Central Puerto S.A. Financial statements for the fiscal year ended December 31, 2015, together with the independent auditor s report.

Transcription

1 Central Puerto S.A. Financial statements for the fiscal year ended December 31, 2015, together with the independent auditor s report.

2 BOARD OF DIRECTORS AND STATUTORY AUDIT COMMITTEE MEMBERS CHAIRMAN: VICE-CHAIRMAN: DIRECTORS: ALTERNATE DIRECTORS: Guillermo Reca José María Vázquez Bernardo Velar de Irigoyen Cristian López Saubidet Gonzalo Tanoira Osvaldo Reca Miguel A. Escasany Miguel Dodero Juan José Salas Gustavo A. Nagel Marcelo Suvá Jorge Bledel Gonzalo Pérès Moore Juan Carlos Casas Diego Miguens Fernando Polledo Olviera Alejandro de Anchorena José Manuel Pazos Pablo Vega

3 - 1 - Registered office: Av. Edison 2701, Buenos Aires City, Argentina FISCAL YEAR No. 24 BEGINNING JANUARY 1, 2015 FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015 (English translation of the interim condensed financial statements originally issued in Spanish - see note 20) CUIT (Argentine taxpayer identification number): Date of registration with the Public Registry of Commerce: Of the articles of incorporation: March 13, Of the last amendment to by-laws: January 19, 2016 (Note 1). Registration number with the IGJ (Argentine regulatory agency of business associations): 1,855, Book 110, Volume A of Corporations. Expiration date of the articles of incorporation: March 13, The Company is not enrolled in the Statutory Optional System for the Mandatory Acquisition of Public Offerings. Data of the parent: Corporate name: Sociedad Argentina de Energía S.A. Registered office: Av. Edison 2701, Buenos Aires City, Argentina Main business activity: Investment and financing Interest in the capital stock and voting rights: 72%. CAPITAL STRUCTURE (Figures stated in Argentine pesos) Class of shares Subscribed, paid-in, issued and registered 199,742,158 common, outstanding book-entry shares, with face value of 1 each and entitled to one vote per share: 199,742,158 GUILLERMO RECA Chairman

4 - 2 - STATEMENT OF INCOME for the year ended December 31, 2015 (English translation of the interim condensed financial statements originally issued in Spanish - see note 20) Notes ARS 000 ARS 000 Revenues 4 3,226,537 1,299,447 Cost of sales Exhibit F (1,749,948) (846,045) Gross income 1,476, ,402 Administrative and selling expenses Exhibit H (379,409) (203,048) Operating income before other operating income and expenses 1,097, ,354 Other operating income , ,755 Other operating expenses 5.2 (53,961) (162,431) Operating income 1,784, ,678 Financial income ,185 66,512 Financial expenses 5.4 (284,763) (48,524) Share of profit of an associate 3 and Exhibit C 48, ,200 Income before income tax 2,018, ,866 Income tax for the year 6 (687,887) (102,135) Net income for the year 1,330, ,731 Earnings per share: Basic and diluted (ARS) GUILLERMO RECA Chairman

5 - 3 - STATEMENT OF COMPREHENSIVE INCOME for the year ended December 31, 2015 (English translation of the interim condensed financial statements originally issued in Spanish - see note 20) Notes ARS 000 ARS 000 Net income for the year 1,330, ,731 Other comprehensive income for the year Other comprehensive income to be reclassified to income in subsequent periods Net gain (loss) on available-for-sale financial assets ,249 (81,901) Share in the other comprehensive income from associates 5.5-2,534 Income tax related to other comprehensive income components 6 (116,987) 28,666 Other comprehensive (loss) income to be reclassified to income in subsequent periods 217,262 (50,701) Other comprehensive income not to be reclassified to income in subsequent periods Remeasurement of losses from employee benefits 10.3 (2,539) (2,371) Income tax related to other comprehensive income components Other comprehensive income not to be reclassified to income in subsequent periods (1,650) (1,541) Other comprehensive income (loss) for the year 215,612 (52,242) Total comprehensive income for the year, net 1,546, ,489 GUILLERMO RECA Chairman

6 - 4 - STATEMENT OF FINANCIAL POSITION as of December 31, 2015 (English translation of the interim condensed financial statements originally issued in Spanish - see note 20) Notes ARS 000 ARS 000 Assets Non-current assets Property, plant and equipment Exhibit A 1,968,148 1,503,894 Intangible assets Exhibit B 275, ,555 Investment in associates 3 and Exhibit C 203,364 43,251 Investment in subsidiaries 3 and Exhibit C Goodwill - Empresa de Energía y Vapor S.A. Exhibit B 1,148 2,407 Trade and other receivables 9.1 2,769,836 2,240,639 Other financial assets Exhibit C 184,310 57,096 Other non-financial assets ,489 11,461 Inventories 8 29,619 37,316 5,917,738 4,207,900 Current assets Inventories 8 82,672 48,792 Other non-financial assets ,907 73,394 Trade and other receivables 9.1 1,249, ,849 Other financial assets Exhibit D 1,893,798 1,028,450 Cash and short-term deposits , ,318 3,640,244 2,092,803 Total assets 9,557,982 6,300,703 Equity and liabilities Equity Capital stock 199, ,742 Adjustment to capital stock 664, ,988 Merger premium 366, ,082 Legal reserve 130, ,391 Special reserve under IGJ Res. 7/05 55,830 55,830 Special reserve under CNV GR , ,181 Optional reserve 1,507,513 1,205,983 Unappropriated retained earnings 1,354, ,417 Accumulated other comprehensive income (loss) 204,977 (12,285) Total equity 4,660,950 3,454,329 Non-current liabilities Other non-financial liabilities , ,232 Interest-bearing loans and borrowings , ,899 Borrowings from CAMMESA , ,841 Payables from compensation and employee benefits ,112 41,115 Deferred income tax liabilities 6 833, ,514 Provisions Exhibit E 133,284 78,821 2,480,180 1,862,422 Current liabilities Trade and other payables , ,537 Other non-financial liabilities , ,016 Interest-bearing debts and borrowings , ,701 Borrowings from CAMMESA ,086 44,653 Payables from compensation and employee benefits , ,431 Income tax payable 323, ,449 Provisions Exhibit E 242,877 30,165 2,416, ,952 Total liabilities 4,897,032 2,846,374 Total equity and liabilities 9,557,982 6,300,703 GUILLERMO RECA Chairman

7 - 5 - STATEMENT OF CHANGES IN EQUITY for the year ended December 31, 2015 (English translation of the interim condensed financial statements originally issued in Spanish - see note 20) Equity holders contributions Capital Noncapitalized stock contributions Retained earnings Special Special reserve reserve under IGJ under Res. 7/05 CNV GR Retained earnings (accumulated losses) Reserve for future distribution of Other accumulated comprehensive income (loss) (1) Total Face value Adjustment to capital stock Merger premium (2) Legal reserve (3) 609 (4) Optional reserve dividends Unappropriated retained earnings ARS 000 ARS 000 ARS 000 ARS 000 ARS 000 ARS 000 ARS 000 ARS 000 ARS 000 ARS 000 ARS 000 As of January 1, , , , ,391 55, ,181 1,205, ,417 (12,285) 3,454,329 Net income for the year ,330,734-1,330,734 Other comprehensive income (loss) for the year (1,650) 217, ,612 Total comprehensive income (loss) for the year, net ,329, ,262 1,546,346 Annual Shareholders Meeting decisions of April 15, 2015: To the legal reserve , (15,887) - - To the optional reserve , ,000 (666,530) - - Annual Shareholders Meeting decisions of November 20, 2015: Distribution of dividends in cash (45,000) (320,000) - - (365,000) Elimination of reciprocal interests (5) ,275-25,275 As of December 31, , , , ,278 55, ,181 1,507,513-1,354, ,977 4,660,950 As of January 1, , ,167 16,524 43, , , ,812 12,620 1,192,678 Net income for the year , ,731 Other comprehensive income (loss) for the year (1,541) (50,701) (52,242) Total comprehensive income (loss) for the year, net ,190 (50,701) 265,489 Optional reserve as agreed upon by the Regular Shareholders Meeting of April 15, ,812 - (160,812) - - Capital stock increase as resolved by the Special Shareholders Meeting of August 25, 2014 (see note 1) 111, ,236 Additions and effects related to the merger described in note 1-534, ,558 70,657 55, , ,227 25,796 1,884,926 As of December 31, , , , ,391 55, ,181 1,205, ,417 (12,285) 3,454,329 (1) Related to the changes in the fair value of the financial assets available for sale and the share in other comprehensive income of Hidroeléctrica Piedra del Águila S.A. until its merger (note 1). (2) Related to 16,524 for the difference between the face value of the shares held by minority shareholders in Central Neuquén S.A., merged with and into the Company in 1995, and the face value of the shares in Central Puerto S.A. that such minority shareholders received in exchange, and 349,558 representing the shares of Hidroeléctrica Piedra del Águila S.A., La Plata Cogeneración S.A. and Centrales Térmicas Mendoza S.A., received in exchange as a result of the merger described in note 1. (3) Related to the adjustment for inflation of the irrevocable contributions reimbursed by the absorbed company Centrales Térmicas Mendoza S.A. to Operating S.A., which was earmarked for covering accumulated losses as provided for by the Special Shareholders Meeting of Centrales Térmicas Mendoza S.A. held on November 26, (4) Related to unappropriated retained earnings as of December 31, 2012, which were reserved due to the excess in the initial amount of unappropriated retained earnings as of January 1, 2012, assessed as per International Financial Reporting Standards regarding the final amount of unappropriated retained earnings as of December 31, 2011, assessed under Argentine professional accounting standards. (5) Related to the effect of reciprocal interests for the Company s shares over dividends distributed by Hidroneuquén S.A. and Operating S.A. (see note and exhibit C). GUILLERMO RECA Chairman

8 - 6 - STATEMENT OF CASH FLOWS for the year ended December 31, 2015 (English translation of the interim condensed financial statements originally issued in Spanish - see note 20) ARS 000 ARS 000 Operating activities Income for the year before income tax 2,018, ,866 Adjustments to reconcile profit for the year before tax to net cash flows: Depreciation of property, plant and equipment 156,928 91,244 Discount of accounts receivable and payable, net (118,560) 150,815 Interest from customers earned (41,965) (52,510) Interest and financial costs 263,335 44,323 Exchange difference and other financial income (745,809) (106,155) Income on disposal of available-for-sale financial assets (67,100) 26,928 Share in net profit of associates (48,293) (135,200) Recovery of provision for dismantling - (92,085) Net income (loss) on property, plant and equipment (replacement)/retirement (8,435) 5,087 Amortization of intangible assets and goodwill 37,271 14,233 Long-term employee benefit plan 24,508 8,563 Increase in the provision for dismantling 21,428 4,201 Recovery of lawsuits and claims - (6,288) Lawsuits and claims 52,702 4,477 Recovery of turnover tax (77,833) - Allowance for doubtful accounts (recovery) charge (1,418) 793 Recovery of insurance (39,521) - Changes in operating assets and liabilities: (Increase) in trade and other receivables and other non-financial assets (650,183) (162,756) (Increase) in inventories (26,184) (1,618) Increase in trade and other payables, other non-financial liabilities and liabilities from employee benefits 319,348 30,426 Interest earned and realized foreign exchange differences 251,840 10,473 Income tax and minimum presumed income tax paid (165,432) (35,300) Net cash flows provided by operating activities 1,155, ,517 Investing activities Purchase of property, plant and equipment (664,166) (45,367) Payment of advance of property, plant and equipment purchases (479,677) - Dividends collected 87,433 11,983 Interest collected 31,529 27,337 Purchase of available-for-sale financial assets, net (183,230) (58,023) Acquisition of interest in associates - (44,914) Guarantees granted - (162,675) Net cash flows used in investing activities (1,208,111) (271,659) Financing activities Loans settled, net (67,214) (30,143) Borrowings from CAMMESA received, net 671, ,600 Interest paid (88,722) (29,569) Payment of dividends (365,000) - Net cash flows provided by financing activities 150, ,888 Increase in cash and short-term deposits, net 97,428 76,746 Fund inflow from merger - 51,380 Exchange difference and other financial income 5,697 5,499 Cash and short-term deposits as of January 1 179,318 45,693 Cash and short-term deposits as of December , ,318 GUILLERMO RECA Chairman

9 Corporate information and main business Central Puerto S.A. (hereinafter the Company or CPSA ) was organized under Presidential Decree No. 122/92, in compliance with Law No. 24,065, which declared the electric power generation, transportation, distribution and selling activities formerly carried out by Servicios Eléctricos del Gran Buenos Aires S.A. to be subject to full privatization. On April 1, 1992, Central Puerto S.A. was taken over by the awardee consortium. Thus, the new company started its operations. During the fiscal year ended December 31, 2014, the Company carried out a merger process with its related companies Hidroeléctrica Piedra del Águila S.A. ( HPDA ), Centrales Térmicas Mendoza S.A. ( CTM ) and La Plata Cogeneración S.A. ( LPC ), as absorbed companies, which were dissolved with no liquidation under the terms of section 82, Law No. 19,550. The preliminary merger agreement was approved by such companies Boards of Directors as of June 30, 2014, as well as by the related Shareholders Meetings as of August 25, In addition, the preliminary merger agreement established October 1, 2014 as the effective date of the merger. As from such date, the Company s Board of Directors took over the management of assets and liabilities belonging to the merged of the companies, under section 84 of the Argentine General Business Associations Law. The purpose of the merger referred was to perform a corporate reorganization aimed at optimizing those companies technical, administrative and business structures and achieving synergies and efficiencies in connection with the development of the activities through a single operating unit. On November 26, 2014, the Argentine Energy Department issued Resolution SE No. 167 authorizing the awarding of the concession agreement related to the Piedra del Águila hydroelectric power plant to the Company. Consequently, on December 5, 2014, the companies involved signed the related Definitive Merger Agreement. As a result of the merger, CPSA s capital stock increased from 88,506 to 199,742 represented by 199,742,158 book-entry shares of common stock, of face value ARS 1 each and entitled to one vote per share. The Company has made all the related filings in accordance with the requirements established by CNV (Argentine Securities Commission) and BCBA (Buenos Aires Stock Exchange) regulations, Argentine General Business Associations Law and other applicable regulations. The approval by the CNV has been obtained and the registration with the Public Registry of Commerce reporting to the IGJ (Argentine regulatory agency of business associations) has been carried out regarding the merger and the dissolution with no liquidation due to the merger of absorbed companies on April 9, 2015, bylaws amendments and the related increase in CPSA s capital on June 3, On July 24, 2015, new shares were issued through Caja de Valores S.A. and all shares were exchanged due to the merger. On September 21, 2015, the Special General Shareholders Meeting amended the by-laws increasing capital stock, as described above. Such amendment was registered with the IGJ on January 19, 2016.

10 - 8 - The Company is mainly engaged in the production of electric power and their block sale. After the merger, the assets owned by the Company to perform its activity are as follows: The Puerto Nuevo and Nuevo Puerto thermal power plants, located in Buenos Aires City and having a total thermal installed capacity of 1778 MWh, a combined cycle plant and steam turbogroups. Thermal power plants located at Luján de Cuyo, province of Mendoza, with a combined installed capacity of 540 MWh and 150 tn/h steam production. A cogeneration thermal power plant located within the refinery of YPF S.A. in Ensenada, province of Buenos Aires, with an installed capacity of 128 MWh and 240 tn/h steam production. The Concession of the Piedra del Águila hydroelectric power plant located over the Limay river, in the province of Neuquén, which has four generation units providing 350 MWh each (see note 17.6). Shares held in Termoeléctrica José de San Martín S.A. ( TJSM ) and Termoeléctrica Manuel Belgrano S.A. ( TMB ), which operate thermal generation stations, with an installed capacity of 823 MWh and 825 MWh, respectively, and in Central Vuelta de Obligado S.A. ( CVOSA ), currently constructing a combined cycle, whose turbines will have an installed capacity of 540 MWh. The financial statements of CPSA for the year ended December 31, 2015, were approved by the Company s Board of Directors on March 09, Merger between Hidroneuquén S.A., Operating S.A. and Sociedad Argentina de Energía S.A. The Company, HIDRONEUQUEN S.A. ( HDNQ ), OPERATING S.A. ( OPERATING ) and SOCIEDAD ARGENTINA DE ENERGÍA S.A. ( SADESA ) commenced a merger whereby the Company will act as surviving company and the rest of the companies will be eventually dissolved with no liquidation under the terms of section 82, Law No. 19,550. To such end, these companies decided that the special statements of financial position of CPSA, HDNQ, OPERATING and SADESA as of September 30, 2015, be used for preparing the Company s special statements of financial position for merger purposes as of such date. Such special statement and the previous merger agreement were approved by the board of directors of those companies on December 15, In addition, the preliminary merger agreement established January 1, 2016, as the effective date of the merger. The transfer in favor of CPSA of the assets, liabilities, rights and duties held by the merged companies shall be applicable to third parties only from the date of registration of the final merger agreement with the IGJ. Until that date, merged companies boards of directors shall continue to be in charge of managing their equity, taking into account that all their acts are performed on account and behalf of CPSA. The purpose of such merger is to achieve a business reorganization aimed at consolidating in CPSA the investments and shares of the merged companies, allowing to increase financial capacity to develop new projects and investments and unify the corporate, accounting and administrative structure of the companies involved, so as to achieve a more effective assignment of existing resources, improve economy in terms of costs and processes, eliminate cross-shareholding among companies and higher stock atomization for the benefit of minority shareholders and new investments. The merged company SADESA is the parent company of all merged companies, and absorbed companies HDNQ and OPERATING are minority shareholders of CPSA. The merger performed pursuant to section 82 and related sections under Argentine General Business Associations Law No. 19,550, section 77 and subsequent sections, Income Tax Law No. 20,628, Chapter X, Title II, CNV General Resolution No. 622 (as amended in 2013), Chapter X, Title II, BCBA Listing Regulations, and further applicable legal provisions and regulations, and subject to its approval by the relevant extraordinary shareholders meetings, the CNV, the BCBA and any other entity whose approval may be required pursuant to applicable regulations.

11 - 9 - By virtue of the merger agreement, the companies agreed to the following exchange ratio: (i) HDNQ s shareholders receive shares of common stock in CPSA per each share of common stock they held in HDNQ, totaling 35,449,540 book-entry shares of common stock, of face value ARS 1 each and entitled to one vote per share, for each share that they held in CPSA. (ii) OPERATING s shareholders receive shares of common stock in CPSA per each share of common stock they held in OPERATING, totaling 63,826,299 book-entry shares of common stock, of face value ARS 1 each and entitled to one vote per share, for each share that they held in CPSA. (iii) SADESA s shareholders receive shares of common stock in CPSA per each share of common stock they held in SADESA, totaling 52,355,142 book-entry shares of common stock, of face value ARS 1 each and entitled to one vote per share, for each share that they held in CPSA. This exchange ratio was determined based on the fair values of the shares of CPSA, HDNQ, OPERATING and SADESA. As a result of the merger process and the abovementioned exchange ratio, CPSA, as surviving company of SADESA, HDNQ and OPERATING, will receive 148,433,740 shares of CPSA that formed part of the equity of SADESA, HDNQ and OPERATING. Those proprietary shares shall be delivered to the merged companies shareholders based on such exchange ratio, with a remainder in the possession of CPSA, as a result of CPSA s interest in HDNQ and OPERATING, which will result in a decrease in CPSA s capital stock from 199,742 to 189,253. As a result of the capital stock reduction referred to above, CPSA s consolidated capital stock after the merger shall be 189,253 represented by 189,252,782 book-entry shares of common stock, of face value ARS 1 each and entitled to one vote per share. In addition, the execution of the final merger agreement is also subject to the condition that the receivables of the creditors opposing to the merger appearing under the circumstances established by Argentine General Business Associations Law, section 83, do not equal or exceed ARS 5 million. Such condition could be rendered ineffective if the boards of directors of CPSA, HDNQ, SADESA and OPERATING so decide. As of the date of issuance of these financial statements, the final merger agreement approval is still pending. 2. Basis of preparation of the financial statements 2.1. Professional accounting standards applied The Company prepares its financial statements in accordance with current CNV regulations which approved General Resolution (RG) N 622, whereby stock and/or other corporate bond issuers, subject to certain conditions, are required to prepare their financial statements under FACPCE (Argentine Federation of Professional Councils in Economic Sciences) Technical Resolution (RT) No. 26 (as amended), providing for the adoption of IFRS (Internal Financial Reporting Standards) issued by the IASB (International Accounting Standards Board), while other entities may opt to use IFRS or IFRS for SMEs replacing current Argentine professional accounting standards Basis of preparation The financial statements for the year ended December 31, 2015, have been prepared in accordance with IFRS as issued by the IASB.

12 These financial statements provide comparative information in respect of the previous year. Due to the merger mentioned in note 1 effective as from October 1, 2014 ( effective merger date ), between companies controlled by the same entity and based on the interpretation of the provisions of IFRS 10, which makes reference to the fact that a parent company s financial statements include income arising from the consolidated companies as from the purchase date as provided for by IFRS 3, the Company decided not to give retroactive effect to the merger and therefore, not to amend the information related to the period preceding the effective merger date. In preparing these financial statements, the Company applied the significant accounting policies, judgments, estimates and assumptions described in sections 2.3 and 2.4 of this note, respectively. Moreover, the Company has adopted the changes in accounting policies described in item 2.5. to this note. These financial statements have been prepared on a historical cost basis, except for available-for-sale financial assets and financial assets at fair value through profit or loss, which have been measured at fair value. The Company s financial statements are presented in Argentine pesos, which is the Company s functional currency, and all values have been rounded to the nearest thousand (ARS 000), except when otherwise indicated. The Company made certain reclassifications of the financial statements for the year ended December 31, 2015, to adjust the presentation thereof to that of the financial statements for the fiscal year ended December 31, Measuring unit Under International Accounting Standard (IAS) 29, the financial statements of an entity whose functional currency is the currency of a hyperinflationary economy, whether they are based on a historical cost approach or a current cost approach, should be stated in terms of the measuring unit current at the end of the reporting fiscal year. Although this standard does not establish an absolute inflation rate at which hyperinflation is deemed to arise, it is a general practice to consider to such end a cumulative rate for changes in prices over three years that approaches or exceeds 100%, together with a series of other qualitative factors related to the macroeconomic environment. As of December 31, 2015, it is not possible to calculate the accumulated inflation rate for the three-year period ended on such date based on the official data provided by the INDEC (Argentine Statistics and Census Institute), while as of the date of approval of these financial statements, the last month for which the INDEC provided information on the variations in the wholesale price index is October However, considering that the accumulated inflation rate during the thirty-four month period ended October 31, 2015, measured based on INDEC official information, is 62%, it should be concluded that as of December 31, 2015, the accumulated inflation percentage is under the 100% previously mentioned. Consequently, at the current year-end, Management has determined that the Argentine peso does not qualify as a currency in a hyperinflationary economy according to the guidelines in IAS 29. Therefore, these financial statements were not restated into constant currency. However, in recent years certain macroeconomic variables that affect the Company s business, such as salary costs, the foreign currency exchange rate and input prices, have undergone somewhat relevant annual changes which, although not leading the Company to conclude that the guidelines in IAS 29 have been exceeded, are relevant and should be considered in the assessment and interpretation of the financial position and financial performance shown by the Company in these financial statements.

13 Summary of significant accounting policies The following are the significant accounting policies applied by the Company in preparing its financial statements Classification of items as current and non-current The Company classifies assets and liabilities in the statement of financial position as current and noncurrent. An entity shall classify an asset as current when: it expects to realize the asset, or intends to sell or consume it, in its normal operating cycle; it holds the asset primarily for the purpose of trading; it expects to realize the asset within twelve months after the reporting period; or the asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. An entity shall classify a liability as current when: it is expected to be settled in normal operating cycle; It is held primarily for the purpose of trading; it is due to be settled within twelve months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities, in all cases Fair value measurement The Company measures certain financial instruments at their fair value at each reporting date. In addition, the fair value of financial instruments measured at amortized cost is disclosed in note 9.5. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

14 The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 input data: quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2 input data: valuation techniques with input data other than the quoted prices included in Level 1, but which are observable for assets or liabilities, either directly or indirectly. Level 3 input data: valuation techniques for which input data are not observable for assets or liabilities Transactions and balances in foreign currency Transactions in foreign currencies are recorded by the Company at the related functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting period-end. All differences are taken to statement of income under other operating income or expenses, or under finance income or loss, depending on the nature of assets or liabilities generating those differences. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined Recognition of revenues Revenue from ordinary activities Revenue from ordinary activities is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made by the customer. Revenue is measured at the fair value of the consideration received or receivable, considering the agreed-upon payment terms and excluding taxes or duties. The Company assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. Revenue from the sale of energy and power is calculated at the prices established in the relevant agreements or at the prices prevailing in the electric market, pursuant to current regulations. They include revenues from energy and power provided and not billed, until the end of the reporting period, valued at the prices defined in agreements or in the relevant regulations for each fiscal year Other income Interest For all financial assets and liabilities measured at amortized cost and interest bearing financial assets classified as available for sale, interest income or expense is recorded using the effective interest rate method, which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. In general, interest income and expense is included in finance income and

15 costs in the statement of income, respectively, unless they derive from operating items (trade and other receivables or trade and other payables); in that case, they are booked under other operating income and expenses, as the case may be Taxes Current income tax and minimum presumed income tax Current income tax assets and liabilities for the year are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute those amounts are those that are enacted or substantively enacted, at the end of the reporting period. The current tax for the Company rate is 35%. Current income tax relating to items recognized directly in equity is recognized in equity and not in the statement of income. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Minimum presumed income tax is supplementary to income tax since while the latter is levied on taxable income for the reporting period, minimum presumed income tax is a minimum levy determined by applying the current 1% rate to the potential income of certain productive assets. Therefore, the Company s tax obligation shall be the higher of these two taxes. However, should minimum presumed income tax exceed current income tax in a given tax year, such excess may be computed as payment on account of any income tax excess over minimum presumed income tax that could occur in any of the ten subsequent tax years. Minimum presumed income tax credit is measured at nondiscounted nominal value, as it is similar to a deferred income tax asset. The carrying amount of minimum presumed income tax is reviewed at each reporting period date and reduced with contra to income or loss for the period under income tax charge to the extent that its use as payment on account of income tax in future fiscal years it is no longer probable. Minimum presumed income tax credit not recognized as credit or previously derecognized is reviewed as of each reporting period-end and it is recognized as an asset with contra to income or loss for the period under income tax expenses to the extent that it is likely to be used as payment on account of income tax payable in future years. As of December 31, 2015, the Company holds a minimum presumed income tax credit for 58,261 because the amount assessed for such tax as of December 31, 2014, exceeded the 2014 current income tax amount. Such credit is booked under income tax payable in current liabilities, regularizing the abovementioned item (see note 14.6). Deferred income tax Deferred tax is provided using the liability method on temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their related carrying amounts. Deferred tax liabilities are recognized for all taxable temporary differences, except: Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

16 In respect of taxable temporary differences associated with investments in subsidiaries and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and/or the carry forward of unused tax losses can be utilized, except: Where the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future and taxable profit will be available against which those differences can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting period date and reduced with contra to income or loss for the period or other comprehensive income, as the case may be, to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized (recovered). Unrecognized deferred tax assets are reassessed at each reporting period date and are recognized with a charge to income or other comprehensive income for the period, as the case may be, to the extent that it has become probable that future taxable profits will allow the deferred tax asset not previously recognized to be recovered. Deferred tax assets and liabilities are measured at nondiscounted nominal value at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting period date. Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transactions either in other comprehensive income or directly in equity. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current income tax assets and liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Other taxes related to sales and to bank account transactions Revenues from recurring activities, expenses incurred and assets are recognized net of the amount of sales tax, as in the case of value-added tax or turnover tax, or the tax on bank account transactions, except: - Where the tax incurred on a sale or on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item as the case may be; - Receivables and payables are stated including value-added tax. The charge for the tax on bank account transactions is presented in the administrative and selling expenses line within the statement of income. The net amount of the tax related to sales and to bank account transactions recoverable from, or payable to, the taxation authority is included as a non-financial asset or liability, as the case may be.

17 Goodwill Empresa de Energía y Vapor S.A. The Company chose not to apply IFRS. 3 (Business Combinations) retrospectively to the acquisition of Empresa de Energía y Vapor S.A. by the merged company LPC, which was made prior to the transition date to IFRS. Use of this exemption means that the carrying amounts of assets and liabilities measured according to Argentine professional accounting standards, which are required to be recognized under IFRS, is their deemed cost at the date of the acquisition. After the acquisition date, measurements should be made in accordance with IFRS. IFRS 1 requires that the carrying amount of goodwill measured according to Argentine professional accounting standards be included in the statement of financial position under IFRS, apart from adjustments for goodwill impairment. In conformity with IFRS 1, the Company performed an impairment test on goodwill as of the transition date to IFRS. In this sense, no impairment recognition related to the value of such asset was deemed necessary as of that date. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses Property, plant and equipment Property, plant and equipment as of January 1, 2011 (transition date to IFRS) is stated at deemed cost as of that date, net of accumulated depreciation and/or accumulated impairment losses, if any. Deemed cost is determined applying the exemption provided by IFRS 1 as follows: - The turbogroups and auxiliary equipment of the Puerto Nuevo and Nuevo Puerto power plants were measured at fair value, based on the appraisal revaluations made by an independent expert appraiser as of that date using appropriate valuation techniques. - Turbogroups and auxiliary equipment of the Piedra del Águila hydroelectric power plant were measured at fair value, based on the appraisal revaluations made by an independent expert appraiser as of that date using appropriate valuation techniques. - The property, plant and equipment of the power plant located in Luján de Cuyo have been measured as of the date of transition to IFRS based on the transfer price determined upon the privatization of absorbed company CTM in It was based on to the price paid for the purchase of 51% of the capital stock acquired by virtue of the power plant privatization process and allocated to each asset on the basis of the technical revaluations conducted by independent experts as of such date and restated according to the changes in the general price index as of February 28, 2003, based on Argentine professional accounting standards. The Company decided to take these values as deemed cost as of the date of those revaluations because it was considered that those values were substantially comparable to the fair values of such assets as of the revaluation dates, adjusted to reflect the changes in a general price index as of those same dates. - The remaining property, plant and equipment items were booked based on the accounting revaluations made as of February 28, 2003, in accordance with Argentine professional accounting standards. Therefore, it was considered that those values were substantially comparable to the depreciated cost thereof according to IFRS, adjusted in this case, to reflect the changes in a general price index as of that same date. Property, plant and equipment additions subsequent to such dates are stated at acquisition cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing component parts of the property, plant and equipment and borrowing costs for long-term construction projects if the criteria to be recognized as assets are met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Company derecognizes the replaced part and recognizes the new part with its own associated useful life and depreciation. Likewise, when a major inspection is performed, its cost is recognized as a replacement if the

18 conditions for the recognition thereof as an asset are met. All other regular repair and maintenance costs are recognized in the statement of income as incurred. The present value of the expected cost for the dismantling of La Plata Cogeneración plant after the term of the agreement executed with YPF (note 17.7) has elapsed is included in the cost of the related asset if the recognition criteria for the appropriate provision are met. For more information on the provision for plant dismantling, refer to notes and 2.4. The machinery and equipment, and the related materials and spare parts of the Nuevo Puerto s combined cycle power plant are depreciated on the basis of the service hours provided. The depreciation of the items making up the combined cycle plant located at Luján de Cuyo, which will be replaced during the following scheduled major repair, are calculated on the basis of the service hours provided according to the hours of their remaining useful life. Turbogroups and auxiliary equipment of the Piedra del Águila hydroelectric power plant are depreciated based on the energy generated during the period/year, subject to an estimated useful life equivalent to an average generation of 5,000 GWh until the end of the concession agreement. As from the fiscal year begining January 1, 2016, the Company will start to depreciate these assets on a straight-line basis until the date of completion of the concession contract for Piedra del Águila hydroelectric power plant (see note 17.6), considering that this new consumption pattern is the one better reflecting the benefits arising from these assets through the end of the concession contract. The depreciation of the remaining property, plant and equipment is calculated on a straight-line basis over the total estimated useful lives of the assets as follows: Buildings: 20 to 50 years Leasehold improvements: 5 years Machinery and equipment, and the related materials and spare parts: 4 to 5 years Communications and computer equipment: 5 years Furniture, office supplies and fixtures: 5 to 10 years Vehicles: 5 years Tools: 5 to 10 years The useful lives of the machinery, equipment, materials and spare parts of the cogeneration power plant located within the refinery of YPF S.A. do not exceed the terms established by the agreement executed with such company mentioned in note In addition, CPSA estimated a significant residual value of those assets as of the agreement expiration date, as it estimates that as a result of the power market s current conditions, this power plant will continue operating after the abovementioned term has elapsed. An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of income when the asset is derecognized. The assets residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.

19 Intangible assets Intangible assets acquired separately are measured on initial recognition at acquisition cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization (if they are considered as having finite useful lives) and accumulated impairment losses, if any. The useful lives of intangible assets are assessed as either finite or indefinite. The useful lives of the intangible assets recognized by the Company are finite. Intangible assets with finite useful lives are amortized over their useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of the asset is accounted for by changing the amortization period or method, as appropriate, and are treated prospectively as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of income in the expense category consistent with the function of the intangible assets. Considering the terms of the concession contract of the Piedra del Águila hydroelectric power plant, and the abovementioned changes to the compensation system to the generators, described in note 18.h), it can be considered that the accounting method to be applied is the one set forth in Interpretation No. 12 Service Concession Arrangements issued by the International Financial Reporting Interpretations Committee ( IFRIC 12 ). According to the Company s evaluations, this interpretation does not cause substantial effects on these financial statements. The Company s intangible assets are described in note Impairment of property, plant and equipment, intangible assets and goodwill The Company assesses at each reporting period-end whether there is an indication that an individual component or a group of property, plant and equipment and/or intangible assets with finite useful lives may be impaired. If any indication exists and the annual impairment testing for an asset is required, the Company estimates the asset s recoverable amount. An asset s recoverable amount is the higher of the fair value less costs to sell that asset, and its value in use. That amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets; in that case, the cash flows of the group of assets that form part of the cash-generating unit to which they belong are taken. Where the carrying amount of an individual asset or CGU exceeds its recoverable amount, the individual asset or CGU, as the case may be, is considered impaired and is written down to its recoverable amount. In assessing value in use of an individual asset or CGU, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the individual asset or CGU, as the case may be. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are verified by valuation multiples, quoted values for similar assets on active markets and other available fair value indicators, if any. The Company bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Company s cash-generating units to which the individual assets are allocated. These detailed budgets and forecast calculations generally cover a five-year period. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the fifth year.