EDENOR S.A.
CONDENSED INTERIM FINANCIAL STATEMENTS
AS OF JUNE 30, 2015 AND FOR THE SIX AND THREE-MONTH PERIOD
ENDED JUNE 30, 2015
PRESENTED IN COMPARATIVE FORM
CONTENTS
Glossary of Terms | 1 |
Legal Information | 2 |
Statement of Financial Position | 3 |
Statement of Comprehensive Income (Loss) | 5 |
Statement of Changes in Equity | 6 |
Statement of Cash Flows | 7 |
Notes to the Financial Statements |
|
Note 1. General information | 9 |
Note 2. Regulatory framework | 11 |
Note 3. Basis of preparation | 13 |
Note 4. Accounting policies | 14 |
Note 5. Financial risk management | 14 |
Note 6. Critical accounting estimates and judgments | 16 |
Note 7. Contingencies and lawsuits | 18 |
Note 8. Property, plant and equipment | 20 |
Note 9. Other receivables | 22 |
Note 10. Trade receivables | 23 |
Note 11. Financial assets at fair value through profit or loss | 23 |
Note 12. Cash and cash equivalents | 24 |
Note 13. Share capital and additional paid-in capital | 24 |
Note 14. Trade payables | 24 |
Note 15. Other payables | 25 |
Note 16. Borrowings | 25 |
Note 17. Salaries and social security taxes payable | 26 |
Note 18. Income tax and tax on minimum presumed income/Deferred tax | 26 |
Note 19. Tax liabilities | 27 |
Note 20. Provisions | 28 |
Note 21. Revenue from sales | 28 |
Note 22. Expenses by nature | 29 |
Note 23 Net financial income (expense) | 30 |
Note 24 Basic and diluted earnings (loss) per share | 30 |
Note 25 Related-party transactions | 31 |
Report on Review of Condensed Interim Financial Statements |
|
Supervisory Committee’s Report |
|
Glossary of Terms
The following definitions, which are not technical ones, will help readers understand some of the terms used in the text of the notes to the Company’s Financial Statements.
Terms | Definitions |
EDENOR S.A | Empresa Distribuidora y Comercializadora Norte S.A. |
EDESUR S.A | Empresa Distribuidora Sur S.A. |
EASA | Electricidad Argentina S.A. |
RTI | Tariff Structure Review |
SE | Energy Secretariat |
FOCEDE | Fund for Electric Power Distribution Expansion and Consolidation Works |
PUREE | Program for the Rational Use of Electric Power |
CAMMESA | Compañía Administradora del Mercado Mayorista Eléctrico (the company in charge of the regulation and operation of the wholesale electricity market) |
SIESA | Salta Inversiones Eléctricas S.A. |
SEGBA S.A. | Servicios Eléctricos del Gran Buenos Aires S.A. |
MMC | Cost Monitoring Mechanism |
MEM | Wholesale Electricity Market |
ENRE | National Regulatory Authority for the Distribution of Electricity |
LVFVD | Sale Settlements with Maturity Dates to be Determined |
IAS | International Accounting Standards |
IFRS | International Financial Reporting Standards |
IFRIC | International Financial Reporting Interpretations Committee |
TERI | Study, Review and Inspection of Works in Public Spaces Fees |
FOTAE | Trust for the Management of Electricity Power Transmission Works |
CYCSA | Comunicaciones y Consumos S.A. |
PYSSA | Préstamos y Servicios S.A. |
SACME | S.A. Centro de Movimiento de Energía |
CNV | National Securities Commission |
1
Legal Information
Corporate name: Empresa Distribuidora y Comercializadora Norte S.A.
Legal address:6363 Del Libertador Ave., City of Buenos Aires
Main business:Distribution and sale of electricity in the area and under the terms of the concession agreement by which this public service is regulated.
Date of registration with the Public Registry of Commerce:
- of the Articles of Incorporation: August 3, 1992
- of the last amendment to the By-laws: May 28, 2007
Term of the Corporation:August3, 2087
Registration number with the “Inspección General de Justicia” (the Argentine governmental regulatory agency of corporations):1,559,940
Parent company:EASA
Legal address:3302 Ortiz de Ocampo, Building 4, City of Buenos Aires
Main business of the parent company: Investment in Edenor S.A.’s Class “A” shares and rendering of technical advisory, management, sales, technology transfer and other services related to the distribution of electricity.
Interest held by the parent company in capital stock and votes:51.54%
CAPITAL STRUCTURE
AS OF JUNE 30, 2015
(amounts stated in pesos)
Class of shares | Subscribed and paid-in | |
Common, book-entry shares, face value 1 and 1 vote per share | ||
Class A | 462,292,111 | |
Class B (1) | 442,210,385 | |
Class C | 1,952,604 | |
906,455,100 |
(1) Includes 9,412,500 treasury shares as of June 30, 2015 and December 31, 2014.
2
Edenor S.A.
Condensed Interim Statement of Financial Position
as of June 30, 2015 presented in comparative form
(Stated in thousands of pesos)
| Note |
| 06.30.15 | 12.31.14 | |
ASSETS |
|
|
| ||
|
|
|
| ||
Non-current assets |
|
|
| ||
Property, plant and equipment | 8 |
| 7,340,378 | 6,652,482 | |
Financial assets at amortized cost |
|
| 39,770 | - | |
Interest in joint ventures |
|
| 434 | 432 | |
Deferred tax asset | 18 |
| 59,416 | 87,167 | |
Other receivables | 9 |
| 251,871 | 249,235 | |
Total non-current assets |
|
| 7,691,869 | 6,989,316 | |
|
|
|
| ||
Current assets |
|
|
| ||
Inventories |
|
| 84,821 | 73,970 | |
Other receivables | 9 |
| 781,478 | 250,307 | |
Trade receivables | 10 |
| 946,536 | 882,949 | |
Financial assets at fair value through profit or loss | 11 |
| 1,136,737 | 254,447 | |
Financial assets at amortized cost |
|
| 903 | - | |
Cash and cash equivalents | 12 |
| 107,134 | 179,080 | |
Total current assets |
|
| 3,057,609 | 1,640,753 | |
TOTAL ASSETS |
|
| 10,749,478 | 8,630,069 |
3
Edenor S.A.
Condensed Interim Statement of Financial Position
as of June 30, 2015 presented in comparative form (Continued)
(Stated in thousands of pesos)
| Note |
| 06.30.15 | 12.31.14 | |
EQUITY |
|
|
| ||
Share capital | 13 |
| 897,043 | 897,043 | |
Adjustment to share capital |
|
| 397,716 | 397,716 | |
Additional paid-in capital |
|
| 3,452 | 3,452 | |
Treasury stock | 13 |
| 9,412 | 9,412 | |
Adjustment to treasury stock |
|
| 10,347 | 10,347 | |
Other comprehensive loss |
|
| (39,862) | (39,862) | |
Accumulated losses |
|
| (168,364) | (893,107) | |
TOTAL EQUITY |
|
| 1,109,744 | 385,001 | |
|
|
|
| ||
|
|
|
| ||
LIABILITIES |
|
|
| ||
Non-current liabilities |
|
|
| ||
Trade payables | 14 |
| 215,556 | 231,105 | |
Other payables | 15 |
| 2,205,127 | 1,644,587 | |
Borrowings | 16 |
| 1,702,988 | 1,598,442 | |
Deferred revenue |
|
| 127,022 | 109,089 | |
Salaries and social security payable | 17 |
| 75,118 | 62,858 | |
Benefit plans |
|
| 170,635 | 150,355 | |
Tax liabilities | 19 |
| 2,543 | 3,164 | |
Provisions | 20 |
| 127,684 | 112,095 | |
Total non-current liabilities |
|
| 4,626,673 | 3,911,695 | |
Current liabilities |
|
|
| ||
Trade payables | 14 |
| 3,622,674 | 3,299,891 | |
Other payables | 15 |
| 105,571 | 187,096 | |
Borrowings | 16 |
| 35,815 | 33,961 | |
Derivative financial instruments |
|
| - | 5,895 | |
Deferred revenue |
|
| 764 | 764 | |
Salaries and social security payable | 17 |
| 612,354 | 610,649 | |
Benefit plans |
|
| 19,738 | 10,566 | |
Tax liabilities | 19 |
| 582,486 | 160,483 | |
Provisions | 20 |
| 33,659 |
| 24,068 |
Total current liabilities |
|
| 5,013,061 | 4,333,373 | |
TOTAL LIABILITIES |
|
| 9,639,734 | 8,245,068 | |
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY |
|
| 10,749,478 | 8,630,069 |
The accompanying notes are an integral part of these Financial Statements.
4
Edenor S.A.
Condensed Interim Statement of Comprehensive Income (Loss)
for the six-month period ended June 30, 2015
presented in comparative form
(Stated in thousands of pesos)
Six months at | Three months at | ||||||||
Note | 06.30.15 |
| 06.30.14 | 06.30.15 | 06.30.14 | ||||
Revenue | 21 | 1,868,010 | 1,753,215 | 899,395 | 852,650 | ||||
Electric power purchases | (1,000,064) | (908,881) | (477,087) | (469,187) | |||||
Subtotal | 867,946 | 844,334 | 422,308 | 383,463 | |||||
Transmission and distribution expenses | 22 | (1,527,088) | (1,315,015) | (822,499) |
| (725,235) | |||
Gross loss | (659,142) | (470,681) | (400,191) | (341,772) | |||||
|
|
|
|
| |||||
Selling expenses | 22 | (366,372) | (279,843) | (195,160) | (146,933) | ||||
Administrative expenses | 22 | (306,533) | (197,297) | (169,589) | (109,123) | ||||
Other operating expense, net | (112,448) | (92,351) | (74,901) | (64,311) | |||||
Gain from interest in joint ventures | 2 | 7 | 2 | 7 | |||||
Income from non-reimbursable customer | 382 | 382 | 191 | 191 | |||||
Operating loss before higer costs recognition and SE Resolution 32/15 | (1,444,111) | (1,039,783) | (839,648) | (661,941) | |||||
Income recognition on account of the RTI - SE Resolution 32/15 | 2 | 2,388,652 | - | 1,054,775 | - | ||||
Higher cost recognition – SE Resolution 250/13 and subsequent Notes | 2 | 186,596 | 735,534 | - | 735,534 | ||||
Operating profit (loss) | 1,131,137 | (304,249) | 215,127 | 73,593 | |||||
Financial income | 23 | 37,633 | 148,281 | 19,545 | 127,939 | ||||
Financial expenses | 23 | 37,896 | (341,776) | 218,279 | (194,748) | ||||
Other financial results | 23 | (26,549) | (265,996) | 4,264 | (18,473) | ||||
Net financial expense | 48,980 | (459,491) | 242,088 | (85,282) | |||||
Profit (Loss) before taxes | 1,180,117 | (763,740) | 457,215 | (11,689) | |||||
| |||||||||
Income tax | 18 | (455,374) | 40,939 | (202,358) | 27,451 | ||||
Profit (Loss) for the period | 724,743 | (722,801) | 254,857 | 15,762 | |||||
| |||||||||
Basic and diluted earnings (loss) per share: | |||||||||
Basic and diluted earnings (loss) per share | 24 | 0.81 | (0.81) | 0.29 | 0.01 | ||||
The accompanying notes are an integral part of these Financial Statements.
5
Edenor S.A.
Condensed Interim Statement of Changes in Equity
for the six-month period ended June 30, 2015
presented in comparative form
(Stated in thousands of pesos)
Share capital | Adjustment to share capital | Treasury stock | Adjust- ment to treasury stock | Additional paid-in capital | Other comprehen- sive loss | Accumulated deficit | Total equity | ||||||||
Balance at December 31, 2013 | 897,043 | 397,716 | 9,412 | 10,347 | 3,452 | (28,277) | (113,391) | 1,176,302 | |||||||
Loss for the six-month period | - | - | - | - | - | - | (722,801) | (722,801) | |||||||
Balance at June 30, 2014 | 897,043 | 397,716 | 9,412 | 10,347 | 3,452 | (28,277) | (836,192) | 453,501 | |||||||
| |||||||||||||||
Loss for the six-month complementary period | - | - | - | - | - | - | (56,915) | (56,915) | |||||||
Other comprehensive loss for the year | - | - | - | - | - | (11,585) | - | (11,585) | |||||||
Balance at December 31, 2014 | 897,043 | 397,716 | 9,412 | 10,347 | 3,452 | (39,862) | (893,107) | 385,001 | |||||||
| |||||||||||||||
Profit for the six-month period | - | - | - | - | - | - | 724,743 | 724,743 | |||||||
Balance at June 30, 2015 | 897,043 | 397,716 | 9,412 | 10,347 | 3,452 | (39,862) | (168,364) | 1,109,744 | |||||||
The accompanying notes are an integral part of these Financial Statements.
6
Edenor S.A.
Condensed Interim Statement of Cash Flows
for the six-month period ended June 30, 2015
presented in comparative form
(Stated in thousands of pesos)
Note | 06.30.15 |
| 06.30.14 | ||
Cash flows from operating activities | |||||
Profit (Loss) for the period | 724,743 | (722,801) | |||
Adjustments to reconcile net (loss) profit to net cash flows from operating activities: | |||||
Depreciation of property, plants and equipments | 22 | 132,027 | 113,756 | ||
Loss on disposals of property, plants and equipments | 1,275 | 291 | |||
Net accrued interest | (89,605) | 189,474 | |||
Exchange differences | 23 | 105,903 | 347,295 | ||
Income tax | 18 | 455,374 | (40,939) | ||
Allowance for the impairment of trade and other receivables, net of recovery | (7,031) | 118 | |||
Adjustment to present value of receivables | 23 | (5,244) | (3,731) | ||
Provision for contingencies | 37,349 | 47,172 | |||
Other expenses - FOCEDE | 25,910 | - | |||
Changes in fair value of financial assets | 23 | (78,263) | (39,354) | ||
Accrual of benefit plans | 42,498 | 18,035 | |||
Higher cost recognition – SE Resolution 250/13 and subsequent Notes | 2 | (186,596) | (735,534) | ||
Income recognition on account of the RTI - SE Resolution 32/15 | 2 | (447,438) | - | ||
Net gain from the repurchase of Corporate Bonds | 23 | - | (44,474) | ||
Income from non-reimbursable customer contributions | (382) | (382) | |||
Changes in operating assets and liabilities: | |||||
Increase in trade receivables | (21,341) | (29,823) | |||
Increase in other receivables | (531,782) | (27,868) | |||
Increase in inventories | (10,850) | (30,381) | |||
Increase (decrease) in deferred revenue | 18,315 | - | |||
Decrease in trade payables | 235,633 | 835,589 | |||
Decrease in salaries and social security payable | 13,965 | 37,587 | |||
Decrease in benefit plans | (13,047) | (4,439) | |||
(Decrease) Increase in tax liabilities | (7,747) | (8,536) | |||
Increase in other payables | (26,636) | 76,868 | |||
Funds obtained from the program for the rational use of electric power (PUREE) (SE Resolution No. 1037/07) | 25,613 | 224,733 | |||
Net decrease in provisions | (12,170) | (8,312) | |||
Subtotal before variations of debts with Cammesa | 380,471 | 194,337 | |||
Increase in account payable and mutuum with Cammesa | 1,108,096 | 433,463 | |||
Net cash flows generated by operating activities | 1,488,567 | 627,800 |
7
Edenor S.A.
Condensed Interim Statement of Cash Flows
for the six-month period ended June 30, 2015
presented in comparative form (Continued)
(Stated in thousands of pesos)
Note | 06.30.15 | 06.30.14 | |||
Cash flows from investing activities | |||||
Payment of property, plants and equipments | (630,048) | (636,491) | |||
Net (payment for) collection of purchase / sale of financial assets at fair value | (849,692) | (7,971) | |||
Collection of receivables from sale of subsidiaries - SIESA | 4,272 | 2,976 | |||
Net cash flows used in investing activities | (1,475,468) | (641,486) | |||
Cash flows from financing activities | |||||
Payment of principal on loans | - | (364) | |||
Payment of interest on loans | (83,484) | (75,289) | |||
Net cash flows used in financing activities | (83,484) | (75,653) | |||
Decrease in cash and cash equivalents | (70,385) | (89,339) | |||
Cash and cash equivalents at the beginning of year | 12 | 179,080 | 243,473 | ||
Exchange differences in cash and cash equivalents | (1,561) | 7,221 | |||
Decrease in cash and cash equivalents | (70,385) | (89,339) | |||
Cash and cash equivalents at the end of period | 12 | 107,134 | 161,355 | ||
Nota | 06.30.15 | 06.30.14 | |||
Supplemental cash flows information | |||||
Non-cash investing and financing activities | |||||
Financial costs capitalized in property, plants and equipments | 8 | (118,597) | (7,295) | ||
Acquisitions of property, plant and equipment through increased trade payables | (72,553) | - | |||
Decrease from offsetting of PUREE-related liability against receivables (SE Resolution 250/13, subsequent Notes and SE Resolution 32/15) | 2 | 10,619 | (168,426) | ||
Decrease from offsetting of liability with CAMMESA for electricity purchases against receivables (SE Resolution 250/13, subsequent Notes and SE Resolution 32/15) | 2 | 158,081 | (1,038,047) | ||
Decrease from offset of other liabilities with CAMMESA for loans for consumption (Mutuums) granted for higher salary costs (SE Resolution 32/15) | (447,438) | - | |||
Decrease in financial assets at fair value from repurchase of Corporate Bonds | - | 91,638 |
The accompanying notes are an integral part of these Financial Statements.
8
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form
1. General information
History and development of the Company
EDENOR S.A., or the Company, was organized on July 21, 1992 by Decree No. 714/92 in connection with the privatization and concession process of the distribution and sale of electric provided out by SEGBA S.A.
After an International Public Bidding, the Federal Government awarded 51% of the Company’s capital stock, in the form of Class "A" shares, to the successful bidder EASA, the parent company of Edenor S.A. The award and the transfer contract were approved on August 24, 1992 by Decree No. 1507/92 of the Federal Government.
On September 1, 1992, EASA took over the operations of EDENOR S.A.
The corporate purpose of EDENOR S.A. is to engage in the distribution and sale of electricity within the concession area. Furthermore, among other activities, the Company may subscribe or acquire shares of other electricity distribution companies, subject to the approval of the regulatory agency; assign the use of the grid to provide electricity transmission or other voice, data and image transmission services, and; render advisory, training, maintenance, consulting, and management services and supply know-how related to the distribution of electricity, both in Argentina and abroad. These activities may be conducted directly by EDENOR S.A. or through subsidiaries or related companies. In addition, the Company may act as trustee of trusts created under Argentine law.
The Company’s economic and financial situation
In fiscal years 2011, 2012 and 2014, the Company recorded negative operating and net results, and both its liquidity level and working capital, even in fiscal year 2013, were severely affected. This situation is due mainly to both the continuous increase of its operating costs that are necessary to maintain the level of service, and a delay in obtaining rate increases and/or a real recognition of higher costs (“MMC”), as stipulated in Section 4 of the Adjustment Agreement, including the review procedure in the event of deviations exceeding 5%.
In spite of the above, in general terms, quality in the electricity distribution service has been maintained and the constant year-on-year increase in the demand for electricity as part of economic growth and the standard of living in recent years has also been met. Due to both the continuous increase recorded in the costs associated with the provision of the service and the need for additional investments to meet the increased demand, the Company has adopted a series of measures aimed at mitigating the negative effects of this situation on its financial structure, minimizing the impact on the sources of employment, the execution of the investment plan or providing essential operation and maintenance works that are necessary to maintain quality and safety in the provision of this public service in a satisfactory manner.
The Company has made a series of presentations before control agencies, regulatory authorities and courts in order to instrument the necessary mechanisms for an efficient and safe provision of the distribution service, the maintenance of the level of investments and compliance with the increased demand.
9
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
Although the partial recognition of higher costs (as stipulated in Section 4.2 of the Adjustment Agreement) for the period May 2007-January 2015, implemented by SE Resolution 250/13, SE Notes 6852/13, 4012/14, 486/14, 1136/14 and SE Resolution 32/15, represented a significant step towards the recovery of the Company’s economic and financial situation, the effects thereof did not allow for the absorption of either operating nor investment costs or for the payment of financial services. However, the constant increase in the necessary operating costs to maintain service levels. and the delay in obtaining genuine rate increases will continue to deteriorate the Company’s operating results, which shows that this recognition has been insufficient to restore the balance that the economic and financial equation of the public service, object of the concession, requires.
In consequence, the Company permanently maintained in the last four fiscal years a working capital deficit, inasmuch as it had neither the necessary nor the adequate conditions to access the financial market to make up the deficit of both its operations and the investment plans necessary to maintain the quality of the service, object of the concession. As of June 30, 2015, the working capital deficit amounted to $1.9 billion. Thus, at the date of issuance of these financial statements, the signing of the payment plan agreement between the Company and CAMMESA for the amounts owed, as described in Note 2.a).e), is pending.
In view of the above, in 2014, the Company obtained from the Federal Government loan grants for consumption (mutuums) to thus afford specific obligations, such as: a) the salary increases granted to Company employees represented by theSindicato de Luz y Fuerza(Electric Light and Power Labor Union) as from May 1, 2014 and other benefits, applicable also to those contractors whose employees are included in the collective bargaining agreements with the union, not currently in effect by Resolution 32 (Note 2.c); and b) the investment plan resulting from the temporary insufficiency of funds obtained from the fixed charges established by Resolution 347/12 and Resolution 32 (Note 2.c).
Additionally, on March 13, 2015, theOfficial Gazettepublished SE Resolution 32/15, issued by the Energy Secretariat (SE), which addresses the need for the adjustment of the economic and financial situation of distribution companies and considers urgent and temporary measures necessary that should be adopted to maintain the normal provision of the public service (Note 2.b). As a consequence of this Resolution, the Company had positive operating results in this area, which have been disclosed in the “Recognition of income on account of the RTI – SE Resolution 35/15” line item within the Statement of Comprehensive Income (Loss).
Based on the cost increase estimates and financial projections made by the Company, and the measures of SE Resolution 32/15, the Board of Directors believes that financial resources will be available, at least during fiscal year 2015, to cover not only the operating costs and debt interest payments, but also part of the investment plans, if the payment plan to be defined with CAMMESAto settle the remaining debt with MEM conformsis met by the generation of a surplus cash flow. Compliance with the investment plans will depend on whether the assistance received until now under the Loan for consumptionMutuum Agreement continues.
Although these temporary measures help decrease the degree of uncertainty concerning the Company’s financial ability for the current fiscal year 2015, the Board of Directors believes that the sustainable recovery of the economic and financial equation of the public service, object of the concession, will fundamentally depend on the application of an RTI that considers permanent development of operating costs, that allows for the payment of the required investments to meet increasing demand with the quality levels stipulated in the Concession Agreement, and that makes it possible to have access to financing sources, cover the corresponding costs and, at the same time, generate a reasonable return on the investment.
The Company Board of Directors will continue to take steps before the regulatory authority aimed not only at monitoring the compliance with and effectiveness of the temporary measures adopted until now, but also obtaining compliance with the provisions of both the Adjustment Agreement and SE Resolution 32/15 concerning the performance of the RTI.
To date, the outcome of the RTI continues to be uncertain as to both its timing and final form.
10
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
Although the conditions of uncertainty existing in previous fiscal years have been mitigated, when compared to short-term projections of the temporary measures adopted by the Federal Government, there is no assurance that such measures will continue to be effective after this first year of application. The effectiveness will depend on the increase of costs in subsequent periods and the availability of resources from the Federal Government to absorb them while, at the same time, continue with the assistance provided through the Mutuums Loans for Consumption,, until the RTI has been resolved in a satisfactory manner.
2. Regulatory framework
At the date of issuance of these condensed interim financial statements, there are no significant changes with respect to the situation reported by the Company as of December 31, 2014, except for the following:
a) Resolution 32/15
At the date of issuance of these condensed interim financial statements, the changes with respect to the situation reported by the Company in the financial statements as of December 31, 2014, are as follow:
The SE issued SE Resolution 32/15, whereby it:
a) Grants a temporary increase in income to Edenor effective as from February 1, 2015, and on account of the RTI, in order for the Company to cover expenses and afford the investments associated with the normal provision of the public service, object of the concession.
The additional income will be produced from the difference between theTheoretical electricity rate schedule included in the resolution and the electricity rate schedule currently applied to each customer category, according to the ENRE’s calculations, which are provided to the SE and CAMMESA on a monthly basis. These funds will be contributed by the Federal Government and transferred to the Company by CAMMESA.
b) Establishes that, as from February 1, 2015, the funds relating to the PUREE to which SE Resolution 745/05 refers will be regarded as part of the Company’s income on account of the RTI and earmarked to cover the higher costs of the provision of the public service, object of the concession.
c) Authorizes the Company to offset, until January 31, 2015, the PUREE-related debts against and up to the amount of the MMC established receivables, including interest, if any, for both concepts.
d) Instructs CAMMESA to issue LVFVD in favor of the Company for the surplus, resulting from the offsetting process indicated in the preceding paragraph, and for the amounts owed by the Company under the Loans for consumption (Mutuums) granted for higher salary costs.
e) Instructs CAMMESA to implement a payment plan to be defined with the Company, with the prior approval of the SE, for the settlement of the remaining balances in favor of the MEM.
f) Establishes that the Company will neither distribute dividends nor use the income deriving from that which has been detailed in caption a) to repay loans to financial entities, restructure financial debts, acquire other companies, grant loans, or carry out other transactions that are not strictly related to the payment of its obligations with the MEM, the payment of salaries of the Company’s own or hired personnel or the making of payments to suppliers of goods and/or services related to the provision of the public service of electricity distribution.
11
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
g) Establishes that the Company shall observe the provisions of clause 22.1 of the Adjustment Agreement and suspend any administrative claim and/or judicial action it may have brought against the Federal Government, the SE and/or the ENRE in relation to compliance with clause 4.2 of the Adjustment Agreement and the resolution.
The impacts of SE Resolution 32/2015 on the Statement of Comprehensive Income (Loss) are summarized below:
06.30.15 | ||
Other income | ||
Additional increase from the difference between the electricity rate schedules (February-June/15) (1) | a) | 1,650,346 |
Funds obtained from the program for the rational use of electric power (PUREE) | b) | 290,868 |
Decrease in loans for consumption (Mutuums) granted for higher salary costs | d) | 447,438 |
Higher cost recognition | 186,596 | |
Total other income | 2,575,248 |
(1) As of June 30, 2015, the balance pending collection amounts to $ 353.1 million.
Additionally, and as established by the Energy Secretariat through SE Note No. 1208 dated June 29, 2015, the amounts owed to CAMMESA have been recalculated based on the new adopted criteria. Thus on July 22, 2015, the newly owed amounts were agreed upon, and CAMMESA issued the LVFVD established in captions c) and d) and the documents supporting what had been agreed. The net result of this agreement generated a profit of $ 254.4 million that has been recorded in the “Financial expenses” line item within the Statement of Comprehensive Income (Loss).
At the date of issuance of these financial statements, Company Management has been analyzing the steps to be taken as indicated in section 14 of SE Resolution 32/15, detailed in the preceding caption g).
b) Loans for consumption (mutuums) and assignments of secured receivables
At the date of issuance of these condensed interim financial statements, there are no significant changes with respect to the situation reported by the Company as of December 31, 2014, except for the following:
1) Extraordinary Investment Plan - Temporary insufficiency of the revenue deriving from the FOCEDE
On January 22, March 13, and June 10, 2015, the loan for consumption agreement was extended, as instructed by the SE to CAMMESA, for an additional amount of $ 1.04 billion, $ 304.7 million and $460.1 million, respectively.
As of June 30, 2015, the debt related to this concept amounts to $ 908.7 million (comprised of $ 831.6 million principal and $ 77.1 million in accrued interest) which is disclosed in “Other non-current payables”.
12
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
2)Higher salary costs
The aforementioned SE Resolution 32/15 resolves that LVFVD be issued in favor of the Company for the Loan for consumption (Mutuum) received by the Company to afford the salary increases deriving from the application of Resolution 836/14 of the Ministry of Labor, Employment and Social Security; allowing the Company to offset them against the outstanding balances for this concept. The LVFVD were issued on July 16, 2015.
In this regard, as of June 30, 2015, the Company made the pertinent recordings, fully canceling the $476.7 million liability for this concept, thus generating a positive result of $ 447.4 million relating to the principal received, which has been disclosed in the “Recognition of income on account of the RTI – SE Resolution 32/15” line item of the income statement, and a positive result of $ 29.3 million, relating to interest accrued, which has been disclosed in the “Financial expenses” line item of the income statement.
c) Framework Agreement
At the date of issuance of these condensed interim financial statements, the changes with respect to the situation reported by the Company as of December 31, 2014, are as follow:
In June 2015, the Company, together with EDESUR S.A., the Federal Government and the Government of the Province of Buenos Aires signed an Addendum pursuant to which the New Framework Agreement was renewed for a period of four years, from January 1, 2015 to December 31, 2018.
Therefore, as of June 30, 2015, the Company recognized the revenue relating to this concept, which amounts to $ 45.6 and has been disclosed in the “Revenue from sales” line item of the Condensed Interim Statement of Comprehensive Income (Loss).
3. Basis of preparation
These condensed interim financial statements for the six and three-month periods ended June 30, 2015 and 2014 have been prepared in accordance with the provisions of IAS 34 “Interim Financial Reporting”.
This condensed interim financial information must be read together with the Company’s financial statements as of December 31, 2014, which have been prepared in accordance with IFRS. These condensed interim financial statements are stated in thousands of Argentine pesos, unless specifically indicated otherwise. They have been prepared under the historical cost convention, as modified by the measurement of financial assets at fair value through profit or loss.
The condensed interim financial statements for the six-month periods ended June 30, 2015 and 2014 have not been audited. The Company Management estimates that they include all the necessary adjustments to fairly present the results of operations for each period. The results of operations for the six-month periods ended June 30, 2015 and 2014 do not necessarily reflect the Company’s results in proportion to the full fiscal years.
These condensed interim financial statements were approved for issue by the Company Board of Directors on August 7, 2015.
13
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
Comparative information
The balances as of December 31, 2014 and for the six-month period ended June 30, 2014, disclosed in these condensed interim financial statements for comparative purposes, arise from the financial statements as of those dates.
4. Accounting policies
The accounting policies adopted for these condensed interim financial statements are consistent with those used in the preparation of the financial statements for the last financial year, which ended December 31, 2014, except for those mentioned below.
There are no new IFRS or IFRIC applicable as from the current period that have a material impact on the Company’s condensed interim financial statements.
These condensed interim financial statements must be read together with the audited financial statements as of December 31, 2014 prepared under IFRS.
· Recognition of income on account of the RTI - SE Resolution 32/15
The recognition established by SE Resolution 32/15 falls within the scope of IAS 20, inasmuch as it implies a compensation to cover the expenses and afford the investments associated with the normal provision of the public service, object of the concession.
It is recognized at fair value when there is reasonable assurance that it will be collected and the Company has complied with the provision of the service.
Such concept has been disclosed in the “Recognition of income on account of the RTI - SE Resolution 32/15” line item of the Condensed Interim Statement of Comprehensive Income (Loss).
5. Financial risk management
The Company’s activities and the market in which it operates expose the Company to a series of financial risks: market risk (including currency risk, cash flows interest rate risk, fair value interest rate risk and price risk), credit risk and liquidity risk.
There have been no significant changes in the Company’s risk management policies since the last fiscal year end.
14
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
Financial risk factors
· Currency risk
As of June 30, 2015 and December 31, 2014, the Company’s balances in foreign currency are as follow:
Currency | Amount in foreign currency | Exchange rate (1) | Total | Total | ||||||
ASSETS |
| |||||||||
NON-CURRENT ASSETS |
| |||||||||
Other receivables | USD | - | 8.988 | - | 2,807 | |||||
TOTAL NON-CURRENT ASSETS | - |
| - | 2,807 | ||||||
CURRENT ASSETS |
| |||||||||
Financial assets at fair value through profit or loss | USD | - | 8.988 | - | 26,002 | |||||
Cash and cash equivalents | USD | 750 | 8.988 | 6,741 | 6,392 | |||||
EUR | 13 | 10.005 | 126 | 148 | ||||||
TOTAL CURRENT ASSETS | 763 | 6,867 | 32,542 | |||||||
TOTAL ASSETS | 763 |
| 6,867 | 35,349 | ||||||
| ||||||||||
LIABILITIES |
| |||||||||
NON-CURRENT LIABILITIES |
| |||||||||
Borrowings | USD | 187,389 | 9.088 | 1,702,988 | 1,598,442 | |||||
TOTAL NON-CURRENT LIABILITIES | 187,389 |
| 1,702,988 | 1,598,442 | ||||||
CURRENT LIABILITIES |
| |||||||||
Trade payables | USD | 5,774 | 9.088 | 52,472 | 76,502 | |||||
EUR | 126 | 10.140 | 1,282 | 20,053 | ||||||
CHF | 30 | 9.728 | 295 | 262 | ||||||
NOK | 68 | 1.166 | 79 | 79 | ||||||
Borrowings | USD | 3,941 | 9.088 | 35,815 | 33,961 | |||||
TOTAL CURRENT LIABILITIES | 9,939 | 89,943 | 130,857 | |||||||
TOTAL LIABILITIES | 197,328 |
| 1,792,931 | 1,729,299 | ||||||
|
(1) The exchange rates used are those of Banco Nación in effect as of June 30, 2015 for US Dollars (USD), Euros (EUR), Swiss Francs (CHF) and Norwegian Krones (NOK). An average exchange rate is used for balances with related parties.
As of June 30, 2015, the Company has Argentine sovereign debt bonds it has acquired in order to hedge this financial risk.
· Financial instruments
The Company classifies the measurements of financial instruments at fair value using a fair value hierarchy that reflects the relevance of the variables used to carry out such measurements. The fair value hierarchy has the following levels:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from the prices).
- Level 3: inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).
15
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
The table below shows the Company’s financial assets and liabilities measured at fair value as of June 30, 2015 and December 31, 2014:
LEVEL 1 | LEVEL 2 | LEVEL 3 | TOTAL | |||||
At June 30, 2015 | ||||||||
Assets | ||||||||
Cash and cash equivalents | ||||||||
Money market funds | 77,556 | - | - | 77,556 | ||||
Financial assets at fair value through profit or loss: | ||||||||
Government bonds | 22,470 | - | - | 22,470 | ||||
Money market funds | 1,114,267 | - | - | 1,114,267 | ||||
Total assets | 1,214,293 | - | - | 1,214,293 | ||||
At December 31, 2014 | ||||||||
Assets | ||||||||
Cash and cash equivalents | ||||||||
Money market funds | 135,537 | - | - | 135,537 | ||||
Financial assets at fair value through profit or loss: | ||||||||
Government bonds | 21,150 | - | - | 21,150 | ||||
Money market funds | 233,297 | - | - | 233,297 | ||||
Total assets | 389,984 | - | - | 389,984 | ||||
Liabilities | ||||||||
Derivative financial instruments | - | 5,895 | - | 5,895 | ||||
Total liabilities | - | 5,895 | - | 5,895 |
Concentration risk factors
· Related to employees who are union members
On June 8, 2015, an agreement was entered into by the Ministry of Labor, Employment and Social Security, EDESUR S.A., theSindicato de Luz y Fuerza Capital Federal (Electric Light and Power Labor Union), theAsociación del Personal Superior de Empresas de Energía (Association of Supervisory Personnel of Energy Companies) and the Company, pursuant to which the following was established:
A salary increase, until April 30, 2016, of 16% from May 1, 2015 and of a non-cumulative 11.8% from September 1, 2015.
An 11.9% increase, for the period May-October 2016, to be calculated on the salaries of April 2016.
The aforementioned Resolution applies also to the contractors whose employees are included in the collective bargaining agreement of the above-mentioned union/association.
6. Critical accounting estimates and judgments
The preparation of the condensed interim financial statements requires the Company Management to make estimates and assessments concerning the future, exercise critical judgments and make assumptions that affect the application of the accounting policies and the reported amounts of assets and liabilities and revenues and expenses.
16
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
These estimates and judgments are permanently evaluated and are based upon past experience and other factors that are reasonable under the existing circumstances. Future actual results may differ from the estimates and assessments made at the date of preparation of these condensed interim financial statements.
In preparing these condensed interim financial statements, there have been no changes in either the critical judgments made by the Company when applying its accounting policies or the information sources of estimation uncertainty with respect to those applied in the financial statements for the year ended December 31, 2014.
a. Impairment of long-lived assets
As from the implementation of SE Resolution No. 32/15, which established a temporary increase in income effective as from February 1, the projections made by the Company have been adjusted with regard to the recoverability of its property, plant and equipment.
The future increase in electricity rates used by the Company to assess the recoverability of its long-lived assets as of June 30, 2015 is based on the rights to which the Company is entitled, as stipulated in the Concession Agreement and the agreements described in Note 2 to the financial statements as of December 31, 2014. Furthermore, the actions taken to maintain and guarantee the provision of the public service, the presentations made before regulatory authorities, the status quo of the discussions that are being held with government representatives, the announcements made by government officials concerning possible changes in the sector’s revenues to restore the economic and financial equation, and certain adopted measures, such as those described in Note 2 to these financial statements, have also been considered. The Company Management estimates that it is reasonable to expect that new increases in income will be obtained as from 2016.
In spite of the current economic and financial situation, described in Note 1 to these financial statements, the Company has made its projections under the assumption that the electricity rates will be improved according to the circumstances. However, the Company may not ensure that the future performance of the variables used to make its projections will be in line with what it has estimated. Therefore, significant differences may arise in relation to the estimates used and assessments made at the date of preparation of these financial statements.
In order to contemplate the estimation risk contained in the projections of the aforementioned variables, the Company has considered three different probability-weighted scenarios. Although in all of them it is estimated that the Company will succeed in reaching an acceptable agreement with the Government resulting in a gradual tariff increase, the Company has considered different timing and magnitude of an increase in the DAV (Distribution Added Value).
The scenarios that have been considered are the following:
a) Scenario called Pessimistic scenario: in this scenario, the Company contemplates the effects of SE Resolution 32/15 and assumes modest electricity rate increases as from 2016 as a result of the gradual implementation of the RTI. CAMMESA’s financial assistance, as regards the reception of loans for consumption (mutuums) for the Extraordinary Investment Plan, is maintained until 2017. In 2017, the accumulated debt for energy purchases would begin to be paid and past higher real costs (not covered by the MMC) would be recognized, which would allow for the offsetting of the debts with CAMMESA against accumulated interest. Probability of occurrence assigned 20%.
b) Scenario called Intermediate scenario: in this case, the Company contemplates the effects of SE Resolution 32/15 and assumes reasonable electricity rate increases as from 2016, as a result of the gradual implementation of the RTI. CAMMESA’s financial assistance, as regards the reception of loans for consumption (mutuums) for the Extraordinary Investment Plan, is maintained until 2017. In 2017, the accumulated debt for energy purchases would begin to be paid and past higher real costs (not covered by the MMC) would be recognized, which would allow for the offsetting of the debts with CAMMESA against accumulated interest. Probability of occurrence assigned 65%.
17
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
c) Scenario called Optimistic scenario: in this case, the Company contemplates the effects of SE Resolution 32/15 and assumes increases in its remuneration in addition to that recognized in the Intermediate scenario as from 2016, as a result of the gradual implementation of the RTI. CAMMESA’s financial assistance, as regards the reception of loans for consumption (mutuums) for the Extraordinary Investment Plan, is maintained until 2017. In 2017, the accumulated debt for energy purchases would begin to be paid and past higher real costs (not covered by the MMC) would be recognized, which would allow for the offsetting of the debts with CAMMESA against accumulated interest. Probability of occurrence assigned 15%.
The Company has assigned to these three scenarios the previously detailed percentages of probability of occurrence based mainly on past experience and considering also the delay in the tariff renegotiation process, the present economic and financial situation, the status quo of the conversations that are being held with the Federal Government and the need to maintain the public service, object of the concession, in operation.
An after tax discount rate (WACC) in pesos stated in nominal terms of 24.5% has been used in all the scenarios.
Sensitivity analysis:
The main factors that could result in impairment charges in future periods are: i) a distortion in the nature, opportunity and modality of the electricity rate increases and recognition of cost adjustments, and ii) the development of the costs to be incurred. These factors have been taken into account in the aforementioned weight of scenarios. Due to the inherent uncertainty involved in these assumptions, the Company estimates that any sensitivity analysis that considers changes in any of them considered individually could lead to distorting conclusions.
Based on the aforementioned, the Company has determined that the valuation of property, plant and equipment, taken as a whole, does not exceed its recoverable value as of June 30, 2015.
b. Going concern
These financial statements have been prepared in accordance with the accounting principles applicable to a going concern, assuming that the Company will continue to operate normally during fiscal year 2015 because in the Company’s opinion SE Resolution 32/15 provides greater certainty concerning the financial conditions existing prior to the issuance thereof and constitutes a reasonable basis for the commencement of the RTI.
7. Contingencies and lawsuits
At the date of issuance of these condensed interim financial statements, there are no significant changes with respect to the situation reported by the Company in the financial statements as of December 31, 2014, except for the following:
a. Legal action brought by the Company (“EDENOR S.A. VS FEDERAL GOVERNMENT – MINISTRY OF FEDERAL PLANNING / PROCEEDING FOR THE DETERMINATION OF A CLAIM AND MOTION TO LITIGATE IN FORMA PAUPERIS”)
On June 28, 2013, the Company instituted these proceedings for the recognizance of a claim and the related leave to proceed in forma pauperis, both pending in the Federal Court of Original Jurisdiction in Contentious and Administrative Federal Matters No. 11 – Clerk’s Office No. 22.
Purpose of the main proceedings: To sue for breach of contract due to the Federal Government’s failure to perform in accordance with the terms of the “Memorandum of Understanding concerning the Renegotiation of the Concession Agreement” (“Acta Acuerdo de Renegociación del Contrato de Concesion” – the “Adjustment Agreement”) entered into with the Company in 2006, and for damages caused as a result of such breach.
18
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
Provisional Remedy: In the same action, in February 2014, the Company applied for the immediate granting of a provisional remedy in order to maintain an efficient and safe service, requesting that until judgment is passed on the merits of the case, the Federal Government be compelled to provide the Company with economic assistance, whether by means of a temporary rate adjustment or through government grants. After notice was served upon and answered by the Federal Government – Ministry of Federal Planning, on May 27, 2014, the court hearing the case rejected the provisional remedy sought by the Company, decision which was confirmed by Division V of the Appellate Court and notified to the Company on December 19, 2014.
Procedural stage of the proceedings: On November 22, 2013, the Company amended the complaint so as to extend it and claim more damages as a consequence of the Federal Government’s omission to perform the obligations under the aforementioned “Adjustment Agreement”. On February 3, 2015, the court hearing the case ordered that notice of the complaint be served to be answered within the time limit prescribed by law, which was answered by the Federal Government in due time on June 2, 2015.
b. TERI
At the date of issuance of these condensed interim financial statements, the Company has received assessments and demand for payment notices from the Government of the City of Buenos Aires for a total amount of $ 49.9 million for this concept.
In the Company’s opinion these fees are not applicable in accordance with federal regulations, the case law and the procedural status of judicial decisions. Therefore, the Management of the Company as well as its external legal advisors believe that there exist good reasons to support the Company’s position and have this tax claim rejected by a court of law. Therefore, the probability of an outflow of resources on account of such contingency has been regarded as low.
19
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
8. Property, plant and equipment
| Lands and buildings | Substations | High, medium and low voltage lines | Meters and Transformer chambers and platforms | Tools, Furniture, vehicles, equipment and communications | Construction in process | Supplies and spare parts | Total | ||||||||
At 12.31.14 | ||||||||||||||||
Cost | 162,192 | 1,444,310 | 4,086,201 | 1,953,167 | 632,114 | 1,960,435 | 136,188 | 10,374,607 | ||||||||
Accumulated depreciation | (44,821) | (536,338) | (1,962,744) | (773,126) | (405,096) | - | - | (3,722,125) | ||||||||
Net amount | 117,371 | 907,972 | 2,123,457 | 1,180,041 | 227,018 | 1,960,435 | 136,188 | 6,652,482 | ||||||||
Additions | - | - | 9,599 | - | - | 804,813 | 6,786 | 821,198 | ||||||||
Disposals | - | - | (1,215) | (60) | - | - | - | (1,275) | ||||||||
Transfers | 21,615 | 99,149 | 350,568 | 146,113 | 44,742 | (662,187) | - | - | ||||||||
Depreciation for the year | (5,216) | (19,752) | (49,825) | (32,154) | (25,080) | - | - | (132,027) | ||||||||
Net amount 06.30.15 | 133,770 | 987,369 | 2,432,584 | 1,293,940 | 246,680 | 2,103,061 | 142,974 | 7,340,378 | ||||||||
At 06.30.15 | ||||||||||||||||
Cost | 183,807 | 1,543,460 | 4,439,248 | 2,099,174 | 676,856 | 2,103,061 | 142,974 | 11,188,580 | ||||||||
Accumulated depreciation | (50,037) | (556,091) | (2,006,664) | (805,234) | (430,176) | - | - | (3,848,202) | ||||||||
Net amount | 133,770 | 987,369 | 2,432,584 | 1,293,940 | 246,680 | 2,103,061 | 142,974 | 7,340,378 |
· During the period ended June 30, 2015, direct costs capitalized amounted to $ 122 million.
· Financial costs capitalized for the period ended June 30, 2015 amounted to $ 118.6 million.
20
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
| Lands and buildings | Substations | High, medium and low voltage lines | Meters and Transformer chambers and platforms | Tools, Furniture, vehicles, equipment and communications | Construction in process | Supplies and spare parts | Total | ||||||||
At 12.31.13 | ||||||||||||||||
Cost | 133,155 | 1,367,062 | 3,778,595 | 1,769,798 | 538,668 | 1,042,590 | 50,577 | 8,680,445 | ||||||||
Accumulated depreciation | (37,052) | (501,649) | (1,872,408) | (713,878) | (366,151) | - | - | (3,491,138) | ||||||||
Net amount | 96,103 | 865,413 | 1,906,187 | 1,055,920 | 172,517 | 1,042,590 | 50,577 | 5,189,307 | ||||||||
Additions | - | - | - | - | 7,407 | 625,120 | 11,259 | 643,786 | ||||||||
Disposals | - | - | (159) | (132) | - | - | - | (291) | ||||||||
Transfers | 9,235 | 6,069 | 83,874 | 60,560 | 20,523 | (180,261) | - | - | ||||||||
Depreciation for the year | (2,895) | (18,170) | (45,862) | (29,294) | (17,535) | - | - | (113,756) | ||||||||
Net amount 06.30.14 | 102,443 | 853,312 | 1,944,040 | 1,087,054 | 182,912 | 1,487,449 | 61,836 | 5,719,046 | ||||||||
At 06.30.14 | ||||||||||||||||
Cost | 142,390 | 1,373,131 | 3,861,833 | 1,830,066 | 566,598 | 1,487,449 | 61,836 | 9,323,303 | ||||||||
Accumulated depreciation | (39,947) | (519,819) | (1,917,793) | (743,012) | (383,686) | - | - | (3,604,257) | ||||||||
Net amount | 102,443 | 853,312 | 1,944,040 | 1,087,054 | 182,912 | 1,487,449 | 61,836 | 5,719,046 |
· During the period ended June 30, 2014, direct costs capitalized amounted to $ 71 million.
· Financial costs capitalized for the period ended June 30, 2014 amounted to $ 7.3 million.
21
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
9. Other receivables
Note | 06.30.15 | 12.31.14 | |||
Non-current: | |||||
- | - | ||||
Minimum national income tax | 169,681 | 168,588 | |||
Tax credits | 5,168 | 2,089 | |||
Financial credit | 69,784 | 71,192 | |||
Related parties | 25.c | 7,238 | 7,366 | ||
Total Non-current | 251,871 | 249,235 | |||
Current: | |||||
Prepaid expenses | 4,537 | 3,198 | |||
Credit form Income recognition on account of the RTI - SE Resolution 32/15 | 2 | 353,054 | - | ||
Value added tax | 187,763 | 167,207 | |||
Advances to suppliers | 6,987 | 8,070 | |||
Advances to personnel | 830 | 1,782 | |||
Security deposits | 2,773 | 2,424 | |||
Financial credit | 12,614 | 6,658 | |||
Receivable with FOCEDE (1) | 185,118 | - | |||
Receivables from electric activities | 35,044 | 48,581 | |||
Related parties | 25.c | 662 | 753 | ||
Guarantee deposits on derivative financial instruments | - | 15,322 | |||
Allowance for the impairment of other receivables | (19,171) | (16,647) | |||
Judicial deposits | 10,314 | 11,900 | |||
Other | 953 | 1,059 | |||
Total Current | 781,478 | 250,307 |
(1) As of June 30, 2015, the net position held by the Company with the FOCEDE is comprised of the following:
06.30.15 | ||
Fixed charge Res. 347/12 collected from customers and not transferred | (1,531) | |
Funds received in excess of that transferred to FOCEDE from fixed charge Res. 347/12 | 1,925 | |
Outstanding receivables from extraordinary Investment Plan | 307,018 | |
Provision for FOCEDE expenses | (122,294) | |
185,118 |
22
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
The roll forward of the allowance for the impairment of other receivables is as follows:
06.30.15 | 03.31.14 | |||
Balance at beginning of year | 16,647 | 20,412 | ||
Increase | 2,524 | 248 | ||
Decrease | - | (4,770) | ||
Recovery | - | (1,839) | ||
Balance at end of period | 19,171 | 14,051 |
10. Trade receivables
06.30.15 | 12.31.14 | |||
Current: | ||||
Sales of electricity - Billed (1) | 666,399 | 641,920 | ||
Sales of electricity – Unbilled | 218,985 | 207,653 | ||
Framework Agreement | 90,798 | 75,815 | ||
National Fund of Electricity | - | 3,428 | ||
Fee payable for the expansion of the transportation and others | 19,372 | 16,851 | ||
Receivables in litigation | 22,419 | 21,844 | ||
Allowance for the impairment of trade receivables | (71,437) | (84,562) | ||
Total Current | 946,536 | 882,949 |
(1) Net of stabilization factor.
The roll forward of the allowance for the impairment of trade receivables is as follows:
06.30.15 | 03.31.14 | |||
Balance at beginning of year | 84,562 | 73,185 | ||
Increase | - | 1,709 | ||
Decrease | (3,570) | (2,171) | ||
Discontinued operations | (9,555) | - | ||
Balance at end of period | 71,437 | 72,723 |
11. Financial assets at fair value through profit or loss
06.30.15 | 12.31.14 | |||
Current | ||||
Government bonds | 22,470 | 21,150 | ||
Money market funds | 1,114,267 | 233,297 | ||
Total current | 1,136,737 | 254,447 |
23
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
12. Cash and cash equivalents
06.30.15 | 12.31.14 | 06.30.14 | ||||
Cash and banks | 24,431 | 38,691 | 18,929 | |||
Time deposits | 5,147 | 4,852 | 8,720 | |||
Money market funds | 77,556 | 135,537 | 133,706 | |||
Total cash and cash equivalents | 107,134 | 179,080 | 161,355 |
13. Share capital and additional paid-in capital
As of June 30, 2015, the Company’s share capital amounts to 906,455,100 shares, divided into 462,292,111 common, book-entry Class A shares with a par value of one peso each and the right to one vote per share; 442,210,385 common, book-entry Class B shares with a par value of one peso each and the right to one vote per share; and 1,952,604 common, book-entry Class C shares with a par value of one peso each and the right to one vote per share.
Section 206 – Argentine Business Organizations Law
At the Ordinary and Extraordinary Shareholders’ Meeting held on April 28, 2015, the Company shareholders, based on the Company’s current financial position and the development thereof since the beginning of fiscal year 2015 as a consequence of the impact caused by the application of SE Resolution 32/15, which would prompt the Company, in the short term, to improve its financial position and thereby rectify the situation of mandatory share capital reduction to which it was exposed as of December 31, 2014, resolved not to reduce the Company’s share capital and instructed the Board of Directors to call an Extraordinary Shareholders’ Meeting if, due to the results of operations for the next three-month periods, the Company would once again become subject to compliance with the mandatory reduction of share capital set forth in section 206 of the Argentine Business Organizations Law. Therefore, it was also decided not to introduce the amendment to the By-Laws arising from the described situation. Due to the financial situation disclosed as of June 30, 2015, the Company is no longer subject to the mandatory share capital reduction set forth in the aforementioned section of the Argentine Business Organizations Law.
14. Trade payables
06.30.15 | 12.31.14 | |||
Non-current | ||||
Suppliers | - | 364 | ||
Customer guarantees | 63,257 | 60,743 | ||
Customer contributions | 100,599 | 118,298 | ||
Funding contributions - substations | 51,700 | 51,700 | ||
Total Non-current | 215,556 | 231,105 | ||
Current | ||||
Payables for purchase of electricity - CAMMESA (1) | 2,724,819 | 2,257,059 | ||
Provision for unbilled electricity purchases - CAMMESA | 212,268 | 305,890 | ||
Suppliers | 533,545 | 570,434 | ||
Customer contributions | 130,326 | 148,076 | ||
Funding contributions - substations | 21,716 | 18,432 | ||
Total Current | 3,622,674 | 3,299,891 |
(1) As of June 30, 2015 and December 31, 2014 net of $ 3.2 billion and $ 3.4 billion, respectively, offset in accordance with the provisions of SE Resolution 250/13, subsequent Notes and Resolution 32/15. The respective LVFVD were issued on July 22, 2015.
24
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
15. Other payables
06.30.15 | 12.31.14 | |||
Non-current | ||||
Loans (mutuum) with CAMMESA | 908,697 | 506,753 | ||
ENRE penalties and discounts | 1,149,344 | 1,032,193 | ||
Liability with FOTAE | 147,086 | 105,641 | ||
Total Non-current | 2,205,127 | 1,644,587 | ||
Current | ||||
Program for the rational use of electric power (1) | - | 17,522 | ||
ENRE penalties and discounts | 63,901 | 70,589 | ||
Liability with FOCEDE (2) | - | 85,386 | ||
Related parties (Note 25.c) | 2,216 | 2,706 | ||
Advances for works to be performed | 39,453 | 10,650 | ||
Other | 1 | 243 | ||
Total Current | 105,571 | 187,096 |
(1) As of June 30, 2015 and December 31, 2014, net of $ 2.2 billion and $ 2.2 billion, respectively, offset in accordance with the provisions of SE Resolution 250/13, subsequent Notes and SE Resolution 32/15. The respective LVFVD were issued on July 22, 2015.
(2) As of December 31, 2014, the net position held by the Company with the FOCEDE is comprised of the following:
16. Borrowings
06.30.15 | 12.31.14 | |||
Non-current | ||||
Corporate notes (1) | 1,702,988 | 1,598,442 | ||
Total non-current | 1,702,988 | 1,598,442 | ||
Current | ||||
Interest | 35,815 | 33,961 | ||
Total current | 35,815 | 33,961 |
(1) Net of debt repurchase and issuance expenses.
25
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
17. Salaries and social security taxes
06.30.15 | 12.31.14 | |||
Non-current | ||||
Early retirements payable | 4,044 | 3,116 | ||
Seniority-based bonus | 71,074 | 59,742 | ||
Total non-current | 75,118 | 62,858 | ||
Current | ||||
Salaries payable and provisions | 533,633 | 543,564 | ||
Social security payable | 75,339 | 64,899 | ||
Early retirements payable | 3,382 | 2,186 | ||
Total current | 612,354 | 610,649 |
18. Income tax and tax on minimum presumed income / Deferred tax
At the date of issuance of these condensed interim financial statements, there are no significant changes with respect to the situation reported by the Company as of December 31, 2014, except for the following:
06.30.15 | 12.31.14 | ||
Deferred tax assets | |||
Inventories | 204 | 197 | |
Derivative financial instruments | - | 2,063 | |
Trade receivables and other receivables | 27,505 | 26,851 | |
Trade payables and other payables | 338,625 | 347,324 | |
Salaries and social security payable | 18,058 | 20,935 | |
Benefit plans | 66,631 | 56,323 | |
Tax liabilities | 13,876 | 13,893 | |
Provisions | 56,470 | 47,657 | |
Deferred tax asset | 521,369 | 515,243 | |
Deferred tax liabilities | |||
Property, plants and equipments | (446,591) | (417,006) | |
Financial assets at fair value through profit or loss | (4,959) | - | |
Borrowings | (10,403) | (11,070) | |
Deferred tax liability | (461,953) | (428,076) | |
Net deferred tax assets | 59,416 | 87,167 |
Taking into account prior year tax losses and the sensitivity of the variables used in the projection of the tax result for 2015, such as the devaluation of the peso and the salary hikes, at the date of these financial statements the Company Management has concluded that there is still no solid and conclusive evidence to recognize prior year tax losses. As of June 30, 2015, the aforementioned tax losses amount to $ 278.2 million.
26
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
The detail of the income tax charge is as follows:
|
| 06.30.15 |
| 06.30.14 |
Deferred tax |
| (27,752) |
| 40,939 |
Current tax |
| (427,622) |
| - |
Income tax expense |
| (455,374) |
| 40,939 |
|
|
|
| |
|
|
|
| |
06.30.15 |
| 06.30.14 | ||
Profit (Loss) before taxes |
| 1,180,117 |
| (763,740) |
Applicable tax rate |
| 35% |
| 35% |
(Loss) Gain Profit at the tax rate |
| (413,041) |
| 267,309 |
|
|
| ||
Gain from interest in joint ventures |
| 1 |
| 2 |
Other |
| (1) |
| 908 |
Subtotal |
| (413,041) |
| 268,219 |
|
|
| ||
Unrecognized net deferred tax assets/liabilities |
| - |
| (262,065) |
Difference between provision and tax return | (42,333) |
| 34,785 | |
Income tax expense | (455,374) | 40,939 |
19. Tax liabilities
06.30.15 | 12.31.14 | |||
Non-current | ||||
Tax regularization plan | 2,543 | 3,164 | ||
Total Non-current | 2,543 | 3,164 | ||
Current | ||||
Income tax provision net of the minimum presumed income tax credit | 427,622 | - | ||
Tax on minimum national income tax payable, net | - | 14,730 | ||
Provincial, municipal and federal contributions and taxes | 66,723 | 67,999 | ||
Tax withholdings | 42,857 | 34,625 | ||
SUSS (Social Security System) withholdings | 1,691 | 1,485 | ||
Municipal taxes | 41,768 | 39,870 | ||
Tax regularization plan | 1,825 | 1,774 | ||
Total Current | 582,486 | 160,483 |
27
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
20. Provisions
Non-current liabilities | Current liabilities | |||
Contingencies | Contingencies | |||
At 12.31.14 | 112,095 | 24,068 | ||
Increases | 15,589 | 21,760 | ||
Decreases | - | (12,169) | ||
At 06.30.15 | 127,684 | 33,659 |
Non-current liabilities | Current liabilities | |||
Contingencies | Contingencies | |||
At 12.31.13 | 83,121 | 10,667 | ||
Increases | - | 47,172 | ||
Decreases | (3) | (8,308) | ||
At 06.30.14 | 83,118 | 49,531 |
21. Revenue from sales
06.30.15 |
| 06.30.14 | ||
Sales of electricity (1) | 1,829,083 | 1,724,725 | ||
Right of use on poles | 36,312 | 26,221 | ||
Connection charges | 1,976 | 1,905 | ||
Reconnection charges | 639 | 364 | ||
Total Revenue from sales | 1,868,010 | 1,753,215 |
(1) Includes revenue from the application of Resolution 347/12 for $ 258.1 million and $ 244.3 million for the six-month periods ended June 30, 2015 and 2014, respectively.
28
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
22. Expenses by nature
The detail of the expenses by nature is as follows:
Description | Transmission and distribution expenses | Selling expenses | Administrative expenses | Total | ||||
Salaries and social security taxes | 869,521 | 135,631 | 155,387 | 1,160,539 | ||||
Pension plans | 31,841 | 4,967 | 5,690 | 42,498 | ||||
Communications expenses | 6,135 | 26,801 | 1,427 | 34,363 | ||||
Allowance for the impairment of trade and other receivables | - | 2,524 | - | 2,524 | ||||
Supplies consumption | 99,768 | - | 7,211 | 106,979 | ||||
Leases and insurance | 250 | - | 28,571 | 28,821 | ||||
Security service | 20,962 | 416 | 9,674 | 31,052 | ||||
Fees and remuneration for services | 255,699 | 156,527 | 78,229 | 490,455 | ||||
Public relations and marketing | - | - | 3,533 | 3,533 | ||||
Advertising and sponsorship | - | - | 1,820 | 1,820 | ||||
Reimbursements to personnel | 659 | 109 | 439 | 1,207 | ||||
Depreciation of property, plants and equipments | 112,856 | 13,670 | 5,501 | 132,027 | ||||
Directors and Supervisory Committee members’ fees | - | - | 1,740 | 1,740 | ||||
ENRE penalties | 129,256 | 2,840 | - | 132,096 | ||||
Taxes and charges | - | 22,846 | 5,489 | 28,335 | ||||
Other | 141 | 41 | 1,822 | 2,004 | ||||
At 06.30.15 | 1,527,088 | 366,372 | 306,533 | 2,199,993 |
The expenses included in the chart above are net of the Company’s own expenses capitalized in property, plant and equipment as of June 30, 2015 for $ 122 million.
Description | Transmission and distribution expenses | Selling expenses | Administrative expenses | Total | ||||
Salaries and social security taxes | 597,892 | 104,233 | 91,293 | 793,418 | ||||
Pension plans | 13,591 | 2,369 | 2,075 | 18,035 | ||||
Communications expenses | 5,706 | 19,732 | 1,273 | 26,711 | ||||
Allowance for the impairment of trade and other receivables | - | 1,957 | - | 1,957 | ||||
Supplies consumption | 100,622 | - | 5,832 | 106,454 | ||||
Leases and insurance | 4,721 | - | 15,516 | 20,237 | ||||
Security service | 11,665 | 161 | 6,292 | 18,118 | ||||
Fees and remuneration for services | 362,518 | 119,609 | 59,831 | 541,958 | ||||
Public relations and marketing | - | - | 2,547 | 2,547 | ||||
Advertising and sponsorship | - | - | 1,312 | 1,312 | ||||
Reimbursements to personnel | 581 | 194 | 738 | 1,513 | ||||
Depreciation of property, plants and equipments | 101,707 | 7,144 | 4,905 | 113,756 | ||||
Directors and Supervisory Committee members’ fees | - | - | 1,422 | 1,422 | ||||
ENRE penalties | 115,878 | 5,780 | - | 121,658 | ||||
Taxes and charges | - | 18,632 | 3,462 | 22,094 | ||||
Other | 134 | 32 | 799 | 965 | ||||
At 06.30.14 | 1,315,015 | 279,843 | 197,297 | 1,792,155 |
The expenses included in the chart above are net of the Company’s own expenses capitalized in property, plant and equipment as of June 30, 2014 for $ 71 million.
29
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
23. Net financial income (expense)
06.30.15 |
| 06.30.14 | ||
Financial income |
| |||
Commercial interest | 23,933 | 20,862 | ||
Financial interest | 13,700 | 127,419 | ||
Total financial income | 37,633 | 148,281 | ||
|
|
| ||
Financial expenses |
|
| ||
Interest and other (1) | (65,344) | (89,590) | ||
Fiscal interest | (1,506) | (3,600) | ||
Commercial interest (3) | 118,822 | (244,565) | ||
Bank fees and expenses | (14,076) | (4,021) | ||
Total financial expenses | 37,896 | (341,776) | ||
|
|
| ||
Other financial results | ||||
Exchange differences | (105,903) | (347,295) | ||
Adjustment to present value of receivables | 5,244 | 3,731 | ||
Changes in fair value of financial assets (2) | 85,137 | 42,796 | ||
Net gain from the repurchase of | - | 44,474 | ||
Other financial expense | (11,027) | (9,702) | ||
Total other financial expense | (26,549) | (265,996) | ||
Total net financial expense | 48,980 | (459,491) |
(1) Net of interest capitalized as of June 30, 2015 and 2014 for $ 118.6 million and $ 7.3 million, respectively.
(2) Includes changes in the fair value of financial assets on cash equivalents as of June 30, 2015 and 2014 for $ 6.9 million and $ 3.4 million, respectively.
(3) Net of the profit recorded due to the agreement with CAMMESA described in Note 2.a).
24. Basic and diluted earnings (loss) per share
Basic
The basic earnings (loss) per share are calculated by dividing the result attributable to the holders of the Company’s equity instruments by the weighted average number of common shares outstanding as of June 30, 2015 and 2014, excluding common shares purchased by the Company and held as treasury shares.
The basic earnings (loss) per share coincide with the diluted earnings (loss) per share, inasmuch as the Company has issued neither preferred shares nor corporate notes convertible into common shares.
06.30.15 | 06.30.14 | |||
Profit (Loss) for the period attributable to the owners of the Company | 724,743 | (722,801) | ||
Weighted average number of common shares outstanding | 897,043 | 897,043 | ||
Basic and diluted earnings (loss) per share – in pesos | 0.81 | (0.81) |
30
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
25. Related-party transactions
· The following transactions were carried out with related parties:
a. Income
Company | Concept | 06.30.15 |
| 06.30.14 | ||
| ||||||
CYCSA | Other income | - | 75 | |||
PYSSA | Advertising on EDENOR bill | - | 2 | |||
| - | 77 |
b. Expense
Company | Concept | 06.30.15 | 06.30.14 | |||
| ||||||
EASA | Technical advisory services on financial matters | (10,986) | (9,652) | |||
SACME | Operation and oversight of the electric power transmission system | (12,577) | (8,906) | |||
Salaverri, Dellatorre, Burgio y Wetzler Malbran | Legal fees | (20) | (205) | |||
PYSSA | Financial and granting of loan services to customers | (41) | (50) | |||
| (23,624) | (18,813) |
· The balances with related parties are as follow:
c. Receivables and payables
| 06.30.15 | 12.31.14 | ||
Other receivables - Non current | ||||
SACME | 7,238 | 7,366 | ||
| 7,238 | 7,366 | ||
Other receivables - Current | ||||
SACME | 662 | 667 | ||
CYCSA | - | 86 | ||
662 | 753 |
| 06.30.15 | 12.31.14 | ||
Trade and Other payables | ||||
SACME | (2,216) | (2,706) | ||
(2,216) | (2,706) |
31
EDENOR S.A.
Notes to the Condensed Interim Financial Statements
as of June 30, 2015 presented in comparative form(continued)
d. Key management personnel’s remuneration
06.30.15 | 06.30.14 | |||
Salaries |
| 38,186 | 30,380 | |
| 38,186 | 30,380 |
RICARDO TORRES |
Chairman
|
32
Free translation from the original in Spanish for publication in Argentina
REPORT OF CONDENSED INTERIM FINANCIAL STATEMENTS´REVIEW
To the Shareholders, President and Directors
Empresa Distribuidora y Comercializadora Norte
Sociedad Anónima (Edenor S.A.)
Legal address: Avenida del Libertador 6363
Autonomous City of Buenos Aires
Tax Code No. 30-65511620-2
Introduction
We have reviewed the condensed interim financial statements of Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (Edenor S.A.) (hereinafter “Edenor S.A.” or “the Company”) which includes the condensed interim statement of financialposition as of June 30, 2015, the related condensed interim statement of comprehensive income for the six and three months periods ended June 30, 2015, the related condensed interim statements of changes in equity and cash flows for the six-month period then ended with the complementary selected notes.
The amounts and other information related to fiscal year 2014 and its interim periods, are part of the financial statements mention above and therefore should be considered in relation to those financial statements.
Directors´ responsibility
Company´s Board of Directors is responsible of preparation and presentation of the financial statements, in accordance with the International Financial Reporting Standards (IFRS) adopted by the Argentine Federation of Professional Councils in Economic Sciences (FACPCE) ,as the applicable accounting framework and incorporated by the National Securities Commission (CNV), as they were approved by the International Accounting Standards Board (IASB), and, therefore, it’s responsible for the preparation and issuance of the condensed interim financial statements mentioned infirst paragraph in accordance with IAS 34 “Interim financial information”. Our responsibility is to express a conclusion based on the limited review we have performed with the scope detailed in section “Scope of our review”.
Scope of our review
Our review was limited to the application of the procedures established in International Standard on Review Engagements 2410 “Review of interim financial information performed by the independent auditor of the entity”, which was adopted as standard review in Argentina through Technical Pronouncement No. 33 of the Argentine Federation of Professional Councils in Economic Sciences as was approved by International Auditing and Assurance Standards Board (IAASB). A review of interim financial information consists in making inquiries of Company staff responsible for the preparation of the information included in the financial statements and the application of analytical procedures and other review procedures. This review is substantially less in scope than an audit in accordance of International Auditing Standards, consequently, this review does not allow us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Therefore, we do not express any opinion on the financial position, comprehensive income and cash flows of the Company.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed interim financial statements mentioned in the first paragraph of this report, are not prepared in all material respects, in accordance with IAS 34.
Emphasis of matter paragraph
We draw the attention to the situation explained in Note 1 to the financial statements in relation to the economic and financial situation of the Company.
Report of compliance with regulations in force
In compliance with regulations in force, we report that:
a) the condensed interim financial statements of the Company, are transcribed into the “Inventory and Balance Sheet” book and, insofar as concerns our field of competence, are in compliance with the provisions of the Commercial Companies Law and pertinent resolutions of the National Securities Commission;
b) the condensed interim financial statements of the company arise from accounting records kept in all formal respects in conformity with legal regulations;
c) we have read the summary of activity, and additional information to the notes of condensed interim financial statements required by section 68 of the Rules of the Stock Exchange of Buenos Aires and article 12 °, Chapter III, Title IV of the regulations of the National Securities Commission on which, as regards those matters that are within our competence, we have no observations to make;
d) at June 30, 2015 the liabilities accrued in favor of the Argentine Integrated Social Security System according to the Company’s accounting records amounted to $75.338.746, which were not yet due at that date.
Autonomous City of Buenos Aires, august 7, 2015
PRICE WATERHOUSE & CO. S.R.L.
(Socio) |
C.P.C.E.C.A.B.A. Tº 1 Fº 17 |
Dr. Andrés Suarez Public Accountant (UBA) C.P.C.E. City of Buenos Aires T° 245 F° 61 |
Empresa Distribuidora y Comercializadora Norte S.A. | ||
By: | /s/ Leandro Montero | |
Leandro Montero | ||
Chief Financial Officer |