EDENOR S.A. FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004 AND 2003 TOGETHER WITH AUDITORS' REPORT

Transcription

1 1 EDENOR S.A. FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004 AND 2003 TOGETHER WITH AUDITORS' REPORT

2 2 MANAGING AND AUDITING BODIES BOARD OF DIRECTORS Chairman Francisco Fernando Ponasso Vice- chairman Henri Marcel Roger Ducré Directors Norberto Antonio González Yves Desrousseaux Nicolás Mitjavile Emilio Jorge Cárdenas Javier Antonio González Fraga Floreal Horacio Crespo Osvaldo Oscar Ramini Alternate Directors Eduard Dahome Oscar Edgardo Marano Didier Lamethe Mario Martín Jean Luis Bétouret Henri Lafontaine José Patricio Richards Domingo Antonio Sia STATUTORY AUDIT COMMITTEE Statutory Auditors Eduardo Javier Romero Miguel Angel Mazzei Ricardo Flammini Alternate Statutory Auditors Alfredo Vítolo Horacio Mollo Máximo Julio Fonrouge

3 3 EMPRESA DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (EDENOR S.A.) Azopardo Capital Federal FISCAL YEAR No BEGINNING DATES JANUARY 1, 2004 FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004 Main business: To render electric power distribution and marketing services in the area and under the terms of the concession contract by which this public service is regulated (Note 1). Date of Registration with the Public Register of Commerce: - of the Articles of Incorporation: August 3, of the last change to the Bylaws: August 21, 2001 Duration of the corporation: through August 3, Registration Number with the "Inspección General de Justicia" (the Argentine governmental regulatory agency of corporations): 1,559,940. CAPITAL STRUCTURE AS OF DECEMBER 31, 2004 (amounts stated in pesos) Class of shares (Note 19) Subscribed and paid in Common book-entry shares, face value 1 and 1 vote per share Class "A" 424,121,202 Class "B" 324,327,978 Class "C" 83,161, ,610,200

4 4 EMPRESA DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (EDENOR S.A.) (English translation of the financial statements originally issued in Spanish - Note 29.) BALANCE SHEETS AS OF DECEMBER 31, 2004 AND 2003 (stated in thousands of pesos) CURRENT ASSETS CURRENT LIABILITIES Cash 8,508 9,546 Accounts payable (Note 6.) 154, ,218 Investments (Exhibit D) 242, ,815 Loans (Note 7.) 1,525,607 1,223,324 Trade receivables (Note 4.) 194, ,494 Salaries and social security taxes payable (Note 8.) 31,155 29,623 Other receivables (Note 5.) 20,727 18,674 Taxes payable (Note 9.) 55,071 53,221 Materials 44,907 49,489 Other liabilities (Note 10.) 151,284 95,037 Total current assets 511, ,018 Total current liabilities 1,917,386 1,505,423 NON-CURRENT LIABILITIES Accounts payable (Note 6.) 23,128 20,264 NON-CURRENT ASSETS Loans (Note 7.) 0 286,019 Salaries and social security taxes payable (Note 8.) 10,939 10,685 Trade receivables 0 0 Other liabilities (Note 10.) 6,882 6,882 Other receivables (Note 5.) 59,305 60,261 Allowances (Exhibit E) 30,159 31,996 Investments (Exhibit C) Total noncurrent liabilities 71, ,846 Property, plant and equipment (Exhibit A) 2,944,125 2,994,441 Total liabilities 1,988,494 1,861,269 Intangible assets 0 0 Total noncurrent assets 3,003,803 3,055,075 SHAREHOLDERS' EQUITY (per related statements) 1,526,885 1,616,824 Total Assets 3,515,379 3,478,093 Total liabilities and shareholders' equity 3,515,379 3,478,093 The accompanying notes 1 to 29 and supplementary statements (Exhibits A,C,D,E,G and H) are an integral part of these financial statements.

5 5 EMPRESA DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (EDENOR S.A.) (English translation of the financial statements originally issued in Spanish - Note 29.) STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (stated in thousands of pesos) Service Revenues (Note 11.) 1,107, ,950 Electric Power Purchases (599,082) (439,814) Gross Income 508, ,136 Transmission and Distribution Expenses (Exhibit H) (326,262) (304,544) Administrative Expenses (Exhibit H) (60,738) (59,297) Selling Expenses (Exhibit H) (81,799) (71,641) Net operating income 39,295 67,654 Financial income (expenses) and holding gains (losses) Generated by assets Exchange difference 4,846 (6,111) Interest 10,116 14,669 Exposure to inflation and holding results (11,008) (2,526) Generated by liabilities Financial expense (10,059) (9,735) Exchange difference (26,116) 225,775 Interest expense (87,737) (79,940) Exposure to inflation and holding results 9,285 15,123 Other income (expenses) - Net (Note 12.) (18,561) (14,257) Income (Loss) before taxes (89,939) 210,652 Tax on minimum presumptive income /Income Tax (Note 3.j) 0 0 Net (Loss) Income for the year (89,939) 210,652 Net (Loss) Income per ordinary share (0.108) The accompanying notes 1 to 29 and supplementary statements (Exhibits A,C,D,E,G and H) are an integral part of these financial statements.

6 6 EMPRESA DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (EDENOR S.A.) (English translation of the financial statements originally issued in Spanish - Note 29.) STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (stated in thousands of pesos) Shareholders contributions Retained Earnings Appropiate Total Total Nominal Value Adjustments Total Retained Unappropriated Earnings retained (Note 19) to Capital Legal earnings Reserve Balance at beginning of year ( ) Prior year adjustments (Notes 3f., 3j. and 3k.) (83.422) Changes of balance at beginning of year ( ) Net income (loss) for the year (89.939) (89.939) Balance at end of year ( ) The accompanying notes 1 to 28 and supplementary statements (Exhibits A,C,D,E,G and H) are an integral part of these financial statements.

7 7 EMPRESA DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (EDENOR S.A.) (English translation of the financial statements originally issued in Spanish - Note 29.) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (stated in thousands of pesos) Cash variations Cash at beginning of year 173,361 56,509 Cash at end of year 251, ,361 Increase in cash 77, ,852 Causes of cash variations Operating activities Net (loss) income for the year (89,939) 210,652 Adjustment to reconcile net income (loss) to net cash provided by operating activities Depreciation of property, plant and equipment (Exhibit A) 174, ,709 Net results on disposals of property, plant and equipment disposal of (Exhibit A) 511 1,363 Income from investments in other companies 0 (30) Changes in operating assets and liabilities Net (Increase) in trade receivables (13,336) (4,825) Net (Increase) in other receivables (11,597) (7,227) Decrease (Increase) in materials 4,582 (3,912) Increase in accounts payable 52,915 11,152 Increase in salaries and social security taxes payable 1,786 8,567 Increase in taxes payable 1,850 7,623 Increase in other liabilities 56,247 31,032 Net Increase (Decrease) in allowances 8,663 (5,814) Financial Interests paid (55,478) (60,306) Net cash flow provided by operating activities before extraordinary operations 131, ,984 Investment activities Additions to property, plant and equipment (Exhibit A) (125,093) (80,563) Net cash flow (used in) investment activities (125,093) (80,563) Financing activities Net Increase (Decrease) of loans 71,742 (165,569) Net cash flow provided by (used in) financing activies 71,742 (165,569) Increased in cash 77, ,852 The accompanying notes 1 to 29 and supplementary statements (Exhibits A,C,D,E,G and H) are an integral part of these financial statements.

8 8 EMPRESA DISTRIBUIDORA Y COMERCIALIZADORA NORTE S.A. (EDENOR S.A.) (amounts stated in thousands of pesos) NOTES TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2004 AND ORGANIZATION AND STARTUP OF THE COMPANY In compliance with Law 24,065 and in agreement with the privatization program of Argentine Stateowned Companies, the entire business of generation, transportation, distribution and sale of electric power carried on 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 591/92, approved the Terms and Conditions (Bid Package) of the International Public Call to Bid to sell the class "A" shares, representing 51% of the capital stock of Empresa Distribuidora Norte S.A. (EDENOR S.A.) and Empresa Distribuidora Sur S.A. (EDESUR S.A.), two of the three electric power distribution companies into which SEGBA had been divided. Electricidad Argentina S.A. (EASA), made up of Electricité de France (EDF), 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, was organized to bid for the class "A" shares of EDENOR S.A., a company set up on July 21, 1992 by Federal Executive Decree 714/92. On the strength of a bid of US$ 427,972,977, the above-mentioned Joint Venture was awarded the class "A" shares of EDENOR S.A., and the contract to transfer 51% of its capital stock was executed on August 6, The award as well as the transfer contract was approved by Federal Executive Power Decree 1507/92 on August 24, Finally, the takeover of the Company took place on September 1, 1992, which is the beginning date of operations. In compliance with Decree 282/93 of the Argentine Federal Executive Power of February 22, 1993, the definitive values and contributions of assets and liabilities and resulting capital derived from the transfer of SEGBA were determined based on the price actually paid for the shares up for bidding (51% of the capital stock represented by all class "A" shares). This price was also used as the basis to determine the value of the remaining 49% of capital stock. The amount of liabilities assumed was added to the total capital stock thus calculated of 831,610, to determine the value of the assets transferred from SEGBA. The purpose of EDENOR S.A. is to render electric power distribution and commercial services within the Northern area of Buenos Aires City and certain departments in the province of Buenos Aires, under the terms of the Concession Agreement governing this public utility, as well as other activities and businesses related to the distribution and sale of electric power. In addition, the Company may subscribe or acquire shares of reciprocal guaranteeing companies as protecting partner, without affecting in any way the capital to be used in regulated activities. The Company may also act as trustee under the terms of Law 24,441, in credit transactions granted to companies that provide goods and / or services related to the electric power distribution and commercial services, which have the guarantee of the reciprocal guaranteeing company it forms part as protecting partner. On June 12, 1996, the Extraordinary Shareholders Meeting approved the change of the corporate name to Empresa Distribuidora y Comercializadora Norte S.A. (EDENOR S.A.) in order to adapt it to the corporate objective. This change to the corporate bylaws was approved by the ENRE by Resolution 417/97 and was registered with the Public Registry of Commerce on August 7, 1997.

9 9 On May 4, 2001 and on June 29, 2001, EDF Internacional S.A. (a subsidiary of EDF in 100%) acquired all the shares that ENDESA Internacional, YPF S.A. (survivor company of ASTRA) and SAUR owned in EASA and in EDENOR. Thus, the direct and indirect participation of EDF Internacional S.A. is 90% of the Company s shares. 2. BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS Financial statements presentation The Company has prepared the financial statements in accordance with generally accepted accounting principles in Argentina and in accordance with the regulations required by the National Securities Commission, taking into account the considerations included in the following paragraphs. By General Resolution 434/03 of the National Securities Commission, as from January 1, 2003, in accounting for its operations, in the valuation of its assets and liabilities and in the calculation of its earnings, the Company uses the regulations established by Technical Resolutions 4, 6, 8, 9 and 16 through 18 (organized text June 2003) and 21 of the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) as adopted by the Professional Council in Economic Sciences of the Autonomous City of Buenos Aires (CPCECABA) with certain few exceptions and clarifications. As a consequence of the application of the above mentioned principles, the Company affected in the Prior Year Adjustments, which is disclosed in the Statements of Changes in Shareholders Equity, the retroactive effect of said change of method. Restatement in constant pesos Until December 31, 2002, in accordance with Decree 1269/02 of the Federal Executive Power and Resolution 415/02 of the CNV (National Securities Commission) of July 27, 2002, the financial statements were prepared in conformity with the disclosure and valuation accounting principles of Technical Resolutions 4, 5, 6, 8, 9, 10 and 12 of the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) that included the restatement to constant pesos set forth in said Technical Resolution 6 with the amendments introduced by Technical Resolution 19 of the same Federation, adopted by Resolution CD 262/01 of the Professional Council in Economic Sciences of the autonomous city of Buenos Aires (CPCECABA). According to Decree 664/03 of the Federal Executive Power and General Resolution 441 of the CNV issued on April 8, 2003, the preparation of financial statements adjusted for inflation is suspended as from March 1, 2003; in said regulations it is stated that the last applicable index shall be the one corresponding to February Also, from the professional accounting principles point of view, the restatement of financial statements in constant currency continued in force until September 30, 2003, in compliance with Resolution MD (Mesa Directiva) (the Board) N. 41/02 of the Professional Council in Economic Sciences of the autonomous city of Buenos Aires (CPCECABA). In the year ended December 31, 2003, according to the Controlling Agency s point of view, said restatement had to be applied until February 2003, date in which the Company discontinued the same, whereas by application of the professional accounting principles, it corresponded the restatement until September The variations recorded in the Argentine Wholesale Price Index (IPIM), between both dates were not significant. In addition, the financial statements fully reflect the recognition of the effect of the changes in the purchasing power of currency through August 31, 1995, by applying the method for restatement to constant pesos set forth in Technical Resolution 6 of the FACPCE. In conformity with the requirements of the CNV, the Company discontinued application of the restatement method effective September 1, 1995, maintaining the restatements recorded through that date.

10 10 Consequently, the financial statements are presented in constant currency based on the application of the above mentioned resolutions and expressed in constant currency of February, 2003 (in accordance with the variations of the Argentine wholesale price index published by the Argentine Institute of Statistics and Census, in relation to the index established as a pattern in December 2001). 3. VALUATION CRITERIA The main valuation criteria used in the preparation of the financial statements have been as follows: a) Cash and banks, current investments, other receivables and liabilities: In local currency: at nominal value. In foreign currency: at the exchange rate in effect as of the end of each year. See detail in Exhibit G. Current investments, other receivables and payables include the portion of financial result accrued through the end of each year, segregating the implicit financial components whenever they are significant. The Bonos de Saneamiento Financiero Municipal (Municipal Financial Restructuring Bonds) issued by Law 11,752 were valued at their conversion value according to the legislation mentioned in Note 28 and have been adjusted at the end of the fiscal year. Due to the existance of not significant interest rates and the low level of variation of the Argentine wholesale price index (IPIM), which makes it possible to consider this year as one of monetary stability, the effect of considering the present values of the current and non-current monetary accounts that had no interest rate or for which there is no financial compensation contemplated, has been considered not significant and has not been determined. b) Trade receivables: At nominal value in view of the low level of variation of the Argentine wholesale price index (IPIM) which makes it possible to consider the year as one of monetary stability. This includes services billed but not collected, and services accrued but unbilled as of the end of each year. The amount thus determined is net of an allowance for doubtful accounts and billing adjustments, as described in more detail in paragraph g) of this Note. c) Materials: At acquisition cost restated as indicated in Note 2. The amounts thus determined do not exceed the recoverable value of these assets. d) Non-current investments: These represent the 50% equity interest in the affiliated company SACME S.A. that as of December 31, 2004 and 2003, was recorded at its equity value on the basis of the affiliated Company s financial statements as of December 31, 2004 and 2003 respectively, following the method established by Technical Resolution 21 of the FACPCE, restated as indicated in Note 2. e) Property, plant and equipment: Property, plant and equipment transferred by SEGBA on September 1, 1992 was added to equity in accordance with the procedure detailed in Note 1, and restated as indicated in Note 2.

11 11 The allocation of the total amount transferred between the sub accounts of this account was determined on the basis of engineering studies performed by the Company's personnel. Additions subsequent to such date were valued at acquisition cost restated as indicated in Note 2. net of the related accumulated depreciation. Depreciation was calculated by applying the straight-line method based on remaining useful lives estimated in light of the abovementioned engineering studies. Also, in order to improve the disclosure of the account, the Company has made certain changes in the classification of property, plant and equipment after an analysis of the classification of certain types of assets that are part of the account, considering each technical process. The amount thus determined of property, plant and equipment taken as a whole does not exceed their recoverable value. f) Intangible assets: All the accounts were eliminated with retroactive effect as of December 31, 2002, and were charged to Prior Year Adjustments in a net amount of 66,736, in compliance with the new professional accounting principles adopted by the Company. g) Allowances: - Deducted from current assets-for doubtful accounts and billing adjustments: this allowance has been set up to adjust the valuation of trade receivables up to its estimated recoverable value. The amount of the allowance was estimated on the historical series of collections for services billed up to the end of each year, on subsequent collections and on estimates based on customer reclassifications and adjustments. The respective breakdown is detailed in Exhibit E. - Included in non-current assets: for impairment of value of net deferred tax assets: the net deferred assets obtained by this calculation have been fully reserved. (Note 3.j) for impairment of value of government securities: the Argentine government securities have been reserved up to its estimated recoverable value in case of a possible reduction during the restructuring process of the public debt. - Included in non-current liabilities: it has been recorded to face contingent situations that could result in probable liabilities for the company. h) Shareholders' equity accounts: These accounts have been restated as indicated in Note 2., except for the "Shareholders Contributions - Nominal value" account, which was kept at the original amount. The excess in the adjustment value over its nominal value is disclosed in the Shareholders Contributions Adjustment to Capital account. i) Income Statement accounts: The accounts that accumulate monetary transactions as of December 31, 2004 are stated at their nominal values and those presented for comparative purposes have been restated in constant currency, applying whenever applicable, to the original values the adjustment coefficients corresponding to the month that the transaction was made, as explained in Note 2. Charges for consumption of non-monetary assets valued at their cost were restated according to the date of acquisition of such assets. Financial income (expense) and holding gains (losses) are disclosed separately under income (expense) generated by assets and by liabilities.

12 12 j) Income tax and tax on minimum presumed income: The current accounting principles require to account for the income tax charge by the application of the liability tax method. This implies the recognition of items of assets and liabilities in the cases where there is a temporary difference between the accounting valuation and the tax valuation of assets and liabilities. Regarding the restatement of property, plant and equipment in constant currency, Resolution MD (the Board) N. 11/03 of the Professional Council in Economic Sciences of the autonomous city of Buenos Aires (CPCECABA) has been applied. At the end of this year, no effect has been recorded in the financial statements considering that the determined deferred income tax assets have been fully reserved as there exists doubts of their probable offset with future taxable income before they expire. The total of temporary differences and tax-losses existing as of the end of the year represents a net deferred tax asset of approximately 294,079. The reconciliation between the income tax that would result from applying to the book value the tax rate and the charge to earnings as of December 31, 2004 and 2003 is as follows: Income tax calculated at the effective rate on the book value before taxes (31,479) 73,729 Permanent differences Restatement in constant currency 35,857 29,440 Others 477 (208) Income tax charge 4, ,961 Offset of tax-losses previously reserved for impairment of net value of deferred tax assets (4,855) (102,961) Income tax for the year 0 0 Breakdown of allowance for impairment of value of deferred tax assets At beginning of year 298, ,895 (Decrease) of the allowance for impairment of net value of deferred tax assets (4,855) (102,961) Balance at end of year 294, ,934 The breakdown of net deferred tax assets (liabilities) as of December 31, 2004 and 2003 is as follow: Non-current deferred tax assets Accumulated Tax-loss 194, ,227 Allowance for bad debts and in litigation 10,894 7,418 Accrued provisions 79,903 57,609 Deferred exchange difference 29,063 43,594 Valuation of materials , ,876 Non-current deferred tax liabilities Property, plant and equipment (19,850) (19,942) Net deferred assets before allowance 294, ,934 Allowance for impairment of value (294,079) (298,934) Deferred assets 0 0

13 13 In addition, the Company determines the tax on minimum presumed income by applying the effective tax rate of 1% to taxable assets at the end of the year. This tax is supplementary of the income tax. The tax liability of the Company shall coincide with the highest of both taxes in each fiscal year. However, should the tax on presumptive minimum income exceed the income tax in a fiscal year, such excess will be eligible to be computed as a partial payment of any surplus of the income tax that might arise on the tax on presumptive minimum income in any of the following ten fiscal years. In the year ended December 31, 2004, a tax charge on presumptive minimum income of 16,080 is estimated, whereas in the year ended December 31, 2003, it amounted to 14,400, respectively. The corresponding taxes are disclosed under other non-current receivables, as stated in the above-mentioned paragraph. k) Labor cost liabilities They correspond to charges for supplementary benefits of paid leave for accumulated vacation, in an amount of 16,499, and for bonus plans to be given to the personnel included in collective bargaining agreements in force, at the time of ordinary retirement and for those with a certain number of working years. The provision for the bonus plans previously mentioned amounts to 9,148 and 7,808 and was made considering all rights accrued by the beneficiaries of the plan until the closing of years ended December 31, 2004, and 2003, respectively, taking into account an actuarial report produced by an independent professional as of both dates. Both concepts are disclosed in the account Provisions for bonus plans to personnel (Note 8). As of December 31, 2003, the charge to Prior Year Adjustment amounted to 16,686, as a consequence of the application of the new professional accounting principles. l) Estimates: The preparation of the financial statements in accordance with generally accepted accounting principles requires the Company Board and Management to make estimates that affect the determination of the reported amounts of assets and liabilities and the disclosure of contingencies as of the date of presentation of the financial statements. Actual results and amounts may differ from the estimates used in the preparation of the financial statements. 4. TRADE RECEIVABLES The detail of trade receivables as of December 31, 2004 and 2003 is as follows: Current: Receivables for electric power sales: Billed 142, ,682 Unbilled 77,765 62,298 In litigation 8,590 9,301 Subtotal 228, ,281 Less: Allowance for doubtful accounts and billing adjustments (Exhibit E) 33,792 24, , ,494

14 14 5. OTHER RECEIVABLES The detail of other receivables as of December 31, 2004 and 2003 is as follows: Current: ANSeS Prepaid expenses (2) 1, Advances to suppliers 97 0 Advances to personnel Art 33, Law 19,550 Companies (Note 18) Advances Tax on presumptive minimum income 10,758 9,698 Other (1) 6,424 7,086 20,727 18,674 Non-current: Argentina Bond 2004 (Note 21 and Exhibit G) 5,411 15,515 Tax credit certificate (Note 21) 0 10,858 Tax on presumptive minimum income 46,329 28,555 Other 7,565 5,333 59,305 60,261 (1) Including 861 and 1,285 in foreign currency (Exhibit G) as of December 31, 2004 and 2003, respectively. (2) Including 7 in foreign currency (Exhibit G) as of December 31, ACCOUNTS PAYABLE The detail of accounts payable as of December 31, 2004 and 2003 is as follows: Current: Payables for electric power and other purchases (1) (2) 93,022 61,888 Unbilled electric power purchases 57,827 40,042 Other 3,420 2, , ,218 Non-current: Client guarantees 23,128 20,264 (1) Including 27,062 and 8,169 in foreign currency (Exhibit G) as of December 31, 2004 and 2003, respectively. (2) Including 544 and 516 with Art. 33, Law 19,550 Companies as of December 31, 2004 and 2003, respectively (Note 18).

15 15 7. LOANS The detail of loans as of December 31, 2004 and 2003 is as follows: Current: Financial loans: In foreign currency (Exhibit G) International Finance Corporation (Note 14) 56,928 11,787 Global Corporate Bonds Program Class 2 and 3 (Note 15) 545, ,255 Interests on corporate bonds (Note 15) 20,286 10,499 Private Corporate Bond with OPIC guarantee (Note 16) 385, ,060 Import financing 74,001 72,650 Soc. Art 33, Law 19,550 EDF International (Note 28) 213,601 0 Other loans (Note 17) 184, ,636 Other 45,660 44,437 Non-current: 1,525,607 1,223,324 Financial loans: In foreign currency (Exhibit G) International Finance Corporation (Note 14) 0 43,950 Global Corporate Bonds Program Class 3 (Note 15) 0 60,065 Private Corporate Bond with OPIC guarantee (Note 16) 0 102,550 Soc. Art 33, Law 19,550 EDF International (Note 28) 0 79, , SALARIES AND SOCIAL SECURITY TAXES PAYABLE The detail of salaries and social security taxes payable as of December 31, 2004 and 2003 is as follows: Current: Salaries payable and Provisions 26,906 25,266 ANSeS 2,904 2,633 Early retirements payable 1,345 1,724 31,155 29,623 Non-current: Early retirements payable 1,791 2,877 Provisions for bonus plans to personnel 9,148 7,808 10,939 10,685

16 16 9. TAXES PAYABLE The detail of taxes payable as of December 31, 2004 and 2003 is as follows: Current: Provincial, municipal and federal contributions and taxes 15,339 14,453 VAT 5,320 13,150 Tax on presumptive minimum income 16,080 14,400 Health and Safety Rate 484 1,198 Other 17,848 10,020 55,071 53, OTHER LIABILITIES The detail of other liabilities as of December 31, 2004 and 2003 is as follows: Current: Operators' compensation (Note 24) (1) 32,462 17,983 Accrued fines 99,278 63,422 Other (2) 19,544 13, ,284 95,037 Non-current: Other 6,882 6,882 (1) Including 30,088 and 16,097 in foreign currency (Exhibit G) as of December 31, 2004 and 2003, respectively. (2) Including 1,802 and 1,420 in foreign currency (Exhibit G) as of December 31, 2004 and 2003, respectively. 11. SERVICE REVENUES The breakdown of the service revenues for the years ended December 31, 2004 and 2003, is as follows: Electric power sales net of bonuses 1,084, ,484 Other service revenues 22,254 25,466 1,107, ,950

17 OTHER INCOME (EXPENSES) - NET The breakdown of the other income (expenses) net for the years December 31, 2004 and 2003 is as follows: Gain (Loss) Net Income for technical services 1,887 1,596 Voluntary retirements and terminations (4,288) (5,574) Termination pay and provision for lawsuits (10,894) (7,278) Net results of disposals of property, plant and equipment (511) (1,363) Other (4,755) (1,638) (18,561) (14,,257) 13. BASIC AGREEMENT On January 10, 1994, the Company, together with EDESUR S.A., the Argentine Federal Government and the Government of Buenos Aires Province signed a Basic Agreement aimed at resolving the issue of supplying electric power to shantytowns and settlements of the needy. The objective of this Basic Agreement is to provide the guidelines to put the supply of electric power to such clients on a proper footing. The ENRE gave its approval to this Basic Agreement through Resolution 6 issued on January 20, 1994, which was approved by the Argentine Federal Executive Power by Decree 584 of April 22, 1994 and by Decree 1,445 of June 2, 1994 of the Executive Power of Buenos Aires Province. In accordance with the terms of article 5 of the above Agreement, the Company waived its right to any claim and/or collection of billings, adjustments, surcharges and interest accrued from September 1, 1992 through January 31, 1994, arising from direct connections, power theft, unrecorded consumption or any other way of misappropriation of electric power or illegal use thereof. The economic value allocated to the above waiver amounted to 20,000, for which a Special Fund was set up. The cost of this Special Fund is borne by the Argentine Federal Government and Buenos Aires Province which make percentage contributions on the bills actually collected from such users living in shantytowns and settlements of the needy. The life of this Fund was 4 years as from the effective date of the Basic Agreement which ended on June 30, The Company has collected the full compensation for the waiver of the abovementioned rights. Article 13 of the Basic Agreement allows, under certain circumstances, its revision and/or adjustment. Although most of its objectives have been accomplished, not all of them were completely fulfilled within the term originally stipulated and considering also that new shantytowns appeared and need to be regularized, the parties in accordance with such article 13, agreed to the extension of the Agreement in 50 more months, ending then on August 31, During the extension period the stipulations originally set up in the Basic Agreement and in the Regulations will apply and a new population census will be taken in order to identify those shantytowns which have not been regularized yet. At the time of issuance of these financial statements said census was concluded and approved by the Regulatory Agency. In addition, the above-mentioned extension period of the Basic Agreement was approved by the Argentine Federal Government by Decree 93 of January 25, As from the due date of the above mentioned Basic Agreement the Company continued supplying electric power services to shantytowns and settlements of the needy that generated not collected receivables as of the date of issuance of these financial statements. On October 6, 2003, the Company signed with the Argentine Federal Government and the Government of the Province of Buenos Aires a new agreement which retroactively includes all the services provided as from September 1 st, 2002, and for a period of 4 years, which can be renewed for a same period should the parties so agree.

18 18 The new Basic Agreement, that has similar terms and conditions to the regulations in force until that moment, was ratified by Decree 1972 of the Federal Executive Power, dated December 29, 2004, and gazzetted on January 5, At the date of issuance of these financial statements its ratification by the Executive Power of the Province of Buenos Aires is still pending. 14. LOAN FROM THE INTERNATIONAL FINANCE CORPORATION To obtain the necessary funding to accomplish the investment program aimed at rehabilitating and improving the electric power distribution network and reducing power losses, the International Finance Corporation (IFC) signed a loan agreement with the Company on May 3, 1994 covering a loan of US$ 173,000,000 divided into three tranches as follows: a) Tranche "A" of US$ 30,000,000 at an interest LIBOR (fixed of 6.125% as from September 15, 1995) + 3% per annum up to September 15, 1998 and % per annum as from that date payable in 16 half-yearly installments starting September 15, 1995, early repayment permitted. b) Tranche "B" of US$ 128,000,000 syndicated with a group of banks at an interest LIBOR (fixed of 5.985% as from September 15, 1995) % per annum up to September 15, 1998 and + 1.5% as from that date, payable in 12 half-yearly installments starting September 15, 1995, early repayment permitted. c) Tranche "C" of US$ 15,000,000 at an interest LIBOR + 3% per annum + premium in accordance with the Company's profits, maturing at March 15, On September 15, 1998 on account of the issue of simple corporate bonds Series 2B (Note 15), the Company made an early repayment in part of Tranche B in an amount of US$ 32,083,333. As of the date the debt corresponding to said tranche has been fully paid off. Also, together with the above early repayment some of the conditions agreed at the time of the original agreement have been modified. The new loan agreement stipulates, among others, the following commitments during the remaining life of the loan: Not to incur long-term debt if: a) the total liabilities to shareholders equity ratio exceeds 1.5 (see Note 28) and/or b) the interest hedge ratio (EBITDA / interests) is less than 3 up to the final maturity of Tranche A. Not to distribute dividends in case of failure to comply with the payment of principal and / or interests of the debt maintained with the IFC. Hence, the restriction not to incur long-term debt if long-term debt to shareholders equity ratio was above 0.54 and the projected debt service coverage ratio below 1.4 have been eliminated. Restrictions imposed on the distribution of dividends if the Company did not meet the requirement of maintaining a projected debt service coverage ratio above 1.2 and a current ratio above 1 after the payment of dividends have also been eliminated. In addition, the following loan guarantees have been eliminated: the irrevocable assignment of the trade receivables of the Company s largest private customers up to the minimum amount of US$ 6,000,000, and the irrevocable assignment by the Company and/or EASA to the IFC of the contractual claims or any other claim or right against the Argentine Federal Government or any of its agencies to be indemnified in the event of termination of the Company's concession, nationalization, confiscation or expropriation of the ownership or effective control of the Company. On September 30, 1997 the IFC announced the fulfillment of the Project based on the facts that the moving average of total electric power losses for a period of 12 consecutive months were lower than 16% and that the financial ratios set forth in the Agreement were met during such year. Therefore, the IFC

19 19 released the operators from the obligation to secure financial support to the Company through subordinated loans. In addition, the restriction to purchase property, plant and equipment or other Noncurrent assets for a total maximum amount of US$ 120,000,000 is no longer in force; the Company may hence change its investment plan without any type of limitation whatsoever. 15. GLOBAL CORPORATE BONDS PROGRAM The Special General Shareholder's Meeting of August 5, 1994, approved the institution of a global simple corporate bonds program not convertible into company shares (the Program), for a total of US$ 300,000,000. Regarding the issuance of such program, the Unanimous Regular General Shareholders Meeting held on September 23, 1996 resolved to ratify the resolutions passed regarding the creation of the Program, to be issued in different and successive classes and/or series, which may be accumulative or not, with a term of five years as from the date of authorization by the National Securities Commission (CNV) or the maximum term which may be generally authorized by regulations in effect, and with such, for each class and/or series and/or re-issuance, as may be authorized under the Program, which may not be less than thirty days nor more than the term to be determined by the Board of Directors, for up to a maximum amount outstanding at any time during the life of the Program of up to US$ 300,000,000, or equivalent thereof in another currency. On November 5, 1996 the CNV (National Securities Commission) authorized the issuance of the Global Program for US$ 300,000,000; Class 1 was issued on December 4, 1996, for US$ 120,000,000 for a fiveyear term and an issuance price of 99.69% of the principal amount. The bonds accrue interest as from the date of issuance at an annual 9.75% rate payable on June 4 and December 4 each year as from June 4, They will be amortized in one single payment on the due date (December 4, 2001). The corporate bonds have been authorized to be listed on the Buenos Aires Stock Exchange, on the OTC market of Buenos Aires and on the Luxembourg Stock Exchange. They are represented by one restricted, nominative, global corporate bond, shares in which will be traded through the clearing systems with Caja de Valores S.A. The Company paid off corporate bonds Class 1 at its expiration date. On September 15, 1997 the Special General Shareholders Meeting unanimously approved increasing the maximum amount of the current Program to up to US$ 600,000,000 or equivalent thereof in another currency, outstanding at any time during the life of the Program as well as ratified the remaining terms and conditions of the Program. On February 27, 1998 the National Securities Commission (CNV) authorized by Certificate 193 the public bid of the aforementioned increase in the amount of the Program. On June 16, 1998 the Board of Directors of the Company approved the issuance of corporate bonds Class 2 at floating rate in an amount of US$ 250,000,000 under the Program. On June 29, 1998 the CNV (National Securities Commission) authorized the update of the prospectus for such issuance. The Corporate Bonds are as follows: Series 2A in an amount of US$ 125,000,000 issued on August 17, 1998, and Series 2B in an amount of US$ 125,000,000 issued on September 15, 1998, with a term of five years, early repayment permitted in any payment date. The bonds accrue interest at 180-day LIBOR plus the following margin: 1.125% for the first year, 1.250% for the second year, 1.625% for the third year and 1.875% for the fourth and fifth year. Interest will be payable on June 15 and December 15 of each year beginning December 15, 1998, and ending June 15, Once a one-year grace period has elapsed corporate bonds will be amortized in seven installments as follows: US$ 25,000,000 on June 15, 1999, US$ 25,000,000 on December 15, 1999, US$ 18,750,000 on June 15, 2000, US$ 18,750,000 on December 15, 2000, US$ 37,500,000 on June 15, 2002, US$ 37,500,000 on December 15, 2002 and US$ 87,500,000 on June 15, 2003 (see Note 28). Funds from this operation were used for the following: (i) early repayment of loan of Inter-American Development Bank, (ii) early repayment in part of the loan from the International Finance Corporation (Note 14),

20 20 (iii) the early repayment of other liabilities of the Company, (iv) financing investments and, (v) working capital, in full accordance with the Law of Corporate Bonds. Both series of corporate bonds Class 2 are authorized to be listed on the Buenos Aires Stock Exchange, on the Luxembourg Stock Exchange and on the OTC market of Buenos Aires. On June 7, 2001, the Special General Shareholders Meeting approved the five-year extension of the Program. The Company made the pertinent presentations to the corresponding controlling agencies and said extension was authorized by the CNV (National Securities Commission) on September 4, On April 25, 2002, the Company issued Class 3 of Corporate Bonds under the Program, in an amount of US$ 82,000,000, at floating rate, with final due date in the year The funds obtained were used to pay off the loan agreement with Citibank N.A. on December 3, 2001, guaranteed by EDF International as a bridge loan until corporate Bonds Class 3 were issued by a public bidding in an amount of up to US$ 125,000,000. The corporate bonds were issued at 100% of their nominal value. The capital is payable in four equal semi-annual installments of US$ 20,500,000, on October 25, 2003, April 25 and October 25, 2004, and April 25, 2005; they accrue LIBO interest rate plus the following margin: 6% for the first year, 4.5% for the second year and 3% for the third year. Interests are payable in half-yearly installments. The Company shall maintain certain financial restrictions during the life of the corporate bonds, as follows: - Maintain total liabilities to total liabilities plus shareholders equity ratio below 0.60 (see Note 28); - Maintain an interest hedge ratio (EBITDA / interests) above 3. Under this transaction, investors had at the moment of the issuance, the option to assign and transfer all the rights on their corporate bonds to a trust in exchange for participation certificates issued by said trust. These certificates have an unconditional guarantee from Electricité de France International S.A. which offers total protection against commercial and political risk. On the second anniversary of the corporate bonds, those holders of participation certificates shall have a sole opportunity to change them for unguaranteed securities. On November 10, 2004, the Company announced the launch of a cash offer to buy their Corporate Bonds Class 2A, at floating rate with due date in 2003, Gain Trust Securities (Note 16) with due date in 2005 and US dollar indebtedness in an added amount of up to US$ 65 million. The offer was opened for 20 days and the closing date was December 10, The purchasing price for each US$ 1,000 of capital of debt instruments could be determined by a modified Dutch auction procedure, with a price range between US$ 700 and US$ 750. The accumulated final amount of nominal capital of the Debt Instruments offered was US$ 12,000,000 and the purchasing price for the above-mentioned offer of Debt Instruments was US$ 740 for each US$ 1,000 of nominal capital. The result obtained by said operation amounted to 9,285 and is disclosed in the line called Exposure to inflation and holding results generated by liabilities of the Statements of Operations. 16. PRIVATE CORPORATE BOND WITH OPIC GUARANTEE On June 16, 2000, the Company obtained funds from the sale of a private corporate bond in an amount of US$ 140,000,000 which is part of the assets of a financial trust, for a five-year term, with a three-year grace period, its due date being May 31, The main terms and conditions are as follows: Interest rate: LIBOR + 2% per annum, payable in semiannual installments, being its first payment on December 15, 2000, from the second to the sixth payment on June 15 and December 15 of each year, the seventh payment on November 30, 2003, the eighth payment on May 31,

21 , the ninth payment on November 30, 2004 and the tenth payment on May 31, OPIC (Overseas Private Investment Corporation) insurance coverage: the corporate bonds issued on account of the financial trust have an OPIC insurance that covers the payments of principal against the risk of local currency inconvertibility and foreign currency untransferability. OPIC premium is 0.5% per annum on the principal, not covering the risk of local currency devaluation. In January 2004, the Company suspended said insurance coverage taking into account that the causes that motivated the same expired. Amortization: in four installments of US$ 35,000,000. Its first payment is on November 30, 2003, the second payment on May 31, 2004, the third payment on November 30, 2004, and the fourth payment on May 31, Early repayment: permitted in part or in full. Restrictions: the following financial covenants shall be maintained: - capitalization ratio: Total Financial Debt / (Total Financial Debt + shareholders equity) less than or equal to 0.6 (see Note 28). - interest hedge: Ebitda / interests higher than or equal to 3. This loan has no restrictions in the payment of dividends, it has no guarantees, nor does it form part of the Global Corporate Bonds Program detailed in Note 15. Also, according to what is established in the previous Note, the Company bought securities in an amount of US$ 12,000,000 through the cash offer. 17. OTHER LOANS On October 12, 2000, and on October 30, 2000, the company signed three loan agreements in an amount of US$ 60,000,000 that consisted of bilateral operations with the Bank Boston, Bank of Tokyo and the Banco Santander Central Hispano. Funds from those loans were used to repay short-term loans. The Company is aware that said loans were assigned to different creditors maintaining the original terms and conditions of issuance of the same. The main characteristics of each loan are as follows: Bank Boston Bank of Tokyo Banco Santander Amount (in US$) 10,000,000 20,000,000 30,000,000 Due Date October 11, 2002 April 16, 2004 November 1, 2004 Rate 90-day Libor 180-day Libor 180-day Libor Spread over rate 1 st and 2 nd Quarter % +2.25% % 3 rd and 4 th Quarter % 5 th and 6 th Quarter+1.625% 7 th and 8 th Quarter % Interests payment Quarterly payable Semi-annual payable Semi-annual payable Amortization At due date At due date In two equal installments on November 1, 2002, and on November 1, 2004 Financial Restrictions EBITDA/Interests >= 3 Total liabilities/ (Total liabilities + Shareholders equity)<=0.6 (see Note 28) None Early repayment In full In full or in part for a minimum amount of 1,000,000 EBITDA/Interests>=3 Financial Debt/ (Financial Debt + Shareholders equity)<=0.6 (see Note 28) In full or in part for a minimum amount of 500,000 and after the end of the first year

22 BALANCES AND OPERATIONS WITH SACME S.A. In accordance with the Bid Package, EDENOR S.A. and EDESUR S.A. have set up, each of them holding a half interest, SACME S.A. which is in charge of controlling the movement of electric power supplied to these distributors. During the years ended December 31, 2004 and 2003, the affiliated company billed the Company 1,790 and 1,678, respectively, in operation and supervision services of electric power transmission system. As of December 31, 2004 and 2003, the outstanding balances with the affiliated company amount to 448 and are included in the account Other Current Receivables (Note 5). Also, as of December 31, 2004 and 2003, respectively, the Company keeps liabilities with the affiliated company in an amount of 544 and 516 (Note 6). 19. CAPITAL STOCK a) General As of December 31, 2004, the capital stock of the Company amounts to 831,610, which has been fully registered with the Public Registry of Commerce. There has been no change in capital stock over the last three years. On June 12, 1996, the Extraordinary Shareholders Meeting approved the offseting of the account unappropriated negative retained earnings as of December 31, 1995 against the Adjustment to Capital account. b) Restriction of the transfer of the Company s shares Based on the Bid Package, the Company s bylaws state that the shareholders of class A shares may not modify their holdings or sell their shares during the first five years as of the transfer date; such term expired on September 1st, When the five-year period is over, any transfer of class A shares will require prior approval by the ENRE, which will have to issue its decision within 90 days. If it does not, the application will be considered to have been approved. Any transfer of shares made in violation of the bylaws of the Company will be invalid. In addition, class A shares will be kept pledged during the whole term of the concession, as a guarantee to fulfill the obligations assumed in the Concession Agreement. Additionally, regarding the issue of corporate bonds Class 2, EASA shall own beneficially and pursuant to the records at least 51% of EDENOR s issued voting and outstanding shares, and EDF and ENHER or their respective successors directly or by their affiliates shall be the operators of the Company. c) Employee Stock Ownership Program Decree 714/92 issued by the Argentine Federal Executive Power which provided for the organization of the Company, states that 10% of capital stock, represented by class C shares, is to be allocated to the Employee Stock Ownership Program (ESOP) in compliance with section III of Law 23,696. Decree 265 (published on February 22, 1994) of the Argentine Federal Government provided for the following: approval of the formal legal instrumentation of this Program, award of the class C shares to the employees acquiring them, a sales price of these shares at 0.92 pesos per share, and the appointment of the Banco de la Nación Argentina as trustee.