
|
|
|
8,392 |
|
Commissions
on municipal taxes collection
|
|
|
3,844 |
|
|
|
2,291 |
|
Net
expense from technical services
|
|
|
(785 |
) |
|
|
(1,566 |
) |
Voluntary
Retirements - Bonuses
|
|
|
(5,381 |
) |
|
|
(31,334 |
) |
Severance
paid
|
|
|
(4,419 |
) |
|
|
(4,228 |
) |
Accrued
litigation (Exhibit E)
|
|
|
(15,500 |
) |
|
|
(19,900 |
) |
Disposal
of property, plant and equipment
|
|
|
(2,748 |
) |
|
|
(1,910 |
) |
Recovery
of allowance for doubtful accounts (1)
|
|
|
21,236 |
|
|
|
14,087 |
|
Net
recovery of accrued litigation (2)
|
|
|
23,431 |
|
|
|
0 |
|
Other
|
|
|
(917 |
) |
|
|
4,343 |
|
|
|
|
23,290 |
|
|
|
(29,825 |
) |
(1)
Related to the Framework Agreement (Note 13, Exhibits E and H).
(2)
Related to the Company’s adherence to the tax regularization plan (Exhibit E and
Note 3.i).
13. FRAMEWORK
AGREEMENT
On
January 10, 1994, the Company, together with EDESUR S.A., the Argentine Federal
Government and the Government of the Province of Buenos Aires signed a Framework
Agreement aimed at resolving the issue of supplying electricity to low-income
areas and shantytowns. Pursuant to such Framework Agreement, the Company is
entitled to receive compensation from a Special Fund for any non-payments of electricity
supplied to low-income areas and shantytowns.
As
permitted by section 13 of the Agreement, which stipulated that the terms and
conditions of the Agreement could be subject to review and/or adjustments under
certain circumstances, and taking into account that not all of the objectives of
the Agreement could be completely fulfilled within the originally stipulated
period, although most of them had been accomplished, and considering also that
new shantytowns had appeared which had to be recognized, the parties agreed to
extend the term of the Agreement for an additional fifty-month period ending
August 31, 2002. During such additional period the original provisions of the
Framework Agreement and the Regulations continued to be in effect. Furthermore,
a new population census was conducted so as to identify those shantytowns which
up to then had not been recognized.
On
October 6, 2003, the Company signed a new Framework Agreement with the Argentine
Federal Government and the Government of the Province of Buenos Aires, whose
purpose was similar to that of the previous agreement, and which retroactively
covered all the services provided as from September 1, 2002. The term of the new
framework agreement was four years to commence as from January 1, 2003 and could
be renewed for another four-year term should the parties so
agree. The aforementioned Framework Agreement expired on December 31,
2006
On
October 26, 2006, the Company entered into a Payment Plan Agreement with the
Government of the Province of Buenos Aires which establishes the conditions
according to which the Province of Buenos Aires will honor its obligation to the
Company amounting to 27,114, for the period September 2002 through June 2006,
which the Province agrees to verify in accordance with the provisions of chapter
VI -section 13 and related sections- of the Fund Regulations of the New
Framework Agreement. Furthermore, the Province agrees to pay the debt resulting
from the aforementioned verification, in 18 equal, consecutive and monthly
installments.
As of
December 31, 2009 and 2008, the balance corresponding to the aforementioned
payment plan agreement amounts to 2,292 (Note 4).
On
September 22, 2008, the Official Gazette published
Resolution No. 900/2008 of the Ministry of Federal Planning, Public Investment
and Services which ratifies the Addendum to the New Framework Agreement entered
into by the Federal Government and the Company, according to which the term of
the agreement is renewed for a period of four years to commence as from January
1, 2007.
Furthermore,
on March 11, 2009, by Resolution No. 158/2009, the ENRE approves the extension
of the regulations established in the Addendum to the new Framework Agreement in
the terms of Resolution No. 22/2004.
On June
18, 2009, the Official
Gazette of the Province of Buenos Aires published Decree No. 732, which
ratifies the Addendum to the New Framework Agreement entered into by the
Government of the Province of Buenos Aires and the Company, according to which
the term of the agreement is renewed for a period of four years to commence as
from January 1, 2007 (Note 12, and Exhibits E and H).
During
November and December 2009, the Company received payments from the Argentine
Federal Government for a total of 20,000.
As of
December 31, 2009 and 2008, the balances with the Argentine Federal Government
and the Government of the Province of Buenos Aires for this concept amount to
54,823 and 49,390, respectively (Notes 3.c and 4). Due to the fact that the
Framework Agreement has been totally ratified, the Company has provided the ENRE
with the documentation to validate the amounts to be collected for this concept
and has initiated the corresponding collection proceedings.
14. CORPORATE NOTES
PROGRAM
RESTRUCTURING
OF FINANCIAL DEBT
On
January 19, 2006, the Board of Directors approved the launching of a
solicitation of consent for the restructuring of the Company’s financial debt
through the exchange of such debt for a combination of cash and notes (the
Restructuring) pursuant to a voluntary exchange offer (the Voluntary Exchange
Offer) and/or an out-of-court reorganization agreement (Acuerdo Preventivo
Extrajudicial) (the APE).
The
restructuring of the Company’s debt was carried out throughout the fiscal year
ended December 31, 2006. As a result of the restructuring process, the defaulted
debt prior to the restructuring, which amounted to US$ 540.9 million as of
February 22, 2006, was reduced to US$ 376.4 million, with an average term of
more than 8 years, at an average cost of 8% and final maturity in
2019.
On
February 23, 2006, the Annual General Meeting approved the extension of the
Global Medium-Term Corporate Notes Issuance Program for a Maximum Amount
(outstanding at any time) of up to US$ 600 million (or its equivalent in any
other currency). Said extension was also approved by the CNV through Resolution
No. 15,359 issued by the CNV’s Board of Directors on March 23,
2006.
In the
meeting held on June 14, 2007, the Company’s Board of Directors approved the
updating of the Trust Agreement for the issuance of corporate notes that had
been duly approved by the CNV, as required by section 76 of Chapter VI of the
CNV’s Regulations.
On June
28, 2007, the Company’s Board of Directors’ meeting approved the issuance and
public offering, within the framework of the Program and under the terms of Law
No. 23,576 as amended, of fixed rate Corporate Notes for a nominal value of up
to US$ 250 million with maximum maturity in 2017. On October 9, 2007, the
Company issued and carried out the public offering of Class 7 Corporate Notes
for US$ 220 million. The 10-year term Corporate Notes were issued at an issue
price of 100% of the principal amount, and accrue interest as from the date of
issuance at a fixed rate of 10.5% per annum, payable on April 9 and October 9 of
each year, with the first interest payment maturing on April 9, 2008. The
principal will be amortized by a lump sum payment at maturity date on October 9,
2017. The Company has requested authorization for the trading of the Corporate
Notes on the Buenos Aires Stock Exchange, the Mercado Abierto Electrónico S.A.
(the OTC market of Argentina), the Luxembourg Stock Exchange, and the Euro MTF
Market, which is the alternative market of the Luxembourg Stock Exchange.
Furthermore, the Company may request authorization for the listing of the
Corporate Notes on the PORTAL Market as well as authorization for their trading
and/or negotiation on any other stock exchange and/or self-regulated market of
Argentina and/or abroad.
Most of
the net proceeds from the sale of the Corporate Notes were used for the
purchase, payment or redemption of the Company’s outstanding Discount Corporate
Notes due in 2014.
Furthermore,
on April 13, 2009, the Company’s Board of Directors approved the issuance and
public offering, within the framework of the Program and under the terms of Law
No. 23,576, as amended, of floating rate Corporate Notes for a nominal value of
up to 150,000 with maximum maturity in 2013.
On May 7,
2009, the Company issued and carried out the public offering of Class 8
Corporate Notes for 75,700. The four-year term corporate notes were issued at an
issue price of 100% of the principal amount and accrue interest as from the date
of issuance at a floating private BADLAR rate plus a spread of 6.75%, payable
quarterly on May 7, August 7, November 7 and February 7 of each year, with the
first interest payment maturing on August 7, 2009.
The
principal will be amortized in 13 consecutive and quarterly installments, with
the first installment maturing on May 7, 2010.
The
Company has requested authorization for the listing of the Corporate Notes on
the Buenos Aires Stock Exchange (BCBA) and admission for trading on the Mercado
Abierto Electrónico S.A. (the OTC market of Argentina).
The
Company used the net proceeds from the sale of the Corporate Notes to finance
the capital expenditures plan.
During
the years ended December 31, 2009, 2008 and 2007, the Company purchased at
market prices and in successive operations all “discount notes” and part of the
“fixed rate par notes” due in 2016 and 2017, for nominal values of US$ 86,038
thousand, US$ 50,033 thousand and U$S 283,726 thousand,
respectively.
Therefore,
the Company’s debt structure as of December 31, 2009 and 2008 was comprised of
the following Notes:
Debt
issued in United States dollars:
As of
December 31, 2009 and 2008, the Company has in its portfolio Class 7 fixed rate
par notes for nominal values of US$ 65,310 thousand –includes corporate notes
for US$ 24,515 thousand transferred as a consequence of the dissolution of the
Discretionary Trust (Note 22)- and US$ 11,500 thousand,
respectively.
Debt
issued in Argentine pesos:
Debt
issued in United States dollars:
The
principal amortization schedule broken down by year of total debt, without
considering possible adjustments, prepayments, redemptions or cancellations is
detailed in the table below:
Year
|
|
Amount
|
|
2010
|
|
|
17,465 |
|
2011
|
|
|
31,501 |
|
2012
|
|
|
31,501 |
|
2013
|
|
|
19,881 |
|
2014
|
|
|
8,216 |
|
2015
|
|
|
8,216 |
|
2016
|
|
|
31,449 |
|
2017
|
|
|
569,830 |
|
2018
|
|
|
4,811 |
|
2019
|
|
|
24,036 |
|
|
|
|
746,906 |
|
The main
covenants are the following:
1)
Negative Covenants
The terms
and conditions of the Corporate Notes include a series of negative covenants
that limit the Company’s actions with regard to, among others, the
following:
-
encumbrance or authorization to encumber its property or assets;
-
incurrence of indebtedness, in certain specified cases;
- sale of
the Company’s assets related to its main business;
-
carrying out of transactions with shareholders or related parties;
- making certain payments (including, among others, dividends,
purchases of Edenor’s common shares or payments on subordinated debt).
2)
Suspension of Covenants
Certain
negative covenants stipulated in the trust agreement will be suspended or
adjusted if:
(a) The
Company’s long-term debt rating is raised to Investment Grade,
or
(b) The
Company’s Level of Indebtedness is equal to or lower than 2.5.
If the
Company subsequently losses its Investment Grade rating or its Level of
Indebtedness is higher than 2.5, as applicable, the suspended negative covenants
will be once again in effect.
However,
the reinstatement of the covenants will not affect those acts which the Company
may have performed during the suspension of such covenants.
3)
Registration Rights
In
accordance with the Registration Rights Agreement, the Company filed with the
SEC an application requesting authorization in connection with an authorized
exchange offer of the Corporate Notes for new notes of the same class registered
with the SEC in accordance with the Securities Act, representing the same
outstanding debt and subject to similar terms and conditions.
The
exchanged corporate notes would have no restrictions concerning their transfer
and would be freely transferable after the authorized exchange offer by those
Corporate Notes holders who are not related parties of the Company.
On April
13, 2009, the Company informed the National Securities Commission that under
rule 144 of the US Securities Act of
1933, as amended, the Class 7 Corporate Notes due in 2017 had become freely
transferable to and from any person who is not a related company of
Edenor.
Consequently,
the Company has entered into a complementary agreement in order to exchange the
Regulation S Global Corporate Note (issued for a nominal value of US$ 160,250
thousand) and the Restricted Global Corporate Note (issued for a nominal value
of US$ 59,750 thousand), both of them issued within the framework of the trust
agreement, for one fully registered “Global Corporate Note” with no interest
coupons attached for a nominal value of US$ 220,000 thousand, which will not
bear the restrictive legend, as defined under the trust agreement entered into
on October 9, 2007.
15. BALANCES AND TRANSACTIONS
WITH THE CONTROLLING COMPANY AND RELATED PARTIES
In the
normal course of business, the Company carries out transactions with the
controlling company and related parties.
As of
December 31, 2009 and 2008, the outstanding balances with the controlling
company and related parties are as follow:
|
|
2009
|
|
|
2008
|
|
Current
investments (Exhibit D)
|
|
|
|
|
|
|
Central
Térmica Güemes
|
|
|
0 |
|
|
|
393 |
|
Total
|
|
|
0 |
|
|
|
393 |
|
Other
receivables (Note 5)
|
|
|
|
|
|
|
|
|
Electricidad
Argentina S.A.
|
|
|
1 |
|
|
|
1 |
|
SACME
S.A.
|
|
|
1,603 |
|
|
|
448 |
|
Total
|
|
|
1,604 |
|
|
|
449 |
|
Trade accounts
payable (Note 6)
|
|
|
|
|
|
|
|
|
Errecondo,
Salaverri, Dellatorre, Gonzalez & Burgio
|
|
|
0 |
|
|
|
(6 |
) |
SACME
S.A.
|
|
|
(1,000 |
) |
|
|
(910 |
) |
Préstamos
y Servicios S.A.
|
|
|
0 |
|
|
|
(7 |
) |
Total
|
|
|
(1,000 |
) |
|
|
(923 |
) |
Non-Current Investments
(Exhibit D)
|
|
|
|
|
|
|
|
|
Central
Térmica Güemes
|
|
|
0 |
|
|
|
10,784 |
|
Total
|
|
|
0 |
|
|
|
10,784 |
|
Transactions
carried out with the controlling company and related parties for the years ended
December 31, 2009 and 2008 are as follow:
|
|
2009
|
|
|
2008
|
|
Other income
|
|
|
|
|
|
|
Electricidad
Argentina S.A.
|
|
|
10 |
|
|
|
9 |
|
Préstamos
y Servicios S.A.
|
|
|
9 |
|
|
|
2 |
|
Total
|
|
|
19 |
|
|
|
11 |
|
Expenses from services
|
|
|
|
|
|
|
|
|
SACME
S.A.
|
|
|
(5,068 |
) |
|
|
(4,256 |
) |
Electricidad
Argentina S.A.
|
|
|
0 |
|
|
|
(224 |
) |
Préstamos
y Servicios S.A.
|
|
|
(415 |
) |
|
|
(42 |
) |
Errecondo,
Salaverri, Dellatorre, Gonzalez & Burgio
|
|
|
(70 |
) |
|
|
(220 |
) |
Total
|
|
|
(5,553 |
) |
|
|
(4,742 |
) |
|
|
2009
|
|
|
2008
|
|
Financial
expenses and interest
|
|
|
|
|
|
|
Electricidad
Argentina S.A.
|
|
|
(9,306 |
) |
|
|
(7,898 |
) |
Errecondo,
Salaverri, Dellatorre, Gonzalez & Burgio
|
|
|
(145 |
) |
|
|
(160 |
) |
Total
|
|
|
(9,451 |
) |
|
|
(8,058 |
) |
Agreement
with Electricidad Argentina S.A. (controlling company)
On April
4, 2006, the Company and EASA entered into an agreement pursuant to which EASA
will provide technical advisory services on financial matters as from September
19, 2005 and for a term of five years. In consideration of these services,
EDENOR will pay EASA an annual amount of US$ 2,000,000 plus VAT. Any
of the parties may terminate the agreement at any time by giving 60 days’
notice, without having to comply with any further obligations or paying any
indemnification to the other party.
At the
meeting held on April 22, 2008, the Board of Directors approved the addendum to
the agreement for the provision of technical advisory services dated March 14,
2008.
The
aforementioned addendum stipulates that the amount to be paid by the Company in
consideration of the services provided by Electricidad Argentina S.A. has been
increased to US$ 2,500,000 plus VAT, payable retroactively as from January 1,
2008. The rest of the contractual terms have not been modified.
Agreement
with Comunicaciones y Consumos S.A.
On March
16, 2007, the Company and Comunicaciones y Consumos S.A. (CYCSA) entered into an
agreement pursuant to which the Company granted CYCSA the exclusive right to
provide telecommunications services to the Company customers through the use of
the Company’s network in accordance with the provisions of Decree No. 764/2000
of the Federal Government, which contemplates the integration of voice, data and
image transmission services through the existing infrastructure of electricity
distribution companies such as the Company’s network. In accordance with the
terms of the agreement, CYCSA will be responsible for all maintenance expenses
and expenses related to the adapting of the Company’s network for the rendering
of such telecommunications services. The term of the agreement, which was
originally ten years to commence from the date on which CYCSA were granted the
license to render telecommunications services, was subsequently extended to
twenty years by virtue of an addendum to the agreement. The agreement will be
automatically renewed upon expiration date for subsequent periods of five years,
unless notice to the contrary is given by any of the parties no less than 120
days prior to the expiration of the corresponding period. In accordance with the
agreement, CYCSA shall periodically request access to the Company’s network.
Such request will be evaluated by the Company and access will be granted based
on the available capacity of the network. In consideration of the use of the
network, CYCSA will grant the Company 2% of the annual charges collected from
customers, before taxes, as well as 10% of the profits obtained from provision
of services. Furthermore, CYCSA will indemnify the Company for any obligation
arising from the rendering of the services through the Company’s network. The
agreement was signed on condition that CYCSA was to obtain the
telecommunications license, which was granted by the National Telecommunications
Secretariat through Resolution No. 179/2008.
Furthermore,
the first addendum to the Agreement for the Granting of Permission for the Use
of Electricity Distribution Network was signed on October 27, 2008. Pursuant to
this addendum, the Company granted CYCSA the right to use the poles and towers
of High, Medium and Low-voltage overhead lines and the ducts and/or triple ducts
accompanying High, Medium and Low-voltage ducts for the laying of optical fiber
owned by CYCSA, on condition that the referred to optical fiber does not affect
the normal supply of the public service. Moreover, said addendum grants Edenor
the right to use part of the capacity of the optical fiber to be installed. It
must be pointed out that the aforementioned addendum was approved by the
Company’s Board of Directors at the meeting held on November 5,
2008.
During
November 2008, the Company and CYCSA entered into the second addendum to the
agreement, which modifies section XI of the main agreement (Term of the
Agreement), thus extending the term of the agreement from ten to twenty years to
commence from the date on which it went into effect. The aforementioned addendum
was approved by the Company’s Board of Directors on December 18,
2008.
Agreement
with Préstamos y Servicios S.A.
On March
16, 2007, the Company entered into an agreement with Préstamos y Servicios S.A.
(PYSSA), a company engaged in the rendering of financial services, pursuant to
which the Company granted PYSSA the exclusive right to conduct its direct and
marketing services through the use of the Company’s facilities and mailing
services. As part of the agreement, the Company agreed to provide physical space
in some of its offices so that PYSSA be able to offer financial and loan
services to Company customers. Furthermore, the Company agreed to include PYSSA
marketing material in the mail sent to customers, including the invoices. The
term of the agreement is five years, which will be automatically renewed for
subsequent periods of five years, unless any of the parties gives notice to the
other of his intention to terminate the agreement no less than 120 days prior to
the expiration of the corresponding period. In accordance with the terms of the
agreement, PYSSA will pay the Company 2% of the monthly charges collected from
customers, before taxes, as well as 10% of the profits obtained from its
services. Furthermore, PYSSA agreed to indemnify the Company for any obligation
arising from the rendering of its services. The agreement established that its
term was subject to the authorization of the ENRE, which approved this through
Resolution No. 381/2007.
The
activities related to the aforementioned agreement have been temporarily
suspended in the Company’s offices as a consequence of the international
financial crisis and its impact on that specific segment of the
economy.
16. CAPITAL
STOCK
As of
December 31, 2009 and 2008, the Company’s capital stock amounts to 906,455,100
shares, represented by 462,292,111 common, book-entry Class A shares with a par
value of one peso each and the right to one vote per share; 442,210,385 common,
book-entry Class B shares with a par value of one peso each and the right to one
vote per share; and 1,952,604 common, book-entry Class C shares with a par value
of one peso each and the right to one vote per share. Each and every share
maintains the same voting rights, i.e. one vote per share. There are no
preferred shares of any kind, dividends and/or preferences in the event of
liquidation, privileged participation rights, prices and dates, or unusual
voting rights. Moreover, there are no significant terms of contracts allowing
for either the issuance of additional shares or any commitment of a similar
nature.
As of
December 31, 2009 and 2008, the Company owns 9,412,500 Class B treasury
shares.
|
b)
|
Restriction
on the transfer of the Company’s common
shares
|
The
Company’s by-laws provide that Class “A” shareholders may transfer their shares
only with the prior approval of the ENRE. The ENRE must communicate its decision
within 90 days upon submission of the request for such approval, otherwise the
transfer will be deemed approved.
Furthermore,
Caja de Valores S.A. (the Public Register Office), which keeps the Share
Register of the shares, is entitled (as stated in the Company’s by-laws) to
reject such entries which, at its criterion, do not comply with the rules for
the transfer of common shares included in (i) the Argentine Business
Organizations Law, (ii) the Concession Agreement and (iii) the Company’s
by-laws.
In
addition, the Class “A” shares are pledged during the entire term of the
concession as security for the performance of the obligations assumed under the
Concession Agreement.
Additionally,
in connection with the issuance of Class 2 Corporate Notes, EASA is required to
be the beneficial owner and owner of record of not less than 51% of EDENOR’s
issued, voting and outstanding shares.
Section
ten of the Adjustment Agreement signed with the Grantor of the Concession and
ratified through Decree No. 1957/06 stipulates that from the signing of the
agreement through the end of the Contractual Transition Period, the majority
shareholders may not modify their ownership interest nor sell their
shares.
|
c)
|
Employee
Stock Ownership Program (ESOP)
|
At the
time of the privatization of SEGBA (the Company’s predecessor), the Argentine
Government assigned the Company’s Class C shares, representing 10% of the
Company’s outstanding capital stock, for the creation of an Employee Stock
Ownership Program (ESOP) in compliance with the
provisions of Law No. 23,696 and its regulatory decrees. Through this program,
certain eligible employees (including former SEGBA employees who had been
transferred to the Company) were entitled to receive a specified number of Class
C shares, to be calculated on the basis of a formula that took into
consideration a number of factors including employee salary, position and
seniority. In order to implement the ESOP, a general transfer agreement, a
voting trust agreement and a trust agreement were signed.
Pursuant
to the general transfer agreement, participating employees were allowed to defer
payment of the Class C shares over time. As security for the payment of the
deferred purchase price, the Class C shares were pledged in favor of the
Argentine government. This pledge was released on April 27, 2007 upon full
payment to the Argentine Government of the deferred purchase price of all Class
C shares. Additionally, in accordance with the terms of the original trust
agreement, the Class C shares were held in trust by Banco de la Nación
Argentina, acting as trustee, for the benefit of the ESOP participating
employees and the Argentine Government. Furthermore, in accordance with the
voting trust agreement, all political rights of participating employees
(including the right to vote at ordinary and extraordinary shareholders’
meetings) were to be jointly exercised until full payment of the deferred
purchase price and release of the pledge in favor of the Argentine Government.
On April 27, 2007, ESOP participating employees fully paid the deferred purchase
price to the Argentine Government, accordingly, the pledge was released and the
voting trust agreement was terminated.
In
accordance with the regulations applicable to the ESOP, participating employees
who retired before full payment of the deferred purchase price to the Argentine
Government was made, were required to transfer their shares to the Guarantee and
Repurchase Fund (Fondo de
Garantía y Recompra) at a price to be calculated in accordance with a
formula established in the general transfer agreement. As of the date of payment
of the deferred purchase price, the Guarantee and Repurchase Fund had not fully
paid the amounts due to former ESOP participating employees for the transfer of
their Class C shares.
A number
of former employees of both SEGBA and the Company have brought legal actions
against the Guarantee and Repurchase Fund, the Argentine Government and, in few
cases, against the Company, in cases in relation to the administration of the
Employee Stock Ownership Program. The plaintiffs who are former employees of
SEGBA were not deemed eligible by the corresponding authorities to participate
in the Employee Stock Ownership Program at the time of its creation. This
decision is being disputed by the plaintiffs who are therefore seeking
compensation. The plaintiffs who are former employees of the Company are
claiming payment for the unpaid amounts owed to them by the Guarantee and
Repurchase Fund either due to non-payment of the transfer of their shares upon
retirement in favor of the Guarantee and Repurchase Fund or incorrect
calculation of amounts paid to them by the Guarantee and Repurchase Fund. In
several of these claims, the plaintiffs have obtained attachment orders or
preliminary injunctions against the Guarantee and Repurchase Fund on Class C
shares and the amounts deposited in such Fund. Due to the fact that the
resolution of these legal proceedings is still pending, the Federal Government
has instructed Banco de la Nación Argentina to create a Contingency Fund so that
a portion of the proceeds of the offering of the Employee Stock Ownership
Program Class C shares be kept during the course of the legal
actions.
No
accrual has been recorded in the financial statements in connection with the
legal actions brought against the Company as the Company’s management believes
that EDENOR is not responsible for the above-mentioned claims.
In
accordance with the agreements, laws and decrees that govern the Employee Stock
Ownership Program, the Class C shares may only be held by personnel of the
Company, therefore before the public offering of the Class C shares that had
been separated from the Program, such shares were converted into Class B shares
and sold. In conformity with the by-laws, the political rights previously
attributable to Class C shares are at present jointly exercised with those
attributable to Class B shares and the holders of the remaining Class C shares
will vote jointly as a single class with the holders of Class B shares when
electing directors and supervisory committee members. As of December 31, 2009
and 2008, 1,952,604 Class C shares, representing 0.22% of the Company’s capital
stock are outstanding (Notes 1 and 16.a).
|
d)
|
Absorption
of unappropriated retained
earnings:
|
On March
31, 2009 the General Annual Meeting resolved that the income for the 2008 fiscal
year be absorbed by the Unappropriated retained earnings account:
-
Income for the 2008 fiscal year
|
|
|
123,115 |
|
|
|
|
|
|
-
Acquisition of treasury stock (Note 1)
|
|
|
(6,130 |
) |
|
|
|
|
|
-
Legal Reserve (5% of the income for the year) (Note 24)
|
|
|
(6,156 |
) |
|
|
|
|
|
-
Unappropriated retained earnings for the 2008 fiscal year
|
|
|
110,829 |
|
17. REGULATORY
FRAMEWORK
a) General
The
Company's business is regulated by Law No. 24,065, which created the National
Regulatory Authority for the Distribution of Electricity (ENRE). In this
connection, the Company is subject to the regulatory framework provided under
the aforementioned Law and the regulations issued by the ENRE.
The ENRE
is empowered to: a) approve and control tariffs, and b) control the quality of
both the service and the technical product, as established in the Concession
Agreement. Failure to comply with the provisions of such Agreement and the rules
and regulations governing the Company's business will make the Company liable to
penalties that may include the forfeiture of the concession.
As from
September 1, 1996, there has been a change in the methods applied to control the
quality of both the product and the service provided by the Company. Within this
new framework, compensation between areas and circuits of different quality is
not allowed, instead, the specific quality provided to individual customers,
rather than an average customer value must be measured. As a result,
fines will be credited to users affected by service deficiencies in future
bills. Penalties are imposed in connection with the following major
issues:
|
1.
|
Deviation
from quality levels of technical product, as measured by voltage levels
and network variations;
|
|
2.
|
Deviation
from quality levels of technical service, as measured by the average
interruption frequency per Kilovatios (KVA) and
total interruption time per KVA;
|
|
3.
|
Deviation
from quality levels of commercial service, as measured by the number of
claims and complaints made by customers, service connection times, the
number of estimated bills and billing
mistakes;
|
|
4.
|
Failure
to comply with information gathering and processing requirements so as to
evaluate the quality of both the technical product and the technical
service;
|
|
5.
|
Failure to comply with public safety
regulations.
|
As of
December 31, 2009 and 2008, the Company has accrued penalties for resolutions
not yet issued by the ENRE corresponding to the six-month control periods
elapsed over those dates. As of December 31, 2008, the Company has
applied the adjustment contemplated in the temporary tariff regime (caption b
item vii) and the adjustments established by the electricity rate schedules
applied during the 2008 fiscal year, Resolutions Nos. 324/2008 and 628/2008
(Note 17.b).
As of
December 31, 2009 and 2008, liabilities for penalties amounting to 377,456 and
331,613, respectively, have been included in other non-current liabilities (Note
10).
In
addition, as of December 31, 2009, the Company’s management has considered that
the ENRE has mostly complied with the obligation to suspend lawsuits aimed at
collecting penalties, without prejudice to maintaining an open discussion with
the entity concerning the effective date of the Adjustment Agreement and,
consequently, concerning the penalties included in the renegotiation and those
subject to the criteria of the Transition Period.
Moreover,
on July 12, 2006 the National Energy Secretariat issued Resolution No. 942/2006
which modifies the allocation of any excess funds resulting from the difference
between surcharges billed and discounts made to customers, deriving from the
implementation of the Program for the Rational Use of Electric Power (PUREE),
which provides for the application of both tariff incentives and penalties aimed
at encouraging customers to reduce consumption. As from July 1, 2006, such
excess funds may be applied against the amounts receivable that the Company
maintains in the Trade receivables account as Unbilled –National Fund of
Electricity, for “Quarterly Adjustment Coefficient of the National Fund of
Electricity” (section 1 of Law No. 25,957) for 2,840 and 2,812 as of December
31, 2009 and 2008, respectively (Note 4). On August 10, 2006 the ENRE issued
Resolution No. 597/2006 which regulates the aforementioned Resolution No.
942/2006 of the National Energy Secretariat and establishes the compensation
mechanism to be used.
On
October 4, 2007 the Official
Gazette published Resolution No. 1037/2007 of the National Energy
Secretariat. Said resolution establishes that the amounts paid by the Company
for the Quarterly Adjustment Coefficient (CAT) implemented by Section 1 of Law
No. 25,957, as well as the amounts corresponding to the Cost Monitoring
Mechanism (MMC) for the period May 2006 through April 2007 (Note 17.b items b
and c) be deducted from the funds resulting from the difference between
surcharges billed and discounts made to customers, resulting from the
implementation of the Program for the Rational Use of Electric Power (PUREE),
until their transfer to the tariff is granted by the regulatory authority. The
resolution also establishes that the MMC adjustment for the period May 2006
through April 2007, applicable as from May 1, 2007, amounts to 9.63
%.
Additionally,
on October 25, 2007 the ENRE issued Resolution No. 710/2007 which approves the
MMC compensation mechanism established in the aforementioned Resolution No.
1037/2007 of the National Energy Secretariat.
The
amounts corresponding to the Cost Monitoring Mechanism (MMC) for the period May
2006 through April 2007 as well as those corresponding to the period May 2007
through October 2007 were transferred to the tariff as from July 1, 2008, in
accordance with the provisions of Resolution No. 324/2008 (Note
17.b).
By Note
No. 1383 dated November 26, 2008 of the National Energy Secretariat, the ENRE
was instructed to consider the earmarking of the funds deriving from the
application of the Cost Monitoring Mechanism (MMC) corresponding to
the period May 2007 through October 2007 whose recognition was pending, and to
allow that such funds be deducted from the excess funds deriving from the
application of the Program for the Rational Use of Electric Power (PUREE), in
accordance with the provisions of Resolution No. 1037/2007 of the National
Energy Secretariat. The MMC adjustment for the period May 2007 through October
2007, applicable as from November 1, 2007, amounts to 7.56 %.
Additionally,
as of December 31, 2009, the Company has submitted to the National Regulatory
Authority for the Distribution of Electricity the MMC adjustment requests, in
accordance with the following detail:
Assessment
Period
|
Application
Date
|
MMC
Adjustment
|
November
2007 - April 2008
|
May
2008
|
5.791%
|
May
2008 – October 2008
|
November
2008
|
5.684%
|
November
2008 - April 2009
|
May
2009
|
5.068%
|
May
2009 – October 2009
|
November
2009
|
5.041%
|
As of the
date of issuance of these financial statements, the approval of the
aforementioned adjustments by the National Regulatory Authority for the
Distribution of Electricity is still pending.
b) Concession
The term
of the concession is 95 years and may be extended for an additional maximum
period of 10 years. The term of the concession is divided into management
periods: a first period of 15 years and subsequent periods of 10 years. At the
end of each management period, the Class “A” shares representing 51% of EDENOR’s
capital stock, currently held by EASA, must be offered for sale through a public
bidding. If EASA makes the highest bid, it will continue to own the
Class “A” shares, and no further disbursements
will be necessary. On the contrary, if EASA is not the highest bidder, then the
bidder who makes the highest bid must pay EASA the amount of the bid in
accordance with the conditions of the public bidding. The proceeds
from the sale of Class “A” shares will be delivered to EASA after deducting any
amounts receivable to which the Grantor of the concession may be
entitled.
In
accordance with the provisions of the Concession Agreement, the Company shall
take the necessary measures to guarantee the supply and availability of
electricity so as to meet demand in due time and in accordance with stipulated
quality levels, for which purpose the Company shall be required to guarantee
sources of supply.
For such
purpose, the Company has the exclusive right to render electric power
distribution and sales services within the concession area to all users who are
not authorized to obtain their power supply from the Electric Power Wholesale
Market (MEM), thus being obliged to supply all the electric power that may be
required. In addition, the Company shall allow free access to its facilities to
any MEM agents whenever required, under the terms of the Concession. No specific
fee must be paid by the Company under the Concession Agreement during the term
of the Concession.
On
January 6, 2002, the Federal Executive Power passed Law No. 25,561 whereby
adjustment clauses denominated in US dollars or any other foreign currencies,
indexation clauses based on price indexes from other countries, as well as any
other indexation mechanisms stipulated in the contracts entered into by the
Federal Government, including those related to public utilities, were declared
null and void as from such date. The resulting prices and rates were converted
into Argentine pesos at a rate of 1 peso per US dollar. Furthermore, Law No.
25,561 authorized the Federal Executive Power to renegotiate public utility
contracts taking certain requirements into account.
In
accordance with the provisions of Laws Nos. 25,972, 26,077, 26,204, 26,339,
26,456 and 26,563 both the declaration of economic emergency and the period to
renegotiate public utility contracts were extended through December 31, 2005,
2006 2007, 2008, 2009 and 2011, respectively.
As a part
of the renegotiation process, the Unit of Renegotiation and Analysis of Public
Utility Contracts (UNIREN) proposed the signing of an Adjustment Agreement that
would be the basis of a comprehensive renegotiation agreement of the Concession
Agreement. The Company satisfied the regulatory agency’s requirements; provided
an answer to the proposal and attended the public hearing convened for such
purpose, rejecting in principle the proposal on the grounds that it did not
properly address the need to redefine the terms of the agreement as contemplated
by the law. Nevertheless, the Company ratified its willingness to reach an
understanding that would restore the financial and economic equation of the
concession agreement. On September 21, 2005, the Company signed the Adjustment
Agreement within the framework of the process of renegotiation of the Concession
Agreement set forth in Law No. 25,561 and supplementary regulations. Due to the
appointment of a new Economy and Production Minister, on February 13, 2006 a new
copy of the Adjustment Agreement was signed under the same terms as those
stipulated in the agreement signed on September 21, 2005.
The
Adjustment Agreement establishes the following:
i)
|
the
implementation of a Temporary Tariff Regime (RTT) effective as from
November 1, 2005, including a 23% average increase in the distribution
margin, which may not result in an increase in the average tariff of more
than 15%, and an additional 5% average increase in the value added
distribution (VAD), allocated to certain specified capital
expenditures;
|
ii)
|
the
requirement that during the term of said temporary tariff regime, dividend
payment be subject to the approval of the regulatory
authority;
|
iii)
|
the
establishment of a “social tariff” for the needy and the levels of quality
of the service to be rendered;
|
iv)
|
the
suspension of the claims and legal actions filed by the Company and its
shareholders in national or foreign courts due to the effects caused by
the Economic Emergency Law;
|
v)
|
the
carrying out of a Revision of the Company Tariff Structure (RTI) which
will result in a new tariff regime that will go into effect on a gradual
basis and remain in effect for the following 5 years. In accordance with
the provisions of Law No. 24,065, the National Regulatory Authority for
the Distribution of Electricity will be in charge of such
review;
|
vi)
|
the
implementation of a minimum investment plan in the electric network for an
amount of 178.8 million to be fulfilled by EDENOR during 2006, plus an
additional investment of 25.5 million should it be required (item f
below);
|
vii)
|
the
adjustment of the penalties imposed by the ENRE that are payable to
customers as discounts, which were notified by such regulatory agency
prior to January 6, 2002 as well as of those that have been notified,
or whose cause or origin has arisen in the period between January 6, 2002
and the date on which the Adjustment Agreement goes into
effect;
|
viii)
|
the
waiver of the penalties imposed by the ENRE that are payable to the
Argentine State, which have been notified, or their cause or origin has
arisen in the period between January 6, 2002 and the date on which the
Adjustment Agreement goes into
effect;
|
ix)
|
the
payment term of the penalties imposed by the ENRE, which are described in
item vii above, is 180 days after the approval of the Revision of the
Company Tariff Structure (RTI) in fourteen semiannual installments, which
represent approximately two-thirds of the penalties imposed by the ENRE
before January 6, 2002 as well as of those that have been notified, or
whose cause or origin has arisen in the period between January 6, 2002 and
the date on which the Adjustment Agreement goes into effect, subject to
compliance with certain
requirements.
|
Said
agreement was ratified by the Federal Executive Power through Decree No.
1957/06, signed by the President of Argentina on December 28, 2006 and published
in the Official Gazette
on January 8, 2007. This agreement stipulates the terms and conditions that,
upon compliance with the other procedures required by the regulations, will be
the fundamental basis of the Comprehensive Renegotiation of the Concession
Agreement of electric power distribution and sale within the federal
jurisdiction, between the Federal Executive Power and the Company.
Additionally,
on February 5, 2007 the Official Gazette published
Resolution No. 51/2007 of the ENRE which approves the electricity rate schedule
resulting from the RTI applicable to consumption recorded as from February 1,
2007. This document provides for the following:
a)
|
A
23% average increase in
distribution costs, service connection costs and service reconnection
costs in effect which the Company collects as the holder of the concession
of the public service of electric power distribution, except for the
residential tariffs;
|
b)
|
Implementation
of an additional 5% average increase in distribution costs, to be applied
to the execution of the works and infrastructure plan detailed in Appendix
II of the Adjustment Agreement. In this regard, the Company has set up the
required fund, which as of December 31, 2009 amounts to 71,897. This
amount is net of the amounts transferred to CAMMESA for
45,824;
|
c)
|
Implementation
of the Cost Monitoring Mechanism (MMC) contemplated in Appendix I of the
Adjustment Agreement, which for the six-month period beginning November 1,
2005 and ending April 30, 2006, shows a percentage of 8.032%. This
percentage will be applied to non-residential consumption recorded from
May 1, 2006 through January 31,
2007;
|
d)
|
Invoicing
in 55 equal and consecutive monthly installments of the differences
arising from the application of the new electricity rate schedule for
non-residential consumption recorded from November 1, 2005 through January
31, 2007 (items i) and ii) above) and from May 1, 2006 through January 31,
2007 (item iii) above);
|
e)
|
Invoicing
of the differences corresponding to deviations between foreseen physical
transactions and those effectively carried out and of other concepts
related to the Wholesale Electric Power Market (MEM), such as the Specific
fee payable for the Expansion of the Network, Transportation and Others,
included in Trade Receivables under Receivables from sales of electricity
as Unbilled (Note 4);
|
f)
|
Presentation,
within a period of 45 calendar days from the issuance of this resolution,
of an adjusted annual investment plan, in physical and monetary values, in
compliance with the requirements of the Adjustment
Agreement.
|
The
Company has recorded the adjustment of the penalties described in the Adjustment
Agreement for an amount of 17,162 as of December 31, 2008, which is equivalent
to the tariff increases mentioned in the items above.
Revenues
from the retroactive tariff increase deriving from the implementation of the new
electricity rate schedule applicable to non-residential consumption for the
period of November 2005 through January 31, 2007 have been fully recognized in
the financial statements for the year ended December 31, 2007. Such amount,
which totaled 218,591, is being invoiced in 55 equal and consecutive monthly
installments, as described in item b) of paragraph d) of this note. As of
December 31, 2009, the installments corresponding to the months of February 2007
through December 2009 for a total of 149,405 have already been
billed.
On April
30, 2007, the Official
Gazette published Resolution No. 434/2007 of the National Energy
Secretariat which adjusts the time periods set forth in the Adjustment Agreement
signed by the Company and the Grantor of the Concession and ratified by Decree
No. 1957 of the Federal Government dated December 28, 2006.
In this
regard, the aforementioned Resolution provides that the contractual transition
period established in the Adjustment Agreement will be in effect from January 6,
2002 to the date on which the Revision of the Company Tariff Structure (RTI)
established in the aforementioned Adjustment Agreement goes into
effect.
Furthermore,
the Resolution establishes that the new electricity rate schedule resulting from
the RTI will go into effect on February 1, 2008. It also stipulates that, in the
event that the tariff resulting from the RTI is higher than the tariff
established in section 4 of the Adjustment Agreement, the transfer of the
increase to the tariff will be made in accordance with the provisions of section
13.2 of the Adjustment Agreement, which establish that the first adjustment will
take effect as from February 1, 2008 and the second will take effect six months
later, maintaining the percentages agreed upon in the Adjustment
Agreement.
The
aforementioned Resolution No. 434/2007 establishes that the Company must present
an investment plan before May 1, 2007 (which has already been complied with),
and that the obligations and commitments set forth in section 22 of the
Adjustment Agreement be extended until the date on which the electricity rate
schedule resulting from the RTI goes into effect, allowing the Company and its
shareholders to resume the claims suspended as a consequence of the Adjustment
Agreement if the new electricity rate schedule does not go into effect in the
aforementioned time period.
Furthermore,
on July 7, 2007 the Official
Gazette published Resolution No. 467/07 of the ENRE pursuant to which the
first management period is extended for 5 years to commence as from the date on
which the Revision of the Company Tariff Structure (RTI) goes into effect. Its
original maturity would have taken place on August 31, 2007.
On July
30, 2008, the National Energy Secretariat issued Resolution No. 865/2008 which
modifies Resolution No. 434/2007 and establishes that the electricity rate
schedule resulting from the Revision of the Company Tariff Structure (RTI) will
go into effect in February 2009.
As of the
date of issuance of these financial statements, no resolution has been issued
concerning the application of the electricity rate schedule resulting from the
RTI which was expected to be in effect since February 1, 2009.
On
September 19, 2007, the Energy Secretariat by Note No. 1006/07 requested that
the Company comply with the provisions of Resolutions Nos. 1875 and 223/07 of
the aforementioned Secretariat, dated December 5, 2005 and January 26, 2007,
respectively.
In
accordance with the aforementioned resolutions, the Company must transfer to
CAMMESA, 61.96% of the total amount of the special fund set up in compliance
with Clause 4.7 of the Adjustment Agreement, plus any interest accrued on the
financial investments made by the Company with such funds. Such funds
will be used for the execution of the works aimed at connecting Central
Costanera and Central Puerto electricity generation plants with Malaver
substation. The Company recorded 807 and 45,017 in Property, plant and equipment
(Exhibit A) in the Construction in process account as of December 31, 2009 and
2008, respectively, and 2,066 in Other liabilities in the Capital Expenditures
fund – CAMMESA account (Note 10) as of December 31, 2008.
On July
31, 2008, the National Regulatory Authority for the Distribution of
Electricity issued
Resolution No. 324/2008 which approves the values of the Company’s electricity
rate schedule that contemplates the partial application of the adjustments
corresponding to the Cost Monitoring Mechanism (MMC) and their transfer to the
tariff. The aforementioned electricity rate schedule increases the Company’s
value added distribution by 17.9% and has been applied to consumption recorded
as from July 1, 2008.
Therefore,
the increase in tariffs for final users has ranged from 0% to 30%, on average,
depending on consumption.
Furthermore,
on October 31, 2008, the National Energy Secretariat issued Resolution No.
1169/2008 which approved the new seasonal reference prices of power and energy
in the Electric Power Wholesale Market (MEM).
Consequently,
the ENRE issued Resolution No. 628/2008 which approves the values of the
electricity rate schedule to be applied as from October 1, 2008.
The
aforementioned electricity rate schedule includes the transfer of the increase
in the seasonal energy price to tariffs, with the aim of reducing Federal
Government grants to the electricity sector, without increasing the value-added
of distribution of the Company
The
National Ombudsman made a presentation against both the resolutions by which the
new electricity rate schedule had gone into effect as from October 1, 2008 and
the application of the Program for the Rational Use of Electric Power
(PUREE).
Within
the framework of the case, on January 27, 2009, the ENRE notified the Company of
a preliminary injunction issued by the Court hearing the case as a consequence
of the Ombudsman’s presentation, according to which the Company is prohibited
from cutting power due to the nonpayment of bills issued with the rate hike
resulting from the application of the resolutions questioned by the Ombudsman,
until a final ruling is issued on the case. The injunction has been appealed by
the Company and the Argentine Federal Government. On September 1, 2009, Court
Room V of the National Appellate Court in Federal Administrative Matters
confirmed the first instance decision, thus maintaining in effect the
preliminary injunction issued by the court of original jurisdiction. The Company
filed an “Extraordinary appeal” against this decision, which was also rejected
by the appellate court hearing the case. As a final recourse, on December 7,
2009, the Company filed an appeal (“Queja por Recurso denegado”)
to the Federal Supreme Court requesting that the extraordinary appeal rejected
by the Appellate Court be sustained. The appeal (“Queja por Recurso denegado”)
is currently being analyzed by the Supreme Court. On July 1, 2009, notice of the
proceedings in the matter of “National Ombudsman vs. Federal Government –
Resolution No. 1169 and Others, proceeding to decide a legal issue” was served
upon the Company, which the Company answered in due time and manner. On November
27, 2009, and within the framework of this case, the Court hearing the case
decided to reject that a summons be served upon the firm CAMMESA as a
third-party defendant that had been requested by the Company and EDELAP S.A. The
Company, considering that said decision causes an irreparable harm filed in due
time an appeal, which, as of the date of issuance of these financial statements,
has not yet been granted.
On August
10, 2009, the National Regulatory Authority for the Distribution of Electricity
issued Disposition No. 55/2009, which established a period for the review and
analysis of both the application of Resolution No. 628/2008 of the ENRE
–exceptions to the application of the electricity rate schedule- and the effects
deriving from the implementation thereof. This review and analysis process
consisted of the verification in situ in the three Electricity Distribution
Companies of the correct application of the rate schedule in effect to, and the
effective implementation of exceptions granted for, consumption recorded from
May 2009 to the date of issuance of the aforementioned disposition, in the case
of small-demand residential customers whose consumption exceeded 1,000 kWh
bimonthly and/or 500 kWh per month.
Furthermore,
it was determined that during the period comprehended by the aforementioned
process, Electricity Distribution Companies should not send bills corresponding
to such period in those cases in which consumption exceeded 1,000 kWh bimonthly
and/or 500 kWh per month.
On August
14, 2009, the Energy Secretariat issued Resolution No. 652/09 which ordered the
suspension of the reference market prices of energy set forth in sections 6, 7
and 8 of Resolution No. 1169/08 of that Secretariat, and established new values
for the periods June-July 2009 and August–September 2009, reinstating partial
government grants to the electricity generation sector. Furthermore, the
resolution also established the unsubsidized reference market prices of energy
for the months of June and July 2009 and the quarter August-October
2009.
Consequently,
on August 18, 2009, the Company was notified of Resolution No. 433/2009 of the
ENRE, which approved the values of the Electricity Rate Schedules applicable to
consumption recorded from midnight June 1, 2009, and midnight August 1, 2009.
Additionally, the resolution also approved the values of the Electricity Rate
Schedule with unsubsidized -full- tariffs applicable to consumption recorded
from midnight June 1, 2009, in accordance with the provisions of section 7 of
Resolution No. 652/2009 of the Energy Secretariat.
The
aforementioned resolution instructed Electricity Distribution Companies to issue
new bills to those customers whose situation fell within the scope of the
resolution, following the provisions of Resolution No. 628/2008 of the ENRE,
this time applying the Electricity Rate Schedules approved in Resolution No.
433/09. In the case of bills that had already been paid, Electricity
Distribution Companies were required to credit the corresponding adjustment
against the amount payable in the next billing period.
Additionally,
Electricity Distribution Companies were instructed to break down the variable
charge in all the bills issued to customers into two concepts: “Unsubsidized
Variable Charge” –full tariff- and “Federal Government Grant” –its value is the
difference between the value arising from the full rate schedule and the
subsidized rate schedule-. Moreover, the surcharges billed due to the
application of the Program for the Rational Use of Electric Power (PUREE) had to
be recalculated.
On
September 3, 2009, the Company was notified of Resolution No. 666/2009 of the
Energy Secretariat, which approved the winter quarterly rescheduling for the MEM
for the period August 1, 2009 - October 31, 2009.
On
September 29, 2009, the Company was notified of Resolution No. 469/09 of the
ENRE, whereby the National Regulatory Authority for the Distribution of
Electricity approved the values of the electricity rate schedule, with
unsubsidized full tariffs to be applied as indicated in section 7 of Resolution
No. 652/09 of the Energy Secretariat. Furthermore, Electricity
Distribution Companies were instructed to include in the bills to be issued to
small demand residential and general-use customers the fixed charges of the
Electricity Rate Schedule approved by Resolution No. 469/09 of the ENRE under
the legend “Unsubsidized Fixed Charge”.
On
October 26, 2009, notice of the complaint “CONSUMIDORES LIBRES COOP. LTADA. DE
PROVISIÓN DE SERVICIOS DE ACCIÓN COMUNITARIA VS Federal Government – National
Energy Secretariat – ENRE, proceedings to decide a legal issue” was served upon
the Company. The complaint was filed by two consumer associations:
CONSUMIDORES LIBRES COOP. LTADA. DE PROVISIÓN DE SERVICIOS DE ACCIÓN COMUNITARIA
and the UNIÓN DE USUARIOS Y CONSUMIDORES against the Federal Government, the
ENRE, EDESUR, EDELAP and EDENOR, and is pending in the National Court of
Original Jurisdiction in Federal Administrative Matters Number 8, in charge of
Justice Ms. Liliana Heiland, attorney-at-law (deputy). In accordance with the
terms of the complaint, the associations for the defense of consumer rights,
ADDUC and UNIÓN DE USUARIOS Y CONSUMIDORES EN DEFENSA DE SUS DERECHOS, have
joined the complaint.
The
remedies sought in the complaint are as follow:
a) That
all the last resolutions concerning electricity rates issued by the National
Regulatory Authority for the Distribution of Electricity and the National Energy
Secretariat be declared null and unconstitutional, and, in consequence whereof,
that the amounts billed by virtue of these resolutions be refunded.
b) That
all the defendants be under the obligation to carry out the Revision of the
Tariff Structure (RTI).
c) That
the resolutions issued by the Energy Secretariat that extend the transition
period of the Adjustment Agreement be declared null and
unconstitutional.
d) That
the defendants be ordered to carry out the sale process, through an
international public bidding, of the class "A" shares, due to the fact that the
Management Period of the Concession Agreement is considered over.
e) That
the resolutions as well as any act performed by a governmental authority that
modify contractual renegotiations be declared null and
unconstitutional.
f) That
the resolutions that extend the management periods contemplated in the
Concession Agreement be declared null and unconstitutional.
g)
Subsidiarily, should the main claim be rejected, that the defendants be ordered
to bill all customers on a bimonthly basis.
Additionally,
it is requested that a preliminary injunction be issued with the aim of
suspending the rate hikes established in the resolutions being questioned by the
plaintiff. Subsidiarily, it is requested that the application of the referred to
resolutions be partially suspended. Finally, it is also subsidiarily requested
by the plaintiff that the application authority be ordered not to issue new
increases other than within the framework of the Revision of the Tariff
Structure process. As of to date, the Court has neither granted nor rejected
that which has been requested. With regard to the subject matter of
the action, it has been answered by the Company within the contemplated legal
time period and in due manner.
With
reference to that which has been previously mentioned, the objected to rate
increases, with the exception of the one granted by Resolution No. 324/08 of the
ENRE, do not have a direct impact on the added value distribution, inasmuch as
they are the result of the transfer to the tariff of the higher generation costs
ordered by the Grantor of the Concession. These generation increases are
effective for the Company within the pass-through mechanism in the
tariff.
On
February 11, 2010 the Court hearing the case decided to turn into a regular
process the proceeding that had been brought as an extraordinary summary
proceeding, thus extending the time periods involved in the process. With regard
to the preliminary injunction, on that date, the court ordered the carrying out
of actions to add and clarify existing evidence, prior to taking any decision
thereon.
With
regard to the commencement of the Revision of the Tariff Structure, the ENRE has
begun this process, and, on November 12, 2009, the Company submitted its revenue
requirements proposal for the new period, which included the grounds and
criteria based on which the request is made.
In
connection with the process for the sale of the shares, the commencement thereof
- -in accordance with the provisions of Resolution No. 467/2007 of the ENRE- must
take place when the five-year tariff period beginning after the ending of the
RTI comes to an end. Additionally, the controlling shareholder -Electricidad
Argentina S.A. - is authorized to present as bidder in the referred to process
and if its offer is selected as the winning bid, the controlling company will
not have to make any disbursement whatsoever to keep the control of
Edenor.
c) Concession
of the use of real property
Pursuant
to the Bid Package, SEGBA granted the Company the free use of real property for
periods of 3, 5 and 95 years, with or without a purchase option, based on the
characteristics of each asset, and the Company would be responsible for the
payment of any taxes, charges and contributions levied on such properties and
for the taking out of insurance against fire, property damage and third-party
liability, to SEGBA’s satisfaction.
The
Company may make all kind of improvements to the properties, including new
constructions, upon SEGBA’s prior authorization, which will become the grantor’s
property when the concession period is over, and the Company will not be
entitled to any compensation whatsoever. SEGBA may terminate the gratuitous
bailment contract after demanding the performance by the Company of any pending
obligation, in certain specified cases contemplated in the Bid Package. At
present, as SEGBA’s residual entity has been liquidated, these presentations and
controls are made to the National Agency of Public Properties (ONABE), with
which the Company entered into a debt recognition and refinancing agreement for
4,681 on September 25, 2009.
The form
of payment stipulated in the aforementioned agreement establishes an advance
payment of 1,170, which the Company made on September 25, 2009, and 48
installments of 104 for the remaining balance of 3,511. The installments include
compensatory interest of 18.5% per annum under the French system, and are
payable as from October 2009
As of
December 31, 2009, principal owed for this concept amounts to 3,358, which has
been recorded in Trade accounts payable under Other (Note 6).
As of the
date of issuance of these financial statements, the Company has acquired for an
amount of 12,765, nine of these properties whose gratuitous bailment contracts
had expired. The title deeds of eight of these properties have been executed at
a price of 12,375. As for the remaining property, a down payment of 117 has been
made while the outstanding amount of 273 will be payable upon the execution of
the title deed on a date to be set by the Ministry of Economy.
18. CASH FLOW
INFORMATION
a)
|
Cash
and cash equivalents:
|
For the
preparation of the Statement of Cash Flows, the Company considers as cash
equivalents all highly liquid investments with original maturities of three
months or less.
|
|
As
of
December
31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of
December
31, 2007
|
|
Cash
and Banks
|
|
|
8,685 |
|
|
|
6,061 |
|
|
|
3,459 |
|
Time
deposits
|
|
|
27,191 |
|
|
|
0 |
|
|
|
12,087 |
|
Money
market funds
|
|
|
80,055 |
|
|
|
88,548 |
|
|
|
0 |
|
Corporate
notes and Shares
|
|
|
112,441 |
|
|
|
393 |
|
|
|
0 |
|
Notes
receivable
|
|
|
0 |
|
|
|
0 |
|
|
|
85,652 |
|
Government
bonds
|
|
|
0 |
|
|
|
30,717 |
|
|
|
0 |
|
Municipal
bonds
|
|
|
0 |
|
|
|
680 |
|
|
|
0 |
|
Total
cash and cash equivalents in the Statement of Cash Flows
|
|
|
228,372 |
|
|
|
126,399 |
|
|
|
101,198 |
|
b)
|
Interest
paid and collected:
|
|
|
For
the years ended
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
Interest
paid during the year
|
|
|
(101,793 |
) |
|
|
(94,162 |
) |
Interest
collected during the year
|
|
|
32,230 |
|
|
|
6,872 |
|
19. INSURANCE
COVERAGE
As of
December 31, 2009, the Company carries the following insurance policies for
purposes of safeguarding its assets and commercial operations:
Risk
covered
|
|
Amount
insured
|
|
|
|
|
|
Comprehensive
(1)
|
|
US$
|
526,323,332 |
|
Mandatory
life insurance
|
|
$ |
24,687,000 |
|
Additional
life insurance
|
|
$ |
64,625,540 |
|
Funeral
and burial insurance
|
|
$ |
54,860,000 |
|
Theft
of securities
|
|
US$
|
100,000 |
|
Vehicles
(theft, third-party liability
and damages)
|
|
$ |
10,322,807 |
|
Land
freight
|
|
US$
|
2,000,000 |
|
Imports
freight
|
|
$ |
2,250,000 |
|
|
(1)
|
Includes:
fire, partial theft, tornado, hurricane, earthquake, earth tremors,
flooding and debris removal from facilities on facilities providing actual
service, except for high, medium and low voltage
networks.
|
20. CLAIM OF THE PROVINCE
OF BUENOS AIRES BOARD OF ELECTRIC
POWER
|
On
December 1, 2003, the Board of Electric Power of the Province of Buenos Aires
(Board) filed a claim against EDENOR in the amount of 284,364 that includes
surcharges and interest as of the date of the claim, and imposed penalties for
an amount of 25,963, due to the Company’s alleged failure to act as collecting
agent of certain taxes established by Decrees-law Nos. 7290/67 and 9038/78 from
July 1997 through June 2001.
On
December 23, 2003, the Company appealed the Board's decision with the Tax Court
of the Province of Buenos Aires, which had the effect of temporarily suspending
the Company’s obligation to pay. Such appeals were filed on the grounds that the
Federal Supreme Court had declared that the regulations established by the
aforementioned Decrees-law were unconstitutional, as they were incompatible with
the Province of Buenos Aires’ commitment not to levy any taxes on the transfer
of electricity.
On March
20, 2007, the Board of Electric Power of the Province of Buenos Aires amended
the original complaint to include an additional claim in the amount of 7,720
that includes surcharges and interest as of the date of the claim for the period
of July 2001 through June 2002, extending the claim to certain Company
Directors.
On June
27, 2007, the Tax Court of the Province of Buenos Aires pronounced in favor of
the appeal duly lodged by the Company, thus becoming final.
At the
same time, on June 23, 2005, a petition for a declaratory judgment proceeding
was filed with the Secretariat of Original Lawsuits of the Federal Supreme
Court, so that the maximum authority clarify the condition of uncertainty
generated by the provincial tax authorities’ insistence on not honoring the
commitment assumed by the Province in the Federal Pact, and their avoidance of
the Federal Supreme Court’s decisions. The aforementioned proceeding is still
pending on the Federal Supreme Court.
Therefore,
no accrual has been recorded for these claims as the Company’s management, based
on both the aforementioned pronouncement and the opinion of its legal advisors,
believes that there exist solid arguments to support its position.
21. LEGAL ACTION FOR ALLEGED
ENVIRONMENTAL POLLUTION
On May
24, 2005, three of EDENOR’s employees were indicted on charges of
polychlorinated biphenyl (PCB)-related environmental contamination. In
connection with this alleged violation, the judge ordered a preliminary
attachment on the Company's assets in the amount of 150 million pesos to cover
the potential cost of damage repair, environmental restoration and court costs.
On May 30, 2005, the Company filed appeals against both the charges brought
against its employees and the attachment order. On December 15, 2005, the
Federal Court of Appeals of San Martín dismissed the charges against all three
defendants and, accordingly, revoked the attachment order against the Company’s
assets. The decision of the Court of Appeals was based on the fact that the
existence of environmental pollution could not be proved, and, in consequence
whereof, established that the Trial Judge should order the acquittal of two ENRE
public officers who had been indicted on related charges. An appeal against this
decision was filed in the Tribunal de Casación (the
highest appellate body for this matter), which on April 5, 2006 ruled that the
appeal was not admissible.
On July
16, 2007, the Company was notified that on July 11, 2007 the Trial Judge ruled
the definitive acquittal of all Company officials and employees that had been
indicted in the case, thus ordering the closing of the case. This decision could
be appealed.
After the
filing of an appeal, on March 25, 2008, the Federal Court of Appeals of San
Martín confirmed the decision rendered by the court of original jurisdiction
that had ordered the acquittal of Messrs. Daniel José Lello, Luciano Pironio,
Julio Adalberto Márquez, Francisco Ponasso, Henri Lafontaine, Henri Marcel Roger
Ducre and Christian Rolland Nadal, as well as the acquittal of ENRE officers,
Mr. Juan Antonio Legisa and Ms. María Cristina Massei.
In its
decision, the appellate court, quoting the “Chazarreta” judgment as judicial
precedent, stated that the right to defense at trial pursuant to due process,
guaranteed by the Constitution, included the right to obtain a judgment that
would put an end to the situation of uncertainty that implied criminal
prosecution. Furthermore, the appellate court’s decision also stated that if the
Prosecutor, after a thorough investigation, was unable to transfer the
presumption of guilt to the degree of certainty required for a declaration of
criminal liability, the status of innocence should prevail.
Based on
the foregoing, and considering that the preliminary investigation phase had
ended, the Federal Court of Appeals ordered the confirmation of the
aforementioned resolution.
It is
worth mentioning that the dismissal ordered by the judge of original
jurisdiction was appealed by the Prosecutor, who cited the possible dismissal of
criminal action for being beyond the statute of limitations, as a grievance,
among other possibilities, caused by the decision of the court.
However,
after the filing of the corresponding legal briefs by the Company, the appellate
court confirmed the decision of the court of original jurisdiction based on the
aforementioned resolution of the Appellate Court, according to which the
existence of PCB-related environmental pollution had not been
proven.
The
decision, whose reversal was requested by the Prosecutor’s Office through an
extraordinary appeal within the period of 10 days as from notice thereof had
been served, was confirmed by the Federal Court of Appeals of San Martín, which
rejected the Prosecuting attorney’s appeal.
The
Prosecutor’s Office filed an appeal (“Recurso de Queja”) to
the Tribunal de Casación
requesting that the appeal dismissed by the Federal Court of Appeals of
San Martín be sustained. The Tribunal de Casación rejected
the appeal as well. The resolution in question was notified to the Prosecutor’s
Office on December 29, 2008. Within the contemplated legal time period, the
Prosecutor’s Office filed with such Tribunal an “Extraordinary
appeal”. The defense has duly answered the notice served. On May 27, 2009, the
Tribunal “dismissed the
extraordinary appeal filed by the Prosecutor’s Office” on the grounds that it
failed to specifically and reasonably refute the arguments that supported the
resolution being appealed, and proved neither the alleged arbitrariness nor the
violation of constitutional guaranties. The Prosecutor’s Office filed an appeal
(“Recurso de Queja”) to
the Federal Supreme Court requesting that the appeal dismissed by the Tribunal de Casación be
sustained. As of the date of issuance of these financial statements, the appeal
is being analyzed by the Supreme Court.
In the
opinion of the Company’s management and its legal advisors, there is a strong
probability that the appeal will be rejected and the judgment ordering the
acquittal of all defendants will be confirmed.
22. DISCRETIONARY TRUST
AGREEMENT
On
September 30, 2008, the Company and Macro Bank Limited entered into an
irrevocable and discretionary trust agreement.
Through
the establishment of the trust, which was approved by the Board of Directors on
September 29, 2008 and duly informed to control authorities, the Company assigns
the management of certain liquid assets for an initial amount of up to US$
24,000,000, which are to be used in the future in accordance with the terms of
the trust.
The
assignment of liquid assets for an amount of US$ 23,922,000 was carried out on
October 2, 2008.
Furthermore,
on November 3 and 11, 2008, the Company carried out an additional assignment of
liquid assets for US$ 2,000,000 and US$ 1,000,000, respectively.
On
September 3, 2009, the discretionary trust was dissolved and the trust property
was liquidated and transferred to the Company.
As of
December 31, 2009 and 2008, the results generated by this transaction have been
disclosed in the Financial income (expense) and holding gains (losses) generated
by assets account of the Statement of Income under Holding results.
23. DERIVATIVE FINANCIAL
INSTRUMENTS
|
a)
Corporate Notes
During
the year ended December 31, 2008, the Company carried out transactions with
derivative financial instruments with the aim of hedging the foreign currency
exchange rate of the cash flows and derivatives of interest payment
transactions.
These
instruments provided an economic and financial hedge of the amounts in foreign
currency that the Company had to pay on the interest payment dates of its
financial debt –Class A and B Fixed Rate Par Notes and Class 7 Notes (Note 14)-,
maturing on October 8, 2008, December 11, 2008, April 8, 2009, June 12, 2009,
October 8, 2009 and December 11, 2009, in the event of fluctuations in foreign
currency exchange rates. The Company has not formally designated these
transactions as hedging instruments. Therefore, they have been recorded in the
accounting in accordance with the provisions of Technical Resolution No. 18 of
the Argentine Federation of Professional Councils in Economic Sciences (FACPCE),
which require that derivative instruments not designated as effective hedging
instruments be recorded at their net realizable value or settlement value,
depending on whether they have been classified as assets or liabilities, with a
contra-account in the financial gains or losses for the year.
As of
December 31, 2009, these transactions have been fully settled, there being no
outstanding balances. Additionally, as of December 31, 2008 there existed a
balance of 7,905 for this concept (Note 7).
As of
December 31, 2009 and 2008, income resulting from these transactions amounted to
1,622 and 5,669, respectively, and was recorded in the Financial income
(expense) and holding gains (losses) generated by liabilities account of the
Statement of Income under Exchange difference.
b)
Forward and Futures Contracts
During
the year ended December 31, 2009, the Company has entered into forward and
futures contracts with the aim of using them as economic instruments in order to
mitigate the risk generated by the fluctuations in the US dollar rate of
exchange.
As of
December 31, 2009, the Company has entered into contracts with Standard Bank
Argentina S.A. and Banco Finansur S.A., the main features of which are as
follow:
Entity
|
Contracted
amount in thousands of US$
|
Average
rate of exchange
|
Transaction
date
|
Settlement
date
|
Book
value as of December 31,
2009 Assets
(Liabilities)
Note
7
|
Banco
Finansur
|
9,000
|
4.1645
|
07/27/2009
|
04/30/2010
|
(1,814)
|
Banco
Finansur
|
1,000
|
4.2420
|
07/27/2009
|
06/30/2010
|
(202)
|
Standard
Bank
|
12,000
|
4.4475
|
09/30/2009
|
12/31/2010
|
(1,338)
|
Banco
Finansur
|
33,000
|
4.2400
|
09/30/2009
|
10/31/2010
|
(1,532)
|
Standard
Bank
|
10,000
|
4.4475
|
10/01/2009
|
12/31/2010
|
(1,115)
|
|
65,000
|
|
|
|
(6,001)
|
As of
December 31, 2009, the economic impact of these transactions -including
contracts that have already been settled as well as those currently in effect-,
resulted in a loss of 12,266 that has been
recorded in the Financial income (expense) and holding gains (losses) generated
by assets account of the Statement of Income under Holding results.
Additionally,
in the case of the futures contract entered into with Banco Finansur S.A., the
Company has provided initial margins for a total of 26,196 which have been
disclosed in the “Other receivables” account (Note 5).
24. RESTRICTIONS ON THE
DISTRIBUTION OF EARNINGS
In
accordance with the provisions of Law No. 19,550, 5% of the net income for the
year must be appropriated to the legal reserve, until such reserve equals 20% of
capital stock. The Ordinary Shareholders’ Meeting held on March 31, 2009
appropriated 6,156 of Unappropriated Retained Earnings as of December 31, 2008
to the aforementioned legal reserve (Note 16.d).
Moreover,
in accordance with the provisions of Law No. 25,063, passed in
December 1998, dividends to be distributed, whether in cash or in kind, in
excess of accumulated taxable profits as of the fiscal year-end immediately
preceding the date of payment or distribution, shall be subject to a final 35%
income tax withholding, except for those dividends distributed to shareholders
who are residents of countries benefiting from conventions for the avoidance of
double taxation who will be subject to a lower tax rate. For income tax
purposes, accumulated taxable income shall be the unappropriated retained
earnings as of the end of the year immediately preceding the date on which the
above-mentioned law went into effect, less dividends paid plus the taxable
income determined as from such year and dividends or income from related
companies in Argentina.
Since the
restructuring of the Company’s financial debt referred to in Note 14, the
Company was not allowed to distribute dividends until April 24, 2008 or until
such time when the Company’s leverage ratio were lower than 2.5, whichever
occurred first. As from this time, distribution of dividends may only be allowed
under certain circumstances depending on the Company’s indebtedness
ratio.
Certain
restrictions on the distribution of dividends by the Company and the need for
approval by the ENRE for any distribution have been disclosed in Note
17.b).
25. BREAKDOWN OF TEMPORARY
INVESTMENTS, RECEIVABLES AND LIABILITIES BY COLLECTION AND PAYMENT
TERMS
|
As
required by the CNV’s regulations, the balances of the accounts below as of
December 31, 2009, are as follow:
Term
|
|
Investments
|
|
|
Receivables
(1)
|
|
|
Financial
Debt
(Loans)
|
|
|
Other payables
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With no explicit due date
|
|
|
0 |
|
|
|
45,531 |
|
|
|
0 |
|
|
|
610,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With due date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past
due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Up
to three months
|
|
|
0 |
|
|
|
74,676 |
|
|
|
0 |
|
|
|
0 |
|
From
three to six months
|
|
|
0 |
|
|
|
28,920 |
|
|
|
0 |
|
|
|
0 |
|
From
six to nine months
|
|
|
0 |
|
|
|
9,199 |
|
|
|
0 |
|
|
|
0 |
|
From
nine to twelve months
|
|
|
0 |
|
|
|
28,880 |
|
|
|
0 |
|
|
|
0 |
|
Over
one year
|
|
|
0 |
|
|
|
15,329 |
|
|
|
0 |
|
|
|
0 |
|
Total
past due
|
|
|
0 |
|
|
|
157,004 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To
become due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Up
to three months
|
|
|
219,687 |
|
|
|
276,693 |
|
|
|
20,527 |
|
|
|
533,400 |
|
From
three to six months
|
|
|
0 |
|
|
|
15,192 |
|
|
|
30,167 |
|
|
|
52,254 |
|
From
six to nine months
|
|
|
0 |
|
|
|
14,739 |
|
|
|
14,155 |
|
|
|
14,402 |
|
From
nine to twelve months
|
|
|
0 |
|
|
|
14,302 |
|
|
|
18,139 |
|
|
|
14,416 |
|
Over
one year
|
|
|
0 |
|
|
|
130,272 |
|
|
|
707,499 |
|
|
|
99,901 |
|
Total
to become due
|
|
|
219,687 |
|
|
|
451,198 |
|
|
|
790,487 |
|
|
|
714,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
with due date
|
|
|
219,687 |
|
|
|
608,202 |
|
|
|
790,487 |
|
|
|
714,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
219,687 |
|
|
|
653,733 |
|
|
|
790,487 |
|
|
|
1,325,148 |
|
(1)
Excludes allowances
(2)
Comprises total liabilities except accrued litigation and financial
debt.
The
financial debt mentioned in Note 14 accrues interest at floating and fixed
rates, which amount to approximately 10.67% on average; only 16.57% of the debt
accrues interest at a floating rate whereas the remaining accrues interest at a
fixed rate.
26. FINANCIAL STATEMENTS
TRANSLATION INTO ENGLISH LANGUAGE
These
financial statements are the English translation of those originally prepared by
the Company in Spanish and presented in accordance with accounting principles
generally accepted in Argentina. The effects of the differences between the
accounting principles generally accepted in Argentina and the accounting
principles generally accepted in the countries in which the financial statements
are to be used have not been quantified. Accordingly, the accompanying financial
statements are not intended to present the financial position, results of
operation, shareholder’s equity or cash flows in accordance with accounting
principles generally accepted in the countries of users of the financial
statements, other than Argentina.
ALEJANDRO MACFARLANE
|
Chairman
|
EMPRESA
DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (EDENOR S.A.)
Legal
address: 1025 Azopardo Street – Autonomous City of Buenos Aires
INFORMATIVE
SUMMARY
FOR
THE YEARS ENDED
DECEMBER
31, 2009, 2008, 2007, 2006 AND 2005
1. General
Comments
(Not
covered by the Independent Auditors’ Report)
(Figures
stated in thousands of pesos as indicated in Note 2 to the financial
statements)
In the
year ended December 31, 2009, the Company recorded a net income of 90,643. As of
year-end, the Company’s shareholders’ equity amounts to 2,182,209.
Net
operating income worsened significantly amounting to 190,392, as compared to the
net operating income of 302,915 recorded in the previous year.
The
demand for electricity, in units of power, in the concession area did not vary
as compared to the 2008 fiscal year.
The
investment in property, plant and equipment totaled 404,310. This amount was
mainly allocated to increasing service quality levels and meeting current and
new customer demand.
In the
period June-September 2009, the National Regulatory Authority for the
Distribution of Electricity began a period for the review and analysis of the
application and effects of the electricity rate schedule in force, instructing
Electricity Distribution Companies not to send bills for consumption exceeding
1,000 Kwh bimonthly and/or 500 Kwh per month during the referred to analysis
period.
Finally,
and subsequent to the period of analysis referred to in the preceding paragraph,
the ENRE approved the values of the different electricity rate schedules to be
applied by Electricity Distribution Companies, and instructed them to issue new
bills based on the values stated in the new electricity rate
schedules.
On
January 27, 2009, the ENRE notified the Company of a preliminary injunction
issued by the Court hearing the case as a consequence of the Ombudsman’s
presentation, according to which the Company is prohibited from cutting power
due to the nonpayment of bills issued with the rate hike resulting from the
application of the resolutions questioned by the Ombudsman, until a final ruling
is issued on the case. The injunction has been appealed by the Company and the
Argentine Federal Government. On July 1, 2009,
notice of the proceedings in the matter of “National Ombudsman vs. Federal
Government – Resolution No. 1169 and Others, proceeding to decide a legal issue”
was served upon the Company, which the Company answered in due time and manner.
On November 27, 2009, and within the framework of this case, the Court hearing
the case decided to reject that a summons be served upon the firm CAMMESA as a
third-party defendant that had been requested by the Company and EDELAP S.A. The
Company, considering that said decision causes an irreparable harm filed in due
time an appeal, which, as of the date of issuance of these financial statements,
has not yet been granted.
On April
13, 2009, the Company’s Board of Directors approved the issuance and public
offering, within the framework of the Program and under the terms of Law No.
23,576, as amended, of floating rate Corporate Notes for a nominal value of up
to 150,000 with maximum maturity in 2013.
On May 7,
2009, the Company issued and carried out the public offering of Class 8
Corporate Notes for 75,700. The four-year term corporate notes were issued at an
issue price of 100% of the principal amount and accrue interest as from the date
of issuance at a floating private BADLAR rate plus a spread of
6.75%.
The
Company used the net proceeds from the sale of the Corporate Notes to finance
the capital expenditures plan.
2. Comparative balance sheet
structure
(figures
stated in thousands of pesos as indicated in Note 2 to the financial
statements)
ACCOUNTS
|
|
|
12.31.2009 |
|
|
|
12.31.2008 |
|
|
|
12.31.2007 |
|
|
|
12.31.2006 |
|
|
|
12.31.2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
693,560 |
|
|
|
587,077 |
|
|
|
496,341 |
|
|
|
347,467 |
|
|
|
575,565 |
|
Non-Current
Assets
|
|
|
3,677,181 |
|
|
|
3,547,553 |
|
|
|
3,351,265 |
|
|
|
3,187,196 |
|
|
|
3,000,885 |
|
Total
Assets
|
|
|
4,370,741 |
|
|
|
4,134,630 |
|
|
|
3,847,606 |
|
|
|
3,534,663 |
|
|
|
3,576,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
760,273 |
|
|
|
635,584 |
|
|
|
539,565 |
|
|
|
435,601 |
|
|
|
2,121,341 |
|
Non-Current
Liabilities
|
|
|
1,428,259 |
|
|
|
1,407,480 |
|
|
|
1,333,460 |
|
|
|
1,428,712 |
|
|
|
77,825 |
|
Total
Liabilities
|
|
|
2,188,532 |
|
|
|
2,043,064 |
|
|
|
1,873,025 |
|
|
|
1,864,313 |
|
|
|
2,199,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
Equity
|
|
|
2,182,209 |
|
|
|
2,091,566 |
|
|
|
1,974,581 |
|
|
|
1,670,350 |
|
|
|
1,377,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Shareholders’ Equity
|
|
|
4,370,741 |
|
|
|
4,134,630 |
|
|
|
3,847,606 |
|
|
|
3,534,663 |
|
|
|
3,576,450 |
|
3. Comparative income
structure
(figures
stated in thousands of pesos as indicated in Note 2 to the financial
statements)
ACCOUNTS
|
|
|
12.31.2009 |
|
|
|
12.31.2008 |
|
|
|
12.31.2007 |
|
|
|
12.31.2006 |
|
|
|
12.31.2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
operating income
|
|
|
190,392 |
|
|
|
302,915 |
|
|
|
429,201 |
|
|
|
35,906 |
|
|
|
(438 |
) |
Other
income (expense), net
|
|
|
23,290 |
|
|
|
(29,825 |
) |
|
|
996 |
|
|
|
(22,944 |
) |
|
|
(652 |
) |
Financial
income (expense) and holding gains (losses)
|
|
|
(43,728 |
) |
|
|
(88,801 |
) |
|
|
(182,755 |
) |
|
|
112,922 |
|
|
|
(148,511 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary
income (loss) before taxes
|
|
|
169,954 |
|
|
|
184,289 |
|
|
|
247,442 |
|
|
|
125,884 |
|
|
|
(149,601 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax
|
|
|
(79,311 |
) |
|
|
(61,174 |
) |
|
|
(124,984 |
) |
|
|
167,182 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
ordinary income (loss) for the year
|
|
|
90,643 |
|
|
|
123,115 |
|
|
|
122,458 |
|
|
|
293,066 |
|
|
|
(149,601 |
) |
4. Statistical data (in units
of power)
(Not
covered by the Independent Auditors’ Report)
CONCEPT
|
UNIT
|
|
|
12.31.2009 |
|
|
|
12.31.2008 |
|
|
|
12.31.2007 |
|
|
|
12.31.2006 |
|
|
|
12.31.2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
of electricity (1)
|
GWh
|
|
|
18,220 |
|
|
|
18,616 |
|
|
|
17,886 |
|
|
|
16,632 |
|
|
|
15,677 |
|
Electric
Power purchases (1)
|
GWh
|
|
|
20,676 |
|
|
|
20,863 |
|
|
|
20,233 |
|
|
|
18,700 |
|
|
|
17,623 |
|
|
(1)
The related amounts include toll
fees.
|
5. Ratios
RATIOS
|
|
|
12.31.2009 |
|
|
|
12.31.2008 |
|
|
|
12.31.2007 |
|
|
|
12.31.2006 |
|
|
|
12.31.2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
Current
assets
|
|
|
0.91 |
|
|
|
0.92 |
|
|
|
0.92 |
|
|
|
0.80 |
|
|
|
0.27 |
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solvency
|
Shareholders’
Equity
|
|
|
1.00 |
|
|
|
1.02 |
|
|
|
1.05 |
|
|
|
0.90 |
|
|
|
0.63 |
|
|
Total
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
assets
|
Non-current
assets
|
|
|
0.84 |
|
|
|
0.86 |
|
|
|
0.87 |
|
|
|
0.90 |
|
|
|
0.84 |
|
|
Total
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary
income (loss) before taxes
|
Ordinary
income (loss)before taxes
|
|
|
8.13 |
% |
|
|
9.36 |
% |
|
|
13.36 |
% |
|
|
9.14 |
% |
|
|
(9.80 |
)% |
|
Shareholders’
Equity excluding income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. Outlook
(Not
covered by the Independent Auditors’ Report)
During
the year 2009, the Argentine economy recorded a slowdown in growth rates as
compared to those recorded during 2008.
This fall
in economic indicators is due to the international financial crisis and the high
volatility of the financial markets.
Nevertheless,
tax collection continued increasing, as it occurred during 2008, though at a
much lower growth rate.
With the
aim of protecting shareholder interests, the Company has repurchased notes,
redeemed its own shares, and carried out transactions with derivative financial
instruments, in order to mitigate the effects of the above-mentioned
crisis.
With
regard to the Revision of the Company Tariff Structure (RTI), Resolution No.
434/2007 of the National Energy Secretariat, that was published in the Official Gazette on April 30,
2007, established that the new electricity rate schedule would go into effect on
February 1, 2008.
On July
30, 2008, the National Energy Secretariat issued Resolution No. 865/2008 which
modifies Resolution No. 434/2007 and establishes that the electricity rate
schedule resulting from the Revision of the Company Tariff Structure (RTI) will
go into effect on February 1, 2009.
As of the
date of issuance of these financial statements, no resolution has been issued
concerning the application of the electricity rate schedule resulting from the
RTI which was expected to be in effect since February 1, 2009.
In
January 2009, the National Ombudsman made a presentation against the resolutions
by which the new electricity rate schedule had gone into effect as from October
1, 2008.
On
November 12, 2009, the Company submitted to the ENRE the proposal of revenue
requirements required in both Resolution No. 467/08 of the ENRE, in accordance
with the terms of the ADJUSTMENT AGREEMENT entered into by the Company and the
UNIREN and ratified by Decree No. 1957/06 of the Federal Government, and
Resolution No. 865/08 of the Energy Secretariat. The presentation included three
different proposals; the two proposals contemplated in Resolution No. 467/08 of
the ENRE and a third one which contemplates a quality regime and cost of
undelivered energy similar to the one currently in effect. Each proposal
included an introduction, the assumptions based on which each proposal was
prepared, and the detailed studies supporting each of the proposed options:
projected demand, measurement campaign, environmental management plan, capital
base study, study of the group of facilities required to meet the demand of a
certain homogeneous market in terms of consumption with the lowest costs (known
as “Sistemas Eléctricos
Representativos”), contemplated investments plan, operating
costs analysis, profitability rate analysis, resulting revenue requirement and
electricity rate adjustment criterion. It was pointed out that the
sustainability of the proposals depends on the actual occurrence of the
assumptions and that any change in the criteria and/or parameters contemplated
in the proposal made by the Company could directly affect the economic and
financial equation that supports each of the proposed options. Furthermore, the
calculations made in each of the three options took into account the transfer to
the tariff in three equal semiannual stages. Finally, the presentation included
regulatory and legal considerations, clearly stating that it only included the
revenue requirements per voltage level for each of the options due to the lack
of data and accurate information that were to be provided by the ENRE in order
to present both an electricity rate structure and an electricity rate schedule,
despite the fact that during the first electricity rate period different rate
structures were in effect.
By Note
No. 91,241, notified to the Company on December 18, 2009, the ENRE requested
that the Company submit the technical rate schedules resulting from the
preparation of its proposal, which as of the date of issuance of these financial
statements have not yet been submitted due to the aforementioned
reasons.
Additionally,
as of December 31, 2009, the Company has submitted to the National Regulatory
Authority for the Distribution of Electricity the MMC adjustment requests, in
accordance with the following detail:
Assessment
Period
|
Application
Date
|
MMC
Adjustment
|
November
2007 - April 2008
|
May
2008
|
5.791%
|
May
2008 – October 2008
|
November
2008
|
5.684%
|
November
2008 - April 2009
|
May
2009
|
5.068%
|
May
2009 – October 2009
|
November
2009
|
5.041%
|
The
approval of the aforementioned adjustments by the National Regulatory Authority
for the Distribution of Electricity is still pending; however, the necessary
steps are being taken to regularize the situation in order to restore the
economic and financial equation of the business due to the increase recorded in
operating costs.
Buenos
Aires, February 25, 2010.
ALEJANDRO MACFARLANE
|
Chairman
|